UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 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: 3,573,950 shares
outstanding as of October 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 17-18
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) September 30, 1997 December 31, 1996
ASSETS
Cash and due from banks:
Non-interest bearing $12,283 $10,463
Interest bearing 91 48
Federal Funds sold 10,350 12,890
Total cash and cash equivalents 22,724 23,401
Investment securities available for sale 17,405 14,387
Investment securities held to maturity (approximate
market value of $35,395 in 1997 and $21,357 in 1996) 35,199 21,295
Total securities 52,604 35,682
Loans $235,242 $215,207
Mortgage loans held-for-sale 4,762 5,466
Allowance for loan losses (2,755) (2,481)
Net-loans 237,249 218,192
Bank premises and equipment 4,540 4,339
Other real estate owned - net of
allowance for losses of $210 in
1997 and $195 in 1996 277 337
Accrued interest receivable 1,846 1,636
Other assets 1,605 1,322
TOTAL ASSETS $320,845 $284,909
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing $49,003 $44,715
Interest bearing 238,504 210,776
Total Deposits 287,507 255,491
Borrowed funds 9,842 8,769
Accrued interest payable 392 328
Other liabilities 832 576
Total Liabilities 298,573 265,164
Stockholders' Equity:
Common stock - $2 par value:
Authorized - 9,000,000 shares
Issued - 3,521,693 shares in 1997 and
3,346,802 shares in 1996 7,043 6,694
Additional paid in capital 8,327 7,633
Retained earnings 6,934 5,517
Net unrealized loss on securities available
for sale (32) (99)
Total Stockholders' Equity 22,272 19,745
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $320,845 $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 NINE MONTHS ENDED
09-30-97 09-30-96 09-30-97 09-30-96
Income:
Interest and fees on loans $5,102 $4,529 $14,614 $13,222
Interest and dividend income
on securities 811 630 2,273 1,792
Interest on temporary investments 66 31 218 181
Total interest and dividend income 5,979 5,190 17,105 15,195
Interest expense 2,740 2,242 7,685 6,460
Net interest income 3,239 2,948 9,420 8,735
Provision for loan losses 176 190 668
Net interest income after provision
for loan losses 3,239 2,772 9,230 8,067
Security gains 112
Other non-interest income 565 489 1,556 1,532
Total non-interest income 565 489 1,556 1,644
Non-interest expenses:
Salaries and benefits 1,258 1,049 3,525 3,129
Other real estate-provision for losses 11 124 34 305
-operating expenses 3 45 18 84
Other non-interest expense 914 829 2,779 2,688
Occupancy - net 211 220 657 664
Total non-interest expense 2,397 2,267 7,013 6,870
Income before income taxes 1,407 994 3,773 2,841
Income taxes 589 421 1,581 1,200
Net Income $ 818 $ 573 $ 2,192 $ 1,641
Net income per share $ 0.22 $ 0.17 $ 0.61 $ 0.49
Weighted average shares of common
stock and common share
equivalents 3,627,131 3,417,503 3,570,519 3,379,961
See accompanying notes to condensed consolidated financial statements.
WESTBANK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
YEAR ENDED DECEMBER 31, 1996 AND NINE MONTHS ENDED SEPTEMBER 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
Net income 2,192 2,192
Cash Dividend Declared
($0.225 per share) (775) (775)
Shares issued:
Stock Option Plan 80,693 162 67 229
Dividend Reinvestment
and Stock Purchase Plan 94,198 187 627 814
Change in unrealized gain (loss)
on securities available
for sale 67 67
BALANCE-SEPTEMBER 30, 1997 3,521,693 $ 7,043 $ 8,327 $ 6,934 $ (32) $22,272
See accompanying notes to condensed consolidated financial statements.
WESTBANK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(Unaudited)
(Dollar amounts in thousands)
1997 1996
Operating activities:
Net income $2,192 $1,641
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for loan losses 190 668
Depreciation and amortization 491 464
Provision for other real estate owned 34 305
Accrued interest receivable (210) (102)
Realized gain on sale of securities (112)
Realized gain on sale of other real estate owned (55) (3)
Realized gain on sale of loans (2) (66)
Realized (gain) loss on sale of equipment (5) (17)
Increase (decrease) in interest payable on deposits 64 2
(Increase) decrease in other assets (283) 301
Increase in other liabilities 256 51
Net cash provided by operating activities 2,672 3,132
Investing activities:
Investments and mortgage-backed securities:
Held to maturity:
Purchases (24,912) (7,579)
Proceeds from maturities and principal payments 11,008 4,802
Available for sale:
Purchases (4,381) (2,456)
Proceeds from sales 2,857
Proceeds from maturities 1,478 5,238
Purchases of premises and equipment (692) (988)
Net increase in loans (19,295) (21,719)
Proceeds from sale of equipment 5 17
Proceeds from sale of other real estate owned 76 2,023
Net cash used in investing activities (36,706) (17,805)
Financing activities:
Net increase (decrease) in borrowings 1,073 817
Net increase in deposits 32,016 25,615
Proceeds from exercise of stock options and stock
purchase plan 1,043 553
Dividends paid (775) (585)
Net cash used in financing activities 33,357 26,400
Increase (decrease) in cash and cash equivalents (677) 11,727
Cash and cash equivalents at beginning of period 23,401 12,604
Cash and cash equivalents at end of period $22,724 $24,331
Cash paid during the period:
Interest on deposits and other borrowings $7,621 $6,458
Income taxes 1,754 997
Transfers of loans to other real estate owned 134 1,782
Sales of other real estate owned financed by the bank 71 667
See notes to consolidated financial statements.
