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, 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 August 2, 1996
9,529,390
<PAGE>
WESTAMERICA BANCORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands)
(Unaudited)
June 30, December 31,
------------------ ----------
1996 1995* 1995
-------- ------- --------
ASSETS
Cash and cash equivalents $167,715 $190,656 $182,133
Money market assets 250 250 250
Investment securities
available for sale 666,149 199,608 620,337
Investment securities held to
maturity with market values of:
$214,941 at June 30, 1996
$614,324 at June 30, 1995
$244,303 at December 31, 1995 216,256 616,362 242,175
Loans, net of reserve for
loan losses of:
$34,017 at June 30, 1996
$33,607 at June 30, 1995
$33,508 at December 31, 1995 1,364,069 1,342,037 1,353,732
Other real estate owned 6,509 6,388 5,103
Premises and equipment, net 30,689 28,118 26,625
Interest receivable and other assets 53,244 62,659 60,589
---------- ---------- ----------
Total assets $2,504,881 $2,446,078 $2,490,944
========== ========== ==========
LIABILITIES
Deposits:
Non-interest bearing $ 474,654 $ 466,175 $ 497,489
Interest bearing:
Transaction 345,636 322,300 356,099
Savings 670,776 740,407 716,871
Time 503,850 483,233 479,062
--------- --------- ---------
Total deposits 1,994,916 2,012,115 2,049,521
Funds purchased 216,183 182,248 175,622
Liability for interest, taxes and
other expenses 17,506 16,703 21,864
Notes and mortgages payable 42,500 20,000 20,000
--------- --------- ---------
Total liabilities 2,271,105 2,231,066 2,267,007
SHAREHOLDERS' EQUITY
Authorized - 50,000 shares
Common stock issued and outstanding:
9,719 at June 30, 1996
9,879 at June 30, 1995
9,793 at December 31, 1995 95,705 94,943 94,786
Unrealized gain on securities
available for sale, net of taxes 2,962 14 1,691
Retained earnings 135,109 120,055 127,460
---------- ---------- ----------
Total shareholders' equity 233,776 215,012 223,937
---------- ---------- ----------
Total liabilities and
shareholders' equity $2,504,881 $2,446,078 $2,490,944
========== ========== ==========
* Restated on an historical basis to reflect the July 17, 1995
acquisition of North Bay Bancorp, on a pooling-of-interests
basis.
<PAGE>
WESTAMERICA BANCORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three months Six months
(in thousands, except ended June 30, ended June 30,
when indicated) ----------------- -----------------
1996 1995* 1996 1995*
------ ------ ------ ------
INTEREST INCOME
Loans $30,930 $32,435 $62,145 $64,581
Money market assets
and funds sold -- 5 -- 258
Trading account securities 1 -- 1 --
Investment securities
available for sale 9,202 2,575 17,990 5,312
Investment securities
held to maturity 3,013 8,647 6,334 17,170
------- ------- ------- -------
Total interest income 43,146 43,662 86,470 87,321
INTEREST EXPENSE
Transaction deposits 1,047 867 2,085 1,804
Savings deposits 4,623 5,219 9,325 10,551
Time deposits 6,114 6,022 12,244 11,198
Funds purchased 2,677 2,081 5,358 4,130
Notes and mortgages payable 757 496 1,313 1,001
------- ------- ------- -------
Total interest expense 15,218 14,685 30,325 28,684
------- ------- ------- -------
NET INTEREST INCOME 27,928 28,977 56,145 58,637
Provision for loan losses 1,200 1,935 2,475 3,270
------- ------- ------- -------
Net interest income after
provision for loan losses 26,728 27,042 53,670 55,367
NON-INTEREST INCOME
Service charges on deposit 3,230 3,219 6,414 6,372
Merchant credit card 690 570 1,373 1,099
Mortgage banking 288 370 633 741
Brokerage commissions 199 155 343 297
Trust fees 92 147 173 316
Investment securities gains 21 -- 35 --
Other 767 973 1,668 1,728
------- ------- ------- -------
Total non-interest income 5,287 5,434 10,639 10,553
NON-INTEREST EXPENSE
Salaries and benefits 9,329 10,858 19,170 21,712
Occupancy 2,513 2,607 5,091 5,208
Equipment 1,309 1,369 2,654 2,803
Data processing 987 1,042 1,967 2,084
Professional fees 552 1,090 1,107 2,683
Other real estate owned 144 233 209 345
FDIC insurance 1 1,150 15 2,327
Other 3,607 5,281 7,096 8,873
------- ------- ------- -------
Total non-interest expense 18,442 23,630 37,309 46,035
------- ------- ------- -------
INCOME BEFORE INCOME TAXES 13,573 8,846 27,000 19,885
Provision for income taxes 4,221 2,308 8,501 5,797
------- ------- ------- -------
NET INCOME $9,352 $6,538 $18,499 $14,088
======= ======= ======= =======
Average shares outstanding 9,737 9,903 9,752 9,908
PER SHARE DATA
Net income $0.96 $0.66 $1.90 $1.42
Dividends declared 0.23 0.20 0.46 0.37
* Restated on an historical basis to reflect the July 17, 1995
acquisition of North Bay Bancorp, on a pooling-of-interests
basis.
