1
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, 2001
Commission file number 0 - 12784
WESTBANK CORPORATION
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-2830731
(State or other jurisdiction of
incorporation or organization) (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:
4,253,374 shares outstanding as of April 30, 2001.
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WESTBANK CORPORATION AND SUBSIDIARIES
INDEX
PART I - FINANCIAL INFORMATION
Page
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of Income 4
Condensed Consolidated Statements of Stockholders' Equity 5
Condensed Consolidated Statements of Comprehensive Income 5
Condensed Consolidated Statements of Cash Flows 6
Notes to Condensed Consolidated Financial Statements 7-8
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-16
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk 16
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings 17
ITEM 2. Changes in Securities and Use of Proceeds 17
ITEM 3. Defaults upon Senior Securities 17
ITEM 4. Submission of Matters to a Vote of Security Holders 17
ITEM 5. Other Information 17
ITEM 6. Exhibits and Reports on Form 8-K 18
Signatures 19
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3
ITEM 1. FINANCIAL STATEMENTS
WESTBANK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollar amounts in thousands,
except per share data) March 31, 2001 December 31, 2000
- - --------------------------------------------------------------------------------
ASSETS Cash and due from banks:
Non-interest bearing $ 15,476 $ 18,043
Interest bearing 249 227
Federal funds sold 1,415 5,249
- - --------------------------------------------------------------------------------
Total cash and cash equivalents 17,140 23,519
- - --------------------------------------------------------------------------------
Investment securities available for sale 90,847 86,267
Investment securities held to maturity
(approximate market value of
$6,984 in 2001 and $11,392 in 2000) 6,954 11,409
- - --------------------------------------------------------------------------------
Total securities 97,801 97,676
- - --------------------------------------------------------------------------------
Loans $ 432,429 $ 432,901
Allowance for loan losses 3,936 3,670
- - --------------------------------------------------------------------------------
Net loans 428,493 429,231
Premises and equipment, net 7,060 7,292
Other real estate owned 135 541
Accrued interest receivable 3,208 3,977
Intangible assets 9,350 9,521
Other assets 2,642 2,839
- - --------------------------------------------------------------------------------
TOTAL ASSETS $ 565,829 $ 574,596
- - --------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing $ 61,712 $ 63,609
Interest bearing 414,352 435,531
- - --------------------------------------------------------------------------------
Total Deposits 476,064 499,140
Borrowed funds 33,990 20,992
Accrued interest payable 1,056 727
Other liabilities 1,574 1,877
- - --------------------------------------------------------------------------------
Total liabilities 512,684 522,736
- - --------------------------------------------------------------------------------
Mandatory redeemable preferred stock 17,000 17,000
Stockholders' Equity:
Common stock - $2 par value
Authorized - 9,000,000 shares
Issued - 4,238,461 shares in 2001 and
- 4,222,520 shares in 2000 8,567 8,567
Additional paid in capital 11,587 11,608
Retained earnings 15,904 15,408
Treasury stock (379) (526)
Accumulated other comprehensive income(loss) 466 (197)
- - --------------------------------------------------------------------------------
Total Stockholders' Equity 36,145 34,860
- - --------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 565,829 $ 574,596
- - --------------------------------------------------------------------------------
See accompanying notes to condensed consolidated financial statements.
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4
WESTBANK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Dollar amounts in thousands, except per share data)
Three months ended March 31, 2001 2000
- - --------------------------------------------------------------------------------
Income:
Interest and fees on loans$8,507 $ 8,692
Interest and dividend income on securities 1,588 1,523
Interest on federal funds sold 52 68
- - --------------------------------------------------------------------------------
Total interest and dividend income 10,147 10,283
Interest expense 5,298 5,295
- - --------------------------------------------------------------------------------
Net interest income 4,849 4,988
Provision for loan losses 227 65
- - --------------------------------------------------------------------------------
Net interest income after
provision for loan losses 4,622 4,923
- - --------------------------------------------------------------------------------
Non-interest income:
Investment security gains 31
Other non-interest income 729 578
- - --------------------------------------------------------------------------------
Total non-interest income 760 578
- - --------------------------------------------------------------------------------
Non-interest expenses:
Salaries and benefits 2,043 2,042
Other non-interest expense 1,559 1,680
Occupancy - net 389 354
- - --------------------------------------------------------------------------------
Total non-interest expense 3,991 4,076
- - --------------------------------------------------------------------------------
Income before income taxes 1,391 1,425
Income taxes 471 524
- - --------------------------------------------------------------------------------
NET INCOME $ 920 $ 901
================================================================================
Net income per share
- Basic $ 0.22 $ 0.21
- Diluted $ 0.22 $ 0.21
Weighted average shares outstanding
- Basic 4,234,848 4,272,683
- Dilutive Option Shares 37,269 58,027
- - --------------------------------------------------------------------------------
- Diluted 4,272,117 4,330,710
================================================================================
See accompanying notes to condensed consolidated financial statements.