WESTBANK CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1997 AND SEPTEMBER 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
September 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 nine months ended September 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 nine month period
ended September 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 nine months ended September 30, 1997 and 1996,
amounted to 3,570,519 and 3,379,961 shares, respectively.
New Accounting Standards
In February, 1997, the Financial Accounting Standards Board ("FASB")
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 nine months ended September 30, 1996 and
by $0.02 for the nine month period ended September 30, 1997. The
presentation of diluted EPS would have been the same as EPS actually
reported for the respective periods.
In June 1997, the FASB issued SFAS No. 130, "Reporting
Comprehensive Income", which requires that changes in comprehensive
income be shown in a financial statement that is displayed with the
same prominence as other financial statements. This statement is
effective for periods beginning after December 15, 1997. The
Company has determined that this statement will have an effect on
the presentation of the Company's financial statements.
Also, in June 1997, the FASB issued SFAS No. 131, "Disclosure About
Segments of an Enterprise and Related Information", which addresses
segment reporting. This statement is effective for financial
statements for periods beginning after December 15, 1997.
Management is currently evaluating the effects of this change on the
Company's financial statements.
NOTE E - COMMITMENTS AND CONTINGENT LIABILITIES
In the normal course of business, there are outstanding commitments
and contingent liabilities, such as, standby letters of credit and
commitments to extend credit. As of September 30, 1997 standby
letters of credit amounted to $734,000 and loan commitments were
$29,759,000 and unused balances available on home equity lines of
credit were $7,375,000.
Trust Assets - Property with a book value of $107,246,000 at
September 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 September
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
September 30, 1997, for Tier 1 was 10.66% and total risk-based
capital was 11.91%, 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 $320,845,000 on September 30,
1997, compared to $284,909,000 on December 31, 1996. As of
September 30, 1997 and September 30, 1996, earning assets amounted
to, respectively, $303,049,000 or 94% of total assets, and
$263,447,000, or 94% of total assets. Earning assets increased
during the first nine 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 September 30, 1997, net income totaled
$818,000 compared to $573,000 for the quarter ended September 30,
1996. For the nine months ended September 30, 1997, net income was
$2,192,000 compared to $1,641,000 for the same period during 1996.
Included in the results of the nine months ended September 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 Losses and Non-Performing Assets - During the
most recent quarter the Corporation recognized loan recoveries
totaling $225,000, as a result no provision for loan losses was
recorded during the third quarter. Loans written off against the
allowance for loan losses totaled $30,000. The third quarter
recoveries were primarily the result of a partial recovery of one
commercial loan which was charged off during 1996.
After giving effect to the actions described above, the allowance
for loan losses at September 30, 1997 totaled $2,755,000 or 1.15% of
total loans, as compared to $2,481,000 or 1.12% at December 31,
1996.
