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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, 2003
Commission file number 0 - 12784
WESTBANK CORPORATION
(Exact name of the registrant as specified in its charter)
MASSACHUSETTS 04-2830731
(State of other jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
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 $2.00 per share: 4,405,014 shares outstanding as of
October 31, 2003.
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WESTBANK CORPORATION AND SUBSIDIARIES
INDEX
PART I - FINANCIAL INFORMATION
Page
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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 7-10
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11-20
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk 21
ITEM 4. Controls and Procedures 21
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings 21
ITEM 2. Changes in Rights of Securities Holders 21
ITEM 3. Defaults by Company on its Senior Securities 21
ITEM 4. Submission of Matters to a Vote of Security Holders 21
ITEM 5. Other Events 21
ITEM 6. Exhibits and Reports on Form 8-K 21
Signatures 22
2
ITEM 1. FINANCIAL STATEMENTS
WESTBANK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 2003
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) (Unaudited) December 31, 2002
- --------------------------------------------------------------------------------------------
ASSETS
Cash and due from banks:
Non-interest-bearing $ 17,001 $ 18,967
Interest-bearing 26 98
Federal funds sold 1,975 28,185
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Total cash and cash equivalents 19,002 47,250
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Securities available for sale 154,982 132,296
Securities held to maturity
(approximate market value of
$289 in 2003 and $505 in 2002) 276 436
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Total securities 155,258 132,732
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Loans 450,247 478,832
Allowance for loan losses 4,714 5,111
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Net loans 445,533 473,721
Premises and equipment, net 6,707 6,586
Accrued interest receivable 2,154 3,037
Intangible assets 8,837 8,837
Bank-owned life insurance 8,628 8,333
Other assets 5,570 2,367
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TOTAL ASSETS $651,689 $682,863
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LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest-bearing $ 80,342 $ 74,169
Interest-bearing 463,311 487,578
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Total deposits 543,653 561,747
Borrowed funds 41,305 56,392
Accrued interest payable 476 665
Other liabilities 4,551 4,447
Mandatorily redeemable preferred stock 17,000 17,000
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Total liabilities 606,985 640,251
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Stockholders' Equity:
Common stock - $2 par value
Authorized - 9,000,000 shares
Issued - 4,523,485 shares in 2002
and 4,523,480 shares in 2003 9,047 9,047
Additional paid in capital 14,483 14,497
Retained earnings 21,626 18,780
Treasury stock (1,990) (2,091)
Accumulated other comprehensive income 1,538 2,379
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Total Stockholders' Equity 44,704 42,612
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 651,689 $682,863
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See accompanying notes to condensed consolidated financial statements.
3
WESTBANK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Quarter Ended September 30, Nine Months Ended September 30,
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) 2003 2002 2003 2002
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Income:
Interest and fees on loans $ 6,962 $ 7,952 $ 21,876 $ 24,009
Interest and dividend income on securities 1,454 1,932 4,721 6,492
Interest on federal funds sold 48 153 164 185
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Total interest and dividend income 8,464 10,037 26,761 30,686
Interest expense 3,293 4,642 10,725 13,635
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Net interest income 5,171 5,395 16,036 17,051
Provision for (recovery of) loan losses (354) 400 (354) 1,133
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Net interest income after
provision for loan losses 5,525 4,995 16,390 15,918
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Non-interest income:
Gain/(Loss) on sale of securities 301 59 564 (218)
Gain on sale of loans 171 45 417 118
Other non-interest income 824 862 2,302 3,136
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Total non-interest income 1,296 966 3,283 3,036
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Non-interest expenses:
Salaries and benefits 2,502 2,220 7,315 6,741
Other non-interest expense 1,663 1,380 4,431 4,445
Occupancy - net 379 356 1,189 1,126
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Total non-interest expense 4,544 3,956 (1) 12,935 12,312 (2)
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Income before income taxes 2,277 2,005 6,738 6,642
Income taxes 856 671 2,309 1,950
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NET INCOME $ 1,421 $ 1,334 (1) $ 4,429 $ 4,692 (2)
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Net income per share
- Basic $0.32 $0.32 (1) $1.01 $1.11 (2)
- Diluted $0.31 $0.31 (1) $0.97 $1.09 (2)
Weighted average shares outstanding
- Basic 4,385,014 4,161,319 4,370,465 4,210,219
- Dilutive Option Shares 233,135 121,425 181,050 99,425
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- Diluted 4,618,149 4,282,744 4,551,515 4,309,644
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(1) Net income for the quarter ended September 30, 2002 has been restated for
the effect of the adoption of SFAS No. 147 ("Acquisition of Certain
Financial Institutions") as of September 30, 2002 to remove the amortization
expense that was recorded. Accordingly, non-interest expense has been
reduced by $171,000, net income has been increased by $102,000, and basic
and diluted net income per share were adjusted by $0.02 and $0.03
respectively for the removal of amortization of expense related to goodwill.
(2) Net income for the nine months ended September 30, 2002 has been restated
for the effect of the adoption of SFAS No. 147 ("Acquisition of Certain
Financial Institutions") as of September 30, 2002 to remove the amortization
expense that was recorded. Accordingly, non-interest expense has been
reduced by $342,000, net income has been increased by $205,000, and basic
and diluted net income per share both were increased by $0.05 for the
removal of amortization of expense related to goodwill.
See accompanying notes to condensed consolidated financial statements.
