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 June 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 August 7, 1995
9,873,171
<TABLE>
<CAPTION>
WESTAMERICA BANCORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands)
(Unaudited)
June 30, December 31,
1995 1994 * 1994
---------- ---------- ----------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents $184,271 $142,121 $155,956
Money market assets 250 250 250
Trading account securities -- 15 --
Investment securities available for sale 199,608 198,162 192,418
Investment securities held to maturity,
with market values of:
$589,653 at June 30, 1995
$619,363 at June 30, 1994
$581,444 at December 31, 1994 591,191 633,281 607,209
Loans, net of reserve for loan losses of:
$31,988 at June 30, 1995
$30,825 at June 30, 1994
$31,293 at December 31, 1994 1,297,031 1,257,279 1,303,697
Other real estate owned 6,388 9,948 8,023
Premises and equipment, net 24,631 26,704 25,502
Interest receivable and other assets 59,101 56,382 55,799
---------- ---------- ----------
Total assets $2,362,471 $2,324,142 $2,348,854
========== ========== ==========
LIABILITIES
Deposits:
Non-interest bearing $450,975 $427,660 $452,760
Interest bearing:
Transaction 306,656 307,110 322,687
Savings 716,880 788,111 767,090
Time 460,373 447,996 431,616
---------- ---------- ----------
Total deposits 1,934,884 1,970,877 1,974,153
Funds purchased 186,839 118,736 134,723
Liability for interest, taxes and
other expenses 14,672 20,111 19,520
Notes and mortgages payable 20,000 28,499 25,524
---------- ---------- ----------
Total liabilities 2,156,395 2,138,223 2,153,920
---------- ---------- ----------
Authorized - 50,000 shares
Common stock issued and outstanding:
9,539 at June 30, 1995
9,603 at June 30, 1994
9,581 at December 31, 1994 73,052 71,982 72,052
Capital surplus 16,034 16,034 16,034
Unrealized gain (loss)
on securities available for sale 13 (958) (2,271)
Retained earnings 116,977 98,861 109,119
---------- ---------- ----------
Total shareholders' equity 206,076 185,919 194,934
Total liabilities and shareholders' equity $2,362,471 $2,324,142 $2,348,854
========== ========== ==========
* Restated on an historical basis to reflect the January 31,
1995 acquisition of PV Financial and the June 6, 1995
acquisition of CapitolBank Sacramento.
</TABLE>
<TABLE>
<CAPTION>
WESTAMERICA BANCORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except when indicated)
(Unaudited)
Three months ended Six months ended
June 30, June 30,
1995 1994 * 1995 1994 *
-------- -------- -------- --------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans $31,122 $28,218 $61,940 $55,582
Money market assets and funds sold -- 103 101 207
Trading account securities -- 1 -- 1
Investment securities available for sale 2,737 2,742 5,312 5,588
Investment securities held to maturity 8,105 8,165 16,407 15,755
-------- -------- -------- --------
Total interest income 41,964 39,229 83,760 77,133
INTEREST EXPENSE
Transaction deposits 816 846 1,698 1,707
Savings deposits 5,065 4,444 10,213 8,678
Time deposits 5,703 4,210 10,565 8,585
Funds purchased 2,153 1,422 4,188 2,251
Long-term debt 496 629 1,001 1,457
-------- -------- -------- --------
Total interest expense 14,233 11,551 27,665 22,678
-------- -------- -------- --------
NET INTEREST INCOME 27,731 27,678 56,095 54,455
Provision for loan losses 1,175 2,004 2,450 4,056
-------- -------- -------- --------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 26,556 25,674 53,645 50,399
NON-INTEREST INCOME
Service charges on deposit accounts 3,134 3,190 6,193 6,330
Merchant credit card 538 601 1,043 1,151
Mortgage banking 197 221 377 565
Brokerage commissions 154 203 292 368
Net investment securities gains -- 44 -- 564
Other 1,112 1,176 2,016 2,466
-------- -------- -------- --------
Total non-interest income 5,135 5,435 9,921 11,444
NON-INTEREST EXPENSE
Salaries and related benefits 10,395 10,666 20,645 21,458
Occupancy 2,415 2,419 4,839 4,704
Equipment 1,233 1,349 2,520 2,634
FDIC insurance assessment 1,098 1,150 2,222 2,300
Professional fees 881 771 2,164 1,342
Data processing 1,007 1,060 2,018 2,153
Other real estate owned 333 68 445 (103)
Other 3,889 4,068 7,207 7,767
-------- -------- -------- --------
Total non-interest expense 21,251 21,551 42,060 42,255
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES 10,440 9,558 21,506 19,588
Provision for income taxes 2,808 3,218 6,314 6,447
-------- -------- -------- --------
NET INCOME $7,632 $6,340 $15,192 $13,141
======== ======== ======== ========
Average shares outstanding 9,564 9,601 9,572 9,597
PER SHARE DATA
Earnings per share $0.80 $0.66 $1.59 $1.37
Dividends declared 0.20 0.15 0.37 0.30
<FN>
* Restated on an historical basis to reflect the January 31,
1995 acquisition of PV Financial and the June 6, 1995
acquisition of CapitolBank Sacramento.
