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, 1997
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 6, 1997
14,304,970
<PAGE>
WESTAMERICA BANCORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
(Unaudited)
------------------------
September 30, December 31,
1997 1996 * 1996 *
---------- ---------- ----------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents $246,485 $342,867 $355,177
Money market assets 250 250 250
Investment securities available for sale 974,149 876,701 892,461
Investment securities held to maturity, 234,731 219,744 215,432
with market values of:
$237,497 at September 30, 1997
$220,620 at September 30,1996
$218,009 at December 31,1996
Loans, net of reserve for loan losses of: 2,205,658 2,251,746 2,236,319
$50,764 at September 30, 1997
$49,795 at September 30,1996
$50,920 at December 31,1996
Other real estate owned 6,019 8,920 9,912
Premises and equipment, net 53,336 64,804 63,968
Interest receivable and other assets 96,267 91,727 93,255
----------- ----------- -----------
Total assets $3,816,895 $3,856,759 $3,866,774
=========== =========== ===========
LIABILITIES
Deposits:
Non-interest bearing $803,040 $789,217 $834,964
Interest bearing:
Transaction and savings 1,494,522 1,583,727 1,569,022
Time 807,614 847,149 824,714
----------- ----------- -----------
Total deposits 3,105,176 3,220,093 3,228,700
Short-term borrowed funds 205,476 172,660 167,447
Liability for interest, taxes and
other expenses 49,690 33,366 32,483
Debt financing and notes payable 57,500 63,896 58,865
----------- ----------- -----------
Total liabilities 3,417,842 3,490,015 3,487,495
SHAREHOLDERS' EQUITY
Authorized - 50,000 shares
Common stock issued and outstanding: 196,994 186,007 187,210
14,367 at September 30, 1997
14,259 at September 30,1996
14,296 at December 31,1996
Unrealized gain on securities available
for sale, net of taxes 14,609 2,762 6,019
Retained earnings 187,450 177,975 186,050
----------- ----------- -----------
Total shareholders' equity 399,053 366,744 379,279
Total liabilities and ----------- ----------- -----------
shareholders' equity $3,816,895 $3,856,759 $3,866,774
=========== =========== ===========
</TABLE>
* Restated on a historical basis to reflect the April 12, 1997, acquisition of
ValliCorp Holdings, Inc. on a pooling-of-interests basis.
<PAGE>
WESTAMERICA BANCORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
---------------- ----------------
1997 1996* 1997 1996*
------- ------- ------- -------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans $51,233 $51,239 $151,606 $154,224
Money market assets and funds sold 27 1,009 1,629 3,370
Investment securities:
Available for sale
Taxable 11,791 10,290 34,453 30,553
Tax-exempt 2,107 1,940 5,626 5,591
Held to maturity
Taxable 1,553 1,480 3,661 4,960
Tax-exempt 1,766 1,685 5,444 5,297
------- ------- -------- --------
Total interest income 68,477 67,643 202,419 203,995
INTEREST EXPENSE
Transaction deposits 1,670 1,638 4,974 4,761
Savings deposits 7,172 7,154 21,343 21,138
Time deposits 10,552 10,520 31,227 31,710
Funds purchased 1,771 2,475 5,633 8,075
Debt financing and notes payable 1,005 1,092 3,012 3,066
------- ------- -------- --------
Total interest expense 22,170 22,879 66,189 68,750
------- ------- -------- --------
NET INTEREST INCOME 46,307 44,764 136,230 135,245
Provision for loan losses 1,650 3,152 6,250 9,154
------- ------- -------- --------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 44,657 41,612 129,980 126,091
NON-INTEREST INCOME
Service charges on deposit accounts 4,960 5,335 15,592 15,467
Merchant credit card 917 1,176 2,946 3,498
Mortgage banking 392 537 1,112 1,541
Financial services commissions 323 229 787 572
Trust fees 153 102 383 275
Securities gain -- 9 136 56
Other 2,031 1,811 7,085 5,264
------- ------- -------- --------
Total non-interest income 8,776 9,199 28,041 26,673
NON-INTEREST EXPENSE
Salaries and related benefits 12,562 15,072 49,779 45,625
Occupancy 3,320 4,484 19,068 12,760
Equipment 2,140 2,596 8,864 7,522
Professional fees 687 1,222 8,709 3,749
Data processing 1,383 1,482 4,794 4,467
Other real estate owned 88 149 929 758
Other 6,023 7,960 19,805 26,340
------- ------- -------- --------
Total non-interest expense 26,203 32,965 111,948 101,221
------- ------- -------- --------
INCOME BEFORE INCOME TAXES 27,230 17,846 46,073 51,543
Provision for income taxes 9,570 5,943 16,235 17,172
------- ------- -------- --------
NET INCOME $17,660 $11,903 $29,838 $34,371
======= ======= ======= =======
Average shares outstanding 14,390 14,080 14,355 14,248
PER SHARE DATA
Earnings per share $1.23 $0.85 $2.08 $2.41
Dividends paid 0.26 0.23 0.78 0.69
</TABLE>
* Restated on a historical basis to reflect the April 12, 1997, acquisition of
ValliCorp Holdings, Inc. on a pooling-of-interest basis.
