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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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, 2004
Commission file number 0 - 12784
WESTBANK CORPORATION
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-2830731
(State or other jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
225 PARK AVENUE, WEST SPRINGFIELD, MASSACHUSETTS 01090-0149
(Address of principal executive offices) (Zip Code)
(413) 747-1400
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
YES [X] NO [_]
Common stock, par value $2 per share: 4,465,598 shares outstanding as of April
30, 2004.
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WESTBANK CORPORATION AND SUBSIDIARIES
INDEX
PART I - FINANCIAL INFORMATION
Page
----
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of Income 4
Condensed Consolidated Statements of Stockholders' Equity 5
Condensed Consolidated Statements of Comprehensive Income 5
Condensed Consolidated Statements of Cash Flow 6
Notes to Condensed Consolidated Financial Statements 7-9
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10-19
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk 20
ITEM 4. Controls and Procedures 20
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings 21
ITEM 2. Changes in Rights of Securities Holders,
Use of Proceeds and Issuer Purchases of Equity Securities 21
ITEM 3. Defaults by Company on Its Senior Securities 21
ITEM 4. Submission of Matters to a Vote of Security Holders 21
ITEM 5. Other Information 21
ITEM 6. Exhibits and Reports on Form 8-K 21
Signatures 22
2
ITEM 1. FINANCIAL STATEMENTS
WESTBANK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, 2004
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) (Unaudited) December 31, 2003
- --------------------------------------------------------------------------------------------------------
ASSETS
Cash and due from banks:
Non-interest bearing $ 14,095 $ 14,599
Interest bearing 60 40
Federal funds sold 6,501 39
- --------------------------------------------------------------------------------------------------------
Total cash and cash equivalents 20,656 14,678
- --------------------------------------------------------------------------------------------------------
Investment securities available for sale, at fair value 212,485 241,812
Investment securities held to maturity, at amortized cost 43,305 250
(approximate fair value of
$43,481 in 2004 and $262 in 2003)
- --------------------------------------------------------------------------------------------------------
Total securities 255,790 242,062
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Loans 425,373 439,911
Allowance for loan losses 4,294 4,428
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Net loans 421,079 435,483
Premises and equipment, net 6,618 6,749
Accrued interest receivable 3,465 3,180
Other real estate owned - net 705
Intangible assets 9,767 8,837
Bank-owned life insurance 8,993 8,703
Investment in unconsolidated investee 526 526
Other assets 4,284 4,368
- --------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 731,883 $ 724,586
========================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing $ 75,221 $ 76,015
Interest bearing 495,187 460,439
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Total deposits 570,408 536,454
Borrowed funds 91,877 122,204
Accrued interest payable 688 575
Payable to Westbank Capital Trust 1 17,526 17,526
Other liabilities 4,030 2,552
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Total liabilities 684,529 679,311
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Stockholders' Equity:
Common stock - $2 par value
Authorized - 9,000,000 shares
Issued - 4,523,480 shares in 2004 and 2003 9,047 9,047
Additional paid in capital 14,277 14,524
Retained earnings 23,688 22,724
Treasury stock (62,684 shares in 2004
and 114,232 shares in 2003) (1,167) (1,692)
Accumulated other comprehensive income 1,509 672
- --------------------------------------------------------------------------------------------------------
Total Stockholders' Equity 47,354 45,275
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 731,883 $ 724,586
========================================================================================================
See accompanying notes to condensed consolidated financial statements.
3
WESTBANK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
Three months ended March 31, 2004 2003
- ---------------------------------------------------------------------------------------------
Income:
Interest and fees on loans $ 6,189 $ 7,633
Interest and dividend income on securities 2,864 1,669
Interest on federal funds sold 7 62
- ---------------------------------------------------------------------------------------------
Total interest and dividend income 9,060 9,364
Interest expense 3,529 3,848
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Net interest income 5,531 5,516
Provision for loan losses
- ---------------------------------------------------------------------------------------------
Net interest income after
provision for loan losses 5,531 5,516
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Non-interest income:
Gain on sale of securities 62 259
Gain on sale of loans 380
Other non-interest income 874 734
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Total non-interest income 1,316 993
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Non-interest expenses:
Salaries and benefits 2,596 2,370
Other non-interest expense 1,529 1,347
Occupancy - net 461 445
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Total non-interest expense 4,586 4,162
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Income before income taxes 2,261 2,347
Income taxes 676 841
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NET INCOME $ 1,585 $ 1,506
=============================================================================================
Net income per share
- Basic $ 0.36 $ 0.35
- Diluted $ 0.34 $ 0.33
Weighted average shares outstanding
- Basic 4,429,208 4,344,446
- Dilutive Option Shares 274,915 164,512
- ---------------------------------------------------------------------------------------------
- Diluted 4,704,123 4,508,958
=============================================================================================
See accompanying notes to condensed consolidated financial statements.