<PAGE>
WESTAMERICA BANCORPORATION
STATEMENTS OF CASH FLOWS
(Unaudited) For the six
months ended
June 30,
----------------
(in thousands) 1996 1995 *
----- ------
OPERATING ACTIVITIES
Net income $18,499 $14,088
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 2,062 2,392
Loan loss provision 2,475 3,170
Amortization of deferred net loan fees (873) (848)
(Increase) decrease in interest income
receivable (1,427) 122
Increase in other assets (3,292) (6,169)
(Decrease) increase in income taxes payable (305) 336
Increase in interest expense payable 1,028 90
Decrease in other liabilities (1,444) (4,457)
Gain on sales of investment securities (35) --
Net loss on sales/write down of equipment 70 339
Originations of loans for resale (4,972) (3,267)
Proceeds from sale of loans originated
for resale 5,549 4,443
Net gain on sale of property acquired
in satisfaction of debt (95) (63)
Write down on property acquired
in satisfaction of debt 225 271
-------- --------
Net cash provided by operating activities 17,465 10,447
-------- --------
INVESTING ACTIVITIES
Net (disbursements) repayments of loans (14,780) 8,708
Purchases of investment securities
available for sale (161,561) (31,167)
Purchases of investment securities
held to maturity (10,634) (28,011)
Purchases of property, plant and equipment (7,655) (1,563)
Proceeds from maturity of securities
available for sale 90,371 23,707
Proceeds from maturity of securities
held to maturity 36,554 50,108
Proceeds from sale of securities
available for sale 35,111 --
Proceeds from sale of property and equipment 1,459 46
Proceeds from property acquired
in satisfaction of debt 728 1,723
-------- --------
Net cash (used in) provided by
investing activities (30,407) 23,551
-------- --------
FINANCING ACTIVITIES
Net decrease in deposits (54,605) (59,577)
Net increase in short-term borrowings 40,561 46,822
Additions (payments) on notes and
mortgages payable 22,500 (5,524)
Exercise of stock options/issuance of shares 2,286 2,430
Cash in lieu of fractional shares -- (14)
Retirement of stock (7,723) (4,966)
Dividends paid (4,495) (3,470)
-------- --------
Net cash used in financing activities (1,476) (24,299)
-------- --------
Net (decrease) increase in cash and
cash equivalents (14,418) 9,699
-------- --------
Cash and cash equivalents at beginning of year 182,133 180,957
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $167,715 $190,656
======== ========
Supplemental disclosure of non-cash and
and cash activities:
Loans transferred to other real estate owned 2,264 296
Unrealized net gain on securities
available for sale 1,271 2,284
Interest paid for the period 29,297 30,019
Income tax payments for the period 8,653 6,551
* Restated on an historical basis to reflect the July 17, 1995
acquisition of North Bay Bancorp, on a pooling-of-interests
basis.
<PAGE>
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 second quarter 1996 net income of
$9.4 million or $.96 per share. On a year-to-date basis, the
Company reported net income of $18.5 million, or $1.90 per
share. This record level of earnings represents increases of 43
percent and 31 percent, respectively, from the second quarter of
1995 and June 1995 year-to-date.
On April 12, 1996, the Company merged one of its subsidiary
banks, Napa Valley Bank, with and into Westamerica Bank, its
largest subsidiary.
All financial data has been restated on an historical basis to
reflect the July 17, 1995 acquisition of North Bay Bancorp,
which was accounted for as a pooling-of-interests.
Acquisitions
- ------------
On July 17, 1995, the merger between the Company and North Bay
Bancorp, parent company of Novato National Bank, became
effective. Under the terms of the merger agreement, the Company
issued approximately 341,000 shares of its common stock in
exchange for all of the outstanding common stock of North Bay
Bancorp. This business combination was accounted for as a
pooling-of-interests business combination and, accordingly, the
consolidated financial statements and financial data for the
periods prior to the merger have been restated to include the
accounts and results of operations of North Bay Bancorp.
In all mergers, certain reclassifications have been made to
conform to the Company's presentation.
