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 March 31, 2000
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 May 1, 2000
36,273,615
<PAGE>
WESTAMERICA BANCORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
(Unaudited)
At March 31, At December 31,
2000 1999 1999
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents $206,226 $194,609 $255,738
Money market assets 250 250 250
Investment securities available for sale 976,020 996,076 982,337
Investment securities held to maturity,
with market values of:
$234,735 at March 31, 2000
$241,281 at March 31, 1999
$235,147 at December 31, 1999 237,156 235,527 237,154
Loans, gross, net of allowance for
loan losses of:
$51,990 at March 31, 2000
$51,703 at March 31, 1999
$51,574 at December 31, 1999 2,259,276 2,236,982 2,269,272
Other real estate owned 2,908 3,862 3,269
Premises and equipment, net 43,320 45,305 44,016
Interest receivable and other assets 103,999 114,466 101,151
- --------------------------------------------------------------------------------------
Total assets $3,829,155 $3,827,077 $3,893,187
======================================================================================
LIABILITIES
Deposits:
Non-interest bearing $932,675 $801,035 911,556
Interest bearing:
Transaction 510,557 565,040 485,860
Savings 844,498 874,909 840,644
Time 831,282 855,777 827,284
- --------------------------------------------------------------------------------------
Total deposits 3,119,012 3,096,761 3,065,344
Short-term borrowed funds 352,447 265,656 462,345
Liability for interest, taxes and
other expenses 26,702 59,851 23,406
Notes payable 38,036 47,600 41,500
- --------------------------------------------------------------------------------------
Total liabilities 3,536,197 3,469,868 3,592,595
- --------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Authorized -
150,000 shares of common stock
Issued and outstanding:
36,412 at March 31, 2000
39,313 at March 31, 1999
37,125 at December 31, 1999 183,039 196,915 186,435
Accumulated other comprehensive income:
Unrealized (loss) gain on securities
available for sale (6,585) 16,065 (4,521)
Retained earnings 116,504 144,229 118,678
- --------------------------------------------------------------------------------------
Total shareholders' equity 292,958 357,209 300,592
- --------------------------------------------------------------------------------------
Total liabilities and
shareholders' equity $3,829,155 $3,827,077 $3,893,187
======================================================================================
</TABLE>
<PAGE>
WESTAMERICA BANCORPORATION
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(in thousands, except per share data)
- ---------------------------------------------------------------------------
(Unaudited)
Three months ended
March 31,
2000 1999
- ---------------------------------------------------------------------------
INTEREST INCOME
Loans $47,227 $46,239
Money market assets and funds sold 4 --
Investment securities available for sale
Taxable 11,649 11,499
Tax-exempt 2,852 2,514
Investment securities held to maturity
Taxable 1,245 1,431
Tax-exempt 2,069 1,951
- ---------------------------------------------------------------------------
Total interest income 65,046 63,634
INTEREST EXPENSE
Transaction deposits 916 949
Savings deposits 4,503 5,052
Time deposits 10,450 9,461
Funds purchased 4,509 2,659
Debt financing and notes payable 692 829
- ---------------------------------------------------------------------------
Total interest expense 21,070 18,950
- ---------------------------------------------------------------------------
NET INTEREST INCOME 43,976 44,684
Provision for loan losses 945 1,195
- ---------------------------------------------------------------------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 43,031 43,489
NON-INTEREST INCOME
Service charges on deposit accounts 5,221 4,805
Merchant credit card 939 844
Financial services commissions 413 565
Mortgage banking 210 232
Trust fees 162 173
Other 3,010 2,528
- ---------------------------------------------------------------------------
Total non-interest income 9,955 9,147
NON-INTEREST EXPENSE
Salaries and related benefits 12,337 12,918
Occupancy 3,059 2,942
Equipment 1,621 1,741
Data processing 1,542 1,464
Professional fees 360 413
Other real estate owned 29 34
Other 5,474 5,461
- ---------------------------------------------------------------------------
Total non-interest expense 24,422 24,973
- ---------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 28,564 27,663
Provision for income taxes 9,338 9,258
- ---------------------------------------------------------------------------
NET INCOME $19,226 $18,405
===========================================================================
Comprehensive income:
Unrealized loss on securities
available for sale, net (2,064) (4,119)
COMPREHENSIVE INCOME $17,162 $14,286
===========================================================================
Average shares outstanding 36,625 39,632
Diluted average shares outstanding 37,058 40,272
PER SHARE DATA
Basic earnings $0.52 $0.46
Diluted earnings 0.52 0.46
Dividends paid 0.18 0.16
<PAGE>
WESTAMERICA BANCORPORATION
STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
(Unaudited)
For the three months
ended March 31,
2000 1999
- --------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $19,226 $18,405
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,918 2,066
Loan loss provision 945 1,195
Amortization of deferred net loan (cost)/fees 138 568
Decrease (increase) in interest income receivable 61 (552)
(Increase) decrease in other assets (3,532) 107
Increase in income taxes payable 9,338 7,564
Increase (decrease) in interest expense payable 170 (390)
(Decrease) increase in other liabilities (4,791) 8,208
Write down/(gain on sales) of equipment 21 (46)
Originations of loans for resale (1,021) (7,554)
Proceeds from sale of loans originated for resale 1,021 7,228
Net gain on sale of property acquired
in satisfaction of debt (135) (105)
Write down on property
acquired in satisfaction of debt 2 --
- --------------------------------------------------------------------------------------------
Net cash provided by operating activities 23,361 36,694
- --------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Net repayments of loans 8,627 7,916
Purchases of investment securities available for sale (22,626) (116,585)
Purchases of investment securities held to maturity (1,751) (14,158)
Purchases of property, plant and equipment (563) (707)
Proceeds from maturity of securities available for sale 24,962 100,879
Proceeds from maturity of securities held to maturity 1,749 5,624
Proceeds from sale of securities available for sale 419 182
Proceeds from sale of property and equipment 20 46
Proceeds from property acquired in satisfaction
of debt 780 816
- --------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities 11,617 (15,987)
- --------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Net increase (decrease) in deposits 53,668 (92,244)
Net (decrease) increase in short-term borrowings (109,898) 61,985
(Repayments) additions to notes payable (3,464) 100
Exercise of stock options/issuance of shares 355 5,378
Retirement of stock (18,538) (24,675)
Dividends paid (6,613) (6,376)
- --------------------------------------------------------------------------------------------
Net cash used in financing activities (84,490) (55,832)
- --------------------------------------------------------------------------------------------
Net decrease in cash and cash equivalents (49,512) (35,125)
Cash and cash equivalents at beginning of period 255,738 229,734
- --------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $206,226 $194,609
============================================================================================
Supplemental disclosure of non-cash activities:
Loans transferred to other real estate owned $286 $258
Depreciation of fixed assets charged against reserves -- 37
Supplemental disclosure of cash flow activity:
Unrealized (loss) gain on securities available for sale (2,064) (4,119)
Interest paid for the period 20,900 19,340
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
In addition to historical information, this discussion includes
certain forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. The Company's
actual results may differ materially from those included in the
forward-looking statements. The forward-looking statements involve
risks and uncertainties which include, but are not limited to,
changes in general economic conditions; competitive conditions in
the geographic and business areas in which the Company conducts its
operations; regulatory or tax changes that affect the cost of or
demand for the Company's products; the resolution of legal
proceedings and related matters. The reader is directed to
Westamerica Bancorporation's annual report on Form 10-K for the
year ended December 31, 1999, particularly the section entitled
"Cautionary Statement," for the purpose of the Safe Harbor
provisions of the Private Securities Litigation Reform Act of 1995
for a discussion of factors which could affect the Company's
business and cause actual results to differ materially from those
expressed in any forward-looking statement made in this report.
