-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, npTiPOC/82cRPtXHT+BMVlDBvb9eXXebt8eN2vUWyutIJ4RAmxTAixt5zcrua2cf y8CCPQs5IIeDi9i0ENIf9Q== 0000742070-95-000007.txt : 19950512 0000742070-95-000007.hdr.sgml : 19950512 ACCESSION NUMBER: 0000742070-95-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950508 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: WESTBANK CORP CENTRAL INDEX KEY: 0000742070 STANDARD INDUSTRIAL CLASSIFICATION: 6022 IRS NUMBER: 042830731 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-12784 FILM NUMBER: 95535192 BUSINESS ADDRESS: STREET 1: 225 PARK AVE STREET 2: PO BOX 149 CITY: WEST SPRINGFIELD STATE: MA ZIP: 01090-0149 BUSINESS PHONE: 4137471400 MAIL ADDRESS: STREET 1: 225 PARK AVE P O BOX 149 STREET 2: 225 PARK AVE P O BOX 149 CITY: WEST SPRINGFIELD STATE: MA ZIP: 01090-0149 10-Q 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, 1995 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: 3,160,768 shares outstanding as of April 30, 1995. WESTBANK CORPORATION AND SUBSIDIARIES INDEX PART I - FINANCIAL INFORMATION Page Financial Statements Condensed Consolidated Balance Sheets 3 Condensed Consolidated Statements of Income 4 Condensed Consolidated Statements of Stockholders' Equity 5 Condensed Consolidated Statements of Cash Flows 6 Notes to Condensed Consolidated Financial Statements 7-9 Management's Discussion and Analysis of Financial Condition and Results of Operations 9-15 PART II - OTHER INFORMATION ITEM 1. Legal Proceedings 16 ITEM 2. Changes in Rights of Securities Holders 16 ITEM 3. Defaults by Company on its Senior Securities 16 ITEM 4. Results of Votes on Matters Submitted to a Vote of Security Holders 16 ITEM 5. Other Information 16 ITEM 6. Exhibits and Reports on Form 8-K 16 Signatures 17 WESTBANK CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS MARCH 31, 1995 AND DECEMBER 31, 1994 (Dollar amounts in thousands) ASSETS March 31, 1995 December 31, 1994 Cash and due from banks: (Unaudited) Non-interest bearing $ 10,461 $ 10,425 Interest bearing 302 275 Federal Funds sold 1,200 1,000 Securities available for sale (Amortized cost of $12,121 in 1995 and $8,001 in 1994) 11,957 7,753 Securities held to maturity (approximate market value of $20,896 in 1995 and $20,631 in 1994) 21,436 21,463 Mortgage-backed securities (approximate market value of $323 in 1995 and $327 in 1994) 319 331 Loans $ 195,026 $ 196,002 Allowance for loan losses (2,740) (3,325) Net-loans 192,286 192,677 Bank premises and equipment 3,547 3,417 Other real estate owned (OREO) - net of allowance for losses of $231 in 1995 and $231 in 1994 1,540 1,552 Accrued interest receivable 1,612 1,668 Deferred income tax receivable 1,608 1,245 Refundable income tax 0 103 Other assets 1,527 1,404 TOTAL ASSETS $ 247,795 $ 243,313 LIABILITIES STOCKHOLDERS' AND EQUITY Deposits Non-interest bearing $ 37,102 $ 40,399 Interest bearing 185,575 178,164 Total Deposits 222,677 218,563 Borrowed funds 8,037 8,625 Accrued interest payable 256 240 Other liabilities 671 541 Total Liabilities 231,641 227,969 Stockholders' Equity: Preferred stock - $5 par value 0 0 Authorized - 100,000 shares Issued - none Common stock - $2 par value Authorized - 9,000,000 shares Issued - 3,156,908 shares in 1995 and 3,138,167 shares in 1994 6,314 6,276 Additional paid in capital 6,903 6,877 Retained earnings 3,032 2,334 Net unrealized loss on securities available for sale (95) (143) Total Stockholders' Equity 16,154 15,344 TOTAL LIABILITIES AND EQUITY $ 247,795 $ 243,313 See accompanying notes to condensed consolidated financial statements. WESTBANK CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994 (Dollar amounts in thousands) (Unaudited) THREE MONTHS ENDED 03-31-95 03-31-94 Income: Interest and fees on loans $ 4,239 $ 3,516 Interest on temporary investments 32 14 Interest and dividends on securities 495 483 Total interest and dividend income 4,766 4,013 Interest expense 1,926 1,406 Net interest income 2,840 2,607 Provision for loan losses 450 347 Interest income after provision for loan losses 2,390 2,260 Security gains 0 150 Other non-interest income 512 596 Income before operating expenses 2,902 3,006 Operating Expenses: Salaries and benefits 956 908 Other real estate-provision for losses 10 241 -operating expense 120 104 Other non-interest expense 839 832 Occupancy - net 187 185 Total operating expenses 2,112 2,270 Income before income taxes 790 736 Income taxes (benefit) (65) (180) Net Income $ 855 $ 916 Net income per share $ .26 $ .29 Weighted average of common and common share equivalents 3,234,625 3,195,513 See accompanying notes to condensed consolidated financial statements. WESTBANK CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY FOR THE YEAR ENDED DECEMBER 31, 1994 AND THREE MONTHS ENDED MARCH 31, 1995 (1995 Unaudited)
