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 June 30, 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: 3,299,844 shares
outstanding as of July 31, 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 9-16
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings 17
ITEM 2. Changes in Rights of Securities Holders 17
ITEM 3. Defaults by Company on its Senior Securities 17
ITEM 4. Results of Votes on Matters Submitted to a Vote
of Security Holders 17
ITEM 5. Other Information 17
ITEM 6. Exhibits and Reports on Form 8-K 17
Signatures 18
WESTBANK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollar amounts in thousands) June 30, 1996 December 31, 1995
ASSETS
Cash and due from banks:
Non-interest bearing $ 12,070 $ 11,195
Interest bearing 792 509
Federal Funds sold 2,200 900
Total cash and cash equivalents 15,062 12,604
Investment securities available for sale 16,017 16,907
Investment securities held to maturity (approximate
market value of $21,251 in 1996 $18,402 in 1995) 21,305 18,209
Total securities 37,322 35,116
Loans $ 203,996 $ 192,145
Mortgage loans held-for-sale 5,852 8,826
Allowance for loan losses (2,647) (3,707)
Net-loans 207,201 197,264
Bank premises and equipment 4,405 3,643
Other real estate owned - net of
allowance for losses of $236 in
1996 and $65 in 1995 1,303 1,300
Accrued interest receivable 1,795 1,658
Deferred income taxes 602 364
Other assets 1,820 1,828
TOTAL ASSETS $ 269,510 $ 253,777
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing $ 42,547 $ 43,981
Interest bearing 195,261 183,981
Total Deposits 237,808 227,962
Borrowed funds 12,294 7,177
Accrued interest payable 300 309
Other liabilities 693 626
Total Liabilities 251,095 236,074
Stockholders' Equity:
Common stock - $2 par value
Authorized - 9,000,000 shares
Issued - 3,275,645 shares in 1996 and
3,221,603 shares in 1995 6,551 6,443
Additional paid in capital 7,388 7,141
Retained earnings 4,734 4,053
Net unrealized gain (loss) on securities available
for sale (258) 66
Total Stockholders' Equity 18,415 17,703
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 269,510 $ 253,777
See accompanying notes to condensed consolidated financial statements.
WESTBANK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Dollar amounts in thousands)
QUARTER ENDED SIX MONTHS ENDED
06-30-96 06-30-95 06-30-96 06-30-95
Income:
Interest and fees on loans $4,358 $4,460 $8,693 $8,699
Interest and dividend income
on securities 626 579 1,162 1,074
Interest on temporary investments 69 80 150 112
Total interest and dividend income 5,053 5,119 10,005 9,885
Interest expense 2,147 2,211 4,218 4,137
Net interest income 2,906 2,908 5,787 5,748
Provision for loan losses 352 350 492 800
Net interest income after provision
for loan losses 2,554 2,558 5,295 4,948
Security gains 112
Other non-interest income 551 523 1,043 1,035
Total non-interest income 551 523 1,155 1,035
Non-interest expenses:
Salaries and benefits 1,036 945 2,080 1,901
Other real estate-provision for losses 50 100 181 110
-operating expenses 19 90 39 210
Other non-interest expense 919 949 1,859 1,788
Occupancy - net 226 166 443 353
Total non-interest expense 2,250 2,250 4,602 4,362
Income before income taxes 855 831 1,848 1,621
Income taxes 350 284 779 219
Net Income $ 505 $ 547 $1,069 $1,402
Net income per share $ 0.15 $ 0.17 $ 0.32 $ 0.43
Weighted average shares of common
stock and common share
equivalents 3,403,431 3,253,803 3,377,086 3,238,077
See accompanying notes to condensed consolidated financial statements.
