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, 1996
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 8, 1996
9,435,502
<TABLE>
<CAPTION>
WESTAMERICA BANCORPORATION
CONSOLIDATED BALANCE SHEETS
- ---------------------------
(in thousands)
(Unaudited)
-----------------------
September 30, December
1996 1995 1995
---------- ---------- ----------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents $153,553 $168,229 $182,133
Money market assets 250 250 250
Investment securities available for sale 700,114 252,497 620,337
Investment securities held to maturity 199,641 583,502 242,175
with market values of:
$200,396 at September 30, 1996
$583,596 at September 30, 1995
$244,303 at December 31, 1995
Loans, net of reserve for loan losses of:
$34,408 at September 30, 1996 1,381,949 1,334,546 1,353,732
$33,097 at September 30, 1995
$33,508 at December 31, 1995
Other real estate owned 5,313 7,595 5,103
Premises and equipment, net 34,947 26,154 26,625
Interest receivable and other assets 53,400 55,903 60,589
---------- ---------- ----------
Total assets $2,529,167 $2,428,676 $2,490,944
========== ========== ==========
LIABILITIES
Deposits:
Non-interest bearing $496,425 $467,402 $497,489
Interest bearing:
Transaction 356,166 337,056 356,099
Savings 710,058 721,981 716,871
Time 506,494 478,943 479,062
Total deposits 2,069,143 2,005,382 2,049,521
Funds purchased 163,960 168,613 175,622
Liability for interest, taxes and
other expenses 24,364 16,386 21,864
Notes and mortgages payable 42,500 20,000 20,000
---------- ---------- ----------
Total liabilities 2,299,967 2,210,381 2,267,007
SHAREHOLDERS' EQUITY
Authorized - 50,000 shares
Common stock issued and outstanding: 93,430 95,089 94,786
9,438 at September 30, 1996
9,842 at September 30, 1995
9,793 at December 31, 1995
Unrealized gain on securities available for sale 4,978 250 1,691
Retained earnings 130,792 122,956 127,460
---------- ---------- ----------
Total shareholders' equity 229,200 218,295 223,937
---------- ---------- ----------
Total liabilities and shareholders' equity $2,529,167 $2,428,676 $2,490,944
========== ========== ==========
</TABLE>
WESTAMERICA BANCORPORATION
CONSOLIDATED STATEMENTS OF INCOME
- -------------------------------------
(in thousands, except when indicated)
(Unaudited)
Three months Nine months
ended ended
September 30, September 30,
1996 1995 1996 1995
------- ------- ------- -------
INTEREST INCOME
Loans $31,079 $31,926 $93,224 $96,507
Money market assets and funds sold -- 19 -- 276
Investment securities:
Available for sale 9,559 3,308 27,550 8,621
Held to maturity 2,844 8,143 9,178 25,313
------- ------- ------- -------
Total interest income 43,482 43,396 129,952 130,717
INTEREST EXPENSE
Transaction deposits 1,111 936 3,196 2,740
Savings deposits 4,842 5,061 14,167 15,612
Time deposits 6,344 6,399 18,588 17,597
Funds purchased 2,359 2,264 7,717 6,394
Notes and mortgages payable 757 372 2,070 1,373
------- ------- ------- -------
Total interest expense 15,413 15,032 45,738 43,716
------- ------- ------- -------
NET INTEREST INCOME 28,069 28,364 84,214 87,001
Provision for loan losses 1,050 1,150 3,525 4,320
------- ------- ------- -------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 27,019 27,214 80,689 82,681
NON-INTEREST INCOME
Fees on deposit accounts 3,237 3,156 9,651 9,528
Merchant credit card 647 669 2,020 1,767
Mortgage banking 361 352 994 1,093
Financial services commissions 229 174 572 472
Trust fees 102 178 275 494
Securities gain -- 19 35 19
Other 1,067 989 2,735 2,717
------- ------- ------- -------
Total non-interest income 5,643 5,537 16,282 16,090
NON-INTEREST EXPENSE
Salaries and related benefits 9,409 9,930 28,579 31,642
Occupancy 2,823 2,797 7,914 8,005
Equipment 1,485 1,877 4,139 4,680
Data processing 1,006 1,128 2,973 3,213
Professional fees 498 914 1,605 3,597
Other real estate owned 117 159 326 604
Other 3,650 3,581 10,761 14,779
------- ------- ------- -------
Total non-interest expense 18,988 20,386 56,297 66,520
INCOME BEFORE INCOME TAXES 13,674 12,365 40,674 32,251
Provision for income taxes 4,207 3,977 12,708 9,775
------- ------- ------- -------
NET INCOME $9,467 $8,388 $27,966 $22,476
====== ====== ======= =======
Average shares outstanding 9,514 9,864 9,672 9,893
PER SHARE DATA
Earnings per share $1.00 $0.85 $2.89 $2.27
Dividends declared 0.23 0.20 0.69 0.57
WESTAMERICA BANCORPORATION
STATEMENTS OF CASH FLOWS
- ---------------------------
(In thousands)
(Unaudited)
For the nine months
ended
September 30,
1996 1995
-------- --------
OPERATING ACTIVITIES
Net income $27,966 $22,476
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 3,015 3,914
Loan loss provision 3,525 4,320
Amortization of deferred net loan (cost)/fees (1,010) (1,419)
Decrease (Increase) in interest income receivable 270 (1,253)
Decrease in other assets 1,357 437
Decrease in income taxes payable (1,142) (1,224)
(Decrease) increase in interest expense payable (26) 150
Decrease in other liabilities (677) (762)
Gain on sales of investment securities (35) (19)
Loss on sales/write down of equipment 260 1,442
Originations of loans for resale (6,778) (5,490)
Proceeds from sale of loans originated for resale 7,057 7,161
