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 March 31, 1996 Commission file number 0 - 12784 WESTBANK CORPORATION (Exact name of registrant as specified in its charter) Massachusetts 04 - 2830731 (State or other jurisdiction of inc. or org.) (I.R.S. Employer I.D. No.) 								 								 225 Park Avenue, West Springfield, Massachusetts 01090-0149 (Address of principal executive offices) (Zip Code) (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: 3,267,349 shares outstanding as of April 30, 1996. WESTBANK CORPORATION AND SUBSIDIARIES INDEX PART I - FINANCIAL INFORMATION Page Financial Statements Condensed Consolidated Balance Sheets 3 Condensed Consolidated Statements of Income 4 Condensed Consolidated Statements of Stockholders' Equity 5 Condensed Consolidated Statements of Cash Flows 6 Notes to Condensed Consolidated Financial Statements 7-8 Management's Discussion and Analysis of Financial Condition and Results of Operations 9-15 PART II - OTHER INFORMATION ITEM 1. Legal Proceedings 16 ITEM 2. Changes in Rights of Securities Holders 16 ITEM 3. Defaults by Company on its Senior Securities 16 ITEM 4. Results of Votes on Matters Submitted to a Vote of Security Holders 16 ITEM 5. Other Information 16 ITEM 6. Exhibits and Reports on Form 8-K 16 Signatures 17 WESTBANK CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS MARCH 31, 1996 AND DECEMBER 31, 1995 (Dollar amounts in thousands) ASSETS March 31, 1996 December 31, 1995 Cash and due from banks: (Unaudited) 	 Non-interest bearing $ 9,729 $ 11,195 Interest bearing 582 509 Federal Funds sold 14,300 900 Total cash and cash equivalents 24,611 12,604 Investment securities available for sale 19,192 16,907 Investment securities held to maturity (approximate market value of $16,490 in 1996 and $18,402 in 1995) 16,446 18,209 Total securities 35,638 35,116 Loans $ 189,268 $ 192,145 Mortgage loans held-for-sale 6,040 8,826 Allowance for loan losses (3,916) (3,707) Net-loans 191,392 197,264 Bank premises and equipment 4,053 3,643 Other real estate owned (OREO) - net of allowance for losses of $187 in 1996 and $65 in 1995 1,858 1,300 Accrued interest receivable 1,634 1,658 Deferred income taxes 553 364 Other assets 1,469 1,828 TOTAL ASSETS $ 261,208 $ 253,777 LIABILITIES AND STOCKHOLDERS' EQUITY Deposits Non-interest bearing $ 42,960 $ 43,981 Interest bearing 190,809 183,981 Total Deposits 233,769 227,962 Borrowed funds 8,690 7,177 Accrued interest payable 325 309 Other liabilities 399 626 Total Liabilities 243,183 236,074 Stockholders' Equity: Common stock - $2 par value Authorized - 9,000,000 shares Issued - 3,247,834 shares in 1996 and 3,221,603 shares in 1995 6,496 6,443 Additional paid in capital 7,254 7,141 Retained earnings 4,424 4,053 Net unrealized gain/(loss) on securities available for sale (149) 66 Total Stockholders' Equity 18,025 17,703 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 261,208 $ 253,777 See accompanying notes to condensed consolidated financial statements. WESTBANK CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995 (Dollar amounts in thousands) (Unaudited) THREE MONTHS ENDED 03-31-96 03-31-95 Income: Interest and fees on loans $ 4,335 $ 4,239 Interest and dividend income on securities 536 495 Interest on temporary investments 81 32 Total interest and dividend income 4,952 4,766 Interest expense 2,071 1,926 Net interest income 2,881 2,840 Provision for loan losses 140 450 Net interest income after provision for loan losses 2,741 2,390 Security gains 112 0 Other non-interest income 492 512 Total non-interest income 604 512 Non-interest expenses: Salaries and benefits 1,044 956 Other real estate-provision for losses 131 10 -operating expenses 20 120 Other non-interest expense 940 839 Occupancy - net 217 187 Total non-interest expense 2,352 2,112 Income before income taxes 993 790 Income taxes (benefit) 429 (65) Net Income $ 564 $ 855 Net income per share $ 0.17 $ 0.26 Weighted average shares of common stock and common share equivalents 3,351,437 3,234,625 See accompanying notes to condensed consolidated financial statements. WESTBANK CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY YEAR ENDED DECEMBER 31, 1995 AND THREE MONTHS ENDED MARCH 31, 1996 (1996 Unaudited) (Dollar amounts in thousands) UNREALIZED GAIN (LOSS) COMMON STOCK ADDITIONAL ON SECURITIES NUMBER OF PAR PAID IN RETAINED AVAILABLE SHARES VALUE CAPITAL EARNINGS FOR SALE TOTAL DECEMBER 31, 1994 3,138,167 $ 6,276 $ 6,877 $ 2,334 $ (143) $ 15,344 Net income - - - 2,353 - 2,353 Cash dividends declared ($.20 per share) - - - (634) - (634) Shares issued: Stock option plan 16,342 33 4 - - 37 Dividend reinvestment and stock purchase plan 67,094 134 