WESTBANK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
YEAR ENDED DECEMBER 31, 1995 AND SIX MONTHS ENDED JUNE 30, 1996
(1996 Unaudited)
(Dollar amounts in thousands)
UNREALIZED
GAIN (LOSS) ON
COMMON STOCK ADDITIONAL 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
($0.12 per share) (388) (388)
Shares issued:
Dividend reinvestment plan 23,062 47 110 157
Stock purchase plan 27,765 55 131 186
Stock option plan 3,215 6 6 12
Change in unrealized gain (loss)
on securities available
for sale (324) (324)
Net income 1,069 1,069
BALANCE-JUNE 30, 1996 3,275,645 $ 6,551 $ 7,388 $ 4,734 $ (258) $18,415
See accompanying notes to condensed consolidated financial statements.
WESTBANK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(Unaudited)
(Dollar amounts in thousands)
1996 1995
Operating activities:
Net income $1,069 $1,402
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for loan losses 492 800
Depreciation and amortization 309 238
Provision for other real estate owned 181 110
(Increase) Decrease in accrued interest receivable (137) (39)
Realized gain on sale of securities (112)
Realized (gain) loss on sale of other real estate owned 24 (2)
Realized (gain) loss on sale of loans (66)
Realized (gain) loss on sale of equipment (17) 15
Increase in deferred taxes (1) (261)
Increase (decrease) in interest payable on deposits (9) 49
(Increase) decrease in other assets (26) 496
Increase (decrease) in other liabilities 67 119
Net cash provided by operating activities 1,774 2,927
Investing activities:
Investments and mortgage-backed securities:
Held to maturity:
Purchases (6,382) (1,500)
Proceeds from maturities and principal payments 3,286 2,500
Available for sale:
Purchases (2,456) (9,971)
Proceeds from sales 2,857
Proceeds from maturities 3,679 794
Purchases of premises and equipment (1,071) (374)
Net (increase) decrease in loans (15,166) (1,409)
Proceeds from sale of equipment 17
Proceeds from sale of other real estate owned 990 331
Net cash used in investing activities (14,246) (9,629)
Financing activities:
Net increase (decrease) in borrowings 5,117 (2,296)
Net increase (decrease) in deposits 9,846 14,762
Proceeds from exercise of stock options and stock purchase plan 355 177
Dividends paid (388) (315)
Net cash used in financing activities 14,930 12,328
Increase in cash and cash equivalents 2,458 5,626
Cash and cash equivalents at beginning of period 12,604 11,700
Cash and cash equivalents at end of period $15,062 $17,326
Cash paid during the year:
Interest on deposits and other borrowings 4,227 2,055
Income taxes 511 100
Transfers of loans to other real estate owned 1,481 864
Sales of other real estate owned financed by the bank 72 72
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. Park West is currently in compliance with all the
requirements of 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 second quarter ended June 30, 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 six month period ended June 30, 1996, are not
necessarily indicative of the results that may be expected for the
year ending 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.
WESTBANK CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
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.
NOTE E - NET INCOME PER SHARE
Net 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 stock and common stock
equivalents for the periods ended June 30, 1996 and 1995, amounted
to 3,377,086 and 3,238,007 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 June 30, 1996 standby letters
of credit amounted to $942,000 and loan commitments were $29,674,000
and unused balances available on home equity lines of credit were
$8,474,000.
Trust Assets - Assets with a book value of $105,600,000 at June 30,
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 June 30,
1996 and December 31, 1995 was 6.82% and 6.87% respectively, which
is above the leverage capital ratio required under the Memorandum.
In addition, the FDIC has established risk-based capital
requirements for insured institutions. Under those requirements,
Tier 1 risk based capital must be at least 4% while total risk-
based capital must be at a minimum of 8%. The Bank's Tier 1
risk-based capital was 9.89% on June 30, 1996 and total risk-based
capital was 11.14%.
WESTBANK CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Changes in Financial Condition -
Total consolidated assets amounted to $269,510,000 on June 30, 1996,
compared to $253,777,000 on December 31, 1995. As of June 30, 1996
and June 30, 1995, earning assets amounted to, respectively,
$250,162,000 or 93% of total assets, and $239,103,000, or 93% of
total assets. Earning assets increased during the first six months
of 1996 as a result of increases in securities, loans and temporary
funds. Deposits originated from three 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 first 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 June 30,
1996 net income totaled $505,000 compared to $547,000 for the three
month period ended June 30, 1995. For the six months ended June 30,
1996, net income was $1,069,000 compared to $1,402,000 for the same
period during 1995.
