UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended June 30, 1997
Commission File Number: 1-9383
WESTAMERICA BANCORPORATION
(Exact Name of Registrant as Specified in its Charter)
CALIFORNIA
(State or other jurisdiction of
incorporation or organization)
94-2156203
(I.R.S. Employer
Identification No.)
1108 Fifth Avenue, San Rafael, California 94901
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code (415) 257-8000
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [ x ] No [ ]
Indicate the number of shares outstanding of each of the registrant classes
of common stock, as of the latest practicable date:
Title of Class
Common Stock,
No Par Value
Shares outstanding as of August 7, 1997
14,393,180
WESTAMERICA BANCORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
June 30,
------------------------ December 31,
1997 1996 * 1996 *
-------- -------- ------------
ASSETS
Cash and cash equivalents $231,007 $333,523 $355,177
Money market assets 250 250 250
Investment securities available for sale 907,750 846,771 892,461
Investment securities held to maturity,
with market values of: 230,578 237,263 215,432
$232,114 at June 30, 1997
$236,088 at June 30, 1996
$218,009 at December 31, 1996
Loans, net of reserve for loan losses of: 2,218,296 2,193,211 2,236,319
$50,742 at June 30, 1997
$46,615 at June 30, 1996
$50,920 at December 31, 1996
Other real estate owned 7,286 9,401 9,912
Premises and equipment, net 61,593 57,130 63,968
Interest receivable and other assets 93,299 83,555 93,255
----------- ----------- -----------
Total assets $3,750,059 $3,761,104 $3,866,774
=========== =========== ===========
LIABILITIES
Deposits:
Non-interest bearing $797,618 $746,616 $834,964
Interest bearing:
Transaction and savings 1,521,778 1,510,976 1,569,022
Time 798,048 837,880 824,714
----------- ----------- -----------
Total deposits 3,117,444 3,095,472 3,228,700
Funds purchased 151,460 222,183 167,447
Liability for interest, taxes and
other expenses 36,674 24,567 32,483
Notes and mortgages payable 57,500 63,387 58,865
----------- ----------- -----------
Total liabilities 3,363,078 3,405,609 3,487,495
SHAREHOLDERS' EQUITY
Authorized - 50,000 shares
Common stock issued and outstanding: 195,901 175,933 187,210
14,397 at June 30, 1997
14,221 at June 30, 1996
14,296 at December 31, 1996
Unrealized gain on securities available for sale,
net of taxes 10,966 243 6,019
Retained earnings 180,114 179,319 186,050
----------- ----------- -----------
Total shareholders' equity 386,981 355,495 379,279
----------- ----------- -----------
Total liabilities and
shareholders' equity $3,750,059 $3,761,104 $3,866,774
=========== =========== ===========
* Restated on a historical basis to reflect the April 12, 1997 acquisition
of ValliCorp Holdings, Inc., on a pooling-of-interests basis.
WESTAMERICA BANCORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited) (Unaudited)
Three months ended Six months ended
June 30, June 30,
1997 1996 * 1997 1996 *
------- ------- -------- --------
INTEREST INCOME
Loans $50,693 $51,291 $100,373 $102,985
Money market assets and funds sold 178 1,144 1,602 2,361
Investment securities:
Available for sale
Taxable 11,544 10,116 22,662 20,263
Tax-exempt 2,098 1,846 3,519 3,651
Held to maturity
Taxable 1,185 1,607 2,108 3,480
Tax-exempt 1,718 1,752 3,678 3,612
--------- --------- --------- ---------
Total interest income 67,416 67,756 133,942 136,352
INTEREST EXPENSE
Transaction deposits 1,628 1,552 3,304 3,123
Savings deposits 7,072 6,906 14,171 13,984
Time deposits 10,362 10,419 20,675 21,190
Funds purchased 1,857 2,794 3,862 5,600
Notes and mortgages payable 997 1,085 2,007 1,974
--------- --------- --------- ---------
Total interest expense 21,916 22,756 44,019 45,871
--------- --------- --------- ---------
NET INTEREST INCOME 45,500 45,000 89,923 90,481
Provision for loan losses 1,050 2,802 4,600 6,002
--------- --------- --------- ---------
Net interest income after
provision for loan losses 44,450 42,198 85,323 84,479
NON-INTEREST INCOME
Service charges on deposit accounts 5,284 5,145 10,632 10,132
Merchant credit card 1,042 1,321 2,029 2,322
Mortgage banking 376 451 720 1,004
Financial services commissions 271 199 464 343
Trust fees 123 92 230 173
Securities gain 125 22 136 47
Other 2,256 1,760 5,054 3,453
--------- --------- --------- ---------
Total non-interest income 9,477 8,990 19,265 17,474
NON-INTEREST EXPENSE
Salaries and related benefits 21,995 14,453 37,217 30,553
Occupancy 8,159 4,126 15,748 8,276
Equipment 4,320 2,434 6,724 4,926
Data processing 1,851 1,472 3,411 2,985
Professional fees 5,060 1,345 8,022 2,527
Other real estate owned 249 279 841 609
Other 7,540 7,181 13,782 18,380
--------- --------- --------- ---------
Total non-interest expense 49,174 31,290 85,745 68,256
INCOME BEFORE INCOME TAXES 4,753 19,898 18,843 33,697
Provision for income taxes 1,939 6,790 6,665 11,229
--------- --------- --------- ---------
NET INCOME $2,814 $13,108 $12,178 $22,468
========= ========= ========= =========
Average shares outstanding 14,357 14,307 14,336 14,332
PER SHARE DATA
Earnings per share $0.20 $0.92 $0.85 $1.57
Dividends paid 0.26 0.23 0.52 0.46
* Restated on a historical basis to reflect the April 12, 1997 acquisition
of ValliCorp Holdings, Inc., on a pooling-of-interests basis.