4
WESTBANK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEAR ENDED DECEMBER 31, 2002 AND NINE MONTHS ENDED SEPTEMBER 30, 2003
(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
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BALANCE - JANUARY 1, 2002 4,266,383 $ 8,632 $ 11,782 $17,787 $ (431) $ 1,246 $ 39,016
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Net income 6,009 6,009
Cash dividends declared
($.40 per share) (1,849) (1,849)
Shares issued from treasury stock:
Stock option plan 54,055 (243) 547 304
Dividend reinvestment and
stock purchase plan 42,310 122 408 530
Changes in unrealized gain/(loss)
on securities available for sale 1,133 1,133
Income tax benefit for exercise of
non-qualified stock options 84 84
Five percent common stock dividend 207,690 415 2,752 (3,167)
Repurchase of common stock (202,658) (2,615) (2,615)
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BALANCE - DECEMBER 31, 2002 4,367,780 9,047 14,497 18,780 (2,091) 2,379 42,612
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(Unaudited)
Net income 4,429 4,429
Cash dividends declared
($.12 per share) (1,583) (1,583)
Shares issued from treasury stock:
Stock option plan 39,000 (183) 523 340
Dividend reinvestment and
stock purchase plan 35,011 74 456 530
Changes in unrealized gain/(loss)
on securities available for sale (841) (841)
Income tax benefit for exercise of
non-qualified stock options 95 95
Repurchase of common stock (54,212) (878) (878)
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BALANCE - SEPTEMBER 30, 2003 4,387,579 $ 9,047 $ 14,483 $21,626 $(1,990) $ 1,538 $ 44,704
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See accompanying notes to condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(DOLLAR AMOUNTS IN THOUSANDS)
Quarter Ended September 30, Nine Months Ended September 30,
2003 2002 2003 2002
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Net income $ 1,421 $ 1,334 $ 4,429 $ 4,692
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Unrealized gain (loss) on securities available for sale,
net of income taxes (benefit) of $(110) and $366 for
the quarter and $(288) and $557 for the nine-month
periods ended September 30, 2003 and 2002 respectively (182) 744 (470) 1,131
Reclassification adjustment for gains (losses) included in net
income, net of income taxes (benefit) of $(113) and $(20) for
the third quarter of 2003 and 2002 respectively, and net of
income taxes (benefit) of $(193) and $72 for the nine months
ended September 30, 2003 and 2002 respectively (188) (39) (371) 146
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Other Comprehensive Income (Loss) (370) 705 (841) 1,277
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COMPREHENSIVE INCOME $ 1,051 $ 2,039 $ 3,588 $ 5,969
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See accompanying notes to condensed consolidated financial statements.
5
WESTBANK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(DOLLAR AMOUNTS IN THOUSANDS)
Nine months ended September 30,
2003 2002
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Operating activities:
Net income $ 4,429 $ 4,692
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for (recovery of) loan losses (354) 1,133
Provision for other real estate owned 11
Accretion of investment discounts (20) (31)
Depreciation and amortization 509 570
Realized loss/(gain) on sale of securities (564) 218
Gain on sale of mortgages (417) (118)
Gain on sale of other real estate owned (45)
Decrease in accrued interest receivable 883 315
Increase in bank-owned life insurance (295)
Increase in other assets (3,203) (311)
Increase/(Decrease) in accrued interest payable on deposits (189) 37
Increase/(Decrease) in other liabilities 104 (232)
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Net cash provided by operating activities 883 6,239
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Investing activities:
Investments and mortgage-back securities:
Held to maturity:
Proceeds from maturities and principal payments 160 272
Available for sale:
Purchases (89,565) (51,166)
Proceeds from sales 16,848 21,260
Proceeds from maturities and principal payments 74,827 61,202
(Purchases)/sales of premises and equipment (630) 72
Net (decrease)/increase in loans 3,906 (51,293)
Proceeds from sale of other real estate owned 312
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Net cash provided by (used in) investing activities 5,546 (19,341)
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Financing activities:
Net increase/(decrease) in borrowings (15,087) 1,277
Net increase/(decrease) in deposits (18,094) 65,698
Treasury stock issued/(purchased), net 87 (1,853)
Dividends paid (1,583) (1,393)
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Net cash (used in)/provided by financial activities (34,677) 63,729
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Increase/(Decrease) in cash and cash equivalents (28,248) 50,627
Cash and cash equivalents at beginning of period 47,250 17,451
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Cash and cash equivalents at end of period $ 19,002 $ 68,078
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Cash paid:
Interest on deposits and other borrowings $ 10,914 $ 13,598
Income taxes 3,043 3,585
Supplemental disclosure of cash flow information:
Securitization of loans into mortgage-backed securities 26,079 23,495
See accompanying notes to condensed consolidated financial statements.
6
WESTBANK CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002
(Unaudited)
NOTE A - GENERAL INFORMATION
Westbank Corporation (hereinafter sometimes referred to as the "Corporation") is
a registered bank holding company organized to facilitate the expansion and
diversification of the business of its banking subsidiary, Westbank (hereinafter
sometimes referred to as "the Bank"), into additional financial services related
to banking. Substantially all operating income and net income of the Corporation
are presently accounted for by the Bank.
