~~See accompanying notes to unaudited consolidated financial statements.~~CONSOLIDATED STATEMENTS OF INCOME

~~See accompanying notes to unaudited consolidated financial statements.~~CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

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 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 months ended March 31, ~~2021~~2022 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, ~~2020.~~2021.

The most significant accounting policies followed by the Company are 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, ~~2020.~~2021. 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, it is reasonably possible conditions could change materially affecting results of operations and financial conditions. Certain risks, uncertainties and other factors, including those discussed in ~~Note~~ 20 ~~“Impact of COVID-~~~~19”~~ ~~to the consolidated financial statements and~~ “Risk Factors” in Part I – Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 may cause actual future results to differ materially from the results discussed in this report on Form 10-Q. Management continues to evaluate the impacts of the COVID-19 pandemic, inflation and the Federal Reserve’s monetary policy, climate changes and the war in Ukraine on the Company’s business. The extent of the impact on the Company’s results of operations, cash flow liquidity, and financial performance, as well as the Company’s ability to execute near- and long-term business strategies and initiatives, will depend on numerous evolving factors and future developments, which are highly uncertain and cannot be reasonably predicted. However, the effects could have a material impact on the Company’s results of operations and heighten many of the risk factors discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. Any one or a combination of such risk factors, or other factors, could materially adversely affect the Company's business, financial condition, results of operations and prospects.

Application of ~~these~~accounting 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 inherently have a greater reliance on the use of estimates, assumptions and judgments 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 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 a 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 at fair value inherently results in more financial statement volatility. The fair values and the information used to record valuation adjustments for certain assets and liabilities are based either on quoted market prices or are provided by other third-party sources, when available. Certain amounts in previous periods have been reclassified to conform to current presentation.

Debt Securities. Debt securities consist of the U.S. Treasury, securities of government sponsored entities, states, counties, municipalities, corporations, agency and non-agency mortgage-backed securities, collateralized loan obligations and commercial paper. Securities transactions are recorded on a trade date basis. The Company classifies its debt securities in one of three categories: trading, available for sale or held to maturity. Trading securities are bought and held principally for the purpose of selling them in the near term. Trading securities are recorded at fair value with unrealized gains and losses included in net income. Held to maturity debt securities are those securities which the Company has the ability and intent to hold until maturity. Held to maturity debt securities are recorded at cost, adjusted for the amortization of premiums or accretion of discounts. Securities not included in trading or held to maturity are classified as available for sale debt securities. Available for sale debt securities are recorded at fair value. Unrealized gains and losses, net of the related tax effect, on available for sale debt securities are included in accumulated other comprehensive income. Accrued interest is recorded within other assets and reversed against interest income if it is not received.

The Company utilizes third-party sources to value its investment securities; securities individually valued using quoted prices in active markets are classified as Level 1 assets in the fair value hierarchy, and securities valued using quoted prices in active markets for similar securities (commonly referred to as “matrix” pricing) are classified as Level 2 assets in the fair value hierarchy. The Company validates the reliability of third-party provided values by comparing individual security pricing for securities between more than one third-party source. When third-party information is not available, valuation adjustments are estimated in good faith by Management and classified as Level 3 in the fair value hierarchy.

The Company follows the 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 when performing investment security pre-purchase analysis or evaluating investment securities for credit loss. Credit ratings issued by recognized rating agencies are considered in the Company’s analysis only as a guide to the historical default rate associated with similarly-rated bonds.

To the extent that debt securities in the held-to-maturity portfolio share common risk characteristics, estimated expected credit losses are calculated in a manner like that used for loans held for investment. That is, for pools of such securities with common risk characteristics, the historical lifetime probability of default and severity of loss in the event of default is derived or obtained from external sources and adjusted for the expected effects of reasonable and supportable forecasts over the expected lives of the securities on those historical credit losses. Expected credit loss on each security in the held-to-maturity portfolio that do not share common risk characteristics with any of the pools of debt securities is individually evaluated and a reserve for credit losses is established at the difference between the discounted value of the expected future cash flows, based on the original effective interest rate, and the recorded amortized cost basis of the security. For certain classes of debt securities, the ~~bank~~Company considers the history of credit losses, current conditions and reasonable and supportable forecasts, which may indicate that the expectation that nonpayment of the amortized cost basis is or continues to be zero. Therefore, for those securities, the ~~bank~~Company does not record expected credit losses.

Available for sale debt securities in unrealized loss positions are evaluated for credit related loss at least quarterly. For available for sale debt securities, a decline in fair value due to credit loss results in recording an allowance for credit losses to the extent the fair value is less than the amortized cost basis. Declines in fair value that have not been recorded through an allowance for credit losses, such as declines due to changes in market interest rates, are recorded through other comprehensive income, net of applicable taxes. Although these evaluations involve significant judgment, an unrealized loss in the fair value of a debt security is generally considered to not be related to credit when the fair value of the security is below the carrying value primarily due to changes in risk-free interest rates, there has not been significant deterioration in the financial condition of the issuer, and the Company does not intend to sell nor does it believe it will be required to sell the security before the recovery of its cost basis.

If the Company intends to sell a debt security or more likely than not will be required to sell the security before recovery of its amortized cost basis, the debt security is written down to its fair value and the write down is charged against the allowance for credit losses with any incremental loss reported in earnings.

Purchase premiums are amortized to the earliest call date and purchase discounts are amortized to maturity as an adjustment to yield using the effective interest method. Unamortized premiums, unaccreted discounts, and early payment premiums are recognized as a component of gain or loss on sale upon disposition of the related security. Interest and dividend income are recognized when earned. Realized gains and losses from the sale of available for sale debt securities are included in earnings using the specific identification method.

Nonmarketable Equity Securities. Nonmarketable equity securities include securities that are not publicly traded, such as Visa Class B common stock, and securities acquired to meet regulatory requirements, such as Federal Reserve Bank stock, which are restricted. These restricted securities are accounted for under the cost method and are included in other assets. The Company reviews those assets accounted for under the cost method at least quarterly. The Company’s review typically includes an analysis of the facts and circumstances of each investment, the expectations for the investment’s cash flows and capital needs, the viability of its business model and any exit strategy. When the review indicates that impairment exists the asset value is reduced to fair value. The Company recognizes the estimated loss in noninterest income.

Loans. Loans are stated at the principal amount outstanding, net of unearned discount and unamortized deferred fees and costs. Interest is accrued daily on the outstanding principal balances and included in other assets. Loans which are more than 90 days delinquent with respect to interest or principal, unless they are well secured and in the process of collection, and other loans on which full recovery of principal or interest is in doubt, are placed on nonaccrual status. Interest previously accrued on loans placed on nonaccrual status is charged against interest income. In addition, some loans secured by real estate and commercial loans to borrowers experiencing financial difficulties are placed on nonaccrual status even though the borrowers continue to repay the loans as scheduled. When the ability to fully collect nonaccrual loan principal is in doubt, payments received are applied against the principal balance of the loans on a cost-recovery method until such time as full collection of the remaining recorded balance is expected. Any additional interest payments received after that time are recorded as interest income on a cash basis. Nonaccrual loans are reinstated to accrual status when none of the loan’s principal and interest is past due and improvements in credit quality eliminate doubt as to the full collectability of both principal and interest, or the loan otherwise becomes well secured and in the process of collection. Certain consumer loans or auto receivables are charged off against the allowance for credit losses when they become 120 days past due.

A troubled debt restructuring (“TDR”) occurs when the Company, for reasons related to a borrower’s financial difficulties, grants a concession to the borrower it would not otherwise consider. The Company follows its general nonaccrual policy for TDRs. Performing TDRs are reinstated to accrual status when improvements in credit quality eliminate the doubt as to full collectability of both principal and interest. Under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), banks may elect to deem that loan modifications do not result in TDRs if they are (1) related to the novel coronavirus disease; (2) executed on a loan that was not more than 30 days past due as of December 31, 2019; and (3) executed between March 1, 2020, and the earlier of (A) 60 days after the date of termination of the National Emergency or (B) December 31, ~~2020.~~ ~~The~~2020.The Consolidated Appropriations Act, 2021, extended the period during which banks may elect to deem that qualified loan modifications do not result in TDR classification through January 1, 2022.

Allowance for Credit Losses. The Company extends loans to commercial and consumer customers primarily in Northern and Central California. These lending activities expose the Company to the risk borrowers will default, causing ~~loss.~~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 these financial statements requires Management to estimate the amount of expected losses over the expected contractual life of ~~our~~the Bank’s existing loan portfolio and establish an allowance for credit losses. Loan agreements generally include a maturity date, and the Company considers the contractual life of a loan agreement to extend from the date of origination to the contractual maturity date. In estimating credit losses, Management must exercise significant judgment in evaluating information deemed relevant. 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 allowance for credit losses is established through provisions for credit losses charged to income. Losses on loans are charged to the allowance for credit losses when all or a portion of the recorded amount of a loan is deemed to be uncollectible. Recoveries of loans previously charged off are credited to the allowance when realized. The Company’s allowance for credit losses is maintained at a level considered adequate to provide for expected losses based on historical loss rates adjusted for current and expected conditions over a forecast period. These include conditions unique to individual borrowers, as well as overall credit loss experience, the amount of past due, nonperforming and classified loans, recommendations of regulatory authorities, prevailing economic conditions, or credit protection agreements and other factors.

Loans that share common risk characteristics are segregated into pools based on common characteristics, which is primarily determined by loan, borrower, or collateral type. Historical loss rates are determined for each pool. For consumer installment loans, primarily secured by automobiles, historical loss rates are determined using a vintage methodology, which tracks losses based on period of origination. For commercial, construction, and commercial real estate, historical loss rates are determined using an open pool methodology where losses are tracked over time for all loans included in the pool at the historical measurement date. Historical loss rates are adjusted for factors that are not reflected in the historical loss rates that are attributable to national or local economic or industry trends which have occurred but have not yet been recognized in past loan charge-off history, estimated losses based on management’s reasonable and supportable expectation of economic trends over a forecast horizon of up to two years, and other factors that impact credit loss expectations that are not reflected in the historical loss rates. Other factors include, but are not limited to, the effectiveness of the Company’s loan review system, adequacy of lending Management and staff, loan policies and procedures, problem loan trends, and concentrations of credit. At the end of the two-year forecast period loss rates revert immediately to the historical loss rates. The results of this analysis are applied to the amortized cost of the loans included within each pool.

Loans that do not share risk characteristics with other loans in the pools are evaluated individually. A loan is considered ‘collateral-dependent’ when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. A credit loss reserve for collateral-dependent loans is established at the difference between the amortized cost basis in the loan and the fair value of the underlying collateral adjusted for costs to sell. For other individually evaluated loans that are not collateral dependent, a credit loss reserve is established at the difference between the amortized cost basis in the loan and the present value of expected future cash flows discounted at the loan’s effective interest rate. The impact of an expected TDR modification is included in the allowance for credit losses when management determines a TDR modification is likely.

Accrued interest is recorded in other assets and is excluded from the estimation of expected credit loss. Accrued interest is reversed through interest income when amounts are determined to be uncollectible, which generally occurs when the underlying receivable is placed on nonaccrual status or charged off.

Liability for Off-Balance Sheet Credit Exposures. Off-balance sheet credit exposures relate to letters of credit and unfunded loan commitments for commercial, construction and consumer loans. The Company maintains a separate allowance for credit losses from off-balance-sheet credit exposures, which is included within other liabilities on the consolidated statements of financial condition. Increases or reductions to the Company’s allowance for credit losses from off-balance sheet credit exposures are recorded in other expenses. Management estimates the amount of expected losses by estimating expected usage exposures that are not unconditionally cancellable by the Company and applying the loss factors used in the allowance for credit loss methodology to estimate the liability for credit losses related to unfunded commitments. No credit loss estimate is reported for off-balance-sheet credit exposures that are unconditionally cancellable by the Company or for undrawn amounts under such arrangements that may be drawn prior to the cancellation of the arrangement.

~~In the~~ ~~three~~ ~~months ended~~ ~~March 31, 2021,~~ ~~the Company adopted the following new accounting guidance:~~

~~FASB ASU~~ ~~2019~~-12, ~~Income Taxes (Topic~~ ~~740~~~~): Simplifying the Accounting for Income Taxes~~~~, was issued~~ ~~December 2019.~~ ~~The ASU is intended to simplify various aspects related to accounting for income taxes, eliminates certain exceptions to the general principles in ASC Topic~~ ~~740~~ related to intra-period tax allocation, simplifies when companies recognize deferred taxes in an interim period, and clarifies certain aspects of the current guidance to promote consistent application. This guidance effective for public entities for fiscal years beginning after ~~December 15, 2020,~~ ~~and for interim period within those fiscal years, with early adoption permitted. The Company adopted the ASU provisions on~~ ~~January 1, 2021~~ ~~and the adoption of the ASU provisions did~~ ~~not~~ ~~have a significant impact on the Company’s consolidated financial statements.~~

FASB ASU 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures, was issued March 2022. The ASU eliminates the accounting guidance for Troubled Debt Restructurings (“TDR”) Loans by creditors, while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors made to borrowers experiencing financial difficulty. Upon adoption of this ASU, an entity is required to disclose current period gross chargeoffs by year of origination for loans. The ASU should be applied prospectively, with the exception of the guidance related to the recognition and measurement of TDR loans that may be applied by recording a cumulative effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. This guidance is effective for reporting periods beginning after December 15, 2022, with early adoption permitted, for public entities that have adopted ASU 2016-13,Financial Instruments – Credit Losses (Topic 326). The Company adopted ASU 2016-13 effective January 1, 2020. FASB ASU 2022-02 is applicable to the Company’s fiscal year beginning January 1, 2023. The Company is currently evaluating the impact of adopting this standard.

FASB ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, was issued March 2020. The ASU provides optional expedients and exceptions for applying GAAP to loan and lease agreements, derivative contracts, and other transactions affected by the anticipated transition away from LIBOR toward new interest rate benchmarks. For transactions that are modified because of reference rate reform and that meet certain scope guidance (i) modifications of loan agreements should be accounted for by prospectively adjusting the effective interest rate and the modification will be considered "minor" so that any existing unamortized origination fees/costs would carry forward and continue to be amortized and (ii) modifications of lease agreements should be accounted for as a continuation of the existing agreement with no reassessments of the lease classification and the discount rate or remeasurements of lease payments that otherwise would be required for modifications not accounted for as separate contracts. ASU 2020-04 also provides numerous optional expedients for derivative accounting. ASU 2020-04 is effective March 12, 2020 through December 31, 2022. An entity may elect to apply ASU 2020-04 for contract modifications as of January 1, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued. Once elected for a Topic or an Industry Subtopic within the Codification, the amendments in this ASU must be applied prospectively for all eligible contract modifications for that Topic or Industry Subtopic. The Company does not expect any material impact on its consolidated financial statements since the Company has an insignificant number of financial instruments applicable to this ASU.

~~Effective~~ ~~January 1, 2020,~~ ~~the Company adopted~~ ~~FASB ASU~~ ~~2016~~-~~13,~~~~Financial Instruments~~ – ~~Credit Losses (Topic~~ ~~326~~~~): Measurement of Credit Losses on Financial Instruments~~~~. Upon adoption of the ASU the Company recorded allowance for credit losses for debt securities held to maturity of $16 thousand. During the~~ ~~fourth~~ ~~quarter ended~~ ~~December 31, 2020,~~ the Company recorded $7 thousand of reversal of provision for credit loss on debt securities held to maturity, resulting in the balance of $9 thousand allowance for credit losses for debt securities held to maturity.

An analysis of the amortized cost and fair value by major categories of debt securities available for sale, which are carried at fair value with net unrealized gains (losses) reported on an after-tax basis as a component of ~~cumulative~~accumulated other comprehensive income, and debt securities held to maturity, which are carried at amortized cost, before allowance for credit losses of $9$7 thousand at March 31, 2022 and December 31, 2021, follows:

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

Expected maturities of mortgage-related 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-related securities. At ~~March 31, 2021~~ ~~and~~ ~~December 31, 2020,~~ ~~the Company had 0 high-risk collateralized mortgage obligations as defined by regulatory guidelines.~~

An analysis of the gross unrealized losses of the debt securities available for sale portfolio follows:

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

Based upon the most recent evaluation, the unrealized losses on the Company’s debt securities available for sale were most likely caused by market conditions for these types of investments, particularly changes in risk-free interest rates and/or market bid-ask spreads. The Company does not intend to sell any debt securities available for sale with an unrealized loss and has concluded that it is more likely than not that it will not be required to sell the debt securities prior to recovery of the amortized cost basis. At March 31, 2022, all corporate securities and collateralized loan obligations are investment grade rated by a major rating agency. Therefore, the Company does not consider these debt securities to have credit related ~~loss~~losses as of March 31, ~~2021.~~2022.

The fair values of debt securities available for sale could decline in the future if the general economy deteriorates, inflation increases, credit ratings decline, the ~~issuer’s~~issuers’ financial condition deteriorates, or the liquidity for debt securities declines. As a result, significant credit ~~loss~~losses on debt securities available for sale may occur in the future.

As of March 31, ~~2021~~2022 and December 31, ~~2020,~~2021, the Company had debt securities pledged to secure public deposits and short-term borrowed funds of ~~$844,502~~$1,002,363 thousand and ~~$888,577~~$1,021,566 thousand, respectively.

An analysis of the gross unrealized losses of the debt securities available for sale portfolio follows:

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

The Company evaluates debt securities on a quarterly basis including changes in security ratings issued by rating agencies, changes in the financial condition of the issuer, and, for mortgage-backed and asset-backed securities, collateral levels, 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. One corporate bond with an amortized cost of $15.0 million and a fair value of $14.98 million at~~ ~~March 31, 2021,~~ is rated below investment grade. The $14.98 million corporate bond was issued by a pharmaceutical company which develops, manufactures and markets generic and branded human pharmaceuticals, as well as active pharmaceutical ingredients, to customers worldwide. The bond matures in ~~July 2021.~~ 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 following table presents the activity in the allowance for credit losses for debt securities held to maturity:

Agency mortgage-backed securities were assigned no credit loss allowance due to the perceived backing of government sponsored entities. Municipal securities were evaluated for risk of default based on credit rating and remaining term to maturity using Moody’s risk of default factors; Moody’s loss upon default factors were applied to the assumed defaulted principal amounts to estimate the amount for credit loss allowance.

The following table summarizes the amortized cost of debt securities held to maturity at March 31, ~~2021,~~2022, aggregated by credit rating:

There were 0 debt securities held to maturity on nonaccrual status or past due 30 days or more as of March 31, ~~2021.~~2022.

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

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

~~The growth in commercial loan balances was due to originations of Paycheck Protection Program (“PPP”)~~PPP loans ~~which~~ are~~100%~~ guaranteed by the Small Business Administration (“SBA”). PPP loan proceeds used for eligible payroll and certain other operating costs are ~~to be forgiven~~eligible for forgiveness, with repayment of loan principal and accrued interest made by the SBA. Management does not expect credit losses on PPP loans.

Therefore, there is no allowance for such loans. The ~~significant increase in the~~ ~~first~~ ~~quarter~~ ~~2020~~following summarizes activity in the allowance for credit ~~losses for consumer installment and other loans was due to expected credit losses associated with forecasted unemployment.~~losses.

The Company’s customers are primarily small businesses, professionals and consumers. Given the scale of these borrowers, corporate credit rating agencies do not evaluate the borrowers’ financial condition. The ~~Company’s subsidiary, Westamerica~~ Bank ~~(the “Bank”)~~ maintains a Loan Review Department which reports directly to the Audit Committee of the Board of Directors. The Loan Review Department performs independent evaluations of loans and validates management assigned credit risk grades on 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.” The Loan Review Department performs continuous evaluations throughout the year. 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 management and validated by the Loan Review Department are subject to review by the Bank’s regulatory authorities during regulatory examinations.