WESTAMERICA BANCORPORATION
STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
For the six months
ended June 30,
1997 1996 *
------- -------
OPERATING ACTIVITIES
Net income $12,178 $22,468
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 4,238 4,924
Loan loss provision 4,600 6,002
Amortization of deferred net loan fees (519) (873)
Decrease (increase) in interest
income receivable 968 (342)
Increase in other assets (3,080) (10,947)
Decrease in income taxes payable (4,123) (305)
(Decrease) increase in interest
expense payable (96) 1,028
Increase (decrease) in other liabilities 6,948 (5,107)
Gain on sales of investment securities (136) (47)
Gain on sales of branches (678) --
Net loss on sales/write-down of equipment 193 70
Originations of loans for resale (6,985) (39,254)
Proceeds from sale of loans
originated for resale 14,650 43,345
Net gain on sale of property
acquired in satisfaction of debt (624) (95)
Write-down on property
acquired in satisfaction of debt 940 548
-------- --------
Net cash provided by
operating activities 28,474 21,415
INVESTING ACTIVITIES
Net repayments of loans 5,670 9,825
Purchases of investment securities
available for sale (191,274) (176,667)
Purchases of investment securities
held to maturity (51,097) (10,634)
Purchases of property, plant and equipment (3,148) (13,075)
Proceeds from maturity of securities
available for sale 162,445 169,647
Proceeds from maturity of securities
held to maturity 35,951 79,228
Proceeds from sale of securities
available for sale 22,153 35,111
Proceeds from sale of property and equipment 1,502 4,267
Proceeds from property
acquired in satisfaction of debt 3,185 3,631
-------- --------
Net cash (used in) provided by
investing activities (14,613) 101,333
FINANCING ACTIVITIES
Net decrease in deposits (111,256) (175,434)
Net (decrease) increase in short-term borrowings (15,987) 40,561
Additions to notes payable -- 22,500
Repayments of notes payable (1,365) (4,413)
Exercise of stock options/issuance of shares 10,994 3,453
Retirement of stock (15,066) (12,973)
Dividends paid (5,351) (5,826)
-------- --------
Net cash used in
financing activities (138,031) (132,132)
Net decrease in cash
and cash equivalents (124,170) (9,384)
Cash and cash equivalents at
beginning of year 355,177 342,907
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $231,007 $333,523
========= =========
Supplemental disclosures:
Loans transferred to other
real estate owned 875 5,573
Unrealized net gain (loss) on securities
available for sale 4,950 (912)
Interest paid for the period 44,232 45,669
Income tax payments for the period 10,114 12,918
* Restated on a historical basis to reflect the April 12, 1997,
acquisition of ValliCorp Holdings, Inc., on a pooling-of-interests basis.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Westamerica Bancorporation (the "Company"), parent company of
Westamerica Bank, Bank of Lake County and Community Banker Services
Corporation, reported second quarter 1997 net income of $2.8
million or $.20 per share. On a year-to-date basis, the Company
reported net income of $12.2 million, or $.85 per share. Second
quarter 1997 income was impacted by one-time charges resulting
from the merger of the Company with ValliCorp Holdings, Inc. (the
"Merger"). These charges approximate $18.8 million pre-tax or $12.8
million after tax. In addition to historical information, this
discussion includes certain forward-looking statements regarding
events and trends which may affect the Company's future results.
Such statements are subject to risks and uncertainties that could
cause the Company's actual results to differ materially. Such
factors include, but are not limited to, those described in this
discussion and analysis. This report, which includes consolidated
financial statements prepared in conformity with generally accepted
accounting principles, should be read in conjunction with
Westamerica Bancorporation's annual report on Form 10-K for the
year ended December 31, 1996.
Acquisition
On April 12, 1997, the Company completed the acquisition of
ValliCorp Holdings, Inc. ("ValliCorp"), parent company of ValliWide
Bank, on a pooling-of-interests basis and, accordingly, the
Company's historical consolidated results have been restated. Under the
terms of the Agreement and Plan of Reorganization among ValliCorp,
ValliWide Bank and the Company, each share of ValliCorp Common
Stock was exchanged for .3479 shares of the Company's Common Stock.
No gain or loss for tax purposes was recognized by ValliCorp
shareholders, except with respect to cash received in lieu of
fractional shares. Based on the closing price of the Company's
Common Stock on April 11, 1997, the acquisition was valued at
approximately $290 million or $20.11 per share. On June 20, 1997,
ValliWide Bank, ValliCorp's only bank subsidiary, merged with and
into Westamerica Bank.
The following summarizes the separate results of the combined
entities for the periods shown prior to the combination:
(In thousands, except per share data)
Restated
Westamerica Combined
Bancorporation ValliCorp Results *
-------------- --------- ---------
Three months ended 6/30/96
Net interest income $27,928 $17,085 $45,000
Net income 9,352 3,768 13,108
Earnings per share 0.96 0.28 0.92
Six months ended 6/30/96
Net interest income 56,145 34,350 90,481
Net income 18,499 3,985 22,468
Earnings per share 1.90 0.30 1.57
At June 30, 1996
Total assets 2,504,881 1,259,058 3,761,104
Total shareholders' equity 233,776 123,551 355,495
* On June 30, 1996, the Company owned 115,500 shares of ValliCorp Common Stock.
Amounts indicated have been adjusted to eliminate these shares as a result
of the Merger.
Components of Net Income
Following is a summary of the components of net income for
the periods indicated:
For the three For the six
months ended months ended
June 30, June 30,
--------------------- ---------------------
(In millions) 1997 1996 1997 1996
------ ------- ------ -------
Net interest income* $47.8 $46.9 $94.4 $94.2
Provision for loan losses (1.1) (2.8) (4.6) (6.0)
Non-interest income 9.5 9.0 19.3 17.5
Non-interest expense (49.2) (31.3) (85.7) (68.3)
Provision for income taxes* (4.2) (8.7) (11.2) (14.9)
------ ------ ------ ------
Net income $2.8 $13.1 $12.2 $22.5
===== ===== ===== =====
Average total assets $3,729.3 $3,748.3 $3,753.6 $3,760.2
Net income (annualized) as
a percentage of average
total assets 0.30% 1.41% 0.65% 1.20%
- ---------------
* Fully taxable equivalent basis (FTE)
During the second quarter of 1997, the Company's net income was
$10.3 million lower than the same period in 1996. During the
quarter, the Company incurred approximately $18.8 million
of one-time costs related to the Merger, partially offset by
staff reductions and other cost controls, as operations were
consolidated and efficiencies were achieved. In addition, the
Company benefited from higher net interest income, a lower
loan loss provision, higher non-interest income and reduced
income taxes due to lower pre-tax income.
Comparing the first six months of 1997 to the prior year,
net income decreased $10.3 million. The reasons for the reduction
in net income for this period are similar to those given above
as an explanation for the decrease in net income for the second
quarter of 1997 compared to 1996.
Analysis of Net Interest Income and Margin
The Company continually manages its interest-earning assets
and interest-bearing liabilities and the Company adapts
rapidly to changes in market rates. Second quarter net
interest income (FTE) was higher than the comparable period
in 1996 by $900,000, as the favorable effect of a higher
level of earning assets and increased balances of low-cost
deposits which resulted in lower cost of funds, were
partially offset by lower yields on earning assets. In
addition, the FTE adjustment increased from the same period
of 1996 due to an increase in the Company's average balance
of tax-exempt investment securities and loans. For the six
months ended June 30, 1997, net interest income increased
$200,000. The reasons for this change are largely similar to
those described above that explain the increase between
second quarter of 1997 and second quarter of 1996.
