0000311094-95-000017.txt : 19950815 0000311094-95-000017.hdr.sgml : 19950815 ACCESSION NUMBER: 0000311094-95-000017 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: WESTAMERICA BANCORPORATION CENTRAL INDEX KEY: 0000311094 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 942156203 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09383 FILM NUMBER: 95563685 BUSINESS ADDRESS: STREET 1: 1108 FIFTH AVE CITY: SAN RAFAEL STATE: CA ZIP: 94901 BUSINESS PHONE: 4152578000 MAIL ADDRESS: STREET 1: 1108 FIFTH AVENUE CITY: SAN RAFAEL STATE: CA ZIP: 94901 FORMER COMPANY: FORMER CONFORMED NAME: INDEPENDENT BANKSHARES CORP DATE OF NAME CHANGE: 19830801 10-Q 1 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, 1995 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, 1995 9,873,171
WESTAMERICA BANCORPORATION CONSOLIDATED BALANCE SHEETS (in thousands) (Unaudited) June 30, December 31, 1995 1994 * 1994 ---------- ---------- ---------- ASSETS Cash and cash equivalents $184,271 $142,121 $155,956 Money market assets 250 250 250 Trading account securities -- 15 -- Investment securities available for sale 199,608 198,162 192,418 Investment securities held to maturity, with market values of: $589,653 at June 30, 1995 $619,363 at June 30, 1994 $581,444 at December 31, 1994 591,191 633,281 607,209 Loans, net of reserve for loan losses of: $31,988 at June 30, 1995 $30,825 at June 30, 1994 $31,293 at December 31, 1994 1,297,031 1,257,279 1,303,697 Other real estate owned 6,388 9,948 8,023 Premises and equipment, net 24,631 26,704 25,502 Interest receivable and other assets 59,101 56,382 55,799 ---------- ---------- ---------- Total assets $2,362,471 $2,324,142 $2,348,854 ========== ========== ========== LIABILITIES Deposits: Non-interest bearing $450,975 $427,660 $452,760 Interest bearing: Transaction 306,656 307,110 322,687 Savings 716,880 788,111 767,090 Time 460,373 447,996 431,616 ---------- ---------- ---------- Total deposits 1,934,884 1,970,877 1,974,153 Funds purchased 186,839 118,736 134,723 Liability for interest, taxes and other expenses 14,672 20,111 19,520 Notes and mortgages payable 20,000 28,499 25,524 ---------- ---------- ---------- Total liabilities 2,156,395 2,138,223 2,153,920 ---------- ---------- ---------- Authorized - 50,000 shares Common stock issued and outstanding: 9,539 at June 30, 1995 9,603 at June 30, 1994 9,581 at December 31, 1994 73,052 71,982 72,052 Capital surplus 16,034 16,034 16,034 Unrealized gain (loss) on securities available for sale 13 (958) (2,271) Retained earnings 116,977 98,861 109,119 ---------- ---------- ---------- Total shareholders' equity 206,076 185,919 194,934 Total liabilities and shareholders' equity $2,362,471 $2,324,142 $2,348,854 ========== ========== ========== * Restated on an historical basis to reflect the January 31, 1995 acquisition of PV Financial and the June 6, 1995 acquisition of CapitolBank Sacramento.
WESTAMERICA BANCORPORATION CONSOLIDATED STATEMENTS OF INCOME (in thousands, except when indicated) (Unaudited) Three months ended Six months ended June 30, June 30, 1995 1994 * 1995 1994 * -------- -------- -------- -------- INTEREST INCOME Loans $31,122 $28,218 $61,940 $55,582 Money market assets and funds sold -- 103 101 207 Trading account securities -- 1 -- 1 Investment securities available for sale 2,737 2,742 5,312 5,588 Investment securities held to maturity 8,105 8,165 16,407 15,755 -------- -------- -------- -------- Total interest income 41,964 39,229 83,760 77,133 INTEREST EXPENSE Transaction deposits 816 846 1,698 1,707 Savings deposits 5,065 4,444 10,213 8,678 Time deposits 5,703 4,210 10,565 8,585 Funds purchased 2,153 1,422 4,188 2,251 Long-term debt 496 629 1,001 1,457 -------- -------- -------- -------- Total interest expense 14,233 11,551 27,665 22,678 -------- -------- -------- -------- NET INTEREST INCOME 27,731 27,678 56,095 54,455 Provision for loan losses 1,175 2,004 2,450 4,056 -------- -------- -------- -------- NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 26,556 25,674 53,645 50,399 NON-INTEREST INCOME Service charges on deposit accounts 3,134 3,190 6,193 6,330 Merchant credit card 538 601 1,043 1,151 Mortgage banking 197 221 377 565 Brokerage commissions 154 203 292 368 Net investment securities gains -- 44 -- 564 Other 1,112 1,176 2,016 2,466 -------- -------- -------- -------- Total non-interest income 5,135 5,435 9,921 11,444 NON-INTEREST EXPENSE Salaries and related benefits 10,395 10,666 20,645 21,458 Occupancy 2,415 2,419 4,839 4,704 Equipment 1,233 1,349 2,520 2,634 FDIC insurance assessment 1,098 1,150 2,222 2,300 Professional fees 881 771 2,164 1,342 Data processing 1,007 1,060 2,018 2,153 Other real estate owned 333 68 445 (103) Other 3,889 4,068 7,207 7,767 -------- -------- -------- -------- Total non-interest expense 21,251 21,551 42,060 42,255 -------- -------- -------- -------- INCOME BEFORE INCOME TAXES 10,440 9,558 21,506 19,588 Provision for income taxes 2,808 3,218 6,314 6,447 -------- -------- -------- -------- NET INCOME $7,632 $6,340 $15,192 $13,141 ======== ======== ======== ======== Average shares outstanding 9,564 9,601 9,572 9,597 PER SHARE DATA Earnings per share $0.80 $0.66 $1.59 $1.37 Dividends declared 0.20 0.15 0.37 0.30 * Restated on an historical basis to reflect the January 31, 1995 acquisition of PV Financial and the June 6, 1995 acquisition of CapitolBank Sacramento.