There was 0 allowance for credit losses allocated to loans on nonaccrual status as of March 31, ~~2021~~2022 ~~and~~or December 31, ~~2020.~~2021. There were 0 commitments to lend additional funds to borrowers whose loans were on nonaccrual status at March 31, ~~2021~~2022 ~~and~~or December 31, ~~2020.~~2021.

The following tables provide information on troubled debt restructurings (TDRs):

During the three months ended March 31, 2022, the Company did not modify any loans that were considered troubled debt restructurings. During the three months ended March 31, 2021, the Company did not modify any loans that were considered troubled debt restructurings for accounting purposes. Section 4013 of the CARES Act allowed certain loan modifications for borrowers impacted by the COVID-19 pandemic to be excluded from TDR accounting. This relief ended on January 1, 2022. During the three months ended March 31, 2021, the Company modified loans under Section 4013 of the CARES Act, granting 90 day deferrals of principal and interest payments. As of March 31, 2021, ~~2021,~~loans deferred under the CARES Act that are not considered TDRs included 1one commercial real estate loan with deferred payments totaling $2.3 million for a borrower in the hospitality industry, and consumer loans totaling $1.8 million. ~~During the~~ ~~three~~ ~~months ended~~No such loans were deferred as of March 31, ~~2020,~~2022. ~~the Company did~~ ~~not~~ ~~modify any loans that were considered troubled debt restructurings including those under the CARES Act.~~ There were 0 chargeoffs related to troubled debt restructurings made during the three months ended March 31, ~~2021~~2022 and March 31, ~~2020.~~2021. During the three months ended March 31, ~~2021~~2022 and March 31, ~~2020,~~2021, 0 troubled debt restructured loans defaulted within 12 months of the modification date. A troubled debt restructuring is considered to be in default when payments are ~~ninety~~90 days or more past due.

~~TDRs of $5,227 thousand included a loan with a balance of $3,120 thousand~~NaN loans on nonaccrual status were included in TDRs of $1,952 thousand at March 31, ~~2021.~~2022 ~~NaN allowance for credit losses was allocated to 1 commercial real estate loan secured by real property with a balance of $3,120~~and $1,965 thousand ~~which was considered collateral-dependent~~ at ~~March~~December 31, 2021.~~Four other commercial real estate loans totaling $7.6 million were secured by real property and considered collateral-dependent at~~ ~~March 31, 2021.~~ At ~~March 31, 2021,~~ ~~$108 thousand of indirect consumer installment loans secured by personal property were past due~~ 90 ~~days or more and considered collateral-dependent and 4 residential real estate loans totaling $365 thousand secured by real property were considered collateral-dependent. There were~~ no ~~other collateral-dependent loans at~~ ~~March 31, 2021.~~

A loan is considered ~~collateral-dependent~~collateral dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral.

~~TDRs of $6,221 thousand included a loan with a balance of $3,420 thousand on nonaccrual status~~ Loans that were considered collateral dependent at ~~December~~March 31, ~~2020.~~2022 ~~NaN allowance for credit losses was allocated to 1 commercial real estate loan secured by real property with a balance of $3,420 thousand, which was considered collateral-dependent at~~ ~~December 31, 2020.~~ ~~Four~~ ~~other~~included the following: 5 commercial real estate loans totaling ~~$7.6~~$8.3 million ~~were~~ secured by real property, ~~and considered collateral-dependent at~~ ~~December 31, 2020.~~ At ~~December 31, 2020,~~ ~~$446~~$429 thousand of indirect consumer installment loans secured by personal property, ~~were past due~~ 90 ~~days or more and considered collateral-dependent~~ and 2 residential real estate loans totaling ~~$346~~$233 thousand secured by real ~~property were considered collateral-dependent.~~property. There were no other ~~collateral-dependent~~collateral dependent loans at March 31, 2022. Loans that were considered collateral dependent at December 31, 2021 included the following: 5 commercial real estate loans totaling $8.4 million secured by real property, $394 thousand of indirect consumer installment loans secured by personal property, one commercial loan with a balance of $57 thousand secured by business assets, and 3 residential real estate loans totaling $420 thousand secured by real property. There were no other collateral dependent loans at December 31, ~~2020.~~2021.

Based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

The Company considers the delinquency and nonaccrual status of the consumer loan portfolio and its impact on the allowance for credit losses. The following table presents the amortized cost in consumer installment and other loans based on delinquency and nonaccrual status:

There were 0 loans held for sale at March 31, ~~2021,~~2022 and December 31, ~~2020.~~2021.

The Company held 0 other real estate owned (OREO) at March 31, ~~2021~~2022 and December 31, ~~2020.~~2021. The amount of consumer mortgage loans outstanding secured by residential real estate properties for which formal foreclosure proceedings were in process was ~~$365~~$62 thousand at March 31, ~~2021~~2022 and ~~$346~~$247 thousand at December 31, ~~2020.~~2021.

Under the California Financial Code, credit extended 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 the sum of the shareholders' equity, allowance for credit 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 credit losses, capital notes, and debentures of the bank. At March 31, ~~2021,~~2022, the Bank did not have credit extended to any one entity exceeding these limits. At March 31, ~~2021,~~2022, the Bank had 3132 lending relationships each with aggregate amounts of $5 million or more. 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 related to real estate loans of ~~$36,082~~$33,776 thousand and ~~$37,456~~$34,226 thousand at March 31, ~~2021~~2022 and December 31, ~~2020,~~2021, 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. At March 31, ~~2021,~~2022, the Bank held corporate bonds in 94109 issuing entities that exceeded $5 million for each issuer.

The Company owns 211 thousand shares of Visa Inc. class B common stock which have transfer restrictions; the carrying value is $-0- thousand. On ~~September 30, 2019,~~January 28, 2022, Visa Inc. ~~announced~~disclosed a revised conversion rate applicable to its class B common stock ~~resulting from~~in its Form ~~September 27, 2019~~ 10~~deposit of funds into its litigation escrow account. This funding reduced~~-Q for the quarterly period ended December 31, 2021. The conversion rate of class B common stock into class A common stock, which is unrestricted and trades actively on the New York Stock Exchange, was reduced from ~~1.6298~~1.6228 to ~~1.6228~~1.6181 per share, effective as of ~~September 27, 2019.~~December 29, 2021. Visa Inc. class A common stock had a closing price of ~~$211.73~~$221.77 per share on March 31, ~~2021,~~2022, the last day of stock market trading for the first quarter ~~2021.~~2022. The ultimate value of the Company’s Visa Inc. class B shares is subject to the extent of Visa Inc.’s future litigation escrow fundings, the resulting conversion rate to class A common stock, and current and future trading restrictions on the class B common stock.

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, ~~2021,~~2022, ~~this investment~~these investments totaled ~~$17,637~~$38,714 thousand and ~~$11,240~~$28,641 thousand of this amount represents outstanding equity capital commitments that are included in other liabilities. At December 31, ~~2020,~~2021, ~~this investment~~these investments totaled ~~$18,335~~$37,145 thousand and ~~$12,202~~$26,485 thousand of this amount represents outstanding equity capital commitments that are included in other liabilities. At March 31, ~~2021,~~2022, the ~~$11,240~~$28,641 thousand of outstanding equity capital commitments are expected to be paid as ~~follows, $2,098~~follows:$6,143 thousand in the remainder of ~~2021,~~ ~~$4,908 thousand in~~ 2022, ~~$3,485~~$12,200 thousand in 2023, ~~$96~~$9,169 thousand in 2024, ~~$81~~$244 thousand in 2025, ~~$74~~$128 thousand in 2026, ~~and $498~~$207 thousand in 2027, and $550 thousand in 2028or thereafter.

~~The net deferred tax liability at~~ ~~March 31, 2021~~ of $6,204 thousand was net of deferred tax benefits of $22,715 thousand, included deferred tax obligations of $28,919 thousand related to unrealized gains of $97,820 thousand on available for sale debt securities. The deferred tax liability at ~~December 31, 2020~~ of $25,778 thousand, net of deferred tax benefits of $22,805 thousand, included deferred tax obligations of $48,021 thousand related to unrealized gains of $162,434 thousand on available for sale debt securities.

The Company has entered into leases for most branch locations and certain other offices that were classified as operating leases primarily with original terms of five years. Certain lease arrangements contain extension options, which can be exercised at the Company’s option, for one or more additional five year terms. Unexercised extension options are not considered reasonably certain of exercise and have not been included in the lease term used to determine the lease liability or right-of-use asset. The Company did not have any finance leases as of March 31, ~~2021.~~2022.

As of March 31, ~~2021,~~2022, the ~~Company recorded a~~Company’s lease liability ~~of $20,609 thousand~~ and a right-of-use asset ~~of $20,609~~were $17,456 thousand. The weighted average remaining life of operating leases and weighted average discount rate used to determine operating lease liabilities were ~~4.6~~4.1 years and ~~1.83%~~1.64%, respectively, at March 31, ~~2021.~~2022. The Company did not have any material lease incentives, unamortized initial direct costs, prepaid lease expense, or accrued lease expense as of March 31, ~~2021.~~2022.

Total lease costs were ~~$1,654~~$1,633 thousand and ~~$1,659~~$1,654 thousand in the three months ended March 31, ~~2021~~2022 and March 31, ~~2020,~~2021, respectively, and were recorded within occupancy and equipment expense. The Company did not have any material short-term or variable leases costs or sublease income during the three months ended March 31, ~~2021~~2022 and March 31, ~~2020.~~2021.

The following table summarizes the remaining lease payments of operating lease liabilities:

The Company has recorded goodwill and other identifiable intangibles associated with purchase business combinations. Goodwill is not amortized, but is evaluated for impairment at least annually. The Company did not recognize impairment during the three months ended March 31, ~~2021~~2022 and year ended December 31, ~~2020.~~2021. 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 three months ended March 31, ~~2021~~2022 and year ended December 31, ~~2020~~2021 no0 such adjustments were recorded.

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

As of March 31, ~~2021,~~2022, the current period and estimated future amortization expense for identifiable intangible assets, to be fully amortized in 2025, was:

Demand deposit overdrafts of ~~$1,194~~$784 thousand and ~~$682~~$611 thousand were included as loan balances at March 31, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively. Interest expense for aggregate time deposits with individual account balances in excess of $100 thousand was $41 thousand in the three months ended March 31, 2022 and $78 thousand in the three months ended March 31, ~~2021~~ ~~and $79 thousand in the~~ ~~three~~ ~~months ended~~ ~~March 31, 2020.~~2021.

~~The following table provides additional detail regarding short-term borrowed funds.~~

The following table provides additional detail regarding short-term borrowed funds.

The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Debt securities available for sale 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, loans individually evaluated for credit loss, certain loans held for investment, debt 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 FASB Accounting Standards 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 and equity 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 mutual funds, federal agency securities, mortgage-backed securities, corporate securities, commercial paper, collateralized loan obligations, municipal bonds and securities of U.S government entities.

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 equity securities, debt securities available for sale and debt securities held to maturity. The Company employs three pricing services. To validate the pricing of these vendors, the Company compares vendors’ pricing for each of the securities for consistency; significant pricing differences, if any, are evaluated using all available independent quotes with the quote most closely reflecting the market generally used as the fair value estimate. In addition, the Company evaluates debt securities for credit ~~loss~~losses on a quarterly basis. 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.

The Company regularly reviews the valuation techniques and assumptions used by its vendors and determines which valuation techniques are utilized based on observable market inputs for the type of securities being measured. The Company uses the information to determine the placement in the fair value hierarchy as level 1, 2 or 3.

The tables below present assets measured at fair value on a recurring basis on the dates indicated.

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 the application of ~~lower of cost~~lower-of-cost or ~~fair value~~fair-value accounting of individual assets. For assets measured at fair value on a nonrecurring basis that were recorded in the balance sheet at March 31, ~~2021~~2022 and December 31, ~~2020,~~2021, the following tables provide the level of valuation assumptions used to determine each adjustment and the carrying value of the related assets at period end.

Level 3 – Valuation is based upon present value of expected future cash flows, independent market prices, estimated liquidation values of loan collateral or appraised value of the collateral as determined by third-party independent appraisers, less 10% for selling costs, generally. ~~Level~~ 3 includes other real estate owned that has been measured at fair value upon transfer to foreclosed assets and loans collateralized by real property and other business asset collateral individually evaluated for credit loss where a specific reserve has been established or a chargeoff 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. The unobservable inputs and qualitative information about the unobservable inputs are not presented as the inputs were not developed by the Company.

The tables below are 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 tables 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.

- 27-

At March 31, 2021

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)

Cash and due from banks
$ 866,457 $ 866,457 $ 866,457 $ 0 $ 0
Debt securities held to maturity
469,259 480,549 0 480,549 0
Loans
1,270,273 1,288,836 0 0 1,288,836

Financial Liabilities:

Deposits
$ 5,923,833 $ 5,923,808 $ 0 $ 5,769,662 $ 154,146
Short-term borrowed funds
95,479 95,479 0 95,479 0
Other borrowed funds
1,681 1,681 0 1,681 0

At December 31, 2020

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)

Cash and due from banks
$ 621,275 $ 621,275 $ 621,275 $ 0 $ 0
Debt securities held to maturity
515,589 529,678 0 529,678 0
Loans
1,232,389 1,290,938 0 0 1,290,938

Financial Liabilities:

Deposits
$ 5,687,979 $ 5,688,049 $ 0 $ 5,531,590 $ 156,459
Short-term borrowed funds
102,545 102,545 0 102,545 0

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.

Loan commitments are agreements to lend to a customer provided there is no violation of any condition established in the agreement. Certain agreements provide the Company the right to cancel or reduce its obligations to lend to customers. The portions that are not cancellable unconditionally by the Company aggregated ~~$36,082~~$33,776 thousand at March 31, ~~2021.~~2022. 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 ~~$264,131~~$242,550 thousand at March 31, ~~2021~~2022 and ~~$277,878~~$233,850 thousand at December 31, ~~2020.~~2021. 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 ~~$4,062~~$3,583 thousand at March 31, ~~2021~~2022 and ~~$2,357~~$3,693 thousand at December 31, ~~2020.~~2021. ~~The Company had 0 commitments outstanding~~Commitments for commercial and similar letters of credit totaled $95 thousand at March 31, ~~2021~~2022 and December 31, ~~2020.~~2021. The Company had $580 thousand in outstanding full recourse guarantees to a 3third^rd party credit card company at March 31, ~~2021~~2022 and December 31, ~~2020.~~2021. At March 31, ~~2021,~~2022, the Company had a reserve for unfunded commitments of ~~$101~~$201 thousand for the above-mentioned loan commitments of ~~$36,082~~$33,776 thousand that are not cancellable unconditionally by the Company. The Company’s reserve for unfunded commitments was ~~$101~~$201 thousand at December 31, ~~2020.~~2021. The reserve for unfunded commitments is included in other liabilities.

The Company determined that it will be obligated to provide refunds of revenue recognized in years prior to 2018 to some customers. The Company initially estimated the probable amount of these obligations to be $5,542 thousand and accrued a liability for such amount in 2017; based on additional information received in the second quarter 2019, the Company increased such liability to $5,843 thousand by recognizing an expense of $301 thousand. The Company paid ~~$385 thousand during the quarter ended~~ ~~March 31, 2021~~ ~~and $4,410~~$452 thousand during the year ended December 31, ~~2020~~2021 to customers eligible for refunds. The remaining accrued obligations at March 31, ~~2021~~2022 totaled ~~$1,048~~$982 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 can be reasonably estimated.

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 ended March 31, ~~2021~~2022 and ~~2020,~~2021, options to purchase ~~598~~802 thousand and ~~514~~598 thousand shares of common stock, respectively, were outstanding but not included in the computation of diluted ~~net income~~earnings 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.

-29-

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

WESTAMERICA BANCORPORATION

FINANCIAL SUMMARY

	For the Three Months Ended									For the Three Months Ended
	March 31,						December 31,			March 31,						December 31,
	2021			2020			2020			2022			2021			2021
	(In thousands, except per share data)									(In thousands, except per share data)
Net Interest and Fee Income (FTE)⁽¹⁾	$	42,583		$	40,547		$	43,292		$	43,807		$	42,583		$	43,117
Provision for Credit Losses		-			4,300			-			-			-			-
Noninterest Income		10,189			11,648			13,959			11,576			10,189			10,842
Noninterest Expense		24,906			24,664			24,545			24,875			24,906			23,912
Income Before Income Taxes (FTE)⁽¹⁾		27,866			23,231			32,706			30,508			27,866			30,047
Provision for Income Taxes (FTE)⁽¹⁾		7,719			6,269			8,868			7,892			7,719			8,327
Net Income	$	20,147		$	16,962		$	23,838		$	22,616		$	20,147		$	21,720

Average Common Shares Outstanding		26,821			27,068			26,838			26,870			26,821			26,866
Average Diluted Common Shares Outstanding		26,842			27,139			26,849			26,885			26,842			26,875
Common Shares Outstanding at Period End		26,864			26,932			26,807			26,883			26,864			26,866

Per Common Share:
Basic Earnings	$	0.75		$	0.63		$	0.89		$	0.84		$	0.75		$	0.81
Diluted Earnings		0.75			0.63			0.89			0.84			0.75			0.81
Book Value Per Common Share		30.23			26.20			31.51			26.10			30.23			30.79

Financial Ratios:
Return On Assets		1.23	%		1.21	%		1.44	%		1.24	%		1.23	%		1.17	%
Return On Common Equity		11.11	%		9.67	%		13.16	%		11.82	%		11.11	%		11.24	%
Net Interest Margin (FTE)⁽¹⁾		2.74	%		3.10	%		2.81	%		2.51	%		2.74	%		2.49	%
Net Loan Chargeoffs to Average Loans		0.12	%		0.36	%		0.09	%		0.23	%		0.12	%		0.13	%
Efficiency Ratio⁽²⁾		47.2	%		47.3	%		42.9	%		44.9	%		47.2	%		44.3	%

Average Balances:
Assets	$	6,650,164		$	5,655,460		$	6,562,753		$	7,406,321		$	6,650,164		$	7,334,977
Loans		1,251,540			1,123,934			1,286,480			1,029,724			1,251,540			1,097,698
Investments		4,440,621			3,845,885			4,430,592			4,947,846			4,440,621			4,866,476
Deposits		5,748,070			4,828,988			5,655,768			6,393,458			5,748,070			6,349,137
Shareholders' Equity		735,496			705,330			720,473			776,225			735,496			766,358

Period End Balances:
Assets	$	6,912,481		$	5,628,126		$	6,747,931		$	7,306,417		$	6,912,481		$	7,461,026
Loans		1,293,756			1,121,243			1,256,243			1,002,514			1,293,756			1,068,126
Investments		4,459,838			3,892,526			4,578,783			4,897,115			4,459,838			4,945,258
Deposits		5,923,833			4,799,426			5,687,979			6,405,874			5,923,833			6,413,956
Shareholders' Equity		812,132			705,546			844,809			701,744			812,132			827,102

Capital Ratios at Period End:
Total Risk Based Capital		16.88	%		15.81	%		16.68	%		15.60	%		16.88	%		15.47	%
Tangible Equity to Tangible Assets		10.15	%		10.58	%		10.90	%		8.06	%		10.15	%		9.60	%

Dividends Paid Per Common Share	$	0.41		$	0.41		$	0.41		$	0.42		$	0.41		$	0.42
Common Dividend Payout Ratio		55	%		66	%		46	%		50	%		55	%		52	%

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 an FTE basis 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 and noninterest income).