For further information on the subject, please refer to the
"Forward-Looking Statement Disclosure" section of this report.
Westamerica Bancorporation (the "Company"), parent company of
Westamerica Bank, Bank of Lake County, Community Banker Services
Corporation and Westamerica Commercial Credit Inc., reported first
quarter 2000 net income of $19.2 million or $.52 diluted earnings
per share. These results compare to net income of $18.4 million or
$.46 diluted earnings per share and $19.5 million or $.51 diluted
earnings per share, respectively, for the first and fourth quarters
of 1999.
Following is a summary of the components of net income for
the periods indicated:
- -------------------------------------------------------------------------
For the three months ended
March 31, December 31,
-------------------- ------------
(In millions) 2000 1999 1999
- -------------------------------------------------------------------------
Net interest income* $47.4 $47.6 $48.1
Provision for loan losses (0.9) (1.2) (1.2)
Non-interest income 10.0 9.1 11.4
Non-interest expense (24.4) (25.0) (25.7)
Provision for income taxes* (12.9) (12.1) (13.1)
- -------------------------------------------------------------------------
Net income $19.2 $18.4 $19.5
=========================================================================
Average total assets $3,822.6 $3,774.5 $3,882.7
Net income (annualized) as
a percentage of average
total assets 2.02% 1.98% 2.00%
=========================================================================
* Fully taxable equivalent basis (FTE)
<PAGE>
During the first three months of 2000, the Company's net income was
$19.2 million, $800 thousand higher than the same period in 1999.
Improvements in non-interest income, reduced operating costs and
a lower loan loss provision from continued improvements in credit
quality were partially offset by lower net interest income, mainly
resulting from increased cost of funds in connection with increases
in higher-costing short-term borrowings, partially offset by higher
earning-asset volume and yields. Completing the change, the
provision for income taxes was higher than in the first quarter of
1999 primarily as a result of higher pretax earnings.
Comparing the first quarter of 2000 to the prior quarter, net
income decreased $300 thousand. Included in this change is lower
service and fee income and reduced net interest income, principally
due to lower earning-asset average balances and lower low-cost
deposits resulting in higher cost of funds, partially offset by
higher earning-asset yields. Partially offsetting these changes,
non-interest expense was lower than the prior quarter and so were
the provisions for loan losses and income taxes.
Net Interest Income
Following is a summary of the components of net interest income
for the periods indicated:
- -------------------------------------------------------------------------
For the three months ended
March 31, December 31,
- -------------------------------------------------------------------------
(In millions) 2000 1999 1999
- -------------------------------------------------------------------------
Interest income $65.1 $63.6 $65.1
Interest expense (21.1) (18.9) (20.3)
FTE adjustment 3.4 2.9 3.3
- -------------------------------------------------------------------------
Net interest income (FTE) $47.4 $47.6 $48.1
=========================================================================
Average earning assets $3,524.3 $3,463.0 $3,555.2
Net interest margin (FTE) 5.39% 5.53% 5.39%
=========================================================================
The Company's primary source of revenue is net interest income, or
the difference between interest income on earning assets and
interest expense on interest-bearing liabilities. Net interest
income (FTE) during the first quarter of 2000 decreased $208 thousand
from the same period in 1999 to $47.4 million. Comparing the first
quarter of 2000 with the previous quarter, net interest income
(FTE) decreased $728 thousand.
Interest Income
During the first quarter of 2000 interest income (FTE) increased
$1.9 million from the same period in 1999. Higher earning-asset
yields and average balances were the primary reasons for the change.
Loan yields increased 9 basis points from prior year, mostly in
categories where loans are tied to the prime rate which, on average
rose 91 basis points from the first quarter of 1999. In addition,
following market trends, investment securities yields rose 4 basis
points from 1999. Adding to the favorable impact of higher yields,
average earning-asset balances increased $61.4 million from the
first quarter of 1999, as loans and investments increased $20.4
million and $41.0 million, respectively. The increase in loan
balances was mainly concentrated in the sought-after indirect
lending and commercial loans with real estate collateral
categories, partially offset by decreases in commercial, real
estate residential and direct consumer loans. The increase in the
<PAGE>
investment securities portfolio is the result of increases in U.S.
Agency and tax-free securities, combined with balance runoffs in
U.S Treasury and asset-backed securities and collateralized
mortgage obligations.
Comparing the first quarter of 2000 with the fourth quarter of
1999, interest income (FTE) remained at $68.4 million. The effect of
a 13 basis point increase in average yields was partially offset by
a $30.9 million seasonal reduction in earning-assets average
balances, accounting for the quarter-to-quarter change. The
increase in average yields reflect market trends, as does an
increase of 32 basis points in the Company's index rate. Lower
earning-asset average balances were comprised of a $18.2 million
decrease in investment securities, particularly asset-backed and
U.S Treasury securities, and a $12.7 million decrease in loans, for
the most part in the commercial category, partially offset by an
increase in indirect dealer paper. All categories of loan yields
increased from prior quarter for a combined total of 15 basis
points; investment yields increased by 7 basis points from the same
period mainly in the tax-free, participation certificates and U.S.