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WESTBANK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
YEAR ENDED DECEMBER 31, 2000 AND THREE MONTHS ENDED MARCH 31, 2001
(2001 Unaudited)
(Dollar amounts in thousands, except per share data)
COMMON STOCK ACCUMULATED
--------------------- ADDITIONAL OTHER
NUMBER PAR PAID-IN RETAINED TREASURY COMPREHENSIVE
OF SHARES VALUE CAPITAL EARNINGS STOCK INCOME/(LOSS) TOTAL
- - ------------------------------------------------------------------------------------------------------------------------------------
BALANCE - DECEMBER 31, 1999 4,283,719 $8,567 $11,633 $13,317 $(1,974) $ 31,543
Net income 3,788 3,788
Cash dividends declared
($.40 per share) (1,697) (1,697)
Treasury Shares:
Redeemed (127,320) $(1,127) (1,127)
Reissued 66,121 (25) 601 576
Unrealized gain (loss) on
securities available for sale 1,777 1,777
- - ------------------------------------------------------------------------------------------------------------------------------------
BALANCE - DECEMBER 31, 2000 4,222,520 8,567 11,608 15,408 (526) (197) (34,860)
Net income 920 920
Cash dividends declared
($.10 per share) (424) (424)
Treasury shares:
Redeemed (1,200) (9) (9)
Reissued 17,141 (21) 156 135
Unrealized gain (loss) on
securities available for sale 663 663
- - ------------------------------------------------------------------------------------------------------------------------------------
BALANCE - MARCH 31, 2001 4,238,461 $8,567 $11,587 $15,904 $ (379) $ 466 $ 36,145
- - ------------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(Dollars in thousands)
Three months ended March 31, 2001 2000
Net Income $ 920 $ 901
- - --------------------------------------------------------------------------------
Unrealized gain (loss) on securities available for sale,
net of income taxes (benefit) of $342 in 2001
and ($85) in 2000 643 (138)
Reclassification adjustment for gains (losses)
included in net income, net of income taxes
of $11 in 2001 20
- - --------------------------------------------------------------------------------
Other Comprehensive Income (Loss) 663 (138)
- - --------------------------------------------------------------------------------
COMPREHENSIVE INCOME $1,583 $ 763
- - --------------------------------------------------------------------------------
See accompanying notes to condensed consolidated financial statements.
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WESTBANK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
(Dollar amounts in thousands)
Three months ended March 31 2001 2000
Operating activities:
Net income $ 920 $ 901
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses 227 65
Depreciation and amortization 239 279
Intangible amortization 171 115
Realized gain on sale of securities (31)
Realized gain on sale of other real estate owned (22)
Decrease in accrued interest receivable 769 567
(Increase)/decrease in other assets 197 (1,135)
Increase/(decrease) in interest payable on deposits 329 (86)
Increase/(decrease) in other liabilities (643) 84
- - ----------------------------------------------------------------------------------------------------
Net cash provided by operating expenses 2,156 790
- - ----------------------------------------------------------------------------------------------------
Investing activities:
Investments and mortgage-backed securities:
Held to maturity:
Purchases
Proceeds from maturities and principal payments 5,451 88
Available for sale:
Purchases (27,798) (12,167)
Proceeds from sales 5,530
Proceeds from maturities and principal payments 17,726 423
Purchases of premises and equipment (7) (120)
Net increase in loans 511 1,853
Proceeds from sale of other real estate owned 428 78
- - ----------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities 1,841 (9,845)
- - ----------------------------------------------------------------------------------------------------
Financing activities:
Net increase/(decrease) in borrowings 12,998 (5,542)
Net increase (decrease) in deposits (23,076) (152)
Treasury stock (purchased)/issued, net 126 (441)
Dividends paid (424) (429)
- - ----------------------------------------------------------------------------------------------------
Net cash (used in)/provided by financing activities (10,376) (6,564)
- - ----------------------------------------------------------------------------------------------------
Decrease in cash and cash equivalents (6,379) (15,619)
Cash and cash equivalents at beginning of period 23,519 31,542
- - ----------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 17,140 $ 15,923
- - ----------------------------------------------------------------------------------------------------
Cash paid:
Interest on deposits and other borrowings $4,969 $5,381
Income taxes 200 509
Supplemental disclosure of cash flow information:
Transfer of loans to other real estate owned 277
See accompanying notes to condensed consolidated financial statements.
