-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KLUmA2nIrdzvn05p1m1ZCPpj5vaSEF76XRYVBMHyuojMLf68LRom5twUQddiktE1 fcVJHHS8Y5j2c7ddKvf2Cw== 0000914039-00-000470.txt : 20001121 0000914039-00-000470.hdr.sgml : 20001121 ACCESSION NUMBER: 0000914039-00-000470 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001113 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: SEC FILE NUMBER: 000-12784 FILM NUMBER: 761459 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 y42507e10-q.txt 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 SEPTEMBER 30, 2000 Commission file number 0 - 12784 WESTBANK CORPORATION (Exact name of registrant as specified in its charter) MASSACHUSETTS 04-2830731 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer I.D. No.) 225 PARK AVENUE, WEST SPRINGFIELD, MASSACHUSETTS 01090-0149 (Address of principal executive offices) (Zip Code)
(413) 747-1400 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. YES X NO Common stock, par value $2 per share: 4,226,593 shares outstanding as of October 31, 2000 2 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 Comprehensive Income 5 Condensed Consolidated Statements of Stockholders' Equity 6 Condensed Consolidated Statements of Cash Flows 7 Notes to Condensed Consolidated Financial Statements 8-9 Management's Discussion and Analysis of Financial Condition and Results of Operations 10-17 PART II - OTHER INFORMATION ITEM 1. Legal Proceedings 18 ITEM 2. Changes in Rights of Securities Holders 18 ITEM 3. Defaults by Company on its Senior Securities 18 ITEM 4. Results of Votes on Matters Submitted to a Vote of Security Holders 18 ITEM 5. Other Events 18 ITEM 6. Exhibits and Reports on Form 8-K 19 Signatures 20
2 3 WESTBANK CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited) (Dollar amounts in thousands) September 30, 2000 December 31, 1999 ------------------ ----------------- ASSETS Cash and due from banks: Non-interest bearing $ 15,609 $ 17,006 Interest bearing 270 1,147 Federal funds sold 896 13,389 --------- --------- Total cash and cash equivalents 16,775 31,542 --------- --------- Investment securities available for sale 87,491 69,516 Investment securities held to maturity (fair value of $11,308 in 2000 and $11,652 in 1999) 11,498 11,804 --------- --------- Total securities 98,989 81,320 --------- --------- Loans 448,366 440,319 Mortgage loans held-for-sale 1,865 2,156 Allowance for loan losses (3,460) (3,908) --------- --------- Net loans 446,771 438,567 Bank premises and equipment 7,384 7,809 Other real estate owned 605 442 Accrued interest receivable 4,018 3,243 Intangible assets 9,672 9,971 Other assets 3,839 3,256 --------- --------- TOTAL ASSETS $ 588,053 $ 576,150 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Deposits: Non-interest bearing $ 62,710 $ 59,643 Interest bearing 437,618 419,253 --------- --------- Total deposits 500,328 478,896 Borrowed funds 34,651 46,546 Accrued interest payable 1,118 732 Other liabilities 1,901 1,433 --------- --------- Total liabilities 537,998 527,607 --------- --------- Mandatory redeemable preferred stock 17,000 17,000 --------- --------- Stockholders' Equity: Common stock -- $2 par value Authorized -- 9,000,000 shares Issued -- 4,283,719 shares in 2000 and 4,283,719 shares in 1999 8,567 8,567 Additional paid in capital 11,621 11,633 Retained earnings 14,860 13,317 Treasury stock - 73,050 shares (638) Accumulated other comprehensive income (loss) (1,355) (1,974) --------- --------- Total Stockholders' Equity 33,055 31,543 --------- --------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 588,053 $ 576,150 ========= =========
See accompanying notes to condensed consolidated financial statements. 3 4 WESTBANK CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (Dollar amounts in thousands)
QUARTER ENDED NINE MONTHS ENDED 09-30-00 09-30-99 09-30-00 09-30-99 ---------- ---------- ---------- ---------- Income: Interest and fees on loans $ 8,944 $ 6,749 $ 26,451 $ 19,282 Interest on federal funds sold 101 28 197 101 Interest on securities 1,794 1,177 5,040 3,567 ---------- ---------- ---------- ---------- 10,839 7,954 31,688 22,950 Interest expense 6,192 3,697 17,152 10,503 ---------- ---------- ---------- ---------- Net interest income 4,647 4,257 14,536 12,447 Provision for loan losses 13 0 153 77 ---------- ---------- ---------- ---------- Net interest income after provision 4,634 4,257 14,383 12,370 ---------- ---------- ---------- ---------- Realized investment gains 0 0 0 92 Other non-interest income 555 602 1,739 1,620 ---------- ---------- ---------- ---------- Total non-interest income 555 602 1,739 1,712 ---------- ---------- ---------- ---------- Operating expense: Salaries and benefits 1,976 1,581 5,938 4,548 Other operating expenses 1,667 1,114 4,856 3,387 Occupancy - net 339 294 1,025 908 ---------- ---------- ---------- ---------- Total operating expenses 3,982 2,989 11,819 8,843 ---------- ---------- ---------- ---------- Income before income taxes 1,207 1,870 4,303 5,239 Income taxes 370 735 1,486 2,012 ---------- ---------- ---------- ---------- Net Income $ 837 $ 1,135 $ 2,817 $ 3,227 ========== ========== ========== ========== Earnings per share -- Basic $ 0.20 $ 0.27 $ 0.67 $ 0.76 -- Diluted $ 0.20 $ 0.26 $ 0.66 $ 0.75 Weighted average shares outstanding -- Basic 4,206,430 4,260,321 4,230,001 4,232,378 -- Dilutive option shares 38,861 95,546 48,675 98,593 -- Diluted 4,245,291 4,355,867 4,278,676 4,330,971
See accompanying notes to condensed consolidated financial statements. 4 5 WESTBANK CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) (Dollar amounts in thousands)
QUARTER ENDED NINE MONTHS ENDED 09-30-00 09-30-99 09-30-00 09-30-99 ------- ------- ------- ------- Net Income $ 837 $ 1,135 $ 2,817 $ 3,227 ------- ------- ------- ------- Other comprehensive income: Unrealized gain/(loss) on securities available for sale, net of income taxes (benefits) of $333 and $(254) for the quarter and $342 and $(996) for the nine-month periods ended September 30, 2000 and 1999, respectively 741 (410) 619 (1,606) Reclassification adjustment for gains included in net income, net of income taxes of $35 for the nine-month period ended September 30, 1999 57 ------- ------- ------- ------- Other comprehensive income (loss) 741 (410) 619 (1,549) ------- ------- ------- ------- Comprehensive Income $ 1,578 $ 725 $ 3,436 $ 1,678 ======= ======= ======= =======
See accompanying notes to condensed consolidated financial statements. 5 6 WESTBANK CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY YEAR ENDED DECEMBER 31, 1999 AND NINE MONTHS ENDED SEPTEMBER 30, 2000 (2000 unaudited) (Dollar amounts in thousands)
ACCUMULATED COMMON STOCK OTHER -------------------- ADDITIONAL COMPREHENSIVE NUMBER PAR PAID IN RETAINED TREASURY INCOME/ OF SHARES VALUE CAPITAL EARNINGS STOCK (LOSS) TOTAL --------- ------ ------- ------- ------ ------- ------- BALANCE - DECEMBER 31, 1998 4,198,838 $8,397 $11,076 $10,803 $ 214 $30,490 Net income 4,167 4,167 Cash dividend declared ($.40 per share) (1,653) (1,653) Shares issued: Stock Option Plan 30,255 61 78 139 Dividend Reinvestment and Stock Purchase Plan 54,626 109 479 588 Changes in unrealized loss on securities available for sale (2,188) (2,188) --------- ------ ------- ------- ------ ------- ------- BALANCE - DECEMBER 31, 1999 4,283,719 8,567 11,633 13,317 (1,974) 31,543 Net income 2,817 2,817 Cash dividend declared ($.30 per share) (1,274) (1,274) Treasury Shares: Redeemed (123,200) $(1,097) (1,097) Reissued 50,150 (12) 459 447 Changes in unrealized loss on securities available for sale 619 619 --------- ------ ------- ------- ------ ------- ------- BALANCE - SEPTEMBER 30, 2000 4,210,669 $8,567 $11,621 $14,860 $ (638) $(1,355) $33,055 ========= ====== ======= ======= ====== ======= =======
See accompanying notes to condensed consolidated financial statements. 6 7 WESTBANK CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 (Unaudited) (Dollar amounts in thousands)
2000 1999 -------- -------- Operating activities: Net income $ 2,817 $ 3,227 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses 153 77 Provision for other real estate owned 62 Depreciation and amortization 788 729 Intangible amortization 457 Realized gain on sale of securities (92) Realized gain/(loss) on sale of other real estate owned (50) 19 Changes in assets and liabilities: (Increase)/Decrease in accrued interest receivable (775) (188) Increase/(Decrease) in interest payable on deposits 386 97 (Increase)/Decrease in other assets (915) (1,467) Increase/(Decrease) in other liabilities 691 (437) -------- -------- Net cash provided by operating activities 3,614 1,965 -------- -------- Investing activities: Investments and mortgage-backed securities: Held to maturity: Purchases (1,050) Proceeds from maturities and principal payments 306 19,762 Available for sale: Purchases (21,389) (21,608) Proceeds from sales 4,679 Proceeds from maturities 4,424 12,271 Purchases of premises and equipment (363) (1,328) Net (increase) in loans (8,834) (59,512) Proceeds from sale of other real estate owned 85 382 -------- -------- Net