</TABLE>
<TABLE>
<CAPTION>
WESTAMERICA BANCORPORATION
STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
For the six months ended June 30,
1995 1994 *
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $15,192 $13,141
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 2,055 2,262
Loan loss provision 2,450 4,056
Amortization of deferred net loan fees (848) (478)
Increase in other assets (5,274) (4,187)
Increase in income taxes payable 853 1,592
Decrease in other liabilities (5,140) (1,447)
Gain on sales of investment
securities available for sale -- (564)
Loss on sales/write down of equipment 335 13
Originations of loans for resale (3,267) (24,430)
Proceeds from sale of loans
originated for resale 3,293 22,239
Gain on sale of property acquired in
satisfaction of debt (63) (579)
Write down on property acquired in
satisfaction of debt 271 211
Net maturities of trading securities -- (5)
------- -------
Net cash provided by operating activities 9,857 11,824
------- -------
INVESTING ACTIVITIES
Net repayments of loans 5,022 40,250
Purchases of investment securities
available for sale (34,528) (71,997)
Purchases of investment securities held
to maturity (22,913) (135,309)
Purchases of premises and equipment (1,523) (1,228)
Proceeds from maturity of securities
available for sale 23,707 26,884
Proceeds from maturity of securities
held to maturity 46,203 65,537
Proceeds from sale of securities
available for sale -- 52,999
Proceeds from sale of property and equipment 46 --
Proceeds from property acquired in
satisfaction of debt 1,723 5,078
Net additions to property acquired in
satisfaction of debt (296) --
------- -------
Net cash provided by (used in)
investing activities 17,441 (17,786)
------- -------
FINANCING ACTIVITIES
Net decrease in deposits (39,196) (29,621)
Net increase in funds purchased 52,073 46,941
Reduction on notes and mortgages payable (5,524) (7,856)
Exercise of stock options/issuance of shares 2,116 742
Cash paid in lieu of fractional shares (14) --
Retirement of stock (4,968) (1,029)
Dividends on common stock (3,470) (2,685)
Net cash provided by financing activities 1,017 6,492
------- -------
NET INCREASE IN CASH AND CASH EQUIVALENTS 28,315 530
Cash and cash equivalents at beginning of year 155,956 141,591
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $184,271 $142,121
======== ========
Supplemental disclosure of non-cash activities:
Loans transferred to other real estate owned 275 1,376
Supplemental disclosure of cash flow activity:
Unrealized gain on securities available for sale 1,703 3,392
Interest paid for the period 28,922 22,966
Income tax payments for the period 6,520 5,261
<FN>
* Restated on an historical basis to reflect the January 31,
1995 acquisition of PV Financial and the June 6, 1995
acquisition of CapitolBank Sacramento.
</TABLE>
WESTAMERICA BANCORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Westamerica Bancorporation, (the "Company"), parent company of
Westamerica Bank and Subsidiary, Napa Valley Bank and
Subsidiary, Bank of Lake County and Community Banker Services
Corporation and Subsidiary, reported second quarter 1995 net
income of $7.6 million or $.80 per share. On a year to-date
basis, the Company reported net income of $15.2 million, or
$1.59 per share. This record level of earnings represents
increases of 20 percent and 16 percent, respectively, from
second quarter 1994 and June 1994 year-to-date.
All financial data has been restated on a historical basis to
reflect the January 31, 1995 acquisition of PV Financial and the
June 6, 1995 acquisition of CapitolBank Sacramento, on a
pooling-of-interest basis.
Acquisitions
On January 31, 1995, the Company completed the acquisition of PV
Financial, parent company of Pacific Valley National Bank, on a
pooling-of-interest 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-interest 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.
The following summarizes the separate results of the combined
entities for the period shown prior to the combination:
(in thousands, except per share data)
Restated
<TABLE>
<CAPTION>
Westamerica Combined
Bancorporation PV Financial CapitolBank Results
-------------- ----------- ----------- -------
<S> <C> <C> <C> <C>
Quarter ended 6/30/94:
Net interest income $23,340 $2,488 $1,850 $27,678
Net income (loss) 6,022 556 (238) 6,340
Earnings per share 0.74 0.26 (0.06) 0.66
For the six months ended 6/30/94:
Net interest income $46,163 $4,700 $3,592 $54,455
Net income 12,017 1,061 63 13,141
Earnings per share 1.49 0.49 0.02 1.37
At June 30, 1994:
Total assets $2,030,256 $170,191 $123,695 $2,324,142
Total shareholders' equity 158,551 18,281 9,087 185,919
At December 31, 1994
Total assets $2,030,235 $179,391 $139,228 $2,348,854
Total shareholders' equity 166,205 19,419 9,310 194,934
</TABLE>
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. The adverse effect of a decrease in the average balance
of low-cost deposits from the second quarter and the first six
months of 1994 and the higher level of interest rates paid on
interest-bearing liabilities in the corresponding periods of
1995, was more than offset by increased yields on
interest-earning assets. As a result, net interest income (FTE)
in 1995 was higher than the comparable periods in 1994. These
variances are shown in the components of net interest income and
the analysis of net interest margin summarized as follows for
the periods indicated:
For the three
months ended
(in millions) June 30,
----------------
1995 1994
---- ----
Interest income $41.9 $39.3
Interest expense (14.2) (11.6)
FTE adjustment 1.6 1.2
----- -----
Net interest income (FTE) $29.3 $28.9
Average earning assets $2,106 $2,127
Net interest margin 5.59% 5.45%
For the six
months ended
(in millions) June 30,
---------------
Interest income 1995 1994
Interest expense ---- ----
FTE adjustment $83.8 $77.2
(27.7) (22.7)
Net interest income (FTE) 3.1 2.3
----- -----
Average earning assets $59.2 $56.8
Net interest margin
$2,115 $2,115
5.65% 5.41%
In the second quarter of 1995, net interest income (FTE)
increased $400,000 or 2 percent from the second quarter of 1994
to $29.3 million. A $2.6 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
$400,000 from the second quarter of 1994, mostly due to a $41.8
million increase in the average balance of tax-exempt investment
securities.
Compared to the first six months of 1994, net interest income
increased $2.4 million or 4 percent as a result of a $6.6
million increase in interest income partially offset by a $5.0
million increase in interest expense. The FTE adjustment
increased $800,000 from the first six 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 $291,000 lower during the second quarter of
1995 than 1994 and $307,000 lower in the first six months of
1995 than in the same period in 1994.
