UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2014~~March 31, 2015

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________.

Commission file number: 001-09383

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 (707) 863-6000

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 þNo o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes þNo o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of "large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ	Accelerated filer o	Non-accelerated filer o	Smaller reporting company o
	(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes oNo þ

Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date:

Title of Class		Shares outstanding as of ~~October 24, 2014~~April 27, 2015
Common Stock, No Par Value	~~25,886,994~~	25,550,676

TABLE OF CONTENTS

			Page
Forward Looking Statements	3
PART I - FINANCIAL INFORMATION
Item 1		Financial Statements	4
		Notes to Unaudited Consolidated Financial Statements	9
		Financial Summary	3029
Item 2		Management's Discussion and Analysis of Financial Condition and Results of Operations	3130
Item 3		Quantitative and Qualitative Disclosures about Market Risk	5451
Item 4		Controls and Procedures	5451
PART II - OTHER INFORMATION
Item 1		Legal Proceedings	5551
Item 1A		Risk Factors	5551
Item 2		Unregistered Sales of Equity Securities and Use of Proceeds	5552
Item 3		Defaults upon Senior Securities	52
Item 4 Mine Safety Disclosures	52
Item 5 Other Information	53
Item 6 Exhibits	53
Signatures	54
Exhibit Index	55
~~Item 4~~		~~Mine Safety Disclosures~~	56
~~Item 5~~		~~Other Information~~	56
~~Item 6~~		~~Exhibits~~	56
~~Signatures~~			57
~~Exhibit Index~~			58
Exhibit 31.1 - Certification of Chief Executive Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a)			59 56
Exhibit 31.2 - Certification of Chief Financial Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a)	60 57
Exhibit 32.1 - Certification of Chief Executive Officer Required by 18 U.S.C. Section 1350	61 58
Exhibit 32.2 - Certification of Chief Financial Officer Required by 18 U.S.C. Section 1350	62 59

2-2-

FORWARD-LOOKING STATEMENTS

This report on Form 10-Q contains forward-looking statements about Westamerica Bancorporation for which it claims the protection of the safe harbor provisions contained in the Private Securities Litigation Reform Act of 1995. Examples of forward-looking statements include, but are not limited to: (i) projections of revenues, expenses, income or loss, earnings or loss per share, the payment or nonpayment of dividends, capital structure and other financial items; (ii) statements of plans, objectives and expectations of the Company or its management or board of directors, including those relating to products or services; (iii) statements of future economic performance; and (iv) statements of assumptions underlying such statements. Words such as "believes", "anticipates", "expects", "intends", "targeted", "projected", "continue", "remain", "will", "should", "may" and other similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements.

These forward-looking statements are based on Management’s current knowledge and belief and include information concerning the Company’s possible or assumed future financial condition and results of operations. A number of factors, some of which are beyond the Company’s ability to predict or control, could cause future results to differ materially from those contemplated. These factors include but are not limited to (1) the length and severity of difficulties in the global, national and California economies and the effects of government efforts to address those difficulties; (2) liquidity levels in capital markets; (3) fluctuations in asset prices including, but not limited to stocks, bonds, real estate, and commodities; (4) the effect of acquisitions and integration of acquired businesses; (5) economic uncertainty created by terrorist threats and attacks on the United States, the actions taken in response, and the uncertain effect of these events on the national and regional economies; (6) changes in the interest rate environment; (7) changes in the regulatory environment; (8) competitive pressure in the banking industry; (9) operational risks including a failure or breach in data processing systems or those of third party vendors and other service providers, including as a result of cyber attacks or fraud; (10) volatility of interest rate sensitive loans, deposits and investments; (11) asset/liability management risks and liquidity risks; (12) the effect of natural disasters, including earthquakes, fire, flood, drought, and other disasters, on the uninsured value of loan collateral, the financial condition of debtors and issuers of investment securities, the economic conditions affecting the Company’s market place, and commodities and asset values, and (13) changes in the securities markets. The reader is directed to the Company's annual report on Form 10-K for the year ended December 31, ~~2013,~~2014, for further 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. The Company undertakes no obligation to update any forward-looking statements in this report.

3-3-

PART I - FINANCIAL INFORMATION

Item1 Financial Statements

WESTAMERICA BANCORPORATION

CONSOLIDATED BALANCE SHEETS

(unaudited)

At September 30, At December 31,
2014 2013
(In thousands)
Assets:
Cash and due from banks $ 524,338 $ 472,028
Investment securities available for sale 1,391,362 1,079,381
Investment securities held to maturity, with fair values of: $1,041,385 at September 30, 2014 and $1,112,676 at December 31, 2013
1,035,041 1,132,299
Loans 1,732,382 1,827,744
Allowance for loan losses (31,769 ) (31,693 )
      Loans, net of allowance for loan losses 1,700,613 1,796,051
Other real estate owned 7,273 13,320
Premises and equipment, net 37,335 37,314
Identifiable intangibles, net 15,338 18,557
Goodwill 121,673 121,673
Other assets 160,752 176,432
Total Assets $ 4,993,725 $ 4,847,055

Liabilities:
Noninterest bearing deposits $ 1,893,480 $ 1,740,182
Interest bearing deposits 2,428,158 2,423,599
    Total deposits 4,321,638 4,163,781
Short-term borrowed funds 76,943 62,668
Federal Home Loan Bank advances 20,156 20,577
Term repurchase agreement - 10,000
Other liabilities 41,593 47,095
Total Liabilities 4,460,330 4,304,121

Shareholders' Equity:
Common stock (no par value), authorized - 150,000 shares Issued and outstanding: 25,906 at September 30, 2014 and 26,510 at December 31, 2013 380,195 378,946
Deferred compensation 2,711 2,711
Accumulated other comprehensive income 9,733 4,313
Retained earnings 140,756 156,964
Total Shareholders' Equity 533,395 542,934
Total Liabilities and  Shareholders' Equity $ 4,993,725 $ 4,847,055

	At March 31,			At December 31,
	2015			2014
	(In thousands)
Assets:
Cash and due from banks	$	247,450		$	380,836
Investment securities available for sale		1,777,320			1,600,781
Investment securities held to maturity, with fair values of: $1,030,865 at March 31, 2015 and $1,048,562 at December 31, 2014		1,015,231			1,038,658
Loans		1,683,884			1,700,290
Allowance for loan losses		(31,187	)		(31,485	)
Loans, net of allowance for loan losses		1,652,697			1,668,805
Other real estate owned		9,233			6,374
Premises and equipment, net		38,313			37,852
Identifiable intangibles, net		13,286			14,287
Goodwill		121,673			121,673
Other assets		160,574			166,458
Total Assets	$	5,035,777		$	5,035,724

Liabilities:
Deposits:
Noninterest bearing deposits	$	1,902,904		$	1,910,781
Interest bearing deposits		2,477,172			2,438,410
Total deposits		4,380,076			4,349,191
Short-term borrowed funds		82,960			89,784
Federal Home Loan Bank advances		-			20,015
Other liabilities		45,361			50,131
Total Liabilities		4,508,397			4,509,121

Shareholders' Equity:
Common stock (no par value), authorized - 150,000 shares Issued and outstanding - 25,563 at March 31, 2015 and 25,745 at December 31, 2014		374,958			378,132
Deferred compensation		2,711			2,711
Accumulated other comprehensive income		9,600			5,292
Retained earnings		140,111			140,468
Total Shareholders' Equity		527,380			526,603
Total Liabilities and Shareholders' Equity	$	5,035,777		$	5,035,724

See accompanying notes to unaudited consolidated financial statements.

4-4-

WESTAMERICA BANCORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(unaudited)

For the Three Months For the Nine Months
Ended September 30,
2014 2013 2014 2013
(In thousands, except per share data)
Interest and Fee Income:
Loans $ 22,129 $ 25,116 $ 67,817 $ 78,696
Investment securities available for sale 6,350 5,426 17,855 16,293
Investment securities held to maturity 6,421 7,414 20,195 22,701
Total Interest and Fee Income 34,900 37,956 105,867 117,690
Interest Expense:
Deposits 709 809 2,216 2,555
Short-term borrowed funds 23 20 64 58
Term repurchase agreement 11 25 60 73
Federal Home Loan Bank advances 103 122 304 360
Debt financing - 200 - 601
Total Interest Expense 846 1,176 2,644 3,647
Net Interest Income 34,054 36,780 103,223 114,043
Provision for Loan Losses 600 1,800 2,600 6,400
Net Interest Income After Provision For Loan Losses 33,454 34,980 100,623 107,643
Noninterest Income:
Service charges on deposit accounts 6,207 6,433 18,322 19,427
Merchant processing services 1,742 2,151 5,485 6,973
Debit card fees 1,543 1,467 4,482 4,302
Other service fees 695 716 2,044 2,174
ATM processing fees 637 701 1,891 2,128
Trust fees 629 567 1,899 1,720
Financial services commissions 194 150 585 614
Other 1,407 2,234 4,534 5,643
Total Noninterest Income 13,054 14,419 39,242 42,981
Noninterest Expense:
Salaries and related benefits 13,639 13,826 41,691 42,293
Occupancy 3,811 3,829 11,284 11,353
Outsourced data processing services 2,093 2,139 6,314 6,436
Amortization of identifiable intangibles 1,056 1,163 3,219 3,547
Furniture and equipment 1,059 974 3,070 2,875
Professional fees 700 730 1,707 2,109
Courier service 663 725 1,938 2,204
Other real estate owned (287 ) 179 (908 ) 791
Other 3,882 4,193 12,131 13,019
Total Noninterest Expense 26,616 27,758 80,446 84,627
Income Before Income Taxes 19,892 21,641 59,419 65,997
Provision for income taxes 4,738 4,903 13,801 14,876
Net Income $ 15,154 $ 16,738 $ 45,618 $ 51,121

Average Common Shares Outstanding 25,973 26,670 26,192 26,900
Diluted Average Common Shares Outstanding 26,016 26,705 26,262 26,919
Per Common Share Data:
Basic earnings $ 0.58 $ 0.63 $ 1.74 $ 1.90
Diluted earnings 0.58 0.63 1.74 1.90
Dividends paid 0.38 0.37 1.14 1.11

~~See accompanying notes to unaudited consolidated financial statements.~~

~~WESTAMERICA BANCORPORATION~~

~~CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME~~

~~(unaudited)~~

For the Three Months For the Nine Months
Ended September 30,
2014 2013 2014 2013
(In thousands)
Net income $ 15,154 $ 16,738 $ 45,618 $ 51,121
Other comprehensive (loss) income:
    (Decrease) increase in net unrealized gains on securities available for sale (4,884 ) (712 ) 9,305 (18,173 )
    Deferred tax benefit (expense) 2,054 299 (3,912 ) 7,641
        (Decrease) increase in net unrealized gains on securities available for sale, net of tax (2,830 ) (413 ) 5,393 (10,532 )
    Post-retirement benefit transition obligation amortization 15 15 45 45
    Deferred tax expense (6 ) (6 ) (18 ) (18 )
        Post-retirement benefit transition obligation amortization, net of tax 9 9 27 27
Total other comprehensive (loss) income (2,821 ) (404 ) 5,420 (10,505 )
Total comprehensive income $ 12,333 $ 16,334 $ 51,038 $ 40,616

~~See accompanying notes to unaudited consolidated financial statements.~~

~~WESTAMERICA BANCORPORATION~~

~~CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY~~

~~(unaudited)~~

	For the Three Months Ended March 31,
	2015		2014
	(In thousands,
	except per share data)
Interest and Fee Income:
Loans	$	20,230	$	22,901
Investment securities available for sale		7,469		5,630
Investment securities held to maturity		6,218		7,033
Total Interest and Fee Income		33,917		35,564
Interest Expense:
Deposits		642		754
Short-term borrowed funds		16		20
Federal Home Loan Bank advances		1		99
Term repurchase agreement		-		25
Total Interest Expense		659		898
Net Interest Income		33,258		34,666
Provision for Loan Losses		-		1,000
Net Interest Income After Provision For Loan Losses		33,258		33,666
Noninterest Income:
Service charges on deposit accounts		5,707		6,010
Merchant processing services		1,703		1,924
Debit card fees		1,456		1,405
Trust fees		706		654
Other service fees		665		661
ATM processing fees		585		620
Financial services commissions		153		171
Other		1,325		1,545
Total Noninterest Income		12,300		12,990
Noninterest Expense:
Salaries and related benefits		13,338		14,126
Occupancy		3,727		3,727
Outsourced data processing services		2,108		2,105
Furniture and equipment		1,119		1,005
Amortization of identifiable intangibles		1,001		1,105
Professional fees		548		430
Courier service		543		610
Other real estate owned		315		(350	)
Other		4,028		4,115
Total Noninterest Expense		26,727		26,873
Income Before Income Taxes		18,831		19,783
Provision for income taxes		4,274		4,476
Net Income	$	14,557	$	15,307

Average Common Shares Outstanding		25,651		26,433
Diluted Average Common Shares Outstanding		25,655		26,537
Per Common Share Data:
Basic earnings	$	0.57	$	0.58
Diluted earnings		0.57		0.58
Dividends paid		0.38		0.38

Common
Shares
Outstanding

Common
Stock

Accumulated
Deferred
Compensation

Accumulated
Other
Comprehensive
Income (Loss)

Retained
Earnings
Total
(In thousands)

Balance, December 31, 2012 27,213 $ 372,012 $ 3,101 $ 14,625 $ 170,364 $ 560,102
Net income for the period 51,121 51,121
Other comprehensive loss (10,505 ) (10,505 )
Exercise of stock options 221 9,219 9,219
Tax benefit decrease upon exercise of stock options
(202 ) (202 )
Restricted stock activity 15 1,068 (390 ) 678
Stock based compensation 1,081 1,081
Stock awarded to employees 2 84 84
Retirement of common stock including repurchases
(873 ) (12,174 ) (27,615 ) (39,789 )
Dividends (29,949 ) (29,949 )
Balance, September 30, 2013 26,578 $ 371,088 $ 2,711 $ 4,120 $ 163,921 $ 541,840

Balance, December 31, 2013 26,510 $ 378,946 $ 2,711 $ 4,313 $ 156,964 $ 542,934
Net income for the period 45,618 45,618
Other comprehensive income 5,420 5,420
Exercise of stock options 256 12,396 12,396
Tax benefit decrease upon exercise of stock options
(447 ) (447 )
Restricted stock activity 21 1,114 1,114
Stock based compensation 1,009 1,009
Stock awarded to employees 2 88 88
Retirement of common stock including repurchases
(883 ) (12,911 ) (31,899 ) (44,810 )
Dividends (29,927 ) (29,927 )
Balance, September 30, 2014 25,906 $ 380,195 $ 2,711 $ 9,733 $ 140,756 $ 533,395

See accompanying notes to unaudited consolidated financial statements.

7-5-

WESTAMERICA BANCORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)

	For the Three Months Ended March 31,
	2015			2014
	(In thousands)
Net income	$	14,557		$	15,307
Other comprehensive income:
Increase in net unrealized gains on securities available for sale		7,418			7,823
Deferred tax expense		(3,119	)		(3,289	)
Increase in net unrealized gains on securities available for sale, net of tax		4,299			4,534
Post-retirement benefit transition obligation amortization		15			15
Deferred tax expense		(6	)		(6	)
Post-retirement benefit transition obligation amortization, net of tax		9			9
Total other comprehensive income		4,308			4,543
Total comprehensive income	$	18,865		$	19,850

See accompanying notes to unaudited consolidated financial statements.

-6-

WESTAMERICA BANCORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

(unaudited)

	Common Shares Outstanding			Common Stock			Accumulated Deferred Compensation		Accumulated Other Comprehensive Income		Retained Earnings			Total
	(In thousands)

Balance, December 31, 2013		26,510		$	378,946		$	2,711	$	4,313	$	156,964		$	542,934
Net income for the period												15,307			15,307
Other comprehensive income										4,543					4,543
Exercise of stock options		225			10,853										10,853
Tax benefit decrease upon expiration/ exercise of stock options					(369	)									(369	)
Stock based compensation					359										359
Stock awarded to employees		1			52										52
Retirement of common stock including repurchases		(437	)		(6,351	)						(16,359	)		(22,710	)
Dividends												(10,086	)		(10,086	)
Balance, March 31, 2014		26,299		$	383,490		$	2,711	$	8,856	$	145,826		$	540,883

Balance, December 31, 2014		25,745		$	378,132		$	2,711	$	5,292	$	140,468		$	526,603
Net income for the period												14,557			14,557
Other comprehensive income										4,308					4,308
Exercise of stock options		-			-										-
Tax benefit decrease upon expiration of stock options					(865	)									(865	)
Stock based compensation					354										354
Stock awarded to employees		1			45										45
Retirement of common stock including repurchases		(183	)		(2,708	)						(5,159	)		(7,867	)
Dividends												(9,755	)		(9,755	)
Balance, March 31, 2015		25,563		$	374,958		$	2,711	$	9,600	$	140,111		$	527,380

See accompanying notes to unaudited consolidated financial statements.

-7-

WESTAMERICA BANCORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	For the Three Months Ended March 31,
	2015			2014
	(In thousands)
Operating Activities:
Net income	$	14,557		$	15,307
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		3,930			4,103
Loan loss provision		-			1,000
Net amortization of deferred loan fees		(78	)		(30	)
Decrease in interest income receivable		812			643
Increase in deferred tax asset		(421	)		(756	)
Increase in other assets		(822	)		(185	)
Stock option compensation expense		354			359
Tax benefit decrease upon expiration/exercise of stock options		865			369
Increase in income taxes payable		4,695			5,232
Increase in interest expense payable		21			5
(Decrease) increase in other liabilities		(6,850	)		8,507
Gain on sale of other assets		-			(400	)
Writedown/loss on sale of premises and equipment		4			16
Net gain on sale of foreclosed assets		-			(493	)
Writedown of foreclosed assets		243			69
Net Cash Provided by Operating Activities		17,310			33,746

Investing Activities:
Net repayments of loans		13,805			9,598
Proceeds from FDIC1 loss-sharing agreement		-			44
Purchases of investment securities available for sale		(354,527	)		(237,948	)
Proceeds from sale/maturity/calls of securities available for sale		185,073			99,350
Purchases of investment securities held to maturity		(10,359	)		(17,993	)
Proceeds from maturity/calls of securities held to maturity		30,468			34,403
Purchases of premises and equipment		(1,326	)		(166	)
Proceeds from sale of FRB2/FHLB3 stock		490			3,248
Proceeds from sale of foreclosed assets		100			2,159
Net Cash Used in Investing Activities		(136,276	)		(107,305	)

Financing Activities:
Net change in deposits		30,891			51,063
Net change in short-term borrowings and FHLB3 advances		(26,824	)		1,620
Exercise of stock options/issuance of shares		-			10,853
Tax benefit decrease upon expiration/exercise of stock options		(865	)		(369	)
Retirement of common stock including repurchases		(7,867	)		(22,710	)
Common stock dividends paid		(9,755	)		(10,086	)
Net Cash (Used in) Provided by Financing Activities		(14,420	)		30,371
Net Change In Cash and Due from Banks		(133,386	)		(43,188	)
Cash and Due from Banks at Beginning of Period		380,836			472,028
Cash and Due from Banks at End of Period	$	247,450		$	428,840

Supplemental Cash Flow Disclosures:
Supplemental disclosure of noncash activities:
Loan collateral transferred to other real estate owned	$	3,202		$	968
Securities purchases pending settlement		1,478			(11,231	)
Supplemental disclosure of cash flow activities:
Interest paid for the period		775			987
Income tax payments for the period		-			-

For the Nine Months
Ended September 30,

2014 2013
(In thousands)
Operating Activities:
Net income $ 45,618 $ 51,121
Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization 12,275 13,325
Loan loss provision 2,600 6,400
Net amortization of deferred loan fees (179 ) (333 )
Decrease in interest income receivable 1,537 1,420
Decrease in other assets 1,390 7,344
(Decrease) increase in income taxes payable (1,160 ) 856
Increase in net deferred tax asset (19 ) (3,719 )
(Decrease) increase in interest expense payable (102 ) 50
Decrease in other liabilities (3,841 ) (984 )
Stock option compensation expense 1,009 1,081
Tax benefit decrease upon exercise of stock options 447 202
Gain on sale of other assets (400 ) (548 )
Net loss on sale of premises and equipment 22 16
Originations of mortgage loans for resale - (441 )
Proceeds from sale of mortgage loans originated for resale - 447
Net gain on sale of foreclosed assets (1,014 ) (892 )
Writedown of foreclosed assets 113 1,752
Net Cash Provided by Operating Activities 58,296 77,097
Investing Activities:
Net repayments of loans 93,115 231,002
Proceeds from FDIC1 loss-sharing indemnification
6,703 6,478
Purchases of investment securities available for sale (747,630 ) (355,440 )
Proceeds from sale/maturity/calls of securities available for sale 444,906 100,660
Purchases of investment securities held to maturity (26,435 ) (152,116 )
Proceeds from maturity/calls of securities held to maturity 115,799 164,369
Purchases of premises and equipment (2,392 ) (1,581 )
Net change in FRB2/FHLB3 securities
3,248 2,243
Proceeds from sale of foreclosed assets 7,549 14,986
Net Cash (Used in) Provided by Investing Activities (105,137 ) 10,601
Financing Activities:
Net change in deposits 157,947 (123,914 )
Net change in short-term borrowings and FHLB3 advances
3,992 (5,866 )
Exercise of stock options 12,396 9,219
Tax benefit decrease upon exercise of stock options (447 ) (202 )
Retirement of common stock including repurchases (44,810 ) (39,789 )
Common stock dividends paid (29,927 ) (29,949 )
Net Cash Provided by (Used in) Financing Activities 99,151 (190,501 )
Net Change In Cash and Due from Banks 52,310 (102,803 )
Cash and Due from Banks at Beginning of Period 472,028 491,382
Cash and Due from Banks at End of Period $ 524,338 $ 388,579

Supplemental Cash Flow Disclosures:
Supplemental disclosure of non cash activities:
  Loan collateral transferred to other real estate owned $ 968 $ 5,404
  Securities purchases pending settlement 2,622 1,961
Supplemental disclosure of cash flow activities:
  Interest paid for the period 2,959 3,982
  Income tax payments for the period 14,981 17,931

See accompanying notes to unaudited consolidated financial statements.

1 Federal Deposit Insurance Corporation ("FDIC")

2 Federal Reserve Bank ("FRB")

3 Federal Home Loan Bank ("FHLB")

8-8-

NOTESTO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1: Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America for interim financial information and pursuant to the rules and regulations of the Securities and Exchange ~~Commission.~~Commission and follow general practices within the banking industry. The results of operations reflect interim adjustments, all of which are of a normal recurring nature and which, in the opinion of Management, are necessary for a fair presentation of the results for the interim periods presented. The interim results for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2015 and 2014 ~~and 2013~~ are not necessarily indicative of the results expected for the full year. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes as well as other information included in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2013.~~2014.

The Company has evaluated events and transactions subsequent to the balance sheet date. Based on this evaluation, the Company is not aware of any events or transactions that occurred subsequent to the balance sheet date but prior to filing that would require recognition or disclosure in its unaudited consolidated financial statements.

Note 2: Accounting Policies

The ~~Company’s~~most significant accounting policies followed by the Company are ~~discussed~~presented in Note 1 to the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2013.~~2014. These policies, along with the disclosures presented in the other financial statement notes and in this discussion, provide information on how significant assets and liabilities are valued in the financial statements and how those values are determined. Based on the valuation techniques used and the sensitivity of financial statement amounts to the methods, assumptions, and estimates underlying those amounts, Management has identified the allowance for loan losses accounting to be the accounting area requiring the most subjective or complex judgments, and as such could be most subject to revision as new information becomes available. A discussion of the factors affecting accounting for the allowance for loan losses and purchased loans is included in the “Loan Portfolio Credit Risk” discussion below. Certain amounts in prior periods have been reclassified to conform to the current presentation.

Application of these principles requires the Company to make certain estimates, assumptions, and judgments that affect the amounts reported in the financial statements and accompanying notes. These estimates, assumptions, and judgments are based on information available as of the date of the financial statements; accordingly, as this information changes, the financial statements could reflect different estimates, assumptions, and judgments. Certain accounting policies ~~underlying~~inherently have a greater reliance on the ~~preparation~~use of ~~these financial statements require Management to make~~ estimates, ~~and judgments. These estimates~~assumptions and judgments ~~may significantly affect reported amounts~~and as such have a greater possibility of producing results that could be materially different than originally reported. Estimates, assumptions and judgments are necessary when assets and liabilities ~~revenues and expenses, and disclosures~~are required to be recorded at fair value, when a decline in the value of an asset not carried on the financial statements at fair value warrants an impairment writedown or valuation reserve to be established, or when an asset or liability needs to be recorded contingent upon a future event. Carrying assets and ~~liabilities. Management exercises judgment~~liabilities at fair value inherently results in more financial statement volatility. The fair values and the information used to ~~estimate the appropriate level of the allowance~~record valuation adjustments for ~~credit losses~~certain assets and ~~to evaluate the extent of~~liabilities are based either on quoted market prices or are provided by other ~~than temporary impairment of investment securities, which are discussed in the Company’s accounting policies.~~third-party sources, when available.

Recently Adopted Accounting Standards

FASB ASU ~~2013-11~~2014-01, ~~Income Taxes~~Investments- Equity Method and Joint Ventures (Topic ~~740)~~323): ~~Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists~~Accounting for Investments in Qualified Affordable Housing Projects, was issued ~~July 2013~~January 2014 to ~~provide guidance on~~permit reporting entities to make an accounting policy election to account for their investments in qualified affordable housing projects using the ~~financial~~proportional amortization method if certain conditions are met. Under the proportional amortization method, an entity amortizes the initial cost of the investment in proportion to the tax credits and other tax benefits received and recognizes the net investment performance in the income statement ~~presentation~~as a component of income tax expense (benefit). For those investments in qualified affordable housing projects not accounted for using the proportional amortization method, the investment should be accounted for as an ~~unrecognized tax benefit when a net operating loss carryforward, a similar loss,~~equity method investment or a ~~tax credit carryforward exists.~~ cost method investment in accordance with GAAP. The policy election must be applied consistently to all qualified affordable housing project investments.

The update ~~provides that an unrecognized~~also requires a reporting entity to disclose information regarding its investments in qualified affordable housing projects, and the effect of the measurement of its investments in qualified affordable housing projects and the related tax ~~benefit, or a portion~~credits on its financial position and results of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss or a tax credit carryforward, unless an exception applies. operations.

The adoption of the update was limited to additional disclosures only and did not have a material effect on the Company’s financial statements at January 1, ~~2014,~~2015, the date adopted.

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FASB ASU 2014-04,Receivables - Troubled Debt Restructurings by Creditors (Subtopic 310-40): Reclassification of Residential Real Estate Collateralizes Consumer Mortgage Loans upon Foreclosure, was issued on January 17, 2014, providing clarification that an in substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either (1) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. Additionally, the amendments require interim and annual disclosure of both (1) the amount of foreclosed residential real estate property held by the creditor and (2) the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure according to local requirements of the applicable jurisdiction.

The adoption of the update was limited to additional disclosures only and did not have a material effect on the Company’s financial statements at January 1, 2015, the date adopted.

Recently Issued Accounting Standards

FASB ASU 2014-11, Transfers and Servicing (Topic 860): Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures, was issued on June 12, 2014. The Update improves the financial reporting of repurchase agreements and other similar transactions through a change in accounting for repurchase-to-maturity transactions and repurchase financings, and the introduction of two new disclosure requirements. New disclosures are required for (1) transfers accounted for as sales in transactions that are economically similar to repurchase agreements, in which the transferor retains substantially all of the exposure to the economic return on the transferred financial asset throughout the term of the transaction and (2) repurchase agreements, securities lending transactions, and repurchase-to-maturity transactions accounted for as secured borrowings about the nature of collateral pledged and the time to maturity of those transactions.

The Company will be required to adhere to new disclosure requirements when the Update is adopted April 1, 2015 for the interim period ending June 30, 2015.

~~FASB ASU 2014-01~~, ~~Investments- Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Qualified Affordable Housing Projects~~, was issued January 2014 to permit reporting entities to make an accounting policy election to account for their investments in qualified affordable housing projects using the proportional amortization method if certain conditions are met. Under the proportional amortization method, an entity amortizes the initial cost of the investment in proportion to the tax credits and other tax benefits received and recognizes the net investment performance in the income statement as a component of income tax expense (benefit). For those investments in qualified affordable housing projects not accounted for using the proportional amortization method, the investment should be accounted for as an equity method investment or a cost method investment in accordance with GAAP. The policy election must be applied consistently to all qualified affordable housing project investments.

The update also requires a reporting entity to disclose information regarding its investments in qualified affordable housing projects, and the effect of the measurement of its investments in qualified affordable housing projects and the related tax credits on its financial position and results of operations.

Management is evaluating the impact that the change in accounting policy would have on the Company’s financial statements. Management does not expect the adoption of this update to have a material effect on the financial statements when adopted on January 1, 2015.