<PAGE>
Components of Net Income
- ------------------------
Following is a summary of the components of net income for the
periods indicated:
For the three For the six
months ended months ended
June 30, June 30,
---------------- ----------------
(In millions) 1996 1995 1996 1995
----- ----- ----- -----
Net interest income * $29.8 $30.6 $59.8 $61.8
Provision for loan losses (1.2) (1.9) (2.5) (3.3)
Non-interest income 5.3 5.4 10.6 10.6
Non-interest expense (18.4) (23.6) (37.3) (46.0)
Provision for income
taxes * (6.1) (4.0) (12.1) (9.0)
----- ----- ----- -----
Net income $9.4 $6.5 $18.5 $14.1
===== ===== ===== =====
* 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 For the six
months ended months ended
June 30, June 30,
---------------- ----------------
1996 1995 1996 1995
----- ----- ----- -----
Net interest income (FTE) 5.29% 5.63% 5.32% 5.67%
Provision for loan losses -0.21% -0.36% -0.22% -0.30%
Non-interest income 0.94% 1.00% 0.95% 0.97%
Non-interest expense -3.27% -4.35% -3.32% -4.23%
Provision for income taxes -1.09% -0.72% -1.08% -0.82%
----- ----- ----- -----
Net income 1.66% 1.20% 1.65% 1.29%
===== ===== ===== =====
Net income (annualized) as
a percent of average
total assets 1.51% 1.10% 1.50% 1.18%
<PAGE>
Analysis of Net Interest Income and Margin
- ------------------------------------------
The Company continually manages its interest-earning assets and
interest-bearing liabilities adapting rapidly to changes in
market rates. Second quarter and June year-to-date 1996 net
interest income (FTE) was lower than the comparable periods in
1995. This was due to the adverse effect of a decrease in the
average balance of low-cost deposits combined with 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 six
months ended months ended
June 30, June 30,
---------------- ----------------
(In millions) 1996 1995 1996 1995
----- ----- ----- -----
Interest income $43.1 $43.7 $86.5 $87.3
Interest expense (15.2) (14.7) (30.3) (28.7)
FTE adjustment 1.9 1.6 3.6 3.2
----- ----- ----- -----
Net interest income (FTE) $29.8 $30.6 $59.8 $61.8
===== ===== ===== =====
Average earning assets $2,269 $2,181 $2,261 $2,197
Net interest margin (FTE) 5.29% 5.63% 5.32% 5.67%
Net interest income (FTE) decreased $800,000 or 3 percent in the
second quarter of 1996 from the $30.6 million earned during the
second quarter of 1995. The effect of a $600,000 decrease in
interest income, mainly resulting from decreases in earning-
asset yields due to higher average balances in the lower
yielding investment securities portfolio, was partially offset
by a $300,000 increase in the FTE adjustment, as the Company's
average balance in tax-exempt securities and tax-free loans
increased $28 million and $27 million, respectively, from the
second quarter of 1995. Also contributing to the unfavorable
variance from the second quarter of 1995, was an increase of
$500,000 in interest expense, principally due to the effect of a
$48 million decrease in the average balances of interest-bearing
low-cost deposits, offset in part by an increase of $25 million
in non-interest bearing demand deposits, and an increase of $68
million in the average balance of higher costing short-term
purchased funds.
On a year-to-date basis, the Company experienced a similar
pattern. 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 $33 million,
and was partially offset by a $400,000 increase in the FTE
adjustment due to the same reasons listed above in reference to
the second quarter of 1996. Interest expense increased $1.6
million from the first six months of 1996, mostly due to a $59
million decrease in the average balances of interest-bearing
low-cost deposits, partially offset by an increase of $24 million
in the average balances of non-interest bearing demand deposits,
and a $61 million increase in the average balance of
higher-costing purchased funds.
Second quarter 1996 amortized loan fees of $290,000, which are
included in interest income on loans, were $236,000 lower than
the same period in 1995; June year-to-date loans fees of
$563,000 were $688,000 lower than the first six months of 1996.
NET INTEREST MARGIN (FTE) For the three For the six
months ended months ended
June 30, June 30,
---------------- ----------------
1996 1995 1996 1995
----- ----- ----- -----
Yield on earning assets 7.98% 8.33% 8.02% 8.30%
Cost of interest-bearing
liabilities 3.45% 3.42% 3.44% 3.32%
---- ---- ---- ----
Net interest spread 4.53% 4.91% 4.58% 4.98%
Impact of non-interest
bearing demand 0.76% 0.72% 0.74% 0.69%
---- ---- ---- ----
Net interest margin 5.29% 5.63% 5.32% 5.67%
==== ==== ==== ====
The net interest margin during the second three months of 1996
was 34 basis points lower than the same period in 1995. The
average yield on earning assets for the same period in 1996 was
35 basis points lower than in 1995 due to a 3 basis point
increase in the rate paid on interest-bearing liabilities. This
was partially offset by the favorable effect of an increase in
non-interest bearing demand deposits.
For the first six months of 1996, the net interest margin was 35
basis points lower than 1995. This change resulted from a 28
basis point decrease in the yield on earning assets and an
increase of 12 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.
<PAGE>
For the three months ended
June 30, 1996
(dollars in thousands) -------------------------------
Interest Rates
Average income/ earned/
balance expense paid
-------- ------- -------
Assets
Money market assets and funds sold $ 250 $ -- --%
Trading account securities 67 1 6.00
Investment securities:
Available for sale 647,979 9,951 6.18
Held to maturity 225,812 3,727 6.64
Loans:
Commercial 822,359 19,122 9.35
Real estate construction 47,639 1,323 11.17
Real estate residential 249,908 4,588 7.38
Consumer 274,906 6,321 9.25
--------- ------
Earning assets 2,268,920 45,033 7.98
Other assets 214,794
----------
Total assets $2,483,714
==========
Liabilities and shareholders' equity
Deposits:
Non-interest bearing demand $ 462,151 $ -- --%
Savings and interest-bearing
transaction 1,032,020 5,670 2.21
Time less than $100,000 302,362 3,687 4.90
Time $100,000 or more 188,605 2,427 5.18
--------- ------
Total interest-bearing deposits 1,522,987 11,784 3.11
Funds purchased 210,687 2,677 5.11
Notes and mortgages payable 42,500 757 7.16
--------- ------
Total interest-bearing liabilities 1,776,174 15,218 3.45
Other liabilities 18,565
Shareholders' equity 226,824
----------
Total liabilities and
shareholders' equity $2,483,714
==========
Net interest spread (1) 4.53%
Net interest income and interest margin (2) $29,815 5.29%
======= ====
(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.