WESTAMERICA BANCORPORATION STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) For the six months ended June 30, 1995 1994 * -------- -------- OPERATING ACTIVITIES Net income $15,192 $13,141 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,055 2,262 Loan loss provision 2,450 4,056 Amortization of deferred net loan fees (848) (478) Increase in other assets (5,274) (4,187) Increase in income taxes payable 853 1,592 Decrease in other liabilities (5,140) (1,447) Gain on sales of investment securities available for sale -- (564) Loss on sales/write down of equipment 335 13 Originations of loans for resale (3,267) (24,430) Proceeds from sale of loans originated for resale 3,293 22,239 Gain on sale of property acquired in satisfaction of debt (63) (579) Write down on property acquired in satisfaction of debt 271 211 Net maturities of trading securities -- (5) ------- ------- Net cash provided by operating activities 9,857 11,824 ------- ------- INVESTING ACTIVITIES Net repayments of loans 5,022 40,250 Purchases of investment securities available for sale (34,528) (71,997) Purchases of investment securities held to maturity (22,913) (135,309) Purchases of premises and equipment (1,523) (1,228) Proceeds from maturity of securities available for sale 23,707 26,884 Proceeds from maturity of securities held to maturity 46,203 65,537 Proceeds from sale of securities available for sale -- 52,999 Proceeds from sale of property and equipment 46 -- Proceeds from property acquired in satisfaction of debt 1,723 5,078 Net additions to property acquired in satisfaction of debt (296) -- ------- ------- Net cash provided by (used in) investing activities 17,441 (17,786) ------- ------- FINANCING ACTIVITIES Net decrease in deposits (39,196) (29,621) Net increase in funds purchased 52,073 46,941 Reduction on notes and mortgages payable (5,524) (7,856) Exercise of stock options/issuance of shares 2,116 742 Cash paid in lieu of fractional shares (14) -- Retirement of stock (4,968) (1,029) Dividends on common stock (3,470) (2,685) Net cash provided by financing activities 1,017 6,492 ------- ------- NET INCREASE IN CASH AND CASH EQUIVALENTS 28,315 530 Cash and cash equivalents at beginning of year 155,956 141,591 -------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $184,271 $142,121 ======== ======== Supplemental disclosure of non-cash activities: Loans transferred to other real estate owned 275 1,376 Supplemental disclosure of cash flow activity: Unrealized gain on securities available for sale 1,703 3,392 Interest paid for the period 28,922 22,966 Income tax payments for the period 6,520 5,261 * Restated on an historical basis to reflect the January 31, 1995 acquisition of PV Financial and the June 6, 1995 acquisition of CapitolBank Sacramento.
WESTAMERICA BANCORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS FINANCIAL CONDITION AND RESULTS OF OPERATIONS Westamerica Bancorporation, (the "Company"), parent company of Westamerica Bank and Subsidiary, Napa Valley Bank and Subsidiary, Bank of Lake County and Community Banker Services Corporation and Subsidiary, reported second quarter 1995 net income of $7.6 million or $.80 per share. On a year to-date basis, the Company reported net income of $15.2 million, or $1.59 per share. This record level of earnings represents increases of 20 percent and 16 percent, respectively, from second quarter 1994 and June 1994 year-to-date. All financial data has been restated on a historical basis to reflect the January 31, 1995 acquisition of PV Financial and the June 6, 1995 acquisition of CapitolBank Sacramento, on a pooling-of-interest basis. Acquisitions On January 31, 1995, the Company completed the acquisition of PV Financial, parent company of Pacific Valley National Bank, on a pooling-of-interest basis and, accordingly, the Company's historical consolidated financial statements were restated. The Company issued approximately 1,180,000 shares in exchange for all the outstanding shares of PV Financial. On June 6, 1995, the Company completed the acquisition of CapitolBank Sacramento, on a pooling-of-interest basis and, accordingly, the Company's historical consolidated financial statements were restated. The Company issued approximately 370,000 shares in exchange for all the outstanding shares of CapitolBank. The following summarizes the separate results of the combined entities for the period shown prior to the combination: (in thousands, except per share data) Restated
Westamerica Combined Bancorporation PV Financial CapitolBank Results -------------- ----------- ----------- ------- Quarter ended 6/30/94: Net interest income $23,340 $2,488 $1,850 $27,678 Net income (loss) 6,022 556 (238) 6,340 Earnings per share 0.74 0.26 (0.06) 0.66 For the six months ended 6/30/94: Net interest income $46,163 $4,700 $3,592 $54,455 Net income 12,017 1,061 63 13,141 Earnings per share 1.49 0.49 0.02 1.37 At June 30, 1994: Total assets $2,030,256 $170,191 $123,695 $2,324,142 Total shareholders' equity 158,551 18,281 9,087 185,919 At December 31, 1994 Total assets $2,030,235 $179,391 $139,228 $2,348,854 Total shareholders' equity 166,205 19,419 9,310 194,934
Analysis of Net Interest Income and Margin ------------------------------------------ The Company continually manages its interest-earning assets and interest-bearing liabilities adapting to changes in market rates. The adverse effect of a decrease in the average balance of low-cost deposits from the second quarter and the first six months of 1994 and the higher level of interest rates paid on interest-bearing liabilities in the corresponding periods of 1995, was more than offset by increased yields on interest-earning assets. As a result, net interest income (FTE) in 1995 was higher than the comparable periods in 1994. These variances are shown in the components of net interest income and the analysis of net interest margin summarized as follows for the periods indicated: For the three months ended (in millions) June 30, ---------------- 1995 1994 ---- ---- Interest income $41.9 $39.3 Interest expense (14.2) (11.6) FTE adjustment 1.6 1.2 ----- ----- Net interest income (FTE) $29.3 $28.9 Average earning assets $2,106 $2,127 Net interest margin 5.59% 5.45% For the six months ended (in millions) June 30, --------------- Interest income 1995 1994 Interest expense ---- ---- FTE adjustment $83.8 $77.2 (27.7) (22.7) Net interest income (FTE) 3.1 2.3 ----- ----- Average earning assets $59.2 $56.8 Net interest margin $2,115 $2,115 5.65% 5.41% In the second quarter of 1995, net interest income (FTE) increased $400,000 or 2 percent from the second quarter of 1994 to $29.3 million. A $2.6 million increase in interest income, mostly due to the increase in market rates experienced in 1995, was offset by an increase in interest expense, principally due to a decrease in the average balances of low-cost deposits combined with higher rates paid. Completing the quarter-to-quarter variances, the FTE adjustment increased $400,000 from the second quarter of 1994, mostly due to a $41.8 million increase in the average balance of tax-exempt investment securities. Compared to the first six months of 1994, net interest income increased $2.4 million or 4 percent as a result of a $6.6 million increase in interest income partially offset by a $5.0 million increase in interest expense. The FTE adjustment increased $800,000 from the first six months of 1994. These variances reflect the same rate and volume trends affecting the quarter-to-quarter variances described above. Amortized loan fees, which are included in interest and fee income on loans, were $291,000 lower during the second quarter of 1995 than 1994 and $307,000 lower in the first six months of 1995 than in the same period in 1994. Components of Net Income Following is a