cash used in investing activities (25,771) (46,404) -------- -------- Financing activities: Net increase/(decrease) in other borrowed funds (12,118) 8,570 Net increase/(decrease) in deposits 21,432 38,362 Proceeds from mandatory redeemable preferred stock 17,000 Proceeds from exercise of stock options and stock purchase plan 578 Treasury stock (purchased)/issued, net (650) Dividends paid (1,274) (1,226) -------- -------- Net cash provided by financing activities 7,390 63,284 -------- -------- Increase/(Decrease) in cash and cash equivalents (14,767) 18,845 Cash and cash equivalents at beginning of period 31,542 14,240 -------- -------- Cash and cash equivalents at end of period $ 16,775 $ 33,085 ======== ======== Cash paid during the period: Interest on deposits and other borrowings $ 16,766 $ 10,406 Income taxes 1,222 1,874 Transfers of loans to other real estate owned 357
See accompanying notes to condensed consolidated financial statements. 7 8 WESTBANK CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND SEPTEMBER 30, 1999 (Unaudited) NOTE A - GENERAL INFORMATION Westbank Corporation (hereinafter sometimes referred to as "Westbank" or the "Corporation") is a registered Financial Holding Company organized to facilitate the expansion and diversification of the business of Park West Bank and Trust Company and Cargill Bank (hereinafter sometimes referred to as "Park West" or "Cargill" and collectively as the "Banks") into additional financial services related to banking. Substantially all operating income and net income of the Corporation are presently accounted for by Park West and Cargill. NOTE B - CURRENT OPERATING ENVIRONMENT Park West operates thirteen banking offices located in Hampden County, Massachusetts, and also operates a Trust Department providing services normally associated with holding property in a fiduciary or agency capacity. A full range of retail banking services is furnished to individuals, businesses and non-profit organizations. Cargill Bank operates four offices in Windham County, Connecticut. A full range of retail banking services is furnished to individuals, businesses and non-profit organizations. The primary source of revenue for Park West and Cargill is derived from providing loans to customers who are predominantly located in Park West's and Cargill's service areas. The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA") imposes significant regulatory restrictions and requirements on banking institutions insured by the FDIC and their holding companies. FDICIA established capital categories into which financial institutions are placed based on capital level. Each capital category establishes different degrees of regulatory restrictions that can apply to a financial institution. As of September 30, 2000, Park West and Cargill's capital was at a level that placed the Banks in the "well capitalized" category as defined by FDICIA. FDICIA imposes a variety of other restrictions and requirements on insured banks. These include significant regulatory reporting requirements such as insuring that a system of risk-based deposit insurance premiums and civil money penalties for inaccurate deposit assessment reports exists. In addition, FDICIA imposes a system of regulatory standards for bank and bank holding company operations, detailed truth in savings disclosure requirements, and restrictions on activities authorized by state law but not authorized for national banks. NOTE C - BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements for the quarter and nine months ended September 30, 2000 and 1999 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 or normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the quarter and nine-month period ended September 30, 2000 are not necessarily indicative of the results that may be expected for the year ending December 31, 2000. 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, 1999. 8 9 NOTE D - ACQUISITION OF BRANCHES On October 29, 1999, the Corporation completed its acquisition of the Connecticut division of New London Trust, F.S.B. The two New London Trust offices became part of Cargill Bank, increasing its number of offices to five. The Corporation has accounted for this acquisition on the purchase method, including the results of their operations since October 29, 1999. The intangible assets are being amortized over fifteen (15) years. The pro forma results of operations for the quarter and nine months ended September 30, 1999, as if this acquisition had occurred at the beginning of 1999, were as follows:
Quarter Nine Months ------- ----------- Net interest income $5,114 $15,024 Net income $1,171 $ 3,265 Basic earnings per share $0.27 $0.77 Diluted earnings per share $0.27 $0.75
NOTE E - COMMITMENTS AND CONTINGENT LIABILITIES In the normal course of business, there are outstanding commitments and contingent liabilities, such as standby letters of credit and commitments to extend credit. As of September 30, 2000, standby letters of credit amounted to $751,000 and loan commitments were $34,500,000 and unused balances available on home equity lines of credit were $11,334,000. Trust Assets - Property with a book value of $117,056,000 at September 30, 2000 held for customers in a fiduciary or agency capacity is not included in the accompanying balance sheet since such items are not assets of the Bank. NOTE F - STOCKHOLDERS' EQUITY The FDIC imposes leverage capital ratio requirements for state non-member banks. In addition, the FDIC has established risk-based capital requirements for insured institutions for Tier 1 risk-based capital of 4.00% and total risk-based capital of 8.0%. The capital ratios of Park West and Cargill as of September 30, 2000 were as follows:
Park West Bank and Trust Company Cargill Bank ----------------- ------------ Leverage Capital Ratio 7.18% 6.13% Tier 1 Risk-Based Capital 10.87% 11.26% Total Risk-Based Capital 11.75% 12.43%
As of September 30, 2000, both Park West and Cargill met the criteria which classified them as well capitalized financial institutions. NOTE G - NEW ACCOUNTING STANDARDS The Financial Accounting Standards Board (the "FASB") issued SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. This statement established accounting and reporting standards for derivative instruments including derivative activities. This statement will be effective for the Corporation's 2001 financial statements. The Corporation has not determined the effect of this standard on its financial statements. 9 10 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Changes in Financial Condition Total consolidated assets amounted to $588,053,000 on September 30, 2000, compared to $576,150,000 on December 31, 1999. As of September 30, 2000 and December 31, 1999, earning assets amounted to, respectively, $550,386,000 or 94% of total assets and $538,331,000 or 93% of total assets. Earning assets increased during the first nine months of 2000 as a result of an increase in loans and investments. Deposits originated throughout the Corporation's branch system and short-term borrowings with the Federal Home Loan Banks funded the growth in assets. Changes in Results of Operations For the quarter ended September 30, 2000, net income totaled $837,000, compared to $1,135,000 for the quarter ended September 30, 1999. For the nine months ended September 30, 2000, net income was $2,817,000, compared to $3,227,000 for the same period during 1999. Included in the results for the nine months ended September 30, 2000 were approximately $250,000 in expenses related to the integration of the branch acquisition in northeast Connecticut. An overall increase in interest income and interest expense reflects an increase in volume and interest rates on earning assets and an increase in volume and increase in rates on interest-bearing liabilities. Further analysis is provided in sections on net interest revenue and supporting schedules. Allowance for Loan Losses and Non-Performing Assets The Corporation's provision for loan losses in the current quarter was $13,000, compared to $0 for the same period in 1999. Loans written off against the allowance for loan losses after recoveries amounted to $601,000 for the nine months ended September 30, 2000. After giving effect to the actions described above, the allowance for loan losses at September 30, 2000, totaled $3,460,000 or .77% of total loans, as compared to $3,908,000 or .89% at December 31, 1999. Non-performing past due loans at September 30, 2000, aggregated $2,057,000 or .46% of total loans, compared to $2,439,000 or .55% at December 31, 1999. The percentage of non-performing and past due loans compared to total assets on those same dates, respectively, amounted to .35% and .42%. The change in non-performing loans was primarily the result of the sale of a pool of classified loans during the first quarter of the year. Other real estate owned at September 30, 2000, totaled $605,000 and stands at .10% of total assets at the end of the current quarter. Management has made every effort to recognize all circumstances known