260 - - 394 Change in unrealized gain											 (loss) on securities available for sale - - - - 209 209 BALANCE-DECEMBER 31, 1995 3,221,603 6,443 7,141 4,053 66 17,703 Cash Dividend Declared: Amount Declaration Record Paid ($0.06 per share) (193) (193) Shares issued under Dividend Reinvestment Plan 11,776 24 51 75 Shares issued under stock purchase plan 14,455 29 62 91 Change in unrealized gain (loss) on securities available for sale (215) (215) Net income 564 564 BALANCE-MARCH 31, 1996 3,247,834 $ 6,496 $ 7,254 $ 4,424 $ (149) $ 18,025 See accompanying notes to condensed consolidated financial statements. WESTBANK CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995 (Unaudited) (Dollar amounts in thousands) Three Months Ended 03-31-96 03-31-95 Operating activities: Net income $ 564 $ 855 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses 140 450 Depreciation and amortization 140 120 Provision for other real estate owned 131 10 Decrease in accrued interest receivable 24 56 Realized gain on sale of securities (112) 0 Realized loss on sale of other real estate owned 10 4 Decrease (increase) in other assets 359 (20) Increase in deferred taxes (31) (363) Increase in interest payable on deposits 16 16 Increase (decrease) in other liabilities (227) 130 Net cash provided by operating activities 1,014 1,258 Investing activities: Investments and mortgage-backed securities: Held to maturity: Purchases (1,497) 0 Proceeds from maturities and principal payments 3,260 39 Available for sale: Purchases (1,990) (4,156) Proceeds from sales 3,083 0 Proceeds from maturities 0 0 Purchases of premises and equipment (550) (250) Net (increase) decrease in loans 1,292 (131) Proceeds from sale of other real estate owned 102 70 Net cash provided by (used in) investing activities 3,700 (4,428) Financing activities: Net increase (decrease) in borrowings 1,513 (588) Net increase (decrease) in deposits 5,807 4,114 Proceeds from exercise of stock options and stock purchase plan 166 64 Dividends paid (193) (157) Net cash used by financing activities 7,293 3,433 Increase (decrease) in cash and cash equivalents 12,007 263 Cash and cash equivalents at beginning of year 12,604 11,700 Cash and cash equivalents at end of year $24,611 $11,963 Cash paid during the year: Interest on deposits and other borrowings 2,055 1,970 Income taxes 100 0 Transfers of loans to other real estate owned 864 205 Sales of other real estate owned financed by the bank 72 134 See notes to consolidated financial statements. WESTBANK CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE A - GENERAL INFORMATION Westbank Corporation (hereinafter sometimes referred to as "Westbank") is a registered Bank Holding Company organized to facilitate the expansion and diversification of the business of Park West Bank and Trust Company (hereinafter sometimes referred to as "Park West") into additional financial services related to banking. Substantially all operating income and net income of the Corporation are presently accounted for by Park West. NOTE B - CURRENT OPERATING ENVIRONMENT Since December 1994, Park West has been operating under a Memorandum of Understanding (the "Memorandum") with the Federal Deposit Insurance Corporation (the "FDIC") and the Commissioner of Banks for the Commonwealth of Massachusetts (the "Commissioner"). On December 11, 1995 the Memorandum was revised. The Memorandum is an informal agreement with the FDIC and the Commissioner requiring Park West, among other things, to maintain a leverage capital ratio of at least 6%, to develop a written plan of action to lessen its risk exposure to certain borrowers and to refrain from extending or renewing credit to any borrower who has a loan or extension of credit with Park West that has been charged off or classified, without first obtaining majority approval of Park West's Board of Directors. Park West must maintain the allowance for losses at a level commensurate to the risk in the loan portfolio and correct other deficiencies noted in the exam. The Memorandum requires Park West to obtain approval from the FDIC and the Commissioner prior to paying or declaring a dividend. Finally, Park West is required to make quarterly reports to the FDIC and the Commissioner detailing the form and manner of action taken to secure compliance with the Memorandum. 