Net gain on sale of property acquired in
satisfaction of debt (129) (192)
Write down on property acquired in
satisfaction of debt 428 401
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 34,081 29,942
INVESTING ACTIVITIES
(Disbursements) repayments of loans (33,374) 11,644
Purchases of investment securities
available for sale (231,661) (88,711)
Purchases of investment securities held to maturity (10,889) (35,738)
Purchases of property, plant and equipment (13,061) (2,224)
Proceeds from maturity of securities
available for sale 129,367 51,154
Proceeds from maturity of securities held to maturity 53,423 62,658
Proceeds from sale of securities available for sale 35,746 4,310
Proceeds from sale of securities held to maturity -- 1,316
Proceeds from sale of premises and equipment 1,464 46
Proceeds from property acquired in
satisfaction of debt 1,854 2,861
-------- --------
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES (67,131) 7,316
FINANCING ACTIVITIES
Net increase (decrease) in deposits 19,622 (66,286)
Net (decrease) increase in short-term borrowings (11,662) 33,187
Additions (reductions) on notes and mortgages payable 22,500 (5,524)
Exercise of stock options/issuance of shares 2,334 3,409
Cash in lieu of fractional shares -- (32)
Retirement of stock (21,633) (9,218)
Dividends paid (6,691) (5,522)
-------- --------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 4,470 (49,986)
-------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS (28,580) (12,728)
Cash and cash equivalents at beginning of period 182,133 180,957
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $153,553 $168,229
======== ========
Supplemental disclosure of non-cash activities
Loans transferred to other real estate owned 2,363 2,642
Unrealized net gain on securities available for sale 3,287 2,520
Supplemental disclosure of cash flow activity
Interest paid for the period 43,656 43,754
Income tax payments for the period 13,463 10,261
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Westamerica Bancorporation (the "Company"), parent company of Westamerica Bank,
Bank of Lake County and Community Banker Services Corporation, reported third
quarter 1996 net income of $9.5 million or $1.00 per share. On a year-to-date
basis, the Company reported net income of $28.0 million, or $2.89 per share.
This record level of earnings represents increases of 17 percent and 24
percent, respectively, from the third quarter of 1995 and September 1995
year-to-date.
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) 1996 1995 1996 1995
------ ------ ------ ------
Net interest income * $30.1 $30.0 $89.9 $91.8
Provision for loan losses (1.1) (1.2) (3.5) (4.3)
Non-interest income 5.6 5.5 16.3 16.1
Non-interest expense (19.0) (20.4) (56.3) (66.5)
Provision for income taxes * (6.1) (5.5) (18.4) (14.6)
------ ------ ------ ------
Net income $9.5 $8.4 $28.0 $22.5
====== ====== ====== ======
* 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,
---------------- ----------------
1996 1995 1996 1995
------ ------ ------ ------
Net interest income (FTE) 5.25% 5.44% 5.30% 5.59%
Provision for loan losses -0.18% -0.21% -0.21% -0.26%
Non-interest income 0.98% 1.00% 0.96% 0.98%
Non-interest expense -3.32% -3.69% -3.32% -4.05%
Provision for income taxes (FTE) -1.08% -1.02% -1.08% -0.89%
------ ------ ------ ------
Net income 1.65% 1.52% 1.65% 1.37%
====== ====== ====== ======
Net income (annualized) as a
percent of average total assets 1.51% 1.38% 1.50% 1.25%
(Average earning assets) 2,279 2,190 2,267 2,194
(Average total assets) 2,492 2,415 2,481 2,409
ANALYSIS OF NET INTEREST INCOME AND MARGIN
The Company continually manages its interest-earning assets and
interest-bearing liabilities and the Company adapts rapidly to changes
in market rates. Third quarter net interest income (FTE) was higher
than the comparable period in 1995 as the favorable effect of a
higher level of earning assets was offset by the unfavorable
impact of decreased balances of low-cost deposits and lower
earning-asset yields. September year-to-date 1996 net interest
income (FTE) was lower than the same period in 1995 mainly due to
the adverse effect of a decrease in the average balance of low-cost
deposits, higher rates paid on interest-bearing liabilities and a
decrease in average earning-asset yields, partially offset by
higher earning-asset average balances. These variances are shown in
the components of net interest income and in the analysis of net
interest margin summarized as follows for the periods indicated:
NET INTEREST INCOME
For the three For the nine
months ended months ended
September 30, September 30,
(In millions) ---------------- ----------------
1996 1995 1996 1995
------ ------ ------ ------
Interest income $43.5 $43.3 $129.9 $130.7
Interest expense (15.4) (15.0) (45.7) (43.7)
FTE adjustment 2.0 1.7 5.7 4.8
------ ------ ------ ------
Net interest income (FTE) $30.1 $30.0 $89.9 $91.8
====== ====== ====== ======
Average earning assets $2,279 $2,190 $2,267 $2,194
Net interest margin (FTE) 5.25% 5.44% 5.30% 5.59%
Net interest income (FTE) increased slightly in the third quarter of
1996 from the $30.0 million earned during the third quarter of 1995.
