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, 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: 3,490,358 shares outstanding as of July 31, 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 9-16 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 18 Signatures 19 WESTBANK CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Dollar amounts in thousands) June 30, 1997 December 31, 1996 					 	 		 ASSETS Cash and due from banks: Non-interest bearing $ 13,990 $ 10,463 Interest bearing 60 48 Federal Funds sold 7,600 12,890 Total cash and cash equivalents 21,650 23,401 Investment securities available for sale 17,578 14,387 Investment securities held to maturity (approximate market value of $29,275 in 1997 and $21,357 in 1996) 29,272 21,295 Total securities 46,850 35,682 Loans $ 228,665 $ 215,207 Mortgage loans held-for-sale 4,976 5,466 Allowance for loan losses (2,560) (2,481) Net-loans 231,081 218,192 Bank premises and equipment 4,459 4,339 Other real estate owned - net of allowance for losses of $236 in 1996 and $65 in 1995 323 337 Accrued interest receivable 1,995 1,636 Other assets 1,538 1,322 TOTAL ASSETS $ 307,896 $ 284,909 LIABILITIES AND STOCKHOLDERS' EQUITY Deposits: Non-interest bearing $ 45,387 $ 44,715 Interest bearing 228,975 210,776 Total Deposits 274,362 255,491 Borrowed funds 10,778 8,769 Accrued interest payable 371 328 Other liabilities 1,133 576 Total Liabilities 286,644 265,164 Stockholders' Equity: Common stock - $2 par value Authorized - 9,000,000 shares Issued - 3,473,046 shares in 1997 and 3,346,802 shares in 1996 6,946 6,694 Additional paid in capital 8,001 7,633 Retained earnings 6,376 5,517 Net unrealized gain (loss) on securities available for sale (71) (99) Total Stockholders' Equity 21,252 19,745 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 307,896 $ 284,909 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 06-30-97 06-30-96 06-30-97 06-30-96 							 			 	 Income: Interest and fees on loans $4,869 $ 4,358 $ 9,512 $ 8,693 Interest and dividend income on securities 792 626 1,462 1,162 Interest on temporary investments 37 69 152 150 Total interest and dividend income 5,698 5,053 11,126 10,005 Interest expense 2,534 2,147 4,945 4,218 Net interest income 3,164 2,906 6,181 5,787 Provision for loan losses 40 352 190 492 Net interest income after provision for loan losses 3,124 2,554 5,991 5,295 Security gains 112 Other non-interest income 485 551 991 1,043 Total non-interest income 485 551 991 1,155 Non-interest expenses: Salaries and benefits 1,139 1,036 2,267 2,080 Other real estate-provision for losses 23 50 23 181 -operating expenses 7 19 15 39 Other non-interest expense 931 919 1,865 1,859 Occupancy - net 223 226 446 443 Total non-interest expense 2,323 2,250 4,616 4,602 Income before income taxes 1,286 855 2,366 1,848 Income taxes 549 350 992 779 Net Income $ 737 $ 505 $ 1,374 $ 1,069 Net income per share $ 0.21 $ 0.15 $ 0.39 $ 0.32 Weighted average shares of common stock and common share equivalents 3,554,125 3,403,431 3,543,085 3,377,086 See accompanying notes to condensed consolidated financial statements. WESTBANK CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY YEAR ENDED DECEMBER 31, 1996 AND SIX MONTHS ENDED JUNE 30, 1997 (1997 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 	 		 				 				 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 ($.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 ($0.15 per share) (515) (515) Shares issued: Stock Option Plan 76,743 154 60 214 Dividend Reinvestment and Stock Purchase Plan 49,501 98 308 406 Change in unrealized gain (loss) on securities available for sale 28 28 Net income 1,374 1,374 BALANCE-JUNE 30, 1997 3,473,046 $ 6,946 $ 8,001 $ 6,376 $ (71) $ 21,252 See accompanying notes to condensed consolidated financial statements. WESTBANK CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS SIX MONTHS ENDED JUNE 30, 1997 AND 1996 (Unaudited) (Dollar amounts in thousands) 1997 1996 Operating