10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark one)

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

For the fiscal year ended December 31, 2018

or

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

For the transition period from ______________ to______________.

Commission File Number: 001-09383

WESTAMERICA BANCORPORATION

(Exact name of the registrant as specified in its charter)

CALIFORNIA	94-2156203
(State or Other Jurisdiction	(I.R.S. Employer
of Incorporation or Organization)	Identification Number)

1108 FIFTH AVENUE, SAN RAFAEL, CALIFORNIA 94901

(Address of principal executive offices) (zip code)

Registrant’s telephone number, including area code: (707) 863-6000

Securities registered pursuant to Section 12(b) of the Act:

Title of class:	Name of each exchange on which registered:
Common Stock, no par value	The NASDAQ Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ☒ NO ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES ☐ NO ☒

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 ☒ NO ☐

Indicate by check mark if whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files.) YES ☒ NO ☐

Indicate by check mark if disclosure of delinquent filers pursuant to item 405 of Regulation S-K (section 229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐

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

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO ☒

The aggregate market value of the Common Stock held by non-affiliates of the registrant as of June 30, 2018 as reported on the NASDAQ Global Select Market, was $1,072,647,598.47 . Shares of Common Stock held by each executive officer and director and by each person who owns 10% or more of the outstanding Common Stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

Number of shares outstanding of each of the registrant’s classes of common stock, as of the close of business on February 20, 2019: 26,889,495 Shares

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive Proxy Statement relating to registrant’s Annual Meeting of Shareholders, to be held on April 25, 2019, are incorporated by reference in Items 10, 11, 12, 13 and 14 of Part III to the extent described therein.

TABLE OF CONTENTS

		Page
PART I
Item 1	Business	2
Item 1A	Risk Factors	9
Item 1B	Unresolved Staff Comments	14
Item 2	Properties	14
Item 3	Legal Proceedings	14
Item 4	Mine Safety Disclosures	15
PART II
Item 5	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	15
Item 6	Selected Financial Data	19
Item 7	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 7A	Quantitative and Qualitative Disclosures About Market Risk	46
Item 8	Financial Statements and Supplementary Data	46
Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	93
Item 9A	Controls and Procedures	93
Item 9B	Other Information	93
PART III
Item 10	Directors, Executive Officers and Corporate Governance	94
Item 11	Executive Compensation	94
Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	95
Item 13	Certain Relationships, Related Transactions and Director Independence	95
Item 14	Principal Accountant Fees and Services	95
PART IV
Item 15	Exhibits, Financial Statement Schedules	95
Signatures		96
Exhibit Index		97

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FORWARD-LOOKING STATEMENTS

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

These forward-looking statements are based on Management’s current knowledge and belief and include information concerning the Company’s possible or assumed future financial condition and results of operations. A number of factors, some of which are beyond the Company’s ability to predict or control, could cause future results to differ materially from those contemplated. These factors include but are not limited to (1) the length and severity of any difficulties in the global, national and California economies and the effects of government efforts to address those difficulties; (2) liquidity levels in capital markets; (3) fluctuations in asset prices including, but not limited to stocks, bonds, real estate, and commodities; (4) the effect of acquisitions and integration of acquired businesses; (5) economic uncertainty created by terrorist threats and attacks on the United States, the actions taken in response, and the uncertain effect of these events on the national and regional economies; (6) changes in the interest rate environment; (7) changes in the regulatory environment; (8) competitive pressure in the banking industry; (9) operational risks including a failure or breach in data processing or security systems or those of third party vendors and other service providers, including as a result of cyber attacks or fraud; (10) volatility of interest rate sensitive loans, deposits and investments; (11) asset/liability management risks and liquidity risks; (12) the effect of natural disasters, including earthquakes, hurricanes, fire, flood, drought, and other disasters, on the uninsured value of the Company’s assets and of loan collateral, the financial condition of debtors and issuers of investment securities, the economic conditions affecting the Company’s market place, and commodities and asset values; (13) changes in the securities markets and (14) the outcome of contingencies, such as legal proceedings. However, the reader should not consider the above-mentioned factors to be a complete set of all potential risks or uncertainties.

Forward-looking statements speak only as of the date they are made. The Company undertakes no obligation to update any forward-looking statements in this report to reflect circumstances or events that occur after the date forward looking statements are made, except as may be required by law. See also “Risk Factors” in Item 1A and other risk factors discussed elsewhere in this report.

PART I

ITEM 1. BUSINESS

Westamerica Bancorporation (the “Company”) is a bank holding company registered under the Bank Holding Company Act of 1956, as amended (“BHCA”). Its legal headquarters are located at 1108 Fifth Avenue, San Rafael, California 94901. Principal administrative offices are located at 4550 Mangels Boulevard, Fairfield, California 94534 and its telephone number is (707) 863-6000. The Company provides a full range of banking services to individual and commercial customers in Northern and Central California through its subsidiary bank, Westamerica Bank (“WAB” or the “Bank”). The principal communities served are located in Northern and Central California, from Mendocino, Lake and Nevada Counties in the north to Kern County in the south. The Company’s strategic focus is on the banking needs of small businesses. In addition, the Bank owns 100% of the capital stock of Community Banker Services Corporation (“CBSC”), a company engaged in providing the Company and its subsidiaries with data processing services and other support functions.

The Company was incorporated under the laws of the State of California in 1972 as “Independent Bankshares Corporation” pursuant to a plan of reorganization among three previously unaffiliated Northern California banks. The Company operated as a multi-bank holding company until mid-1983, at which time the then six subsidiary banks were merged into a single bank named Westamerica Bank and the name of the holding company was changed to Westamerica Bancorporation.

The Company acquired five banks within its immediate market area during the early to mid 1990’s. In April 1997, the Company acquired ValliCorp Holdings, Inc., parent company of ValliWide Bank, the largest independent bank holding company headquartered in Central California. Under the terms of all of the merger agreements, the Company issued shares of its common stock in exchange for all of the outstanding shares of the acquired institutions. The subsidiary banks acquired were merged with and into WAB. These six  aforementioned business combinations were accounted for as poolings-of-interests.

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During the period 2000 through 2005, the Company acquired three additional banks. These acquisitions were accounted for using the purchase accounting method.

On February 6, 2009, Westamerica Bank acquired the banking operations of County Bank (“County”) from the Federal Deposit Insurance Corporation (“FDIC”). On August 20, 2010, Westamerica Bank acquired assets and assumed liabilities of the former Sonoma Valley Bank (“Sonoma”) from the FDIC. The County and Sonoma acquired assets and assumed liabilities were measured at estimated fair values, as required by FASB ASC 805, Business Combinations.

At December 31, 2018, the Company had consolidated assets of approximately $5.6 billion, deposits of approximately $4.9 billion and shareholders’ equity of approximately $616 million. The Company and its subsidiaries employed 762 full-time equivalent staff as of December 31, 2018.

The Company’s Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports as well as beneficial ownership reports on Forms 3, 4 and 5 are available through the SEC’s website (https://www.sec.gov). Such documents as well as the Company’s director, officer and employee Code of Conduct and Ethics are also available free of charge from the Company by request to:

Westamerica Bancorporation

Corporate Secretary A-2M

Post Office Box 1200

Suisun City, California 94585-1200

Supervision and Regulation

The following is not intended to be an exhaustive description of the statutes and regulations applicable to the Company’s or the Bank’s business. The description of statutory and regulatory provisions is qualified in its entirety by reference to the particular statutory or regulatory provisions. Moreover, major new legislation and other regulatory changes affecting the Company, the Bank, and the financial services industry in general have occurred in the last several years and can be expected to occur in the future. The nature, timing and impact of new and amended laws and regulations cannot be accurately predicted.

Regulation and Supervision of Bank Holding Companies

The Company is a bank holding company subject to the BHCA. The Company reports to, is registered with, and may be examined by, the Board of Governors of the Federal Reserve System (“FRB”). The FRB also has the authority to examine the Company’s subsidiaries. The Company is a bank holding company within the meaning of Section 3700 of the California Financial Code. As such, the Company and the Bank are subject to examination by, and may be required to file reports with, the Commissioner of the California Department of Business Oversight (the “Commissioner”).

The FRB has significant supervisory and regulatory authority over the Company and its affiliates. The FRB requires the Company to maintain certain levels of capital. See “Capital Standards.” The FRB also has the authority to take enforcement action against any bank holding company that commits any unsafe or unsound practice, or violates certain laws, regulations or conditions imposed in writing by the FRB. Under the BHCA, the Company is required to obtain the prior approval of the FRB before it acquires, merges or consolidates with any bank or bank holding company. Any company seeking to acquire, merge or consolidate with the Company also would be required to obtain the prior approval of the FRB.

The Company is generally prohibited under the BHCA from acquiring ownership or control of more than 5% of any class of voting shares of any company that is not a bank or bank holding company and from engaging directly or indirectly in activities other than banking, managing banks, or providing services to affiliates of the holding company. However, a bank holding company, with the approval of the FRB, may engage, or acquire the voting shares of companies engaged, in activities that the FRB has determined to be closely related to banking or managing or controlling banks. A bank holding company must demonstrate that the benefits to the public of the proposed activity will outweigh the possible adverse effects associated with such activity.

The FRB generally prohibits a bank holding company from declaring or paying a cash dividend that would impose undue pressure on the capital of subsidiary banks or would be funded only through borrowing or other arrangements which might adversely affect a bank holding company’s financial position. Under the FRB policy, a bank holding company should not continue its existing rate of cash dividends on its common stock unless its net income is sufficient to fully fund each dividend and its prospective rate of earnings retention appears consistent with its capital needs, asset quality and overall financial condition. See the section entitled “Restrictions on Dividends and Other Distributions” for additional restrictions on the ability of the Company and the Bank to pay dividends.

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Transactions between the Company and the Bank are restricted under Regulation W. The regulation codifies prior interpretations of the FRB and its staff under Sections 23A and 23B of the Federal Reserve Act. In general, subject to certain specified exemptions, a bank or its subsidiaries are limited in their ability to engage in “covered transactions” with affiliates: (a) to an amount equal to 10% of the bank’s capital and surplus, in the case of covered transactions with any one affiliate; and (b) to an amount equal to 20% of the bank’s capital and surplus, in the case of covered transactions with all affiliates. The Company is considered to be an affiliate of the Bank. A “covered transaction” includes, among other things, a loan or extension of credit to an affiliate; a purchase of securities issued by an affiliate; a purchase of assets from an affiliate, with some exceptions; and the issuance of a guarantee, acceptance or letter of credit on behalf of an affiliate.

Federal regulations governing bank holding companies and change in bank control (Regulation Y) provide for a streamlined and expedited review process for bank acquisition proposals submitted by well-run bank holding companies. These provisions of Regulation Y are subject to numerous qualifications, limitations and restrictions. In order for a bank holding company to qualify as “well-run,” both it and the insured depository institutions which it controls must meet the “well capitalized” and “well managed” criteria set forth in Regulation Y.

The Gramm-Leach-Bliley Act (the “GLBA”), or the Financial Services Act of 1999, repealed provisions of the Glass-Steagall Act, which had prohibited commercial banks and securities firms from affiliating with each other and engaging in each other’s businesses. Thus, many of the barriers prohibiting affiliations between commercial banks and securities firms have been eliminated.

The BHCA was also amended by the GLBA to allow new “financial holding companies” (“FHCs”) to offer banking, insurance, securities and other financial products to consumers. Specifically, the GLBA amended section 4 of the BHCA in order to provide for a framework for the engagement in new financial activities. A bank holding company (“BHC”) may elect to become an FHC if all its subsidiary depository institutions are well capitalized and well managed. If these requirements are met, a BHC may file a certification to that effect with the FRB and declare that it elects to become an FHC. After the certification and declaration is filed, the FHC may engage either de novo or through an acquisition in any activity that has been determined by the FRB to be financial in nature or incidental to such financial activity. BHCs may engage in financial activities without prior notice to the FRB if those activities qualify under the list of permissible activities in section 4(k) of the BHCA. However, notice must be given to the FRB within 30 days after an FHC has commenced one or more of the financial activities. The Company has not elected to become an FHC.

Regulation and Supervision of Banks

The Bank is a California state-chartered Federal Reserve member bank and its deposits are insured by the FDIC. The Bank is subject to regulation, supervision and regular examination by the California Department of Business Oversight (“DBO”) and the FRB. The regulations of these agencies affect most aspects of the Bank’s business and prescribe permissible types of loans and investments, the amount of required reserves, requirements for branch offices, the permissible scope of its activities and various other requirements.

In addition to federal banking law, the Bank is also subject to applicable provisions of California law. Under California law, the Bank is subject to various restrictions on, and requirements regarding, its operations and administration including the maintenance of branch offices and automated teller machines, capital requirements, deposits and borrowings, shareholder rights and duties, and investment and lending activities.

In addition, the Federal Deposit Insurance Corporation Improvement Act (“FDICIA”) imposes limitations on the activities and equity investments of state chartered, federally insured banks. FDICIA also prohibits a state bank from making an investment or engaging in any activity as a principal that is not permissible for a national bank, unless the Bank is adequately capitalized and the FDIC approves the investment or activity after determining that such investment or activity does not pose a significant risk to the deposit insurance fund.

On July 21, 2010, financial regulatory reform legislation entitled the "Dodd-Frank Wall Street Reform and Consumer Protection Act" (the "Dodd-Frank Act") was signed into law. The Dodd-Frank Act implemented far-reaching changes across the financial regulatory landscape, including provisions that, among other things:

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• Centralized responsibility for consumer financial protection by creating a new agency, the Consumer Financial Protection Bureau, responsible for implementing, examining and (as to banks with $10 billion or more in assets) enforcing compliance with federal consumer financial laws.

• Restricted the preemption of state law by federal law and disallowed subsidiaries and affiliates of national banks from availing themselves of such preemption.

• Applied the same leverage and risk-based capital requirements that would apply to insured depository institutions to most bank holding companies.

• Required bank regulatory agencies to seek to make their capital requirements for banks countercyclical so that capital requirements increase in times of economic expansion and decrease in times of economic contraction.

• Changed the assessment base for federal deposit insurance from the amount of insured deposits to consolidated assets less tangible capital, eliminated the ceiling on the size of the Deposit Insurance Fund ("DIF") and increased the floor of the size of the DIF.

• Imposed comprehensive regulation of the over-the-counter derivatives market, which would include certain provisions that would effectively prohibit insured depository institutions from conducting certain derivatives businesses in the institution itself.

• Required large, publicly traded bank holding companies to create a risk committee responsible for the oversight of enterprise risk management.

• Implemented corporate governance revisions, including with regard to executive compensation and proxy access by shareholders, that would apply to all public companies, not just financial institutions.

• Made permanent the $250 thousand limit for federal deposit insurance.

• Repealed the federal prohibitions on the payment of interest on demand deposits, thereby permitting depository institutions to pay interest on business transaction and other accounts.

• Amended the Electronic Fund Transfer Act ("EFTA") to, among other things, give the FRB the authority to establish rules regarding interchange fees charged for electronic debit transactions by payment card issuers having assets over $10 billion and to enforce a new statutory requirement that such fees be reasonable and proportional to the actual cost of a transaction to the issuer. While the Company’s assets are currently less than $10 billion, interchange fees charged by larger institutions may dictate the level of fees smaller institutions will be able to charge to remain competitive.

Provisions in the legislation that affect the payment of interest on demand deposits and interchange fees may increase the costs associated with deposits as well as place limitations on certain revenues those deposits may generate.

Capital Standards

The federal banking agencies have risk-based capital adequacy guidelines intended to provide a measure of capital adequacy that reflects the degree of risk associated with a banking organization’s operations for both transactions resulting in assets being recognized on the balance sheet as assets, and the extension of credit facilities such as letters of credit and recourse arrangements, which are recorded as off balance sheet items. Under these guidelines, nominal dollar amounts of assets and credit equivalent amounts of off balance sheet items are multiplied by one of several risk adjustment percentages, which range from 0% for assets with low credit risk, such as certain U.S. government securities, to 1250% for assets with relatively higher credit risk, such as certain securitizations. A banking organization’s risk-based capital ratios are obtained by dividing its qualifying capital by its total risk-adjusted assets and off balance sheet items.

The federal banking agencies take into consideration concentrations of credit risk and risks from nontraditional activities, as well as an institution’s ability to manage those risks, when determining the adequacy of an institution’s capital. This evaluation is made as a part of the institution’s regular safety and soundness examination. The federal banking agencies also consider interest rate risk (related to the interest rate sensitivity of an institution’s assets and liabilities, and its off balance sheet financial instruments) in the evaluation of a bank’s capital adequacy.

As of December 31, 2018, the Company’s and the Bank’s respective ratios exceeded applicable regulatory requirements. See Note 9 to the consolidated financial statements for capital ratios of the Company and the Bank, compared to minimum capital requirements and for the Bank the standards for well capitalized depository institutions.

On July 2, 2013, the Federal Reserve Board approved a final rule that implements changes to the regulatory capital framework for all banking organizations over a transitional period 2015 through 2018.

See the sections entitled “Capital Resources and Capital to Risk-Adjusted Assets” in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations for additional information.

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Prompt Corrective Action and Other Enforcement Mechanisms

FDICIA requires each federal banking agency to take prompt corrective action to resolve the problems of insured depository institutions, including but not limited to those that fall below one or more prescribed minimum capital ratios.

An institution that, based upon its capital levels, is classified as “well capitalized,” “adequately capitalized” or “undercapitalized” may be treated as though it were in the next lower capital category if the appropriate federal banking agency, after notice and opportunity for hearing, determines that an unsafe or unsound condition or an unsafe or unsound practice warrants such treatment. At each successive lower capital category, an insured depository institution is subject to more restrictions. In addition to measures taken under the prompt corrective action provisions, commercial banking organizations may be subject to potential enforcement actions by the federal banking agencies for unsafe or unsound practices in conducting their businesses or for violations of any law, rule, regulation or any condition imposed in writing by the agency or any written agreement with the agency.

Safety and Soundness Standards

FDICIA has implemented certain specific restrictions on transactions and required federal banking regulators to adopt overall safety and soundness standards for depository institutions related to internal control, loan underwriting and documentation, and asset growth. Among other things, FDICIA limits the interest rates paid on deposits by undercapitalized institutions, restricts the use of brokered deposits, limits the aggregate extensions of credit by a depository institution to an executive officer, director, principal shareholder or related interest, and reduces deposit insurance coverage for deposits offered by undercapitalized institutions for deposits by certain employee benefits accounts. The federal banking agencies may require an institution to submit an acceptable compliance plan as well as have the flexibility to pursue other more appropriate or effective courses of action given the specific circumstances and severity of an institution’s noncompliance with one or more standards.

Federal banking agencies require banks to maintain adequate valuation allowances for potential credit losses. The Company has an internal staff that continually reviews loan quality and reports to the Board of Directors. This analysis includes a detailed review of the classification and categorization of problem loans, assessment of the overall quality and collectability of the loan portfolio, consideration of loan loss experience, trends in problem loans, concentration of credit risk, and current economic conditions, particularly in the Bank’s market areas. Based on this analysis, Management, with the review and approval of the Board, determines the adequate level of allowance required. The allowance is allocated to different segments of the loan portfolio, but the entire allowance is available for the loan portfolio in its entirety.

Restrictions on Dividends and Other Distributions

The Company’s ability to pay dividends to its shareholders is subject to the restrictions set forth in the California General Corporation Law (“CGCL”). The CGCL provides that a corporation may make a distribution to its shareholders if (i) the corporation’s retained earnings equal or exceed the amount of the proposed distribution plus unpaid accrued dividends (if any) on securities with a dividend preference, or (ii) immediately after the dividend, the corporation’s total assets equal or exceed total liabilities plus unpaid accrued dividends (if any) on securities with a dividend preference.

The Company’s ability to pay dividends depends in part on the Bank’s ability to pay cash dividends to the Company. The power of the board of directors of an insured depository institution to declare a cash dividend or other distribution with respect to capital is subject to statutory and regulatory restrictions which limit the amount available for such distribution depending upon the earnings, financial condition and cash needs of the institution, as well as general business conditions. FDICIA prohibits insured depository institutions from paying management fees to any controlling persons or, with certain limited exceptions, making capital distributions, including dividends, if, after such transaction, the institution would be undercapitalized.

In addition to the restrictions imposed under federal law, banks chartered under California law generally may only pay cash dividends to the extent such payments do not exceed the lesser of retained earnings of the bank or the bank’s net income for its last three fiscal years (less any distributions to shareholders during this period). In the event a bank desires to pay cash dividends in excess of such amount, the bank may pay a cash dividend with the prior approval of the Commissioner in an amount not exceeding the greatest of the bank’s retained earnings, the bank’s net income for its last fiscal year or the bank’s net income for its current fiscal year.

The federal banking agencies also have the authority to prohibit a depository institution or its holding company from engaging in business practices which are considered to be unsafe or unsound, possibly including payment of dividends or other payments under certain circumstances even if such payments are not expressly prohibited by statute. The Federal Reserve Board has issued guidance indicating its expectations that a bank holding company will inform and consult with Federal Reserve supervisory staff sufficiently in advance of (i) declaring and paying a dividend that could raise safety and soundness concerns (e.g., declaring and paying a dividend that exceeds earnings for the period for which the dividend is being paid); (ii) redeeming or repurchasing regulatory capital instruments when the bank holding company is experiencing financial weaknesses; or (iii) redeeming or repurchasing common stock or perpetual preferred stock that would result in a net reduction as of the end of the quarter in the amount of such equity instruments outstanding compared with the beginning of the quarter in which the redemption or repurchase occurred.

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Premiums for Deposit Insurance

Substantially all of the deposits of the Bank are insured up to applicable limits by the DIF of the FDIC and are subject to deposit insurance assessments to maintain the DIF. The FDIC utilizes a risk-based assessment system that imposes insurance premiums based upon a risk matrix that takes into account a bank's capital level, asset quality and supervisory rating ("CAMELS rating").

In July 2010, Congress in the Dodd-Frank Act increased the minimum for the DIF reserve ratio, the ratio of the amount in the fund to insured deposits, from 1.15% to 1.35% and required that the ratio reach that level by September 30, 2020. Further, the Dodd-Frank Act made banks with $10 billion or more in assets responsible for the increase from 1.15% to 1.35%, among other provisions.

In October 2010, the FDIC adopted a new DIF restoration plan to ensure the DIF reaching 1.35% by September 30, 2020. In assessing its progress in restoring the reserves, at least semi-annually, the FDIC updates its loss and income projections for the fund and, if needed, increases or decreases assessment rates, following notice-and-comment rulemaking, if required.

In February 2011, the FDIC adopted a final rule effective April 1, 2011 to:

(1) Redefine the deposit insurance assessment base from total domestic deposits to average total assets minus average tangible equity as required by the Dodd-Frank Act;

(2) Change the deposit insurance assessment rates (which provide for progressively lower assessment rate schedules that will take effect when the reserve ratio exceeds 1.15%, 2%, and 2.5%) ;

(3) Implement the Dodd-Frank Act DIF dividend provisions; and

(4) Revise the risk-based assessment system for all “large” and “highly complex” insured depository institutions. “Large” depository institutions are defined generally as having more than $10 billion in assets and "highly complex" institutions have over $50 billion in assets and are fully owned by a parent with over $500 billion in assets. The Bank is neither a “large” nor “highly complex” institution.

In March, 2016, the FDIC issued a final rule to increase the DIF reserve ratio to the statutory minimum level of 1.35%, effective July 1, 2016, if the reserve ratio reached 1.15% before that date.

In August, 2016, the FDIC announced the DIF reserve ratio surpassed the 1.15% reserve ratio target, triggering three major changes:

(1) The decline in the range of initial assessment rates for all banks from 5-35 basis points to 3-30 basis points;

(2) The assessment of a quarterly surcharge on large banks equal to an annual rate of 4.5 basis points in addition to regular assessments; and

(3) A revised method to calculate risk-based assessment rates for established small banks (under $1 billion in assets) pursuant to an FDIC final rule issued April, 2016.

In September 2018, the FDIC issued a Financial Institutions Letter stating the Deposit Insurance Fund Reserve Ratio reached 1.36%, exceeding the statutorily required minimum reserve ratio of 1.35% ahead of the September 30, 2020, deadline required under the Dodd-Frank Act. FDIC regulations provide for two changes to deposit insurance assessments upon reaching the minimum: (1) surcharges on insured depository institutions with total consolidated assets of $10 billion or more (large banks) will cease; and (2) small banks will receive assessment credits for the portion of their assessments that contributed to the growth in the reserve ratio from between 1.15% and 1.35%, to be applied when the reserve ratio is at or above 1.38%. In January 2019, the Bank, which meets the definition of a “small Bank”, was advised by the FDIC its assessment credit to be applied when the reserve ratio is at or above 1.38% is $1.4 million which will reduce future assessment expenses. The Company cannot provide any assurance as to the effect of any future changes in its deposit insurance premium rates.

Community Reinvestment Act and Fair Lending Developments

The Bank is subject to certain fair lending requirements and reporting obligations involving home mortgage lending operations and Community Reinvestment Act (“CRA”) activities. The CRA generally requires the federal banking agencies to evaluate the record of financial institutions in meeting the credit needs of their local communities, including low and moderate income neighborhoods. In addition to substantive penalties and corrective measures that may be required for a violation of certain fair lending laws, the federal banking agencies may take compliance with such laws and CRA into account when regulating and supervising other activities including merger applications.

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Financial Privacy Legislation and Customer Information Security

The GLBA, in addition to the previously described changes in permissible nonbanking activities permitted to banks, BHCs and FHCs, also required the federal banking agencies, among other federal regulatory agencies, to adopt regulations governing the privacy of consumer financial information. The Bank is subject to the FRB’s regulations in this area. The federal bank regulatory agencies have established standards for safeguarding nonpublic personal information about customers that implement provisions of the GLBA (the “Guidelines”). Among other things, the Guidelines require each financial institution, under the supervision and ongoing oversight of its Board of Directors or an appropriate committee thereof, to develop, implement and maintain a comprehensive written information security program designed to ensure the security and confidentiality of customer information, to protect against any anticipated threats or hazards to the security or integrity of such information, and to protect against unauthorized access to or use of such information that could result in substantial harm or inconvenience to any customer.

U.S.A. PATRIOT Act

Title III of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (“USA Patriot Act”) is the International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001. It includes numerous provisions for fighting international money laundering and blocking terrorist access to the U.S. financial system. The goal of Title III is to prevent the U.S. financial system and the U.S. clearing mechanisms from being used by parties suspected of terrorism, terrorist financing and money laundering. The provisions of Title III of the USA Patriot Act which affect the Bank are generally set forth as amendments to the Bank Secrecy Act. These provisions relate principally to U.S. banking organizations’ relationships with foreign banks and with persons who are resident outside the United States. The USA Patriot Act does not impose any filing or reporting obligations for banking organizations, but does require certain additional due diligence and recordkeeping practices.

Sarbanes-Oxley Act of 2002

The stated goals of the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”) are to increase corporate responsibility, to provide for enhanced penalties for accounting and auditing improprieties at publicly traded companies and to protect investors by improving the accuracy and reliability of corporate disclosures pursuant to the securities laws. Sarbanes-Oxley generally applies to all companies, both U.S. and non-U.S., that file or are required to file periodic reports under the Securities Exchange Act of 1934 (the “Exchange Act”).

