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, 1998 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: 3,765,552 shares outstanding as of April 30, 1998. WESTBANK CORPORATION AND SUBSIDIARIES INDEX PART I - FINANCIAL INFORMATION Page Financial Statements Condensed Consolidated Balance Sheets 3 Condensed Consolidated Statements of Income and Comprehensive 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 Securities and Use of Proceeds 16 ITEM 3. Defaults upon Senior Securities 16 ITEM 4. Submission of Matters to a Vote of Security Holders 16 ITEM 5. Other Information 16-17 ITEM 6. Exhibits and Reports on Form 8-K 17 Signatures 18 WESTBANK CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Dollar amounts in thousands) March 31, 1998 December 31, 1997 - - ------------------------------------------------------------------------------ ASSETS Cash and due from banks: Non-interest bearing $ 11,242 $ 9,603 Interest bearing 22 79 Federal funds sold 179 3,678 - - ------------------------------------------------------------------------------ Total cash and cash equivalents 11,443 13,360 Investment securities available for sale 21,300 20,088 Investment securities held to maturity (approximate market value of $38,598 in 1998 and $34,655 in 1997) 38,484 34,503 - - ------------------------------------------------------------------------------ Total securities 59,784 54,591 - - ------------------------------------------------------------------------------ Loans $ 235,554 $ 231,012 Mortgage loans held-for-sale 3,757 4,251 Allowance for loan losses (2,852) (2,848) - - ------------------------------------------------------------------------------ Net-loans 236,459 232,415 Bank premises and equipment 4,676 4,474 Other real estate owned - net of allowance for losses of $200 in 1998 and $200 in 1997 379 149 Accrued interest receivable 1,764 1,968 Other assets 1,956 1,308 - - ------------------------------------------------------------------------------ TOTAL ASSETS $ 316,461 $ 308,265 ============================================================================== LIABILITIES AND STOCKHOLDERS' EQUITY Deposits: Non-interest bearing $ 46,306 $ 48,638 Interest bearing 230,464 222,922 - - ------------------------------------------------------------------------------ Total Deposits 276,770 271,560 Borrowed funds 12,717 11,884 Accrued interest payable 393 379 Other liabilities 1,266 691 - - ------------------------------------------------------------------------------ Total Liabilities 291,146 284,514 - - ------------------------------------------------------------------------------ Stockholders' Equity: Common stock - $2 par value Authorized - 9,000,000 shares Issued - 3,747,797 shares in 1998 and 3,581,377 shares in 1997 7,496 7,163 Additional paid in capital 9,570 8,819 Retained earnings 8,174 7,708 Accumulated other comprehensive income 75 61 - - ------------------------------------------------------------------------------ Total Stockholders' Equity 25,315 23,751 - - ------------------------------------------------------------------------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 316,461 $ 308,265 ============================================================================== See accompanying notes to condensed consolidated financial statements. WESTBANK CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (Unaudited) (Dollar amounts in thousands) Three months ended March 31, 1998 1997 - - --------------------------------------------------------------------- Income: Interest and fees on loans $ 4,979 $ 4,643 Interest and dividend income on ecurities 827 670 Interest on temporary investments 36 115 - - --------------------------------------------------------------------- Total interest and dividend income 5,842 5,428 Interest expense 2,579 2,411 - - --------------------------------------------------------------------- Net interest income 3,263 3,017 Provision for loan losses 19 150 - - --------------------------------------------------------------------- Net interest income after provision for loan losses 3,244 2,867 - - --------------------------------------------------------------------- Non-interest income 608 506 - - --------------------------------------------------------------------- Non-interest expenses: Salaries and benefits 1,225 1,128 Other real estate expenses 22 8 Other non-interest expense 983 934 Occupancy - net 225 223 - - --------------------------------------------------------------------- Total non-interest expense 2,455 2,293 - - --------------------------------------------------------------------- Income before income taxes 1,397 1,080 Income taxes 558 443 - - --------------------------------------------------------------------- Net Income $ 839 $ 637 ===================================================================== Net income per share - Basic $ 0.22 $ 0.19 - Diluted $ 0.22 $ 0.18 Weighted average shares outstanding - Basic 3,733,402 3,426,453 - Dilutive Option Shares 104,956 95,684 - Diluted 3,838,358 3,522,137 ===================================================================== Comprehensive Income: Net Income $839 $637 Other comprehensive income: Unrealized gain/(loss) on securities available for sale 127 (389) Tax effect (52) 162 ===================================================================== Total other comprehensive income 75 (227) ===================================================================== Comprehensive Income $914 $410 ===================================================================== See accompanying notes to condensed consolidated financial statements. WESTBANK CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY YEAR ENDED DECEMBER 31, 1997 AND THREE MONTHS ENDED MARCH 31, 1998 (1998 Unaudited) (Dollar amounts in thousands) ACCUMULATED COMMON STOCK OTHER ADDITIONAL COMPREHENSIVE NUMBER OF PAR PAID IN RETAINED INCOME/ SHARES VALUE CAPITAL EARNINGS (LOSS) TOTAL - - ----------------------------------------------------------------------------------------- BALANCE-DECEMBER 31, 1996 3,346,802 $6,694 $7,633 $5,517 $(99) $19,745 Net income - - - 3,231 - 3,231 Cash dividends declared ($.30 per share) - - - (1,040) - (1,040) Shares issued: Stock Option Plan 88,156 176 94 - - 270 Dividend Reinvestment and Stock Purchase Plan 146,419 293 1,092 - - 1,385 Unrealized gain on securities available for sale - - - - 160 160 - - ----------------------------------------------------------------------------------------- BALANCE-DECEMBER 31, 1997 3,581,377 7,163 8,819 7,708 61 23,751 Net income - - - 839 - 839 Cash Dividend Declared ($0.10 per share) - - - (373) - (373) Shares issued: Stock Option Plan 154,536 309 619 - - 928 Dividend Reinvestment and Stock Purchase Plan 11,884 24 132		 - - 156 Unrealized gain on securities available for sale - - - - 14 14 - - ----------------------------------------------------------------------------------------- BALANCE-MARCH 31, 1998 3,747,797 $ 7,496 $ 9,570 $ 8,174 $ 75 $ 25,315 ========================================================================================= 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, 1998 1997 - - ------------------------------------------------------------------------------- Operating activities: Net income $ 839 $ 637 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses 19 150 Depreciation and amortization 189 163 Provision for other real estate owned 17 0 Decrease (increase) in accrued interest receivable 229 (160) Realized gain on sale of other real estate owned (30) 0 Increase in other assets (673) (284) Increase in interest payable on deposits 14 28 Increase in other liabilities 575 631 - - ------------------------------------------------------------------------------- Net cash provided by operating activities 1,179 1,165 - - ------------------------------------------------------------------------------- Investing activities: Investments and mortgage-backed securities: Held to maturity: Purchases (18,485) (11,481) Proceeds from maturities and principal payments 14,504 3,091 Available for sale: Purchases (4,584) (1,714) Proceeds from sales 1,270 0 Proceeds from maturities and principal payments 2,102 30 Purchases of premises and equipment (391) (251) Net (increase) decrease in loans (4,296) (2,886) Proceeds from sale of other real estate owned 30 0 - - ------------------------------------------------------------------------------- Net cash used in investing activities (9,850) (13,211) - - ------------------------------------------------------------------------------- Financing activities: Net increase (decrease) in borrowings 833 (375) Net increase (decrease) in deposits 5,210 8,626 Proceeds from exercise of stock options and stock purchase plan 1,084 423 Dividends paid (373) (256) - - ------------------------------------------------------------------------------- Net cash used by financing activities 6,754 8,418 - - ------------------------------------------------------------------------------- Decrease in cash and cash equivalents (1,917) (3,628) Cash and cash equivalents at beginning of period 13,360 23,401 - - ------------------------------------------------------------------------------- Cash and cash equivalents at end of period $11,443 $19,773 =============================================================================== Cash paid: Interest on deposits and other borrowings $2,565 $2,383 Income taxes 195 155 Transfers of loans to other real estate owned 247 66 See notes to consolidated financial statements. WESTBANK CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS THREE MONTHS ENDED MARCH 31, 1998 AND 1997 (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, 1998, 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, 1998 and 1997 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, 1998, are not necessarily indicative of the results that may be expected for the year ending December 31, 1998. 