summary of the components of net income for the periods indicated: For the three months ended June 30, ---------------- (In millions) 1995 1994 ---- ---- Net interest income * $29.3 $28.9 Provision for loan losses (1.2) (2.0) Non-interest income 5.1 5.4 Non-interest expense (21.2) (21.5) Provision for income taxes * (4.4) (4.5) ----- ----- Net income $7.6 $6.3 ===== ===== * Fully taxable equivalent basis (FTE) For the six months ended June 30, --------------- (In millions) 1995 1994 ---- ---- Net interest income * $59.2 $56.8 Provision for loan losses (2.5) (4.1) Non-interest income 9.9 11.4 Non-interest expense (42.0) (42.2) Provision for income taxes * (9.4) (8.8) ----- ----- Net income $15.2 $13.1 ===== ===== * Fully taxable equivalent basis (FTE) Components of Net Income as a Percent of Average Earning Assets The components of net income (annualized) expressed as a percent of average earning assets are summarized in the following table for the periods indicated: For the three months ended June 30, ---------------- 1995 1994 ---- ---- Net interest income * 5.59% 5.45% Provision for loan losses -0.22% -0.38% Non-interest income 0.98% 1.03% Non-interest expense -4.05% -4.06% Provision for income taxes * -0.85% -0.84% Net income 1.45% 1.20% * Fully taxable equivalent Net income (annualized) as a a percent of average total assets 1.33% 1.09% For the six months ended June 30, --------------- 1995 1994 ---- ---- Net interest income * 5.65% 5.41% Provision for loan losses -0.23% -0.39% Non-interest income 0.95% 1.09% Non-interest expense -4.01% -4.02% Provision for income taxes * -0.91% -0.84% Net income 1.45% 1.25% * Fully taxable equivalent Net income (annualized) as a percent of average total assets 1.32% 1.14% Net Interest Margin (FTE) For the three months ended June 30, ---------------- 1995 1994 ---- ---- Yield on earning assets 8.30% 7.63% Cost of interest-bearing liabilities 3.43% 2.68% ----- ----- Net interest spread 4.87% 4.95% Impact of non-interest bearing funds 0.72% 0.50% ----- ----- Net interest margin 5.59% 5.45% For the six months ended June 30, --------------- 1995 1994 ---- ---- Yield on earning assets 8.28% 7.58% Cost of interest-bearing liabilities 3.33% 2.66% ----- ----- Net interest spread 4.95% 4.92% Impact of non-interest bearing funds 0.70% 0.49% ----- ----- Net interest margin 5.65% 5.41% The average yield on earning assets for the three-month period ended June 30, 1995 was 66 basis points higher than the same period in 1994. The effect of this change, combined with a favorable impact of non-interest bearing funds, more than offset the increased costs of interest-bearing liabilities which were, for the three-month period ended June 30, 1995, 75 basis points higher than the comparable period in 1994. On a year-to-date basis, the Company experienced a similar pattern. For the first half of 1995, the yield on earning assets was 69 basis points higher that the first six months in 1994. This positive variance, added to a more favorable impact of non-interest bearing funds, more than offset the adverse effect of an increase of 67 basis points in the cost of interest-bearing liabilities. Summary of Average Balances, Yields/Rates and Interest Differential In 1995, higher market rates and a higher yielding asset mix through increases in the average balance of loans for the second quarter and the first six months of 1995 compared with comparable periods in 1994, resulted in increases in the average yield on earning assets for the three and six months ended June 30, 1995 of 66 and 69 basis points, respectively, from the same periods in 1994. Partially offsetting this favorable trend, the average balances of low-cost deposits for the second quarter of 1995 decreased $46 million from the second quarter of 1994. On a year-to-date basis, low-cost deposits decreased $22 million from the same period of 1994. This change and a general rise in market interest rates, were the main reasons for increases of 75 and 67 basis points, respectively, in the weighted average rate paid on total interest-bearing liabilities, from the second quarter and the first half of 1994. The following tables present, for the periods indicated, information regarding the 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 average interest-bearing liabilities and the resulting rates. 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 federal tax rate. Loan fees, which are amortized and included in interest and fee income on loans, were $291,000 lower in the second quarter of 1995 compared to the same period of 1994 and $307,000 lower in the first six months of 1995 compared to the same period a year ago. Distribution of assets, liabilities and shareholders' equity.
For the three months ended June 30, 1995 (dollars in thousands) ----------------------------------- Interest Rates Average income/ earned/ Assets balance expense paid ------ --------- --------- ------ Money market assets and funds sold $250 $-- -- % Trading account securities 1 -- -- Investment securities available for sale 189,897 2,908 6.14 Investment securities held to maturity 595,310 9,278 6.25 Loans: Commercial 773,005 18,957 9.84 Real estate construction 57,244 1,772 12.42 Real estate residential 207,080 3,906 7.57 Consumer 283,420 6,751 9.55 --------- ------ Earning assets 2,106,207 43,572 8.30 Other assets 200,817 ---------- Total assets $2,307,024 ========== Liabilities and shareholders' equity ------------------------------------ Deposits Non-interest bearing demand $423,091 $-- -- % Savings and interest-bearing transaction 1,039,498 5,882 2.27 Time less than $100,000 294,026 3,619 4.94 Time $100,000 or more 155,837 2,083 5.36 --------- ------ Total interest-bearing deposits 1,489,361 11,584 3.12 Funds purchased 147,972 2,153 5.84 Notes and mortgages payable 25,049 496 7.95 --------- ------ Total interest-bearing liabilities 1,662,382 14,233 3.43 Other liabilities 16,751 Shareholders' equity 204,800 --------- Total liabilities and shareholders' equity $2,307,024 ========== Net interest spread (1) 4.87 % Net interest income and interest margin (2) $29,339 5.59 % ======= ==== (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.
For the three months ended June 30, 1994 * (dollars in thousands) ----------------------------------- Interest Rates Average income/ earned/ Assets balance expense paid ------ --------- --------- ------ Money market assets and funds sold $10,549 $103 3.90 % Trading account securities 115 1 4.22 Investment securities available for sale 208,761 2,833 5.44 Investment securities held to maturity 612,186 9,168 6.01 Loans: Commercial 755,406 16,919 8.98 Real estate construction 72,270 1,742 9.67 Real estate residential 181,583 3,443 7.61 Consumer 286,042 6,256 8.77 --------- ------ Earning assets 2,126,912 40,465 7.63 Other assets 208,906 --------- Total assets $2,335,818 ========== Liabilities and shareholders' equity ------------------------------------ Deposits Non-interest bearing demand $409,900 $-- -- % Savings and interest-bearing transaction 1,098,830 5,291 1.93 Time less than $100,000 313,356 2,952 3.78 Time $100,000 or more 140,637 1,257 3.59 --------- ------ Total interest-bearing deposits 1,552,823 9,500 2.45 Funds purchased 145,731 1,422 3.91 Notes and mortgages payable 28,533 629 8.84 --------- ------ Total interest-bearing liabilities 1,727,087 11,551 2.68 Other liabilities 15,157 Shareholders' equity 183,674 --------- Total liabilities and shareholders' equity $2,335,818 ========== Net interest spread (1) 4.95 % Net interest income and interest margin (2) $28,914 5.45 % ======= ==== (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. * Restated on an historical basis to reflect the January 31, 1995 acquisition of PV Financial and the June 6, 1995 acquisition of CapitolBank Sacramento.