Sarbanes-Oxley includes very specific additional disclosure requirements and corporate governance rules, required the SEC and securities exchanges to adopt extensive additional disclosure, corporate governance and other related rules and mandates further studies of certain issues. Sarbanes-Oxley represents significant federal involvement in matters traditionally left to state regulatory systems, such as the regulation of the accounting profession, and to state corporate law, such as the relationship between a board of directors and management and between a board of directors and its committees and public company shareholders. Sarbanes-Oxley addresses, among other matters: (i) independent audit committees for reporting companies whose securities are listed on national exchanges or automated quotation systems and expanded duties and responsibilities for audit committees; (ii) certification of financial statements by the chief executive officer and the chief financial officer; (iii) the forfeiture of bonuses or other incentive-based compensation and profits from the sale of an issuer’s securities by directors and senior officers in the twelve month period following initial publication of any financial statements that later require restatement; (iv) a prohibition on insider trading during pension plan blackout periods; (v) disclosure of off-balance sheet transactions; (vi) a prohibition on personal loans to directors and officers under most circumstances with exceptions for certain normal course transactions by regulated financial institutions; (vii) expedited electronic filing requirements related to trading by insiders in an issuer’s securities on Form 4; (viii) disclosure of a code of ethics and filing a Form 8-K for a change or waiver of such code; (ix) accelerated filing of periodic reports; (x) the formation of the Public Company Accounting Oversight Board (“PCAOB”) to regulate public accounting firms and the audit of public companies that are subject to the securities laws; (xi) auditor independence; (xii) internal control evaluation and reporting; and (xiii) various increased criminal penalties for violations of securities laws.

Programs To Mitigate Identity Theft

In November 2007, federal banking agencies together with the National Credit Union Administration and Federal Trade Commission adopted regulations under the Fair and Accurate Credit Transactions Act of 2003 to require financial institutions and other creditors to develop and implement a written identity theft prevention program to detect, prevent and mitigate identity theft in connection with certain new and existing accounts. Covered accounts generally include consumer accounts and other accounts that present a reasonably foreseeable risk of identity theft. Each institution’s program must include policies and procedures designed to: (i) identify indicators, or “red flags,” of possible risk of identity theft; (ii) detect the occurrence of red flags; (iii) respond appropriately to red flags that are detected; and (iv) ensure that the program is updated periodically as appropriate to address changing circumstances. The regulations include guidelines that each institution must consider and, to the extent appropriate, include in its program.

-8-

Pending Legislation

Changes to state laws and regulations (including changes in interpretation or enforcement) can affect the operating environment of BHCs and their subsidiaries in substantial and unpredictable ways. From time to time, various legislative and regulatory proposals are introduced. These proposals, if codified, may change banking statutes and regulations and the Company’s operating environment in substantial and unpredictable ways. If codified, these proposals could increase or decrease the cost of doing business, limit or expand permissible activities or affect the competitive balance among banks, savings associations, credit unions and other financial institutions. The Company cannot accurately predict whether those changes in laws and regulations will occur, and, if those changes occur, the ultimate effect they would have upon our financial condition or results of operations. It is likely, however, that the current level of enforcement and compliance-related activities of federal and state authorities will continue and potentially increase.

Competition

The Bank’s principal competitors for deposits and loans are major banks and smaller community banks, savings and loan associations and credit unions. To a lesser extent, competitors include thrift and loans, mortgage brokerage companies and insurance companies. Other institutions, such as brokerage houses, mutual fund companies, credit card companies, and certain retail establishments offer investment vehicles that also compete with banks for deposit business. Federal legislation in recent years has encouraged competition between different types of financial institutions and fostered new entrants into the financial services market.

Legislative changes, as well as technological and economic factors, can be expected to have an ongoing impact on competitive conditions within the financial services industry. While the future impact of regulatory and legislative changes cannot be predicted with certainty, the business of banking will remain highly competitive.

ITEM 1A. RISK FACTORS

Readers and prospective investors in the Company’s securities should carefully consider the following risk factors as well as the other information contained or incorporated by reference in this Report.

The risks and uncertainties described below are not the only ones facing the Company. Additional risks and uncertainties that Management is not aware of or focused on or that Management currently deems immaterial may also impair the Company’s business operations. This Report is qualified in its entirety by these risk factors.

If any of the following risks actually occur, the Company’s financial condition and results of operations could be materially and adversely affected. If this were to happen, the value of the company’s securities could decline significantly, and investors could lose all or part of their investment in the Company’s common stock.

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Market and Interest Rate Risk

Changes in interest rates could reduce income and cash flow.

The Company’s income and cash flow depend to a great extent on the difference between the interest earned on loans and investment securities and the interest paid on deposits and other borrowings, and the Company’s success in competing for loans and deposits. The Company cannot control or prevent changes in the level of interest rates which fluctuate in response to general economic conditions, the policies of various governmental and regulatory agencies, in particular, the Federal Open Market Committee of the FRB, and pricing practices of the Company’s competitors. Changes in monetary policy, including changes in interest rates, will influence the origination of loans, the purchase of investments, the generation of deposits and other borrowings, and the rates received on loans and investment securities and paid on deposits and other liabilities. The discussion in this Report under “Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations – Asset, Liability and Market Risk Management” and “- Liquidity and Funding” and “Item 7A Quantitative and Qualitative Disclosures About Market Risk” is incorporated by reference in this paragraph.

Changes in capital market conditions could reduce asset valuations.

Capital market conditions, including interest rates, liquidity, investor confidence, bond issuer credit worthiness, perceived counter-party risk, the supply of and demand for financial instruments, the financial strength of market participants, and other factors can materially impact the value of the Company’s assets. An impairment in the value of the Company’s assets could result in asset write-downs, reducing the Company’s asset values, earnings, and equity.

The value of securities in the Company’s investment securities portfolio may be negatively affected by disruptions in securities markets

The market for some of the investment securities held in the Company’s portfolio can be extremely volatile. Volatile market conditions may detrimentally affect the value of these securities, such as through reduced valuations due to the perception of heightened credit and liquidity risks. There can be no assurance that the declines in market value will not result in other than temporary impairments of these assets, which would lead to loss recognition that could have a material adverse effect on the Company’s net income and capital levels.

The weakness of other financial institutions could adversely affect the Company.

Financial services institutions are interrelated as a result of trading, clearing, counterparty, or other relationships. The Company routinely executes transactions with counterparties in the financial services industry, including brokers and dealers, commercial banks, investment banks, and other institutional clients. Many of these transactions expose the Company to credit risk in the event of default of the Company’s counterparty or client. In addition, the Company’s credit risk may be increased when the collateral the Company holds cannot be realized or is liquidated at prices not sufficient to recover the full amount of the secured obligation. There is no assurance that any such losses would not materially and adversely affect the Company’s results of operations or earnings.

Shares of Company common stock eligible for future sale or grant of stock options and other equity awards could have a dilutive effect on the market for Company common stock and could adversely affect the market price.

The Articles of Incorporation of the Company authorize the issuance of 150 million shares of common stock (and two additional classes of 1 million shares each, denominated “Class B Common Stock” and “Preferred Stock”, respectively) of which approximately 26.7 million shares of common stock were outstanding at December 31, 2018. Pursuant to its stock option plans, at December 31, 2018, the Company had outstanding options for 946 thousand shares of common stock, of which 457 thousand were currently exercisable. As of December 31, 2018, 713 thousand shares of Company common stock remained available for grants under the Company’s equity incentive plans. Sales of substantial amounts of Company common stock in the public market could adversely affect the market price of its common stock.

The Company’s payment of dividends on common stock could be eliminated or reduced.

Holders of the Company’s common stock are entitled to receive dividends only when, as and if declared by the Company’s Board of Directors. Although the Company has historically paid cash dividends on the Company’s common stock, the Company is not required to do so and the Company’s Board of Directors could reduce or eliminate the Company’s common stock dividend in the future.

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The Company could repurchase shares of its common stock at price levels considered excessive.

The Company repurchases and retires its common stock in accordance with Board of Directors-approved share repurchase programs. At December 31, 2018, approximately 1.8 million shares remained available to repurchase under such plans. The Company has been active in repurchasing and retiring shares of its common stock when alternative uses of excess capital, such as acquisitions, have been limited. The Company could repurchase shares of its common stock at price levels considered excessive, thereby spending more cash on such repurchases as deemed reasonable and effectively retiring fewer shares than would be retired if repurchases were effected at lower prices.

Risks Related to the Nature and Geographical Location of the Company’s Business

The Company invests in loans that contain inherent credit risks that may cause the Company to incur losses.

The risk that borrowers may not pay interest or repay their loans as agreed is an inherent risk of the banking business. The company mitigates this risk by adhering to sound and proven underwriting practices, managed by experienced and knowledgeable credit professionals. Nonetheless, the Company may incur losses on loans that meet its underwriting criteria, and these losses may exceed the amounts set aside as reserves. The Company can provide no assurance that the credit quality of the loan portfolio will not deteriorate in the future and that such deterioration will not adversely affect the Company or its results of operations.

The Company’s operations are concentrated geographically in California, and poor economic conditions may cause the Company to incur losses.

Substantially all of the Company’s business is located in California. A portion of the loan portfolio of the Company is dependent on real estate. At December 31, 2018, real estate served as the principal source of collateral with respect to approximately 55% of the Company’s loan portfolio. The Company’s financial condition and operating results will be subject to changes in economic conditions in California. The California economy was severely affected by the recessionary period of 2008 to 2009. Much of the California real estate market experienced a decline in values of varying degrees. This decline had an adverse impact on the business of some of the Company’s borrowers and on the value of the collateral for many of the Company’s loans. Generally, the counties surrounding and near San Francisco Bay have recovered more soundly from the recent recession than counties in the California “Central Valley,” from Sacramento in the north to Bakersfield in the south. Approximately 22% of the Company’s loans are to borrowers in the California “Central Valley.” Economic conditions in California’s diverse geographic markets can be vastly different and are subject to various uncertainties, including the condition of the construction and real estate sectors, the effect of drought on the agricultural sector and its infrastructure, and the California state and municipal governments’ budgetary and fiscal conditions. The Company can provide no assurance that conditions in any sector or geographic market of the California economy will not deteriorate in the future and that such deterioration will not adversely affect the Company.

The markets in which the Company operates are subject to the risk of earthquakes, fires, storms and other natural disasters.

All of the properties of the Company are located in California. Also, most of the real and personal properties which currently secure a majority of the Company’s loans are located in California. Further, the Company invests in securities issued by companies and municipalities operating throughout the United States, and in mortgage-backed securities collateralized by real property located throughout the United States. California and other regions of the United States are prone to earthquakes, brush and wildfires, flooding, drought and other natural disasters. In addition to possibly sustaining uninsured damage to its own properties, if there is a major earthquake, flood, drought, fire or other natural disaster, the Company faces the risk that many of its debtors may experience uninsured property losses, or sustained business or employment interruption and/or loss which may materially impair their ability to meet the terms of their debt obligations. A major earthquake, flood, prolonged drought, fire or other natural disaster in California or other regions of the United States could have a material adverse effect on the Company’s business, financial condition, results of operations and cash flows.

Adverse changes in general business or economic conditions could have a material adverse effect on the Company’s financial condition and results of operations.

A sustained or continuing weakness or weakening in business and economic conditions generally or specifically in the principal markets in which the Company does business could have one or more of the following adverse impacts on the Company’s business:

· a decrease in the demand for loans and other products and services offered by the Company;

· an increase or decrease in the usage of unfunded credit commitments;

· an increase or decrease in the amount of deposits;

· a decrease in non-depository funding available to the Company;

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· an impairment of certain intangible assets, including goodwill;

· an increase in the number of clients and counterparties who become delinquent, file for protection under bankruptcy laws or default on their loans or other obligations to the Company, which could result in a higher level of nonperforming assets, net charge-offs, provision for loan losses, reduced interest revenue and cash flows, and valuation adjustments on assets;

· an impairment in the value of investment securities;

· an impairment in the value of life insurance policies owned by the Company;

· an impairment in the value of real estate owned by the Company.

The 2008 - 2009 financial crisis led to the failure or merger of a number of financial institutions. Financial institution failures can result in further losses as a consequence of defaults on securities issued by them and defaults under contracts entered into with such entities as counterparties. The failure of institutions with FDIC insured deposits can cause the DIF reserve ratio to decline, resulting in increased deposit insurance assessments on surviving FDIC insured institutions. Weak economic conditions can significantly weaken the strength and liquidity of financial institutions.

The Company’s financial performance generally, and in particular the ability of borrowers to pay interest on and repay principal of outstanding loans and the value of collateral securing those loans, are highly dependent upon the business environment in the markets where the Company operates, in the State of California and in the United States as a whole. A favorable business environment is generally characterized by, among other factors, economic growth, healthy labor markets, efficient capital markets, low inflation, high business and investor confidence, and strong business earnings. Unfavorable or uncertain economic and market conditions can be caused by: declines in economic growth, high rates of unemployment, deflation, declines in business activity or consumer, investor or business confidence; limitations on the availability of or increases in the cost of credit and capital; increases in inflation; natural disasters; or a combination of these or other factors.

Such business conditions could adversely affect the credit quality of the Company’s loans, the demand for loans, loan volumes and related revenue, securities valuations, amounts of deposits, availability of funding, results of operations and financial condition.

Regulatory Risks

Restrictions on dividends and other distributions could limit amounts payable to the Company.

As a holding company, a substantial portion of the Company’s cash flow typically comes from dividends paid by the Bank. Various statutory provisions restrict the amount of dividends the Company’s subsidiaries can pay to the Company without regulatory approval. A reduction in subsidiary dividends paid to the Company could limit the capacity of the Company to pay dividends. In addition, if any of the Company’s subsidiaries were to liquidate, that subsidiary’s creditors will be entitled to receive distributions from the assets of that subsidiary to satisfy their claims against it before the Company, as a holder of an equity interest in the subsidiary, will be entitled to receive any of the assets of the subsidiary.

Adverse effects of changes in banking or other laws and regulations or governmental fiscal or monetary policies could adversely affect the Company.

The Company is subject to significant federal and state regulation and supervision, which is primarily for the benefit and protection of the Company’s customers and not for the benefit of investors. In the past, the Company’s business has been materially affected by these regulations.

Laws, regulations or policies, including accounting standards and interpretations currently affecting the Company and the Company’s subsidiaries, may change at any time. Regulatory authorities may also change their interpretation of these statutes and regulations. Therefore, the Company’s business may be adversely affected by any future changes in laws, regulations, policies or interpretations or regulatory approaches to compliance and enforcement including future acts of terrorism, major U.S. corporate bankruptcies and reports of accounting irregularities at U.S. public companies.

Additionally, the Company’s business is affected significantly by the fiscal and monetary policies of the federal government and its agencies. The Company is particularly affected by the policies of the FRB, which regulates the supply of money and credit in the United States of America. Among the instruments of monetary policy available to the FRB are (a) conducting open market operations in U.S. government securities, (b) changing the discount rates of borrowings by depository institutions, (c) changing interest rates paid on balances financial institutions deposit with the FRB, and (d) imposing or changing reserve requirements against certain borrowings by banks and their affiliates. These methods are used in varying degrees and combinations to directly affect the availability of bank loans and deposits, as well as the interest rates charged on loans and paid on deposits. The policies of the FRB may have a material effect on the Company’s business, results of operations and financial condition. Under long- standing policy of the FRB, a BHC is expected to act as a source of financial strength for its subsidiary banks. As a result of that policy, the Company may be required to commit financial and other resources to its subsidiary bank in circumstances where the Company might not otherwise do so.

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Following the recessions of 2008 and 2009, the FRB provided vast amounts of liquidity into the banking system. The FRB purchased large quantities of U.S. government securities, including agency-backed mortgage securities, increasing the demand for such securities thereby reducing interest rates. Interest rates remained historically low through 2016 as the monetary policy of the Federal Open Market Committee (the “FOMC”) was highly accommodative. The FRB began reducing these asset purchase activities in the fourth quarter 2013 and the FOMC began removing monetary stimulus in December 2016 and has increased the federal funds rate by 2.00 percent to 2.50 percent through December 2018. The raised target range for the federal funds rate could reduce liquidity in the markets and cause interest rates to rise, thereby increasing funding costs to the Bank, reducing the availability of funds to the Bank to finance its existing operations, and causing fixed-rate investment securities and loans to decline in value.

Federal and state governments could pass legislation detrimental to the Company’s performance.

As an example, the Company could experience higher credit losses because of federal or state legislation or regulatory action that reduces the amount the Bank's borrowers are otherwise contractually required to pay under existing loan contracts. Also, the Company could experience higher credit losses because of federal or state legislation or regulatory action that limits or delays the Bank's ability to foreclose on property or other collateral or makes foreclosure less economically feasible. Federal, state and local governments could pass tax legislation causing the Company to pay higher levels of taxes.

The FDIC insures deposits at insured financial institutions up to certain limits. The FDIC charges insured financial institutions premiums to maintain the Deposit Insurance Fund. The FDIC may increase premium assessments to maintain adequate funding of the Deposit Insurance Fund.

The behavior of depositors in regard to the level of FDIC insurance could cause our existing customers to reduce the amount of deposits held at the Bank, and could cause new customers to open deposit accounts at the Bank. The level and composition of the Bank's deposit portfolio directly impacts the Bank's funding cost and net interest margin.

Systems, Accounting and Internal Control Risks

The accuracy of the Company’s judgments and estimates about financial and accounting matters will impact operating results and financial condition.

The discussion under “Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies” in this Report and the information referred to in that discussion is incorporated by reference in this paragraph. The Company makes certain estimates and judgments in preparing its financial statements. The quality and accuracy of those estimates and judgments will have an impact on the Company’s operating results and financial condition.

A new accounting standard will significantly change the manner in which the Company recognizes credit losses and may have a material impact on the Company’s results of operations, financial condition or liquidity.

In June 2016, the Financial Accounting Standards Board (“FASB”) issued a new accounting update, FASB ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The ASU changes the accounting for estimates for credit losses related to financial assets measured at amortized cost and certain other contracts. The ASU replaces the currently incurred loss model with model based on current expected credit loss (“CECL”), which will accelerate recognition of credit losses. Additionally credit losses relating to debt securities available-for-sale will be recorded through an allowance for credit losses under the new standard. The Company will be required to adopt the ASU provisions on January 1, 2010. The ASU will significantly change the manner in which the Company determines the adequacy of its allowance for loan losses. The Company is evaluating the impact the CECL model will have, but the Company may recognize a one-time cumulative-effect adjustment to its allowance for loan losses as of the beginning of the first reporting period in which the new standard is effective. Any required adjustment to the allowance for loan losses resulting from this change in methodology will be accomplished through an offsetting after-tax-adjustment to shareholders’ equity. Moreover, the CECL model may create more volatility in the level of the allowance for loan losses after adoption. If the Company is required to materially increase the level of its allowance for loan losses for any reason, such increase could adversely affect its business, financial condition and results of operations.

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The Company’s information systems may experience an interruption or breach in security.

The Company relies heavily on communications and information systems, including those of third party vendors and other service providers, to conduct its business. Any failure, interruption or breach in security of these systems could result in failures or disruptions in the Company’s data processing, accounting, customer relationship management and other systems. Communication and information systems failures can result from a variety of risks including, but not limited to, events that are wholly or partially out of the Company’s control, such as telecommunication line integrity, weather, terrorist acts, natural disasters, accidental disasters, unauthorized breaches of security systems, energy delivery systems, cyber attacks, and other events. Although the Company devotes significant resources to maintain and regularly upgrade its systems and processes that are designed to protect the security of the Company’s computer systems, software, networks and other technology assets and the confidentiality, integrity and availability of information belonging to the Company and its customers, there is no assurance that any such failures, interruptions or security breaches will not occur or, if they do occur, that they will be adequately corrected by the Company or its vendors. The occurrence of any such failures, interruptions or security breaches could damage the Company’s reputation, result in a loss of customer business, subject the Company to additional regulatory scrutiny, or expose the Company to litigation and possible financial liability, any of which could have a material adverse effect on the Company’s financial condition and results of operations.

The Company’s controls and procedures may fail or be circumvented.

Management regularly reviews and updates the Company’s internal control over financial reporting, disclosure controls and procedures, and corporate governance policies and procedures. The Company maintains controls and procedures to mitigate against risks such as processing system failures and errors, and customer or employee fraud, and maintains insurance coverage for certain of these risks. Any system of controls and procedures, however well designed and operated, is based in part on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of the system are met. Events could occur which are not prevented or detected by the Company’s internal controls or are not insured against or are in excess of the Company’s insurance limits or insurance underwriters’ financial capacity. Any failure or circumvention of the Company’s controls and procedures or failure to comply with regulations related to controls and procedures could have a material adverse effect on the Company’s business, results of operations and financial condition.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None

ITEM 2. PROPERTIES

Branch Offices and Facilities

Westamerica Bank is engaged in the banking business through 80 branch offices in 21 counties in Northern and Central California. WAB believes all of its offices are constructed and equipped to meet prescribed security requirements.

The Company owns 28 banking office locations and one centralized administrative service center facility and leases 58 facilities.  Most of the leases contain renewal options and provisions for rental increases, principally for changes in the cost of living index, and for changes in other operating costs such as property taxes and maintenance.

ITEM 3. LEGAL PROCEEDINGS

Due to the nature of its business, the Company is subject to various threatened or filed legal cases. Based on the advice of legal counsel, the Company does not expect such cases will have a material, adverse effect on its financial position or results of operations. Legal liabilities are accrued when obligations become probable and the amount can be reasonably estimated. In the third quarter 2018, the Company achieved a mediated settlement to dismiss a lawsuit, subject to court approval, and accrued a liability for $3,500 thousand.

The Company has determined that it will be obligated to provide refunds of revenue recognized in years prior to 2017 to some customers. The Company estimates the probable amount of these obligations will be $5,542 thousand and accrued a liability for such amount in 2017; the estimated liability is subject to revision.

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ITEM 4. MINE SAFETY DISCLOSURES

Not applicable

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

The Company’s common stock is traded on the NASDAQ Stock Market (“NASDAQ”) under the symbol “WABC”. The following table shows the high and the low sales prices for the common stock, for each quarter, as reported by NASDAQ:

	High		Low
2018:
First quarter	$	62.52	$	55.72
Second quarter		60.68		55.81
Third quarter		64.52		57.56
Fourth quarter		63.20		52.75
2017:
First quarter	$	64.07	$	54.12
Second quarter		57.78		51.31
Third quarter		59.54		49.54
Fourth quarter		63.03		53.96

As of January 31, 2019, there were approximately 5,500 shareholders of record of the Company’s common stock.

The Company has paid cash dividends on its common stock in every quarter since its formation in 1972. See Item 8, Financial Statements and Supplementary Data, Note 20 to the consolidated financial statements for recent quarterly dividend information. It is currently the intention of the Board of Directors of the Company to continue payment of cash dividends on a quarterly basis. There is no assurance, however, that any dividends will be paid since they are dependent upon earnings, cash balances, financial condition and capital requirements of the Company and its subsidiaries as well as policies of the FRB pursuant to the BHCA. See Item 1, “Business - Supervision and Regulation.”

The notes to the consolidated financial statements included in this Report contain additional information regarding the Company’s capital levels, capital structure, regulations affecting subsidiary bank dividends paid to the Company, the Company’s earnings, financial condition and cash flows, and cash dividends declared and paid on common stock.

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Stock performance

The following chart compares the cumulative return on the Company’s stock during the ten years ended December 31, 2018 with the cumulative return on the S&P 500 composite stock index and NASDAQ’S Bank Index. The comparison assumes $100 invested in each on December 31, 2008 and reinvestment of all dividends.

	December 31,
	2008		2009		2010		2011		2012		2013
Westamerica Bancorporation (WABC)	$	100.00	$	111.42	$	114.64	$	93.54	$	93.76	$	128.29
S&P 500 (SPX)		100.00		126.47		145.55		148.59		172.34		228.11
NASDAQ Bank Index (CBNK)		100.00		83.71		95.57		85.53		101.55		143.89

	December 31,
	2014		2015		2016		2017		2018
Westamerica Bancorporation (WABC)	$	114.86	$	109.95	$	152.39	$	143.47	$	134.59
S&P 500 (SPX)		259.26		257.61		288.10		343.35		322.05
NASDAQ Bank Index (CBNK)		150.96		161.07		221.80		228.93		188.40

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The following chart compares the cumulative return on the Company’s stock during the five years ended December 31, 2018 with the cumulative return on the S&P 500 composite stock index and NASDAQ’S Bank Index. The comparison assumes $100 invested in each on December 31, 2013 and reinvestment of all dividends.

	December 31,
	2013		2014		2015		2016		2017		2018
Westamerica Bancorporation (WABC)	$	100.00	$	89.53	$	85.71	$	118.79	$	111.83	$	104.91
S&P 500 (SPX)		100.00		113.65		112.93		126.30		150.52		141.18
NASDAQ Bank Index (CBNK)		100.00		104.91		111.94		154.15		159.10		130.93

ISSUER PURCHASES OF EQUITY SECURITIES

The table below sets forth the information with respect to purchases made by or on behalf of Westamerica Bancorporation or any “affiliated purchaser” (as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934), of common stock during the quarter ended December 31, 2018 (in thousands, except per share data).

	2018
Period	(a) Total Number of shares Purchased		(b) Average Price Paid per Share		(c) Number of Shares Purchased as Part of Publicly Announced Plans or Programs		(d) Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
	(In thousands, except exercise price)
October 1 through October 31		-	$	-		-		1,750
November 1 through November 30		-		-		-		1,750
December 1 through December 31		-		-		-		1,750
Total		-	$	-		-		1,750

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

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No shares were repurchased during the period from October 1, 2018 through December 31, 2018. A program approved by the Board of Directors on July 26, 2018 authorizes the purchase of up to 1,750 thousand shares of the Company’s common stock from time to time prior to September 1, 2019.

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ITEM 6. SELECTED FINANCIAL DATA

The following financial information for the five years ended December 31, 2018 has been derived from the Company’s audited consolidated financial statements. This information should be read in conjunction with those statements, notes and other information included elsewhere herein.

WESTAMERICA BANCORPORATION

FINANCIAL SUMMARY

	For the Years Ended December 31,
	2018			2017			2016			2015			2014
	(In thousands, except per share data and ratios)
Interest and loan fee income	$	151,723		$	138,312		$	135,919		$	136,529		$	140,209
Interest expense		1,959			1,900			2,116			2,424			3,444
Net interest and loan fee income		149,764			136,412			133,803			134,105			136,765
(Reversal of) provision for loan losses		-			(1,900	)		(3,200	)		-			2,800
Noninterest income:
Equity securities (losses) gains		(52	)		7,955			-			-			-
Other noninterest income		48,201			48,673			46,574			47,867			51,787
Total noninterest income		48,149			56,628			46,574			47,867			51,787
Noninterest expense:
Loss contingency		3,500			5,542			3			-			-
Other noninterest expense		103,416			102,226			103,617			105,300			106,799
Total noninterest expense		106,916			107,768			103,620			105,300			106,799
Income before income taxes		90,997			87,172			79,957			76,672			78,953
Income tax provision		19,433			37,147			21,104			17,919			18,307
Net income	$	71,564		$	50,025		$	58,853		$	58,753		$	60,646
Average common shares outstanding		26,649			26,291			25,612			25,555			26,099
Average diluted common shares outstanding		26,756			26,419			25,678			25,577			26,160
Common shares outstanding at December 31,		26,730			26,425			25,907			25,528			25,745
Per common share:
Basic earnings	$	2.69		$	1.90		$	2.30		$	2.30		$	2.32
Diluted earnings		2.67			1.89			2.29			2.30			2.32
Book value at December 31,		23.03			22.34			21.67			20.85			20.45
Financial ratios:
Return on assets		1.27	%		0.92	%		1.12	%		1.16	%		1.22	%
Return on common equity		11.35	%		8.39	%		10.85	%		11.32	%		11.57	%
Net interest margin (FTE)(1)		2.98	%		2.95	%		3.03	%		3.36	%		3.70	%
Net loan losses to average loans		0.14	%		0.08	%		0.04	%		0.11	%		0.17	%
Efficiency ratio(2)		52.52	%		52.51	%		53.55	%		53.69	%		52.24	%
Equity to assets		11.05	%		10.71	%		10.46	%		10.30	%		10.46	%
Period end balances:
Assets	$	5,568,526		$	5,513,046		$	5,366,083		$	5,168,875		$	5,035,724
Loans		1,207,202			1,287,982			1,352,711			1,533,396			1,700,290
Allowance for loan losses		21,351			23,009			25,954			29,771			31,485
Investment securities		3,641,026			3,352,371			3,237,070			2,886,291			2,639,439
Deposits		4,866,839			4,827,613			4,704,741			4,540,659			4,349,191
Identifiable intangible assets and goodwill		123,602			125,523			128,600			132,104			135,960
Short-term borrowed funds		51,247			58,471			59,078			53,028			89,784
Federal Home Loan Bank advances		-			-			-			-			20,015
Shareholders' equity		615,591			590,239			561,367			532,205			526,603
Capital ratios at period end:
Total risk based capital		17.03	%		16.17	%		15.95	%		13.39	%		14.54	%
Tangible equity to tangible assets		9.04	%		8.63	%		8.26	%		7.94	%		7.97	%
Dividends paid per common share	$	1.60		$	1.57		$	1.56		$	1.53		$	1.52
Common dividend payout ratio		60	%		83	%		68	%		67	%		66	%

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

⁽²⁾ The efficiency ratio is defined as noninterest expense divided by total revenue (net interest income on an FTE basis and noninterest income).