Note 3: Investment Securities

An analysis of the amortized cost, gross unrealized gains and losses accumulated in other comprehensive income, and fair value of ~~investment securities~~the available for sale investment securities portfolio follows:

	Investment Securities Available for Sale At September 30, 2014									Investment Securities Available for Sale At March 31, 2015
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(In thousands)									(In thousands)
U.S. Treasury securities	$	3,499	$	10	$	-		$	3,509	$	3,500	$	4	$	-		$	3,504
Securities of U.S. Government sponsored entities		442,482		214		(1,160	)		441,536		631,974		1,637		(3	)		633,608
Residential mortgage-backed securities		26,574		1,799		(20	)		28,353		22,625		1,682		(9	)		24,298
Commercial mortgage-backed securities		3,021		7		(7	)		3,021		2,826		5		(11	)		2,820
Obligations of states and political subdivisions		176,614		10,203		(197	)		186,620		165,063		10,756		(125	)		175,694
Residential collateralized mortgage obligations		240,091		594		(11,400	)		229,285		220,397		644		(5,142	)		215,899
Asset-backed securities		8,674		-		(35	)		8,639		3,015		-		(23	)		2,992
FHLMC(1) and FNMA(2) stock		804		13,798		-			14,602
FHLMC1 and FNMA2 stock											775		5,685		-			6,460
Corporate securities		470,570		3,674		(1,106	)		473,138		708,371		2,911		(2,025	)		709,257
Other securities		2,039		756		(136	)		2,659		2,039		867		(118	)		2,788
Total	$	1,374,368	$	31,055	$	(14,061	)	$	1,391,362	$	1,760,585	$	24,191	$	(7,456	)	$	1,777,320

~~(1)~~1 Federal Home Loan Mortgage Corporation

~~(2)~~2 Federal National Mortgage Association

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An analysis of the amortized cost, gross unrecognized gains and losses, and fair value of the held to maturity investment securities portfolio follows:

	Investment Securities Held to Maturity At March 31, 2015
	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses			Fair Value
	(In thousands)
Securities of U.S. government sponsored entities	$	995	$	12	$	-		$	1,007
Residential mortgage-backed securities		57,259		1,319		(64	)		58,514
Obligations of states and political subdivisions		712,374		13,478		(1,062	)		724,790
Residential collateralized mortgage obligations		244,603		2,811		(860	)		246,554
Total	$	1,015,231	$	17,620	$	(1,986	)	$	1,030,865

An analysis of the amortized cost, gross unrealized gains and losses accumulated in other comprehensive income, and fair value of the available for sale investment securities portfolio follows:

	Investment Securities Available for Sale At December 31, 2014
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(In thousands)
U.S. Treasury securities	$	3,500	$	5	$	-		$	3,505
Securities of U.S. Government sponsored entities		635,278		937		(1,027	)		635,188
Residential mortgage-backed securities		24,647		1,776		(16	)		26,407
Commercial mortgage-backed securities		2,923		6		(10	)		2,919
Obligations of states and political subdivisions		171,907		10,015		(123	)		181,799
Residential collateralized mortgage obligations		230,347		634		(8,524	)		222,457
Asset-backed securities		8,349		-		(36	)		8,313
FHLMC1 and FNMA2 stock		775		4,393		-			5,168
Corporate securities		511,699		2,169		(1,629	)		512,239
Other securities		2,039		871		(124	)		2,786
Total	$	1,591,464	$	20,806	$	(11,489	)	$	1,600,781

1 Federal Home Loan Mortgage Corporation

2 Federal National Mortgage Association

An analysis of the amortized cost, ~~unrealized~~gross unrecognized gains and losses, and fair value of ~~investment securities~~the held to maturity investment securities portfolio follows:

Investment Securities Held to Maturity
At September 30, 2014

Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Fair
Value

(In thousands)
Securities of U.S. Government sponsored entities $ 1,164 $ - $ - $ 1,164
Residential mortgage-backed securities 59,182 926 (86 ) 60,022
Obligations of states and political subdivisions 703,554 11,483 (2,909 ) 712,128
Residential collateralized mortgage obligations 271,141 1,673 (4,743 ) 268,071
Total $ 1,035,041 $ 14,082 $ (7,738 ) $ 1,041,385

	Investment Securities Held to Maturity At December 31, 2014
	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses			Fair Value
	(In thousands)
Securities of U.S. government sponsored entities	$	1,066	$	11	$	-		$	1,077
Residential mortgage-backed securities		59,078		1,183		(137	)		60,124
Obligations of states and political subdivisions		720,189		11,350		(2,358	)		729,181
Residential collateralized mortgage obligations		258,325		2,236		(2,381	)		258,180
Total	$	1,038,658	$	14,780	$	(4,876	)	$	1,048,562

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~~An analysis of the amortized cost, unrealized gains and losses accumulated in other comprehensive income, and fair value of investment securities available for sale follows:~~

Investment Securities Available for Sale
At December 31, 2013

Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Fair
Value

(In thousands)
U.S. Treasury securities $ 3,500 $ 9 $ (3 ) $ 3,506
Securities of U.S. Government sponsored entities 131,080 75 (663 ) 130,492
Residential mortgage-backed securities 32,428 1,763 (15 ) 34,176
Commercial mortgage-backed securities 3,411 19 (5 ) 3,425
Obligations of states and political subdivisions 186,082 5,627 (323 ) 191,386
Residential collateralized mortgage obligations 266,890 730 (14,724 ) 252,896
Asset-backed securities 14,653 3 (101 ) 14,555
FHLMC and FNMA stock 804 12,568 - 13,372
Corporate securities 430,794 2,901 (1,264 ) 432,431
Other securities 2,049 1,251 (158 ) 3,142
Total $ 1,071,691 $ 24,946 $ (17,256 ) $ 1,079,381

~~An analysis of the amortized cost, unrealized gains and losses, and fair value of investment securities held to maturity follows:~~

Investment Securities Held to Maturity
At December 31, 2013

Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Fair
Value

(In thousands)
Securities of U.S. Government sponsored entities $ 1,601 $ - $ (4 ) $ 1,597
Residential mortgage-backed securities 65,076 854 (624 ) 65,306
Obligations of states and political subdivisions 756,707 6,211 (21,667 ) 741,251
Residential collateralized mortgage obligations 308,915 1,209 (5,602 ) 304,522
Total $ 1,132,299 $ 8,274 $ (27,897 ) $ 1,112,676

The amortized cost and fair value of investment securities by contractual maturity are shown in the following tables at the dates indicated:

At September 30, 2014

Securities Available
for Sale

Securities Held
to Maturity

Amortized
Cost

Fair
Value

Amortized
Cost

Fair
Value

(In thousands)
Maturity in years:
1 year or less $ 45,444 $ 45,671 $ 13,767 $ 14,233
Over 1 to 5 years 625,789 629,181 216,979 220,062
Over 5 to 10 years 362,884 366,119 270,071 273,124
Over 10 years 67,722 72,471 203,901 205,873
Subtotal 1,101,839 1,113,442 704,718 713,292
Mortgage-backed securities and residential collateralized mortgage obligations
269,686 260,659 330,323 328,093
Other securities 2,843 17,261 - -
Total $ 1,374,368 $ 1,391,362 $ 1,035,041 $ 1,041,385

	At March 31, 2015
	Securities Available for Sale				Securities Held to Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(In thousands)
Maturity in years:
1 year or less	$	80,420	$	80,658	$	15,322	$	15,829
Over 1 to 5 years		973,932		976,816		247,297		249,867
Over 5 to 10 years		409,874		416,005		270,191		275,665
Over 10 years		47,697		51,576		180,559		184,436
Subtotal		1,511,923		1,525,055		713,369		725,797
Mortgage-backed securities and residential collateralized mortgage obligations		245,848		243,017		301,862		305,068
Other securities		2,814		9,248		-		-
Total	$	1,760,585	$	1,777,320	$	1,015,231	$	1,030,865

Securities available for sale at ~~September 30, 2014~~March 31, 2015 with maturity dates over ~~five years~~one year but less than ~~ten~~five years include ~~$255,634~~$351,761 thousand (fair value) of securities of U.S. Government sponsored entities with call options on dates within one year or less, of which ~~$89,821~~$71,129 thousand have interest coupons which will increase if the issuer does not exercise the call option.

	At December 31, 2014
	Securities Available for Sale				Securities Held to Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(In thousands)
Maturity in years:
1 year or less	$	57,891	$	57,991	$	15,355	$	15,855
Over 1 to 5 years		629,200		630,797		228,380		230,248
Over 5 to 10 years		584,872		589,250		285,219		288,631
Over 10 years		58,770		63,006		192,301		195,524
Subtotal		1,330,733		1,341,044		721,255		730,258
Mortgage-backed securities and residential collateralized mortgage obligations		257,917		251,783		317,403		318,304
Other securities		2,814		7,954		-		-
Total	$	1,591,464	$	1,600,781	$	1,038,658	$	1,048,562

At December 31, 2013

Securities Available
for Sale

Securities Held
to Maturity

Amortized
Cost

Fair
Value

Amortized
Cost

Fair
Value

(In thousands)
Maturity in years:
1 year or less $ 75,385 $ 75,609 $ 9,639 $ 9,900
Over 1 to 5 years 536,333 538,111 187,051 189,827
Over 5 to 10 years 66,669 68,166 314,630 310,104
Over 10 years 87,722 90,484 246,988 233,017
Subtotal 766,109 772,370 758,308 742,848
Mortgage-backed securities and residential collateralized mortgage obligations
302,729 290,497 373,991 369,828
Other securities 2,853 16,514 - -
Total $ 1,071,691 $ 1,079,381 $ 1,132,299 $ 1,112,676

Expected maturities of mortgage-backed securities can differ from contractual maturities because borrowers have the right to call or prepay obligations with or without call or prepayment penalties. In addition, such factors as prepayments and interest rates may affect the yield on the carrying value of mortgage-backed securities. At ~~September 30, 2014~~March 31, 2015 and December 31, ~~2013,~~2014, the Company had no high-risk collateralized mortgage obligations as defined by regulatory guidelines.

~~An analysis of gross unrealized losses of investment securities available for sale follows:~~

Investment Securities Available for Sale
At September 30, 2014

No. of Less than 12 months No. of 12 months or longer No. of Total
Investment Unrealized Investment Unrealized Investment Unrealized
Positions Fair Value Losses Positions Fair Value Losses Positions Fair Value Losses
($ in thousands)
Securities of U.S. Government sponsored entities 24 $ 358,842 $ (1,103 ) 1 $ 9,943 $ (57 ) 25 $ 368,785 $ (1,160 )
Residential mortgage-backed securities - - - 2 828 (20 ) 2 828 (20 )
Commercial mortgage-backed securities - - - 2 1,822 (7 ) 2 1,822 (7 )
Obligations of states and political subdivisions 8 2,783 (46 ) 21 6,460 (151 ) 29 9,243 (197 )
Residential collateralized mortgage obligations - - - 38 209,504 (11,400 ) 38 209,504 (11,400 )
Asset-backed securities 1 5,030 (1 ) 1 3,609 (34 ) 2 8,639 (35 )
Corporate securities 31 93,716 (772 ) 5 34,218 (334 ) 36 127,934 (1,106 )
Other securities - - - 1 1,864 (136 ) 1 1,864 (136 )
Total 64 $ 460,371 $ (1,922 ) 71 $ 268,248 $ (12,139 ) 135 $ 728,619 $ (14,061 )

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12-12-

An analysis of the gross unrealized losses of the available for sale investment securities ~~held to maturity~~portfolio follows:

	Investment Securities Held to Maturity At September 30, 2014																					Investment Securities Available for Sale At March 31, 2015
	No. of		Less than 12 months					No. of		12 months or longer					No. of		Total					No. of		Less than 12 months					No. of		12 months or longer					No. of		Total
	Investment				Unrealized			Investment				Unrealized			Investment				Unrealized			Investment				Unrealized			Investment				Unrealized			Investment				Unrealized
	Positions		Fair Value		Losses			Positions		Fair Value		Losses			Positions		Fair Value		Losses			Positions		Fair Value		Losses			Positions		Fair Value		Losses			Positions		Fair Value		Losses
	($ in thousands)																					($ in thousands)
Securities of U.S. Government sponsored entities		1	$	1,164	$	-			-	$	-	$	-			1	$	1,164	$	-			-	$	-	$	-			1	$	9,997	$	(3	)		1	$	9,997	$	(3	)
Residential mortgage-backed securities		2		9,658		(48	)		2		3,320		(38	)		4		12,978		(86	)		-		-		-			1		803		(9	)		1		803		(9	)
Commercial mortgage-backed securities																							1		921		(6	)		1		751		(5	)		2		1,672		(11	)
Obligations of states and political subdivisions		14		10,434		(45	)		180		162,095		(2,864	)		194		172,529		(2,909	)		5		2,380		(20	)		11		3,842		(105	)		16		6,222		(125	)
Residential collateralized mortgage obligations		15		63,098		(787	)		23		132,175		(3,956	)		38		195,273		(4,743	)		-		-		-			29		184,632		(5,142	)		29		184,632		(5,142	)
Asset-backed securities																							-		-		-			1		2,992		(23	)		1		2,992		(23	)
Corporate securities																							59		232,085		(1,769	)		6		33,078		(256	)		65		265,163		(2,025	)
Other securities																							-		-		-			1		1,882		(118	)		1		1,882		(118	)
Total		32	$	84,354	$	(880	)		205	$	297,590	$	(6,858	)		237	$	381,944	$	(7,738	)		65	$	235,386	$	(1,795	)		51	$	237,977	$	(5,661	)		116	$	473,363	$	(7,456	)

An analysis of gross unrecognized losses of the held to maturity investment securities portfolio follows:

	Investment Securities Held to Maturity At March 31, 2015
	No. of		Less than 12 months					No. of		12 months or longer					No. of		Total
	Investment				Unrecognized			Investment				Unrecognized			Investment				Unrecognized
	Positions		Fair Value		Losses			Positions		Fair Value		Losses			Positions		Fair Value		Losses
	($ in thousands)
Residential mortgage-backed securities		2	$	14,483	$	(60	)		1	$	163	$	(4	)		3	$	14,646	$	(64	)
Obligations of states and political subdivisions		45		32,117		(177	)		83		70,639		(885	)		128		102,756		(1,062	)
Residential collateralized mortgage obligations		4		13,767		(134	)		16		83,929		(726	)		20		97,696		(860	)
Total		51	$	60,367	$	(371	)		100	$	154,731	$	(1,615	)		151	$	215,098	$	(1,986	)

The unrealized losses on the Company’s investment securities were caused by market conditions for these types of investments, particularly changes in risk-free interest rates. The Company evaluates securities on a quarterly basis including changes in security ratings issued by ratings agencies, changes in the financial condition of the issuer, and, for mortgage-related and asset-backed securities, delinquency and loss information with respect to the underlying collateral, changes in the levels of subordination for the Company’s particular position within the repayment structure and remaining credit enhancement as compared to expected credit losses of the security. Substantially all of these securities continue to be investment grade rated by a major rating agency. In addition to monitoring credit rating agency evaluations, Management performs its own evaluations regarding the credit worthiness of the issuer or the securitized assets underlying asset backed securities.

The Company does not intend to sell any investments and has concluded that it is more likely than not that it will not be required to sell the investments prior to recovery of the amortized cost basis. Therefore, the Company does not consider these investments to be other-than-temporarily impaired as of ~~September 30, 2014.~~March 31, 2015.

The fair values of the investment securities could decline in the future if the general economy deteriorates, inflation increases, credit ratings decline, the issuer’s financial condition deteriorates, or the liquidity for securities declines. As a result, other than temporary impairments may occur in the future.

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As of ~~September 30,~~March 31, 2015, $720,036 thousand of investment securities were pledged to secure public deposits and short-term borrowed funds. As of December 31, 2014, ~~$773,297~~$757,623 thousand of investment securities were pledged to secure public deposits, short-term borrowed funds and FHLB advances. ~~As of December 31, 2013, $778,588 thousand of investment securities were pledged to secure public deposits, short-term borrowed funds, FHLB advances and term repurchase agreements.~~

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An analysis of gross unrealized losses of investment securities available for sale follows:

Investment Securities Available for Sale
At December 31, 2013

No. of Less than 12 months No. of 12 months or longer No. of Total
Investment Unrealized Investment Unrealized Investment Unrealized
Positions Fair Value Losses Positions Fair Value Losses Positions Fair Value Losses
($ in thousands)
U.S. Treasury securities 1 $ 2,994 $ (3 ) - $ - $ - 1 $ 2,994 $ (3 )
Securities of U.S. Government sponsored entities 15 91,669 (663 ) - - - 15 91,669 (663 )
Residential mortgage-backed securities 3 864 (15 ) - - - 3 864 (15 )
Commercial mortgage-backed securities 1 1,072 (5 ) - - - 1 1,072 (5 )
Obligations of states and political subdivisions 35 17,516 (222 ) 11 3,214 (101 ) 46 20,730 (323 )
Residential collateralized mortgage obligations 34 187,848 (12,326 ) 6 40,575 (2,398 ) 40 228,423 (14,724 )
Asset-backed securities 1 5,002 (1 ) 1 4,475 (100 ) 2 9,477 (101 )
Corporate securities 25 117,751 (1,087 ) 2 9,824 (177 ) 27 127,575 (1,264 )
Other securities - - - 1 1,842 (158 ) 1 1,842 (158 )
Total 115 $ 424,716 $ (14,322 ) 21 $ 59,930 $ (2,934 ) 136 $ 484,646 $ (17,256 )

	Investment Securities Available for Sale At December 31, 2014
	No. of		Less than 12 months					No. of		12 months or longer					No. of		Total
	Investment				Unrealized			Investment				Unrealized			Investment				Unrealized
	Positions		Fair Value		Losses			Positions		Fair Value		Losses			Positions		Fair Value		Losses
	($ in thousands)
Securities of U.S. Government sponsored entities		15	$	253,632	$	(989	)		1	$	9,963	$	(38	)		16	$	263,595	$	(1,027	)
Residential mortgage-backed securities		-		-		-			2		822		(16	)		2		822		(16	)
Commercial mortgage-backed securities		1		942		(7	)		1		803		(3	)		2		1,745		(10	)
Obligations of states and political subdivisions		7		2,548		(18	)		17		5,518		(105	)		24		8,066		(123	)
Residential collateralized mortgage obligations		-		-		-			32		205,074		(8,524	)		32		205,074		(8,524	)
Asset-backed securities		1		5,008		(7	)		1		3,305		(29	)		2		8,313		(36	)
Corporate securities		53		165,026		(1,304	)		5		34,222		(325	)		58		199,248		(1,629	)
Other securities		-		-		-			1		1,876		(124	)		1		1,876		(124	)
Total		77	$	427,156	$	(2,325	)		60	$	261,583	$	(9,164	)		137	$	688,739	$	(11,489	)

An analysis of gross ~~unrealized~~unrecognized losses of investment securities held to maturity follows:

Investment Securities Held to Maturity
At December 31, 2013

No. of Less than 12 months No. of 12 months or longer No. of Total
Investment Unrealized Investment Unrealized Investment Unrealized
Positions Fair Value Losses Positions Fair Value Losses Positions Fair Value Losses
($ in thousands)
Securities of U.S. Government sponsored entities 1 $ 1,597 $ (4 ) - $ - $ - 1 $ 1,597 $ (4 )
Residential mortgage-backed securities 13 38,396 (616 ) 1 392 (8 ) 14 38,788 (624 )
Obligations of states and political subdivisions 530 355,797 (14,893 ) 64 64,427 (6,774 ) 594 420,224 (21,667 )
Residential collateralized mortgage obligations 42 214,981 (5,175 ) 5 14,120 (427 ) 47 229,101 (5,602 )
Total 586 $ 610,771 $ (20,688 ) 70 $ 78,939 $ (7,209 ) 656 $ 689,710 $ (27,897 )

	Investment Securities Held to Maturity At December 31, 2014
	No. of		Less than 12 months					No. of		12 months or longer					No. of		Total
	Investment				Unrecognized			Investment				Unrecognized			Investment				Unrecognized
	Positions		Fair Value		Losses			Positions		Fair Value		Losses			Positions		Fair Value		Losses
	($ in thousands)
Residential mortgage-backed securities		4	$	19,467	$	(132	)		1	$	201	$	(5	)		5	$	19,668	$	(137	)
Obligations of states and political subdivisions		103		76,202		(439	)		138		123,370		(1,919	)		241		199,572		(2,358	)
Residential collateralized mortgage obligations		5		13,932		(166	)		22		119,513		(2,215	)		27		133,445		(2,381	)
Total		112	$	109,601	$	(737	)		161	$	243,084	$	(4,139	)		273	$	352,685	$	(4,876	)

The unrealized losses on the Company’s investment securities were caused by market conditions for these types of investments, particularly rising risk-free interest rates causing bond prices to decline.

The following table provides information about the amount of interest income earned on investment securities ~~that~~which is fully taxable and ~~that~~which is exempt from regular federal income tax:

For the Three Months For the Nine Months
Ended September 30,
2014 2013 2014 2013
(In thousands)
Taxable $ 6,348 $ 5,502 $ 17,907 $ 16,626
Tax-exempt 6,423 7,338 20,143 22,368
Total interest income from investment securities $ 12,771 $ 12,840 $ 38,050 $ 38,994

	For the Three Months Ended March 31,
	2015		2014
	(In thousands)

Taxable	$	7,554	$	5,683
Tax-exempt		6,133		6,980
Total interest income from investment securities	$	13,687	$	12,663

14-14-

Note 4: Loans and Allowance for Credit Losses

A summary of the major categories of loans outstanding is shown in the following tables.

	At March 31, 2015
	Commercial			Commercial Real Estate			Construction		Residential Real Estate			Consumer Installment & Other			Total
	(In thousands)
Originated loans	$	391,863		$	548,936		$	12,438	$	140,334		$	371,975		$	1,465,546
Purchased covered loans:
Gross purchased covered loans		-			-			-		2,574			13,955			16,529
Credit risk discount		-			-			-		(133	)		(67	)		(200	)
Purchased non-covered loans:
Gross purchased non-covered loans		17,367			152,167			1,021		1,206			38,953			210,714
Credit risk discount		(1,255	)		(5,904	)		-		(262	)		(1,284	)		(8,705	)
Total	$	407,975		$	695,199		$	13,459	$	143,719		$	423,532		$	1,683,884

	At December 31, 2014
	Commercial			Commercial Real Estate			Construction			Residential Real Estate			Consumer Installment & Other			Total
	(In thousands)
Originated loans	$	374,005		$	567,594		$	11,003		$	146,925		$	370,842		$	1,470,369
Purchased covered loans:
Gross purchased covered loans		-			-			-			2,626			14,920			17,546
Credit risk discount		-			-			-			(434	)		(34	)		(468	)
Purchased non-covered loans:
Gross purchased non-covered loans		19,166			157,502			2,919			972			41,656			222,215
Credit risk discount		(1,356	)		(6,492	)		(50	)		(262	)		(1,212	)		(9,372	)
Total	$	391,815		$	718,604		$	13,872		$	149,827		$	426,172		$	1,700,290

Changes in the carrying amount of impaired purchased loans were as follows:

	For the Three Months Ended March 31, 2015			For the Year Ended December 31, 2014
Impaired purchased loans	(In thousands)
Carrying amount at the beginning of the period	$	4,672		$	4,936
Reductions during the period		(16	)		(264	)
Carrying amount at the end of the period	$	4,656		$	4,672

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-15-

Changes in the accretable yield for purchased loans were as follows:

	For the Three Months Ended March 31, 2015			For the Year Ended December 31, 2014
Accretable yield:	(In thousands)
Balance at the beginning of the period	$	2,261		$	2,505
Reclassification from nonaccretable difference		739			5,016
Accretion		(973	)		(5,260	)
Balance at the end of the period	$	2,027		$	2,261

Accretion	$	(973	)	$	(5,260	)
Change in FDIC indemnification		141			1,110
(Increase) in interest income	$	(832	)	$	(4,150	)

The following summarizes activity in the allowance for credit losses:

	Allowance for Loan Losses For the Three Months Ended March 31, 2015
	Commercial			Commercial Real Estate			Construction		Residential Real Estate			Consumer Installment and Other			Purchased Non-covered Loans			Purchased Covered Loans		Unallocated		Total
	(In thousands)
Allowance for loan losses:
Balance at beginning of period	$	5,460		$	4,245		$	644	$	2,241		$	7,717		$	2,120		$	-	$	9,058	$	31,485
Additions:
Provision		(110	)		(137	)		86		(101	)		(281	)		247			-		296		-
Deductions:
Chargeoffs		(60	)					-					(995	)		(35	)		-		-		(1,090	)
Recoveries		180			15			-		-			590			7			-		-		792
Net loan recoveries (losses)		120			15			-		-			(405	)		(28	)		-		-		(298	)
Total allowance for loan losses	$	5,470		$	4,123		$	730	$	2,140		$	7,031		$	2,339		$	0	$	9,354	$	31,187

FDIC indemnification expired February 6, 2014 for County Bank non-single-family residential collateralized purchased loans; accordingly, such loans have been reclassified from purchased covered loans to purchased non-covered ~~loans.~~

~~A summary of~~loans as well as the ~~major categories of loans outstanding is shown in the following tables.~~related allowance for credit losses.

At September 30, 2014
Commercial
Commercial
Real Estate
Construction
Residential
Real Estate

Consumer
Installment
& Other
Total
(In thousands)
Originated loans $ 370,060 $ 573,179 $ 9,824 $ 156,794 $ 379,708 $ 1,489,565
Purchased covered loans:
    Gross purchased covered loans - - - 2,905 15,119 18,024
    Credit risk discount - - - (434 ) (67 ) (501 )
Purchased non-covered loans:
    Gross purchased non-covered loans 20,318 167,052 2,931 979 44,247 235,527
    Credit risk discount (1,460 ) (7,060 ) (50 ) (262 ) (1,401 ) (10,233 )
        Total $ 388,918 $ 733,171 $ 12,705 $ 159,982 $ 437,606 $ 1,732,382

At December 31, 2013
Commercial
Commercial
Real Estate
Construction
Residential
Real Estate

Consumer
Installment
& Other
Total
(In thousands)
Originated loans $ 338,824 $ 596,653 $ 10,723 $ 176,196 $ 400,888 $ 1,523,284
Purchased covered loans:
    Gross purchased covered loans 20,066 175,562 3,223 8,558 54,194 261,603
    Credit risk discount (1,530 ) (8,122 ) (50 ) (434 ) (797 ) (10,933 )
Purchased non-covered loans:
    Gross purchased non-covered loans 7,525 35,712 - 999 12,799 57,035
    Credit risk discount (726 ) (786 ) - (262 ) (1,471 ) (3,245 )
        Total $ 364,159 $ 799,019 $ 13,896 $ 185,057 $ 465,613 $ 1,827,744

~~Changes in the carrying amount of impaired purchased loans were as follows:~~

For the
Nine Months Ended
September 30, 2014

For the Year Ended
December 31, 2013

Impaired purchased loans (In thousands)
Carrying amount at the beginning of the period $ 4,936 $ 14,629
Reductions during the period (292 ) (9,693 )
Carrying amount at the end of the period $ 4,644 $ 4,936

	Allowance for Credit Losses For the Three Months Ended March 31, 2014
	Commercial			Commercial Real Estate			Construction			Residential Real Estate		Consumer Installment and Other			Purchased Non-covered Loans			Purchased Covered Loans			Unallocated		Total
	(In thousands)
Allowance for loan losses:
Balance at beginning of period	$	4,005		$	12,070		$	602		$	405	$	3,198		$	-		$	1,561		$	9,852	$	31,693
Additions:
Provision		130			(974	)		(160	)		86		214			1,272			-			432		1,000
Deductions:
Chargeoffs		(60	)		-			-			-		(999	)		(260	)		-			-		(1,319	)
Recoveries		168			163			3			-		400			1			-			-		735
Net loan recoveries (losses)		108			163			3			-		(599	)		(259	)		-			-		(584	)
Indemnification expiration		-			-			-			-		-			1,561			(1,561	)		-
Balance at end of period		4,243			11,259			445			491		2,813			2,574			-			10,284		32,109
Liability for off-balance sheet credit exposure		1,672			-			185			-		440			251			-			145		2,693
Total allowance for credit losses	$	5,915		$	11,259		$	630		$	491	$	3,253		$	2,825		$	-		$	10,429	$	34,802

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15-16-

~~Changes in the accretable yield for purchased loans were as follows:~~

For the
Nine Months Ended
September 30, 2014

For the
Year Ended
December 31, 2013

Accretable yield: (In thousands)
Balance at the beginning of the period $ 2,505 $ 4,948
Reclassification from nonaccretable difference 3,513 12,504
Accretion (3,287 ) (14,947 )
Balance at the end of the period $ 2,731 $ 2,505

Accretion $ (3,287 ) $ (14,947 )
Reduction in FDIC indemnification asset 278 11,438
(Increase) in interest income $ (3,009 ) $ (3,509 )

~~The following summarizes activity in the allowance for credit losses:~~

Allowance for Credit Losses
For the Three Months Ended September 30, 2014

Commercial
Commercial
Real Estate
Construction
Residential
Real Estate

Consumer
Installment
and Other

Purchased
Non-covered
Loans

Purchased
Covered
Loans
Unallocated Total
(In thousands)
Allowance for loan losses:
    Balance at beginning of period $ 5,297 $ 10,664 $ 442 $ 409 $ 2,055 $ 2,707 $ - $ 10,824 $ 32,398
    Additions:
        Provision (269 ) (640 ) - (17 ) 802 (184 ) - 908 600
    Deductions:
        Chargeoffs (905 ) - - - (916 ) - - - (1,821 )
        Recoveries 229 15 - - 297 51 - - 592
            Net loan (losses) recoveries (676 ) 15 - - (619 ) 51 - - (1,229 )
    Balance at end of period 4,352 10,039 442 392 2,238 2,574 - 11,732 31,769
Liability for off-balance sheet credit exposure 1,706 24 105 - 451 131 - 276 2,693
Total allowance for credit losses $ 6,058 $ 10,063 $ 547 $ 392 $ 2,689 $ 2,705 $ - $ 12,008 $ 34,462

