UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended September 30, 1995
Commission File Number: 1-9383
WESTAMERICA BANCORPORATION
(Exact Name of Registrant as Specified in its Charter)
CALIFORNIA
(State or other jurisdiction of incorporation or organization)
94-2156203
(I.R.S. Employer Identification No.)
1108 Fifth Avenue, San Rafael, California 94901
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code (415) 257-8000
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 [ ]
Indicate the number of shares outstanding of each of the
registrant classes of common stock, as of the latest practicable
date:
Title of Class
Common Stock, No Par Value
Shares outstanding as of November 7, 1995 9,829,718
WESTAMERICA BANCORPORATION
CONSOLIDATED BALANCE SHEETS
- ---------------------------
(Unaudited)
<TABLE>
<CAPTION>
(in thousands) September 30, December 31,
1995 1994 * 1994 *
-------- -------- --------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents $168,229 $185,389 $180,957
Money market assets 250 250 250
Investment securities available for sale 252,497 188,335 193,096
Investment securities held to maturity 583,502 659,807 633,550
Market values of:
$583,596 at September 30, 1995
$640,780 at September 30, 1994
$607,232 at December 31, 1994
Loans, net of reserve for loan losses of: 1,334,546 1,340,982 1,353,404
$33,097 at September 30, 1995
$32,333 at September 30, 1994
$32,450 at December 31, 1994
Other real estate owned 7,595 11,080 8,023
Premises and equipment, net 26,154 29,607 29,332
Interest receivable and other assets 55,903 55,152 58,840
---------- ---------- ----------
TOTAL ASSETS $2,428,676 $2,470,602 $2,457,452
========== ========== ==========
LIABILITIES
Deposits:
Non-interest bearing $467,402 $454,596 472,278
Interest bearing:
Transaction 337,056 335,375 357,681
Savings 721,981 839,026 784,933
Time 478,943 457,035 456,776
---------- ---------- ----------
Total deposits 2,005,382 2,086,032 2,071,668
Funds purchased 168,613 140,143 135,426
Liability for interest, taxes and
other expenses 16,386 15,968 20,173
Notes and mortgages payable 20,000 27,517 25,524
---------- ---------- ----------
Total liabilities 2,210,381 2,269,660 2,252,791
Authorized - 50,000 shares
Common stock issued and outstanding: 78,975 77,561 77,515
9,842 at September 30, 1995
9,919 at September 30, 1994
9,901 at December 31, 1994
Capital surplus 16,114 16,114 16,114
Unrealized gain (loss) on securities
available for sale 250 (1,281) (2,270)
Retained earnings 122,956 108,548 113,302
---------- ---------- ----------
Total shareholders' equity 218,295 200,942 204,661
---------- ---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $2,428,676 $2,470,602 $2,457,452
========== ========== ==========
<FN>
* Restated on an historical basis to reflect the January 31,
1995 acquisition of PV Financial, the June 6, 1995 acquisition
of CapitolBank Sacramento and the July 17, 1995 acquisition of
North Bay Bancorp, all on a pooling-of-interests basis.
</TABLE>
<TABLE>
WESTAMERICA BANCORPORATION
CONSOLIDATED STATEMENTS OF INCOME
- ---------------------------------
(Unaudited)
<CAPTION>
(in thousands, except when indicated) Three months ended Nine months ended
September 30, September 30,
1995 1994 * 1995 1994 *
------- ------- ------- -------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans, including fees $31,926 $30,402 $96,507 $88,618
Money market assets and funds sold 19 400 276 784
Investment securities available for sale 3,308 2,571 8,621 8,210
Investment securities held to maturity 8,143 8,894 25,313 25,180
------- ------- ------- -------
Total interest income 43,396 42,267 130,717 122,792
INTEREST EXPENSE
Transaction deposits 936 915 2,740 2,727
Savings deposits 5,061 5,336 15,612 14,657
Time deposits 6,399 4,533 17,597 13,550
Funds purchased 2,264 1,382 6,394 3,669
Long-term debt 372 604 1,373 2,061
------- ------- ------- -------
Total interest expense 15,032 12,770 43,716 36,664
------- ------- ------- -------
NET INTEREST INCOME 28,364 29,497 87,001 86,128
Provision for loan losses 1,150 1,597 4,320 5,673
------- ------- ------- -------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 27,214 27,900 82,681 80,455
NON-INTEREST INCOME
Service charges on deposit accounts 3,156 3,232 9,528 9,753
Merchant credit card 669 575 1,767 1,768
Mortgage banking 352 467 1,093 3,719
Brokerage commissions 174 144 472 515
Trust fees 178 184 494 548
Net investment securities gain (loss) 19 (41) 19 500
Other 989 1,057 2,717 3,495
------- ------- ------- -------
Total non-interest income 5,537 5,618 16,090 20,298
------- ------- ------- -------
NON-INTEREST EXPENSE
Salaries and related benefits 9,930 10,952 31,642 34,303
Occupancy 2,797 2,694 8,005 7,759
Equipment 1,877 1,567 4,680 4,524
Professional fees 914 839 3,597 2,493
Data processing 1,128 1,173 3,213 3,381
Other real estate owned and
property held for sale 159 271 604 274
Other 3,581 5,546 14,779 17,657
------- ------- ------- -------
Total non-interest expense 20,386 23,042 66,520 70,391
------- ------- ------- -------
INCOME BEFORE INCOME TAXES 12,365 10,476 32,251 30,362
Provision for income taxes 3,977 3,232 9,775 9,794
------- ------- ------- -------
NET INCOME $8,388 $7,244 $22,476 $20,568
======= ======= ======= =======
Average shares outstanding 9,864 9,918 9,893 9,914
PER SHARE DATA
Earnings per share $0.85 $0.73 $2.27 $2.07
Dividends declared 0.20 0.17 0.57 0.47
<FN>
* Restated on an historical basis to reflect the January 31,
1995 acquisition of PV Financial, the June 6, 1995 acquisition
of CapitolBank Sacramento and the July 17, 1995 acquisition of
North Bay Bancorp, all on a pooling-of-interests basis.