Components of Net Income
Following is a summary of the components of net income for the
periods indicated:
For the three
months ended
June 30,
----------------
(In millions) 1995 1994
---- ----
Net interest income * $29.3 $28.9
Provision for loan losses (1.2) (2.0)
Non-interest income 5.1 5.4
Non-interest expense (21.2) (21.5)
Provision for income taxes * (4.4) (4.5)
----- -----
Net income $7.6 $6.3
===== =====
* Fully taxable equivalent basis (FTE)
For the six
months ended
June 30,
---------------
(In millions) 1995 1994
---- ----
Net interest income * $59.2 $56.8
Provision for loan losses (2.5) (4.1)
Non-interest income 9.9 11.4
Non-interest expense (42.0) (42.2)
Provision for income taxes * (9.4) (8.8)
----- -----
Net income $15.2 $13.1
===== =====
* 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
months ended
June 30,
----------------
1995 1994
---- ----
Net interest income * 5.59% 5.45%
Provision for loan losses -0.22% -0.38%
Non-interest income 0.98% 1.03%
Non-interest expense -4.05% -4.06%
Provision for income taxes * -0.85% -0.84%
Net income 1.45% 1.20%
* Fully taxable equivalent
Net income (annualized) as a
a percent of average
total assets 1.33% 1.09%
For the six
months ended
June 30,
---------------
1995 1994
---- ----
Net interest income * 5.65% 5.41%
Provision for loan losses -0.23% -0.39%
Non-interest income 0.95% 1.09%
Non-interest expense -4.01% -4.02%
Provision for income taxes * -0.91% -0.84%
Net income 1.45% 1.25%
* Fully taxable equivalent
Net income (annualized) as
a percent of average
total assets 1.32% 1.14%
Net Interest Margin (FTE)
For the three
months ended
June 30,
----------------
1995 1994
---- ----
Yield on earning assets 8.30% 7.63%
Cost of interest-bearing
liabilities 3.43% 2.68%
----- -----
Net interest spread 4.87% 4.95%
Impact of non-interest
bearing funds 0.72% 0.50%
----- -----
Net interest margin 5.59% 5.45%
For the six
months ended
June 30,
---------------
1995 1994
---- ----
Yield on earning assets 8.28% 7.58%
Cost of interest-bearing
liabilities 3.33% 2.66%
----- -----
Net interest spread 4.95% 4.92%
Impact of non-interest
bearing funds 0.70% 0.49%
----- -----
Net interest margin 5.65% 5.41%
The average yield on earning assets for the three-month period
ended June 30, 1995 was 66 basis points higher than the same
period in 1994. The effect of this change, combined with a
favorable impact of non-interest bearing funds, more than offset
the increased costs of interest-bearing liabilities which were,
for the three-month period ended June 30, 1995, 75 basis points
higher than the comparable period in 1994.
On a year-to-date basis, the Company experienced a similar
pattern. For the first half of 1995, the yield on earning assets
was 69 basis points higher that the first six 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 67 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 second
quarter and the first six months of 1995 compared with
comparable periods in 1994, resulted in increases in the average
yield on earning assets for the three and six months ended June
30, 1995 of 66 and 69 basis points, respectively, from the same
periods in 1994. Partially offsetting this favorable trend, the
average balances of low-cost deposits for the second quarter of
1995 decreased $46 million from the second quarter of 1994. On a
year-to-date basis, low-cost deposits decreased $22 million from
the same period of 1994. This change and a general rise in
market interest rates, were the main reasons for increases of 75
and 67 basis points, respectively, in the weighted average rate
paid on total interest-bearing liabilities, from the second
quarter and the first half of 1994.
The following tables present, for the periods indicated,
information regarding the consolidated average assets,
liabilities and shareholders' equity, the amounts of interest
income from average earning assets and the resulting yields, and
the amount of interest expense paid on average interest-bearing
liabilities and the resulting rates. Average loan balances
include non-performing loans. Interest income includes proceeds
from loans on non-accrual status only to the extent cash
payments have been received and applied as interest income.
Yields on securities and certain loans have been adjusted
upward to reflect the effect of income thereon exempt from
federal income taxation at the current statutory federal tax
rate. Loan fees, which are amortized and included in interest
and fee income on loans, were $291,000 lower in the second
quarter of 1995 compared to the same period of 1994 and $307,000
lower in the first six months of 1995 compared to the same
period a year ago.
Distribution of assets, liabilities and shareholders' equity.
<TABLE>
<CAPTION>
For the three months ended
June 30, 1995
(dollars in thousands) -----------------------------------
Interest Rates
Average income/ earned/
Assets balance expense paid
------ --------- --------- ------
<S> <C> <C> <C>
Money market assets and funds sold $250 $-- -- %
Trading account securities 1 -- --
Investment securities available for sale 189,897 2,908 6.14
Investment securities held to maturity 595,310 9,278 6.25
Loans:
Commercial 773,005 18,957 9.84
Real estate construction 57,244 1,772 12.42
Real estate residential 207,080 3,906 7.57
Consumer 283,420 6,751 9.55
--------- ------
Earning assets 2,106,207 43,572 8.30
Other assets 200,817
----------
Total assets $2,307,024
==========
Liabilities and shareholders' equity
------------------------------------
Deposits
Non-interest bearing demand $423,091 $-- -- %
Savings and interest-bearing
transaction 1,039,498 5,882 2.27
Time less than $100,000 294,026 3,619 4.94
Time $100,000 or more 155,837 2,083 5.36
--------- ------
Total interest-bearing deposits 1,489,361 11,584 3.12
Funds purchased 147,972 2,153 5.84
Notes and mortgages payable 25,049 496 7.95
--------- ------
Total interest-bearing liabilities 1,662,382 14,233 3.43
Other liabilities 16,751
Shareholders' equity 204,800
---------
Total liabilities and shareholders'
equity $2,307,024
==========
Net interest spread (1) 4.87 %
Net interest income and interest margin (2) $29,339 5.59 %
======= ====
<FN>
(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
(annualized) by total average earning assets.
</TABLE>
<TABLE>
<CAPTION>
For the three months ended
June 30, 1994 *
(dollars in thousands) -----------------------------------
Interest Rates
Average income/ earned/
Assets balance expense paid
------ --------- --------- ------
<S> <C> <C> <C>
Money market assets and funds sold $10,549 $103 3.90 %
Trading account securities 115 1 4.22
Investment securities available for sale 208,761 2,833 5.44
Investment securities held to maturity 612,186 9,168 6.01
Loans:
Commercial 755,406 16,919 8.98
Real estate construction 72,270 1,742 9.67
Real estate residential 181,583 3,443 7.61
Consumer 286,042 6,256 8.77
--------- ------
Earning assets 2,126,912 40,465 7.63
Other assets 208,906
---------
Total assets $2,335,818
==========
Liabilities and shareholders' equity
------------------------------------
Deposits
Non-interest bearing demand $409,900 $-- -- %
Savings and interest-bearing
transaction 1,098,830 5,291 1.93
Time less than $100,000 313,356 2,952 3.78
Time $100,000 or more 140,637 1,257 3.59
--------- ------
Total interest-bearing deposits 1,552,823 9,500 2.45
Funds purchased 145,731 1,422 3.91
Notes and mortgages payable 28,533 629 8.84
--------- ------
Total interest-bearing liabilities 1,727,087 11,551 2.68
Other liabilities 15,157
Shareholders' equity 183,674
---------
Total liabilities and shareholders'
equity $2,335,818
==========
Net interest spread (1) 4.95 %
Net interest income and interest margin (2) $28,914 5.45 %
======= ====
<FN>
(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
(annualized) by total average earning assets.
* Restated on an historical basis to reflect the January 31, 1995
acquisition of PV Financial and the June 6, 1995 acquisition of
CapitolBank Sacramento.