4
WESTBANK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEAR ENDED DECEMBER 31, 2003 AND THREE MONTHS ENDED MARCH 31, 2004
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
COMMON STOCK ACCUMULATED
----------------------- ADDITIONAL OTHER
NUMBER PAR PAID-IN RETAINED TREASURY COMPREHENSIVE
OF SHARES VALUE CAPITAL EARNINGS STOCK INCOME/(LOSS) TOTAL
- ----------------------------------------------------------------------------------------------------------------------------------
BALANCE - JANUARY 1, 2003 4,367,780 $ 9,047 $ 14,497 $ 18,780 $ (2,091) $ 2,379 $ 42,612
==================================================================================================================================
Net income 6,054 6,054
Cash dividends declared
($.48 per share) (2,110) (2,110)
Shares issued from treasury stock:
Stock option plan 54,850 (278) 744 466
Dividend reinvestment
and stock purchase plan 42,305 105 559 664
Changes in unrealized gain/(loss)
on securities available for sale (1,707) (1,707)
Repurchase of common stock (55,687) (904) (904)
Income tax benefit for exercise of
non-qualified stock options 105 105
Stock option compensation (Note D) 95 95
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BALANCE - DECEMBER 31, 2003 4,409,248 9,047 14,524 22,724 (1,692) 672 45,275
==================================================================================================================================
(UNAUDITED)
Net income 1,585 1,585
Cash dividends declared
($0.14 per share) (621) (621)
Shares issued from treasury stock:
Stock option plan 69,164 (388) 942 554
Dividend reinvestment
and stock purchase plan 8,199 50 112 162
Changes in unrealized gain/(loss)
on securities available for sale 837 837
Repurchase of common stock (25,815) (529) (529)
Income tax benefit for exercise of
non-qualified stock options 88 88
Stock option compensation (Note D) 3 3
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BALANCE - MARCH 31, 2004 4,460,796 $ 9,047 $ 14,277 $ 23,688 $ (1,167) $ 1,509 $ 47,354
==================================================================================================================================
See accompanying notes to condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
(DOLLARS IN THOUSANDS)
Three months ended March 31, 2004 2003
=================================================================================================
Net Income $ 1,585 $ 1,506
- -------------------------------------------------------------------------------------------------
Unrealized gain (loss) on securities available for sale,
net of income tax (benefit) expense of $(294) in 2004
and $259 in 2003 1,131 (503)
Reclassification adjustment for losses
included in net income, net of income tax
benefit of $(148) in 2004 and $(88) in 2003 (294) (171)
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Other Comprehensive Income (Loss) 837 (674)
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COMPREHENSIVE INCOME $ 2,422 $ 832
=================================================================================================
See accompanying notes to condensed consolidated financial statements.
5
WESTBANK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED)
(DOLLAR AMOUNTS IN THOUSANDS)
Three months ended March 31 2004 2003
============================================================================================================
Operating activities:
Net income $ 1,585 $ 1,506
Adjustments to reconcile net income to
net cash provided by operating activities:
Investment accretion (income) expense (66) 28
Depreciation and amortization 202 196
Realized gain on sale of securities (62) (259)
Realized gain on sale of loans (380)
Exercise of non-qualified stock options 88
Changes in assets and liabilities:
(Increase) Decrease in accrued interest receivable (285) 556
Increase in bank-owned life insurance (290) (98)
Decrease (Increase) in other assets 84 (399)
Increase (Decrease) in accrued interest payable on deposits 113 (58)
Increase (Decrease) in other liabilities 548 (563)
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Net cash provided by operating activities 1,537 909
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Investing activities:
Investments and mortgage-backed securities:
Held to maturity:
Purchases (43,077)
Proceeds from sales 19,880 7,208
Proceeds from maturities and principal payments 22 59
Available for sale:
Purchases (60,735) (665)
Proceeds from maturities and principal payments 70,248 29,444
Purchases of premises and equipment (71) (44)
Proceeds from loan sales 18,662
Net increase in loans (3,684) (361)
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Net cash provided by (used in) investing activities 1,245 35,641
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Financing activities:
Net decrease in borrowings (30,327) (4,116)
Net increase (decrease) in deposits 33,954 (25,037)
Treasury stock issued, net 190 29
Dividends paid (621) (531)
- ------------------------------------------------------------------------------------------------------------
Net cash (used in) provided by financing activities 3,196 (29,655)
- ------------------------------------------------------------------------------------------------------------
Increase in cash and cash equivalents 5,978 6,895
Cash and cash equivalents at beginning of period 14,678 47,250
- ------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 20,656 $ 54,145
============================================================================================================
Cash paid:
Interest on deposits and other borrowings $ 3,642 $ 3,906
Income taxes 437 892
Supplemental disclosure of cash flow information:
Transfer of loans to other real estate owned 574
Unrealized gain (loss) on securities available for sale, net of taxes 837 (674)
Increase in additional minimum pension liability 930
See accompanying notes to condensed consolidated financial statements.
6
WESTBANK CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2004 AND 2003
(Unaudited)
NOTE A - GENERAL INFORMATION
Westbank Corporation (hereinafter sometimes referred to as the "Corporation") is
a registered Bank Holding Company organized to facilitate the expansion and
diversification of the business of Westbank (hereinafter sometimes referred to
as "the Bank") into additional financial services related to banking.
Substantially all operating income and net income of the Corporation are
presently accounted for by the Bank.
NOTE B - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements for the
quarters ended March 31, 2004 and 2003 have been prepared in accordance with
accounting principles generally accepted in the United States of America
("generally accepted accounting principles"). Certain information and note
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been omitted, pursuant to the
rules and regulations of the Securities and Exchange Commission for interim
reports. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the three-month period ended March 31, 2004, are
not necessarily indicative of the results that may be expected for the year
ending December 31, 2004. In preparing such financial statements, management is
required to make estimates and assumptions that affect the reported amounts.
Actual results could differ significantly from these estimates.
For further information, please refer to the Consolidated Financial Statements
and footnotes thereto included in the Westbank Corporation's Annual Report on
Form 10-K for the year ended December 31, 2003.
NOTE C - FINANCIAL STATEMENT RECLASSIFICATION
Certain amounts in the December 31, 2003 financial statements have been
reclassified to conform to the March 31, 2004 presentation.
NOTE D - STOCK-BASED COMPENSATION
Prior to January 1, 2003, the Corporation accounted for stock-based employee
compensation under the intrinsic value method consistent with the provisions of
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees", and related Interpretations, as permitted by Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS
No. 123). Effective January 1, 2003, the Corporation adopted the fair value
recognition provisions of SFAS No. 123 prospectively to all employee awards
granted, modified or settled after January 1, 2003. In accordance with this
Statement, the Corporation began expensing the cost of the stock-based employee
compensation for all new employee awards granted.