</TABLE>
WESTAMERICA BANCORPORATION
STATEMENTS OF CASH FLOWS
- ------------------------
(unaudited)
For the nine months ended
(in thousands) September 30, 1995
1995 1994 *
OPERATING ACTIVITIES ------- -------
Net income $22,476 $20,568
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 3,914 3,866
Loan loss provision 4,320 5,673
Amortization of deferred net loan fees (1,419) (752)
Increase in interest income receivable (1,253) (659)
(Increase) decrease in other assets 437 (5,531)
Decrease in income taxes payable (1,224) (66)
Increase in interest expense payable 150 818
(Decrease) increase in other liabilities (762) 441
(Gain) loss on sales of investment
securities (19) (500)
Loss on sales/writedown of equipment 1,442 77
Originations of loans for resale (5,490) (127,847)
Proceeds from sale of loans originated
for resale 7,161 153,222
Gain on sale of property acquired in
satisfaction of debt (192) (523)
Write down on property acquired in
satisfaction of debt 401 436
Maturities/sales of trading securities - 10
------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 29,942 49,233
INVESTING ACTIVITIES
Net repayments (disbursements) of loans 14,286 (5,453)
Purchases of investment securities
available for sale (88,711) (89,981)
Purchases of investment securities
held to maturity (35,738) (191,381)
Purchases of property, plant and equipment (2,224) (2,063)
Proceeds from maturity of securities
available for sale 51,154 42,063
Proceeds from maturity of securities
held to maturity 62,658 128,897
Proceeds from sale of securities
available for sale 4,310 53,615
Proceeds from sale of securities
held to maturity 1,316 -
Proceeds from sale of property,
plant and equipment 46 -
Proceeds from property acquired in
satisfaction of debt 2,861 -
Deletions (additions) of property acquired
in satisfaction of debt (2,642) 5,966
------- -------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES 7,316 (58,337)
WESTAMERICA BANCORPORATION
STATEMENTS OF CASH FLOWS
CONTINUED
- ------------------------
(unaudited)
For the nine months ended
(in thousands) September 30, 1995
1995 1994 *
------- -------
FINANCING ACTIVITIES
Net decrease in deposits (66,286) (23,687)
Net increase in fed funds purchased 33,187 63,845
Principal payments on notes and mortgages (5,524) (8,835)
Issuance of shares of common stock 3,409 1,026
Cash in lieu of fractional shares (32) -
Retirement of stock (9,218) (1,415)
Dividends paid (5,522) (4,192)
------- -------
NET CASH (USED IN) PROVIDED BY
FINANCING ACTIVITIES (49,986) 26,742
------- -------
NET (DECREASE) INCREASE IN CASH
AND CASH EQUIVALENTS (12,728) 17,638
Cash and cash equivalents at
beginning of period 180,957 167,751
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $168,229 $185,389
======== ========
Supplemental disclosure of non-cash activities
activities:
Loans transferred to other real
estate owned 2,642 3,391
Unrealized gain (loss) on securities
available for sale 2,520 (4,016)
Supplemental disclosure of cash flow
activity:
Interest paid for the period 43,754 35,101
Income tax payments for the period 10,261 10,029
* Restated on an historical basis to reflect the January 31,
1995 acquisition of PV Financial, the June 6, 1995 acquisition
of CapitolBank Sacramento and the July 17, 1995 acquisition
of North Bay Bancorp, all on a pooling-of-interests basis.
WESTAMERICA BANCORPORATION
==========================
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
- ---------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- ---------------------------------------------
Westamerica Bancorporation, (the "Company"), parent company of
Westamerica Bank, Napa Valley Bank, Bank of Lake County and
Community Banker Services Corporation, reported third quarter
1995 net income of $8.4 million or $.85 per share. On a year
to-date basis, the Company reported net income of $22.5 million,
or $2.27 per share. This record level of earnings represents
increases of 16 percent and 9 percent, respectively, from third
quarter 1994 and September 1994 year-to-date. All financial data
has been restated on an historical basis, following the
pooling-of interests method of accounting, to reflect the
January 31, 1995 acquisition of PV Financial, the June 6, 1995
acquisition of CapitolBank Sacramento and the July 17, 1995
acquisition of North Bay Bancorp.
Acquisitions
- ------------
On January 31, 1995, the Company completed the acquisition of PV
Financial, parent company of Pacific Valley National Bank, on a
pooling-of-interests basis and, accordingly, the Company's
historical consolidated financial statements were restated. The
Company issued approximately 1,180,000 shares in exchange for
all the outstanding shares of PV Financial.
On June 6, 1995, the Company completed the acquisition of
CapitolBank Sacramento, on a pooling-of-interests basis and,
accordingly, the Company's historical consolidated financial
statements were restated. The Company issued approximately
370,000 shares in exchange for all the outstanding shares of
CapitolBank.
On July 17, 1995, the Company completed the acquisition of North
Bay Bancorp, parent company of Novato National Bank, on a
pooling-of-interests basis and, accordingly, the Company's
historical consolidated financial statements were restated. The
Company issued approximately 340,000 shares in exchange for all
the outstanding shares of North Bay Bancorp.
The following summarizes the separate results of the combined
entities for the period shown prior to the combination:
<TABLE>
(in thousands, except per share data) Restated
<CAPTION>
Westamerica PV North Bay Combined
Bancorporation Financial CapitolBank Bancorp Results
------------- --------- ----------- --------- --------
<S> <C> <C> <C> <C> <C>
Quarter ended 9/30/94:
Net interest income $23,424 $2,826 $2,039 $1,208 $29,497
Net income 6,285 640 219 100 7,244
Earnings per share 0.78 0.29 0.05 0.09 0.73
For the nine months ended 9/30/94:
Net interest income $69,588 $7,525 $5,632 $3,383 $86,128
Net income 18,304 1,701 281 282 20,568
Earnings per share 2.27 0.78 0.07 0.26 2.07
At September 30, 1994:
Total assets $2,052,084 $172,989 $137,969 $107,560 $2,470,602
Total shareholders' equity 163,023 18,836 9,272 9,811 200,942
At December 31, 1994
Total assets $2,030,235 $179,391 $139,228 $108,598 $2,457,452
Total shareholders' equity 166,205 19,419 9,310 9,727 204,661
</TABLE>
Components of Net Income
- ------------------------
Following is a summary of the components of net income for the
periods indicated:
For the three For the nine
months ended months ended
September 30, September 30,
(in millions) ------------------- ----------------
1995 1994 1995 1994
---- ---- ---- ----
Net interest income * $30.0 $31.0 $91.8 $90.0
Provision for loan losses (1.2) (1.6) (4.3) (5.7)
Non-interest income 5.5 5.6 16.1 20.3
Non-interest expense (20.4) (23.0) (66.5) (70.4)
Provision for income taxes (5.5) (4.8) (14.6) (13.6)
---- ---- ---- ----
Net income $8.4 $7.2 $22.5 $20.6
==== ==== ==== ====
* Fully taxable equivalent basis (FTE)
Components of Net Income as a Percent of Average Earning Assets.
The components of net income (annualized) expressed as a percent
of average earning assets are summarized in the following table
for the periods indicated:
For the three For the nine
months ended months ended
September 30, September 30,
------------------- ----------------
1995 1994 1995 1994
---- ---- ---- ----
Net interest income * 5.44% 5.49% 5.59% 5.40%
Provision for loan losses -0.21% -0.28% -0.28% -0.31%
Non-interest income 1.00% 0.99% 0.98% 1.22%
Non-interest expense -3.69% -4.08% -4.03% -4.25%
Provision for income taxes -1.02% -0.84% -0.89% -0.83%
----- ----- ----- -----
Net income 1.52% 1.28% 1.37% 1.23%
===== ===== ===== =====
* Fully taxable equivalent
Net income (annualized) as
as a percent of average
total assets 1.38% 1.17% 1.25% 1.12%
Analysis of Net Interest Income and Margin
- ------------------------------------------
The Company continually manages its interest-earning assets and
interest-bearing liabilities adapting to changes in market
rates. During the third quarter of 1995, the adverse effect of a
decrease in the average balance of low-cost deposits and the
higher level of interest rates paid on interest-bearing
liabilities from the third quarter of 1994, was partially offset
by increased yields on interest-earning assets. During the first
nine months of 1995, increased yields on interest-earning assets
from the same period in 1994 more than offset the negative
effect of a decrease in the average balance of low-cost deposits
and the higher level of interest rates paid on interest-bearing
liabilities. As a result, net interest income (FTE) in 1995 was
lower in the third quarter of 1995 than the comparable period in
1994 and higher than 1994 for the first nine months of 1995.