For the six months ended June 30, 1995 (dollars in thousands) ----------------------------------- Interest Rates Average income/ earned/ Assets balance expense paid ------ --------- --------- ------ Money market assets and funds sold $3,903 $101 5.24 % Trading account securities -- -- -- Investment securities available for sale 189,984 5,774 6.13 Investment securities held to maturity 598,545 18,565 6.25 Loans: Commercial 774,044 37,796 9.85 Real estate construction 58,365 3,460 11.95 Real estate residential 205,523 7,750 7.60 Consumer 284,942 13,445 9.52 --------- ------- Earning assets 2,115,306 86,891 8.28 Other assets 199,065 --------- Total assets $2,314,371 ========== Liabilities and shareholders' equity ------------------------------------ Deposits Non-interest bearing demand $421,043 $-- -- % Savings and interest-bearing transaction 1,057,675 11,911 2.27 Time less than $100,000 293,701 6,838 4.70 Time $100,000 or more 146,928 3,727 5.11 --------- ------- Total interest-bearing deposits 1,498,304 22,476 3.03 Funds purchased 149,373 4,188 5.65 Notes and mortgages payable 25,286 1,001 7.99 --------- ------- Total interest-bearing liabilities 1,672,963 27,665 3.33 Other liabilities 18,491 Shareholders' equity 201,874 --------- Total liabilities and shareholders' equity $2,314,371 ========== Net interest spread (1) 4.95 % Net interest income and interest margin (2) $59,226 5.65 % ======= ==== (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.
For the six months ended June 30, 1994 * (dollars in thousands) ----------------------------------- Interest Rates Average income/ earned/ Assets balance expense paid ------ --------- --------- ------ Money market assets and funds sold $11,684 $211 3.64 % Trading account securities 66 1 4.47 Investment securities available for sale 209,136 5,769 5.56 Investment securities held to maturity 590,478 17,607 6.01 Loans: Commercial 762,405 33,135 8.76 Real estate construction 71,747 3,329 9.36 Real estate residential 180,079 6,896 7.72 Consumer 289,152 12,492 8.71 --------- ------ Earning assets 2,114,747 79,440 7.58 Other assets 208,820 --------- Total assets $2,323,567 ========== Liabilities and shareholders' equity ------------------------------------ Deposits Non-interest bearing demand $409,734 $-- -- % Savings and interest-bearing transaction 1,091,052 10,384 1.92 Time less than $100,000 319,416 6,029 3.81 Time $100,000 or more 146,121 2,557 3.53 --------- ------ Total interest-bearing deposits 1,556,589 18,970 2.46 Funds purchased 128,603 2,251 3.53 Notes and mortgages payable 32,373 1,457 9.08 --------- ------ Total interest-bearing liabilities 1,717,565 22,678 2.66 Other liabilities 15,357 Shareholders' equity 180,911 --------- Total liabilities and shareholders' equity $2,323,567 =========== Net interest spread (1) 4.92 % Net interest income and interest margin (2) $56,762 5.41 % ======= ==== (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. * Restated on an historical basis to reflect the January 31, 1995 acquisition of PV Financial and the June 6, 1995 acquisition of CapitolBank Sacramento.
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. Three months ended June 30, 1995 compared with three months ended June 30, 1994 * -------------------------------- (In thousands) Volume Rate Total -------- ------ ------ Increase (decrease) in interest and fee income: MMkt. assets and funds sold ($51) ($52) ($103) Trading account securities (1) - (1) Investment securities available for sale (178) 253 75 Investment securities held to maturity (231) 341 110 Loans: Commercial 449 1,589 2,038 Real estate construction (84) 114 30 Real estate residential 481 (18) 463 Consumer (56) 551 495 -------- ------ ------ Total loans 790 2,236 3,026 -------- ------ ------ Total increase in interest and fee income (1) 329 2,778 3,107 -------- ------ ------ Increase (decrease) in interest expense: Deposits: Savings/interest-bearing transaction (263) 854 591 Time less than $ 100,000 (168) 835 667 Time $ 100,000 or more 148 678 826 -------- ------ ------ Total interest-bearing (283) 2,367 2,084 Funds purchased 22 709 731 Notes and mortgages payable (73) (60) (133) -------- ------ ------ Total increase in interest expense (334) 3,016 2,682 -------- ------ ------ Increase in net interest income (1) $663 ($238) $425 ======= ======= ======= (1) Amounts calculated on a fully taxable equivalent basis using the current statutory federal tax rate. * Restated on an historical basis to reflect the January 31, 1995 acquisition of PV Financial and the June 6, 1995 acquisition of CapitolBank Sacramento. Six months ended June 30, 1995 compared with six months ended June 30, 1994 * -------------------------------- Volume Rate Total -------- ------ ------ Increase (decrease) in interest and fee income: MMkt. assets and funds sold ($319) $209 ($110) Trading account securities (1) - (1) Investment securities available for sale (47) 52 5 Investment securities held to maturity 243 715 958 Loans: Commercial 632 4,029 4,661 Real estate construction (269) 400 131 Real estate residential 958 (104) 854 Consumer (177) 1,130 953 -------- ------ ------ Total loans 1,144 5,455 6,599 -------- ------ ------ Total increase in interest and fee income (1) $1,020 6,431 $7,451 -------- ------ ------ Increase (decrease) in interest expense: Deposits: Savings/interest-bearing transaction (306) 1,833 1,527 Time less than $ 100,000 (426) 1,235 809 Time $ 100,000 or more 14 1,156 1,170 -------- ------ ------ Total interest-bearing (718) 4,224 3,506 Funds purchased 411 1,526 1,937 Notes and mortgages payable (294) (162) (456) -------- ------ ------ Total increase in interest expense (601) 5,588 4,987 -------- ------ ------ Increase in net interest income (1) $1,621 $843 $2,464 ======= ======= ======= (1) Amounts calculated on a fully taxable equivalent basis using the current statutory federal tax rate. * Restated on an historical basis to reflect the January 31, 1995 acquisition of PV Financial and the June 6, 1995 acquisition of CapitolBank Sacramento. 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 strict underwriting and administration procedures and aggressively pursuing collection efforts with troubled debtors. Continuing improvements in credit quality allowed the Company to lower its provision for loan losses to $1.2 million in the second quarter of 1995, compared to $2.0 million in the same period in 1994. For the first six months of 1995, the loan loss provision was $2.5 million compared to $4.1 million for the same period in 1994. For more information regarding net credit losses and the reserve for loan losses, see the "Asset Quality" section of this report. Non-interest Income The following table summarizes the components of non-interest income for the periods indicated. For the three months ended June 30, ---------------- (in millions) 1995 1994 ---- ---- Service charges on deposits accounts $3.13 $3.19 Merchant credit card 0.54 0.60 Mortgage banking income 0.20 0.22 Brokerage commissions 0.15 0.20 Trust fees 0.15 0.18 Net investment securities gains -- 0.04 Other non-interest income 0.96 1.01 ------ ------ Total $5.13 $5.44 ====== ====== For the six months ended June 30, ---------------- (in millions) 1995 1994 ---- ---- Service charges on deposits accounts $6.19 $6.33 Merchant credit card 1.04 1.15 Mortgage banking income 0.38 0.57 Brokerage commissions 0.29 0.37 Trust fees 0.32 0.36 Net investment securities gains -- 0.56 Other non-interest income 1.70 2.10 ------ ------ Total $9.92 $11.44 ====== ====== The $310,000 decrease in non-interest income during the second quarter of 1995 compared to the second quarter of 1994 resulted from decreases in all categories, including $60,000 lower service charges on deposit accounts and lower merchant credit card and brokerage commissions of $60,000 and $50,000, respectively. In addition, trust fees and mortgage banking income were $30,000 and $20,000, respectively, lower than the second quarter of 1994. The sale of securities available for sale contributed $44,000 to the non-interest income realized during the second quarter of 1994 and $0 in 1995. The same pattern repeats when comparing the fist six months of 1995 with the same period in 1994. The sale of securities available for sale contributed $560,000 to the non-interest income realized during the first half of 1994. Mortgage banking income was lower in 1995 than in 1994 by $190,000, due to reduced mortgage refinancing volumes. In addition, service charges on deposits and merchant credit card income were lower as compared to the first half of 1994 by $140,000 and $110,000, respectively. Completing the variance, brokerage commissions and trust fees for the first six months of 1995 were $80,000 and $40,000, respectively, lower than the same period in 1994. Non-interest expense The following table summarizes the components of non-interest expense for the periods indicated. For the three months ended June 30, ---------------- 1995 1994 (In millions) ---- ---- Salaries $8.99 $9.23 Other personnel 1.41 1.44 Occupancy 2.41 2.42 Equipment 1.23 1.35 FDIC deposit insurance 1.10 1.15 Data processing services 1.01 1.06 Professional fees 0.88 0.77 Stationery and supplies 0.43 0.39 Advertising/public relations 0.41 0.34 Postage 0.36 0.36 Loan expense 0.34 0.33 Courier service 0.33 0.32 Operational losses 0.24 0.42 Other real estate owned 0.33 0.07 Merchant credit card 0.17 0.21 Other non-interest expense 1.61 1.69 ------ ------ Total $21.25 $21.55 ====== ====== For the six months ended June 30, ---------------- 1995 1994 (In millions) ---- ---- Salaries $17.26 $18.24 Other personnel 3.38 3.22 Occupancy 4.84 4.70 Equipment 2.52 2.63 FDIC deposit insurance 2.22 2.30 Data processing services 2.02 2.15 Professional fees 2.16 1.34 Stationery and supplies 0.80 0.75 Advertising/public relations 0.67 0.63 Postage 0.71 0.73 Loan expense 0.56 0.72 Courier service 0.65 0.65 Operational losses 0.45 0.58 Other real estate owned 0.45 (0.10) Merchant credit card 0.36 0.40 Other non-interest expense 3.01 3.32 ------ ------ Total $42.06 $42.26 ====== ====== Non-interest expense continues to show the effects of cost controls and the benefits resulting from consolidation of operations. During the second quarter of 1995, non-interest expense decreased $300,000 from the second quarter of 1994. Salaries expense decreased $240,000, mainly from the a reduction of 81 full-time equivalent employees resulting from merger of operations following the PV Financial and the CapitolBank acquisitions. In addition, operational losses were reduced by $180,000 and equipment expense was $120,000 lower than the second quarter of 1994, even after the write-offs of unused inventories resulting from the mergers. The decline in deposit volume resulted in $50,000 lower insurance premiums and data processing expenses were $50,000 lower than the same quarter of 1994. Partially offsetting these favorable variances, other real estate owned expenses increased $260,000 from the second quarter of 1994, following the Company's policy to continue to writedown these types of property to net realizable values. In addition, acquisition related expenses were the main reason for the $110,000 increase in professional fees, a $70,000 increase in advertising and public relations expense and a $40,000 increase in stationery and supplies costs. During the first six months of 1995, non-interest expense decreased $200,000 from the first six months of 1994. The favorable impact of consolidation of operations, partially offset by increased merger-related expenses account for the major variances, as follows: personnel expenses decreased $820,000, loan expense and operational losses were $160,000 and $130,000, respectively, lower than the prior period, and data processing services, equipment and deposit insurance expenses were $130,000, $110,000, and $80,000, respectively, lower than the first six months of 1994. Partially offsetting these major variances, during the first six months of 1995 professional fees were $820,000 higher than 1994, other real estate owned expenses increased $550,000 from prior year, occupancy expenses were $140,000 higher than 1995 and stationery and supplies and advertising and public relations expenses were $50,000 and $40,000, respectively, higher than the first six months of 1994. Provision for Income Tax The Company recorded income tax expense of $2.8 million in the second quarter of 1995, representing an effective tax rate of 27 percent, compared to $3.2 million, or an effective tax rate of 34 percent, during the second quarter of 1994. The reduced income tax expense in the current quarter is mainly due to a reduction in the valuation allowance at CapitolBank of $924,000 prior to the merger with the Company, partially offset by increased income taxes as a result of the higher level of pre-tax earnings. For the first six months of 1995, the Company recorded income tax expense of $6.3 million, compared to $6.4 million during the same period in 1994, representing effective tax rates of 29 percent and 33 percent, respectively. The main reasons for the variance are the same as those given for the second quarter. Asset Quality Classified Assets The Company closely monitors the markets in which it conducts its lending operations. The Company continues its strategy to control exposure to loans with high credit risk and increase diversification of earning assets. Asset reviews are performed using grading standards and criteria similar to those employed by bank regulatory agencies. Assets receiving lesser grades fall under the "classified assets" category which includes all non-performing assets. These lesser grades occur when known information about possible credit problems causes doubts about the ability of such borrowers to comply with loan repayment terms. These loans have varying degrees of uncertainty and may become non-performing assets. Classified assets receive an elevated level of attention to ensure collection. The following is a summary of classified assets on the dates indicated: June 30, December 31, ($ in millions) --------------- ----------- 1995 1994 1994 ---- ---- ---- Classified loans $47.9 $55.4 $45.9 Other classified assets 6.4 9.9 8.0 ----- ----- ----- Total classified assets $54.3 $65.3 $53.9 ===== ===== ===== Reserve for loan losses as a percentage of classified loans 67% 56% 68% Classified loans at June 30, 1995, decreased $7.5 million to $47.9 million from a year ago levels, reflecting improvements in borrowers' financial condition and satisfaction of debt. The improvement is primarily due to the repayment of classified real estate construction loans. Other classified assets, which decreased $3.5 million from prior year, were due to sales and writedowns of properties classified as other real estate owned. Non-performing assets Non-performing assets include non-accrual loans, loans 90 days past due and still accruing and other real estate owned. Loans are placed on non-accrual status upon 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. 