7
NOTE E - FINANCIAL AND PERFORMANCE LETTERS OF CREDIT
The Corporation has financial and performance letters of credit. Financial
letters of credit require the Corporation to make payment if the customer's
financial condition deteriorates, as defined in the agreements. Performance
letters of credit require the Corporation to make payments if the customer fails
to perform certain non-financial contractual obligations. The Corporation
measures and considers recognition of the fair value of the guarantee obligation
at inception. The Corporation estimates the initial fair value of the letters of
credit based on the fee received from the customer. The fees collected as of
March 31, 2004 were immaterial; therefore, these guarantee obligations are not
reflected in the accompanying financial statements. The maximum potential
undiscounted amount of future payments of letters of credit as of March 31, 2004
are approximately $673,000, of which $30,000 will expire on May 5, 2004,
$450,000 will expire on September 17, 2004, and $193,000 will expire on January
15, 2005. Amounts due under these letters of credit would be reduced by any
proceeds that the Corporation would be able to obtain in liquidating the
collateral for the loans, which varies depending on the customer. The
Corporation has not recorded any contingent liabilities related to these letters
of credit.
NOTE F - PAYABLE TO WESTBANK CAPITAL TRUST 1
The Corporation's adoption of FIN 46(R), "Consolidation of Variable Interest
Entities," as of March 31, 2004 required the Corporation to remove Westbank
Capital Trust 1 from the Corporation's consolidated financial statements and to
record on its balance sheet the portion of ownership of the Preferred Stock
issue in the amount of $526,000 as an "Investment in Unconsolidated Investee"
and the total amount outstanding of $17,526,000 as "Note Payable to Westbank
Capital Trust 1." Interest income and expense were recognized in the financial
statements. The adoption of FIN 46(R) did not have a material impact on the
financial position or results of operations. The banking regulatory agencies
have not issued any guidance that would change the regulatory capital treatment
for the trust preferred securities issued by Westbank Capital Trust 1 based on
the adoption of FIN 46(R). However, as additional interpretations from the
banking regulators related to entities such as Westbank Capital Trust 1 become
available, management will reevaluate the potential impact on its Tier 1 capital
calculation of such interpretations.
NOTE G - DIRECTORS AND EXECUTIVES SUPPLEMENTAL RETIREMENT PLAN
The Westbank Directors and Executives Supplemental Retirement Plan was
established during 2001. Under the Supplemental Retirement Plan, the Bank
provides post-retirement benefits for non-employee Directors who retire from the
Board after reaching age seventy-two (72) and certain executive officers who
retire at age sixty-five (65). The retirement benefit is in the amount of
seventy-five percent (75%) of the Director's or executive's final compensation
at retirement and is payable for the life of the retiree. For the executives,
this amount is reduced by fifty percent (50%) of the primary insurance amount
from Social Security and any employer-provided qualified retirement plans. The
Corporation uses a December 31 measurement date for the plan.
The combined cost for the defined benefit portion of the Directors and
Executives Supplemental Retirement Plan includes the following components:
March 31, 2004 2003
- --------------------------------------------------------------------------
Service cost $ 30,319 $ 26,347
Interest cost 43,032 38,991
Amortization of prior service cost 31,235 31,235
- --------------------------------------------------------------------------
$ 104,586 $ 96,573
==========================================================================
The weighted average assumptions utilized to determine the benefit obligation
and net benefit cost are as follows:
At March 31, 2004 2003
- --------------------------------------------------------------------------
Discount rate 6.30% 6.30%
Rate of increase in compensation levels 5.00 5.00
The Corporation does not expect to contribute to the Directors and Executives
Supplemental Retirement Plan in 2004.
8
NOTE H - RECENT ACCOUNTING PRONOUNCEMENTS
The Securities and Exchange Commission staff recently released Staff Accounting
Bulletin (SAB) 105, "Loan Commitments Accounted for as Derivative Instruments."
SAB 105 requires that a lender should not consider the expected future cash
flows related to loan servicing or include any internally developed intangible
assets, such as customer-related intangible assets, in determining the fair
value of loan commitments accounted for as derivatives. Corporations will be
required to adopt SAB 105 effective for commitments entered into after March 31,
2004. The requirements of SAB 105 will apply to the Corporation's mortgage loan
interest rate lock commitments related to loans held for sale. At March 31,
2004, such commitments with notional amounts of approximately $467,500 were
outstanding, all of which have been pre-sold in the secondary mortgage market.
The effect on the Corporation's financial presentation was immaterial. The
Corporation anticipates that it will adopt SAB 105 at the beginning of its
second quarter and that application of its guidance will have no impact on the
results of operations and financial position.
9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2004 AND 2003
INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS -
The following forward looking statements are made in accordance with the Private
Securities Litigation Reform Act of 1995.
The Corporation has made and may make in the future forward-looking statements
concerning future performance, including but not limited to future earnings and
events or conditions that may affect such future performance. These
forward-looking statements are based upon management's expectations and belief
concerning possible future developments and the potential effect of such future
developments on the Corporation. There is no assurance that such future
developments will be in accordance with management's expectations and belief or
that the effect of any future developments on the Corporation will be those
anticipated by the Corporation's management.
All assumptions that form the basis of any forward-looking statements regarding
future performance, as well as events or conditions which 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 and central Massachusetts, and northeastern
Connecticut;
2. The real estate market in western and central Massachusetts, and
northeastern Connecticut;
3. Competition in the Corporation's primary market area from other banks,
especially in light of continued consolidation in the New England banking
industry;
4. 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;
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.
10
CRITICAL ACCOUNTING POLICIES
The accounting and reporting policies of Westbank Corporation are in accordance
with generally accepted accounting policies in the United States of America and
conform to general practices within the banking industry. In reviewing and
understanding financial information for the Corporation, you are encouraged to
read and understand the significant accounting policies that are used in
preparing the Corporation's consolidated financial statements. These policies
are described in Note 1 to the consolidated financial statements in the
Corporation's Annual Report on Form 10-K. Of these policies, management believes
that the accounting for loans and the allowance for loan losses are the most
critical.