-30-

Financial Overview

Westamerica Bancorporation and subsidiaries’ (collectively, the “Company”) reported net income of ~~$20.1~~$22.6 million or ~~$0.75~~$0.84 diluted earnings per common share (“EPS”), including ~~“make-whole” interest income on corporate bonds redeemed prior to maturity of $700 thousand.~~a $1.2 million reconciling payment from a payments network. First quarter ~~2021~~2022 results compare with net income of ~~$17.0~~$20.1 million or ~~$0.63~~$0.75 EPS for the first quarter ~~2020~~2021 and ~~$23.8~~$21.7 million or ~~$0.89~~$0.81 EPS for the fourth quarter ~~2020.~~2021.

The Company’s primary and wholly-owned subsidiary, ~~bank,~~ Westamerica Bank (the “Bank”), ~~continued to support the Bank’s~~supported its customers during the COVID-19 pandemic. The Bank originated ~~$91 million in~~ loans under ~~the second round of~~ the Paycheck Protection Program (“PPP”) ~~during the first quarter 2021.~~. PPP loans meaningfully increased ~~interest-earning assets and~~ related loan interest and fee income. The Bank continues to work with loan customers requesting deferral of loan payments due to economic weakness caused by the pandemic. At March 31, 2021, loans granted deferrals under the CARES Act included consumer loans totaling $1.8 million and one hospitality industry commercial real estate loan with a balance of $2.3 million. The results for the first quarter 2020 include a provision for credit losses of $4.3 million, which reduced EPS $0.11, representing Management’s estimate of additional reserves needed over the remaining life of its loans due to increased credit-risk from deteriorating economic conditions caused by the COVID-19 pandemic. Results for the fourth quarter 2020 include a $3.5 million gain on sale of a closed branch building, “make-whole” interest income of $1.9 million on corporate bonds redeemed before maturity, and a customary adjustment to the tax provision for filed 2019 tax returns, which increased EPS $0.15.

In response to the pandemic, the Federal Reserve has engaged significant levels of monetary policy to provide liquidity and credit facilities to the financial markets. ~~On March 15, 2020, the~~The Federal Open Market Committee (“FOMC”) ~~reduced~~kept interest rates near zero since March 2020. On March 17, 2022, the FOMC increased the target range by 0.25% for the federal funds rate to ~~0 to 0.25 percent; relatedly,~~0.50 percent, the first interest rate increase since 2018. The FOMC ~~reduced~~projected additional interest rate increases over the course of 2022 as inflation has reached a 40-year high. The FOMC increased the interest rate paid on ~~deposit~~excess reserve balances to ~~0.10~~0.40 percent effective March ~~16, 2020.~~17, 2022. The Bank maintains deposit balances at the Federal Reserve Bank; the amount that earns interest is identified in the Company’s financial statements as “interest-bearing cash”.

The Company presents its net interest margin and net interest income on a fully taxable equivalent (“FTE”) basis using the current statutory federal tax rate. Management believes the FTE basis is valuable to the reader because the Company’s loan and investment securities portfolios contain a relatively large portion of municipal loans and securities that are federally tax exempt. The Company’s tax exempt loans and securities composition may not be similar to that of other banks, therefore in order to reflect the impact of the federally tax exempt loans and securities on the net interest margin and net interest income for comparability with other banks, the Company presents its net interest margin and net interest income on an FTE basis.

The Company’s significant accounting policies (see Note 1, “Summary of Significant Accounting Policies,” to Financial Statements in the Company’s ~~2020~~2021 Form 10-K and Note 2 “Summary of Significant Accounting Policies” in this Form 10-Q) are fundamental to understanding the Company’s results of operations and financial condition. Certain risks, uncertainties and other factors, including those discussed in ~~Note 20 “Impact of COVID-19” to the consolidated financial statements included in, and~~ “Risk Factors” in Part I – Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 may cause actual future results to differ materially from the results discussed in this report on Form 10-Q.

Management continues to evaluate the impacts of the COVID-19 pandemic, inflation, the Federal Reserve’s monetary policy, climate changes, the war in Ukraine on the Company’s business and its customers. The extent of the impact on the Company’s results of operations, cash flow liquidity, and financial performance, as well as the Company’s ability to execute near- and long-term business strategies and initiatives, will depend on numerous evolving factors and future developments, which are highly uncertain and cannot be reasonably predicted.

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-31-

Net Income

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

	For the Three Months Ended									For the Three Months Ended
	March 31,						December 31,			March 31,						December 31,
	2021			2020			2020			2022			2021			2021
	(In thousands, except per share data)									(In thousands, except per share data)
Net interest and loan fee income (FTE)	$	42,583		$	40,547		$	43,292		$	43,807		$	42,583		$	43,117
Provision for credit losses		-			4,300			-			-			-			-
Noninterest income		10,189			11,648			13,959			11,576			10,189			10,842
Noninterest expense		24,906			24,664			24,545			24,875			24,906			23,912
Income before taxes (FTE)		27,866			23,231			32,706			30,508			27,866			30,047
Income tax provision (FTE)		7,719			6,269			8,868			7,892			7,719			8,327
Net income	$	20,147		$	16,962		$	23,838		$	22,616		$	20,147		$	21,720

Average diluted common shares		26,842			27,139			26,849			26,885			26,842			26,875
Diluted earnings per common share	$	0.75		$	0.63		$	0.89		$	0.84		$	0.75		$	0.81

Average total assets	$	6,650,164		$	5,655,460		$	6,562,753		$	7,406,321		$	6,650,164		$	7,334,977
Net income to average total assets (annualized)		1.23	%		1.21	%		1.44	%		1.24	%		1.23	%		1.17	%
Net income to average common shareholders' equity (annualized)		11.11	%		9.67	%		13.16	%		11.82	%		11.11	%		11.24	%

Net income for the first quarter ~~2021~~2022 increased ~~$3.2~~$2.5 million compared with the first quarter ~~2020.~~2021. Net interest and loan fee income (FTE) increased ~~$2.0~~$1.2 million in the first quarter ~~2021~~2022 compared with the first quarter ~~2020 mainly~~2021 due to higher average balances of ~~investments~~investment securities and ~~PPP~~interest-bearing cash and higher yield on loans, partially offset by lower average balances of loans and lower yield on ~~interest-earning assets and loan payoffs and paydowns. Additionally, first quarter 2021 results include “make-whole” interest income on corporate bonds redeemed prior to maturity of $700 thousand.~~investment securities. The ~~first quarter 2021~~ provision for credit losses was zero ~~reflecting Management's evaluation of credit risk over the remaining life of loans and bonds. Results~~ for the first quarter ~~2020, include a provision of credit losses of $4.3 million, which reduced EPS $0.11, representing Management~~2022 and the first quarter 2021, reflecting Management's estimate of ~~additional~~ reserves needed over the remaining life of its loans ~~due to credit-risk from economic weakness caused by the COVID-19 pandemic.~~and investment securities. First quarter ~~2021~~2022 noninterest income ~~decreased $1.5~~increased $1.4 million compared with first quarter ~~2020~~2021 primarily due to ~~lower fees on overdrawn accounts and analyzed accounts and because~~a $1.2 million reconciling payment from a payments network. First quarter 2022 noninterest expense did not materially change compared with the first quarter 2020 included $603 thousand in excess of amounts charged-off in prior periods on a purchased loan. First quarter 2021 noninterest expense increased $242 thousand due to higher professional fees and FDIC assessments. First quarter 2020 FDIC assessments were reduced by a $246 thousand FDIC assessment credit. The increases were partially offset by lower salaries due to attrition.2021. The tax rate (FTE) was 25.9% for the first quarter 2022 and 27.7% for the first quarter ~~2021 and 27.0%~~2021. The lower first quarter 2022 tax rate was primarily attributable to higher estimated tax credits from limited partnership investments in low-income housing.

Net income for the first quarter ~~2020.~~

Comparing the first quarter 2021 with the fourth quarter 2020 net income decreased $3.7 million. Net interest and loan fee (FTE) income decreased $709 thousand due to lower average balances of PPP loans and lower yield on interest-earning assets. Results for the first quarter include “make-whole” interest income on corporate bonds redeemed prior to maturity of $700 thousand compared with $1.9 million for the fourth quarter. The provision for credit losses remained zero in the first quarter 2021 and the fourth quarter 2020, reflecting Management's evaluation of credit risk over the remaining life of loans and bonds. In the first quarter 2021 noninterest income decreased $3.8 million primarily because fourth quarter 2020 results include a $3.5 million gain on sale of a closed branch building. In the first quarter 2021 noninterest expense2022 increased ~~$361~~$896 thousand compared with the fourth quarter ~~2020~~2021. Net interest and loan fee income (FTE) increased $690 thousand in the first quarter 2022 compared with the fourth quarter 2021 due to higher average balances of investment securities and interest-bearing cash and higher yield on interest earning assets, partially offset by lower average balances of loans. The provision for credit losses was zero for the first quarter 2022 and the fourth quarter 2021, reflecting Management's estimate of reserves needed over the remaining life of its loans and investment securities. First quarter 2022 noninterest income increased $734 thousand compared with fourth quarter 2021 primarily due to a $1.2 million reconciling payment from a payments network. First quarter 2022 noninterest expense increased $963 thousand compared with the fourth quarter 2021 due to the seasonal increase in payroll taxes ~~employee benefits,~~ and ~~professional fees.~~salary adjustments to comply with California minimum wage laws. The tax rate (FTE) was ~~27.7%~~25.9% for the first quarter ~~2021~~2022 and ~~27.1%~~27.7% for the fourth quarter ~~2020.~~

2021. The lower first quarter 2022 tax rate was primarily attributable to higher estimated tax credits from limited partnership investments in low-income housing.

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32-32-

Net Interest and Loan Fee Income (FTE)

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

	For the Three Months Ended									For the Three Months Ended
	March 31,						December 31,			March 31,						December 31,
	2021			2020			2020			2022			2021			2021
	(In thousands)									(In thousands)
Interest and loan fee income	$	42,316		$	39,991		$	42,961		$	43,759		$	42,316		$	43,041
Interest expense		475			442			481			480			475			504
FTE adjustment		742			998			812			528			742			580
Net interest and loan fee income (FTE)	$	42,583		$	40,547		$	43,292		$	43,807		$	42,583		$	43,117

Average earning assets	$	6,244,622		$	5,242,142		$	6,156,749		$	6,998,234		$	6,244,622		$	6,919,528
Net interest margin (FTE) (annualized)		2.74	%		3.10	%		2.81	%		2.51	%		2.74	%		2.49	%

Net interest and loan fee income (FTE) increased ~~$2.0~~$1.2 million in the first quarter ~~2021~~2022 compared with the first quarter ~~2020 mainly~~2021 due to higher average balances of ~~investments~~investment securities (up ~~$595~~$507 million) and ~~PPP~~interest-bearing cash (up $468 million) and higher yield on loans (up ~~$189 million)~~0.38%), partially offset by lower average balances of loans (down $222 million) and lower yield on ~~interest-earning assets~~investment securities (down ~~0.36%~~0.05%) ~~and loan payoffs and paydowns. First quarter 2021 results include “make-whole” interest income on corporate bonds redeemed prior to maturity of $700 thousand.~~.

Net interest and loan fee income (FTE) ~~income decreased $709~~increased $690 thousand in the first quarter 2022 compared with the fourth quarter 2021 due to higher average balances of investment securities (up $81 million) and interest-bearing cash (up $65 million) and higher yield on interest earning assets (up 0.02%), partially offset by lower average balances of ~~PPP~~ loans (down ~~$39~~$68 million), lower yield on interest-earning assets (down 0.07%) and loan payoffs and paydowns. Results for the first quarter include “make-whole” interest income on corporate bonds redeemed prior to maturity of $700 thousand compared with $1.9 million for the fourth quarter..

The annualized net interest margin (FTE) was 2.51% in the first quarter 2022 compared with 2.74% in the first quarter 2021 ~~3.10% in the first quarter 2020~~ and ~~2.81%~~2.49% in the fourth quarter ~~2020.~~2021.

The Company’s funding costs were 0.03% in the first quarter ~~2021~~2022 and the first and fourth quarters of ~~2020.~~2021. Average balances of checking and saving deposits accounted for ~~97.3%~~97.8% of average total deposits in the first quarter ~~2021, 96.5%~~2022, 97.3% in the first quarter ~~2020~~2021 and ~~97.2%~~97.7% in the fourth quarter ~~2020.~~2021.

Net Interest Margin (FTE)

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

	For the Three Months Ended									For the Three Months Ended
	March 31,						December 31,			March 31,						December 31,
	2021			2020			2020			2022			2021			2021

Yield on earning assets (FTE)		2.77	%		3.13	%		2.84	%		2.54	%		2.77	%		2.52	%
Rate paid on interest-bearing liabilities		0.06	%		0.07	%		0.06	%		0.05	%		0.06	%		0.06	%
Net interest spread (FTE)		2.71	%		3.06	%		2.78	%		2.49	%		2.71	%		2.46	%
Impact of noninterest-bearing funds		0.03	%		0.04	%		0.03	%		0.02	%		0.03	%		0.03	%
Net interest margin (FTE)		2.74	%		3.10	%		2.81	%		2.51	%		2.74	%		2.49	%

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-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 the 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, rates and interest margins are annualized.

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

	For the Three Months Ended March 31, 2022
			Interest
	Average		Income/		Yields/
	Balance		Expense		Rates
	($ in thousands)
Assets
Investment securities:
Taxable	$	4,710,561	$	28,733		2.44	%
Tax-exempt ⁽¹⁾		237,285		2,037		3.43	%
Total investments ⁽¹⁾		4,947,846		30,770		2.49	%
Loans:
Taxable
Paycheck Protection Program ("PPP") loans		35,871		849		9.60	%
Other taxable		946,660		11,733		5.03	%
Total taxable		982,531		12,582		5.19	%
Tax-exempt ⁽¹⁾		47,193		456		3.92	%
Total loans ⁽¹⁾		1,029,724		13,038		5.14	%
Total interest-bearing cash		1,020,664		479		0.19	%
Total Interest-earning assets ⁽¹⁾		6,998,234		44,287		2.54	%
Other assets		408,087
Total assets	$	7,406,321

Liabilities and shareholders' equity
Noninterest-bearing demand	$	3,005,065	$	-		-	%
Savings and interest-bearing transaction		3,245,192		371		0.05	%
Time less than $100,000		79,029		40		0.21	%
Time $100,000 or more		64,172		41		0.26	%
Total interest-bearing deposits		3,388,393		452		0.05	%
Short-term borrowed funds		157,753		28		0.07	%
Total interest-bearing liabilities		3,546,146		480		0.05	%
Other liabilities		78,885
Shareholders' equity		776,225
Total liabilities and shareholders' equity	$	7,406,321
Net interest spread ^{(1) (2)}						2.49	%
Net interest and fee income and interest margin ^{(1) (3)}			$	43,807		2.51	%

⁽¹⁾	Amounts calculated on an FTE 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, divided by the average balance of interest-earning assets. The net interest margin is greater than the net interest spread due to the benefit of noninterest-bearing demand deposits.

-34-

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

	For the Three Months Ended March 31, 2021
			Interest
	Average		Income/		Yields/
	Balance		Expense		Rates
	($ in thousands)
Assets
Investment securities:
Taxable	$	4,079,472	$	25,198		2.47	%
Tax-exempt ⁽¹⁾		361,149		3,038		3.36	%
Total investments ⁽¹⁾		4,440,621		28,236		2.54	%
Loans:
Taxable
Paycheck Protection Program ("PPP") loans		188,971		1,853		3.98	%
Other taxable		1,011,975		12,339		4.95	%
Total taxable		1,200,946		14,192		4.79	%
Tax-exempt ⁽¹⁾		50,594		492		3.94	%
Total loans ⁽¹⁾		1,251,540		14,684		4.76	%
Total interest-bearing cash		552,461		138		0.10	%
Total Interest-earning assets ⁽¹⁾		6,244,622		43,058		2.77	%
Other assets		405,542
Total assets	$	6,650,164

Liabilities and shareholders' equity
Noninterest-bearing demand	$	2,713,632	$	-		-	%
Savings and interest-bearing transaction		2,877,575		339		0.05	%
Time less than $100,000		85,622		42		0.20	%
Time $100,000 or more		71,241		78		0.44	%
Total interest-bearing deposits		3,034,438		459		0.06	%
Short-term borrowed funds		95,575		16		0.07	%
Other borrowed funds		214		-		0.35	%
Total interest-bearing liabilities		3,130,227		475		0.06	%
Other liabilities		70,809
Shareholders' equity		735,496
Total liabilities and shareholders' equity	$	6,650,164
Net interest spread ^{(1) (2)}						2.71	%
Net interest and fee income and interest margin ^{(1) (3)}			$	42,583		2.74	%

⁽¹⁾	Amounts calculated on an FTE 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, divided by the average balance of interest-earning assets. The net interest margin is greater than the net interest spread due to the benefit of noninterest-bearing demand deposits.

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-35-

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

	For the Three Months Ended March 31, 2020							For the Three Months Ended December 31, 2021
			Interest							Interest
	Average		Income/		Yields/			Average		Income/		Yields/
	Balance		Expense		Rates			Balance		Expense		Rates
	($ in thousands)							($ in thousands)
Assets
Investment securities:
Taxable	$	3,329,935	$	21,964		2.64	%	$	4,603,761	$	27,765		2.41	%
Tax-exempt ⁽¹⁾		515,950		4,259		3.30	%		262,715		2,267		3.45	%
Total investments ⁽¹⁾		3,845,885		26,223		2.73	%		4,866,476		30,032		2.47	%
Loans:
Taxable		1,077,370		13,431		5.01	%
PPP loans									68,870		1,208		6.96	%
Other taxable									980,198		11,543		4.67	%
Total taxable									1,049,068		12,751		4.82	%
Tax-exempt ⁽¹⁾		46,564		479		4.14	%		48,630		472		3.85	%
Total loans ⁽¹⁾		1,123,934		13,910		4.98	%		1,097,698		13,223		4.78	%
Total interest-bearing cash		272,323		856		1.24	%		955,354		366		0.15	%
Total Interest-earning assets ⁽¹⁾		5,242,142		40,989		3.13	%		6,919,528		43,621		2.52	%
Other assets		413,318							415,449
Total assets	$	5,655,460						$	7,334,977

Liabilities and shareholders' equity
Noninterest-bearing demand	$	2,222,737	$	-		-	%	$	3,022,787	$	-		-	%
Savings and interest-bearing transaction		2,438,082		301		0.05	%		3,179,605		377		0.05	%
Time less than $100,000		94,320		54		0.23	%		80,825		41		0.20	%
Time $100,000 or more		73,849		79		0.43	%		65,920		61		0.37	%
Total interest-bearing deposits		2,606,251		434		0.07	%		3,326,350		479		0.06	%
Short-term borrowed funds		42,330		8		0.07	%		141,761		25		0.07	%
Total interest-bearing liabilities		2,648,581		442		0.07	%		3,468,111		504		0.06	%
Other liabilities		78,812							77,721
Shareholders' equity		705,330							766,358
Total liabilities and shareholders' equity	$	5,655,460						$	7,334,977
Net interest spread ^{(1) (2)}						3.06	%						2.46	%
Net interest and fee income and interest margin ^{(1) (3)}			$	40,547		3.10	%			$	43,117		2.49	%

⁽¹⁾	Amounts calculated on an FTE 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, divided by the average balance of interest-earning assets. The net interest margin is greater than the net interest spread due to the benefit of noninterest-bearing demand deposits.