NOTE B - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements for the
quarters ended September 30, 2003 and 2002 have been prepared in accordance with
accounting principles generally accepted in the United States of America
("generally accepted accounting principles"). Certain information and note
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been omitted, pursuant to the
rules and regulations of the Securities and Exchange Commission for interim
reports. 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 nine-month period ended September 31, 2003
are not necessarily indicative of the results that may be expected for the year
ending December 31, 2003. 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 Westbank Corporation's Annual Report on Form
10-K for the year ended December 31, 2002.
NOTE C - STOCK-BASED COMPENSATION
Prior to January 1, 2003. The Corporation accounted for stock-based employee
compensation under the intrinsic value method consistent with the provisions of
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees", and related Interpretations, as permitted by Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS
No. 123). Effective January 1, 2003, the Corporation adopted the fair value
recognition provisions of SFAS No. 123 prospectively to all employee awards
granted, modified or settled after January 1, 2003. In accordance with this
Statement, the Corporation began expensing the cost of the stock-based employee
compensation for all new employee awards granted.
The following table shows net income and earnings per share for the nine months
ended September 30, 2003 and 2002, as if the fair value based method had been
applied to all outstanding and unvested awards in each period.
7
Quarter Ended September 30, Nine Months Ended September 30,
(DOLLARS IN THOUSANDS) 2003 2002 2003 2002
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Net income:
Reported net income $1,421 $1,334 $4,429 $4,692
Add: Stock-based employee compensation expense
included in reported net income, net of related
tax effects 8 63
Deduct: Total stock-based employee compensation
expense determined under fair value based
method for all awards net of related taxes
effects (1) 8 9 63 36
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Pro forma net income $1,421 $1,325 $4,429 $4,656
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Earnings per share:
Basic - as reported $ 0.32 $ 0.32 $ 1.01 $ 1.11
====================================================================================================================================
Basic - pro forma $ 0.32 $ 0.32 $ 1.01 $ 1.11
====================================================================================================================================
Diluted - as reported $ 0.31 $ 0.31 $ 0.97 $ 1.09
====================================================================================================================================
Diluted - pro forma $ 0.31 $ 0.31 $ 0.97 $ 1.08
====================================================================================================================================
(1) All previously awarded grants were fully amortized prior to January 2, 2003.
8
NOTE E - RECENT ACCOUNTING PRONOUNCEMENTS
On January 1, 2003, the Corporation adopted Financial Accounting Standards Board
(FASB) Interpretation 45 (FIN 45), "Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others." FIN 45 requires a guarantor entity, at the inception of a guarantee
covered by the measurement provisions of the interpretation, to record a
liability for the fair value of the obligation undertaken in issuing the
guarantee. The Corporation has financial and performance letters of credit.
Financial letters of credit require the Corporation to make payment if the
customer's financial condition deteriorates, as defined in the agreements.
Performance letters of credit require the Corporation to make payments if the
customer fails to perform certain non-financial contractual obligations. The
Corporation previously did not record a liability when guaranteeing obligations,
unless it became probable that the Corporation would have to perform under the
guarantee. FIN 45 applies prospectively to guarantees the Corporation issues or
modifies subsequent to December 31, 2002. The Corporation defines the initial
fair value of the letters of credit as the fee received from the customer. The
fees collected as of September 30, 2003 were immaterial. The maximum potential
undiscounted amount of future payments of letters of credit under FIN 45 as of
September 30, 2003 are approximately $203,000, of which $193,000 will expire on
January 15, 2004 and $10,000 will expire on February 13, 2004. Amounts due under
these letters of credit would be reduced by any proceeds that the Corporation
would be able to obtain in liquidating the collateral for the loans, which
varies depending on the customer. The Corporation has not recorded any
contingent liabilities related to these letters of credit.
In January 2003, the FASB issued FASB Interpretation 46 (FIN 46), "Consolidation
of Variable Interest Entities." FIN 46 clarifies the application of Accounting
Research Bulletin 51, "Consolidated Financial Statements", for certain entities
that do not have sufficient equity at risk for the entity to finance its
activities without additional subordinated financial support from other parties
or in which equity investors do not have the characteristics of a controlling
financial interest ("variable interest entities"). Variable interest entities,
within the scope of FIN 46, will be required to be consolidated by their primary
beneficiary. The primary beneficiary is determined to be the party that absorbs
a majority of the entity's expected losses, receives a majority of its expected
returns, or both. FIN 46 applies immediately to variable interest entities
created after January 31, 2003 and to variable interest entities in which an
enterprise obtains an interest after that date. It applies in the first fiscal
year or interim period ending December 15, 2003 to variable interest entities in
which an enterprise holds a variable interest that it acquired before February
1, 2003. The Corporation does not anticipate FIN 46 to have a material impact on
its consolidated financial position or results of operations.
On May 15, 2003, the FASB issued Statement of Financial Accounting Standards
Statement 150 (SFAS No. 150), "Accounting for Certain Financial Instruments with
Characteristics of Both Liabilities and Equity." SFAS No. 150 requires the
reclassification of certain financial instruments from either equity or
mezzanine presentation to liabilities and requires an issuer of those financial
statements to recognize changes in fair value of the redemption amount, as
applicable, in earnings. On July 1, 2003, the Corporation adopted FASB SFAS No.
150, requiring the Corporation to change the classification of mandatorily
redeemable preferred stock in the statement of financial position from the
mezzanine to liabilities. The change did not have a material impact on the
Corporation's results of operations.