These variances are summarized as follows for the periods
indicated:
Net Interest Income (FTE)
For the three For the nine
months ended months ended
(in millions) September 30, September 30,
------------------- ----------------
1995 1994 1995 1994
---- ---- ---- ----
Interest income $43.3 $42.3 $130.7 $122.8
Interest expense (15.0) (12.8) (43.7) (36.6)
FTE adjustment 1.7 1.5 4.8 3.8
----- ----- ----- -----
Net interest income (FTE) $30.0 $31.0 $91.8 $90.0
===== ===== ===== =====
Average earning assets $2,190 $2,242 $2,194 $2,227
Net interest margin 5.44% 5.49% 5.59% 5.40%
In the third quarter of 1995, net interest income (FTE)
decreased $1.0 million or 3 percent from the third quarter of
1994 to $30.0 million. A $1.0 million increase in interest
income, mostly due to the increase in market rates experienced
in 1995, was offset by an increase in interest expense,
principally due to a decrease in the average balances of
low-cost deposits combined with higher rates paid. Completing
the quarter-to-quarter variances, the FTE adjustment increased
$200,000 from the third quarter of 1994, mostly due to a $23.2
million increase in the average balance of tax-exempt investment
securities.
Compared to the first nine months of 1994, net interest income
increased $1.8 million or 2 percent as a result of a $7.9
million increase in interest income partially offset by a $7.1
million increase in interest expense. The FTE adjustment
increased $1.0 million from the first nine months of 1994. These
variances reflect the same rate and volume trends affecting the
quarter-to-quarter variances described above.
Amortized loan fees, which are included in interest and fee
income on loans, were $542,000 lower during the third quarter of
1995 than 1994 and $745,000 lower in the first nine months of
1995 than in the same period in 1994.
Net Interest Margin (FTE)
For the three For the nine
months ended months ended
September 30, September 30,
------------------- ----------------
1995 1994 1995 1994
---- ---- ---- ----
Yield on interest
earning assets 8.16% 7.75% 8.26% 7.60%
Cost of interest-bearing
liabilities 3.46% 2.80% 3.37% 2.71%
----- ----- ----- -----
Net interest spread 4.70% 4.95% 4.89% 4.89%
Impact of non-interest
bearing funds 0.74% 0.54% 0.70% 0.51%
----- ----- ----- -----
Net interest margin 5.44% 5.49% 5.59% 5.40%
===== ===== ===== =====
The average yield on earning assets for the three-month period
ended September 30, 1995 was 41 basis points higher than the
same period in 1994. The effect of this change, combined with a
favorable impact of non-interest bearing funds, was offset by
the increased costs of interest-bearing liabilities which were,
for the three-month period ended September 30, 1995, 66 basis
points higher than the comparable period in 1994.
For the first nine months of 1995, the yield on earning assets
was 66 basis points higher that the first nine months in 1994.
This positive variance, added to a more favorable impact of
non-interest bearing funds, more than offset the adverse effect
of an increase of 66 basis points in the cost of
interest-bearing liabilities.
Summary of Average Balances, Yields/Rates and Interest
Differential
In 1995, higher market rates and a higher yielding asset mix
through increases in the average balance of loans for the third
quarter and the first nine months of 1995 compared with
comparable periods in 1994, resulted in increases in the average
yield on earning assets for the three and nine months ended
September 30, 1995 of 41 and 66 basis points, respectively, from
the same periods in 1994. Partially offsetting this favorable
trend, the average balances of low-cost deposits for the third
quarter of 1995 decreased $111 million from the third quarter of
1994. On a year-to-date basis, average low-cost deposits
decreased $66 million from the same period of 1994. This change
and a general rise in market interest rates, were the main
reasons for increases of 66 basis points, each, in the weighted
average rate paid on total interest-bearing liabilities from the
third quarter and the first nine months of 1994.
Distribution of assets, liabilities and shareholders' equity.
Yields/rates and interest margin. Note: Yields on certain
investment securities and loans have been adjusted upward to
reflect the effect of income thereon exempt from federal income
taxation at the current statutory tax rate.
For the three months ended
September 30, 1995
(dollars in thousands) --------------------------------
Interest Rates
Average income/ earned/
balance expense paid
Assets -------- -------- --------
Money market assets
and funds sold $1,047 $19 7.20 %
Investment securities
available for sale 213,539 3,308 6.15
Investment securities
held to maturity 608,538 9,535 6.22
Loans:
Commercial 809,064 19,876 9.75
Real estate construction 61,535 1,638 10.56
Real estate residential 212,411 3,903 7.29
Consumer 284,332 6,793 9.48
--------- ------
Interest-earning assets 2,190,466 45,072 8.16
Other assets 225,009
----------
Total assets $2,415,475
==========
Liabilities and
shareholders' equity
Deposits
Non-interest bearing demand $457,249 $-- -- %
Savings and interest-bearing
transaction 1,064,654 5,997 2.23
Time less than $100,000 305,132 3,954 5.14
Time $100,000 or more 173,859 2,445 5.58
--------- ------
Total interest-bearing deposits 1,543,645 12,396 3.19
Funds purchased 159,240 2,264 5.64
Notes and mortgages payable 20,094 372 7.34
--------- ------
Total interest-bearing
liabilities 1,722,979 15,032 3.46
Other liabilities 18,835
Shareholders' equity 216,412
----------
Total liabilities and
shareholders' equity $2,415,475
==========
Net interest spread (1) 4.70 %
Net interest income and interest margin (2) $30,040 5.44 %
======= ====
(1) Net interest spread represents the average yield earned on
interest-earning assets less the average rate paid on
interest-bearing liabilities.
(2) Net interest margin is computed by dividing net interest
income (FTE) (annualized) by total average interest-earning
assets.