(Dollar amounts in thousands) NET UNREALIZED GAIN (LOSS) ON COMMON STOCK ADDITIONAL SECURITIES NUMBER OF PAR PAID IN RETAINED AVAILABLE SHARES VALUE CAPITAL EARNINGS FOR SALE TOTAL DECEMBER 31, 1993 3,125,506 $ 6,251 $ 6,861 $ 159 $ - $ 13,271 Net income - - - 2,175 - 2,175 Shares issued under stock option plan 7,864 16 - - - 16 Shares issued under stock purchase plan 4,797 9 16 - - 25 Cumulative effect of implementing accounting standard for investments as of January 1, 1994 - - - - 233 233 Unrealized loss on securities available for sale for the year - - - - (376) (376) Balance, December 31, 1994 3,138,167 $6,276 $6,877 $2,334 $(143) $15,344 Cash Dividend Declared: Amount Declaration Record Paid $0.05 1/10/95 1/20/95 1/25/95 (157) (157) Shares issued under Dividend Reinvestment Plan 6,403 13 18 31 Shares issued under stock option plan 10,342 21 2 23 Shares issued under stock purchase plan 1,996 4 6 10 (Increase)/decrease in unrealized loss on Securities available for sale 48 48 Interim income for three months ended March 31, 1995 855 855 BALANCE - MARCH 31, 1995 3,156,908 $6,314 $6,903 $3,032 $(95) $16,154
See accompanying notes to condensed consolidated financial statements. WESTBANK CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994 (Unaudited) (Dollar amounts in thousands) 03-31-95 03-31-94 Operating activities: Net income $ 855 $ 916 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses 450 347 Depreciation and amortization 120 156 Provision for other real estate owned 10 241 Decrease in interest payable on deposits 16 (77) (Increase) decrease in accrued interest receivable 56 (68) Realized gain on sale of securities 0 (150) Realized (gain) loss on sale of other real estate owned 4 0 Realized loss on sale of premises and equipment 0 0 Decrease (increase) in other assets (123) (248) Increase (decrease) in other liabilities 130 254 Decrease (increase) in income taxes refundable 103 10 Increase in deferred taxes (363) (400) Net cash provided by operating activities 1,258 981 Investing activities: Investments and mortgage-backed securities: Held to maturity: Purchases 0 (500) Proceeds from maturities 39 637 Available for sale: Purchases (4,156) 0 Proceeds from sales 0 4,936 Proceeds from maturities 0 0 Purchases of premises and equipment (250) (64) Net (increase) decrease in loans (131) (3,193) Proceeds from sale of other real estate owned 70 971 Net cash provided by (used in) investing activities (4,428) 2,787 Financing activities: Net increase (decrease) in borrowings (588) (5,039) Net increase (decrease) in deposits 4,114 2,133 Proceeds from exercise of stock options and stock purchase plan 64 7 Dividends paid (157) 0 Net cash used by financing activities 3,433 (2,899) Increase (decrease) in cash and cash equivalents 263 869 Cash and cash equivalents at beginning of year 11,700 12,974 Cash and cash equivalents at end of year $11,963 $13,843 Cash paid during the year: Interest on deposits and other borrowings 1,970 533 Income taxes 0 210 Transfers of loans to other real estate owned 205 223 Sales of other real estate owned financed by the bank 134 630 See notes to consolidated financial statements. WESTBANK CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE A - GENERAL INFORMATION Westbank Corporation (hereinafter sometimes referred to as "Westbank") is a registered Bank Holding Company organized to facilitate the expansion and diversification of the business of Park West Bank and Trust Company (hereinafter sometimes referred to as "Park West") into additional financial services related to banking which are permitted