9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2003
INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS -
The following forward-looking statements are made in accordance with the Private
Securities Litigation Reform Act of 1995.
The Corporation 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 the Corporation. 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 the Corporation will be those
anticipated by the Corporation's management.
All assumptions that form the basis of any forward-looking statements regarding
future performance, as well as events or conditions that may affect such future
performance, are based on factors that are beyond the Corporation'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 the Corporation's
primary market areas of western Massachusetts and northeastern Connecticut;
2. The real estate markets in western Massachusetts, central Massachusetts and
northeastern Connecticut;
3. Competition in the Corporation's primary market area from other banks,
especially in light of continued consolidation in the New England banking
industry;
4. Changes in interest rates;
5. The cost and other effects of unanticipated legal and administrative cases
and proceedings, settlements and investigations;
6. Changes in laws and regulations, including federal and state banking laws
and regulations, to which the Corporation and its subsidiaries are subject;
7. Changes in accounting policies and practices, as may be adopted by the
Financial Accounting Standards Board or any regulatory agency having
authority over the Corporation and/or its subsidiaries; and
8. Disruption in general economic conditions due to military or terrorist
activity.
Forward-looking statements speak only as of the date they were made. While the
Corporation 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, the Corporation does not intend
to review or revise any particular forward-looking statement.
10
SECURITIES
Securities that management has the positive intent and ability to hold until
maturity are stated at cost, adjusted for amortization of premiums and accretion
of discounts. Those securities that have been identified as assets for which
there is not a positive intent to hold to maturity, including all marketable
equity securities, are classified as available for sale with unrealized gains
(losses), net of income taxes, reported as a separate component of stockholders'
equity. The Corporation determines if securities will be classified as held to
maturity or available for sale at the time of purchase. In addition, any
mortgage-backed securities created out of the Corporation's own inventory of
residential real estate loans are also considered available for sale. Gains and
losses on sales of securities are recognized in non-interest income at the time
of sale on a specific identification basis. Securities that have experienced an
other than temporary decline in fair value are written down to estimated fair
value, establishing a new cost basis with the amount of the write-down expensed
as a realized loss. The Corporation does not engage in trading activities.
Mortgage-backed securities held to maturity are stated at cost, adjusted for
amortization of premiums and accretion of discounts determined by a method that
approximates the level-yield method. Management has the positive ability and the
intent to hold these assets until maturity.
LOANS
Loans have been reduced by deferred loan fees and the allowance for loan losses.
Interest income on loans is recorded on an accrual basis. Loan origination fees,
net of certain direct loan origination costs, are deferred and recognized as
income over the life of the related loan as an adjustment to the loan's yield.
Non-accrual loans are loans on which the accrual of interest ceases when the
collection of principal or interest payments is determined to be doubtful by
management. It is the general policy of the Corporation to discontinue the
accrual of interest when principal or interest payments are delinquent ninety
(90) days, unless the loan principal and interest are determined by management
to be fully collectible. Any unpaid amounts previously accrued on these loans
are reversed from income. Interest received on a loan in non-accrual status is
applied to reduce principal or, if management determines that the principal is
collectible, applied to interest on a cash basis. A loan is returned to accrual
status after the borrower has brought the loan current and has demonstrated
compliance with the loan terms for a sufficient period, and management's doubts
concerning collectibility have been removed.
The Corporation measures impairment of loans in accordance with SFAS No. 114,
"Accounting for Impairment of a Loan", as Amended by SFAS No. 118, "Accounting
by Creditors for Impairment of a Loan - Income Recognition and Disclosures"
(collectively SFAS No. 114). A loan is recognized as impaired when it is
probable that either principal or interest are not collectible in accordance
with the terms of the loan agreement. Measurement of impairment for commercial
loans is generally based on the present value of expected future cash flows
discounted at the loan's effective interest rate. Commercial real estate loans
are generally measured based on the fair value of the underlying collateral. If
the estimated fair value of the impaired loan is less than the related recorded
amount, a specific valuation allowance is established or a write-down is charged
against the allowance for loan losses. Smaller balance homogenous loans,
including residential real estate and consumer loans, are excluded from the
provisions of SFAS No. 114. Generally, income is recorded only on a cash basis
for impaired loans.
The appropriateness of the allowance for loan losses is evaluated quarterly by
management. Factors considered in evaluating the appropriateness of the
allowance include the size and concentration of the portfolio, previous loss
experience, current economic conditions and their effect on borrowers, the
financial condition of individual borrowers and the related performance of
individual loans in relation to contract terms. The provision for loan losses
charged to operating expense is based upon management's judgment of the amount
necessary to maintain the allowance at an appropriate level to absorb losses.
Management also retains an independent loan review consultant to provide advice
on the appropriateness of the loan loss allowance. Loan losses are charged
against the allowance for loan losses when management believes the
collectibility of the principal is unlikely.
Mortgage loans originated and intended for sale in the secondary market are
carried at the lower of cost or fair value in the aggregate. There were no
mortgages originated and intended for sale. Net unrealized losses are recognized
through a valuation allowance charged to income as of September 30, 2003.