Interest income (FTE) was higher by $200,000 due to an $89 million
increase in the average balance of earning assets partially offset by
lower yields due to higher average balances in the lower yielding
investment securities portfolio. In addition, the FTE adjustment was
higher by $300,000, as the Company's average balance in tax-exempt
securities and tax-free loans was higher than the third quarter of 1995.
The favorable effect of these two variances was partially offset by a
$400,000 increase in interest expense, principally due to a $49 million
increase in the average balances of interest-bearing liabilities including
increases in higher-costing time deposits, purchased funds and
long-term debt of $21 million, $26 million and $22 million, respectively,
and an decrease of $20 million in low-costing transaction and saving
deposits.
On a year-to-date basis, net interest income decreased $1.9 million
from the same period in 1995. Interest income decreased $800,000 as
the growth in the average balances of the lower-yielding investment
securities portfolio exceeded that of higher-yielding loans by $28
million, but was offset by a $900,000 increase in the FTE adjustment
due to the same reasons listed above in reference to the third quarter of
1996. Interest expense increased $2.0 million from the first nine
months of 1996, mostly due to increases in higher-costing purchased
funds and long-term debt of $50 million and $15 million, respectively,
and a $46 million decrease in the average balances of interest-bearing
low-cost deposits, partially offset by the favorable effect of an increase
of $23 million in the average balances of non-interest bearing demand
deposits.
Third quarter 1996 loan fees of $249,000, which are included in
interest income on loans, were $62,000 lower than the same period
in 1995; September 1996 year-to-date loan fees of $812,000 were
$750,000 lower than the first nine months of 1995.
NET INTEREST MARGIN (FTE)
For the three For the nine
months ended months ended
September 30, September 30,
---------------- ----------------
1996 1995 1996 1995
----- ----- ----- -----
Average yield on earning assets 7.94% 8.16% 7.99% 8.26%
Average cost of interest-bearing
liabilities 3.46% 3.46% 3.45% 3.37%
----- ----- ----- -----
Net interest spread 4.48% 4.70% 4.54% 4.89%
Impact of non-interest
bearing demand 0.77% 0.74% 0.76% 0.70%
----- ----- ----- -----
Net interest margin 5.25% 5.44% 5.30% 5.59%
===== ===== ===== =====
The net interest margin during the third quarter of 1996 was 19 basis
points lower than the same period in 1995. The average yield on
earning assets for in 1996 was 22 basis points lower than in 1995, as
loan yields were 37 basis points lower than the third quarter of 1995
and were partially offset by investment yields, higher than prior year by
10 basis points. The combined unfavorable effect was partially offset by
a increase in non-interest bearing demand deposits.
For the first nine months of 1996, the net interest margin was 29 basis
points lower than 1995. This change resulted from a 27 basis point
decrease in the yield on earning assets and an increase of 8 basis
points in the rate paid on interest-bearing liabilities, partially offset by
the favorable effect of an increase in non-interest bearing deposits.
SUMMARY OF AVERAGE BALANCES, YIELDS/RATES AND INTEREST DIFFERENTIAL
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 interest-bearing liabilities. 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 tax
rate.