For the three months ended
September 30, 1994
(dollars in thousands) --------------------------------
Interest Rates
Average income/ earned/
balance expense paid
Assets -------- -------- --------
Money market assets
and funds sold $35,330 $400 4.49 %
Investment securities
available for sale 197,810 2,571 5.16
Investment securities
held to maturity 654,717 10,219 6.19
Loans:
Commercial 794,272 18,490 9.24
Real estate construction 79,551 2,058 10.26
Real estate residential 193,708 3,228 6.61
Consumer 286,933 6,806 9.41
--------- ------
Interest-earning assets 2,242,321 43,772 7.75
Other assets 223,891
----------
Total assets $2,466,212
==========
Liabilities and
shareholders' equity
Deposits
Non-interest bearing demand $444,381 $-- -- %
Savings and interest-bearing
transaction 1,188,968 6,250 2.09
Time less than $100,000 316,293 3,109 3.90
Time $100,000 or more 146,320 1,424 3.86
--------- ------
Total interest-bearing deposits 1,651,581 10,783 2.59
Funds purchased 126,767 1,383 4.33
Notes and mortgages payable 28,179 604 8.50
--------- ------
Total interest-bearing
liabilities 1,806,527 12,770 2.80
Other liabilities 16,927
Shareholders' equity 198,377
----------
Total liabilities and
shareholders' equity $2,466,212
==========
Net interest spread (1) 4.95 %
Net interest income and interest margin (2) $31,002 5.49 %
======= ====
(1) Net interest spread represents the average yield earned on
interest-earning assets less the average rate paid on
interest-bearing liabilities.
(2) Net interest margin is computed by dividing net interest
income (FTE) (annualized) by total average interest-earning
assets.
For the nine months ended
September 30, 1995
(dollars in thousands) --------------------------------
Interest Rates
Average income/ earned/
balance expense paid
Assets -------- -------- --------
Money market assets and
and funds sold $6,447 $276 5.72 %
Investment securities
available for sale 198,289 8,621 5.81
Investment securities
held to maturity 619,364 29,332 6.33
Loans:
Commercial 806,057 59,320 9.84
Real estate construction 64,861 5,627 11.60
Real estate residential 210,218 11,757 7.48
Consumer 289,256 20,591 9.52
--------- -------
Interest-earning assets 2,194,492 135,524 8.26
Other assets 214,144
----------
Total assets $2,408,636
==========
Liabilities and
shareholders' equity
Deposits
Non-interest bearing demand $442,484 $-- -- %
Savings and interest-bearing
transaction 1,089,798 18,352 2.25
Time less than $100,000 304,825 11,066 4.85
Time $100,000 or more 164,944 6,531 5.29
--------- ------
Total interest-bearing deposits 1,559,567 35,949 3.08
Funds purchased 151,298 6,394 5.65
Notes and mortgages payable 23,556 1,373 7.79
--------- ------
Total interest-bearing
liabilities 1,734,421 43,716 3.37
Other liabilities 18,278
Shareholders' equity 213,453
----------
Total liabilities and
shareholders' equity $2,408,636
==========
Net interest spread (1) 4.89 %
Net interest income and interest margin (2) $91,808 5.59 %
======= ====
(1) Net interest spread represents the average yield earned on
interest-earning assets less the average rate paid on
interest-bearing liabilities.
(2) Net interest margin is computed by dividing net interest
income (FTE) (annualized) by total average interest-earning
assets.
For the nine months ended
September 30, 1994
(dollars in thousands) --------------------------------
Interest Rates
Average income/ earned/
balance expense paid
Assets -------- -------- --------
Money market assets
and funds sold $32,275 $784 3.25 %
Investment securities
available for sale 205,707 8,210 5.34
Investment securities
held to maturity 628,451 28,562 6.08
Loans:
Commercial 795,783 53,641 9.01
Real estate construction 77,226 5,662 9.80
Real estate residential 194,973 10,484 7.19
Consumer 293,010 19,279 8.80
--------- -------
Interest-earning assets 2,227,425 126,622 7.60
Other assets 222,367
----------
Total assets $2,449,792
==========
Liabilities and
shareholders' equity
Deposits
Non-interest bearing demand $432,347 $-- -- %
Savings and interest-bearing
transaction 1,165,835 17,383 1.99
Time less than $100,000 325,067 9,311 3.83
Time $100,000 or more 156,415 4,240 3.62
--------- ------
Total interest-bearing deposits 1,647,317 30,934 2.51
Funds purchased 129,539 3,669 3.79
Notes and mortgages payable 30,975 2,061 8.90
--------- -----
Total interest-bearing
liabilities 1,807,831 36,664 2.71
Other liabilities 16,434
Shareholders' equity 193,180
----------
Total liabilities and
shareholders' equity $2,449,792
==========
Net interest spread (1) 4.89 %
Net interest income and interest margin (2) $89,958 5.40 %
======= ====
(1) Net interest spread represents the average yield earned on
interest-earning assets less the average rate paid on
interest-bearing liabilities.
(2) Net interest margin is computed by dividing net interest
income (FTE) (annualized) by total average interest-earning
assets.
Rate and volume variances. The following table sets forth a
summary of the changes in interest income and interest expense
from changes in average asset and liability balances (volume)
and changes in average interest rates for the periods indicated.
Changes not solely attributable to volume or rates have been
allocated in proportion to the respective volume and rate
components.
Three months ended
September 30, 1995
compared with three months
ended September 30, 1994
------------------------------
(in thousands) Volume Rate Total
------ ------ ------
Increase (decrease) in
interest and fee income:
MMkt. assets and funds sold ($876) $495 ($381)
Investment securities
available for sale 216 521 737
Investment securities
held to maturity (724) 40 (684)
Loans:
Commercial 349 1,037 1,386
Real estate construction (482) 62 (420)
Real estate residential 327 348 675
Consumer (64) 51 (13)
------ ------ ------
Total loans 130 1,498 1,628
------ ------ ------
Total increase (decrease) in
interest and fee income (1) (1,254) 2,554 1,300
Increase (decrease) in
interest expense:
Deposits:
Savings/interest-bearing
transaction (801) 548 (253)
Time less than $ 100,000 (105) 950 845
Time $ 100,000 or more 303 718 1,021
------ ------ ------
Total interest-bearing (603) 2,216 1,613
Funds purchased 403 478 881
Notes and mortgages payable (157) (75) (232)
------ ------ ------
Total increase (decrease) in
interest expense (357) 2,619 2,262
------ ------ ------
Total increase (decrease) in
net interest income (1) ($897) ($65) ($962)
===== ===== =====
(1) Amounts calculated on a fully taxable equivalent basis using the current
statutory federal tax rate.
Nine months ended
September 30, 1995
compared with nine months
ended September 30, 1994
------------------------------
(in thousands) Volume Rate Total
------ ------ ------
Increase (decrease) in
interest and fee income:
MMkt. assets and funds sold ($12,308) $11,800 ($508)
Investment securities
available for sale (278) 689 411
Investment securities
held to maturity (404) 1,174 770
Loans:
Commercial 700 4,979 5,679
Real estate construction 237 (272) (35)
Real estate residential 842 431 1,273
Consumer (243) 1,555 1,312
------ ------ ------
Total loans 1,536 6,693 8,229
Total increase (decrease) in -------- ------- ------
interest and fee income (1) ($11,454) $20,356 $8,902
Increase (decrease) in
interest expense:
Deposits:
Savings/interest-bearing
transaction (985) 1,954 969
Time less than $ 100,000 (533) 2,288 1,755
Time $ 100,000 or more 242 2,049 2,291
------ ------ ------
Total interest-bearing (1,276) 6,291 5,015
Funds purchased 693 2,032 2,725
Notes and mortgages payable (453) (235) (688)
------ ------ ------
Total increase (decrease) in
interest expense (1,036) 8,088 7,052
------ ------ ------
Total increase (decrease) in
net interest income (1) ($10,418) $12,268 $1,850
======== ======= ======
(1) Amounts calculated on a fully taxable equivalent basis using the current
statutory federal tax rate.