Treasury securities categories.
Interest Expense
For the first quarter of 2000 interest expense was $2.12 million
higher than the first quarter of 1999. Following a general increase
in rates paid on deposits and borrowed funds reflective of a
general increase market rates, total interest-bearing liability
rates increased 33 basis points from the first quarter of 1999. The
adverse effect on net interest income of interest-bearing
liabilities rate increases was partially offset by a $26.1 million
reduction in the corresponding average balances, including a
reduction of $129.8 million in deposits, and reductions in debt
financing and long-term debt of $5.0 million and $3.4 million,
respectively, partially offset by an increase of $112.1 million in
short-term borrowed funds. In addition, interest-free demand
deposits increased $121.4 million from the first quarter of 1999,
which includes the transfer, during the third quarter of 1999, of
certain interest-bearing transaction deposits into the non-interest
bearing category.
Interest expense increased $721 thousand from the fourth quarter of
1999, as an increase of 17 basis points on the rates paid on
interest-bearing liabilities and a $36.3 million decrease in demand
deposit average balances were partially offset by a $13.0 million
decrease in interest-bearing liability average balances. Reflecting
market conditions, rates paid increased in almost all categories of
interest-bearing liabilities, with the exception of long-term
certificates of deposits and core savings and money market saving
deposits. There were no significant changes to the average balance
of short-term borrowed funds and the average balance of long-term
debt decreased $2.3 million from the previous quarter.
In all periods, the Company has attempted continuously to reduce
high-rate time deposits while increasing the balances of more
profitable, lower-cost transaction accounts minimizing the effect
of adverse cyclical quarterly trends.
<PAGE>
Net Interest Margin (FTE)
The following summarizes the components of the Company's net
interest margin for the periods indicated:
- -------------------------------------------------------------------------
For the three months ended
March 31, December 31,
- -------------------------------------------------------------------------
2000 1999 1999
- -------------------------------------------------------------------------
Yield on earning assets 7.79% 7.75% 7.66%
Rate paid on interest-bearing
liabilities 3.28% 2.95% 3.12%
- -------------------------------------------------------------------------
Net interest spread 4.51% 4.80% 4.54%
Impact of all other net
non-interest bearing funds 0.88% 0.73% 0.85%
- -------------------------------------------------------------------------
Net interest margin 5.39% 5.53% 5.39%
=========================================================================
During the first quarter of 2000, the Company's net interest margin
was 14 basis points lower than the first quarter of 1999, as the
unfavorable impact of an increase in the cost of funds, triggered
by rising market rates, was partially offset by the effect of a
moderate increase of 4 basis points in earning-asset yields. Further
reducing the combined 29 basis points decrease in net interest
spread from the first quarter of 1999, the net interest margin was
favorably impacted by the effect of a 15 basis points increase
resulting from higher volume of net non-interest bearing funds.
This change reflects mostly a $121.4 million increase in
interest-free demand deposit accounts, partially offset by the
effect of the Company's share repurchase programs, which more than
offset the capital contributions originated from higher net income,
resulting in a $47.5 million decrease in average equity capital
from the first quarter of 1999.
The net interest margin remained unchanged from the prior quarter
as the effects of a more rapid rise in the cost of funds than the
yield on earning assets - a 16 basis points increase in the rates
paid on interest-bearing liabilities was partially offset by a 13
basis points increase in earning-asset yields - was offset by a 3
basis points increase primarily due to the favorable impact of
higher market rates on net non-interest bearing fund average
balances.
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. 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
March 31, 2000
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest Rates
Average income/ earned/
(Dollars in thousands) balance expense paid
- -------------------------------------------------------------------------------------
Assets
Money market assets and funds sold $466 $4 3.45 %
Investment securities:
Available for sale
Taxable 767,670 11,649 6.10
Tax-exempt 220,651 4,192 7.64
Held to maturity
Taxable 81,845 1,245 6.12
Tax-exempt 155,260 3,035 7.86
Loans:
Commercial 1,483,244 32,043 8.69
Real estate construction 46,779 1,321 11.36
Real estate residential 335,441 5,779 6.93
Consumer 432,993 9,166 8.51
- -------------------------------------------------------------------------
Earning assets 3,524,349 68,434 7.79
Other assets 298,242
- -----------------------------------------------------------
Total assets $3,822,591
===========================================================
Liabilities and shareholders' equity
Deposits:
Non-interest bearing demand $916,153 $-- -- %
Savings and interest-bearing
transaction 1,326,499 5,419 1.64
Time less than $100,000 392,218 4,610 4.73
Time $100,000 or more 451,539 5,840 5.20
- -------------------------------------------------------------------------
Total interest-bearing deposits 2,170,256 15,869 2.94
Funds purchased 369,959 4,509 4.90
Debt financing and notes payable 39,174 692 7.11
- -------------------------------------------------------------------------
Total interest-bearing liabilities 2,579,389 21,070 3.28
Other liabilities 31,689
Shareholders' equity 295,360
- -----------------------------------------------------------
Total liabilities and
shareholders' equity $3,822,591
===========================================================
Net interest spread (1) 4.51 %
Net interest income and interest margin (2) $47,364 5.39 %
=====================================================================================
</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 calculating the difference
between the weighted average yields on earning assets less the
interest expense (annualized) divided by the average balance of
earning assets.
<PAGE>
Distribution of assets, liabilities and shareholders' equity:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
For the three months ended
March 31, 1999
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest Rates
Average income/ earned/
(Dollars in thousands) balance expense paid
- -------------------------------------------------------------------------------------
Assets
Money market assets and funds sold $250 $-- -- %
Investment securities:
Available for sale
Taxable 758,674 11,499 6.15
Tax-exempt 191,536 3,593 7.61
Held to maturity
Taxable 88,839 1,431 6.53
Tax-exempt 145,579 2,776 7.73
Loans:
Commercial 1,472,275 31,055 8.55
Real estate construction 56,140 1,489 10.76
Real estate residential 373,006 6,517 7.09
Consumer 376,680 8,162 8.79
- -------------------------------------------------------------------------
Earning assets 3,462,979 66,522 7.75
Other assets 311,487
- -----------------------------------------------------------
Total assets $3,774,466
===========================================================
Liabilities and shareholders' equity
Deposits:
Non-interest bearing demand $794,758 $-- -- %
Savings and interest-bearing
transaction 1,450,817 6,001 1.68
Time less than $100,000 423,983 4,727 4.52
Time $100,000 or more 425,325 4,734 4.51
- -------------------------------------------------------------------------
Total interest-bearing deposits 2,300,125 15,462 2.73
Funds purchased 257,855 2,659 4.18
Debt financing and notes payable 47,545 829 7.07
- -------------------------------------------------------------------------
Total interest-bearing liabilities 2,605,525 18,950 2.95
Other liabilities 31,314
Shareholders' equity 342,869
- -----------------------------------------------------------
Total liabilities and
shareholders' equity $3,774,466
===========================================================
Net interest spread (1) 4.80 %
Net interest income and interest margin (2) $47,572 5.53 %
=====================================================================================
(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 calculating the difference
between the weighted average yields on earning assets less the
interest expense (annualized) divided by the average balance of
earning assets.