at this time that could affect the collectibility of loans and has reflected these in the provision for loan losses, the write-down of other real estate owned and impaired loans to fair value and other loans (watch list) monitored by management, the charge-off of loans and the balance in the allowance for loan losses. Management deems that the provision for the quarter and the balance in the allowance for loan losses are adequate, based on results provided by the loan grading system and circumstances known at this time. 10 11 WESTBANK CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) NET INTEREST INCOME The Corporation's earning assets include a diverse portfolio of earning instruments, ranging from the Corporation's core business of loan extensions to interest-bearing securities issued by federal, state and municipal authorities. These earning assets are financed through a combination of interest-bearing and interest-free sources. Net interest income, the most significant component of earnings, is the amount by which the interest generated by assets exceeds the interest expense on liabilities. The Corporation analyzes its performance by utilizing the concepts of interest rate spread and net yield on earning assets. The interest rate spread represents the difference between the yield on earning assets and interest paid on interest-bearing liabilities. The net yield on earning assets is the difference between the rate of interest on earning assets and the effective rate paid on all funds - interest-bearing liabilities as well as interest-free sources (primarily demand deposits and shareholders' equity). The balances and rates derived for the analysis of net interest income presented on the following pages reflect the consolidated assets and liabilities of the Corporation's principal earning subsidiaries, Park West Bank and Trust Company and Cargill Bank. (Dollar amounts in thousands)
QUARTER ENDED SIX MONTHS ENDED 09-30-00 09-30-99 09-30-00 09-30-99 ------- ------- ------- ------- Interest and dividend income $10,839 $ 7,954 $31,688 $22,950 Interest expense 6,192 3,697 17,152 10,503 ------- ------- ------- ------- Net interest income $ 4,647 $ 4,257 $14,536 $12,447 ======= ======= ======= =======
INTEREST RATE SPREAD AND NET YIELD ON EARNING ASSETS (Dollar amounts in thousands)
QUARTER ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30, 2000 1999 2000 1999 -------------------- ----------------- ----------------- ------------------- Average Average Average Average Balance Rate Balance Rate Balance Rate Balance Rate -------- ---- --------- ---- -------- ---- -------- ---- Earning Assets $556,944 7.82% $ 419,637 7.58% $543,794 7.80% $403,205 7.59% -------- ---- --------- ---- -------- ---- -------- ---- Interest-bearing liabilities 497,680 4.98 354,474 4.17 485,838 4.71 339,252 4.13 -------- ---- --------- ---- -------- ---- -------- ---- Interest rate spread 2.84 3.41 3.09 3.46 ---- ---- ---- ---- Interest-free resources used to fund earning assets 59,264 65,163 57,956 63,953 -------- --------- -------- -------- Total Sources of Funds $556,944 $ 419,637 $543,794 $403,205 ======== ========= ======== ======== Net Yield on Earning Assets 3.37% 4.06% 3.59% 4.12% ==== ==== ==== ====
11 12 WESTBANK CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) CHANGES IN NET INTEREST INCOME (Dollar amounts in thousands)
QUARTER ENDED 09-30-00 NINE MONTHS ENDED 09-30-00 OVER OVER QUARTER ENDED 09-30-99 NINE MONTHS ENDED 09-30-99 -------------------------------------- -------------------------------------- CHANGE DUE TO CHANGE DUE TO VOLUME RATE TOTAL VOLUME RATE TOTAL ------- ------- ------- ------- ------- ------- Interest Income: Loans $ 2,050 $ 187 $ 2,237 $ 6,937 $ 335 $ 7,272 Securities 533 88 621 1,197 287 1,484 Federal funds 66 7 73 66 30 96 ------- ------- ------- ------- ------- ------- Total Interest Earned 2,649 282 2,931 8,200 652 8,852 ------- ------- ------- ------- ------- ------- Interest Expense: Interest-bearing deposits 1,434 556 1,990 3,838 849 4,687 Other borrowed funds 337 168 505 1,353 609 1,962 ------- ------- ------- ------- ------- ------- Total Interest Expense 1,771 724 2,495 5,191 1,458 6,649 ------- ------- ------- ------- ------- ------- Net Interest Income $ 878 $ (442) $ 436 $ 3,009 $ (806) $ 2,203 ======= ======= ======= ======= ======= =======