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 the doubt as to the full collectibility of both interest and principal. 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: (In millions) June 30, December 31, --------------- ----------- 1995 1994 1994 ---- ---- ---- Performing non-accrual loans $3.26 $1.55 $1.94 Non-performing non-accrual loans 6.43 10.92 7.36 ----- ----- ----- Total non-accrual loans 9.69 12.47 9.30 Loans 90 days past due and still accruing 0.14 0.73 1.78 ----- ----- ----- Total non-performing loans 9.83 13.20 11.08 Other real estate owned 6.39 9.95 8.02 ------ ------ ------ Total non-performing assets $16.22 $23.15 $19.10 ====== ====== ====== Reserve for loan losses as a percentage of non-performing loans 325% 234% 282% Performing non-accrual loans increased $1.71 million at June 30, 1995 from $1.55 million at June 30 1994 and increased $1.32 million from $1.94 million at December 31, 1994. Non-performing non-accrual loans of $6.43 million at June 30, 1995, decreased $4.49 million from June 30, 1994 and decreased $930,000 from December 31, 1994. The $2.78 million reduction in total non-accrual loans from June 30, 1994, was principally due to construction loan payoffs and sales. The $3.56 million decrease in other real estate owned balances from June 30, 1994 were due to liquidations and sales. The $390,000 increase in non-accrual loans from December 31, 1994 was mainly due to commercial loan additions while the $1.63 million reduction in other real estate balances was mainly due to sales of related properties. The amount of gross interest income that would have been recorded for non-accrual loans for the three and six months ending June 30, 1995, if all such loans had been current in accordance with their original terms was $178,000 and $340,000, 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, 1995 totaled $9,000 and $225,000, respectively, representing annualized yields of .5 and 6.0 percent, respectively. Cash payments received which were applied against the book balance of non-accrual loans outstanding at June 30, 1995, totaled $314,000. The Company's reserve for loan losses is maintained at a level estimated to be adequate to provide for losses that can be reasonably anticipated based upon specific conditions, credit loss experience, the amount of past due, non-performing and classified loans, recommendations of regulatory authorities, prevailing economic conditions and other factors. 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, the $32.0 million reserve for loan losses, which constituted 2.41 percent of total loans at June 30, 1995, is considered to be adequate as a reserve against inherent losses. The loan portfolio is continuously evaluated considering current economic conditions that dictate 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 (In millions) months ended June 30, ---------------- 1995 1994 ---- ---- Balance, beginning of period $32.0 $29.3 Loan loss provision 1.2 2.0 Credit losses (1.6) (1.1) Credit loss recoveries 0.4 0.7 ---- ---- Net credit losses (1.2) (0.4) ----- ----- Balance, end of period $32.0 $30.9 ===== ===== Reserve for loan losses as a percentage of loans outstanding 2.41% 2.39% For the six (In millions) months ended June 30, --------------- 1995 1994 ---- ---- Balance, beginning of period $31.3 $28.9 Loan loss provision 2.5 4.1 Credit losses (3.0) (2.5) Credit loss recoveries 1.2 0.4 ---- ---- Net credit losses (1.8) (2.1) ----- ----- Balance, end of period $32.0 $30.9 ===== ===== In May, 1993, the Financial Accounting Standards Board ("FASB") issued Statement No. 114, "Accounting by Creditors for Impairment of a Loan" ("SFAS 114"), which addresses the accounting treatment of certain impaired loans and amends FASB Statements No. 5 and No. 15. In October 1994, the FASB issued Statement No. 118 "Accounting by Creditors for Impairment of a Loan - Income Recognition and Disclosures", which amended the income recognition and disclosure provisions of SFAS 114. Under SFAS 114, a loan is impaired when, based on current information and events, it is "probable" that a creditor will be unable to collect all amounts due (principal and interest) according to the contractual terms of the loan agreement. The measurement of impairment may be based on (i)the present value of the expected cash flows of the impaired loan discounted at the loan's original effective interest rate, (ii) the observable market price of the impaired loan, or (iii) the fair value of the collateral of a collateral-dependent loan. SFAS 114 does not apply to large groups of smaller balance homogeneous loans that are collectively evaluated for impairment. Effective January 1, 1995, the Company adopted SFAS 114, as amended by SFAS 118. The Company identifies loans for impairment when, based upon current information and events, it is probable that it will be unable to collect all amounts due according to the contractual terms of the loan agreement. In determining impairment, the Company considers large non-homogeneous loans including non-accrual loans, troubled debt restructurings in which a loan is granted a rate of interest below market rate or a partial forgiveness of indebtedness, and performing loans which exhibit, among other characteristics, high loan-to-value ratios, low debt-coverage ratios, or other indications that the borrowers are experiencing increased levels of financial difficulty. The adoption of FASB 114, as amended by SFAS 118, had no material impact on the Company's consolidated financial statements as the Company's existing policy of measuring loan impairment was consistent with methods prescribed in these standards. Based upon the Company's loan reserve methodology and following the provisions of SFAS 114, large groups of smaller balance homogeneous loans are evaluated collectively for impairment. Therefore, installment, personal revolving credit, residential real estate and student loans are excluded from the provisions of SFAS 114. In addition, it is the Company's position that commercial and construction loans graded "OAEM" (Other Assets Especially Mentioned - Grade 5) or better, need not be reviewed for impairment, since the grading itself is a measure of repayment probability. Furthermore, based upon current information and events, the Company considers that it is probable that it will collect all amounts due on these loans according to the contractual terms of the original agreements. In summary, the Company considers impaired loans to include all "Substandard" (Grade 6), "Doubtful" (Grade 7) and "Loss" (Grade 8) classified commercial and construction loans that meet materiality thresholds, as classified loans below the established thresholds are considered by the Company to represent immaterial loss risk. Materiality thresholds are $250,000 for Substandard graded loans and $100,000 for Doubtful graded loans. All Loss graded loans are considered impaired. At June 30, 1995, the carrying value of loans considered to be impaired under SFAS 114 as amended by SFAS 118 totaled $4.8 million with $1.4 million in specific reserves allocated to them. The average recorded investment in impaired loans during the six months ended June 30, 1995, was approximately $3.2 million. All of these accounts were on non-accrual at June 30, 1995. The Company does not recognize interest income on loans once they are considered to be impaired. 