</TABLE>
<PAGE>
Distribution of assets, liabilities and shareholders' equity:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
For the three months ended
December 31, 1999
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest Rates
Average income/ earned/
(Dollars in thousands) balance expense paid
- -------------------------------------------------------------------------------------
Assets
Money market assets and funds sold $421 $4 3.64 %
Investment securities:
Available for sale
Taxable 782,564 11,852 6.01
Tax-exempt 219,997 4,089 7.37
Held to maturity
Taxable 83,653 1,265 6.00
Tax-exempt 157,418 3,039 7.66
Loans:
Commercial 1,501,453 31,938 8.44
Real estate construction 51,534 1,455 11.20
Real estate residential 339,287 5,815 6.80
Consumer 418,912 8,984 8.51
- -------------------------------------------------------------------------
Earning assets 3,555,239 68,441 7.66
Other assets 327,486
- -----------------------------------------------------------
Total assets $3,882,725
===========================================================
Liabilities and shareholders' equity
Deposits:
Non-interest bearing demand $952,423 $-- -- %
Savings and interest-bearing
transaction 1,357,554 5,751 1.68
Time less than $100,000 397,765 4,483 4.47
Time $100,000 or more 422,705 5,024 4.71
- -------------------------------------------------------------------------
Total interest-bearing deposits 2,178,024 15,258 2.78
Funds purchased 369,528 4,299 4.62
Debt financing and notes payable 44,833 793 7.02
- -------------------------------------------------------------------------
Total interest-bearing liabilities 2,592,385 20,350 3.12
Other liabilities 31,678
Shareholders' equity 306,239
- -----------------------------------------------------------
Total liabilities and
shareholders' equity $3,882,725
===========================================================
Net interest spread (1) 4.54 %
Net interest income and interest margin (2) $48,091 5.39 %
=====================================================================================
(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 calculating the difference
between the weighted average yields on earning assets less the
interest expense (annualized) divided by the average balance of
earning assets.
</TABLE>
<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. As previously stated, appropriate
amounts are calculated on a fully taxable equivalent basis using
the current statutory federal tax rate.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Three months ended
March 31, 2000
compared with three months
ended March 31, 1999
- -------------------------------------------------------------------------------------
(In thousands) Volume Rate Total
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Increase (decrease) in
interest and fee income:
Money market assets and funds sold $4 $0 $4
Investment securities:
Available for sale
Taxable 375 (225) 150
Tax-exempt 582 17 599
Held to maturity
Taxable (103) (83) (186)
Tax-exempt 207 52 259
Loans:
Commercial 318 670 988
Real estate construction (253) 85 (168)
Real estate residential (605) (133) (738)
Consumer 1,268 (264) 1,004
- -------------------------------------------------------------------------------------
Total increase
in loans 728 358 1,086
- -------------------------------------------------------------------------------------
Total increase in
interest and fee income 1,793 119 1,912
- -------------------------------------------------------------------------------------
Increase (decrease) in interest expense:
Deposits:
Savings/interest-bearing (470) (112) (582)
Time less than $ 100,000 (298) 181 (117)
Time $ 100,000 or more 318 788 1,106
- -------------------------------------------------------------------------------------
Total (decrease) increase in
interest-bearing deposits (450) 857 407
Funds purchased 1,325 525 1,850
Debt financing and notes payable (141) 4 (137)
- -------------------------------------------------------------------------------------
Total increase in
interest expense 734 1,386 2,120
- -------------------------------------------------------------------------------------
Increase (decrease) in net
interest income $1,059 ($1,267) ($208)
=====================================================================================
</TABLE>
<PAGE>
Rate and volume variances.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Three months ended
March 31, 2000
compared with three months
ended December 31, 1999
- -------------------------------------------------------------------------------------
(In thousands) Volume Rate Total
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Increase (decrease) in
interest and fee income:
Money market assets and funds sold $-- $-- $--
Investment securities:
Available for sale
Taxable (1,181) 978 (203)
Tax-exempt 8 95 103
Held to maturity
Taxable (235) 215 (20)
Tax-exempt 4 (8) (4)
Loans:
Commercial (73) 178 105
Real estate construction (158) 24 (134)
Real estate residential 53 (89) (36)
Consumer 178 4 182
- -------------------------------------------------------------------------------------
Total increase
in loans 0 117 117
- -------------------------------------------------------------------------------------
Total (decrease) increase in
interest and fee income (1,404) 1,397 (7)
- -------------------------------------------------------------------------------------
Increase (decrease) in interest expense:
Deposits:
Savings/interest-bearing (168) (164) (332)
Time less than $ 100,000 (41) 168 127
Time $ 100,000 or more 325 492 817
- -------------------------------------------------------------------------------------
Total increase in
interest-bearing deposits 116 496 612
Funds purchased 5 205 210
Debt financing and notes payable (112) 11 (101)
- -------------------------------------------------------------------------------------
Total increase in
interest expense 9 712 721
- -------------------------------------------------------------------------------------
(Decrease) increase in net
interest income ($1,413) $685 ($728)
=====================================================================================
</TABLE>
<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
reduce credit costs by enforcing underwriting and administration
procedures and aggressively pursuing collection efforts with
troubled debtors. The Company provided $945 thousand for loan
losses in the first quarter of 2000, $250 thousand lower than the
same period of 1999 and from the previous quarter. 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 months ended
March 31, December 31,
- -------------------------------------------------------------------------
(In millions) 2000 1999 1999
- -------------------------------------------------------------------------
Service charges on deposit
accounts $5.22 $4.81 $5.42
Merchant credit card 0.94 0.84 0.96
Financial services
commissions 0.41 0.57 0.47
Mortgage banking income 0.21 0.23 0.22
Trust fees 0.16 0.17 0.20
Other non-interest income 3.02 2.53 4.18
- -------------------------------------------------------------------------
Total $9.96 $9.15 $11.45
=========================================================================
The $810 thousand increase in non-interest income during the first
quarter of 2000 compared to the first quarter of 1999, was
comprised primarily of $410 thousand higher service charges on
deposit accounts including higher overdraft and returned item
charges primarily due to the effect of a program implemented in the
third quarter of 1999 through which charges escalate following a
tiered system based on number of occurrences; and $100 thousand
higher merchant credit card income primarily due to an 8 percent
increase in sales volume and fee repricing. In addition, included
in the $490 thousand increase in Other non-interest income, are $200
thousand realized through new product offerings (debit card), and
higher safe deposit box fee income, increased fees from issuing
official checks and higher settlement fees from ATM network
servicers, $104 thousand, $65 thousand and $61 thousand,
respectively. Partially offsetting these changes, financial
services commissions were $160 thousand lower than the first
quarter of 1999 due to lower sales volumes, and mortgage banking
income was $20 thousand lower from the comparable period in the
prior year mainly due to lower fees from originations of resalable
loans, partially offset by higher net gains from loans sold in the
secondary market.
