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, 1997 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: 3,465,952 shares outstanding as of April 30, 1997. 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 (Unaudited) (Dollar amounts in thousands) March 31, 1997 December 31, 1996 ASSETS Cash and due from banks: Non-interest bearing $ 11,397 $ 10,463 Interest bearing 66 48 Federal Funds sold 8,310 12,890 Total cash and cash equivalents 19,773 23,401 Investment securities available for sale 15,942 14,387 Investment securities held to maturity (approximate market value of $29,483 in 1997 and $21,357 in 1996) 29,685 21,295 Total securities 45,627 35,682 Loans $ 218,194 $ 215,207 Mortgage loans held-for-sale 5,092 5,466 Allowance for loan losses (2,424) (2,481) Net-loans 220,862 218,192 Bank premises and equipment 4,427 4,339 Other real estate owned (OREO) - net of allowance for losses of $195 in 1997 and $195 in 1996 403 337 Accrued interest receivable 1,796 1,636 Other assets 1,606 1,322 TOTAL ASSETS $ 294,494 $ 284,909 LIABILITIES AND STOCKHOLDERS' EQUITY Deposits Non-interest bearing $ 43,598 $ 44,715 Interest bearing 220,519 210,776 Total Deposits 264,117 255,491 Borrowed funds 8,394 8,769 Accrued interest payable 356 328 Other liabilities 1,207 576 Total Liabilities 274,074 265,164 Stockholders' Equity: Common stock - $2 par value Authorized - 9,000,000 shares Issued - 3,447,124 shares in 1997 and 3,346,802 shares in 1996 6,894 6,694 Additional paid in capital 7,856 7,633 Retained earnings 5,897 5,517 Net unrealized gain/(loss) on securities available for sale (227) (99) Total Stockholders' Equity 20,420 19,745 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 294,494 $ 284,909 See accompanying notes to condensed consolidated financial statements. WESTBANK CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Dollar amounts in thousands) Three months ended March 31, 1997 1996 (Unaudited) Income: Interest and fees on loans $ 4,643 $ 4,335 Interest and dividend income on securities 670 536 Interest on temporary investments 115 81 Total interest and dividend income 5,428 4,952 Interest expense 2,411 2,071 Net interest income 3,017 2,881 Provision for loan losses 150 140 Net interest income after provision for loan losses 2,867 2,741 Security gains 0 112 Other non-interest income 506 492 Total non-interest income 506 604 Non-interest expenses: Salaries and benefits 1,128 1,044 Other real estate-provision for losses 0 131 -operating expenses 8 20 Other non-interest expense 934 940 Occupancy - net 223 217 Total non-interest expense 2,293 2,352 Income before income taxes 1,080 993 Income taxes 443 429 Net Income $ 637 $ 564 Net income per share $ 0.18 $ 0.17 Weighted average shares of common stock and common share equivalents 3,514,102 3,351,437 See accompanying notes to condensed consolidated financial statements. WESTBANK CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY YEAR ENDED DECEMBER 31, 1996 AND THREE MONTHS ENDED MARCH 31, 1997 (1997 Unaudited) (Dollar amounts in thousands) 																	 UNREALIZED GAIN (LOSS) ON COMMON STOCK ADDT'L. SECURITIES NUMBER OF PAR PAID IN RETAINED AVAILABLE SHARES VALUE CAPITAL EARNINGS FOR SALE TOTAL 	 		 				 	 		 BALANCE-DECEMBER 31, 1995 3,221,603 $ 6,443 $ 7,141 $ 4,053 $ 66 $ 17,703 Net income - - - 2,248 - 2,248 Cash dividends declared	 (0.24 per share) - - - (784) - (784) Shares issued: Stock option plan 30,584 61 25 - - 86 Dividend reinvestment and stock purchase plan 94,615 190 467 - - 657 Change in unrealized gain (loss) on securities available for sale - - - - (165) (165) BALANCE-DECEMBER 31, 1996 3,346,802 6,694 7,633 5,517 (99) 19,745 Cash Dividend Declared ($0.75 per share) (257) (257) Shares issued: Stock Option Plan 72,243 145 43 188 Dividend Reinvestment and Stock Purchase Plan 28,079 55 180 235 Change in unrealized gain (loss) on securities available for sale (128) (128) Net income 637 637 BALANCE-MARCH 31, 1997 3,447,124 $ 6,894 $ 7,856 $ 5,897 $ (227) $ 20,420 See accompanying notes to condensed consolidated financial statements. WESTBANK CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollar amounts in thousands) Three months ended March 31, 1997 1996 Operating activities: Net income $ 637 $ 564 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses 150 140 Depreciation and amortization 163 140 