These variances are shown in the components of net interest
income and in the analysis of net interest margin summarized
as follows for the periods indicated:
Net Interest Income
For the three For the six
months ended months ended
June 30, June 30,
(In millions) --------------------- ---------------------
1997 1996 1997 1996
------ ------- ------ -------
Interest income $67.4 $67.8 $133.9 $136.4
Interest expense (21.9) (22.8) (44.0) (45.9)
FTE adjustment 2.3 1.9 4.5 3.7
------- ------- ------- -------
Net interest income (FTE) $47.8 $46.9 $94.4 $94.2
====== ====== ====== ======
Average earning assets $3,384.0 $3,406.5 $3,412.4 $3,416.2
Net interest margin (FTE) 5.67% 5.54% 5.58% 5.54%
Second quarter loan fees, excluding deferrals of $1.8 million,
included in interest income on loans, were $800,000 higher
than in the same period of 1996. On a year-to-date basis,
loan fees excluding deferrals were $800,000 higher than the
comparable period in 1996. In both cases, the increases were
due to the increase level of loan originations.
Net Interest Margin (FTE)
For the three For the six
months ended months ended
June 30, June 30,
--------------------- ---------------------
1997 1996 1997 1996
------- ------- ------- -------
Yield on earning assets 8.27% 8.22% 8.18% 8.24%
Cost of interest-bearing
liabilities 3.44% 3.46% 3.43% 3.47%
-------- -------- -------- --------
Net interest spread 4.83% 4.76% 4.75% 4.77%
Impact of non-interest
bearing demand 0.84% 0.78% 0.83% 0.77%
-------- -------- -------- --------
Net interest margin 5.67% 5.54% 5.58% 5.54%
======== ======== ======== ========
The net interest margin during the second quarter of 1997 was 13
basis points higher than the same period in 1996. The average yield
on earning assets in 1997 was five basis points higher than in 1996
as the Company benefited from a 32 basis point increase in
investment securities yields. This was mostly due to increased
balances of tax-free securities and the restatement of the
fully taxable equivalent adjustment on a consolidated basis
after the Merger, not previously accounted for by ValliCorp.
Furthermore, the rate paid on interest-bearing liabilities
decreased two basis points from the second quarter of 1996;
this effect was in addition to the favorable impact of higher
non-interest bearing demand deposits.
For the first six months of 1997, the net interest margin was four
basis points higher than the first six months of 1996. A four basis
point decrease in the rate paid on interest-bearing liabilities,
combined with the favorable impact of an increase in non-interest
bearing demand balances, was partially offset by a six basis point
decrease in earning-asset yields, mainly due to lower loan yields
only partially offset by higher yields on the Company's securities
portfolio.
Summary of Average Balances, Yields/Rates and Interest Differential
The following tables present, for the periods indicated,
information regarding the Company's consolidated average
assets, liabilities and shareholders' equity, the amounts of
interest income from average earning assets and the resulting
yields, and the amount of interest expense paid on
interest-bearing liabilities. Average loan balances include
non-performing loans. Interest income includes proceeds from
loans on non-accrual status only to the extent cash payments
have been received and applied as interest income. Yields on
securities and certain loans have been adjusted upward to
reflect the effect of income thereon exempt from federal
income taxation at the current statutory tax rate.
Distribution of assets, liabilities and shareholders' equity.
For the three months ended
June 30, 1997
- -------------------------------------------------------------------------
(Dollars in thousands)
Interest Rates
Average income/ earned/
balance expense paid
- -------------------------------------------------------------------------
Assets
Money market assets and funds sold $12,573 $178 5.68 %
Investment securities:
Taxable 877,035 12,729 5.82
Tax-exempt 243,939 5,450 8.96
Loans:
Commercial 1,372,867 31,903 9.32
Real estate construction 91,106 2,476 10.90
Real estate residential 359,881 7,116 7.93
Consumer 426,632 9,883 9.29
- ----------------------------------------------------------------
Earning assets 3,384,033 69,735 8.27
Other assets 345,303
- --------------------------------------------------------
Total assets $3,729,336
========================================================
Liabilities and shareholders' equity
Deposits:
Non-interest bearing demand $768,157 $-- -- %
Savings and interest-bearing
transaction 1,543,980 8,700 2.26
Time less than $100,000 482,560 6,124 5.09
Time $100,000 or more 321,950 4,238 5.28
- ----------------------------------------------------------------
Total interest-bearing deposits 2,348,490 19,062 3.26
Funds purchased 150,857 1,857 4.94
Notes and mortgages payable 58,126 997 6.88
- ----------------------------------------------------------------
Total interest-bearing liabilities 2,557,473 21,916 3.44
Other liabilities 28,519
Shareholders' equity 375,187
- --------------------------------------------------------
Total liabilities and shareholders' equity $3,729,336
========================================================
Net interest spread (1) 4.83 %
Net interest income and interest margin (2) $47,819 5.67 %
==========================================================================
(1) Net interest spread represents the average yield earned on
interest-earning assets less the average rate paid on
interest-bearing liabilities.
(2) Net interest margin is computed by dividing net interest income
(annualized) by total average earning assets.
Distribution of assets, liabilities and shareholders' equity.
For the three months ended
June 30, 1996
- ---------------------------------------------------------------------------
(Dollars in thousands)
Interest Rates
Average income/ earned/
balance expense paid
- ---------------------------------------------------------------------------
Assets
Money market assets and funds sold $83,575 $1,144 5.51 %
Investment securities:
Taxable 813,175 11,723 5.80
Tax-exempt 271,252 5,063 7.51
Loans:
Commercial 1,339,102 31,400 9.43
Real estate construction 126,647 3,314 10.52
Real estate residential 304,864 6,199 8.18
Consumer 467,839 10,800 9.28
- -----------------------------------------------------------------
Earning assets 3,406,454 69,643 8.22
Other assets 341,850
- ---------------------------------------------------------
Total assets $3,748,304
=========================================================
Liabilities and shareholders' equity
Deposits:
Non-interest bearing demand $728,452 $-- -- %
Savings and interest-bearing
transaction 1,536,275 8,458 2.21
Time less than $100,000 520,698 6,419 4.96
Time $100,000 or more 307,191 4,000 5.24
- -----------------------------------------------------------------
Total interest-bearing deposits 2,364,164 18,877 3.21
Funds purchased 220,058 2,794 5.11
Notes and mortgages payable 63,387 1,085 6.88
- -----------------------------------------------------------------
Total interest-bearing liabilities 2,647,609 22,756 3.46
Other liabilities 19,381
Shareholders' equity 352,862
- ---------------------------------------------------------
Total liabilities and shareholders' equity $3,748,304
=========================================================
Net interest spread (1) 4.76 %
Net interest income and interest margin (2) $46,887 5.54 %
============================================================================
(1) Net interest spread represents the average yield earned on
interest-earning assets less the average rate paid on
interest-bearing liabilities.