by the Federal Bank Holding Company Act of 1956, as amended. Westbank became the owner of all of Park West's outstanding capital stock effective July 2, 1984. Substantially all operating income and net income of the Corporation are presently accounted for by Park West. NOTE B - CURRENT OPERATING ENVIRONMENT From March, 1992 until December 22, 1994 Park West had been operating under a Formal Order (the "Formal Order") with the Federal Deposit Insurance Corporation and the Commissioner of Banks for the Commonwealth of Massachusetts. On December 22, 1994, as a result of the improved financial condition of the Bank, the Formal Order was released. The Formal Order was replaced with a Memorandum of Understanding (the "Memorandum"). The Memorandum is an informal agreement with the Federal Deposit Insurance Corporation (the "FDIC") and the Commissioner of Banks for the Commonwealth of Massachusetts (the "Commissioner") requiring Park West, among other things, to maintain a leverage capital ratio of at least 6%, to develop a written plan of action to lessen its risk exposure to certain borrowers and to refrain from extending or renewing credit to any borrower who has a loan or extension of credit with Park West that has been charged off or classified, without first obtaining majority approval of Park West's Board of Directors. Park West must maintain the allowance for loan losses at a level commensurate to the risk in the loan portfolio. The Memorandum requires Park West to obtain approval from the FDIC and the Commissioner prior to paying or declaring a dividend. Finally, Park West is required to make quarterly reports to the FDIC and the Commissioner detailing the form and manner of action taken to secure compliance with the Memorandum. The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA") was enacted into law on December 19, 1991 and imposes significant new regulatory restrictions and requirements on banking institutions insured by the FDIC and their holding companies. Effective December 19, 1992, FDICIA established five capital categories into which financial institutions are placed based on capital level. The capital categories established by FDICIA are: well capitalized; adequately capitalized; undercapitalized; significantly undercapitalized; and critically under- capitalized. Each capital category establishes different degrees of regulatory restrictions which can apply to a financial institution. As of March 31, 1995, Park West's capital was at a level that placed the Bank in the well capitalized category. FDICIA imposes a variety of other restrictions and requirements on insured banks. These include significant new regulatory reporting requirements for fiscal years commencing after December 31, 1992, a system of risk-based deposit insurance premiums and civil money penalties for inaccurate deposit assessment reports. In addition, a system of regulatory standards for bank and bank holding company operations, detailed new truth in savings disclosure requirements, and restrictions on activities authorized by state law but not authorized for national banks. The weak economy and real estate market continues to impair the financial results of the Corporation. Despite these weaknesses the Corporation has managed significant improvements in the level of non-performing assets. As a result of the continued aggressive management of problem loans and an on-going expense reduction program, the Board of Directors and management believe the Corporation is positioned to sustain compliance with the Memorandum as well as the requirements of FDICIA. NOTE C - BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements for the first quarter ended March 31, 1995 and 1994 have been prepared in accordance with generally accepted accounting principles for interim information and with instructions for Form 10-Q. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month period ended March 31, 1995, are not necessarily indicative of the results that may be expected for the year ended December 31, 1995. 