Non-performing past due loans at September 30, 1997 aggregated
$1,182,000 or 0.49% of total loans compared to $2,361,000 or 1.07%
at December 31, 1996. The percentage of non-performing and past due
loans compared to total assets on those same dates, respectively,
amounted to 0.37% 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 by $60,000 and totaled $277,000 on
September 30, 1997 compared to December 31, 1996 and stands at 0.09%
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 and
has reflected these in deciding as to 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 NINE MONTHS ENDED
09-30-97 09-30-96 09-30-97 09-30-96
Interest and divided income $5,979 $5,190 $17,105 $15,195
Interest expense 2,740 2,242 7,685 6,460
Net interest income $3,239 $2,948 $9,420 $8,735
INTEREST RATE SPREAD AND NET YIELD ON EARNING ASSETS
(Dollar amounts in thousands)
QUARTER ENDED SEPT. 30, NINE MONTHS ENDED SEPT. 30,
1997 1996 1997 1996
Average Average Average Average
Balance Rate Balance Rate Balance Rate Balance Rate
Earning Assets $293,287 8.15% $253,598 8.19% $281,194 8.11% $246,645 8.21%
Interest-bearing
liabilities 241,791 4.53% 207,888 4.31% 231,223 4.43 200,749 4.29
Interest rate spread 3.62 3.88 3.68 3.92
Interest-free
resources used to
fund earning assets 51,496 45,710 49,971 45,896
Total Sources of Funds $293,287 3.73 $253,598 3.54 $281,194 3.64 $246,645 3.49
Net Yield on Earning Assets 4.42% 4.65% 4.47% 4.72%
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 09-30-97 NINE MONTHS ENDED 09-30-97
O V E R O V E R
QUARTER ENDED 09-30-96 NINE MONTHS ENDED 09-30-96
CHANGE DUE TO CHANGE DUE TO
VOLUME RATE TOTAL VOLUME RATE TOTAL
Interest Income:
Loans $541 $32 $573 $1,537 $(145) $1,392
Securities 198 (17) 181 500 (19) 481
Federal funds 30 5 35 17 20 37
Total Interest Earned 769 20 789 2,054 (144) 1,910
Interest Expense:
Interest bearing deposits 393 113 506 1,013 202 1,215
Other Borrowed Funds (5) (3) (8) (2) 12 10
Total Interest Expense $388 $110 $498 $1,011 $214 $1,225
Net Interest Income $381 $(90) $291 $1,043 $(358) $685
Net interest earned increased by $291,000 during the third quarter
of 1997 compared to the third quarter of 1996. For the nine month
period ended September 30, 1997 net interest income increased by
$685,000 versus the same period of 1996.
Average earning assets increased by $35,549,000 during the first
nine months of 1997. The average earning base was $281,194,000
compared to $246,645,000 in the same period last year.
OPERATING EXPENSES
The components of total operating (non-interest) expenses for the
periods and their percentage of gross income are as follows:
(Dollar amounts in thousands)
QUARTER ENDED NINE MONTHS ENDED
09-30-97 09-30-96 09-30-97 09-30-96
Amount Percent Amount Percent Amount Percent Amount Percent
Salaries and benefits $1,258 19.22% $1,049 18.50% $3,525 18.89% $3,129 18.60%
Other real estate - expense 14 0.22 169 3.00 52 0.28 389 2.30
Other non-interest expense 914 13.97 829 14.60 2,779 14.89 2,688 16.00
Occupancy - net 211 3.22 220 3.80 657 3.52 664 3.90
Total Operating Expenses $2,397 36.63% $2,267 39.90% $7,013 37.58% $6,870 40.80%
For the nine month period operating expenses increased by approximately
$143,000 primarily the result of overall growth of the Corporation.
WESTBANK CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - (Continued)
CAPITAL RATIOS September 30,
1997 1996
Ratio of "Tier 1" leverage capital
to total assets at end of period 6.94% 6.77%
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:
September 30,
1997 1996
Tier 1 Capital (minimum required 4.00%) 10.66% 10.19%
Tier 2 Capital (minimum required 8.00%) 11.91% 11.45%
INTEREST RATE SENSITIVITY
The following table sets forth the distribution of the repricing of
the Corporation's earning assets and interest bearing liabilities as
of September 30, 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 $62,975 $40,163 $105,532 $94,379 $303,049
Interest Bearing
Liabilities 79,746 69,930 98,667 49,006 297,349
Interest Rate
Sensitivity Gap $(16,771) $(29,767) $6,865 $45,373 $5,700
Cumulative Interest
Rate
Sensitivity Gap $(16,771) $(46,538) $(39,673) $5,700
Interest Rate
Sensitivity
Gap Ratio (5.53)% (9.82)% 2.27% 14.97%
Cumulative Interest
Rate Sensitivity
Gap Ratio (5.53)% (15.35)% (13.08)% 1.89%
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 September 30, 1997,
the Corporation's ratio of such assets to total deposits and
borrowed funds was 23.56%.