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7
WESTBANK CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2001 AND 2000
(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 its banking subsidiaries, Park
West Bank and Trust Company ("Park West") and Cargill Bank ("Cargill") into
additional financial services related to banking. Substantially all operating
income and net income of the Corporation are presently accounted for by Park
West and Cargill.
NOTE B - CURRENT OPERATING ENVIRONMENT
Park West operates thirteen banking offices located in Hampden County,
Massachusetts, 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 is furnished to individuals, businesses and
non-profit organizations. Cargill Bank operates four offices in Windham County,
Connecticut. A full range of retail banking services is furnished to
individuals, businesses and non-profit organizations. The primary source of
revenue for Park West and Cargill is derived from providing loans to customers
who are predominantly located in Park West's and Cargill's service areas.
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, 2001,
Park West and Cargill's capital was at a level that placed the Banks 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, 2001 and 2000 have been prepared in accordance
with accounting principles generally accepted in the United States of America
("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, 2001, are not necessarily indicative of the results that may be
expected for the year ending December 31, 2001. In preparing such financial
statements, management is required to make estimates and assumptions that affect
the reported amounts. Actual results could differ significantly from these
estimates.
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, 2000.
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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, 2001, standby letters of credit amounted to
$605,700, loan commitments were $36,450,000 and unused balances available on
home equity lines of credit were $11,030,000.
Trust Assets - Property with a book value of $118,316,000 at March 31, 2001,
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.
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 capital ratios of Park West and Cargill as of March 31, 2001, were as
follows:
Park West Bank
and Trust Company Cargill Bank
Leverage Capital Ratio 7.88% 6.85%
Tier 1 Risk-Based Capital 11.50% 12.56%
Total Risk-Based Capital 12.51% 13.81%
As of March 31, 2001, both Park West and Cargill met the criteria which
classified them as well-capitalized financial institutions.
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9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2001 AND 2000
INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS -
The following forward looking statements are made in accordance with the Private
Securities Litigation Reform Act of 1995.
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 that 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 areas of Western Massachusetts and Northeastern Connecticut;
2. The real estate market in Western Massachusetts and Northeastern
Connecticut;
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.
CHANGES IN FINANCIAL CONDITION -
Total consolidated assets amounted to $565,829,000 on March 31, 2001 compared to
$574,596,000 on December 31, 2000. As of March 31, 2001, and December 31, 2000,
earning assets amounted to, respectively, $531,894,000 or 94% of total assets,
and $536,053,000 or 93% of total assets. Earning assets decreased during the
first three months of 2001 as a result of decreases in loans and temporary
investments. A decrease in deposits and an increase in borrowed funds offset the
decline in earning assets.
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10
CHANGES IN RESULTS OF OPERATIONS -
For the quarter ended March 31, 2001, net income totaled $920,000 compared to
$901,000 for the three-month period ended March 31, 2000.
Non-interest income increased by $151,000 during the first quarter of 2001
compared to the first quarter of 2000. During the first quarter of 2001, the
Corporation recognized a gain on sale of securities available for sale totaling
$31,000. Non-interest expense totaled $3,991,000 for the quarter ended March 31,
2001, a decrease of $85,000 versus the first quarter of 2000.
An overall decrease in interest income reflects a decrease in volume and
interest rates on earning assets, while a decrease in interest-bearing
liabilities and an increase in rates kept interest expense level with the first
quarter of 2000. Further analysis is provided in sections on net interest
revenue and supporting schedules.
ALLOWANCE FOR LOAN LOSSES AND NON-PERFORMING ASSETS -
An increase of $162,000 has been reflected in the provision for loan losses in
the quarter, with $227,000 being provided compared to $65,000 in 2000. Loans
written off against the allowance for loan losses after recoveries amounted to
net recoveries of $39,000 for the first three months of 2001 versus $153,000 for
the same period of 2000.
After giving effect to the actions described above, the allowance for loan
losses at March 31, 2001, totaled $3,936,000 or 0.91% of total loans, as
compared to $3,670,000 or 0.85% at December 31, 2000.