<PAGE>
Comparing the first three months of 2000 to the fourth quarter of
1999, non-interest income decreased $1.49 million. The largest
contributors to this change are included in the Other non-interest
income category, as follows: a litigation settlement for $1.5
million recognized in the fourth quarter of 1999 was partially offset
by $111 thousand higher gains on sales of properties acquired in
satisfaction of debt and higher safe deposit box income and fees
resulting from sales of official checks recorded in the first
quarter of 2000. In addition, service charges on deposit accounts
were $200 thousand lower than the prior quarter primarily from
reduced overdraft and returned items fees due to lower seasonal
volume following year-end spending patterns and lower account
analysis charges; financial services commissions were $60 thousand
lower due to reduced sales volume, and trust fees were $40 thousand
lower than the fourth quarter of 1999 primarily due higher annual
fees recognized at year-end. Completing the change from prior
quarter, merchant credit card and mortgage banking income were $20
thousand and $10 thousand, respectively, lower than the fourth
quarter of 1999.
Non-interest expense
The following table summarizes the components of non-interest
expense for the periods indicated.
- -------------------------------------------------------------------------
For the three months ended
March 31, December 31,
- -------------------------------------------------------------------------
(In millions) 2000 1999 1999
- -------------------------------------------------------------------------
Salaries and incentives $9.57 $10.01 $10.21
Other personnel 2.77 2.91 2.53
Occupancy 3.06 2.94 3.15
Equipment 1.62 1.74 1.70
Data processing services 1.54 1.46 1.52
Courier service 0.83 0.87 0.82
Postage 0.55 0.62 0.63
Merchant credit card 0.41 0.31 0.38
Stationery and supplies 0.40 0.37 0.41
Professional fees 0.36 0.41 0.52
Advertising/public relations 0.29 0.32 0.31
Operational losses 0.29 0.22 0.36
Loan expense 0.26 0.36 0.27
Other real estate owned 0.03 0.03 0.09
Other non-interest expense 2.44 2.40 2.77
- -------------------------------------------------------------------------
Total $24.42 $24.97 $25.67
=========================================================================
Average full time
equivalent staff 1,076 1,119 1,085
Non-interest expense to revenues
("efficiency ratio")(FTE) 42.61% 44.03% 43.12%
=========================================================================
<PAGE>
Non-interest expense of $24.42 million in first quarter of 2000 was
$550 thousand lower than the same quarter in 1999, as the Company
continued to control costs through efficiencies and consolidation
of operations, reflected in the continued improvements in the
efficiency ratio. Included in this change are $580 thousand lower
employee-related expenses, a result of reductions in personnel (43
lower full-time equivalent staff) and decreased incentive
compensation program expenses; $120 thousand lower equipment costs,
mainly due to lower expenses related to assets reaching fully
depreciated lives; $100 thousand lower loan-related expenses,
including lower appraisal fees and other costs incurred on behalf
of customers resulting from weaker demand during the first quarter
of 2000; $70 thousand lower postage expenses; $50 thousand lower
professional fees, including lower legal expenses related to
non-performing loans partially offset by higher expenses related to
the creation of the Company's new subsidiaries, and lower
consulting costs, as prior year included environmental work
performed on the land adjacent to the Company's headquarters. In
addition, courier costs were $40 thousand lower than the comparable
quarter of 1999 and advertising and public relations expenses were
$30 thousand lower that the first quarter of 1999, primarily due to
reduced costs related to the publication of shareholder reports and
customer entertainment, in part offset by increased branch and
other promotional advertising.
Partially offsetting these changes, the first quarter of 2000
includes $120 thousand higher occupancy costs mainly due to the
combined effect of higher rental expenses net of sublease income
and lower building repairs and maintenance costs; $100 thousand
higher merchant credit card related costs primarily due to
increased processing fees and volume; $80 thousand higher data
processing costs due to a contract renewal with the Company's
primary outside servicer which resulted in a base-rate adjustment;
Company's primary outside servicer; and $70 thousand higher
operational losses, mainly sundry losses incurred in the branches
related to fraudulent activities. Completing the change from the
first quarter of 1999, other was $40 thousand higher than prior
year, primarily as a result of increased assessments from
regulatory agencies, and stationery and supplies costs were $30
thousand higher than the comparable period in 1999 due to increased
usage and purchases of inventories.