<PAGE>
For the three months ended
June 30, 1995 *
(dollars in thousands) -------------------------------
Interest Rates
Average income/ earned/
balance expense paid
-------- ------- -------
Assets
Money market assets and funds sold $390 $ 5 5.14%
Trading account securities -- -- --
Investment securities:
Available for sale 181,323 2,634 5.83
Held to maturity 630,412 9,934 6.32
Loans:
Commercial 802,099 19,762 9.88
Real estate construction 65,824 2,049 12.49
Real estate residential 210,446 3,955 7.54
Consumer 290,205 6,931 9.58
--------- ------
Earning assets 2,180,699 45,270 8.33
Other assets 211,082
----------
Total assets $2,391,781
==========
Liabilities and shareholders' equity
Deposits
Non-interest bearing demand $ 436,901 $ -- --%
Savings and interest-bearing
transaction 1,080,601 6,086 2.26
Time less than $100,000 304,619 3,758 4.95
Time $100,000 or more 169,030 2,264 5.37
--------- ------
Total interest-bearing deposits 1,554,250 12,108 3.12
Funds purchased 143,040 2,081 5.84
Notes and mortgages payable 25,049 496 7.94
--------- ------
Total interest-bearing liabilities 1,722,339 14,685 3.42
Other liabilities 17,494
Shareholders' equity 215,047
----------
Total liabilities and
shareholders' equity $2,391,781
==========
Net interest spread (1) 4.91%
Net interest income and interest margin (2) $30,585 5.63%
======= ====
(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 July 17, 1995
acquisition of North Bay Bancorp on a pooling-of-interests basis.
<PAGE>
For the six months ended
June 30, 1996
(dollars in thousands) -------------------------------
Interest Rates
Average income/ earned/
balance expense paid
-------- ------- -------
Assets
Money market assets and funds sold $ 250 $ -- --%
Trading account securities 34 1 5.91
Investment securities:
Available for sale 639,639 19,467 6.12
Held to maturity 233,430 7,739 6.67
Loans:
Commercial 817,027 38,371 9.44
Real estate construction 49,239 2,847 11.63
Real estate residential 244,942 8,995 7.38
Consumer 275,983 12,734 9.28
--------- ------
Earning assets 2,260,544 90,154 8.02
Other assets 215,272
----------
Total assets $2,475,816
==========
Liabilities and shareholders' equity
Deposits
Non-interest bearing demand $ 459,161 $ -- --%
Savings and interest-bearing
transaction 1,042,938 11,410 2.20
Time less than $100,000 304,638 7,550 4.98
Time $100,000 or more 178,971 4,694 5.27
--------- ------
Total interest-bearing deposits 1,526,547 23,654 3.12
Funds purchased 208,429 5,358 5.17
Notes and mortgages payable 36,293 1,313 7.28
--------- ------
Total interest-bearing liabilities 1,771,269 30,325 3.44
Other liabilities 20,608
Shareholders' equity 224,778
----------
Total liabilities and
shareholders' equity $2,475,816
==========
Net interest spread (1) 4.58%
Net interest income and interest margin (2) $59,829 5.32%
======= ====
(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.
<PAGE>
For the six months ended
June 30, 1995 *
(dollars in thousands) -------------------------------
Interest Rates
Average income/ earned/
balance expense paid
Assets -------- ------- -------
Money market assets and funds sold $ 9,022 $ 258 5.77%
Trading account securities -- -- --
Investment securities:
Available for sale 185,750 5,432 5.90
Held to maturity 629,817 19,673 6.30
Loans:
Commercial 804,553 39,447 9.89
Real estate construction 66,524 3,989 12.09
Real estate residential 209,121 7,854 7.57
Consumer 291,718 13,799 9.54
--------- ------
Earning assets 2,196,505 90,452 8.30
Other assets 208,711
----------
Total assets $2,405,216
==========
Liabilities and shareholders' equity
Deposits
Non-interest bearing demand $ 435,101 $ -- --%
Savings and interest-bearing
transaction 1,102,370 12,355 2.26
Time less than $100,000 304,672 7,112 4.71
Time $100,000 or more 160,487 4,086 5.13
--------- ------
Total interest-bearing deposits 1,567,529 23,553 3.03
Funds purchased 147,326 4,130 5.65
Notes and mortgages payable 25,286 1,001 7.98
--------- ------
Total interest-bearing liabilities 1,740,141 28,684 3.32
Other liabilities 18,001
Shareholders' equity 211,973
----------
Total liabilities and
shareholders' equity $2,405,216
==========
Net interest spread (1) 4.98%
Net interest income and interest margin (2) $61,768 5.67%
======= ====
(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 July 17, 1995
acquisition of North Bay Bancorp on a pooling-of-interests basis.
<PAGE>
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, 1996 compared
with three months ended
June 30, 1995 *
-----------------------------
Volume Rate Total
------ ---- -----
Increase (decrease) in
interest and fee income:
Money market assets and
funds sold $ (1) $ (4) $ (5)
Trading account securities 1 -- 1
Investment securities:
Available for sale 7,150 167 7,317
Held to maturity (6,734) 527 (6,207)
Loans:
Commercial 570 (1,210) (640)
Real estate construction (525) (201) (726)
Real estate residential 711 (78) 633
Consumer (368) (242) (610)
------ ------ ------
Total loans 388 (1,731) (1,343)
------ ------ ------
Total increase (decrease)
in interest and
fee income (1) 804 (1,041) (237)
------ ------ ------
Increase (decrease) in
interest expense:
Deposits:
Savings/interest-bearing (280) (136) (416)
Time less than $ 100,000 (32) (39) (71)
Time $ 100,000 or more 238 (75) 163
------ ------ ------
Total interest-bearing (74) (250) (324)
Funds purchased 808 (212) 596
Notes and mortgages payable 303 (42) 261
------ ------ ------
Total increase (decrease)
in interest expense 1,037 (504) 533
------ ------ ------
Decrease in net
interest income (1) $ (233) $ (537) $ (770)
====== ====== ======
(1) Amounts calculated on a fully taxable equivalent basis
using the current statutory federal tax rate.
