<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 2000
Commission file number 0 - 12784
WESTBANK CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
MASSACHUSETTS 04-2830731
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer I.D. No.)
225 PARK AVENUE, WEST SPRINGFIELD, MASSACHUSETTS 01090-0149
(Address of principal executive offices) (Zip Code)
</TABLE>
(413) 747-1400
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
Common stock, par value $2 per share: 4,226,593 shares outstanding as of
October 31, 2000
<PAGE> 2
WESTBANK CORPORATION AND SUBSIDIARIES
INDEX
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page
----
<S> <C>
Financial Statements
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of Income 4
Condensed Consolidated Statements of Comprehensive Income 5
Condensed Consolidated Statements of Stockholders' Equity 6
Condensed Consolidated Statements of Cash Flows 7
Notes to Condensed Consolidated Financial Statements 8-9
Management's Discussion and Analysis of
Financial Condition and Results of Operations 10-17
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings 18
ITEM 2. Changes in Rights of Securities Holders 18
ITEM 3. Defaults by Company on its Senior Securities 18
ITEM 4. Results of Votes on Matters Submitted
to a Vote of Security Holders 18
ITEM 5. Other Events 18
ITEM 6. Exhibits and Reports on Form 8-K 19
Signatures 20
</TABLE>
2
<PAGE> 3
WESTBANK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Unaudited)
(Dollar amounts in thousands) September 30, 2000 December 31, 1999
------------------ -----------------
<S> <C> <C>
ASSETS
Cash and due from banks:
Non-interest bearing $ 15,609 $ 17,006
Interest bearing 270 1,147
Federal funds sold 896 13,389
--------- ---------
Total cash and cash equivalents 16,775 31,542
--------- ---------
Investment securities available for sale 87,491 69,516
Investment securities held to maturity
(fair value of $11,308 in 2000 and $11,652 in 1999) 11,498 11,804
--------- ---------
Total securities 98,989 81,320
--------- ---------
Loans 448,366 440,319
Mortgage loans held-for-sale 1,865 2,156
Allowance for loan losses (3,460) (3,908)
--------- ---------
Net loans 446,771 438,567
Bank premises and equipment 7,384 7,809
Other real estate owned 605 442
Accrued interest receivable 4,018 3,243
Intangible assets 9,672 9,971
Other assets 3,839 3,256
--------- ---------
TOTAL ASSETS $ 588,053 $ 576,150
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing $ 62,710 $ 59,643
Interest bearing 437,618 419,253
--------- ---------
Total deposits 500,328 478,896
Borrowed funds 34,651 46,546
Accrued interest payable 1,118 732
Other liabilities 1,901 1,433
--------- ---------
Total liabilities 537,998 527,607
--------- ---------
Mandatory redeemable preferred stock 17,000 17,000
--------- ---------
Stockholders' Equity:
Common stock -- $2 par value
Authorized -- 9,000,000 shares
Issued -- 4,283,719 shares in 2000 and
4,283,719 shares in 1999 8,567 8,567
Additional paid in capital 11,621 11,633
Retained earnings 14,860 13,317
Treasury stock - 73,050 shares (638)
Accumulated other comprehensive income (loss) (1,355) (1,974)
--------- ---------
Total Stockholders' Equity 33,055 31,543
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 588,053 $ 576,150
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE> 4
WESTBANK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
QUARTER ENDED NINE MONTHS ENDED
09-30-00 09-30-99 09-30-00 09-30-99
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Income:
Interest and fees on loans $ 8,944 $ 6,749 $ 26,451 $ 19,282
Interest on federal funds sold 101 28 197 101
Interest on securities 1,794 1,177 5,040 3,567
---------- ---------- ---------- ----------
10,839 7,954 31,688 22,950
Interest expense 6,192 3,697 17,152 10,503
---------- ---------- ---------- ----------
Net interest income 4,647 4,257 14,536 12,447
Provision for loan losses 13 0 153 77
---------- ---------- ---------- ----------
Net interest income after provision 4,634 4,257 14,383 12,370
---------- ---------- ---------- ----------
Realized investment gains 0 0 0 92
Other non-interest income 555 602 1,739 1,620
---------- ---------- ---------- ----------
Total non-interest income 555 602 1,739 1,712
---------- ---------- ---------- ----------
Operating expense:
Salaries and benefits 1,976 1,581 5,938 4,548
Other operating expenses 1,667 1,114 4,856 3,387
Occupancy - net 339 294 1,025 908
---------- ---------- ---------- ----------
Total operating expenses 3,982 2,989 11,819 8,843
---------- ---------- ---------- ----------
Income before income taxes 1,207 1,870 4,303 5,239
Income taxes 370 735 1,486 2,012
---------- ---------- ---------- ----------
Net Income $ 837 $ 1,135 $ 2,817 $ 3,227
========== ========== ========== ==========
Earnings per share
-- Basic $ 0.20 $ 0.27 $ 0.67 $ 0.76
-- Diluted $ 0.20 $ 0.26 $ 0.66 $ 0.75