</TABLE>
<TABLE>
<CAPTION>
For the six months ended
June 30, 1995
(dollars in thousands) -----------------------------------
Interest Rates
Average income/ earned/
Assets balance expense paid
------ --------- --------- ------
<S> <C> <C> <C>
Money market assets and funds sold $3,903 $101 5.24 %
Trading account securities -- -- --
Investment securities available for sale 189,984 5,774 6.13
Investment securities held to maturity 598,545 18,565 6.25
Loans:
Commercial 774,044 37,796 9.85
Real estate construction 58,365 3,460 11.95
Real estate residential 205,523 7,750 7.60
Consumer 284,942 13,445 9.52
--------- -------
Earning assets 2,115,306 86,891 8.28
Other assets 199,065
---------
Total assets $2,314,371
==========
Liabilities and shareholders' equity
------------------------------------
Deposits
Non-interest bearing demand $421,043 $-- -- %
Savings and interest-bearing
transaction 1,057,675 11,911 2.27
Time less than $100,000 293,701 6,838 4.70
Time $100,000 or more 146,928 3,727 5.11
--------- -------
Total interest-bearing deposits 1,498,304 22,476 3.03
Funds purchased 149,373 4,188 5.65
Notes and mortgages payable 25,286 1,001 7.99
--------- -------
Total interest-bearing liabilities 1,672,963 27,665 3.33
Other liabilities 18,491
Shareholders' equity 201,874
---------
Total liabilities and shareholders'
equity $2,314,371
==========
Net interest spread (1) 4.95 %
Net interest income and interest margin (2) $59,226 5.65 %
======= ====
<FN>
(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
(annualized) by total average earning assets.
</TABLE>
<TABLE>
<CAPTION>
For the six months ended
June 30, 1994 *
(dollars in thousands) -----------------------------------
Interest Rates
Average income/ earned/
Assets balance expense paid
------ --------- --------- ------
<S> <C> <C> <C>
Money market assets and funds sold $11,684 $211 3.64 %
Trading account securities 66 1 4.47
Investment securities available for sale 209,136 5,769 5.56
Investment securities held to maturity 590,478 17,607 6.01
Loans:
Commercial 762,405 33,135 8.76
Real estate construction 71,747 3,329 9.36
Real estate residential 180,079 6,896 7.72
Consumer 289,152 12,492 8.71
--------- ------
Earning assets 2,114,747 79,440 7.58
Other assets 208,820
---------
Total assets $2,323,567
==========
Liabilities and shareholders' equity
------------------------------------
Deposits
Non-interest bearing demand $409,734 $-- -- %
Savings and interest-bearing
transaction 1,091,052 10,384 1.92
Time less than $100,000 319,416 6,029 3.81
Time $100,000 or more 146,121 2,557 3.53
--------- ------
Total interest-bearing deposits 1,556,589 18,970 2.46
Funds purchased 128,603 2,251 3.53
Notes and mortgages payable 32,373 1,457 9.08
--------- ------
Total interest-bearing liabilities 1,717,565 22,678 2.66
Other liabilities 15,357
Shareholders' equity 180,911
---------
Total liabilities and shareholders'
equity $2,323,567
===========
Net interest spread (1) 4.92 %
Net interest income and interest margin (2) $56,762 5.41 %
======= ====
<FN>
(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
(annualized) by total average earning assets.
* Restated on an historical basis to reflect the January 31, 1995
acquisition of PV Financial and the June 6, 1995 acquisition of
CapitolBank Sacramento.
</TABLE>
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
June 30, 1995 compared
with three months ended
June 30, 1994 *
--------------------------------
(In thousands) Volume Rate Total
-------- ------ ------
Increase (decrease) in
interest and fee income:
MMkt. assets and funds sold ($51) ($52) ($103)
Trading account securities (1) - (1)
Investment securities available for sale (178) 253 75
Investment securities held to maturity (231) 341 110
Loans:
Commercial 449 1,589 2,038
Real estate construction (84) 114 30
Real estate residential 481 (18) 463
Consumer (56) 551 495
-------- ------ ------
Total loans 790 2,236 3,026
-------- ------ ------
Total increase in interest and
fee income (1) 329 2,778 3,107
-------- ------ ------
Increase (decrease) in interest expense:
Deposits:
Savings/interest-bearing transaction (263) 854 591
Time less than $ 100,000 (168) 835 667
Time $ 100,000 or more 148 678 826
-------- ------ ------
Total interest-bearing (283) 2,367 2,084
Funds purchased 22 709 731
Notes and mortgages payable (73) (60) (133)
-------- ------ ------
Total increase in
interest expense (334) 3,016 2,682
-------- ------ ------
Increase in net
interest income (1) $663 ($238) $425
======= ======= =======
(1) Amounts calculated on a fully taxable equivalent basis
using the current statutory federal tax rate.
* Restated on an historical basis to reflect the January 31, 1995
acquisition of PV Financial and the June 6, 1995 acquisition of
CapitolBank Sacramento.
Six months ended
June 30, 1995 compared
with six months ended
June 30, 1994 *
--------------------------------
Volume Rate Total
-------- ------ ------
Increase (decrease) in
interest and fee income:
MMkt. assets and funds sold ($319) $209 ($110)
Trading account securities (1) - (1)
Investment securities available for sale (47) 52 5
Investment securities held to maturity 243 715 958
Loans:
Commercial 632 4,029 4,661
Real estate construction (269) 400 131
Real estate residential 958 (104) 854
Consumer (177) 1,130 953
-------- ------ ------
Total loans 1,144 5,455 6,599
-------- ------ ------
Total increase in interest and
fee income (1) $1,020 6,431 $7,451
-------- ------ ------
Increase (decrease) in interest expense:
Deposits:
Savings/interest-bearing transaction (306) 1,833 1,527
Time less than $ 100,000 (426) 1,235 809
Time $ 100,000 or more 14 1,156 1,170
-------- ------ ------
Total interest-bearing (718) 4,224 3,506
Funds purchased 411 1,526 1,937
Notes and mortgages payable (294) (162) (456)
-------- ------ ------
Total increase in
interest expense (601) 5,588 4,987
-------- ------ ------
Increase in net
interest income (1) $1,621 $843 $2,464
======= ======= =======
(1) Amounts calculated on a fully taxable equivalent basis
using the current statutory federal tax rate.
* Restated on an historical basis to reflect the January 31, 1995
acquisition of PV Financial and the June 6, 1995 acquisition of
CapitolBank Sacramento.