Non-performing past due loans at March 31, 2001, aggregated $2,796,000 or 0.65%
of total loans compared to $2,196,000 or 0.51% at December 31, 2000. The
percentage of non-performing and past due loans compared to total assets on
those same dates, respectively, amounted to 0.52% and 0.48%.
Other real estate owned decreased during the most recent quarter by $406,000
compared to 2000 and totals $135,000. The percentage of other real estate owned
to total assets as of March 31, 2001 and December 31, 2000 amounted to 0.02% and
0.09% respectively.
Management has made every effort to recognize all circumstances known at this
time which could affect the collectibility of loans and has reflected these in
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 loan grading system and circumstances known at this time.
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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 stockholders' 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 subsidiaries, Park West Bank and Trust Company
and Cargill Bank
(Dollar amounts in thousands)
Quarter ended March 31, 2001 2000
- - --------------------------------------------------------------------------------
Interest and dividend income $10,147 $10,283
Interest expense 5,298 5,295
- - --------------------------------------------------------------------------------
Net interest income 4,849 4,988
Tax equivalent adjustment 46 32
================================================================================
NET INTEREST INCOME (TAXABLE EQUIVALENT) $ 4,895 $ 5,020
================================================================================
INTEREST RATE SPREAD AND NET YIELD ON EARNING ASSETS
(Dollar amounts in thousands)
Quarter ended March 31, 2001 2000
- - -------------------------------------------------------------------------------
Average Average
Balance Rate Balance Rate
- - -------------------------------------------------------------------------------
Earning Assets $527,486 7.73% $531,480 7.76%
- - -------------------------------------------------------------------------------
Interest-bearing liabilities 460,937 4.60% 474,709 4.46%
- - -------------------------------------------------------------------------------
Interest rate spread 3.13 3.30
- - -------------------------------------------------------------------------------
Interest-free resources used
to fund earning assets 66,549 56,771
- - -------------------------------------------------------------------------------
Total Sources of Funds $527,486 4.02 $531,480 3.99
================================================================================
NET YIELD ON EARNING ASSETS 3.71% 3.77%
================================================================================
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CHANGES IN NET INTEREST INCOME
(Dollar amounts in thousands)
QUARTER ENDED MARCH 31, 2001
OVER
QUARTER ENDED MARCH 31, 2000
- - -------------------------------------------------------------------------------
CHANGE DUE TO
VOLUME RATE TOTAL
- - -------------------------------------------------------------------------------
Interest Income:
Loans $ (180) $ 9 $(171)
Securities 113 (48) 65
Federal Funds (23) 7 (16)
- - -------------------------------------------------------------------------------
Total Interest Earned (90) (32) (122)
Interest Expense:
Interest-bearing deposits 11 245 256
Other borrowed funds (227) (26) (253)
- - -------------------------------------------------------------------------------
Total Interest Expense (216) 219 3
- - -------------------------------------------------------------------------------
NET INTEREST INCOME $ 126 $(251) $(125)
================================================================================
Net interest earned on a taxable equivalent basis decreased to $4,849,000 in the
first quarter of 2001, down $125,000 as compared with the comparable period of
2000.
Average earning assets declined by $3,994,000 during the first quarter of 2001.
The average earning base was $527,486,000 compared to $531,480,000 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 March 31, 2001 2000
- - --------------------------------------------------------------------------------
Amount Percent Amount Percent
- - --------------------------------------------------------------------------------
Salaries and benefits $2,043 18.73% $2,042 18.80%
Other non-interest expense 1,559 14.29 1,680 15.47
Occupancy - net 389 3.57 354 3.26
- - --------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES $3,991 36.59% $4,076 37.53%
================================================================================
For the three-month period ended March 31, 2001, operating expenses decreased by
approximately $85,000 versus the 2000 period. Salaries and benefits increased by
$1,000, while other non-interest expense declined by $121,000 and occupancy grew
by $35,000. The decline is a direct result of integrating Cargill Bank into the
Westbank Corporation operating structure.
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CAPITAL RATIOS
March 31, 2001 December 31, 2000
- - --------------------------------------------------------------------------------
The following is the Corporation's
ratio of "Tier I" leverage capital
to total assets at end of period 6.93% 6.45%
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 (2) tiers. In this Corporation, Tier 1 includes the common
stockholders' equity and a portion of the mandatory redeemable preferred stock;
total risk-based, or supplementary, capital includes not only the equity but
also a portion of the allowance for loan losses and a portion of the mandatory
redeemable preferred stock.