Weighted average shares outstanding
-- Basic 4,206,430 4,260,321 4,230,001 4,232,378
-- Dilutive option shares 38,861 95,546 48,675 98,593
-- Diluted 4,245,291 4,355,867 4,278,676 4,330,971
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE> 5
WESTBANK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
QUARTER ENDED NINE MONTHS ENDED
09-30-00 09-30-99 09-30-00 09-30-99
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net Income $ 837 $ 1,135 $ 2,817 $ 3,227
------- ------- ------- -------
Other comprehensive income:
Unrealized gain/(loss) on securities
available for sale, net of income taxes
(benefits) of $333 and $(254) for the
quarter and $342 and $(996) for the
nine-month periods ended September 30,
2000 and 1999, respectively 741 (410) 619 (1,606)
Reclassification adjustment for
gains included in net income,
net of income taxes of $35 for
the nine-month period ended
September 30, 1999 57
------- ------- ------- -------
Other comprehensive income (loss) 741 (410) 619 (1,549)
------- ------- ------- -------
Comprehensive Income $ 1,578 $ 725 $ 3,436 $ 1,678
======= ======= ======= =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE> 6
WESTBANK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEAR ENDED DECEMBER 31, 1999 AND NINE MONTHS ENDED SEPTEMBER 30, 2000
(2000 unaudited)
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
ACCUMULATED
COMMON STOCK OTHER
-------------------- ADDITIONAL COMPREHENSIVE
NUMBER PAR PAID IN RETAINED TREASURY INCOME/
OF SHARES VALUE CAPITAL EARNINGS STOCK (LOSS) TOTAL
--------- ------ ------- ------- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE - DECEMBER 31, 1998 4,198,838 $8,397 $11,076 $10,803 $ 214 $30,490
Net income 4,167 4,167
Cash dividend declared
($.40 per share) (1,653) (1,653)
Shares issued:
Stock Option Plan 30,255 61 78 139
Dividend Reinvestment
and Stock Purchase Plan 54,626 109 479 588
Changes in unrealized loss on
securities available for sale (2,188) (2,188)
--------- ------ ------- ------- ------ ------- -------
BALANCE - DECEMBER 31, 1999 4,283,719 8,567 11,633 13,317 (1,974) 31,543
Net income 2,817 2,817
Cash dividend declared
($.30 per share) (1,274) (1,274)
Treasury Shares:
Redeemed (123,200) $(1,097) (1,097)
Reissued 50,150 (12) 459 447
Changes in unrealized loss on
securities available for sale 619 619
--------- ------ ------- ------- ------ ------- -------
BALANCE - SEPTEMBER 30, 2000 4,210,669 $8,567 $11,621 $14,860 $ (638) $(1,355) $33,055
========= ====== ======= ======= ====== ======= =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
<PAGE> 7
WESTBANK CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(Unaudited)
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
2000 1999
-------- --------
<S> <C> <C>
Operating activities:
Net income $ 2,817 $ 3,227
Adjustments to reconcile net income to
net cash provided by operating activities:
Provision for loan losses 153 77
Provision for other real estate owned 62
Depreciation and amortization 788 729
Intangible amortization 457
Realized gain on sale of securities (92)
Realized gain/(loss) on sale of other real estate owned (50) 19
Changes in assets and liabilities:
(Increase)/Decrease in accrued interest receivable (775) (188)
Increase/(Decrease) in interest payable on deposits 386 97
(Increase)/Decrease in other assets (915) (1,467)
Increase/(Decrease) in other liabilities 691 (437)
-------- --------
Net cash provided by operating activities 3,614 1,965
-------- --------
Investing activities:
Investments and mortgage-backed securities:
Held to maturity:
Purchases (1,050)
Proceeds from maturities and principal payments 306 19,762
Available for sale:
Purchases (21,389) (21,608)
Proceeds from sales 4,679
Proceeds from maturities 4,424 12,271
Purchases of premises and equipment (363) (1,328)
Net (increase) in loans (8,834) (59,512)
Proceeds from sale of other real estate owned 85 382
-------- --------
Net cash used in investing activities (25,771) (46,404)
-------- --------
Financing activities:
Net increase/(decrease) in other borrowed funds (12,118) 8,570
Net increase/(decrease) in deposits 21,432 38,362
Proceeds from mandatory redeemable preferred stock 17,000
Proceeds from exercise of stock options and stock purchase plan 578
Treasury stock (purchased)/issued, net (650)
Dividends paid (1,274) (1,226)
-------- --------
Net cash provided by financing activities 7,390 63,284
-------- --------
Increase/(Decrease) in cash and cash equivalents (14,767) 18,845
Cash and cash equivalents at beginning of period 31,542 14,240
-------- --------
Cash and cash equivalents at end of period $ 16,775 $ 33,085
======== ========
Cash paid during the period:
Interest on deposits and other borrowings $ 16,766 $ 10,406
Income taxes 1,222 1,874
Transfers of loans to other real estate owned 357
</TABLE>
See accompanying notes to condensed consolidated financial statements.