Provision for other real estate owned 0 131 Decrease (increase) in accrued interest receivable (160) 24 Realized gain on sale of securities 0 (112) Realized loss on sale of other real estate owned 0 10 Decrease (increase) in other assets (284) 328 Increase in interest payable on deposits 28 16 Increase (decrease) in other liabilities 631 (227) Net cash provided by operating activities 1,165 1,014 Investing activities: Investments and mortgage-backed securities: Held to maturity: Purchases (11,481) (1,497) Proceeds from maturities and principal payments 3,091 3,260 Available for sale: Purchases (1,714) (1,990) Proceeds from sales 0 3,083 Proceeds from maturities and principal payments 30 0 Purchases of premises and equipment (251) (550) Net (increase) decrease in loans (2,886) 1,292 Proceeds from sale of other real estate owned 0 102 Net cash provided by (used in) investing activities (13,211) 3,700 Financing activities: Net increase (decrease) in borrowings (375) 1,513 Net increase (decrease) in deposits 8,626 5,807 Proceeds from exercise of stock options and stock purchase plan 423 166 Dividends paid (256) (193) Net cash used by financing activities 8,418 7,293 Increase (decrease) in cash and cash equivalents (3,628) 12,007 Cash and cash equivalents at beginning of year 23,401 12,604 Cash and cash equivalents at end of year $19,773 $24,611 Cash paid during the year: Interest on deposits and other borrowings 2,383 2,055 Income taxes 155 100 Transfers of loans to other real estate owned 66 864 Sales of other real estate owned financed by the bank 0 72 See notes to consolidated financial statements. WESTBANK CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS THREE MONTHS ENDED MARCH 31, 1997 AND MARCH 31, 1996 (Unaudited) NOTE A - GENERAL INFORMATION Westbank Corporation (hereinafter sometimes referred to as "Westbank" or the "Corporation") 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" or the "Bank") 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 The Corporation operates eleven banking offices located in Hampden County 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 are furnished to individuals, businesses and non-profit organizations. The Corporation's primary source of revenue is derived from providing loans to customers, predominately located in Western Massachusetts. 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, 1997, 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. NOTE C - BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements for the first quarter ended March 31, 1997 and 1996 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, 1997, are not necessarily indicative of the results that may be expected for the year ending December 31, 1997. 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, 1996. NOTE D - 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 periods ended March 31, 1997 and 1996, amounted to 3,514,102 and 3,351,437 shares, respectively. New Accounting Standard In February, 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128 ("SFAS 128"), "Earnings Per Share," which establishes new standards for the computation and disclosure of earnings per share ("EPS"). The new statement requires dual presentation of "basic" EPS and "diluted" EPS. Basic EPS is based on the weighted average number of common shares outstanding for the period, excluding any dilutive common shares equivalents. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted. The Company cannot adopt SFAS 128 until the fourth quarter of fiscal year 1997. Once adopted, all prior period EPS data must be restated. The effect of SFAS 128, had it been adopted beginning in fiscal year 1996, would have been to present basic EPS that would have been greater than EPS actually reported by $0.01 for the three months ended March 31, 1996 and by $0.01 for the three month period ended March 31, 1997. The presentation of diluted EPS would have been the same as EPS actually reported for the respective periods. 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 March 31, 1997 standby letters of credit amounted to $641,000 and loan commitments were $30,118,000 and unused balances available on home equity lines of credit were $7,859,000. Trust Assets - Property with a book value of $106,588,000 at March 31, 1997 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. The Bank's leverage capital ratio as of March 31, 1997 and December 31, 1996 was 6.83% and 6.93% 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, 1997, for Tier 1 was 10.15% and total risk-based capital was 11.40%, which meets the FDIC criteria for a well-capitalized financial institution. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Changes in Financial Condition - Total consolidated assets amounted to $294,494,000 on March 31, 1997, compared to $284,909,000 on December 31, 1996. As of March 31, 1997 and March 31, 1996, earning assets amounted to, respectively, $277,289,000 or 94% of total assets, and $245,828,000, or 94% of total assets. Earning assets increased during the first three months of 1997 as a result of increases in securities, loans and temporary funds. Deposits originated throughout the Bank's branch system provided the funds to support the increase in earning assets. Changes in Results of Operations - For the quarter ended March 31, 1997, net income totaled $637,000 compared to $564,000 for the three-month period ended March 31, 1996. Included in the results of the 1996 quarter is a gain on the sale of securities totaling $112,000. Non-interest expense declined during the first quarter of 1997 by $59,000 primarily the result of a reduction in other real estate expenses. 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 slight increase has been reflected in the provision for loan losses in the quarter with $150,000 being provided compared to $140,000 in 1996. Loans and leases written off against the allowance for loan/lease losses after recoveries amounted to $207,000 for the first three months of 1997 versus a net recovery of $69,000 for the same period of 1996. After giving effect to the actions described above, the allowance for loan/lease losses at March 31, 1997 totaled $2,424,000 or 1.09% of total loans/leases, as compared to $2,481,000 or 1.12% at December 31, 1996. Non-performing past due loans/leases at March 31, 1997 aggregated $1,867,000 or 0.84% of total loans/leases compared to $2,361,000 or 1.07% at December 31, 1996. The percentage of non-performing and past due loans/leases compared to total assets on those same dates, respectively, amounted to 0.63% and 0.83%. The change in non-performing loans was primarily the result of the continued resolution of problem assets. Other real estate owned declined during the most recent quarter by $1,455,000 compared to the same period of 1996 and totals $403,000. The percentage of other real estate owned to total assets as of March 31, 1997 and March 31, 1996 amounted to 0.14% and 0.71%, 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. (Dollar amounts in thousands) Quarter ended March 31, 1997 1996 Interest and divided income $5,428 $4,952 Interest expense 2,411 2,071 Net interest income $3,017 $2,881 INTEREST RATE SPREAD AND NET YIELD ON EARNING ASSETS (Dollar amounts in thousands) Quarter ended March 31, 1997 1996 Average Average Balance Rate Balance Rate Earning Assets $271,129 8.01% $238,565 8.31% Interest-bearing liabilities $222,621 4.33% $192,091 4.31% Interest rate spread 3.68 4.00 Interest-free resources used to fund earning assets 48,508 46,474 Total Sources of Funds $271,129 3.56 $238,565 3.47 Net Yield on Earning Assets 4.45% 4.84% CHANGES IN NET INTEREST INCOME (Dollar amounts in thousands) 									 QUARTER ENDED MARCH 31, 1997 (Taxable Equivalent) O V E R QUARTER ENDED MARCH 31, 1996 CHANGE DUE TO VOLUME RATE TOTAL Interest Income: Loans/Leases $490 $(182) $308 Securities 122 12 134 Federal funds 29 5 34 Total Interest Earned 641 (165) 476 Interest Expense: Interest bearing deposits 342 4 346 Other Borrowed Funds (6) 0 (6) Total Interest Expense $336 $ 4 $340 Net Interest Income $305 $(169) $136 Net interest earned increased to $3,017,000 in the first quarter of 1997, up $136,000 as compared with the comparable period of 1996. Average earning assets increased by $32,564,000 during the first quarter of 1997. The average earning base was $271,129,000 compared to $238,565,000 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 3-31-97 3-31-96 Amount Percent Amount Percent 							 					 	 Salaries and benefits $1,128 19.01% $1,044 18.79% Other real estate - expense 8 0.13 151 2.72 Other non-interest expense 934 15.74 940 16.92 Occupancy - net 223 3.76 217 3.90 Total Operating Expenses $2,293 