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 Company's principal sources of liquidity are current period earnings and investment securities available for sale. At June 30, 1995, investment securities available for sale totaled $199.6 million. The Company generates significant liquidity from its operating activities. The Company's profitability in the first six months of 1995 and 1994 was the main contributor to the cash flows provided from operations for such years of $9.9 million and $11.8 million, respectively. Additional cash flow is provided by and used in financing activities, primarily customer deposits and short-term borrowings from banks. In the first six months of 1995, $1.0 million were provided by financing activities, as a $52.1 million increase in purchased funds was partially offset by a $39.0 million decrease in deposits combined with other cash flow uses including long-term debt maturities, dividends paid to shareholders and retirement of stock. The Company uses cash flows from operating and financing activities primarily to make investments in investment securities and loans. After net loan repayments of $8.6 million during the first three months of 1995, net loan disbursements exceeded repayments by $3.6 million in the second quarter of 1995, resulting in net repayments of $5.0 million during the first six months of 1995. This compares to net repayments of $40.3 million during the first six months of 1994. Due to the reduced level of loan repayment in 1995 as a result of the Company's current strategy to grow the loan portfolio with high quality loans extended to financially strong customers in the markets served by the three subsidiary banks, net purchases of investment securities decreased $12.5 million during the first six months of 1995. The net repayment of loans during the first six months of 1994 provided added liquidity for the Company, and was the main contributor to the increase of $61.9 million in the investment securities portfolio. The Company expects its cash provided by operations to increase through the end of 1995 due to retained profits. For the same period, it is anticipated that the investment securities portfolio and demand for loans will moderately increase. It is also anticipated that deposit balances will moderately increase through the end of the current year. Although interest rate risk is influenced by market forces, it can be controlled by monitoring and managing the repricing characteristics of assets and liabilities. In evaluating exposure to interest rate risk, the Company considers the effects of various factors in implementing interest rate risk management activities, including interest rate swaps, utilized to hedge the impact of interest rate fluctuations on interest-bearing assets and liabilities in the current interest rate environment. Interest rate swaps are agreements to exchange interest payments computed on notional amounts. The notional amounts do not represent exposure to credit risk. However, these agreements expose the Company to market risks associated with fluctuations of interest rates and credit risk associated with the counterparty's ability to meet its interest payment obligation. The Company minimizes this credit risk by entering into contracts with well-capitalized money-center banks, and by requiring settlement of only the net difference between the exchanged interest payments. At June 30, 1995, the Company was engaged into two interest rate swaps. These contracts have notional amounts totaling $60.0 million and expire in August 1995. The Company pays a variable rate based on three-month LIBOR and receives an average fixed rate of interest of 4.11 percent. The three-month LIBOR rate has averaged 4.78 percent from the date these two swaps were entered through June 30, 1995. The Company had entered into four interest rate swaps at June 30, 1994, with notional amounts totaling $110.0 million, including the two outstanding as of June 30, 1995. The two other swaps, with notional amounts totaling $50.0 million expired in November and December of 1994. The effect of entering into these contracts resulted in a decrease to net interest income of $607,000 for the first six months of 1995 compared to a decrease of $245,000 during the comparable period in 1994. At June 30, 1995, the fair value of the interest rate swaps was a loss of $154,000 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 industry standard 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 ten 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, 1995 does not expose the Company to an unacceptable level of interest rate risk. Capital Resources 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 $206.1 million at June 30, 1995, representing an increase of $20.2 million or 11 percent from June 30, 1994 and an increase of $11.1 million, or 6 percent, from December 31, 1994. As a result of the Company's profitability and the retention of earnings, the ratio of equity to total assets increased to 8.7 percent at June 30, 1995, from 8.0 percent a year ago and 8.3 percent at year-end 1994. The ratio of Tier I capital to risk-adjusted assets increased to 12.89 percent at June 30, 1995 compared to 12.07 percent at June 30, 1994 and 12.40 percent at December 31, 1994. Total capital to risk-adjusted assets increased to 15.40 percent at June 30, 1995 compared to 14.63 percent at June 30, 1994 and 14.92 percent at December 31, 1994. The following summarizes the ratios of capital to risk-adjusted assets for the periods indicated: June 30, December 31, ---------------- ---------- 1995 1994 1994 ---- ---- ---- Tier I Capital 12.89% 12.07% 12.40% Total Capital 15.40% 14.63% 14.92% Leverage ratio 8.87% 8.04% 8.33% The risk-based capital ratios rose in 1995 due to a more rapid growth in equity than total 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 regulatory definitions of "well capitalized". During the last quarter of 1994 and in 1995, the Board of Directors approved the repurchase of up to 178,500 shares of common stock from time to time, subject to appropriate regulatory and acquisition accounting requirements for reissuance through stock performance plans. These purchases are made periodically in the open market and will lessen the dilutive impact of these plans on the calculation of earnings per share. Interim Periods The financial information of the Company included herein for June 1995 and 1994 is unaudited; however, such information reflects all adjustments which are, in the opinion of Management, necessary for a fair statement of results for the interim periods. Those adjustments are normal and recurring in nature. The results of operations for the three and six-month period ended June 30, 1995 are not necessarily indicative of the results to be expected for the full year. This report should be read in conjunction with Westamerica Bancorporation's annual report on Form 10-K for the year ended December 31, 1994. Certain amounts in prior periods have been restated to conform to the current presentation. SIGNATURES Pursuant to the requirements of 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. Date: August 11, 1995 WESTAMERICA BANCORPORATION (Registrant) /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 25, 1995, were solicited pursuant Regulation 14A of the Securities Exchange Act of 1934. The Report of Inspector of election indicates that 6,887,888 shares of the Common Stock of the Company, out of 9,237,141 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 6,598,955 288,133 Louis E. Bartolini 6,565,717 321,371 Charles I. Daniels, Jr. 6,566,379 320,709 Don Emerson 6,657,012 230,076 Arthur C. Latno, Jr. 6,566,525 320,563 Patrick D. Lynch 6,564,491 322,597 Catherine C. MacMillan 6,564,915 322,173 Dwight H. Murray, Jr. 6,654,163 232,925 Ronald A. Nelson 6,656,716 230,372 Carl R. Otto 6,567,013 320,075 David L. Payne 6,645,558 241,530 Edward B. Sylvester 6,653,095 233,993 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 1995. For : 6,697,153 Against : 35,486 Abstain : 155,249 3.