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, 1994. NOTE D - CHANGE IN ACCOUNTING The Bank adopted Statement of Financial Accounting Standards No. 114, "Accounting by Creditors for Impairment of a Loan" (SFAS No. 114) on January 1, 1995. This statement addresses the accounting by creditors for impairment of certain loans. It is applicable to all creditors and to all loans, uncollateralized as well as collateralized except large groups of smaller balance homogeneous loans that are collectively evaluated for impairment, loans that are measured at fair value or at the lower of cost or fair value, leases and debt securities. It applies to all loans that are restructured in a troubled debt restructuring involving a modification of terms. SFAS No. 114 requires that impaired loans that are within the scope of the statement be measured based on the present value of expected future cash flows discounted at the loan's effective interest rate or, as a practical expedient, at the loan's observable market price or the fair value of the collateral if the loan is collateral dependent. The adoption of this Statement did not have a material impact on the Bank's financial condition or results of its operations; however, certain amounts in the 1994 financial statements were reclassified to conform to the 1995 presentation. NOTE E - NET INCOME PER SHARE Earnings per share were computed by dividing net income by the weighted average number of shares of common stock outstanding and common stock equivalent shares arising from unexercised stock options. The weighted average of common and common stock equivalents for the periods ended March 31, 1995 and 1994, amounted to 3,234,625 and 3,195,513 shares, respectively. NOTE F - 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, 1995 standby letters of credit amounted to $961,000 and loan commitments were $23,072,000 and unused balances available on home equity lines of credit were $7,876,000. Trust Assets - Property with a book value of $92,158,000 at March 31, 1995 held for customers by a subsidiary in a fiduciary or agency capacity, is not included in the accompanying Balance Sheet since such items are not assets of the Bank. NOTE G - STOCKHOLDERS' EQUITY The FDIC imposes leverage capital ratio requirements for state non-member Banks. The Bank's leverage capital ratio as of March 31, 1995 and December 31, 1994 was 6.54% and 6.36%, respectively. In addition, the FDIC has established risk-based capital requirements for insured institutions of, Tier 1 risk-based capital of 4.00% and total risk-based capital of 8.00%. The Bank's risk-based capital at March 31, 1995, for Tier 1 was 8.98% and total risk-based capital was 10.23%. As discussed in NOTE B, on December 22, 1994, in conjunction with an examination by the Commissioner the Formal Order was eliminated and replaced with a Memorandum of Understanding. The Memorandum requires, among other items: park West's Tier 1 capital to total asset ratio remain at or above 6%; Park West to submit written plans to further reduce classified assets; the Bank to review and/or revise its Asset/Liability Management Policy; and not declare or pay any dividends without prior approval by FDIC and the Commissioner. Park West management believes that the Bank will be able to comply with all of the terms of the Memorandum. Under the Memorandum, the Corporation is prohibited from paying dividends without the prior approval of the FDIC and the Massachusetts Commissioner of Banks. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Total consolidated assets amounted to $247,795,000 on March 31, 1995, compared to $243,313,000 on December 31, 1994. As of March 31, 1995 and March 31, 1994 earning assets amounted to, respectively, $230,500,000, or 93% of total assets, and $209,669,000, or 92% of total assets. For the quarter ended March 31, 1995, net income totaled $855,000 compared to $916,000 for the three month period ended March 31, 1994. Included in the results of the current quarter is a $65,000 tax benefit which is the result of a decrease in the valuation reserve pertaining to deferred tax assets, offset by the provision for current taxes. Net income for the quarter ended March 31, 1994 reflects a tax benefit of $180,000 as a result of a decrease in the valuation reserve pertaining to deferred tax assets, offset