Net interest earned on a tax equivalent basis increased by $436,000 during the third quarter of 2000 compared to the third quarter of 1999. For the nine-month period ended September 30, 2000, net interest income increased by $2,203,000 versus the same period of 1999. Average earning assets increased by $140,589,000 during the first nine months of 2000. The average earning base was $543,794,000 compared to $403,205,000 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: (Dollars amounts in thousands)
QUARTER ENDED NINE MONTHS ENDED 09-30-00 09-30-99 09-30-00 09-30-99 ------------------------------------- ------------------------------------- Amount Percent Amount Percent Amount Percent Amount Percent ------ ------- ------ ------- ------ ------- ------ -------- Salaries and benefits $ 1,976 17.34% $ 1,581 18.48% $ 5,938 17.76% $ 4,548 18.44% Other non-interest expense 1,667 14.63 1,114 13.02 4,856 14.53 3,387 13.73 Occupancy - net 339 2.98 294 3.43 1,025 3.07 908 3.69 ------- ----- ------- ----- ------- ----- ------- ----- Total Operating Expenses $ 3,982 34.95% $ 2,989 34.93% $11,819 35.36% $ 8,843 35.86% ======= ===== ======= ===== ======= ===== ======= =====
For the nine-month period ended September 30, 2000, operating expenses increased by approximately $2,976,000 over the 1999 period. The increase was a result of increases in salary and benefits totaling $1,390,000, occupancy expense totaling $117,000 and an increase in other non-interest expense of $1,469,000. The increases are a direct result of the branch acquisition on October 29, 1999 and the related staffing and acquisition costs. 12 13 WESTBANK CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) CAPITAL RATIOS
09-30-00 09-30-99 -------- -------- Ratio of "Tier 1" leverage capital to total assets at end of period 6.20% 9.70%
Regulatory risk-based capital requirements take into account the different risk categories of banking organizations by assigning risk weight 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 September 30, 2000: Tier 1 Capital (minimum required 4.00%) 9.46 % Tier 2 Capital (minimum required 8.00%) 11.81 % 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, 2000. (Dollar amounts in thousands)
Three Over Three Over One Months Months to Year to Over or Less One Year Five Years Five Years Total --------- --------- --------- --------- --------- Earning Assets $ 67,401 $ 66,843 $ 170,444 $ 245,698 $ 550,386 Interest-Bearing Liabilities 121,584 170,123 179,895 17,667 489,269 --------- --------- --------- --------- --------- Interest Rate Sensitivity Gap $ (54,183) $(103,280) $ (9,451) $ 228,031 $ 61,117 --------- --------- --------- --------- --------- Cumulative Interest Rate Sensitivity Gap $ (54,183) $(157,463) $(166,914) $ 61,117 Interest Rate Sensitivity Gap Ratio (9.84)% (18.77)% (1.72)% 41.44% Cumulative Interest Rate Sensitivity Gap Ratio (9.84)% (28.61)% (30.33)% 11.11%
13 14 WESTBANK CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) LIQUIDITY Liquidity management requires close scrutiny of the mix and maturity of deposits and borrowings and short-term investments. Cash and due from banks, federal funds sold, investment securities and mortgage-backed securities, as compared to deposits, are used by Westbank to compute its liquidity on a daily basis as adjusted for regulatory purposes. In addition, Westbank is subject to Regulation D of the Federal Reserve Bank (FRB), which requires depository institutions to maintain reserve balances on deposit with the FRB based on certain average depositor balances. Westbank is in compliance with Regulation D. Management of Westbank believes that its current liquidity is sufficient to meet current and anticipated funding needs. PROVISION AND ALLOWANCE FOR LOAN LOSSES (Dollar amounts in thousands)
QUARTER ENDED NINE MONTHS ENDED 09-30-00 09-30-99 09-30-00 09-30-99 ------ ------ ------ ------ Balance at beginning of period $3,896 $2721 $3,908 $2,665 Provision charged to expense 13 153 77 ------ ------ ------ ------ 3,909 2,721 4,061 2,742 ------ ------ ------ ------ Charge-offs: Loans secured by real estate 25 41 163 128 Commercial and industrial loans 410 441 Consumer loans 29 25 53 65 ------ ------ ------ ------ 464 66 657 193 ------ ------ ------ ------ Recoveries: Loans secured by real estate 9 4 31 90 Commercial and industrial loans 1 10 15 Consumer loans 5 3 15 8 ------ ------ ------ ------ 15 7 56 113 ------ ------ ------ ------ Net charge-offs (recoveries) 449 59 601 80 ------ ------ ------ ------ Balance at end of period $3,460 $2,662 $3,460 $2,662 ====== ====== ====== ====== Net charge-offs to: Average loans 0.10% 0.02% 0.13% 0.02% Loans at end of period 0.10% 0.02% 0.13% 0.02% Allowance for loan losses 12.98% 2.21% 17.37% 3.01% Allowance for loan losses as a percentage of: Average loans 0.77% 0.77% 0.78% 0.81% Loans at end of period 0.77% 0.75% 0.77% 0.75%