- Proposal to amend the Restated Articles of Incorporation which would increase the number of shares of authorized common stock. For : 5,175,915 Against : 190,052 Abstain : 1,278,305 4.- Proposal to approve the Stock Option Plan of 1995 For : 5,232,674 Against : 1,204,042 Abstain : 207,456 Item 5 - Other Information None Item 6 - Exhibits and Reports on Form 8-K (a) Exhibit 3: Certificate of Amendment to the Articles of Incorporation of Westamerica Bancorporation (b) Exhibit 11: Computation of Earnings Per Share on Common and Common Equivalent Shares and on Common Shares Assuming Full Dilution (c) Reports on Form 8-K: On June 8, 1995, the Company filed a Form 8-K announcing the consummation of the merger between CapitolBank Sacramento with and into Westamerica Bancorporation effective as of the close of business on June 6, 1995. EX-27 2
9 1000 3-MOS 3-MOS 6-MOS 6-MOS DEC-31-1995 DEC-31-1994 DEC-31-1995 DEC-31-1994 JUN-30-1995 JUN-30-1994 JUN-30-1995 JUN-30-1994 184271 142121 184271 142121 1483909 1543217 1483909 1543217 0 0 0 0 0 0 0 0 199608 198162 199608 197162 591191 633281 591191 633281 589653 619363 589653 619363 1329019 1288104 1329019 1288104 31988 30825 31988 30825 2362471 2324142 2362471 2324142 1934884 1970877 1934884 1970877 186839 118736 186839 118736 14672 20111 14672 20111 20000 28499 20000 28499 73052 71982 73052 71982 0 0 0 0 0 0 0 0 133024 113937 133024 113937 2362474 2324142 2362471 2324142 31122 28218 61940 55582 10842 10907 21719 21343 0 104 101 208 41964 39229 83760 77133 11584 9500 22476 18970 14233 11551 27665 22678 27731 27678 56095 54455 1175 2004 2450 4056 0 44 0 564 21251 21551 42060 42255 10440 9558 21506 19588 10440 9558 21506 19588 0 0 0 0 0 0 0 0 7632 6340 15192 13141 .80 .66 1.59 1.37 .80 .66 1.59 1.37 5.59 5.45 5.65 5.41 9690 12470 9690 12470 140 730 140 730 0 0 0 0 0 0 0 0 32000 29300 31300 28900 1600 1100 3000 2500 400 700 1200 400 32000 30900 32000 30900 32000 30900 32000 30900 0 0 0 0 0 0 0 0
EX-11 3 Exhibit 11 WESTAMERICA BANCORPORATION COMPUTATION OF EARNINGS PER SHARE ON COMMON AND COMMON EQUIVALENT SHARES AND ON COMMON SHARES ASSUMING FULL DILUTION For the three months ended June 30, ----------------------- 1995 1994 * ----- ------ Weighted average number of common shares outstanding 9,563,824 9,601,033 Assumed exercise on certain options 170,566 81,439 --------- --------- Total 9,734,390 9,682,472 ========= ========= Net income (in thousands) $7,632 $6,340 Fully-diluted earnings per share 0.78 # $0.65 ====== ===== Primary earnings per share $0.80 $0.66 ===== ===== * Data has been restated on a historical basis to reflect the January 31, 1995 acquisition of PV Financial and the June 6, 1995 acquisition of CapitolBank on a pooling-of-interest basis. # Anti-dilutive For the six months ended June 30, --------------------- 1995 1994 * ----- ------ Weighted average number of common shares outstanding 9,571,680 9,597,254 Assumed exercise on certain options 163,488 77,773 --------- --------- 9,735,168 9,675,027 ========== ====== Net income (in thousands) $15,192 $13,141 Fully-diluted earnings per share 1.56 # $1.36 ====== ==== Primary earnings per share $1.59 $1.37 ==== ==== * Data has been restated on a historical basis to reflect the January 31, 1995 acquisition of PV Financial and the June 6, 1995 acquisition of CapitolBank on a pooling-of-interest basis. # Anti-dilutive EX-3 4 A461693 State of California SECRETARY OF STATE CORPORATION DIVISION I, BILL JONES, Secretary of State of the State of California, hereby certify: That the annexed transcript has been compared with the corporate record on file in this office, of which it purports to be a copy, and that same is full, true and correct. IN WITNESS WHEREOF, I execute this certificate and affix the Great Seal of the State of California this May 31, 1995 ------------ /s/ BILL JONES ------------------------------ Bill Jones, Secretary of State A461693 ENDORSED FILE In the office of the Secretary of State of the State of California May 30, 1995 /s/ Bill Jones ------------------------------ BILL JONES, Secretary of State CERTIFICATE OF AMENDMENT OF RESTATED ARTICLES OF ------------------------------------------------ INCORPORATION OF WESTAMERICA BANCORPORATION ------------------------------------------- David L. Payne and Mary Anne Bell certify that: 1. They are the president and assistant corporate secretary, respectively, of WESTAMERICA BANCORPORATION, a California corporation (the "Corporation"). 2. Paragraph 1. of Article III of the Restated Articles of Incorporation is hereby amended as follows: 1. Capitalization. This corporation is authorized to issue three classes of shares designated "Common Stock", "Class B Common Stock" and "Preferred Stock", respectively. The number of shares of Common Stock authorized to be issued is 50,000,000, the number of shares of Class B Common Stock authorized to be issued is 1,000,000 and the number of shares of Preferred Stock authorized to be issued is 1,000,000. The Preferred Stock and Class B Common Stock may be issued from time to time in one or more series. The Board of Directors is authorized to fix the number of shares of any series of Preferred Stock and Class B Common Stock and to determine the designation of any such series. The Board of Directors is also authorized to determine or alter the rights, preferences, privileges, and restrictions granted to or imposed upon any wholly unissued series of Preferred Stock or Class B Common Stock, and, within the limits and restrictions stated in any resolution or resolutions of the Board of Directors originally fixing the number of shares constituting any series, to increase or decrease (but not below the number of shares of such series then outstanding) the number of shares of any such series subsequent to the issue of shares of that series. 3. The amendment herein set forth has been duly approved by the unanimous written consent of the board of directors. 4. The amendment herein set forth has been duly approved by the required vote of the shareholders in accordance with Sections 902 and 903 of the Corporation Code. The total number of outstanding shares of Common Stock of the Corporation is 9,237,141. The number of shares voting in favor of the amendment equaled or exceeded the vote required. The percentage vote required for the approval of the amendment herein set forth was more than 50%. IN WITNESS WHEREOF, the undersigned have executed this certificate on May 26, 1995. /s/ David L. Payne ------------------------- DAVID L. PAYNE, President /s/ Mary Anne Bell ------------------------- MARY ANNE BELL, Assistant Corporate Secretary We further declare under penalty of perjury under the laws of the State of California that the matters set forth in this certificate are true and correct of our own knowledge. Dated: May 26, 1995 /s/ David L. Payne ------------------------- DAVID L. PAYNE, President /s/ Mary Anne Bell ------------------------- MARY ANNE BELL, Assistant Corporate Secretary