Interest income on loans is recorded on an accrual basis. Loan origination fees,
net of certain direct loan origination costs, are deferred and recognized as
income over the life of the related loan as an adjustment to the loan's yield.
Non-accrual loans are loans on which the accrual of interest ceases when the
collection of principal or interest payments is determined to be doubtful by
management. It is the general policy of the Corporation to discontinue the
accrual of interest when principal or interest payments are delinquent ninety
(90) days, unless the loan principal and interest are determined by management
to be fully collectible. Any unpaid amounts previously accrued on these loans
are reversed from income. Interest received on a loan in non-accrual status is
applied to reduce principal or, if management determines that the principal is
collectible, applied to interest on a cash basis. A loan is returned to accrual
status after the borrower has brought the loan current and has demonstrated
compliance with the loan terms for a sufficient period, and management's doubts
concerning collectibility have been removed.
The Corporation measures impairment of loans in accordance with Statement of
Financial Accounting Standards (SFAS) No. 114, "Accounting for Impairment of a
Loan", as Amended by SFAS No. 118, "Accounting by Creditors for Impairment of a
Loan - Income Recognition and Disclosures" (collectively "SFAS No. 114"). A loan
is recognized as impaired when it is probable that either principal or interest
is not collectible in accordance with the terms of the loan agreement.
Measurement of impairment for commercial loans is generally based on the present
value of expected future cash flows discounted at the loan's effective interest
rate. Commercial real estate loans are generally measured based on the fair
value of the underlying collateral. If the estimated fair value of the impaired
loan is less than the related recorded amount, a specific valuation allowance is
established or a write-down is charged against the allowance for loan losses.
Smaller balance homogenous loans, including residential real estate and consumer
loans, are excluded from the provisions of SFAS No. 114. Generally, income is
recorded only on a cash basis for impaired loans.
The appropriateness of the allowance for loan losses is evaluated quarterly by
management. Factors considered in evaluating the appropriateness of the
allowance include the size and concentration of the portfolio, previous loss
experience, current economic conditions and their effect on borrowers, the
financial condition of individual borrowers and the related performance of
individual loans in relation to contract terms. The provision for loan losses
charged to operating expense is based upon management's judgment of the amount
necessary to maintain the allowance at an appropriate level to absorb losses.
Management also retains an independent loan review consultant to provide advice
on the appropriateness of the loan loss allowance. Loan losses are charged
against the allowance for loan losses when management believes the
collectibility of the principal is unlikely.
At March 31, 2004, the allowance for loan losses totaled $4,294,000,
representing 1.01% of total loans and 360.2% of non-performing loans. Please see
"Provision and Allowance for Loan Losses" for further discussion of the
Corporation's methodology in determining the allowance as of March 31, 2004.
Mortgage loans originated and intended for sale in the secondary market are
carried at the lower of cost or fair value in the aggregate. Net unrealized
losses are recognized through a valuation allowance charged to income.
11
BUSINESS SUMMARY -
Westbank Corporation is a one-bank holding company with its headquarters located
in West Springfield, Massachusetts. Westbank operates eighteen (18) branch
offices and twenty-three (23) ATM's, serving communities in western and central
Massachusetts and northeastern Connecticut. Westbank's affiliates include
Westbank, a commercial bank and trust company, Park West Securities Corporation
and PWB&T, Inc.
Westbank Corporation has a growth-oriented strategy focused on (1) shareholder
value, (2) expanding its banking franchise, (3) unparalleled service and (4)
effective capital management.
The primary source of Westbank's revenue is net interest income from loans and
deposits, and fee income. Balance sheet growth was approximately 1% for the
quarter ended March 31, 2004. The components of growth for the quarter were
federal funds sold, security purchases and deposits. The offset to the growth
was a decline in the loan portfolio and borrowed funds. The rise in interest
rates during the latter part of 2003 and continuing into 2004 resulted in lower
mortgage volume. Contributing to the decline in the loan portfolio, management
sold approximately $18,700,000 of fixed rate residential real estate loans as
part of its interest rate risk management strategy. Deposits grew approximately
6.3% for the quarter, providing management with the funds to pay down
approximately 24.8%, or $30,300,000, of its borrowings.
CHANGES IN FINANCIAL CONDITION -
Total consolidated assets amounted to $731,883,000 on March 31, 2004 compared to
$724,586,000 on December 31, 2003. As of March 31, 2004, and December 31, 2003,
earning assets amounted to, respectively, $688,250,000 or 94.0% of total assets
and $682,578,000 or 94.2% of total assets. Earning assets increased during the
first three months of 2004 as a result of an increase in securities and federal
funds sold, which was offset by a decrease in loans. An increase in deposits and
a decrease in borrowed funds offset the increase in earning assets.
CHANGES IN RESULTS OF OPERATIONS -
For the quarter ended March 31, 2004, net income totaled $1,585,000 compared to
$1,506,000 for the three-month period ended March 31, 2003.
Non-interest income increased by $323,000 during the first quarter of 2004
compared to the first quarter of 2003. During the first quarter of 2004, the
Corporation recognized gains on sale of securities available for sale and loans
totaling $62,000 and $380,000 respectively, while other non-interest income
totaled $874,000. Included in other non-interest income are $110,500 in
write-downs of the Bank's mortgage servicing assets and $180,000 of life
insurance proceeds. Non-interest expense totaled $4,586,000 for the quarter
ended March 31, 2004, an increase of $424,000 versus the first quarter of 2003.
The overall decrease in interest income reflects an increase in volume and a
decline in interest rates on earning assets, while the decrease in interest
expense reflects an increase in interest-bearing liabilities and a decrease in
rates as compared to the first quarter of 2003. Further analysis is provided in
sections on net interest revenue and supporting schedules.