<PAGE>
WESTAMERICA BANCORPORATION
STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
(Unaudited)
For the nine months
ended September 30,
------------------------
1997 1996 *
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $29,838 $34,371
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 6,234 7,225
Loan loss provision 6,250 9,154
Amortization of deferred net loan fees (870) (1,010)
Decrease in interest income receivable 1,679 2,632
Decrease (increase) in other assets 4,036 (9,056)
Increase (decrease) in income taxes payable 3,247 (1,149)
Decrease in interest expense payable (541) (26)
Decrease in other liabilities (41) (4,198)
Gain on sales of investment securities (136) (56)
Gain on sales of branches (678) --
Net loss on sales/write-down of equipment 7,627 260
Originations of loans for resale (9,123) (56,031)
Proceeds from sale of loans
originated for resale 16,387 57,910
Net gain on sale of property
acquired in satisfaction of debt (866) (129)
Write-down on property
acquired in satisfaction of debt 1,248 428
-------- --------
Net cash provided by
operating activities 64,291 40,325
INVESTING ACTIVITIES
Net cash obtained in merger -- 4,370
Net repayments of loans 16,684 14,780
Purchases of investment securities
available for sale (337,857) (246,807)
Purchases of investment securities
held to maturity (65,721) (10,889)
Purchases of property, plant and equipment (4,515) (19,805)
Proceeds from maturity of securities
available for sale 248,295 217,289
Proceeds from maturity of securities
held to maturity 46,422 97,053
Proceeds from sale of securities
available for sale 22,415 35,767
Proceeds from sale of property and equipment 1,696 4,366
Proceeds from property
acquired in satisfaction of debt 5,112 4,926
-------- --------
Net cash (used in) provided by
investing activities (67,469) 101,050
FINANCING ACTIVITIES
Net decrease in deposits (123,524) (116,634)
Net increase (decrease) in short-term borrowings 38,029 (13,372)
Additions to notes payable -- 22,500
Repayments of notes payable (1,365) (5)
Exercise of stock options/issuance of shares 13,456 4,196
Retirement of stock (23,015) (26,883)
Dividends paid (9,095) (11,217)
-------- --------
Net cash used in
financing activities (105,514) (141,415)
-------- --------
Net decrease in cash
and cash equivalents (108,692) (40)
Cash and cash equivalents at
beginning of year 355,177 342,907
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $246,485 $342,867
======== ========
Supplemental disclosures:
Loans transferred to other
real estate owned 1,601 7,120
Unrealized net gain on securities
available for sale 8,594 1,607
Interest paid for the period 66,523 67,328
Income tax payments for the period 14,305 19,385
</TABLE>
* Restated on a historical basis to reflect the April 12, 1997, acquisition of
ValliCorp Holdings, Inc., 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, Community Banker Services
Corporation and Westamerica Commercial Credit Inc., reported third
quarter 1997 net income of $17.7 million or $1.23 per share. On a
year-to-date basis, the Company reported net income of $29.8 million,
or $2.08 per share. In addition to historical information, this
discussion includes certain forward-looking statements regarding
events and trends which may affect the Company's future results.
Such statements are subject to risks and uncertainties that could
cause the Company's actual results to differ materially. Such
factors include, but are not limited to, those described in this
discussion and analysis. This report, which includes consolidated
financial statements prepared in conformity with generally accepted
accounting principles, should be read in conjunction with
Westamerica Bancorporation's annual report on Form 10-K for the
year ended December 31, 1996.
Acquisition
On April 12, 1997, the Company completed the acquisition
with ValliCorp Holdings, Inc. ("ValliCorp"), parent company of
ValliWide Bank, on a pooling-of-interests basis (the "Merger") and,
accordingly, the Company's historical consolidated results have
been restated. Under the terms of the Agreement and Plan of
Reorganization among ValliCorp, ValliWide Bank and the Company,
each share of ValliCorp Common Stock was exchanged for .3479 shares
of the Company's Common Stock. No gain or loss for tax purposes was
recognized by ValliCorp shareholders, except with respect to cash
received in lieu of fractional shares. Based on the closing price
of the Company's Common Stock on April 11, 1997, the acquisition
was valued at approximately $290 million or $20.11 per share. On
June 20, 1997, ValliWide Bank, ValliCorp's only bank subsidiary,
merged with and into Westamerica Bank.
The following summarizes the separate results of the combined
entities for the periods shown prior to the combination:
(In thousands, except per share data)
<TABLE>
<CAPTION>
Restated
Westamerica Combined
Bancorporation ValliCorp Results *
--------------- --------- ----------
<S> <C> <C> <C>
Three months ended 9/30/96
Net interest income $28,069 $16,711 $44,764
Net income 9,467 2,449 11,903
Earnings per share 1.00 0.18 0.85
Nine months ended 9/30/96
Net interest income $84,214 $51,060 $135,245
Net income 27,966 6,434 34,371
Earnings per share 2.89 0.48 2.41
At September 30, 1996
Total assets $2,529,167 $1,329,555 $3,856,759
Total shareholders' equity 229,200 139,376 366,744
</TABLE>
* On September 30, 1996, the Company owned 115,500 shares of ValliCorp
Common Stock. Amounts indicated have been adjusted to eliminate
these shares as a result of the Merger.
<PAGE>
Components of Net Income
Following is a summary of the components of net income for
the periods indicated:
[/TABLE]
<TABLE>
<CAPTION>
For the three For the nine
months ended months ended
September 30, September 30,
---------------------- ---------------------
(In millions) 1997 1996 1997 1996
------ ------- ------ -------
<S> <C> <C> <C> <C>
Net interest income* $48.8 $46.7 $143.2 $140.9
Provision for loan losses (1.7) (3.2) (6.3) (9.2)
Non-interest income 8.8 9.2 28.0 26.7
Non-interest expense (26.2) (33.0) (111.9) (101.2)
Provision for income taxes* (12.0) (7.8) (23.2) (22.8)
------ ------ ------ ------
Net income $17.7 $11.9 $29.8 $34.4
===== ===== ===== =====
Average total assets $3,733.7 $3,754.7 $3,746.9 $3,758.4
Net income (annualized) as
a percentage of average
total assets 1.88% 1.26% 1.06% 1.22%
- ---------------
</TABLE>
* Fully taxable equivalent basis (FTE)
<PAGE>
During the third quarter of 1997, the Company's net income was
$17.7 million, $5.8 million higher than the same period in 1996.
Higher net interest income, resulting mainly from higher earning
asset yields, a lower loan loss provision and reduced expenses due
to consolidation of operations after the Merger, were partially
offset by lower service fees and other non-interest income.
Comparing the first nine months of 1997 to the prior year, net
income decreased $4.6 million. During the second quarter of 1997,
the Company incurred approximately $18.8 million in one-time costs
associated with the Merger, partially offset by staff reductions
and other cost controls, as operations were consolidated and
efficiencies were achieved during the third quarter. In addition,
the Company benefited from higher net interest income, a lower loan
loss provision and higher non-interest income.
Analysis of Net Interest Income and Margin
Net interest income, the Company's principal source of
revenues, was higher in the third quarter of 1997 compared to
the third quarter of 1996 by $2.1 million, principally due to
the favorable effects of higher average earning-asset
balances and increased related yields, combined with
increased balances of low-cost deposits and a lower volume of
high-cost purchased funds. The Company continually manages
its interest-earning assets and interest-bearing liabilities
and adapts rapidly to changes in market rates.
For the nine months ended September 30, 1997, net interest
income (FTE) increased $2.3 million. An increased level of
low-cost deposits and an accompanying reduction in
higher-costing purchased funds balances were the main reasons
for the increase.