For the three months ended
September 30, 1996
(dollars in thousands) --------------------------
Interest Rates
Average income/ earned/
balance expense paid
---------- ------- -------
Assets
Money market assets and funds sold $250 $-- -- %
Investment securities available for sale 667,863 10,311 6.14
Investment securities held to maturity 207,910 3,604 6.90
Loans:
Commercial 829,849 19,292 9.25
Real estate construction 42,233 1,183 11.14
Real estate residential 258,532 4,771 7.34
Consumer 272,238 6,305 9.21
---------- -------
Earning assets 2,278,875 45,466 7.94
Other assets 212,850
----------
Total assets $2,491,725
==========
Liabilities and shareholders' equity
Deposits
Non-interest bearing demand $477,082 $-- -- %
Savings and interest-bearing
transaction 1,044,779 5,954 2.27
Time less than $100,000 295,804 3,669 4.93
Time $100,000 or more 203,789 2,675 5.22
---------- -------
Total interest-bearing deposits 1,544,372 12,298 3.17
Funds purchased 185,542 2,358 5.06
Notes and mortgages payable 42,500 757 7.09
---------- -------
Total interest-bearing liabilities 1,772,414 15,413 3.46
Other liabilities 19,829
Shareholders' equity 222,400
----------
Total liabilities and shareholders' equity $2,491,725
==========
Net interest spread (1) 4.48 %
Net interest income and interest margin (2) $30,053 5.25 %
======= ====
(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 assets.
SUMMARY OF AVERAGE BALANCES, YIELDS/RATES AND INTEREST DIFFERENTIAL (Continued)
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
---------- -------
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 (annualized)
by total average assets.
SUMMARY OF AVERAGE BALANCES, YIELD/RATES AND INTEREST DIFFERENTIAL (Continued)
For the nine months ended
September 30, 1996
(dollars in thousands) --------------------------
Interest Rates
Average income/ earned/
balance expense paid
---------- ------- -------
Assets
Money market assets and funds sold $272 $-- -- %
Investment securities available for sale 649,024 29,775 6.13
Investment securities held to maturity 224,946 11,351 6.74
Loans:
Commercial 821,301 57,661 9.38
Real estate construction 46,904 4,029 11.47
Real estate residential 249,472 13,766 7.37
Consumer 274,735 19,038 9.26
---------- -------
Earning assets 2,266,654 135,620 7.99
Other assets 214,465
----------
Total assets $2,481,119
==========
Liabilities and shareholders' equity
Deposits
Non-interest bearing demand $465,134 $-- -- %
Savings and interest-bearing
transaction 1,043,552 17,364 2.22
Time less than $100,000 301,693 11,219 4.97
Time $100,000 or more 187,244 7,369 5.26
---------- -------
Total interest-bearing deposits 1,532,489 35,952 3.13
Funds purchased 200,800 7,716 5.13
Notes and mortgages payable 38,362 2,070 7.21
---------- -------
Total interest-bearing liabilities 1,771,651 45,738 3.45
Other liabilities 20,349
Shareholders' equity 223,985
----------
Total liabilities and shareholders' equity $2,481,119
==========
Net interest spread (1) 4.54 %
Net interest income and interest margin (2) $89,882 5.30 %
======= ====
(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 assets.
SUMMARY OF AVERAGE BALANCES, YIELDS/RATES AND INTEREST DIFFERENTIAL (Continued)
For the nine months ended
September 30, 1995
(dollars in thousands) --------------------------
Interest Rates
Average income/ earned/
balance expense paid
---------- ------- -------
Assets
Money market assets 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
---------- -------
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 (annualized)
by total average assets.
RATE AND VOLUME VARIANCES. The following tables set 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, 1996
compared with three
months ended
September 30, 1995
----------------------
(In thousands) Volume Rate Total
------ ------ ------
Increase (decrease) in interest and fee income:
MMkt. assets and funds sold ($8) ($11) ($19)
Investment securities available for sale 7,005 (2) 7,003
Investment securities held to maturity (7,113) 1,182 (5,931)
Loans:
Commercial 590 (1,174) (584)
Real estate construction (552) 97 (455)
Real estate residential 841 27 868
Consumer (294) (194) (488)
------ ------ ------
Total loans 585 (1,244) (659)
------ ------ ------
Total increase (decrease) in
interest and fee income (1) 469 (75) 394
Increase (decrease) in interest expense:
Deposits:
Savings/interest-bearing (187) 144 (43)
Time less than $ 100,000 (123) (162) (285)
Time $ 100,000 or more 366 (136) 230
------ ------ ------
Total interest-bearing 56 (154) (98)
Funds purchased 253 (159) 94
Notes and mortgages payable 398 (13) 385
------ ------ ------
Total increase (decrease)
in interest expense 707 (326) 381
------ ------ ------
Increase (decrease) in net
interest income (1) ($238) $251 $13
------ ------ ------
(1) Amounts calculated on a fully taxable equivalent basis
using the current statutory federal tax rate.