(2) Net interest margin is computed by dividing net interest income
(annualized) by total average earning assets.
Distribution of assets, liabilities and shareholders' equity.
For the six months ended
June 30, 1997
- -------------------------------------------------------------------------
(Dollars in thousands)
Interest Rates
Average income/ earned/
balance expense paid
- -------------------------------------------------------------------------
Assets
Money market assets and funds sold $58,811 $1,602 5.49 %
Investment securities:
Taxable 866,599 24,770 5.76
Tax-exempt 236,632 10,375 8.84
Loans:
Commercial 1,362,806 62,305 9.22
Real estate construction 96,131 5,085 10.67
Real estate residential 357,465 14,315 8.08
Consumer 433,976 19,994 9.29
- ---------------------------------------------------------------
Earning assets 3,412,420 138,446 8.18
Other assets 341,138
- -------------------------------------------------------
Total assets $3,753,558
=======================================================
Liabilities and shareholders' equity
Deposits:
Non-interest bearing demand $759,253 $-- -- %
Savings and interest-bearing
transaction 1,561,912 17,475 2.26
Time less than $100,000 488,836 12,276 5.06
Time $100,000 or more 322,121 8,399 5.26
- ---------------------------------------------------------------
Total interest-bearing deposits 2,372,869 38,150 3.24
Funds purchased 158,591 3,862 4.91
Notes and mortgages payable 58,300 2,007 6.94
- ---------------------------------------------------------------
Total interest-bearing liabilities 2,589,760 44,019 3.43
Other liabilities 28,436
Shareholders' equity 376,109
- -------------------------------------------------------
Total liabilities and shareholders' equity $3,753,558
=======================================================
Net interest spread (1) 4.75 %
Net interest income and interest margin (2) $94,427 5.58 %
=========================================================================
(1) Net interest spread represents the average yield earned on
interest-earning assets less the average rate paid on
interest-bearing liabilities.
(2) Net interest margin is computed by dividing net interest income
(annualized) by total average earning assets.
Distribution of assets, liabilities and shareholders' equity.
For the six months ended
June 30, 1996
- ---------------------------------------------------------------------------
(Dollars in thousands)
Interest Rates
Average income/ earned/
balance expense paid
- ---------------------------------------------------------------------------
Assets
Money market assets and funds sold $85,336 $2,361 5.56 %
Investment securities:
Taxable 840,919 23,743 5.68
Tax-exempt 260,631 10,145 7.83
Loans:
Commercial 1,318,511 62,433 9.52
Real estate construction 127,280 6,641 10.49
Real estate residential 308,965 12,835 8.35
Consumer 474,571 21,878 9.27
- -----------------------------------------------------------------
Earning assets 3,416,213 140,036 8.24
Other assets 343,999
- ---------------------------------------------------------
Total assets $3,760,212
=========================================================
Liabilities and shareholders' equity
Deposits:
Non-interest bearing demand $726,446 $-- -- %
Savings and interest-bearing
transaction 1,555,077 17,107 2.21
Time less than $100,000 527,926 13,280 5.06
Time $100,000 or more 298,853 7,910 5.32
- -----------------------------------------------------------------
Total interest-bearing deposits 2,381,856 38,297 3.23
Funds purchased 218,034 5,600 5.17
Notes and mortgages payable 57,191 1,974 6.94
- -----------------------------------------------------------------
Total interest-bearing liabilities 2,657,081 45,871 3.47
Other liabilities 25,510
Shareholders' equity 351,175
- ---------------------------------------------------------
Total liabilities and shareholders' equity $3,760,212
=========================================================
Net interest spread (1) 4.77 %
Net interest income and interest margin (2) $94,165 5.54 %
============================================================================
(1) Net interest spread represents the average yield earned on
interest-earning assets less the average rate paid on
interest-bearing liabilities.
(2) Net interest margin is computed by dividing net interest income
(annualized) by total average earning assets.
Rate and volume variances.
The following table sets forth a summary of the changes in interest
income and interest expense from changes in average asset and
liability balances (volume) and changes in average interest rates
for the periods indicated. Changes not solely attributable to
volume or rates have been allocated in proportion to the respective
volume and rate components.
- ---------------------------------------------------------------------------
(In thousands) Three months ended
June 30, 1997
compared with three months
ended June 30, 1996
-----------------------------
Volume Rate Total
- ---------------------------------------------------------------------------
Increase (decrease) in
interest and fee income:
Money market assets and funds sold ($1,003) $37 ($966)
Investment securities:
Taxable 962 44 1,006
Tax-exempt (399) 786 387
Loans:
Commercial 937 (434) 503
Real estate construction (960) 122 (838)
Real estate residential 1,101 (184) 917
Consumer (925) 8 (917)
- ---------------------------------------------------------------------------
Total loans 153 (488) (335)
- ---------------------------------------------------------------------------
Total (decrease) increase in interest
and fee income (287) 379 92
- ---------------------------------------------------------------------------
Increase (decrease) in interest expense:
Deposits:
Savings/interest-bearing 47 195 242
Time less than $ 100,000 (463) 168 (295)
Time $ 100,000 or more 203 35 238
- ---------------------------------------------------------------------------
Total (decrease) increase
in interest-bearing deposits (213) 398 185
Funds purchased (847) (90) (937)
Notes and mortgages payable (87) (1) (88)
- ---------------------------------------------------------------------------
Total(decrease) increase in
interest expense (1,147) 307 (840)
- ---------------------------------------------------------------------------
Increase in net
interest income (1) $860 $72 $932
===========================================================================
(1) Amounts calculated on a fully taxable equivalent basis
using the current statutory federal tax rate.
Rate and volume variances.