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, 1997. NOTE D - 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, 1998 standby letters of credit amounted to $595,000 and loan commitments were $29,818,000 and unused balances available on home equity lines of credit were $8,247,000. Trust Assets - Property with a book value of $117,661,000 at March 31, 1998 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 E - STOCKHOLDERS' EQUITY The FDIC imposes leverage capital ratio requirements for state non-member Banks. The Bank's leverage capital ratio as of March 31, 1998 and December 31, 1997 was 7.54% and 7.04% respectively. In addition, the FDIC has established risk-based capital requirements for insured institutions for 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, 1998 for Tier 1 was 11.06% and total risk-based capital was 12.31%, which meets the FDIC criteria for a well-capitalized financial institution. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THREE MONTHS ENDED MARCH 31, 1998 AND 1997 Changes in Financial Condition - Total consolidated assets amounted to $316,461,000 on March 31, 1998, compared to $308,265,000 on December 31, 1997. As of March 31, 1998 and March 31, 1997, earning assets amounted to, respectively, $299,306,000 or 95% of total assets, and $277,289,000, or 94% of total assets. Earning assets increased during the first three months of 1998 as a result of increases in securities and loans. 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, 1998, net income totaled $839,000 compared to $637,000 for the three-month period ended March 31, 1997. Non-interest income increased during the first quarter of 1998 by $102,000 while non-interest expense increased by $162,000, primarily the result of overall growth of the Corporation. 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 Losses and Non-Performing Assets - A decrease of $131,000 has been reflected in the provision for loan losses in the quarter with $19,000 being provided compared to $150,000 in 1997. Loans written off against the allowance for loan losses after recoveries amounted to $15,000 for the first three months of 1998 versus $207,000 for the same period of 1997. After giving effect to the actions described above, the allowance for loan losses at March 31, 1998 totaled $2,852,000 or 1.19% of total loans, as compared to $2,848,000 or 1.21% at December 31, 1997. Non-performing past due loans at March 31, 1998 aggregated $858,000 or 0.36% of total loans compared to $1,226,000 or 0.52% at December 31, 1997. The percentage of non-performing and past due loans compared to total assets on those same dates, respectively, amounted to 0.27% and 0.40%. The change in non-performing loans was primarily the result of the continued resolution of problem assets. Other real estate owned increased during the most recent quarter by $230,000 compared to 1997 and totals $379,000. The percentage of other real estate owned to total assets as of March 31, 1998 and December 31, 1997 amounted to 0.12% and 0.40%, respectively. 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. 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, 1998 1997 - - ------------------------------------------------------------------------------ Interest and divided income $5,842 $5,428 Interest expense 2,579 2,411 - - ------------------------------------------------------------------------------ Net interest income $3,263 $3,017 ============================================================================== INTEREST RATE SPREAD AND NET YIELD ON EARNING ASSETS (Dollar amounts in thousands) Quarter ended March 31, 1998 1997 - - ------------------------------------------------------------------------------ Average Average Balance Rate Balance Rate - - ------------------------------------------------------------------------------ Earning Assets $291,062 8.03% $271,129 8.01% - - ------------------------------------------------------------------------------ Interest-bearing liabilities 234,693 4.40% 222,621 4.33% - - ------------------------------------------------------------------------------ Interest rate spread 3.63 3.68 - - ------------------------------------------------------------------------------ Interest-free resources used to fund earning assets 56,369 48,508 - - ------------------------------------------------------------------------------ Total Sources of Funds $291,062 