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 which can apply to a financial institution. As of March 31, 1996, Park West's capital was at a level that placed the Bank 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. The weak economy and real estate market continues to impair the financial results of the Corporation. Despite these weaknesses the Corporation has managed significant improvements in earnings and asset quality. As a result of the continued aggressive management of problem loans, the Board of Directors and management believe the Corporation is positioned to comply with the Memorandum as well as the requirements of FDICIA. NOTE C - BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements for the first quarter ended March 31, 1996 and 1995 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 of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month period ended March 31, 1996, are not necessarily indicative of the results that may be expected for the year ended December 31, 1996. 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, 1995. NOTE D - CHANGES IN ACCOUNTING PRINCIPLES On January 1, 1996 the Bank adopted Statement of Financial Accounting Standards No. 122, "Accounting for Mortgage Servicing Rights". This statement requires allocation of the total cost of mortgage loans to the mortgage servicing rights and the loans (without the mortgage servicing rights) based on their relative fair values. The adoption of this statement did not have a material effect on the Bank's financial condition or results of its operations. The Bank has elected to adopt Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation," in 1996 through disclosure only. NOTE E - NET INCOME PER SHARE Earnings per share were computed by dividing net income by the weighted average number of shares of common stock outstanding and common stock equivalent shares arising from unexercised stock options. The weighted average of common and common stock equivalents for the period ended March 31, 1996 and 1995, amounted to 3,351,437 and 3,234,625 shares, respectively. NOTE F - 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 March 31, 1996 standby letters of credit amounted to $927,000 and loan commitments were $29,703,000 and unused balances available on home equity lines of credit were $7,790,000. Trust Assets - Property with a book value of $107,417,000 at March 31, 1996 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 G - STOCKHOLDERS' EQUITY The FDIC imposes leverage capital ratio requirements for state non-member Banks. The Bank's leverage capital ratio as of March 31, 1996 and December 31, 1995 was 6.99% and 6.87% respectively. In addition, the FDIC has established risk-based capital requirements for insured institutions of, Tier 1 risk-based capital of 4.00% and total risk-based capital of 8.00%. The Bank's risk-based capital at March 31, 1996, for Tier 1 was 10.02% and total risk-based capital was 11.28%. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Changes in Financial Condition - Total consolidated assets amounted to $261,208,000 on March 31, 1996, compared to $253,777,000 on December 31, 1995. As of March 31, 1996 and March 31, 1995, earning assets amounted to, respectively, $245,818,000 or 94% of total assets, and $230,500,000, or 93% of total assets. Earning assets increased during the first three months of 1996 as a result of increases in securities loans and temporary funds. Deposits originated from two newly opened supermarket branches provided the funds to support the increase in earning assets. During the first three months of 1996, the Corporation securitized approximately $3.6 million of residential mortgages into mortgage-backed securities, which were placed into the Corporation's securities available-for-sale account. During the quarter, the Corporation also sold approximately $3 million of mortgage-backed securities resulting in a gain of $112,000. Changes in Results of Operations - For the quarter ended March 31, 1996, net income totaled $564,000 compared to $855,000 for the three-month period ended March 31, 1995. Included in the results of the 1995 quarter is a tax benefit of $400,000, which is the result of a decrease in the valuation reserve pertaining to deferred tax assets. An overall increase in interest income and interest expense reflects an increase in volume and interest rates on earning assets and interest-bearing deposits. Further analysis is provided in sections on net interest revenue and supporting schedules. Allowance for Loan/Lease Losses and Non-Performing Assets - A decrease has been reflected in the provision for loan losses in the quarter with $140,000 being provided compared to $450,000 in 1995. Loans and leases written off against the allowance for loan/lease losses after recoveries amounted to ($69,000) for the first three months of 1996 versus $1,035,000 for the same period of 1995. After giving effect to the actions described above, the allowance for loan/lease losses at March 31, 