11
RECENT ACCOUNTING PRONOUNCEMENTS -
On January 1, 2003, the Corporation adopted FASB Interpretation 45 (FIN 45),
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others." FIN 45 required a guarantor
entity, at the inception of a guarantee covered by the measurement provisions of
the Interpretation, to record a liability for the fair value of the obligation
undertaken in issuing the guarantee. The Corporation has financial and
performance letters of credit. Financial letters of credit require the
Corporation to make payment if the customer's financial condition deteriorates,
as defined in the agreements. Performance letters of credit require the
Corporation to make payments if the customer fails to perform certain
non-financial contractual obligations. The Corporation previously did not record
a liability when guaranteeing obligations, unless it became probable that the
Corporation would have to perform under the guarantee. FIN 45 applies
prospectively to guarantees the Corporation issued or modifies subsequent to
December 31, 2002. The Corporation defines the initial fair value of the letters
of credit as the fee received from the customer. The fees collected as of
September 30, 2003 were immaterial. The maximum potential undiscounted amount of
future payments of letters of credit under FIN 45 as of September 30, 2003 are
approximately $203,000, of which $193,000 will expire on January 15, 2004 and
$10,000 will expire on February 13, 2004. Amounts due under these letters of
credit would be reduced by any proceeds that the Corporation would be able to
obtain in liquidating the collateral for the loans, which varies depending on
the customer. The Corporation has not recorded any contingent liabilities
related to these letters of credit.
CHANGES IN FINANCIAL CONDITION -
Total consolidated assets amounted to $651,689,000 on September 30, 2003
compared to $682,863,000 on December 31, 2002. As of September 30, 2003 and
December 31, 2002, earning assets amounted to, respectively, $607,506,000 or 93%
of total assets, and $639,847,000 or 94% of total assets. Earning assets
decreased during the first nine months of 2003 as a result of an increase in
loans and federal funds sold, which was offset by a decrease in securities. A
decrease in deposits and a decrease in borrowed funds offset the decrease in
earning assets.
CHANGES IN RESULTS OF OPERATIONS -
For the quarter ended September 30, 2003, net income totaled $1,421,000 or $0.31
per diluted share compared to $1,334,000 or $0.31 per diluted share for the
three-month period ended September 30, 2002. For the nine months ended September
30, 2003, net income was $4,429,000 or $0.97 per diluted share, compared to
$4,692,000 or $1.09 per diluted share for the same period during 2002.
Non-interest income increased by $330,000 during the third quarter of 2003
compared to the third quarter of 2002. During the third quarter of 2003, the
Corporation recognized gains on the sale of securities available for sale and
loan sales totaling $301,000 and $171,000 respectively, while other non-interest
income totaled $824,000. Non-interest expense totaled $4,544,000 for the quarter
ended September 30, 2003, an increase of $588,000 versus the third quarter of
2002.
The overall decrease in interest income reflects a decrease in volume and a
decline in interest rates on earning assets, while the decrease in interest
expense reflects a decrease in interest-bearing liabilities and a decrease in
rates as compared to the third quarter of 2002. Further analysis is provided in
sections on net interest revenue and supporting schedules.
ALLOWANCE FOR LOAN LOSSES AND NON-PERFORMING ASSETS -
A decrease of $218,000 has been reflected in the allowance for loan losses at
September 30, 2003 as compared to September 30, 2002. The Corporation recorded
the recovery of a provision of $354,000 for the quarter ended September 30, 2003
as compared to $400,000 in 2002. Loans written off against the allowance for
loan losses after recoveries amounted to net charge-offs of $54,000 for the
quarter ended September 30, 2003 versus net charge-offs of $151,000 for the same
period of 2002.
The allowance for loan losses at September 30, 2003 totaled $4,714,000 or 1.05%
of total loans, as compared to $5,111,000 or 1.07% at December 31, 2002.
Non-performing past due loans at September 30, 2003 aggregated $3,517,000 or
0.78% of total loans compared to $1,558,000 or 0.33% at December 31, 2002. The
percentage of non-performing and past due loans compared to total assets on
those same dates, respectively, amounted to 0.54% and 0.23%.
Management has made every effort to evaluate all circumstances known at this
time that could affect the collectibility of loans and has reflected these in
determining 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 believes that the provision for the quarter, and the balance
in the allowance for loan losses, are adequate based on the results of
management's loan reserve evaluation process and circumstances known at this
time.
12
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 subsidiary, Westbank.