7
<PAGE> 8
WESTBANK CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND SEPTEMBER 30, 1999
(Unaudited)
NOTE A - GENERAL INFORMATION
Westbank Corporation (hereinafter sometimes referred to as "Westbank" or the
"Corporation") is a registered Financial Holding Company organized to facilitate
the expansion and diversification of the business of Park West Bank and Trust
Company and Cargill Bank (hereinafter sometimes referred to as "Park West" or
"Cargill" and collectively as the "Banks") into additional financial services
related to banking. Substantially all operating income and net income of the
Corporation are presently accounted for by Park West and Cargill.
NOTE B - CURRENT OPERATING ENVIRONMENT
Park West operates thirteen banking offices located in Hampden County,
Massachusetts, and also operates a Trust Department providing services normally
associated with holding property in a fiduciary or agency capacity. A full range
of retail banking services is furnished to individuals, businesses and
non-profit organizations. Cargill Bank operates four offices in Windham County,
Connecticut. A full range of retail banking services is furnished to
individuals, businesses and non-profit organizations. The primary source of
revenue for Park West and Cargill is derived from providing loans to customers
who are predominantly located in Park West's and Cargill's service areas.
The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA")
imposes significant regulatory restrictions and requirements on banking
institutions insured by the FDIC and their holding companies. FDICIA established
capital categories into which financial institutions are placed based on capital
level. Each capital category establishes different degrees of regulatory
restrictions that can apply to a financial institution. As of September 30,
2000, Park West and Cargill's capital was at a level that placed the Banks in
the "well capitalized" category as defined by FDICIA.
FDICIA imposes a variety of other restrictions and requirements on insured
banks. These include significant regulatory reporting requirements such as
insuring that a system of risk-based deposit insurance premiums and civil money
penalties for inaccurate deposit assessment reports exists. In addition, FDICIA
imposes a system of regulatory standards for bank and bank holding company
operations, detailed truth in savings disclosure requirements, and restrictions
on activities authorized by state law but not authorized for national banks.
NOTE C - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements for the
quarter and nine months ended September 30, 2000 and 1999 have been prepared in
accordance with generally accepted accounting principles for interim information
and with instructions for Form 10-Q. Accordingly, they do not include all of the
information and notes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all adjustments
(consisting or normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the quarter and
nine-month period ended September 30, 2000 are not necessarily indicative of the
results that may be expected for the year ending December 31, 2000.
For further information, please refer to the Consolidated Financial Statements
and footnotes thereto included in the Westbank Corporation's Annual Report on
Form 10-K for the year ended December 31, 1999.
8
<PAGE> 9
NOTE D - ACQUISITION OF BRANCHES
On October 29, 1999, the Corporation completed its acquisition of the
Connecticut division of New London Trust, F.S.B. The two New London Trust
offices became part of Cargill Bank, increasing its number of offices to five.
The Corporation has accounted for this acquisition on the purchase method,
including the results of their operations since October 29, 1999. The intangible
assets are being amortized over fifteen (15) years.
The pro forma results of operations for the quarter and nine months ended
September 30, 1999, as if this acquisition had occurred at the beginning of
1999, were as follows:
<TABLE>
<CAPTION>
Quarter Nine Months
------- -----------
<S> <C> <C>
Net interest income $5,114 $15,024
Net income $1,171 $ 3,265
Basic earnings per share $0.27 $0.77
Diluted earnings per share $0.27 $0.75
</TABLE>
NOTE E - COMMITMENTS AND CONTINGENT LIABILITIES
In the normal course of business, there are outstanding commitments and
contingent liabilities, such as standby letters of credit and commitments to
extend credit. As of September 30, 2000, standby letters of credit amounted to
$751,000 and loan commitments were $34,500,000 and unused balances available on
home equity lines of credit were $11,334,000.