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion addresses information pertaining to the financial condition and results of operations of Westamerica Bancorporation and subsidiaries (the “Company”) that may not be otherwise apparent from a review of the consolidated financial statements and related footnotes. It should be read in conjunction with those statements and notes found on pages 48 through 90, as well as with the other information presented throughout this Report.

Critical Accounting Policies

The Company’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America and follow general practices within the banking industry. Application of these principles requires the Company to make certain estimates, assumptions, and judgments that affect the amounts reported in the financial statements and accompanying notes. These estimates, assumptions, and judgments are based on information available as of the date of the financial statements; accordingly, as this information changes, the financial statements could reflect different estimates, assumptions, and judgments. Certain accounting policies inherently have a greater reliance on the use of estimates, assumptions and judgments and as such have a greater possibility of producing results that could be materially different than originally reported. Estimates, assumptions and judgments are necessary when assets and liabilities are required to be recorded at fair value, when a decline in the value of an asset not carried on the financial statements at fair value warrants an impairment writedown or valuation reserve to be established, or when an asset or liability needs to be recorded contingent upon a future event. Carrying assets and liabilities at fair value inherently results in more financial statement volatility. The fair values and the information used to record valuation adjustments for certain assets and liabilities are based either on quoted market prices or are provided by other third-party sources, when available.

The most significant accounting policies followed by the Company are presented in Note 1 to the consolidated financial statements. These policies, along with the disclosures presented in the other financial statement notes and in this discussion, provide information on how significant assets and liabilities are valued in the financial statements and how those values are determined. Based on the valuation techniques used and the sensitivity of financial statement amounts to the methods, assumptions, and estimates underlying those amounts, Management has identified the allowance for loan losses accounting to be the accounting area requiring the most subjective or complex judgments, and as such could be most subject to revision as new information becomes available. A discussion of the factors affecting accounting for the allowance for loan losses and purchased loans is included in the “Loan Portfolio Credit Risk” discussion below.

Financial Overview

Westamerica Bancorporation and subsidiaries’ (collectively, the “Company”) reported net income of $71.6 million or $2.67 diluted earnings per common share (“EPS”) in 2018. The 2018 results include a $585 thousand tax-exempt life insurance policy gain and a $3.5 million loss contingency settlement, which on an aggregate basis reduced EPS $0.07. In 2018, the Company achieved a mediated settlement to dismiss a lawsuit, subject to court approval, and accrued a liability for such amount. The 2018 results compare to net income of $50.0 million or $1.89 EPS for the year ended December 31, 2017 and net income of $58.9 million or $2.29 EPS for the year ended December 31, 2016. The 2017 results include $12.3 million in adjustments to net deferred tax asset values triggered by enactment of the Tax Cuts and Jobs Act of 2017 (the “Act”) which reduced EPS $0.48, recognition of a $5.5 million loss contingency, which reduced EPS $0.12, and securities gains of $8.0 million, which increased EPS $0.18.

The Company’s principal source of revenue is net interest and loan fee income, which represents interest and fees earned on loans and investment securities (“earning assets”) reduced by interest paid on deposits and other borrowings (“interest-bearing liabilities”). Market interest rates declined considerably following the recession of 2008 and 2009. Interest rates remained historically low through 2016 as the monetary policy of the Federal Open Market Committee (the “FOMC”) was highly accommodative. During this period, Management avoided originating long-dated, low-yielding loans given the potential impact of such assets on forward earning potential; as a result, loans declined and investment securities increased. The changed composition of the earning assets and low market interest rates pressured the net interest margin to lower levels. The FOMC began removing monetary stimulus in December 2016 and has increased the federal funds rate by 2.00 percent to 2.50 percent through December 2018, although longer-term rates have not increased by a similar magnitude. This recent increase in market interest rates has begun benefiting the Company’s earning asset yields. However, the rising market rates have not resulted in higher rates paid on deposits. The funding source of the Company’s earning assets is primarily customer deposits. The Company’s long-term strategy includes maximizing checking and savings deposits as these types of deposits are lower-cost and less sensitive to changes in interest rates compared to time deposits. The 2018 average volume of checking and savings deposits was 95 .6 percent of average total deposits.

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Credit quality remained solid with nonperforming assets totaling $5.8 million at December 31, 2018 and net chargeoffs of $1.7 million in 2018. The Company did not recognize a provision for loan losses in 2018.

The Company presents its net interest margin and net interest income on an FTE basis using the current statutory federal tax rate. Management believes the FTE basis is valuable to the reader because the Company’s loan and investment securities portfolios contain a relatively large portion of municipal loans and securities that are federally tax exempt. The Company’s tax exempt loans and securities composition may not be similar to that of other banks, therefore in order to reflect the impact of the federally tax exempt loans and securities on the net interest margin and net interest income for comparability with other banks, the Company presents its net interest margin and net interest income on an FTE basis. Yields on tax-exempt securities and loans have been adjusted upward to reflect the effect of income exempt from federal income taxation at the federal statutory tax rate of 35% for 2017 and 2016. Due to the Act, the federal tax rate became 21% for 2018; as such, the upward adjustment to reflect the effect of income exempt from federal taxation is lower in 2018.

The Company’s significant accounting policies (see Note 1 “Summary of Significant Accounting Policies” to the Consolidated Financial Statements below) are fundamental to understanding the Company’s results of operations and financial condition. The Company adopted the FASB ASU 2016-09, Improvements to Employee Share-Based Payment Accounting effective January 1, 2017. The 2018 and 2017 results reflect the Company’s prospective adoption of ASU 2016-09; the 2018 and 2017 income tax provision was $737 thousand and $698 thousand, respectively, lower than would have been under accounting standards prior to the adoption of ASU 2016-09.

Net Income

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

	For the Years Ended December 31,
	2018			2017			2016
	($ in thousands, except per share data)
Net interest and loan fee income	$	149,764		$	136,412		$	133,803
FTE adjustment		5,646			12,182			13,142
Net interest and loan fee income (FTE)		155,410			148,594			146,945
Reversal of (provision for) loan losses		-			1,900			3,200
Noninterest income		48,149			56,628			46,574
Noninterest expense		(106,916	)		(107,768	)		(103,620	)
Income before income taxes (FTE)		96,643			99,354			93,099
Income taxes (FTE)		(25,079	)		(49,329	)		(34,246	)
Net income	$	71,564		$	50,025		$	58,853
Net income per average fully-diluted common share	$	2.67		$	1.89		$	2.29
Net income as a percentage of average shareholders' equity		11.35	%		8.39	%		10.85	%
Net income as a percentage of average total assets		1.27	%		0.92	%		1.12	%

Comparing 2018 with 2017, net income increased $21.5 million. Net interest and loan fee income increased in 2018 compared with 2017 mostly attributable to higher average balances of investments and higher yields on earning assets as market interest rates rose. The increase was offset by lower average balances of loans. Net interest and loan fee income (FTE) in 2018 included a lower FTE adjustment than in 2017 due to the reduced federal corporate tax as a result of enactment of the Act. The provision for loan losses remained zero, reflecting Management's evaluation of losses inherent in the loan portfolio. In 2018, noninterest income decreased $8.5 million compared with 2017 because 2017 results included $8.0 million in gains of sale of securities. The non-FTE book tax provision for 2018, which reflected the tax-exempt nature of a $585 thousand life insurance policy gain, was $19.4 million compared with $37.1 million for 2017, representing effective tax rates of 21.4% and 42.6%, respectively. The non-FTE book tax provision for 2017 includes $12.3 million in adjustments to net deferred tax asset values triggered by enactment of the Act. The federal statutory tax rate was reduced from 35% in 2017 to 21% in 2018 due to the Act. The non-FTE book tax provisions for 2018 and 2017 include tax benefits of $737 thousand and $698 thousand, respectively, for tax deductions from the exercise of employee stock options which exceed related compensation expenses recognized in the financial statements.

Comparing 2017 with 2016, net income decreased $8.8 million. Net interest and loan fee income increased in 2017 compared with 2016 mostly attributable to higher average balances of investments and higher net yield on taxable investments and interest-bearing cash, offset by lower average balances of loans and lower yields on those loans. The Company recorded a $1.9 million reversal of provision for loan losses in 2017 and a $3.2 million reversal of provision for loan losses in 2016, reflecting Management's evaluation of losses inherent in the loan portfolio. Noninterest income increased in 2017 compared with 2016 because 2017 included $8.0 million in gains on sale of securities and higher income from merchant processing services, partially offset by lower service charges on deposit accounts. Noninterest expense increased due to a $5.5 million loss contingency and an impairment charge of tax credit investments, partially offset by reductions in professional fees. The non-FTE tax book provision for 2017 was higher than in 2016 primarily due to a $12.3 million charge to re-measure the Company’s net deferred tax asset triggered by enactment of the Act. The 2017 income tax provision was $698 thousand lower than it would have been under accounting standards prior to the adoption of ASU 2016-09.

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Net Interest and Loan Fee Income (FTE)

The Company's primary source of revenue is net interest income, or the difference between interest income earned on loans and investment securities and interest expense paid on interest-bearing deposits and other borrowings.

Components of Net Interest and Loan Fee Income (FTE)

	For the Years Ended December 31,
	2018			2017			2016
	($ in thousands)
Interest and loan fee income	$	151,723		$	138,312		$	135,919
Interest expense		(1,959	)		(1,900	)		(2,116	)
Net interest and loan fee income		149,764			136,412			133,803
FTE adjustment		5,646			12,182			13,142
Net interest and loan fee income (FTE)	$	155,410		$	148,594		$	146,945
Net interest margin (FTE)		2.98	%		2.95	%		3.03	%

Comparing 2018 with 2017, net interest and loan fee income increased $13.4 million due to higher average balances of investments (up $270 million) and higher yield on interest earning assets (up 0.03%), offset by lower average balances of loans (down $106 million). The FTE adjustment was lower in 2018 compared with 2017 mainly due to the reduced federal corporate tax rate as a result of enactment of the Act.

Comparing 2017 with 2016, net interest and loan fee income increased $2.6 million mostly due to higher average balances of investments (up $255 million) and higher yield on taxable investments (up 0.13%) and interest-bearing cash (up 0.59%), offset by lower average balances of loans (down $109 million) and lower net yield on those loans (down 0.16%).

The yield on earning assets (FTE) was 3.02% in 2018 and 2.99% in 2017, 3.08% in 2016. The 2018 yield on earning assets (FTE) reflected higher market interest rates which offset the impact of the reduced FTE adjustment.

The Company’s funding cost was 0.04% in 2018 compared with 0.04% in 2017 and 0.05% in 2016. Average balances of time deposits declined $58 million from 2016 to 2018 while lower-cost checking and savings deposits grew 8% in the same period. Average balances of checking and saving deposits accounted for 95.6% of average total deposits in 2018 compared with 94.8% in 2017 and 94.1% in 2016.

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Summary of Average Balances, Yields/Rates and Interest Differential

The following tables present information regarding the consolidated average assets, liabilities and shareholders’ equity, the amounts of interest income earned from average interest earning assets and the resulting yields, and the amounts of interest expense incurred on average interest-bearing liabilities and the resulting rates. Average loan balances include nonperforming loans. Interest income includes reversal of previously accrued interest on loans placed on non-accrual status during the period and proceeds from loans on nonaccrual status only to the extent cash payments have been received and applied as interest income and accretion of purchased loan discounts. Yields on tax-exempt securities and loans have been adjusted upward to reflect the effect of income exempt from federal income taxation at the federal statutory tax rate of 35 percent for 2016 and 2017. Due to the Tax Cuts and Jobs Act of 2017, the federal tax rate is 21 percent for 2018; as such, the upward adjustment to reflect the effect of income exempt from federal taxation is lower in 2018.

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

	For the Year Ended December 31, 2018
			Interest
	Average		Income/		Yields/
	Balance		Expense		Rates
	($ in thousands)
Assets
Investment securities:
Taxable	$	2,830,075	$	65,330		2.31	%
Tax-exempt (1)		747,522		24,610		3.29	%
Total investments (1)		3,577,597		89,940		2.51	%
Loans:
Taxable		1,153,549		57,240		4.96	%
Tax-exempt (1)		55,618		2,264		4.07	%
Total loans (1)		1,209,167		59,504		4.92	%
Total interest bearing cash		425,871		7,925		1.86	%
Total interest-earning assets (1)		5,212,635		157,369		3.02	%
Other assets		407,983
Total assets	$	5,620,618
Liabilities and shareholders' equity
Noninterest-bearing demand	$	2,209,924	$	-		-	%
Savings and interest-bearing transaction		2,447,652		1,275		0.05	%
Time less than $100,000		119,586		279		0.23	%
Time $100,000 or more		94,919		368		0.39	%
Total interest-bearing deposits		2,662,157		1,922		0.07	%
Short-term borrowed funds		59,992		37		0.06	%
Total interest-bearing liabilities		2,722,149		1,959		0.07	%
Other liabilities		57,848
Shareholders' equity		630,697
Total liabilities and shareholders' equity	$	5,620,618
Net interest spread (1) (2)						2.95	%
Net interest and fee income and interest margin (1) (3)			$	155,410		2.98	%

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

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

⁽³⁾ Net interest margin is computed by calculating the difference between interest income and expense, divided by the average balance of interest-earning assets. The net interest margin is greater than the net interest spread due to the benefit of noninterest-bearing demand deposits.

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

	For the Year Ended December 31, 2017
			Interest
	Average		Income/		Yields/
	Balance		Expense		Rates
	($ in thousands)
Assets
Investment securities:
Taxable	$	2,498,001	$	51,445		2.06	%
Tax-exempt (1)		809,136		31,737		3.92	%
Total investments (1)		3,307,137		83,182		2.52	%
Loans:
Taxable		1,252,474		59,700		4.77	%
Tax-exempt (1)		62,728		3,136		5.00	%
Total loans (1)		1,315,202		62,836		4.78	%
Total interest bearing cash		406,034		4,476		1.10	%
Total interest-earning assets (1)		5,028,373		150,494		2.99	%
Other assets		411,309
Total assets	$	5,439,682
Liabilities and shareholders' equity
Noninterest-bearing demand	$	2,095,522	$	-		-	%
Savings and interest-bearing transaction		2,380,841		1,123		0.05	%
Time less than $100,000		136,324		318		0.23	%
Time $100,000 or more		109,563		415		0.38	%
Total interest-bearing deposits		2,626,728		1,856		0.07	%
Short-term borrowed funds		69,671		44		0.06	%
Total interest-bearing liabilities		2,696,399		1,900		0.07	%
Other liabilities		51,405
Shareholders' equity		596,356
Total liabilities and shareholders' equity	$	5,439,682
Net interest spread (1) (2)						2.92	%
Net interest and fee income and interest margin (1) (3)			$	148,594		2.95	%

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

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

⁽³⁾ Net interest margin is computed by calculating the difference between interest income and expense, divided by the average balance of interest-earning assets. The net interest margin is greater than the net interest spread due to the benefit of noninterest-bearing demand deposits.

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

	For the Year Ended December 31, 2016
			Interest
	Average		Income/		Yields/
	Balance		Expense		Rates
	($ in thousands)
Assets
Investment securities:
Taxable	$	2,212,234	$	42,718		1.93	%
Tax-exempt (1)		840,262		34,103		4.06	%
Total investments (1)		3,052,496		76,821		2.52	%
Loans:
Taxable		1,356,417		66,842		4.93	%
Tax-exempt (1)		67,842		3,530		5.20	%
Total loans (1)		1,424,259		70,372		4.94	%
Total interest bearing cash		365,243		1,868		0.51	%
Total interest-earning assets (1)		4,841,998		149,061		3.08	%
Other assets		404,146
Total assets	$	5,246,144
Liabilities and shareholders' equity
Noninterest-bearing demand	$	2,026,939	$	-		-	%
Savings and interest-bearing transaction		2,290,640		1,166		0.05	%
Time less than $100,000		154,022		402		0.26	%
Time $100,000 or more		118,750		509		0.43	%
Total interest-bearing deposits		2,563,412		2,077		0.08	%
Short-term borrowed funds		61,276		39		0.06	%
Total interest-bearing liabilities		2,624,688		2,116		0.08	%
Other liabilities		52,216
Shareholders' equity		542,301
Total liabilities and shareholders' equity	$	5,246,144
Net interest spread (1) (2)						3.00	%
Net interest and fee income and interest margin (1) (3)			$	146,945		3.03	%

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

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

⁽³⁾ Net interest margin is computed by calculating the difference between interest income and expense, divided by the average balance of interest-earning assets. The net interest margin is greater than the net interest spread due to the benefit of noninterest-bearing demand deposits.

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

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

Summary of Changes in Interest Income and Expense

	For the Year Ended December 31, 2018
	Compared with
	For the Year Ended December 31, 2017
	Volume			Yield/Rate			Total
	(In thousands)
Increase (decrease) in interest and loan fee income:
Investment securities:
Taxable	$	6,839		$	7,046		$	13,885
Tax-exempt (1)		(2,417	)		(4,710	)		(7,127	)
Total investments (1)		4,422			2,336			6,758
Loans:
Taxable		(4,715	)		2,255			(2,460	)
Tax-exempt (1)		(355	)		(517	)		(872	)
Total loans (1)		(5,070	)		1,738			(3,332	)
Total interest bearing cash		219			3,230			3,449
Total (decrease) in interest and loan fee income (1)		(429	)		7,304			6,875
Increase (decrease) in interest expense:
Deposits:
Savings and interest-bearing transaction		32			120			152
Time less than $100,000		(39	)		-			(39	)
Time $100,000 or more		(55	)		8			(47	)
Total interest-bearing deposits		(62	)		128			66
Short-term borrowed funds		(7	)		-			(7	)
Total (decrease) increase in interest expense		(69	)		128			59
(Decrease) increase in net interest and loan fee income (1)	$	(360	)	$	7,176		$	6,816

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

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Summary of Changes in Interest Income and Expense

	For the Year Ended December 31, 2017
	Compared with
	For the Year Ended December 31, 2016
	Volume			Yield/Rate			Total
	(In thousands)
Increase (decrease) in interest and loan fee income:
Investment securities:
Taxable	$	5,518		$	3,209		$	8,727
Tax-exempt (1)		(1,263	)		(1,103	)		(2,366	)
Total investments (1)		4,255			2,106			6,361
Loans:
Taxable		(5,118	)		(2,024	)		(7,142	)
Tax-exempt (1)		(266	)		(128	)		(394	)
Total loans (1)		(5,384	)		(2,152	)		(7,536	)
Total interest bearing cash		209			2,399			2,608
Total (decrease) increase in interest and loan fee income (1)		(920	)		2,353			1,433
Increase (decrease) in interest expense:
Deposits:
Savings and interest-bearing transaction		46			(89	)		(43	)
Time less than $100,000		(46	)		(38	)		(84	)
Time $100,000 or more		(39	)		(55	)		(94	)
Total interest-bearing deposits		(39	)		(182	)		(221	)
Short-term borrowed funds		5			-			5
Total decrease in interest expense		(34	)		(182	)		(216	)
(Decrease) increase in net interest and loan fee income (1)	$	(886	)	$	2,535		$	1,649

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

Provision for Loan Losses

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

The Company provided no provision for loan losses in 2018. The Company recorded a reversal of the provision for loan losses of $1.9 million in 2017 and $3.2 million in 2016. Classified loans declined $9.3 million (which included nonperforming loans of $4.9 million) in 2018. The provision for loan losses was zero in 2018, reflecting Management's evaluation of losses inherent in the loan portfolio. At December 31, 2018, the Company had $5.7 million in residential real estate secured loans which are indemnified from loss by the FDIC up to eighty percent of principal; the indemnification expired February 6, 2019. For further information regarding credit risk, net credit losses and the allowance for loan losses, see the “Loan Portfolio Credit Risk” and “Allowance for Loan Losses” sections of this Report.

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Noninterest Income

Components of Noninterest Income 

	For the Years Ended December 31,
	2018			2017		2016
	(In thousands)
Service charges on deposit accounts	$	18,508		$	19,612	$	20,854
Merchant processing services		9,630			8,426		6,377
Debit card fees		6,643			6,421		6,290
Trust fees		2,938			2,875		2,686
ATM processing fees		2,752			2,610		2,411
Other service fees		2,567			2,584		2,571
Life insurance gains		585			-		-
Financial services commissions		499			639		568
Equity securities (losses) gains		(52	)		7,955		-
Other noninterest income		4,079			5,506		4,817
Total Noninterest Income	$	48,149		$	56,628	$	46,574

In 2018, noninterest income decreased $8.5 million compared with 2017 primarily because 2017 results included $8.0 million in gains on sale of securities. Service charges on deposit accounts decreased $1.1 million due to declines in fees for overdrafts, checking accounts and analyzed accounts. The decreases in other noninterest income were partially offset by an increase in merchant processing services fees of $1.2 million due to successful sales efforts and higher transaction volumes and a $585 thousand life insurance gain in 2018.

In 2017, noninterest income increased $10.1 million compared with 2016 mainly due to $8.0 million in gains on sale of securities. Merchant processing services fees increased $2.0 million due to successful sales efforts and higher transaction volumes. ATM processing fees and debit card fees increased $199 thousand and $131 thousand, respectively, primarily due to increased transaction volumes. Trust fees increased $189 thousand due to successful sales efforts. Offsetting the increase were service charges on deposits which decreased $1.2 million due to declines in fees charged on overdrawn and insufficient funds accounts (down $1.0 million) and lower fees on analyzed accounts (down $220 thousand).

Noninterest Expense

Components of Noninterest Expense 

	For the Years Ended December 31,
	2018		2017		2016
	(In thousands)
Salaries and related benefits	$	53,007	$	51,519	$	51,507
Occupancy and equipment		19,679		19,430		19,017
Outsourced data processing services		9,229		9,035		8,505
Loss contingency		3,500		5,542		3
Professional fees		2,842		2,161		3,980
Amortization of identifiable intangibles		1,921		3,077		3,504
Courier service		1,779		1,732		1,952
Impairment of tax credit investments		-		625		-
Other noninterest expense		14,959		14,647		15,152
Total Noninterest Expense	$	106,916	$	107,768	$	103,620

In 2018, noninterest expense decreased $852 thousand compared with 2017. The 2018 noninterest expense included a $3.5 million mediated settlement to dismiss a lawsuit, subject to court approval. The 2017 noninterest expense included a $5.5 million loss contingency and a $625 thousand impairment of low income housing limited partnership investments due to enactment of the Act. The 2017 loss contingency represents the Company’s estimated refunds to customers of revenue recognized in prior years. Salaries and related benefits increased $1.5 million primarily due to the annual merit increase cycle and higher incentives and employee benefit costs. Professional fees increased $681 thousand due to higher legal and consulting fees. Amortization of intangibles decreased $1.2 million as assets are amortized on a declining balance method.

-28-

In 2017, noninterest expense increased $4.1 million compared with 2016. The 2017 noninterest expense included a $5.5 million loss contingency and a $625 thousand impairment of low income housing limited partnership investments due to enactment of the Act. The loss contingency represents the Company’s estimated refunds to customers of revenue recognized in prior years. Expenses for occupancy and equipment increased $413 thousand due to technology upgrades. Outsourced data processing services expense increased $530 thousand primarily due to additional processing services. Professional fees decreased $1.8 million due to lower legal fees associated with nonperforming assets. Amortization of intangibles decreased $427 thousand as assets are amortized on a declining balance method. Other noninterest expense decreased $505 thousand primarily due to lower insurance premiums.

Provision for Income Tax

The Company’s income tax provision was $19.4 million in 2018 compared with $37.1 million in 2017 and $21.1 million in 2016, representing effective tax rates of 21.4%, 42.6% and 26.4%, respectively. The 2017 income tax provision included a $12.3 million charge to re-measure the Company’s net deferred tax asset triggered by enactment of the Tax Cuts and Jobs Act of 2017. The book tax provisions for 2018 and 2017 include tax benefits of $737 thousand and $698 thousand, respectively, for tax deductions from the exercise of employee stock options which exceed related compensation expenses recognized in the financial statements. The lower effective tax rate for 2018 reflects a reduction in the federal corporate tax rate as a result of enactment of the Act and the tax-exempt nature of a $585 thousand life insurance policy gain.

Investment Securities Portfolio

The Company maintains an investment securities portfolio consisting of securities issued by the U.S. Treasury, U.S. Government sponsored entities, agency and non-agency mortgage backed securities, state and political subdivisions, corporations, and other securities.

Management has increased the investment securities portfolio in response to deposit growth and loan volume declines. The average carrying value of the Company’s investment securities portfolio was $3.6 billion for the year ended December 31, 2018 compared with $3.4 billion for the year ended December 31, 2017.

Management continually evaluates the Company’s investment securities portfolio in response to established asset/liability management objectives, changing market conditions that could affect profitability, liquidity, and the level of interest rate risk to which the Company is exposed. These evaluations may cause Management to change the level of funds the Company deploys into investment securities and change the composition of the Company’s investment securities portfolio. In the year ended December 31, 2018, Management increased the holdings of corporate securities in order to improve yields without extending the duration of the bond portfolio.

At December 31, 2018, substantially all of the Company’s investment securities continue to be investment grade rated by one or more major rating agencies. In addition to monitoring credit rating agency evaluations, Management performs its own evaluations regarding the credit worthiness of the issuer or the securitized assets underlying asset-backed securities. The Company’s procedures for evaluating investments in securities are in accordance with guidance issued by the Board of Governors of the Federal Reserve System, “Investing in Securities without Reliance on Nationally Recognized Statistical Rating Agencies” (SR 12-15) and other regulatory guidance. There have been no significant differences in the Company’s internal analyses compared with the ratings assigned by the third party credit rating agencies.

During the third quarter 2018, the Atlantic hurricane season caused severe damage within many U.S. states. Management evaluated investment security exposures within the counties receiving disaster designations. The Company’s exposures are limited to municipal bond and utility provider corporate debt from issuers within South Carolina counties, the state of North Carolina and the Florida panhandle, and has determined that the storms had no material impact on the valuation of its investment securities.

Effective January 1, 2018, upon adoption of ASU 2016-01, equity securities included in the Company’s available for sale portfolio of $1,800 thousand were reclassified to equity securities. The reclassification of equity securities resulted in recording a cumulative effect adjustment to decrease retained earnings by $142 thousand, net of tax.

At December 31, 2018, the market value of equity securities was $1,747 thousand. During the year ended December 31, 2018, the Company recognized gross unrealized holding losses of $52 thousand in earnings.