(DOLLAR AMOUNTS IN THOUSANDS)
Quarter Ended September 30, Nine Months Ended September 30,
2003 2002 2003 2002
- ------------------------------------------------------------------------------------------------------------------------------------
Interest and dividend income $ 8,464 $10,037 $26,761 $30,686
Interest expense 3,293 4,642 10,725 13,635
- ------------------------------------------------------------------------------------------------------------------------------------
Net interest income 5,171 5,395 16,036 17,051
Tax equivalent adjustment 34 61 83 150
====================================================================================================================================
NET INTEREST INCOME (TAXABLE EQUIVALENT) $ 5,205 $ 5,456 $16,119 $17,201
====================================================================================================================================
INTEREST RATE SPREAD AND NET YIELD ON EARNING ASSETS
(DOLLAR AMOUNTS IN THOUSANDS)
Quarter ended September 30, Nine Months Ended September 30,
2003 2002 2003 2002
- ------------------------------------------------------------------------------------------------------------------------------------
Average Average Average Average
Balance Rate Balance Rate Balance Rate Balance Rate
- ------------------------------------------------------------------------------------------------------------------------------------
Earning Assets $603,490 5.63% $639,312 6.32% $610,429 5.86% $618,118 6.65%
- ------------------------------------------------------------------------------------------------------------------------------------
Interest-bearing liabilities 520,807 2.53 558,509 3.32 528,424 2.71 542,617 3.35
- ------------------------------------------------------------------------------------------------------------------------------------
Interest rate spread 3.10 3.00 3.15 3.30
- ------------------------------------------------------------------------------------------------------------------------------------
Interest-free resources used
to fund earning assets 82,683 80,803 82,005 75,501
- ------------------------------------------------------------------------------------------------------------------------------------
Total Sources of Funds $603,490 $639,312 $610,429 $618,118
====================================================================================================================================
NET YIELD ON EARNING ASSETS 3.45% 3.42% 3.52% 3.71%
====================================================================================================================================
13
CHANGES IN NET INTEREST INCOME
(DOLLAR AMOUNTS IN THOUSANDS)
QUARTER ENDED SEPTEMBER 30, 2003
OVER
QUARTER ENDED SEPTEMBER 30, 2002
- ------------------------------------------------------------------------------------------------------------------------------------
CHANGE DUE TO
VOLUME RATE TOTAL
- ------------------------------------------------------------------------------------------------------------------------------------
Interest Income:
Loans $ (162) $ (855) $ (1,017)
Securities (196) (282) (478)
Federal funds (39) (66) (105)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Interest Earned (397) (1,203) (1,600)
Interest Expense:
Interest-bearing deposits (152) (972) (1,124)
Other borrowed funds (205) (20) (225)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Interest Expense (357) (992) (1,349)
- ------------------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME $ (40) $ (211) $ (251)
====================================================================================================================================
For the quarter ended September 30, 2003, a decrease in average earning assets
of $35,822,000 or 5.6% and a 69-basis point decrease in average rate of return
resulted in a decrease in volume of $397,000 and a decrease in rate of
$1,203,000 . A decrease in average interest-bearing liabilities of $37,702,000
or 6.8% and a 79-basis point decrease in average rate of interest paid
contributed to a decrease in volume of $357,000 and a decrease in rate of
$992,000. Net interest earned on a tax equivalent basis decreased to $5,205,000
for the third quarter of 2003, down $251,000 as compared with the quarter ended
September 30, 2002.
14
CHANGES IN NET INTEREST INCOME
(DOLLAR AMOUNTS IN THOUSANDS) NINE MONTHS ENDED SEPTEMBER 30, 2003
OVER
NINE MONTHS ENDED SEPTEMBER 30, 2002
- ------------------------------------------------------------------------------------------------------------------------------------
CHANGE DUE TO
VOLUME RATE TOTAL
- ------------------------------------------------------------------------------------------------------------------------------------
Interest Income:
Loans $ 211 $ (2,397) $ (2,186)
Securities (914) (871) (1,785)
Federal funds 74 (95) (21)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Interest Earned (629) (3,363) (3,992)
Interest Expense:
Interest-bearing deposits 159 (2,532) (2,373)
Other borrowed funds (573) 36 (537)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Interest Expense (414) (2,496) (2,910)
- ------------------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME $ (215) $ (867) $ (1,082)
====================================================================================================================================
For the nine-month period ended September 30, 2003, a decrease in average
earning assets of $7,689,000 or 1.2% and a 79-basis point decrease in average
rate of return resulted in a decrease in volume of $629,000 and a decrease in
rate of $3,363,000. A decrease in average interest-bearing liabilities of
$14,194,000 or 2.6% and a 64-basis point decrease in average rate of interest
paid contributed to a decrease in volume of $414,000 and a decrease in rate of
$2,496,000. Net interest earned on a tax equivalent basis decreased to
$16,119,000 for the third quarter of 2003, down $1,082,000 as compared with the
nine-month period ended September 30, 2002.
OPERATING EXPENSES
The components of total operating expenses for the period and their percentage
of gross income are as follows:
(DOLLAR AMOUNTS IN THOUSANDS)
Quarter Ended September 30, Nine Months Ended September 30,
2003 2002 2003 2002
- ------------------------------------------------------------------------------------------------------------------------------------
Amount Percent Amount Percent Amount Percent Amount Percent
- ------------------------------------------------------------------------------------------------------------------------------------
Salaries and benefits $2,502 25.64% $2,220 20.18% $ 7,315 24.35% $ 6,741 19.99%
Other non-interest expense 1,663 17.04 1,380 12.54 4,431 14.75 4,445 13.18
Occupancy - net 379 3.88 356 3.24 1,189 3.96 1,126 3.34
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES $4,544 46.56% $3,956 35.95% $ 12,935 43.05% $ 12,312 36.51%
====================================================================================================================================
For the three-month period ended September 30, 2003, operating expenses
increased by approximately $588,000 versus the 2002 period. Salaries and
benefits increased by $282,000, while other non-interest expense increased by
$283,000 and occupancy increased by $23,000. The increase is a direct result of
general additions to staff, and additions to staff and general operating costs
related to the opening of the Corporation's newest office in Webster,
Massachusetts.
For the nine-month period ended September 30, 2003, operating expenses increased
by approximately $623,000 versus the 2002 period. Salaries and benefits
increased by $574,000, while other non-interest expense decreased by $14,000 and
occupancy increased by $63,000. The increase is a direct result of general
additions to staff, and additions to staff and general operating costs related
to the opening of the Corporation's newest office in Webster, Massachusetts.