- ---------------------------------------------------------------------------
(In thousands) Six months ended
June 30, 1997
compared with six months
ended June 30, 1996
------------------------------
Volume Rate Total
- ---------------------------------------------------------------------------
Increase (decrease) in
interest and fee income:
Money market assets and funds sold ($729) ($30) ($759)
Investment securities:
Taxable 686 341 1,027
Tax-exempt (565) 795 230
Loans:
Commercial (2,442) 2,314 (128)
Real estate construction (1,669) 113 (1,556)
Real estate residential 1,879 (399) 1,480
Consumer (1,933) 49 (1,884)
- ---------------------------------------------------------------------------
Total loans (4,165) 2,077 (2,088)
- ---------------------------------------------------------------------------
Total (decrease) increase in interest and
fee income (4,773) 3,183 (1,590)
- ---------------------------------------------------------------------------
Increase (decrease) in interest expense:
Deposits:
Savings/interest-bearing 67 301 368
Time less than $ 100,000 (1,019) 15 (1,004)
Time $ 100,000 or more 579 (90) 489
- ---------------------------------------------------------------------------
Total (decrease) increase
in interest-bearing deposits (373) 226 (147)
Funds purchased (1,471) (267) (1,738)
Notes and mortgages payable 33 0 33
- ---------------------------------------------------------------------------
Total decrease in interest expense (1,811) (41) (1,852)
- ---------------------------------------------------------------------------
(Decrease) increase in net
interest income (1) ($2,962) $3,224 $262
===========================================================================
(1) Amounts calculated on a fully taxable equivalent basis
using the current statutory federal tax rate.
Provision for Loan Losses
The level of the provision for loan losses during each of the
periods presented reflects the Company's continued efforts to
improve loan quality by enforcing underwriting and
administration procedures and aggressively pursuing
collection efforts with troubled debtors. Maintenance of
credit quality standards allowed the Company to reduce the
level of its provision for loan losses to $1.1 million in the
second quarter of 1997, $1.8 million lower than the same
period in 1996. On a year-to-date basis, the $4.6 million
provision for loan losses in 1997 was $1.4 million lower than
the first six months of 1996. This provision includes $2.5
million booked at ValliCorp prior to the merger, conforming
to Westamerica Bancorporation's different workout strategy
for loans and properties acquired in the merger.
For further information regarding net credit losses and the
reserve for loan losses, see the "Asset Quality" section of this
report.
Non-interest Income
The following table summarizes the components of non-interest
income for the periods indicated.
For the three For the six
months ended months ended
(In millions) June 30, June 30,
--------------------- ---------------------
1997 1996 1997 1996
------ ------- ------ -------
Deposit account fees $5.28 $5.15 $10.63 $10.13
Merchant credit card 1.04 1.32 2.03 2.32
Mortgage banking income 0.38 0.45 0.72 1.00
Financial services
commissions 0.27 0.20 0.46 0.34
Trust fees 0.12 0.09 0.23 0.17
Net investment
securities gain 0.13 0.02 0.14 0.05
Other non-interest income 2.26 1.76 5.06 3.46
------ ------ ------ ------
Total $9.48 $8.99 $19.27 $17.47
====== ====== ====== ======
The $490,000 increase in non-interest income during the second
quarter of 1997 compared to the second quarter of 1996, included
$130,000 higher deposit account fees, $70,000 higher financial
services commissions resulting from increased share of fees earned
by the agent managing certain investments of the Company's
customers, and $30,000 higher trust fees. In addition, the sale of
mortgage-backed securities resulted in $110,000 higher gains than
in the prior year and the gain on sale of branches was the major
contributor to the increase in the "Other" non-interest income
category. Partially offsetting these favorable variances, merchant
credit card income decreased $280,000 from the second quarter of 1996
due to a reduced level of activity, and mortgage banking fees were
$70,000 lower than the same period mainly due to lower refinancing
volume.
Comparing the first six months of 1997 to the same period of
1996, non-interest income increased $1.8 million. The largest
contributor to this variance was a gain on sale of assets at
ValliWide Bank prior to the merger with and into Westamerica Bank
and after the merger of the holding companies, included in the
"Other" non-interest income category variance of $1.6 million. In
addition, deposit account fees were $500,000 higher than prior year
principally due to higher account analysis and other transaction
account fees, and financial services commissions and trust fees
were $120,000 and $60,000, respectively, higher than the second
quarter of 1996. The sale of securities resulted in a $90,000
higher gain than in prior year. Partially offsetting these
favorable variances, merchant credit card fees and mortgage banking
income were $290,000 and $280,000, respectively, lower than prior
year due to the same reasons mentioned above for the second quarter
of 1997 compared to the same period in 1996.
Non-interest Expense
The following table summarizes the components of
non-interest expense for the periods indicated.
For the three For the six
months ended months ended
June 30, June 30,
--------------------- ---------------------
(In millions) 1997 1996 1997 1996
------ ------- ------ -------
Salaries and incentives $20.75 $13.52 $33.83 $27.67
Other personnel 1.25 0.93 3.39 2.88
Occupancy 8.16 4.13 15.75 8.28
Equipment 4.32 2.43 6.72 4.93
Data processing services 1.85 1.47 3.41 2.99
Professional fees 5.06 1.35 8.02 2.53
Courier service 0.78 0.76 1.60 1.37
Stationery and supplies 0.78 0.74 1.39 1.36
Postage 0.70 0.59 1.28 1.19
Loan expense 0.45 0.54 0.93 0.90
Marketing 0.45 0.84 1.04 1.55
Merchant credit card 0.48 0.57 0.99 1.07
Operational losses 0.23 0.20 0.53 0.41
Other real estate owned 0.25 0.28 0.84 0.61
Other non-interest expense 3.66 2.94 6.03 10.52
------- ------- ------- -------
Total $49.17 $31.29 $85.75 $68.26
======= ======= ======= =======
During the second quarter of 1997, non-interest expense increased
$17.88 million from the second quarter of 1996. Major increases
from the second quarter of 1996 relate to one-time costs of
approximately $18.75 million in connection with the Merger. These
costs are mostly included in the increases shown in salaries and
incentives principally due to an estimated $7.2 million in
severance expenses, occupancy and equipment due to approximately
$6.6 million in write-offs of unused premises and furniture,
professional fees, which includes $3.9 million in investment banker
costs, and $250,000 in data processing services due to contract
termination related expenses. In addition, postage increased
$110,000 due to additional customer mailings to disclose
particulars of the ValliCorp merger and account characteristics.
Stationery and supplies expenses increased $40,000 mainly due to
inventory set-ups at the new branches joining the Company's
network. Completing the increased variances in non-interest
expense, operational losses and courier costs increased $30,000 and
$20,000, respectively, from the second quarter of 1996. Reductions
in non-interest expense from the second quarter of 1996 include
$390,000 lower marketing expense and merchant credit card and other
real estate owned related costs, $90,000 and $30,000, respectively.