by the provision for current taxes. An overall increase in interest income and interest expense reflects an increase in volume and interest rates on earning assets, and interest bearing deposits. Further analysis is provided in sections on net interest revenue and supporting schedules. An increase has been reflected in the provision for loan losses in the current quarter with $450,000 being provided compared to $347,000 in the 1994 quarter. Decreases are noted in other real estate provisions and operating expenses. This expense totalled $130,000 for the current quarter compared with $345,000 a year ago, a decrease of $215,000. Loans and leases written-off against the allowance for loan/lease losses after recoveries amounted to $1,035,000 in the current quarter compared to $386,000 during the quarter ended December 31, 1994. After giving effect to the actions described above, the allowance for loan/lease losses at March 31, 1995, totalled $2,740,000 or 1.40% of total loans/leases as compared to $3,325,000 or 1.70% at December 31, 1994. Non-performing past due loans/leases at March 31, 1995, aggregated $4,364,000 or 2.24% of total loan/leases compared to $5,883,000 or 3.00% at December 31, 1994. The percentage of non-performing and past due loan/leases compared to total assets on those same dates, respectively amounted to 1.76%, and 2.42%. Other real estate owned-net, amounted to $1,540,000 at March 31, 1995, compared to $1,552,000 at December 31, 1994. The percentage as compared to total assets on those same dates respectively amounted to 0.62%, and 0.64%. Management has made every effort to recognize all circumstances known at this time which could affect the collectibility of loan/leases and has reflected these in deciding as to the provision for loan/lease losses, the writing down of other real estate owned and impaired loans to fair value, the charge-off of loans/leases and the balance in the allowance for losses. Management deems that the provision for the quarter, and the balance in the allowance for loan/lease losses, are adequate based on results provided by the grading system and circumstances known at this time. NET INTEREST INCOME The Corporation's earning assets include a diverse portfolio of earning instruments ranging from the Corporation's core business of loan extensions to interest-bearing securities issued by federal, state and municipal authorities. These earning assets are financed through a combination of interest-bearing and interest-free sources. Net interest income, the most significant component of earnings, is the amount by which the interest generated by assets exceeds the interest expense on liabilities. For analytical purposes, the interest earned on tax exempt assets is adjusted to a "tax equivalent" basis to recognize the income tax savings which facilitates comparison between taxable and tax exempt assets. The Corporation analyzes its performance by utilizing the concepts of interest rate spread and net yield on earning assets. The interest rate spread represents the difference between the yield on earning assets and interest paid on interest-bearing liabilities. The net yield on earning assets is the difference between the rate of interest on earning assets and the effective rate paid on all funds - interest-bearing liabilities, as well as, interest-free sources (primarily demand deposits and shareholders' equity). The balances and rates derived for the analysis of net interest income presented on the following pages reflect the consolidated assets and liabilities of the Corporation's principal earning subsidiary, Park West Bank and Trust Company. QUARTER ENDED (Dollar amounts in thousands) 03-31-95 03-31-94 Interest revenue $ 4,766 $ 4,013 Interest expense 1,926 1,406 Net interest income 2,840 2,607 Tax equivalent adjustment 8 6 Net interest income (taxable equivalent) $ 2,848 $ 2,613 INTEREST RATE SPREAD AND NET YIELD ON EARNING ASSETS (Dollar amounts in thousands) QUARTER ENDED 03-31-95 03-31-94 (Taxable Equivalent) Average Average Balance Rate Balance Rate Earning Assets $228,952 8.34% $208,399 7.72% Interest-bearing liabilities 190,707 4.04 176,329 3.19 Interest rate spread 4.30 4.53 Interest-free