10-K 1 form10-k_11807.txt FORM 10-K FOR YEAR ENDED DECEMBER 31, 2002 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K [mark one] [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002 OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 0-12784 WESTBANK CORPORATION -------------------------------------------------------------------------------- Massachusetts 04-2830731 -------------------------------------------------------------------------------- (State of (I.R.S. Employer Incorporation) Identification Number) 225 Park Avenue, West Springfield, Massachusetts 01090-0149 -------------------------------------------------------------------------------- (Address of principal executive office) (Zip Code) (413) 747-1400 -------------------------------------------------------------------------------- (Telephone Number) Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered ------------------- ------------------- NONE NONE Securities registered pursuant to Section 12(g) of the Act: Common stock, $2.00 Par Value Preferred stock, $5.00 Par Value -------------------------------- (Title of Class) 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 ninety days. Yes [X] No [_] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] Based on the closing sales price on June 28, 2002, the aggregate market value of the voting stock held by non-affiliates of the registrant was $56,493,857. The number of shares outstanding of the registrants common stock, $2.00 par value, was 4,378,206 on March 1, 2003. Portions of the Annual Report to Stockholders for the year ended December 31, 2002 are incorporated by reference into Parts I and II. Portions of the Proxy Statement issued by the Corporation in connection with the Annual Meeting to be held on April 16, 2003 are incorporated by reference into Part III. ================================================================================ WESTBANK CORPORATION INDEX TO FORM 10-K PART I ------ Item 1 Business I-1 Item 2 Properties I-2 Item 3 Legal Proceedings I-2 Item 4 Submission of Matters to a Vote of Security Holders I-2 PART II ------- Item 5 Market for the Corporation's Common Stock and Related Stockholder Matters II-1 Item 6 Selected Financial Data II-1 Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations II-1,2 Item 7-A Quantitative and Qualitative Disclosures About Market Risk II-1,2 Item 8 Financial Statements and Supplementary Data II-2 Item 9 Changes in and Disagreements with Accountant on Accounting and Financial Disclosure II-2 PART III -------- Item 10 Directors and Executive Officers of the Registrant III-1 Item 11 Executive Compensation III-1 Item 12 Security Ownership of Certain Beneficial Owners and Management III-1 Item 13 Certain Relationships and Related Transactions III-1 Item 14 Controls and Procedures III-1 PART IV ------- Item 15 Exhibits, Financial Statement Schedules and Reports on Form 8-K IV-1 Signatures IV-2 Section 302 Certifications IV-3,4 Exhibit Index IV-5 WESTBANK CORPORATION, WEST SPRINGFIELD, MASSACHUSETTS PART I ------ ITEM 1. BUSINESS ------ -------- Reference is made to Page 4 of the Corporation's Annual Report to Stockholders for the year ended December 31, 2002, wherein this subject is covered. Statistical Disclosure by Bank Holding Companies ------------------------------------------------ The following statistical tables and accompanying text provide required financial data about the Corporation and should be read in conjunction with the Consolidated financial statements and related notes, appearing in the 2002 Annual Report to Stockholders and is incorporated herein by reference thereto: Page of Annual Report ------------- I. Distribution of Assets, Liabilities and Stockholders' Equity: Interest Rates and Interest Differential 10 and 11 Rate/Volume Analysis of Interest Margin on Earning Assets 12 II. Investment Portfolio 13, 30, 31 and 41 III. Loan Portfolio 14,31,32 and 41 a. Types of Loans 14 and 31 b. Maturities and Sensitivities to Changes in Interest Rates 9,10 and 14 c. Risk Elements 9, 15, 16, 17, 31 and 32 IV. Summary of Loan Loss Experience 15 and 16 V. Deposits 17, 33 and 41 VI. Return on Equity and Assets 18 VII. Short Term Borrowings 18, 33, 34 and 41 I-1 ITEM 2. PROPERTIES ------ ---------- The Corporation had one principal banking subsidiary, Westbank, which operates seventeen banking offices located in Massachusetts and Connecticut, as follows: ================================== =========== =========== =========== LOCATION OWNED LEASED TOTAL (MASSACHUSETTS) ---------------------------------- ----------- ----------- ----------- Agawam (Feeding Hills) 1 1 ---------------------------------- ----------- ----------- ----------- Chicopee 1 1 ---------------------------------- ----------- ----------- ----------- Chicopee - Supemarket 1 1 ---------------------------------- ----------- ----------- ----------- East Longmeadow 1 1 ---------------------------------- ----------- ----------- ----------- East Longmeadow - Supemarket 1 1 ---------------------------------- ----------- ----------- ----------- Holyoke 1 1 ---------------------------------- ----------- ----------- ----------- Ludlow 1 1 ---------------------------------- ----------- ----------- ----------- Southwick 1 1 ---------------------------------- ----------- ----------- ----------- West Springfield 2 1 3 ---------------------------------- ----------- ----------- ----------- Westfield 