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 lower its provision for loan
losses to $1.2 million in the second quarter of 1995, compared
to $2.0 million in the same period in 1994. For the first six
months of 1995, the loan loss provision was $2.5 million
compared to $4.1 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
months ended
June 30,
----------------
(in millions) 1995 1994
---- ----
Service charges on deposits accounts $3.13 $3.19
Merchant credit card 0.54 0.60
Mortgage banking income 0.20 0.22
Brokerage commissions 0.15 0.20
Trust fees 0.15 0.18
Net investment securities gains -- 0.04
Other non-interest income 0.96 1.01
------ ------
Total $5.13 $5.44
====== ======
For the six
months ended
June 30,
----------------
(in millions) 1995 1994
---- ----
Service charges on deposits accounts $6.19 $6.33
Merchant credit card 1.04 1.15
Mortgage banking income 0.38 0.57
Brokerage commissions 0.29 0.37
Trust fees 0.32 0.36
Net investment securities gains -- 0.56
Other non-interest income 1.70 2.10
------ ------
Total $9.92 $11.44
====== ======
The $310,000 decrease in non-interest income during the second
quarter of 1995 compared to the second quarter of 1994 resulted
from decreases in all categories, including $60,000 lower
service charges on deposit accounts and lower merchant credit
card and brokerage commissions of $60,000 and $50,000,
respectively. In addition, trust fees and mortgage banking
income were $30,000 and $20,000, respectively, lower than the
second quarter of 1994. The sale of securities available for
sale contributed $44,000 to the non-interest income realized
during the second quarter of 1994 and $0 in 1995.
The same pattern repeats when comparing the fist six months of
1995 with the same period in 1994. The sale of securities
available for sale contributed $560,000 to the non-interest
income realized during the first half of 1994. Mortgage banking
income was lower in 1995 than in 1994 by $190,000, due to reduced
mortgage refinancing volumes. In addition, service charges on
deposits and merchant credit card income were lower as compared
to the first half of 1994 by $140,000 and $110,000,
respectively. Completing the variance, brokerage commissions and
trust fees for the first six months of 1995 were $80,000 and
$40,000, respectively, lower than the same period in 1994.
Non-interest expense
The following table summarizes the components of non-interest
expense for the periods indicated.
For the three
months ended
June 30,
----------------
1995 1994
(In millions) ---- ----
Salaries $8.99 $9.23
Other personnel 1.41 1.44
Occupancy 2.41 2.42
Equipment 1.23 1.35
FDIC deposit insurance 1.10 1.15
Data processing services 1.01 1.06
Professional fees 0.88 0.77
Stationery and supplies 0.43 0.39
Advertising/public relations 0.41 0.34
Postage 0.36 0.36
Loan expense 0.34 0.33
Courier service 0.33 0.32
Operational losses 0.24 0.42
Other real estate owned 0.33 0.07
Merchant credit card 0.17 0.21
Other non-interest expense 1.61 1.69
------ ------
Total $21.25 $21.55
====== ======
For the six
months ended
June 30,
----------------
1995 1994
(In millions) ---- ----
Salaries $17.26 $18.24
Other personnel 3.38 3.22
Occupancy 4.84 4.70
Equipment 2.52 2.63
FDIC deposit insurance 2.22 2.30
Data processing services 2.02 2.15
Professional fees 2.16 1.34
Stationery and supplies 0.80 0.75
Advertising/public relations 0.67 0.63
Postage 0.71 0.73
Loan expense 0.56 0.72
Courier service 0.65 0.65
Operational losses 0.45 0.58
Other real estate owned 0.45 (0.10)
Merchant credit card 0.36 0.40
Other non-interest expense 3.01 3.32
------ ------
Total $42.06 $42.26
====== ======
Non-interest expense continues to show the effects of cost
controls and the benefits resulting from consolidation of
operations. During the second quarter of 1995, non-interest
expense decreased $300,000 from the second quarter of 1994.
Salaries expense decreased $240,000, mainly from the a reduction
of 81 full-time equivalent employees resulting from merger of
operations following the PV Financial and the CapitolBank
acquisitions. In addition, operational losses were reduced by
$180,000 and equipment expense was $120,000 lower than the
second quarter of 1994, even after the write-offs of unused
inventories resulting from the mergers. The decline in deposit
volume resulted in $50,000 lower insurance premiums and data
processing expenses were $50,000 lower than the same quarter of
1994. Partially offsetting these favorable variances, other real
estate owned expenses increased $260,000 from the second quarter
of 1994, following the Company's policy to continue to writedown
these types of property to net realizable values. In addition,
acquisition related expenses were the main reason for the
$110,000 increase in professional fees, a $70,000 increase in
advertising and public relations expense and a $40,000 increase
in stationery and supplies costs.
During the first six months of 1995, non-interest expense
decreased $200,000 from the first six 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
$820,000, loan expense and operational losses were $160,000 and
$130,000, respectively, lower than the prior period, and data
processing services, equipment and deposit insurance expenses
were $130,000, $110,000, and $80,000, respectively, lower than
the first six months of 1994. Partially offsetting these major
variances, during the first six months of 1995 professional fees
were $820,000 higher than 1994, other real estate owned expenses
increased $550,000 from prior year, occupancy expenses were
$140,000 higher than 1995 and stationery and supplies and
advertising and public relations expenses were $50,000 and
$40,000, respectively, higher than the first six months of 1994.
Provision for Income Tax
The Company recorded income tax expense of $2.8 million in the
second quarter of 1995, representing an effective tax rate of 27
percent, compared to $3.2 million, or an effective tax rate of
34 percent, during the second quarter of 1994. The reduced
income tax expense in the current quarter is mainly due to a
reduction in the valuation allowance at CapitolBank of $924,000
prior to the merger with the Company, partially offset by
increased income taxes as a result of the higher level of
pre-tax earnings. For the first six months of 1995, the Company
recorded income tax expense of $6.3 million, compared to $6.4
million during the same period in 1994, representing effective
tax rates of 29 percent and 33 percent, respectively. The main
reasons for the variance are the same as those given for the
second quarter.
Asset Quality
Classified Assets
The Company closely monitors the markets in which it conducts
its lending operations. The Company continues its strategy to
control exposure to loans with high credit risk and increase
diversification of earning assets. Asset reviews are performed
using grading standards and criteria similar to those employed
by bank regulatory agencies. Assets receiving lesser grades fall
under the "classified assets" category which includes all
non-performing assets. These lesser grades occur when known
information about possible credit problems causes doubts about
the ability of such borrowers to comply with loan repayment
terms. These loans have varying degrees of uncertainty and may
become non-performing assets. Classified assets receive an
elevated level of attention to ensure collection.