For the six months ended June 30, 1996 the Corporation recorded tax
expense totaling $779,000 versus $219,000 during 1995. The lower
tax expense during 1995 was a result of a decrease in the valuation
reserve pertaining to deferred tax assets.
An overall increase in interest income and interest expense for the
period ended June 30, 1996, reflects an increase in volume and
decreases in 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 Losses and Non-Performing Assets - A slight
increase has been reflected in the provision for loan losses in the
current quarter with $352,000 being provided compared to $350,000 in
the quarter ending June 30, 1995. For the six month period ended
June 30, 1996 the provision for loan losses declined by $308,000
compared to the same period one year ago.
After giving effect to the actions described above, the allowance
for loan losses at June 30, 1996 totalled $2,647,000 or 1.26% of
total loans, as compared to $3,707,000 or 1.84% at December 31,
1995.
Non-performing past due loans at June 30, 1996 aggregated $3,113,000
or 1.48% of total loans compared to $6,896,000 or 3.43% at December
31, 1995. The percentage of non-performing and past due loans
compared to total assets on those same dates, respectively, amounted
to 1.16% and 2.71%. The change in non-performing loans was
primarily the result of the sale of a pool of non-performing loans
which resulted in net proceeds to the Corporation of approximately
$2,000,000.
Other real estate owned increased by $295,000 compared to December
31, 1995. The percentage of other real estate owned to total assets
as of June 30, 1996 and December 31, 1995 amounted to 0.48% and
0.40% respectively.
Management has made every effort to recognize all circumstances
known at this time which could affect the collectibility of loans
and has reflected these in establishing the provision for loan
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 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 grading system and
circumstances known at this time.
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
subsidiary, Park West Bank and Trust Company.
(Dollar amounts in thousands)
QUARTER ENDED SIX MONTHS ENDED
06-30-96 06-30-95 06-30-96 06-30-95
Interest and divided income $5,053 $5,119 $10,005 $9,885
Interest expense 2,147 2,211 4,218 4,137
Net interest income 2,906 2,908 5,787 5,748
INTEREST RATE SPREAD AND NET YIELD ON EARNING ASSETS
(Dollar amounts in thousands)
QUARTER ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
1996 1995 1996 1995
Average Average Average Average
Balance Rate Balance Rate Balance Rate Balance Rate
Earning Assets $247,775 8.16% $236,920 8.64% $243,170 8.23% $232,936 8.49%
Interest-bearing
liabilities 202,268 4.25% 197,319 4.48% 197,180 4.28 194,013 4.26
Interest rate spread 3.91 4.16 3.95 4.23
Interest-free
resources used to
fund earning assets 45,507 39,601 45,990 38,923
Total Sources of Funds $247,775 3.47 $236,920 3.73 $243,170 3.47 $232,936 3.55
Net Yield on Earning Assets 4.69% 4.91% 4.76% 4.94%
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)
QUARTER ENDED 06-30-96 SIX MONTHS ENDED 06-30-96
O V E R O V E R
QUARTER ENDED 06-30-95 SIX MONTHS ENDED 06-30-95
CHANGE DUE TO CHANGE DUE TO
VOLUME RATE TOTAL VOLUME RATE TOTAL
Interest Income:
Loans $177 $(279) $(102) $245 $(251) $(6)
Securities 42 5 47 78 10 88
Federal funds 5 (16) (11) 59 (21) 38
Total Interest Earned 224 (290) (66) 382 (262) 120
Interest Expense:
Interest bearing deposits 27 (96) (69) 45 65 110
Other Borrowed Funds 20 (15) 5 15 (44) (29)
Total Interest Expense $47 $(111) $(64) $60 $21 $81
Net Interest Income $177 $(179) $(2) $322 $(283) $39
Net interest earned remained level during the second quarter of 1996
compared to the second quarter of 1995. For the six month period
ended June 30, 1996 net interest income increased by $39,000 versus
the same period of 1995.