PROVISION AND ALLOWANCE FOR LOAN LOSSES
(Dollar amounts in thousands)
QUARTER ENDED NINE MONTHS ENDED
09-30-97 09-30-96 09-30-97 09-30-96
Balance at beginning of period $2,560 $2,647 $2,481 $3,707
Provision charged to expense 176 190 668
2,560 2,823 2,671 4,375
Charge-offs:
Loans secured by real estate 10 77 249 1,787
Commercial and industrial loans 12 45 155 134
Consumer loans 8 11 50 68
30 133 454 1,989
Recoveries:
Loans secured by real estate 22 39 152 328
Commercial and industrial loans 201 2 376 4
Consumer loans 2 4 9 16
Lease financing receivables 1 1
225 45 538 349
Net charge-offs (recoveries) (195) 88 (84) 1,640
Balance at end of period $2,755 $2,735 $2,755 $2,735
Net Charge-offs (recoveries) to:
Average loans (.08)% .04% (.04)% .80%
Loans at end of period (.08)% .04% (.03)% .76%
Allowance for loan losses (7.08)% 3.22% (3.05)% 59.96%
Allowance for loan losses
as a percentage of:
Average loans 1.15% 1.28% 1.20% 1.33%
Loans at end of period 1.15% 1.27% 1.15% 1.27%
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)
09-30-97 06-30-97 03-31-97 12-31-96 09-30-96
Non-Accrual Loans:
Loans secured by real estate $897 $1,143 $1,377 $1,697 $1,910
Construction/Land development 33 78 4 10
Commercial and Industrial Loans 6 240 238 372 750
Consumer Loans 9 5 14 6 1
912 1,421 1,707 2,079 2,671
Loans Contractually
past due 90 days or more
still accruing:
Loans secured by real estate 198 15 70 274 33
Commercial and Industrial Loans 18 76 6
Consumer Loans 54 10 14 8
270 25 160 282 39
Total non-accrual and past due $1,182 $1,446 $1,867 $2,361 $2,710
Non-accrual and past due
as a percentage of total loans 0.49% 0.62% 0.84% 1.07% 1.26%
Allowance for loan
losses as a percentage of
non accrual and past due 233.08% 177.04% 129.83% 105.08% 99.09%
Other real estate owned - net $277 $323 $403 $337 $793
Total non-performing assets $1,459 $1,769 $2,270 $2,698 $3,503
Non-performing assets as a
percentage of total assets 0.45% 0.57% 0.77% 0.95% 1.24%
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
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996
Balance Interest Rate Balance Interest Rate
Federal Funds sold and
temporary investments $4,807 $66 5.49% $2,547 $31 4.87%
Securities 49,221 811 6.59 37,245 630 6.76
Loans 239,259 5,102 8.53 213,806 4,529 8.47
Total earning assets 293,287 $5,979 8.15 253,598 $5,190 8.19
Loan loss allowance (2,692) (2,701)
All other assets 18,766 19,430
TOTAL ASSETS $309,361 $270,327
LIABILITIES AND EQUITY
Interest bearing deposits $233,504 $2,680 4.59 $198,865 $2,174 4.37
Borrowed funds 8,287 60 2.90 9,023 68 3.01
Total interest bearing
liabilities 241,791 $2,740 4.53 207,888 $2,242 4.31
Interest rate spread 3.62% 3.88%
Demand deposits 44,265 42,646
Other liabilities 1,536 1,091
Shareholders' equity 21,769 18,702
TOTAL LIABILITIES
AND EQUITY $309,361 $270,327
NET INTEREST INCOME $3,239 $2,948
Interest Earned/Earning Assets 8.15% 8.19%
Interest Expense/Earning Assets 3.73 3.54
Net Yield on Earning Assets 4.42% 4.65%
WESTBANK CORPORATION AND SUBSIDIARIES
YEAR TO DATE AVERAGE BALANCES
INTEREST EARNED - INTEREST EXPENSE
(Dollar amounts in thousands)
NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996
Balance Interest Rate Balance Interest Rate
Federal Funds sold and
temporary investments $5,433 $218 5.35% $4,624 $181 5.21%
Securities 46,024 2,273 6.58 36,361 1,792 6.57
Loans 229,737 14,614 8.48 205,660 13,222 8.57
Total earning assets 281,194 $17,105 8.11 246,645 $15,195 8.21
Loan loss allowance (2,576) (3,369)
All other assets 18,128 19,285
TOTAL ASSETS $296,746 $262,561
LIABILITIES AND EQUITY
Interest bearing deposits $222,670 $7,483 4.48 $192,074 $6,268 4.35
Borrowed funds 8,553 202 3.15 8,675 192 2.95
Total interest bearing
liabilities 231,223 $7,685 4.43 200,749 $6,460 4.29
Interest rate spread 3.68% 3.92%
Demand deposits 43,060 42,436
Other liabilities 1,554 1,098
Shareholders' equity 20,909 18,278
TOTAL LIABILITIES
AND EQUITY $296,746 $262,561
NET INTEREST INCOME $9,420 $8,735
Interest Earned/Earning Assets 8.11% 8.21%
Interest Expense/Earning Assets 3.64 3.49
Net Yield on Earning Assets 4.47% 4.72%
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 Information
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: November 12, 1997
Donald R. Chase
President and
Chief Executive Officer
Date: November 12, 1997
John M. Lilly
Treasurer and
Chief Financial Officer
10Q.697