The approach the Corporation uses in determining the adequacy of the allowance for loan losses is the combination of a target reserve and a general reserve allocation. Quarterly, based on an internal review of the loan portfolio, the Corporation identifies required reserve allocations targeted to recognized problem loans that, in the opinion of management, have potential loss exposure or questions relative to the depth of the collateral on these same loans. In addition, the Corporation allocates a general reserve against the remainder of the loan portfolio. 14 15 WESTBANK CORPORATION AND SUBSIDIARIES NON-ACCRUAL, PAST DUE AND RESTRUCTURED LOANS (CONTINUED) (Dollar amounts in thousands)
09-30-00 06-30-00 03-31-00 12-31-99 09-30-99 -------- -------- -------- -------- -------- Non-Accrual Loans $1,693 $ 691 $ 996 $2,001 $ 658 ------ ------ ------ ------ ------ Loans contracturally past due 90 days or more and still accruing 364 778 381 438 357 ------ ------ ------ ------ ------ Total non-accrual, past due and restructured loans $2,057 $1,469 $1,377 $2,439 $1,015 ------ ------ ------ ------ ------ Non-accrual, past due and restructured loans as a percentage of total loans .46% .33% .31% .55% .29% ------ ------ ------ ------ ------ Allowance for loan losses as a percentage of non-accrual, past due and restructured loans 168.21% 265.21% 277.41% 160.23% 262.27% ------ ------ ------ ------ ------ Other real estate owned - net $ 605 $ 672 $ 512 $ 442 $ 84 ------ ------ ------ ------ ------ Total non-performing assets $2,662 $2,141 $1,889 $2,881 $1,099 ------ ------ ------ ------ ------ Non-performing assets as a percentage of total assets .45% .36% .33% .50% .24% ------ ------ ------ ------ ------
15 16 WESTBANK CORPORATION AND SUBSIDIARIES QUARTER-TO-DATE AVERAGE BALANCES INTEREST EARNED - INTEREST EXPENSE (Dollar amounts in thousands)
FOR THE QUARTER ENDED FOR THE QUARTER ENDED SEPTEMBER 30, 2000 SEPTEMBER 30, 1999 Balance Interest Rate Balance Interest Rate ---------- --------- ---- ---------- --------- ---- Federal funds sold and temporary investments $ 6,493 $ 101 6.22% $ 2,167 $ 28 5.17% Securities 99,627 1,798 7.22 69,797 1,177 6.74 Loans 450,824 8,986 7.97 347,673 6,749 7.76 ---------- --------- ---- ---------- --------- ---- Total earning assets 556,944 10,885 7.82% 419,637 7,954 7.58% ---------- --------- ---- ---------- --------- ---- Loan loss allowance (4,101) (2,717) All other assets 40,474 23,189 --------- ---------- TOTAL ASSETS $593,317 $440,109 ========= ========== LIABILITIES AND EQUITY Interest-bearing deposits $443,818 $5,293 4.77% $319,023 $3,303 4.14% Borrowed funds 53,862 899 6.68 35,451 394 4.45 ---------- --------- ---- ---------- --------- ---- Total interest-bearing liabilities 497,680 6,192 4.98% 354,474 3,697 4.17% ---------- --------- ---- ---------- --------- ---- Interest rate spread 2.84% 3.41% Demand deposits 60,166 52,457 Other liabilities 3,278 2,063 Shareholders' equity 32,193 31,115 ---------- ---------- TOTAL LIABILITIES AND EQUITY $593,317 $440,109 ========= ========== NET INTEREST INCOME $4,693 $4,257 ========= ========= Interest Earned/Earning Assets 7.82% 7.58% Interest Expense/Earning Assets 4.45 3.52 ---- ---- Net Yield on Earning Assets 3.37% 4.06% ---- ---- Deduct Tax Equivalent Adjustment 46 0 --------- --------- NET INTEREST INCOME $4,647 $4,257 ========= =========
16 17 WESTBANK CORPORATION AND SUBSIDIARIES YEAR-TO-DATE AVERAGE BALANCES INTEREST EARNED - INTEREST EXPENSE (Dollar amounts in thousands)
NINE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, 2000 SEPTEMBER 30, 1999 Balance Interest Rate Balance Interest Rate ---------- ---------- ---- ---------- ---------- ---- Federal funds sold and temporary investments $ 4,485 $ 197 5.86% $ 2,971 $ 101 4.53% Securities 94,014 5,051 7.16 71,479 3,567 6.65 Loans 445,295 26,554 7.95 328,755 19,282 7.82 ---------- ---------- ---- ---------- ---------- ---- Total earning assets 543,794 $31,802 7.80% 403,205 $22,950 7.59% ---------- ---------- ---- ---------- ---------- ---- Loan loss allowance (4,027) (2,715) All other assets 39,841 22,909 ---------- ---------- TOTAL ASSETS $579,608 $423,399 ========== ========== LIABILITIES AND EQUITY Interest-bearing deposits $427,500 $14,300 4.46% $310,806 $9,613 4.12% Borrowed funds 58,338 2,852 6.52 28,446 890 4.17 ---------- ---------- ---- ---------- ---------- ---- Total interest-bearing liabilities 485,838 $17,152 4.71 339,252 $10,503 4.13 ---------- ---------- ---- ---------- ---------- ---- Interest rate spread 3.09% 3.46% Demand deposits 59,339 51,237 Other liabilities 2,913 1,873 Shareholders' equity 31,518 31,037 ---------- ---------- TOTAL LIABILITIES AND EQUITY $579,608 $423,399 ========== ========== NET INTEREST INCOME $14,650 $12,447 ========== ========== Interest Earned/Earning Assets 7.80% 7.59% Interest Expense/Earning Assets 4.21 3.47 ---- ---- Net Yield on Earning Assets 3.59% 4.12% ---- ---- Deduct Tax Equivalent Adjustment 114 0 ---------- ---------- NET INTEREST INCOME $14,536 $12,447 ========== ==========