Allowance for Credit Losses
For the Nine Months Ended September 30, 2014

Commercial
Commercial
Real Estate
Construction
Residential
Real Estate

Consumer
Installment
and Other

Purchased
Non-covered
Loans

Purchased
Covered
Loans
Unallocated Total
(In thousands)
Allowance for loan losses:
    Balance at beginning of period $ 4,005 $ 12,070 $ 602 $ 405 $ 3,198 $ - $ 1,561 $ 9,852 $ 31,693
    Additions:
        Provision 945 (2,224 ) (163 ) 17 942 1,203 - 1,880 2,600
    Deductions:
        Chargeoffs (1,114 ) - - (30 ) (3,217 ) (260 ) - - (4,621 )
        Recoveries 516 193 3 - 1,315 70 - - 2,097
            Net loan recoveries (losses) (598 ) 193 3 (30 ) (1,902 ) (190 ) - - (2,524 )
    Indemnification expiration - - - - - 1,561 (1,561 ) - -
    Balance at end of period 4,352 10,039 442 392 2,238 2,574 - 11,732 31,769
Liability for off-balance sheet credit exposure 1,706 24 105 - 451 131 - 276 2,693
Total allowance for credit losses $ 6,058 $ 10,063 $ 547 $ 392 $ 2,689 $ 2,705 $ - $ 12,008 $ 34,462

Allowance for Credit Losses
For the Three Months Ended September 30, 2013

Commercial
Commercial
Real Estate
Construction
Residential
Real Estate

Consumer
Installment
and Other

Purchased
Non-covered
Loans

Purchased
Covered
Loans
Unallocated Total
(In thousands)
Allowance for loan losses:
    Balance at beginning of period $ 4,384 $ 11,275 $ 478 $ 532 $ 2,603 $ - $ 285 $ 11,369 $ 30,926
    Additions:
        Provision 102 447 53 (104 ) 1,154 - 1,300 (1,152 ) 1,800
    Deductions:
        Chargeoffs (637 ) (117 ) - - (909 ) - (79 ) - (1,742 )
        Recoveries 326 30 - - 516 - 60 - 932
            Net loan losses (311 ) (87 ) - - (393 ) - (19 ) - (810 )
    Balance at end of period 4,175 11,635 531 428 3,364 - 1,566 10,217 31,916
Liability for off-balance sheet credit exposure 1,613 - 103 - 483 - - 494 2,693
Total allowance for credit losses $ 5,788 $ 11,635 $ 634 $ 428 $ 3,847 $ - $ 1,566 $ 10,711 $ 34,609

Allowance for Credit Losses
For the Nine Months Ended September 30, 2013

Commercial
Commercial
Real Estate
Construction
Residential
Real Estate

Consumer
Installment
and Other

Purchased
Non-covered
Loans

Purchased
Covered
Loans
Unallocated Total
(In thousands)
Allowance for loan losses:
    Balance at beginning of period $ 6,445 $ 10,063 $ 484 $ 380 $ 3,194 $ - $ 1,005 $ 8,663 $ 30,234
    Additions:
        Provision (667 ) 2,100 47 157 1,660 116 1,433 1,554 6,400
    Deductions:
        Chargeoffs (2,687 ) (656 ) - (109 ) (3,114 ) (116 ) (955 ) - (7,637 )
        Recoveries 1,084 128 - - 1,624 - 83 - 2,919
            Net loan losses (1,603 ) (528 ) - (109 ) (1,490 ) (116 ) (872 ) - (4,718 )
    Balance at end of period 4,175 11,635 531 428 3,364 - 1,566 10,217 31,916
Liability for off-balance sheet credit exposure 1,613 - 103 - 483 - - 494 2,693
Total allowance for credit losses $ 5,788 $ 11,635 $ 634 $ 428 $ 3,847 $ - $ 1,566 $ 10,711 $ 34,609

The allowance for credit losses and recorded investment in loans were evaluated for impairment as follows:

Allowance for Credit Losses and Recorded Investment in Loans Evaluated for Impairment
At September 30, 2014

Commercial Commercial Real Estate Construction Residential Real Estate Consumer Installment and Other Purchased Non-covered Loans Purchased Covered Loans Unallocated Total
(In thousands)
Allowance for credit losses:
Individually evaluated for impairment $ - $ - $ - $ - $ - $ 892 $ - $ - $ 892
Collectively evaluated for impairment 6,058 10,063 547 392 2,689 1,813 - 12,008 33,570
Purchased loans with evidence of credit deterioration - - - - - - - - -
Total $ 6,058 $ 10,063 $ 547 $ 392 $ 2,689 $ 2,705 $ - $ 12,008 $ 34,462
Carrying value of loans:
Individually evaluated for impairment $ 2,714 $ 3,037 $ - $ - $ - $ 13,118 $ - $ - $ 18,869
Collectively evaluated for impairment 367,346 570,142 9,824 156,794 379,708 207,764 17,291 - 1,708,869
Purchased loans with evidence of credit deterioration - - - - - 4,412 232 - 4,644
Total $ 370,060 $ 573,179 $ 9,824 $ 156,794 $ 379,708 $ 225,294 $ 17,523 $ - $ 1,732,382

	Allowance for Loan Losses and Recorded Investment in Loans Evaluated for Impairment At March 31, 2015
	Commercial		Commercial Real Estate		Construction		Residential Real Estate		Consumer Installment and Other		Purchased Non-covered Loans		Purchased Covered Loans		Unallocated		Total
	(In thousands)
Allowance for loan losses:
Individually evaluated for impairment	$	493	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	493
Collectively evaluated for impairment		4,977		4,123		730		2,140		7,031		2,339		-		9,354		30,694
Purchased loans with evidence of credit deterioration		-		-		-		-		-		-		-		-		-
Total	$	5,470	$	4,123	$	730	$	2,140	$	7,031	$	2,339	$	-	$	9,354	$	31,187
Carrying value of loans:
Individually evaluated for impairment	$	12,459	$	597	$	-	$	574	$	599	$	10,740	$	-	$	-	$	24,969
Collectively evaluated for impairment		379,404		548,339		12,438		139,760		371,376		186,835		16,107		-		1,654,259
Purchased loans with evidence of credit deterioration		-		-		-		-		-		4,434		222		-		4,656
Total	$	391,863	$	548,936	$	12,438	$	140,334	$	371,975	$	202,009	$	16,329	$	-	$	1,683,884

Allowance for Credit Losses and Recorded Investment in Loans Evaluated for Impairment
At December 31, 2013

Commercial Commercial Real Estate Construction Residential Real Estate Consumer Installment and Other Purchased Non-covered Loans Purchased Covered Loans Unallocated Total
(In thousands)
Allowance for credit losses:
Individually evaluated for impairment $ 100 $ 1,243 $ - $ - $ - $ - $ 153 $ - $ 1,496
Collectively evaluated for impairment 5,563 10,827 639 405 3,695 - 1,408 10,353 32,890
Purchased loans with evidence of credit deterioration - - - - - - - - -
Total $ 5,663 $ 12,070 $ 639 $ 405 $ 3,695 $ - $ 1,561 $ 10,353 $ 34,386
Carrying value of loans:
Individually evaluated for impairment $ 3,901 $ 3,357 $ - $ - $ - $ 3,785 $ 9,999 $ - $ 21,042
Collectively evaluated for impairment 334,923 593,296 10,723 176,196 400,888 47,571 238,169 - 1,801,766
Purchased loans with evidence of credit deterioration - - - - - 2,434 2,502 - 4,936
Total $ 338,824 $ 596,653 $ 10,723 $ 176,196 $ 400,888 $ 53,790 $ 250,670 $ - $ 1,827,744

	Allowance for Credit Losses and Recorded Investment in Loans Evaluated for Impairment At December 31, 2014
	Commercial		Commercial Real Estate		Construction		Residential Real Estate		Consumer Installment and Other		Purchased Non-covered Loans		Purchased Covered Loans		Unallocated		Total
	(In thousands)
Allowance for credit losses:
Individually evaluated for impairment	$	496	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	496
Collectively evaluated for impairment		7,372		4,245		988		2,241		8,154		2,120		-		8,562		33,682
Purchased loans with evidence of credit deterioration		-		-		-		-		-		-		-		-		-
Total	$	7,868	$	4,245	$	988	$	2,241	$	8,154	$	2,120	$	-	$	8,562	$	34,178
Carrying value of loans:
Individually evaluated for impairment	$	11,811	$	2,970	$	-	$	574	$	599	$	12,364	$	-	$	-	$	28,318
Collectively evaluated for impairment		362,194		564,624		11,003		146,351		370,243		196,034		16,851		-		1,667,300
Purchased loans with evidence of credit deterioration		-		-		-		-		-		4,445		227		-		4,672
Total	$	374,005	$	567,594	$	11,003	$	146,925	$	370,842	$	212,843	$	17,078	$	-	$	1,700,290

The Bank’s customers are small businesses, professionals and consumers. Given the scale of these borrowers, corporate credit rating agencies do not evaluate the borrowers’ financial condition. The Bank maintains a Loan Review Department which reports directly to the Board of Directors. The Loan Review Department performs independent evaluations of loans and assigns credit risk grades to evaluated loans using grading standards employed by bank regulatory agencies. Loans judged to carry lower-risk attributes are assigned a “pass” grade, with a minimal likelihood of loss. Loans judged to carry higher-risk attributes are referred to as “classified loans,” and are further disaggregated, with increasing expectations for loss recognition, as “substandard,” “doubtful,” and “loss.” Loan Review Department evaluations occur every calendar quarter. If the Bank becomes aware of deterioration in a borrower’s performance or financial condition between Loan Review Department examinations, assigned risk grades are re-evaluated promptly. Credit risk grades assigned by the Loan Review Department are subject to review by the Bank’s regulatory authorities during regulatory examinations.

The following summarizes the credit risk profile by internally assigned grade:

Credit Risk Profile by Internally Assigned Grade
At September 30, 2014

Commercial Commercial Real Estate Construction Residential Real Estate Consumer Installment and Other Purchased Non-covered Loans
Purchased Covered Loans (1)
Total
(In thousands)
Grade:
Pass $ 363,911 $ 530,115 $ 9,824 $ 154,759 $ 378,677 $ 194,451 $ 15,953 $ 1,647,690
Substandard 6,136 43,064 - 2,035 680 40,717 2,071 94,703
Doubtful 13 - - - 13 337 - 363
Loss - - - - 338 22 - 360
Credit risk discount - - - - - (10,233 ) (501 ) (10,734 )
Total $ 370,060 $ 573,179 $ 9,824 $ 156,794 $ 379,708 $ 225,294 $ 17,523 $ 1,732,382

	Credit Risk Profile by Internally Assigned Grade At March 31, 2015
	Commercial		Commercial Real Estate		Construction		Residential Real Estate		Consumer Installment and Other		Purchased Non-covered Loans			Purchased Covered Loans (1)			Total
	(In thousands)
Grade:
Pass	$	384,159	$	509,428	$	12,438	$	137,992	$	370,845	$	172,947		$	14,938		$	1,602,747
Substandard		7,692		39,508		-		2,342		906		37,691			1,591			89,730
Doubtful		12		-		-		-		8		76			-			96
Loss		-		-		-		-		216		-			-			216
Credit risk discount		-		-		-		-		-		(8,705	)		(200	)		(8,905	)
Total	$	391,863	$	548,936	$	12,438	$	140,334	$	371,975	$	202,009		$	16,329		$	1,683,884

(1) Credit risk profile reflects internally assigned grade of purchased covered loans without regard to FDIC indemnification.

Credit Risk Profile by Internally Assigned Grade
At December 31, 2013

Commercial Commercial Real Estate Construction Residential Real Estate Consumer Installment and Other Purchased Non-covered Loans
Purchased Covered Loans (1)
Total
(In thousands)
Grade:
Pass $ 329,667 $ 554,991 $ 10,274 $ 174,113 $ 399,377 $ 41,490 $ 196,882 $ 1,706,794
Substandard 8,142 41,662 449 2,083 1,127 14,587 64,624 132,674
Doubtful 1,015 - - - 19 958 97 2,089
Loss - - - - 365 - - 365
Credit risk discount - - - - - (3,245 ) (10,933 ) (14,178 )
Total $ 338,824 $ 596,653 $ 10,723 $ 176,196 $ 400,888 $ 53,790 $ 250,670 $ 1,827,744

-17-

	Credit Risk Profile by Internally Assigned Grade At December 31, 2014
	Commercial		Commercial Real Estate		Construction		Residential Real Estate		Consumer Installment and Other		Purchased Non-covered Loans			Purchased Covered Loans (1)			Total
	(In thousands)
Grade:
Pass	$	366,487	$	527,980	$	11,003	$	144,902	$	369,618	$	182,644		$	15,509		$	1,618,143
Substandard		7,506		39,614		-		2,023		734		39,473			2,037			91,387
Doubtful		12		-		-		-		12		77			-			101
Loss		-		-		-		-		478		21			-			499
Credit risk discount		-		-		-		-		-		(9,372	)		(468	)		(9,840	)
Total	$	374,005	$	567,594	$	11,003	$	146,925	$	370,842	$	212,843		$	17,078		$	1,700,290

(1) Credit risk profile reflects internally assigned grade of purchased covered loans without regard to FDIC indemnification.

The following tables summarize loans by delinquency and nonaccrual status:

Summary of Loans by Delinquency and Nonaccrual Status
At September 30, 2014

Current and Accruing 30-59 Days Past Due and Accruing 60-89 Days Past Due and Accruing Past Due 90 days or More and Accruing Nonaccrual Total Loans
(In thousands)
Commercial $ 368,428 $ 723 $ 414 $ - $ 495 $ 370,060
Commercial real estate 563,817 3,679 1,469 - 4,214 573,179
Construction 8,894 - 930 - - 9,824
Residential real estate 152,538 2,659 1,597 - - 156,794
Consumer installment and other 375,971 2,936 459 342 - 379,708
Total originated loans 1,469,648 9,997 4,869 342 4,709 1,489,565
Purchased non-covered loans 209,775 891 1,255 76 13,297 225,294
Purchased covered loans 17,224 - 4 - 295 17,523
Total $ 1,696,647 $ 10,888 $ 6,128 $ 418 $ 18,301 $ 1,732,382

	Summary of Loans by Delinquency and Nonaccrual Status At March 31, 2015
	Current and Accruing		30-59 Days Past Due and Accruing		60-89 Days Past Due and Accruing		Past Due 90 days or More and Accruing		Nonaccrual		Total Loans
	(In thousands)
Commercial	$	388,683	$	2,355	$	533	$	-	$	292	$	391,863
Commercial real estate		534,341		7,960		5,109		-		1,526		548,936
Construction		12,438		-		-		-		-		12,438
Residential real estate		136,975		1,976		479		-		904		140,334
Consumer installment and other		369,260		1,548		357		191		619		371,975
Total originated loans		1,441,697		13,839		6,478		191		3,341		1,465,546
Purchased non-covered loans		187,198		2,945		1,821		-		10,045		202,009
Purchased covered loans		16,208		121		-		-		-		16,329
Total	$	1,645,103	$	16,905	$	8,299	$	191	$	13,386	$	1,683,884

	Summary of Loans by Delinquency and Nonaccrual Status At December 31, 2014
	Current and Accruing		30-59 Days Past Due and Accruing		60-89 Days Past Due and Accruing		Past Due 90 days or More and Accruing		Nonaccrual		Total Loans
	(In thousands)
Commercial	$	372,235	$	1,704	$	36	$	-	$	30	$	374,005
Commercial real estate		557,041		6,500		-		-		4,053		567,594
Construction		11,003		-		-		-		-		11,003
Residential real estate		144,021		1,513		817		-		574		146,925
Consumer installment and other		365,753		3,310		625		502		652		370,842
Total originated loans		1,450,053		13,027		1,478		502		5,309		1,470,369
Purchased non-covered loans		196,150		4,204		491		-		11,998		212,843
Purchased covered loans		16,389		389		3		-		297		17,078
Total	$	1,662,592	$	17,620	$	1,972	$	502	$	17,604	$	1,700,290

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18-18-

Summary of Loans by Delinquency and Nonaccrual Status
At December 31, 2013

Current and Accruing 30-59 Days Past Due and Accruing 60-89 Days Past Due and Accruing Past Due 90 days or More and Accruing Nonaccrual Total Loans
(In thousands)
Commercial $ 336,497 $ 677 $ 383 $ - $ 1,267 $ 338,824
Commercial real estate 586,619 4,012 2,473 - 3,549 596,653
Construction 10,275 - - - 448 10,723
Residential real estate 173,082 2,789 325 - - 176,196
Consumer installment and other 396,725 3,035 606 410 112 400,888
Total originated loans 1,503,198 10,513 3,787 410 5,376 1,523,284
Purchased non-covered loans 45,755 4,237 180 - 3,618 53,790
Purchased covered loans 236,577 845 940 - 12,308 250,670
Total $ 1,785,530 $ 15,595 $ 4,907 $ 410 $ 21,302 $ 1,827,744

The following is a summary of the effect of nonaccrual loans on interest income:

For the Three Months For the Nine Months
Ended September 30,
2014 2013 2014 2013
(In thousands)
Interest income that would have been recognized had the loans performed in accordance with their original terms
$ 298 $ 502 $ 833 $ 1,405
Net interest income reversed (recognized) on nonaccrual loans 15 (20 ) (55 ) (113 )
Total reduction of interest income $ 313 $ 482 $ 778 $ 1,292

	For the Three Months Ended March 31,
	2015			2014
	(In thousands)
Interest income that would have been recognized had the loans performed in accordance with their original terms	$	311		$	260
Less: Interest income recognized on nonaccrual loans		(205	)		(44	)
Total reduction of interest income	$	106		$	216

There were no commitments to lend additional funds to borrowers whose loans were on nonaccrual status at ~~September 30, 2014~~March 31, 2015 and December 31, ~~2013.~~2014.

The following summarizes impaired loans:

	Impaired Loans At September 30, 2014						Impaired Loans At March 31, 2015
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
	(In thousands)						(In thousands)
Impaired loans with no related allowance recorded:
Commercial	$	3,389	$	3,563	$	-	$	2,651	$	2,715	$	-
Commercial real estate		13,463		16,044		-		17,159		23,100		-
Construction		1,834		1,884		-		-		-		-
Residential real estate								1,145		1,175		-
Consumer installment and other		1,183		1,332		-		990		1,097		-

Impaired loans with an allowance recorded:
Commercial		259		259		259		9,860		9,860		493
Commercial real estate		6,330		9,796		633		-		-		-
Construction								-		-		-
Residential real estate								-		-		-
Consumer installment and other								-		-		-

Total:
Commercial	$	3,648	$	3,822	$	259	$	12,511	$	12,575	$	493
Commercial real estate		19,793		25,840		633		17,159		23,100		-
Construction		1,834		1,884		-		-		-		-
Residential real estate								1,145		1,175		-
Consumer installment and other		1,183		1,332		-		990		1,097

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19-19-

Impaired Loans
At December 31, 2013

Recorded
Investment

Unpaid
Principal
Balance

Related
Allowance

(In thousands)
Impaired loans with no related allowance recorded:
    Commercial $ 3,931 $ 4,498 $ -
    Commercial real estate 11,002 13,253 -
    Construction 2,483 2,947 -
    Consumer installment and other 2,014 2,133 -

Impaired loans with an allowance recorded:
    Commercial 1,000 2,173 100
    Commercial real estate 9,773 12,482 1,396

Total:
    Commercial $ 4,931 $ 6,671 $ 100
    Commercial real estate 20,775 25,735 1,396
    Construction 2,483 2,947 -
    Consumer installment and other 2,014 2,133 -

	Impaired Loans At December 31, 2014
	Recorded Investment		Unpaid Principal Balance		Related Allowance
	(In thousands)
Impaired loans with no related allowance recorded:
Commercial	$	2,031	$	2,095	$	-
Commercial real estate		19,478		25,519		-
Construction		1,834		1,884		-
Residential real estate		574		574		-
Consumer installment and other		1,518		1,628		-

Impaired loans with an allowance recorded:
Commercial		9,910		9,910		496
Commercial real estate		-		-		-
Construction		-		-		-
Residential real estate		-		-		-
Consumer installment and other		-		-		-

Total:
Commercial	$	11,941	$	12,005	$	496
Commercial real estate		19,478		25,519		-
Construction		1,834		1,884		-
Residential real estate		574		574		-
Consumer installment and other		1,518		1,628

Impaired loans include troubled debt restructured loans. Impaired loans at ~~September 30, 2014,~~March 31, 2015, included ~~$5,907~~$6,537 thousand of restructured loans, including ~~$711~~$998 thousand that were on nonaccrual status. Impaired loans at December 31, ~~2013,~~2014, included ~~$5,453~~$4,837 thousand of restructured loans, ~~including $529 thousand that~~none of which were on nonaccrual status.

	Impaired Loans
	For the Three Months Ended September 30,								For the Nine Months Ended September 30,								Impaired Loans For the Three Months Ended March 31,
	2014				2013				2014				2013				2015				2014
	Average Recorded Investment		Recognized Interest Income		Average Recorded Investment		Recognized Interest Income		Average Recorded Investment		Recognized Interest Income		Average Recorded Investment		Recognized Interest Income		Average Recorded Investment		Recognized Interest Income		Average Recorded Investment		Recognized Interest Income
	(In thousands)																(In thousands)
Commercial	$	3,885	$	59	$	9,977	$	35	$	4,388	$	186	$	11,726	$	141	$	12,226	$	146	$	4,842	$	67
Commercial real estate		20,787		103		27,714		129		19,961		373		27,795		634		18,318		257		19,298		117
Construction		1,934		-		2,660		29		2,076		-		2,389		80		917		-		2,259		-
Residential real estate		-		-		207		-		108		-		483		-		860		6		162		-
Consumer installment and other		1,207		7		1,054		8		1,416		22		1,359		23		1,254		6		1,716		8
Total	$	27,813	$	169	$	41,612	$	201	$	27,949	$	581	$	43,752	$	878	$	33,575	$	415	$	28,277	$	192

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-20-

The following table provides information on troubled debt restructurings:

	Troubled Debt Restructurings At September 30, 2014								Troubled Debt Restructurings At March 31, 2015
	Number of Contracts		Pre-Modification Carrying Value		Period-End Carrying Value		Period-End Individual Impairment Allowance		Number of Contracts		Pre-Modification Carrying Value		Period-End Carrying Value		Period-End Individual Impairment Allowance
	(In thousands)								(In thousands)
Commercial		6	$	3,465	$	3,109	$	259		6	$	2,813	$	2,599	$	-
Commercial real estate		3		2,754		2,787		-		5		3,875		3,693		-
Residential real estate										1		18		5		-
Consumer installment and other		1		18		11		-		1		241		240		-
Total		10	$	6,237	$	5,907	$	259		13	$	6,947	$	6,537	$	-

	Troubled Debt Restructurings At March 31, 2014
	Number of Contracts		Pre-Modification Carrying Value		Period-End Carrying Value		Period-End Individual Impairment Allowance
	(In thousands)
Commercial		3	$	3,201	$	2,938	$	262
Commercial real estate		2		2,291		2,316		-
Consumer installment and other		1		18		17		-
Total		6	$	5,510	$	5,271	$	262

Troubled Debt Restructurings
At September 30, 2013

Number of
Contracts

Pre-Modification
Carrying Value

Period-End
Carrying Value

Period-End
Individual
Impairment
Allowance

(In thousands)
Commercial 4 $ 1,991 $ 1,689 $ -
Commercial real estate 3 6,295 5,849 394
Total 7 $ 8,286 $ 7,538 $ 394

During the three ~~and nine~~ months ended ~~September 30, 2014,~~March 31, 2015, the Company modified ~~three loans with a total carrying value of $617 thousand and~~ five loans with a ~~total~~ carrying value of ~~$726~~$1,736 thousand ~~respectively,~~ that were considered troubled debt restructurings. The concessions granted in the ~~five restructurings completed~~first quarter 2015 consisted of modification of payment terms to extend the maturity date to allow for deferred principal repayment and under-market terms. During the three months ended March 31, 2014, the Company modified one loan with a carrying value of $17 thousand that was considered a troubled debt restructuring. The concession granted in the first ~~nine months of~~quarter 2014 consisted of modification of payment terms to extend the maturity date to allow for deferred principal repayment. During the three ~~and nine~~ months ended ~~September 30,~~March 31, 2015 and 2014, no troubled debt restructured loans defaulted.

During the three months ended September 30, 2013, no loans were modified that were considered troubled debt restructurings. During the nine months ended September 30, 2013, the Company modified four loans with a total carrying value of $3,019 thousand that were considered troubled debt restructurings. The concessions granted in the four restructurings completed in the first nine months of 2013 consisted of modification of payment terms to lower the interest rate and extend the maturity date to allow for deferred principal repayment. During the three months and nine months ended September 30, 2013, no troubled debt restructurings and one commercial real estate loan with a carrying value of $3,954 thousand defaulted, respectively. A troubled debt restructuring is considered to be in default when payments are 90ninety days or more past due.

~~The~~At December 31, 2014, the Company ~~pledges~~pledged loans to secure borrowings with a carrying value of $20,015 thousand from the Federal Home Loan Bank ~~of San Francisco (FHLB)~~(“FHLB”). ~~The carrying value of the FHLB advances was $20,156 thousand and $20,577 thousand at September 30, 2014 and December 31, 2013, respectively.~~ The loans restricted due to collateral requirements approximated ~~$20,374 thousand and $24,242~~$18,366 thousand at ~~September 30, 2014 and~~ December 31, ~~2013, respectively.~~2014. The FHLB ~~does not have the right to sell or repledge such loans.~~advances matured and were repaid in full in January 2015.

There were no loans held for sale at ~~September 30, 2014~~March 31, 2015 and December 31, ~~2013.~~
2014.

At March 31, 2015 and March 31, 2014, the Company held total other real estate owned (OREO) of $9,233 thousand and $12,186 thousand, respectively, of which $486 thousand and $967 thousand, respectively, were foreclosed residential real estate properties. The amount of consumer mortgage loans outstanding secured by residential real estate properties for which formal foreclosure proceedings were in process totaled $599 thousand and $902 thousand at March 31, 2015 and March 31, 2014, respectively.

Note 5: Concentration of Credit Risk

The Company’s business activity is with customers in Northern and Central California. The loan portfolio is well diversified within the Company’s geographic market, although the Company has significant credit arrangements that are secured by real estate collateral. In addition to real estate loans outstanding as disclosed in Note 4, the Company had loan commitments and standby letters of credit related to real estate loans of ~~$65,965~~$68,724 thousand and ~~$62,277~~$66,086 thousand at ~~September 30, 2014~~March 31, 2015 and December 31, ~~2013,~~2014, respectively. The Company requires collateral on all real estate loans with loan-to-value ratios at origination generally no greater than 75% on commercial real estate loans and no greater than 80% on residential real estate loans.

~~[The remainder~~ Under the California Financial Code, loans to any one person owing to a commercial bank at any one time shall not exceed the following limitations: (a) unsecured loans shall not exceed 15 percent of ~~this page intentionally left blank]~~the sum of the shareholders' equity, allowance for loan losses, capital notes, and debentures of the bank, or (b) secured and unsecured loans in all shall not exceed 25 percent of the sum of the shareholders' equity, allowance for loan losses, capital notes, and debentures of the bank. At March 31, 2015, Westamerica Bank did not have loans to any one customer exceeding these limits; Westamerica Bank had 40 borrower relationships with aggregate loans exceeding $5 million.

21-21-

Note 6: Other Assets

Other assets consisted of the following:

At September 30,
2014

At December 31,
2013

(In thousands)
Cost method equity investments:
    Federal Reserve Bank stock (1)
$ 14,069 $ 14,069
    Federal Home Loan Bank stock (2)
940 4,188
    Other investments 286 376
        Total cost method equity investments 15,295 18,633
Life insurance cash surrender value 45,583 43,896
Net deferred tax asset 48,873 53,281
Limited partnership investments 16,802 18,198
Interest receivable 17,388 18,925
FDIC indemnification receivable - 4,032
Prepaid assets 5,123 5,229
Other assets 11,688 14,238
    Total other assets $ 160,752 $ 176,432

	At March 31, 2015		At December 31, 2014
	(In thousands)
Cost method equity investments:
Federal Reserve Bank stock (1)	$	14,069	$	14,069
Federal Home Loan Bank stock (2)		450		940
Other investments		201		241
Total cost method equity investments		14,720		15,250
Life insurance cash surrender value		47,098		46,479
Net deferred tax asset		47,138		50,903
Limited partnership investments		17,445		18,673
Interest receivable		18,582		19,394
Prepaid assets		5,719		5,609
Other assets		9,872		10,150
Total other assets	$	160,574	$	166,458

(1) A bank applying for membership in the Federal Reserve System is required to subscribe to stock in the Federal Reserve Bank of San Francisco (FRB) in a sum equal to six percent of the bank’s paid-up capital stock and surplus. One-half of the amount of the bank's subscription shall be paid to the FRB and the remaining half will be subject to call when deemed necessary by the Board of Governors of the Federal Reserve System.

(2) Borrowings from the FHLB must be supported by capital stock holdings. The minimum activity-based requirement is 4.7% of the outstanding advances. The requirement may be adjusted from time to time by the FHLB within limits established in the FHLB's Capital Plan.

The Company invests in flow-through limited liability entities that manage or invest in affordable housing projects that qualify for low-income housing tax credits. At March 31, 2015, this investment totaled $17,445 thousand and $2,460 thousand of this amount represents outstanding equity capital commitments. These commitments are expected to be paid as follows, $614 thousand in 2015, $763 thousand in 2016, and $1,083 thousand in 2017 or thereafter.