Comparing the first quarter of 2000 with the fourth quarter of
1999, non-interest expense decreased $1.25 million. Included in
this change are $400 thousand lower employee-related expenses,
primarily due to higher accruals related to incentive compensation
recognized during the previous quarter partially offset by first
quarter 2000 higher employee benefits expense and lower deferrals
in connection with costs incurred originating new loans. In
addition, professional fees were $160 thousand lower than the
previous quarter, due to reduced legal expense related to
non-performing loans and human resources issues, and lower
consulting costs as the fourth quarter of 1999 included certain
costs related to the transfer of the tax-deferred pension plan to a
new servicer; occupancy expense was $90 thousand lower primarily
due to lower costs of assets reaching fully depreciated lives and
lower utilities expenses; equipment expense was $80 thousand lower
than the previous quarter mainly due to lower repairs and
maintenance costs and lower costs of assets reaching fully
depreciated status; and postage expense was $80 thousand lower than
the fourth quarter of 1999. In addition, operational losses were
<PAGE>
$70 thousand lower in the first quarter of 2000 as the fourth
quarter of 1999 included additional charge-offs resulting from
increased volume of pending sundry losses requiring resolution; and
other real estate owned expense was $60 thousand lower primarily
due to lower related property tax expense. The rest of the
favorable changes from the fourth quarter of 1999 include a
reduction of $330 thousand in other expenses, including an accrual
established in 1999 to cover for possible incidentals related to
Y2K compliance issues and its subsequent reversal in the first
quarter of 2000, and an additional accrual recognized in the last
quarter of 1999 in connection with pending litigations, and lower
advertising and public relations, stationery and supplies and loan
expense, $20 thousand, $10 thousand and $10 thousand, respectively,
lower than the previous quarter. Partially offsetting these
favorable changes from the fourth quarter of 1999, merchant credit
card costs were $30 thousand higher, due to increased volume and a
consequent increase in processing expense; data processing costs
were $20 thousand higher, primarily due to a base-rate adjustment
resulting from a contract renewal with the Company's primary
servicer, and courier services costs were $10 thousand higher than
the previous quarter.
Provision for Income Tax
During the first quarter of 2000, the Company recorded income tax
expense of $9.3 million, unchanged from the first quarter of 1999
and $500 thousand lower than the $9.8 million recorded in the
fourth quarter of 1999. The current provision represents an
effective tax rate of 32.7 percent, compared to 33.5 percent, for
the first and fourth quarters of 1999. The provision for income
taxes for all periods presented is primarily attributable to the
respective level of earnings and the incidence of allowable
deductions.
Asset Quality
The Company closely monitors the markets in which it conducts its
lending operations and continues its strategy to control exposure
to loans with high credit risk and increase diversification of
earning assets into less risky investments. 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.
<PAGE>
The following is a summary of classified assets on the dates
indicated:
- -------------------------------------------------------------------------
At
At March 31, December 31,
- -------------------------------------------------------------------------
(In millions) 2000 1999 1999
- -------------------------------------------------------------------------
Classified loans $36.3 $52.0 $41.3
Other classified assets 2.9 3.9 3.3
- -------------------------------------------------------------------------
Total classified assets $39.2 $55.9 $44.6
=========================================================================
Allowance for loan losses as a
percentage of classified loans 143% 99% 125%
=========================================================================
Classified loans at March 31, 2000, decreased $15.7 million or 30
percent to $36.3 million from March 31, 1999, reflecting the
continued enforcing of the Company's strict credit standards and a
stronger economy. The decrease was principally due to reductions of
classified commercial and commercial real estate loans. Other
classified assets decreased $1.0 million from March 31, 1999, due
to sales and write-downs of properties acquired in satisfaction of
debt ("other real estate owned") partially offset by new
foreclosures on loans with real estate collateral. The $5.0 million
decrease in classified loans from December 31, 1999, was
principally due to reductions in commercial and commercial real
estate loans. The $400 thousand reduction in other classified
assets from December 31, 1999, was mainly due to sales and
write-downs of other real estate owned properties.
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. 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:
- -------------------------------------------------------------------------
At
At March 31, December 31,
- -------------------------------------------------------------------------
(In millions) 2000 1999 1999
- -------------------------------------------------------------------------
Performing non-accrual loans $4.29 $2.28 $3.46
Non-performing,
non-accrual loans 3.41 6.21 5.50
- -------------------------------------------------------------------------
Total non-accrual loans 7.70 8.49 8.96
Loans 90 days past due and
still accruing 0.37 0.30 0.58
- -------------------------------------------------------------------------
Total non-performing loans 8.07 8.79 9.54
- -------------------------------------------------------------------------
Restructured loans -- -- --
Other real estate owned 2.91 3.86 3.27
- -------------------------------------------------------------------------
Total non-performing assets $10.98 $12.65 $12.81
=========================================================================
Allowance for loan losses
as a percentage of
non-performing loans 644% 588% 540%
=========================================================================
Performing non-accrual loans increased $2.01 million to $4.29
million at March 31, 2000, from $2.28 million at March 31, 1999,
and $830 thousand from $3.46 million outstanding at December 31,
1999. Non-performing, non-accrual loans of $3.41 million at March
31, 2000, decreased $2.80 million from March 31, 1999, and $2.09
million from December 31, 1999. The increases in performing
non-accrual loans from prior periods presented resulted primarily
from the addition of one commercial loan with real estate
collateral, while the decrease in non-performing non-accrual loans
from prior year and prior quarter-end reflects payoffs and sales of
commercial and commercial real estate loans.
The $95 thousand and $360 thousand decreases in other real estate
owned balances from March 31 and December 31, 1999, respectively,
were due to write-downs and liquidations net of foreclosures of
properties acquired in satisfaction of debt.
<PAGE>
The amount of gross interest income that would have been recorded
for non-accrual loans for the three months ended March 31, 2000, if
all such loans had been current in accordance with their original
terms, was $229 thousand, compared to $152 thousand and $213
thousand, respectively, for the first and fourth quarters of 1999.
The amount of interest income that was recognized on non-accrual
loans from all cash payments, including those related to interest
owed from prior years, made during the three months ended March
31, 2000, totaled $372 thousand, compared to $112 thousand for the
comparable period in 1999 and $297 thousand for the fourth quarter
of 1999. These cash payments represent annualized yields of 19.5
percent for the first quarter of 2000 compared to 6.13 percent and
11.75 percent, respectively, for the first and fourth quarters of
1999. Total cash payments received, including those recorded in
prior years, which were applied against the book balance of
non-accrual loans outstanding at March 31, 2000, totaled
approximately $290 thousand.
The overall credit quality of the loan portfolio continues to be
strong and improving; however, the total non-performing assets
could fluctuate from period to period. The performance of any
individual loan can be impacted by external factors such as the
interest rate environment or factors particular to the borrower.
The Company expects to maintain the level of non-performing assets;
however, the Company can give no assurance that additional
increases in non-accrual loans will not occur in the future.