ALLOWANCE FOR LOAN LOSSES AND NON-PERFORMING ASSETS -
A decrease of $134,000 has been reflected in the allowance for loan losses in
the quarter, with $0 being provided compared to $0 in 2003. Loans written off
against the allowance for loan losses after recoveries amounted to net
charge-offs of $134,000 for the first three months of 2004 versus net recoveries
of $71,000 for the same period of 2003.
After giving effect to the actions described above, the allowance for loan
losses at March 31, 2004, totaled $4,294,000 or 1.01% of total loans, as
compared to $4,428,000 or 1.01% at December 31, 2003.
Non-performing past due loans at March 31, 2004, aggregated $1,192,000 or .28%
of total loans compared to $3,308,000 or .75% at December 31, 2003. The
percentage of non-performing past due loans and other real estate owned compared
to total assets on those same dates, respectively, amounted to .26% and .46%.
Management has made every effort to recognize all circumstances known at this
time which could affect the collectibility of loans and has reflected these in
determining the provision for loan losses, the writing down of other real estate
owned and impaired loans to fair value and other loans (watch list) monitored by
management, the charge-off of loans and the balance in the allowance for loan
losses. Management believes that the provision for the quarter, and the balance
in the allowance for loan losses, are adequate based on results provided by the
loan grading system and circumstances known at this time.
12
NET INTEREST INCOME
The Corporation's earning assets include a diverse portfolio of earning
instruments ranging from the Corporation's core business of loan extensions to
interest-bearing securities issued by federal, state and municipal authorities.
These earning assets are financed through a combination of interest-bearing and
interest-free sources.
Net interest income, the most significant component of earnings, is the amount
by which the interest generated by assets exceeds the interest expense on
liabilities. For analytical purposes, the interest earned on tax exempt assets
is adjusted to a "tax equivalent" basis to recognize the income tax savings
which facilitates comparison between taxable and tax exempt assets.
The Corporation analyzes its performance by utilizing the concepts of interest
rate spread and net yield on earning assets. The interest rate spread represents
the difference between the yield on earning assets and interest paid on
interest-bearing liabilities. The net yield on earning assets is the difference
between the rate of interest on earning assets and the effective rate paid on
all funds - interest-bearing liabilities, as well as interest-free sources
(primarily demand deposits and stockholders' equity).
The balances and rates derived for the analysis of net interest income presented
on the following pages reflect the consolidated assets and liabilities of the
Corporation's principal earning subsidiary, Westbank.
(DOLLAR AMOUNTS IN THOUSANDS)
Quarter ended March 31, 2004 2003
- -------------------------------------------------------------------------------
Interest and dividend income $ 9,060 $ 9,364
Interest expense 3,529 3,848
- -------------------------------------------------------------------------------
Net interest income 5,531 5,516
Tax equivalent adjustment 32 23
===============================================================================
NET INTEREST INCOME (TAXABLE EQUIVALENT) $ 5,563 $ 5,539
===============================================================================
INTEREST RATE SPREAD AND NET YIELD ON EARNING ASSETS
(DOLLAR AMOUNTS IN THOUSANDS)
Quarter ended March 31, 2004 2003
- -------------------------------------------------------------------------------
Average Average
Balance Rate Balance Rate
- -------------------------------------------------------------------------------
Earning Assets $677,293 5.37% $623,233 6.02%
- -------------------------------------------------------------------------------
Interest-bearing liabilities 593,181 2.38 542,594 2.84
- -------------------------------------------------------------------------------
Interest rate spread 2.99 3.18
- -------------------------------------------------------------------------------
Interest-free resources used
to fund earning assets 84,112 80,639
- -------------------------------------------------------------------------------
Total Sources of Funds $677,293 2.08 $623,233 2.47
===============================================================================
NET YIELD ON EARNING ASSETS 3.29% 3.55%
===============================================================================
13
QUARTER-TO-DATE AVERAGE BALANCES
INTEREST EARNED - INTEREST EXPENSE
(DOLLAR AMOUNTS IN THOUSANDS)
Three months ended March 31, 2004 2003
- ------------------------------------------------------------------------------------------------------------------------
Balance Interest Rate Balance Interest Rate
- ------------------------------------------------------------------------------------------------------------------------
Federal funds sold and
temporary investments $ 3,791 $ 7 .74% $ 24,786 $ 62 1.00%
Securities (a) 236,484 2,868 4.85 120,608 1,672 5.55
Loans (b) 437,018 6,217 5.69 477,839 7,653 6.41
- ------------------------------------------------------------------------------------------------------------------------
Total earning assets 677,293 $ 9,092 5.37% 623,233 $ 9,387 6.02%
- ------------------------------------------------------------------------------------------------------------------------
Loan loss allowance (4,460) (5,155)
All other assets 43,181 42,836
- ------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 716,014 $ 660,914
========================================================================================================================
LIABILITIES AND EQUITY
Interest bearing deposits $ 472,566 $ 2,528 2.14% $ 471,368 $ 2,965 2.52%
Borrowed funds 120,615 1,001 3.32 71,226 883 4.96
- ------------------------------------------------------------------------------------------------------------------------
Total interest bearing
liabilities 593,181 3,529 2.38 542,594 3,848 2.84
- ------------------------------------------------------------------------------------------------------------------------
Interest rate spread 2.99% 3.18%
Demand deposits 75,169 71,176
Other liabilities 1,933 4,609
Shareholders' equity 45,731 42,535
- ------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND EQUITY $ 716,014 $ 660,914
========================================================================================================================
Net Interest Income
(tax equivalent basis) $ 5,563 $ 5,539
Interest Earned/Earning Assets 5.37% 6.02%
Interest Expense/Earning Assets 2.08 2.47
- ------------------------------------------------------------------------------------------------------------------------
Net Yield on Earning Assets 3.29% 3.55%
Deduct tax equivalent adjustment 32 23
- ------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME $ 5,531 $ 5,516
========================================================================================================================
(a) Tax equivalent basis. Interest income on non-taxable investment securities
and loans includes the effects of the tax equivalent adjustments using the
marginal federal tax rate of 34% in adjusting tax exempt interest income to
a fully taxable basis.