Comparing the first six month of 1997 with the comparable period in
1996, non-interest expense increased $17.49 million. The reasons
listed above for the variances between the second quarter of 1997
and the second quarter of 1996, are similar to those explaining
the changes between the first six months of both years with the
addition of certain items included in the first quarter of
1997, also related to the ValliCorp merger, such as increased
professional fees and increased occupancy and furniture and
equipment costs due to higher branch restructuring costs at
ValliWide Bank prior to the merger with and into Westamerica
Bank. The decrease of $4.49 million in the Other category of
non-interest expense is mainly due to merger and integration costs
at ValliCorp during 1996 totaling $4.58 million.
Provision for Income Tax
During the second quarter of 1997, the Company recorded income tax
expense of $1.9 million compared to $6.8 million in the second
quarter of 1996. On a year-to-date basis, income tax expense was
$6.7 million for 1997 compared to $11.2 million in 1996. The
provision recorded for the first six months of 1997 represents an
effective tax rate of 35.4 percent, compared to 33.3 percent for
the first six months of 1996. The provision for income taxes for
all periods presented is directly attributable to the respective
level of earnings and the non-tax deductible expenses incurred
in connection with mergers and acquisitions.
Asset Quality
The Company closely monitors the markets in which it conducts its
lending operations. The Company continues its strategy to control
exposure to loans with high credit risk and increase diversification
of earning assets into less risky investments. Asset reviews are
performed using grading standards and criteria similar to those
employed by bank regulatory agencies. Assets receiving lesser grades
fall under the "classified assets" category, which includes all
non-performing assets and potential problem loans, and receive an
elevated level of attention to ensure collection. The following is a
summary of classified assets on the dates indicated:
June 30, December 31,
(In millions) -------------------- -------------
1997 1996 1996
------ ------ ------
Classified loans $74.1 $85.9 $62.9
Other classified assets 7.3 9.4 9.9
------ ------ ------
Total classified assets $81.4 $95.3 $72.8
====== ====== ======
Reserve for loan losses as
a percentage of
classified loans 68% 54% 81%
Classified loans at June 30, 1997, decreased $11.8 million or 14
percent to $74.1 million from June 30, 1996, principally due to
sales and pay-offs of loans with real estate collateral and
transfers to the other real estate owned category. The $11.2
million increase of classified loans from December 31, 1996 was
mainly due to increases in residential real estate loans and other
loans with real estate collateral.
Non-performing Assets
Non-performing assets include non-accrual loans, loans 90 days past
due as to principal or interest and still accruing and other real
estate owned. Loans are placed on non-accrual status when reaching
90 days or more delinquent, unless the loan is well secured and in
the process of collection. Interest previously accrued on loans
placed on non-accrual status is charged against interest income. In
addition, loans secured by real estate with temporarily impaired
values and commercial loans to borrowers experiencing financial
difficulties are placed on non-accrual status even though the
borrowers continue to repay the loans as scheduled. Such loans are
classified as "performing non-accrual" and are included in total
non-performing assets. Performing non-accrual loans are reinstated
to accrual status when improvements in credit quality eliminate
Management's doubt as to the full collectibility of both interest
and principal and the loan is brought current. When the ability to
fully collect non-accrual loan principal is in doubt, cash payments
received are applied against the principal balance of the loan until
such time as full collection of the remaining recorded balance is
expected. Any subsequent interest received is recorded as interest
income on a cash basis.
The following is a summary of non-performing assets on the dates
indicated:
June 30, December 31,
(In millions) -------------------- ------------
1997 1996 1996
------- ------- -------
Non-accrual loans:
Performing $9.39 $2.18 $4.29
Non-performing 11.40 17.21 12.55
------- ------- -------
Total non-accrual loans 20.79 19.39 16.84
Restructured loans 0.22 0.26 0.22
Loans 90 days past due and
still accruing 0.55 3.04 1.74
------- ------- -------
Total non-performing loans 21.56 22.69 18.80
------- ------- -------
Other real estate owned 7.29 9.40 9.91
------- ------- -------
Total non-performing assets $28.85 $32.09 $28.71
======= ======= =======
Reserve for loan losses as
a percentage of
non-performing loans 235% 205% 271%
Performing non-accrual loans increased $7.21 million to $9.39
million at June 30, 1997 from $2.18 million at June 30, 1996 and
increased $5.10 million from $4.29 million outstanding at December
31, 1996. The majority of the increases was due to reclassifications
from non-performing into performing non-accrual loans that were not
classified as such by ValliWide Bank prior to the merger with and
into Westamerica Bank. Non-performing non-accrual loans of $11.40
million at June 30, 1997, decreased $5.81 million from June 30,
1996 and decreased $1.15 million from December 31, 1996.
These reductions were in part due to the mentioned reclassification
from non-performing into performing non-accrual loans from
ValliWide Bank's loans in addition to payoffs and write-offs of
loans with real estate collateral and commercial loans. The
$211,000 and $262,000 decreases in other real estate owned balances
from June 30, 1996 and December 31, 1996, respectively, were due
to additions from non-accrual loans with real estate collateral net
of liquidations, write-downs and sales.
The amount of gross interest income that would have been
recorded for non-accrual loans for the three and six months
ended June 30, 1997, if all such loans had been current in
accordance with their original terms, was $495,000 and
$667,000, respectively. The amount of interest income that
was recognized on non-accrual loans from cash payments made
during the three and six months ended June 30, 1997 totaled
$120,000 and $220,000, respectively, representing annualized
yields of 2.45 percent and 3.28 percent, respectively. Cash
payments received which were applied against the book balance
of non-accrual loans outstanding at June 30, 1997, totaled
$510,000.
Reserve for Loan Losses
It is the position of the Company that the level of the loan
loss reserve is adequate to provide for losses that can be
estimated based on anticipated specific and general
conditions as determined by Management. These include credit
loss experience, the amount of past due, non-performing and
classified loans, recommendations of regulatory authorities
and prevailing economic conditions. The reserve is allocated
to segments of the loan portfolio based in part on
quantitative analyses of historical credit loss experience.
Criticized and classified loan balances are analyzed using
both a linear regression model and standard allocation
percentages. The results of these analyses are applied to
current criticized and classified loan balances to allocate
the reserve to the respective segments of the loan portfolio.
In addition, loans with similar characteristics not usually
criticized using regulatory guidelines due to their small
balances and numerous accounts, are analyzed based on the
historical rate of net losses and delinquency trends grouped
by the number of days the payments on these loans are
delinquent. While these factors are judgmental and may not be
reduced to a purely mathematical formula, Management
considers the reserve for loan losses, for the periods
presented, to be adequate as a reserve against inherent
losses. Management continues to evaluate the loan portfolio
and assess current economic conditions that will dictate
future required reserve levels.