Average earning assets increased by $10,234,000 during the first six
months of 1996. The average earning base was $243,170,000 compared
to $232,936,000 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 SIX MONTHS ENDED
06-30-96 06-30-95 06-30-96 06-30-95
Amount Percent Amount Percent Amount Percent Amount Percent
Salaries and benefits $1,036 18.49% $945 16.75% $2,080 18.64% $1,901 17.41%
Other real estate - expense 69 1.23 190 3.37 220 1.97 320 2.93
Other non-interest expense 919 16.40 949 16.82 1,859 16.65 1,788 16.37
Occupancy - net 226 4.03 166 2.94 443 3.98 353 3.24
Total Operating Expenses $2,250 40.15% $2,250 39.88% $4,602 41.24% $4,362 39.95%
For the six month period operating expenses increased by
approximately $240,000 primarily the result of the addition of three
new branch offices opened late in 1995 and early 1996.
WESTBANK CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - (Continued)
COMPONENTS RATIOS
Ratio of "Tier 1" leverage capital
to total assets at end of period 6.93% 6.53%
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
June 30, 1996:
Tier 1 Capital (minimum required 4.00%) 9.97%
Tier 2 Capital (minimum required 8.00%) 11.23%
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 June 30, 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 $53,743 $42,278 $ 77,083 $77,058 $250,162
Interest Bearing
Liabilities 67,634 66,437 73,419 65 207,555
Interest Rate
Sensitivity Gap $(13,891) $(24,159) $ 3,664 $76,993 $ 42,607
Cumulative Interest
Rate
Sensitivity Gap $(13,891) $(38,050) $(34,386) $42,607
Interest Rate
Sensitivity
Gap Ratio (5.55)% (9.66)% 1.46% 30.78%
Cumulative Interest
Rate Sensitivity
Gap Ratio (5.55)% (15.21)% (13.75)% 17.03%
WESTBANK CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - (Continued)
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 June 30, 1996, the
Corporation's ratio of such assets to total deposits and borrowed
funds was 18.55%.
PROVISION AND ALLOWANCE FOR LOAN LOSSES
(Dollar amounts in thousands)
QUARTER ENDED SIX MONTHS ENDED
06-30-96 06-30-95 06-30-96 06-30-95
Balance at beginning of period $3,916 $2,740 $3,707 $3,325
Provision charged to expense 352 350 492 800
4,268 3,090 4,199 4,125
Charge-offs:
Loans secured by real estate 1,528 105 1,710 896
Commercial and industrial loans 75 89 204
Consumer loans 30 28 57 85
Lease financing receivables 5 5
1,633 138 1,856 1,190
Recoveries:
Loans secured by real estate 6 10 289 10
Commercial and industrial loans 1 39 2 41
Consumer loans 5 3 12 16
Lease financing receivables 1 1 3
12 53 304 70
Net charge-offs 1,621 85 1,552 1,120
Balance at end of period $2,647 $3,005 $2,647 $3,005
Net Charge-offs to:
Average loans .79% .04% .77% .57%
Loans at end of period .77% .04% .74% .57%
Allowance for loan losses 61.24% 2.83% 58.63% 37.27%
Allowance for loan losses
as a percentage of:
Average loans 1.29% 1.53% 1.31% 1.53%
Loans at end of period 1.26% 1.54% 1.26% 1.54%
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.