The following are the Corporation's risk-based capital ratios at March 31, 2001:
Tier 1 Capital (minimum required 4.00%) 10.62%
Total Risk-Based Capital (minimum required 8.00%) 13.14%
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,
2001:
(Dollar amounts in thousands)
Three Over Three Over One
Months Months to Year to Over Five
or Less One Year Five Years Years Total
- - ------------------------------------------------------------------------------------------------------------------------------------
Earning Assets $ 70,287 $ 83,408 $ 152,756 $225,443 $531,894
Interest-Bearing
Liabilities 132,655 132,814 176,383 23,490 465,342
- - ------------------------------------------------------------------------------------------------------------------------------------
Interest Rate
Sensitivity Gap $(62,368) $ (49,406) $ (23,627) $201,953 $ 66,552
Cumulative Interest
Rate Sensitivity Gap $(62,368) $(111,774) $(135,401) $ 66,552
Interest Rate
Sensitivity Gap Ratio (11.73)% (9.29)% (4.44)% 37.97%
Cumulative Interest
Rate Sensitivity Gap Ratio (11.73)% (21.02)% (25.46)% 12.51%
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LIQUIDITY
The Corporation's liquidity represents the ability to meet loan commitments,
deposit withdrawals and any other cash needs as they arise. Funds to meet
liquidity needs are available by converting liquid assets or by generating new
deposits or through other funding sources. Factors affecting a bank's liquidity
needs include changes in interest rates, demand for loan products and general
economic conditions. The Corporation has alternative sources of liquidity,
including federal funds lines of credit, lines of credit available through the
Federal Home Loan Bank of Boston and repurchase agreements. Management believes
that the Corporation's level of liquidity is adequate to meet current and future
funding needs.
PROVISION AND ALLOWANCE FOR LOAN LOSSES
(Dollar amounts in thousands)
Quarter ended March 31, 2001 2000
- - ----------------------------------------------------------------------------------------------------------------------------------
Balance at beginning of period $ 3,670 $3,908
Provision for loan losses 227 65
- - ----------------------------------------------------------------------------------------------------------------------------------
3,897 3,973
- - ----------------------------------------------------------------------------------------------------------------------------------
Less charge-offs:
Loans secured by real estate 138
Commercial and industrial loans 12
Consumer loans 27 9
- - ----------------------------------------------------------------------------------------------------------------------------------
27 159
- - ----------------------------------------------------------------------------------------------------------------------------------
Add-recoveries:
Loans secured by real estate 57
Commercial and industrial loans 6
Consumer loans 3 6
- - ----------------------------------------------------------------------------------------------------------------------------------
66 6
- - ----------------------------------------------------------------------------------------------------------------------------------
Net charge-offs (recoveries) (39) 153
- - ----------------------------------------------------------------------------------------------------------------------------------
BALANCE AT END OF PERIOD $ 3,936 $3,820
- - ----------------------------------------------------------------------------------------------------------------------------------
Net charge-offs (recoveries) to:
Average loans (.01)% .03%
Loans at end of period (.01)% .03%
Allowance for loan losses at January 1 (1.06)% 3.92%
Allowance for loan losses at March 31 as a percentage of:
Average loans .91% .87%
Loans at end of period .91% .87%
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.
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NON-ACCRUAL, PAST DUE AND NON-PERFORMING LOANS
(Dollar amounts in thousands)
03-31-01 12-31-00 09-30-00 06-30-00 03-31-00
Non-accrual loans $ 2,441 $ 1,778 $ 1,693 $ 691 $ 996
- - ------------------------------------------------------------------------------------------------------------------------------------
Loans contractually past
due 90 days or more
still accruing 355 418 364 778 381
- - ------------------------------------------------------------------------------------------------------------------------------------
Total non-accrual, past due
and restructured loans $ 2,796 $ 2,196 $ 2,057 $ 1,469 $ 1,377
Non-accrual, past due and
restructured loans as a
percentage of total loans 0.65% 0.51% 0.46% 0.33% 0.31%
Allowance for loan losses as a
percentage of non-accrual, past
due and restructured loans 140.77% 167.12% 168.21% 265.21% 277.41%
- - ------------------------------------------------------------------------------------------------------------------------------------
Other real estate owned - net $ 135 $ 541 $ 605 $ 672 $ 512
- - ------------------------------------------------------------------------------------------------------------------------------------
Total non-performing assets $ 2,931 $ 2,737 $ 2,662 $ 2,141 $ 1,889
- - ------------------------------------------------------------------------------------------------------------------------------------
Non-performing assets as a
percentage of total assets 0.52% 0.48% 0.45% 0.36% 0.33%
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QUARTER-TO-DATE AVERAGE BALANCES
INTEREST EARNED - INTEREST EXPENSE