Nine months ended
September 30, 1996
compared with nine
months ended
September 30, 1995
----------------------
Volume Rate Total
------- ------- -------
Increase (decrease) in interest and fee income:
MMkt. assets and funds sold ($135) ($141) ($276)
Investment securities available for sale 20,661 493 21,154
Investment securities held to maturity (20,008) 2,027 (17,981)
Loans:
Commercial 1,122 (2,781) (1,659)
Real estate construction (1,538) (60) (1,598)
Real estate residential 2,175 (166) 2,009
Consumer (1,004) (549) (1,553)
------- ------- -------
Total loans 755 (3,556) (2,801)
------- ------- -------
Total increase (decrease) in
interest and fee income (1) $1,273 (1,177) $96
Increase (decrease) in interest expense:
Deposits:
Savings/interest-bearing (759) (229) (988)
Time less than $ 100,000 (120) 273 153
Time $ 100,000 or more 884 (46) 838
------- ------- -------
Total interest-bearing 5 (2) 3
Funds purchased 1,837 (515) 1,322
Notes and mortgages payable 791 (94) 697
------- ------- -------
Total increase (decrease)
in interest expense 2,633 (611) 2,022
------- ------- -------
Increase (decrease) in net
interest income (1) ($1,360) ($566)($1,926)
------- ------- -------
(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 this area allowed the Company to further reduce the level
of its provision for loan losses to $1.1 million in the third quarter of
1996, an amount $100,000 lower than the third quarter of 1995. For the first
nine months of 1996, the loan loss provision was $3.5 million compared
to $4.3 million in the same period in 1995. For further 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) 1996 1995 1996 1995
------ ------ ------ ------
Fees on deposit accounts $3.23 $3.15 $9.65 $9.53
Merchant credit card 0.65 0.67 2.02 1.77
Mortgage banking income 0.36 0.35 0.99 1.09
Financial services commissions 0.23 0.17 0.57 0.47
Trust fees 0.10 0.18 0.28 0.49
Net investment securities gain -- 0.02 0.04 0.02
Other non-interest income 1.07 1.00 2.73 2.72
------ ------ ------ ------
Total $5.64 $5.54 $16.28 $16.09
====== ====== ====== ======
The $100,000 increase in non-interest income during the third quarter of 1996
compared to the third quarter of 1995, included $80,000 higher service fees
on deposit accounts, resulting from higher account analysis fees partially
offset by lower savings accounts and overdraft fees, and $70,000 higher other
non-interest income, mainly due to higher asset sales reduced by lower
dividend income from marketable equity securities. In addition, financial
services commissions and mortgage banking income were $60,000 and $10,000,
respectively, higher in the third quarter of 1996 compared to the same period
in 1995. Partially offsetting these favorable variances, trust fees and
merchant credit card income, largely dependent upon volume activity, were
$80,000 and $20,000 lower than the third quarter of 1995 and the sale of
investment securities in the third quarter of 1995 resulted in a gain of
$20,000.
On a year-to-date basis, merchant credit card income was $250,000 higher when
compared with the same period in 1995, primarily due to increased activity,
and deposit services fees were $120,000 higher than the first nine months of
1995 as a result of higher account analysis fees in part offset by lower
activity charges on other transaction accounts. Financial services
commissions were $100,000 higher than the first nine months of prior year
resulting from a recently implemented asset management program, and gain on
sale of securities and other non-interest income were $20,000 and $10,000,
respectively, higher than the comparable period of 1995. Partially offsetting
these favorable variances from September 1995 year-to-date, was a decline in
trust fees of $210,000 and a decline of $100,000 in mortgage banking income,
reflecting lower mortgage servicing fees due to lower volume, reduced in part
by improved results in connection with sales of mortgage loans.
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) 1996 1995 1996 1995
------ ------ ------ ------
Salaries $8.01 $8.72 $23.86 $26.87
Other personnel 1.40 1.21 4.72 4.77
Occupancy 2.82 2.80 7.91 8.01
Equipment 1.48 1.88 4.14 4.68
Data processing services 1.01 1.13 2.97 3.21
Professional fees 0.50 0.91 1.61 3.60
Courier service 0.56 0.37 1.53 1.03
Stationery and supplies 0.40 0.37 1.21 1.23
Postage 0.31 0.39 1.02 1.15
Advertising/public relations 0.28 0.36 0.90 1.04
Loan expense 0.27 0.23 0.86 0.84
Merchant credit card 0.24 0.18 0.63 0.56
Operational losses 0.19 0.21 0.54 0.72
Other real estate owned 0.12 0.16 0.33 0.60
Other non-interest expense 1.40 1.47 4.07 8.21
------ ------ ------ ------
Total $18.99 $20.39 $56.30 $66.52
====== ====== ====== ======
Non-interest expense continues to show the effects of cost controls and the
benefits resulting from consolidation of operations after the 1995
acquisitions. During the third quarter of 1996, non-interest expense
decreased $1.4 million from the third quarter of 1995. Reductions in
non-interest expense include salaries and other employee related expenses,
lower by $520,000, as a result of streamlining of operations reflected in
the reduction of 45 full-time equivalent employees; professional fees,
down $410,000 as the third quarter of 1995 included increased one-time
expenses related to the 1995 mergers; furniture and equipment, down $400,000
as a result of 1995 merger-related fixed asset write-offs, and
advertising/public relations and postage expenses down $80,000, each, from
the third quarter of 1995.