(b) Average loan balances above include non-accrual loans. When a loan is
placed in non-accrual status, interest income is recorded to the extent
actually received in cash or is applied to reduce principal.
14
CHANGES IN NET INTEREST INCOME
(DOLLAR AMOUNTS IN THOUSANDS)
QUARTER ENDED MARCH 31, 2004 OVER
QUARTER ENDED MARCH 31, 2003
- ------------------------------------------------------------------------------
CHANGE DUE
VOLUME TO RATE TOTAL
- ------------------------------------------------------------------------------
Interest Income:
Loans $ (619) $ (817) $ (1,436)
Securities 1,430 (234) 1,196
Federal Funds (42) (13) (55)
- ------------------------------------------------------------------------------
Total Interest Earned 769 (1,064) (295)
Interest Expense:
Interest-bearing deposits 8 (445) (437)
Other borrowed funds 475 (357) 118
- ------------------------------------------------------------------------------
Total Interest Expense 483 (802) (319)
- ------------------------------------------------------------------------------
NET INTEREST INCOME $ 286 $ (262) $ 24
==============================================================================
For the quarter ended March 31, 2004, an increase in average earning assets of
$54,060,000 or 8.67% and a 65-basis-point decrease in average rate of return
resulted in an increase in volume of $769,000 and a decrease in rate of
$1,064,000. An increase in average interest-bearing liabilities of $50,587,000
or 9.32% and a 46-basis-point decrease in average rate of interest paid
contributed to an increase in volume of $483,000 and a decrease in rate of
$802,000. Net interest earned on a tax equivalent basis increased to $5,563,000
for the first quarter of 2004, up $24,000 as compared with the quarter ended
March 31, 2003.
OPERATING EXPENSES
The components of total operating expenses for the periods and their percentage
of gross income are as follows:
(DOLLAR AMOUNTS IN THOUSANDS)
Quarter ended March 31, 2004 2003
- -------------------------------------------------------------------------------
Amount Percent Amount Percent
- -------------------------------------------------------------------------------
Salaries and benefits $2,596 25.02% $2,370 22.88%
Other non-interest expense 1,529 14.74 1,347 13.01
Occupancy - net 461 4.44 445 4.30
- -------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES $4,586 44.20% $4,162 40.19%
===============================================================================
For the three-month period ended March 31, 2004, operating expenses increased by
approximately $424,000 versus the 2003 period. Salaries and benefits increased
by $226,000, while other non-interest expense increased by $182,000 and
occupancy increased by $16,000. The increase is a direct result of general
additions to staff, the overall growth of the Corporation, and additions to
staff and general operating costs related to the opening of the Corporation's
newest office in Webster, Massachusetts.
15
INTEREST RATE SENSITIVITY
The following table sets forth the distribution of the repricing of the
Corporation's earning assets and interest-bearing liabilities as of March 31,
2004, the interest rate sensitivity gap (i.e. interest rate sensitive assets
less interest rate sensitive liabilities), the cumulative interest rate
sensitivity gap, the interest rate sensitivity gap ratio and the cumulative
interest rate sensitivity gap ratio. The table also sets forth the time periods
in which earning assets and interest-bearing liabilities will mature or may
reprice in accordance with their contractual terms. However, the table does not
necessarily indicate the impact of general interest rate movements on the net
interest margin since the repricing of various categories of assets and
liabilities is subject to competitive pressures and the needs of the Banks
customers. In addition, various assets and liabilities indicated as repricing
within the same period may, in fact, reprice at different times within such
period and at different rates.
(DOLLAR AMOUNTS IN THOUSANDS)
THREE OVER THREE OVER ONE
MONTHS MONTHS TO YEAR TO OVER FIVE
OR LESS ONE YEAR FIVE YEARS YEARS TOTAL
- -----------------------------------------------------------------------------------------------------
Earning Assets $ 103,349 $ 53,376 $ 169,319 $ 362,206 $ 688,250
Interest-Bearing
Liabilities 130,912 174,131 281,894 17,653 604,590
- -----------------------------------------------------------------------------------------------------
Interest Rate
Sensitivity Gap $ (27,563) $ (120,755) $ (112,575) $ 344,553 $ 83,660
=====================================================================================================
Cumulative Interest
Rate Sensitivity Gap $ (27,563) $ (148,318) $ (260,893) $ 83,660 $ 83,660
Interest Rate
Sensitivity Gap Ratio (4.00)% (17.55)% (16.36)% 50.06%
Cumulative Interest
Rate Sensitivity Gap Ratio (4.00)% (21.55)% (37.91)% 12.15%
The presentation of a run-off and repricing of savings accounts and NOW accounts
is based on the Corporation's historical experience with $9,741,000 and
$3,422,000, respectively, included in the three-month to one-year category and
the remainder placed in the one- to five-year category of the interest-bearing
liabilities.
Westbank seeks to manage the mix of asset and liability maturities to control
the effect of changes in the general level of interest rates on net interest
income. Except for its effect on the general level of interest rates, inflation
does not have a material impact on Westbank's earnings due to the rate of
variability and short-term maturities of its earning assets.
LIQUIDITY
Liquidity refers to the Corporation's ability to general adequate amounts of
cash to fund loan originations, security purchases, deposit withdrawals, and
fund dividends on the Corporation's common stock and the amount payable to
Westbank Capital Trust 1.
The Corporation's liquidity position is monitored by the Asset/Liability
Committee, based on policies approved by the Board of Directors. The Committee
meets regularly to review and direct the Bank's investment, lending and
deposit-gathering activities.
At March 31, 2004, the Corporation maintained cash balances, short-term
investments and investments available for sale totaling $233,141 million,
representing 31.9% of total quarter-end assets, versus $256,490 million or 35.4%
of total assets at December 31, 2003.