The amounts recognized in net income for these investments include:

	For the Three Months Ended March 31,
	2015		2014
	(In thousands)
Investment loss included in pre-tax income	$	675	$	700
Tax credits recognized in provision for income taxes		658		771

Note 7: Goodwill and Identifiable Intangible Assets

The Company has recorded goodwill and other identifiable intangibles associated with purchase business combinations. Goodwill is not amortized, but is periodically evaluated for impairment. The Company did not recognize impairment during the ~~nine~~three months ended ~~September 30, 2014~~March 31, 2015 and year ended December 31, ~~2013.~~2014. Identifiable intangibles are amortized to their estimated residual values over their expected useful lives. Such lives and residual values are also periodically reassessed to determine if any amortization period adjustments are indicated. During the ~~nine~~three months ended ~~September 30, 2014~~March 31, 2015 and year ended December 31, ~~2013,~~2014, no such adjustments were recorded.

-22-

The carrying values of goodwill were:

At September 30,
2014

At December 31,
2013

(In thousands)
Goodwill $ 121,673 $ 121,673

		At March 31, 2015		At December 31, 2014
	(In thousands)
Goodwill		$	121,673	$	121,673

The gross carrying amount of identifiable intangible assets and accumulated amortization was:

	At September 30, 2014					At December 31, 2013					At March 31, 2015					At December 31, 2014
	Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization
	(In thousands)										(In thousands)
Core Deposit Intangibles	$	56,808	$	(42,215	)	$	56,808	$	(39,242	)	$	56,808	$	(44,116	)	$	56,808	$	(43,188	)
Merchant Draft Processing Intangible		10,300		(9,555	)		10,300		(9,309	)		10,300		(9,706	)		10,300		(9,633	)
Total Identifiable Intangible Assets	$	67,108	$	(51,770	)	$	67,108	$	(48,551	)	$	67,108	$	(53,822	)	$	67,108	$	(52,821	)

As of ~~September 30, 2014,~~March 31, 2015, the current year and estimated future amortization expense for identifiable intangible assets was:

Core
Deposit
Intangibles

Merchant
Draft
Processing
Intangible
Total
(In thousands)
Nine months ended September 30, 2014 (actual) $ 2,973 $ 246 $ 3,219
Estimate for year ended December 31, 2014 3,946 324 4,270
2015 3,594 262 3,856
2016 3,292 212 3,504
2017 2,913 164 3,077
2018 1,892 29 1,921
2019 538 - 538

	Core Deposit Intangibles		Merchant Draft Processing Intangible		Total
	(In thousands)
Three months ended March 31, 2015 (actual)	$	928	$	73	$	1,001
Estimate for year ended December 31, 2015		3,594		262		3,856
2016		3,292		212		3,504
2017		2,913		164		3,077
2018		1,892		29		1,921
2019		538		-		538
2020		287		-		287

Note 8: Deposits and Borrowed Funds

The following table provides additional detail regarding ~~deposits:~~deposits.

	Deposits				Deposits
	At September 30, 2014		At December 31, 2013		At March 31, 2015		At December 31, 2014
	(In thousands)				(In thousands)
Noninterest-bearing	$	1,893,480	$	1,740,182	$	1,902,904	$	1,910,781
Interest-bearing:
Transaction		775,377		763,088		787,633		792,448
Savings		1,231,640		1,167,744		1,313,007		1,260,819
Time		421,141		492,767
Time deposits less than $100 thousand						165,412		169,959
Time deposits $100 thousand through $250 thousand						109,909		113,023
Time deposits more than $250 thousand						101,211		102,161
Total deposits	$	4,321,638	$	4,163,781	$	4,380,076	$	4,349,191

Demand deposit overdrafts of ~~$2,775~~$3,073 thousand and ~~$3,002~~$3,173 thousand were included as loan balances at ~~September 30, 2014~~March 31, 2015 and December 31, ~~2013,~~2014, respectively. Interest expense for aggregate time deposits with individual account balances in excess of $100 thousand was ~~$219 thousand and $683~~$197 thousand in the ~~third~~first quarter 2015 and ~~first nine months of 2014, respectively and $257 thousand and $843~~$232 thousand in the ~~third~~first quarter ~~and first nine months of 2013, respectively.~~2014.

Short-term borrowed funds of ~~$76,943~~$82,960 thousand and ~~$62,668~~$89,784 thousand at ~~September 30, 2014~~March 31, 2015 and December 31, ~~2013,~~2014, respectively, represent securities sold under agreements to repurchase the securities. As the Company is obligated to repurchase the securities, the transfer of the securities is accounted for as a secured borrowing rather than a sale. Securities sold under repurchase agreements are held in the custody of independent securities brokers. The carrying amount of the securities approximates ~~$164,062~~$115,411 thousand and ~~$113,902~~$148,014 thousand at ~~September 30, 2014~~March 31, 2015 and December 31, ~~2013,~~2014, respectively. The short-term borrowed funds mature on an overnight basis.

~~Federal Home Loan Bank (“FHLB”)~~

-23-

FHLB advances matured and were repaid in full in January 2015. At December 31, 2014, FHLB advances with a carrying value of ~~$20,156~~$20,015 thousand ~~at September 30, 2014 and $20,577 thousand at December 31, 2013 are~~were secured by residential real estate loans and ~~securities. The amount~~securities of such loans and securities approximates $28,686 thousand at September 30, 2014 and $32,953 thousand at December 31, 2013. The FHLB advances are due in full at par value upon their maturity dates: $20,000 thousand mature in January 2015. The FHLB advances may be paid off prior to such maturity dates subject to prepayment fees.

The term repurchase agreement matured and was repaid in full in August 2014. At December 31, 2013, the carrying value of the term repurchase agreement was $10,000 thousand, representing securities sold under an agreement to repurchase the securities. The Company accounted for the transfer of the securities as a secured borrowing rather than a sale due to its obligation to repurchase the securities. At December 31, 2013, the carrying amount of the related securities was approximately ~~$11,278 thousand, which were held in the custody of independent securities brokers.~~$26,484 thousand.

The Company has a $35,000 thousand unsecured line of credit which had no outstanding balance at ~~September 30, 2014~~March 31, 2015 and December 31, ~~2013.~~2014. The line of credit has a variable interest rate, which was 2.0% per annum at ~~September 30, 2014,~~March 31, 2015, with interest payable monthly on outstanding advances. Advances may be made up to the unused credit limit through March 18, ~~2015.~~2016.

Note 9: Fair Value Measurements

The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Available for sale investment securities are recorded at fair value on a recurring basis. Additionally, from time to time, the Company may be required to record at fair value other assets on a nonrecurring basis, such as other real estate owned, impaired loans, certain loans held for investment, investment securities held to maturity, and other assets. These nonrecurring fair value adjustments typically involve the lower-of-cost-or-fair value accounting of individual assets.

In accordance with the Fair Value Measurement and Disclosure topic of the Codification, the Company bases its fair values on the price that would be received to sell an asset or paid to transfer a liability in the principal market or most advantageous market for an asset or liability in an orderly transaction between market participants on the measurement date under current market conditions. A fair value measurement reflects all of the assumptions that market participants would use in pricing the asset or liability, including assumptions about the risk inherent in a particular valuation technique, the effect of a restriction on the sale or use of an asset, and the risk of nonperformance.

The Company groups its assets and liabilities measured at fair value into a three-level hierarchy, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. When the valuation assumptions used to measure the fair value of the asset or liability are categorized within different levels of the fair value hierarchy, the asset or liability is categorized in its entirety within the lowest level of the hierarchy. These levels are:

Level 1 – Valuation is based upon quoted prices for identical instruments traded in active exchange markets, such as the New York Stock Exchange. Level 1 includes U.S. Treasury, equity and federal agency securities, which are traded by dealers or brokers in active markets. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.

Level 2 – Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market. Level 2 includes mortgage-backed securities, corporate securities, asset-backed securities, municipal bonds and residential collateralized mortgage obligations.

Level 3 – Valuation is generated from model-based techniques that use significant assumptions not observable in the market. These unobservable assumptions reflect the Company’s estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques.

The Company relies on independent vendor pricing services to measure fair value for investment securities available for sale and investment securities held to maturity. The Company employs three pricing services. To validate the pricing of these vendors, the Company ~~routinely randomly samples securities and~~ compares vendors’ pricing for each of the ~~sampled~~ securities for consistency; significant pricing differences, if any, are evaluated using all available independent quotes with the ~~lowest~~ quote closely affecting the market is generally used as the fair value estimate. In addition, the Company conducts “other than temporary impairment (OTTI)” analysis on a quarterly basis; securities selected for OTTI analysis include all securities at a market price below 95 percent of par value and with a market to book ratio below 95:100. As with any valuation technique used to estimate fair value, changes in underlying assumptions used could significantly affect the results of current and future values. Accordingly, these fair value estimates may not be realized in an actual sale of the securities.

When the Company changes its valuation assumptions for measuring financial assets and financial liabilities at fair value, either due to changes in current market conditions or other factors, it may need to transfer those assets or liabilities to another level in the hierarchy based on the new assumptions used. The Company recognizes these transfers at the end of the reporting period that the transfers occur. For the ~~nine~~three months ended ~~September 30, 2014~~March 31, 2015 and year ended December 31, ~~2013,~~2014, there were no transfers in or out of levels 1, 2 or 3.

24-24-

Assets Recorded at Fair Value on a Recurring Basis

The table below presents assets measured at fair value on a recurring basis.

	At September 30, 2014								At March 31, 2015
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2 )		Significant Unobservable Inputs (Level 3 )		Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2 )		Significant Unobservable Inputs (Level 3 )
	(In thousands)								(In thousands)
U.S. Treasury securities	$	3,509	$	3,509	$	-	$	-	$	3,504	$	3,504	$	-	$	-
Securities of U.S. Government sponsored entities		441,536		441,536		-		-		633,608		633,608		-		-
Residential mortgage-backed securities		28,353		-		28,353		-		24,298		-		24,298		-
Commercial mortgage-backed securities		3,021		-		3,021		-		2,820		-		2,820		-
Obligations of states and political subdivisions		186,620		-		186,620		-		175,694		-		175,694		-
Residential collateralized mortgage obligations		229,285		-		229,285		-		215,899		-		215,899		-
Asset-backed securities		8,639		-		8,639		-		2,992		-		2,992		-
FHLMC and FNMA stock		14,602		14,602		-		-		6,460		6,460		-		-
Corporate securities		473,138		-		473,138		-		709,257		-		709,257		-
Other securities		2,659		795		1,864		-		2,788		906		1,882		-
Total securities available for sale	$	1,391,362	$	460,442	$	930,920	$	-	$	1,777,320	$	644,478	$	1,132,842	$	-

At December 31, 2013
Fair Value
Quoted Prices in Active Markets for Identical Assets
(Level 1)

Significant Other Observable Inputs
(Level 2 )

Significant Unobservable Inputs
(Level 3 )

(In thousands)
U.S. Treasury securities $ 3,506 $ 3,506 $ - $ -
Securities of U.S. Government sponsored entities 130,492 130,492 - -
Residential mortgage-backed securities 34,176 - 34,176 -
Commercial mortgage-backed securities 3,425 - 3,425 -
Obligations of states and political subdivisions 191,386 - 191,386 -
Residential collateralized mortgage obligations 252,896 - 252,896 -
Asset-backed securities 14,555 - 14,555 -
FHLMC and FNMA stock 13,372 13,372 - -
Corporate securities 432,431 - 432,431 -
Other securities 3,142 1,300 1,842 -
Total securities available for sale $ 1,079,381 $ 148,670 $ 930,711 $ -

	At December 31, 2014
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2 )		Significant Unobservable Inputs (Level 3 )
	(In thousands)
U.S. Treasury securities	$	3,505	$	3,505	$	-	$	-
Securities of U.S. Government sponsored entities		635,188		635,188		-		-
Residential mortgage-backed securities		26,407		-		26,407		-
Commercial mortgage-backed securities		2,919		-		2,919		-
Obligations of states and political subdivisions		181,799		-		181,799		-
Residential collateralized mortgage obligations		222,457		-		222,457		-
Asset-backed securities		8,313		-		8,313		-
FHLMC and FNMA stock		5,168		5,168		-		-
Corporate securities		512,239		-		512,239		-
Other securities		2,786		910		1,876		-
Total securities available for sale	$	1,600,781	$	644,771	$	956,010	$	-

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25-25-

Assets Recorded at Fair Value on a Nonrecurring Basis

The Company may be required, from time to time, to measure certain assets at fair value on a nonrecurring basis in accordance with GAAP. These adjustments to fair value usually result from application of lower-of-cost or fair-value accounting of individual assets. For assets measured at fair value on a nonrecurring basis that were recorded in the balance sheet at ~~September 30, 2014~~March 31, 2015 and December 31, ~~2013,~~2014, the following table provides the level of valuation assumptions used to determine each adjustment and the carrying value of the related assets at period end.

																				For the Three
																				Months Ended
	At September 30, 2014								For the Nine Months Ended September 30, 2014			At March 31, 2015								March 31, 2015
	Fair Value		Level 1		Level 2		Level 3		Total Losses			Fair Value		Level 1		Level 2		Level 3		Total Losses
	(In thousands)											(In thousands)
Other real estate owned	$	7,273	$	-	$	7,273	$	-	$	(43	)	$	9,233	$	-	$	9,233	$	-	$	(243	)
Impaired loans		7,475		-		6,700		775		(260	)		16,120		-		6,753		9,367		-
Total assets measured at fair value on a nonrecurring basis	$	14,748	$	-	$	13,973	$	775	$	(303	)	$	25,353	$	-	$	15,986	$	9,367	$	(243	)

At December 31, 2013
For the
Year Ended
December 31, 2013

Fair Value Level 1 Level 2 Level 3
Total Losses

(In thousands)
Other real estate owned $ 13,320 $ - $ 13,320 $ - $ (814 )
Impaired loans 9,672 - 7,967 1,705 (233 )
Total assets measured at fair value on a nonrecurring basis $ 22,992 $ - $ 21,287 $ 1,705 $ (1,047 )

									For the
									Year Ended
	At December 31, 2014								December 31, 2014
	Fair Value		Level 1		Level 2		Level 3		Total Losses
	(In thousands)
Other real estate owned	$	6,374	$	-	$	6,374	$	-	$	(358	)
Impaired loans		17,085		-		7,670		9,415		(884	)
Total assets measured at fair value on a nonrecurring basis	$	23,459	$	-	$	14,044	$	9,415	$	(1,242	)

Level 2 – Valuation is based upon independent market prices or appraised value of the collateral, less 10% for selling costs, generally. Level 2 includes other real estate owned that has been measured at fair value upon transfer to foreclosed assets and impaired loans collateralized by real property where a specific reserve has been established or a charge-off has been recorded. Losses on other real estate owned represent losses recognized in earnings during the period subsequent to its initial classification as foreclosed assets.

Level 3 – Valuation is based upon estimated liquidation values of loan collateral. The value of level 3 assets can also include a component of real estate, which is valued as described for level 2 inputs, when collateral for the impaired loan includes both business assets and real estate. Level 3 includes impaired loans where a specific reserve has been established or a charge-off has been recorded.

Disclosures about Fair Value of Financial Instruments

The following section describes the valuation methodologies used by the Company for estimating fair value of financial instruments not recorded at fair value in the balance sheet.

Cash and Due from Banks Cash and due from banks represent U.S. dollar denominated coin and currency, deposits at the Federal Reserve Bank and correspondent banks, and amounts being settled with other banks to complete the processing of customers’ daily transactions. Collectively, the Federal Reserve Bank and financial institutions operate in a market in which cash and due from banks transactions are processed continuously in significant daily volumes honoring the face value of the U.S. dollar.

Investment Securities Held to Maturity The fair values of investment securities were estimated using quoted prices as described above for Level 1 and Level 2 valuation.

Loans Loans were separated into two groups for valuation. Variable rate loans, except for those described below, which reprice frequently with changes in market rates were valued using historical cost. Fixed rate loans and variable rate loans that have reached their minimum contractual interest rates were valued by discounting the future cash flows expected to be received from the loans using current interest rates charged on loans with similar characteristics. Additionally, the allowance for loan losses of ~~$31,769~~$31,187 thousand at ~~September 30, 2014~~March 31, 2015 and ~~$31,693~~$31,485 thousand at December 31, ~~2013~~2014 and the fair value discount due to credit default risk associated with purchased covered and purchased non-covered loans of ~~$501~~$200 thousand and ~~$10,233~~$8,705 thousand, respectively at ~~September 30, 2014~~March 31, 2015 and purchased covered and purchased non-covered loans of ~~$10,933~~$468 thousand and ~~$3,245~~$9,372 thousand, respectively at December 31, ~~2013~~2014 were applied against the estimated fair values to recognize estimated future defaults of contractual cash flows. The Company does not consider these values to be a liquidation price for the loans.

26-26-

~~FDIC Indemnification Receivable~~ The fair value of the FDIC indemnification receivable recorded in Other Assets was estimated by discounting estimated future cash flows using current market rates for financial instruments with similar characteristics.

Deposit Liabilities Deposits with no stated maturity such as checking accounts, savings accounts and money market accounts can be readily converted to cash or used to settle transactions at face value through the broad financial system operated by the Federal Reserve Bank and financial institutions. The fair value of deposits with no stated maturity is equal to the amount payable on demand. The fair values of time deposits were estimated by discounting estimated future contractual cash flows using current market rates for financial instruments with similar characteristics.

Short-Term Borrowed Funds The carrying amount of securities sold under agreement to repurchase and other short-term borrowed funds approximate fair value due to the relatively short period of time between their origination and their expected realization.

Federal Home Loan Bank Advances The fair values of FHLB advances were estimated by using redemption amounts quoted by the Federal Home Loan Bank of San Francisco.

~~Term Repurchase Agreement~~ ~~The fair value of the term repurchase agreement was estimated by using interpolated yields for financial instruments with similar characteristics.~~

The table below is a summary of fair value estimates for financial instruments and the level of the fair value hierarchy within which the fair value measurements are categorized, excluding financial instruments recorded at fair value on a recurring basis. The values assigned do not necessarily represent amounts which ultimately may be realized for assets or paid to settle liabilities. In addition, these values do not give effect to adjustments to fair value which may occur when financial instruments are sold or settled in larger quantities. The carrying amounts in the following table are recorded in the balance sheet under the indicated captions.

The Company has not included assets and liabilities that are not financial instruments, such as goodwill, long-term relationships with deposit, merchant processing and trust customers, other purchased intangibles, premises and equipment, deferred taxes and other assets and liabilities. The total estimated fair values do not represent, and should not be construed to represent, the underlying value of the Company.

	At September 30, 2014										At March 31, 2015
	Carrying Amount		Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2 )		Significant Unobservable Inputs (Level 3 )		Carrying Amount		Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2 )		Significant Unobservable Inputs (Level 3 )
Financial Assets:	(In thousands)										(In thousands)
Cash and due from banks	$	524,338	$	524,338	$	524,338	$	-	$	-	$	247,450	$	247,450	$	247,450	$	-	$	-
Investment securities held to maturity		1,035,041		1,041,385		1,164		1,040,221		-		1,015,231		1,030,865		1,007		1,029,858		-
Loans		1,700,613		1,701,539		-		-		1,701,539		1,652,697		1,665,928		-		-		1,665,928

Financial Liabilities:
Deposits	$	4,321,638	$	4,319,692	$	-	$	3,900,497	$	419,195	$	4,380,076	$	4,379,658	$	-	$	4,003,544	$	376,114
Short-term borrowed funds		76,943		76,943		-		76,943		-		82,960		82,960		-		82,960		-
Federal Home Loan Bank advances		20,156		20,161		20,161		-		-

	At December 31, 2013										At December 31, 2014
	Carrying Amount		Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2 )		Significant Unobservable Inputs (Level 3 )		Carrying Amount		Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2 )		Significant Unobservable Inputs (Level 3 )
Financial Assets:	(In thousands)										(In thousands)
Cash and due from banks	$	472,028	$	472,028	$	472,028	$	-	$	-	$	380,836	$	380,836	$	380,836	$	-	$	-
Investment securities held to maturity		1,132,299		1,112,676		1,597		1,111,079		-		1,038,658		1,048,562		1,077		1,047,485		-
Loans		1,796,051		1,800,625		-		-		1,800,625		1,668,805		1,685,048		-		-		1,685,048
Other assets - FDIC indemnification receivable		4,032		4,032		-		-		4,032

Financial Liabilities:
Deposits	$	4,163,781	$	4,162,935	$	-	$	3,671,014	$	491,921	$	4,349,191	$	4,348,958	$	-	$	3,964,048	$	384,910
Short-term borrowed funds		62,668		62,668		-		62,668		-		89,784		89,784		-		89,784		-
Federal Home Loan Bank advances		20,577		20,558		20,558		-		-		20,015		20,014		20,014		-		-
Term repurchase agreement		10,000		10,054		-		10,054		-

The majority of the Company’s standby letters of credit and other commitments to extend credit carry current market interest rates if converted to loans. No premium or discount was ascribed to these commitments because virtually all funding would be at current market rates.

-27-

Note 10: Commitments and Contingent Liabilities

Loan commitments are agreements to lend to a customer provided there is no violation of any condition established in the agreement. Commitments generally have fixed expiration dates or other termination clauses. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future funding requirements. Loan commitments are subject to the Company’s normal credit policies and collateral requirements. Unfunded loan commitments were ~~$314,937~~$320,290 thousand and ~~$320,934~~$312,694 thousand at ~~September 30, 2014~~March 31, 2015 and December 31, ~~2013,~~2014, respectively. Standby letters of credit commit the Company to make payments on behalf of customers when certain specified future events occur. Standby letters of credit are primarily issued to support customers’ short-term financing requirements and must meet the Company’s normal credit policies and collateral requirements. Financial and performance standby letters of credit outstanding totaled ~~$28,652~~$27,490 thousand and ~~$31,777~~$29,002 thousand at ~~September 30, 2014~~March 31, 2015 and December 31, ~~2013,~~2014, respectively. The Company also had commitments for commercial and similar letters of credit of $40 thousand at ~~September 30, 2014~~March 31, 2015 and ~~$344 thousand at~~ December 31, ~~2013.~~2014. At March 31, 2015 and December 31, 2014, the Company had a reserve for unfunded commitments of $2,693 thousand included in other liabilities.

Due to the nature of its business, the Company is subject to various threatened or filed legal cases. Based on the advice of legal counsel, the Company does not expect such cases will have a material, adverse effect on its financial position or results of operations. Legal liabilities are accrued when obligations become probable and the amount is reasonably estimable.

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Note 11: Earnings Per Common Share

The table below shows earnings per common share and diluted earnings per common share. Basic earnings per common share are computed by dividing net income by the average number of common shares outstanding during the period. Diluted earnings per common share are computed by dividing net income by the average number of common shares outstanding during the period plus the impact of common stock equivalents.

	For the Three Months				For the Nine Months
	Ended September 30,								For the Three Months Ended March 31,
	2014		2013		2014		2013		2015		2014
	(In thousands, except per share data)								(In thousands, except per share data)
Net income (numerator)	$	15,154	$	16,738	$	45,618	$	51,121	$	14,557	$	15,307
Basic earnings per common share
Weighted average number of common shares outstanding - basic (denominator)		25,973		26,670		26,192		26,900		25,651		26,433
Basic earnings per common share	$	0.58	$	0.63	$	1.74	$	1.90	$	0.57	$	0.58
Diluted earnings per common share
Weighted average number of common shares outstanding - basic		25,973		26,670		26,192		26,900		25,651		26,433
Add common stock equivalents for options		43		35		70		19		4		104
Weighted average number of common shares outstanding - diluted (denominator)		26,016		26,705		26,262		26,919		25,655		26,537
Diluted earnings per common share	$	0.58	$	0.63	$	1.74	$	1.90	$	0.57	$	0.58

For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2015 and 2014, options to purchase ~~1,322~~1,775 thousand and 1,060 thousand shares of common stock, respectively, were outstanding but not included in the computation of diluted net income per share because the option exercise price exceeded the fair value of the stock such that their inclusion would have had an anti-dilutive effect.

~~For the three and nine months ended September 30, 2013, options to purchase 1,356 thousand and 1,979~~809 thousand shares of common stock, respectively, were outstanding but not included in the computation of diluted net income per share because the option exercise price exceeded the fair value of the stock such that their inclusion would have had an anti-dilutive effect.

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29-28-

WESTAMERICA BANCORPORATION

FINANCIAL SUMMARY

	For the Three Months						For the Nine Months						For the Three Months Ended
	Ended September 30,												March 31,			March 31,			December 31,
	2014			2013			2014			2013			2015			2014			2014
	(In thousands, except per share data)												(In thousands, except per share data)
Net Interest and Fee Income (FTE)1	$	37,905		$	41,224		$	115,351		$	127,687		$	36,930		$	38,864		$	37,305
Provision for Loan Losses		600			1,800			2,600			6,400			-			1,000			200
Noninterest Income		13,054			14,419			39,242		��	42,981			12,300			12,990			12,545
Noninterest Expense		26,616			27,758			80,446			84,627			26,727			26,873			26,353
Income Before Income Taxes (FTE)1		23,743			26,085			71,547			79,641			22,503			23,981			23,297
Income Tax Provision (FTE)1		8,589			9,347			25,929			28,520
Provision for Income Taxes (FTE)1														7,946			8,674			8,269
Net Income	$	15,154		$	16,738		$	45,618		$	51,121		$	14,557		$	15,307		$	15,028

Average Common Shares Outstanding		25,973			26,670			26,192			26,900			25,651			26,433			25,821
Diluted Average Common Shares Outstanding		26,016			26,705			26,262			26,919			25,655			26,537			25,858
Common Shares Outstanding at Period End		25,906			26,578									25,563			26,299			25,745

Per Common Share:
Basic Earnings	$	0.58		$	0.63		$	1.74		$	1.90		$	0.57		$	0.58		$	0.58
Diluted Earnings		0.58			0.63			1.74			1.90			0.57			0.58			0.58
Book Value	$	20.59		$	20.39
Book Value Per Common Share													$	20.63		$	20.57		$	20.45

Financial Ratios:
Return on Assets		1.21	%		1.37	%		1.24	%		1.41	%
Return on Common Equity		11.55	%		12.42	%		11.59	%		12.70	%
Return On Assets														1.17	%		1.27	%		1.18	%
Return On Common Equity														11.44	%		11.64	%		11.51	%
Net Interest Margin (FTE)1		3.66	%		4.01	%		3.75	%		4.13	%		3.43	%		3.83	%		3.53	%
Net Loan Losses to Average Loans		0.28	%		0.17	%		0.19	%		0.32	%		0.07	%		0.13	%		0.11	%
Efficiency Ratio2		52.2	%		49.9	%		52.0	%		49.6	%		54.3	%		51.8	%		52.9	%

Average Balances:
Assets	$	4,971,808		$	4,830,475		$	4,923,705		$	4,859,473		$	5,059,537		$	4,889,940		$	5,050,417
Earning Assets		4,125,835			4,093,727			4,111,364			4,125,407			4,342,031			4,093,087			4,203,048
Loans		1,760,115			1,902,389			1,794,513			1,990,937			1,683,748			1,822,065			1,709,012
Deposits		4,303,389			4,130,881			4,250,969			4,153,956			4,402,946			4,209,723			4,373,472
Shareholders' Equity		520,702			534,634			526,337			538,319			516,086			533,159			518,206

Period End Balances:
Assets	$	4,993,725		$	4,806,487								$	5,035,777		$	4,921,042		$	5,035,724
Earning Assets		4,158,785			4,078,819									4,476,435			4,166,936			4,339,729
Loans		1,732,382			1,877,308									1,683,884			1,816,319			1,700,290
Deposits		4,321,638			4,108,307									4,380,076			4,214,783			4,349,191
Shareholders' Equity		533,395			541,840									527,380			540,883			526,603

Capital Ratios at Period End:
Total Risk Based Capital		15.03	%		15.99	%								13.08	%		15.19	%		14.54	%
Tangible Equity to Tangible Assets		8.16	%		8.58	%								8.01	%		8.40	%		7.97	%

Dividends Paid Per Common Share	$	0.38		$	0.37		$	1.14		$	1.11		$	0.38		$	0.38		$	0.38
Common Dividend Payout Ratio		66	%		59	%		66	%		58	%		67	%		66	%		66	%

The above financial summary has been derived from the Company's unaudited consolidated financial statements. This information should be read in conjunction with those statements, notes and the other information included elsewhere herein. Percentages under the heading "Financial Ratios" are annualized with the exception of the efficiency ratio.

1 Yields on securities and certain loans have been adjusted upward to a "fully taxable equivalent" ("FTE") basis, which is a non-GAAP financial measure, in order to reflect the effect of income which is exempt from federal income taxation at the current statutory tax rate.

2 The efficiency ratio is defined as noninterest expense divided by total revenue (net interest income on an FTE basis, which is a non-GAAP financial measure, and noninterest income).

30-29-

Item2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The Federal Reserve’s Federal Open Market Committee has maintained highly accommodative monetary policies to influence interest rates to low levels in order to provide stimulus to the economy following the “financial crisis” recession. ~~Westamerica Bancorporation and subsidiaries’ (the “Company”)~~The Company’s principal source of revenue is net interest and fee income, which represents interest earned on loans and investment securities (“earning assets”) reduced by interest paid on deposits and other borrowings (“interest-bearing liabilities”). The relatively low level of market interest rates has reduced the spread between interest rates on earning assets and interest bearing liabilities. The Company’s net interest margin and net interest income declined as market interest rates on newly originated loans remain below the yields earned on older-dated loans and on the overall loan portfolio. The Company is reducing its exposure to rising interest rates by purchasing shorter-duration investment securities with lower yields than longer-duration securities. The Company’s credit quality continued to improve, as nonperforming assets at March 31, 2015 declined ~~fifty~~twenty four percent ~~in the twelve months ended September 30,~~compared with March 31, 2014 and net loan losses ~~declined~~remained low in the ~~nine~~three months ended ~~September 30, 2014 compared to the comparable period of 2013.~~March 31, 2015. The improvement in credit quality has resulted in Management reducing the provision for loan losses ~~by fifty-nine percent~~to zero in the ~~nine months ended September 30,~~first quarter 2015 from $1 million in the first quarter 2014 ~~compared to~~and $200 thousand in the ~~comparable period of 2013.~~fourth quarter 2014. The credit quality improvement also contributed to reducing noninterest expenses related to nonperforming assets. Management is focused on controlling all noninterest expense levels, particularly due to market interest rate pressure on net interest income.