Trust Assets - Property with a book value of $117,056,000 at September 30, 2000
held for customers in a fiduciary or agency capacity is not included in the
accompanying balance sheet since such items are not assets of the Bank.
NOTE F - STOCKHOLDERS' EQUITY
The FDIC imposes leverage capital ratio requirements for state non-member banks.
In addition, the FDIC has established risk-based capital requirements for
insured institutions for Tier 1 risk-based capital of 4.00% and total risk-based
capital of 8.0%.
The capital ratios of Park West and Cargill as of September 30, 2000 were as
follows:
<TABLE>
<CAPTION>
Park West Bank
and Trust Company Cargill Bank
----------------- ------------
<S> <C> <C>
Leverage Capital Ratio 7.18% 6.13%
Tier 1 Risk-Based Capital 10.87% 11.26%
Total Risk-Based Capital 11.75% 12.43%
</TABLE>
As of September 30, 2000, both Park West and Cargill met the criteria which
classified them as well capitalized financial institutions.
NOTE G - NEW ACCOUNTING STANDARDS
The Financial Accounting Standards Board (the "FASB") issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities. This statement
established accounting and reporting standards for derivative instruments
including derivative activities. This statement will be effective for the
Corporation's 2001 financial statements. The Corporation has not determined the
effect of this standard on its financial statements.
9
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Changes in Financial Condition
Total consolidated assets amounted to $588,053,000 on September 30, 2000,
compared to $576,150,000 on December 31, 1999. As of September 30, 2000 and
December 31, 1999, earning assets amounted to, respectively, $550,386,000 or 94%
of total assets and $538,331,000 or 93% of total assets. Earning assets
increased during the first nine months of 2000 as a result of an increase in
loans and investments. Deposits originated throughout the Corporation's branch
system and short-term borrowings with the Federal Home Loan Banks funded the
growth in assets.
Changes in Results of Operations
For the quarter ended September 30, 2000, net income totaled $837,000, compared
to $1,135,000 for the quarter ended September 30, 1999. For the nine months
ended September 30, 2000, net income was $2,817,000, compared to $3,227,000 for
the same period during 1999. Included in the results for the nine months ended
September 30, 2000 were approximately $250,000 in expenses related to the
integration of the branch acquisition in northeast Connecticut.
An overall increase in interest income and interest expense reflects an increase
in volume and interest rates on earning assets and an increase in volume and
increase in rates on interest-bearing liabilities. Further analysis is provided
in sections on net interest revenue and supporting schedules.
Allowance for Loan Losses and Non-Performing Assets
The Corporation's provision for loan losses in the current quarter was $13,000,
compared to $0 for the same period in 1999. Loans written off against the
allowance for loan losses after recoveries amounted to $601,000 for the nine
months ended September 30, 2000.
After giving effect to the actions described above, the allowance for loan
losses at September 30, 2000, totaled $3,460,000 or .77% of total loans, as
compared to $3,908,000 or .89% at December 31, 1999.
Non-performing past due loans at September 30, 2000, aggregated $2,057,000 or
.46% of total loans, compared to $2,439,000 or .55% at December 31, 1999. The
percentage of non-performing and past due loans compared to total assets on
those same dates, respectively, amounted to .35% and .42%. The change in
non-performing loans was primarily the result of the sale of a pool of
classified loans during the first quarter of the year.
Other real estate owned at September 30, 2000, totaled $605,000 and stands at
.10% of total assets at the end of the current quarter.
Management has made every effort to recognize all circumstances known at this
time that could affect the collectibility of loans and has reflected these in
the provision for loan losses, the write-down of other real estate owned and
impaired loans to fair value and other loans (watch list) monitored by
management, the charge-off of loans and the balance in the allowance for loan
losses. Management deems that the provision for the quarter and the balance in
the allowance for loan losses are adequate, based on results provided by the
loan grading system and circumstances known at this time.
10
<PAGE> 11
WESTBANK CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
NET INTEREST INCOME
The Corporation's earning assets include a diverse portfolio of earning
instruments, ranging from the Corporation's core business of loan extensions to
interest-bearing securities issued by federal, state and municipal authorities.
These earning assets are financed through a combination of interest-bearing and
interest-free sources.
Net interest income, the most significant component of earnings, is the amount
by which the interest generated by assets exceeds the interest expense on
liabilities.