-29-

The following table shows the fair value carrying amount of the Company’s equity securities and debt securities available for sale as of the dates indicated:

	At December 31,
	2018		2017		2016
	(In thousands)
Equity securities:
Mutual funds	$	1,747	$	1,800	$	1,815
FHLMC(1) and FNMA stock(2)		-		-		10,869
Other securities		-		-		656
Total equity securities		1,747		1,800		13,340
Debt securities available for sale:
U.S. Treasury securities		139,574		-		-
Securities of U.S. Government sponsored entities		164,018		119,319		138,660
Agency residential mortgage-backed securities (MBS)		853,871		767,706		691,499
Non-agency residential MBS		114		154		271
Agency commercial MBS		1,842		2,219		-
Securities of U.S. Government entities		1,119		1,590		2,025
Obligations of states and political subdivisions		179,091		185,221		183,411
Asset-backed securities		-		-		695
Corporate securities		1,315,041		1,115,498		860,857
Total debt securities available for sale		2,654,670		2,191,707		1,877,418
Total	$	2,656,417	$	2,193,507	$	1,890,758

⁽¹⁾ Federal Home Loan Mortgage Corporation

⁽²⁾ Federal National Mortgage Association

The following table sets forth the relative maturities and contractual yields of the Company’s debt securities available for sale (stated at fair value) at December 31, 2018. Yields on state and political subdivision securities have been calculated on a fully taxable equivalent basis using the current federal statutory rate. Mortgage-backed securities are shown separately because they are typically paid in monthly installments over a number of years.

Debt Securities Available for Sale Maturity Distribution

	At December 31, 2018
	Within one year			After one but  within five  years			After five but  within ten  years			After ten years			Mortgage- backed			Total
	($ in thousands)
U.S. Treasury securities	$	139,574		$	-		$	-		$	-		$	-		$	139,574
Interest rate		2.33	%		-	%		-	%		-	%		-	%		2.33	%
Securities of U.S. Government sponsored entities		990			163,028			-			-			-			164,018
Interest rate		2.00	%		2.28	%		-	%		-	%		-	%		2.28	%
Securities of U.S. Government entities		-			-			1,119			-			-			1,119
Interest rate		-	%		-	%		3.49	%		-	%		-	%		3.49	%
Obligations of states and political subdivisions		17,774			39,589			84,758			36,970			-			179,091
Interest rate		2.61	%		4.27	%		4.34	%		2.91	%		-	%		3.74	%
Corporate securities		103,638			1,211,403			-			-			-			1,315,041
Interest rate		2.28	%		2.72	%		-	%		-	%		-	%		2.69	%
Subtotal		261,976			1,414,020			85,877			36,970			-			1,798,843
Interest rate		2.33	%		2.71	%		4.33	%		2.91	%		-	%		2.73	%
MBS		-			-			-			-			855,827			855,827
Interest rate		-	%		-	%		-	%		-	%		2.28	%		2.28	%
Total	$	261,976		$	1,414,020		$	85,877		$	36,970		$	855,827		$	2,654,670
Interest rate		2.33	%		2.71	%		4.33	%		2.91	%		2.28	%		2.55	%

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The following table shows the amortized cost carrying amount and fair value of the Company’s debt securities held to maturity as of the dates indicated:

	At December 31,
	2018		2017		2016
	(In thousands)
Securities of U.S. Government sponsored entities	$	-	$	-	$	581
Agency residential MBS		447,332		545,883		668,235
Non-agency residential MBS		3,387		4,462		5,370
Agency commercial MBS		-		9,041		9,332
Obligations of states and political subdivisions		533,890		599,478		662,794
Total	$	984,609	$	1,158,864	$	1,346,312
Fair value	$	971,445	$	1,155,342	$	1,340,741

The following table sets forth the relative maturities and contractual yields of the Company’s debt securities held to maturity at December 31, 2018. Yields on state and political subdivision securities have been calculated on a fully taxable equivalent basis using the current federal statutory rate. Mortgage-backed securities are shown separately because they are typically paid in monthly installments over a number of years.

Debt Securities Held to Maturity Maturity Distribution

	At December 31, 2018
	Within one year			After one but within five years			After five but within ten  years			After ten years			Mortgage- backed			Total
	($ in thousands)
Obligations of states and political subdivisions	$	86,172		$	214,137		$	232,544		$	1,037		$	-		$	533,890
Interest rate		2.15	%		2.73	%		3.62	%		3.53	%		-	%		3.00	%
MBS		-			-			-			-			450,719			450,719
Interest rate		-	%		-	%		-	%		-	%		2.07	%		2.07	%
Total	$	86,172		$	214,137		$	232,544		$	1,037		$	450,719		$	984,609
Interest rate		2.15	%		2.73	%		3.62	%		3.53	%		2.07	%		2.58	%

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

	At December 31,
	2018					2017
	Market value		As a  percent of total corporate securities			Market value		As a  percent of total corporate securities
	($ in thousands)
Basic materials	$	30,410		2	%	$	35,219		3	%
Communications		49,642		4	%		50,763		5	%
Consumer, cyclical		58,430		5	%		12,592		1	%
Consumer, non-cyclical		169,851		13	%		133,476		12	%
Energy		19,668		1	%		-		0	%
Financial		531,512		40	%		525,932		47	%
Industrial		152,636		12	%		129,989		12	%
Technology		105,324		8	%		71,708		6	%
Utilities		197,568		15	%		155,819		14	%
Total corporate securities	$	1,315,041		100	%	$	1,115,498		100	%

-31-

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

At December 31, 2018, the Company’s investment securities portfolios included securities issued by 583 state and local government municipalities and agencies located within 43 states. None of the Company’s investment securities were issued by Puerto Rican government entities. The largest exposure to any one municipality or agency was $9.3 million (fair value) represented by eight general obligation bonds.

	At December 31, 2018
	Amortized		Fair
	Cost		Value
	(In thousands)
Obligations of states and political subdivisions:
General obligation bonds:
California	$	104,607	$	105,730
Texas		56,653		56,286
New Jersey		35,501		35,527
Minnesota		29,609		29,593
Other (35 states)		267,402		266,136
Total general obligation bonds	$	493,772	$	493,272
Revenue bonds:
California	$	35,164	$	35,399
Kentucky		19,320		19,328
Colorado		14,564		14,539
Washington		13,034		13,228
Iowa		13,202		13,052
Indiana		12,007		12,034
Other (28 states)		113,047		112,805
Total revenue bonds	$	220,338	$	220,385
Total obligations of states and political subdivisions	$	714,110	$	713,657

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-32-

At December 31, 2017, the Company’s investment securities portfolios included securities issued by 647 state and local government municipalities and agencies located within 44 states. None of the Company’s investment securities were issued by Puerto Rican government entities. The largest exposure to any one municipality or agency was $10.0 million (fair value) represented by nine general obligation bonds.

	At December 31, 2017
	Amortized		Fair
	Cost		Value
	(In thousands)
Obligations of states and political subdivisions:
General obligation bonds:
California	$	104,330	$	106,311
Texas		66,636		66,699
New Jersey		39,387		39,612
Minnesota		30,485		30,707
Other (36 states)		292,102		294,779
Total general obligation bonds	$	532,940	$	538,108
Revenue bonds:
California	$	38,838	$	39,660
Kentucky		21,731		21,958
Iowa		17,304		17,287
Colorado		14,956		15,086
Washington		13,506		13,963
Indiana		12,914		13,054
Other (29 states)		130,196		131,301
Total revenue bonds	$	249,445	$	252,309
Total obligations of states and political subdivisions	$	782,385	$	790,417

At December 31, 2018 and 2017, the revenue bonds in the Company’s investment securities portfolios were issued by state and local government municipalities and agencies to fund public services such as water utility, sewer utility, recreational and school facilities, and general public and economic improvements. The revenue bonds were payable from 22 revenue sources at December 31, 2018 and at December 31, 2017. The revenue sources that represent 5% or more individually of the total revenue bonds are summarized in the following tables.

	At December 31, 2018
	Amortized		Fair
	Cost		Value
	(In thousands)
Revenue bonds by revenue source:
Water	$	46,326	$	46,671
Sales tax		28,264		28,517
Sewer		28,335		28,502
Lease (renewal)		17,013		17,051
College & University		13,919		13,714
Other (17 sources)		86,481		85,930
Total revenue bonds by revenue source	$	220,338	$	220,385

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-33-

	At December 31, 2017
	Amortized		Fair
	Cost		Value
	(In thousands)
Revenue bonds by revenue source:
Water	$	50,737	$	51,854
Sewer		30,427		31,030
Sales tax		30,233		30,777
Lease (renewal)		20,007		20,235
College & University		17,230		17,087
Other (17 sources)		100,811		101,326
Total revenue bonds by revenue source	$	249,445	$	252,309

See Note 2 to the consolidated financial statements for additional information related to the investment securities.

Loan Portfolio

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

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

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

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

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

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

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

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

Loan volumes have declined due to payoffs and problem loan workout activities, particularly with purchased loans, and reduced volumes of loan originations. The Company did not take an aggressive posture relative to loan portfolio growth during the post-recession period of historically low interest rates. Management increased investment securities as loan volumes declined.

-34-

The following table shows the composition of the loan portfolio of the Company by type of loan and type of borrower, on the dates indicated:

Loan Portfolio

	At December 31,
	2018		2017		2016		2015		2014
	(In thousands)
Commercial	$	275,080	$	335,996	$	354,697	$	382,748	$	391,815
Commercial real estate		580,480		568,584		542,171		637,456		718,604
Construction		3,982		5,649		2,555		3,951		13,872
Residential real estate		44,866		65,183		87,724		120,091		149,827
Consumer installment and other		302,794		312,570		365,564		389,150		426,172
Total loans	$	1,207,202	$	1,287,982	$	1,352,711	$	1,533,396	$	1,700,290

The following table shows the maturity distribution and interest rate sensitivity of commercial, commercial real estate, and construction loans at December 31, 2018. Balances exclude residential real estate loans and consumer loans totaling $347.7 million. These types of loans are typically paid in monthly installments over a number of years.

Loan Maturity Distribution

	At December 31, 2018
	Within One Year		One to Five Years		After Five Years		Total
	(In thousands)
Commercial and Commercial real estate	$	105,197	$	186,315	$	564,048	$	855,560
Construction		3,982		-		-		3,982
Total	$	109,179	$	186,315	$	564,048	$	859,542
Loans with fixed interest rates	$	42,082	$	75,003	$	42,152	$	159,237
Loans with floating or adjustable interest rates		67,097		111,312		521,896		700,305
Total	$	109,179	$	186,315	$	564,048	$	859,542

Commitments and Letters of Credit

The Company issues formal commitments on lines of credit to well-established and financially responsible commercial enterprises. Such commitments can be either secured or unsecured and are typically in the form of revolving lines of credit for seasonal working capital needs. Occasionally, such commitments are in the form of letters of credit to facilitate the customers’ particular business transactions. Commitment fees are generally charged for commitments and letters of credit. Commitments on lines of credit and letters of credit typically mature within one year. For further information, see the accompanying notes to the consolidated financial statements.

Loan Portfolio Credit Risk

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

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

-35-

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

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

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

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

Nonperforming Assets

	At December 31,
	2018		2017		2016		2015		2014
	(In thousands)
Nonperforming nonaccrual loans	$	998	$	1,641	$	3,956	$	14,648	$	17,494
Performing nonaccrual loans		3,870		4,285		4,429		350		110
Total nonaccrual loans		4,868		5,926		8,385		14,998		17,604
Accruing loans 90 or more days past due		551		531		497		295		502
Total nonperforming loans		5,419		6,457		8,882		15,293		18,106
Other real estate owned		350		1,426		3,095		9,264		6,374
Total nonperforming assets	$	5,769	$	7,883	$	11,977	$	24,557	$	24,480

Nonperforming assets have declined during 2018 due to payoffs, chargeoffs and sale of Other Real Estate Owned. At December 31, 2018, one loan secured by commercial real estate with a balance of $3.9 million was on nonaccrual status. The remaining four nonaccrual loans held at December 31, 2018 had an average carrying value of $250 thousand and the largest carrying value was $516 thousand.

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

-36-

Allowance for Credit Losses

The Company’s allowance for loan losses represents Management’s estimate of loan losses inherent in the loan portfolio. In evaluating credit risk for loans, Management measures loss potential of the carrying value of loans. As described above, payments received on nonaccrual loans may be applied against the principal balance of the loans until such time as full collection of the remaining recorded balance is expected.

The following table summarizes the allowance for loan losses, chargeoffs and recoveries for the periods indicated:

	For the Years Ended December 31,
	2018			2017			2016			2015			2014
	($ in thousands)
Analysis of the Allowance for Loan Losses
Balance, beginning of period	$	23,009		$	25,954		$	29,771		$	31,485		$	31,693
(Reversal of) provision for loan losses		-			(1,900	)		(3,200	)		-			2,800
Loans charged off:
Commercial		(513	)		(961	)		(2,023	)		(756	)		(2,152	)
Commercial real estate		(240	)		-			-			(449	)		(1,022	)
Construction		-			-			-			(431	)		-
Residential real estate		-			-			-			-			(30	)
Consumer and other installment		(4,124	)		(4,957	)		(4,749	)		(3,493	)		(4,214	)
Total chargeoffs		(4,877	)		(5,918	)		(6,772	)		(5,129	)		(7,418	)
Recoveries of loans previously charged off:
Commercial		1,447			762			4,028			1,174			2,275
Commercial real estate		-			88			554			290			213
Construction		-			1,899			-			45			53
Consumer and other installment		1,772			2,124			1,573			1,906			1,869
Total recoveries		3,219			4,873			6,155			3,415			4,410
Net loan losses		(1,658	)		(1,045	)		(617	)		(1,714	)		(3,008	)
Balance, end of period	$	21,351		$	23,009		$	25,954		$	29,771		$	31,485
Net loan losses as a percentage of average loans		0.14	%		0.08	%		0.04	%		0.11	%		0.17	%

The Company's allowance for loan losses is maintained at a level considered appropriate to provide for losses that can be estimated based upon specific and general conditions. These include conditions unique to individual borrowers, as well as overall loan loss experience, the amount of past due, nonperforming and classified loans, recommendations of regulatory authorities, prevailing economic conditions and other factors. A portion of the allowance is individually allocated to impaired loans whose full collectability of principal is uncertain. Such allocations are determined by Management based on loan-by-loan analyses. The Company evaluates for impairment all loans with outstanding principal balances in excess of $500 thousand which are classified or on nonaccrual status and all “troubled debt restructured” loans. The remainder of the loan portfolio is collectively evaluated for impairment based in part on quantitative analyses of historical loan loss experience of loan portfolio segments to determine standard loss rates for each segment. The loss rate for each loan portfolio segment reflects both the historical loss experience during a look-back period and a loss emergence period. Liquidating purchased consumer installment loans are evaluated separately by applying historical loss rates to forecasted liquidating principal balances to measure losses inherent in this portfolio segment. The loss rates are applied to segmented loan balances to allocate the allowance to the segments of the loan portfolio.

The remainder of the allowance is considered to be unallocated. The unallocated allowance is established to provide for probable losses that have been incurred as of the reporting date but not reflected in the allocated allowance. The unallocated allowance addresses additional qualitative factors consistent with Management's analysis of the level of risks inherent in the loan portfolio, which are related to the risks of the Company's general lending activity. Included in the unallocated allowance is the risk of losses that are attributable to national or local economic or industry trends which have occurred but have not yet been recognized in loan chargeoff history (external factors). The primary external factor evaluated by the Company and the judgmental amount of unallocated reserve assigned by Management as of December 31, 2018 is economic and business conditions $0.4 million. Also included in the unallocated allowance is the risk of losses attributable to general attributes of the Company's loan portfolio and credit administration (internal factors). The internal factors evaluated by the Company and the judgmental amount of unallocated reserve assigned by Management are: loan review system $0.9 million, adequacy of lending Management and staff $0.8 million and concentrations of credit $1.0 million.

-37-

The following table presents the allocation of the allowance for loan losses as of December 31 for the years indicated:

	At December 31,
	2018					2017					2016					2015					2014
	Allocation of the Allowance Balance		Loans as Percent of Total Loans			Allocation of the Allowance Balance		Loans as Percent of Total Loans			Allocation of the Allowance Balance		Loans as Percent of Total Loans			Allocation of the Allowance Balance		Loans as Percent of Total Loans			Allocation of the Allowance Balance		Loans as Percent of Total Loans
	($ in thousands)
Commercial	$	6,311		23	%	$	7,746		26	%	$	8,327		26	%	$	9,559		25	%	$	5,460		23	%
Commercial real estate		3,884		48	%		3,849		44	%		3,330		40	%		4,212		42	%		4,245		42	%
Construction		1,465		-	%		335		1	%		152		-	%		235		-	%		654		1	%
Residential real estate		869		4	%		995		5	%		1,330		7	%		1,801		8	%		2,241		9	%
Consumer installment and other		5,645		25	%		6,418		24	%		7,980		27	%		8,001		25	%		9,827		25	%
Unallocated portion		3,177		-	%		3,666		-	%		4,835		-	%		5,963		-	%		9,058		-	%
Total	$	21,351		100	%	$	23,009		100	%	$	25,954		100	%	$	29,771		100	%	$	31,485		100	%

The portion of the allowance for loan losses ascribed to loan segments changed from December 31, 2017 to December 31, 2018 based on Management’s evaluation of credit risk. The allowance for loan losses ascribed to commercial loans declined due to the improved financial performance of a specific borrower. The allowance for loan losses ascribed to construction loans increased based on an increased level of credit exposure relative to real property values. The allowance for loan losses ascribed to consumer installment loans declined due to Management’s measurement of a shortened loss emergence period.

	Allowance for Loan Losses
	For the Year Ended December 31, 2018
												Consumer
				Commercial					Residential			Installment
	Commercial			Real Estate			Construction		Real Estate			and Other			Unallocated			Total
	(In thousands)
Allowance for loan losses:
Balance at beginning of period	$	7,746		$	3,849		$	335	$	995		$	6,418		$	3,666		$	23,009
(Reversal) provision		(2,369	)		275			1,130		(126	)		1,579			(489	)		-
Chargeoffs		(513	)		(240	)		-		-			(4,124	)		-			(4,877	)
Recoveries		1,447			-			-		-			1,772			-			3,219
Total allowance for loan losses	$	6,311		$	3,884		$	1,465	$	869		$	5,645		$	3,177		$	21,351

	Allowance for Loan Losses and Recorded Investment in Loans Evaluated for Impairment
	At December 31, 2018
	Commercial		Commercial Real Estate		Construction		Residential Real Estate		Consumer Installment and Other		Unallocated		Total
	(In thousands)
Allowance for loan losses:
Individually evaluated for impairment	$	2,752	$	-	$	-	$	-	$	-	$	-	$	2,752
Collectively evaluated for impairment		3,559		3,884		1,465		869		5,645		3,177		18,599
Purchased loans with evidence of credit deterioration		-		-		-		-		-		-		-
Total	$	6,311	$	3,884	$	1,465	$	869	$	5,645	$	3,177	$	21,351
Carrying value of loans:
Individually evaluated for impairment	$	9,921	$	8,217	$	-	$	717	$	-	$	-	$	18,855
Collectively evaluated for impairment		265,136		572,042		3,982		44,149		302,651		-		1,187,960
Purchased loans with evidence of credit deterioration		23		221		-		-		143		-		387
Total	$	275,080	$	580,480	$	3,982	$	44,866	$	302,794	$	-	$	1,207,202

Management considers the $21.4 million allowance for loan losses to be adequate as a reserve against probable incurred loan losses in the loan portfolio as of December 31, 2018.

See Note 3 to the consolidated financial statements for additional information related to the loan portfolio, loan portfolio credit risk, and allowance for loan losses.

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-38-

Asset/Liability and Market Risk Management

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

Interest Rate Risk

Interest rate risk is a significant market risk affecting the Company. Many factors affect the Company’s exposure to interest rates, such as general economic and financial conditions, customer preferences, historical pricing relationships, and re-pricing characteristics of financial instruments. Financial instruments may mature or re-price at different times. Financial instruments may re-price at the same time but by different amounts. Short-term and long-term market interest rates may change by different amounts. The timing and amount of cash flows of various financial instruments may change as interest rates change. In addition, the changing levels of interest rates may have an impact on loan demand and demand for various deposit products.

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

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

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

The Company’s asset and liability position was slightly “asset sensitive” at December 31, 2018, depending on the interest rate assumptions applied to each simulation model. An “asset sensitive” position results in a slightly larger change in interest income than in interest expense resulting from application of assumed interest rate changes.

At December 31, 2018, Management’s measurements of estimated changes in net interest income were:

Static Simulation:
Assumed Immediate Parallel Shift in Interest Rates	-1.00	%	0.00	%	+1.00%
First Year Change in Net Interest Income	-7.50	%	0.00	%	+5.30%
Dynamic Simulation:
Assumed Change in Interest Rates Over 1 Year	-1.00	%	0.00	%	+1.00%
First Year Change in Net Interest Income	-3.60	%	0.00	%	+2.80%

Simulation estimates depend on, and will change with, the size and mix of the actual and projected composition of financial instruments at the time of each simulation.

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

-39-

Market Risk - Equity Markets

Equity price risk can affect the Company. Preferred or common stock holdings, as permitted by banking regulations, can fluctuate in value. Changes in value of preferred or common stock holdings are recognized in the Company's income statement.

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

Market Risk - Other

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

Liquidity and Funding

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

In recent years, the Company's deposit base has provided the majority of the Company's funding requirements. This relatively stable and low-cost source of funds, along with shareholders' equity, provided 98 percent of funding for average total assets in the year ended December 31, 2018 and 2017. The stability of the Company’s funding from customer deposits is in part reliant on the confidence clients have in the Company. The Company places a very high priority in maintaining this confidence through conservative credit and capital management practices and by maintaining an appropriate level of liquidity.

Liquidity is further provided by assets such as balances held at the Federal Reserve Bank, investment securities, and amortizing loans. The Company's investment securities portfolio provides a substantial secondary source of liquidity. The Company held $3.6 billion in total investment securities at December 31, 2018. Under certain deposit, borrowing and other arrangements, the Company must hold and pledge investment securities as collateral. At December 31, 2018, such collateral requirements totaled approximately $728 million.

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

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

-40-

Westamerica Bancorporation ("Parent Company") is a separate entity apart from the Bank and must provide for its own liquidity. In addition to its operating expenses, the Parent Company is responsible for the payment of dividends declared for its shareholders, and interest and principal on any outstanding debt. The Parent Company currently has no debt. Substantially all of the Parent Company's revenues are obtained from subsidiary dividends and service fees.

The Bank’s dividends paid to the Parent Company, proceeds from the exercise of stock options, and Parent Company cash balances provided adequate cash for the Parent Company to pay shareholder dividends of $43 million in 2018 and $41 million in 2017, and retire common stock in the amount of $524 thousand in 2018 and $314 thousand in 2017. Payment of dividends to the Parent Company by the Bank is limited under California and Federal laws. The Company believes these regulatory dividend restrictions will not have an impact on the Parent Company's ability to meet its ongoing cash obligations.

Contractual Obligations

Deposits and sort-term borrowings are detailed on pages 43 and 44. The following table sets forth the known contractual obligations, except deposits, short-term borrowing arrangements and post-retirement benefit plans, of the Company:

	At December 31, 2018
	Within One Year		Over One to Three Years		Over Three to Five Years		After Five Years		Total
	(In thousands)
Operating Lease Obligations	$	5,996	$	7,150	$	3,144	$	1,044	$	17,334
Purchase Obligations		8,301		16,991		-		-		25,292
Total	$	14,297	$	24,141	$	3,144	$	1,044	$	42,626

Operating lease obligations have not been reduced by minimum sublease rentals of $1 million due in the future under noncancelable subleases. Operating lease obligations may be retired prior to the contractual maturity as discussed in the notes to the consolidated financial statements. The purchase obligation consists of the Company’s minimum liabilities under contracts with third-party automation services providers .

Capital Resources

The Company has historically generated high levels of earnings, which provide a means of accumulating capital. The Company's net income as a percentage of average shareholders' equity (“return on equity” or “ROE”) has been 11.3% in 2018, 8.4% in 2017 and 10.9% in 2016. The Company also raises capital as employees exercise stock options. Capital raised through the exercise of stock options was $13 million in 2018, $25 million in 2017 and $24 million in 2016.

The Company paid common dividends totaling $43 million in 2018, $41 million in 2017 and $40 million in 2016, which represent dividends per common share of $1.60, $1.57 and $1.56, respectively. The Company's earnings have historically exceeded dividends paid to shareholders. The amount of earnings in excess of dividends provides the Company resources to finance growth and maintain appropriate levels of shareholders' equity. In the absence of profitable growth opportunities, the Company has at times repurchased and retired its common stock as another means to return earnings to shareholders. The Company repurchased and retired 9 thousand shares valued at $524 thousand in 2018, 6 thousand shares valued at $314 thousand in 2017 and 137 thousand shares valued at $6 million in 2016.

The Company's primary capital resource is shareholders' equity, which was $616 million at December 31, 2018 compared with $590 million at December 31, 2017. The Company's ratio of equity to total assets was 11.05% at December 31, 2018 and 10.71% at December 31, 2017.

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

-41-

Capital to Risk-Adjusted Assets

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

· Introduced a new “Common Equity Tier 1” capital measurement,

· Established higher minimum levels of capital,

· Introduced a “capital conservation buffer,”

· Increased the risk-weighting of certain assets, and

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

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

Banking organizations that are not subject to the “advanced approaches rule” began complying with the final rule on January 1, 2015; on such date, the Company and the Bank became subject to the revised definitions of regulatory capital, the new minimum regulatory capital ratios, and various regulatory capital adjustments and deductions according to transition provisions and timelines. All banking organizations began calculating standardized total risk-weighted assets on January 1, 2015. The transition period for the capital conservation buffer for all banking organizations began on January 1, 2016 and ended January 1, 2019, when the 2.5% capital conservation buffer was fully implemented. Any bank subject to the rule which is unable to maintain its “capital conservation buffer” above the minimum regulatory capital ratios will be restricted in the payment of discretionary executive compensation and shareholder distributions, such as dividends and share repurchases.

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

The capital ratios for the Company and the Bank under the new capital framework are presented in the tables below, on the dates indicated.

													To Be
							Required for						Well-capitalized
							Capital Adequacy Purposes						Under Prompt
	At December 31, 2018						Effective			Effective			Corrective Action
	Company			Bank			January 1, 2018			January 1, 2019			Regulations (Bank)
Common Equity Tier I Capital		16.30	%		13.01	%		6.375	%(1)		7.00	%(2)		6.50	%
Tier I Capital		16.30	%		13.01	%		7.875	%(1)		8.50	%(2)		8.00	%
Total Capital		17.03	%		13.94	%		9.875	%(1)		10.50	%(2)		10.00	%
Leverage Ratio		9.51	%		7.55	%		4.000	%		4.00	%		5.00	%

⁽¹⁾ Includes 1.875% capital conservation buffer.

⁽²⁾ Includes 2.5% capital conservation buffer.

													To Be
							Required for						Well-capitalized
							Capital Adequacy Purposes						Under Prompt
	At December 31, 2017						Effective			Effective			Corrective Action
	Company			Bank			January 1, 2017			January 1, 2019			Regulations (Bank)
Common Equity Tier I Capital		15.36	%		12.50	%		5.75	%(3)		7.00	%(4)		6.50	%
Tier I Capital		15.36	%		12.50	%		7.25	%(3)		8.50	%(4)		8.00	%
Total Capital		16.17	%		13.52	%		9.25	%(3)		10.50	%(4)		10.00	%
Leverage Ratio		8.86	%		7.16	%		4.00	%		4.00	%		5.00	%

⁽³⁾ Includes 1.25% capital conservation buffer.

⁽⁴⁾ Includes 2.5% capital conservation buffer.

-42-

In June 2016, the Financial Accounting Standards Board issued an update to the accounting standards for credit losses known as the "Current Expected Credit Losses" (CECL) methodology, which replaces the existing incurred loss methodology for certain financial assets. The Company intends to timely adopt the CECL methodology January 1, 2020, which involves an implementing accounting entry to retained earnings. In December 2018, the federal bank regulatory agencies approved a final rule which will be effective April 1, 2019 modifying their regulatory capital rules and providing an option to phase in over a period of three years the day-one regulatory capital effects of implementing the CECL methodology. The Company has not determined whether it will elect the three year phase in period for the day-one regulatory capital effects. See Note 1 to the consolidated financial statements, “Summary of Significant Accounting Policies: Recently Issued Accounting Standards” for more information on the CECL methodology.