* Restated on an historical basis to reflect the July 17, 1995
acquisition of North Bay Bancorp, on a pooling-of-interests
basis.
<PAGE>
Six months ended
June 30, 1996 compared
with six months ended
June 30, 1995 *
(In thousands) -----------------------------
Volume Rate Total
------ ---- -----
Increase (decrease) in
interest and fee income:
Money market assets and
funds sold $ (127) $ (131) $ (258)
Trading account securities 1 -- 1
Investment securities:
Available for sale 13,821 214 14,035
Held to maturity (13,155) 1,221 (11,934)
Loans:
Commercial 570 (1,646) (1,076)
Real estate construction (995) (147) (1,142)
Real estate residential 1,335 (194) 1,141
Consumer (707) (358) (1,065)
------- ------- -------
Total loans 203 (2,345) (2,142)
------- ------- -------
Total increase (decrease)
in interest and
fee income (1) 743 (1,041) (298)
------- ------- -------
Increase (decrease) in
interest expense
Deposits:
Savings/interest-bearing (633) (312) (945)
Time less than $ 100,000 (1) 439 438
Time $ 100,000 or more 492 116 608
------- ------- -------
Total interest-bearing (142) 243 101
Funds purchased 1,548 (320) 1,228
Notes and mortgages payable 391 (79) 312
------- ------- -------
Total increase (decrease)
in interest expense 1,797 (156) 1,641
------- ------- -------
Decrease in net
interest income (1) $(1,054) $ (885) $(1,939)
======= ======= =======
(1) Amounts calculated on a fully taxable equivalent basis
using the current statutory federal tax rate.
* Restated on an historical basis to reflect the July 17, 1995
acquisition of North Bay Bancorp, on a pooling-of-interests
basis.
<PAGE>
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.
Maintenance of underwriting standards and continuing
improvements in credit quality allowed the Company to reduce the
level of its provision for loan losses to $1.2 million in the
second quarter of 1996. This amount is $735,000 lower than the
second quarter of 1995, which included a $600,000 additional
provision recognized by Novato National Bank, North Bay
Bancorp's subsidiary bank, prior to North Bay Bancorp's merger
into the Company. 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 six
months ended months ended
June 30, June 30,
(in millions) ---------------- ----------------
1996 1995 1996 1995
----- ----- ----- -----
Deposit account fees $3.23 $3.22 $6.41 $6.37
Merchant credit card 0.69 0.57 1.37 1.10
Mortgage banking income 0.29 0.37 0.63 0.74
Brokerage commissions 0.20 0.15 0.34 0.30
Trust fees 0.09 0.15 0.17 0.32
Investment securities gain 0.02 -- 0.04 --
Other non-interest income 0.77 0.97 1.68 1.72
----- ----- ------ ------
Total $5.29 $5.43 $10.64 $10.55
===== ===== ====== ======
The $140,000 decrease in non-interest income during the second
quarter of 1996 compared to the second quarter of 1995, included
$190,000 lower other non-interest income, principally due to the
reversal, during the second quarter of 1995, of overaccrued
reserves that had been recorded at the acquired institutions
prior to the merger with and into the Company, $80,000 lower
mortgage banking income resulting mostly from lower mortgage
servicing fees, due to reduced refinancing volume and $60,000
lower trust fees. Partially offsetting these variances, merchant
credit card income increased $120,000 in the second quarter of
1996 compared to the same quarter of 1995 due to increased
volume, and brokerage commissions were $50,000 higher than in
the second quarter of 1995. Completing the variance, the sale of
investment securities available for sale resulted in a $20,000
gain in the second quarter of 1996, compared to $0 during the
same period in 1995, and service charges on deposit accounts
were $10,000 higher than in the comparable period of 1995.
On a year-to-date basis, the same pattern repeats when comparing
the individual changes experienced in 1996 compared with the
same period in 1995.
Non-interest income for the first six months of 1996 was $90,000
higher than the same period in 1995. Merchant credit card income
was $270,000 higher than in 1995 due to volume, and brokerage
commissions and service charges on deposit accounts were
$40,000, each, higher than the first six months of 1995 mostly
due to increased volumes. The Company realized a gain of $40,000
from the sale of investment securities available for sale
compared to $0 in 1995. Partially offsetting these increases in
non-interest income, trust fees were $150,000 lower than the
first six months of 1995 as volumes have decreased from prior
year; mortgage banking income decreased $110,000 from the same
period in 1995 principally due to lower mortgage servicing fees
resulting from lower volumes; other non-interest income
decreased $40,000 reflecting the effect of the 1995 reversal of
reserves mentioned above. These variances were partially offset
by higher miscellaneous items also included in this category.
Non-interest expense
- --------------------
The following table summarizes the components of non-interest expense
for the periods indicated.