activities: Net income $1,374 $ 1,069 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses 190 492 Depreciation and amortization 327 309 Provision for other real estate owned 23 181 (Increase) Decrease in accrued interest receivable (359) (137) Realized gain on sale of securities (112) Realized (gain) loss on sale of other real estate owned 24 Realized (gain) loss on sale of loans (66) Realized (gain) loss on sale of equipment (14) (17) Increase (decrease) in interest payable on deposits 43 (9) (Increase) decrease in other assets (216) (27) Increase (decrease) in other liabilities 557 67 Net cash provided by operating activities 1,925 1,774 Investing activities: Investments and mortgage-backed securities: Held to maturity: Purchases (13,480) (6,382) Proceeds from maturities and principal payments 5,492 3,286 Available for sale: Purchases (4,013) (2,456) Proceeds from sales 2,857 Proceeds from maturities 861 3,679 Purchases of premises and equipment (447) (1,071) Net (increase) decrease in loans (13,164) (15,166) Proceeds from sale of equipment 14 17 Proceeds from sale of other real estate owned 76 990 Net cash used in investing activities (24,661) (14,246) Financing activities: Net increase (decrease) in borrowings 2,009 5,117 Net increase (decrease) in deposits 18,871 9,846 Proceeds from exercise of stock options and stock purchase plan 620 355 Dividends paid (515) (388) Net cash used in financing activities 20,985 14,930 Increase (decrease) in cash and cash equivalents (1,751) 2,458 Cash and cash equivalents at beginning of period 23,401 12,604 Cash and cash equivalents at end of period $21,650 $15,062 Cash paid during the year: Interest on deposits and other borrowings $4,902 $4,227 Income taxes 950 511 Transfers of loans to other real estate owned 85 1,481 Sales of other real estate owned financed by the bank 72 See notes to consolidated financial statements. WESTBANK CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS QUARTER AND SIX MONTHS ENDED JUNE 30, 1997 AND JUNE 30, 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 Corporation has recently received regulatory approval to open a full service office in the town of Ludlow Massachusetts, the targeted opening date for this new office is April, 1998. 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 June 30, 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 quarter and six months ended June 30, 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 quarter and six month period ended June 30, 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 six months ended June 30, 1997 and 1996, amounted to 3,543,085 and 3,377,086 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 six months ended June 30, 1996 and by $0.01 for the six month period ended June 30, 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 June 30, 1997 standby letters of credit amounted to $575,000 and loan commitments were $28,407,000 and unused balances available on home equity lines of credit were $7,652,000. Trust Assets - Property with a book value of $108,009,000 at June 30, 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 June 30, 1997 and December 31, 1996 was 6.90% 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 June 30, 1997, for Tier 1 was 10.08% and total risk- based capital was 11.33%, 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 $307,896,000 on June 30, 1997, compared to $284,909,000 on December 31, 1996. As of June 30, 1997 and June 30, 1996, earning assets amounted to, respectively, $288,151,000 or 94% of total assets, and $269,293,000, or 94% of total assets. Earning assets increased during the first six 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 June 30, 1997, net income totaled $737,000 compared to $505,000 for the quarter ended June 30, 1996. For the six months ended June 30, 1997, net income was $1,374,000 compared to $1,069,000 for the same period during 1996. Included in the results of the six months ended June 30, 1996 is a