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

Deposit Categories

The Company primarily attracts deposits from local businesses and professionals, as well as through retail savings and checking accounts, and, to a more limited extent, certificates of deposit.

The following table summarizes the Company’s average daily amount of deposits and the rates paid for the periods indicated:

Deposit Distribution and Average Rates Paid

	For the Years Ended December 31,
	2018								2017								2016
	Average Balance		Percentage of Total Deposits			Rate			Average Balance		Percentage of Total Deposits			Rate			Average Balance		Percentage of Total Deposits			Rate
	($ In thousands)
Noninterest-bearing demand	$	2,209,924		45.4	%		-	%	$	2,095,522		44.4	%		-	%	$	2,026,939		44.1	%		-	%
Interest bearing:
Transaction		928,277		19.0	%		0.04	%		888,116		18.8	%		0.03	%		862,581		18.8	%		0.03	%
Savings		1,519,375		31.2	%		0.06	%		1,492,725		31.6	%		0.02	%		1,428,059		31.1	%		0.06	%
Time less than $100 thousand		119,586		2.5	%		0.23	%		136,324		2.9	%		0.17	%		154,022		3.4	%		0.26	%
Time $100 thousand or more		94,919		1.9	%		0.39	%		109,563		2.3	%		0.38	%		118,750		2.6	%		0.43	%
Total (1)	$	4,872,081		100.0	%		0.04	%	$	4,722,250		100.0	%		0.04	%	$	4,590,351		100.0	%		0.05	%

⁽¹⁾ The rates for total deposits reflect the value of noninterest-bearing deposits.

The Company’s strategy includes building the value of its deposit base by building balances of lower-costing deposits and avoiding reliance on higher-costing time deposits. From 2016 to 2018 higher costing time deposits declined from 6% to 4% of total deposits. The Company’s average balances of checking and savings accounts represented 96% of average balances of total deposits in 2018 compared with 95% in 2017 and 94% in 2016.

Total time deposits were $195 million and $232 million at December 31, 2018 and 2017, respectively. The following table sets forth, by time remaining to maturity, the Company’s total domestic time deposits. The Company has no foreign time deposits.

-43-

Time Deposits Maturity Distribution

	At December 31, 2018
	(In thousands)
2019	$	144,482
2020		26,229
2021		13,574
2022		5,463
2023		5,473
Thereafter		30
Total	$	195,251

The following sets forth, by time remaining to maturity, the Company’s domestic time deposits in amounts of $100 thousand or more:

Time Deposits $100,000 or more Maturity Distribution

	At December 31, 2018
	(In thousands)
Three months or less	$	27,718
Over three through six months		14,785
Over six through twelve months		21,932
Over twelve months		28,162
Total	$	92,597

Short-term Borrowings

The following table sets forth the short-term borrowings of the Company:

Short-Term Borrowings Distribution

	At December 31,
	2018		2017		2016
	(In thousands)
Securities sold under agreements to repurchase the securities	$	51,247	$	58,471	$	59,078
Total short-term borrowings	$	51,247	$	58,471	$	59,078

Further detail of federal funds purchased and other borrowed funds is as follows:

	For the Years Ended December 31,
	2018			2017			2016
	($ in thousands)
Federal funds purchased balances and rates paid on outstanding amount:
Average balance for the year	$	1		$	5		$	5
Maximum month-end balance during the year		-			-			-
Average interest rate for the year		-	%		1.53	%		0.77	%
Average interest rate at period end		-	%		-	%		-	%
Securities sold under agreements to repurchase the securities balances and rates paid on outstanding amount:
Average balance for the year	$	59,991		$	69,666		$	61,271
Maximum month-end balance during the year		68,894			82,126			74,815
Average interest rate for the year		0.06	%		0.06	%		0.06	%
Average interest rate at period end		0.06	%		0.06	%		0.06	%

-44-

Financial Ratios

The following table shows key financial ratios for the periods indicated:

	At and For the Years Ended December 31,
	2018			2017			2016
Return on average total assets		1.27	%		0.92	%		1.12	%
Return on average common shareholders' equity		11.35	%		8.39	%		10.85	%
Average shareholders' equity as a percentage of:
Average total assets		11.22	%		10.96	%		10.34	%
Average total loans		52.16	%		45.34	%		38.08	%
Average total deposits		12.95	%		12.63	%		11.81	%
Common dividend payout ratio		60	%		83	%		68	%

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-45-

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

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

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO FINANCIAL STATEMENTS

	Page
Management’s Internal Control Over Financial Reporting	47
Consolidated Balance Sheets as of December 31, 2018 and 2017	48
Consolidated Statements of Income for the years ended December 31, 2018, 2017 and 2016	49
Consolidated Statements of Comprehensive Income for the years ended December 31, 2018, 2017 and 2016	50
Consolidated Statements of Changes in Shareholders’ Equity for the years ended December 31, 2018, 2017 and 2016	51
Consolidated Statements of Cash Flows for the years ended December 31, 2018, 2017 and 2016	52
Notes to the Consolidated Financial Statements	53
Report of Independent Registered Public Accounting Firm	91

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MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Management of Westamerica Bancorporation and subsidiaries (the “Company”) is responsible for establishing and maintaining adequate internal control over financial reporting, and for performing an assessment of the effectiveness of internal control over financial reporting as of December 31, 2018. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s system of internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of Management and Directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Management performed an assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2018 based upon criteria in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on this assessment, Management determined that the Company’s internal control over financial reporting was effective as of December 31, 2018 based on the criteria in Internal Control - Integrated Framework (2013) issued by COSO.

The Company’s independent registered public accounting firm has issued an attestation report on the Company’s internal control over financial reporting. Their opinion and attestation on internal control over financial reporting appear on page 91.

Dated: February 28, 2019

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WESTAMERICA BANCORPORATION

CONSOLIDATED BALANCE SHEETS

	At December 31,
	2018			2017
	(In thousands)
Assets:
Cash and due from banks	$	420,284		$	575,002
Equity securities		1,747			1,800
Debt securities available for sale		2,654,670			2,191,707
Debt securities held to maturity, with fair values of: $971,445 at December 31, 2018 and $1,155,342 at December 31, 2017		984,609			1,158,864
Loans		1,207,202			1,287,982
Allowance for loan losses		(21,351	)		(23,009	)
Loans, net of allowance for loan losses		1,185,851			1,264,973
Other real estate owned		350			1,426
Premises and equipment, net		34,507			35,301
Identifiable intangibles, net		1,929			3,850
Goodwill		121,673			121,673
Other assets		162,906			158,450
Total Assets	$	5,568,526		$	5,513,046
Liabilities:
Noninterest-bearing deposits	$	2,243,251		$	2,197,526
Interest-bearing deposits		2,623,588			2,630,087
Total deposits		4,866,839			4,827,613
Short-term borrowed funds		51,247			58,471
Other liabilities		34,849			36,723
Total Liabilities		4,952,935			4,922,807
Contingencies (Note 13)
Shareholders' Equity:
Common stock (no par value), authorized - 150,000 shares Issued and outstanding: 26,730 at December 31, 2018 and 26,425 at December 31, 2017		448,351			431,734
Deferred compensation		1,395			1,533
Accumulated other comprehensive loss		(39,996	)		(16,832	)
Retained earnings		205,841			173,804
Total Shareholders' Equity		615,591			590,239
Total Liabilities and Shareholders' Equity	$	5,568,526		$	5,513,046

See accompanying notes to consolidated financial statements.

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WESTAMERICA BANCORPORATION

CONSOLIDATED STATEMENTS OF INCOME

	For the Years Ended December 31,
	2018			2017			2016
	(In thousands, except per share data)
Interest and Loan Fee Income:
Loans	$	59,030		$	61,740		$	69,139
Equity securities		354			293			267
Debt securities available for sale		60,383			44,371			34,009
Debt securities held to maturity		24,031			27,432			30,636
Interest bearing cash		7,925			4,476			1,868
Total Interest and Loan Fee Income		151,723			138,312			135,919
Interest Expense:
Deposits		1,922			1,856			2,077
Short-term borrowed funds		37			44			39
Total Interest Expense		1,959			1,900			2,116
Net Interest and Loan Fee Income		149,764			136,412			133,803
Reversal of Provision for Loan Losses		-			(1,900	)		(3,200	)
Net Interest and Loan Fee Income After Reversal of Provision For Loan Losses		149,764			138,312			137,003
Noninterest Income:
Service charges on deposit accounts		18,508			19,612			20,854
Merchant processing services		9,630			8,426			6,377
Debit card fees		6,643			6,421			6,290
Trust fees		2,938			2,875			2,686
ATM processing fees		2,752			2,610			2,411
Other service fees		2,567			2,584			2,571
Life insurance gains		585			-			-
Financial services commissions		499			639			568
Equity securities (losses) gains		(52	)		7,955			-
Other noninterest income		4,079			5,506			4,817
Total Noninterest Income		48,149			56,628			46,574
Noninterest Expense:
Salaries and related benefits		53,007			51,519			51,507
Occupancy and equipment		19,679			19,430			19,017
Outsourced data processing services		9,229			9,035			8,505
Loss contingency		3,500			5,542			3
Professional fees		2,842			2,161			3,980
Amortization of identifiable intangibles		1,921			3,077			3,504
Courier service		1,779			1,732			1,952
Impairment of tax credit investments		-			625			-
Other noninterest expense		14,959			14,647			15,152
Total Noninterest Expense		106,916			107,768			103,620
Income Before Income Taxes		90,997			87,172			79,957
Provision for income taxes		19,433			37,147			21,104
Net Income	$	71,564		$	50,025		$	58,853
Average Common Shares Outstanding		26,649			26,291			25,612
Diluted Average Common Shares Outstanding		26,756			26,419			25,678
Per Common Share Data:
Basic earnings	$	2.69		$	1.90		$	2.30
Diluted earnings		2.67			1.89			2.29
Dividends paid		1.60			1.57			1.56

See accompanying notes to consolidated financial statements.

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WESTAMERICA BANCORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

	For the Years Ended December 31,
	2018			2017			2016
	(In thousands)
Net Income	$	71,564		$	50,025		$	58,853
Other comprehensive loss:
Changes in net unrealized losses on debt securities available for sale		(27,939	)		(3,767	)		(18,610	)
Deferred tax benefit		8,258			1,585			7,825
Reclassification of gains included in net income		-			(7,955	)		-
Deferred tax expense on gains included in net income		-			3,345			-
Changes in unrealized losses on debt securities available for sale, net of tax		(19,681	)		(6,792	)		(10,785	)
Post-retirement benefit transition obligation amortization		-			59			61
Deferred tax expense		-			(25	)		(25	)
Post-retirement benefit transition obligation amortization, net of tax		-			34			36
Total Other Comprehensive Loss		(19,681	)		(6,758	)		(10,749	)
Total Comprehensive Income	$	51,883		$	43,267		$	48,104

See accompanying notes to consolidated financial statements.

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WESTAMERICA BANCORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

	Common Shares Outstanding			Common Stock			Deferred Compensation			Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Total
	(In thousands, except per share data)
Balance, December 31, 2015		25,528		$	378,858		$	2,578		$	675		$	150,094		$	532,205
Net income for the year 2016														58,853			58,853
Other comprehensive loss											(10,749	)					(10,749	)
Exercise of stock options		499			24,031												24,031
Tax benefit increase upon exercise and expiration of stock options					394												394
Restricted stock activity		15			1,798			(1,045	)								753
Stock based compensation					1,494												1,494
Stock awarded to employees		2			90												90
Retirement of common stock		(137	)		(2,059	)								(3,721	)		(5,780	)
Dividends ($1.56 per share)														(39,924	)		(39,924	)
Balance, December 31, 2016		25,907			404,606			1,533			(10,074	)		165,302			561,367
Net income for the year 2017														50,025			50,025
Other comprehensive loss											(6,758	)					(6,758	)
Exercise of stock options		509			24,583												24,583
Restricted stock activity		13			707												707
Stock based compensation					1,824												1,824
Stock awarded to employees		2			104												104
Retirement of common stock		(6	)		(90	)								(224	)		(314	)
Dividends ($1.57 per share)														(41,299	)		(41,299	)
Balance, December 31, 2017		26,425			431,734			1,533			(16,832	)		173,804			590,239
Cumulative effect of equity securities losses reclassified											142			(142	)		-
Adjusted Balance, January 1, 2018		26,425			431,734			1,533			(16,690	)		173,662			590,239
Reclass stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017											(3,625	)		3,625			-
Net income for the year 2018														71,564			71,564
Other comprehensive loss											(19,681	)					(19,681	)
Exercise of stock options		292			13,373												13,373
Restricted stock activity		20			1,281			(138	)								1,143
Stock based compensation					1,988												1,988
Stock awarded to employees		2			124												124
Retirement of common stock		(9	)		(149	)								(375	)		(524	)
Dividends ($1.60 per share)														(42,635	)		(42,635	)
Balance, December 31, 2018		26,730		$	448,351		$	1,395		$	(39,996	)	$	205,841		$	615,591

See accompanying notes to consolidated financial statements.

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WESTAMERICA BANCORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

	For the Years Ended December 31,
	2018			2017			2016
Operating Activities:	(In thousands)
Net income	$	71,564		$	50,025		$	58,853
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization/accretion		24,402			26,082			19,939
Reversal of provision for loan losses		-			(1,900	)		(3,200	)
Net amortization of deferred loan fees		(203	)		(46	)		(340	)
Increase in interest income receivable		(2,277	)		(2,068	)		(1,316	)
(Increase) decrease in net deferred tax asset		(943	)		27,018			4,380
Increase in other assets		(4,017	)		(1,732	)		(3,321	)
Stock option compensation expense		1,988			1,824			1,494
Tax benefit increase upon exercise and expiration of stock options		-			-			(394	)
Increase (decrease) in income taxes payable		7,554			(6,650	)		(40	)
Decrease in interest expense payable		(27	)		(31	)		(52	)
(Decrease) increase in other liabilities		(580	)		(3,016	)		2,026
Life insurance gains		(585	)		-			-
Equity securities losses		52			-			-
Gain on sale of other assets		-			(1,004	)		-
Gain on sale of securities		-			(7,955	)		-
(Gain) loss on disposal of premises and equipment		(216	)		60			30
Net (gain) loss on sale of or write-down of foreclosed assets		(83	)		147			(422	)
Net Cash Provided by Operating Activities		96,629			80,754			77,637
Investing Activities:
Net repayments of loans		80,985			66,065			183,506
Net payments under FDIC(1) indemnification agreements		-			(63	)		(127	)
Proceeds from life insurance		1,169			-			-
Purchases of debt securities available for sale		(854,555	)		(635,814	)		(1,080,959	)
Proceeds from sale/maturity/calls of debt securities available for sale		353,327			319,324			737,625
Purchases of debt securities held to maturity		-			-			(246,956	)
Proceeds from maturity/calls of debt securities held to maturity		167,029			178,429			204,054
Purchases of premises and equipment		(3,123	)		(2,720	)		(1,818	)
Proceeds from sale of premises and equipment		446			-			-
Proceeds from sale of foreclosed assets		1,159			1,521			7,412
Net Cash Used in Investing Activities		(253,563	)		(73,258	)		(197,263	)
Financing Activities:
Net change in deposits		39,226			122,872			164,082
Net change in short-term borrowings		(7,224	)		(607	)		6,050
Exercise of stock options		13,373			24,583			24,031
Taxes paid by withholding shares for tax purposes		-			-			(356	)
Tax benefit increase upon exercise and expiration of stock options		-			-			394
Retirement of common stock		(524	)		(314	)		(5,424	)
Common stock dividends paid		(42,635	)		(41,299	)		(39,924	)
Net Cash Provided by Financing Activities		2,216			105,235			148,853
Net Change In Cash and Due from Banks		(154,718	)		112,731			29,227
Cash and Due from Banks at Beginning of Period		575,002			462,271			433,044
Cash and Due from Banks at End of Period	$	420,284		$	575,002		$	462,271
Supplemental Cash Flow Disclosures:
Supplemental disclosure of noncash activities:
Loan collateral transferred to other real estate owned	$	-		$	-		$	821
Supplemental disclosure of cash flow activities:
Interest paid for the period		1,932			1,931			2,202
Income tax payments for the period		13,627			17,351			19,264

See accompanying notes to consolidated financial statements.

⁽¹⁾ Federal Deposit Insurance Corporation ("FDIC")

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WESTAMERICA BANCORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1: Business and Accounting Policies

Westamerica Bancorporation, a registered bank holding company (the “Company”), provides a full range of banking services to corporate and individual customers in Northern and Central California through its wholly-owned subsidiary bank, Westamerica Bank (the “Bank”). The Bank is subject to competition from both financial and nonfinancial institutions and to the regulations of certain agencies and undergoes periodic examinations by those regulatory authorities. All of the financial service operations are considered by management to be aggregated in one reportable operating segment.

The Company has evaluated events and transactions subsequent to the balance sheet date. Based on this evaluation, the Company is not aware of any events or transactions that occurred subsequent to the balance sheet date but prior to filing that would require recognition or disclosure in its consolidated financial statements. Certain amounts in prior periods have been reclassified to conform to the current presentation.

Summary of Significant Accounting Policies

The consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America. The following is a summary of significant policies used in the preparation of the accompanying financial statements.

Accounting Estimates. Certain accounting policies underlying the preparation of these financial statements require Management to make estimates, assumptions, and judgments that affect the amounts reported in the financial statements and accompanying notes. These estimates, assumptions, and judgments are based on information available as of the date of the financial statements; accordingly, as this information changes, the financial statements could reflect different estimates, assumptions, and judgments and as such have a greater possibility of producing results that could be materially different than originally reported. Estimates, assumptions, and judgments are necessary when assets and liabilities are required to be recorded at fair value, when a decline in fair value of an asset not carried on the financial statements at fair value warrants an impairment writedown or valuation reserve to be established, or when an asset or liability needs to be recorded contingent upon a future event. The allowance for loan losses accounting is an area requiring the most subjective or complex judgments, and as such could be most subject to revision as new information becomes available. A discussion of the factors affecting the accounting for the allowance for loan losses is included in the following “Loans” and “Allowance for Credit Losses” sections. Carrying assets and liabilities at fair value inherently results in financial statement volatility. The fair values and the information used to record valuation adjustments for certain assets and liabilities are based either on quoted market prices or are provided by other third party sources, when available. The “Securities” section discusses the factors that may affect the valuation of the Company’s securities. Although the estimates contemplate current conditions and how Management expects them to change in the future, it is reasonably possible that in 2019 actual conditions could be worse than anticipated in those estimates, which could materially affect our results of operations and financial condition.

Principles of Consolidation. The consolidated financial statements include the accounts of the Company and all the Company’s subsidiaries. Significant intercompany transactions have been eliminated in consolidation. The Company does not maintain or conduct transactions with any unconsolidated special purpose entities.

Cash. Cash includes Due From Banks balances which are readily convertible to known amounts of cash and are generally 90 days or less from maturity at the time of initiation, presenting insignificant risk of changes in value due to interest rate changes.

Equity Securities. Equity securities consist of marketable equity securities and mutual funds which are recorded at fair value. Unrealized gains and losses are included in net income effective January 1, 2018 prior to such date unrealized gains and losses were included in other comprehensive income.

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

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

A decline in the market value of any available for sale or held to maturity security below amortized cost that is deemed other than temporary results in a charge to earnings and the establishment of a new cost basis for the security. Unrealized investment securities losses are evaluated at least quarterly to determine whether such declines in value should be considered “other than temporary” and therefore be subject to immediate loss recognition in income. Although these evaluations involve significant judgment, an unrealized loss in the fair value of a debt security is generally deemed to be temporary when the fair value of the security is below the carrying value primarily due to changes in risk-free interest rates, there has not been significant deterioration in the financial condition of the issuer, and the Company does not intend to sell or be required to sell the securities before recovery of its amortized cost. An unrealized loss in the value of an equity security is generally considered temporary when the fair value of the security declined primarily due to current market conditions and not deterioration in the financial condition of the issuer, the Company expects the fair value of the security to recover in the near term and the Company does not intend to sell or be required to sell the securities before recovery of its cost basis. Other factors that may be considered in determining whether a decline in the value of either a debt or an equity security is “other than temporary” include ratings by recognized rating agencies, actions of commercial banks or other lenders relative to the continued extension of credit facilities to the issuer of the security, the financial condition, capital strength and near-term prospects of the issuer, and recommendations of investment advisors or market analysts.

The Company follows the guidance issued by the Board of Governors of the Federal Reserve System, “Investing in Securities without Reliance on Nationally Recognized Statistical Rating Agencies” (SR 12-15) and other regulatory guidance when performing investment security pre-purchase analysis or evaluating investment securities for impairment. Credit ratings issued by recognized rating agencies are considered in the Company’s analysis only as a guide to the historical default rate associated with similarly-rated bonds.

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

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

Loans. Loans are stated at the principal amount outstanding, net of unearned discount and unamortized deferred fees and costs. Interest is accrued daily on the outstanding principal balances. Loans which are more than 90 days delinquent with respect to interest or principal, unless they are well secured and in the process of collection, and other loans on which full recovery of principal or interest is in doubt, are placed on nonaccrual status. Interest previously accrued on loans placed on nonaccrual status is charged against interest income. In addition, some loans secured by real estate with temporarily impaired values and commercial loans to borrowers experiencing financial difficulties are placed on nonaccrual status (“performing nonaccrual loans”) even though the borrowers continue to repay the loans as scheduled. When the ability to fully collect nonaccrual loan principal is in doubt, payments received are applied against the principal balance of the loans on a cost-recovery method until such time as full collection of the remaining recorded balance is expected. Any additional interest payments received after that time are recorded as interest income on a cash basis. Performing nonaccrual loans are reinstated to accrual status when improvements in credit quality eliminate the doubt as to the full collectability of both interest and principal. Certain consumer loans or auto receivables are charged off against the allowance for credit losses when they become 120 days past due.

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The Company evaluates all classified loans and nonaccrual loans with outstanding principal balances in excess of $500 thousand, and all “troubled debt restructured” loans for impairment. The Company recognizes a loan as impaired when, based on current information and events, it is probable that it will be unable to collect both the contractual interest and principal payments as scheduled in the loan agreement. Income recognition on impaired loans conforms to that used on nonaccrual loans. In certain circumstances, the Company might agree to restructured loan terms with borrowers experiencing financial difficulties; such restructured loans are evaluated under ASC 310-40, “Troubled Debt Restructurings by Creditors.” In general, a restructuring constitutes a troubled debt restructuring when the Company, for reasons related to a borrower’s financial difficulties, grants a concession to the borrower it would not otherwise consider. Loans are evaluated on an individual basis. The Company follows its general nonaccrual policy for troubled debt restructurings. Performing troubled debt restructurings are reinstated to accrual status when improvements in credit quality eliminate the doubt as to full collectability of both principal and interest.

Nonrefundable fees and certain costs associated with originating or acquiring loans are deferred and amortized as an adjustment to interest income over the contractual loan lives. Upon prepayment, unamortized loan fees, net of costs, are immediately recognized in interest income. Other fees, including those collected upon principal prepayments, are included in interest income when received. Loans held for sale are identified upon origination and are reported at the lower of cost or market value on an aggregate loan basis.

Purchased Loans. Purchased loans are recorded at estimated fair value on the date of purchase. Impaired purchased loans are accounted for under FASB ASC 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality, when the loans have evidence of credit deterioration since origination and it is probable at the date of acquisition that the Company will not collect all contractually required principal and interest payments. Evidence of credit quality deterioration as of the purchase date may include attributes such as past due and nonaccural status. Generally, purchased loans that meet the Company’s definition for nonaccrual status fall within the scope of FASB ASC 310-30. The difference between contractually required payments at acquisition and the cash flows expected to be collected at acquisition is referred to as the nonaccretable difference. Subsequent decreases to the expected cash flows will generally result in a provision for loan losses. Subsequent increases in cash flows result in a reversal of the provision for loan losses to the extent of prior charges, or a reclassification of the difference from nonaccretable to accretable with a positive impact on interest income on a prospective basis. Any excess of expected cash flows over the estimated fair value is referred to as the accretable yield and is recognized into interest income over the remaining life of the loan when there is a reasonable expectation about the amount and timing of such cash flows. For covered purchased loans with an accretable difference, the corresponding FDIC receivable is amortized over the shorter of the contractual term of the indemnification asset or the remaining life of the loan. Further, the Company elected to analogize to ASC 310-30 and account for all other loans that had a discount due in part to credit not within the scope of ASC 310-30 using the same methodology.

Covered Loans. Loans covered under loss-sharing or similar credit protection agreements with the FDIC are reported in loans exclusive of the expected reimbursement cash flows from the FDIC. Covered loans are initially recorded at fair value at the acquisition date. Subsequent decreases in the amount expected to be collected results in a provision for loan losses and a corresponding increase in the estimated FDIC reimbursement, with the estimated net loss impacting earnings. Interest previously accrued on covered loans placed on nonaccrual status is charged against interest income, net of estimated FDIC reimbursements of such accrued interest. The FDIC reimburses the Company up to 80% of 90 days interest on covered loans. The indemnification expired February 6, 2019.

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

The preparation of these financial statements requires Management to estimate the amount of probable incurred losses inherent in the loan portfolio and establish an allowance for credit losses. In estimating credit losses, Management must exercise significant judgment in evaluating information deemed relevant. The amount of ultimate losses on the loan portfolio can vary from the estimated amounts. Management follows a systematic methodology to estimate loss potential in an effort to reduce the differences between estimated and actual losses.

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The allowance for credit losses is established through provisions for credit losses charged to income. Losses on loans, including impaired loans, are charged to the allowance for loan losses when all or a portion of the recorded amount of a loan is deemed to be uncollectible. Recoveries of loans previously charged off are credited to the allowance when realized. The Company’s allowance for credit losses is maintained at a level considered adequate to provide for losses that can be estimated based upon specific and general conditions. These include conditions unique to individual borrowers, as well as overall credit loss experience, the amount of past due, nonperforming and classified loans, recommendations of regulatory authorities, prevailing economic conditions, FDIC loss-sharing or similar credit protection agreements and other factors. A portion of the allowance is specifically allocated to impaired loans whose full collectability is uncertain. Such allocations are determined by Management based on loan-by-loan analyses. The Company evaluates all classified loans and nonaccrual loans with outstanding principal balances in excess of $500 thousand, and all “troubled debt restructured” loans for impairment. A second allocation is based in part on quantitative analyses of historical credit loss experience. The results of this analysis are applied to current loan balances to allocate the reserve to the respective segments of the loan portfolio exclusive of loans individually evaluated for impairment. In addition, consumer installment loans which have similar characteristics and are not usually criticized using regulatory guidelines are analyzed and reserves established based on the historical loss rates and delinquency trends, grouped by the number of days the payments on these loans are delinquent. The remainder of the reserve is considered to be unallocated. The unallocated allowance is established to provide for probable losses that have been incurred as of the reporting date but not reflected in the allocated allowance. It addresses additional qualitative factors consistent with Management’s analysis of the level of risks inherent in the loan portfolio, which are related to the risks of the Company’s general lending activity. Included in the unallocated allowance is the risk of losses that are attributable to national or local economic or industry trends which have occurred but have not yet been recognized in past loan charge-off history (external factors). The external factors evaluated by the Company include: economic and business conditions, external competitive issues, and other factors. Also included in the unallocated allowance is the risk of losses that are attributable to general attributes of the Company’s loan portfolio and credit administration (internal factors). The internal factors evaluated by the Company include: loan review system, adequacy of lending Management and staff, loan policies and procedures, problem loan trends, concentrations of credit, and other factors. By their nature, these risks are not readily allocable to any specific segment of the loan portfolio in a statistically meaningful manner.