~~The Company~~Westamerica Bancorporation and subsidiaries (the “Company”) reported first quarter 2015 net income of ~~$15.2~~$14.6 million or $0.57 diluted earnings per common share. These results compare to net income of $15.3 million or $0.58 diluted earnings per common share ~~for the third quarter 2014~~ and ~~net income of $45.6~~$15.0 million or ~~$1.74~~$0.58 diluted earnings per common share, respectively, for the ~~nine months ended September 30,~~first and fourth quarters of 2014. These results compare to net income of $16.7 million or $0.63 diluted earnings per common share for the third quarter 2013 and net income of $51.1 million or $1.90 diluted earnings per common share for the nine months ended September 30, 2013.

Net Income

Following is a summary of the components of net income for the periods indicated:

For the Three Months For the Nine Months
Ended September 30,
2014 2013 2014 2013
(In thousands, except per share data)
Net interest income (FTE) $ 37,905 $ 41,224 $ 115,351 $ 127,687
Provision for loan losses (600 ) (1,800 ) (2,600 ) (6,400 )
Noninterest income 13,054 14,419 39,242 42,981
Noninterest expense (26,616 ) (27,758 ) (80,446 ) (84,627 )
Income before taxes (FTE) 23,743 26,085 71,547 79,641
Income tax provision (FTE) (8,589 ) (9,347 ) (25,929 ) (28,520 )
Net income $ 15,154 $ 16,738 $ 45,618 $ 51,121

Average diluted common shares 26,016 26,705 26,262 26,919
Diluted earnings per common share $ 0.58 $ 0.63 $ 1.74 $ 1.90

Average total assets $ 4,971,808 $ 4,830,475 $ 4,923,705 $ 4,859,473
Net income to average total assets (annualized) 1.21 % 1.37 % 1.24 % 1.41 %
Net income to average common stockholders' equity (annualized) 11.55 % 12.42 % 11.59 % 12.70 %

	For the Three Months Ended
	March 31,						December 31,
	2015			2014			2014
	(In thousands, except per share data)
Net interest and fee income (FTE)	$	36,930		$	38,864		$	37,305
Provision for loan losses		-			(1,000	)		(200	)
Noninterest income		12,300			12,990			12,545
Noninterest expense		(26,727	)		(26,873	)		(26,353	)
Income before taxes (FTE)		22,503			23,981			23,297
Income tax provision (FTE)		(7,946	)		(8,674	)		(8,269	)
Net income	$	14,557		$	15,307		$	15,028

Average diluted common shares		25,655			26,537			25,858
Diluted earnings per common share	$	0.57		$	0.58		$	0.58

Average total assets	$	5,059,537		$	4,889,940		$	5,050,417
Net income to average total assets (annualized)		1.17	%		1.27	%		1.18	%
Net income to average common stockholders' equity (annualized)		11.44	%		11.64	%		11.51	%

Net income for the ~~third~~first quarter of ~~2014~~2015 was ~~$1.6 million~~$750 thousand less than the same quarter of ~~2013,~~2014, the net result of declines in net interest and fee income (fully taxable equivalent or “FTE”) and noninterest income, partially offset by decreases in the provision for loan losses ~~noninterest expense~~ and income tax provision (FTE). A decrease in net interest and fee income (FTE) was mostly attributed to lower average balances of loans and lower yields on interest-earning assets, partially offset by higher average balances of investments and a lower average ~~balances~~volume of ~~higher-costing interest-bearing liabilities.~~higher-cost funding sources. The provision for loan losses was reduced, reflecting Management's evaluation of losses inherent in the loan portfolio; net losses and nonperforming loan volumes have declined relative to earlier periods. ~~Lower noninterest~~Noninterest income ~~was mostly attributable~~decreased primarily due to ~~lower merchant processing service fees, lower~~reduced levels of service charges on deposit accounts and the recognition in 2013 of a loan principal recovery exceeding the purchase date fair value (included in “other noninterest income”). Noninterest expense decreased primarily due to reduced other real estate owned (“OREO”) expense net of disposition gains and lower ~~personnel costs.~~merchant credit card fees.

Comparing the first ~~nine months~~quarter of ~~2014 with~~2015 to the ~~first nine months~~fourth quarter of ~~2013,~~2014, net income decreased ~~$5.5 million primarily~~$471 thousand due to lower net interest and fee income (FTE) ~~and~~, lower noninterest income and higher noninterest expense, partially offset by decreases in the provision for loan losses ~~noninterest expense~~ and income tax provision (FTE). The lower net interest and fee income (FTE) was primarily caused by lower yields on interest earning assets, the effect of two less accrual days and a lower average volume of loans, ~~and lower yields on interest earning assets,~~ partially offset by higher average balances of investments and a lower average ~~balances~~volume of ~~higher-costing interest-bearing liabilities.~~higher-cost funding sources. The provision for loan losses was reduced, reflecting improved credit quality and Management's evaluation of losses inherent in the loan portfolio. ~~Lower noninterest~~Noninterest income ~~was mostly attributable~~decreased primarily due to ~~lower merchant processing service fees, lower~~reduced levels of service charges on ~~deposit accounts and the recognition in 2013 of a loan principal recovery exceeding the purchase date fair value (included in “other noninterest income”).~~deposits accounts. Noninterest expense ~~decreased~~increased mostly due to ~~reduced OREO expense net of disposition gains,~~higher personnel ~~costs, loan administration expenses, limited partnership operating losses (included in other noninterest expense) and professional fees.~~expenses.

31- 30 -

Net Interest and Fee Income (FTE)

Following is a summary of the components of net interest and fee income (FTE) for the periods indicated:

For the Three Months For the Nine Months
Ended September 30,
2014 2013 2014 2013
(In thousands)
Interest and fee income $ 34,900 $ 37,956 $ 105,867 $ 117,690
Interest expense (846 ) (1,176 ) (2,644 ) (3,647 )
FTE adjustment 3,851 4,444 12,128 13,644
Net interest income (FTE) $ 37,905 $ 41,224 $ 115,351 $ 127,687

Average earning assets $ 4,125,835 $ 4,093,727 $ 4,111,364 $ 4,125,407
Net interest margin (FTE) (annualized) 3.66 % 4.01 % 3.75 % 4.13 %

	For the Three Months Ended
	March 31,						December 31,
	2015			2014			2014
	(In thousands)
Interest and fee income	$	33,917		$	35,564		$	34,342
Interest expense		(659	)		(898	)		(800	)
FTE adjustment		3,672			4,198			3,763
Net interest and fee income (FTE)	$	36,930		$	38,864		$	37,305

Average earning assets	$	4,342,031		$	4,093,087		$	4,203,048
Net interest margin (FTE) (annualized)		3.43	%		3.83	%		3.53	%

Net interest and fee income (FTE) decreased during the ~~third~~first quarter ~~2014~~2015 by ~~$3.3~~$1.9 million from the same period in ~~2013~~2014 to ~~$37.9~~$36.9 million, mainly due to lower average balances of loans (down ~~$142~~$138 million) and lower yields on interest-earning assets (down 3843 basis points “bp”), partially offset by higher average balances of investments (up ~~$174~~$387 million) and lower average balances of higher-costing interest-bearing liabilities.

Comparing the first ~~nine months~~quarter of ~~2014~~2015 with the ~~first nine months~~fourth quarter of ~~2013,~~2014, net interest and fee income (FTE) decreased ~~$12.3 million primarily~~$375 thousand due to lower yields on interest earning assets (down 12 bp), the effect of two less accrual days and a lower average volume of loans (down ~~$196~~$25 million) ~~and lower yields on interest-earning assets (down 41 bp)~~, partially offset by higher average balances of investments (up ~~$182~~$164 million) and lower average balances of higher-costing interest-bearing liabilities.

Loan volumes have declined due to problem loan workout activities (such as chargeoffs, collateral repossessions and principal payments), particularly with purchased loans, and reduced volumes of loan originations. In Management’s opinion, current levels of competitive loan pricing do not provide adequate forward earnings potential. As a result, the Company has not currently taken an aggressive posture relative to loan portfolio growth. Management has maintained relatively stable interest-earning asset volumes by increasing investment securities as loan volumes have declined.

Yields on interest-earning assets have declined due to relatively low interest rates prevailing in the market. InThe net interest margin (FTE) was 3.43% in the first ~~nine months~~quarter 2015, 3.53% in the fourth quarter 2014 and 3.83% in the first quarter 2014. The volume of ~~2014, the~~older-dated higher-yielding loans declined due to principal maturities and paydowns. Newly originated loans have lower yields. The Company, ~~purchased~~in anticipation of rising interest rates, has been purchasing floating rate and shorter-duration investment securities with lower yields than longer-duration securities ~~in order~~ to ~~reduce its exposure to anticipated rising interest rates.~~increase liquidity. The Company’s high levels of liquidity will provide an opportunity to obtain higher yielding assets once market interest rates start rising. The Company has been replacing higher-cost funding sources with low-cost deposits and interest expense has declined to offset some of the decline in interest income.

Interest and Fee Income (FTE)

Interest and fee income (FTE) for the ~~third~~first quarter of ~~2014~~2015 decreased ~~$3.6~~$2.2 million or ~~8.6%~~5.5% from the same period in ~~2013.~~2014. The decrease was caused by lower average balances of loans and lower yields on interest-earning assets, partially offset by higher average balances of investments.

The total average balances of loans declined due to decreases in the average balances of commercial real estate loans (down ~~$105~~$78 million), consumer loans (down ~~$42~~$36 million), residential real estate loans (down ~~$35~~$37 million) and tax-exempt commercial loans (down ~~$19~~$16 million)~~, partially offset by a $61 million increase in the average balance of taxable commercial loans.~~. The average investment portfolio increased largely due to higher average balances of securities of U.S. Government sponsored entities (up ~~$304~~$359 million), corporate securities (up $192 million), partially offset by ~~a $107 million decrease~~decreases in average balances of collateralized mortgage obligations and mortgage-backed ~~securities.~~securities (down $103 million) and municipal securities (down $56 million).

32- 31 -

The average yield on the Company's earning assets decreased from ~~4.12%~~3.92% in the ~~third~~first quarter ~~2013~~2014 to ~~3.74%~~3.49% in the corresponding period of ~~2014.~~2015. The composite yield on loans declined 2723 bp to ~~5.08%~~4.96% mostly due to lower yields on taxable commercial loans (down 97136 bp), and consumer loans (down 2523 bp), partially offset by a 12 bp increase in yields on commercial real estate ~~loans (down 9 bp) and construction loans (down 459 bp).~~loans. Nonperforming loans are included in average loan volumes used to compute loan yields; fluctuations in nonaccrual loan volumes impact loan yields. ~~Construction~~Higher yields on commercial real estate loans were ~~higher in the third quarter 2013 due~~attributable to higher interest received on nonaccrual loans and discount accretion on purchased loans. The investment yields in general declined due to market rates. The investment portfolio yield decreased 3234 bp to ~~2.74%~~2.55% primarily due to lower yields on municipal securities (down ~~40 bp) and corporate securities (down 10~~32 bp), partially offset by ~~a 54 bp increase~~increases in yields on securities of U.S. Government sponsored ~~entities.~~entities (up 27 bp) and collateralized mortgage obligations and mortgage-backed securities (up 14 bp). The yield on securities of U.S. government sponsored entities, collateralized mortgage obligations and mortgage-backed securities rose as securities added to the portfolio in ~~2014~~the first quarter 2015 were higher yielding than securities held in the prior period.

Comparing the first ~~nine months~~quarter of ~~2014~~2015 with the ~~first nine months~~fourth quarter of ~~2013,~~2014, interest and fee income (FTE) was down ~~$12.3 million~~$516 thousand or ~~10.2%~~1.4%. The decrease resulted from lower yields on interest earning assets, the effect of two less accrual days and a lower average volume of loans, ~~and lower yields on interest-earning assets,~~ partially offset by higher average balances of investments.

Average ~~balances~~interest earning assets increased $139 million or 3.3% in the first quarter of ~~loans decreased $196~~2015 compared with the fourth quarter of 2014 due to a $164 million ~~primarily~~increase in average investments and a $25 million decrease in average loans. The decrease in the average balance of the loan portfolio was attributable to decreases in average balances of commercial real estate loans (down ~~$109 million), consumer loans (down $58~~$13 million), residential real estate loans (down ~~$42~~$11 million) and ~~tax-exempt commercial~~consumer loans (down ~~$19~~$6 million), partially offset by a ~~$35~~$6 million increase in the average balance of taxable commercial loans. The average investment portfolio increased ~~$182 million~~ mostly due to higher average balances of corporate securities (up $117 million) and U.S. government sponsored entities (up ~~$247~~$70 million), partially offset by ~~a $106 million decrease in~~lower average balances of collateralized mortgage obligations and mortgage-backed ~~securities.~~

securities (down $25 million). The average yield on earning assets for the first ~~nine months~~quarter of ~~2014~~2015 was ~~3.84%~~3.49% compared with ~~4.25%~~3.61% in the ~~first nine months~~fourth quarter of ~~2013.~~2014. The loan portfolio yield for the first ~~nine months~~quarter of 2015 was 4.96% compared with 5.03% for the fourth quarter of 2014 ~~was 5.15% compared with 5.40% for the first nine months of 2013~~mostly due to lower yields on ~~taxable commercial loans (down 64 bp),~~ consumer loans (down 3419 bp), commercial ~~real estate~~taxable loans (down ~~13 bp), construction loans (down 295~~23 bp), residential real estate loans (down 1017 bp), commercial tax-exempt loans (down 24 bp) and ~~tax-exempt commercial~~construction loans (down 18131 bp), partially offset by higher yields on commercial real estate loans (up 13 bp). ~~Nonperforming~~Higher yields on commercial real estate loans are included in average loan volumes used to compute loan yields; fluctuations in nonaccrual loan volumes impact loan yields. The yield on construction loans in the first nine months of 2013 was elevated duewere attributable to higher interest received on nonaccrual loans and discount accretion on purchased loans. The investment portfolio yield decreased 379 bp to ~~2.81%~~2.55% primarily due to lower yields on municipal securities (down ~~50 bp) and corporate securities (down 24~~11 bp), partially offset by higher yields on collateralized mortgage obligations and mortgage-backed securities ~~of U.S. government sponsored entities~~ (up 4212 bp). The yield on securities of ~~U.S. government sponsored entities~~collateralized mortgage obligations and mortgage-backed securities rose ~~as securities added~~due to ~~the portfolio in 2014 were higher yielding than securities held in the prior period.~~lower levels of premium amortization.

Interest Expense

Interest expense has been reduced by lowering rates paid on interest-bearing deposits and borrowings and by reducing the volume of higher-cost funding sources. A ~~$15~~$10 million ~~long-term note~~term repurchase agreement was repaid in ~~October 2013 and average~~August 2014. Federal Home Loan Bank advances of $20 million were repaid in January 2015. Average balances of time deposits declined ~~$114 million in the third quarter 2014 compared with third quarter 2013 and $142~~$87 million in the first ~~nine months of 2014~~quarter 2015 compared with the first ~~nine months of 2013.~~quarter 2014. Lower-cost checking and savings deposits accounted for ~~90.1%~~91.4% of total average deposits in the ~~third~~first quarter 2015 compared with 91.0% in the fourth quarter 2014 ~~compared with 86.9% in the third quarter 2013~~ and ~~89.4%~~88.9% in the first ~~nine months of 2014 compared with 85.8% in the first nine months of 2013.~~quarter 2014.

Interest expense in the ~~third~~first quarter of ~~2014~~2015 decreased ~~$330~~$239 thousand or ~~28.1%~~26.6% compared with the same period in ~~2013~~2014 due to lower average balances of higher-costing interest-bearing liabilities. Interest-bearing liabilities ~~declined~~increased due to higher average balances of money market savings (up $68 million), money market checking accounts (up $29 million) and regular savings (up $39 million) and securities sold under repurchase agreements (up $24 million), partially offset by lower average balances of time deposits $100 thousand or more (down ~~$84~~$59 million), time deposits less than $100 thousand (down ~~$30 million), debt financing (down $15~~$28 million), Federal Home Loan Bank advances (down $5$19 million) and term repurchase agreement (down ~~$6 million), partially offset by higher average balances of money market savings (up $58 million), money market checking accounts (up $39 million) and regular savings (up $22~~$10 million). The average rate paid on interest-bearing liabilities decreased from ~~0.18%~~0.14% in the ~~third~~first quarter of ~~2013~~2014 compared to ~~0.13%~~0.10% in the ~~third~~first quarter of ~~2014.~~2015. Rates on interest-bearing deposits were ~~0.12%~~0.10% for the ~~third~~first quarter ~~2014~~2015 compared with 0.13% for the ~~third~~first quarter ~~2013.~~2014.

Comparing the first ~~nine months~~quarter of ~~2014~~2015 with the ~~first nine months~~fourth quarter of ~~2013,~~2014, interest expense declined ~~$1.0 million~~$141 thousand or ~~27.5%~~17.6% due to lower average balances of higher-costing interest-bearing liabilities. Average balances of ~~debt financing and~~ Federal Home Loan Bank advances declined ~~$15 million and $5 million, respectively.~~$18 million. Average balances of interest-bearing deposits ~~decreased~~increased primarily due to higher balances of money market savings (up $32 million) and regular savings (up $15 million), partially offset by lower average balances of time deposits $100 thousand or more (down ~~$111~~$7 million), and time deposits less than $100 thousand (down $30 million) and preferred money market savings (down $13 million), partially offset by higher average balances of money market savings (up $52 million), money market checking accounts (up $28 million), and regular savings (up $17$6 million). Rates paid on interest-bearing liabilities averaged ~~0.14%~~0.10% during the first ~~nine months of 2014~~quarter 2015 compared with ~~0.19%~~0.12% for the ~~first nine months of 2013.~~fourth quarter 2014. Rates paid on interest-bearing deposits were ~~0.12%~~0.10% in the first ~~nine months of 2014~~quarter 2015 compared with ~~0.14%~~0.11% in the ~~first nine months of 2013.~~fourth quarter 2014.

33- 32 -

Net Interest Margin (FTE)

The following summarizes the components of the Company's net interest margin for the periods ~~indicated:~~indicated (Percentages are annualized.):

	For the Three Months Ended
	March 31,						December 31,
	2015			2014			2014

Yield on earning assets (FTE)		3.49	%		3.92	%		3.61	%
Rate paid on interest-bearing liabilities		0.10	%		0.14	%		0.12	%
Net interest spread (FTE)		3.39	%		3.78	%		3.49	%
Impact of noninterest-bearing funds		0.04	%		0.05	%		0.04	%
Net interest margin (FTE)		3.43	%		3.83	%		3.53	%

For the Three Months For the Nine Months
Ended September 30,
2014 2013 2014 2013

Yield on earning assets (FTE) 3.74 % 4.12 % 3.84 % 4.25 %
Rate paid on interest-bearing liabilities 0.13 % 0.18 % 0.14 % 0.19 %
Net interest spread (FTE) 3.61 % 3.94 % 3.70 % 4.06 %
Impact of noninterest-bearing demand deposits 0.05 % 0.07 % 0.05 % 0.07 %
Net interest margin (FTE) 3.66 % 4.01 % 3.75 % 4.13 %

During the first ~~nine months of 2014,~~quarter 2015, the net interest margin (FTE) was affected by low market interest rates. The volume of older-dated higher-yielding loans and securities declined due to principal maturities and paydowns. Newly originated loans have lower yields. The Company, in anticipation of rising interest rates, has been purchasing floating rate and shorter-duration investment securities to increase liquidity. The liquidity from the shorter-duration securities can be invested at higher interest rates during a period of rising interest rates. The Company has been purchasing securities of U. S. government sponsored entities which have call options; the issuing entities have been exercising the call options, and the Company has re-invested the proceeds at higher rates; interest rates in the two to five-year time horizon have increased throughout 2014. Rates on interest-bearing liabilities were kept low by reducing the volume of higher-cost funding sources. During the ~~third~~first quarter ~~2014~~2015 the net interest margin (FTE) decreased 3540 bp compared with the same period in ~~2013.~~2014. Lower yields on earning assets were partially offset by lower rates paid on interest-bearing liabilities and resulted in a 3339 bp decrease in net interest spread (FTE). The ~~funding value~~4 bp net interest margin contribution of noninterest-bearing demand deposits ~~declines as earning asset yields decline.~~resulted in the net interest margin (FTE) of 3.43%. During the first ~~nine months~~quarter of ~~2014,~~2015, the net interest margin (FTE) decreased 3810 bp compared with the ~~first nine months~~fourth quarter of ~~2013.~~2014. The net interest spread (FTE) in the first ~~nine months~~quarter of ~~2014~~2015 was ~~3.70%~~3.39% compared with ~~4.06%~~3.49% in the ~~first nine months~~fourth quarter of ~~2013,~~2014, the net result of a 4112 bp decrease in earning asset yields ~~partially offset by lower~~and 2 bp decrease in the cost of interest-bearing ~~liabilities (down 5 bp).~~liabilities.

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34- 33 -

Summary of Average Balances, Yields/Rates and Interest Differential

The following tables present information regarding the consolidated average assets, liabilities and shareholders’ equity, the amounts of interest income earned from average interest earning assets and the resulting yields, and the amounts of interest expense incurred on average interest-bearing liabilities and the resulting rates. Average loan balances include nonperforming loans. Interest income includes reversal of previously accrued interest on loans placed on non-accrual status during the period and proceeds from loans on nonaccrual status only to the extent cash payments have been received and applied as interest income and accretion of purchased loan discounts. Yields on tax-exempt securities and loans have been adjusted upward to reflect the effect of income exempt from federal income taxation at the current statutory tax rate. Yields, rates and interest margins are annualized.

Distribution of Assets, Liabilities & Shareholders’ Equity and Yields, Rates & Interest Margin

For the Three Months Ended
September 30, 2014
Interest
Average Income/ Yields/
Balance Expense Rates
(In thousands)
Assets
Investment securities:
Available for sale
Taxable $ 1,148,461 $ 4,687 1.63 %
Tax-exempt (1)
168,734 2,556 6.06 %
Held to maturity
Taxable 349,587 1,661 1.90 %
Tax-exempt (1)
698,938 7,309 4.18 %
Loans:
Commercial:
Taxable 306,245 4,137 5.36 %
Tax-exempt (1)
85,598 1,173 5.44 %
Commercial real estate 741,962 11,465 6.13 %
Real estate construction 13,223 168 5.04 %
Real estate residential 167,265 1,435 3.43 %
Consumer installment and other 445,822 4,160 3.70 %
Total loans (1)
1,760,115 22,538 5.08 %
Total Interest-earning assets (1)
4,125,835 $ 38,751 3.74 %
Other assets 845,973
Total assets $ 4,971,808

Liabilities and shareholders' equity
Deposits:
Noninterest-bearing demand $ 1,869,853 $ - - %
Savings and interest-bearing transaction 2,005,687 290 0.06 %
Time less than $100,000 194,338 200 0.41 %
Time $100,000 or more 233,511 219 0.37 %
Total interest-bearing deposits 2,433,536 709 0.12 %
Short-term borrowed funds 71,067 23 0.13 %
Term repurchase agreement 4,457 11 1.00 %
Federal Home Loan Bank advances 20,240 103 2.02 %
Total interest-bearing liabilities 2,529,300 $ 846 0.13 %
Other liabilities 51,953
Shareholders' equity 520,702
Total liabilities and shareholders' equity $ 4,971,808
Net interest spread (1) (2)
3.61 %
Net interest and fee income and interest margin (1) (3)
$ 37,905 3.66 %

	For the Three Months Ended
	March 31, 2015
			Interest
	Average		Income/		Yields/
	Balance		Expense		Rates
	(In thousands)
Assets
Investment securities:
Available for sale
Taxable	$	1,466,850	$	5,896		1.61	%
Tax-exempt (1)		166,018		2,417		5.82	%
Held to maturity
Taxable		321,373		1,658		2.06	%
Tax-exempt (1)		704,042		7,005		3.98	%
Loans:
Commercial:
Taxable		308,197		3,434		4.52	%
Tax-exempt (1)		78,906		1,096		5.63	%
Commercial real estate		710,475		10,941		6.25	%
Real estate construction		14,064		178		5.12	%
Real estate residential		147,507		1,231		3.34	%
Consumer installment and other		424,599		3,733		3.57	%
Total loans (1)		1,683,748		20,613		4.96	%
Total Interest-earning assets (1)		4,342,031	$	37,589		3.49	%
Other assets		717,506
Total assets	$	5,059,537

Liabilities and shareholders' equity
Deposits:
Noninterest-bearing demand	$	1,919,820	$	-		-	%
Savings and interest-bearing transaction		2,103,115		279		0.05	%
Time less than $100,000		180,760		166		0.37	%
Time $100,000 or more		199,251		197		0.40	%
Total interest-bearing deposits		2,483,126		642		0.10	%
Short-term borrowed funds		86,354		16		0.08	%
Federal Home Loan Bank advances		2,004		1		0.20	%
Total interest-bearing liabilities		2,571,484	$	659		0.10	%
Other liabilities		52,147
Shareholders' equity		516,086
Total liabilities and shareholders' equity	$	5,059,537
Net interest spread (1) (2)						3.39	%
Net interest and fee income and interest margin (1) (3)			$	36,930		3.43	%

(1) Amounts calculated on a fully taxable equivalent basis using the current statutory federal tax rate.

(2) Net interest spread represents the average yield earned on interest-earning assets less the average rate incurred on interest-bearing liabilities.

(3) Net interest margin is computed by calculating the difference between interest income and expense, ~~(annualized),~~ devided ~~divided~~ by the average balance of interest-earning assets.

35- 34 -

Distribution of Assets, Liabilities & Shareholders’ Equity and Yields, Rates & Interest Margin

For the Three Months Ended
September 30, 2013
Interest
Average Income/ Yields/
Balance Expense Rates
(In thousands)
Assets
Investment securities:
Available for sale
Taxable $ 868,008 $ 3,722 1.72 %
Tax-exempt (1)
181,954 2,674 5.88 %
Held to maturity
Taxable 415,241 1,780 1.71 %
Tax-exempt (1)
726,135 8,591 4.73 %
Loans:
Commercial:
Taxable 245,292 3,915 6.33 %
Tax-exempt (1)
104,344 1,482 5.63 %
Commercial real estate 847,154 13,276 6.22 %
Real estate construction 15,002 364 9.63 %
Real estate residential 202,540 1,736 3.43 %
Consumer installment and other 488,057 4,860 3.95 %
Total loans (1)
1,902,389 25,633 5.35 %
Total interest-earning assets (1)
4,093,727 $ 42,400 4.12 %
Other assets 736,748
Total assets $ 4,830,475

Liabilities and shareholders' equity
Deposits:
Noninterest-bearing demand $ 1,699,169 $ - - %
Savings and interest-bearing transaction 1,889,808 294 0.06 %
Time less than $100,000 224,274 258 0.46 %
Time $100,000 or more 317,630 257 0.32 %
Total interest-bearing deposits 2,431,712 809 0.13 %
Short-term borrowed funds 56,844 20 0.14 %
Term repurchase agreement 10,000 25 0.98 %
Federal Home Loan Bank advances 25,663 122 1.89 %
Debt financing 15,000 200 5.35 %
Total interest-bearing liabilities 2,539,219 $ 1,176 0.18 %
Other liabilities 57,453
Shareholders' equity 534,634
Total liabilities and shareholders' equity $ 4,830,475
Net interest spread (1) (2)
3.94 %
Net interest and fee income and interest margin (1) (3)
$ 41,224 4.01 %

~~(1)~~ ~~Amounts calculated on a fully taxable equivalent basis using the current statutory federal tax rate.~~

~~(2)~~ ~~Net interest spread represents the average yield earned on interest-earning assets less the average rate incurred~~ ~~on interest-bearing liabilities.~~

~~(3)~~ ~~Net interest margin is computed by calculating the difference between interest income and expense (annualized),~~ ~~divided by the average balance of interest-earning assets.~~

~~Distribution of Assets, Liabilities & Shareholders’ Equity and Yields, Rates & Interest Margin~~

	For the Nine Months Ended							For the Three Months Ended
	September 30, 2014							March 31, 2014
			Interest							Interest
	Average		Income/		Yields/			Average		Income/		Yields/
	Balance		Expense		Rates			Balance		Expense		Rates
	(In thousands)							(In thousands)
Assets
Investment securities:
Available for sale
Taxable	$	1,057,066	$	12,787		1.61	%	$	970,514	$	3,925		1.62	%
Tax-exempt (1)		172,936		7,393		5.70	%		177,452		2,434		5.49	%
Held to maturity
Taxable		364,535		5,120		1.87	%		379,393		1,758		1.85	%
Tax-exempt (1)		722,314		23,542		4.35	%		743,663		8,286		4.46	%
Loans:
Commercial:
Taxable		294,138		12,261		5.57	%		281,015		4,073		5.88	%
Tax-exempt (1)		89,967		3,828		5.69	%		94,841		1,312		5.61	%
Commercial real estate		768,470		35,277		6.14	%		788,270		11,923		6.13	%
Real estate construction		13,158		540		5.49	%		13,141		190		5.88	%
Real estate residential		175,431		4,474		3.40	%		184,427		1,549		3.36	%
Consumer installment and other		453,349		12,773		3.77	%
Consumer									460,371		4,312		3.80	%
Total loans (1)		1,794,513		69,153		5.15	%		1,822,065		23,359		5.19	%
Total Interest-earning assets (1)		4,111,364	$	117,995		3.84	%		4,093,087	$	39,762		3.92	%
Other assets		812,341							796,853
Total assets	$	4,923,705						$	4,889,940

Liabilities and shareholders' equity
Deposits:
Noninterest-bearing demand	$	1,813,141	$	-		-	%	$	1,768,464	$	-		-	%
Savings and interest-bearing transaction		1,988,905		896		0.06	%		1,974,430		301		0.06	%
Time less than $100,000		201,438		637		0.42	%		208,627		221		0.43	%
Time $100,000 or more		247,485		683		0.37	%		258,202		232		0.36	%
Total interest-bearing deposits		2,437,828		2,216		0.12	%		2,441,259		754		0.13	%
Short-term borrowed funds		64,836		64		0.13	%		62,472		20		0.13	%
Term repurchase agreement		8,132		60		0.99	%		10,000		25		1.01	%
Federal Home Loan Bank advances		20,379		304		1.99	%		20,520		99		1.97	%
Total interest-bearing liabilities		2,531,175	$	2,644		0.14	%		2,534,251	$	898		0.14	%
Other liabilities		53,052							54,066
Shareholders' equity		526,337							533,159
Total liabilities and shareholders' equity	$	4,923,705						$	4,889,940
Net interest spread (1) (2)						3.70	%						3.78	%
Net interest and fee income and interest margin (1) (3)			$	115,351		3.75	%			$	38,864		3.83	%

(1) Amounts calculated on a fully taxable equivalent basis using the current statutory federal tax rate.