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

For the Three Months Ended December 31, 2020

Interest

Average

Income/

Yields/

Balance

Expense

Rates

($ in thousands)

Assets

Investment securities:

Taxable
$ 4,034,072 $ 25,200 2.50 %
Tax-exempt ⁽¹⁾
396,520 3,358 3.39 %
Total investments ⁽¹⁾
4,430,592 28,558 2.58 %
Loans:

Taxable

PPP loans
227,828 2,342 4.08 %
Other taxable
1,008,393 12,267 4.84 %
Total taxable
1,236,221 14,609 4.70 %
Tax-exempt ⁽¹⁾
50,259 494 3.91 %
Total loans ⁽¹⁾
1,286,480 15,103 4.67 %
Total interest-bearing cash
439,677 112 0.10 %
Total Interest-earning assets ⁽¹⁾
6,156,749 43,773 2.84 %
Other assets
406,004
Total assets
$ 6,562,753

Liabilities and shareholders' equity

Noninterest-bearing demand
$ 2,736,348 $ - - %
Savings and interest-bearing transaction
2,759,607 336 0.05 %
Time less than $100,000
88,507 45 0.20 %
Time $100,000 or more
71,306 81 0.45 %
Total interest-bearing deposits
2,919,420 462 0.06 %
Short-term borrowed funds
114,820 19 0.07 %
Total interest-bearing liabilities
3,034,240 481 0.06 %
Other liabilities
71,692
Shareholders' equity
720,473
Total liabilities and shareholders' equity
$ 6,562,753
Net interest spread ^{(1) (2)}
2.78 %
Net interest and fee income and interest margin ^{(1) (3)}
$ 43,292 2.81 %

⁽¹⁾	~~Amounts calculated on an FTE 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, divided by the average balance of interest-earning assets. The net interest margin is greater than the net interest spread due to the benefit of noninterest-bearing demand deposits.

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-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~~Noninterest Income

11,57610,18910,842

Noninterest Expense

24,87524,90623,912

Income Before Income Taxes (FTE)⁽¹⁾

30,50827,86630,047

Provision for Income Taxes (FTE)⁽¹⁾

7,8927,7198,327

Net Income

$22,616$20,147$21,720

Average Common Shares Outstanding

26,87026,82126,866

Average Diluted Common Shares Outstanding

26,88526,84226,875

Common Shares Outstanding at Period End

26,88326,86426,866

Per Common Share:

Basic Earnings

$0.84$0.75$0.81

Diluted Earnings

0.840.750.81

Book Value Per Common Share

26.1030.2330.79

Financial Ratios:

Return On Assets

1.24%1.23%1.17%

Return On Common Equity

11.82%11.11%11.24%

Net Interest ~~Income and Expense~~Margin (FTE)⁽¹⁾

2.51%2.74%2.49%

Net Loan Chargeoffs to Average Loans

0.23%0.12%0.13%

Efficiency Ratio⁽²⁾

44.9%47.2%44.3%

Average Balances:

Assets

$7,406,321$6,650,164$7,334,977

Loans

1,029,7241,251,5401,097,698

Investments

4,947,8464,440,6214,866,476

Deposits

6,393,4585,748,0706,349,137

Shareholders' Equity

776,225735,496766,358

Period End Balances:

Assets

$7,306,417$6,912,481$7,461,026

Loans

1,002,5141,293,7561,068,126

Investments

4,897,1154,459,8384,945,258

Deposits

6,405,8745,923,8336,413,956

Shareholders' Equity

701,744812,132827,102

Capital Ratios at Period End:

Total Risk Based Capital

15.60%16.88%15.47%

Tangible Equity to Tangible Assets

8.06%10.15%9.60%

Dividends Paid Per Common Share

$0.42$0.41$0.42

Common Dividend Payout Ratio

50%55%52%

For the Three Months Ended March 31, 2021

Compared with

For the Three Months Ended March 31, 2020

Volume

Yield/Rate

Total

(In thousands)

Increase (decrease) in interest and loan fee income:

Investment securities:

Taxable
$ 4,944 $ (1,710 ) $ 3,234
Tax-exempt ⁽¹⁾
(1,278 ) 57 (1,221 )
Total investments ⁽¹⁾
3,666 (1,653 ) 2,013
Loans:

Taxable:

PPP loans
1,853 - 1,853
Other
(899 ) (193 ) (1,092 )
Total taxable
954 (193 ) 761
Tax-exempt ⁽¹⁾
39 (26 ) 13
Total loans ⁽¹⁾
993 (219 ) 774
Total interest-bearing cash
868 (1,586 ) (718 )
Total increase (decrease) in interest and loan fee income ⁽¹⁾
5,527 (3,458 ) 2,069
Increase (decrease) in interest expense:

Deposits:

Savings and interest-bearing transaction
52 (14 ) 38
Time less than $100,000
(5 ) (7 ) (12 )
Time $100,000 or more
(3 ) 2 (1 )
Total interest-bearing deposits
44 (19 ) 25
Short-term borrowed funds
10 (2 ) 8
Other borrowed funds
- - -
Total increase (decrease) in interest expense
54 (21 ) 33
Increase (decrease) in net interest and loan fee income ⁽¹⁾
$ 5,473 $ (3,437 ) $ 2,036

⁽¹⁾	Yields on securities and certain loans have been adjusted upward to an FTE basis 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 and noninterest income).

-30-

Financial Overview

Westamerica Bancorporation and subsidiaries’ (collectively, the “Company”) reported net income of $22.6 million or $0.84 diluted earnings per common share (“EPS”), including a $1.2 million reconciling payment from a payments network. First quarter 2022 results compare with net income of $20.1 million or $0.75 EPS for the first quarter 2021 and $21.7 million or $0.81 EPS for the fourth quarter 2021.

The Company’s primary and wholly-owned subsidiary, Westamerica Bank (the “Bank”), supported its customers during the COVID-19 pandemic. The Bank originated loans under the Paycheck Protection Program (“PPP”). PPP loans meaningfully increased related loan interest and fee income.

In response to the pandemic, the Federal Reserve has engaged significant levels of monetary policy to provide liquidity and credit facilities to the financial markets. The Federal Open Market Committee (“FOMC”) kept interest rates near zero since March 2020. On March 17, 2022, the FOMC increased the target range by 0.25% for the federal funds rate to 0.50 percent, the first interest rate increase since 2018. The FOMC projected additional interest rate increases over the course of 2022 as inflation has reached a 40-year high. The FOMC increased the interest rate paid on excess reserve balances to 0.40 percent effective March 17, 2022. The Bank maintains deposit balances at the Federal Reserve Bank; the amount that earns interest is identified in the Company’s financial statements as “interest-bearing cash”.

The Company’s significant accounting policies (see Note 1, “Summary of Significant Accounting Policies,” to Financial Statements in the Company’s 2021 Form 10-K and Note 2 “Summary of Significant Accounting Policies” in this Form 10-Q) are fundamental to understanding the Company’s results of operations and financial condition. Certain risks, uncertainties and other factors, including those discussed in “Risk Factors” in Part I – Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 may cause actual future results to differ materially from the results discussed in this report on Form 10-Q. Management continues to evaluate the impacts of the COVID-19 pandemic, inflation, the Federal Reserve’s monetary policy, climate changes, the war in Ukraine on the Company’s business and its customers. The extent of the impact on the Company’s results of operations, cash flow liquidity, and financial performance, as well as the Company’s ability to execute near- and long-term business strategies and initiatives, will depend on numerous evolving factors and future developments, which are highly uncertain and cannot be reasonably predicted.

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-31-

Net Income

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

	For the Three Months Ended
	March 31,						December 31,
	2022			2021			2021
	(In thousands, except per share data)
Net interest and loan fee income (FTE)	$	43,807		$	42,583		$	43,117
Provision for credit losses		-			-			-
Noninterest income		11,576			10,189			10,842
Noninterest expense		24,875			24,906			23,912
Income before taxes (FTE)		30,508			27,866			30,047
Income tax provision (FTE)		7,892			7,719			8,327
Net income	$	22,616		$	20,147		$	21,720

Average diluted common shares		26,885			26,842			26,875
Diluted earnings per common share	$	0.84		$	0.75		$	0.81

Average total assets	$	7,406,321		$	6,650,164		$	7,334,977
Net income to average total assets (annualized)		1.24	%		1.23	%		1.17	%
Net income to average common shareholders' equity (annualized)		11.82	%		11.11	%		11.24	%

Net income for the first quarter 2022 increased $2.5 million compared with the first quarter 2021. Net interest and loan fee income (FTE) increased $1.2 million in the first quarter 2022 compared with the first quarter 2021 due to higher average balances of investment securities and interest-bearing cash and higher yield on loans, partially offset by lower average balances of loans and lower yield on investment securities. The provision for credit losses was zero for the first quarter 2022 and the first quarter 2021, reflecting Management's estimate of reserves needed over the remaining life of its loans and investment securities. First quarter 2022 noninterest income increased $1.4 million compared with first quarter 2021 primarily due to a $1.2 million reconciling payment from a payments network. First quarter 2022 noninterest expense did not materially change compared with the first quarter 2021. The tax rate (FTE) was 25.9% for the first quarter 2022 and 27.7% for the first quarter 2021. The lower first quarter 2022 tax rate was primarily attributable to higher estimated tax credits from limited partnership investments in low-income housing.

Net income for the first quarter 2022 increased $896 thousand compared with the fourth quarter 2021. Net interest and loan fee income (FTE) increased $690 thousand in the first quarter 2022 compared with the fourth quarter 2021 due to higher average balances of investment securities and interest-bearing cash and higher yield on interest earning assets, partially offset by lower average balances of loans. The provision for credit losses was zero for the first quarter 2022 and the fourth quarter 2021, reflecting Management's estimate of reserves needed over the remaining life of its loans and investment securities. First quarter 2022 noninterest income increased $734 thousand compared with fourth quarter 2021 primarily due to a $1.2 million reconciling payment from a payments network. First quarter 2022 noninterest expense increased $963 thousand compared with the fourth quarter 2021 due to the seasonal increase in payroll taxes and salary adjustments to comply with California minimum wage laws. The tax rate (FTE) was 25.9% for the first quarter 2022 and 27.7% for the fourth quarter 2021. The lower first quarter 2022 tax rate was primarily attributable to higher estimated tax credits from limited partnership investments in low-income housing.

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-32-

Net Interest and Loan Fee Income (FTE)

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

	For the Three Months Ended
	March 31,						December 31,
	2022			2021			2021
	(In thousands)
Interest and loan fee income	$	43,759		$	42,316		$	43,041
Interest expense		480			475			504
FTE adjustment		528			742			580
Net interest and loan fee income (FTE)	$	43,807		$	42,583		$	43,117

Average earning assets	$	6,998,234		$	6,244,622		$	6,919,528
Net interest margin (FTE) (annualized)		2.51	%		2.74	%		2.49	%

Net interest and loan fee income (FTE) increased $1.2 million in the first quarter 2022 compared with the first quarter 2021 due to higher average balances of investment securities (up $507 million) and interest-bearing cash (up $468 million) and higher yield on loans (up 0.38%), partially offset by lower average balances of loans (down $222 million) and lower yield on investment securities (down 0.05%).

Net interest and loan fee income (FTE) increased $690 thousand in the first quarter 2022 compared with the fourth quarter 2021 due to higher average balances of investment securities (up $81 million) and interest-bearing cash (up $65 million) and higher yield on interest earning assets (up 0.02%), partially offset by lower average balances of loans (down $68 million).

The annualized net interest margin (FTE) was 2.51% in the first quarter 2022 compared with 2.74% in the first quarter 2021 and 2.49% in the fourth quarter 2021.

The Company’s funding costs were 0.03% in the first quarter 2022 and the first and fourth quarters of 2021. Average balances of checking and saving deposits accounted for 97.8% of average total deposits in the first quarter 2022, 97.3% in the first quarter 2021 and 97.7% in the fourth quarter 2021.

Net Interest Margin (FTE)

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

	For the Three Months Ended
	March 31,						December 31,
	2022			2021			2021

Yield on earning assets (FTE)		2.54	%		2.77	%		2.52	%
Rate paid on interest-bearing liabilities		0.05	%		0.06	%		0.06	%
Net interest spread (FTE)		2.49	%		2.71	%		2.46	%
Impact of noninterest-bearing funds		0.02	%		0.03	%		0.03	%
Net interest margin (FTE)		2.51	%		2.74	%		2.49	%

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-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 the reversal of previously accrued interest on loans placed on non-accrual status during the period, 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, rates and interest margins are annualized.

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

	For the Three Months Ended March 31, 2022
			Interest
	Average		Income/		Yields/
	Balance		Expense		Rates
	($ in thousands)
Assets
Investment securities:
Taxable	$	4,710,561	$	28,733		2.44	%
Tax-exempt ⁽¹⁾		237,285		2,037		3.43	%
Total investments ⁽¹⁾		4,947,846		30,770		2.49	%
Loans:
Taxable
Paycheck Protection Program ("PPP") loans		35,871		849		9.60	%
Other taxable		946,660		11,733		5.03	%
Total taxable		982,531		12,582		5.19	%
Tax-exempt ⁽¹⁾		47,193		456		3.92	%
Total loans ⁽¹⁾		1,029,724		13,038		5.14	%
Total interest-bearing cash		1,020,664		479		0.19	%
Total Interest-earning assets ⁽¹⁾		6,998,234		44,287		2.54	%
Other assets		408,087
Total assets	$	7,406,321

Liabilities and shareholders' equity
Noninterest-bearing demand	$	3,005,065	$	-		-	%
Savings and interest-bearing transaction		3,245,192		371		0.05	%
Time less than $100,000		79,029		40		0.21	%
Time $100,000 or more		64,172		41		0.26	%
Total interest-bearing deposits		3,388,393		452		0.05	%
Short-term borrowed funds		157,753		28		0.07	%
Total interest-bearing liabilities		3,546,146		480		0.05	%
Other liabilities		78,885
Shareholders' equity		776,225
Total liabilities and shareholders' equity	$	7,406,321
Net interest spread ^{(1) (2)}						2.49	%
Net interest and fee income and interest margin ^{(1) (3)}			$	43,807		2.51	%

⁽¹⁾	Amounts calculated on an FTE 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, divided by the average balance of interest-earning assets. The ~~remainder~~net interest margin is greater than the net interest spread due to the benefit of ~~this page intentionally left blank]~~noninterest-bearing demand deposits.

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

For the Three Months Ended March 31, 2021

Compared with

For the Three Months Ended December 31, 2020

Volume

Yield/Rate

Total

(In thousands)

Increase (decrease) in interest and loan fee income:

Investment securities:

Taxable
$ 284 $ (286 ) $ (2 )
Tax-exempt ⁽¹⁾
(300 ) (20 ) (320 )
Total investments ⁽¹⁾
(16 ) (306 ) (322 )
Loans:

Taxable:

PPP loans
(418 ) (71 ) (489 )
Other
10 62 72
Total taxable
(408 ) (9 ) (417 )
Tax-exempt ⁽¹⁾
(1 ) (1 ) (2 )
Total loans ⁽¹⁾
(409 ) (10 ) (419 )
Total interest-bearing cash
27 (1 ) 26
Total decrease in interest and loan fee income ⁽¹⁾
(398 ) (317 ) (715 )
Increase (decrease) in interest expense:

Deposits:

Savings and interest-bearing transaction
9 (6 ) 3
Time less than $100,000
(3 ) - (3 )
Time $100,000 or more
- (3 ) (3 )
Total interest-bearing deposits
6 (9 ) (3 )
Short-term borrowed funds
(3 ) - (3 )
Other borrowed funds
- - -
Total increase (decrease) in interest expense
3 (9 ) (6 )
Decrease in net interest and loan fee income ⁽¹⁾
$ (401 ) $ (308 ) $ (709 )

-34-

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

	For the Three Months Ended March 31, 2021
			Interest
	Average		Income/		Yields/
	Balance		Expense		Rates
	($ in thousands)
Assets
Investment securities:
Taxable	$	4,079,472	$	25,198		2.47	%
Tax-exempt ⁽¹⁾		361,149		3,038		3.36	%
Total investments ⁽¹⁾		4,440,621		28,236		2.54	%
Loans:
Taxable
Paycheck Protection Program ("PPP") loans		188,971		1,853		3.98	%
Other taxable		1,011,975		12,339		4.95	%
Total taxable		1,200,946		14,192		4.79	%
Tax-exempt ⁽¹⁾		50,594		492		3.94	%
Total loans ⁽¹⁾		1,251,540		14,684		4.76	%
Total interest-bearing cash		552,461		138		0.10	%
Total Interest-earning assets ⁽¹⁾		6,244,622		43,058		2.77	%
Other assets		405,542
Total assets	$	6,650,164

Liabilities and shareholders' equity
Noninterest-bearing demand	$	2,713,632	$	-		-	%
Savings and interest-bearing transaction		2,877,575		339		0.05	%
Time less than $100,000		85,622		42		0.20	%
Time $100,000 or more		71,241		78		0.44	%
Total interest-bearing deposits		3,034,438		459		0.06	%
Short-term borrowed funds		95,575		16		0.07	%
Other borrowed funds		214		-		0.35	%
Total interest-bearing liabilities		3,130,227		475		0.06	%
Other liabilities		70,809
Shareholders' equity		735,496
Total liabilities and shareholders' equity	$	6,650,164
Net interest spread ^{(1) (2)}						2.71	%
Net interest and fee income and interest margin ^{(1) (3)}			$	42,583		2.74	%

⁽¹⁾	Amounts calculated on an FTE basis using the current statutory federal tax rate.

⁽²⁾	~~Provision for Credit Losses~~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, divided by the average balance of interest-earning assets. 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 credit losses reflects Management's assessment of credit risk innet interest margin is greater than the ~~loan portfolio and debt securities held to maturity during each of the periods presented.~~

The Company provided no provision for credit losses in the first quarter 2021 based on Management’s evaluation of credit quality and the adequacy of the allowance for credit losses. The Company recorded a provision of credit losses of $4.3 million in the first quarter 2020, which represented Management’s estimate of additional reserves needed over the remaining life of its loansnet interest spread due to ~~credit-risk from weakened economic conditions caused by~~ the COVID-19 pandemic. For further information regarding credit risk, net credit losses and the allowance for credit losses, see the “Loan Portfolio Credit Risk” and “Allowance for Credit Losses” sectionsbenefit of ~~this Report.~~noninterest-bearing demand deposits.

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-35-

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

	For the Three Months Ended December 31, 2021
			Interest
	Average		Income/		Yields/
	Balance		Expense		Rates
	($ in thousands)
Assets
Investment securities:
Taxable	$	4,603,761	$	27,765		2.41	%
Tax-exempt ⁽¹⁾		262,715		2,267		3.45	%
Total investments ⁽¹⁾		4,866,476		30,032		2.47	%
Loans:
Taxable
PPP loans		68,870		1,208		6.96	%
Other taxable		980,198		11,543		4.67	%
Total taxable		1,049,068		12,751		4.82	%
Tax-exempt ⁽¹⁾		48,630		472		3.85	%
Total loans ⁽¹⁾		1,097,698		13,223		4.78	%
Total interest-bearing cash		955,354		366		0.15	%
Total Interest-earning assets ⁽¹⁾		6,919,528		43,621		2.52	%
Other assets		415,449
Total assets	$	7,334,977

Liabilities and shareholders' equity
Noninterest-bearing demand	$	3,022,787	$	-		-	%
Savings and interest-bearing transaction		3,179,605		377		0.05	%
Time less than $100,000		80,825		41		0.20	%
Time $100,000 or more		65,920		61		0.37	%
Total interest-bearing deposits		3,326,350		479		0.06	%
Short-term borrowed funds		141,761		25		0.07	%
Total interest-bearing liabilities		3,468,111		504		0.06	%
Other liabilities		77,721
Shareholders' equity		766,358
Total liabilities and shareholders' equity	$	7,334,977
Net interest spread ^{(1) (2)}						2.46	%
Net interest and fee income and interest margin ^{(1) (3)}			$	43,117		2.49	%

⁽¹⁾	Amounts calculated on an FTE 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, divided by the average balance of interest-earning assets. The net interest margin is greater than the net interest spread due to the benefit of noninterest-bearing demand deposits.