The Corporation analyzes its performance by utilizing the concepts of interest
rate spread and net yield on earning assets. The interest rate spread represents
the difference between the yield on earning assets and interest paid on
interest-bearing liabilities. The net yield on earning assets is the difference
between the rate of interest on earning assets and the effective rate paid on
all funds - interest-bearing liabilities as well as interest-free sources
(primarily demand deposits and shareholders' equity).
The balances and rates derived for the analysis of net interest income presented
on the following pages reflect the consolidated assets and liabilities of the
Corporation's principal earning subsidiaries, Park West Bank and Trust Company
and Cargill Bank.
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
QUARTER ENDED SIX MONTHS ENDED
09-30-00 09-30-99 09-30-00 09-30-99
------- ------- ------- -------
<S> <C> <C> <C> <C>
Interest and dividend income $10,839 $ 7,954 $31,688 $22,950
Interest expense 6,192 3,697 17,152 10,503
------- ------- ------- -------
Net interest income $ 4,647 $ 4,257 $14,536 $12,447
======= ======= ======= =======
</TABLE>
INTEREST RATE SPREAD AND NET YIELD ON EARNING ASSETS
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
QUARTER ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
2000 1999 2000 1999
-------------------- ----------------- ----------------- -------------------
Average Average Average Average
Balance Rate Balance Rate Balance Rate Balance Rate
-------- ---- --------- ---- -------- ---- -------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Earning Assets $556,944 7.82% $ 419,637 7.58% $543,794 7.80% $403,205 7.59%
-------- ---- --------- ---- -------- ---- -------- ----
Interest-bearing
liabilities 497,680 4.98 354,474 4.17 485,838 4.71 339,252 4.13
-------- ---- --------- ---- -------- ---- -------- ----
Interest rate spread 2.84 3.41 3.09 3.46
---- ---- ---- ----
Interest-free resources
used to fund
earning assets 59,264 65,163 57,956 63,953
-------- --------- -------- --------
Total Sources of Funds $556,944 $ 419,637 $543,794 $403,205
======== ========= ======== ========
Net Yield on Earning Assets 3.37% 4.06% 3.59% 4.12%
==== ==== ==== ====
</TABLE>
11
<PAGE> 12
WESTBANK CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
CHANGES IN NET INTEREST INCOME
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
QUARTER ENDED 09-30-00 NINE MONTHS ENDED 09-30-00
OVER OVER
QUARTER ENDED 09-30-99 NINE MONTHS ENDED 09-30-99
-------------------------------------- --------------------------------------
CHANGE DUE TO CHANGE DUE TO
VOLUME RATE TOTAL VOLUME RATE TOTAL
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Interest Income:
Loans $ 2,050 $ 187 $ 2,237 $ 6,937 $ 335 $ 7,272
Securities 533 88 621 1,197 287 1,484
Federal funds 66 7 73 66 30 96
------- ------- ------- ------- ------- -------
Total Interest Earned 2,649 282 2,931 8,200 652 8,852
------- ------- ------- ------- ------- -------
Interest Expense:
Interest-bearing deposits 1,434 556 1,990 3,838 849 4,687
Other borrowed funds 337 168 505 1,353 609 1,962
------- ------- ------- ------- ------- -------
Total Interest Expense 1,771 724 2,495 5,191 1,458 6,649
------- ------- ------- ------- ------- -------
Net Interest Income $ 878 $ (442) $ 436 $ 3,009 $ (806) $ 2,203
======= ======= ======= ======= ======= =======
</TABLE>
Net interest earned on a tax equivalent basis increased by $436,000 during the
third quarter of 2000 compared to the third quarter of 1999. For the nine-month
period ended September 30, 2000, net interest income increased by $2,203,000
versus the same period of 1999.
Average earning assets increased by $140,589,000 during the first nine months of
2000. The average earning base was $543,794,000 compared to $403,205,000 in the
same period last year.
OPERATING EXPENSES
The components of total operating expenses for the periods and their percentage
of gross income are as follows:
(Dollars amounts in thousands)
<TABLE>
<CAPTION>
QUARTER ENDED NINE MONTHS ENDED
09-30-00 09-30-99 09-30-00 09-30-99
------------------------------------- -------------------------------------
Amount Percent Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ ------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Salaries and benefits $ 1,976 17.34% $ 1,581 18.48% $ 5,938 17.76% $ 4,548 18.44%
Other non-interest expense 1,667 14.63 1,114 13.02 4,856 14.53 3,387 13.73
Occupancy - net 339 2.98 294 3.43 1,025 3.07 908 3.69
------- ----- ------- ----- ------- ----- ------- -----
Total Operating Expenses $ 3,982 34.95% $ 2,989 34.93% $11,819 35.36% $ 8,843 35.86%
======= ===== ======= ===== ======= ===== ======= =====
</TABLE>
For the nine-month period ended September 30, 2000, operating expenses increased
by approximately $2,976,000 over the 1999 period. The increase was a result of
increases in salary and benefits totaling $1,390,000, occupancy expense totaling
$117,000 and an increase in other non-interest expense of $1,469,000. The
increases are a direct result of the branch acquisition on October 29, 1999 and
the related staffing and acquisition costs.