(2) Net interest spread represents the average yield earned on interest-earning assets less the average rate incurred on interest-bearing liabilities.

(3) Net interest margin is computed by calculating the difference between interest income and expense, ~~(annualized),~~ divided by the average balance of interest-earning assets.

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37- 35 -

Distribution of Assets, Liabilities & Shareholders’ Equity and Yields, Rates & Interest Margin

	For the Nine Months Ended							For the Three Months Ended
	September 30, 2013							December 31, 2014
			Interest							Interest
	Average		Income/		Yields/			Average		Income/		Yields/
	Balance		Expense		Rates			Balance		Expense		Rates
	(In thousands)							(In thousands)
Assets
Investment securities:
Available for sale
Taxable	$	797,721	$	10,879		1.82	%	$	1,298,294	$	5,262		1.62	%
Tax-exempt (1)		187,400		7,943		5.65	%		169,388		2,492		5.88	%
Held to maturity
Taxable		442,962		5,747		1.73	%		333,491		1,597		1.92	%
Tax-exempt (1)		706,387		26,397		4.98	%		692,863		7,097		4.10	%
Loans:
Commercial:
Taxable		258,995		12,024		6.21	%		302,170		3,616		4.75	%
Tax-exempt (1)		109,255		4,795		5.87	%		80,706		1,194		5.87	%
Commercial real estate		877,490		41,130		6.27	%		723,153		11,151		6.12	%
Real estate construction		15,657		988		8.44	%		13,057		212		6.44	%
Real estate residential		217,704		5,711		3.50	%		158,908		1,396		3.51	%
Consumer installment and other		511,836		15,720		4.11	%
Consumer									431,018		4,088		3.76	%
Total loans (1)		1,990,937		80,368		5.40	%		1,709,012		21,657		5.03	%
Total Interest-earning assets (1)		4,125,407	$	131,334		4.25	%		4,203,048	$	38,105		3.61	%
Other assets		734,066							847,369
Total assets	$	4,859,473						$	5,050,417

Liabilities and shareholders' equity
Deposits:
Noninterest-bearing demand	$	1,657,819	$	-		-	%	$	1,925,741	$	-		-	%
Savings and interest-bearing transaction		1,905,341		882		0.06	%		2,054,750		279		0.05	%
Time less than $100,000		231,922		830		0.48	%		187,087		184		0.39	%
Time $100,000 or more		358,874		843		0.31	%		205,894		209		0.40	%
Total interest-bearing deposits		2,496,137		2,555		0.14	%		2,447,731		672		0.11	%
Short-term borrowed funds		58,548		58		0.13	%		86,323		25		0.12	%
Term repurchase agreement		10,000		73		0.98	%
Federal Home Loan Bank advances		25,719		360		1.87	%		20,099		103		2.03	%
Debt financing		15,000		601		5.35	%
Total interest-bearing liabilities		2,605,404	$	3,647		0.19	%		2,554,153	$	800		0.12	%
Other liabilities		57,931							52,317
Shareholders' equity		538,319							518,206
Total liabilities and shareholders' equity	$	4,859,473						$	5,050,417
Net interest spread (1) (2)						4.06	%						3.49	%
Net interest and fee income and interest margin (1) (3)			$	127,687		4.13	%			$	37,305		3.53	%

(1) Amounts calculated on a fully taxable equivalent basis using the current statutory federal tax rate.

(2) Net interest spread represents the average yield earned on interest-earning assets less the average rate incurred on interest-bearing liabilities.

(3) Net interest margin is computed by calculating the difference between interest income and expense, ~~(annualized),~~ divided by the average balance of interest-earning assets.

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38- 36 -

Summary of Changes in Interest Income and Expense due to Changes in Average Asset & Liability Balances and Yields Earned & Rates Paid

The following tables set forth a summary of the changes in interest income and interest expense due to changes in average assets and liability balances (volume) and changes in average interest yields/rates for the periods indicated. Changes not solely attributable to volume or yields/rates have been allocated in proportion to the respective volume and yield/rate components.

Summary of Changes in Interest Income and Expense

	Three Months Ended September 30, 2014									For the Three Months Ended March 31, 2015
	Compared with									Compared with
	Three Months Ended September 30, 2013									For the Three Months Ended March 31, 2014
	Volume			Yield/Rate			Total			Volume			Yield/Rate			Total
	(In thousands)									(In thousands)
Increase (decrease) in interest and fee income:
Investment securities:
Available for sale
Taxable	$	1,203		$	(238	)	$	965		$	2,007		$	(36	)	$	1,971
Tax-exempt (1)		(194	)		76			(118	)		(157	)		140			(17	)
Held to maturity
Taxable		(281	)		162			(119	)		(269	)		169			(100	)
Tax-exempt (1)		(322	)		(960	)		(1,282	)		(441	)		(840	)		(1,281	)
Loans:
Commercial:
Taxable		973			(751	)		222			394			(1,033	)		(639	)
Tax-exempt (1)		(266	)		(43	)		(309	)		(220	)		4			(216	)
Commercial real estate		(1,648	)		(163	)		(1,811	)		(1,177	)		195			(982	)
Real estate construction		(43	)		(153	)		(196	)		13			(25	)		(12	)
Real estate residential		(301	)		-			(301	)		(310	)		(8	)		(318	)
Consumer installment and other		(417	)		(283	)		(700	)
Consumer											(335	)		(244	)		(579	)
Total loans (1)		(1,702	)		(1,393	)		(3,095	)		(1,635	)		(1,111	)		(2,746	)
Total decrease in interest and fee income (1)		(1,296	)		(2,353	)		(3,649	)		(495	)		(1,678	)		(2,173	)
Increase (decrease) in interest expense:
Deposits:
Savings and interest-bearing transaction		18			(22	)		(4	)
Savings and interest-bearing
transaction											20			(42	)		(22	)
Time less than $100,000		(34	)		(24	)		(58	)		(30	)		(25	)		(55	)
Time $100,000 or more		(68	)		30			(38	)		(53	)		18			(35	)
Total interest-bearing deposits		(84	)		(16	)		(100	)		(63	)		(49	)		(112	)
Short-term borrowed funds		5			(2	)		3			8			(12	)		(4	)
Term repurchase agreement		(14	)		-			(14	)		(25	)		-			(25	)
Federal Home Loan Bank advances		(26	)		7			(19	)		(89	)		(9	)		(98	)
Debt financing		(200	)		-			(200	)
Total decrease in interest expense		(319	)		(11	)		(330	)		(169	)		(70	)		(239	)
Decrease in net interest and fee income (1)	$	(977	)	$	(2,342	)	$	(3,319	)	$	(326	)	$	(1,608	)	$	(1,934	)

(1) Amounts calculated on a fully taxable equivalent basis using the current statutory federal tax rate.

- 37 -

Summary of Changes in Interest Income and Expense

	For the Three Months Ended March 31, 2015
	Compared with
	For the Three Months Ended December 31, 2014
	Volume			Yield/Rate			Total
	(In thousands)
Increase (decrease) in interest and fee income:
Investment securities:
Available for sale
Taxable	$	683		$	(49	)	$	634
Tax-exempt (1)		(50	)		(25	)		(75	)
Held to maturity
Taxable		(58	)		119			61
Tax-exempt (1)		115			(207	)		(92	)
Loans:
Commercial:
Taxable		49			(231	)		(182	)
Tax-exempt (1)		(50	)		(48	)		(98	)
Commercial real estate		(437	)		227			(210	)
Real estate construction		12			(46	)		(34	)
Real estate residential		(100	)		(65	)		(165	)
Consumer installment and other		(143	)		(212	)		(355	)
Total loans (1)		(669	)		(375	)		(1,044	)
Total increase (decrease) in interest and fee income (1)		21			(537	)		(516	)
Increase (decrease) in interest expense:
Deposits:
Savings and interest-bearing
transaction		1			(1	)		-
Time less than $100,000		(10	)		(8	)		(18	)
Time $100,000 or more		(11	)		(1	)		(12	)
Total interest-bearing deposits		(20	)		(10	)		(30	)
Short-term borrowed funds		-			(9	)		(9	)
Federal Home Loan Bank advances		(92	)		(10	)		(102	)
Total decrease in interest expense		(112	)		(29	)		(141	)
Increase (decrease) in net interest and fee income (1)	$	133		$	(508	)	$	(375	)

(1) Amounts calculated on a fully taxable equivalent basis using the current statutory federal tax rate.

39- 38 -

~~Summary of Changes in Interest Income and Expense~~

Nine Months Ended September 30, 2014
Compared with
Nine Months Ended September 30, 2013
Volume Yield/Rate Total
(In thousands)
Increase (decrease) in interest and fee income:
Investment securities:
Available for sale
Taxable $ 3,537 $ (1,629 ) $ 1,908
Tax-exempt (1)
(613 ) 63 (550 )
Held to maturity
Taxable (1,018 ) 391 (627 )
Tax-exempt (1)
595 (3,450 ) (2,855 )
Loans:
Commercial:
Taxable 1,632 (1,395 ) 237
Tax-exempt (1)
(847 ) (120 ) (967 )
Commercial real estate (5,110 ) (743 ) (5,853 )
Real estate construction (158 ) (290 ) (448 )
Real estate residential (1,109 ) (128 ) (1,237 )
Consumer installment and other (1,801 ) (1,146 ) (2,947 )
Total loans (1)
(7,393 ) (3,822 ) (11,215 )
Total decrease in interest and fee income (1)
(4,892 ) (8,447 ) (13,339 )
Increase (decrease) in interest expense:
Deposits:
Savings and interest-bearing transaction
39 (25 ) 14
Time less than $100,000 (109 ) (84 ) (193 )
Time $100,000 or more (262 ) 102 (160 )
Total interest-bearing deposits (332 ) (7 ) (339 )
Short-term borrowed funds 6 - 6
Term repurchase agreement (14 ) 1 (13 )
Federal Home Loan Bank advances (75 ) 19 (56 )
Debt financing (601 ) - (601 )
Total (decrease) increase in interest expense (1,016 ) 13 (1,003 )
Decrease in net interest and fee income (1)
$ (3,876 ) $ (8,460 ) $ (12,336 )

~~(1)~~ ~~Amounts calculated on a fully taxable equivalent basis using the current statutory federal tax rate.~~

Provision for Loan Losses

The Company manages credit costs by consistently enforcing conservative underwriting and administration procedures and aggressively pursuing collection efforts with debtors experiencing financial difficulties. The provision for loan losses reflects Management's assessment of credit risk in the loan portfolio during each of the periods presented.

The Company provided ~~$600 thousand~~no provision for loan losses in the ~~third~~first quarter of ~~2014, $1.8~~2015 compared with $1.0 million ~~in the third quarter of 2013, $2.6 million~~and $200 thousand in the first ~~nine months of~~quarter 2014 and ~~$6.4 million in~~ the ~~first nine months of 2013.~~fourth quarter 2014, respectively. The ~~reduced~~ provision for loan losses ~~for the third quarter and the first nine months of 2014 reflects~~is determined based on Management’s ~~current~~ evaluation of credit quality for the loan portfolio. The Company recorded purchased County Bank and Sonoma Valley Bank loans at estimated fair value upon the acquisition dates, February 6, 2009 and August 20, 2010, respectively. Such estimated fair values were recognized for individual loans, although small balance homogenous loans were pooled for valuation purposes. The valuation discounts recorded for purchased loans included Management’s assessment of the risk of principal loss under economic and borrower conditions prevailing on the dates of purchase. The purchased County Bank loans secured by single-family residential real estate are “covered” through February 6, 2019 by loss-sharing agreements the Company entered with the FDIC which mitigates losses during the term of the agreements. The FDIC indemnification of purchased County Bank non-single-family residential ~~real estate~~ secured loans expired February 6, 2014. Any deterioration in estimated value related to principal loss subsequent to the acquisition dates requires additional loss recognition through a provision for loan losses. No assurance can be given ~~that~~ future provisions for loan losses related to purchased loans will not be necessary. For further information regarding credit risk, the FDIC loss-sharing agreements, net credit losses and the allowance for loan losses, see the “Loan Portfolio Credit Risk” and “Allowance for Credit Losses” sections of this report.

Noninterest Income

The following table summarizes the components of noninterest income for the periods indicated.

For the Three Months For the Nine Months
Ended September 30,
2014 2013 2014 2013
(In thousands)

Service charges on deposit accounts $ 6,207 $ 6,433 $ 18,322 $ 19,427
Merchant processing services 1,742 2,151 5,485 6,973
Debit card fees 1,543 1,467 4,482 4,302
ATM processing fees 637 701 1,891 2,128
Other service fees 695 716 2,044 2,174
Trust fees 629 567 1,899 1,720
Financial services commissions 194 150 585 614
Other noninterest income 1,407 2,234 4,534 5,643
Total $ 13,054 $ 14,419 $ 39,242 $ 42,981

	For the Three Months Ended
	March 31,				December 31,
	2015		2014		2014
	(In thousands)

Service charges on deposit accounts	$	5,707	$	6,010	$	5,870
Merchant processing services		1,703		1,924		1,734
Debit card fees		1,456		1,405		1,478
Trust fees		706		654		684
Other service fees		665		661		673
ATM processing fees		585		620		581
Financial services commissions		153		171		171
Other noninterest income		1,325		1,545		1,354
Total	$	12,300	$	12,990	$	12,545

Noninterest income for the ~~third~~first quarter ~~2014~~2015 declined by ~~$1.4 million~~$690 thousand or ~~9.5%~~5.3% from the same period in ~~2013.~~2014. Service charges on deposits decreased ~~$226~~$303 thousand ~~primarily~~ due to declines in fees charged on overdrawn and insufficient funds accounts (down ~~$173~~$150 thousand) ~~and~~, lower activity on checking accounts (down ~~$105~~$88 thousand) and lower fees on analyzed accounts (down $67 thousand). Merchant processing services fees decreased ~~$409~~$221 thousand primarily due to ~~customer attrition and~~ lower transaction volumes. ~~Other noninterest income decreased $827 thousand primarily due to the recognition in 2013 of a loan principal recovery exceeding the purchase date fair value.~~

In the first ~~nine months of 2014,~~quarter 2015, noninterest income decreased ~~$3.7 million~~$245 thousand or ~~8.7%~~2.0% compared with the ~~first nine months~~fourth quarter 2014 generally due to fewer processing days and lower levels of ~~2013.~~customer transaction activity. Service charges on deposits decreased ~~$1.1 million~~$163 thousand compared with the ~~first nine months of 2013 primarily~~fourth quarter 2014 due to declines in fees charged on overdrawn and insufficient funds accounts (down ~~$764~~$165 thousand), and lower activity on checking accounts, ~~(down $311 thousand). Merchant processing services~~partially offset by collection of annual IRA fees ~~decreased $1.5 million primarily due to customer attrition and lower transaction volumes. ATM processing fees decreased $237 thousand mainly because~~in the Bank customers had fewer transactions at non-Westamerica ATMs and other cash dispensing terminals. Debit card fees increased $180 thousand primarily due to higher transaction volumes. Trust fees increased $179 thousand mostly due to marketing efforts to increase customer accounts and higher court-approved fees. Other noninterest income decreased $1.1 million primarily due to the recognition in 2013 of a loan principal recovery exceeding the purchase date fair value.first quarter 2015.

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41- 39 -

Noninterest Expense

The following table summarizes the components of noninterest expense for the periods indicated.

For the Three Months For the Nine Months
Ended September 30,
2014 2013 2014 2013
(In thousands)

Salaries and related benefits $ 13,639 $ 13,826 $ 41,691 $ 42,293
Occupancy 3,811 3,829 11,284 11,353
Outsourced data processing services 2,093 2,139 6,314 6,436
Amortization of identifiable intangibles 1,056 1,163 3,219 3,547
Furniture and equipment 1,059 974 3,070 2,875
Professional fees 700 730 1,707 2,109
Courier service 663 725 1,938 2,204
Other real estate owned (287 ) 179 (908 ) 791
Other noninterest expense 3,882 4,193 12,131 13,019
Total $ 26,616 $ 27,758 $ 80,446 $ 84,627

	For the Three Months Ended
	March 31,					December 31,
	2015		2014			2014
	(In thousands)

Salaries and related benefits	$	13,338	$	14,126		$	13,086
Occupancy		3,727		3,727			3,708
Outsourced data processing services		2,108		2,105			2,097
Furniture and equipment		1,119		1,005			1,104
Amortization of identifiable intangibles		1,001		1,105			1,051
Professional fees		548		430			640
Courier service		543		610			686
Other real estate owned		315		(350	)		265
Other		4,028		4,115			3,716
Total	$	26,727	$	26,873		$	26,353

Noninterest expense decreased ~~$1.1 million or 4.1%~~$146 thousand in the ~~third~~first quarter ~~2014~~2015 compared with the same period in ~~2013.~~2014 primarily due to lower personnel costs, lower intangible amortization, lower operational losses and lower courier service costs, partially offset by increases in other real estate owned (“OREO”) expense net of disposition gains. Salaries and related benefits declined ~~$187~~$788 thousand ~~primarily~~mostly due to employee attrition. Amortization of identifiable intangibles decreased ~~$107~~$104 thousand as assets are amortized on a declining balance method. Expenses for other real estate owned in the first quarter 2015 included net writedowns while the first quarter 2014 included net gains on disposition of ~~disposition gains, decreased $466~~foreclosed assets. Professional fees increased $118 thousand due to higher net gains on sale of repossessed loan collateral. Other noninterest expense decreased $311 thousand mostly due to decreases in limited partnership operating losses, business insurance costs and correspondent bank charges.

In the first nine months of 2014, noninterest expense decreased $4.2 million or 4.9% compared with the first nine months of 2013. Salaries and related benefits decreased $602 thousand primarily due to employee attrition. Amortization of identifiable intangibles decreased $328 thousand as assets are amortized on a declining balance method. Professionalaccounting fees, ~~declined $402 thousand due to~~partially offset by lower legal fees associated with nonperforming assets. ~~Expenses for other real estate owned, net of disposition gains, declined $1.7 million~~Equipment expense increased $114 thousand mostly due to higher ~~net gains on sale of repossessed loan collateral. Other~~depreciation costs resulting from computer and software upgrades.

In the first quarter 2015, noninterest expense ~~decreased $888~~increased $374 thousand compared with the fourth quarter 2014 primarily due to higher personnel costs, partially offset by lower courier service expenses. Salaries and related benefits increased $252 thousand primarily due to ~~lower loan administration costs and lower limited partnership operating losses.~~seasonally higher payroll taxes. Courier expense decreased primarily due to consolidating service runs.

Provision for Income Tax

During the ~~third~~first quarter ~~2014,~~2015, the Company recorded an income tax provision (FTE) of ~~$8.6~~$7.9 million, compared with ~~$9.3~~$8.7 million and $8.3 million for the ~~third~~first and fourth quarters of 2014, respectively. The current quarter ~~2013. The third quarter 2014~~ provision represents an effective tax rate (FTE) of ~~36.2%~~35.3%, compared with ~~35.8% for the third quarter 2013. The income tax provision (FTE) was $25.9 million~~36.2% and 35.5% for the first ~~nine months~~and fourth quarters of 2014, ~~compared with $28.5 million for the corresponding period of 2013. The first nine months of 2014 effective tax rate (FTE) was 36.2% compared to 35.8% for the same period of 2013.~~respectively.

Investment Portfolio

The Company maintains a securities portfolio consisting of securities issued by U.S. Treasury, U.S. Government sponsored entities, state and political subdivisions, ~~and~~ corporations, and asset-backed and other securities. Investment securities are held in safekeeping by an independent custodian.

Management has ~~maintained relatively stable interest-earning asset volumes by increasing~~increased the investment ~~securities as~~portfolio in response to deposit growth and loan ~~volumes have declined.~~volume declines. The carrying value of the Company’s investment securities portfolio was ~~$2.4~~$2.8 billion as of ~~September 30, 2014,~~March 31, 2015, an increase of ~~$214.7~~$153 million ~~or 9.7%~~ compared to December 31, ~~2013.~~2014.

Management continually evaluates the Company’s investment securities portfolio in response to established asset/liability management objectives, changing market conditions that could affect profitability, liquidity, and the level of interest rate risk to which the Company is exposed. These evaluations may cause Management to change the level of funds the Company deploys into investment securities, change the composition of the Company’s investment securities portfolio, and change the proportion of investments allocated into the available for sale and held to maturity investment categories.

42- 40 -

The Company has been reducing its positions in mortgage-related securities ~~since the second quarter 2013~~ in an effort to manage extension risk. Extension risk represents the risk mortgages underlying the securities experience slower principal reductions as rising market interest rates cause a disincentive for borrowers to reduce principal balances; under such circumstances the Company will hold these securities for a longer period than anticipated at current yield levels rather than having the opportunity to reinvest cash flows at higher yields. The Company’s positioning of the balance sheet for rising interest rates has resulted in the purchase of floating rate corporate bonds, federal agency bonds, and short-term state and municipal bonds. As of ~~September 30, 2014,~~March 31, 2015, substantially all of the Company’s investment securities continue to be investment grade rated by one or more major rating agencies. In addition to monitoring credit rating agency evaluations, Management performs its own evaluations regarding the credit worthiness of the issuer or the securitized assets underlying asset-backed securities.

The Company’s procedures for evaluating investments in securities issued by states, municipalities and political subdivisions are in accordance with guidance issued by the Board of Governors of the Federal Reserve System, “Investing in Securities without Reliance on Nationally Recognized Statistical Rating Agencies” (SR 12-15) and other regulatory guidance. Credit ratings are considered in our analysis only as a guide to the historical default rate associated with similarly-rated bonds. There have been no significant differences in our internal analyses compared with the ratings assigned by the third party credit rating agencies.

The following tables summarize the total general obligation and revenue bonds ~~issued by states and political subdivisions held~~ in the Company’s investment securities portfolios as of ~~the~~ dates indicated identifying the state in which the issuing government municipality or agency operates.

At ~~September 30, 2014,~~March 31, 2015, the Company’s investment securities portfolios included securities issued by ~~755~~753 state and local government municipalities and agencies located within 4445 states with a fair value of ~~$898.7~~$900.5 million. The largest exposure to any one municipality or agency was ~~$7.5~~$5.0 million (fair value) represented by ~~three~~one revenue ~~bonds.~~bond.

	At March 31, 2015
	Amortized		Fair
	Cost		Value
	(In thousands)
Obligations of states and political subdivisions:
California	$	112,494	$	115,635
Texas		63,714		64,988
Pennsylvania		48,664		49,617
New Jersey		31,768		32,264
Arizona		28,446		29,473
Other (35 states)		272,832		278,831
Total general obligation bonds	$	557,918	$	570,808

Revenue bonds:
California	$	59,675	$	62,238
Pennsylvania		29,458		30,070
Kentucky		19,937		20,512
Iowa		18,208		18,959
Colorado		18,512		18,941
Indiana		16,783		16,920
Other (31 states)		156,946		162,036
Total revenue bonds	$	319,519	$	329,676
Total obligations of states and political subdivisions	$	877,437	$	900,484

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At September 30, 2014
Amortized Fair
Cost Value
(In thousands)
Obligations of states and political subdivisions:
General obligation bonds:
California $ 107,912 $ 110,696
Texas 56,651 57,715
Pennsylvania 48,687 49,522
Minnesota 27,968 28,357
Arizona 27,458 28,324
Other (34 states) 285,656 290,533
Total general obligation bonds $ 554,332 $ 565,147

Revenue bonds:
California $ 60,290 $ 62,510
Pennsylvania 28,843 29,441
Iowa 18,243 18,925
Colorado 18,123 18,361
Indiana 17,270 17,130
Kentucky 16,818 17,127
Other (31 states) 166,249 170,107
Total revenue bonds $ 325,836 $ 333,601
Total obligations of states and political subdivisions $ 880,168 $ 898,748

- 41 -

At December 31, ~~2013,~~2014, the Company’s investment securities portfolios included securities issued by ~~808~~763 state and local government municipalities and agencies located within 4745 states with a fair value of ~~$932.6~~$911.0 million. The largest exposure to any one municipality or agency was ~~$5.3~~$7.4 million (fair value) represented by ~~two~~three revenue bonds.

	At December 31, 2014
	Amortized		Fair
	Cost		Value
	(In thousands)
Obligations of states and political subdivisions:
General obligation bonds:
California	$	107,997	$	110,563
Texas		65,292		66,162
Pennsylvania		48,675		49,546
Minnesota		33,524		33,840
New Jersey		30,223		30,598
Arizona		28,492		29,378
Other (34 states)		249,513		254,043
Total general obligation bonds	$	563,716	$	574,130

Revenue bonds:
California	$	60,473	$	62,788
Pennsylvania		29,462		30,101
Kentucky		19,975		20,370
Iowa		18,225		18,898
Colorado		18,532		18,862
Indiana		16,865		16,859
Other (31 states)		164,848		168,972
Total revenue bonds	$	328,380	$	336,850
Total obligations of states and political subdivisions	$	892,096	$	910,980

At December 31, 2013
Amortized Fair
Cost Value
(In thousands)
Obligations of states and political subdivisions:
General obligation bonds:
California $ 119,215 $ 119,360
Texas 57,433 56,594
Pennsylvania 48,722 47,394
Other (37 states) 375,640 371,215
Total general obligation bonds $ 601,010 $ 594,563

Revenue bonds:
California $ 63,001 $ 64,246
Pennsylvania 29,537 28,898
Colorado 18,176 17,563
Indiana 17,811 17,031
Other (37 states) 213,254 210,336
Total revenue bonds $ 341,779 $ 338,074
Total obligations of states and political subdivisions $ 942,789 $ 932,637

At ~~September 30, 2014,~~March 31, 2015, the revenue bonds in the Company’s investment securities portfolios were issued by state and local government municipalities and agencies to fund public services such as water utility, sewer utility, recreational and school facilities, and general public and economic improvements. The revenue bonds were payable from 24 revenue sources. The revenue sources that represent 5% or more individually of the total revenue bonds are summarized in the following table.

	At March 31, 2015
	Amortized		Fair
	Cost		Value
	(In thousands)
Revenue bonds by revenue source
Water	$	66,235	$	69,172
Sewer		48,421		49,930
Sales tax		35,017		36,434
Lease (renewal)		21,760		22,275
Lease (abatement)		18,539		19,399
College & University		18,506		18,819
Other		111,041		113,647
Total revenue bonds by revenue source	$	319,519	$	329,676

At September 30, 2014
Amortized Fair
Cost Value
(In thousands)
Revenue bonds by revenue source
Water $ 67,684 $ 70,093
Sewer 47,857 49,061
Sales tax 35,594 36,747
Lease (abatement) 19,126 19,809
Lease (renewal) 18,838 19,078
College & University 16,553 16,813
Other 120,184 122,000
Total revenue bonds by revenue source $ 325,836 $ 333,601
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- 42 -

At December 31, ~~2013,~~2014, the revenue bonds in the Company’s investment securities portfolios were issued by state and local government municipalities and agencies to fund public services such as water utility, sewer utility, recreational and school facilities, and general public and economic improvements. The revenue bonds were payable from 2725 revenue sources. The revenue sources that represent 5% or more individually of the total revenue bonds are summarized in the following table.

At December 31, 2013
Amortized Fair
Cost Value
(In thousands)
Revenue bonds by revenue source
Water $ 70,924 $ 70,948
Sewer 49,625 48,911
Sales tax 34,291 33,465
Lease (abatement) 21,821 22,033
Lease (renewal) 21,353 20,742
Other 143,765 141,975
Total revenue bonds by revenue source $ 341,779 $ 338,074

	At December 31, 2014
	Amortized		Fair
	Cost		Value
	(In thousands)
Revenue bonds by revenue source
Water	$	66,305	$	68,885
Sewer		48,461		49,773
Sales tax		35,045		36,289
Lease (renewal)		21,789		22,091
Lease (abatement)		19,002		19,710
College & University		17,655		17,849
Other		120,123		122,253
Total revenue bonds by revenue source	$	328,380	$	336,850

See Note 3 to the unaudited consolidated financial statements for additional information related to the investment securities.