Liability for Off-Balance Sheet Credit Exposures. A liability for off-balance sheet credit exposures is established through expense recognition. Off-balance sheet credit exposures relate to letters of credit and unfunded loan commitments for commercial, construction and consumer loans. Historical credit loss factors for commercial, construction and consumer loans are applied to the amount of these off-balance sheet credit exposures to estimate inherent losses.

Other Real Estate Owned. Other real estate owned is comprised of property acquired through foreclosure proceedings, acceptances of deeds-in-lieu of foreclosure and, if applicable, vacated bank properties. Losses recognized at the time of acquiring property in full or partial satisfaction of debt are charged against the allowance for credit losses. Other real estate owned is recorded at the fair value of the collateral, generally based upon an independent property appraisal, less estimated disposition costs. Losses incurred subsequent to acquisition due to any decline in annual independent property appraisals are recognized as noninterest expense. Routine holding costs, such as property taxes, insurance and maintenance, and losses from sales and dispositions, are recognized as noninterest expense.

Premises and Equipment. Premises and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation is computed substantially on the straight-line method over the estimated useful life of each type of asset. Estimated useful lives of premises and equipment range from 20 to 50 years and from 3 to 20 years, respectively. Leasehold improvements are amortized over the terms of the lease or their estimated useful life, whichever is shorter.

Revenue Recognition. The Company recognizes revenue as it is earned based on contractual terms, as transactions occur, or as services are provided and collectability is reasonably assured. In certain circumstances, noninterest income is reported net of associated expenses that are directly related to variable volume-based sales or revenue sharing arrangements or when the Company acts on an agency basis for others.

Life Insurance Cash Surrender Value. The Company has purchased life insurance policies on certain directors and officers as well as acquired such assets as part of the acquisition of other banks. Company owned life insurance is recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges or other amounts due that are probable at settlement. These assets are included in other assets on the consolidated balance sheets.

Intangible Assets. Intangible assets are comprised of goodwill, core deposit intangibles and other identifiable intangibles acquired in business combinations. Intangible assets with definite useful lives are amortized on an accelerated basis over their respective estimated useful lives not exceeding 15 years. If an event occurs that indicates the carrying amount of an intangible asset may not be recoverable, Management reviews the asset for impairment. Any goodwill and any intangible asset acquired in a purchase business combination determined to have an indefinite useful life is not amortized, but is evaluated for impairment annually. The Company has the option to first assess qualitative factors to determine the likelihood of impairment pursuant to FASB ASU 2011-08, Testing for Goodwill Impairment. Although the Company has the option to first assess qualitative factors when determining if impairment exists, the Company has opted to perform a quantitative analysis to determine if impairment exists.

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Impairment of Long-Lived Assets. The Company reviews its long-lived and certain intangible assets for impairment whenever events or changes indicate that the carrying amount of an asset may not be recoverable. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

Income Taxes. The Company and its subsidiaries file consolidated tax returns. The Company accounts for income taxes in accordance with FASB ASC 740, Income Taxes, resulting in two components of income tax expense: current and deferred. Current income tax expense approximates taxes to be paid or refunded for the current period. The Company determines deferred income taxes using the balance sheet method. Under this method, the net deferred tax asset or liability is based on the tax effects of the differences between the book and tax bases of assets and liabilities, and recognizes enacted changes in tax rates and laws in the period in which they occur. Deferred income tax expense results from changes in deferred tax assets and liabilities between periods. Deferred tax assets are recognized subject to Management’s judgment that realization is more likely than not. A tax position that meets the more likely than not recognition threshold is measured to determine the amount of benefit to recognize. The tax position is measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon settlement. Interest and penalties are recognized as a component of income tax expense.

Stock Options. The Company applies FASB ASC 718 – Compensation – Stock Compensation, to account for stock based awards granted to employees using the fair value method. The Company recognizes compensation expense for restricted performance share grants over the relevant attribution period. Restricted performance share grants have no exercise price, therefore, the intrinsic value is measured using an estimated per share price at the vesting date for each restricted performance share. The estimated per share price is adjusted during the attribution period to reflect actual stock price performance. The Company’s obligation for unvested outstanding restricted performance share grants is classified as a liability until the vesting date due to a cash settlement feature, at which time the issued shares become classified as shareholders’ equity.

Extinguishment of Debt. Gains and losses, including fees, incurred in connection with the early extinguishment of debt are charged to current earnings as reductions in noninterest income.

Postretirement Benefits. The Company uses an actuarial-based accrual method of accounting for post-retirement benefits.

Other. Securities and other property held by the Bank in a fiduciary or agency capacity are not included in the financial statements since such items are not assets of the Company or its subsidiaries.

Recently Adopted Accounting Standards

In 2018, the Company adopted the following new accounting guidance:

FASB Accounting Standard Update (ASU) 2014-09, Revenue (Topic 606): Revenue from Contracts with Customers, was issued May 2014. The ASU specifies a standardized approach for revenue recognition across industries and transactions. The ASU also requires additional disclosures. The scope of the ASU does not include revenue streams covered by other ASU topics; thus, Topic 606 does not apply to revenue related to financial instruments, guarantees and leases, which are the primary sources of the Company’s net interest income.

All of the Company’s net interest income and a portion of its noninterest income are out of scope of the guidance. The contracts that are in scope of the guidance are primarily related to service charges and fees on deposit accounts, merchant processing fees, debit card fees, ATM processing fees, trust fees and other service charges, commissions and fees. The Company’s revenue recognition practices within the scope of the ASU as described below did not change in any material regard upon adoption of the ASU.

Service Charges on Deposit Accounts, ATM Processing Fees and Other Service Fees: The Company earns fees from its deposit customers for transaction-based, account maintenance, and overdraft services. Transaction-based fees are recognized at the time the transaction is executed as that is the point in time the Company fulfills the customer’s request. Account maintenance fees, which relate primarily to monthly maintenance, are earned over the course of a month, representing the period over which the Company satisfies the performance obligation. Overdraft fees are recognized at the point in time that the overdraft occurs. Service charges on deposits are withdrawn from the customer’s account balance. ATM processing fees and other service fees are recognized at the point in time that the transaction occurs or the services provided.

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Merchant Processing Services and Debit Card Fees: The Company earns interchange fees from cardholder transactions conducted through the payment networks. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are recognized daily, concurrently with the transaction processing services provided to the cardholder.

Trust Fees: The Company earns trust fees from its contracts with customers to manage assets for investment or custody services. These fees are primarily earned over time as the Company provides the contracted monthly services and are generally assessed based on a tiered scale of the market value of assets under management (AUM) at month-end. Other related services provided, which are based on a fixed fee schedule, are recognized when the services are rendered.

Gains/Losses on Sales of OREO: The Company records a gain or loss from the sale of OREO when control of the property transfers to the buyer, which generally occurs at the time of an executed deed. The Company does not finance the sale of OREO. Gains on sale of OREO were $110 thousand, and $72 thousand and $1,185 thousand in the twelve months ended December 31, 2018 and 2017 and 2016, respectively.

The Company adopted the ASU on January 1, 2018 and no cumulative adjustment was required.

FASB ASU 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, was issued January 2016. The ASU addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. Most notably, the ASU changes the income statement impact of equity investments held by the Company and the requirement for the Company to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes (Note 11).

The Company was required to adopt the ASU provisions on January 1, 2018, and for those equity securities with readily determinable fair values, the Company elected the retrospective transition approach with a cumulative effect adjustment to the balance sheet and for those equity securities that do not have readily determinable fair values, the Company elected the prospective transition approach. The impact of the adoption of this accounting standard on the Company’s consolidated financial statements will be subject to the price volatility of the equity investments. As a result of implementing the ASU provisions, effective January 1, 2018, the Company recorded a cumulative effect adjustment to decrease retained earnings by $142 thousand.

FASB ASU 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, was issued February 2018. The ASU eliminates the stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017 by allowing a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017. The Company early adopted the provisions of the ASU effective January 1, 2018, by reclassifying the Company’s $3,625 thousand stranded tax effect.

Recently Issued Accounting Standards

FASB ASU 2016-02, Leases (Topic 842), was issued February 25, 2016. The provisions of the new standard require lessees to recognize most leases on-balance sheet, increasing reported assets and liabilities. Lessor accounting remains substantially similar to current U.S. GAAP.

The Company will be required to adopt the ASU provisions effective January 1, 2019, and plans to elect the modified retrospective transition approach. The implementing entry will recognize a lease liability of $15.3 million and right-to-use asset of $15.3 million for facilities leases. The change in occupancy and equipment expense will not be material.

FASB ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, was issued on June 16, 2016. The ASU significantly changes estimates for credit losses related to financial assets measured at amortized cost and certain other contracts. For estimating credit losses, the FASB is replacing the incurred loss model with the current expected credit loss (CECL) model, which will accelerate recognition of credit losses. Additionally, credit losses relating to debt securities available-for-sale will be recorded through an allowance for credit losses under the new standard. The Company will also be required to provide additional disclosures related to the financial assets within the scope of the new standard.

The Company will be required to adopt the ASU provisions on January 1, 2020. Management has evaluated available data, defined portfolio segments of loans with similar attributes, and selected loss estimate models for each identified loan portfolio segment. Management has preliminarily measured historical loss rates for each portfolio segment. The ultimate adjustment to the allowance for loan losses will be accomplished through an offsetting after-tax adjustment to shareholders’ equity. Management has also segmented debt securities held to maturity, selected methods to estimate losses for each segment, and preliminarily measured a loss estimate. Economic conditions and the composition of the Company’s loan portfolio and debt securities held to maturity at the time of adoption will influence the extent of the adopting accounting adjustment. Management expects to develop an aggregate loss estimate by September 30, 2019.

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FASB ASU 2017-08, Receivables – Non-Refundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities, was issued March 2017. The ASU will shorten the amortization period for certain callable debt securities held at a premium. Specifically, the ASU requires the premium to be amortized to the earliest call date. The ASU does not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. The Company will be required to adopt the ASU provisions on January 1, 2019. The implementing entry will reduce the carrying value of investment securities, specifically obligations of states and political subdivisions, by $3.1 million and reduce retained earnings by $2.8 million, net of tax. The change in premium amortization method will not be material to revenue recognition.

FASB ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, was issued August 2017. The ASU will expand and refine hedge accounting for both nonfinancial and financial risk components and align the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. The ASU also provides for a one-time reclassification of prepayable assets from held-to-maturity (HTM) to available for sale (AFS) regardless of derivative use.

The Company will be required to adopt the ASU provisions on January 1, 2019. The Company does not currently engage in trading activities or use derivative instruments to control interest rate risk, even though such activities may be permitted with the approval of the Company’s Board of Directors. The Company has evaluated the prepayable assets in the HTM portfolio and will not effect a one-time reclassification of prepayable assets from HTM to the AFS upon implementation.

FASB ASU 2018-13, Fair Value Measurements (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement, was issued August 2018. The ASU is part of the disclosure framework project, where the primary focus is to improve the effectiveness of disclosures in the financial statements. The ASU removes, modifies and adds disclosure requirements related to Fair Value Measurements.

The provisions of the ASU are effective January 1, 2020 with the option to early adopt any removed or modified disclosures upon issuance of the ASU. The Company early adopted the provisions to remove and/or modify relevant disclosures in Note 11 to the consolidated financial statements. The requirement to include additional disclosures will be adopted by the Company January 1, 2020. The additional disclosures will not affect the financial results upon adoption.

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Note 2: Investment Securities

Effective January 1, 2018, upon adoption of ASU 2016-01, equity securities included in the Company’s available for sale portfolio of $1,800 thousand were reclassified to equity securities. The reclassification of equity securities resulted in recording a cumulative effect adjustment to decrease retained earnings by $142 thousand, net of tax.

At December 31, 2018, the market value of equity securities was $1,747 thousand. During the twelve months ended December 31, 2018, the Company recognized gross unrealized holding losses of $52 thousand in earnings.

An analysis of the amortized cost and fair value by major categories of debt securities available for sale, which are carried at fair value with net unrealized gains (losses) reported on an after-tax basis as a component of cumulative other comprehensive income, and debt securities held to maturity, which are carried at amortized cost, follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
At December 31, 2018	(In thousands)
Debt securities available for sale
U.S. Treasury securities	$	139,572	$	5	$	(3	)	$	139,574
Securities of U.S. Government sponsored entities		167,228		65		(3,275	)		164,018
Agency residential mortgage-backed securities (MBS)		883,715		595		(30,439	)		853,871
Non-agency residential MBS		113		1		-			114
Agency commercial MBS		1,869		-		(27	)		1,842
Securities of U.S. Government entities		1,128		-		(9	)		1,119
Obligations of states and political subdivisions		180,220		1,856		(2,985	)		179,091
Corporate securities		1,337,608		1,075		(23,642	)		1,315,041
Total debt securities available for sale		2,711,453		3,597		(60,380	)		2,654,670
Debt securities held to maturity
Agency residential MBS		447,332		249		(14,129	)		433,452
Non-agency residential MBS		3,387		40		-			3,427
Obligations of states and political subdivisions		533,890		3,403		(2,727	)		534,566
Total debt securities held to maturity		984,609		3,692		(16,856	)		971,445
Total	$	3,696,062	$	7,289	$	(77,236	)	$	3,626,115

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
At December 31, 2017	(In thousands)
Debt securities available for sale
Securities of U.S. Government sponsored entities	$	122,285	$	1	$	(2,967	)	$	119,319
Agency residential MBS		787,679		522		(20,495	)		767,706
Non-agency residential MBS		153		1		-			154
Agency commercial MBS		2,244		-		(25	)		2,219
Securities of U.S. Government entities		1,612		-		(22	)		1,590
Obligations of states and political subdivisions		182,907		3,796		(1,482	)		185,221
Corporate securities		1,123,671		1,104		(9,277	)		1,115,498
Total debt securities available for sale		2,220,551		5,424		(34,268	)		2,191,707
Debt securities held to maturity
Agency residential MBS		545,883		606		(9,850	)		536,639
Non-agency residential MBS		4,462		70		-			4,532
Agency commercial MBS		9,041		-		(66	)		8,975
Obligations of states and political subdivisions		599,478		7,736		(2,018	)		605,196
Total debt securities held to maturity		1,158,864		8,412		(11,934	)		1,155,342
Total	$	3,379,415	$	13,836	$	(46,202	)	$	3,347,049

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

	At December 31, 2018
	Debt Securities Available for Sale				Debt Securities Held to Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(In thousands)
Maturity in years:
1 year or less	$	262,418	$	261,976	$	86,172	$	86,148
Over 1 to 5 years		1,438,849		1,414,020		214,137		213,829
Over 5 to 10 years		85,817		85,877		232,544		233,515
Over 10 years		38,672		36,970		1,037		1,074
Subtotal		1,825,756		1,798,843		533,890		534,566
MBS		885,697		855,827		450,719		436,879
Total	$	2,711,453	$	2,654,670	$	984,609	$	971,445

	At December 31, 2017
	Debt Securities Available for Sale				Debt Securities Held to Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(In thousands)
Maturity in years:
1 year or less	$	193,337	$	193,385	$	50,295	$	51,105
Over 1 to 5 years		1,031,807		1,023,047		269,050		269,471
Over 5 to 10 years		159,266		160,042		277,170		281,546
Over 10 years		46,065		45,154		2,963		3,074
Subtotal		1,430,475		1,421,628		599,478		605,196
MBS		790,076		770,079		559,386		550,146
Total	$	2,220,551	$	2,191,707	$	1,158,864	$	1,155,342

Expected maturities of mortgage-related securities can differ from contractual maturities because borrowers have the right to call or prepay obligations with or without call or prepayment penalties. In addition, such factors as prepayments and interest rates may affect the yield on the carrying value of mortgage-related securities. At December 31, 2018 and December 31, 2017, the Company had no high-risk collateralized mortgage obligations as defined by regulatory guidelines.

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

	Debt Securities Available for Sale At December 31, 2018
	No. of		Less than 12 months					No. of		12 months or longer					No. of		Total
	Investment				Unrealized			Investment				Unrealized			Investment				Unrealized
	Positions		Fair Value		Losses			Positions		Fair Value		Losses			Positions		Fair Value		Losses
	($ in thousands)
U.S. Treasury securities		2	$	54,805	$	(3	)		-	$	-	$	-			2	$	54,805	$	(3	)
Securities of U.S. Government sponsored entities		1		990		(5	)		9		117,963		(3,270	)		10		118,953		(3,275	)
Agency residential MBS		8		107,497		(507	)		58		640,210		(29,932	)		66		747,707		(30,439	)
Agency commercial MBS		1		1,842		(27	)		-		-		-			1		1,842		(27	)
Securities of U.S. Government entities		-		-		-			2		1,119		(9	)		2		1,119		(9	)
Obligations of states and political subdivisions		32		26,452		(166	)		71		67,121		(2,819	)		103		93,573		(2,985	)
Corporate securities		38		308,157		(3,403	)		79		722,740		(20,239	)		117		1,030,897		(23,642	)
Total		82	$	499,743	$	(4,111	)		219	$	1,549,153	$	(56,269	)		301	$	2,048,896	$	(60,380	)

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

	Debt Securities Held to Maturity At December 31, 2018
	No. of		Less than 12 months					No. of		12 months or longer					No. of		Total
	Investment				Unrecognized			Investment				Unrecognized			Investment				Unrecognized
	Positions		Fair Value		Losses			Positions		Fair Value		Losses			Positions		Fair Value		Losses
	($ in thousands)
Agency residential MBS		16	$	8,495	$	(34	)		78	$	412,574	$	(14,095	)		94	$	421,069	$	(14,129	)
Non-agency residential MBS		1		26		-			-		-		-			1		26		-
Obligations of states and political subdivisions		97		83,633		(271	)		142		151,546		(2,456	)		239		235,179		(2,727	)
Total		114	$	92,154	$	(305	)		220	$	564,120	$	(16,551	)		334	$	656,274	$	(16,856	)

The unrealized losses on the Company’s debt securities were caused by market conditions for these types of investments, particularly changes in risk-free interest rates. The Company evaluates debt securities on a quarterly basis including changes in security ratings issued by rating agencies, changes in the financial condition of the issuer, and, for mortgage-backed and asset-backed securities, delinquency and loss information with respect to the underlying collateral, changes in the levels of subordination for the Company’s particular position within the repayment structure and remaining credit enhancement as compared to expected credit losses of the security. Substantially all of these securities continue to be investment grade rated by a major rating agency. One corporate bond with a carrying value of $15.0 million and a market value of $13.8 million at December 31, 2018, is rated below investment grade. In addition to monitoring credit rating agency evaluations, Management performs its own evaluations regarding the credit worthiness of the issuer or the securitized assets underlying asset backed securities.

The Company does not intend to sell any debt securities and has concluded that it is more likely than not that it will not be required to sell the debt securities prior to recovery of the amortized cost basis. Therefore, the Company does not consider these debt securities to be other-than-temporarily impaired as of December 31, 2018.

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

As of December 31, 2018 and December 31, 2017, the Company had debt securities pledged to secure public deposits and short-term borrowed funds of $728,161  thousand and $715,774  thousand, respectively.

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

	Debt Securities Available for Sale
	At December 31, 2017
	No. of		Less than 12 months					No. of		12 months or longer					No. of		Total
	Investment				Unrealized			Investment				Unrealized			Investment				Unrealized
	Positions		Fair Value		Losses			Positions		Fair Value		Losses			Positions		Fair Value		Losses
	($ in thousands)
Securities of U.S. Government sponsored entities		1	$	996	$	(2	)		8	$	117,252	$	(2,965	)		9	$	118,248	$	(2,967	)
Agency residential MBS		7		238,554		(1,501	)		51		516,711		(18,994	)		58		755,265		(20,495	)
Non-agency residential MBS		1		1		-			-		-		-			1		1		-
Agency commercial MBS		2		2,219		(25	)		-		-		-			2		2,219		(25	)
Securities of U.S. Government entities		-		-		-			3		1,590		(22	)		3		1,590		(22	)
Obligations of states and political subdivisions		50		21,453		(228	)		35		52,071		(1,254	)		85		73,524		(1,482	)
Corporate securities		64		571,112		(4,047	)		38		282,924		(5,230	)		102		854,036		(9,277	)
Total		125	$	834,335	$	(5,803	)		135	$	970,548	$	(28,465	)		260	$	1,804,883	$	(34,268	)

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

	Debt Securities Held to Maturity
	At December 31, 2017
	No. of		Less than 12 months					No. of		12 months or longer					No. of		Total
	Investment				Unrecognized			Investment				Unrecognized			Investment				Unrecognized
	Positions		Fair Value		Losses			Positions		Fair Value		Losses			Positions		Fair Value		Losses
	($ in thousands)
Agency residential MBS		15	$	30,218	$	(201	)		65	$	479,775	$	(9,649	)		80	$	509,993	$	(9,850	)
Agency commercial MBS		1		1,913		(4	)		1		7,062		(62	)		2		8,975		(66	)
Obligations of states and political subdivisions		146		131,032		(553	)		59		58,979		(1,465	)		205		190,011		(2,018	)
Total		162	$	163,163	$	(758	)		125	$	545,816	$	(11,176	)		287	$	708,979	$	(11,934	)

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

	For the Years Ended December 31,
	2018		2017		2016
	(In thousands)
Taxable	$	65,330	$	51,445	$	42,718
Tax-exempt from regular federal income tax		19,438		20,651		22,194
Total interest income from investment securities	$	84,768	$	72,096	$	64,912

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Note 3: Loans and Allowance for Credit Losses

At December 31, 2018, the Company had $5.7 million in residential real estate secured loans which are indemnified from loss by the FDIC up to eighty percent of principal; the indemnification expired February 6, 2019.

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

	At Decmber 31,
	2018		2017
	(In thousands)
Commercial	$	275,080	$	335,996
Commercial Real Estate		580,480		568,584
Construction		3,982		5,649
Residential Real Estate		44,866		65,183
Consumer Installment & Other		302,794		312,570
Total	$	1,207,202	$	1,287,982

Total loans outstanding reported above include loans purchased from the FDIC of $58,247  thousand and $83,478 thousand at December 31, 2018 and December 31, 2017, respectively.

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

	For the Years Ended December 31,
	2018			2017
Accretable yield:	(In thousands)
Balance at the beginning of the period	$	738		$	1,237
Reclassification from nonaccretable difference		1,119			1,852
Accretion		(1,675	)		(2,351	)
Balance at the end of the period	$	182		$	738
Accretion	$	(1,675	)	$	(2,351	)
Change in FDIC indemnification		2			192
(Increase) in interest income	$	(1,673	)	$	(2,159	)

The following summarizes activity in the allowance for loan losses:

	Allowance for Loan Losses For the Year Ended December 31, 2018
	Commercial			Commercial Real Estate			Construction		Residential Real Estate			Consumer Installment and Other			Unallocated			Total
	(In thousands)
Allowance for loan losses:
Balance at beginning of period	$	7,746		$	3,849		$	335	$	995		$	6,418		$	3,666		$	23,009
(Reversal) provision		(2,369	)		275			1,130		(126	)		1,579			(489	)		-
Chargeoffs		(513	)		(240	)		-		-			(4,124	)		-			(4,877	)
Recoveries		1,447			-			-		-			1,772			-			3,219
Total allowance for loan losses	$	6,311		$	3,884		$	1,465	$	869		$	5,645		$	3,177		$	21,351

	Allowance for Loan Losses For the Year Ended December 31, 2017
	Commercial			Commercial Real Estate		Construction			Residential Real Estate			Consumer Installment and Other			Unallocated			Total
	(In thousands)
Allowance for loan losses:
Balance at beginning of period	$	8,327		$	3,330	$	152		$	1,330		$	7,980		$	4,835		$	25,954
(Reversal) provision		(382	)		431		(1,716	)		(335	)		1,271			(1,169	)		(1,900	)
Chargeoffs		(961	)		-		-			-			(4,957	)		-			(5,918	)
Recoveries		762			88		1,899			-			2,124			-			4,873
Total allowance for loan losses	$	7,746		$	3,849	$	335		$	995		$	6,418		$	3,666		$	23,009

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	Allowance for Credit Losses For the Year Ended December 31, 2016
	Commercial			Commercial Real Estate			Construction			Residential Real Estate			Consumer Installment and Other			Unallocated			Total
	(In thousands)
Allowance for loan losses:
Balance at beginning of period	$	9,559		$	4,212		$	235		$	1,801		$	8,001		$	5,963		$	29,771
(Reversal) provision		(3,237	)		(1,436	)		(83	)		(471	)		3,155			(1,128	)		(3,200	)
Chargeoffs		(2,023	)		-			-			-			(4,749	)		-			(6,772	)
Recoveries		4,028			554			-			-			1,573			-			6,155
Total allowance for loan losses	$	8,327		$	3,330		$	152		$	1,330		$	7,980		$	4,835		$	25,954

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

	Allowance for Loan Losses and Recorded Investment in Loans Evaluated for Impairment At December 31, 2018
	Commercial		Commercial Real Estate		Construction		Residential Real Estate		Consumer Installment and Other		Unallocated		Total
	(In thousands)
Allowance for loan losses:
Individually evaluated for impairment	$	2,752	$	-	$	-	$	-	$	-	$	-	$	2,752
Collectively evaluated for impairment		3,559		3,884		1,465		869		5,645		3,177		18,599
Purchased loans with evidence of credit deterioration		-		-		-		-		-		-		-
Total	$	6,311	$	3,884	$	1,465	$	869	$	5,645	$	3,177	$	21,351
Carrying value of loans:
Individually evaluated for impairment	$	9,921	$	8,217	$	-	$	717	$	-	$	-	$	18,855
Collectively evaluated for impairment		265,136		572,042		3,982		44,149		302,651		-		1,187,960
Purchased loans with evidence of credit deterioration		23		221		-		-		143		-		387
Total	$	275,080	$	580,480	$	3,982	$	44,866	$	302,794	$	-	$	1,207,202

	Allowance for Loan Losses and Recorded Investment in Loans Evaluated for Impairment At December 31, 2017
	Commercial		Commercial Real Estate		Construction		Residential Real Estate		Consumer Installment and Other		Unallocated		Total
	(In thousands)
Allowance for loan losses:
Individually evaluated for impairment	$	4,814	$	171	$	-	$	-	$	-	$	-	$	4,985
Collectively evaluated for impairment		2,932		3,678		335		995		6,418		3,666		18,024
Purchased loans with evidence of credit deterioration		-		-		-		-		-		-		-
Total	$	7,746	$	3,849	$	335	$	995	$	6,418	$	3,666	$	23,009
Carrying value of loans:
Individually evaluated for impairment	$	10,675	$	14,234	$	-	$	208	$	-	$	-	$	25,117
Collectively evaluated for impairment		325,291		553,769		5,649		64,975		312,406		-		1,262,090
Purchased loans with evidence of credit deterioration		30		581		-		-		164		-		775
Total	$	335,996	$	568,584	$	5,649	$	65,183	$	312,570	$	-	$	1,287,982

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

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

	Credit Risk Profile by Internally Assigned Grade At December 31, 2018
	Commercial		Commercial Real Estate		Construction		Residential Real Estate		Consumer Installment and Other		Total
	(In thousands)
Grade:
Pass	$	264,634	$	567,578	$	3,982	$	43,112	$	300,553	$	1,179,859
Substandard		10,446		12,902		-		1,754		1,556		26,658
Doubtful		-		-		-		-		135		135
Loss		-		-		-		-		550		550
Total	$	275,080	$	580,480	$	3,982	$	44,866	$	302,794	$	1,207,202

Credit risk profile reflects internally assigned grades of purchased covered loans without regard to FDIC indemnification on $5,713 thousand residential real estate and consumer loans at December 31, 2018. The indemnification expired February 6, 2019.