WESTBANK CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - (Continued)
NON-ACCRUAL, PAST DUE AND RESTRUCTURED LOANS
(Dollar amounts in thousands)
06-30-96 03-31-96 12-31-95 09-30-95 06-30-95
Non-Accrual Loans:
Loans secured by real estate $2,116 $3,172 $5,450 $2,124 $2,745
Construction/Land development 19 464 353 361 52
Commercial and Industrial Loans 856 838 373 302 299
Consumer Loans 1 7 4 13 16
2,992 4,481 6,180 2,800 3,112
Loans Contractually
past due 90 days or more
still accruing:
Loans secured by real estate 145 128 271 201
Commercial and Industrial Loans 43 20 135 118 50
Consumer Loans 20 14 16 14
43 185 277 405 265
Restructured Loans 78 437 439 442 496
Total non-accrual, past
due and restructured
loans $3,113 $5,103 $6,896 $3,647 $3,873
Non-accrual, past due and
restructured loans
as a percentage of total
loans 1.48% 2.61% 3.43% 1.80% 1.98%
Allowance for loan
losses as a percentage of
non accrual, past due and
restructured loans 85.03% 76.74% 53.76% 105.18% 77.59%
OTHER REAL ESTATE
Other real estate owned - net $1,303 $1,858 $1,300 $1,237 $1,775
Total non-performing assets $4,416 $6,961 $8,196 $4,884 $5,648
Non-performing assets as a
percentage of total assets 1.64% 2.66% 3.23% 1.86% 2.19%
WESTBANK CORPORATION AND SUBSIDIARIES
QUARTERLY TO DATE AVERAGE BALANCES
INTEREST EARNED - INTEREST EXPENSE
(Dollar amounts in thousands)
FOR THE QUARTER ENDED FOR THE QUARTER ENDED
JUNE 30, 1996 JUNE 30, 1995
Balance Interest Rate Balance Interest Rate
Federal Funds sold and
temporary investments $6,020 $69 4.58% $5,664 $80 5.65%
Securities 37,342 626 6.71 34,830 579 6.65
Loans/leases 204,413 4,358 8.53 196,426 4,460 9.08
Total earning assets 247,775 $5,053 8.16 236,920 $5,119 8.64
Loan loss allowance (3,598) (2,869)
All other assets 19,584 18,794
TOTAL ASSETS $263,761 $252,845
LIABILITIES AND EQUITY
Interest bearing deposits $193,624 $2,086 4.31 $191,257 $2,155 4.51
Borrowed funds 8,644 61 2.82 6,062 56 3.70
Total interest bearing
liabilities 202,268 $2,147 4.25 197,319 $2,211 4.48
Interest rate spread 3.91% 4.16%
Demand deposits 42,134 38,153
Other liabilities 1,149 902
Shareholders' equity 18,211 16,471
TOTAL LIABILITIES
AND EQUITY $263,761 $252,845
NET INTEREST INCOME $2,906 $2,908
Interest Earned/Earning Assets 8.16% 8.64%
Interest Expense/Earning Assets 3.47 3.73
Net Yield on Earning Assets 4.69% 4.91%
WESTBANK CORPORATION AND SUBSIDIARIES
YEAR TO DATE AVERAGE BALANCES
INTEREST EARNED - INTEREST EXPENSE
(Dollar amounts in thousands)
SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1996 JUNE 30, 1995
Balance Interest Rate Balance Interest Rate
Federal Funds sold and
temporary investments $6,288 $150 4.77% $3,820 $112 5.86%
Securities 35,293 1,162 6.58 33,079 1,074 6.49
Loans/leases 201,589 8,693 8.62 196,037 8,699 8.87
Total earning assets 243,170 $10,005 8.23 232,936 $9,885 8.49
Loan loss allowance (3,703) (3,065)
All other assets 19,212 18,804
TOTAL ASSETS $258,679 $248,675
LIABILITIES AND EQUITY
Interest bearing deposits $188,679 $4,094 4.34 $186,576 $3,984 4.27
Borrowed funds 8,501 124 2.92 7,437 153 4.11
Total interest bearing
liabilities 197,180 $4,218 4.28 194,013 $4,137 4.26
Interest rate spread 3.95% 4.23%
Demand deposits 42,330 37,596
Other liabilities 1,102 854
Shareholders' equity 18,067 16,212
TOTAL LIABILITIES
AND EQUITY $258,679 $248,675
NET INTEREST INCOME $5,787 $5,748
Interest Earned/Earning Assets 8.23% 8.49%
Interest Expense/Earning Assets 3.47 3.55
Net Yield on Earning Assets 4.76% 4.94%
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
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
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: August 13, 1996
Donald R. Chase
President and Chief Executive Officer
Date: August 13, 1996
John M. Lilly
Treasurer and Chief Financial Officer