Provision for Loan Losses
- -------------------------
The level of the provision for loan losses during each of the
periods presented reflects the Company's continued efforts to
improve loan quality by enforcing strict underwriting and
administration procedures and aggressively pursuing collection
efforts with troubled debtors. Continuing improvements in credit
quality allowed the Company to reduce its provision for loan
losses to $1.2 million in the third quarter of 1995, compared to
$1.6 million in the same period in 1994. For the first nine
months of 1995, the loan loss provision was $4.3 million
compared to $5.7 million for the same period in 1994. For more
information regarding net credit losses and the reserve for loan
losses, see the "Asset Quality" section of this report.
Non-Interest Income
- -------------------
The following table summarizes the components of non-interest
income for the periods indicated.
For the three For the nine
months ended months ended
September 30, September 30,
---------------- ----------------
(in millions) 1995 1994 1995 1994
----- ----- ----- -----
Service charges on deposit
accounts $3.15 $3.23 $9.53 $9.75
Merchant credit card 0.67 0.58 1.77 1.77
Mortgage banking income 0.35 0.47 1.09 3.72
Trust fees 0.18 0.18 0.49 0.55
Brokerage commissions 0.17 0.14 0.47 0.52
Net investment securities
gain (loss) 0.02 (0.04) 0.02 0.50
Other non-interest income 1.00 1.06 2.72 3.49
------ ------ ------ ------
Total $5.54 $5.62 $16.09 $20.30
====== ====== ====== ======
The $80,000 decrease in non-interest income during the third
quarter of 1995 compared to the third quarter of 1994 resulted
from decreases in most categories, with the exception of
merchant credit card income and brokerage commissions which
increased $90,000 and $30,000 respectively. The
quarter-to-quarter decreases include $120,000 lower mortgage
banking income resulting from a slowing down of refinancing
volume in 1995, $80,000 lower service charges on deposit
accounts and lower trust fee income. The sale of securities
available for sale contributed $20,000 to the non-interest
income realized during the third quarter of 1995 compared to a
$40,000 loss in 1994. The $4.2 million decrease in non-interest
income during the first nine months of 1995 compared with the
same period in 1994 was due to decreases in all categories with
the exception of merchant credit card income, which remained
unchanged from 1994. The non-interest income decreases include
$2.6 million lower mortgage banking income due to reduced
mortgage refinancing volume and lower loan servicing income,
$220,000 lower service charges on deposit accounts and lower
trust fees and brokerage commissions, $60,000 and $50,000,
respectively. The sale of investment securities available for
sale contributed $500,000 to the non-interest income realized
during the first nine months of 1994, compared to $20,000 during
the comparable period in 1995.
Non-interest expense
- --------------------
The following table summarizes the components of non-interest
expense for the periods indicated.
For the three For the nine
months ended months ended
September 30, September 30,
------------------- -----------------
(in millions) 1995 1994 1995 1994
----- ----- ----- -----
Salaries $8.72 $9.44 $26.87 $29.31
Other personnel 1.21 1.51 4.77 4.99
Occupancy 2.80 2.69 8.01 7.76
Equipment 1.88 1.57 4.68 4.52
Professional fees 0.91 0.84 3.60 2.49
Data processing services 1.13 1.17 3.21 3.38
Stationery and supplies 0.37 0.46 1.23 1.29
Postage 0.39 0.43 1.15 1.22
Advertising/public relations 0.36 0.44 1.04 1.16
Courier service 0.37 0.34 1.03 1.00
Loan expense 0.23 0.49 0.84 2.55
Operational losses 0.21 0.21 0.72 0.81
Merchant credit card 0.18 0.22 0.56 0.64
Other real estate owned and
property held for sale 0.16 0.27 0.60 0.27
Other non-interest expense 1.47 2.96 8.21 9.00
------ ------ ------ ------
Total $20.39 $23.04 $66.52 $70.39
====== ====== ====== ======
Non-interest expense continues to show the effects of cost
controls and the benefits resulting from the rapid consolidation
of operations after the 1995 mergers. During the third quarter
of 1995, non-interest expense decreased $2.7 million from the
third quarter of 1994. Salaries and other personnel costs, the
principal contributors to the variance, decreased $1.0 million,
mainly from the a reduction of 141 full-time equivalent
employees resulting from merger of operations following the PV
Financial, CapitolBank and North Bay Bancorp acquisitions. In
addition, FDIC insurance premiums, included in "other
non-interest expense" was reduced by $1.3 million from the third
quarter of 1994, including a $300,000 rebate for overpayments in
the second quarter of 1995. Further decreases in non-interest
expense from the third quarter of 1994 were realized in loan
expense, $260,000 lower than prior year, other real estate
owned and properties held for sale related expenses, $110,000
lower than 1994 mainly due to gains on sales partially offset by
writedowns of properties to net realizable values, and
stationery and supplies and advertising/public relations
expenses, $90,000 and $80,000, respectively, lower than the same
quarter in 1994. Decreases in non-interest expense from the
third quarter of 1994, were also realized in the areas of data
processing, postage and merchant credit card, $40,000, each,
lower than 1994.
Partially offsetting these favorable variances, equipment and
occupancy expenses were $310,000 and $110,000, respectively,
higher than the third quarter of 1994, as a result of
merger-related fixed asset writeoffs, while professional fees,
$70,000 higher than the third quarter of 1994, increased mainly
due to one-time merger and acquisitions related costs.
During the first nine months of 1995, non-interest expense
decreased $3.9 million from the first nine months of 1994. The
favorable impact of consolidation of operations, partially
offset by increased merger-related expenses account for the
major variances, as follows: personnel expenses decreased $2.7
million, loan expense and data processing costs were $1.7
million and $170,000, respectively, lower than the prior period,
advertising/public relations and operational losses were
$120,000 and $90,000 respectively, lower than 1994 and postage
and stationery and supplies were $70,000 and $60,000,
respectively, lower than the first nine months of 1994. Also
included in the 1995 year-to-date favorable variances from prior
year is the reduction of deposit insurance costs, included in
other non-interest expense as described above. Partially
offsetting these variances, professional fees were $ 1.1 million
higher than the first nine months of 1994 due to mergers and
acquisitions related costs, while property writeoffs, also
resulting from 1995 mergers, were the main reason for the
increase of $250,000 and $160,000, respectively, in occupancy
and equipment expenses. Also included in the increases in
non-interest expense from the first nine months of 1994, other
real estate owned and property held for sale expenses were
$330,000 higher than prior year, following the Company's policy
to continue to writedown such properties to net realizable
values.