1996 totalled $3,916,000 or 2.01% of total loans/leases, as compared to $3,707,000 or 1.84% at December 31, 1995. Non-performing past due loans/leases at March 31, 1996 aggregated $5,103,000 or 2.61% of total loans/leases compared to $6,896,000 or 3.43% at December 31, 1995. The percentage of non-performing and past due loans/leases compared to total assets on those same dates, respectively, amounted to 1.95% and 2.71%. The change in non-performing loans was primarily the result of the resolution of one large real estate loan totaling approximately $2,300,000 which resulted in a recovery of $280,000, and the transfer to non-performing status of one commercial loan totaling $730,000. Other real estate owned increased during the most recent quarter by $318,000 compared to the same period of 1995 and totals $1,858,000. Included in this amount is one property totaling $290,000 which the Corporation holds for investment purposes. The percentage of other real estate owned to total assets as of March 31, 1996 and March 31, 1995 amounted to .71% and .62%, respectively. Management has made every effort to recognize all circumstances known at this time which could affect the collectibility of loan/leases and has reflected these in deciding as to the provision for loan/lease losses, the writing 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/leases and the balance in the allowance for loan/lease losses. Management deems that the provision for the quarter, and the balance in the allowance for loan/lease losses, are adequate based on results provided by the grading system and circumstances known at this time. 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. For analytical purposes, the interest earned on tax exempt assets is adjusted to a "tax equivalent" basis to recognize the income tax savings which facilitates comparison between taxable and tax exempt assets. 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 subsidiary, Park West Bank and Trust Company. QUARTER ENDED (Dollar amounts in thousands) 03-31-96 03-31-95 Interest and divided income $ 4,952 $ 4,766 Interest expense 2,071 1,926 Net interest income 2,881 2,840 Tax equivalent adjustment 4 8 Net interest income (taxable equivalent) $ 2,885 $ 2,848 INTEREST RATE SPREAD AND NET YIELD ON EARNING ASSETS (Dollar amounts in thousands) QUARTER ENDED 03-31-96 03-31-95 (Taxable Equivalent) Average Average Balance Rate Balance Rate Earning Assets $238,565 8.31% $228,952 8.34% Interest-bearing liabilities $192,091 4.31% $190,707 4.04% Interest rate spread 4.00 4.30 Interest-free resources used to fund earning assets 46,474 38,245 Total Sources of Funds $238,565 3.47 $228,952 3.36 Net Yield on Earning Assets 4.84% 4.98% CHANGES IN NET INTEREST INCOME (Dollar amounts in thousands) QUARTER ENDED MARCH 31, 1996 (Taxable Equivalent) O V E R QUARTER ENDED MARCH 31, 1995 CHANGE DUE TO VOLUME RATE TOTAL Interest Income: Loans/Leases $ 68 $ 24 $ 92 Securities 36 5 41 Federal funds 54 (5) 49 Total Interest Earned 158 24 182 Interest Expense: Interest bearing deposits 18 161 179 Other Borrowed Funds (5) (29) (34) Total Interest Expense $ 13 $ 132 $145 Net Interest Income $145 $(108) $ 37 Net interest earned on a taxable equivalent basis increased to $2,885,000 in the first quarter of 1996, up $37,000 as compared with the comparable period of 1995. Average earning assets increased by $9,613,000 during the first quarter of 1996. The average earning base was $238,565,000 compared to $228,952,000 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: (Dollar amounts in thousands) QUARTER ENDED 3-31-96 3-31-95 Amount Percent Amount Percent Salaries and benefits $1,044 18.79% $ 956 18.11% Other real estate - expense 151 2.72 130 2.46 Other non-interest expense 940 16.92 839 15.90 Occupancy - net 217 3.90 187 3.55 Total Operating Expenses $2,352 42.33% $2,112 40.02% COMPONENTS RATIOS Ratio of "Tier 1" leverage capital to total assets at end of period 6.90% 6.98% Regulatory risk-based capital requirements take into account the different risk categories of banking organizations by assigning risk weights 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 March 31, 1996: Tier 1 Capital (minimum required 4.00%) 10.20% Tier 2 Capital (minimum required 8.00%) 11.46% 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 March 31, 1996. (Dollar amounts in thousands) Three Over Three Over One Over Months Months to Year to Five or Less One Year Five Years Years Total Earning Assets $73,749 $ 42,236 $ 69,206 $60,627 $245,818 Interest Bearing Liabilities 75,894 51,454 72,151 199,499 Interest Rate Sensitivity Gap $(2,145) $ (9,218) $ (2,945) $60,627 $ 46,319 Cumulative Interest Rate