These changes are shown in the components of net interest
income and in the analysis of net interest margin summarized
as follows for the periods indicated:
<PAGE>
Net Interest Income
<TABLE>
<CAPTION>
For the three For the nine
months ended months ended
September 30, September 30,
(In millions) ---------------------- ---------------------
1997 1996 1997 1996
------ ------- ------ -------
<S> <C> <C> <C> <C>
Interest income $68.5 $67.6 $202.4 $204.0
Interest expense (22.2) (22.9) (66.2) (68.8)
FTE adjustment 2.5 2.0 7.0 5.7
------- ------- ------- -------
Net interest income (FTE) $48.8 $46.7 $143.2 $140.9
====== ====== ====== ======
Average earning assets $3,402.1 $3,399.2 $3,409.0 $3,410.6
Net interest margin (FTE) 5.69% 5.47% 5.62% 5.52%
</TABLE>
Third quarter loan fees, excluding deferrals of $1.0 million,
included in interest income on loans, were $500,000 higher
than in the same period of 1996. On a year-to-date basis,
loan fees excluding deferrals were $1.2 million higher than the
comparable period in 1996. In both cases, the increases were
due to the increased level of loan originations.
<PAGE>
Net Interest Margin (FTE)
<TABLE>
<CAPTION>
For the three For the nine
months ended months ended
September 30, September 30,
---------------------- ---------------------
1997 1996 1997 1996
------ ------- ------ -------
<S> <C> <C> <C> <C>
Yield on earning assets 8.27% 8.15% 8.21% 8.21%
Cost of interest-bearing
liabilities 3.47% 3.46% 3.44% 3.47%
------- ------- ------- -------
Net interest spread 4.80% 4.69% 4.77% 4.74%
Impact of non-interest
bearing demand 0.89% 0.78% 0.85% 0.78%
------- ------- ------- -------
Net interest margin 5.69% 5.47% 5.62% 5.52%
====== ====== ====== ======
</TABLE>
The net interest margin during the third quarter of 1997 was 22
basis points higher than the same period in 1996. The average yield
on earning assets during the current quarter was 12 basis points
higher than the same period in 1996 as the Company benefited from a
32 basis point increase in investment securities yields. This was
the combined result of increased balances of tax-free securities, a
reduction in lower-yielding short-term funds sold and the
restatement of the fully taxable equivalent adjustment on a
consolidated basis after the Merger, not previously accounted for
by ValliCorp. Even though the rate paid on interest-bearing
liabilities increased one basis point from the third quarter of
1996, its effect was offset by the favorable impact to the net
interest margin of the higher volume of non-interest bearing demand
deposits.
For the first nine months of 1997, the net interest margin was 10
basis points higher than the first nine months of 1996. A three
basis point decrease in the rate paid on interest-bearing
liabilities, combined with the favorable impact of an increase in
non-interest bearing demand balances, were the main reasons for
this increase.
<PAGE>
Summary of Average Balances, Yields/Rates and Interest Differential
The following tables present, for the periods indicated,
information regarding the Company's 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. The information included has been restated on a
historical basis and presents the combined financial condition of
the Company and ValliCorp as if the Merger had been in effect for
all periods presented. 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>
Distribution of assets, liabilities and shareholders' equity:
<TABLE>
<CAPTION>
For the three months ended
September 30, 1997
- ---------------------------------------------------------------------------
(Dollars in thousands)
Interest Rates
Average income/ earned/
balance expense paid
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Money market assets and funds sold $2,250 $27 4.76 %
Investment securities:
Taxable 865,482 13,344 6.12
Tax-exempt 284,726 5,646 7.87
Loans:
Commercial 1,436,306 34,018 9.40
Real estate construction 78,705 2,255 11.37
Real estate residential 329,765 6,174 7.43
Consumer 404,853 9,469 9.28
- ----------------------------------------------------------------
Earning assets 3,402,087 70,933 8.27
Other assets 331,606
- -------------------------------------------------------
Total assets $3,733,693
=======================================================
Liabilities and shareholders' equity
Deposits:
Non-interest bearing demand $785,603 $-- -- %
Savings and interest-bearing
transaction 1,523,057 8,842 2.30
Time less than $100,000 475,865 6,156 5.13
Time $100,000 or more 327,853 4,396 5.32
- ----------------------------------------------------------------
Total interest-bearing deposits 2,326,775 19,394 3.31
Funds purchased 151,995 1,771 4.62
Debt financing and notes payable 57,500 1,005 6.93
- ----------------------------------------------------------------
Total interest-bearing liabilities 2,536,270 22,170 3.47
Other liabilities 33,198
Shareholders' equity 378,622
- -------------------------------------------------------
Total liabilities and shareholders' equity $3,733,693
=======================================================
Net interest spread (1) 4.80 %
Net interest income and interest margin (2) $48,763 5.69 %
===========================================================================
</TABLE>
(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>
Distribution of assets, liabilities and shareholders' equity:
<TABLE>
<CAPTION>
For the three months ended
September 30, 1996
- ---------------------------------------------------------------------------
(Dollars in thousands)
Interest Rates
Average income/ earned/
balance expense paid
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Money market assets and funds sold $73,068 $1,009 5.49 %
Investment securities:
Taxable 814,044 11,770 5.75
Tax-exempt 260,581 5,135 7.84
Loans:
Commercial 1,364,462 31,681 9.24
Real estate construction 113,756 2,992 10.46
Real estate residential 313,893 6,364 8.07
Consumer 459,429 10,677 9.25
- ----------------------------------------------------------------
Earning assets 3,399,233 69,628 8.15
Other assets 355,501
- -------------------------------------------------------
Total assets $3,754,734
=======================================================
Liabilities and shareholders' equity
Deposits:
Non-interest bearing demand $752,093 $-- -- %
Savings and interest-bearing
transaction 1,541,845 8,792 2.27
Time less than $100,000 509,261 6,346 4.96
Time $100,000 or more 318,223 4,174 5.22
- ----------------------------------------------------------------
Total interest-bearing deposits 2,369,329 19,312 3.24
Funds purchased 194,800 2,475 5.05
Debt financing and notes payable 63,541 1,092 6.84
- ----------------------------------------------------------------
Total interest-bearing liabilities 2,627,670 22,879 3.46
Other liabilities 27,734
Shareholders' equity 347,237
- -------------------------------------------------------
Total liabilities and shareholders' equity $3,754,734
=======================================================
Net interest spread (1) 4.69 %
Net interest income and interest margin (2) $46,749 5.47 %
===========================================================================
</TABLE>
(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>
Distribution of assets, liabilities and shareholders' equity:
<TABLE>
<CAPTION>
For the nine months ended
September 30, 1997
- ---------------------------------------------------------------------------