Decreases in non-interest expense from the third quarter of 1995 were also
realized in the areas of other real estate owned, down $40,000 resulting, in
part from lower maintenance expense, as a result of disposals of property
acquired in satisfaction of debt, partially offset by lower net gains on
sales and higher write-downs on related properties, and lower operational
losses.
During the first nine months of 1996, non-interest expense decreased $10.22
million from the first nine months of 1995. The favorable impact of
consolidation of operations after the 1995 mergers is reflected in the
reductions of expenses in all categories, with the exception of courier
services, higher than prior year by $500,000 and merchant credit card and
loan expense, higher than the first nine months of 1995 by $70,000 and
$20,000, respectively. Reductions in non-interest expense from the first nine
months of 1995 include employee related expense, lower by $3.06 million,
principally caused by a reduction of 92 in full-time equivalent staff, FDIC
insurance expense, included in the other non-interest expense category, lower
by $2.17 million, due to the elimination of premiums and professional fees,
down $1.99 million, as the first nine months of 1995 included higher one-time
expenses in connection with merger activity. In addition, equipment expense
decreased $540,000, also as a result of 1995 merger-related fixed asset
write-offs and other real estate owned expenses decreased $270,000, as 1995
included higher write-downs and maintenance costs of related properties.
Favorable variances from the first nine months of 1995 also include data
processing services, down $240,000, reflecting consolidation of operations
after the mergers, operational losses and advertising/public relations, down
$180,000 and $140,000, respectively, postage, down $130,000 and occupancy and
stationery and supplies costs, which decreased $100,000 and $20,000,
respectively from the comparable period in the prior year.
PROVISION FOR INCOME TAX
During the third quarter and the first nine months of 1996, the Company
recorded income tax expense of $4.2 million and $12.7 million, respectively,
compared to $4.0 million and $9.8 million in the comparable periods
of 1995. The 1996 provisions represent effective tax rates of 31 percent for
the third quarter and the first nine months of 1996 and 32 percent and 30
percent, respectively, for the third quarter and first nine months of 1995.
The lower 1995 September year-to-date effective rate is mainly due to a
$924,000 reduction in the valuation allowance at CapitolBank Sacramento,
recognized prior to the acquisition by the Company during the second quarter
of 1995. The increased expenses in the current year are directly attributable
to the higher level of earnings.
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 assets 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:
Balances as of:
September 30,
(In millions) --------------- December 31,
1996 1995 1995
----- ----- -----
Classified loans $41.4 $47.0 $44.9
Other classified assets 5.3 7.6 5.1
----- ----- -----
Total classified assets $46.7 $54.6 $50.0
===== ===== =====
Reserve for loan losses
as a percentage of
classified loans 83% 70% 75%
Classified loans at September 30, 1996, decreased $5.6 million or 12 percent
to $41.4 million from September 30, 1995, principally due to sales and
pay-offs of loans with real estate collateral and transfers to the other real
estate owned category. The $2.3 million decrease from prior year of other
classified assets was due to the combination of transfers of loans with real
estate collateral net of sales, write-downs and payoffs 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:
Balances as of:
September 30,
(In millions) --------------- December 31,
1996 1995 1995
------ ------ ------
Performing non-accrual loans $5.27 $1.26 $2.46
Non-performing, non-accrual loans 3.55 7.79 7.49
------ ------ ------
Total non-accrual loans 8.82 9.05 9.95
Loans 90 days past due and
still accruing 0.28 0.25 0.27
------ ------ ------
Total non-performing loans 9.10 9.30 10.22
Other real estate owned 5.31 7.60 5.10
------ ------ ------
Total non-performing assets $14.41 $16.90 $15.32
====== ====== ======
Reserve for loan losses
as a percentage of
non-performing loans 378% 356% 328%
Performing non-accrual loans increased $4.01 million to $5.27 million at
September 30, 1996 from $1.26 million at September 30, 1995 and increased
$2.81 million from $2.46 million outstanding at December 31, 1995.
Non-performing non-accrual loans of $3.55 million at September 30, 1996,
decreased $4.24 million from September 30, 1995 and decreased $3.94 million
from December 31, 1995. The $230,000 and $1.13 million reductions in total
non-accrual loans from September 30 and December 31, 1995, respectively,
were principally due to payoffs and writeoffs of loans with real estate
collateral and commercial loans. The $2.29 million reduction in other real
estate owned balances from September 30, 1995 was due to the combination of
liquidations, write-downs and sales net of additions from non-accrual loans
with real estate collateral. The increase of $210,000 in other real estate
owned balances from December 31, 1995 was due to transfers from loans with
real estate collateral partially offset by liquidations, write-downs 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, 1996,
if all such loans had been current in accordance with their original terms,
was $169,000 and $575,000, 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, 1996 totaled $0 and $124,000,
respectively, which represented a year-to-date annualized yield of 1.94
percent. Cash payments received which were applied against the book balance
of non-accrual loans outstanding at September 30, 1996, totaled $102,000.