15
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, 2003.
(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 $ 96,866 $ 52,904 $ 168,212 $ 289,524 $607,506
Interest-Bearing
Liabilities 108,584 143,897 251,865 17,270 521,616
- ------------------------------------------------------------------------------------------------------------------------------------
Interest Rate
Sensitivity Gap $ (11,718) $ (90,993) $ (83,653) $ 272,254 $ 85,890
- ------------------------------------------------------------------------------------------------------------------------------------
Cumulative Interest
Rate Sensitivity Gap $ (11,718) $ (102,711) $(186,364) $ 85,890
Interest Rate
Sensitivity Gap Ratio (1.93%) (14.98%) (13.77%) 44.82%
Cumulative Interest
Rate Sensitivity Gap Ratio (1.93%) (16.91%) (30.68%) 14.14%
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.
16
PROVISION AND ALLOWANCE FOR LOAN LOSSES
(DOLLAR AMOUNTS IN THOUSANDS)
Quarter Ended September 30, Nine Months Ended September 30,
- ------------------------------------------------------------------------------------------------------------------------------------
2003 2002 2003 2002
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at beginning of period $ 5,122 $ 4,683 $ 5,111 $4,179
Provision for (Recovery of) loan losses (354) 400 (354) 1,133
- ------------------------------------------------------------------------------------------------------------------------------------
4,768 5,083 4,757 5,312
- ------------------------------------------------------------------------------------------------------------------------------------
Less charge-off's:
Loans secured by real estate 2 9 8 133
Commercial and industrial loans 5 123 37 159
Consumer loans 48 28 115 170
- ------------------------------------------------------------------------------------------------------------------------------------
55 160 160 462
- ------------------------------------------------------------------------------------------------------------------------------------
Add-recoveries:
Loans secured by real estate 1 0 101 16
Commercial and industrial loans 6 13 34
Consumer loans 3 3 32
- ------------------------------------------------------------------------------------------------------------------------------------
1 9 117 82
- ------------------------------------------------------------------------------------------------------------------------------------
Net charge-off's (recoveries) 54 151 43 380
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE AT END OF PERIOD $ 4,714 $ 4,932 $ 4,714 $4,932
====================================================================================================================================
Net charge-off's (recoveries) to:
Average loans .01% .03% .01% .08%
Loans at end of period .01% .03% .01% .08%
Allowance for loan losses at January 1 1.06% 3.61% .84% 9.09%
Allowance for loan losses at September 30 as a percentage of:
Average loans 1.03% 1.05% 1.01% 1.07%
Loans at end of period 1.05% 1.05% 1.05% 1.05%
The approach the Corporation uses in determining the adequacy of the allowance
for loan losses is an exposure method based on the Corporation's loan loss
history, among other factors. 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 uncertainties relative to the depth of the collateral on these same
loans. In addition, the Corporation maintains a formula-based reserve against
the remainder of the loan portfolio, based on the overall mix of the loan
portfolio and the loss history of each loan category. The formula-based reserve
methodology is based on a range of estimated loss percentages based on loan
type. The amount of the recorded reserve above the minimum of the formula range
is based on management's evaluation of relevant qualitative factors (e.g. local
area economic statistics) and the percentage of loan loss reserves to aggregate
loans.
17
NON-ACCRUAL, PAST DUE AND NON-PERFORMING LOANS
(DOLLAR AMOUNTS IN THOUSANDS)
09-30-03 06-30-03 03-31-03 12-31-02 09-30-02
- ------------------------------------------------------------------------------------------------------------------------------------
Non accrual-loans $2,182 $ 1,116 $1,052 $ 1,372 $2,246
Loans contractually past
due 90 days or more
still accruing 1,335 346 373 186 1,025
- ------------------------------------------------------------------------------------------------------------------------------------
Total non-accrual, past due
and restructured loans 3,517 1,462 1,425 1,558 3,271
- ------------------------------------------------------------------------------------------------------------------------------------
Non-accrual, past due and
restructured loans as a
percentage of total loans 0.78% 0.32% 0.30% 0.33% 0.69%
- ------------------------------------------------------------------------------------------------------------------------------------
Allowance for loan losses as a
percentage of non-accrual,
past due and restructured loans 134.03% 350.34% 363.90% 328.05% 150.64%
- ------------------------------------------------------------------------------------------------------------------------------------
Other real estate owned - net
- ------------------------------------------------------------------------------------------------------------------------------------
Total non-performing assets $3,517 $1,462 $1,425 $ 1,558 $3,271
Non-performing assets as a
percentage of total assets 0.54% 0.23% 0.22% 0.23% 0.47%
- ------------------------------------------------------------------------------------------------------------------------------------
18
QUARTER-TO-DATE AVERAGE BALANCES
INTEREST EARNED - INTEREST EXPENSE
(DOLLAR AMOUNTS IN THOUSANDS)
Quarter Ended September 30,
2003 2002
- --------------------------------------------------------------------------------------------------------------------------------
Balance Interest (1) Rate Balance Interest (1) Rate
- --------------------------------------------------------------------------------------------------------------------------------
Federal funds sold and
temporary investments $ 24,640 $ 48 .78% $ 36,131 $ 153 1.69%
Securities 119,515 1,458 4.88 134,192 1,936 5.77
Loans 459,335 6,99 26.09 468,989 8,009 6.83
- --------------------------------------------------------------------------------------------------------------------------------
Total earning assets 603,490 $8,498 5.63% 639,312 $10,098 6.32%
- --------------------------------------------------------------------------------------------------------------------------------
Loan loss allowance (5,111) (4,768)
All other assets 43,050 44,793
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 641,429 $ 679,337
================================================================================================================================
LIABILITIES AND EQUITY
Interest-bearing deposits $ 461,924 $2,569 2.22% $ 483,020 $ 3,693 3.06%
Borrowed funds 58,883 724 4.92 75,489 949 5.03
- --------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 520,807 $3,293 2.53 558,509 $ 4,642 3.32
- --------------------------------------------------------------------------------------------------------------------------------
Interest rate spread 3.10% 3.00%
Demand deposits 74,770 73,725
Other liabilities 2,629 5,610
Shareholders' equity 43,223 41,493
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES
AND EQUITY $ 641,429 $ 679,337
================================================================================================================================
Net Interest Income (tax equivalent basis) $5,205 $ 5,456
Interest Earned/Earning Assets 5.63% 6.32%
Interest Expense/Earning Assets 2.18 2.90
- --------------------------------------------------------------------------------------------------------------------------------
Net Yield on Earning Assets 3.45% 3.42%
Deduct tax equivalent adjustment 34 61
- --------------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME $5,171 $ 5,395
================================================================================================================================
(1) Amounts shown are adjusted to a "tax equivalent" basis.