12
<PAGE> 13
WESTBANK CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
CAPITAL RATIOS
<TABLE>
<CAPTION>
09-30-00 09-30-99
-------- --------
<S> <C> <C>
Ratio of "Tier 1" leverage capital
to total assets at end of period 6.20% 9.70%
</TABLE>
Regulatory risk-based capital requirements take into account the different risk
categories of banking organizations by assigning risk weight to assets and the
credit equivalent amounts of off-balance sheet exposures.
In addition, capital is divided into two tiers. For this Corporation, Tier 1
includes the common stockholders' equity. Tier 2, or supplementary capital,
includes not only the equity but, also, a portion of the allowance for loan
losses. Net unrealized gain/(losses) on securities available for sale are not
permitted to be included for regulatory capital purposes.
The following are the Corporation's risk-based capital ratios at September 30,
2000:
Tier 1 Capital (minimum required 4.00%) 9.46 %
Tier 2 Capital (minimum required 8.00%) 11.81 %
INTEREST RATE SENSITIVITY
The following table sets forth the distribution of the repricing of the
Corporation's earning assets and interest-bearing liabilities as of September
30, 2000.
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
Three Over Three Over One
Months Months to Year to Over
or Less One Year Five Years Five Years Total
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Earning Assets $ 67,401 $ 66,843 $ 170,444 $ 245,698 $ 550,386
Interest-Bearing
Liabilities 121,584 170,123 179,895 17,667 489,269
--------- --------- --------- --------- ---------
Interest Rate
Sensitivity Gap $ (54,183) $(103,280) $ (9,451) $ 228,031 $ 61,117
--------- --------- --------- --------- ---------
Cumulative Interest
Rate
Sensitivity Gap $ (54,183) $(157,463) $(166,914) $ 61,117
Interest Rate
Sensitivity
Gap Ratio (9.84)% (18.77)% (1.72)% 41.44%
Cumulative Interest
Rate Sensitivity
Gap Ratio (9.84)% (28.61)% (30.33)% 11.11%
</TABLE>
13
<PAGE> 14
WESTBANK CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
LIQUIDITY
Liquidity management requires close scrutiny of the mix and maturity of deposits
and borrowings and short-term investments. Cash and due from banks, federal
funds sold, investment securities and mortgage-backed securities, as compared to
deposits, are used by Westbank to compute its liquidity on a daily basis as
adjusted for regulatory purposes. In addition, Westbank is subject to Regulation
D of the Federal Reserve Bank (FRB), which requires depository institutions to
maintain reserve balances on deposit with the FRB based on certain average
depositor balances. Westbank is in compliance with Regulation D. Management of
Westbank believes that its current liquidity is sufficient to meet current and
anticipated funding needs.
PROVISION AND ALLOWANCE FOR LOAN LOSSES
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
QUARTER ENDED NINE MONTHS ENDED
09-30-00 09-30-99 09-30-00 09-30-99
------ ------ ------ ------
<S> <C> <C> <C> <C>
Balance at beginning of period $3,896 $2721 $3,908 $2,665
Provision charged to expense 13 153 77
------ ------ ------ ------
3,909 2,721 4,061 2,742
------ ------ ------ ------
Charge-offs:
Loans secured by real estate 25 41 163 128
Commercial and industrial loans 410 441
Consumer loans 29 25 53 65
------ ------ ------ ------
464 66 657 193
------ ------ ------ ------
Recoveries:
Loans secured by real estate 9 4 31 90
Commercial and industrial loans 1 10 15
Consumer loans 5 3 15 8
------ ------ ------ ------
15 7 56 113
------ ------ ------ ------
Net charge-offs (recoveries) 449 59 601 80
------ ------ ------ ------
Balance at end of period $3,460 $2,662 $3,460 $2,662
====== ====== ====== ======
Net charge-offs to:
Average loans 0.10% 0.02% 0.13% 0.02%
Loans at end of period 0.10% 0.02% 0.13% 0.02%
Allowance for loan losses 12.98% 2.21% 17.37% 3.01%
Allowance for loan losses as a percentage of:
Average loans 0.77% 0.77% 0.78% 0.81%
Loans at end of period 0.77% 0.75% 0.77% 0.75%
</TABLE>
The approach the Corporation uses in determining the adequacy of the allowance
for loan losses is the combination of a target reserve and a general reserve
allocation. Quarterly, based on an internal review of the loan portfolio, the
Corporation identifies required reserve allocations targeted to recognized
problem loans that, in the opinion of management, have potential loss exposure
or questions relative to the depth of the collateral on these same loans. In
addition, the Corporation allocates a general reserve against the remainder of
the loan portfolio.