RESERVE FOR LOAN LOSSES
It is the position of the Company that, even though the strategy to improve
credit quality is reflected in the declining balances of non-accrual loans,
the level of the loan loss reserve is adequate to provide for losses that
can be estimated based on anticipated specific and general conditions as
determined by Management. These include credit loss experience, the amount of
past due, non-performing and classified loans, recommendations of regulatory
authorities and prevailing economic conditions. 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. In the current quarter,
management reduced the Company's provision for loan losses due to the factors
discussed above. While these factors are judgmental and may not be reduced to
a purely mathematical formula, Management considers the reserve for loan
losses, for the periods presented, to be adequate as a reserve against
inherent losses. Management continues to evaluate the loan portfolio and
assess current economic conditions that will dictate future 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
months ended months ended
September 30, September 30,
---------------- ----------------
1996 1995 1996 1995
------ ------ ------ ------
Balance, beginning of period $34.02 $33.61 $33.51 $32.45
Loan loss provision 1.05 1.15 3.53 4.32
Credit losses (1.32) (2.20) (4.38) (5.38)
Credit loss recoveries 0.66 0.54 1.75 1.71
------ ------ ------ ------
Net credit losses (0.66) (1.66) (2.63) (3.67)
------ ------ ------ ------
Balance, end of period $34.41 $33.10 $34.41 $33.10
====== ====== ====== ======
Reserve for loan losses
as a percentage of
loans outstanding 2.43% 2.42%
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. In
evaluating the 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, which are used as a basis for the calculations only and do
not represent exposure to risk for the Company. The risk to the
Company is associated with interest rate fluctuations and with the
counterparty's ability to meet interest payment obligations. 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
third quarter of 1995, the Company was a party in two interest rate
swaps with notional amounts totaling $60 million, which had
commenced in August of 1993 and matured in August of 1995. The
Company paid a variable rate based on three-month LIBOR and
received an average fixed rate of 4.11 percent. The effect of entering into
these contracts resulted in reductions of net interest income of
$763,000 for the first nine months of 1995. The Company had no
interest rate swaps outstanding during the first nine months of 1996.
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, 1996 does not expose the Company to an
unacceptable level of interest rate risk.
LIQUIDITY
The Company's principal source of asset liquidity is investment
securities available for sale. At September 30, 1996, investment
securities available for sale totaled $700.1 million. This represents an
increase of $447.6 million from September 30, 1995 resulting, in large
part, from a one-time reclassification, at December 31, 1995, of $329.4
million of securities from held to maturity to available for sale, that
provided greater flexibility for managing the securities portfolio. This
reclassification followed a special report issued by the Financial
Accounting Standards Board, "A Guide to Implementation of Statement
No. 115 on Accounting for Certain Investments in Debt and Equity
Securities - Questions and Answers", which allowed companies to
reassess the appropriateness of the classifications of all securities
and account for any reclassification at fair value.
The Company generates significant liquidity from its operating activities.
The Company's profitability in the first nine months of 1996 and 1995 was
the main contributor to the cash flows provided from operations for such
periods of $34.1 million and $29.9 million, respectively.
Cash flow is provided by and used in financing activities, primarily
customer deposits, short-term borrowings from banks, extensions of long-term
debt and issuances and repurchases of common stock. In the first nine months
of 1996, $4.5 million were provided by financing activities, as a $19.6
million increase in deposits, the issuance of $22.5 million of the Company's
Senior Notes and exercises of stock options in the amount of $2.3 million
were partially offset by a $21.6 million repurchase and retirement of stock,
an $11.6 million decrease in short-term purchased funds and $6.7 million in
dividends paid to shareholders.
These results compare to the first nine months of 1995 when $50.0 million
were used in financing activities, including a $66.3 million decrease in
customer deposits, plus payments of $5.5 million on long-term debt, and
retirement of stock and dividends paid to shareholders of $9.2 million and
$5.6 million, respectively. These uses of funds were partially offset by a
$33.2 million increase in short-term purchased funds and a $3.4 million
increase in common stock from option exercises.
The Company uses cash flows from operating and financing activities
primarily to invest in securities and loans. During the first nine months
of 1996, net disbursements of loans were $33.4 million compared to net
repayments of loans of $11.6 million during the same period in 1995. The
Company continued to grow its investment securities portfolio in 1996,
reflected in the $24.0 million increase in purchases of investment
securities, net of maturities and sales, for the first nine months of 1996,
compared to an increase of $5.0 million during the same period of 1995. Costs
related to the new facility to consolidate the Company's operations and back
office functions to Fairfield, California, were the main reason for the $13.1
million increase in purchases of property, plant and equipment, compared to
$2.2 million during the first nine months of 1995.