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-36-

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

Noninterest Income

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

For the Three Months Ended

March 31,

December 31,

2021

2020

2020

(In thousands)

Service charges on deposit accounts
$ 3,304 $ 4,248 $ 3,452
Merchant processing services
2,560 2,358 2,713
Debit card fees
1,601 1,468 1,643
Trust fees
801 777 765
ATM processing fees
601 579 570
Other service fees
469 506 457
Financial services commissions
70 125 66
Gains on sales of real property
- - 3,536
Other noninterest income
783 1,587 757
Total
$ 10,189 $ 11,648 $ 13,959

First quarter 2021 noninterest income decreased $1.5 million compared with first quarter 2020 due to lower service charges on deposit accounts and because other noninterest income in the first quarter 2020 included $603 thousand in excess of amounts charged-off in prior periods on a purchased loan. Service charges on deposit accounts decreased $944 thousand due to declines in fees on overdrawn accounts and analyzed accounts. The decreases were partially offset by fees generated from increased transactions of merchant processing services and debit card.

First quarter 2021 noninterest income decreased $3.8 million compared with fourth quarter 2020 due to lower service charges on deposit accounts and because fourth quarter 2020 results included a $3.5 million gain on sale of a closed branch building.

11,57610,18910,842

Noninterest Expense

24,87524,90623,912

Income Before Income Taxes (FTE)⁽¹⁾

30,50827,86630,047

Provision for Income Taxes (FTE)⁽¹⁾

7,8927,7198,327

Net Income

$22,616$20,147$21,720

Average Common Shares Outstanding

26,87026,82126,866

Average Diluted Common Shares Outstanding

26,88526,84226,875

Common Shares Outstanding at Period End

26,88326,86426,866

Per Common Share:

Basic Earnings

$0.84$0.75$0.81

Diluted Earnings

0.840.750.81

Book Value Per Common Share

26.1030.2330.79

Financial Ratios:

Return On Assets

1.24%1.23%1.17%

Return On Common Equity

11.82%11.11%11.24%

Net Interest Margin (FTE)⁽¹⁾

2.51%2.74%2.49%

Net Loan Chargeoffs to Average Loans

0.23%0.12%0.13%

Efficiency Ratio⁽²⁾

44.9%47.2%44.3%

Average Balances:

Assets

$7,406,321$6,650,164$7,334,977

Loans

1,029,7241,251,5401,097,698

Investments

4,947,8464,440,6214,866,476

Deposits

6,393,4585,748,0706,349,137

Shareholders' Equity

776,225735,496766,358

Period End Balances:

Assets

$7,306,417$6,912,481$7,461,026

Loans

1,002,5141,293,7561,068,126

Investments

4,897,1154,459,8384,945,258

Deposits

6,405,8745,923,8336,413,956

Shareholders' Equity

701,744812,132827,102

Capital Ratios at Period End:

Total Risk Based Capital

15.60%16.88%15.47%

Tangible Equity to Tangible Assets

8.06%10.15%9.60%

Dividends Paid Per Common Share

$0.42$0.41$0.42

Common Dividend Payout Ratio

50%55%52%

⁽¹⁾	Yields on securities and certain loans have been adjusted upward to an FTE basis in order to reflect the effect of income which is exempt from federal income taxation at the current statutory tax rate.

⁽²⁾

The ~~following table summarizes the components of~~efficiency ratio is defined as noninterest expense ~~for the periods indicated.~~

For the Three Months Ended

March 31,

December 31,

2021

2020

2020

(In thousands)

Salaries and related benefits
$ 12,665 $ 13,018 $ 12,291
Occupancy and equipment
4,880 4,932 4,900
Outsourced data processing services
2,390 2,405 2,359
Professional fees
942 389 722
Courier service
504 491 502
Amortization of identifiable intangibles
69 73 69
Other noninterest expense
3,456 3,356 3,702
Total
$ 24,906 $ 24,664 $ 24,545

~~First quarter 2021~~divided by total revenue (net interest income on an FTE basis and noninterest expense increased $242 thousand compared with first quarter 2020 due to higher professional fees and FDIC assessments. First quarter 2020 FDIC assessments were reduced by a $246 thousand FDIC assessment credit. The increases were partially offset by lower salaries due to attrition.income).

~~In the first quarter 2021 noninterest expense increased $361 thousand compared with the fourth quarter 2020 due to higher payroll taxes, employee benefits, and professional fees.~~

-30-

Financial Overview

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-31-

Net Income

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

	For the Three Months Ended
	March 31,						December 31,
	2022			2021			2021
	(In thousands, except per share data)
Net interest and loan fee income (FTE)	$	43,807		$	42,583		$	43,117
Provision for credit losses		-			-			-
Noninterest income		11,576			10,189			10,842
Noninterest expense		24,875			24,906			23,912
Income before taxes (FTE)		30,508			27,866			30,047
Income tax provision (FTE)		7,892			7,719			8,327
Net income	$	22,616		$	20,147		$	21,720

Average diluted common shares		26,885			26,842			26,875
Diluted earnings per common share	$	0.84		$	0.75		$	0.81

Average total assets	$	7,406,321		$	6,650,164		$	7,334,977
Net income to average total assets (annualized)		1.24	%		1.23	%		1.17	%
Net income to average common shareholders' equity (annualized)		11.82	%		11.11	%		11.24	%

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-32-

Net Interest and Loan Fee Income (FTE)

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

	For the Three Months Ended
	March 31,						December 31,
	2022			2021			2021
	(In thousands)
Interest and loan fee income	$	43,759		$	42,316		$	43,041
Interest expense		480			475			504
FTE adjustment		528			742			580
Net interest and loan fee income (FTE)	$	43,807		$	42,583		$	43,117

Average earning assets	$	6,998,234		$	6,244,622		$	6,919,528
Net interest margin (FTE) (annualized)		2.51	%		2.74	%		2.49	%

The annualized net interest margin (FTE) was 2.51% in the first quarter 2022 compared with 2.74% in the first quarter 2021 and 2.49% in the fourth quarter 2021.

Net Interest Margin (FTE)

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

	For the Three Months Ended
	March 31,						December 31,
	2022			2021			2021

Yield on earning assets (FTE)		2.54	%		2.77	%		2.52	%
Rate paid on interest-bearing liabilities		0.05	%		0.06	%		0.06	%
Net interest spread (FTE)		2.49	%		2.71	%		2.46	%
Impact of noninterest-bearing funds		0.02	%		0.03	%		0.03	%
Net interest margin (FTE)		2.51	%		2.74	%		2.49	%

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-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 the reversal of previously accrued interest on loans placed on non-accrual status during the period, 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, rates and interest margins are annualized.

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

	For the Three Months Ended March 31, 2022
			Interest
	Average		Income/		Yields/
	Balance		Expense		Rates
	($ in thousands)
Assets
Investment securities:
Taxable	$	4,710,561	$	28,733		2.44	%
Tax-exempt ⁽¹⁾		237,285		2,037		3.43	%
Total investments ⁽¹⁾		4,947,846		30,770		2.49	%
Loans:
Taxable
Paycheck Protection Program ("PPP") loans		35,871		849		9.60	%
Other taxable		946,660		11,733		5.03	%
Total taxable		982,531		12,582		5.19	%
Tax-exempt ⁽¹⁾		47,193		456		3.92	%
Total loans ⁽¹⁾		1,029,724		13,038		5.14	%
Total interest-bearing cash		1,020,664		479		0.19	%
Total Interest-earning assets ⁽¹⁾		6,998,234		44,287		2.54	%
Other assets		408,087
Total assets	$	7,406,321

Liabilities and shareholders' equity
Noninterest-bearing demand	$	3,005,065	$	-		-	%
Savings and interest-bearing transaction		3,245,192		371		0.05	%
Time less than $100,000		79,029		40		0.21	%
Time $100,000 or more		64,172		41		0.26	%
Total interest-bearing deposits		3,388,393		452		0.05	%
Short-term borrowed funds		157,753		28		0.07	%
Total interest-bearing liabilities		3,546,146		480		0.05	%
Other liabilities		78,885
Shareholders' equity		776,225
Total liabilities and shareholders' equity	$	7,406,321
Net interest spread ^{(1) (2)}						2.49	%
Net interest and fee income and interest margin ^{(1) (3)}			$	43,807		2.51	%

⁽¹⁾	Amounts calculated on an FTE 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, divided by the average balance of interest-earning assets. The net interest margin is greater than the net interest spread due to the benefit of noninterest-bearing demand deposits.

-34-

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

	For the Three Months Ended March 31, 2021
			Interest
	Average		Income/		Yields/
	Balance		Expense		Rates
	($ in thousands)
Assets
Investment securities:
Taxable	$	4,079,472	$	25,198		2.47	%
Tax-exempt ⁽¹⁾		361,149		3,038		3.36	%
Total investments ⁽¹⁾		4,440,621		28,236		2.54	%
Loans:
Taxable
Paycheck Protection Program ("PPP") loans		188,971		1,853		3.98	%
Other taxable		1,011,975		12,339		4.95	%
Total taxable		1,200,946		14,192		4.79	%
Tax-exempt ⁽¹⁾		50,594		492		3.94	%
Total loans ⁽¹⁾		1,251,540		14,684		4.76	%
Total interest-bearing cash		552,461		138		0.10	%
Total Interest-earning assets ⁽¹⁾		6,244,622		43,058		2.77	%
Other assets		405,542
Total assets	$	6,650,164

Liabilities and shareholders' equity
Noninterest-bearing demand	$	2,713,632	$	-		-	%
Savings and interest-bearing transaction		2,877,575		339		0.05	%
Time less than $100,000		85,622		42		0.20	%
Time $100,000 or more		71,241		78		0.44	%
Total interest-bearing deposits		3,034,438		459		0.06	%
Short-term borrowed funds		95,575		16		0.07	%
Other borrowed funds		214		-		0.35	%
Total interest-bearing liabilities		3,130,227		475		0.06	%
Other liabilities		70,809
Shareholders' equity		735,496
Total liabilities and shareholders' equity	$	6,650,164
Net interest spread ^{(1) (2)}						2.71	%
Net interest and fee income and interest margin ^{(1) (3)}			$	42,583		2.74	%

⁽¹⁾	Amounts calculated on an FTE 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, divided by the average balance of interest-earning assets. The net interest margin is greater than the net interest spread due to the benefit of noninterest-bearing demand deposits.

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

	For the Three Months Ended December 31, 2021
			Interest
	Average		Income/		Yields/
	Balance		Expense		Rates
	($ in thousands)
Assets
Investment securities:
Taxable	$	4,603,761	$	27,765		2.41	%
Tax-exempt ⁽¹⁾		262,715		2,267		3.45	%
Total investments ⁽¹⁾		4,866,476		30,032		2.47	%
Loans:
Taxable
PPP loans		68,870		1,208		6.96	%
Other taxable		980,198		11,543		4.67	%
Total taxable		1,049,068		12,751		4.82	%
Tax-exempt ⁽¹⁾		48,630		472		3.85	%
Total loans ⁽¹⁾		1,097,698		13,223		4.78	%
Total interest-bearing cash		955,354		366		0.15	%
Total Interest-earning assets ⁽¹⁾		6,919,528		43,621		2.52	%
Other assets		415,449
Total assets	$	7,334,977

Liabilities and shareholders' equity
Noninterest-bearing demand	$	3,022,787	$	-		-	%
Savings and interest-bearing transaction		3,179,605		377		0.05	%
Time less than $100,000		80,825		41		0.20	%
Time $100,000 or more		65,920		61		0.37	%
Total interest-bearing deposits		3,326,350		479		0.06	%
Short-term borrowed funds		141,761		25		0.07	%
Total interest-bearing liabilities		3,468,111		504		0.06	%
Other liabilities		77,721
Shareholders' equity		766,358
Total liabilities and shareholders' equity	$	7,334,977
Net interest spread ^{(1) (2)}						2.46	%
Net interest and fee income and interest margin ^{(1) (3)}			$	43,117		2.49	%

⁽¹⁾	Amounts calculated on an FTE 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, divided by the average balance of interest-earning assets. The net interest margin is greater than the net interest spread due to the benefit of noninterest-bearing demand deposits.

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

Summary of Changes in Interest Income and Expense

	For the Three Months Ended March 31, 2022
	Compared with
	For the Three Months Ended March 31, 2021
	Volume			Yield/Rate			Total
	(In thousands)
Increase (decrease) in interest and loan fee income:
Investment securities:
Taxable	$	3,898		$	(363	)	$	3,535
Tax-exempt ⁽¹⁾		(1,042	)		41			(1,001	)
Total investments ⁽¹⁾		2,856			(322	)		2,534
Loans:
Taxable:
PPP loans		(3,624	)		2,620			(1,004	)
Other		(795	)		189			(606	)
Total taxable		(4,419	)		2,809			(1,610	)
Tax-exempt ⁽¹⁾		(33	)		(3	)		(36	)
Total loans ⁽¹⁾		(4,452	)		2,806			(1,646	)
Total interest-bearing cash		117			224			341
Total (decrease) increase in interest and loan fee income ⁽¹⁾		(1,479	)		2,708			1,229
Increase (decrease) in interest expense:
Deposits:
Savings and interest-bearing transaction		43			(11	)		32
Time less than $100,000		(3	)		1			(2	)
Time $100,000 or more		(8	)		(29	)		(37	)
Total interest-bearing deposits		32			(39	)		(7	)
Short-term borrowed funds		10			2			12
Total increase (decrease) in interest expense		42			(37	)		5
(Decrease) increase in net interest and loan fee income ⁽¹⁾	$	(1,521	)	$	2,745		$	1,224

⁽¹⁾	Amounts calculated on an FTE basis using the current statutory federal tax rate.

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Summary of Changes in Interest Income and Expense

	For the Three Months Ended March 31, 2022
	Compared with
	For the Three Months Ended December 31, 2021
	Volume			Yield/Rate			Total
	(In thousands)
Increase (decrease) in interest and loan fee income:
Investment securities:
Taxable	$	644		$	324		$	968
Tax-exempt ⁽¹⁾		(219	)		(11	)		(230	)
Total investments ⁽¹⁾		425			313			738
Loans:
Taxable:
PPP loans		(806	)		447			(359	)
Other		(476	)		666			190
Total taxable		(1,282	)		1,113			(169	)
Tax-exempt ⁽¹⁾		(21	)		5			(16	)
Total loans ⁽¹⁾		(1,303	)		1,118			(185	)
Total interest-bearing cash		25			88			113
Total (decrease) increase in interest and loan fee income ⁽¹⁾		(853	)		1,519			666
Increase (decrease) in interest expense:
Deposits:
Savings and interest-bearing transaction		3			(9	)		(6	)
Time less than $100,000		(1	)		-			(1	)
Time $100,000 or more		(2	)		(18	)		(20	)
Total interest-bearing deposits		-			(27	)		(27	)
Short-term borrowed funds		2			1			3
Total increase (decrease) in interest expense		2			(26	)		(24	)
(Decrease) increase in net interest and loan fee income ⁽¹⁾	$	(855	)	$	1,545		$	690

⁽¹⁾	Amounts calculated on an FTE basis using the current statutory federal tax rate.

Provision for Credit Losses

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

The Company provided no provision for credit losses in the first quarter 2022 and the first quarter 2021, based on Management’s estimate of reserves needed over the remaining life of its loans and investments. For further information regarding credit risk, net credit losses, and the allowance for credit losses, see the “Loan Portfolio Credit Risk” and “Allowance for Credit Losses” sections of this Report.

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Noninterest Income

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

	For the Three Months Ended
	March 31,				December 31,
	2022		2021		2021
	(In thousands)

Service charges on deposit accounts	$	3,582	$	3,304	$	3,580
Merchant processing services		2,623		2,560		3,000
Debit card fees		2,872		1,601		1,727
Trust fees		843		801		844
ATM processing fees		451		601		488
Other service fees		449		469		449
Financial services commissions		117		70		96
Other noninterest income		639		783		658
Total	$	11,576	$	10,189	$	10,842

First quarter 2022 noninterest income increased $1.4 million compared with first quarter 2021 primarily due to a $1.2 million reconciling payment from a payments network in the first quarter 2022. Service charges on deposit accounts increased $278 thousand due to increased fee income on overdrawn accounts and fee income on analyzed deposit accounts.

First quarter 2022 noninterest income increased $734 thousand compared with fourth quarter 2021 primarily due to a $1.2 million reconciling payment from a payments network in the first quarter 2022.

Noninterest Expense

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

	For the Three Months Ended
	March 31,				December 31,
	2022		2021		2021
	(In thousands)

Salaries and related benefits	$	11,920	$	12,665	$	11,436
Occupancy and equipment		4,746		4,880		4,692
Outsourced data processing services		2,437		2,390		2,357
Professional fees		736		942		757
Courier service		582		504		572
Amortization of identifiable intangibles		64		69		65
Other noninterest expense		4,390		3,456		4,033
Total	$	24,875	$	24,906	$	23,912

Noninterest expense decreased $31 thousand in the first quarter 2022 compared with the first quarter 2021. Salaries and related benefits decreased $745 thousand due to attrition. Other noninterest expense increased $934 thousand due to higher estimated operating losses on limited partnership investments in low-income housing.

Noninterest expense increased $963 thousand in the first quarter 2022 compared with the fourth quarter 2021. Salaries and related benefits increased $484 thousand due to the seasonal increase in payroll taxes, wage and salary adjustments to comply with California minimum wage laws. Other noninterest expense increased $357 thousand due to higher estimated operating losses on limited partnership investments in low-income housing.

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-39-

Provision for Income Tax

The Company’s income tax provision (FTE) was $7.9 million for the first quarter 2022 compared with $7.7 million for the first quarter 2021 ~~compared with $6.3 million for the first quarter 2020~~ and ~~$8.9~~$8.3 million for the fourth quarter ~~2020,~~2021, representing effective tax rates (FTE) of 25.9%, 27.7% and 27.7%, ~~27.0% and 27.1%,~~ respectively. The lower first quarter 2022 tax rate was primarily attributable to higher estimated tax credits from limited partnership investments in low-income housing.

Investment Securities Portfolio

The Company maintains an investment securities portfolio consisting of securities issued by ~~agency and non-agency mortgage backed securities,~~ state and political subdivisions and corporations, collateralized loan obligations, agency and non-agency issued mortgage backed securities, and other securities.

Management ~~managed~~manages the investment securities portfolio in response to changes in deposit and loan volumes. The carrying value of the Company’s investment securities portfolio was ~~$4.5~~$4.9 billion at March 31, ~~2021~~2022 and ~~$4.6 billion at~~ December 31, ~~2020.~~2021. The following table ~~indicates the carrying values of investment~~lists debt securities in the Company’s portfolio by type as of the indicated dates. ~~The Company adopted ASU 2016-13 effective January 1, 2020.~~ Debt securities held to maturity ~~of $469,268 thousand~~are listed at ~~December 31, 2021 and $515,598 thousand at December 31, 2020, are~~ amortized cost before related reserve for expected credit losses of $9$7 thousand. Debt securities available for sale are listed at fair value.