Allowance for Loan Losses
The Company's allowance for loan losses is maintained at a level
estimated to be adequate to provide for losses that can be
estimated based upon specific and general conditions. These include
credit loss experience, the amount of past due, non-performing and
classified loans, recommendations of regulatory authorities,
prevailing economic conditions and other factors. The allowance is
allocated to segments of the loan portfolio based in part on
quantitative analyses of historical credit loss experience, in
which criticized and classified loan balances are analyzed using a
linear regression model to determine standard allocation
percentages. The results of this analysis 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. A portion of the allowance is also
allocated to impaired loans. Management considers the $52.0 million
allowance for loan losses, which constituted 2.25 percent of total
loans at March 31, 2000, to be adequate as a reserve against
inherent losses. However, while the Company's policy is to charge
off in the current period those loans on which the loss is
considered probable, the risk exists of future losses which cannot
be precisely quantified or attributed to particular loans or
classes of loans. Management continues to evaluate the loan
portfolio and assess current economic conditions that will dictate
future required allowance levels.
<PAGE>
The following table summarizes the loan loss provision, net credit
losses and allowance for loan losses for the periods indicated:
- -------------------------------------------------------------------------
For the three months ended
March 31, December 31,
- -------------------------------------------------------------------------
(In millions) 2000 1999 1999
- -------------------------------------------------------------------------
Balance, beginning
of period $51.6 $51.3 $51.6
Loan loss provision 0.9 1.2 1.2
Loans charged off (1.8) (1.5) (1.9)
Recoveries of previously
charged-off loans 1.3 0.7 0.7
- -------------------------------------------------------------------------
Net credit losses (0.5) (0.8) (1.2)
- -------------------------------------------------------------------------
Balance, end of period $52.0 $51.7 $51.6
=========================================================================
Allowance for loan losses
as a percentage
of loans outstanding 2.25% 2.26% 2.22%
=========================================================================
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 risk is a simulation model to project changes in net interest
income ("NII") that result from forecast changes in interest rates.
The analysis calculates the difference between a NII forecast over
a 12-month period using a flat interest rate scenario, and a NII
forecast using a rising or falling rate scenario where the Fed
Funds rate is made to rise or fall evenly by 200 basis points over
the 12-month forecast interval triggering a response in the other
forecasted rates. It is the policy of the Company to require that
such simulated NII changes should be always less than 10 percent or
steps must be taken to reduce interest-rate risk. According to the
same policy, if the simulated changes in NII reach 7.5 percent, a
closer look at the risk will be put in place to determine what
steps could be taken to control risk should it grow worse. The
results of the model indicate that the mix of interest rate
sensitive assets and liabilities at March 31, 2000 would not result
in a fluctuation of NII that would exceed the parameters
established by Company policy.
At March 31, 2000 and 1999, the Company had no derivative financial
instruments outstanding. As the Company believes that the
derivative financial instrument disclosures contained within the
notes to the financial statements of its 1999 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 were
effective with the 1997 Form 10-K. At March 31, 2000, there were no
substantial changes in the information on market risk that was
disclosed in the Company's Form 10-Ks since 1997.
<PAGE>
Liquidity
The Company's principal source of asset liquidity is marketable
investment securities available for sale. At March 31, 2000,
investment securities available for sale totaled $976 million,
representing a decrease of $20.1 million from March 31, 1999. In
addition, the Company generates significant liquidity from its
operating activities. The Company's profitability during the first
three months of 2000 and 1999 generated substantial cash flows,
which are included in the total provided from operations of $23.4
million and $36.7 million, respectively. Additional cash flows may
be provided by financing activities, primarily the acceptance of
deposits and borrowings from banks.
During the first quarter of 2000, the effect of the Company's stock
repurchase programs and dividends paid to shareholders were $18.5
million and $6.6 million, respectively. These cash outflows, added
to a $109.9 million reduction in short-term borrowed funds and a
$3.5 million reduction in long-term debt partially offset by a
$53.7 million increase in deposits, are included in the net cash
used in financing activities during the first three months of 2000,
totaling $84.5 million.
This compares to the first quarter of 1999, when the cash used in
financing activities totaled $55.8 million. This amount includes
cash outflows related to the Company's stock repurchase programs
and dividends paid to shareholders of $24.7 million and $6.4
million, respectively, in addition to a $92.2 million reduction in
deposit balances, partially offset by a $62.0 million increase in
short-term borrowings and $5.4 million increase in equity from the
issuance of stock.
The Company uses cash flows from operating and financing activities
primarily to invest in loans and investment securities. Purchases
of investment securities net of maturities decreased $2.8 million
during the first three months of 2000 compared to an increase of
$24.1 million during the comparable period in 1999. Proceeds from
net repayments of loans totaled $8.6 million and $7.9 million for
the first three months of 2000 and 1999, respectively.
The Company anticipates increasing its cash level from operations
through 2000 due to increased profitability and retained earnings.
For the same period, it is anticipated that demand for loans will
continue to increase, particularly in the commercial and real
estate categories. The growth in deposit balances is expected to
follow the anticipated growth in loan balances.
Line of Credit
On July 31, 1998, the Company entered into an agreement with a
well-established financial institution, establishing a line of
credit for general corporate purposes including the repurchase of
stock. The line of credit, which had a one-year term and an
available commitment ranging from $60.0 million to $37.5 million,
was canceled in the third quarter of 1999. The Company replaced this
available source of cash inflow with increased cash dividends from
its affiliates.
<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.
Since the beginning of 1994 and through March 31, 2000, the Board
of Directors of the Company has authorized the repurchase of
5,252,150 shares of the Company's common stock from time to time,
subject to appropriate regulatory and other accounting
requirements. The Company acquired 250,000 shares of its common
stock in the open market during the first three months of 2000,
1,000,000 in 1999, 996,000 in 1998, 1,040,886 in 1997, and
1,207,800, 721,350 and 93,000 in 1996, 1995 and 1994, respectively.
So far, these repurchases have been made periodically in the open
market with the intention to lessen the dilutive impact of issuing
new shares to meet stock performance, option plans, acquisitions
and other requirements.
In addition to these systematic repurchases, a new plan to
repurchase up to 1,750,000 of the Company's shares of common stock
(the "Program") was approved by the Board of Directors on August
26, 1999. The Company's strong capital position and healthy
profitability contributed to the initiation of the Program, which
was being implemented to optimize the Company's use of equity
capital and enhance shareholder value. Pursuant to the Program, the
Company repurchased 797,261 shares of its common stock during 1999
at an average price of approximately $31 per share, and 469,500
during the first quarter of 2000 at an average price of
approximately $24 per share.