The following table summarizes the loan loss provision, net credit
losses and loan loss reserve for the periods indicated:
For the three For the six
months ended months ended
June 30, June 30,
(In millions) --------------------- ---------------------
1997 1996 1997 1996
------ ------- ------ -------
Balance, beginning
of period $51.0 $46.5 $50.9 $48.5
Loan loss provision 1.1 2.8 4.6 6.0
Loans charged off (2.3) (3.7) (6.7) (9.9)
Recoveries of previously
charged-off loans 0.9 1.0 1.9 2.0
------- ------- ------- -------
Net credit losses (1.4) (2.7) (4.8) (7.9)
------- ------- ------- -------
Balance, end of period $50.7 $46.6 $50.7 $46.6
======= ======= ======= =======
Reserve for loan losses
as a percentage of
loans outstanding 2.24% 2.08%
Asset and Liability Management
The fundamental objective of the Company's management of
assets and liabilities is to maximize its economic value
while maintaining adequate liquidity and a conservative level
of interest rate risk.
The primary analytical tool used by the Company to gauge
interest rate sensitivity is a simulation model used by many
major banks and bank regulators. This model is used to
simulate, based on the current and projected portfolio mix,
the effects on net interest income of changes in market
interest rates. Under the Company's policy and practice, the
projected amount of net interest income over the ensuing
twelve months is not allowed to fluctuate more than 10
percent even under alternate assumed interest rate changes of
plus or minus 200 basis points. The results of the model
indicate that the mix of interest rate sensitive assets and
liabilities at June 30, 1997 would not result in a
fluctuation of net income exceeding 10 percent.
The Securities and Exchange Commission (SEC) has approved
rule amendments to clarify and expand existing disclosure
requirements for derivative financial instruments. The
amendments require enhanced disclosure of accounting policies
for derivative financial instruments in the footnotes to the
financial statements. In addition, the amendments expand
existing disclosure requirements to include quantitative and
qualitative information about market risk inherent in market
risk sensitive instruments. The required quantitative and
qualitative information should be disclosed outside the
financial statements and related notes thereto. The enhanced
accounting policy disclosure requirements are effective for
the quarterly period ended June 30, 1997. As the Company
believes that the derivative financial instrument disclosures
contained within the notes to the financial statements of its
1996 Form 10-K substantially conform with the accounting
policy requirements of these rule amendments, no further
interim disclosure has been provided. The rule amendments
that require expanded disclosure of quantitative and
qualitative information about market risk are effective with
the 1997 Form 10-K. At June 30, 1997 and 1996, the Company
had no derivative financial instruments outstanding.
Liquidity
The Company's principal source of asset liquidity is marketable
investment securities available for sale. At June 30, 1997,
investment securities available for sale totaled $907.8 million.
This represents an increase of $61.0 million from June 30, 1996.
The Company generates significant liquidity from its
operating activities. The Company's profitability during the
first six months of 1997 and 1996 was the main contributor
to the cash flows from operations for such periods of $28.5
million and $21.4 million, respectively.
Cash flows are provided by and used in financing activities,
primarily customer deposits, short-term borrowings from
banks, extensions of long-term debt and repurchases of the
Company's Common Stock. During the first six months of 1997,
$138.0 million was used by financing activities, including a
$111.3 million decrease in deposits, a $16.0 million decrease
in short-term borrowings, a $15.1 million outflow used for
purchasing the Company's common stock, dividends paid in the
amount of $5.4 million and repayments of long-term debt for
$1.4 million. These uses of cash were partially offset by
$11.0 million provided by the issuance of new shares of
common stock, principally for stock option exercises.
This compares to the first six months of 1996 when $132.1 million
was used in financing activities, as a $175.4 million decrease in
deposits combined with other cash flow uses including retirement of
stock and dividends to shareholders of $13.0 million and $5.8
million, respectively, and repayments of long-term debt of
$4.4 million, were partially offset by a $40.6 million
increase in short-term borrowed funds, the issuance of $22.5
million of the Company's Senior Notes and a $3.5 million
increase in common stock from stock option exercises.
The Company uses cash flows from operating and financing activities
primarily to invest in securities and loans. During the first six
months of 1997, net repayments of loans were $5.7 million compared
to $9.8 million during the same period in 1996. The Company
continued to grow its investment securities portfolio in 1997,
reflected in the $22.0 million increase in investment securities,
net of maturities and sales, for the first six months of 1997,
compared to a decrease of $83.6 million during the same period of
1996. Costs related to the new facility to consolidate the
Company's operations and back office functions to Fairfield,
California, were the main reason for the $13.1 million in
purchases of property, plant and equipment, during the first six
months of 1996.
The Company anticipates increasing its cash level from
operations through the end of 1997 due to increased
profitability and retained earnings. For the same period, it
is anticipated that the investment securities portfolio and
demand for loans will moderately increase. The growth in
deposit balances is expected to follow the anticipated growth
in loan and investment balances through the end of 1997.
Capital Resources
The current and projected capital position of the Company and the
impact of capital plans and long-term strategies is reviewed
regularly by Management.
The Company's capital position represents the level of capital
available to support continued operations and expansion. The
Company's primary capital resource is shareholders' equity which
was $387.0 million at June 30, 1997, representing an increase of
$31.5 million or 9 percent from June 30, 1996 and an increase of
$7.7 million, or 2 percent, from December 31, 1996. As a result of
the Company's profitability and the retention of earnings, the
ratio of equity to total assets increased to 10.3 percent at June
30, 1997, from 9.5 percent a year ago and 9.8 percent as of
December 31, 1996. The ratio of Tier I capital to risk-adjusted
assets was 12.68 percent at June 30, 1997, compared to 12.95
percent at June 30, 1996 and 12.96 percent at December 31, 1996.
Total capital to risk-adjusted assets was 14.64 percent at June 30,
1997 compared to 14.96 percent at June 30, 1996 and 14.95 percent
at December 31, 1996.
The following summarizes the ratios of capital to
risk-adjusted assets for the periods indicated:
June 30, December 31,
-------------------- -------------
1997 1996 1996
------ ------ ------
Tier I Capital 12.68% 12.95% 12.96%
Total Capital 14.64% 14.96% 14.95%
Leverage ratio 9.67% 9.26% 9.27%
The risk-based capital ratios decreased at June 30, 1997 compared to
June 30, 1996 as the increase in risk weighted assets outpaced the
growth in total equity, due in part to the increase in loan
balances and other assets. Capital ratios are reviewed on a regular
basis to ensure that capital exceeds the prescribed regulatory
minimums and is adequate to meet the Company's future needs. All
ratios are in excess of the regulatory definition of "well
capitalized".