Loan Portfolio Credit Risk

The Company originates loans with the intent to hold such assets until principal is repaid. Management follows written loan underwriting policies and procedures which are approved by the Bank’s Board of Directors. Loans are underwritten following approved underwriting standards and lending authorities within a formalized organizational structure. The Board of Directors also approves independent real estate appraisers to be used in obtaining estimated values for real property serving as loan collateral. Prevailing economic trends and conditions are also taken into consideration in loan underwriting practices.

All loan applications must be for clearly defined legitimate purposes with a determinable primary source of repayment, and as appropriate, secondary sources of repayment. All loans are supported by appropriate documentation such as current financial statements, tax returns, credit reports, collateral information, guarantor asset verification, title reports, appraisals, and other relevant documentation.

Commercial loans represent term loans used to acquire durable business assets or revolving lines of credit used to finance working capital. Underwriting practices evaluate each borrower’s cash flow as the principal source of loan repayment. Commercial loans are generally secured by the borrower’s business assets as a secondary source of repayment. Commercial loans are evaluated for credit-worthiness based on prior loan performance, borrower financial information including cash flow, borrower net worth and aggregate debt.

Commercial real estate loans represent term loans used to acquire real estate to be operated by the borrower in a commercial capacity. Underwriting practices evaluate each borrower’s global cash flow as the principal source of loan repayment, independent appraisal of value of the property, and other relevant factors. Commercial real estate loans are generally secured by a first lien on the property as a secondary source of repayment.

Real estate construction loans represent the financing of real estate development. Loan principal disbursements are controlled through the use of project budgets, and disbursements are approved based on construction progress, which is validated by project site inspections. The real estate serves as collateral, secured by a first lien position on the property.

Residential real estate loans generally represent first lien mortgages used by the borrower to purchase or refinance a principal residence. For interest-rate risk purposes, the Company offers only fully-amortizing, adjustable-rate mortgages. In underwriting first lien mortgages, the Company evaluates each borrower’s ability to repay the loan, an independent appraisal of the value of the property, and other relevant factors. The Company does not offer riskier mortgage products, such as “interest-only” mortgages and “negative amortization” mortgages.

For loans secured by real estate, the Bank requires title insurance to insure the status of its lien and each borrower is obligated to insure the real estate collateral, naming the Company as loss payee, in an amount sufficient to repay the principal amount outstanding in the event of a property casualty loss.

~~Consumer loans are predominantly comprised of indirect automobile loans with underwriting based on credit history and scores, personal income, debt service capacity, and collateral values.~~

At September 30, At December 31,
2014 2013
(In thousands)
Commercial $ 388,918 $ 364,159
Commercial real estate 733,171 799,019
Construction 12,705 13,896
Residential real estate 159,982 185,057
Consumer installment and other 437,606 465,613
Total $ 1,732,382 $ 1,827,744

The Company extends loans to commercial and consumer customers in Northern and Central California. These lending activities expose the Company to the risk borrowers will default, causing loan losses. The Company’s lending activities are exposed to various qualitative risks. All loan segments are exposed to risks inherent in the economy and market conditions. Significant risk characteristics related to the commercial loan segment include the borrowers’ business performance and financial condition, and the value of collateral for secured loans. Significant risk characteristics related to the commercial real estate segment include the borrowers’ business performance and the value of properties collateralizing the loans. Significant risk characteristics related to the construction loan segment include the borrowers’ performance in successfully developing the real estate into the intended purpose and the value of the property collateralizing the loans. Significant risk characteristics related to the residential real estate segment include the borrowers’ financial wherewithal to service the mortgages and the value of the property collateralizing the loans. Significant risk characteristics related to the consumer loan segment include the financial condition of the borrowers and the value of collateral securing the loans.

The preparation of the financial statements requires Management to estimate the amount of losses inherent in the loan portfolio and establish an allowance for credit losses. The allowance for credit losses is established by assessing a provision for loan losses against the Company’s earnings. In estimating credit losses, Management must exercise judgment in evaluating information deemed relevant, such as financial information regarding individual borrowers, overall credit loss experience, the amount of past due, nonperforming and classified loans, recommendations of regulatory authorities, prevailing economic conditions and other information. The amount of ultimate losses on the loan portfolio can vary from the estimated amounts. Management follows a systematic methodology to estimate loss potential in an effort to reduce the differences between estimated and actual losses.

The Company closely monitors the markets in which it conducts its lending operations and follows a strategy to control exposure to loans with high credit risk. The Bank’s organization structure separates the functions of business development and loan underwriting; Management believes this segregation of duties avoids inherent conflicts of combining business development and loan approval functions. In measuring and managing credit risk, the Company adheres to the following practices.

The Bank maintains a Loan Review Department which reports directly to the Board of Directors. The Loan Review Department performs independent evaluations of loans and assigns credit risk grades to evaluated loans using grading standards employed by bank regulatory agencies. Those loans judged to carry higher risk attributes are referred to as “classified loans.” Classified loans receive elevated management attention to maximize collection.

The Bank maintains two loan administration offices whose sole responsibility is to manage and collect classified loans.

- 43 -

Classified loans with higher levels of credit risk are further designated as “nonaccrual loans.” Management places classified loans on nonaccrual status when full collection of contractual interest and principal payments is in doubt. Uncollected interest previously accrued on loans placed on nonaccrual status is reversed as a charge against interest income. The Company does not accrue interest income on loans following placement on nonaccrual status. Interest payments received on nonaccrual loans are applied to reduce the carrying amount of the loan unless the carrying amount is well secured by loan collateral. “Nonperforming assets” include nonaccrual loans, loans 90 or more days past due and still accruing, and repossessed loan collateral (commonly referred to as “Other Real Estate Owned”).

The former County Bank loans and repossessed loan collateral were purchased from the FDIC with indemnifying loss-sharing agreements. The loss-sharing agreement on single-family residential real estate assets expires February 6, 2019. The loss-sharing agreement on non-single-family residential real estate assets expired February 6, 2014 as to losses and expires February 6, 2017 as to loss ~~recoveries; the Company reclassified assets for which loss indemnification expired during the first quarter 2014 from “purchased covered” to “purchased non-covered”.~~recoveries.

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Nonperforming Assets
	At March 31,				At December 31,
	2015		2014		2014
	(In thousands)
Originated:
Nonperforming nonaccrual loans	$	3,315	$	4,784	$	5,296
Performing nonaccrual loans		26		39		13
Total nonaccrual loans		3,341		4,823		5,309
Accruing loans 90 or more days past due		191		196		502
Total nonperforming loans		3,532		5,019		5,811
Other real estate owned		5,483		5,347		4,809
Total nonperforming assets	$	9,015	$	10,366	$	10,620

Purchased covered:
Nonperforming nonaccrual loans	$	-	$	86	$	297
Performing nonaccrual loans		-		-		-
Total nonaccrual loans		-		86		297
Accruing loans 90 or more days past due		-		-		-
Total nonperforming loans		-		86		297
Other real estate owned		486		585		-
Total nonperforming assets	$	486	$	671	$	297

Purchased non-covered:
Nonperforming nonaccrual loans	$	8,952	$	11,578	$	11,901
Performing nonaccrual loans		1,093		902		97
Total nonaccrual loans		10,045		12,480		11,998
Accruing loans 90 or more days past due		-		209		-
Total nonperforming loans		10,045		12,689		11,998
Other real estate owned		3,264		6,254		1,565
Total nonperforming assets	$	13,309	$	18,943	$	13,563

Total nonperforming assets	$	22,810	$	29,980	$	24,480

Nonperforming Assets
At September 30, At December 31,
2014 2013 2013
(In thousands)
Originated:
Nonperforming nonaccrual loans $ 4,696 $ 5,786 $ 5,301
Performing nonaccrual loans 13 1,093 75
Total nonaccrual loans 4,709 6,879 5,376
Accruing loans 90 or more days past due 342 392 410
Total nonperforming loans 5,051 7,271 5,786
Other real estate owned 5,123 3,162 5,527
Total nonperforming assets $ 10,174 $ 10,433 $ 11,313

Purchased covered:
Nonperforming nonaccrual loans $ 295 $ 24,348 $ 11,672
Performing nonaccrual loans - 1,937 636
Total nonaccrual loans 295 26,285 12,308
Accruing loans 90 or more days past due - 23 -
Total nonperforming loans 295 26,308 12,308
Other real estate owned 585 9,273 7,793
Total nonperforming assets $ 880 $ 35,581 $ 20,101

Purchased non-covered:
Nonperforming nonaccrual loans $ 12,745 $ 2,664 $ 2,920
Performing nonaccrual loans 552 701 698
Total nonaccrual loans 13,297 3,365 3,618
Accruing loans 90 or more days past due 76 - -
Total nonperforming loans 13,373 3,365 3,618
Other real estate owned 1,565 2,535 -
Total nonperforming assets $ 14,938 $ 5,900 $ 3,618

Total nonperforming assets $ 25,992 $ 51,914 $ 35,032

~~The Bank’s commercial~~At March 31, 2015, one purchased non-covered nonperforming nonaccrual loan customers are primarily small businesses and professionals. As a result, average loan balances are relatively small, providing risk diversification within the overall loan portfolio. At September 30, 2014, the Bank’s nonaccrual loans reflected this diversification: nonaccrual originated loans withhad a carrying value ~~totaling $5 million comprised nine borrowers, and~~of $6,330 thousand; such loan is secured by commercial real estate. The remaining twenty nonaccrual ~~purchased~~ loans ~~with a~~held at March 31, 2015 had an average carrying value ~~totaling $14 million comprised fifteen borrowers.~~of $353 thousand, the largest carrying value was $1,364 thousand.

Management believes the overall credit quality of the loan portfolio is reasonably stable; however, classified and nonperforming assets could fluctuate from period to period. The performance of any individual loan can be affected by external factors such as the interest rate environment, economic conditions, and collateral values or factors particular to the borrower. No assurance can be given that additional increases in nonaccrual and delinquent loans will not occur in the future.

- 44 -

Allowance for Credit Losses

The Company’s allowance for credit losses represents Management’s estimate of credit losses inherent in the loan portfolio. In evaluating credit risk for loans, Management measures loss potential of the carrying value of loans. As described above, payments received on nonaccrual loans may be applied against the principal balance of the loans until such time as full collection of the remaining recorded balance is expected. Further, ~~the~~the carrying value of purchased loans includes fair value discounts assigned at the time of purchase under the provisions of FASB ASC 805, Business Combinations, and FASB ASC 310-30, Loans or Debt Securities with Deteriorated Credit Quality. The allowance for credit losses represents Management’s estimate of credit losses in excess of these reductions to the carrying value of loans within the loan portfolio.

The following table summarizes the allowance for credit losses, chargeoffs and recoveries of the Company for the periods indicated:

For the Three Months For the Nine Months
Ended September 30,
2014 2013 2014 2013
(In thousands)
Analysis of the Allowance for Credit Losses
Balance, beginning of period $ 35,091 $ 33,619 $ 34,386 $ 32,927
Provision for loan losses 600 1,800 2,600 6,400
Provision for unfunded commitments - - - -
Loans charged off
Commercial (905 ) (637 ) (1,114 ) (2,687 )
Commercial real estate - (117 ) - (656 )
Real estate construction - - - -
Real estate residential - - (30 ) (109 )
Consumer installment and other (916 ) (909 ) (3,217 ) (3,114 )
Purchased covered loans - (79 ) - (955 )
Purchased non-covered loans - - (260 ) (116 )
Total chargeoffs (1,821 ) (1,742 ) (4,621 ) (7,637 )
Recoveries of loans previously charged off
Commercial 229 326 516 1,084
Commercial real estate 15 30 193 128
Real estate construction - - 3 -
Real estate residential - - - -
Consumer installment and other 297 516 1,315 1,624
Purchased covered loans - 60 - 83
Purchased non-covered loans 51 - 70 -
Total recoveries 592 932 2,097 2,919
Net loan losses (1,229 ) (810 ) (2,524 ) (4,718 )
Balance, end of period $ 34,462 $ 34,609 $ 34,462 $ 34,609
Components:
Allowance for loan losses $ 31,769 $ 31,916
Liability for off-balance sheet credit exposure 2,693 2,693
Allowance for credit losses $ 34,462 $ 34,609
Net loan (losses) recoveries:
Originated loans $ (1,280 ) $ (791 ) $ (2,334 ) $ (3,730 )
Purchased covered loans - (19 ) - (872 )
Purchased non-covered loans 51 - (190 ) (116 )
Net loan losses as a percentage of
average total loans (annualized) 0.28 % 0.17 % 0.19 % 0.32 %

	For the Three Months Ended
	March 31,						December 31,
	2015			2014			2014
	(In thousands)
Analysis of the Allowance for Credit Losses
Balance, beginning of period	$	34,178		$	34,386		$	34,462
Provision for loan losses		-			1,000			200
Provision for unfunded commitments		-			-			-
Loans charged off
Commercial		(60	)		(60	)		(776	)
Commercial real estate		-			-			(762	)
Consumer installment and other		(995	)		(999	)		(997	)
Purchased covered loans		-			(260	)		-
Purchased non-covered loans		(35	)		-			(262	)
Total chargeoffs		(1,090	)		(1,319	)		(2,797	)
Recoveries of loans previously charged off
Commercial		180			168			1,734
Commercial real estate		15			163			20
Construction		-			3			-
Consumer installment and other		590			400			554
Purchased non-covered loans		7			1			5
Total recoveries		792			735			2,313
Net loan (losses)		(298	)		(584	)		(484	)
Balance, end of period	$	33,880		$	34,802		$	34,178
Components:
Allowance for loan losses	$	31,187		$	32,109		$	31,485
Liability for off-balance sheet credit exposure		2,693			2,693			2,693
Allowance for credit losses	$	33,880		$	34,802		$	34,178
Net loan losses:
Originated loans	$	(270	)	$	(325	)	$	(227	)
Purchased covered loans		-			(260	)		-
Purchased non-covered loans		(28	)		-			(257	)
Net loan losses as a percentage of
average total loans (annualized)		0.07	%		0.13	%		0.11	%

The Company's allowance for credit losses is maintained at a level considered appropriate to provide for losses that can be estimated based upon specific and general conditions. These include conditions unique to individual borrowers, as well as overall credit loss experience, the amount of past due, nonperforming and classified loans, the amount of non-indemnified purchased loans, ~~FDIC loss-sharing indemnification,~~ recommendations of regulatory authorities, prevailing economic conditions and other factors. A portion of the allowance is ~~specifically~~individually allocated to impaired loans whose full collectability of principal is uncertain. Such allocations are determined by Management based on loan-by-loan analyses. The Company evaluates all ~~classified loans and nonaccrual~~ loans with outstanding principal balances in excess of $500 thousand which are classified or on nonaccrual status and all “troubled debt restructured” loans for impairment. ~~A second allocation~~The remainder of the loan portfolio is collectively evaluated for impairment based in part on quantitative analyses of historical credit loss experience ~~in which historical originated classified credit balances are analyzed using a statistical model~~of loan portfolio segments to determine standard loss rates for ~~originated loans.~~each segment. The ~~results of this analysis~~loss rate for each loan portfolio segment reflects both the historical loss experience during a look-back period and the loss emergence period. During 2014, the Company refined its processes used to measure look-back periods and loss emergence periods. The loss rates are applied to ~~originated classified~~segmented loan balances to allocate the allowance to the ~~respective~~ segments of the loan portfolio. In addition, originated loans with similar characteristics not usually criticized using regulatory guidelines are analyzed based on the historical loss rates and delinquency trends, grouped by the number of days the payments on these loans are delinquent. Last, allocations are made to originated non-classified commercial and commercial real estate loans based on historical loss rates and other statistical data.

- 45 -

Purchased loans were recorded on the date of purchase at estimated fair value; fair value discounts include a component for estimated credit losses. The Company evaluates all nonaccrual purchased loans with outstanding principal balances in excess of $500 thousand for impairment; the impaired loan value is compared to the recorded investment in the loan, which has been reduced by the credit default discount estimated on the date of purchase. If Management’s impairment analysis determines the impaired loan value is less than the recorded investment in the purchased loan, an allocation of the allowance for credit losses is established ~~net of estimated FDIC indemnification.~~for the deficiency. For all other purchased loan portfolio segments, Management applies the standard loss rates to the purchased loan portfolio segments to determine initial allocations of the allowance. Further, liquidating purchased consumer installment loans ~~Management evaluates post-acquisition~~are evaluated separately by applying historical ~~credit~~loss rates to forecasted liquidating principal balances to initially measure losses oninherent in this portfolio segment. The initial allocations of the allowance to purchased ~~loans,~~loan portfolio segments are compared to credit default discounts ~~on purchased loans, and other data~~ascribed to ~~evaluate the likelihood of realizing the recorded investment of purchased loans.~~each segment. Management establishes allocations of the allowance for credit losses for any estimated deficiency.

The remainder of the allowance is considered to be unallocated. The unallocated allowance is established to provide for probable losses that have been incurred as of the reporting date but not reflected in the allocated allowance. The unallocated allowance addresses additional qualitative factors consistent with Management's analysis of the level of risks inherent in the loan portfolio, which are related to the risks of the Company's general lending activity. Included in the unallocated allowance is the risk of losses that are attributable to national or local economic or industry trends which have occurred but have not yet been recognized in loan chargeoff history (external factors). The primary external ~~factors~~factor evaluated by the Company and the judgmental amount of unallocated reserve assigned by Management as of ~~September 30, 2014 are:~~March 31, 2015 are economic and business conditions ~~$1.4 million, external competitive issues $900 thousand, and other factors.~~$1.7 million. Also included in the unallocated allowance is the risk of losses attributable to general attributes of the Company's loan portfolio and credit administration (internal factors). The internal factors evaluated by the Company and the judgmental amount of unallocated reserve assigned by Management are: loan review system ~~$900 thousand,~~$1.8 million, adequacy of lending Management and staff ~~$900 thousand, loan policies and procedures $1.0~~$1.7 million, concentrations of credit ~~$1.0~~$3.2 million, and other factors. By their nature, these risks are not readily allocable to any specific loan category in a statistically meaningful manner and are difficult to quantify with a specific number. Management assigns a range of estimated risk to the qualitative risk factors described above based on Management's judgment as to the level of risk, and assigns a quantitative risk factor from the range of loss estimates to determine the appropriate level of the unallocated portion of the allowance.

Allowance for Credit Losses
For the Three Months Ended September 30, 2014
Consumer Purchased Purchased
Commercial Residential Installment Non-covered Covered
Commercial Real Estate Construction Real Estate and Other Loans Loans Unallocated Total
(In thousands)
Allowance for loan losses:
Balance at beginning of period $ 5,297 $ 10,664 $ 442 $ 409 $ 2,055 $ 2,707 $ - $ 10,824 $ 32,398
Additions:
Provision (269 ) (640 ) - (17 ) 802 (184 ) - 908 600
Deductions:
Chargeoffs (905 ) - - - (916 ) - - - (1,821 )
Recoveries 229 15 - - 297 51 - - 592
Net loan (losses) recoveries (676 ) 15 - - (619 ) 51 - - (1,229 )
Balance at end of period 4,352 10,039 442 392 2,238 2,574 - 11,732 31,769
Liability for off-balance sheet credit exposure 1,706 24 105 - 451 131 - 276 2,693
Total allowance for credit losses $ 6,058 $ 10,063 $ 547 $ 392 $ 2,689 $ 2,705 $ - $ 12,008 $ 34,462

Allowance for Credit Losses
For the Nine Months Ended September 30, 2014
Consumer Purchased Purchased
Commercial Residential Installment Non-covered Covered
Commercial Real Estate Construction Real Estate and Other Loans Loans Unallocated Total
(In thousands)
Allowance for loan losses:
Balance at beginning of period $ 4,005 $ 12,070 $ 602 $ 405 $ 3,198 $ - $ 1,561 $ 9,852 $ 31,693
Additions:
Provision 945 (2,224 ) (163 ) 17 942 1,203 - 1,880 2,600
Deductions:
Chargeoffs (1,114 ) - - (30 ) (3,217 ) (260 ) - - (4,621 )
Recoveries 516 193 3 - 1,315 70 - - 2,097
Net loan recoveries (losses) (598 ) 193 3 (30 ) (1,902 ) (190 ) - - (2,524 )
Indemnification expiration - - - - - 1,561 (1,561 ) - -
Balance at end of period 4,352 10,039 442 392 2,238 2,574 - 11,732 31,769
Liability for off-balance sheet credit exposure 1,706 24 105 - 451 131 - 276 2,693
Total allowance for credit losses $ 6,058 $ 10,063 $ 547 $ 392 $ 2,689 $ 2,705 $ - $ 12,008 $ 34,462

	Allowance for Loan Losses For the Three Months Ended March 31, 2015
	Commercial			Commercial Real Estate			Construction		Residential Real Estate			Consumer Installment and Other			Purchased Non-covered Loans			Purchased Covered Loans		Unallocated		Total
	(In thousands)
Allowance for loan losses:
Balance at beginning of period	$	5,460		$	4,245		$	644	$	2,241		$	7,717		$	2,120		$	-	$	9,058	$	31,485
Additions:
Provision		(110	)		(137	)		86		(101	)		(281	)		247			-		296		-
Deductions:
Chargeoffs		(60	)					-					(995	)		(35	)		-		-		(1,090	)
Recoveries		180			15			-		-			590			7			-		-		792
Net loan recoveries (losses)		120			15			-		-			(405	)		(28	)		-		-		(298	)
Total allowance for loan losses	$	5,470		$	4,123		$	730	$	2,140		$	7,031		$	2,339		$	0	$	9,354	$	31,187

	Allowance for Loan Losses and Recorded Investment in Loans Evaluated for Impairment At March 31, 2015
	Commercial		Commercial Real Estate		Construction		Residential Real Estate		Consumer Installment and Other		Purchased Non-covered Loans		Purchased Covered Loans		Unallocated		Total
	(In thousands)
Allowance for loan losses:
Individually evaluated for impairment	$	493	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	493
Collectively evaluated for impairment		4,977		4,123		730		2,140		7,031		2,339		-		9,354		30,694
Purchased loans with evidence of credit deterioration		-		-		-		-		-		-		-		-		-
Total	$	5,470	$	4,123	$	730	$	2,140	$	7,031	$	2,339	$	-	$	9,354	$	31,187
Carrying value of loans:
Individually evaluated for impairment	$	12,459	$	597	$	-	$	574	$	599	$	10,740	$	-	$	-	$	24,969
Collectively evaluated for impairment		379,404		548,339		12,438		139,760		371,376		186,835		16,107		-		1,654,259
Purchased loans with evidence of credit deterioration		-		-		-		-		-		4,434		222		-		4,656
Total	$	391,863	$	548,936	$	12,438	$	140,334	$	371,975	$	202,009	$	16,329	$	-	$	1,683,884

Allowance for Credit Losses and Recorded Investment in Loans Evaluated for Impairment
At September 30, 2014
Commercial
Commercial
Real Estate
Construction
Residential
Real Estate

Consumer
Installment
and Other

Purchased
Non-covered
Loans

Purchased
Covered
Loans
Unallocated Total
(In thousands)
Allowance for credit losses:
Individually evaluated for impairment $ - $ - $ - $ - $ - $ 892 $ - $ - $ 892
Collectively evaluated for impairment 6,058 10,063 547 392 2,689 1,813 - 12,008 33,570
Purchased loans with evidence of credit deterioration - - - - - - - - -
Total $ 6,058 $ 10,063 $ 547 $ 392 $ 2,689 $ 2,705 $ - $ 12,008 $ 34,462
Carrying value of loans:
Individually evaluated for impairment $ 2,714 $ 3,037 $ - $ - $ - $ 13,118 $ - $ - $ 18,869
Collectively evaluated for impairment 367,346 570,142 9,824 156,794 379,708 207,764 17,291 - 1,708,869
Purchased loans with evidence of credit deterioration - - - - - 4,412 232 - 4,644
Total $ 370,060 $ 573,179 $ 9,824 $ 156,794 $ 379,708 $ 225,294 $ 17,523 $ - $ 1,732,382

Management considers the ~~$34.5~~$33.9 million allowance for credit losses to be adequate as a reserve against credit losses inherent in the loan portfolio as of ~~September 30, 2014.~~March 31, 2015.

See Note 4 to the unaudited consolidated financial statements for additional information related to the loan portfolio, loan portfolio credit risk, and allowance for credit losses.

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Asset/Liability and Market Risk Management

Asset/liability management involves the evaluation, monitoring and management of interest rate risk, market risk, liquidity and funding. The fundamental objective of the Company's management of assets and liabilities is to maximize its economic value while maintaining adequate liquidity and a conservative level of interest rate risk.

Interest Rate Risk

Interest rate risk is a significant market risk affecting the Company. Many factors affect the Company’s exposure to interest rates, such as general economic and financial conditions, customer preferences, historical pricing relationships, and re-pricing characteristics of financial instruments. Assets and liabilities may mature or re-price at different times. Assets and liabilities may re-price at the same time but by different amounts. Short-term and long-term market interest rates may change by different amounts. The timing and amount of cash flows of various assets or liabilities may shorten or lengthen as interest rates change. In addition, the changing levels of interest rates may have an impact on loan demand, demand for various deposit products, credit losses, and other elements of earnings such as account analysis fees on commercial deposit accounts and correspondent bank service charges.

The Company’s earnings are affected not only by general economic conditions, but also by the monetary and fiscal policies of the U.S. and its agencies, particularly the Federal Reserve Board (the “FRB”). The monetary policies of the FRB can influence the overall growth of loans, investment securities, and deposits and the level of interest rates earned on assets and paid for liabilities. The nature and impact of future changes in monetary policies are generally not predictable.

The Federal Open Market Committee’s ~~September 17, 2014~~April 29, 2015 press release stated “The Committee's sizable and still-increasing holdings of longer-term securities should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative, which in turn should promote a stronger economic recovery and help to ensure that inflation, over time, is at the rate most consistent with the Committee's dual mandate… To“To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that ~~a highly accommodative stance of monetary policy remains appropriate. In determining how long to maintain~~ the current 0 to 1/4 percent target range for the federal funds rate remains appropriate. In determining how long to maintain this target range, the Committee will assess progress--both realized and expected--toward its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term.… When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent. The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run.” In this context, Management’s most likely earnings forecast for the twelve months ending ~~September 30, 2015~~March 31, 2016 assumes market interest rates will either remain relatively stable ~~and yields on newly originated~~ or ~~refinanced loans and on purchased investment securities~~short-term rates will ~~reflect current interest rates, which are generally lower than yields on the Company’s older dated loans and investment securities.~~rise gradually.

In adjusting the Company's asset/liability position, Management attempts to manage interest rate risk while enhancing the net interest margin and net interest income. At times, depending on expected increases or decreases in general interest rates, the relationship between long and short term interest rates, market conditions and competitive factors, Management may adjust the Company's interest rate risk position in order to manage its net interest margin and net interest income. The Company's results of operations and net portfolio values remain subject to changes in interest rates and to fluctuations in the difference between long and short term interest rates.

The Company’s asset and liability position ~~ranged from risk neutral to~~was slightly ~~“liability~~“asset sensitive” at ~~September 30, 2014,~~March 31, 2015, depending on the interest rate assumptions applied to the simulation model employed by Management to measure interest rate risk. ~~A “liability~~An “asset sensitive” position results in a slightly larger change in interest ~~expense~~income than in interest ~~income~~expense resulting from application of assumed interest rate changes. Simulation estimates depend on, and will change with, the size and mix of the actual and projected balance sheet at the time of each simulation. Management’s interest rate risk management is currently biased toward stable interest rates in the near-term, and ultimately, rising interest rates. Management continues to monitor the interest rate environment as well as economic conditions and other factors it deems relevant in managing the Company's exposure to interest rate risk.

The Company does not currently engage in trading activities or use derivative instruments to control interest rate risk, even though such activities may be permitted with the approval of the Company's Board of Directors.

Market Risk - Equity Markets

Equity price risk can affect the Company. As an example, any preferred or common stock holdings, as permitted by banking regulations, can fluctuate in value. Management regularly assesses the extent and duration of any declines in market value, the causes of such declines, the likelihood of a recovery in market value, and its intent to hold securities until a recovery in value occurs. Declines in value of preferred or common stock holdings that are deemed “other than temporary” could result in loss recognition in the Company's income statement.

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Fluctuations in the Company's common stock price can impact the Company's financial results in several ways. First, the Company has regularly repurchased and retired its common stock; the market price paid to retire the Company's common stock can affect the level of the Company's shareholders' equity, cash flows and shares outstanding. Second, the Company's common stock price impacts the number of dilutive equivalent shares used to compute diluted earnings per share. Third, fluctuations in the Company's common stock price can motivate holders of options to purchase Company common stock through the exercise of such options thereby increasing the number of shares outstanding. Finally, the amount of compensation expense associated with share based compensation fluctuates with changes in and the volatility of the Company's common stock price.

Market Risk - Other

Market values of loan collateral can directly impact the level of loan charge-offs and the provision for loan losses. The financial condition and liquidity of debtors issuing bonds and debtors whose mortgages or other obligations are securitized can directly impact the credit quality of the Company’s investment portfolio requiring the Company to recognize other than temporary impairment charges. Other types of market risk, such as foreign currency exchange risk and commodity price risk, are not significant in the normal course of the Company's business activities.

Liquidity and Funding

The objective of liquidity management is to manage cash flow and liquidity reserves so that they are adequate to fund the Company's operations and meet obligations and other commitments on a timely basis and at a reasonable cost. The Company achieves this objective through the selection of asset and liability maturity mixes that it believes best meet its needs. The Company's liquidity position is enhanced by its ability to raise additional funds as needed in the wholesale markets.

In recent years, the Company's deposit base has provided the majority of the Company's funding requirements. This relatively stable and low-cost source of funds, along with shareholders' equity, provided 97 percent of funding for average total assets in the first ~~nine months of 2014~~quarter 2015 and ~~2013.~~2014. The stability of the Company’s funding from customer deposits is in part reliant on the confidence clients have in the Company. The Company places a very high priority in maintaining this confidence through conservative credit and capital management practices and by maintaining an appropriate level of liquidity reserves.