Sensitivity Gap $ 2,145 $(11,363) $(14,308) $46,319 Interest Rate Sensitivity Gap Ratio (0.87)% (3.75)% (1.20)% 24.66% Cumulative Interest Rate Sensitivity Gap Ratio (0.87)% (4.62)% (5.82)% 18.84% LIQUIDITY Cash and due from banks, federal funds sold, investment securities, mortgage-backed securities and loans available for sale, as compared to deposits and short term liabilities, are used by the Corporation to compute its liquidity on a daily basis. At March 31, 1996, the Corporation's ratio of such assets to total deposits and borrowed funds was 18.12%. PROVISION AND ALLOWANCE FOR LOAN/LEASE LOSSES (Dollar amounts in thousands) QUARTER ENDED 3-31-96 3-31-95 Balance at beginning of period $ 3,707 $ 3,325 Provision charged to expense 140 450 $ 3,847 $ 3,775 Less Charge-offs: Loans secured by real estate 182 791 Commercial and industrial loans 14 204 Consumer loans 27 57 $ 223 $ 1,052 Add-Recoveries: Loans secured by real estate 283 0 Commercial and industrial loans 1 2 Consumer loans 7 13 Lease financing receivables 1 2 292 17 Net charge-offs (recoveries) (69) 1,035 Balance at end of period $ 3,916 $ 2,740 Net Charge-offs (recoveries) to: Average loans/leases (.03)% .53% Loans/leases at end of period (.04)% .53% Allowance for loan/lease losses (1.76)% 37.77% Allowance for loan/lease losses as a percentage of: Average loans/leases 1.97% 1.40% Loans/leases at end of period 2.01% 1.40% The approach the Corporation uses in determining the adequacy of the Allowance for Loan/Lease 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. NON-ACCRUAL, PAST DUE AND RESTRUCTURED LOANS (Dollar amounts in thousands) Non-Accrual Loans: 03-31-96 12-31-95 09-30-95 06-30-95 03-31-95 Loans secured by real estate$ 3,172 $ 5,450 $ 2,124 $ 2,745 $ 3,302 Construction/Land development 464 353 361 52 58 Commercial and Industrial Loans 838 373 302 299 357 Consumer Loans 7 4 13 16 24 4,481 6,180 2,800 3,112 3,741 Loans Contractually past due 90 days or more still accruing: Loans secured by real estate 145 128 271 201 117 Commercial and Industrial Loans 20 135 118 50 0 Consumer Loans 20 14 16 14 8 185 277 405 265 125 Restructured Loans 437 439 442 496 498 Total non-accrual, past due and restructured loans $ 5,103 $ 6,896 $ 3,647 $ 3,873 $ 4,364 Non-accrual, past due and restructured loans as a percentage of total loans 2.61% 3.43% 1.80% 1.98% 2.24% Allowance for loan losses as a percentage of non accrual, past due and restructured loans 76.74% 53.76% 105.18% 77.59% 62.79% OTHER REAL ESTATE Other real estate owned - net$ 1,858 $ 1,300 $ 1,237 $ 1,775 $ 1,540 Total non-performing assets $ 6,961 $ 8,196 $ 4,884 $ 5,648 $ 5,904 Non-performing assets as a percentage of total assets 2.66% 3.23% 1.86% 2.19% 2.38% WESTBANK CORPORATION AND SUBSIDIARIES QUARTER TO DATE AVERAGE BALANCES INTEREST EARNED - INTEREST EXPENSE (RATES ON A TAX EQUIVALENT BASIS) (Dollar amounts in thousands) THREE MONTHS ENDED THREE MONTHS ENDED March 31, 1996 March 31, 1995 Balance Interest Rate Balance Interest Rate Federal Funds sold and temporary investments $ 6,556 $ 81 4.94% $ 2,266 $ 32 5.65% Securities 33,242 536 6.45 31,037 495 6.38 Loans/leases 198,767 4,339 8.73 195,649 4,247 8.68 Total earning assets 238,565 $ 4,956 8.31 278,952 $ 4,774 8.34 Loan/lease loss allowance (3,809) (3,260) All other assets 18,837 18,813 TOTAL ASSETS $253,593 $244,505 LIABILITIES AND EQUITY Interest bearing deposits $183,733 $ 2,008 4.37 $181,897 $ 1,829 4.02 Borrowed funds 8,358 63 3.02 8,810 97 4.40 Total interest bearing liabilities 192,091 $ 2,071 4.31 190,707 $ 1,926 4.04 Interest rate spread 4.00% 4.30% Demand deposits 42,526 37,040 Other liabilities 1,053 806 Shareholders' equity 17,923 15,952 TOTAL LIABILITIES AND EQUITY $253,593 $244,505 Net Interest Income $ 2,885 $ 2,848 Interest Earned/Earning Assets 8.31% 8.34% Interest Expense/Earning Assets 3.47 3.36 Net Yield on Earning Assets 4.84% 4.98% Deduct - Tax Equivalent Adjustment 4 8 NET INTEREST INCOME $ 2,881 $ 2,840 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 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 which 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 which 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 area, Western Massachusetts; 2. The recovery of the real estate market in Western Massachusetts; 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 is 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 statement in light of future events. ITEM 6. Exhibits and Reports on Form 8 - None 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: May 10, 1996 Donald R. Chase, President and Chief Executive Officer Date: May 10, 1996 John M. Lilly, Treasurer and Chief Financial Officer