16
The following table summarizes the Corporation's contractual obligations as well
as commitments to fund loans:
(DOLLAR AMOUNTS IN THOUSANDS)
DUE IN DUE IN
DUE IN ONE TO THREE TO DUE AFTER
ONE YEAR THREE YEARS FIVE YEARS FIVE YEARS TOTAL
=======================================================================================================================
Contractual Obligations:
Investment security purchases $ 9,229 $ 9,229
Total borrowings 7,532 $ 28,231 $ 30,000 $ 8,000 73,763
Payable to Westbank Capital Trust 1 17,526 17,526
Annual rental commitments under non-
cancelable operating leases 260 436 230 12 938
- -----------------------------------------------------------------------------------------------------------------------
$ 17,021 $ 28,667 $ 30,230 $ 25,538 $ 101,456
=======================================================================================================================
EXPIRES IN EXPIRES IN
EXPIRES IN ONE TO THREE TO EXPIRES IN
(DOLLAR AMOUNTS IN THOUSANDS) ONE YEAR THREE YEARS FIVE YEARS FIVE YEARS TOTAL
=======================================================================================================================
Commitments:
Commitments to extend credit $ 17,028 $ 17,028
Undisbursed portion of loans in process
and unused portions of lines of credit 29,662 $ 5,379 $ 1,719 $ 19,224 55,984
- -----------------------------------------------------------------------------------------------------------------------
$ 46,690 $ 5,379 $ 1,719 $ 19,224 $ 73,012
=======================================================================================================================
At March 31, 2004, the Corporation had certificates of deposit maturing within
the next 12 months amounting to $193,039,000. Based on historical experience,
the Corporation anticipates that a significant portion of the maturing
certificates of deposit will be renewed with the Corporation.
In addition to cash flow from loan and securities payments and prepayments, as
well as from sales of available for sale securities and mortgage loans, the
Corporation has significant borrowing capacity available to fund liquidity
needs. During the first quarter of 2004, the Corporation decreased its
utilization of borrowings and increased its use of deposits as a source of
funds. The average balance of borrowings for the first quarters of 2004 and 2003
were $109,236,000 and $71,066,000 respectively. The Bank's borrowings to date
have consisted primarily of advances from the Federal Home Loan Bank of Boston,
of which the Bank is a member. Under the terms of the collateral agreement with
the Federal Home Loan Bank, the Bank pledges residential mortgage loans and
mortgage-backed securities, as well as the Bank's stock in the Federal Home Loan
Bank, as collateral for such transactions. The note payable to Westbank Capital
Trust 1 is callable in whole or in part on or after September 30, 2004.
The Corporation has not used any off-balance sheet financing arrangements for
liquidity purposes. Its primary financial instruments with off-balance sheet
risk are limited to loan servicing for others, obligations to fund loans to
customers pursuant to existing commitments and commitments to sell mortgage
loans. Liquidity management requires close scrutiny of the mix and maturity of
deposits, borrowings and short-term investments. Cash and due from banks,
federal funds sold, investment securities and mortgage-backed securities
available for sale, as compared to deposits and borrowings, are used by the
Corporation to compute its liquidity on a daily basis.
The primary source of funds for the payment of dividends by the Corporation is
dividends paid to the Corporation by the Bank. Bank regulatory authorities
generally restrict the amounts available for payment of dividends, if the effect
thereof would cause the capital of the Bank to be reduced below applicable
capital requirements. These restrictions indirectly affect the Corporation's
ability to pay dividends.
Management of the Corporation believes that its current liquidity is sufficient
to meet current and anticipated funding needs.
17
PROVISION AND ALLOWANCE FOR LOAN LOSSES
(DOLLAR AMOUNTS IN THOUSANDS)
Quarter ended March 31, 2004 2003
- ------------------------------------------------------------------------------
Balance at beginning of period $ 4,428 $ 5,111
Provision for loan losses
- ------------------------------------------------------------------------------
4,428 5,111
- ------------------------------------------------------------------------------
Less charge-offs:
Loans secured by real estate 82 4
Commercial and industrial loans 51
Consumer loans 14 40
- ------------------------------------------------------------------------------
147 44
- ------------------------------------------------------------------------------
Add-recoveries:
Loans secured by real estate 100
Commercial and industrial loans 1 13
Consumer loans 12 2
- ------------------------------------------------------------------------------
13 115
- ------------------------------------------------------------------------------
Net charge-offs (recoveries) 134 (71)
- ------------------------------------------------------------------------------
BALANCE AT END OF PERIOD $ 4,294 $ 5,182
==============================================================================
Net charge-offs (recoveries) to:
Average loans .03% (.02%)
Loans at end of period .03% (.01%)
Allowance for loan losses at January 1 3.03% (1.39%)
Allowance for loan losses at March 31 as a
percentage of:
Average loans .98% 1.08%
Loans at end of period 1.01% 1.08%
The approach the Corporation uses in determining the adequacy of the allowance
for loan losses is an exposure method based on the Corporation's loan loss
history, among other factors. Quarterly, based on an internal review of the loan
portfolio, the Corporation identifies required reserve allocations targeted to
recognized problem loans that, in the opinion of management, have potential loss
exposure or uncertainties relative to the depth of the collateral on these same
loans. In addition, the Corporation maintains a formula-based reserve against
the remainder of the loan portfolio, based on the overall mix of the loan
portfolio and the loss history of each loan category. The formula-based reserve
methodology is based on a range of estimated loss percentages based on loan
type. The amount of the recorded reserve above the minimum of the formula range
is based on management's evaluation of relevant qualitative factors (e.g. local
area economic statistics) and the percentage of loan loss reserves to aggregate
loans.