Provision for Income Tax
- ------------------------
The Company recorded income tax expense of $4.0 million in the
third quarter of 1995, representing an effective tax rate of 32
percent, compared to $3.2 million, or an effective tax rate of
31 percent, during the third quarter of 1994. For the first
nine months of 1995, the Company recognized income tax expense
of $9.8 million, the same level recorded in the comparable
period of 1994, representing effective tax rates of 30 percent
and 32 percent, respectively.
Asset Quality
- -------------
Classified Assets
The Company closely monitors the markets in which it conducts
its lending operations. The Company continues its strategy to
control exposure to loans with high credit risk and increase
diversification of earning assets. Asset reviews are performed
using grading standards and criteria similar to those employed
by bank regulatory agencies. Assets receiving lesser grades fall
under the "classified assets" category which includes all
non-performing assets. These loans have a higher degree of risk
and receive an elevated level of attention to ensure collection.
The following is a summary of classified assets on the dates
indicated:
September 30, December 31,
(in millions) ---------------- ----------
1995 1994 1994
---- ---- ----
Classified loans $47.0 $60.3 $49.7
Other classified assets 7.6 11.1 8.0
----- ----- -----
Total classified assets $54.6 $71.4 $57.7
===== ===== =====
Reserve for loan losses
as a percentage of
classified loans 70% 54% 65%
Classified loans at September 30, 1995, decreased $13.3 million
or 22 percent to $47.0 million from September 30, 1994,
reflecting improvements in borrowers' financial condition and
satisfaction of debt. The improvement is primarily due to the
repayment of classified real estate construction loans. Other
classified assets, which decreased $3.5 million from prior year,
were due to sales and writedowns of properties classified as
other real estate owned.
Non-performing assets
Non-performing assets include non-accrual loans, loans 90 days
past due and still accruing and other real estate owned. Loans
are placed on non-accrual status when reaching 90 days or more
delinquent, unless the loan is well secured and in the process
of collection. Interest previously accrued on loans placed on
non-accrual status is charged against interest income.
Generally, loans secured by real estate with temporarily
impaired values and commercial loans to borrowers experiencing
financial difficulties are placed on non-accrual status even
though the borrowers continue to repay the loans as scheduled.
Such loans are classified as "performing non-accrual" and are
included in total non-performing assets.
Performing non-accrual loans are reinstated to accrual status
when improvements in credit quality eliminate the doubt as to
the full collectibility of both interest and principal. When the
ability to fully collect non-accrual loan principal is in doubt,
cash payments received are applied against the principal balance
of the loan until such time as full collection of the remaining
recorded balance is expected. Any subsequent interest received
is recorded as interest income on a cash basis.
The following is a summary of non-performing assets on the dates
indicated:
(in millions) September 30, December 31,
------------------ ----------
1995 1994 1994
---- ---- ----
Performing non-accrual loans $1.26 $2.13 $1.94
Non-performing
non-accrual loans 7.79 10.88 8.35
---- ---- ----
Total non-accrual loans 9.05 13.01 10.29
Loans 90 days past due
and still accruing 0.25 1.63 1.77
---- ---- ----
Total non-performing loans 9.30 14.64 12.06
Other real estate owned 7.60 11.08 8.03
---- ---- ----
Total non-performing assets $16.90 $25.72 $20.09
==== ==== ====
Reserve for loan losses as
a percentage of
non-performing loans 356% 221% 269%
Performing non-accrual loans decreased $870,000 at September 30,
1995 from $2.13 million at September 30, 1994 and decreased
$680,000 from $1.94 million at December 31, 1994. Non-performing
non-accrual loans of $7.79 million at September 30, 1995,
decreased $3.09 million from September 30, 1994 and decreased
$560,000 from December 31, 1994. The $3.96 million reduction in
total non-accrual loans from September 30, 1994, was principally
due to construction loan payoffs and sales. The $3.48 million
and the $430,000 decreases in other real estate owned balances
from September 30, 1994 and December 31, 1994 were due to
liquidations and sales.
The amount of gross interest income that would have been
recorded for non-accrual loans for the three and nine months
ending September 30, 1995, if all such loans had been current in
accordance with their original terms, was $243,000 and $583,000,
respectively. The amount of interest income that was recognized
on non-accrual loans from cash payments made during the three
and nine months ended September 30, 1995 totaled $6,000 and
$231,000, respectively, representing annualized yields of .23
percent and 3.20 percent, respectively. Cash payments received
which were applied against the book balance of non-accrual loans
outstanding at September 30, 1995, totaled $292,000.
The Company's reserve for loan losses is maintained at a level
estimated to be adequate to provide for losses that can be
reasonably anticipated based upon specific conditions, credit
loss experience, the amount of past due, non-performing and
classified loans, recommendations of regulatory authorities,
prevailing economic conditions and other factors. The reserve is
allocated to segments of the loan portfolio based in part on
quantitative analyses of historical credit loss experience.
Criticized and classified loan balances are analyzed using both
a linear regression model and standard allocation percentages.
The results of these analyses are applied to current criticized
and classified loan balances to allocate the reserve to the
respective segments of the loan portfolio. In addition, loans
with similar characteristics not usually criticized using
regulatory guidelines due to their small balances and numerous
accounts, are analyzed based on the historical rate of net
losses and delinquency trends grouped by the number of days the
payments on these loans are delinquent. While these factors are
judgmental and may not be reduced to a purely mathematical
formula, the $33.1 million reserve for loan losses, which
constituted 2.42 percent of total loans at September 30, 1995,
is considered to be adequate as a reserve against inherent
losses. The loan portfolio is continuously evaluated considering
current economic conditions that dictate required reserve levels.
The following table summarizes the loan loss provision, net
credit losses and loan loss reserve for the periods indicated:
For the three For the nine
(in millions) months ended months ended
September 30 September 30,
---------------- ----------------
1995 1994 1995 1994
----- ----- ----- -----
Balance, beginning of period $33.6 $32.1 $32.5 $30.0
Loan loss provision 1.2 1.6 4.3 5.7
Credit losses (2.2) (2.1) (5.4) (5.3)
Credit loss recoveries 0.5 0.7 1.7 1.9
---- ---- ---- ----
Net credit losses (1.7) (1.4) (3.7) (3.4)
----- ----- ----- -----
Balance, end of period $33.1 $32.3 $33.1 $32.3
===== ===== ===== =====
Reserve for loan losses
as a percentage of
loans outstanding 2.42% 2.35%
Effective January 1, 1995, the Company adopted Statement of
Financial Accounting Standards No.114, "Accounting by Creditors
for Impairment of a Loan ("SFAS 114"), as amended by Statement
of Financial Accounting Standards No. 118, "Accounting by
Creditors for Impairment of a Loan - Income Recognition and
Disclosures" ("SFAS 118"). Under SFAS 114, a loan is impaired
when, based on current information and events, it is "probable"
that a creditor will be unable to collect all amounts due
(principal and interest) according to the contractual terms of
the loan agreement. The measurement of impairment may be based
on (i) the present value of the expected cash flows of the
impaired loan discounted at the loan's original effective
interest rate, (ii) the observable market price of the impaired
loan, or (iii) the fair value of the collateral of a
collateral-dependent loan. SFAS 114 does not apply to large
groups of smaller balance homogeneous loans that are
collectively evaluated for impairment.