	Credit Risk Profile by Internally Assigned Grade At December 31, 2017
	Commercial		Commercial Real Estate		Construction		Residential Real Estate		Consumer Installment and Other		Total
	(In thousands)
Grade:
Pass	$	324,185	$	548,853	$	5,649	$	62,253	$	310,429	$	1,251,369
Substandard		11,811		19,731		-		2,930		1,370		35,842
Doubtful		-		-		-		-		1		1
Loss		-		-		-		-		770		770
Total	$	335,996	$	568,584	$	5,649	$	65,183	$	312,570	$	1,287,982

Credit risk profile reflects internally assigned grades of purchased covered loans without regard to FDIC indemnification on $7,766 thousand residential real estate and consumer loans at December 31, 2017.

The following tables summarize loans by delinquency and nonaccrual status:

	Summary of Loans by Delinquency and Nonaccrual Status At December 31, 2018
	Current and Accruing		30-59 Days Past Due and Accruing		60-89 Days Past Due and Accruing		Past Due 90 Days or More and Accruing		Nonaccrual		Total Loans
	(In thousands)
Commercial	$	274,045	$	781	$	254	$	-	$	-	$	275,080
Commercial real estate		574,853		617		785		-		4,225		580,480
Construction		3,982		-		-		-		-		3,982
Residential real estate		43,372		789		189		-		516		44,866
Consumer installment and other		297,601		3,408		1,107		551		127		302,794
Total	$	1,193,853	$	5,595	$	2,335	$	551	$	4,868	$	1,207,202

	Summary of Loans by Delinquency and Nonaccrual Status At December 31, 2017
	Current and Accruing		30-59 Days Past Due and Accruing		60-89 Days Past Due and Accruing		Past Due 90 Days or More and Accruing		Nonaccrual		Total Loans
	(In thousands)
Commercial	$	334,908	$	627	$	164	$	-	$	297	$	335,996
Commercial real estate		561,883		1,143		125		-		5,433		568,584
Construction		5,649		-		-		-		-		5,649
Residential real estate		65,183		-		-		-		-		65,183
Consumer installment and other		307,445		3,321		1,077		531		196		312,570
Total	$	1,275,068	$	5,091	$	1,366	$	531	$	5,926	$	1,287,982

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There were no commitments to lend additional funds to borrowers whose loans were on nonaccrual status at December 31, 2018 and December 31, 2017.

The following summarizes impaired loans:

	Impaired Loans At December 31,
	2018						2017
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
	(In thousands)
With no related allowance recorded:
Commercial	$	755	$	759	$	-	$	1,212	$	1,271	$	-
Commercial real estate		8,438		10,373		-		13,169		14,985		-
Residential real estate		717		747		-		208		239		-
Consumer installment and other		270		377		-		360		466		-
Total with no related allowance recorded		10,180		12,256		-		14,949		16,961		-
With an allowance recorded:
Commercial		9,189		9,189		2,752		9,764		9,764		4,814
Commercial real estate		-		-		-		1,790		1,792		171
Total with an allowance recorded		9,189		9,189		2,752		11,554		11,556		4,985
Total	$	19,369	$	21,445	$	2,752	$	26,503	$	28,517	$	4,985

Impaired loans include troubled debt restructured loans. Impaired loans at December 31, 2018, included $8,579 thousand of restructured loans, $4,225 thousand of which were on nonaccrual status. Impaired loans at December 31, 2017, included $12,081 thousand of restructured loans, $4,285 thousand of which were on nonaccrual status.

	Impaired Loans For the Years Ended December 31,
	2018				2017				2016
	Average Recorded Investment		Recognized Interest Income		Average Recorded Investment		Recognized Interest Income		Average Recorded Investment		Recognized Interest Income
	(In thousands)
Commercial	$	10,532	$	667	$	11,156	$	508	$	12,923	$	512
Commercial real estate		11,703		758		14,806		884		16,701		725
Construction		-		-		-		-		102		-
Residential real estate		269		19		423		17		746		19
Consumer installment and other		254		14		415		20		473		25
Total	$	22,758	$	1,458	$	26,800	$	1,429	$	30,945	$	1,281

The following tables provide information on troubled debt restructurings:

	Troubled Debt Restructurings At December 31, 2018
	Number of Contracts		Pre-Modification Carrying Value		Period-End Carrying Value		Period-End Individual Impairment Allowance
	($ in thousands)
Commercial		4	$	2,274	$	811	$	19
Commercial real estate		8		9,237		7,568		-
Residential real estate		1		241		200		-
Total		13	$	11,752	$	8,579	$	19

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	Troubled Debt Restructurings At December 31, 2017
	Number of Contracts		Pre-Modification Carrying Value		Period-End Carrying Value		Period-End Individual Impairment Allowance
	($ in thousands)
Commercial		7	$	2,393	$	1,085	$	43
Commercial real estate		10		11,528		10,788		-
Residential real estate		1		241		208		-
Total		18	$	14,162	$	12,081	$	43

	Troubled Debt Restructurings At December 31, 2016
	Number of Contracts		Pre-Modification Carrying Value		Period-End Carrying Value		Period-End Individual Impairment Allowance
	($ in thousands)
Commercial		7	$	2,719	$	1,489	$	113
Commercial real estate		10		11,257		10,673		-
Residential real estate		1		241		219		-
Total		18	$	14,217	$	12,381	$	113

During the year ended December 31, 2018, the Company did not modify any loans that were considered troubled debt restructurings.

During the year ended December 31, 2017, the Company modified four loans with a carrying value of $699 thousand that were considered troubled debt restructurings. The four concessions granted in 2017 consisted of modifications of payment terms to extend the maturity date to allow for deferred principal repayment and under-market terms.

During the year ended December 31, 2016, the Company modified four loans with a total carrying value of $4,731 thousand that were considered troubled debt restructurings. The concessions granted in the four restructurings completed in 2016 consisted of three modifications of payment terms to extend the maturity date to allow for deferred principal repayment and under-market terms and one court order requiring under-market terms.

During the year ended December 31, 2018, one troubled debt restructured loan with a carrying value of $41 thousand was charged off. During the year ended December 31, 2017, one troubled debt restructured loan with a carrying value of $58 thousand was charged off. There were no chargeoffs related to troubled debt restructurings made during the year ended December 31, 2016. During the years ended December 31, 2018, 2017 and 2016, no troubled debt restructured loans defaulted within 12 months of the modification date. A troubled debt restructuring is considered to be in default when payments are ninety days or more past due.

There were no loans restricted due to collateral requirements at December 31, 2018 and December 31, 2017.

There were no loans held for sale at December 31, 2018 and December 31, 2017.

At December 31, 2018 and December 31, 2017, the Company held total other real estate owned (OREO) of $350 thousand net of reserve of $-0-   thousand and $1,426 thousand net of reserve of $1,905 thousand, respectively, of which $-0-  was foreclosed residential real estate properties or covered OREO at both dates. The amount of consumer mortgage loans outstanding secured by residential real estate properties for which formal foreclosure proceedings were in process was $516 thousand at December 31, 2018 and $196 thousand at December 31, 2017.

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Note 4: Concentration of Credit Risk

Under the California Financial Code, credit extended to any one person owing to a commercial bank at any one time shall not exceed the following limitations: (a) unsecured loans shall not exceed 15 percent of the sum of the shareholders' equity, allowance for loan losses, capital notes, and debentures of the bank, or (b) secured and unsecured loans in all shall not exceed 25 percent of the sum of the shareholders' equity, allowance for loan losses, capital notes, and debentures of the bank. At December 31, 2018, the Bank did not have credit extended to any one entity exceeding these limits. At December 31, 2018, the Bank had 37 lending relationships each with aggregate amounts of $5 million or more. The Company has significant credit arrangements that are secured by real estate collateral. In addition to real estate loans outstanding as disclosed in Note 3, the Company had loan commitments related to real estate loans of $53,891 thousand and $53,874 thousand at December 31, 2018 and December 31, 2017, respectively. The Company requires collateral on all real estate loans with loan-to-value ratios at origination generally no greater than 75% on commercial real estate loans and no greater than 80% on residential real estate loans. At December 31, 2018, the Bank held corporate bonds in 78 issuing entities that exceeded $5 million for each issuer.

Note 5: Premises, Equipment and Other Assets

Premises and equipment consisted of the following:

	At December 31,
	Cost		Accumulated Depreciation and Amortization			Net Book Value
	(In thousands)
2018
Land	$	11,691	$	-		$	11,691
Building and improvements		41,912		(27,178	)		14,734
Leasehold improvements		6,174		(4,968	)		1,206
Furniture and equipment		23,845		(16,969	)		6,876
Total	$	83,622	$	(49,115	)	$	34,507
2017
Land	$	11,796	$	-		$	11,796
Building and improvements		41,641		(26,249	)		15,392
Leasehold improvements		5,817		(4,790	)		1,027
Furniture and equipment		22,284		(15,198	)		7,086
Total	$	81,538	$	(46,237	)	$	35,301

Depreciation and amortization of premises and equipment included in noninterest expense amounted to $3,677 thousand in 2018, $3,925 thousand in 2017 and $3,959 thousand in 2016.

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Other assets consisted of the following:

	At December 31,
	2018		2017
	(In thousands)
Cost method equity investments:
Federal Reserve Bank stock (1)	$	14,069	$	14,069
Other investments		158		158
Total cost method equity investments		14,227		14,227
Life insurance cash surrender value		56,083		54,101
Net deferred tax asset		42,256		33,112
Limited partnership investments		10,219		10,119
Interest receivable		25,834		23,557
Prepaid assets		4,658		4,906
Other assets		9,629		18,428
Total other assets	$	162,906	$	158,450

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

The Company owns 211 thousand shares of Visa Inc. class B common stock which have transfer restrictions; the carrying value is $-0- thousand. On July 5, 2018, Visa Inc. announced a new conversion rate applicable to its class B common stock resulting from its June 28, 2018 deposit of funds into its litigation escrow account. This funding reduced the conversion rate of class B common stock into class A common stock, which is unrestricted and trades actively on the New York Stock Exchange, from 1.6483 to 1.6298. Visa Inc. class A common stock had a closing price of $131.94 per share on December 31, 2018, the last day of stock market trading for the fourth quarter 2018. The ultimate value of the Company’s Visa Inc. class B shares is subject to the extent of Visa Inc.’s future litigation escrow fundings, the resulting conversion rate to class A common stock, and current and future trading restrictions on the class B common stock.

The Company invests in flow-through limited liability entities that manage or invest in affordable housing projects that qualify for low-income housing tax credits. At December 31, 2018, this investment totaled $10,219 thousand and $4,799  thousand of this amount represents outstanding equity capital commitments that are included in other liabilities. At December 31, 2017, this investment totaled $10,119 thousand and $2,299  thousand of this amount represented outstanding equity capital commitments. At December 31, 2018, the $4,799 thousand of outstanding equity capital commitments are expected to be paid as follows, $627 thousand in 2019, $2,026 thousand in 2020, $138 thousand in 2021, $261 thousand in 2022, $134 thousand in 2023, $1,041 thousand in 2024 and $572 thousand in 2025 or thereafter.

The amounts recognized in net income for these investments include:

	For the Years Ended December 31,
	2018		2017		2016
	(In thousands)
Investment loss included in pre-tax income	$	2,900	$	1,800	$	2,475
Valuation impairment included in pre-tax income		-		625		-
Tax credits recognized in provision for income taxes		1,121		1,850		2,286

The $625 thousand valuation impairment recognized in 2017 was due to a decline in future expected federal tax benefits due to the reduction in the federal corporate tax rate upon enactment of the Tax Cuts and Jobs Act of 2017.

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Note 6: Goodwill and Identifiable Intangible Assets

The Company has recorded goodwill and other identifiable intangibles associated with purchase business combinations. Goodwill is not amortized, but is evaluated for impairment at least annually. The Company did not recognize impairment during the years ended December 31, 2018, 2017 and 2016. Identifiable intangibles are amortized to their estimated residual values over their expected useful lives. Such lives and residual values are also periodically reassessed to determine if any amortization period adjustments are indicated. During the years ended December 31, 2018, 2017 and 2016 no such adjustments were recorded.

The carrying values of goodwill were:

	At December 31,
	2018		2017
	(In thousands)
Goodwill	$	121,673	$	121,673

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

	At December 31,
	2018					2017
	Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization
	(In thousands)
Core Deposit Intangibles	$	56,808	$	(54,879	)	$	56,808	$	(52,987	)
Merchant Draft Processing Intangible		10,300		(10,300	)		10,300		(10,271	)
Total Identifiable Intangible Assets	$	67,108	$	(65,179	)	$	67,108	$	(63,258	)

As of December 31, 2018, the current period and estimated future amortization expense for identifiable intangible assets was:

	Core Deposit Intangibles		Merchant Draft Processing Intangible		Total
	(In thousands)
For the Year Ended December 31, 2018 (actual)	$	1,892	$	29	$	1,921
Estimate for the Year Ended December 31, 2019		538		-		538
2020		287		-		287
2021		269		-		269
2022		252		-		252
2023		236		-		236

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Note 7: Deposits and Borrowed Funds

The following table provides additional detail regarding deposits.

	Deposits
	At December 31,
	2018		2017
	(In thousands)
Noninterest-bearing	$	2,243,251	$	2,197,526
Interest-bearing:
Transaction		929,346		904,245
Savings		1,498,991		1,494,024
Time deposits less than $100 thousand		102,654		117,848
Time deposits $100 thousand through $250 thousand		64,512		76,578
Time deposits more than $250 thousand		28,085		37,392
Total deposits	$	4,866,839	$	4,827,613

Demand deposit overdrafts of $980  thousand and $2,786  thousand were included as loan balances at December 31, 2018 and 2017, respectively. Interest expense for aggregate time deposits with individual account balances in excess of $100 thousand was $368 thousand in 2018, $415 thousand in 2017 and $509 thousand in 2016.

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

	Repurchase Agreements (Sweep) Accounted for as Secured Borrowings
	Remaining Contractual Maturity of the Agreements Overnight and Continuous
	At December 31,
	2018		2017
Repurchase agreements:	(In thousands)
Collateral securing borrowings:
Securities of U.S. Government sponsored entities	$	73,803	$	74,173
Agency residential MBS		58,380		58,251
Corporate securities		91,837		105,113
Total collateral carrying value	$	224,020	$	237,537
Total short-term borrowed funds	$	51,247	$	58,471

	For the Years Ended December 31,
	2018		2017
	Highest Balance at Any Month-end
	(In thousands)
Securities sold under repurchase agreements	$	68,894	$	82,126

Note 8: Shareholders’ Equity

The Company grants stock options and restricted performance shares to employees in exchange for employee services, pursuant to the shareholder-approved 1995 Stock Option Plan, which was last amended and restated in 2012. Nonqualified stock option grants (“NQSO”) are granted with an exercise price equal to the fair market value of the related common stock on the grant date. NQSO generally become exercisable in equal annual installments over a three-year period with each installment vesting on the anniversary date of the grant. Each NQSO has a maximum ten-year term. A restricted performance share grant becomes vested after three years of being awarded, provided the Company has attained its performance goals for such three-year period.

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The following table summarizes information about stock options granted under the Plan as of December 31, 2018. The intrinsic value is calculated as the difference between the market value as of December 31, 2018 and the exercise price of the shares. The market value as of December 31, 2018 was $55.68 as reported by the NASDAQ Global Select Market:

			Options Outstanding								Options Exercisable
			At December 31, 2018						For the Year Ended December 31, 2018		At December 31, 2018						For the Year Ended December 31, 2018
Range of Exercise Price			Number Outstanding		Aggregate Intrinsic Value		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price		Number Exercisable		Aggregate Intrinsic Value		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price
			(In thousands)				(Years)				(In thousands)				(Years)
$40	-	45		176	$	2,309		6.6	$	43		87	$	1,122		6.1	$	43
45	-	50		11		106		3.1		46		11		106		3.1		46
50	-	55		286		1,297		0.7		51		286		1,297		0.7		51
55	-	60		229		-		7.7		57		73		-		6.9		57
60	-	65		244		-		9.1		62		-		N/A		N/A		N/A
$40	-	65		946	$	3,712		5.7		54		457	$	2,525		2.8		50

The Company applies the Roll-Geske option pricing model (Modified Roll) to determine grant date fair value of stock option grants. This model modifies the Black-Scholes Model to take into account dividends and American options. During the year ended December 31, 2018, 2017 and 2016, the Company granted 249 thousand, 266 thousand and 325 thousand stock options, respectively. The following weighted average assumptions were used in the option pricing to value stock options granted in the periods indicated:

	For the Years Ended December 31,
	2018			2017			2016
Expected volatility (1)		20	%		20	%		22	%
Expected life in years (2)		4.8			4.8			4.8
Risk-free interest rate (3)		2.50	%		1.97	%		1.41	%
Expected dividend yield		2.65	%		3.28	%		4.49	%
Fair value per award	$	9.98		$	8.27		$	5.97

⁽¹⁾ Measured using daily price changes of Company’s stock over respective expected term of the option and the implied volatility derived from the market prices of the Company’s stock and traded options.

⁽²⁾ The number of years that the Company estimates that the options will be outstanding prior to exercise.

⁽³⁾ The risk-free rate over the expected life based on the US Treasury yield curve in effect at the time of the grant.

Employee stock option grants are being expensed by the Company over the grants’ three year vesting period. The Company issues new shares upon the exercise of options. The number of shares authorized to be issued for options at December 31, 2018 is 713 thousand.

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A summary of option activity during the year ended December 31, 2018 is presented below:

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term
	(In thousands)					(Years)
Outstanding at January 1, 2018		1,030		$	49.44
Granted		249			62.16
Exercised		(292	)		45.76
Forfeited or expired		(41	)		52.54
Outstanding at December 31, 2018		946		$	53.78		5.7
Exercisable at December 31, 2018		457		$	50.38		2.8

A summary of the Company’s nonvested option activity during the year ended December 31, 2018 is presented below:

	Shares			Weighted Average Grant Date Fair Value
	(In thousands)
Nonvested at January 1, 2018		561		$	6.98
Granted		249			9.98
Vested		(280	)		6.54
Forfeited		(41	)		7.66
Nonvested at December 31, 2018		489			8.71

The weighted average estimated grant date fair value for options granted under the Company’s stock option plan during the twelve months ended December 31, 2018, 2017 and 2016 was $9.98, $8.27 and $5.97 per share, respectively. The total remaining unrecognized compensation cost related to nonvested awards as of December 31, 2018 is $2,871 thousand and the weighted average period over which the cost is expected to be recognized is 1.8 years.

The total intrinsic value of options exercised during the twelve months ended December 31, 2018, 2017 and 2016 was $4,264 thousand, $4,642 thousand and $3,242 thousand, respectively. The total fair value of Restricted Performance Shares (“RPSs”) that vested during the twelve months ended December 31, 2018, 2017 and 2016 was $1,143 thousand, $708 thousand and $753 thousand, respectively. The total fair value of options vested during the twelve months ended December 31, 2018, 2017 and 2016 was $1,835 thousand, $1,493 thousand and $1,269 thousand, respectively. The Company adopted the ASU 2016-09 provisions effective January 1, 2017, which has the potential to create volatility in the book tax provision at the time nonqualified stock options are exercised or expire. During the twelve months of 2018, 292 thousand shares were issued due to the exercise of nonqualified stock options resulting in a tax deduction exceeding related share based compensation by $2,516 thousand. During the twelve months of 2017, 509 thousand shares were issued due to the exercise of nonqualified stock options resulting in a tax deduction exceeding related share based compensation by $1,667 thousand. The income tax provision was $737 thousand lower in 2018 and $698 thousand in 2017 lower than would have been under accounting standards prior to the adoption of ASU 2016-09. The increase in tax benefits recognized for the tax deductions from the exercise of options totaled $394 thousand for the twelve months ended December 31, 2016.

A summary of the status of the Company’s restricted performance shares as of December 31, 2018 and 2017 and changes during the twelve months ended on those dates, follows:

	2018			2017
	(In thousands)
Outstanding at January 1,		49			48
Granted		11			14
Issued upon vesting		(19	)		(13	)
Forfeited		(2	)		-
Outstanding at December 31,		39			49

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As of December 31, 2018 and 2017, the restricted performance shares had a weighted-average contractual life of 1.2 years. The compensation cost that was charged against income for the Company’s restricted performance shares granted was $660 thousand, $827 thousand and $1,228 thousand for the twelve months ended December 31, 2018, 2017 and 2016, respectively. There were no stock appreciation rights or incentive stock options granted in the twelve months ended December 31, 2018 and 2017.

On February 13, 2009, the Company issued a warrant to purchase 246,640 shares of the Company’s common stock at an exercise price of $50.92 per share. The warrants may be exercised in a manner wherein the Company withholds shares of common stock issuable upon exercise of the warrant equal in value to the aggregate exercise price, in which case the warrant holder would not deliver cash for the aggregate exercise price and the Company would issue a number of shares equal to the intrinsic value on the exercise date. The warrants remain outstanding at December 31, 2018. On January 29, 2019, the warrants were exercised in a cashless transaction resulting in the issuance of 50,788 shares of the Company’s common stock.

The Company repurchases and retires its common stock in accordance with Board of Directors approved share repurchase programs. At December 31, 2018, approximately 1,750 thousand shares remained available to repurchase under such plans.

Shareholders have authorized two additional classes of stock of one million shares each, to be denominated “Class B Common Stock” and “Preferred Stock,” respectively, in addition to the 150 million shares of common stock presently authorized. At December 31, 2018, no shares of Class B Common Stock or Preferred Stock were outstanding.

Note 9: Regulatory Capital

Banks and bank holding companies are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can result in regulatory action. The final rules implementing Basel Committee on Banking Supervision’s capital guidelines for U.S. banks (Basel III rules) became effective for the Company on January 1, 2015 with full compliance with all of the requirements being phased in over a multi-year schedule, and fully phased in by January 1, 2019. Under the Basel III rules, the Company must hold a capital conservation buffer above the adequately capitalized risk-based capital ratios. The capital conservation buffer was phased in from 0.0% for 2015 to 2.50% in 2019. The capital conservation buffer was 1.875% for 2018 and 1.25% for 2017. The net unrealized gain or loss on available for sale securities is not included in computing regulatory capital. Management believes as of December 31, 2018, the Company and Bank met all capital adequacy requirements to which they are subject.

Prompt corrective action regulations provide five classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. At year-end 2018 and 2017, the most recent regulatory notifications categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the institution’s category.

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The capital ratios for the Company and the Bank under the new capital framework as of the dates indicated are presented in the table below.

	At December 31, 2018					Required for Capital Adequacy Purposes Effective January 1, 2018					To Be Well-capitalized Under Prompt Corrective Action Regulations
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	($ in thousands)
Common Equity Tier 1 Capital
Company	$	528,042		16.30	%	$	206,576		6.375	%(1)		N/A		N/A
Bank		415,575		13.01	%		203,664		6.375	%(1)	$	207,658		6.50	%
Tier 1 Capital
Company		528,042		16.30	%		255,182		7.875	%(1)		N/A		N/A
Bank		415,575		13.01	%		251,585		7.875	%(1)		255,579		8.00	%
Total Capital
Company		551,701		17.03	%		319,990		9.875	%(1)		N/A		N/A
Bank		445,234		13.94	%		315,480		9.875	%(1)		319,474		10.00	%
Leverage Ratio (2)
Company		528,042		9.51	%		222,111		4.000	%		N/A		N/A
Bank		415,575		7.55	%		220,312		4.000	%		275,390		5.00	%

⁽¹⁾ Includes 1.875% capital conservation buffer.

⁽²⁾ The leverage ratio consists of Tier 1 capital divided by the most recent quarterly average total assets, excluding certain intangible assets.

	At December 31, 2017					Required for Capital Adequacy Purposes Effective January 1, 2017					To Be Well-capitalized Under Prompt Corrective Action Regulations
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	($ in thousands)
Common Equity Tier 1 Capital
Company	$	479,259		15.36	%	$	179,377		5.75	%(3)		N/A		N/A
Bank		383,796		12.50	%		176,568		5.75	%(3)	$	199,599		6.50	%
Tier 1 Capital
Company		479,259		15.36	%		226,170		7.25	%(3)		N/A		N/A
Bank		383,796		12.50	%		222,630		7.25	%(3)		245,660		8.00	%
Total Capital
Company		504,576		16.17	%		288,562		9.25	%(3)		N/A		N/A
Bank		415,113		13.52	%		284,045		9.25	%(3)		307,076		10.00	%
Leverage Ratio (2)
Company		479,259		8.86	%		216,280		4.000	%		N/A		N/A
Bank		383,796		7.16	%		214,468		4.000	%		268,085		5.00	%

⁽²⁾ The leverage ratio consists of Tier 1capital divided by the most recent quarterly average total assets, excluding certain intangible assets.

⁽³⁾ Includes 1.25% capital conservation buffer.

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Note 10: Income Taxes

Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the amounts reported in the financial statements of existing assets and liabilities and their respective tax basis and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Amounts for the current year are based upon estimates and assumptions as of the date of these financial statements and could vary significantly from amounts shown on the tax returns as filed.

The components of the net deferred tax asset are as follows:

	At December 31,
	2018		2017
	(In thousands)
Deferred tax asset
Allowance for credit losses	$	6,868	$	7,349
State franchise taxes		3,026		1,871
AMT carryforward		-		1,752
Securities available for sale		16,787		8,586
Deferred compensation		5,229		5,279
Real estate owned		553		553
Purchased assets and assumed liabilities		935		1,111
Post-retirement benefits		555		526
Employee benefit accruals		2,104		2,066
VISA Class B shares		167		96
Limited partnership investments		708		57
Impaired capital assets		3,070		3,056
Accrued liabilities		2,554		1,609
Premises and equipment		31		299
Other		721		520
Total deferred tax asset		43,308		34,730
Deferred tax liability
Net deferred loan fees		291		281
Intangible assets		761		1,247
Other		-		90
Total deferred tax liability		1,052		1,618
Net deferred tax asset	$	42,256	$	33,112

At December 31, 2018 and December 31, 2017, the Company had a $3,070 thousand and $3,056 thousand, respectively, deferred tax asset related to a California capital loss carryforwards which will expire if unutilized within five years of the year incurred. The Company believes it will have sufficient California capital gains within the five year utilization period to absorb the carryforward.

At December 31, 2017, the Company had no net operating loss and a $1,752 thousand AMT tax credit carryforward; the AMT tax credit carryforward was fully utilized in 2018.

Based on Management’s judgment, a valuation allowance is not needed to reduce the gross deferred tax asset because it is more likely than not that the gross deferred tax asset will be realized through recoverable taxes or future taxable income. Net deferred tax assets are included with other assets in the consolidated balance sheets.

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The provision for federal and state income taxes consists of amounts currently payable and amounts deferred are as follows:

	For the Years Ended December 31,
	2018			2017		2016
	(In thousands)
Current income tax expense:
Federal	$	10,560		$	1,778	$	16,258
State		9,816			7,810		7,292
Total current		20,376			9,588		23,550
Deferred income tax (benefit) expense:
Federal		(206	)		14,461		(2,604	)
State		(737	)		783		158
Total deferred		(943	)		15,244		(2,446	)
Adjustment of net deferred tax asset for enacted changes in tax rates:
Federal		-			12,315		-
State		-			-		-
Total adjustments		-			12,315		-
Provision for income taxes	$	19,433		$	37,147	$	21,104

The provision for income taxes differs from the provision computed by applying the statutory federal income tax rate to income before taxes, as follows:

	For the Years Ended December 31,
	2018			2017			2016
	(In thousands)
Federal income taxes due at statutory rate	$	19,109		$	30,509		$	27,985
Reductions in income taxes resulting from:
Interest on state and municipal securities and loans not taxable for federal income tax purposes		(4,375	)		(7,794	)		(8,382	)
State franchise taxes, net of federal income tax benefit		7,173			5,586			4,843
Re-measurement of net deferred tax asset due to enactment of new federal tax rate		-			12,315			-
Stock compensation deduction in excess of book expense		(528	)		(583	)		-
Tax credits		(1,291	)		(1,850	)		(2,286	)
Dividend received deduction		(32	)		(60	)		(52	)
Cash value life insurance		(490	)		(603	)		(607	)
Other		(133	)		(373	)		(397	)
Provision for income taxes	$	19,433		$	37,147		$	21,104

The 2017 income tax provision includes a $12.3 million dollar charge to re-measure the Company’s net deferred tax asset as a result of the enactment of the Tax Cuts and Jobs Act of 2017.