The following is a summary of classified assets on the dates
indicated:
June 30, December 31,
($ in millions) --------------- -----------
1995 1994 1994
---- ---- ----
Classified loans $47.9 $55.4 $45.9
Other classified assets 6.4 9.9 8.0
----- ----- -----
Total classified assets $54.3 $65.3 $53.9
===== ===== =====
Reserve for loan losses as a
percentage of classified loans 67% 56% 68%
Classified loans at June 30, 1995, decreased $7.5 million to
$47.9 million from a year ago levels, 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 upon 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. 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) June 30, December 31,
--------------- -----------
1995 1994 1994
---- ---- ----
Performing non-accrual loans $3.26 $1.55 $1.94
Non-performing non-accrual loans 6.43 10.92 7.36
----- ----- -----
Total non-accrual loans 9.69 12.47 9.30
Loans 90 days past due and still
accruing 0.14 0.73 1.78
----- ----- -----
Total non-performing loans 9.83 13.20 11.08
Other real estate owned 6.39 9.95 8.02
------ ------ ------
Total non-performing assets $16.22 $23.15 $19.10
====== ====== ======
Reserve for loan losses as a percentage
of non-performing loans 325% 234% 282%
Performing non-accrual loans increased $1.71 million at June 30,
1995 from $1.55 million at June 30 1994 and increased $1.32
million from $1.94 million at December 31, 1994. Non-performing
non-accrual loans of $6.43 million at June 30, 1995, decreased
$4.49 million from June 30, 1994 and decreased $930,000 from
December 31, 1994. The $2.78 million reduction in total
non-accrual loans from June 30, 1994, was principally due to
construction loan payoffs and sales. The $3.56 million decrease
in other real estate owned balances from June 30, 1994 were due
to liquidations and sales. The $390,000 increase in non-accrual
loans from December 31, 1994 was mainly due to commercial loan
additions while the $1.63 million reduction in other real estate
balances was mainly due to sales of related properties.
The amount of gross interest income that would have been
recorded for non-accrual loans for the three and six months
ending June 30, 1995, if all such loans had been current in
accordance with their original terms was $178,000 and $340,000,
respectively. The amount of interest income that was recognized
on non-accrual loans from cash payments made during the three
and six months ended June 30, 1995 totaled $9,000 and $225,000,
respectively, representing annualized yields of .5 and 6.0
percent, respectively. Cash payments received which were applied
against the book balance of non-accrual loans outstanding at
June 30, 1995, totaled $314,000.
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 $32.0 million reserve for loan losses, which
constituted 2.41 percent of total loans at June 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
(In millions) months ended
June 30,
----------------
1995 1994
---- ----
Balance, beginning of period $32.0 $29.3
Loan loss provision 1.2 2.0
Credit losses (1.6) (1.1)
Credit loss recoveries 0.4 0.7
---- ----
Net credit losses (1.2) (0.4)
----- -----
Balance, end of period $32.0 $30.9
===== =====
Reserve for loan losses as a
percentage of loans outstanding 2.41% 2.39%
For the six
(In millions) months ended
June 30,
---------------
1995 1994
---- ----
Balance, beginning of period $31.3 $28.9
Loan loss provision 2.5 4.1
Credit losses (3.0) (2.5)
Credit loss recoveries 1.2 0.4
---- ----
Net credit losses (1.8) (2.1)
----- -----
Balance, end of period $32.0 $30.9
===== =====
In May, 1993, the Financial Accounting Standards Board ("FASB")
issued Statement No. 114, "Accounting by Creditors for
Impairment of a Loan" ("SFAS 114"), which addresses the
accounting treatment of certain impaired loans and amends FASB
Statements No. 5 and No. 15. In October 1994, the FASB issued
Statement No. 118 "Accounting by Creditors for Impairment of a
Loan - Income Recognition and Disclosures", which amended the
income recognition and disclosure provisions of SFAS 114.
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. Effective January 1,
1995, the Company adopted SFAS 114, as amended by SFAS 118. The
Company identifies loans for impairment when, based upon current
information and events, it is probable that it will be unable to
collect all amounts due according to the contractual terms of
the loan agreement. In determining impairment, the Company
considers large non-homogeneous loans including non-accrual
loans, troubled debt restructurings in which a loan is granted a
rate of interest below market rate or a partial forgiveness of
indebtedness, and performing loans which exhibit, among other
characteristics, high loan-to-value ratios, low debt-coverage
ratios, or other indications that the borrowers are experiencing
increased levels of financial difficulty.
The adoption of FASB 114, as amended by SFAS 118, had no material
impact on the Company's consolidated financial statements as the
Company's existing policy of measuring loan impairment was
consistent with methods prescribed in these standards.
Based upon the Company's loan reserve methodology and following
the provisions of SFAS 114, large groups of smaller balance
homogeneous loans are evaluated collectively for impairment.
Therefore, installment, personal revolving credit, residential
real estate and student loans are excluded from the provisions
of SFAS 114. In addition, it is the Company's position that
commercial and construction loans graded "OAEM" (Other Assets
Especially Mentioned - Grade 5) or better, need not be reviewed
for impairment, since the grading itself is a measure of
repayment probability. Furthermore, based upon current
information and events, the Company considers that it is
probable that it will collect all amounts due on these loans
according to the contractual terms of the original agreements.
In summary, the Company considers impaired loans to include all
"Substandard" (Grade 6), "Doubtful" (Grade 7) and "Loss" (Grade
8) classified commercial and construction loans that meet
materiality thresholds, as classified loans below the
established thresholds are considered by the Company to represent
immaterial loss risk. Materiality thresholds are $250,000 for
Substandard graded loans and $100,000 for Doubtful graded loans.
All Loss graded loans are considered impaired.
At June 30, 1995, the carrying value of loans considered to be
impaired under SFAS 114 as amended by SFAS 118 totaled $4.8
million with $1.4 million in specific reserves allocated to
them. The average recorded investment in impaired loans during
the six months ended June 30, 1995, was approximately $3.2
million. All of these accounts were on non-accrual at June 30,
1995. The Company does not recognize interest income on loans
once they are considered to be 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 June 30, 1995, investment securities available for
sale totaled $199.6 million.
The Company generates significant liquidity from its operating
activities. The Company's profitability in the first six months
of 1995 and 1994 was the main contributor to the cash flows
provided from operations for such years of $9.9 million and
$11.8 million, respectively.