38.64% $2,352 42.33% COMPONENTS RATIOS 03/31/97 12/31/96 Ratio of "Tier 1" leverage capital to total assets at end of period 6.93% 6.93% 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, 1997: Tier 1 Capital (minimum required 4.00%) 10.50% Tier 2 Capital (minimum required 8.00%) 11.75% 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, 1997: (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 $61,580 $39,824 $93,99 $81,891 $277,289 Interest Bearing Liabilities 82,345 67,852 78,716 228,913 Interest Rate Sensitivity Gap $(20,765) $(28,028) $15,278 $81,891 $ 48,376 Cumulative Interest Rate Sensitivity Gap $(20,765) $(48,793) $(33,515) $48,376 Interest Rate Sensitivity Gap Ratio (7.48)% (10.11)% 5.51% 29.53% Cumulative Interest Rate Sensitivity Gap Ratio (7.48)% (17.59)% (12.08)% 17.45% 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, 1997, the Corporation's ratio of such assets to total deposits and borrowed funds was 23.47%. PROVISION AND ALLOWANCE FOR LOAN/LEASE LOSSES (Dollar amounts in thousands) Quarter ended March 31, 1997 1996 Balance at beginning of period $ 2,481 $ 3,707 Provision charged to expense 150 140 2,631 3,847 Less Charge-offs: Loans secured by real estate 84 182 Commercial and industrial loans 131 14 Consumer loans 14 27 229 223 Add-Recoveries: Loans secured by real estate 19 283 Commercial and industrial loans 1 1 Consumer loans 2 7 Lease financing receivables 0 1 22 292 Net charge-offs (recoveries) 207 (69) Balance at end of period $ 2,424 $ 3,916 Net Charge-offs (recoveries) to: Average loans/leases .09% (.03)% Loans/leases at end of period .09% (.04)% Allowance for loan/lease losses 8.54% (1.76)% Allowance for loan/lease losses as a percentage of: Average loans/leases 1.09% 1.97% Loans/leases at end of period 1.09% 2.01% 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) 03-31-97 12-31-96 09-30-96 06-30-96 03-31-96		 										 	 		 	 		 Non-Accrual Loans: Loans secured by real estate $1,377 $1,697 $1,910 $2,116 $3,172 Construction/Land development 78 4 10 19 464 Commercial and Industrial Loans 238 372 750 856 838 Consumer Loans 14 6 1 1 7 1,707 2,079 2,671 2,992 4,481 Loans Contractually past due 90 days or more still accruing: Loans secured by real estate 70 274 33 0 145 Commercial and Industrial Loans 76 0 6 43 20 Consumer Loans 14 8 0 0 20 160 282 39 43 185 Restructured Loans 0 0 0 78 437 Total non-accrual, past due and restructured loans $1,867 $2,361 $2,710 $3,113 $5,103 Non-accrual, past due and restructured loans as a percentage of total loans 0.84% 1.07% 1.26% 1.48% 2.61% Allowance for loan losses as a percentage of non accrual, past due and restructured loans 129.83% 105.08% 99.09% 85.03% 76.74% OTHER REAL ESTATE Other real estate owned - net $403 $337 $793 $1,303 $1,858 Total non-performing assets $2,270 $2,698 $3,503 $4,416 $6,961 Non-performing assets as a percentage of total assets 0.77% 0.95% 1.24% 1.64% 2.66% WESTBANK CORPORATION AND SUBSIDIARIES QUARTER TO DATE AVERAGE BALANCES INTEREST EARNED - INTEREST EXPENSE (Dollar amounts in thousands) Three months ended March 31, 1997 1996 Balance Interest Rate Balance Interest Rate Federal Funds sold and temporary investments $8,712 $115 5.28% $6,556 $81 4.94% Securities 40,619 670 6.60 33,242 536 6.45 Loans/leases 221,798 4,643 8.37 198,767 4,335 8.73 Total earning assets 271,129 $5,428 8.01 238,565 $4,952 8.31 Loan/lease loss allowance (2,537) (3,809) All other assets 17,493 18,837 TOTAL ASSETS $286,085 $253,593 LIABILITIES AND EQUITY Interest bearing deposits $215,071 $2,354 4.38 $183,733 $2,008 4.37 Borrowed funds 7,550 57 3.02 8,358 63 3.02 Total interest bearing liabilities 222,621 $2,411 4.33 192,091 $2,071 4.31 Interest rate spread 3.68% 4.00% Demand deposits 41,877 42,526 Other liabilities 1,358 1,053 Shareholders' equity 20,229 17,923 TOTAL LIABILITIES AND EQUITY $286,085 $253,593 Net Interest Income $3,017 $2,881 Interest Earned/Earning Assets 8.01% 8.31% Interest Expense/Earning Assets 3.56 3.47 Net Yield on Earning Assets 4.45% 4.84% 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 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 statement. 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 /s/ Donald R. Chase Date: May 12, 1997 Donald R. Chase President and Chief Executive Officer /s/ John M. Lilly Date: May 12, 1997 John M. Lilly Treasurer and Chief Financial Officer