gain on the sale of securities totaling $112,000. An overall increase in interest income and interest expense reflects an increase in volume and decrease in interest rates on earning assets and an increase in volume and rates on 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 significant decrease has been reflected in the provision for loan losses in the current quarter with $40,000 being provided compared to $352,000 for the same period in 1996. Loans and leases written off against the allowance for loan/lease losses after recoveries amounted to net recoveries of $96,000 for the six months ended June 30, 1997. After giving effect to the actions described above, the allowance for loan/lease losses at June 30, 1997 totaled $2,560,000 or 1.10% of total loans/leases, as compared to $2,481,000 or 1.12% at December 31, 1996. Non-performing past due loans/leases at June 30, 1997 aggregated $1,446,000 or 0.62% 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 0.47% and 0.83%. The change in non-performing loans was primarily the result of the continued resolution of problem assets. Other real estate owned remained level at June 30, 1997 totaling $323,000 as compared to December 31, 1996 and stands at 0.10% of total assets at the end of the current quarter. 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. 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 06-30-97 06-30-96 06-30-97 06-30-96 Interest and divided income $5,698 $5,053 $11,126 $10,005 Interest expense 2,534 2,147 4,945 4,218 Net interest income $3,164 $2,906 $6,181 $5,787 INTEREST RATE SPREAD AND NET YIELD ON EARNING ASSETS (Dollar amounts in thousands) QUARTER ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, 1997 1996 1997 1996 Average Average Average Average Balance Rate Balance Rate Balance Rate Balance Rate 					 	 Earning Assets $279,168 8.16% $247,775 8.16% $275,149 8.09% $243,170 8.23% Interest-bearing liabilities 229,261 4.42% 202,268 4.25% 225,941 4.38 197,180 4.28 Interest rate spread 3.74 3.91 3.71 3.95 Interest-free resources used to fund earning assets 49,907 45,507 49,208 45,990 Total Sources of Funds $279,168 3.63 $247,775 3.47 $275,149 3.59 $243,170 3.47 Net Yield on Earning Assets 4.53% 4.69% 4.50% 4.76% 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 06-30-97 SIX MONTHS ENDED 06-30-97 O V E R O V E R QUARTER ENDED 06-30-96 SIX MONTHS ENDED 06-30-96 CHANGE DUE TO CHANGE DUE TO VOLUME RATE TOTAL VOLUME RATE TOTAL Interest Income: Loans $506 $5 $511 $996 $(177) $819 Securities 180 (14) 166 302 (2) 300 Federal funds (42) 10 (32) (13) 15 2 Total Interest Earned 644 1 645 1,285 (164) 1,121 Interest Expense: Interest bearing deposits 278 86 364 620 90 710 Other Borrowed Funds 9 14 23 3 14 17 Total Interest Expense $287 $100 $387 $623 $104 $727 Net Interest Income $357 $(99) $258 $662 $(268) $394 Net interest earned increased by $258,000 during the second quarter of 1997 compared to the second quarter of 1996. For the six month period ended June 30, 1997 net interest income increased by $394,000 versus the same period of 1996. Average earning assets increased by $31,979,000 during the first six months of 1997. The average earning base was $275,149,000 compared to $243,170,000 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 06-30-97 06-30-96 06-30-97 06-30-96 Amount Percent Amount Percent Amount Percent Amount Percent Salaries and benefits $1,139 18.42% $1,036 18.49% $2,267 18.71% $2,080 18.64% Other real estate - expense 30 0.48 69 1.23 38 0.31 220 1.97 Other non-interest expense 931 15.06 919 16.40 1,865 15.39 1,859 16.65 Occupancy - net 223 3.61 226 4.03 446 3.68 443 3.98 Total Operating Expenses $2,323 37.57% $2,250 40.15% $4,616 38.09% $4,602 41.24% For the six month period ended June 30, 1997, operating expenses increased by approximately $14,000 over the 1996 period. The increase was a result of increases in salary and benefits totaling $187,000 offset by reductions in other real estate expenses of $182,000. WESTBANK CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued) COMPONENTS RATIOS 		 6/30/97 6/30/96 Ratio of "Tier 1" leverage capital to total assets at end of period 6.90% 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 June 30, 1997: Tier 1 Capital (minimum required 4.00%) 10.06% Tier 2 Capital (minimum required 8.00%) 11.31% 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, 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 $60,037 $42,411 $101,314 $84,389 $288,151 Interest Bearing Liabilities 76,383 70,483 92,885 2 239,753 Interest Rate Sensitivity Gap $(16,346) $(28,072) $8,429 $84,387 $48,398 Cumulative Interest Rate Sensitivity Gap $(16,346) $(44,418) $(35,989) $48,398 Interest Rate Sensitivity Gap Ratio (5.67)% (9.74)% 2.93% 29.28% Cumulative Interest Rate Sensitivity Gap Ratio (5.67)% (15.41)% (12.48)% 16.80% 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, 1997, the Corporation's ratio of such assets to total deposits and borrowed funds was 21.26%. PROVISION AND ALLOWANCE FOR LOAN LOSSES (Dollar amounts in thousands) QUARTER ENDED SIX MONTHS ENDED 06-30-97 06-30-96 06-30-97 06-30-96 								 		 			 Balance at beginning of period $2,424 $3,916 $2,481 $3,707 Provision charged to expense 40 352 190 492 2,464 4,268 2,671 4,199 Charge-offs: Loans secured by real estate 155 1,528 239 1,710 Commercial and industrial loans 12 75 143 89 Consumer loans 28 30 42 57 195 1,633 424 1,856 Recoveries: Loans secured by real estate 111 6 130 289 Commercial and industrial loans 174 1 175 2 Consumer loans 5 5 7 12 Lease financing receivables 1 1 1 291 12 313 304 Net charge-offs (recoveries) (96) 1,621 111 1,552 Balance at end of period $2,560 $2,647 $2,560 $2,647 Net Charge-offs to: Average loans (.04)% .79% .05% .77% Loans at end of period (.04)% .77% .05% .74% Allowance for loan losses (3.75)% 61.24% 4.34% 58.63% Allowance for loan losses as a percentage of: Average loans 1.12% 1.29% 1.14% 1.31% Loans at end of period 1.10% 1.26% 1.10% 1.26% 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. NON-ACCRUAL, PAST DUE AND RESTRUCTURED LOANS (Dollar amounts in thousands) 06-30-97 03-31-97 12-31-96 09-30-96 06-30-96 										 Non-Accrual Loans: Loans secured by real estate $1,143 $1,377 $1,697 $1,910 $2,116 Construction/Land development 33 78 4 10 19 Commercial and Industrial Loans 240 238 372 750 856 Consumer Loans 5 14 6 1 1 1,421 1,707 2,079 2,671 2,992 Loans Contractually past due 90 days or more still accruing: Loans secured by real estate 15 70 274 33 0 Commercial and Industrial Loans 0 76 0 6 43 Consumer Loans 10 14 8 0 0 25 160 282 39 43 Restructured Loans 0 0 0 0 78 Total non-accrual, past due and restructured loans $1,446 $1,867 $2,361 $2,710 $3,113 Non-accrual, past due and restructured loans as a percentage of total loans 0.62% 0.84% 1.07% 1.26% 1.48% Allowance for loan losses as a percentage of non accrual, past due and restructured loans 177.04% 129.83% 105.08% 99.09% 85.03% OTHER REAL ESTATE Other real estate owned - net $323 $403 $337 $793 $1,303 Total non-performing assets $1,769 $2,270 $2,698 $3,503 $4,416 Non-performing assets as a percentage of total assets 0.57% 0.77% 0.95% 1.24% 1.64% 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, 1997 JUNE 30, 1996 Balance Interest Rate Balance Interest Rate 					 	 	 	 		 	 Federal Funds sold and temporary investments $2,781 $37 5.32% $6,020 $69 4.58% Securities 48,233 792 6.57 37,342 626 6.71 Loans/leases 228,154 4,869 8.54 204,413 4,358 8.53 Total earning assets 279,168 $5,698 8.16 247,775 $5,053 8.16 Loan loss allowance (2,500) (3,598) All other assets 18,128 19,584 TOTAL ASSETS $294,796 $263,761 LIABILITIES AND EQUITY Interest bearing deposits $219,436 $2,450 4.47 $193,624 $2,086 4.31 Borrowed funds 9,825 84 3.42 8,644 61 2.82 Total interest bearing liabilities 229,261 $2,534 4.42 202,268 $2,147 4.25 Interest rate spread 3.72% 3.91% Demand deposits 43,037 42,134 Other liabilities 1,687 1,148 Shareholders' equity 20,811 18,211 TOTAL LIABILITIES