Additional cash flow is provided by and used in financing
activities, primarily customer deposits and short-term
borrowings from banks. In the first six months of 1995, $1.0
million were provided by financing activities, as a $52.1
million increase in purchased funds was partially offset by a
$39.0 million decrease in deposits combined with other cash flow
uses including long-term debt maturities, dividends paid to
shareholders and retirement of stock.
The Company uses cash flows from operating and financing
activities primarily to make investments in investment
securities and loans. After net loan repayments of $8.6 million
during the first three months of 1995, net loan disbursements
exceeded repayments by $3.6 million in the second quarter of
1995, resulting in net repayments of $5.0 million during the
first six months of 1995. This compares to net repayments of
$40.3 million during the first six months of 1994. Due to the
reduced level of loan repayment in 1995 as a result of the
Company's current strategy to grow the loan portfolio with high
quality loans extended to financially strong customers in the
markets served by the three subsidiary banks, net purchases of
investment securities decreased $12.5 million during the first
six months of 1995. The net repayment of loans during the first
six months of 1994 provided added liquidity for the Company, and
was the main contributor to the increase of $61.9 million in the
investment securities portfolio.
The Company expects its cash provided by operations to increase
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.
Although interest rate risk is influenced by market forces, it
can be controlled by monitoring and managing the repricing
characteristics of assets and liabilities. 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. At June 30, 1995, the Company was
engaged into two interest rate swaps. These contracts have
notional amounts totaling $60.0 million and expire in August
1995. The Company pays a variable rate based on three-month
LIBOR and receives an average fixed rate of interest of 4.11
percent. The three-month LIBOR rate has averaged 4.78 percent
from the date these two swaps were entered through June 30,
1995. The Company had entered into four interest rate swaps at
June 30, 1994, with notional amounts totaling $110.0 million,
including the two outstanding as of June 30, 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
$607,000 for the first six months of 1995 compared to a decrease
of $245,000 during the comparable period in 1994. At June 30,
1995, the fair value of the interest rate swaps was a loss of
$154,000 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
June 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 $206.1 million at June 30, 1995, representing an increase of
$20.2 million or 11 percent from June 30, 1994 and an increase
of $11.1 million, or 6 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 8.7
percent at June 30, 1995, from 8.0 percent a year ago and 8.3
percent at year-end 1994. The ratio of Tier I capital to
risk-adjusted assets increased to 12.89 percent at June 30, 1995
compared to 12.07 percent at June 30, 1994 and 12.40 percent at
December 31, 1994. Total capital to risk-adjusted assets
increased to 15.40 percent at June 30, 1995 compared to 14.63
percent at June 30, 1994 and 14.92 percent at December 31, 1994.
The following summarizes the ratios of capital to risk-adjusted
assets for the periods indicated:
June 30, December 31,
---------------- ----------
1995 1994 1994
---- ---- ----
Tier I Capital 12.89% 12.07% 12.40%
Total Capital 15.40% 14.63% 14.92%
Leverage ratio 8.87% 8.04% 8.33%
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 the last quarter of 1994 and in 1995, the Board of
Directors approved the repurchase of up to 178,500 shares of
common stock from time to time, subject to appropriate
regulatory and acquisition accounting requirements for
reissuance through stock performance 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.
Interim Periods
The financial information of the Company included herein for
June 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 six-month period
ended June 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.
Date: August 11, 1995
WESTAMERICA BANCORPORATION
(Registrant)
/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
Proxies for the Annual Meeting of
shareholders held on April 25, 1995, were
solicited pursuant Regulation 14A of the
Securities Exchange Act of 1934. The Report
of Inspector of election indicates that
6,887,888 shares of the Common Stock of the
Company, out of 9,237,141 shares
outstanding, were present at the meeting.
The following matters were submitted to a
vote of the shareholders:
1.- Election of directors:
Withheld/
For Exceptions
--------- ----------
Etta Allen 6,598,955 288,133
Louis E. Bartolini 6,565,717 321,371
Charles I. Daniels, Jr. 6,566,379 320,709
Don Emerson 6,657,012 230,076
Arthur C. Latno, Jr. 6,566,525 320,563
Patrick D. Lynch 6,564,491 322,597
Catherine C. MacMillan 6,564,915 322,173
Dwight H. Murray, Jr. 6,654,163 232,925
Ronald A. Nelson 6,656,716 230,372
Carl R. Otto 6,567,013 320,075
David L. Payne 6,645,558 241,530
Edward B. Sylvester 6,653,095 233,993
2.- Ratification of independent certified
public accountant firm. A proposal to
ratify the selection of KPMG Peat Marwick
LLP as independent certified public
accountants for the Company for 1995.
For : 6,697,153
Against : 35,486
Abstain : 155,249
3.- Proposal to amend the Restated Articles
of Incorporation which would increase the
number of shares of authorized common stock.
For : 5,175,915
Against : 190,052
Abstain : 1,278,305
4.- Proposal to approve the Stock Option
Plan of 1995
For : 5,232,674
Against : 1,204,042
Abstain : 207,456
Item 5 - Other Information
None
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibit 3: Certificate of Amendment to the Articles of
Incorporation of Westamerica Bancorporation
(b) Exhibit 11: Computation of Earnings Per Share on Common
and Common Equivalent Shares and on Common
Shares Assuming Full Dilution
(c) Reports on Form 8-K:
On June 8, 1995, the Company filed a Form
8-K announcing the consummation of the
merger between CapitolBank Sacramento with
and into Westamerica Bancorporation
effective as of the close of business on
June 6, 1995.