For the three For the six
months ended months ended
June 30, June 30,
(In millions) ---------------- ----------------
1996 1995 1996 1995
----- ----- ----- -----
Salaries $7.23 $8.69 $14.65 $17.00
Other personnel 2.10 2.17 4.52 4.71
Occupancy 2.51 2.61 5.09 5.21
Equipment 1.31 1.37 2.65 2.80
Data processing services 0.99 1.04 1.97 2.08
Professional fees 0.55 1.09 1.11 2.68
Courier service 0.53 0.33 0.97 0.66
Stationery and supplies 0.45 0.45 0.82 0.85
Postage 0.34 0.38 0.71 0.76
Advertising/public relation 0.33 0.41 0.61 0.68
Loan expense 0.34 0.36 0.58 0.62
Merchant credit card 0.20 0.19 0.38 0.38
Operational losses 0.17 0.28 0.35 0.51
Other real estate owned 0.14 0.23 0.21 0.35
FDIC deposit insurance -- 1.15 0.01 2.33
Other non-interest expense 1.25 2.88 2.68 4.41
------ ------ ------ ------
Total $18.44 $23.63 $37.31 $46.03
====== ====== ====== ======
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 second
quarter of 1996, non-interest expense decreased $5.19 million
from the second quarter of 1995. All categories decreased with
the exception of courier service and merchant credit card
related expenses. Reductions in non-interest expense include
salaries and other employee related expenses, lower by $1.53
million, as a result of streamlining of operations reflected in
the reduction of 102 full-time equivalent employees; FDIC
insurance expense, lower by $1.2 million due to the elimination
of premiums; professional fees, down $540,000 as the second
quarter of 1995 included one-time expenses related to the 1995
mergers; and operational losses, down $110,000 from the second
quarter of 1995. In addition, occupancy expense was down
$100,000 from the second quarter in 1995 principally as a result
of merger-related fixed asset write-offs recorded in 1995; other
real estate owned was $90,000 lower as 1995 included higher
write-downs to net realizable values of properties acquired in
satisfaction of debt; and advertising/public relations and
equipment expenses were $80,000 and $60,000, respectively, lower
than the second quarter of 1995, mostly due to asset write-offs
and other expense associated with the first and second quarter
of 1995 mergers. Completing the variance from the same quarter
of 1995, data processing services, postage and loan expense were
lower by $50,000, $40,000 and $20,000, respectively, reflecting
the consolidation of operations after the mergers.
During the first six months of 1996, non-interest expense
decreased $8.72 million from the first six 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 $310,000, in part due to the larger territory
covered by the Company's operations and the increased number of
merchant pick-ups and deliveries. Reductions in non-interest
expense from the first six months of 1995 include employee
related expense, lower by $2.54 million, principally caused by a
reduction of 116 in full-time equivalent staff, FDIC insurance
expense, lower by $2.32 million due to the elimination of
premiums and professional fees, down $1.57 million as the first
six months of 1995 included one-time expenses in connection with
merger activity. In addition, operational losses were $160,000
lower than in the prior year and equipment expense decreased
$150,000, also as a result of 1995 merger-related fixed asset
write-offs. Other real estate owned expenses decreased $140,000,
as 1995 included higher write-downs and maintenance costs of
related properties, and occupancy and data processing services
were down $120,000 and $110,000, respectively, mainly reflecting
consolidation of operations. Completing the variance,
advertising/public relations was lower than 1995 by $70,000,
postage was down $50,000 and loan expense and stationery and
supplies expense were lower by $40,000 and $30,000,
respectively, from the first six months of 1995, as related
costs stabilized after increased merger activity.
Provision for income tax
- ------------------------
During the second quarter and the first six months of 1996, the
Company recorded income tax expense of $4.2 million and $8.5
million, respectively, compared to $2.3 million and $5.8 million
in the comparable periods of 1995. The 1996 provisions represent
effective tax rates of 31 percent for the second quarter and the
first six months of 1996 and 26 percent and 29 percent,
respectively, for the second quarter and first six months of
1995. The reduced income tax expense in the second quarter of
1995 was 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 at
June 30, December 31,
(In millions) ---------------- -----------
1996 1995 1995
----- ----- -----
Classified loans $41.4 $51.4 $44.9
Other classified assets 6.5 6.4 5.1
----- ----- -----
Total classified assets $47.9 $57.8 $50.0
===== ===== =====
Reserve for loan losses
as a percentage of
classified loans 82% 65% 75%
Classified loans at June 30, 1996, decreased $10.0 million or 19
percent to $41.4 million from June 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 $100,000
increase 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 at
June 30, December 31,
(In millions) ---------------- -----------
1996 1995 1995
Loans: ----- ----- -----
Performing non-accrual $2.17 $3.26 $2.46
Non-performing,
non-accrual 6.11 7.16 7.49
----- ----- -----
Total non-accrual loans 8.28 10.42 9.95
90 days past due and
still accruing 0.17 0.28 0.27
----- ----- -----
Total non-performing loans 8.45 10.70 10.22
Other real estate owned 6.51 6.39 5.10
------ ------ ------
Total non-performing assets $14.96 $17.09 $15.32
====== ====== ======
Reserve for loan losses
as a percentage of
non-performing loans 402% 314% 328%
Performing non-accrual loans decreased $1.09 million to $2.17
million at June 30, 1996 from $3.26 million at June 30, 1995 and
decreased $290,000 from $2.46 million outstanding at December
31, 1995. Non-performing non-accrual loans of $6.11 million at
June 30, 1996, decreased $1.05 million from June 31, 1995 and
decreased $1.38 million from December 31, 1995. The $2.14
million and $1.67 million reductions in total non-accrual loans
from June 30 and December 31, 1995, respectively, were
principally due to payoffs and writeoffs of loans with real
estate collateral and commercial loans. The $120,000 and the
$1.41 million other real estate owned increases from June 30 and
December 31, 1995, respectively, were due to the combination of
additions from non-accrual loans with real estate collateral net
of liquidations and sales. The amount of gross interest income
that would have been recorded for non-accrual loans for the
three and six months ending June 30, 1996, if all such loans had
been current in accordance with their original terms, was
$192,000 and $406,000, 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,
1996 totaled $45,000 and $124,000, respectively, representing
annualized yields of 2.10 and 2.86 percent. Cash payments
received which were applied against the book balance of
non-accrual loans outstanding at June 30, 1996, totaled $291,000.