3.54 $271,129 3.56 ============================================================================== Net Yield on Earning Assets 4.49% 4.45% ============================================================================== CHANGES IN NET INTEREST INCOME (Dollar amounts in thousands) QUARTER ENDED MARCH 31, 1998 0 V E R QUARTER ENDED MARCH 31, 1997 - - ------------------------------------------------------------------------------ CHANGE DUE TO VOLUME RATE TOTAL - - ------------------------------------------------------------------------------ Interest Income: Loans $315 21 $336 Securities 179 (22) 157 Federal funds (86) 7 (79) - - ------------------------------------------------------------------------------ Total Interest Earned 408 6 414 Interest Expense: Interest bearing deposits 106 39 145 Other Borrowed Funds 21 2 23 - - ------------------------------------------------------------------------------ Total Interest Expense 127 41 168 - - ------------------------------------------------------------------------------ Net Interest Income $281 $(35) $246 ============================================================================== Net interest earned increased to $3,263,000 in the first quarter of 1998, up $246,000 as compared with the comparable period of 1997. Average earning assets increased by $19,933,000 during the first quarter of 1998. The average earning base was $291,062,000 compared to $271,129,000 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 - - ------------------------------------------------------------------------------ 3-31-98 3-31-97 Amount Percent Amount Percent - - ------------------------------------------------------------------------------ Salaries and benefits $1,225 18.99% $1,128 19.01% Other real estate expense 22 0.34 8 0.13 Other non-interest expense 983 15.24 934 15.74 Occupancy - net 225 3.49 223 3.76 - - ------------------------------------------------------------------------------ Total Operating Expenses $2,455 38.06% $2,293 38.64% ============================================================================== CAPITAL RATIOS 3-31-98 12-31-97 - - ------------------------------------------------------------------------------ Ratio of "Tier 1" leverage capital to total assets at end of period 8.00% 7.70% 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, 1998: Tier 1 Capital (minimum required 4.00%) 12.15% Tier 2 Capital (minimum required 8.00%) 13.40% 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, 1998: (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 $57,036 $37,052 $95,392 $109,826 $299,306 Interest Bearing Liabilities 89,065 67,499 86,617 243,181 - - ------------------------------------------------------------------------------- Interest Rate Sensitivity Gap $(32,029) $(30,447) $8,775 $109,826 $ 56,125 =============================================================================== Cumulative Interest Rate Sensitivity Gap $(32,029) $(62,476) $(53,701) $56,125 Interest Rate Sensitivity Gap Ratio (10.70)% (10.17)% 2.93% 36.69% Cumulative Interest Rate Sensitivity Gap Ratio (10.70)% (20.87)% (17.94)% 18.75% 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, 1998, the Corporation's ratio of such assets to total deposits and borrowed funds was 25.90%. PROVISION AND ALLOWANCE FOR LOAN LOSSES (Dollar amounts in thousands) Quarter ended March 31, 1998 1997 - - ------------------------------------------------------------------------------ Balance at beginning of period $ 2,848 $ 2,481 Provision charged to expense 19 150 - - ------------------------------------------------------------------------------ 2,867 2,631 - - ------------------------------------------------------------------------------ Less Charge-offs: Loans secured by real estate 40 84 Commercial and industrial loans 7 131 Consumer loans 11 14 - - ------------------------------------------------------------------------------ 58 229 - - ------------------------------------------------------------------------------ Add-Recoveries: Loans secured by real estate 25 19 Commercial and industrial loans 15 1 Consumer loans 3 2 - - ------------------------------------------------------------------------------ 43 22 - - ------------------------------------------------------------------------------ Net charge-offs (recoveries) 15 207 - - ------------------------------------------------------------------------------ Balance at end of period $ 2,852 $ 2,424 ============================================================================== Net Charge-offs (recoveries) to: Average loans .01% .09% Loans at end of period .01% .09% Allowance for loan losses .53% 8.54% Allowance for loan losses as a percentage of: Average loans 1.20% 1.09% Loans at end of period 1.19% 1.09% 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) 