	At March 31, 2021					At December 31, 2020					At March 31, 2022					At December 31, 2021
	Carrying Value		As a percent of total investment securities			Carrying Value		As a percent of total investment securities			Carrying Value		As a percent of total investment securities			Carrying Value		As a percent of total investment securities
	($ in thousands)										($ in thousands)
Agency residential mortgage-backed securities	$	789,953		18	%	$	893,284		20	%
Agency mortgage-backed securities											$	496,935		10	%	$	559,358		11	%
Obligations of states and political subdivisions		361,656		8	%		384,932		8	%		236,368		5	%		251,933		5	%
Corporate securities		2,149,366		48	%		2,117,978		46	%		2,547,118		52	%		2,746,735		56	%
Commercial paper		-		-	%		24,990		1	%
Collateralized loan obligations		1,157,452		26	%		1,156,101		25	%		1,616,584		33	%		1,386,355		28	%
Other		1,411		-	%		1,498		-	%		110		-	%		877		-	%
Total	$	4,459,838		100	%	$	4,578,783		100	%	$	4,897,115		100	%	$	4,945,258		100	%

Debt securities available for sale	$	3,990,570				$	4,063,185				$	4,616,588				$	4,638,855
Debt securities held to maturity		469,268					515,598					280,527					306,403
Total	$	4,459,838				$	4,578,783				$	4,897,115				$	4,945,258

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 and change the composition of the Company’s investment securities portfolio.

At March 31, ~~2021,~~2022, substantially all of the Company’s investment securities ~~continue to be~~were investment grade as 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 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. There ~~have been~~were no significant differences in the Company’s internal analyses compared with the ratings assigned by the third party credit rating ~~agencies.~~agencies with respect to the reported periods.

The Company had no marketable equity securities at March 31, 2022 and December 31, 2021.

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40-40-

The following table summarizes total corporate securities by credit rating:

At March 31, 2021

At December 31, 2020

Market value

As a percent of
total corporate
securities

Market value

As a percent of
total corporate
securities

($ in thousands)

AAA
$ 21,772 1 % $ 21,905 1 %
AA+
20,893 1 % 20,979 1 %
AA
20,150 1 % 41,232 2 %
AA-
77,527 3 % 46,969 2 %
A+
152,735 7 % 153,917 7 %
A
466,316 22 % 374,155 18 %
A-
338,379 16 % 385,642 18 %
BBB+
474,978 22 % 489,677 23 %
BBB
481,913 22 % 486,108 23 %
BBB-
79,722 4 % 82,431 4 %
Investment grade
2,134,385 99 % 2,103,015 99 %
Below investment grade
14,981 1 % 14,963 1 %
Total Corporate securities
$ 2,149,366 100 % $ 2,117,978 100 %

The Company’s $14.98 million below investment grade corporate bond rated BB- at March 31, 2021 and $14.96 million corporate bond rated BB- at December 31, 2020, represents a bond of one pharmaceutical company which develops, manufactures and markets generic and branded human pharmaceuticals, as well as active pharmaceutical ingredients, to customers worldwide. The bond matures in July 2021.

	At March 31, 2022					At December 31, 2021
	Market value		As a percent of total corporate securities			Market value		As a percent of total corporate securities
	($ in thousands)
AAA	$	21,074		1	%	$	21,400		1	%
AA+		20,114		1	%		20,479		1	%
AA		19,472		1	%		19,781		1	%
AA-		101,651		4	%		105,373		4	%
A+		112,424		5	%		128,325		5	%
A		490,549		19	%		539,062		19	%
A-		593,749		23	%		628,089		23	%
BBB+		765,321		29	%		797,860		29	%
BBB		422,764		17	%		474,648		17	%
BBB-		-		-	%		11,718		-	%
Total Corporate securities	$	2,547,118		100	%	$	2,746,735		100	%

The following table summarizes total corporate securities by the industry sector in which the issuing companies operate:

	At March 31, 2021					At December 31, 2020					At March 31, 2022					At December 31, 2021
	Market value		As a percent of total corporate securities			Market value		As a percent of total corporate securities			Market value		As a percent of total corporate securities			Market value		As a percent of total corporate securities
	($ in thousands)										($ in thousands)
Financial	$	1,026,283		48	%	$	938,222		44	%	$	1,330,497		52	%	$	1,421,317		52	%
Consumer, Non-cyclical		181,918		8	%		184,069		9	%		264,366		11	%		271,069		10	%
Industrial												205,897		8	%		217,065		8	%
Utilities		173,378		8	%		185,486		9	%		161,904		6	%		208,522		7	%
Communications		167,294		8	%		173,483		8	%		152,703		6	%		161,537		6	%
Industrial		165,268		8	%		188,803		9	%
Technology		128,407		6	%		130,725		6	%		121,979		5	%		127,853		5	%
Consumer, Cyclical												109,387		4	%		125,686		4	%
Basic Materials		116,312		5	%		120,811		6	%		107,367		4	%		114,964		4	%
Energy		99,098		5	%		103,049		5	%		93,018		4	%		98,722		4	%
Consumer, Cyclical		91,408		4	%		93,330		4	%
Total Corporate securities	$	2,149,366		100	%	$	2,117,978		100	%	$	2,547,118		100	%	$	2,746,735		100	%

The following table summarizes total corporate securities by the location of the issuers’ headquarters; all the bonds are denominated in United States dollars:

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	At March 31, 2022
	Market value		As a percent of total corporate securities
	($ in thousands)
United States of America	$	1,784,820		70	%
United Kingdom		216,905		9	%
Japan		182,562		7	%
Switzerland		97,906		4	%
France		96,218		4	%
Netherlands		52,852		2	%
Canada		33,922		1	%
Germany		33,742		1	%
Australia		26,006		1	%
Belgium		22,185		1	%
Total Corporate securities	$	2,547,118		100	%

41-41-

The ~~following table summarizes total consumer, cyclical by sub-sector:~~

At March 31, 2021

Market value

($ in thousands)

Hotels
$ -
Restaurants
20,975
Department Stores
-
Casinos
-
Airlines
-
Other
70,433
Total Consumer, Cyclical
$ 91,408

~~The~~ Company’s $21.0 million in corporate bonds to issuers operating in the consumer cyclical – restaurant subsector represent bonds of one company which retails, roasts and provides its own brand of specialty coffee and other complementary products through retail locations worldwide and sells coffee through several distribution channels. The bonds mature in 2023. At March 31, 2021, the bonds were rated BBB and priced with an unrealized gain of $1.0 million.

At March 31, 2021

Amortized

Fair

Cost

Value

(In thousands)

Energy
$ 95,579 $ 99,098
Industrial
158,979 165,268
Total
$ 254,558 $ 264,366

The $99.1 million (fair value) in corporate bonds in the energy sector are issued by four issuers at March 31, 2021. The $165.3 million (fair value) in corporate bonds in the industrial sector are issued by nine issuers at March 31, 2021.

~~The Company’s $1.2~~$1.6 billion (fair value) in collateralized loan obligations at March 31, ~~2021, include~~2022, consist of investments in ~~133~~170 issues that are within the senior tranches of their respective fund securitization structures. ~~All of the Company’s~~The following table summarizes total collateralized loan ~~obligation investments are rated AAA or AA at March 31, 2021.~~obligations by credit rating:

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	At March 31, 2022
	Amortized		Fair
	Cost		Value
	(In thousands)
AAA	$	550,394	$	550,397
AA		1,066,724		1,066,187
Total	$	1,617,118	$	1,616,584

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 March 31, ~~2021,~~2022, the Company’s investment securities portfolios included securities issued by ~~297~~187 state and local government municipalities and agencies located within 4033 states. The largest exposure to any one municipality or agency was ~~$8.1~~$7.2 million (fair value) represented by ~~six~~five general obligation bonds.

At March 31, 2021

Amortized

Fair

Cost

Value

(In thousands)

Obligations of states and political subdivisions:

General obligation bonds:

California
$ 66,059 $ 68,275
Texas
18,917 19,389
Washington
16,184 16,791
Other (31 states)
158,999 163,630
Total general obligation bonds
$ 260,159 $ 268,085

Revenue bonds:

California
$ 17,575 $ 17,977
Kentucky
10,819 11,152
Indiana
9,342 9,498
Virginia
7,597 7,944
Colorado
6,301 6,488
Washington
6,221 6,318
Maryland
5,972 6,026
Other (19 states)
33,370 33,851
Total revenue bonds
97,197 99,254
Total obligations of states and political subdivisions
$ 357,356 $ 367,339

	At March 31, 2022
	Amortized		Fair
	Cost		Value
	(In thousands)
Obligations of states and political subdivisions:
General obligation bonds:
California	$	48,156	$	48,341
Washington		13,427		13,484
Texas		11,619		11,621
Arizona		9,220		9,288
Other (24 states)		90,254		90,344
Total general obligation bonds	$	172,676	$	173,078

Revenue bonds:
California	$	14,903	$	14,824
Kentucky		8,842		8,888
Virginia		7,570		7,641
Colorado		6,157		6,191
Indiana		5,743		5,767
Other (10 states)		20,701		20,790
Total revenue bonds		63,916		64,101
Total obligations of states and political subdivisions	$	236,592	$	237,179

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-42-

At December 31, ~~2020,~~2021, the Company’s investment securities portfolios included securities issued by ~~317~~197 state and local government municipalities and agencies located within 4033 states. The largest exposure to any one municipality or agency was ~~$8.2~~$7.4 million (fair value) represented by ~~six~~five general obligation bonds.

	At December 31, 2020				At December 31, 2021
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
	(In thousands)				(In thousands)
Obligations of states and political subdivisions:
General obligation bonds:
California	$	67,386	$	70,075	$	48,332	$	49,829
Washington						13,460		13,924
Texas		20,644		21,283		11,653		12,024
New Jersey		17,403		17,629
Washington		16,226		17,000
Other (32 states)		159,019		164,764
Other (27 states)						110,722		114,132
Total general obligation bonds	$	280,678	$	290,751	$	184,167	$	189,909

Revenue bonds:
California	$	17,587	$	18,054	$	14,912	$	15,208
Kentucky		10,822		11,210		8,846		9,093
Indiana		9,350		9,565
Virginia		7,604		8,019		7,576		7,809
Colorado		6,302		6,519		6,158		6,241
Washington		6,225		6,358
Maryland		5,972		6,043
Other (19 states)		35,061		35,656
Indiana						5,747		5,821
Other (12 states)						20,714		20,934
Total revenue bonds		98,923		101,424		63,953		65,106
Total obligations of states and political subdivisions	$	379,601	$	392,175	$	248,120	$	255,015

At March 31, ~~2021~~2022 and December 31, ~~2020,~~2021, 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 1914 revenue sources at March 31, ~~2021~~2022 and December 31, ~~2020.~~2021. The revenue sources that represent 5% or more individually of the total revenue bonds are summarized in the following tables.

	At March 31, 2021				At March 31, 2022
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
	(In thousands)				(In thousands)
Revenue bonds by revenue source:
Water	$	21,058	$	21,325	$	10,123	$	10,174
Sewer		12,424		12,868		8,507		8,568
Sales tax		10,729		10,977		8,196		8,237
Lease (renewal)		9,206		9,489		6,966		6,994
Lease (abatement)		8,471		8,615		6,912		6,934
Other (14 sources)		35,309		35,980
Lease (appropriation)						4,562		4,572
Special Assessment						4,080		3,957
Intergovernmental Agreement						3,861		3,895
Other (6 sources)						10,709		10,770
Total revenue bonds by revenue source	$	97,197	$	99,254	$	63,916	$	64,101

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44-43-

	At December 31, 2020				At December 31, 2021
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
	(In thousands)				(In thousands)
Revenue bonds by revenue source:
Water	$	22,731	$	23,095	$	10,123	$	10,222
Sewer		12,447		12,989		8,525		8,828
Sales tax		10,738		11,013		8,203		8,304
Lease (renewal)		9,209		9,545		6,969		7,175
Lease (abatement)		8,483		8,674		6,922		7,010
Other (14 sources)		35,315		36,108
Lease (appropriation)						4,564		4,618
Special Assessment						4,080		4,197
Intergovernmental Agreement						3,860		3,926
Other (6 sources)						10,707		10,826
Total revenue bonds by revenue source	$	98,923	$	101,424	$	63,953	$	65,106

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

Loan Portfolio Credit Risk

The Company extends loans to commercial and consumer customers which expose the Company to the risk that the borrowers will default, causing loss. 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.

During 2020 and the first ~~quarter~~six months of 2021, the Bank processed customer PPP loan applications pursuant to the CARES Act. The United States Small Business Administration guarantees PPP loans; given this guarantee, the PPP loans are not considered to have default ~~risk. The Company funded $249 million PPP loans in the second quarter 2020~~risk and ~~$91 million loans during the first quarter 2021 under the second round of the PPP.~~do not carry an allowance for credit losses. The outstanding balances of PPP loans, net of deferred fees and costs, were ~~$233~~$27 million at March 31, ~~2021.~~

On April 7, 2020, the U.S. banking agencies issued an Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (Revised). The statement describes accounting for COVID-19-related loan modifications, including clarifying the interaction between current accounting rules and the temporary relief provided by the CARES Act. The Bank has been actively working with consumer and commercial borrowers requesting deferral of loan payments, granting deferrals of principal and interest payments for 90 days. At March 31, 2021, consumer loans granted loan deferrals totaled $1.8 million and one commercial real estate loan with deferred payments totaled $2.3 million, in the hospitality industry.2022.

The preparation of the financial statements requires Management to estimate the amount of expected losses in the loan portfolio and establish an allowance for credit losses. The allowance for credit losses is maintained by assessing or reversing a provision for credit losses through 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 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.~~practices:

●

The Bank maintains a Loan Review Department which reports directly to the audit committee of the Board of Directors. The Loan Review Department performs independent evaluations of loans to challenge the credit risk grades assigned by Management, 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 in order to maximize collection.

●

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

-44-

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”).

At March 31,

At December 31,

2021

2020

2020

(In thousands)

Nonperforming nonaccrual loans
$ 402 $ 419 $ 526
Performing nonaccrual loans
3,569 3,933 3,803
Total nonaccrual loans
3,971 4,352 4,329
Accruing loans 90 or more days past due
132 178 450
Total nonperforming loans
4,103 4,530 4,779
Other real estate owned
- 43 -
Total nonperforming assets
$ 4,103 $ 4,573 $ 4,779

Nonperforming Assets

	At March 31,				At December 31,
	2022		2021		2021
	(In thousands)

Nonperforming nonaccrual loans	$	63	$	402	$	265
Performing nonaccrual loans		421		3,569		427
Total nonaccrual loans		484		3,971		692
Accruing loans 90 or more days past due		431		132		339
Total nonperforming loans	$	915	$	4,103	$	1,031

At March 31, ~~2021, one loan secured by commercial real estate with a balance of $3.1 million was on nonaccrual status. The remaining seven~~2022, nonaccrual loans ~~held at March 31, 2021 had~~consisted of three loans with an average carrying value of ~~$122~~$161 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, pandemics, 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.

Allowance for Credit Losses

~~Effective January 1, 2020, the Company adopted Accounting Standards Update (ASU) 2016-13,~~ ~~Financial Instruments~~ – ~~Credit Losses: Measurement of Credit Losses on Financial Instruments~~ ~~(“CECL”).~~ The following table summarizes allowance for credit losses at the dates indicated:

	At March 31,				At December 31,		At March 31,		At December 31,
	2021		2020		2020		2022		2021
	(In thousands)						(In thousands)

Allowance for Credit Losses on Loans	$	23,483	$	24,804	$	23,854	$	22,925	$	23,514
Allowance for Credit Losses on Held to Maturity Debt Securities		9		16		9		7		7
Total Allowance for Credit Losses	$	23,492	$	24,820	$	23,863	$	22,932	$	23,521

Allowance for unfunded credit commitments								201		201

Allowance for Credit Losses on Debt Securities Held to Maturity

Management segmented debt securities held to maturity, selected methods to estimate losses for each segment, and measured a loss estimate. Agency mortgage-backed securities were assigned no credit loss allowance due to the perceived backing of government sponsored entities. Municipal securities were evaluated for risk of default based on credit rating and remaining term to maturity using Moody’s risk of default factors; Moody’s loss upon default factors were applied to the assumed defaulted principal amounts to estimate the amount for credit loss allowance. ~~The adoption of the ASU resulted in establishment of allowance~~Allowance for credit losses related to debt securities held to maturity ~~of $16 thousand. It~~ was ~~reduced to $9~~$7 thousand at March 30, 2022 and at December 31, ~~2020, and at March 31,~~ 2021, reflecting the ~~outstanding amount for~~expected credit losses on debt securities held to ~~maturity was $9 thousand.~~maturity.

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46-45-

Allowance for Credit Losses on Loans

The Company’s allowance for credit losses on loans represents Management’s estimate of forecasted credit losses in the loan portfolio based on the ~~current expected credit loss (CECL)~~CECL model. In evaluating credit risk for loans, Management measures the 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.

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

	For the Three Months Ended									For the Three Months Ended
	March 31,						December 31,			March 31,						December 31,
	2021			2020			2020			2022			2021			2021
	(In thousands)									(In thousands)
Analysis of the Allowance for Credit Losses on Loans
Balance, end of prior period	$	23,854		$	19,484		$	24,142
Adoption of ASU 2016-13		-			2,017			-
Balance, beginning of period		23,854			21,501			24,142		$	23,514		$	23,854		$	23,882
Provision for credit losses		-			4,300			7			-			-			-
Loans charged off:
Commercial		-			(178	)		(58	)
Consumer installment and other		(929	)		(1,395	)		(892	)		(1,212	)		(929	)		(1,016	)
Total chargeoffs		(929	)		(1,573	)		(950	)		(1,212	)		(929	)		(1,016	)
Recoveries of loans previously charged off:
Commercial		13			143			69			224			13			60
Commercial real estate		12			12			12			15			12			14
Consumer installment and other		533			421			574			384			533			574
Total recoveries		558			576			655			623			558			648
Net chargeoffs		(371	)		(997	)		(295	)		(589	)		(371	)		(368	)
Balance, end of period	$	23,483		$	24,804		$	23,854		$	22,925		$	23,483		$	23,514

Net chargeoffs as a percentage of average total loans (annualized)		0.12	%		0.36	%		0.09	%		0.23	%		0.12	%		0.13	%

Allowance for unfunded credit commitments		101			53			101			201			101			201

The Company's allowance for credit losses on loans is maintained at a level considered adequate to provide for expected losses based on historical loss rates adjusted for current and expected conditions over a forecast period. These include conditions unique to individual borrowers, as well as overall loan loss experience, the amount of past due, nonperforming and classified loans, recommendations of regulatory authorities, prevailing and forecasted economic conditions, or credit protection agreements and other factors. Loans that share common risk characteristics are segregated into pools based on common characteristics, which is primarily determined by loan, borrower, or collateral type. Historical loss rates are determined for each pool. Loans that do not share risk characteristics with other loans in the pools are evaluated individually. See Note 2 to the unaudited consolidated financial statements for additional information.