1 1 ---------------------------------- ----------- ----------- ----------- Westfield - Supermarket 1 1 ---------------------------------- ----------- ----------- ----------- (CONNECTICUT) ---------------------------------- ----------- ----------- ----------- Putnam 1 1 2 ---------------------------------- ----------- ----------- ----------- Woodstock 1 1 ---------------------------------- ----------- ----------- ----------- Danielson 1 1 ---------------------------------- ----------- ----------- ----------- TOTAL 9 8 17 ================================== =========== =========== =========== All banking offices except the one in Holyoke have drive-in facilities and twenty-four hour automated teller machines. Title to the properties described as owned in the foregoing table is held by Westbank with warranty deed with no material encumbrances. Westbank owns, with no material encumbrances, land adjacent to the main office which is available for parking and, through a subsidiary, also owns one other property adjacent to the main office consisting of land also used as a parking lot. ITEM 3. LEGAL PROCEEDINGS ------ ----------------- Certain litigation is pending against the Corporation and the its subsidiaries. Management, after consultation with legal counsel, does not anticipate that any liability arising out of such litigation will have a material effect on the Corporation's Financial Statements. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ------ --------------------------------------------------- NONE I-2 PART II ------- ITEM 5. MARKET FOR CORPORATION'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS ------ --------------------------------------------------------------------- Reference is made to the inside back cover of the Corporation's Annual Report to Stockholders for the year ended December 31, 2002, wherein this subject is covered. ITEM 6. SELECTED FINANCIAL DATA ------ ----------------------- Reference is made to Page 5 of the Corporation's Annual Report to Stockholders for the year ended December 31, 2002, wherein this subject is covered. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ------ ----------------------------------------------------------- AND RESULTS OF OPERATIONS ------------------------- Reference is made to Pages 6 through 21 of the Corporation's Annual Report to Stockholders for the year ended December 31, 2002, wherein this subject is covered. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ------- ---------------------------------------------------------- Reference is made to Pages 9 and 10 of the Corporation's Annual Report to Stockholders for the year ended December 31, 2002, wherein the subject matter is covered. Information Concerning Forward-Looking Statements; Safe Harbor -------------------------------------------------------------- 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 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 market in western 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. Any changes in federal and state bank regulatory requirements; 5. Changes in interest rates; 6. The cost and other effects of unanticipated legal and administrative cases and proceedings, settlements and investigations; 7. Unanticipated changes in laws and regulations, including federal and state banking laws and regulations, to which the Corporation and its subsidiaries are subject; II-1 PART II (CONTINUED) ------------------- 8. 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 9. 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. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ------ ------------------------------------------- Reference is made to Pages 22 through 45 of the Corporation's Annual Report to Stockholders for the year ended December 31, 2002, wherein this subject is covered. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND ------ --------------------------------------------------------------- FINANCIAL DISCLOSURE -------------------- NONE II-2 PART III -------- ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT ------- -------------------------------------------------- Reference is made to Pages 4 through 9 of the Corporation's Proxy Statement to Stockholders for the 2003 Annual Meeting scheduled for April 16, 2003, wherein this subject is covered. ITEM 11. EXECUTIVE COMPENSATION ------- ---------------------- References is made to Pages 10 through 13 of the Corporation's Proxy Statement to Stockholders for the 2003 Annual Meeting scheduled for April 16, 2003, wherein this subject is covered. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT ------- -------------------------------------------------------------- Reference is made to Pages 8 and 9 of the Corporation's Proxy Statement to Stockholders for the 2003 Annual Meeting scheduled for April 16, 2003, wherein this subject is covered. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ------- ---------------------------------------------- Reference is made to Pages 8 through 16, of the Corporation's Proxy Statement to Stockholders for the 2003 Annual Meeting scheduled for April 16, 2003, wherein this subject is covered under the caption "Beneficial Ownership of Stock and Executive Compensation - Miscellaneous". ITEM 14. CONTROLS AND PROCEDURES ------- ----------------------- Within 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 evaluations. III-1 PART IV ------- ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K ------- --------------------------------------------------------------- The following documents are filed as a part of this report: 1. Financial Statements The following financial statements are incorporated in this Annual Report on Form 10-K by reference to the Corporation's Annual Report to Stockholders for the year ended December 31, 2002: WESTBANK CORPORATION -------------------- Page of Annual Report ------ Independent Auditors' Reports 51 Consolidated Balance Sheets at December 31, 2002 and 2001 23 Consolidated Statements of Income for the years ended December 31, 2002, 2001 and 2000 24 Consolidated Statement of Stockholders' Equity from January 1, 2000, to December 31, 2002 25 Consolidated Statements of Comprehensive Income for the years ended December 31, 2002, 2001 and 2000 25 Consolidated Statements of Cash Flows for the years ended December 31, 2002, 2001 and 2000 26 Notes to Consolidated Financial Statements 27-50 Current reports on Form 8-K Reporting other Events were filed by the Registrant during the year ended December 31, 2002: NONE 2. Financial Statement Schedules Financial Statement Schedules are omitted because they are inapplicable or not required. 3. Exhibits See accompanying Exhibit Index. IV-1 SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. WESTBANK CORPORATION By: /s/ Donald R. Chase ----------------------------------- Donald R. Chase PRESIDENT AND CHIEF EXECUTIVE OFFICER Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons in the capacities and on the dates indicated. SIGNATURE TITLE DATE -------------------------------------------------------------------------------- /s/ Donald R. Chase PRESIDENT AND CHIEF EXECUTIVE ----------------------------- OFFICER AND DIRECTOR 3/19/03 Donald R. Chase /s/ Ernest N. Laflamme, Jr. CHAIRMAN OF THE BOARD ----------------------------- AND DIRECTOR 3/19/03 Ernest N. Laflamme, Jr. /s/ John M. Lilly TREASURER AND CHIEF ----------------------------- FINANCIAL OFFICER 3/19/03 John M. Lilly /s/ Roland O. Archambault ----------------------------- DIRECTOR 3/19/03 Roland O. Archambault /s/ Mark A. Beauregard ----------------------------- DIRECTOR 3/19/03 Mark A. Beauregard /s/ David R. Chamberland ----------------------------- DIRECTOR 3/19/03 David R. Chamberland /s/ G. Wayne McCary ----------------------------- DIRECTOR 3/19/03 G. Wayne McCary /s/ Robert J. Perlak ----------------------------- CORPORATE CLERK AND DIRECTOR 3/19/03 Robert J. Perlak /s/ George R. Sullivan ----------------------------- DIRECTOR 3/19/03 George R. Sullivan /s/ James E. Tremble ----------------------------- DIRECTOR 3/19/03 James E. Tremble IV-2 SECTION 302 CERTIFICATIONS SARBANES-OXLEY ACT OF 2002 I, Donald R. Chase, certify that: 1. I have reviewed this annual report on Form 10-K of Westbank Corporation; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements and other financial information included in this annual report fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining the disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a. designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b. evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and c. presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the board of directors (or persons performing the equivalent function): a. all significant deficiencies in the design or operation of internal controls that could adversely affect the registrant's ability to record, process, summarize and report financial data, and have identified for the registrant's auditors any material weaknesses in internal controls; and b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: 3/19/03 /s/ Donald R. Chase ----------- ------------------------------------ Donald R. Chase President and Chief Executive Officer IV-3 SECTION 302 CERTIFICATIONS SARBANES-OXLEY ACT OF 2002 I, John M. Lilly, certify that: 1. I have reviewed this annual report on Form 10-K of Westbank Corporation; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements and other financial information included in this annual report fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining the disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a. designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b. evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and c. presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the board of directors (or persons performing the equivalent function): a. all significant deficiencies in the design or operation of internal controls that could adversely affect the registrant's ability to record, process, summarize and report financial data, and have identified for the registrant's auditors any material weaknesses in internal controls; and b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: 3/19/03 /s/ John M. Lilly ----------- ------------------------------------ John M. Lilly Treasurer and Chief Financial Officer IV-4 EXHIBIT INDEX Page No. -------- 3. Articles of Organization and By-Laws, as amended ** (a) Articles of Organization, as amended * (b) By-Laws, as amended * 21. Subsidiaries of Registrant TO BE INCLUDED 99.1 Certification of Periodic Report 99.2 Portions of the Corporation's Annual Report to Stockholders for year-end 2002 incorporated by reference into this annual report on Form 10-K --------------- * 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. IV-5