The Corporation measures impairment of loans in accordance with SFAS No. 114,
"Accounting for Impairment of a Loan as Amended by SFAS No. 118, "Accounting by
Creditors for Impairment of a Loan - Income Recognition and Disclosures"
(collectively SFAS No. 114). A loan is recognized as impaired when it is
probable that either principal or interest is not collectible in accordance with
the terms of the loan agreement. Measurement of impairment for commercial loans
is generally based on the present value of expected future cash flows discounted
at the loan's effective interest rate. Commercial real estate loans are
generally measured based on the fair value of the underlying collateral. If the
estimated fair value of the impaired loan is less than the related recorded
amount, a specific valuation allowance is established or a write-down is charged
against the allowance for loan losses. Smaller balance homogenous loans,
including residential real estate and consumer loans, are excluded from the
provisions of SFAS No. 114. Generally, income is recorded only on a cash basis
for impaired loans.
The formula reserve allocation is calculated by applying loss factors to
outstanding loans by category. Loss factors are based on historical loss
experience.
18
The general reserve allocation incorporates general business and economic
conditions, credit quality trends, loan concentrations, industry conditions
within portfolio segments and overall delinquency levels.
The allowance for loan losses is increased by provisions charged against current
earnings. Loan losses are charged against the allowance when management believes
that the collectibility of the loan principal is unlikely. Recoveries on loans
previously charged off are credited to the allowance. Management believes that
the allowance for loan losses is appropriate. While management uses available
information to assess possible losses on loans, future adjustments to the
allowance may be necessary based on changes in non-performing loans, changes in
economic conditions or for other reasons. Any future adjustments to the
allowance would be recognized in the period in which they were determined to be
necessary. In addition, various regulatory agencies periodically review the
Corporation's allowance for loan losses as an integral part of their examination
process. Such agencies may require the Corporation to recognize adjustments to
the allowance, based on judgements different from those of management.
Management also retains an independent loan review consultant to provide advice
on the appropriateness of the loan loss allowance.
For the quarters ended March 31, 2004 and 2003, the Bank did not make any
additions to the allowances for loan
losses. For the quarters ended March 31, 2004 and 2003, recoveries totaled
$13,000 and $115,000, and charge-offs totaled $147,000 and $44,000 respectively.
NON-ACCRUAL, PAST DUE AND NON-PERFORMING LOANS
(DOLLAR AMOUNTS IN THOUSANDS)
03-31-04 12-31-03 09-30-03 06-30-03 03-31-03
=========================================================================================================
Non-accrual loans $ 997 $ 3,111 $ 2,182 $ 1,116 $ 1,052
- ---------------------------------------------------------------------------------------------------------
Loans contractually past due 90 days
or more still accruing 195 197 1,335 346 373
- ---------------------------------------------------------------------------------------------------------
Total non-accrual and past due loans 1,192 3,308 3,517 1,462 1,425
- ---------------------------------------------------------------------------------------------------------
Non-accrual and past due loans as a
percentage of total loans 0.28% 0.75% 0.78% 0.32% 0.30%
- ---------------------------------------------------------------------------------------------------------
Allowance for loan losses as a
percentage of non-accrual and
past due loans 360.23% 133.86% 134.03% 350.34% 363.90%
- ---------------------------------------------------------------------------------------------------------
Other real estate owned - net 705
- ---------------------------------------------------------------------------------------------------------
Total non-performing assets $ 1,897 $ 3,308 $ 3,517 $ 1,462 $ 1,425
Non-performing assets as a
percentage of total assets 0.26% 0.46% 0.54% 0.23% 0.22%
- ---------------------------------------------------------------------------------------------------------
19
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in the Corporation's assessment of its
sensitivity to market risk since its presentation in the 2003 Annual Report
filed with the Securities and Exchange Commission.
ITEM 4. 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.
20
PART II - OTHER INFORMATION
ITEM 1. 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 2. Changes in Rights of Securities Holders, Use of Proceeds and Issuer
Purchases of Equity Securities
Share Repurchase Plan - During the fourth quarter of 2003, the Board of
Directors approved a new stock repurchase program of up to 5% of the
Corporation's stock. The value of the 5% stock of the Corporation at
the time of the announcement was approximately $3,800,000. The
following table summarizes repurchases of Westbank Corporation's stock
for the quarter ended March 31, 2004.
Maximum
Total Number of Shares Number of Shares
Average Purchased as Part of that May Yet Be
Total Number of Price Paid Publicly Announced Purchased Under the
Period Shares Purchased Per Share Plans or Programs Plans or Programs
------ ---------------- --------- ----------------- -----------------
January 2004 15,315 $ 18.98 4,370 213,534
February 2004 5,975 22.54 5,975 207,559
March 2004 4,525 23.07 4,525 203,034
Total 25,815 $ 20.52 14,870 203,034
On January 12, 2004, under the terms of the 1996 Incentive Stock Option
Plan, the Corporation purchased from officers 10,945 shares of its
common stock at an average stock option price of $18.56 per share in
exchange for 26,250 shares at an average stock option price of $7.74
per share.
ITEM 3. Defaults by Company on its Senior Securities - NONE
ITEM 4. Submission of Matters to a Vote of Security Holders - NONE
ITEM 5. Other Information - NONE
ITEM 6. Exhibits and Reports on Form 8-K
a. Exhibits
3. Articles of Organization and By-Laws, as amended *
(a) Articles of Organization, as amended *
(b) By-Laws, as amended *
31.1 Certification of Chief Executive Officer, pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Certification of Chief Financial Officer, pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certification of Chief Executive Officer, pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
32.2 Certification of Chief Financial Officer, pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
b. Reports on Form 8-K - None
* Incorporated by reference to identically numbered exhibits contained in
Registrant's Annual Report on Form 10-K for the year ended December 31,
1988.
21
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 5, 2004 /s/ Donald R. Chase
--------------------------------------
Donald R. Chase
President and Chief Executive Officer
Date: May 5, 2004 /s/ John M. Lilly
--------------------------------------
John M. Lilly
Treasurer and Chief Financial Officer
22