The Company generally identifies loans to be reported as
impaired when such loans are in non-accrual status or are
considered troubled debt restructurings due to the granting of a
below market rate of interest or a partial forgiveness of
indebtedness on an existing loan.
In measuring impairment for the purpose of establishing specific
loan loss reserves, the Company reviews all impaired commercial
and construction loans classified "Substandard" and "Doubtful"
that meet materiality thresholds of $250,000 and $100,000,
respectively. All "Loss" classified loans are reserved at 100
percent under the Company's standard loan loss reserve
methodology. The Company considers classified loans below the
established thresholds to represent immaterial loss risk.
Commercial and construction loans that are not classified, and
large groups of smaller balance homogeneous loans such as
installment, personal revolving credit, residential real estate
and student loans, are evaluated collectively for impairment
under the Company's standard loan loss reserve methodology and
are, therefore, excluded from the provisions of SFAS 114.
The following summarizes the Company's impaired loans at
September 30, 1995:
Troubled Total Memo:
Non-accrual Debt Impaired Specific
Loans Restructurings Loans Reserves
(in thousands) ----------- ------------ ------- --------
$9,052 $77 $9,129 $899
The average balances of the Company's impaired loans for the
nine months ended September 1995, was $10.3 million. All these
credits, with the exception of one restructured troubled credit
were on non-accrual status. In general, the Company does not
recognize any interest income on loans that are classified as
impaired.
Asset and Liability Management
- ------------------------------
The fundamental objective of the Company's management of assets
and liabilities is to maximize its economic value while
maintaining adequate liquidity and a conservative level of
interest rate risk. The Company's principal sources of liquidity
are current period earnings and investment securities available
for sale. At September 30, 1995, investment securities available
for sale totaled $252.5 million.
The Company generates significant liquidity from its operating
activities. The Company's profitability in the first nine months
of 1995 and 1994 was the main contributor to the cash flows
provided from operations for such years of $29.9 million and
$49.2 million, respectively. Additional cash flow is provided
through net proceeds from sales of loans originated for resale
which were $1.7 million and $25.4 million for the first nine
months of 1995 and 1994, respectively.
Additional cash flow is provided by and used in financing
activities, primarily customer deposits and short-term
borrowings from banks. In the first nine months of 1995, $50.0
million were used in financing activities, as a $66.3 million
decrease in deposits combined with other cash flow uses
including long-term debt maturities, dividends paid to
shareholders and retirement of stock was partially offset by a
$33.2 million increase in purchase funds and other sources,
including issuance of shares of the Company's common stock from
exercises of stock options. This compares with financing
activities providing $26.7 million during the first nine months
of 1994, including a $63.8 million increase in purchase funds,
partially offset by a $23.7 million decrease in customers'
deposits and an $8.8 million decrease in long term debt.
The Company uses cash flows from operating and financing
activities primarily to make investments in investment
securities and loans. During the first nine months of 1995, net
repayments of loans totaled $14.3 million compared with net loan
disbursements of $5.5 million during the same period in 1994.
Due to the sluggish growth in loan balances, the Company
continued to grow its investment securities portfolio. Purchases
of investment securities net of maturities and sales totaled
$5.0 million in the first nine months of 1995, compared to $56.8
in the same period of 1994.
The Company anticipates of increasing its cash provided by
operations through the end of 1995 due to retained profits. For
the same period, it is anticipated that the investment
securities portfolio and demand for loans will moderately
increase. It is also anticipated that deposit balances will
moderately increase through the end of the current year.
In evaluating exposure to interest rate risk, the Company
considers the effects of various factors in implementing
interest rate risk management activities, including interest
rate swaps, utilized to hedge the impact of interest rate
fluctuations on interest-bearing assets and liabilities in the
current interest rate environment.
Interest rate swaps are agreements to exchange interest payments
computed on notional amounts. The notional amounts do not
represent exposure to credit risk. However, these agreements
expose the Company to market risks associated with fluctuations
of interest rates and credit risk associated with the
counterparty's ability to meet its interest payment obligation.
The Company minimizes this credit risk by entering into
contracts with well-capitalized money-center banks, and by
requiring settlement of only the net difference between the
exchanged interest payments. During the month of August 1995,
the last two of these contracts, with notional amounts totaling
$60.0 million expired. The Company paid a variable rate based on
three-month LIBOR and received an average fixed rate of interest
of 4.11 percent. The Company had entered into four interest rate
swaps at June 30, 1994, with notional amounts totaling $110.0
million, including the two outstanding through part of August
1995. The two other swaps, with notional amounts totaling $50.0
million expired in November and December of 1994. The effect of
entering into these contracts resulted in a decrease to net
interest income of $763,000 for the first nine months of 1995
compared to a decrease of $403,000 during the comparable period
in 1994.
The primary analytical tool used by the Company to gauge
interest-rate sensitivity is a simulation model used by many
major banks and bank regulators. This industry standard model is
used to simulate, based on the current and projected portfolio
mix, the effects on net interest income of changes in market
interest rates. Under the Company's policy and practice, the
projected amount of net interest income over the ensuing twelve
months is not allowed to fluctuate more than ten percent even
under alternate assumed interest rate changes of plus or minus
200 basis points. The results of the model indicate that the mix
of interest rate sensitive assets and liabilities at September
30, 1995 does not expose the Company to an unacceptable level of
interest rate risk.
Capital Resources
- -----------------
The Company's capital position represents the level of capital
available to support continued operations and expansion. The
Company's primary capital resource is shareholders' equity which
was $218.3 million at September 30, 1995, representing an
increase of $17.4 million or 9 percent from September 30, 1994
and an increase of $13.6 million, or 7 percent, from December
31, 1994. As a result of the Company's profitability and the
retention of earnings, the ratio of equity to total assets
increased to 9.0 percent at September 30, 1995, from 8.1 percent
a year ago and 8.3 percent at year-end 1994. The ratio of Tier I
capital to risk-adjusted assets increased to 13.05 percent at
September 30, 1995 compared to 12.38 percent at September 30,
1994 and 12.53 percent at December 31, 1994. Total capital to
risk-adjusted assets increased to 15.51 percent at September 30,
1995 compared to 14.86 percent at September 30, 1994 and 15.01
percent at December 31, 1994.
The following summarizes the ratios of capital to risk-adjusted
assets for the periods indicated:
September 30, December 31,
-------------------- ----------
1995 1994 1994
---- ---- ----
Tier I Capital 13.05% 12.38% 12.53%
Total Capital 15.51% 14.86% 15.01%
Leverage ratio 9.02% 8.19% 8.37%
The risk-based capital ratios rose in 1995 due to a more rapid
growth in equity than total assets. Capital ratios are reviewed
on a regular basis to ensure that capital exceeds the prescribed
regulatory minimums and is adequate to meet the Company's future
needs. All ratios are in excess of regulatory definitions of
"well capitalized". During 1994 and in 1995, the Board of
Directors approved the repurchase of up to 238,500 shares of
common stock from time to time, subject to appropriate
regulatory and acquisition accounting requirements for
reissuance through stock performance and option plans. These
purchases are made periodically in the open market and will
lessen the dilutive impact of these plans on the calculation of
earnings per share.