~~During~~In the first ~~nine months of~~quarter 2015 and 2014, ~~and 2013,~~ non-deposit funding has continued to be provided by short-term borrowings ~~a term repurchase agreement,~~ and Federal Home Loan Bank advances until repayment in January 2015, and additionally, ~~long-term debt for the first nine months of 2013.~~a term repurchase agreement until repayment in August 2014. These non-deposit sources of funds comprise a modest portion of total funding.

Liquidity is further provided by assets such as balances held at the Federal Reserve Bank, investment securities, and amortizing loans. The Company's investment securities portfolio provides a substantial secondary liquidity reserve. The Company held ~~$2.4~~$2.8 billion in total investment securities at ~~September 30, 2014.~~March 31, 2015. Under certain deposit, borrowing and other arrangements, the Company must hold and pledge investment securities as collateral. At ~~September 30, 2014,~~March 31, 2015, such collateral requirements totaled approximately ~~$773~~$720 million.

Liquidity risk can result from the mismatching of asset and liability cash flows, or from disruptions in the financial markets. The Company performs liquidity stress tests on a periodic basis to evaluate the sustainability of its liquidity. Under the stress testing, the Company assumes outflows of funds increase beyond expected levels. Measurement of such heightened outflows considers the composition of the Company’s deposit base, including any concentration of deposits, non-deposit funding such as short-term borrowings and Federal Home Loan Bank advances, and unfunded lending commitments. The Company evaluates its stock of highly liquid assets to meet the assumed higher levels of outflows. Highly liquid assets include cash and amounts due from other banks from daily transaction settlements, reduced by branch cash needs and Federal Reserve Bank reserve requirements, and investment securities based on regulatory risk-weighting guidelines. Based on the results of the most recent liquidity stress test, Management is satisfied with the liquidity condition of the Bank and the Company. However, no assurance can be given the Bank or Company will not experience a period of reduced liquidity.

Management will monitor the Company’s cash levels throughout ~~2014.~~2015. Loan demand from credit-worthy borrowers will be dictated by economic and competitive conditions. The Company aggressively solicits non-interest bearing demand deposits and money market checking deposits, which are the least sensitive to changes in interest rates. The growth of these deposit balances is subject to heightened competition, the success of the Company's sales efforts, delivery of superior customer service, new regulations and market conditions. The Company does not aggressively solicit higher-costing time deposits; as a result, Management anticipates such deposits will decline. Changes in interest rates, most notably rising interest rates, could impact deposit volumes. Depending on economic conditions, interest rate levels, and a variety of other conditions, deposit growth may be used to fund loans, reduce borrowings or purchase investment securities. However, due to possible concerns such as uncertainty in the general economic environment, competition and political uncertainty, loan demand and levels of customer deposits are not certain. Shareholder dividends are expected to continue subject to the Board's discretion and continuing evaluation of capital levels, earnings, asset quality and other factors.

- 48 -

Westamerica Bancorporation ("Parent Company") is a separate entity apart from Westamerica Bank (“Bank”) and must provide for its own liquidity. In addition to its operating expenses, the Parent Company is responsible for the payment of dividends declared for its shareholders, and interest and principal on any outstanding debt. Substantially all of the Parent Company's revenues are obtained from subsidiary dividends and service fees. ~~The~~

In the first quarter 2015, the Bank’s dividends paid to the Parent Company provided adequate cash flow for the Parent Company to pay shareholder dividends of $10 million and retire common stock in the amount of $8 million. In the first quarter 2014, the Bank’s dividends paid to the Parent Company and proceeds from the exercise of stock options provided adequate cash flow for the Parent Company ~~in the first nine months of 2014 and 2013~~ to pay shareholder dividends of ~~$30~~$10 million ~~in each period,~~ and retire common stock in the amount of ~~$45 million and $40 million, respectively.~~$23 million. Payment of dividends to the Parent Company by the Bank is limited under California and Federal laws. The Company believes these regulatory dividend restrictions will not have an impact on the Parent Company's ability to meet its ongoing cash obligations.

Capital Resources

The Company has historically generated high levels of earnings, which provides a means of raising capital. The Company's net income as aan annualized percentage of average shareholders' equity (“return on equity” or “ROE”) has been ~~11.6% (annualized)~~11.4% in the first ~~nine months of~~quarter 2015, 11.6% in 2014 and 12.5% in ~~2013 and 14.9% in 2012.~~2013. The Company also raises capital as employees exercise stock options. ~~Capital~~There was no capital raised through the exercise of stock options ~~totaled~~in the first quarter 2015 compared with $12.4 million in ~~the first nine months of~~ 2014 and $21.5 million in ~~2013 and $7.6 million in 2012.~~2013.

The Company paid common dividends totaling ~~$29.9~~$9.8 million in the first ~~nine months of~~quarter 2015, $39.8 million in 2014 and $40.1 million in 2013, ~~and $41.0 million in 2012,~~ which represent dividends per common share of ~~$1.14,~~$0.38, $1.52 and $1.49, ~~and $1.48,~~ respectively. The Company's earnings have historically exceeded dividends paid to shareholders. The amount of earnings in excess of dividends provides the Company resources to finance growth and maintain appropriate levels of shareholders' equity. In the absence of profitable growth opportunities, the Company has repurchased and retired its common stock as another means to return earnings to shareholders. The Company repurchased and retired ~~883~~183 thousand shares valued at ~~$44.8~~$7.9 million in the first ~~nine months of~~quarter 2015, 1.0 million shares valued at $52.7 million in 2014 and 1.2 million shares valued at $57.3 million in ~~2013 and 1.1 million shares valued at $51.5 million in 2012.~~2013.

The Company's primary capital resource is shareholders' equity, which was ~~$533.4~~$527.4 million at ~~September 30, 2014~~March 31, 2015 compared with ~~$542.9~~$526.6 million at December 31, ~~2013.~~2014. The Company's ratio of equity to total assets was ~~10.68%~~10.47% at ~~September 30, 2014~~March 31, 2015 and ~~11.20%~~10.46% at December 31, ~~2013.~~2014.

The Company performs capital stress tests on a periodic basis to evaluate the sustainability of its capital. Under the stress testing, the Company assumes various scenarios such as deteriorating economic and operating conditions, unanticipated asset devaluations, and significant operational lapses. The Company measures the impact of these scenarios on its earnings and capital. Based on the results of the most recent stress tests, Management is satisfied with the capital condition of the Bank and the Company. However, no assurance can be given the Bank or Company will not experience a period of reduced earnings or a reduction in capital from unanticipated events and circumstances.

Capital to Risk-Adjusted Assets

~~The following summarizes the ratios of regulatory capital to risk-adjusted assets for the Company on the dates indicated:~~

Minimum Well-capitalized
At September 30, At December 31, Regulatory by Regulatory
2014 2013 2013 Requirement Definition

Tier I Capital 13.61 % 14.59 % 14.71 % 4.00 % 6.00 %
Total Capital 15.03 % 15.99 % 16.18 % 8.00 % 10.00 %
Leverage ratio 8.12 % 8.61 % 8.55 % 4.00 % 5.00 %

~~The following summarizes the ratios of capital to risk-adjusted assets for the Bank on the dates indicated:~~

Minimum Well-capitalized
At September 30, At December 31, Regulatory by Regulatory
2014 2013 2013 Requirement Definition

Tier I Capital 12.36 % 13.37 % 13.26 % 4.00 % 6.00 %
Total Capital 14.00 % 14.97 % 14.93 % 8.00 % 10.00 %
Leverage ratio 7.33 % 7.84 % 7.67 % 4.00 % 5.00 %

FDIC-indemnified assets are generally 20% risk-weighted. The FDIC indemnification expires on February 6, 2019 as to single-family residential real estate indemnified assets and expired on February 6, 2014 as to non-single-family residential real estate indemnified assets. Subsequent to such dates, previously FDIC-indemnified assets will generally be included in the 100% risk-weight category. The expiration of FDIC indemnification related to non-single-family residential real estate assets on February 6, 2014 caused an increase in risk-weighted assets, and a corresponding decline in the Tier 1 and Total Capital ratios.

On July 2, 2013, the Federal Reserve Board approved a final rule that implements changes to the regulatory capital framework for all banking organizations. The rule’s provisions which would most affect the regulatory capital requirements of the Company and the Bank:

Introduce a new “Common Equity Tier 1” capital measurement,

Establish higher minimum levels of capital,

Introduce a “capital conservation buffer,”

Increase the risk-weighting of certain assets, and

Establish limits on the amount of deferred tax assets with any excess treated as a deduction from Tier 1 capital.

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Under the final rule, a banking organization that is not subject to the “advanced approaches rule” may make a one-time election not to include most elements of Accumulated Other Comprehensive Income, including net-of-tax unrealized gains and losses on available for sale investment securities, in regulatory capital. Neither the Company nor the Bank are subject to the “advanced approaches rule” and ~~intend to make~~made the election not to include most elements of Accumulated Other Comprehensive Income in regulatory capital.

~~Generally, banking~~Banking organizations that are not subject to the “advanced approaches rule” ~~must begin~~began complying with the final rule on January 1, 2015; on such date, the Company and the Bank ~~become~~became subject to the revised definitions of regulatory capital, the new minimum regulatory capital ratios, and various regulatory capital adjustments and deductions according to transition provisions and timelines. All banking organizations ~~must begin~~began calculating standardized total risk-weighted assets on January 1, 2015. The transition period for the capital conservation buffer for all banking organizations will begin on January 1, 2016 and end January 1, 2019. Any bank subject to the rule which is unable to maintain its “capital conservation buffer” will be restricted in the payment of discretionary executive compensation and shareholder distributions, such as dividends and share repurchases.

The final rule ~~does~~did not supersede provisions of the Federal Deposit Insurance Corporation Improvement Act (FDICIA) requiring federal banking agencies to take prompt corrective action (PCA) to resolve problems of insured depository institutions. The final rule ~~revises~~revised the PCA thresholds to incorporate the higher minimum levels of capital, including the newly proposed “common equity tier 1” ratio.

~~Management has evaluated the~~The capital ~~structure and assets~~ratios for the Company and the Bank ~~as of September 30, 2014 assuming~~under the ~~Federal Reserve’s final rule was currently fully phased-in. Based on this evaluation,~~new capital framework are presented in the ~~Company and the Bank currently maintain capital in excess of all the final rule regulatory ratios, as follows:~~table below.

	At March 31, 2015						Transitional Minimum Regulatory Requirement Effective			Minimum Regulatory Requirement (1) Effective			Well-capitalized by Regulatory Definition Under FDICIA Effective
	Company			Bank			January 1, 2015			January 1, 2019			January 1, 2015

Common Equity Tier I Capital		12.54	%		11.35	%		4.50	%		7.00	%		6.50	%
Tier I Capital		12.54	%		11.35	%		6.00	%		8.50	%		8.00	%
Total Capital		13.08	%		12.05	%		8.00	%		10.50	%		10.00	%
Leverage Ratio		7.88	%		7.09	%		4.00	%		4.00	%		5.00	%

Final Rule
Final Rule Minimum
Minimum "Well-capitalized" Plus "Capital Proforma Measurements as of
Capital Under PCA Conservation September 30, 2014 Assuming Final
Requirement Proposal Buffer" Rule Fully Phased-in
Company Bank
Capital Measurement:
Leverage 4.00 % 5.00 % 4.00 % 8.12 % 7.33 %
Common Equity Tier 1 4.50 % 6.50 % 7.00 % 13.56 % 12.31 %
Tier I Capital 6.00 % 8.00 % 8.50 % 13.56 % 12.31 %
Total Capital 8.00 % 10.00 % 10.50 % 14.97 % 13.94 %
(1) Includes 2.5% capital conservation buffer.

The Company and the Bank intend to maintain regulatory capital in excess of the highest regulatory standard. The Company and the Bank routinely project capital levels by analyzing forecasted earnings, credit quality, securities valuations, shareholder dividends, asset volumes, share repurchase activity, stock option exercise proceeds, and other factors. Based on current capital projections, the Company and the Bank expect to maintain regulatory capital levels exceeding the highest effective regulatory standard and pay quarterly dividends to shareholders. No assurance can be given that changes in capital management plans will not occur.

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The following summarizes the ratios of regulatory capital to risk-adjusted assets under the superseded capital framework on the dates indicated:

	At March 31,			At December 31,			Minimum Regulatory			Well-capitalized by Regulatory
	2014			2014			Requirement			Definition

Company:
Tier I Capital		13.74	%		13.30	%		4.00	%		6.00	%
Total Capital		15.19	%		14.54	%		8.00	%		10.00	%
Leverage ratio		8.40	%		7.95	%		4.00	%		5.00	%

Bank:
Tier I Capital		12.40	%		12.04	%		4.00	%		6.00	%
Total Capital		14.07	%		13.49	%		8.00	%		10.00	%
Leverage ratio		7.54	%		7.16	%		4.00	%		5.00	%

Item3. Quantitative and Qualitative Disclosures about Market Risk

Credit risk and interest rate risk are the most significant market risks affecting the Company, and equity price risk can also affect the Company’s financial results. These risks are described in the preceding sections regarding “Loan Portfolio Credit Risk,” and “Asset/Liability and Market Risk Management.” Other types of market risk, such as foreign currency exchange risk and commodity price risk, are not significant in the normal course of the Company’s business activities.

Item4. Controls and Procedures

The Company’s principal executive officer and principal financial officer have evaluated the effectiveness of the Company’s “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended, as of ~~September 30, 2014.~~March 31, 2015.

Based upon their evaluation, the principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures are effective to ensure that material information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported as and when required and that such information is communicated to the Company’s management, including the principal executive officer and the principal financial officer, to allow for timely decisions regarding required disclosures. The evaluation did not identify any change in the Company’s internal control over financial reporting that occurred during the quarter ended ~~September 30, 2014~~March 31, 2015 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item1. Legal Proceedings

~~Due to~~Neither the ~~nature~~Company nor any of its subsidiaries is a party to any material pending legal proceeding, nor is their property the subject of any material pending legal proceeding, other than ordinary routine legal proceedings arising in the ordinary course of the Company’s business. None of these proceedings is expected to have a material adverse impact upon the Company’s business, ~~the Company is subject to various threatened~~financial position or filed legal cases resulting from loan collection efforts, transaction processing for deposit accounts and employment practices. The Company establishes a liability for contingent litigation losses for any legal matter when payments associated with the claims become probable and the costs can be reasonably estimated.results of operations.

Item1A. Risk Factors

The Company’s Form 10-K as of December 31, ~~2013~~2014 includes detailed disclosure about the risks faced by the Company’s business; such risks have not materially changed since the Form 10-K was filed.

- 51 -

Item2. Unregistered Sales of Equity Securities and Use of Proceeds

(a) Previously reported on Form 8-K.

(b) None

The table below sets forth the information with respect to purchases made by or on behalf of the Company or any “affiliated purchaser” (as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934), of common stock during the quarter ended ~~September 30, 2014.~~March 31, 2015.

Period	(a) Total Number of Shares Purchased		(b) Average Price Paid per Share		(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs*		(d) Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
	(In thousands, except per share data)
January 1
through		85	$	42.87		85		1,648
January 31
February 1
through		43		42.44		43		1,605
February 28
March 1
through		55		43.60		55		1,550
March 31
Total		183	$	42.99		183		1,550

(c) (d)
Total Number Maximum Number
of Shares of Shares that May
(a) (b) Purchased as Part of Yet Be Purchased
Total Number of Average Price Publicly Announced Under the Plans
Period Shares Purchased Paid per Share Plans or Programs* or Programs
(In thousands, except per share data)
July 1
through 121 $ 48.84 121 1,948
July 31
August 1
through 13 47.36 13 1,935
August 31
September 1
through 41 48.32 41 1,894
September 30
Total 175 $ 48.62 175 1,894

* Includes 27 thousand, 4 thousand and 711 thousand shares purchased in ~~July, August~~January, February and ~~September,~~March, respectively, by the Company in private transactions with the independent administrator of the Company's Tax Deferred Savings/Retirement Plan (ESOP). The Company includes the shares purchased in such transactions within the total number of shares authorized for purchase pursuant to the currently existing publicly announced program.

The Company repurchases shares of its common stock in the open market to optimize the Company’s use of equity capital and enhance shareholder value and with the intention of lessening the dilutive impact of issuing new shares ~~related to~~under stock option plans, and other ongoing requirements.

Shares were repurchased during the ~~period from July 1 through July 23, 2014~~first quarter of 2015 pursuant to a program approved by the Board of Directors on July 25, 2013 authorizing the purchase of up to 2 million shares of the Company’s common stock. Shares were repurchased during the period from July 24, 2014 through September 30, 2014 pursuant to a replacement program approved by the Board of Directors on July 24, 2014 authorizing the purchase of up to 2 million shares of the Company’s common stock from time to time prior to September 1, 2015.

Item3. Defaults upon Senior Securities

None

Item4. Mine Safety Disclosures

Not applicable.

- 52 -

Item5. Other Information

~~None~~(a) Submission of Matters to a Vote of Security Holders

Information required is incorporated by reference to the Registrant’s Form 8-K, filed with the Securities and Exchange Commission on April 27, 2015.

Item6. Exhibits

The exhibit list required by this item is incorporated by reference to the Exhibit Index filed with this report.

[The remainder of this page intentionally left blank]

56- 53 -

SIGNATURES

Pursuant to the requirements of the Securities 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)

~~/s/ JOHN "ROBERT" THORSON~~

/s/ JOHN "ROBERT" THORSON

John "Robert" Thorson

Senior Vice President and Chief Financial Officer

(~~Principal~~Chief Financial and Accounting Officer)

Date: ~~November 3, 2014~~

May 5, 2015

57- 54 -

EXHIBIT INDEX

Exhibit 31.1: Certification of Chief Executive Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a)

Exhibit 31.2: Certification of Chief Financial Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a)

Exhibit 32.1: Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Exhibit 32.2: Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Exhibit 101: Pursuant to Rule 405 of Regulation S-T, the following financial information from the Company’s Quarterly Report on Form 10-Q for the period ended ~~September 30, 2014,~~March 31, 2015, is formatted in XBRL interactive data files: (i) Consolidated Statements of Income for the three ~~and nine~~ months ended ~~September 30, 2014~~March 31, 2015 and ~~2013;~~2014; (ii) Consolidated Balance Sheets at ~~September 30, 2014,~~March 31, 2015, and December 31, ~~2013;~~2014; (iii) Consolidated Statements of Comprehensive Income for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2015 and 2014, ~~and 2013,~~ (iv) Consolidated Statements of Changes in Shareholders’ Equity for the ~~nine~~three months ended ~~September 30, 2014~~March 31, 2015 and ~~2013;~~2014; (v) Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~September 30,~~March 31, 2015 and 2014 ~~and 2013~~ and (vi) Notes to the ~~unaudited~~ Unaudited

Consolidated Financial Statements.

58- 55 -

	At September 30,			At December 31,
	2014			2013
	(In thousands)
Assets:
Cash and due from banks	$	524,338		$	472,028
Investment securities available for sale		1,391,362			1,079,381
Investment securities held to maturity, with fair values of: $1,041,385 at September 30, 2014 and $1,112,676 at December 31, 2013		1,035,041			1,132,299
Loans		1,732,382			1,827,744
Allowance for loan losses		(31,769	)		(31,693	)
Loans, net of allowance for loan losses		1,700,613			1,796,051
Other real estate owned		7,273			13,320
Premises and equipment, net		37,335			37,314
Identifiable intangibles, net		15,338			18,557
Goodwill		121,673			121,673
Other assets		160,752			176,432
Total Assets	$	4,993,725		$	4,847,055

Liabilities:
Noninterest bearing deposits	$	1,893,480		$	1,740,182
Interest bearing deposits		2,428,158			2,423,599
Total deposits		4,321,638			4,163,781
Short-term borrowed funds		76,943			62,668
Federal Home Loan Bank advances		20,156			20,577
Term repurchase agreement		-			10,000
Other liabilities		41,593			47,095
Total Liabilities		4,460,330			4,304,121

Shareholders' Equity:
Common stock (no par value), authorized - 150,000 shares Issued and outstanding: 25,906 at September 30, 2014 and 26,510 at December 31, 2013		380,195			378,946
Deferred compensation		2,711			2,711
Accumulated other comprehensive income		9,733			4,313
Retained earnings		140,756			156,964
Total Shareholders' Equity		533,395			542,934
Total Liabilities and Shareholders' Equity	$	4,993,725		$	4,847,055

	For the Nine Months Ended September 30,
	2014			2013
	(In thousands)
Operating Activities:
Net income	$	45,618		$	51,121
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		12,275			13,325
Loan loss provision		2,600			6,400
Net amortization of deferred loan fees		(179	)		(333	)
Decrease in interest income receivable		1,537			1,420
Decrease in other assets		1,390			7,344
(Decrease) increase in income taxes payable		(1,160	)		856
Increase in net deferred tax asset		(19	)		(3,719	)
(Decrease) increase in interest expense payable		(102	)		50
Decrease in other liabilities		(3,841	)		(984	)
Stock option compensation expense		1,009			1,081
Tax benefit decrease upon exercise of stock options		447			202
Gain on sale of other assets		(400	)		(548	)
Net loss on sale of premises and equipment		22			16
Originations of mortgage loans for resale		-			(441	)
Proceeds from sale of mortgage loans originated for resale		-			447
Net gain on sale of foreclosed assets		(1,014	)		(892	)
Writedown of foreclosed assets		113			1,752
Net Cash Provided by Operating Activities		58,296			77,097
Investing Activities:
Net repayments of loans		93,115			231,002
Proceeds from FDIC1 loss-sharing indemnification		6,703			6,478
Purchases of investment securities available for sale		(747,630	)		(355,440	)
Proceeds from sale/maturity/calls of securities available for sale		444,906			100,660
Purchases of investment securities held to maturity		(26,435	)		(152,116	)
Proceeds from maturity/calls of securities held to maturity		115,799			164,369
Purchases of premises and equipment		(2,392	)		(1,581	)
Net change in FRB2/FHLB3 securities		3,248			2,243
Proceeds from sale of foreclosed assets		7,549			14,986
Net Cash (Used in) Provided by Investing Activities		(105,137	)		10,601
Financing Activities:
Net change in deposits		157,947			(123,914	)
Net change in short-term borrowings and FHLB3 advances		3,992			(5,866	)
Exercise of stock options		12,396			9,219
Tax benefit decrease upon exercise of stock options		(447	)		(202	)
Retirement of common stock including repurchases		(44,810	)		(39,789	)
Common stock dividends paid		(29,927	)		(29,949	)
Net Cash Provided by (Used in) Financing Activities		99,151			(190,501	)
Net Change In Cash and Due from Banks		52,310			(102,803	)
Cash and Due from Banks at Beginning of Period		472,028			491,382
Cash and Due from Banks at End of Period	$	524,338		$	388,579

Supplemental Cash Flow Disclosures:
Supplemental disclosure of non cash activities:
Loan collateral transferred to other real estate owned	$	968		$	5,404
Securities purchases pending settlement		2,622			1,961
Supplemental disclosure of cash flow activities:
Interest paid for the period		2,959			3,982
Income tax payments for the period		14,981			17,931

	For the Nine Months Ended September 30, 2014			For the Year Ended December 31, 2013
Impaired purchased loans	(In thousands)
Carrying amount at the beginning of the period	$	4,936		$	14,629
Reductions during the period		(292	)		(9,693	)
Carrying amount at the end of the period	$	4,644		$	4,936

	For the Nine Months Ended September 30, 2014			For the Year Ended December 31, 2013
Accretable yield:	(In thousands)
Balance at the beginning of the period	$	2,505		$	4,948
Reclassification from nonaccretable difference		3,513			12,504
Accretion		(3,287	)		(14,947	)
Balance at the end of the period	$	2,731		$	2,505

Accretion	$	(3,287	)	$	(14,947	)
Reduction in FDIC indemnification asset		278			11,438
(Increase) in interest income	$	(3,009	)	$	(3,509	)

	Impaired Loans At December 31, 2013
	Recorded Investment		Unpaid Principal Balance		Related Allowance
	(In thousands)
Impaired loans with no related allowance recorded:
Commercial	$	3,931	$	4,498	$	-
Commercial real estate		11,002		13,253		-
Construction		2,483		2,947		-
Consumer installment and other		2,014		2,133		-

Impaired loans with an allowance recorded:
Commercial		1,000		2,173		100
Commercial real estate		9,773		12,482		1,396

Total:
Commercial	$	4,931	$	6,671	$	100
Commercial real estate		20,775		25,735		1,396
Construction		2,483		2,947		-
Consumer installment and other		2,014		2,133		-

	Troubled Debt Restructurings
	At September 30, 2013
	Number of Contracts		Pre-Modification Carrying Value		Period-End Carrying Value		Period-End Individual Impairment Allowance
	(In thousands)
Commercial		4	$	1,991	$	1,689	$	-
Commercial real estate		3		6,295		5,849		394
Total		7	$	8,286	$	7,538	$	394

	At September 30, 2014		At December 31, 2013
	(In thousands)
Cost method equity investments:
Federal Reserve Bank stock (1)	$	14,069	$	14,069
Federal Home Loan Bank stock (2)		940		4,188
Other investments		286		376
Total cost method equity investments		15,295		18,633
Life insurance cash surrender value		45,583		43,896
Net deferred tax asset		48,873		53,281
Limited partnership investments		16,802		18,198
Interest receivable		17,388		18,925
FDIC indemnification receivable		-		4,032
Prepaid assets		5,123		5,229
Other assets		11,688		14,238
Total other assets	$	160,752	$	176,432

	Nine Months Ended September 30, 2014
	Compared with
	Nine Months Ended September 30, 2013
	Volume			Yield/Rate			Total
	(In thousands)
Increase (decrease) in interest and fee income:
Investment securities:
Available for sale
Taxable	$	3,537		$	(1,629	)	$	1,908
Tax-exempt (1)		(613	)		63			(550	)
Held to maturity
Taxable		(1,018	)		391			(627	)
Tax-exempt (1)		595			(3,450	)		(2,855	)
Loans:
Commercial:
Taxable		1,632			(1,395	)		237
Tax-exempt (1)		(847	)		(120	)		(967	)
Commercial real estate		(5,110	)		(743	)		(5,853	)
Real estate construction		(158	)		(290	)		(448	)
Real estate residential		(1,109	)		(128	)		(1,237	)
Consumer installment and other		(1,801	)		(1,146	)		(2,947	)
Total loans (1)		(7,393	)		(3,822	)		(11,215	)
Total decrease in interest and fee income (1)		(4,892	)		(8,447	)		(13,339	)
Increase (decrease) in interest expense:
Deposits:
Savings and interest-bearing transaction		39			(25	)		14
Time less than $100,000		(109	)		(84	)		(193	)
Time $100,000 or more		(262	)		102			(160	)
Total interest-bearing deposits		(332	)		(7	)		(339	)
Short-term borrowed funds		6			-			6
Term repurchase agreement		(14	)		1			(13	)
Federal Home Loan Bank advances		(75	)		19			(56	)
Debt financing		(601	)		-			(601	)
Total (decrease) increase in interest expense		(1,016	)		13			(1,003	)
Decrease in net interest and fee income (1)	$	(3,876	)	$	(8,460	)	$	(12,336	)

	Allowance for Credit Losses
	For the Nine Months Ended September 30, 2014
													Consumer			Purchased			Purchased
				Commercial						Residential			Installment			Non-covered			Covered
	Commercial			Real Estate			Construction			Real Estate			and Other			Loans			Loans			Unallocated		Total
	(In thousands)
Allowance for loan losses:
Balance at beginning of period	$	4,005		$	12,070		$	602		$	405		$	3,198		$	-		$	1,561		$	9,852	$	31,693
Additions:
Provision		945			(2,224	)		(163	)		17			942			1,203			-			1,880		2,600
Deductions:
Chargeoffs		(1,114	)		-			-			(30	)		(3,217	)		(260	)		-			-		(4,621	)
Recoveries		516			193			3			-			1,315			70			-			-		2,097
Net loan recoveries (losses)		(598	)		193			3			(30	)		(1,902	)		(190	)		-			-		(2,524	)
Indemnification expiration		-			-			-			-			-			1,561			(1,561	)		-		-
Balance at end of period		4,352			10,039			442			392			2,238			2,574			-			11,732		31,769
Liability for off-balance sheet credit exposure		1,706			24			105			-			451			131			-			276		2,693
Total allowance for credit losses	$	6,058		$	10,063		$	547		$	392		$	2,689		$	2,705		$	-		$	12,008	$	34,462

										Minimum			Well-capitalized
	At September 30,						At December 31,			Regulatory			by Regulatory
	2014			2013			2013			Requirement			Definition

Tier I Capital		13.61	%		14.59	%		14.71	%		4.00	%		6.00	%
Total Capital		15.03	%		15.99	%		16.18	%		8.00	%		10.00	%
Leverage ratio		8.12	%		8.61	%		8.55	%		4.00	%		5.00	%

							Final Rule
	Final Rule						Minimum
	Minimum			"Well-capitalized"			Plus "Capital			Proforma Measurements as of
	Capital			Under PCA			Conservation			September 30, 2014 Assuming Final
	Requirement			Proposal			Buffer"			Rule Fully Phased-in
										Company			Bank
Capital Measurement:
Leverage		4.00	%		5.00	%		4.00	%		8.12	%		7.33	%
Common Equity Tier 1		4.50	%		6.50	%		7.00	%		13.56	%		12.31	%
Tier I Capital		6.00	%		8.00	%		8.50	%		13.56	%		12.31	%
Total Capital		8.00	%		10.00	%		10.50	%		14.97	%		13.94	%