resources used to fund earning assets 38,245 32,070 Total Sources of Funds $228,952 3.36 $208,399 2.70 Net Yield on Earning Assets 4.98% 5.02% CHANGES IN NET INTEREST EARNED (Dollar amounts in thousands) QUARTER ENDED 03-31-95 (Taxable Equivalent) O V E R QUARTER ENDED 03-31-94 CHANGE DUE TO Interest Earned VOLUME RATE TOTAL Loans/leases $ 415 $ 310 $ 725 Securities 11 1 12 Federal funds 2 16 18 Total Interest Earned 428 327 755 Interest Expense Interest bearing deposits 132 352 484 Other borrowed funds (7) 43 36 Total Interest Expense 125 395 520 Net Interest Earned $ 303 $ (68) $ 235 Net interest earned on a taxable equivalent basis increased to $2,848,000 in the first quarter of 1995, up $235,000 as compared with the comparable period of 1994, or 9%. Average earning assets increased by $20,553,000 during the first quarter of 1995. The average earning base was $228,952,000 compared to $208,399,000 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: QUARTER ENDED (Dollar amounts in thousands) 03-31-95 03-31-94 Amount Percent Amount Percent Salaries and benefits $ 956 18.11% $ 908 19.08% Other Real Estate - expenses 130 2.46 345 7.25 Other non-interest expense 839 15.90 832 17.48 Occupancy - net 187 3.55 185 3.89 Total Operating Expenses $2,112 40.02% $2,270 47.70% COMPONENTS OF CAPITAL (Dollar amounts in thousands) March 31, 1995 December 31, 1994 Stockholders' Equity: Common Stock $ 6,314 $ 6,276 Additional paid-in capital 6,903 6,877 Retained earnings 3,032 2,334 Net unrealized gain/(loss) on securities available for sale (95) (143) Total Stockholders' Equity $16,154 $15,344 Ratio of "Tier 1" leverage capital to total assets at end of period 6.52% 6.31% Regulatory risk-based capital requirements, which became effective on December 31, 1990, take into account the different risk categories of banking organizations by assigning risk weights to assets and the credit equivalent amounts of off-balance sheet exposures. In addition, capital is divided into two tiers. For this Corporation, Tier 1 includes the common stockholders' equity; Tier 2, or supplementary capital, includes not only the equity, but also, a portion of the allowance for loan losses, net unrealized gain/(losses) on securities available for sale are not permitted to be included for regulatory capital purposes. The following are the Corporation's risk-based capital ratios at March 31, 1995: Tier 1 Capital (minimum required 4.00%) 8.90% Tier 2 Capital (minimum required 8.00%) 10.15% Under the Memorandum, the Corporation is prohibited from paying dividends without the prior approval of the FDIC and the Massachusetts Commissioner of Banks. 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, 1995. (Dollar amounts in thousands)
Over Three Over One Three Months Months to Year to Over or Less One Year Five Years Five Years Total Earning Assets $ 68,654 $ 48,979 $ 73,805 $ 38,802 $230,240 Interest Bearing Liabilities 69,487 55,919 68,199 37,109 230,714 Interest Rate Sensitivity Gap $ (833) $ (6,940) $ 5,606 $ 1,693 $ (474) Cumulative Interest Rate Sensitivity Gap $ (833) $ (7,773) $ (2,167) $ (474) Interest Rate Sensitivity Gap Ratio (0.36)% (3.01)% 2.43% 0.74% Cumulative Interest Rate Sensitivity Gap Ratio (0.36)% (3.37)% 0.94% (0.20)%
LIQUIDITY Cash and due from banks, federal funds sold, investment securities, mortgage- backed securities and loans available for sale, as compared to deposits and short term liabilities, are used by the Corporation to compute its liquidity on a daily basis. At March 31, 1995, the Corporation's ratio of such assets to total deposits and borrowed funds was 26.16%. PROVISION AND ALLOWANCE FOR LOAN/LEASE LOSSES (Dollar amounts in thousands) QUARTER ENDED 03-31-95 03-31-94 Balance at beginning of period $ 3,325 $ 3,472 Provision charged to expense 450 347 3,775 3,819 Less-Charge-offs: Loans secured by real estate 791 267 Construction/land development 0 0 Commercial and industrial loans 204 128 Consumer loans 57 8 1,052 403 Add-Recoveries: Loans secured by real estate 0 0 Construction/land developing 0 0 Commercial and industrial loans 2 42 Consumer loans 13 4 Lease financing receivables 2 1 17 47 Net charge-offs 1,035 356 Balance at end