(Dollars in thousands)
Interest Rates
Average income/ earned/
balance expense paid
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Money market assets and funds sold $39,957 $1,629 5.45 %
Investment securities:
Taxable 866,073 38,114 5.88
Tax-exempt 252,817 16,020 8.47
Loans:
Commercial 1,387,306 96,324 9.28
Real estate construction 90,322 7,340 10.87
Real estate residential 348,232 20,488 7.87
Consumer 424,268 29,464 9.28
- ----------------------------------------------------------------
Earning assets 3,408,975 209,379 8.21
Other assets 337,961
- -------------------------------------------------------
Total assets $3,746,936
=======================================================
Liabilities and shareholders' equity
Deposits:
Non-interest bearing demand $768,036 $-- -- %
Savings and interest-bearing
transaction 1,548,960 26,317 2.27
Time less than $100,000 484,512 18,432 5.09
Time $100,000 or more 324,032 12,795 5.28
- ----------------------------------------------------------------
Total interest-bearing deposits 2,357,504 57,544 3.26
Funds purchased 156,392 5,633 4.82
Debt financing and notes payable 58,034 3,012 6.94
- ----------------------------------------------------------------
Total interest-bearing liabilities 2,571,930 66,189 3.44
Other liabilities 30,023
Shareholders' equity 376,947
- -------------------------------------------------------
Total liabilities and shareholders' equity $3,746,936
=======================================================
Net interest spread (1) 4.77 %
Net interest income and interest margin (2) $143,190 5.62 %
===========================================================================
</TABLE>
(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>
Distribution of assets, liabilities and shareholders' equity:
<TABLE>
<CAPTION>
For the nine months ended
September 30, 1996
- ---------------------------------------------------------------------------
(Dollars in thousands)
Interest Rates
Average income/ earned/
balance expense paid
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Money market assets and funds sold $81,268 $3,370 5.54 %
Investment securities:
Taxable 831,939 35,513 5.70
Tax-exempt 260,615 15,279 7.83
Loans:
Commercial 1,333,828 94,115 9.43
Real estate construction 122,772 9,633 10.48
Real estate residential 310,607 19,199 8.26
Consumer 469,524 32,554 9.26
- ----------------------------------------------------------------
Earning assets 3,410,553 209,663 8.21
Other assets 347,833
- -------------------------------------------------------
Total assets $3,758,386
=======================================================
Liabilities and shareholders' equity
Deposits:
Non-interest bearing demand $734,995 $-- -- %
Savings and interest-bearing
transaction 1,550,667 25,899 2.23
Time less than $100,000 521,704 19,626 5.03
Time $100,000 or more 305,310 12,084 5.29
- ----------------------------------------------------------------
Total interest-bearing deposits 2,377,681 57,609 3.24
Funds purchased 210,289 8,075 5.13
Debt financing and notes payable 59,308 3,066 6.91
- ----------------------------------------------------------------
Total interest-bearing liabilities 2,647,278 68,750 3.47
Other liabilities 26,251
Shareholders' equity 349,862
- -------------------------------------------------------
Total liabilities and shareholders' equity $3,758,386
=======================================================
Net interest spread (1) 4.74 %
Net interest income and interest margin (2) $140,913 5.52 %
===========================================================================
</TABLE>
(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>
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.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
(In thousands) Three months ended
September 30, 1997
compared with three months
ended September 30, 1996
---------------------------
Volume Rate Total
- --------------------------------------------------------------------------
Increase (decrease) in
interest and fee income:
<S> <C> <C> <C>
Money market assets and funds sold ($878) ($104) ($982)
Investment securities:
Taxable 786 788 1,574
Tax-exempt 492 19 511
Loans:
Commercial 1,760 577 2,337
Real estate construction (1,024) 287 (737)
Real estate residential 337 (527) (190)
Consumer (1,246) 38 (1,208)
- --------------------------------------------------------------------------
Total loans (173) 375 202
- --------------------------------------------------------------------------
Total increase in interest and fee income 227 1,078 1,305
- --------------------------------------------------------------------------
Increase (decrease) in interest expense:
Deposits:
Savings/interest-bearing (198) 248 50
Time less than $ 100,000 (412) 222 (190)
Time $ 100,000 or more 135 87 222
- --------------------------------------------------------------------------
Total (decrease) increase
in interest-bearing deposits (475) 557 82
Funds purchased (507) (197) (704)
Debt financing and notes payable (102) 15 (87)
- --------------------------------------------------------------------------
Total(decrease) increase in
interest expense (1,084) 375 (709)
- --------------------------------------------------------------------------
Increase in net
interest income (1) $1,311 $703 $2,014
==========================================================================
</TABLE>
(1) Amounts calculated on a fully taxable equivalent basis
using the current statutory federal tax rate.
<PAGE>
Rate and volume variances.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
(In thousands) Nine months ended
September 30, 1997
compared with nine months
ended September 30, 1996
---------------------------
Volume Rate Total
- --------------------------------------------------------------------------
Increase (decrease) in
interest and fee income:
<S> <C> <C> <C>
Money market assets and funds sold ($1,688) ($53) ($1,741)
Investment securities:
Taxable 1,463 1,138 2,601
Tax-exempt (427) 1,168 741
Loans:
Commercial 3,540 (1,331) 2,209
Real estate construction (2,662) 369 (2,293)
Real estate residential 2,114 (825) 1,289
Consumer (3,174) 84 (3,090)
- --------------------------------------------------------------------------
Total loans (182) (1,703) (1,885)
- --------------------------------------------------------------------------
Total (decrease) increase in interest and
fee income (834) 550 (284)
- --------------------------------------------------------------------------
Increase (decrease) in interest expense:
Deposits:
Savings/interest-bearing (27) 445 418
Time less than $ 100,000 (1,440) 246 (1,194)
Time $ 100,000 or more 728 (17) 711
- --------------------------------------------------------------------------
Total (decrease) increase
in interest-bearing deposits (739) 674 (65)
Funds purchased (1,971) (471) (2,442)
Debt financing and notes payable (70) 16 (54)
- --------------------------------------------------------------------------
Total (decrease) increase in
interest expense (2,780) 219 (2,561)
- --------------------------------------------------------------------------
Increase in net interest income $1,946 $331 $2,277
==========================================================================
</TABLE>
(1) Amounts calculated on a fully taxable equivalent basis
using the current statutory federal tax rate.