AND EQUITY $294,796 $263,761 NET INTEREST INCOME $3,164 $2,906 Interest Earned/Earning Assets 8.16% 8.16% Interest Expense/Earning Assets 3.63 3.47 Net Yield on Earning Assets 4.53% 4.69% 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, 1997 JUNE 30, 1996 Balance Interest Rate Balance Interest Rate 			 			 Federal Funds sold and temporary investments $5,747 $152 5.29% $6,288 $150 4.77% Securities 44,426 1,462 6.58 35,293 1,162 6.58 Loans/leases 224,976 9,512 8.46 201,589 8,693 8.62 Total earning assets 275,149 $11,126 8.09 243,170 $10,005 8.23 Loan loss allowance (2,518) (3,703) All other assets 17,810 19,212 TOTAL ASSETS $290,441 $258,679 LIABILITIES AND EQUITY Interest bearing deposits $217,254 $4,805 4.42 $188,679 $4,094 4.34 Borrowed funds 8,687 140 3.22 8,501 124 2.92 Total interest bearing liabilities 225,941 $4,945 4.38 197,180 $4,218 4.28 Interest rate spread 3.71% 3.95% Demand deposits 42,457 42,330 Other liabilities 1,564 1,102 Shareholders' equity 20,479 18,067 TOTAL LIABILITIES AND EQUITY $290,441 $258,679 NET INTEREST INCOME $6,181 $5,787 Interest Earned/Earning Assets 8.09% 8.23% Interest Expense/Earning Assets 3.59 3.47 Net Yield on Earning Assets 4.50% 4.76% WESTBANK CORPORATION AND SUBSIDIARIES PART II - OTHER INFORMATION ITEM 1. Legal Proceedings - None ITEM 2. Changes in Rights of Securities Holders - None ITEM 3. Defaults by Company on its Senior Securities - None ITEM 4. Results of Votes on Matters Submitted to a Vote of Security Holders - None ITEM 5. Other Events a. Information Concerning Forward-Looking Statements. Westbank has made and may make in the future forward looking statements concerning future performance, including but not limited to future earnings, and events or conditions 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 in light of future events. b. Registration on Form S-3 On June 19, 1997 the Corporation filed a registration statement on Form S-3, which is hereby incorporated by reference. c. Registration of Form S-8 On June 19, 1997 the Corporation filed a registration statement on Form S-8, which is hereby incorporated by reference. ITEM 6. Exhibits and Reports on Form 8 a. Exhibits EXHIBIT INDEX Page No. 3. Articles of Organization, as amended ** 				 (a) Articles of Organization, as amended * (b) By-Laws, as amended * 10.1 Employment Contract dated October 1, 1986, between William A. Franks, Jr. and Westbank Corporation *** 10.12 Termination Agreement dated February 20, 1987, between Donald R. Chase and Park West Bank and Trust Company *** 10.14 Termination Agreement dated February 20, 1987, between Stanley F. Osowski and CCB, Inc. *** 10.15 1985 Incentive Stock Option Plan for Key Employees * 10.16 1995 Directors Stock Option Plan **** 10.17 1996 Stock Incentive Plan ***** 13. 1996 Annual Report to Stockholders ARS (IFC 1-36 IBC) 21. Subsidiaries of Registrant ****** 27. Financial Data Schedule TO BE INCLUDED * Incorporated by reference to identically numbered exhibits contained in Registrant's Annual Report on Form 10-K for the year ended December 31, 1988 ** Incorporated by reference to identically numbered exhibits contained in Registrant's Annual Report on Form 10-K for the year ended December 31, 1987 *** Incorporated by reference to identically numbered exhibits contained in Registrant's Annual Report on Form 10-K for the year ended December 31, 1986 **** Incorporated by reference to identically numbered exhibits contained in Registrant's Annual Report on Form 10-K for the year ended December 31, 1995 ***** Incorporated by reference to identically numbered exhibits contained in Registrant's 1996 Proxy Statement ****** Incorporated by reference to identically numbered exhibits contained in Registrant's Annual Report on Form 10-K for the year ended December 31, 1996. b. 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 7, 1997 Donald R. Chase President and Chief Executive Officer Date: August 7, 1997 John M. Lilly Treasurer and Chief Financial Officer