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 $293.0 million at March 31, 2000. This amount, which is
reflective of the effect of common stock repurchases and dividends
paid to shareholders partially offset by the generation and
retention of earnings, represents a decrease of $64.3 million or 18
percent from March 31, 1999, and a decrease of $7.6 million, or 3
percent, from December 31, 1999. As a consequence of the decrease
in shareholders' equity, the Company's ratio of equity to total
assets decreased to 7.65 percent at March 31, 2000, from 9.33
percent and 7.72 percent at March 31 and December 31, 1999,
respectively. The ratio of Tier I capital to risk-adjusted assets
was 9.82 percent at March 31, 2000, compared to 11.69 percent at
March 31, 1999, and 9.82 percent at December 31, 1999. Total
capital to risk-adjusted assets was 11.46 percent at March 31,
2000, compared to 13.62 percent at March 31, 1999, and 11.75
percent at December 31, 1999.
<PAGE>
The following summarizes the ratios of capital to risk-adjusted
assets for the periods indicated:
- -------------------------------------------------------------------------
At Minimum
March 31, December 31, Regulatory
-------------------- ------------ Capital
2000 1999 1999 Requirements
- -------------------------------------------------------------------------
Tier I Capital 9.85% 11.69% 9.82% 4.00%
Total Capital 11.48% 13.62% 11.75% 8.00%
Leverage ratio 7.58% 9.16% 7.48% 4.00%
The risk-based capital ratios decreased at March 31, 2000, compared
to March 31, 1999, primarily due to the decrease in the total level
of shareholders' equity due to the Company's common stock
repurchases and dividends paid to shareholders, partially offset by
increased net income. From December 31, 1999, there was no change
in the Tier I capital ratio as the favorable effect of net income
was offset by the reduction in equity due to common stock
repurchases and dividends paid; the reduction in the Total Capital
ratio includes a reduction in the allowable portion of a
subordinated capital note issued by Westamerica Bank, which is
discounted for regulatory capital purposes as it approaches
maturity. Capital ratios are reviewed by Management on a regular
basis to ensure that capital exceeds the prescribed regulatory
minimums and is adequate to meet the Company's future needs. As
shown in the table above, all ratios are in excess of the
regulatory definition of "well capitalized".
Forward-Looking Statement Disclosure
Readers are cautioned that forward-looking statements contained in
this report should be read in conjunction with the Company's
disclosures under the heading "Cautionary Statement for the
Purposes of the Safe Harbor Provisions of the Private Securities
Litigation Reform Act of 1995."
Cautionary Statement for the Purposes of the Safe Harbor Provisions
of the Private Securities Litigation Reform Act of 1995."
The Company is including the following cautionary statement to take
advantage of the "Safe Harbor" provisions of the Private Securities
Litigation Reform Act of 1995 for any forward-looking statement
made by, or on behalf of, the Company. The factors identified in
this cautionary statement are important factors (but not
necessarily all important factors) that could cause actual results
to differ materially from those expressed in any forward-looking
statement made by, or on behalf of, the Company.
Where any such forward-looking statement includes a statement of
the assumptions of bases underlying such forward-looking statement,
the Company cautions that, while it believes such assumptions or
bases to be reasonable and makes them in good faith, assumed facts
or bases almost always vary from actual results, and the
differences between assumed facts or bases and actual results can
be material, depending on the circumstances. Where, in any
forward-looking statement, the Company, expresses an expectation or
belief as to future results, such expectation or belief is
expressed in good faith and believed to have a reasonable basis,
but there can be no assurance that the statement of expectation or
belief will result, or be achieved or accomplished.
<PAGE>
Taking into account the foregoing, the following are identified as
important risk factors that could cause actual results to differ
materially from those expressed in any forward-looking statement
made by, or on behalf of, the Company:
The dates on which the Company believes the Year 2000 project will
be completed are based on Management's best estimates, which were
derived utilizing numerous assumptions of future events, including
the continued availability of certain resources, third-party
modification plans and other factors. However, there can be no
guarantee that these estimates will be achieved, or that there will
not be a delay in, or increased costs associated with, the
implementation of the Year 2000 Project. Specific factors that
might cause differences between the estimates and actual results
include, but are not limited to, the availability and cost of
trained personnel, ability to locate and correct all computer
related issues, timely responses to and corrections by third
parties and suppliers, the availability to implement interfaces
between new systems and the systems not being replaced, and similar
uncertainties. Due to the general uncertainty inherent in the Year
2000 problem, resulting in part from the uncertainty of the Year
2000 readiness of third parties, the Company cannot ensure its
ability to timely and cost-effectively resolve problems associated
with the Year 2000 issue that may affect its operations and
business, or expose it to third-party liability.
<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: May 4, 2000 /s/ DENNIS R. HANSEN
--------------------
Dennis R. Hansen
Senior Vice President
and Controller
Chief Accounting Officer
<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
On March 17, 2000, Westamerica Bancorporation (the
"Company") filed a Report on Form 8-K announcing
the signing of a Definitive Merger Agreement with
First Counties Bank under which the Company will
acquire all of the outstanding shares of common stock
of First Counties Bank pursuant to a tax-free exchange
of shares.
The filing included the following:
Item 5. Other events
Item 7. Financial Statements and Exhibits:
(c) Exhibits:
(i) Press release dated March 15, 2000,
(Exhibit 99);
(ii) Agreement and Plan of Reorganization
and Merger dated March 14, 2000 (Exhibit 2).
Exhibit 11
WESTAMERICA BANCORPORATION
Computation of Earnings Per Share on Common and
Common Equivalent Shares and on Common Shares
Assuming Full Dilution
- -------------------------------------------------------------------------
For the three months
ended March 31,
(In thousands, except per share data) 2000 1999
- -------------------------------------------------------------------------
Weighted average number of common
shares outstanding - basic 36,625 39,632
Add exercise of options reduced by the
number of shares that could have been
purchased with the proceeds of such
exercise 433 640
- -------------------------------------------------------------------------
Weighted average number of common
shares outstanding - diluted 37,058 40,272
=========================================================================
Net income $19,226 $18,405
Basic earnings per share $0.52 $0.46
Diluted earnings per share $0.52 $0.46
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