<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 underwriting and administration
procedures and aggressively pursuing collection efforts with
troubled debtors. After the Merger, and continuing with the above
mentioned strategy, the Company provided $1.7 million for loan
losses for the third quarter of 1997, compared to $3.2 million for
the same period in 1996. On a year-to-date basis, the $6.3 million
provision for loan losses in 1997 was $2.9 million lower than the
first nine months of 1996. The 1997 provision includes $2.5 million
recorded by ValliCorp prior to the Merger, conforming to upgraded
credit standards and workout strategies for loans and properties.
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.
<TABLE>
<CAPTION>
For the three For the nine
months ended months ended
(In millions) September 30, September 30,
--------------------- ---------------------
1997 1996 1997 1996
------ ------- ------ -------
<S> <C> <C> <C> <C>
Deposit account fees $4.96 $5.34 $15.59 $15.47
Merchant credit card 0.92 1.18 2.95 3.50
Mortgage banking income 0.39 0.54 1.11 1.54
Financial services
commissions 0.32 0.23 0.79 0.57
Trust fees 0.15 0.10 0.38 0.28
Net investment
securities gain -- 0.01 0.14 0.06
Other non-interest income 2.04 1.80 7.08 5.25
------ ------ ------ ------
Total $8.78 $9.20 $28.04 $26.67
====== ====== ====== ======
</TABLE>
<PAGE>
The $420,000 decrease in non-interest income during the third
quarter of 1997 compared to the third quarter of 1996, included
$380,000 lower deposit account fees principally due to income
foregone during the first cycle of accounts converted in the merger
of ValliWide Bank with and into Westamerica Bank, $260,000 lower
merchant credit card income and $150,000 lower mortgage banking
mainly due to lower refinancing volume. Partially offsetting these
variances, financial services commissions were $90,000 higher than
the third quarter of 1996 resulting from increased share of fees
earned by the agent managing certain investments of the Company's
customers, and trust fees were $50,000 higher than the comparable
period of prior year. In addition, gains realized on asset sales
were the major contributor to the increase in the other
non-interest income category.
Comparing the first nine months of 1997 to the same period of 1996,
non-interest income increased $1.37 million. The largest
contributor to this variance was a gain on sale of assets at
ValliWide Bank prior to the merger with and into Westamerica Bank
and after the merger of the holding companies, included in the
"Other" non-interest income category variance of $1.83 million. In
addition, financial services commissions were $220,000 higher than
prior year for the same reason stated above and deposit account
fees were $120,000 higher than the comparable period in 1996 as
higher account analysis and other transaction account fees during
the first nine months of 1996 more than offset the income foregone
during the first cycle after the merger of ValliWide Bank's
converted accounts. The favorable variances also include $100,000
higher trust fees and an $80,000 gain on sales of investment
securities. Partially offsetting these favorable variances,
merchant credit card fees and mortgage banking income were $550,000
and $430,000, respectively, lower than the same period in 1996.
Non-interest Expense
The following table summarizes the components of non-interest
expense for the periods indicated.
<TABLE>
<CAPTION>
For the three For the nine
months ended months ended
September 30, September 30,
--------------------- ---------------------
(In millions) 1997 1996 1997 1996
------ ------- ------ -------
<S> <C> <C> <C> <C>
Salaries and incentives $10.87 $13.89 $44.70 $41.56
Other personnel 1.69 1.18 5.08 4.07
Occupancy 3.32 4.48 19.07 12.76
Equipment 2.14 2.60 8.86 7.52
Professional fees 0.69 1.22 8.71 3.75
Data processing services 1.38 1.48 4.79 4.47
Courier service 0.81 0.81 2.41 2.18
Stationery and supplies 0.53 0.81 1.91 2.17
Postage 0.52 0.59 1.79 1.78
Marketing 0.40 0.78 1.44 2.33
Merchant credit card 0.37 0.65 1.36 1.72
Loan expense 0.36 0.44 1.29 1.35
Other real estate owned 0.09 0.15 0.93 0.76
Operational losses 0.26 0.28 0.79 0.69
Other non-interest expense 2.77 3.61 8.82 14.11
------- ------- ------- -------
Total $26.20 $32.97 $111.95 $101.22
======= ======= ======= =======
</TABLE>
<PAGE>
In the third quarter of 1997, non-interest expense decreased $6.77
million from the third quarter of 1996 reflecting the effect of
administration and operation consolidations, branch closures and
other Merger-related efficiencies. The decrease affected all
categories of non-interest expense. The largest variance from prior
year is employee related, reflecting the reduction of 426 full-time
equivalent staff. Other expense reductions from prior year include
$1.16 million lower occupancy costs, as facilities closures
including branches and write-offs of assets have reduced related
expenses; $530,000 lower professional fees, mostly due to increased
expenses in 1996 related to mergers and acquisitions; and $460,000
lower equipment costs, principally due to lower expenses resulting
from merger-related asset write-offs. Other variances in
non-interest expense from the third quarter of 1996 resulting
primarily from achieved economies of scale after consolidation of
operations between Westamerica and ValliWide banks include $380,000
lower marketing expenses; $280,000 lower merchant credit card
expenses; and $280,000 and $100,000, respectively, lower stationery
and supplies expenses and data processing services. In addition,
loan expense was $80,000 lower, postage was $70,000 lower and other
real estate owned costs and operational losses were $60,000 and
$20,000, respectively, lower than prior year.
Comparing the first nine months of 1997 with the comparable period
in 1996, non-interest expense increased $10.73 million. Major
increases from the first nine months of 1996 relate to one-time
costs of approximately $18.8 million in connection with the Merger.
These costs are included in salaries and incentives, occupancy,
professional fees, equipment, data processing services and courier
service costs. Other real estate owned increased $170,000,
principally due to write-downs net of sales of properties acquired
in satisfaction of debt and operational losses were $100,000 higher
than the comparable period of 1996. Partially offsetting these
variances, other non-interest expense decreased $5.29 million from
prior year principally due to the inclusion of $5.12 million of
ValliCorp's costs related to merger and integration activities
during 1996. Marketing related costs decreased $890,000 from the
first nine months of 1996, mainly from reduced branch advertising
and public relations costs. Credit card expenses decreased by
$360,000. Stationery and supplies costs decreased by $260,000 as
consolidation of operations required lower purchases and usage of
inventories and loan expenses were $60,000 lower than the
comparable period of 1996 mainly due to decreased activity after
the mergers.