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 increased 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. 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 six
months ended months ended
June 30, June 30,
(In millions) ---------------- ----------------
1996 1995 1996 1995
------ ------ ------ ------
Balance, beginning
of period $33.78 $33.05 $33.51 $32.45
Loan loss provision 1.20 1.94 2.48 3.27
Credit losses (1.54) (1.82) (3.06) (3.28)
Credit loss recoveries 0.58 0.44 1.09 1.17
----- ----- ----- -----
Net credit losses (0.96) (1.38) (1.97) (2.11)
------ ------ ------ ------
Balance, end of period $34.02 $33.61 $34.02 $33.61
====== ====== ====== ======
Reserve for loan losses
as a percentage of
loans outstanding 2.43% 2.44%
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. At June 30, 1995, the Company was a
party in two interest rate swaps with notional amounts totaling
$60 million. 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 $607,000 for the first six
months of 1995. The Company had no interest rate swaps
outstanding during the first six 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 June 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 June 30, 1996, investment
securities available for sale totaled $666.1 million. This
represents an increase of $466.5 million from June 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 six months
of 1996 and 1995 was the main contributor to the cash flows
provided from operations for such periods of $17.5 million and
$10.4 million, respectively.
Cash flow is provided by and used in financing activities,
primarily customer deposits, short-term borrowings from banks
and extensions of long-term debt. In the first six months of
1996, $1.5 million were used in financing activities, as a $54.6
million decrease in deposits combined with other cash flow uses,
including $4.5 million in dividends paid to shareholders and
$7.7 million in repurchases and retirement of stock, were
partially offset by an increase of $40.6 million in purchased
funds, a $2.3 million increase in common stock from option
exercises and the issuance of $22.5 million of the Company's
Senior Notes. These results compare to the first six months of
1995 when $24.3 million were used in financing activities,
mainly comprised of a $59.6 million decrease in customer
deposits, plus payments of $5.5 million on long-term debt, and
retirement of stock and dividends paid to shareholders for $5.0
million and $3.5 million, respectively. These uses of funds were
partially offset by a $46.8 million increase in short-term
purchased funds and a $2.4 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 six months of 1996, net disbursements of loans were
$14.8 million compared to net repayments of loans of $8.7
million during the same period in 1995. The Company continued to
grow its investment securities portfolio in 1996, reflected in
the $10.2 million increase in purchases of investment securities
net of maturities and sales for the first six months of 1996
compared to proceeds from maturities net of purchases of $14.6
million during the same period 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 $233.8 million at June 30, 1996, representing an increase of
$18.8 million or 9 percent from June 30, 1995 and an increase of
$9.8 million, or 4 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 9.3 percent at
June 30, 1996, from 8.8 percent a year ago and 9.0 percent at
year-end 1995. The ratio of Tier I capital to risk-adjusted
assets was 13.11 percent at June 30, 1996 compared to 13.01
percent at June 30, 1995 and 12.77 percent at December 31, 1995.
Total capital to risk-adjusted assets was 15.51 percent at June
30, 1996 compared to 15.48 percent at June 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:
At
At June 30, December 31,
---------------- -----------
1996 1995 1995
----- ----- -----
Tier I Capital 13.11% 13.01% 12.77%
Total Capital 15.51% 15.48% 15.18%
Leverage ratio 9.29% 9.03% 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, 410,750 shares had been purchased through June
30, 1996.
Interim Periods
- ---------------
The financial information of the Company included herein for
June 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 six-month
periods ended June 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 October 23, 1995, the Financial Accounting Standards Board
Issued Statement No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"). The recognition provisions and
disclosure requirements of SFAS 123 are effective January 1,
1996. SFAS 123 allows an entity to either (i) retain the current
method of accounting for stock compensation (principally APB
Opinion No. 25) for purposes of preparing its basic financial
statements or (ii) to adopt a new fair value based method that
is established by the provisions of SFAS 123. Companies may
continue to apply the accounting provisions of APB Opinion No.
25 in determining net income. However, they must apply the
disclosure requirements of SFAS 123. The Company will retain its
current method of accounting for stock compensation and thus
SFAS 123 is not expected to have an impact on the Company's
financial results.
In January 1996, the Company adopted the provisions of Statement
of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of" ("SFAS 121"). Under the provisions of SFAS 121,
long-lived assets and certain identifiable intangibles to be
held and used by an entity are required to be reviewed for
impairment whenever events or changes indicate that the carrying
amount of those assets may not be recoverable. The adoption of
SFAS 121 did not have any effect on the Company's financial
statements.