Allowance for Credit Losses

For the Three Months Ended March 31, 2021

Consumer

Commercial

Residential

Installment

Commercial

Real Estate

Construction

Real Estate

and Other

Total

(In thousands)

Allowance for credit losses:

Balance at beginning of period
$ 9,205 $ 5,660 $ 6 $ 47 $ 8,936 $ 23,854
Provision (reversal)
336 (167 ) - (4 ) (165 ) -
Chargeoffs
- - - - (929 ) (929 )
Recoveries
13 12 - - 533 558
Total allowance for credit losses
$ 9,554 $ 5,505 $ 6 $ 43 $ 8,375 $ 23,483

	Allowance for Credit Losses
	For the Three Months Ended March 31, 2022
												Consumer
				Commercial						Residential		Installment
	Commercial			Real Estate			Construction			Real Estate		and Other			Total
	(In thousands)
Allowance for credit losses:
Balance at beginning of period	$	6,966		$	6,529		$	2		$	45	$	9,972		$	23,514
(Reversal) provision		(875	)		(69	)		(2	)		3		943			-
Chargeoffs		-			-			-			-		(1,212	)		(1,212	)
Recoveries		224			15			-			-		384			623
Total allowance for credit losses	$	6,315		$	6,475		$	-		$	48	$	10,087		$	22,925

Management considers the ~~$23.5~~$22.9 million allowance for credit losses on loans to be adequate as a reserve against current expected credit losses in the loan portfolio as of March 31, ~~2021.~~2022.

See Note 4 to the unaudited consolidated financial statements for additional information related to the loan portfolio, loan portfolio credit risk, allowance for credit losses on loans, and other real estate owned.

-46-

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. Financial instruments may mature or re-price at different times. Financial instruments 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 financial instruments may change as interest rates change. In addition, the changing levels of interest rates may have an impact on loan demand and demand for various deposit products.

The Company’s earnings are affected not only by general economic conditions, but also by the monetary and fiscal policies of the United States government and its agencies, particularly the FOMC. The monetary policies of the FOMC can influence the overall growth of loans, investment securities, and deposits and the level of interest rates earned on loans and investment securities and paid for deposits and other borrowings. The nature and impact of future changes in monetary policies are generally not predictable.

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 market 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. 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, intermediate, and short-term interest rates.

Management monitors the Company’s interest rate risk using a purchased simulation model, which is periodically ~~validated~~assessed using supervisory guidance issued by the Board of Governors of the Federal Reserve System, SR 11-7 “Guidance on Model Risk Management.” Management measures its exposure to interest rate risk using ~~both~~ a ~~static and~~ dynamic composition of financial instruments. Within the static composition simulation, cash flows are assumed redeployed into like financial instruments at prevailing rates and yields, except cash flows from PPP loans are reinvested into interest-bearing cash. Within the dynamic composition simulation, Management makes assumptions regarding the expected change in the volume of financial ~~instruments. Both simulations are~~instruments given the assumed change in market interest rates. The simulation is used to measure expected changes in net interest income assuming various levels of change in market interest rates.

The Company’s asset and liability position was ~~slightly~~ “asset sensitive” at March 31, ~~2021,~~2022, depending on the interest rate assumptions applied to ~~each~~the simulation model. An “asset sensitive” position results in a ~~slightly~~ larger change in interest income than in interest expense resulting from application of assumed interest rate changes.

At March 31, ~~2021,~~2022, Management’s most recent measurements of estimated changes in net interest income were:

~~Static Simulation (balance sheet composition unchanged):~~
~~Assumed Immediate Parallel Shift in Interest Rates~~	~~+1.00~~	%
~~First Year Change in Net Interest Income~~	~~+13.0~~	%

Dynamic Simulation (balance sheet composition changes):
Assumed Change in Interest Rates Over 1 Year	+~~1.00~~1.00%	%+2.00%
First Year Change in Net Interest Income	+~~6.9~~6.8%	%+12.9%

Simulation estimates depend on, and will change with, the size and mix of the actual and projected composition of financial instruments at the time of each simulation. Assumptions made in the simulation may not materialize and unanticipated events and circumstances may occur. In addition, the simulation does not take into account any future actions. Management may undertake to mitigate the impact of interest rate changes, loan prepayment estimates and spread relationships, which may change regularly.

The Company does not currently engage in trading activities or use derivative instruments to manage 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. Preferred or common stock holdings, as permitted by banking regulations, can fluctuate in value. Changes in value of preferred or common stock holdings are recognized in the Company's income statement.

-47-

Fluctuations in the Company's common stock price can impact the Company's financial results in several ways. First, the Company has at times repurchased and retired its common stock; the market price paid to retire the Company's common stock affects 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 and potentially adding volatility to the book tax provision. Finally, the amount of compensation expense and tax deductions 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 chargeoffs and the provision for credit 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 securities portfolio requiring the Company to establish or increase reserves for credit losses. Other types of market risk, such as foreign currency exchange 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~~Bank's operations and meet obligations and other commitments on a timely basis and at a reasonable cost. The ~~Company~~Bank achieves this objective through the selection of asset and liability maturity mixes that it believes best meet its needs. The ~~Company's~~Bank's liquidity position is enhanced by its ability to raise additional funds as needed by selling debt securities available-for-sale or borrowing in the wholesale markets.

In recent years, the ~~Company's~~Bank's deposit base has provided the majority of the ~~Company's~~Bank's funding requirements. This relatively stable and low-cost source of funds, along with shareholders' equity, provided 97% of funding for average total assets in the first quarter ended March 31, ~~2021~~2022 and in the year ended December 31, ~~2020.~~2021. The stability of the ~~Company’s~~Bank’s funding from customer deposits is in part reliant on the confidence clients have in the ~~Company.~~Bank. The ~~Company~~Bank places a very high priority in maintaining this confidence through conservative credit and capital management practices and by maintaining an appropriate level of liquidity.

Liquidity is further provided by assets such as balances held at the Federal Reserve Bank, investment securities, and amortizing loans. The ~~Company's~~Bank's investment securities portfolio provides a substantial secondary source of liquidity. The ~~Company~~Bank held ~~$4.5~~$4.9 billion in total investment securities at March 31, ~~2021.~~2022. Under certain deposit, borrowing and other arrangements, the ~~Company~~Bank must hold and pledge investment securities as collateral. At March 31, ~~2021,~~2022, such collateral requirements totaled approximately ~~$845 million.~~

The Bank funded $249 million in PPP loans in the second quarter 2020 and $91 million in the first quarter 2021 by crediting loan proceeds to the borrower’s deposit accounts. PPP loans, net of deferred fees and costs, were $233 million at March 31, 2021. The Federal Reserve Board established the Paycheck Protection Program Liquidity Facility (“PPPLF”) to provide funding for eligible firms extending PPP loans. Under the PPPLF, the Bank must pledge PPP loans as collateral for PPPLF borrowings. Principal reductions on the pledged PPP loans must immediately result in principal reduction of the PPPLF borrowing.$1.0 billion.

Liquidity risk can result from the mismatching of asset and liability cash flows, or from disruptions in the financial markets. The ~~Company~~Bank performs liquidity stress tests on a periodic basis to evaluate the sustainability of its liquidity. Under the stress testing, the ~~Company~~Bank assumes outflows of funds increase beyond expected levels. Measurement of such heightened outflows considers the composition of the ~~Company’s~~Bank’s deposit base, including any concentration of deposits, non-deposit funding such as short-term borrowings, and unfunded lending commitments. The ~~Company~~Bank 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.~~Bank. However, no assurance can be given the Bank ~~or Company~~ will not experience a period of reduced liquidity.

Management continually monitors the ~~Company’s~~Bank’s cash levels. Loan demand from credit worthy borrowers will be dictated by economic and competitive conditions. The ~~Company~~Bank 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~~Bank's sales efforts, delivery of superior customer service, ~~PPP loan originations,~~ new regulations and market conditions. The ~~Company~~Bank does not aggressively solicit higher-costing time deposits. Changes in interest rates, most notably rising interest rates or increased consumer spending, could impact deposit volumes. Depending on economic conditions, interest rate levels, liquidity management and a variety of other conditions, deposit growth may be used to fund loans or purchase investment securities. However, due to possible volatility in economic conditions, 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.

Westamerica Bancorporation ("Parent Company") is a separate entity apart from the 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. The Parent Company currently has no debt. Substantially all of the Parent Company's revenues are obtained from subsidiary dividends and service fees.

-48-

The Bank’s dividends paid to the Parent Company, proceeds from the exercise of stock options, and Parent Company cash balances provided adequate cash for the Parent Company to pay shareholder dividends of $11 million in the quarter ended March 31, ~~2021~~2022 and $44 million in the year ended December 31, ~~2020~~2021 and retire common stock in the ~~amount~~amounts of ~~$232~~$218 thousand and ~~$16 million,~~$232 thousand, respectively. 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 provide a means of accumulating capital. The Company's net income as a percentage of average shareholders' equity (“return on equity” or “ROE”) has been ~~11.1%~~11.8% for the quarter ended March 31, ~~2021~~2022 and ~~11.3%~~11.5% for the year ended December 31, ~~2020.~~2021. The Company also raises capital as employees exercise stock options. Capital raised through the exercise of stock options was ~~$3.0 million~~$624 thousand in the quarter ended March 31, ~~2021~~2022 and ~~$2.8~~$3.0 million in the year ended December 31, ~~2020.~~2021.

The Company paid common dividends totaling $11 million in the quarter ended March 31, ~~2021~~2022 and $44 million in the year ended December 31, ~~2020,~~2021, which represent dividends per common share of ~~$0.41~~$0.42 and ~~$1.64,~~$1.65, 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 at times repurchased and retired its common stock as another means to return capital to shareholders. The Company repurchased and retired 3 thousand shares valued at $218 thousand in the quarter ended March 31, 2022 and 4 thousand shares valued at $232 thousand in the ~~quarter ended March 31, 2021 and 319 thousand shares valued at $16 million in the~~ year ended December 31, ~~2020.~~2021.

The Company's primary capital resource is shareholders' equity, which was ~~$812~~$702 million ~~and~~at March 31, ~~2021~~2022 compared with ~~$845~~$827 million at December 31, ~~2020.~~2021. The Company's ratio of equity to total assets was ~~11.7%~~9.6% at March 31, ~~2021~~2022 and ~~12.5%~~11.1% at December 31, ~~2020.~~2021.

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, and unanticipated asset devaluations. 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.

~~[The remainder of this page intentionally left blank]~~

Capital to Risk-Adjusted Assets

The capital ratios for the Company and the Bank under current regulatory capital standards are presented in the tables below, on the dates indicated. For Common Equity Tier I Capital, Tier I1 Capital and Total Capital, the minimum percentage required for regulatory capital adequacy purposes include a 2.5% “capital conservation buffer.”

										To Be												To Be
							Required for			Well-capitalized												Well-capitalized
							Capital			Under Prompt									Required for			Under Prompt
	At March 31, 2021						Adequacy			Corrective Action			At March 31, 2022						Capital Adequacy			Corrective Action
	Company			Bank			Purposes			Regulations (Bank)			Company			Bank			Purposes			Regulations (Bank)

Common Equity Tier I Capital		16.26	%		12.94	%		7.00	%		6.50	%		15.08	%		12.48	%		7.00	%		6.50	%
Tier I Capital		16.26	%		12.94	%		8.50	%		8.00	%		15.08	%		12.48	%		8.50	%		8.00	%
Total Capital		16.88	%		13.72	%		10.50	%		10.00	%		15.60	%		13.15	%		10.50	%		10.00	%
Leverage Ratio		9.48	%		7.51	%		4.00	%		5.00	%		9.14	%		7.53	%		4.00	%		5.00	%

To Be

Required for
Well-capitalized

Capital
Under Prompt

At December 31, 2020

Adequacy

Corrective Action

Company

Bank

Purposes

Regulations (Bank)

Common Equity Tier I Capital
16.04 % 13.00 % 7.00 % 6.50 %
Tier I Capital
16.04 % 13.00 % 8.50 % 8.00 %
Total Capital
16.68 % 13.80 % 10.50 % 10.00 %
Leverage Ratio
9.40 % 7.58 % 4.00 % 5.00 %

In June 2016, the Financial Accounting Standards Board issued an update to the accounting standards for credit losses known as the "Current Expected Credit Losses" (CECL) methodology, which replaced the existing incurred loss methodology for certain financial assets. The Company adopted the CECL methodology effective January 1, 2020, which involved an implementing accounting entry to retained earnings on a net-of-tax basis. The adoption of the CECL methodology did not have a material adverse day-one impact to capital ratios and the Company did not adopt the phase in regulatory capital relief. See Note 1 to consolidated financial statements, “Recently Adopted Accounting Standards” included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, for more information on the CECL methodology.

~~PPP loans are zero percent risk weighted for regulatory capital purposes; average PPP loans~~[The remainder of $189 million did not affect regulatory capital ratios. The Leverage ratio would have been approximately 0.3% higher for the Company and 0.2% higher for the Bank without PPP loans. To the extent funding of PPP loans is through excess cash balances or PPPLF borrowings, the Leverage ratio is unaffected. However, PPP loans funded by increased non-PPPLF borrowings reduces the leverage ratio.this page intentionally left blank]

-49-

										To Be
										Well-capitalized
							Required for			Under Prompt
	At December 31, 2021						Capital Adequacy			Corrective Action
	Company			Bank			Purposes			Regulations (Bank)

Common Equity Tier I Capital		14.93	%		12.48	%		7.00	%		6.50	%
Tier I Capital		14.93	%		12.48	%		8.50	%		8.00	%
Total Capital		15.47	%		13.17	%		10.50	%		10.00	%
Leverage Ratio		9.06	%		7.55	%		4.00	%		5.00	%

The Company and the Bank routinely project capital levels by analyzing forecasted earnings, credit quality, 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~~expects to maintain regulatory capital levels in excess of the minimum required to be considered well-capitalized under the prompt corrective action ~~framework while continuing~~framework; The Company and the Bank expect to ~~pay~~continue paying quarterly dividends to shareholders. No assurance can be given that changes in capital management plans will not occur.

Item 3. Quantitative and Qualitative Disclosures about Market 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.

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.

Item 4. 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) and 15d-15(e) of the Securities Exchange Act of 1934, as amended, as of March 31, ~~2021.~~2022.

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 March 31, ~~2021~~2022 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Due to the nature of its business, the Company is subject to various threatened or filed legal cases. Neither the 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. Based on the advice of legal counsel, the Company does not expect such cases will have a material, adverse effect on its business, financial position or results of operations. Legal liabilities are accrued when obligations become probable and the amount can be reasonably estimated.

-50-

Item 1A. Risk Factors

The Company’s Annual Report on Form 10-K ~~as of~~for the year ended December 31, ~~2020~~2021 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.

~~[The remainder of this page intentionally left blank]~~

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(a) None

(b) None

The table below sets forth the information with respect to purchases made by or on behalf of Westamerica Bancorporation or any “affiliated purchaser”, as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), of common stock during the quarter ended March 31, ~~2021.~~2022.

	2021								2022
Period	(a) Total Number of Shares Purchased		(b) Average Price Paid per Share		(c) 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		(a) Total Number of Shares Purchased		(b) Average Price Paid per Share		(c) 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 price paid)								(In thousands, except price paid)
January 1 through January 31		-	$	-		-		1,624		-	$	-		-		1,750
February 1 through February 28		-		-		-		1,624		-		-		-		1,750
March 1 through March 31		4		61.09		4		1,620		3		58.66		3		1,747
Total		4	$	61.09		4		1,620		3	$	58.66		3		1,747

The Company repurchases shares of its common stock in the open market on a discretionary basis from time to time 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 under equity incentive plans, and other ongoing requirements.

Shares repurchased during the period from January 1, 2021 through March 31, 2021 were pursuant to a program approved by the Board of Directors on July ~~23, 2020~~22, 2021 authorizing the purchase of up to 1,750 thousand shares of the Company’s common stock from time to time prior to September 1, ~~2021.~~2022.

Item 3. Defaults upon Senior Securities

None

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None

[The remainder of this page intentionally left blank]

53-51-

Item 6. Exhibits

Exhibit No.		Description of Exhibit

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.INS		XBRL Instance Document – The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

Exhibit 101.SCH		Inline XBRL Taxonomy Extension Schema Document

Exhibit 101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

Exhibit 101.DEF		Inline XBRL Taxonomy Extension Definitions Linkbase Document

Exhibit 101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document

Exhibit 101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

Exhibit 104.		The Cover page of Westamerica Bancorporation’s Quarterly Report on Form 10-Q for the quarter ended March 31, ~~2021,~~2022, formatted in Inline XBRL (contained in Exhibit 101)

[The remainder of this page intentionally left blank]

-52-

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 thereunto duly authorized.

WESTAMERICA BANCORPORATION

(Registrant)

/s/ Jesse Leavitt

Jesse Leavitt

~~Jesse Leavitt~~

~~Senior Vice President and Chief Financial Officer~~

Senior Vice President and Chief Financial Officer(Principal Financial and Chief Accounting Officer)Date: May 9, 2022

~~Date: May 5, 2021~~

-53-

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, no par value	WABC	The Nasdaq Stock Market, LLC

Large accelerated filer ☒ ☑	Accelerated filer ☐	Non-accelerated filer ☐
Smaller reporting company ☐	Emerging growth company ☐

WESTAMERICA BANCORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)

	At March 31,			At December 31,			At March 31,			At December 31,
	2021			2020			2022			2021
	(In thousands)						(In thousands)
Assets:
Cash and due from banks	$	866,457		$	621,275		$	1,037,593		$	1,132,085
Debt securities available for sale		3,990,570			4,063,185			4,616,588			4,638,855
Debt securities held to maturity, net of allowance for credit losses of $9 at March 31, 2021 and $9 at December 31, 2020 (Fair value of $480,549 at March 31, 2021 and $529,678 at December 31, 2020)		469,259			515,589
Debt securities held to maturity, net of allowance for credit losses of $7 at March 31, 2022 and December 31, 2021 (Fair value of $278,187 at March 31, 2022 and $312,562 at December 31, 2021)								280,520			306,396
Loans		1,293,756			1,256,243			1,002,514			1,068,126
Allowance for credit losses on loans		(23,483	)		(23,854	)		(22,925	)		(23,514	)
Loans, net of allowance for credit losses on loans		1,270,273			1,232,389			979,589			1,044,612
Premises and equipment, net		32,216			32,813			30,626			31,155
Identifiable intangibles, net		1,035			1,104			771			835
Goodwill		121,673			121,673			121,673			121,673
Other assets		160,998			159,903			239,057			185,415
Total Assets	$	6,912,481		$	6,747,931		$	7,306,417		$	7,461,026

Liabilities:
Noninterest-bearing deposits	$	2,798,542		$	2,725,177		$	3,000,268		$	3,069,080
Interest-bearing deposits		3,125,291			2,962,802			3,405,606			3,344,876
Total deposits		5,923,833			5,687,979			6,405,874			6,413,956
Short-term borrowed funds		95,479			102,545			124,442			146,246
Other borrowed funds		1,681			0
Other liabilities		79,356			112,598			74,357			73,722
Total Liabilities		6,100,349			5,903,122			6,604,673			6,633,924

Contingencies (Note 10)

Shareholders' Equity:
Common stock (no par value), authorized - 150,000 shares Issued and outstanding: 26,864 at March 31, 2021 and 26,807 at December 31, 2020		469,850			466,006
Common stock (no par value), authorized: 150,000 shares Issued and outstanding: 26,883 at March 31, 2022 and 26,866 at December 31, 2021								472,435			471,008
Deferred compensation		35			35			35			35
Accumulated other comprehensive income		68,901			114,412
Accumulated other comprehensive (loss) income								(88,300	)		49,664
Retained earnings		273,346			264,356			317,574			306,395
Total Shareholders' Equity		812,132			844,809			701,744			827,102
Total Liabilities and Shareholders' Equity	$	6,912,481		$	6,747,931		$	7,306,417		$	7,461,026