(Dollar amounts in thousands)
Three months ended March 31, 2001 2000
- - ------------------------------------------------------------------------------------------------------------------------------------
Balance Interest Rate Balance Interest Rate
- - ------------------------------------------------------------------------------------------------------------------------------------
Federal funds sold and
temporary investments $ 3,466 $ 52 6.00% $ 5,033 $ 68 5.40%
Securities 92,733 1,592 6.87 86,172 1,527 7.09
Loans 431,287 8,549 7.93 440,275 8,720 7.92
- - ------------------------------------------------------------------------------------------------------------------------------------
Total earning assets 527,486 10,193 7.73% 531,480 $10,315 7.76%
- - ------------------------------------------------------------------------------------------------------------------------------------
Loan loss allowance (3,802) (3,998)
All other assets 37,166 38,888
- - ------------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $560,850 $566,370
====================================================================================================================================
LIABILITIES AND EQUITY
Interest bearing deposits $415,344 $ 4,604 4.43% $414,303 $ 4,348 4.20%
Borrowed funds 45,593 694 6.09 60,406 947 6.27
- - ------------------------------------------------------------------------------------------------------------------------------------
Total interest bearing
liabilities 460,937 5,298 4.60 474,709 5,295 4.46
- - ------------------------------------------------------------------------------------------------------------------------------------
Interest rate spread 3.13% 3.30%
Demand deposits 60,439 58,117
Other liabilities 4,051 2,364
Shareholders' equity 35,423 31,180
- - ------------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES
AND EQUITY $560,850 $566,370
====================================================================================================================================
Net Interest Income(tax equivalent basis) $ 4,895 $ 5,020
Interest Earned/Earning Assets 7.73% 7.76%
Interest Expense/Earning Assets 4.02 3.99
- - ------------------------------------------------------------------------------------------------------------------------------------
Net Yield on Earning Assets 3.71% 3.77%
Deduct tax equivalent adjustment 46 32
- - ------------------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME $ 4,849 $ 4,988
====================================================================================================================================
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There has been no material changes in the Corporation's assessment of its
sensitivity to market risk since its presentation in the 2000 Annual Report
filed with the Securities and Exchange Commission.
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PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
Certain litigation is pending against the Corporation and the its
subsidiaries. Management, after consultation with legal counsel,
does not anticipate that any liability arising out of such
litigation will have a material effect on the Corporation's
Financial Statements.
On January 17, 2001, the United States Office of Thrift Supervision
("OTS") and Cargill entered into a "Stipulation and Consent to the
Issuance of an Order of Assessment of Civil Money Penalties" (the
"Consent"), pursuant to which Cargill agreed to pay a fine of
Fifteen Thousand Dollars ($15,000.00) due to Cargill's failure to
inform OTS prior to the declaration of certain capital distributions
and for filing an inaccurate Thrift Financial Report ("TFR") with
respect to such distributions. The Bank believes that the items
noted by OTS do not materially impact the financial statements of
Cargill. Cargill is taking specific steps to ensure that it will
comply with all applicable rules, agreements and regulations
regarding the declaration of distributions. Upon payment of the
fine, the Consent order was terminated on January 24, 2001.
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. Merger of Cargill Bank
On April 19, 2001 and May 2, 2001 respectively, the Boards of
Directors of Park West Bank and Trust Company ("Park West") and
Cargill Bank voted to merge Cargill Bank with and into Park West.
Both Park West and Cargill Bank are wholly-owned subsidiaries of
Westbank Corporation. The purpose of the merger is to consolidate
the operations of both banks, resulting in reduced operating costs
through improved efficiencies and economies of scale. This merger
transaction will not have a material effect on the consolidated
financial statements of Westbank Corporation as presented in this
Quarterly Report on Form 10-Q.
b. Registration on Form S-3
None
c. Registration on Form S-8
None
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ITEM 6. Exhibits and Reports on Form 8-K
a. Exhibits
EXHIBIT INDEX
Page No.
3. Articles of Organization, as amended **
(a) Articles of Organization, as amended *
(b) By-Laws, as amended *
10. Material Contracts - None
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.
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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 11, 2001 /s/
----------------------------------------
Donald R. Chase
President and Chief Executive Officer
Date: May 11, 2001 /s/
----------------------------------------
John M. Lilly
Treasurer and Chief Financial Officer
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