Provision for Income Tax
During the third quarter of 1997, the Company recorded income tax
expense of $9.6 million compared to $5.9 million in the third
quarter of 1996. On a year-to-date basis, income tax expense was
$16.2 million for 1997 compared to $17.2 million in 1996. The
provision recorded for the first nine months of 1997 represents an
effective tax rate of 35.2 percent, compared to 33.3 percent for
the first nine months of 1996. The provision for income taxes for
all periods presented is directly attributable to the respective
level of earnings and the non-tax deductible expenses incurred in
connection with mergers and acquisitions.
<PAGE>
Asset Quality
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 and potential problem loans, and receive an elevated level
of attention to ensure collection. The following is a summary of
classified assets on the dates indicated:
<TABLE>
<CAPTION>
September 30, December 31,
(In millions) -------------------- -------------
1997 1996 1996
------ ------ ------
<S> <C> <C> <C>
Classified loans $69.3 $79.4 $62.9
Other classified assets 6.0 8.9 9.9
------ ------ ------
Total classified assets $75.3 $88.3 $72.8
====== ====== ======
Reserve for loan losses as
a percentage of
classified loans 73% 63% 81%
</TABLE>
Classified loans at September 30, 1997, decreased $10.1 million or
13 percent to $69.3 million from September 30, 1996, principally
due to sales and pay-offs of loans with real estate collateral and
transfers to the other real estate owned category. The $6.4 million
increase in classified loans from December 31, 1996 was mainly due
to increases in commercial loans and other loans with real estate
collateral.
Non-performing Assets
Non-performing assets include non-accrual loans, loans 90 days past
due as to principal or interest 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. In
addition, 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
Management's doubt as to the full collectibility of both interest
and principal and the loan is brought current. 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.
<PAGE>
The following is a summary of non-performing assets on the dates
indicated:
<TABLE>
<CAPTION>
September 30, December 31,
(In millions) --------------------- -------------
1997 1996 1996
------- ------- --------
<S> <C> <C> <C>
Non-accrual loans:
Performing $4.68 $5.27 $4.29
Non-performing 15.64 17.82 12.55
------- ------- -------
Total non-accrual loans 20.32 23.09 16.84
Restructured loans -- 0.26 0.22
Loans 90 days past due and
still accruing 0.75 0.65 1.74
------- ------- -------
Total non-performing loans 21.07 24.00 18.80
------- ------- -------
Other real estate owned 6.02 8.92 9.91
------- ------- -------
Total non-performing assets $27.09 $32.92 $28.71
======= ======= =======
Reserve for loan losses as
a percentage of
non-performing loans 241% 207% 271%
</TABLE>
Non-accrual loans decreased $2.77 million to $20.32 million at
September 30, 1997 from $23.09 at September 30, 1996 and increased
$3.48 million from $16.84 million outstanding at December 31, 1996.
The reduction in balances of non-accrual loans from September, 1996
was principally due to write-offs, pay-offs and pay-downs net of
additions of loans with real estate collateral and commercial
loans. The increase from December 31, 1996 was mainly due to the
addition of two large commercial real estate loans partially offset
by write-offs, pay-offs and pay-downs. The change in the restructured
loan category was due to one loan, maturing in December of 2002,
categorized by ValliWide Bank as "Trouble Debt Restructure" but
eliminated from the non-performing asset list as it has performed
as agreed since its restructuring.
The $2.90 million and $3.89 million decreases in other real estate
owned balances from September 30, 1996 and December 31, 1996,
respectively, were due to additions from non-accrual loans with
real estate collateral net of 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 ended September
30, 1997, if all such loans had been current in accordance with
their original terms, was $509,000 and $1.2 million, 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, 1997 totaled $189,000 and $409,000,
respectively, representing annualized yields of 3.34 percent and
3.31 percent, respectively. Cash payments received which were
applied against the book balance of non-accrual loans outstanding
at September 30, 1997, totaled $555,000.
Reserve for Loan Losses
It is the position of the Company that 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. 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.
<PAGE>
The following table summarizes the loan loss provision, net credit
losses and loan loss reserve for the periods indicated:
<TABLE>
<CAPTION>
For the three For the nine
months ended months ended
September 30, September 30,
(In millions) --------------------- ---------------------
1997 1996 1997 1996
------ ------- ------ -------
<S> <C> <C> <C> <C>
Balance, beginning
of period $50.7 $46.6 $50.9 $48.5
Loan loss provision 1.7 3.2 6.3 9.2
Loans charged off (2.9) (2.7) (9.6) (12.6)
Recoveries of previously
charged-off loans 1.3 1.1 3.2 3.1
------- ------- ------- -------
Net credit losses (1.6) (1.6) (6.4) (9.5)
Reserve acquired
through merger * -- 1.6 -- 1.6
------- ------- ------- -------
Balance, end of period $50.8 $49.8 $50.8 $49.8
======= ======= ======= =======
Reserve for loan losses
as a percentage of
loans outstanding 2.25% 2.16%
</TABLE>
* As reported by ValliCorp, after its merger with Auburn Bancorp on
September 1996, accounted for using the purchase method of
accounting.
<PAGE>
Asset and Liability Management
The fundamental objective of the Company's management of assets and
liabilities is to maximize economic value while maintaining
adequate liquidity and a conservative level of interest rate risk.
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 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 10 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, 1997 would not result in a fluctuation
of net income exceeding 10 percent.
The Securities and Exchange Commission (SEC) has approved rule
amendments to clarify and expand existing disclosure requirements
for derivative financial instruments. The amendments require
enhanced disclosure of accounting policies for derivative financial
instruments in the footnotes to the financial statements. In
addition, the amendments expand existing disclosure requirements to
include quantitative and qualitative information about market risk
inherent in market risk sensitive instruments. The required
quantitative and qualitative information should be disclosed
outside the financial statements and related notes thereto. The
enhanced accounting policy disclosure requirements are effective
for filings that include financial statements for fiscal periods
ending after June 15, 1997. As the Company believes that the
derivative financial instrument disclosures contained within the
notes to the financial statements of its 1996 Form 10-K
substantially conform with the accounting policy requirements of
these rule amendments, no further interim disclosure has been
provided. The rule amendments that require expanded disclosure of
quantitative and qualitative information about market risk are
effective with the 1997 Form 10-K. At September 30, 1997 and 1996,
the Company had no derivative financial instruments outstanding.
Liquidity
The Company's principal source of asset liquidity is marketable
investment securities available for sale. At September 30, 1997,
investment securities available for sale totaled $974.1 million.