03-31-98 12-31-97 09-30-97 06-30-97 03-31-97 - - ------------------------------------------------------------------------------- Non-accrual loans: Loans secured by real estate $595 $983 $897 $1,143 $1,377 Construction/Land development 2 3 0 33 78 Commercial and Industrial Loans 37 37 6 240 238 Consumer Loans 1 19 9 5 14 - - ------------------------------------------------------------------------------- $635 $1,042 $912 1,421 1,707 - - ------------------------------------------------------------------------------- Loans contractually past due 90 days or more still accruing: Loans secured by real estate $193 $170 $198 $15 $70 Commercial and Industrial Loans 24 0 18 0 76 Consumer Loans 6 14 54 10 14 - - ------------------------------------------------------------------------------- $223 $184 $270 25 160 - - ------------------------------------------------------------------------------- Total non-accrual, past due and restructured loans $858 $1,226 $1,182 $1,446 $1,867 =============================================================================== Non-accrual, past due and restructured loans as a percentage of total loans 0.36% 0.52% 0.49% 0.62% 0.84% =============================================================================== Allowance for loan losses as a percentage of non accrual, past due and restructured loans 332.40% 232.30% 233.08% 177.04% 129.83% =============================================================================== OTHER REAL ESTATE Other real estate owned - net $379 $149 $277 $323 $403 =============================================================================== Total non-performing assets $1,237 $1,375 $1,459 $1,769 $2,270 =============================================================================== Non-performing assets as a percentage of total assets 0.39% 0.45% 0.45% 0.57% 0.77% =============================================================================== WESTBANK CORPORATION AND SUBSIDIARIES QUARTER TO DATE AVERAGE BALANCES INTEREST EARNED - INTEREST EXPENSE (Dollar amounts in thousands) Three months ended March 31, 1998 1997 Balance Interest Rate Balance Interest Rate - - -------------------------------------------------------------------------------------------- Federal Funds sold and temporary investments $2,570 $36 5.60% $8,712 $115 5.28% Securities 51,701 827 6.40 40,619 670 6.60 Loans 236,791 4,979 8.41 221,798 4,643 8.37 - - -------------------------------------------------------------------------------------------- Total earning assets 291,062 $5,842 8.03 271,129 $5,428 8.01 - - -------------------------------------------------------------------------------------------- Loan loss allowance (2,923) (2,537) All other assets 17,640 17,493 - - -------------------------------------------------------------------------------------------- TOTAL ASSETS $305,779 $286,085 ============================================================================================ LIABILITIES AND EQUITY Interest bearing deposits $224,416 $2,499 4.45 $215,071 $2,354 4.38 Borrowed funds 10,277 80 3.12 7,550 57 3.02 - - -------------------------------------------------------------------------------------------- Total interest bearing liabilities 234,693 $2,579 4.40 222,621 $2,411 4.33 - - -------------------------------------------------------------------------------------------- Interest rate spread 3.63% 3.68% Demand deposits 45,302 41,877 Other liabilities 1,031 1,358 Shareholders' equity 24,753 20,229 - - -------------------------------------------------------------------------------------------- TOTAL LIABILITIES AND EQUITY $305,779 $286,085 ============================================================================================ Net Interest Income $3,263 $3,017 Interest Earned/Earning Assets 8.03% 8.01% Interest Expense/Earning Assets 3.54 3.56 - - -------------------------------------------------------------------------------------------- Net Yield on Earning Assets 4.49% 4.45% ============================================================================================ 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. 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-K - None a. Exhibits EXHIBIT INDEX Page No. 3. Articles of Organization, as amended ** (a) Articles of Organization, as amended * (b) By-Laws, as amended * 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 b. Reports on Form 8-K - None Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Quarterly Report to be signed on its behalf by the undersigned thereunto duly authorized. WESTBANK CORPORATION Date: May 12, 1998				 /s/ Donald R. Chase Donald R. Chase President and Chief Executive Officer Date: May 12, 1998				 /s/ John M. Lilly John M. Lilly Treasurer and Chief Financial Officer