Since the beginning of 1994, the Board of Directors of the
Company has authorized the repurchase of 914,050 shares of
common stock from time to time, subject to appropriate
regulatory and other accounting requirements. These purchases
are made periodically in the open market and lessen the
dilutive impact of issuing new shares to meet stock
performance, option plans, acquisitions and other
requirements. Pursuant to this program, 674,050 shares had
been purchased through December 31, 1996, 12,500 were
purchased during the first quarter of 1997 and 168,200 were
purchased during the second quarter of 1997.
Interim Periods
In February, 1997, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards No. 128,
"Earnings per Share" ("SFAS 128"). SFAS 128 establishes standards
for computing and presenting earnings per share ("EPS") and applies
to entities with publicly held common stock or potential common
stock. SFAS 128 simplifies the standards for computing earnings per
share previously found in APB Opinion No. 15, "Earnings per Share",
and replaces the presentation of primary EPS with a presentation of
basic EPS. It also requires dual presentation of basic and diluted
EPS on the face of the income statement and requires a
reconciliation of the numerator and denominator of the basic EPS
computation to the numerator and denominator of the diluted EPS
computation. SFAS 128 is effective for financial statements issued
for periods ending after December 15, 1997, including interim
periods; earlier application is not permitted. This statement
requires restatement of all prior-period EPS data presented.
The pro forma EPS amounts computed using this statement for the
three and six-month periods ended June 30, 1997 and 1996 are as
follows:
For the three months
(Dollars and shares in ended June 30, 1997
thousands except per --------------------------------------
share amounts) Per Share
Net Income Shares Amount
---------- ------ ---------
Basic EPS:
Income available to common
shareholders $2,814 $14,357 $0.20
Effect of Dilative Securities:
Stock options outstanding -- 268
------- -------
Diluted EPS:
Income available to common
shareholders plus assumed
conversions $2,814 14,625 $0.19
======= ======= =======
For the three months
(Dollars and shares in ended June 30, 1996
thousands except per -------------------------------------
share amounts) Per Share
Net Income Shares Amount
--------- --------- ---------
Basic EPS:
Income available to common
shareholders $13,108 14,307 $0.92
Effect of Dilative Securities:
Stock options outstanding -- 287
------- -------
Diluted EPS:
Income available to common
shareholders plus assumed
conversions $13,108 14,594 $0.90
======== ======= ======
For the six months
ended June 30, 1997
(Dollars and shares in -------------------------------------
thousands except per Per Share
share amounts) Net Income Shares Amount
---------- ------ ---------
Basic EPS:
Income available to common
shareholders $12,178 $14,336 $0.85
Effect of Dilative Securities:
Stock options outstanding -- 243
------- -------
Diluted EPS:
Income available to common
shareholders plus assumed
conversions $12,178 14,579 $0.84
======= ======= =======
For the six months
(Dollars and shares in ended June 30, 1996
thousands except per -------------------------------------
share amounts) Per Share
Net Income Shares Amount
--------- --------- ---------
Basic EPS:
Income available to common
shareholders $22,468 $14,332 $1.57
Effect of Dilative Securities:
Stock options outstanding -- 268
------- -------
Diluted EPS:
Income available to common
shareholders plus assumed
conversions $22,468 14,600 $1.54
======== ======= ======
In June 1997, the FASB issued Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive
Income" ("SFAS 130"). SFAS 130 establishes standards for
reporting and displaying comprehensive income and its
components in the financial statements. It requires that a
company classify items of other comprehensive income, as
defined by accounting standards, by their nature (e.g.,
unrealized gains or losses on securities) in a financial
statement, but does not require a specific format for that
statement. The Company is in the process of determining its
preferred format. The accumulated balance of other
comprehensive income is to be displayed separately from
retained earnings and additional paid-in capital in the
equity section of the balance sheet. SFAS 130 is effective
with the year-end 1998 financial statements; however, a total
for comprehensive income is required in the financial
statements of interim periods beginning in 1998.
Reclassification of financial statements for earlier periods
provided for comparative purposes is required.
In June 1997, the FASB issued Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of
an Enterprise and Related Information" ("SFAS 131"). SFAS 131
requires that a public business enterprise report financial
and descriptive information about its reportable operating
segments on the basis that is used internally for evaluating
segment performance and deciding how to allocate resources to
segments. SFAS 131 is effective with the year-end 1998
financial statements. No comparative information will be
required for interim periods in the initial year of
application.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange
Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly
authorized.
WESTAMERICA BANCORPORATION
(Registrant)
Date: August 7, 1997 /s/ DENNIS R. HANSEN
--------------------
Dennis R. Hansen
Senior Vice President
and Controller
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
Due to the nature of the banking business, the Subsidiary
Banks are at times party to various legal actions; all
such actions are of a routine nature and arise in the normal
course of business of the Subsidiary Banks.
Item 2 - Changes in Securities
None
Item 3 - Defaults upon Senior Securities
None
Item 4 - Submission of Matters to a Vote of Security Holders
Proxies for the Annual Meeting of shareholders held on April 22,
1997, were solicited pursuant Regulation 14A of the Securities
Exchange Act of 1934. The Report of Inspector of election
indicates that 7,551,033 shares of the Common Stock of the
Company, out of 9,444,222 shares outstanding, were present at the
meeting. The following matters were submitted to a vote of the
shareholders:
1.- Election of directors:
Withheld/
For Exceptions
------ ------
Etta Allen 7,381,502 169,531
Louis E. Bartolini 7,381,502 169,531
Charles I. Daniels, Jr. 7,381,502 169,531
Don Emerson 7,381,502 169,531
Arthur C. Latno, Jr. 7,381,502 169,531
Patrick D. Lynch 7,381,502 169,531
Catherine C. MacMillan 7,381,502 169,531
Ronald A. Nelson 7,381,502 169,531
Carl R. Otto 7,381,502 169,531
David L. Payne 7,381,502 169,531
Edward B. Sylvester 7,381,502 169,531
2.- Ratification of independent certified public accountant firm.
A proposal to ratify the selection of KPMG Peat Marwick LLP as
independent certified public accountants for the Company for
1997.
For : 7,441,189
Against : 30,978
Abstain : 78,526
3.- Proposal to change the method of compensating the members who
serve on the Board of Directors.
For : 739,827
Against : 5,320,706
Abstain : 288,234
Item 5 - Other Information
None
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibit 11: Computation of Earnings Per Share on Common
and Common Equivalent Shares and on Common
Shares Assuming Full Dilution
(b) Exhibit 27 : Financial Data Schedule
Reports on Form 8-K: None