On October 23, 1995, the Financial Accounting Standards Board issued
Statement No. 123, "Accounting for Stock-Based Compensation". Statement
No. 123 allows an entity to either (1) retain the current method of
accounting for stock compensation (principally APB Opinion No. 25)
for purposes of preparing its basic financial statements or (2) to
adopt a new fair value based method that is established by the
provisions of the new Statement. The impact on the Company's
financial statements from the adoption of Statement No. 123 is not
expected to be material.
Interim Periods
- ---------------
The financial information of the Company included herein for
September 1995 and 1994 is unaudited; however, such information
reflects all adjustments which are, in the opinion of
Management, necessary for a fair statement of results for the
interim periods. Those adjustments are normal and recurring in
nature. The results of operations for the three and nine-month
period ended September 30, 1995 are not necessarily indicative
of the results to be expected for the full year. This report
should be read in conjunction with Westamerica Bancorporation's
annual report on Form 10-K for the year ended December 31, 1994.
Certain amounts in prior periods have been restated to conform
to the current presentation.
SIGNATURES
- ----------
Pursuant to the requirements of Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
WESTAMERICA BANCORPORATION
(Registrant)
Date: November 11, 1995 /s/ DENNIS R. HANSEN
--------------------
Dennis R. Hansen
Senior Vice President
and Controller
PART II - OTHER INFORMATION
- ---------------------------
Item 1 - Legal Proceedings
Due to the nature of the banking business, the Subsidiary
Banks are at times party to various legal actions; all
such actions are of a routine nature and arise in the normal
course of business of the Subsidiary Banks.
Item 2 - Changes in Securities
None
Item 3 - Defaults upon 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) Exhibit 11: Computation of Earnings Per Share on Common
and Common Equivalent Shares and on Common
Shares Assuming Full Dilution
<TABLE> <S> <C>
<ARTICLE> 9
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS 9-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1994 DEC-31-1995 DEC-31-1994
<PERIOD-START> JUL-1-1995 JUL-1-1994 JAN-1-1995 JAN-1-1994
<PERIOD-END> SEP-30-1995 SEP-30-1994 SEP-30-1995 SEP-30-1994
<CASH> 168,229 185,389 168,229 185,389
<INT-BEARING-DEPOSITS> 0 0 0 0
<FED-FUNDS-SOLD> 0 0 0 0
<TRADING-ASSETS> 0 0 0 0
<INVESTMENTS-HELD-FOR-SALE> 252,497 188,335 252,497 188,335
<INVESTMENTS-CARRYING> 583,502 659,807 583,502 659,807
<INVESTMENTS-MARKET> 583,596 640,780 583,596 640,780
<LOANS> 1,367,643 1,373,315 1,367,643 1,373,315
<ALLOWANCE> 33,097 32,333 33,097 32,333
<TOTAL-ASSETS> 2,428,676 2,470,602 2,428,676 2,470,602
<DEPOSITS> 2,005,382 2,086,032 2,005,382 2,086,032
<SHORT-TERM> 168,613 140,143 168,613 140,143
<LIABILITIES-OTHER> 16,386 15,968 16,386 15,968
<LONG-TERM> 20,000 27,517 20,000 27,517
<COMMON> 78,975 77,561 78,975 77,561
0 0 0 0
0 0 0 0
<OTHER-SE> 139,320 123,381 139,320 123,381
<TOTAL-LIABILITIES-AND-EQUITY> 2,428,676 2,470,602 2,428,676 2,470,602
<INTEREST-LOAN> 31,926 30,402 96,507 88,618
<INTEREST-INVEST> 11,451 11,465 33,934 33,390
<INTEREST-OTHER> 19 400 276 784
<INTEREST-TOTAL> 43,396 42,267 130,717 122,792
<INTEREST-DEPOSIT> 12,396 10,784 35,949 30,934
<INTEREST-EXPENSE> 15,032 12,770 43,716 36,664
<INTEREST-INCOME-NET> 28,364 29,497 87,001 86,128
<LOAN-LOSSES> 1,150 1,597 4,320 5,673
<SECURITIES-GAINS> 19 (41) 19 500
<EXPENSE-OTHER> 20,386 23,042 66,520 70,391
<INCOME-PRETAX> 12,365 10,476 32,251 30,362
<INCOME-PRE-EXTRAORDINARY> 12,365 10,476 32,251 30,362
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 8,388 7,244 22,476 20,568
<EPS-PRIMARY> .85 .73 2.27 2.07
<EPS-DILUTED> .85 .73 2.27 2.07
<YIELD-ACTUAL> 5.44 5.49 5.59 5.4
<LOANS-NON> 0 0 9,052 13,010
<LOANS-PAST> 0 0 250 1,630
<LOANS-TROUBLED> 0 0 77 0
<LOANS-PROBLEM> 0 0 0 0
<ALLOWANCE-OPEN> 33,600 32,100 32,500 30,000
<CHARGE-OFFS> 2,200 2,100 5,400 5,300
<RECOVERIES> 500 700 1,700 1,900
<ALLOWANCE-CLOSE> 33,100 32,300 33,100 32,300
<ALLOWANCE-DOMESTIC> 33,100 32,300 33,100 32,300
<ALLOWANCE-FOREIGN> 0 0 0 0
<ALLOWANCE-UNALLOCATED> 0 0 0 0
</TABLE>
Exhibit 11
WESTAMERICA BANCORPORATION
COMPUTATION OF EARNINGS PER SHARE ON
- ------------------------------------
COMMON AND COMMON EQUIVALENT SHARES
- -----------------------------------
AND ON COMMON SHARES ASSUMING FULL DILUTION
- -------------------------------------------
(Unaudited)
For the three For the nine
months ended months ended
September 30, September 30,
------------------ ---------------
1995 1994 * 1995 1994 *
----- ------ ----- ------
Weighted average number of
common shares outstanding 9,863,691 9,917,552 9,893,198 9,914,185
Add exercise of options reduced
by the number of shares that
could have been purchased
with the proceeds
from such exercise 168,438 90,313 165,138 81,953
---------- ---------- ---------- ----------
Total 10,032,129 10,007,865 10,058,336 9,996,138
========== ========== ========== ==========
Net income (in thousands) $8,388 $7,244 $22,476 $20,568
Fully-diluted
earnings per share $0.84 $0.72 $2.23 $2.06
===== ===== ===== =====
Primary earnings per share $0.85 $0.73 $2.27 $2.07
===== ===== ===== =====
* Data has been restated on an historical basis to reflect the
January 31, 1995 acquisition of PV Financial, the June 6, 1995
acquisition of CapitolBank Sacramento and the July 17, 1995
acquisition of North Bay Bancorp, all on a pooling-of-interests
basis.
