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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
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Massachusetts 04-2830731
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(State of (I.R.S. Employer
Incorporation) Identification Number)
225 Park Avenue, West Springfield, Massachusetts 01090-0149
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(Address of principal executive office) (Zip Code)
(413) 747-1400
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(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.
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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
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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
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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
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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
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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
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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
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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
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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
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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
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/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.
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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