14
<PAGE> 15
WESTBANK CORPORATION AND SUBSIDIARIES
NON-ACCRUAL, PAST DUE AND RESTRUCTURED LOANS
(CONTINUED)
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
09-30-00 06-30-00 03-31-00 12-31-99 09-30-99
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Non-Accrual Loans $1,693 $ 691 $ 996 $2,001 $ 658
------ ------ ------ ------ ------
Loans contracturally past
due 90 days or more
and still accruing 364 778 381 438 357
------ ------ ------ ------ ------
Total non-accrual, past due
and restructured loans $2,057 $1,469 $1,377 $2,439 $1,015
------ ------ ------ ------ ------
Non-accrual, past due and
restructured loans as a
percentage of total loans .46% .33% .31% .55% .29%
------ ------ ------ ------ ------
Allowance for loan losses as a
percentage of non-accrual,
past due and restructured loans 168.21% 265.21% 277.41% 160.23% 262.27%
------ ------ ------ ------ ------
Other real estate owned - net $ 605 $ 672 $ 512 $ 442 $ 84
------ ------ ------ ------ ------
Total non-performing assets $2,662 $2,141 $1,889 $2,881 $1,099
------ ------ ------ ------ ------
Non-performing assets as a
percentage of total assets .45% .36% .33% .50% .24%
------ ------ ------ ------ ------
</TABLE>
15
<PAGE> 16
WESTBANK CORPORATION AND SUBSIDIARIES
QUARTER-TO-DATE AVERAGE BALANCES
INTEREST EARNED - INTEREST EXPENSE
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
FOR THE QUARTER ENDED FOR THE QUARTER ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999
Balance Interest Rate Balance Interest Rate
---------- --------- ---- ---------- --------- ----
<S> <C> <C> <C> <C> <C> <C>
Federal funds sold and
temporary investments $ 6,493 $ 101 6.22% $ 2,167 $ 28 5.17%
Securities 99,627 1,798 7.22 69,797 1,177 6.74
Loans 450,824 8,986 7.97 347,673 6,749 7.76
---------- --------- ---- ---------- --------- ----
Total earning assets 556,944 10,885 7.82% 419,637 7,954 7.58%
---------- --------- ---- ---------- --------- ----
Loan loss allowance (4,101) (2,717)
All other assets 40,474 23,189
--------- ----------
TOTAL ASSETS $593,317 $440,109
========= ==========
LIABILITIES AND EQUITY
Interest-bearing deposits $443,818 $5,293 4.77% $319,023 $3,303 4.14%
Borrowed funds 53,862 899 6.68 35,451 394 4.45
---------- --------- ---- ---------- --------- ----
Total interest-bearing
liabilities 497,680 6,192 4.98% 354,474 3,697 4.17%
---------- --------- ---- ---------- --------- ----
Interest rate spread 2.84% 3.41%
Demand deposits 60,166 52,457
Other liabilities 3,278 2,063
Shareholders' equity 32,193 31,115
---------- ----------
TOTAL LIABILITIES
AND EQUITY $593,317 $440,109
========= ==========
NET INTEREST INCOME $4,693 $4,257
========= =========
Interest Earned/Earning Assets 7.82% 7.58%
Interest Expense/Earning Assets 4.45 3.52
---- ----
Net Yield on Earning Assets 3.37% 4.06%
---- ----
Deduct Tax Equivalent Adjustment 46 0
--------- ---------
NET INTEREST INCOME $4,647 $4,257
========= =========
</TABLE>
16
<PAGE> 17
WESTBANK CORPORATION AND SUBSIDIARIES
YEAR-TO-DATE AVERAGE BALANCES
INTEREST EARNED - INTEREST EXPENSE
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999
Balance Interest Rate Balance Interest Rate
---------- ---------- ---- ---------- ---------- ----
<S> <C> <C> <C> <C> <C> <C>
Federal funds sold and
temporary investments $ 4,485 $ 197 5.86% $ 2,971 $ 101 4.53%
Securities 94,014 5,051 7.16 71,479 3,567 6.65
Loans 445,295 26,554 7.95 328,755 19,282 7.82
---------- ---------- ---- ---------- ---------- ----
Total earning assets 543,794 $31,802 7.80% 403,205 $22,950 7.59%
---------- ---------- ---- ---------- ---------- ----
Loan loss allowance (4,027) (2,715)
All other assets 39,841 22,909
---------- ----------
TOTAL ASSETS $579,608 $423,399
========== ==========
LIABILITIES AND EQUITY
Interest-bearing deposits $427,500 $14,300 4.46% $310,806 $9,613 4.12%
Borrowed funds 58,338 2,852 6.52 28,446 890 4.17
---------- ---------- ---- ---------- ---------- ----
Total interest-bearing
liabilities 485,838 $17,152 4.71 339,252 $10,503 4.13
---------- ---------- ---- ---------- ---------- ----
Interest rate spread 3.09% 3.46%
Demand deposits 59,339 51,237