19
QUARTER-TO-DATE AVERAGE BALANCES
INTEREST EARNED - INTEREST EXPENSE
(DOLLAR AMOUNTS IN THOUSANDS)
Nine Months Ended September 30,
2003 2002
- --------------------------------------------------------------------------------------------------------------------------------
Balance Interest (1) Rate Balance Interest (1) Rate
- --------------------------------------------------------------------------------------------------------------------------------
Federal funds sold and
temporary investments $ 23,740 $ 164 .92% $ 13,854 $ 185 1.78%
Securities 121,812 4,731 5.18 143,450 6,503 6.04
Loans 464,877 21,949 6.30 460,814 24,148 6.99
- --------------------------------------------------------------------------------------------------------------------------------
Total earning assets 610,429 $26,844 5.86% 618,118 $30,836 6.65%
- --------------------------------------------------------------------------------------------------------------------------------
Loan loss allowance (5,155) (4,459)
All other assets 42,656 45,077
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 647,930 $ 658,736
================================================================================================================================
LIABILITIES AND EQUITY
Interest-bearing deposits $ 463,738 $ 8,306 2.39% $ 457,017 $10,679 3.12%
Borrowed funds 64,685 2,419 4.99 85,600 2,956 4.60
- --------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 528,423 10,725 2.71 542,617 $13,635 3.35
- --------------------------------------------------------------------------------------------------------------------------------
Interest rate spread 3.15% 3.30%
Demand deposits 72,740 70,697
Other liabilities 3,772 5,460
Shareholders' equity 42,995 39,962
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES
AND EQUITY $ 647,930 $ 658,736
================================================================================================================================
Net Interest Income (tax equivalent basis) $16,119 $17,201
Interest Earned/Earning Assets 5.86% 6.65%
Interest Expense/Earning Assets 2.34 2.94
- --------------------------------------------------------------------------------------------------------------------------------
Net Yield on Earning Assets 3.52% 3.71%
Deduct tax equivalent adjustment 83 150
- --------------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME $16,036 $17,051
================================================================================================================================
(1) Amounts shown are adjusted to a "tax equivalent" basis.
20
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in the Corporation's assessment of its
sensitivity to market risk since its presentation in the 2002 Annual Report
filed with the Securities and Exchange Commission.
ITEM 4. CONTROLS AND PROCEDURES
Within ninety (90) days prior to the filing date of this report, the Corporation
carried out an evaluation, under the supervision and with the participation of
the Corporation's management, including the Corporation's Chief Executive
Officer and Chief Financial Officer, of the effectiveness of the design and
operation of the Corporation's disclosure controls and procedures. Based on that
evaluation, the Chief Executive Officer and Chief Financial Officer concluded
that the Corporation's disclosure controls and procedures are effective to
ensure that information required to be disclosed by the Corporation in the
reports that it files or submits under the Securities Exchange Act of 1934 is
recorded, processed, summarized and reported within the time periods specified
in the Securities and Exchange Commission's rules and forms.
There were no significant changes in the Corporation's internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of their evaluation.
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
Certain litigation is pending against the Corporation and 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.
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 - NONE
ITEM 6. Exhibits and Reports on Form 8-K
a. Exhibits
21
EXHIBIT INDEX
3. Articles of Organization, as amended
(a) Articles of Organization, as amended
(b) By-Laws, as amended
31.1 Section 302 Certification of Chief Executive Officer
31.2 Section 302 Certification of Chief Financial Officer
32.1 Section 906 Certification of Chief Executive Officer
32.2 Section 906 Certification of Chief Financial Officer
b. Reports on Form 8-K
Report on Form 8-K filed July 17, 2003
Report on Form 8-K filed October 17, 2003
22
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 13, 2003 /s/ Donald R. Chase
--------------------------------------
Donald R. Chase
President and Chief Executive Officer
Date: November 13, 2003 /s/ John M. Lilly
--------------------------------------
John M. Lilly
Treasurer and Chief Financial Officer
23