In January 1996, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 122,
"Accounting for Mortgage Servicing Rights" ("SFAS 122"), which
amends Statement No.65. SFAS 122 eliminated the accounting
distinction to recognize as separate assets the rights to
service mortgage loans for others depending on how the servicing
rights were acquired, whether by purchase of loans or by
origination of loans. SFAS 122 also requires the assessment of
capitalized mortgage servicing rights for impairment to be based
on the current value of those rights. The adoption of SFAS 122
did not have a material impact on the Company's financial
statements.
Certain amounts in prior periods have been restated to conform
to the current presentation.
<PAGE>
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: August 6, 1996 /s/ DENNIS R. HANSEN
--------------------
Dennis R. Hansen
Senior Vice President
and Controller
<PAGE>
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 23, 1996, were solicited pursuant
Regulation 14A of the Securities Exchange Act of
1934. The Report of Inspector of election
indicates that 7,470,716 shares of the Common
Stock of the Company, out of 9,791,109 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 7,349,652 121,064
Louis E. Bartolini 7,310,815 159,901
Charles I. Daniels, Jr. 7,310,314 160,402
Don Emerson 7,407,447 63,269
Arthur C. Latno, Jr. 7,318,882 151,834
Patrick D. Lynch 7,315,483 155,233
Catherine C. MacMillan 7,310,359 160,357
Dwight H. Murray, Jr. 7,400,792 69,924
Ronald A. Nelson 7,403,956 66,760
Carl R. Otto 7,378,847 91,869
David L. Payne 7,406,998 63,718
Edward B. Sylvester 7,376,070 94,646
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
1996.
For : 7,355,398
Against : 23,924
Abstain : 90,394
3.- Proposal to change the method of compensating the
members who serve on the Board of Directors.
For : 657,796
Against : 5,109,089
Abstain : 271,898
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) Reports on Form 8-K: None
<TABLE> <S> <C>
<ARTICLE> 9
<RESTATED>
<MULTIPLIER> 1000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-START> JAN-01-1996 JAN-01-1995
<PERIOD-END> JUN-30-1996 JUN-30-1995
<CASH> 167,715 190,656
<INT-BEARING-DEPOSITS> 0 0
<FED-FUNDS-SOLD> 0 0
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 666,149 199,608
<INVESTMENTS-CARRYING> 216,256 616,362
<INVESTMENTS-MARKET> 214,941 614,324
<LOANS> 1,398,086 1,375,644
<ALLOWANCE> 34,017 33,607
<TOTAL-ASSETS> 2,504,881 2,446,078
<DEPOSITS> 1,994,916 2,012,115
<SHORT-TERM> 216,183 182,248
<LIABILITIES-OTHER> 17,506 16,703
<LONG-TERM> 42,500 20,000
0 0
0 0
<COMMON> 79,591 78,829
<OTHER-SE> 154,185 136,186
<TOTAL-LIABILITIES-AND-EQUITY> 2,504,881 2,446,078
<INTEREST-LOAN> 62,145 64,581
<INTEREST-INVEST> 24,325 22,482
<INTEREST-OTHER> 0 258
<INTEREST-TOTAL> 86,470 87,321
<INTEREST-DEPOSIT> 23,654 23,553
<INTEREST-EXPENSE> 30,325 28,684
<INTEREST-INCOME-NET> 56,145 58,637
<LOAN-LOSSES> 2,475 3,270
<SECURITIES-GAINS> 35 0
<EXPENSE-OTHER> 37,309 46,035
<INCOME-PRETAX> 27,000 19,885
<INCOME-PRE-EXTRAORDINARY> 27,000 19,885
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 18,499 14,088
<EPS-PRIMARY> 1.90 1.42
<EPS-DILUTED> 1.90 1.42
<YIELD-ACTUAL> 5.32 5.67
<LOANS-NON> 8,282 10,424
<LOANS-PAST> 170 280
<LOANS-TROUBLED> 0 0
<LOANS-PROBLEM> 0 0
<ALLOWANCE-OPEN> 33,508 32,450
<CHARGE-OFFS> 3,058 3,284
<RECOVERIES> 1,092 1,171
<ALLOWANCE-CLOSE> 34,017 33,607
<ALLOWANCE-DOMESTIC> 34,017 33,607
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 14,655 10,537
</TABLE>
Exhibit 11
WESTAMERICA BANCORPORATION
COMPUTATION OF EARNINGS PER SHARE ON
COMMON AND COMMON EQUIVALENT SHARES AND
ON COMMON SHARES ASSUMING FULL DILUTION
Three months Six months
ended June 30, ended June 30,
---------------- -----------------
1996 1995 * 1996 1995 *
----- ------ ------ ------
(In thousands, except per share
Weighted average number of
common shares outstanding 9,737 9,903 9,752 9,908
Add exercise of options reduced
by the number of shares that
could have been purchased with
the proceeds from such
exercise 247 259 246 244
------ ------ ------ ------
Total 9,984 10,162 9,998 10,152
Net income $9,352 $6,538 $18,499 $14,088
Primary earnings per share $0.96 $0.66 $1.90 $1.42
===== ===== ===== =====
Fully-diluted earnings
per share $0.94 $0.64 $1.85 $1.39
===== ===== ===== =====
* Restated on an historical basis to reflect the July 17, 1995
acquisition of North Bay Bancorp, on a pooling-of-interests
basis.