The Company anticipates increasing its cash level from operations through the
end of 1996 due to increased profitability and retained earnings. For the
same period, it is anticipated that the investment securities portfolio and
demand for loans will moderately increase. The growth in deposit balances is
expected to follow the anticipated growth in loan and investment balances
through the end of 1996.
CAPITAL RESOURCES
The current and projected capital position of the Company and the impact of
capital plans and long-term strategies is reviewed regularly by Management.
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 $229.2 million at September 30,
1996, representing an increase of $10.9 million or 5 percent from
September 30, 1995 and an increase of $5.3 million, or 2 percent, from
December 31, 1995. As a result of the Company's profitability and the
retention of earnings, the ratio of equity to total assets increased to
9.1 percent at September 30, 1996, from 9.0 percent a year ago and at
year-end 1995. The ratio of Tier I capital to risk-adjusted assets was
12.52 percent at September 30, 1996 compared to 13.05 percent at
September 30, 1995 and 12.77 percent at December 31, 1995. Total capital
to risk-adjusted assets was 14.89 percent at September 30, 1996 compared to
15.51 percent at September 30, 1995 and 15.18 percent at December 31, 1995.
The following summarizes the ratios of capital to risk-adjusted assets for
the periods indicated:
Balances as of:
9/30/96 12/31/95
(In millions) -------------- --------
1996 1995 1995
---- ---- ----
Tier I Capital 12.52% 13.05% 12.77%
Total Capital 14.89% 15.51% 15.18%
Leverage ratio 8.99% 9.02% 9.12%
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 1996, 1995 and in 1994, the Board of Directors approved
the repurchase of up to 838,150 shares of common stock from time to time,
subject to appropriate regulatory and acquisition accounting requirements.
These purchases are made periodically in the open market and lessen the
dilutive impact of issuing new shares to meet stock performance, option plans
and other requirements on the calculation of earnings per share. Pursuant
to this program, 674,050 shares had been purchased through September 30, 1996.
INTERIM PERIODS
The financial information of the Company included herein for September 1996
and 1995 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 periods ended
September 30, 1996 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, 1995.
On June 28, 1996, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities"
("SFAS 125"). SFAS 125 provides accounting and reporting standards for
transfers and servicing of financial assets and extinguishments of
liabilities based on consistent application of a financial-components
approach that focuses on control. SFAS 125 distinguishes transfers of
financial assets that are sales from transfers that are secured borrowings.
SFAS 125 is effective for transfers and servicing of financial assets and
extinguishments of liabilities occurring after December 31, 1996. The
adoption of SFAS 125 is not expected to have a material effect on the
Company's consolidated financial statements.
Certain amounts in prior periods have been restated to conform to the current
presentation.
OTHER EVENTS
On November 12, 1996, the Company announced that it had entered into
an Agreement and Plan of Reorganization dated as of November 11, 1996
with ValliCorp Holdings, Inc. ("ValliCorp"), the parent company of
ValliWide Bank, headquartered in Fresno, California. Based on
Westamerica's closing stock price on November 11, 1996, the transaction
is valued at approximately $304 million. Pursuant to the Agreement and
Plan of Reorganization, Westamerica would acquire ValliCorp in a tax-free
exchange of its common stock for each outstanding common share of
ValliCorp (the "Merger"). Westamerica would also assume outstanding
options to purchase ValliCorp common stock. Based on Westamerica's
closing stock price on November 11, 1996, Westamerica would issue
approximately 5.7 million shares of common stock, assuming no stock options
are exercised. The Merger is subject to approval by the shareholders of both
companies, regulatory approvals and other customary terms and conditions. On
November 13, 1996, the Company filed a current report on Form 8-K with the
Securities and Exchange Commission, which Form 8-K is incorporated into this
Report on Form 10-Q by reference.
Based on September 30, 1996 consolidated balance sheets for both companies,
the combined company would have, on a pro forma basis, $3.9 billion in total
assets, $3.2 billion in total deposits, $2.3 billion in total loans and $366
million in shareholders' equity.
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 13, 1996 /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
(b) Report on Form 8-K:
On November 13, 1996, the Company filed a report
on Form 8-K announcing that it had entered into an
Agreement and Plan of Reorganization dated
November 11, 1996, with ValliCorp Holdings, Inc., the
parent company of ValliWide bank, headquartered in
Fresno, California.
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 For the nine
months ended months ended
September 30, September 30,
(In thousands, except ---------------- ----------------
per share data) 1996 1995 1996 1995
------ ------ ------ ------
Weighted average number of common
shares outstanding 9,514 9,864 9,672 9,893
Add exercise of options reduced by
the number of shares that could
have been purchased with the
proceeds from such exercise 252 252 248 247
------ ------ ------- -------
9,766 10,116 9,920 10,140
Net income $9,467 $8,388 $27,966 $22,476
Primary earnings per share $1.00 $0.85 $2.89 $2.27
===== ===== ===== =====
Fully-diluted earnings per share $0.97 $0.83 $2.82 $2.22
===== ===== ===== =====
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