This represents an increase of $97.4 million from September 30,
1996.
The Company generates significant liquidity from its operating
activities. The Company's profitability during the first nine
months of 1997 and 1996 was the main contributor to the cash flows
from operations for such periods of $64.3 million and $40.3
million, respectively.
Cash flows are provided by and used in financing activities,
primarily customer deposits, short-term borrowings from banks,
extensions of long-term debt and repurchases of the Company's
Common Stock. During the first nine months of 1997, $105.5 million
was used by financing activities, including a $123.5 million
decrease in deposits, a $23.0 million outflow used for purchasing
the Company's common stock, dividends paid in the amount of $9.1
million and repayments of long-term debt for $1.4 million. These
uses of cash were partially offset by $13.5 million provided by the
issuance of new shares of common stock, principally for stock
option exercises and a $38.0 million increase in short-term
borrowings. This compares to the first nine months of 1996 when
$141.4 million was used in financing activities, as a $116.6
million decrease in deposits combined with other cash flow uses
including retirement of stock and dividends to shareholders of
$26.9 million and $11.2 million, respectively, and a $13.4 million
decrease in short-term borrowed funds were partially offset by the
issuance of $22.5 million of the Company's Senior Notes and a $4.2
million increase in common stock principally from stock 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 1997, net repayments of loans were $16.7 million compared
to $14.8 million during the same period in 1996. The Company
continued to grow its investment securities portfolio in 1997,
reflected in the $86.6 million increase, during the first nine
months of 1997, in investment securities net of maturities and
sales, compared to a decrease of $92.4 million during the same
period of 1996. Costs related to the new facility to consolidate
the Company's operations and back office functions to Fairfield,
California, are included in purchases of property plant and
equipment during the first nine months of 1996; costs related to
branch restructurings are included in the purchases of property,
plant and equipment, during the first nine months of 1997 and 1996.
The Company anticipates increasing its cash level from operations
through the end of 1997 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 1997.
<PAGE>
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 $399.1 million at September 30, 1997, representing an increase
of $32.3 million or 9 percent from September 30, 1996 and an
increase of $19.8 million, or 5 percent, from December 31, 1996. As
a result of the Company's profitability and the retention of
earnings, the ratio of equity to total assets increased to 10.5
percent at September 30, 1997, from 9.5 percent a year ago and 9.8
percent as of December 31, 1996. The ratio of Tier I capital to
risk-adjusted assets was 12.83 percent at September 30, 1997,
compared to 12.52 percent at September 30, 1996 and 12.96 percent
at December 31, 1996. Total capital to risk-adjusted assets was
14.78 percent at September 30, 1997 compared to 14.51 percent at
June 30, 1996 and 14.95 percent at December 31, 1996.
The following summarizes the ratios of capital to risk-adjusted
assets for the periods indicated:
<TABLE>
<CAPTION>
September 30, December 31,
-------------------- -------------
1997 1996 1996
------ ------ -------
<S> <C> <C> <C>
Tier I Capital 12.83% 12.52% 12.96%
Total Capital 14.78% 14.51% 14.95%
Leverage ratio 9.89% 9.25% 9.27%
</TABLE>
The risk-based capital ratios increased at September 30, 1997
compared to September 30, 1996 as the increase in equity,
principally due to the generation and retention of earnings,
out paced the increase in risk-weighted assets. The reduction in
capital ratios from December 31, 1996 is due to a relatively large
increase in risk-weighted assets due in part to increases in loan
balances and other assets. Capital ratios are reviewed on a regular
basis to ensure that capital exceeds the prescribed regulatory
minimums and is adequate to meet the Company's future needs. All
ratios are in excess of the regulatory definition of "well
capitalized".
Since the beginning of 1994 through June 30, 1997, the Board of
Directors of the Company authorized the repurchase of 914,050
shares of common stock from time to time, subject to appropriate
regulatory and other accounting requirements. Pursuant to this
program, 674,050 shares had been purchased through December 31,
1996, 12,500 were purchased during the first quarter of 1997,
168,200 were purchased during the second quarter of 1997 and 59,300
were purchased during the third quarter of 1997. During October,
1997, the Board of Directors further approved the continuing
systematic repurchase of 240,000 additional shares in open-market
transactions from time to time prior to November 1, 1998. Through a
separate program, the Board of Directors also approved, during
October 1997, the purchase from time to time in open-market and
block transactions up to 70,000 shares. These purchases are
conducted in accordance with the limitations and guidelines of rule
10b-18 and are made to lessen the dilutive impact of issuing new
shares to meet stock performance, option plans, acquisitions and
other requirements.
<PAGE>
Interim Periods
In February, 1997, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards No. 128,
"Earnings per Share" ("SFAS 128"). SFAS 128 establishes standards
for computing and presenting earnings per share ("EPS") and applies
to entities with publicly held common stock or potential common
stock. SFAS 128 simplifies the standards for computing earnings per
share previously found in APB Opinion No. 15, "Earnings per Share",
and replaces the presentation of primary EPS with a presentation of
basic EPS. It also requires dual presentation of basic and diluted
EPS on the face of the income statement and requires a
reconciliation of the numerator and denominator of the basic EPS
computation to the numerator and denominator of the diluted EPS
computation. SFAS 128 is effective for financial statements issued
for periods ending after December 15, 1997, including interim
periods; earlier application is not permitted. This statement
requires restatement of all prior-period EPS data presented.