<TABLE> <S> <C>
<ARTICLE> 9
<RESTATED>
<MULTIPLIER> 1000
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1994 DEC-31-1995 DEC-31-1994
<PERIOD-END> JUN-30-1995 JUN-30-1994 JUN-30-1995 JUN-30-1994
<CASH> 184271 142121 184271 142121
<INT-BEARING-DEPOSITS> 1483909 1543217 1483909 1543217
<FED-FUNDS-SOLD> 0 0 0 0
<TRADING-ASSETS> 0 0 0 0
<INVESTMENTS-HELD-FOR-SALE> 199608 198162 199608 197162
<INVESTMENTS-CARRYING> 591191 633281 591191 633281
<INVESTMENTS-MARKET> 589653 619363 589653 619363
<LOANS> 1329019 1288104 1329019 1288104
<ALLOWANCE> 31988 30825 31988 30825
<TOTAL-ASSETS> 2362471 2324142 2362471 2324142
<DEPOSITS> 1934884 1970877 1934884 1970877
<SHORT-TERM> 186839 118736 186839 118736
<LIABILITIES-OTHER> 14672 20111 14672 20111
<LONG-TERM> 20000 28499 20000 28499
<COMMON> 73052 71982 73052 71982
0 0 0 0
0 0 0 0
<OTHER-SE> 133024 113937 133024 113937
<TOTAL-LIABILITIES-AND-EQUITY> 2362474 2324142 2362471 2324142
<INTEREST-LOAN> 31122 28218 61940 55582
<INTEREST-INVEST> 10842 10907 21719 21343
<INTEREST-OTHER> 0 104 101 208
<INTEREST-TOTAL> 41964 39229 83760 77133
<INTEREST-DEPOSIT> 11584 9500 22476 18970
<INTEREST-EXPENSE> 14233 11551 27665 22678
<INTEREST-INCOME-NET> 27731 27678 56095 54455
<LOAN-LOSSES> 1175 2004 2450 4056
<SECURITIES-GAINS> 0 44 0 564
<EXPENSE-OTHER> 21251 21551 42060 42255
<INCOME-PRETAX> 10440 9558 21506 19588
<INCOME-PRE-EXTRAORDINARY> 10440 9558 21506 19588
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 7632 6340 15192 13141
<EPS-PRIMARY> .80 .66 1.59 1.37
<EPS-DILUTED> .80 .66 1.59 1.37
<YIELD-ACTUAL> 5.59 5.45 5.65 5.41
<LOANS-NON> 9690 12470 9690 12470
<LOANS-PAST> 140 730 140 730
<LOANS-TROUBLED> 0 0 0 0
<LOANS-PROBLEM> 0 0 0 0
<ALLOWANCE-OPEN> 32000 29300 31300 28900
<CHARGE-OFFS> 1600 1100 3000 2500
<RECOVERIES> 400 700 1200 400
<ALLOWANCE-CLOSE> 32000 30900 32000 30900
<ALLOWANCE-DOMESTIC> 32000 30900 32000 30900
<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
For the three months ended
June 30,
-----------------------
1995 1994 *
----- ------
Weighted average number of common
shares outstanding 9,563,824 9,601,033
Assumed exercise on certain options 170,566 81,439
--------- ---------
Total 9,734,390 9,682,472
========= =========
Net income (in thousands) $7,632 $6,340
Fully-diluted earnings per share 0.78 # $0.65
====== =====
Primary earnings per share $0.80 $0.66
===== =====
* Data has been restated on a historical basis to reflect the
January 31, 1995 acquisition of PV Financial and the June 6,
1995 acquisition of CapitolBank on a pooling-of-interest basis.
# Anti-dilutive
For the six months ended
June 30,
---------------------
1995 1994 *
----- ------
Weighted average number of common
shares outstanding 9,571,680 9,597,254
Assumed exercise on certain options 163,488 77,773
--------- ---------
9,735,168 9,675,027
========== ======
Net income (in thousands) $15,192 $13,141
Fully-diluted earnings per share 1.56 # $1.36
====== ====
Primary earnings per share $1.59 $1.37
==== ====
* Data has been restated on a historical basis to reflect the
January 31, 1995 acquisition of PV Financial and the June 6,
1995 acquisition of CapitolBank on a pooling-of-interest basis.
# Anti-dilutive
A461693
State of California
SECRETARY OF STATE
CORPORATION DIVISION
I, BILL JONES, Secretary of State of the State of California,
hereby certify:
That the annexed transcript has been compared with the corporate
record on file in this office, of which it purports to be a
copy, and that same is full, true and correct.
IN WITNESS WHEREOF, I execute this certificate and affix the
Great Seal of the State of California this
May 31, 1995
------------
/s/ BILL JONES
------------------------------
Bill Jones, Secretary of State
A461693
ENDORSED FILE
In the office of the Secretary of State
of the State of California
May 30, 1995
/s/ Bill Jones
------------------------------
BILL JONES, Secretary of State
CERTIFICATE OF AMENDMENT OF RESTATED ARTICLES OF
------------------------------------------------
INCORPORATION OF WESTAMERICA BANCORPORATION
-------------------------------------------
David L. Payne and Mary Anne Bell certify that:
1. They are the president and assistant corporate secretary,
respectively, of WESTAMERICA BANCORPORATION, a California
corporation (the "Corporation").
2. Paragraph 1. of Article III of the Restated Articles
of Incorporation is hereby amended as follows:
1. Capitalization. This corporation is authorized
to issue three classes of shares designated "Common
Stock", "Class B Common Stock" and "Preferred Stock",
respectively. The number of shares of Common Stock
authorized to be issued is 50,000,000, the number of
shares of Class B Common Stock authorized to be issued
is 1,000,000 and the number of shares of Preferred
Stock authorized to be issued is 1,000,000. The
Preferred Stock and Class B Common Stock may be issued
from time to time in one or more series. The Board of
Directors is authorized to fix the number of shares of
any series of Preferred Stock and Class B Common Stock
and to determine the designation of any such series.
The Board of Directors is also authorized to determine
or alter the rights, preferences, privileges, and
restrictions granted to or imposed upon any wholly
unissued series of Preferred Stock or Class B Common
Stock, and, within the limits and restrictions stated
in any resolution or resolutions of the Board of
Directors originally fixing the number of shares
constituting any series, to increase or decrease (but
not below the number of shares of such series then
outstanding) the number of shares of any such series
subsequent to the issue of shares of that series.
3. The amendment herein set forth has been duly approved
by the unanimous written consent of the board of directors.
4. The amendment herein set forth has been duly approved by the
required vote of the shareholders in accordance with Sections
902 and 903 of the Corporation Code. The total number of
outstanding shares of Common Stock of the Corporation is
9,237,141. The number of shares voting in favor of the
amendment equaled or exceeded the vote required. The percentage
vote required for the approval of the amendment herein set forth
was more than 50%.
IN WITNESS WHEREOF, the undersigned have executed
this certificate on May 26, 1995.
/s/ David L. Payne
-------------------------
DAVID L. PAYNE, President
/s/ Mary Anne Bell
-------------------------
MARY ANNE BELL, Assistant
Corporate Secretary
We further declare under penalty of perjury under the laws
of the State of California that the matters set forth in this
certificate are true and correct of our own knowledge.
Dated: May 26, 1995
/s/ David L. Payne
-------------------------
DAVID L. PAYNE, President
/s/ Mary Anne Bell
-------------------------
MARY ANNE BELL, Assistant
Corporate Secretary