WESTAMERICA BANCORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(unaudited)

	For the Three Months Ended
	March 31,
	2021			2020
	(In thousands)
Net income	$	20,147		$	16,962
Other comprehensive loss:
Changes in net unrealized gains on debt securities available for sale		(64,614	)		(36,744	)
Deferred tax benefit		19,103			10,864
Changes in net unrealized gains on debt securities available for sale, net of tax		(45,511	)		(25,880	)
Total comprehensive loss	$	(25,364	)	$	(8,918	)

WESTAMERICA BANCORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(unaudited)

									Accumulated
	Common								Other
	Shares			Common			Deferred		Comprehensive			Retained
	Outstanding			Stock			Compensation		Income (Loss)			Earnings			Total
	(In thousands except per share data)

Balance, December 31, 2019		27,062		$	465,460		$	771	$	26,051		$	239,135		$	731,417
Adoption of ASU 2016-13					0			0		0			52			52
Adjusted Balance, January 1, 2020		27,062			465,460			771		26,051			239,187			731,469
Net income for the period					0			0		0			16,962			16,962
Other comprehensive loss					0			0		(25,880	)		0			(25,880	)
Exercise of stock options		40			2,266			0		0			0			2,266
Restricted stock activity		10			534			0		0			0			534
Stock based compensation		-			525			0		0			0			525
Stock awarded to employees		-			21			0		0			0			21
Retirement of common stock		(180	)		(3,105	)		0		0			(6,142	)		(9,247	)
Dividends ($0.41 per share)					0			0		0			(11,104	)		(11,104	)
Balance, March 31, 2020		26,932		$	465,701		$	771	$	171		$	238,903		$	705,546

Balance, December 31, 2020		26,807		$	466,006		$	35	$	114,412		$	264,356		$	844,809
Net income for the period					0			0		0			20,147			20,147
Other comprehensive loss					0			0		(45,511	)		0			(45,511	)
Exercise of stock options		52			2,960			0		0			0			2,960
Restricted stock activity		9			526			0		0			0			526
Stock based compensation		-			368			0		0			0			368
Stock awarded to employees		-			56			0		0			0			56
Retirement of common stock		(4	)		(66	)		0		0			(166	)		(232	)
Dividends ($0.41 per share)					0			0		0			(10,991	)		(10,991	)
Balance, March 31, 2021		26,864		$	469,850		$	35	$	68,901		$	273,346		$	812,132

		Page
Forward Looking Statements		3
PART I - FINANCIAL INFORMATION
Item 1	Financial Statements	4
	Notes to Unaudited Consolidated Financial Statements	9
Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	30
Item 3	Quantitative and Qualitative Disclosures about Market Risk	50
Item 4	Controls and Procedures	50
PART II - OTHER INFORMATION
Item 1	Legal Proceedings	50
Item 1A	Risk Factors	51
Item 4	~~Controls and Procedures~~ 2	52
~~PART II - OTHER INFORMATION~~
~~Item 1~~	~~Legal Proceedings~~	52
~~Item 1A~~	~~Risk Factors~~	52
~~Item 2~~	Unregistered Sales of Equity Securities and Use of Proceeds	5351
Item 3	Defaults upon Senior Securities	51
Item 4	Mine Safety Disclosures	51
Item 5	Other Information	51
Item 6	Exhibits	52
~~Item 3~~Signatures		~~Defaults upon Senior Securities~~	53
~~Item 4~~	~~Mine Safety Disclosures~~	53
~~Item 5~~	~~Other Information~~	53
~~Item 6~~	~~Exhibits~~	54
~~Signatures~~		55

WESTAMERICA BANCORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
	For the
	Three Months Ended
	March 31,
	2021		2020
	(In thousands,
	except per share data)
Interest and Fee Income:
Loans	$	14,581	$	13,809
Equity securities		110		103
Debt securities available for sale		24,889		21,315
Debt securities held to maturity		2,598		3,908
Interest-bearing cash		138		856
Total Interest and Fee Income		42,316		39,991
Interest Expense:
Deposits		459		434
Short-term borrowed funds		16		8
Total Interest Expense		475		442
Net Interest and Fee Income		41,841		39,549
Provision for Credit Losses		0		4,300
Net Interest and Fee Income After Provision For Credit Losses		41,841		35,249
Noninterest Income:
Service charges on deposit accounts		3,304		4,248
Merchant processing services		2,560		2,358
Debit card fees		1,601		1,468
Trust fees		801		777
ATM processing fees		601		579
Other service fees		469		506
Financial services commissions		70		125
Other noninterest income		783		1,587
Total Noninterest Income		10,189		11,648
Noninterest Expense:
Salaries and related benefits		12,665		13,018
Occupancy and equipment		4,880		4,932
Outsourced data processing services		2,390		2,405
Professional fees		942		389
Courier service		504		491
Amortization of identifiable intangibles		69		73
Other noninterest expense		3,456		3,356
Total Noninterest Expense		24,906		24,664
Income Before Income Taxes		27,124		22,233
Provision for income taxes		6,977		5,271
Net Income	$	20,147	$	16,962

Average Common Shares Outstanding		26,821		27,068
Average Diluted Common Shares Outstanding		26,842		27,139
Per Common Share Data:
Basic earnings	$	0.75	$	0.63
Diluted earnings		0.75		0.63
Dividends paid		0.41		0.41

WESTAMERICA BANCORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
	For the Three Months
	Ended March 31,
	2021			2020
	(In thousands)
Operating Activities:
Net income	$	20,147		$	16,962
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization/accretion		4,256			6,304
Credit loss provision		0			4,300
Net amortization of deferred net loan fees		(1,246	)		(18	)
Decrease (increase) in interest income receivable		1,961			(201	)
Increase in income taxes payable		7,450			4,572
(Increase) decrease in deferred tax asset		(472	)		879
Increase in other assets		(3,004	)		(3,625	)
Stock option compensation expense		368			525
Increase in interest expense payable		16			10
Increase in other liabilities		2,796			24,743
Net Cash Provided by Operating Activities		32,272			54,451

Investing Activities:
Net (disbursements) repayments of loans		(36,544	)		4,545
Purchases of debt securities available for sale		(385,553	)		(438,122	)
Proceeds from sale/maturity/calls of debt securities available for sale		367,499			266,561
Proceeds from maturity/calls of debt securities held to maturity		45,447			55,112
Purchases of premises and equipment		(145	)		(1,796	)
Net Cash Used in Investing Activities		(9,296	)		(113,700	)

Financing Activities:
Net change in deposits		235,854			(13,195	)
Net change in borrowings		(5,385	)		21,736
Exercise of stock options		2,960			2,266
Retirement of common stock		(232	)		(9,247	)
Common stock dividends paid		(10,991	)		(11,104	)
Net Cash Provided by (Used in) Financing Activities		222,206			(9,544	)
Net Change In Cash and Due from Banks		245,182			(68,793	)
Cash and Due from Banks at Beginning of Period		621,275			373,421
Cash and Due from Banks at End of Period	$	866,457		$	304,628

Supplemental Cash Flow Disclosures:
Supplemental disclosure of noncash activities:
Right-of-use assets acquired in exchange for operating lease liabilities	$	3,301		$	0
Securities purchases pending settlement		5,000			607
Supplemental disclosure of cash flow activities:
Cash paid for amounts included in operating lease liabilities		1,618			1,659
Interest paid for the period		459			432

									Accumulated
	Common								Other
	Shares			Common			Deferred		Comprehensive			Retained
	Outstanding			Stock			Compensation		Income (Loss)			Earnings			Total
	(In thousands except per share data)

Balance, December 31, 2020		26,807		$	466,006		$	35	$	114,412		$	264,356		$	844,809
Net income for the period					0			0		0			20,147			20,147
Other comprehensive loss										(45,511	)					(45,511	)
Exercise of stock options		52			2,960											2,960
Restricted stock activity		9			526			0								526
Stock based compensation		-			368											368
Stock awarded to employees		0			56											56
Retirement of common stock		(4	)		(66	)							(166	)		(232	)
Dividends ($0.41 per share)													(10,991	)		(10,991	)
Balance, March 31, 2021		26,864		$	469,850		$	35	$	68,901		$	273,346		$	812,132

Balance, December 31, 2021		26,866		$	471,008		$	35	$	49,664		$	306,395		$	827,102
Net income for the period					0			0		0			22,616			22,616
Other comprehensive loss					0			0		(137,964	)		0			(137,964	)
Exercise of stock options		11			624											624
Restricted stock activity		8			492			0								492
Stock based compensation		-			339											339
Stock awarded to employees		1			37											37
Retirement of common stock		(3	)		(65	)							(153	)		(218	)
Dividends ($0.42 per share)													(11,284	)		(11,284	)
Balance, March 31, 2022		26,883		$	472,435		$	35	$	(88,300	)	$	317,574		$	701,744

	At March 31, 2021
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(In thousands)
Debt securities available for sale
Agency residential mortgage-backed securities ("MBS")	$	558,366	$	19,124	$	0		$	577,490
Securities of U.S. Government entities		146		0		(1	)		145
Obligations of states and political subdivisions		101,817		4,310		(10	)		106,117
Corporate securities		2,076,354		79,548		(6,536	)		2,149,366
Collateralized loan obligations		1,156,067		2,596		(1,211	)		1,157,452
Total debt securities available for sale		3,892,750		105,578		(7,758	)		3,990,570
Debt securities held to maturity
Agency residential MBS		212,463		5,623		(19	)		218,067
Non-agency residential MBS		1,266		10		(7	)		1,269
Obligations of states and political subdivisions		255,539		5,683		0			261,222
Total debt securities held to maturity		469,268		11,316		(26	)		480,558
Total	$	4,362,018	$	116,894	$	(7,784	)	$	4,471,128

	At March 31, 2021								At March 31, 2022
	Debt Securities Available				Debt Securities Held				Securities Available				Securities Held
	for Sale				to Maturity				for Sale				to Maturity
	Amortized		Fair		Amortized		Fair		Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value		Cost		Value		Cost		Value
	(In thousands)								(In thousands)
Maturity in years:
1 year or less	$	222,016	$	224,112	$	49,319	$	49,593	$	373,260	$	375,294	$	12,582	$	12,625
Over 1 to 5 years		851,915		894,939		129,579		132,526		600,734		603,365		122,239		122,862
Over 5 to 10 years		1,829,139		1,861,379		76,641		79,103		2,417,110		2,315,148		11,952		12,097
Over 10 years		431,314		432,650		0		0		981,517		959,600		0		0
Subtotal		3,334,384		3,413,080		255,539		261,222		4,372,621		4,253,407		146,773		147,584
MBS		558,366		577,490		213,729		219,336		369,329		363,181		133,754		130,603
Total	$	3,892,750	$	3,990,570	$	469,268	$	480,558	$	4,741,950	$	4,616,588	$	280,527	$	278,187

	Debt Securities Held to Maturity
	At December 31, 2020
	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)
Agency residential MBS		3	$	377	$	(1	)		3	$	788	$	(31	)		6	$	1,165	$	(32	)

	For the Three Months Ended March 31,				For the Three Months Ended March 31,
	2021		2020		2022		2021
	(In thousands)				(In thousands)
Allowance for credit losses:
Balance, end of prior period	$	9	$	0
Impact of adopting ASU 2016-13		0		16
Beginning balance		9		16	$	7	$	9
Provision		0		0		0		0
Chargeoffs		0		0		0		0
Recoveries		0		0		0		0
Total ending balance	$	9	$	16	$	7	$	9

	Credit Risk Profile by Credit Rating								Credit Risk Profile by Credit Rating
	At March 31, 2021								At March 31, 2022
	AAA/AA/A		BBB		BB/B/NR		Total		AAA/AA/A		B-		Not Rated		Total
	(In thousands)								(In thousands)
Agency residential MBS	$	212,463	$	0	$	0	$	212,463	$	116	$	529	$	133,109	$	133,754
Non-agency residential MBS		325		0		941		1,266
Obligations of states and political subdivisions		227,479		21,821		6,239		255,539		145,645		0		1,128		146,773
Total	$	440,267	$	21,821	$	7,180	$	469,268	$	145,761	$	529	$	134,237	$	280,527

	Credit Risk Profile by Internally Assigned Grade												Credit Risk Profile by Internally Assigned Grade
	At March 31, 2021												At March 31, 2022
	Commercial		Commercial Real Estate		Construction		Residential Real Estate		Consumer Installment and Other		Total		Commercial		Commercial Real Estate		Residential Real Estate		Consumer Installment and Other		Total
	(In thousands)												(In thousands)
Grade:
Pass	$	440,277	$	531,702	$	115	$	20,215	$	272,291	$	1,264,600	$	196,769	$	495,026	$	15,222	$	278,668	$	985,685
Substandard		8,365		17,100		0		1,337		1,520		28,322		314		12,619		1,240		976		15,149
Doubtful		0		0		0		0		596		596		20		0		0		1,048		1,068
Loss		0		0		0		0		238		238		0		0		0		612		612
Total	$	448,642	$	548,802	$	115	$	21,552	$	274,645	$	1,293,756	$	197,103	$	507,645	$	16,462	$	281,304	$	1,002,514

	Summary of Loans by Delinquency and Nonaccrual Status												Summary of Loans by Delinquency and Nonaccrual Status
	At March 31, 2021												At March 31, 2022
	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		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)												(In thousands)
Commercial	$	448,428	$	214	$	0	$	0	$	0	$	448,642	$	196,991	$	91	$	20	$	1	$	0	$	197,103
Commercial real estate		543,356		2,028		0		0		3,418		548,802		505,742		1,615		0		0		288		507,645
Construction		115		0		0		0		0		115
Residential real estate		20,863		538		0		0		151		21,552		16,316		13		0		0		133		16,462
Consumer installment and other		272,039		1,590		482		132		402		274,645		276,012		3,818		981		430		63		281,304
Total	$	1,284,801	$	4,370	$	482	$	132	$	3,971	$	1,293,756	$	995,061	$	5,537	$	1,001	$	431	$	484	$	1,002,514

	Troubled Debt Restructurings
	At March 31, 2021
							Period-End
							Individual
	Number of		Pre-Modification		Period-End		Credit Loss
	Contracts		Carrying Value		Carrying Value		Allowance
	($ in thousands)
Commercial real estate		4	$	7,545	$	5,049	$	0
Residential real estate		1		241		178		0
Total		5	$	7,786	$	5,227	$	0

		At March 31, 2021																			At March 31, 2022
																Revolving																			Revolving
																Loans																			Loans
		Term Loans Amortized Cost Basis by Origination Year												Total		Amortized					Term Loans Amortized Cost Basis by Origination Year												Total		Amortized
		Prior		2017		2018		2019		2020		2021		Term Loans		Cost Basis		Total			Prior		2018		2019		2020		2021		2022		Term Loans		Cost Basis		Total
		(In thousands)																			(In thousands)
Commercial loans by grade	Commercial loans by grade																			Commercial loans by grade
Pass		$	43,588	$	9,477	$	18,031	$	35,795	$	174,758	$	117,247	$	398,896	$	41,381	$	440,277		$	37,077	$	8,312	$	15,699	$	23,241	$	84,028	$	2,947	$	171,304	$	25,465	$	196,769
Substandard			38		0		0		0		7,409		0		7,447		918		8,365			29		0		0		0		0		0		29		285		314
Doubtful			0		0		0		0		0		0		0		0		0			0		20		0		0		0		0		20		0		20
Loss			0		0		0		0		0		0		0		0		0			0		0		0		0		0		0		0		0		0
Total		$	43,626	$	9,477	$	18,031	$	35,795	$	182,167	$	117,247	$	406,343	$	42,299	$	448,642		$	37,106	$	8,332	$	15,699	$	23,241	$	84,028	$	2,947	$	171,353	$	25,750	$	197,103

	Minimum future lease payments			Minimum future lease payments
	At March 31,			At March 31,
	2021			2022
	(In thousands)			(In thousands)
2021	$	4,503
2022		5,331
The remainder of 2022				$	4,362
2023		4,619			5,170
2024		3,025			3,584
2025		1,795			2,396
2026					986
Thereafter		2,114			1,478
Total minimum lease payments		21,387			17,976
Less: discount		(778	)		(520	)
Present value of lease liability	$	20,609		$	17,456

	Total		Total
	Core		Core
	Deposit		Deposit
	Intangibles		Intangibles
	(In thousands)		(In thousands)
For the three months ended March 31, 2021 (actual)	$	69
Estimate for the remainder of 2021		200
Estimate for year ending December 31, 2022		252
For the three months ended March 31, 2022 (actual)			$	64
The remainder of 2022				188
2023		236		236
2024		222		222
2025		125		125

	Repurchase Agreements (Sweep) Accounted for as Secured Borrowings
	Remaining Contractual Maturity of the Agreements
	Overnight and Continuous
	At March 31,		At December 31,
	2021		2020
Repurchase agreements:	(In thousands)
Collateral securing borrowings:
Agency residential MBS	$	58,799	$	67,019
Corporate securities		181,119		188,195
Total collateral carrying value	$	239,918	$	255,214
Total short-term borrowed funds	$	95,479	$	102,545

	At December 31, 2020
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3) ⁽¹⁾
	(In thousands)
Debt securities available for sale
Agency residential MBS	$	652,952	$	0	$	652,952	$	0
Securities of U.S. Government entities		154		0		154		0
Obligations of states and political subdivisions		111,010		0		111,010		0
Corporate securities		2,117,978		0		2,117,978		0
Commercial paper		24,990		0		24,990		0
Collateralized loan obligations		1,156,101		0		1,156,101		0
Total debt securities available for sale	$	4,063,185	$	0	$	4,063,185	$	0

									For the Three
									Months Ended
	At March 31, 2021								March 31, 2021
	Carrying Value		Level 1		Level 2		Level 3		Total Losses
	(In thousands)
Loans:
Commercial	$	5,186	$	0	$	0	$	5,186	$	0
Commercial real estate		3,410		0		0		3,410		0
Residential real estate		177		0		0		177		0
Total assets measured at fair value on a nonrecurring basis	$	8,773	$	0	$	0	$	8,773	$	0

									For the
									Year Ended
	At December 31, 2020								December 31, 2020
	Carrying Value		Level 1		Level 2		Level 3		Total Losses
	(In thousands)
Loans:
Commercial	$	5,270	$	0	$	0	$	5,270	$	0
Commercial real estate		3,710		0		0		3,710		0
Residential real estate		181		0		0		181		0
Total assets measured at fair value on a nonrecurring basis	$	9,161	$	0	$	0	$	9,161	$	0

	At March 31, 2022
	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)
Cash and due from banks	$	1,037,593	$	1,037,593	$	1,037,593	$	0	$	0
Debt securities held to maturity		280,520		278,187		0		278,187		0
Loans		979,589		969,272		0		0		969,272

Financial Liabilities:
Deposits	$	6,405,874	$	6,404,747	$	0	$	6,264,152	$	140,595
Short-term borrowed funds		124,442		124,442		0		124,442		0

	At March 31, 2021
	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)
Cash and due from banks	$	866,457	$	866,457	$	866,457	$	0	$	0
Debt securities held to maturity		469,259		480,549		0		480,549		0
Loans		1,270,273		1,288,836		0		0		1,288,836

Financial Liabilities:
Deposits	$	5,923,833	$	5,923,808	$	0	$	5,769,662	$	154,146
Short-term borrowed funds		95,479		95,479		0		95,479		0
Other borrowed funds		1,681		1,681		0		1,681		0