The pro forma EPS amounts computed using this statement for the
three and nine-month periods ended September 30, 1997 and 1996 are
as follows:
<TABLE>
<CAPTION>
For the three months
(Dollars and shares in ended September 30, 1997
thousands except per ---------------------------------------
share amounts) Per Share
Net Income Shares Amount
---------- ------ ----------
<S> <C> <C> <C>
Basic EPS:
Income available to common
shareholders $17,660 14,390 $1.23
Effect of dilutive securities:
Stock options outstanding -- 279
-------- -------
Diluted EPS:
Income available to common
shareholders plus assumed
conversions $17,660 14,669 $1.20
======== ======= ======
</TABLE>
<TABLE>
<CAPTION>
For the three months
(Dollars and shares in ended September 30, 1996
thousands except per ---------------------------------------
share amounts) Per Share
Net Income Shares Amount
---------- ------ ----------
<S> <C> <C> <C>
Basic EPS:
Income available to common
shareholders $11,903 14,080 $0.85
Effect of dilutive securities:
Stock options outstanding -- 270
-------- -------
Diluted EPS:
Income available to common
shareholders plus assumed
conversions $11,903 14,350 $0.83
======== ======= ======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
For the nine months
(Dollars and shares in ended September 30, 1997
thousands except per ---------------------------------------
share amounts) Per Share
Net Income Shares Amount
---------- ------ ----------
<S> <C> <C> <C>
Basic EPS:
Income available to common
shareholders $29,838 14,355 $2.08
Effect of dilutive securities:
Stock options outstanding -- 255
-------- -------
Diluted EPS:
Income available to common
shareholders plus assumed
conversions $29,838 14,610 $2.04
======== ======= ======
</TABLE>
<TABLE>
<CAPTION>
For the nine months
(Dollars and shares in ended September 30, 1996
thousands except per ---------------------------------------
share amounts) Per Share
Net Income Shares Amount
---------- ------ ----------
<S> <C> <C> <C>
Basic EPS:
Income available to common
shareholders $34,371 14,248 $2.41
Effect of dilutive securities:
Stock options outstanding -- 269
-------- -------
Diluted EPS:
Income available to common
shareholders plus assumed
conversions $34,371 14,517 $2.37
======== ======= ======
</TABLE>
In June 1997, the FASB issued Financial Accounting Standard No.
130, "Reporting Comprehensive Income" ("SFAS 130"). SFAS 130 is
effective with the year-end 1998 financial statements; however, the
total comprehensive income is required in the financial statements
for interim periods beginning in 1998. In June 1997, the FASB
issued Financial Accounting Standard No. 131, "Disclosure About
Segments of An Enterprise and Related Information" ("SFAS 131").
SFAS 131 is effective with the year-end 1998 financial statements.
Management believes that the adoption of these statements will not
have a material impact on the Company's financial statements.
<PAGE>
SIGNATURES
Pursuant to the requirements of the 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 6, 1997 /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
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) Exhibit 27 : Financial Data Schedule
(c) Reports on Form 8-K: None
<PAGE>
Exhibit 11
WESTAMERICA BANCORPORATION
Computation of Earnings Per Share on Common
and Common Equivalent Shares and on Common
Shares Assuming Full Dilution
(In thousands, except per share data)
<TABLE>
<CAPTION>
For the three For the nine
months ended months ended
September 30, September 30,
--------------------- ----------------------
1997 1996 * 1997 1996 *
------- ------- -------- -------
<S> <C> <C> <C> <C>
Weighted average number of
common shares outstanding 14,390 14,080 14,355 14,248
Add exercise of options
reduced by the number of
shares that could have
been purchased with the
proceeds from such exercise 279 270 255 269
------- ------- ------- -------
Total 14,669 14,350 14,610 14,517
======= ======= ======= =======
Net income $17,660 $11,903 $29,838 $34,371
Primary earnings per share $1.23 $0.85 $2.08 $2.41
====== ====== ====== ======
Fully-diluted
earnings per share $1.20 $0.83 $2.04 $2.37
====== ====== ====== ======
</TABLE>
* Restated on a historical basis to reflect the April 12, 1997, acquisition
of ValliCorp Holdings, Inc. on a pooling-of-interests basis.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS 3-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997 DEC-31-1996 DEC-31-1996
<PERIOD-START> JUL-01-1997 JAN-01-1997 JUL-01-1996 JAN-01-1996
<PERIOD-END> SEP-30-1997 SEP-30-1997 SEP-30-1996 SEP-30-1996
<CASH> 0 246,485 0 342,867
<INT-BEARING-DEPOSITS> 0 2,302,136 0 2,430,876
<FED-FUNDS-SOLD> 0 0 0 77,700
<TRADING-ASSETS> 0 0 0 0
<INVESTMENTS-HELD-FOR-SALE> 0 974,149 0 876,701
<INVESTMENTS-CARRYING> 0 234,731 0 219,744
<INVESTMENTS-MARKET> 0 237,497 0 220,620
<LOANS> 0 2,256,422 0 2,301,541
<ALLOWANCE> 0 50,764 0 49,795
<TOTAL-ASSETS> 0 3,816,895 0 3,856,759
<DEPOSITS> 0 3,105,176 0 3,220,093
<SHORT-TERM> 0 205,476 0 172,660
<LIABILITIES-OTHER> 0 49,690 0 33,366
<LONG-TERM> 0 57,500 0 63,896
0 0 0 0
0 0 0 0
<COMMON> 0 196,994 0 186,007
<OTHER-SE> 0 202,059 0 180,737
<TOTAL-LIABILITIES-AND-EQUITY> 0 3,816,895 0 3,856,759
<INTEREST-LOAN> 51,233 151,606 51,239 154,224
<INTEREST-INVEST> 17,217 49,184 15,395 46,401
<INTEREST-OTHER> 27 1,629 1,009 3,370
<INTEREST-TOTAL> 68,477 202,419 67,643 203,995
<INTEREST-DEPOSIT> 19,394 57,544 19,312 57,609
<INTEREST-EXPENSE> 22,170 66,189 22,879 68,750
<INTEREST-INCOME-NET> 46,307 136,230 44,764 135,245
<LOAN-LOSSES> 1,650 6,250 3,152 9,154
<SECURITIES-GAINS> 0 136 9 56
<EXPENSE-OTHER> 26,203 111,948 32,965 101,221
<INCOME-PRETAX> 27,230 46,073 17,846 51,543
<INCOME-PRE-EXTRAORDINARY> 17,660 29,838 11,903 34,371
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 17,660 29,838 11,903 34,371
<EPS-PRIMARY> 1.23 2.08 .85 2.41
<EPS-DILUTED> 1.20 2.04 .83 2.37
<YIELD-ACTUAL> 5.69 5.62 5.47 5.52
<LOANS-NON> 0 20,318 0 23,095
<LOANS-PAST> 0 748 0 651
<LOANS-TROUBLED> 0 0 0 257
<LOANS-PROBLEM> 0 0 0 0
<ALLOWANCE-OPEN> 50,742 50,920 46,615 48,494
<CHARGE-OFFS> 2,894 9,626 2,701 12,568
<RECOVERIES> 1,266 3,220 1,063 3,049
<ALLOWANCE-CLOSE> 50,764 50,764 49,794 49,794
<ALLOWANCE-DOMESTIC> 0 50,764 0 49,794
<ALLOWANCE-FOREIGN> 0 0 0 0
<ALLOWANCE-UNALLOCATED> 0 18,405 0 24,177
</TABLE>