Other liabilities 2,913 1,873
Shareholders' equity 31,518 31,037
---------- ----------
TOTAL LIABILITIES
AND EQUITY $579,608 $423,399
========== ==========
NET INTEREST INCOME $14,650 $12,447
========== ==========
Interest Earned/Earning Assets 7.80% 7.59%
Interest Expense/Earning Assets 4.21 3.47
---- ----
Net Yield on Earning Assets 3.59% 4.12%
---- ----
Deduct Tax Equivalent Adjustment 114 0
---------- ----------
NET INTEREST INCOME $14,536 $12,447
========== ==========
</TABLE>
17
<PAGE> 18
WESTBANK CORPORATION AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings - NONE
ITEM 2. Changes in Rights of Securities Holders - NONE
ITEM 3. Defaults by Company on its Senior Securities - NONE
ITEM 4. Results of Votes on Matters Submitted to a Vote of Security
Holders - NONE
ITEM 5. Other Events
a. Information Concerning Forward-Looking Statements
Westbank has made, and may make in the future, forward-looking
statements concerning future performance, including, but not
limited to, future earnings and events or conditions that may
affect such future performance. These forward-looking statements
are based upon management's expectations and belief concerning
possible future developments and the potential effect of such
future developments on Westbank. There is no assurance that such
future developments will be in accordance with management's
expectations and belief or that the effect of any future
developments on Westbank will be those anticipated by Westbank
management.
All assumptions that form the basis of any forward-looking
statements regarding future performance, as well as events or
conditions that may affect such future performance, are based on
factors that are beyond Westbank's ability to control or predict
with precision, including future market conditions and the
behavior of other market participants. Among the factors that
could cause actual results to differ materially from such
forward-looking statements are the following:
1. The status of the economy in general, as well as in
Westbank's prime market areas of Western Massachusetts and
Northeastern Connecticut;
2. The real estate market in Western Massachusetts and
Northeastern Connecticut;
3. Competition in Westbank's prime market area from other
banks, especially in light of continued consolidation in
the New England banking industry;
4. Any changes in federal and state bank regulatory
requirements;
5. Changes in interest rates; and
6. The cost and other effects of unanticipated legal and
administrative cases and proceedings, settlements and
investigations.
While Westbank periodically reassesses material trends and
uncertainties affecting the Corporation's performance in
connection with its preparation of Management's Discussion and
Analysis of Results of Operations and Financial Condition
contained in its quarterly and annual reports, Westbank does not
intend to review or revise any particular forward-looking
statements.
b. Registration on Form S-3
None.
c. Registration of Form S-8
None
18
<PAGE> 19
ITEM 6. Exhibits and Reports on Form 8
a. Exhibits
EXHIBIT INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
3. Articles of Organization, as amended **
(a) Articles of Organization, as amended *
(b) By-Laws, as amended *
10. Material Contracts - None
27. Financial Data Schedule To be included
</TABLE>
* Incorporated by reference to identically numbered exhibits contained
in Registrant's Annual Report on Form 10-K for the year ended December
31, 1988.
** Incorporated by reference to identically numbered exhibits contained
in Registrant's Annual Report on Form 10-K for the year ended December
31, 1987.
b. Reports on Form 8-K - None
19
<PAGE> 20
WESTBANK CORPORATION AND SUBSIDIARIES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Quarterly Report to be signed on its behalf by
the undersigned thereunto duly authorized.
WESTBANK CORPORATION
Date: November 10, 2000 /s/
------------------------------------
Donald R. Chase
President and Chief Executive Officer
Date: November 10, 2000 /s/
------------------------------------
John M. Lilly
Treasurer and Chief Financial Officer
20