17 18 WESTBANK CORPORATION AND SUBSIDIARIES PART II - OTHER INFORMATION ITEM 1. Legal Proceedings - NONE ITEM 2. Changes in Rights of Securities Holders - NONE ITEM 3. Defaults by Company on its Senior Securities - NONE ITEM 4. Results of Votes on Matters Submitted to a Vote of Security Holders - NONE ITEM 5. Other Events a. Information Concerning Forward-Looking Statements Westbank has made, and may make in the future, forward-looking statements concerning future performance, including, but not limited to, future earnings and events or conditions that may affect such future performance. These forward-looking statements are based upon management's expectations and belief concerning possible future developments and the potential effect of such future developments on Westbank. There is no assurance that such future developments will be in accordance with management's expectations and belief or that the effect of any future developments on Westbank will be those anticipated by Westbank management. All assumptions that form the basis of any forward-looking statements regarding future performance, as well as events or conditions that may affect such future performance, are based on factors that are beyond Westbank's ability to control or predict with precision, including future market conditions and the behavior of other market participants. Among the factors that could cause actual results to differ materially from such forward-looking statements are the following: 1. The status of the economy in general, as well as in Westbank's prime market areas of Western Massachusetts and Northeastern Connecticut; 2. The real estate market in Western Massachusetts and Northeastern Connecticut; 3. Competition in Westbank's prime market area from other banks, especially in light of continued consolidation in the New England banking industry; 4. Any changes in federal and state bank regulatory requirements; 5. Changes in interest rates; and 6. The cost and other effects of unanticipated legal and administrative cases and proceedings, settlements and investigations. While Westbank periodically reassesses material trends and uncertainties affecting the Corporation's performance in connection with its preparation of Management's Discussion and Analysis of Results of Operations and Financial Condition contained in its quarterly and annual reports, Westbank does not intend to review or revise any particular forward-looking statements. b. Registration on Form S-3 None. c. Registration of Form S-8 None 18 19 ITEM 6. Exhibits and Reports on Form 8 a. Exhibits EXHIBIT INDEX
Page No. -------- 3. Articles of Organization, as amended ** (a) Articles of Organization, as amended * (b) By-Laws, as amended * 10. Material Contracts - None 27. Financial Data Schedule To be included
* Incorporated by reference to identically numbered exhibits contained in Registrant's Annual Report on Form 10-K for the year ended December 31, 1988. ** Incorporated by reference to identically numbered exhibits contained in Registrant's Annual Report on Form 10-K for the year ended December 31, 1987. b. Reports on Form 8-K - None 19 20 WESTBANK CORPORATION AND SUBSIDIARIES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Quarterly Report to be signed on its behalf by the undersigned thereunto duly authorized. WESTBANK CORPORATION Date: November 10, 2000 /s/ ------------------------------------ Donald R. Chase President and Chief Executive Officer Date: November 10, 2000 /s/ ------------------------------------ John M. Lilly Treasurer and Chief Financial Officer 20 EX-27 2 y42507ex27.txt EX-27
9 3-MOS DEC-31-2000 SEP-30-2000 15,609 270 896 0 87,491 11,498 11,308 450,231 3,460 558,053 500,328 27,651 1,901 7,000 17,000 0 33,055 0 558,053 26,451 5,040 197 31,688 14,300 17,152 14,536 153 0 11,819 4,303 4,303 0 0 2,817 .67 .66 3.59 1,693 364 0 2,057 3,908 657 56 3,460 3,460 0 0
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