of period $ 2,740 $ 3,463 Net Charge-offs to: Average loan/leases .53% .20% Loans/leases at end of period .53% .20% Allowance for loan/lease losses 31.64% 10.25% Allowance for loan/lease losses as a percentage of: Average loan/leases 1.40% 1.97% Loan/leases at end of period 1.40% 1.92% The approach the Corporation uses in determining the adequacy of the Allowance for Loan/Lease Losses is the combination of a target reserve and a general reserve allocation. Quarterly, based on an internal review of the Loan Portfolio, the Corporation identifies required reserve allocations targeted to recognized problem loans that, in the opinion of management, have potential loss exposure or questions relative to the depth of the collateral on these same loans. In addition, the Corporation allocates a general reserve against the remainder of the Loan Portfolio. NON-ACCRUAL, PAST DUE AND RESTRUCTURED LOANS (Dollar amounts in thousands)
Non-Accrual Loans: 03-31-95 12-31-94 09-30-94 06-30-94 03-31-94 Loans secured by real estate $ 3,302 $ 4,173 $ 4,977 $ 5,200 $ 2,304 Construction/Land development 58 68 0 84 91 Commercial and Industrial Loans 357 570 1,132 483 466 Consumer Loans 24 79 53 19 7 3,741 4,890 6,162 5,786 2,868 Loans Contractually past due 90 days or more still accruing: Loans secured by real estate 117 260 81 229 921 Construction/Land development 0 0 0 0 22 Commercial and Industrial Loans 0 216 5 49 16 Consumer Loans 8 16 36 23 18 Lease financing receivables 0 0 0 0 7 125 492 122 301 984 Restructured Loans 498 501 452 456 614 Total non-accrual, past due and restructured loans $ 4,364 $ 5,883 $ 6,736 $ 6,543 $ 4,469 Non-accrual, past due and restructured loans as a percentage of total loans 2.24% 3.00% 3.65% 3.55% 2.48% Allowance for loan losses as a percentage of non accrual, past due and restructured loans 62.79% 56.52% 47.04% 60.43% 77.49% OTHER REAL ESTATE Other real estate owned - net $ 1,540 $ 1,552 $ 1,659 $ 2,107 $ 2,360
WESTBANK CORPORATION AND SUBSIDIARIES QUARTER TO DATE AVERAGE BALANCES INTEREST EARNED - INTEREST EXPENSE (RATES ON A TAX EQUIVALENT BASIS) (Dollar amounts in thousands)
THREE MONTHS ENDED THREE MONTHS ENDED March 31, 1995 March 31, 1994 Balance Interest Rate Balance Interest Rate Federal Funds sold and temporary investments $ 2,266 $ 32 5.65% $ 2,067 $ 14 2.71% Securities 31,037 495 6.38 30,439 483 6.35 Loans/leases 195,649 4,247 8.68 175,893 3,522 8.01 Total earning assets 228,952 $ 4,774 8.34 208,399 $ 4,019 7.72 Loan/lease loss allowance (3,260) (3,469) All other assets 18,813 19,342 TOTAL ASSETS $244,505 $224,272 LIABILITIES AND EQUITY Interest bearing deposits $181,897 $ 1,829 4.02 $166,627 $ 1,345 3.23 Borrowed funds 8,810 97 4.40 9,702 61 2.51 Total interest bearing liabilities 190,707 $ 1,926 4.04 176,329 $ 1,406 3.19 Interest rate spread 4.30% 4.53% Demand deposits 37,040 33,290 Other liabilities 806 713 Shareholders' equity 15,952 13,940 TOTAL LIABILITIES AND EQUITY $244,505 $224,272 Net Interest Income $ 2,848 $ 2,613 Interest Earned/Earning Assets 8.34% 7.72% Interest Expense/Earning Assets 3.36 2.70 Net Yield on Earning Assets 4.98% 5.02% Deduct - Tax Equivalent Adjustment 8 6 NET INTEREST INCOME $ 2,840 $ 2,607
PART II - OTHER INFORMATION ITEM 1. Legal Proceedings None ITEM 2. Changes in Rights of Securities Holders None ITEM 3. Defaults by Company on its Senior Securities None ITEM 4. Results of Votes on Matters Submitted to a Vote of Security Holders None ITEM 5. Other Information None ITEM 6. Exhibits and Reports on Form 8 The Corporation filed a report on Form 8-K on March 31, 1995 reporting the discovery of an alleged defalcation by a former employee of the Corporation. 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 8, 1995 Donald R. Chase President and Chief Executive Officer Date: May 8, 1995 John M. Lilly, Treasurer and Chief Financial Officer EX-27 2
9 0000742070 WESTBANK CORPORATION 1000 3-MOS DEC-31-1995 JAN-01-1995 MAR-31-1995 10442 302 1200 0 11957 21755 21190 195026 2740 247795 222677 8037 927 0 16154 0 0 0 247795 4239 495 32 4766 1829 1926 2840 450 0 2112 790 0 0 0 855 .26 .26 4.98 3741 125 498 4364 3325 1052 17 2740 2740 0 0
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