A reconciliation of the beginning and ending amounts of unrecognized tax benefits follow:

	2018		2017
	(In thousands)
Balance at January 1,	$	909	$	1,099
Additions for tax positions taken in the current period		-		-
Reductions for tax positions taken in the current period		-		-
Additions for tax positions taken in prior years		-		-
Reductions for tax positions taken in prior years		-		-
Decrease related to settlements with taxing authorities		-		(190	)
Decrease as a result of a lapse in statute of limitations		-		-
Balance at December 31,	$	909	$	909

The Company’s uncertain tax positions relate to positions taken on tax returns which are under examination. The timing of concluding the examinations is dependent on the taxing authorities. The examinations could conclude in 2019. Unrecognized tax benefits at December 31, 2018 and 2017 include accrued interest and penalties of $13 thousand and $13 thousand, respectively. When recognized, the entire amount of the unrecognized tax benefits will affect the effective tax rate.

The Company classifies interest and penalties as a component of the provision for income taxes. At December 31, 2018, the tax years ended December 31, 2017, 2016 and 2015 remain subject to examination by the Internal Revenue Service and the tax years ended December 31, 2017, 2016, 2015, 2014, 2013, 2012 and 2011 remain subject to examination by the California Franchise Tax Board.

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Note 11: Fair Value Measurements

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

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

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

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

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

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

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

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

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Assets Recorded at Fair Value on a Recurring Basis

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

	At December 31, 2018
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3) (1)
	(In thousands)
Equity securities
Mutual funds	$	1,747	$	-	$	1,747	$	-
Total equity securities		1,747		-		1,747		-
Debt securities available for sale
U.S. Treasury securities		139,574		139,574		-		-
Securities of U.S. Government sponsored entities		164,018		-		164,018		-
Agency residential MBS		853,871		-		853,871		-
Non-agency residential MBS		114		-		114		-
Agency commercial MBS		1,842		-		1,842		-
Securities of U.S. Government entities		1,119		-		1,119		-
Obligations of states and political subdivisions		179,091		-		179,091		-
Corporate securities		1,315,041		-		1,315,041		-
Total debt securities available for sale		2,654,670		139,574		2,515,096		-
Total	$	2,656,417	$	139,574	$	2,516,843	$	-

⁽¹⁾ There were no transfers in to or out of level 3 during the year ended December 31, 2018.

	At December 31, 2017
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3) (1)
	(In thousands)
Equity securities
Mutual funds	$	1,800	$	-	$	1,800	$	-
Total equity securities		1,800		-		1,800		-
Debt securities available for sale
Securities of U.S. Government sponsored entities		119,319		-		119,319		-
Agency residential MBS		767,706		-		767,706		-
Non-agency residential MBS		154		-		154		-
Agency commercial MBS		2,219		-		2,219		-
Securities of U.S. Government entities		1,590		-		1,590		-
Obligations of states and political subdivisions		185,221		-		185,221		-
Corporate securities		1,115,498		-		1,115,498		-
Total debt securities available for sale		2,191,707		-		2,191,707		-
Total	$	2,193,507	$	-	$	2,193,507	$	-

⁽¹⁾ There were no transfers in to or out of level 3 during the year ended December 31, 2017.

Assets Recorded at Fair Value on a Nonrecurring Basis

The Company may be required, from time to time, to measure certain assets at fair value on a nonrecurring basis in accordance with GAAP. These adjustments to fair value usually result from application of lower of cost or fair value accounting of individual assets. For assets measured at fair value on a nonrecurring basis that were recorded in the balance sheet at December 31, 2018 and December 31, 2017, the following tables provide the level of valuation assumptions used to determine each adjustment and the carrying value of the related assets at period end.

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									For the
									Year Ended
	At December 31, 2018								December 31, 2018
	Carrying Value		Level 1		Level 2		Level 3		Total Losses
	(In thousands)
Other real estate owned	$	350	$	-	$	-	$	350	$	-
Impaired loans:
Commercial		6,437		-		-		6,437		-
Commercial real estate		3,870		-		-		3,870		(240	)
Total assets measured at fair value on a nonrecurring basis	$	10,657	$	-	$	-	$	10,657	$	(240	)

									For the
									Year Ended
	At December 31, 2017								December 31, 2017
	Carrying Value		Level 1		Level 2		Level 3		Total Losses
	(In thousands)
Other real estate owned	$	1,426	$	-	$	-	$	1,426	$	(219	)
Impaired loans:
Commercial		4,950		-		-		4,950		-
Commercial real estate		5,904		-		-		5,904		-
Total assets measured at fair value on a nonrecurring basis	$	12,280	$	-	$	-	$	12,280	$	(219	)

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

Disclosures about Fair Value of Financial Instruments

The following section describes the valuation methodologies used by the Company for estimating fair value of financial instruments not recorded at fair value in the balance sheet. The Company implemented the provisions of ASU 2016-01, Financial Instruments – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities, effective January 1, 2018. The provisions require the Company to use the “exit price notion” when measuring the fair value of financial instruments for disclosure purposes.

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

Equity Securities The fair values of equity securities were estimated using quoted prices as describe above for Level 2 valuation.

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

Loans Loans are valued using the exit price notion. The Company uses a net present value of cash flows methodology that seeks to incorporate interest rate, credit, liquidity and prepayment risks in the fair market value estimation. Inputs to the calculation include market rates for similarly offered products, market interest rate projections, credit spreads, estimated credit losses and prepayment assumptions.

Prior to adoption of ASU 2016-01, loans were separated into two groups for valuation. Variable rate loans, except for those described below, that reprice frequently with changes in market rates were valued using historical cost. Fixed rate loans and variable rate loans that have reached their minimum contractual interest rates were valued by discounting the future cash flows expected to be received from the loans using current interest rates charged on loans with similar characteristics. Additionally, the allowance for loan losses of $23,009 thousand at December 31, 2017 was applied against the estimated fair values to recognize estimated future defaults of contractual cash flows.

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Deposit Liabilities Deposits with no stated maturity such as checking accounts, savings accounts and money market accounts can be readily converted to cash or used to settle transactions at face value through the broad financial system operated by the Federal Reserve Banks and financial institutions. The fair value of deposits with no stated maturity is equal to the amount payable on demand. The fair value of time deposits was estimated using a net present value of cash flows methodology, incorporating market interest rate projections and rates on alternative funding sources.

Prior to adoption of ASU 2016-01, the fair value of time deposits were estimated by discounting estimated future contractual cash flows using current market rates for financial instruments with similar characteristics.

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

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

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

	At December 31, 2018
	Carrying Amount		Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2 )		Significant Unobservable Inputs (Level 3 )
Financial Assets:	(In thousands)
Cash and due from banks	$	420,284	$	420,284	$	420,284	$	-	$	-
Debt securities held to maturity		984,609		971,445		-		971,445		-
Loans		1,185,851		1,184,770		-		-		1,184,770
Financial Liabilities:
Deposits	$	4,866,839	$	4,862,668	$	-	$	4,671,588	$	191,080
Short-term borrowed funds		51,247		51,247		-		51,247		-

	At December 31, 2017
	Carrying Amount		Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2 )		Significant Unobservable Inputs (Level 3 )
Financial Assets:	(In thousands)
Cash and due from banks	$	575,002	$	575,002	$	575,002	$	-	$	-
Debt securities held to maturity		1,158,864		1,155,342		-		1,155,342		-
Loans		1,264,973		1,257,811		-		-		1,257,811
Financial Liabilities:
Deposits	$	4,827,613	$	4,824,586	$	-	$	4,595,795	$	228,791
Short-term borrowed funds		58,471		58,471		-		58,471		-

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

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Note 12: Lease Commitments

Twenty eight banking offices and a centralized administrative service center are owned and 58 facilities are leased. Substantially all the leases contain renewal options and provisions for rental increases, principally for cost of living index. The Company also leases certain pieces of equipment.

Minimum future rental payments under noncancelable operating leases as of December 31, 2018 are as follows:

	Minimum future rental payments
	(In thousands)
2019	$	5,996
2020		4,409
2021		2,741
2022		1,921
2023		1,223
Thereafter		1,044
Total minimum lease payments	$	17,334

The total minimum future rental payments have not been reduced by minimum sublease rentals of $1,319 thousand due in the future under noncancelable subleases. Total rentals for premises were $6,794 thousand in 2018, $6,695 thousand in 2017 and $6,823 thousand in 2016. Total sublease rentals were $397 thousand in 2018, $406 thousand in 2017 and $435 thousand in 2016. Total rentals for premises, net of sublease income, included in noninterest expense were $6,397 thousand in 2018, $6,289 thousand in 2017 and $6,388 thousand in 2016.

Note 13: Commitments and Contingent Liabilities

Loan commitments are agreements to lend to a customer provided there is no violation of any condition established in the agreement. Commitments generally have fixed expiration dates or other termination clauses. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future funding requirements. Loan commitments are subject to the Company’s normal credit policies and collateral requirements. Unfunded loan commitments were $278,598 thousand and $272,646 thousand at December 31, 2018 and December 31, 2017, respectively. Standby letters of credit commit the Company to make payments on behalf of customers when certain specified future events occur. Standby letters of credit are primarily issued to support customers’ short-term financing requirements and must meet the Company’s normal credit policies and collateral requirements. Financial and performance standby letters of credit outstanding totaled $2,772 thousand and $19,263 thousand at December 31, 2018 and December 31, 2017, respectively. The Company had no commitments outstanding for commercial and similar letters of credit at December 31, 2018 and December 31, 2017. The Company had $75 thousand in outstanding full recourse guarantees to a 3^rd party credit card company at December 31, 2018. The Company had a reserve for unfunded commitments of $2,308 thousand at December 31, 2018 and 2017, included in other liabilities.

Due to the nature of its business, the Company is subject to various threatened or filed legal cases. Based on the advice of legal counsel, the Company does not expect such cases will have a material, adverse effect on its financial position or results of operations. Legal liabilities are accrued when obligations become probable and the amount can be reasonably estimated. In the third quarter 2018, the Company achieved a mediated settlement to dismiss a lawsuit, subject to court approval, and accrued a liability for $3,500 thousand.

The Company has determined that it will be obligated to provide refunds of revenue recognized in years prior to 2017 to some customers. The Company estimates the probable amount of these obligations will be $5,542 thousand and accrued a liability for such amount in 2017; the estimated liability is subject to revision.

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Note 14: Retirement Benefit Plans

The Company sponsors a qualified defined contribution Deferred Profit-Sharing Plan covering substantially all of its salaried employees with one or more years of service. The costs charged to noninterest expense related to discretionary Company contributions to the Deferred Profit-Sharing Plan were $1,057 thousand in 2018, $944 thousand in 2017 and $1,000 thousand in 2016.

The Company also sponsors a qualified defined contribution Tax Deferred Savings/Retirement Plan (ESOP) covering salaried employees who become eligible to participate upon completion of a 90-day introductory period. The Tax Deferred Savings/ Retirement Plan (ESOP) allows employees to defer, on a pretax or after-tax basis, a portion of their salaries as contributions to this Plan. Participants may invest in several funds, including one fund that invests primarily in Westamerica Bancorporation common stock. The Company funds contributions to match participating employees’ contributions, subject to certain limits. The matching contributions charged to compensation expense were $1,052 thousand in 2018, $1,098 thousand in 2017 and $1,075 thousand in 2016.

The Company offers a continuation of group insurance coverage to eligible employees electing early retirement, for the period from the date of retirement until age 65. For eligible employees the Company pays a portion of these early retirees’ group insurance premiums. The Company also reimburses a portion of Medicare Part B premiums for all qualifying retirees over age 65 and, if eligible, their spouses. Eligibility for post-retirement medical benefits is based on age and years of service, and restricted to employees hired prior to February 1, 2006 who elect early retirement prior to January 1, 2019. The Company uses an actuarial-based accrual method of accounting for post-retirement benefits. The Company used a December 31 measurement date for determining post-retirement medical benefit calculations.

The following tables set forth the net periodic post-retirement benefit cost and the change in the benefit obligation for the years ended December 31 and the funded status of the post-retirement benefit plan as of December 31:

Net Periodic Benefit Cost

	At December 31,
	2018		2017			2016
	(In thousands)
Service benefit	$	24	$	(311	)	$	(153	)
Interest cost		72		95			108
Amortization of unrecognized transition obligation		-		61			61
Net periodic (benefit) cost	$	96	$	(155	)	$	16

Other Changes in Benefit Obligations Recognized in Other Comprehensive Income

Amortization of unrecognized transition obligation, net of tax		-		(34	)		(36	)
Total recognized in net periodic (benefit) cost and accumulated other comprehensive income	$	96	$	(189	)	$	(20	)

The transition obligation for this post-retirement benefit plan became fully amortized during the twelve months ended December 31, 2017.

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Obligation and Funded Status

	At December 31,
	2018			2017			2016
Change in benefit obligation	(In thousands)
Benefit obligation at beginning of year	$	1,958		$	2,319		$	2,522
Service benefit		24			(311	)		(153	)
Interest cost		72			95			108
Benefits paid		(141	)		(145	)		(158	)
Benefit obligation at end of year	$	1,913		$	1,958		$	2,319
Accumulated post-retirement benefit obligation attributable to:
Retirees	$	1,913		$	1,575		$	1,705
Fully eligible participants		-			382			606
Other		-			1			8
Total	$	1,913		$	1,958		$	2,319
Fair value of plan assets		-			-			-
Accumulated post-retirement benefit obligation in excess of plan assets	$	1,913		$	1,958		$	2,319

Additional Information

Assumptions

	At December 31,
	2018			2017			2016
Weighted-average assumptions used to determine benefit obligations
Discount rate		3.76	%		3.70	%		4.10	%
Weighted-average assumptions used to determine net periodic benefit cost
Discount rate		3.70	%		4.10	%		4.30	%

The above discount rate is based on the Corporate Aa 25-year rate, the term of which approximates the term of the benefit obligations. The Company reserves the right to terminate or alter post-employment health benefits. Post-retirement medical benefits are currently fixed amounts without provision for future increases; as a result, the assumed annual average rate of inflation used to measure the expected cost of benefits covered by this program is zero percent for 2018 and beyond.

Assumed benefit inflation rates are not applicable for this program.

	Estimated future benefit payments
	(In thousands)
2019	$	143
2020		143
2021		143
2022		140
2023		138
Years 2024-2028		624

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Note 15: Related Party Transactions

Certain of the Directors, executive officers and their associates have had banking transactions with subsidiaries of the Company in the ordinary course of business. The table below reflects information concerning loans to certain directors and executive officers and/or family members during 2018 and 2017:

	2018			2017
	(In thousands)
Balance at January 1,	$	622		$	867
Originations		-			-
Principal reductions		(45	)		(245	)
Balance at December 31,	$	577		$	622
Percent of total loans outstanding.		0.05	%		0.05	%

Note 16: Regulatory Matters

Payment of dividends to the Company by the Bank is limited under regulations for state chartered banks. The amount that can be paid in any calendar year, without prior approval from regulatory agencies, cannot exceed the net profits (as defined) for the preceding three calendar years less dividends paid. The Company consistently has paid quarterly dividends to its shareholders since its formation in 1972.

The Bank is required to maintain reserves with the Federal Reserve Bank equal to a percentage of its reservable deposits. The Bank’s daily average on deposit at the Federal Reserve Bank was $473,250 thousand in 2018 and $458,186 thousand in 2017, which amounts exceed the Bank’s required reserves.

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Note 17: Other Comprehensive Income

The components of other comprehensive (loss) income and other related tax effects were:

	2018
	Before tax			Tax effect		Net of tax
	(In thousands)
Debt securities available for sale:
Net unrealized losses arising during the year	$	(27,939	)	$	8,258	$	(19,681	)
Reclassification of losses included in net income		-			-		-
Net unrealized losses arising during the year		(27,939	)		8,258		(19,681	)
Post-retirement benefit obligation		-			-		-
Other comprehensive loss	$	(27,939	)	$	8,258	$	(19,681	)

	2017
	Before tax			Tax effect			Net of tax
	(In thousands)
Debt securities available for sale:
Net unrealized losses arising during the year	$	(3,767	)	$	1,585		$	(2,182	)
Reclassification of gains included in net income		(7,955	)		3,345			(4,610	)
Net unrealized losses arising during the year		(11,722	)		4,930			(6,792	)
Post-retirement benefit obligation		59			(25	)		34
Other comprehensive loss	$	(11,663	)	$	4,905		$	(6,758	)

	2016
	Before tax			Tax effect			Net of tax
	(In thousands)
Debt securities available for sale:
Net unrealized losses arising during the year	$	(18,610	)	$	7,825		$	(10,785	)
Reclassification of (gains) losses included in net income		-			-			-
Net unrealized losses arising during the year		(18,610	)		7,825			(10,785	)
Post-retirement benefit obligation		61			(25	)		36
Other comprehensive loss	$	(18,549	)	$	7,800		$	(10,749	)

Accumulated other comprehensive income (loss) balances were:

	Post-retirement Benefit Obligation			Net Unrealized Gains (losses) on Securities			Accumulated Other Comprehensive Income (loss)
	(In thousands)
Balance, December 31, 2015	$	(70	)	$	745		$	675
Net change		36			(10,785	)		(10,749	)
Balance, December 31, 2016		(34	)		(10,040	)		(10,074	)
Net change		34			(6,792	)		(6,758	)
Balance, December 31, 2017		-			(16,832	)		(16,832	)
Cumulative effect of equity securities losses reclassified		-			142			142
Adjusted Balance, January 1, 2018		-			(16,690	)		(16,690	)
Reclass stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017		-			(3,625	)		(3,625	)
Net change		-			(19,681	)		(19,681	)
Balance, December 31, 2018	$	-		$	(39,996	)	$	(39,996	)

The transition obligation for this post-retirement benefit plan became fully amortized during the twelve months ended December 31, 2017.

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Note 18: Earnings Per Common Share

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

	For the Years Ended December 31,
	2018		2017		2016
	(In thousands, except per share data)
Net income (numerator)	$	71,564	$	50,025	$	58,853
Basic earnings per common share
Weighted average number of common shares outstanding - basic (denominator)		26,649		26,291		25,612
Basic earnings per common share	$	2.69	$	1.90	$	2.30
Diluted earnings per common share
Weighted average number of common shares outstanding - basic		26,649		26,291		25,612
Add common stock equivalents for options		107		128		66
Weighted average number of common shares outstanding - diluted (denominator)		26,756		26,419		25,678
Diluted earnings per common share	$	2.67	$	1.89	$	2.29

For the years ended December 31, 2018, 2017 and 2016, options to purchase 423 thousand, 323 thousand and 773 thousand shares of common stock, respectively, were outstanding but not included in the computation of diluted earnings per common share because the option exercise price exceeded the fair value of the stock such that their inclusion would have had an anti-dilutive effect.

Note 19: Westamerica Bancorporation (Parent Company Only Condensed Financial Information)

Statements of Income and Comprehensive Income

	For the Years Ended December 31,
	2018			2017			2016
	(In thousands)
Dividends from subsidiaries	$	43,892		$	12,728		$	56,824
Interest income		33			43			25
Other income		9,447			8,590			8,315
Total income		53,372			21,361			65,164
Interest on borrowings		-			-			-
Salaries and benefits		7,575			7,163			7,079
Other expense		3,181			3,416			3,290
Total expense		10,756			10,579			10,369
Income before taxes and equity in undistributed income of subsidiaries		42,616			10,782			54,795
Income tax benefit		919			241			1,025
Earnings of subsidiaries greater than subsidiary dividends		28,029			39,002			3,033
Net income		71,564			50,025			58,853
Other comprehensive loss, net of tax		(19,681	)		(6,758	)		(10,749	)
Comprehensive income	$	51,883		$	43,267		$	48,104

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Balance Sheets

	At December 31,
	2018		2017
	(In thousands)
Assets
Cash	$	72,878	$	53,409
Investment securities available for sale		-		-
Investment in Westamerica Bank		509,125		500,776
Investment in non-bank subsidiaries		455		455
Premises and equipment, net		10,400		9,639
Accounts receivable from Westamerica Bank		580		538
Other assets		36,990		40,547
Total assets	$	630,428	$	605,364
Liabilities
Accounts payable to Westamerica Bank	$	46	$	92
Other liabilities		14,791		15,033
Total liabilities		14,837		15,125
Shareholders' equity		615,591		590,239
Total liabilities and shareholders' equity	$	630,428	$	605,364

Statements of Cash Flows

	For the Years Ended December 31,
	2018			2017			2016
	(In thousands)
Operating Activities
Net income	$	71,564		$	50,025		$	58,853
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		361			319			305
(Increase) decrease in accounts receivable from affiliates		(43	)		(16	)		299
Increase in other assets		(2,638	)		(2,203	)		(1,940	)
Stock option compensation expense		1,988			1,824			1,494
Tax benefit increase upon exercise of stock options and expiration of stock options		-			-			(394	)
Provision (benefit) for deferred income tax		5,028			(3,971	)		1,983
Increase in other liabilities		978			202			1,392
Earnings of subsidiaries greater than subsidiary dividends		(28,029	)		(39,002	)		(3,033	)
Life insurance gains		(585	)		-			-
Gain on sales of premises and equipment		(538	)		(793	)		(79	)
Net Cash Provided by Operating Activities		48,086			6,385			58,880
Investing Activities
Proceeds from life insurance		1,169			-			-
Net Cash Provided by Investing Activities		1,169			-			-
Financing Activities
Exercise of stock options/issuance of shares		13,373			24,583			24,031
Taxes paid by withholding shares for tax purposes		-			-			(356	)
Tax benefit increase (decrease) upon exercise of stock options and expiration of stock options		-			-			394
Retirement of common stock		(524	)		(314	)		(5,424	)
Dividends		(42,635	)		(41,299	)		(39,924	)
Net Cash Used in Financing Activities		(29,786	)		(17,030	)		(21,279	)
Net change in cash		19,469			(10,645	)		37,601
Cash at Beginning of Period		53,409			64,054			26,453
Cash at End of Period	$	72,878		$	53,409		$	64,054
Supplemental Cash Flow Disclosures:
Supplemental disclosure of cash flow activities:
Interest paid for the period	$	-		$	-		$	-
Income tax payments for the period		13,627			17,351			19,264

-89-

Note 20: Quarterly Financial Information

(Unaudited)

	For the Three Months Ended
	March 31,				June 30,					September 30,					December 31,
	(In thousands, expect per share data and price range of common stock)
2018
Interest and loan fee income	$	36,315			$	37,346				$	38,614				$	39,448
Net interest income		35,856				36,887					38,087					38,934
Provision for loan losses		-				-					-					-
Noninterest income		11,955				11,769					12,528					11,897
Noninterest expense		26,022				25,741					29,366					25,787
Income before taxes		21,789				22,915					21,249					25,044
Net income		17,506				18,010					16,993					19,055
Basic earnings per common share		0.66				0.68					0.64					0.71
Diluted earnings per common share		0.66				0.67					0.63					0.71
Dividends paid per common share		0.40				0.40					0.40					0.40
Price range, common stock		55.72	-	62.52		55.81	-	60.68			57.56	-	64.52			52.75	-	63.20
2017
Interest and loan fee income	$	34,128			$	34,083				$	34,623				$	35,478
Net interest income		33,648				33,607					34,150					35,007
(Reversal of) provision for loan losses		-				(1,900			)		-					-
Noninterest income		11,657				12,123					12,548					20,300
Noninterest expense		25,419				25,316					25,592					31,441
Income before taxes		19,886				22,314					21,106					23,866
Net income		15,049				15,799					15,017					4,160
Basic earnings per common share		0.58				0.60					0.57					0.16
Diluted earnings per common share		0.57				0.60					0.57					0.16
Dividends paid per common share		0.39				0.39					0.39					0.40
Price range, common stock		54.12	-	64.07		51.31	-	57.78			49.54	-	59.54			53.96	-	63.03
2016
Interest and loan fee income	$	34,001			$	34,248				$	33,955				$	33,715
Net interest income		33,449				33,707					33,432					33,215
(Reversal of) provision for loan losses		-				-					(3,200			)		-
Noninterest income		11,729				11,702					11,598					11,545
Noninterest expense		26,212				25,750					26,575					25,083
Income before taxes		18,966				19,659					21,655					19,677
Net income		14,226				14,546					15,628					14,453
Basic earnings per common share		0.56				0.57					0.61					0.56
Diluted earnings per common share		0.56				0.57					0.61					0.56
Dividends paid per common share		0.39				0.39					0.39					0.39
Price range, common stock		40.72	-	49.63		45.86	-	51.53			46.61	-	50.96			48.20	-	65.34

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Shareholders and the Board of Directors of

Westamerica Bancorporation

San Rafael, California

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Westamerica Bancorporation (the "Company") as of December 31, 2018 and 2017, the related consolidated statements of income, comprehensive income, changes in shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2018, and the related notes (collectively referred to as the "financial statements"). We also have audited the Company’s internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control – Integrated Framework: (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2018 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control – Integrated Framework: (2013) issued by COSO.

Basis for Opinions

The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

(Continued)

-91-

Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Crowe LLP                                                

Crowe LLP

We have served as the Company's auditor since 2015.

Sacramento, California

February 28, 2019

-92-

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

The Company’s principal executive officer and principal financial officer have evaluated the effectiveness of the Company’s “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended, as of December 31, 2018.

Based upon their evaluation, the principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures are effective to ensure that material information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported as and when required and that such information is communicated to the Company’s management, including the principal executive officer and the principal financial officer, to allow for timely decisions regarding required disclosures. The evaluation did not identify any change in the Company’s internal control over financial reporting that occurred during the quarter ended December 31, 2018 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. Management’s Report on Internal Control Over Financial Reporting and the attestation Report of Independent Registered Public Accounting Firm are found on pages 47 and 91, respectively.

ITEM 9B. OTHER INFORMATION

None.

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-93-

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS OF THE REGISTRANT AND CORPORATE GOVERNANCE

The information regarding Directors of the Registrant and compliance with Section 16(a) of the Securities Exchange Act of 1934 required by this Item 10 of this Annual Report on Form 10-K is incorporated by reference from the information contained under the captions “Board of Directors and Committees”, “Proposal 1 — Election of Directors” and “Section 16(a) Beneficial Ownership Reporting Compliance” in the Company’s Proxy Statement for its 2018 Annual Meeting of Shareholders which will be filed pursuant to Regulation 14A of the Securities Exchange Act of 1934.

Executive Officers

The executive officers of the Company and Westamerica Bank serve at the pleasure of the Board of Directors and are subject to annual appointment by the Board at its first meeting following the Annual Meeting of Shareholders. It is anticipated that each of the executive officers listed below will be reappointed to serve in such capacities at that meeting.

Name of Executive	Position	Held Since
David L. Payne	Mr. Payne, born in 1955, is the Chairman of the Board, President and Chief Executive Officer of the Company. Mr. Payne is President and Chief Executive Officer of Gibson Printing and Publishing Company and Gibson Radio and Publishing Company which are newspaper, commercial printing and real estate investment companies headquartered in Vallejo, California.	1984
John “Robert” Thorson	Mr. Thorson, born in 1960, is Senior Vice President and Chief Financial Officer of the Company. Mr. Thorson joined Westamerica Bancorporation in 1989, was Vice President and Manager of Human Resources from 1995 until 2001 and was Senior Vice President and Treasurer from 2002 until 2005.	2005
Russell W. Rizzardi	Mr. Rizzardi, born in 1955, is Senior Vice President and Chief Credit Administrator of Westamerica Bank. Mr. Rizzardi joined Westamerica Bank in 2007. He has been in the banking industry since 1979 and was previously with Wells Fargo Bank and U.S. Bank.	2008
George ”Steve” Ensinger	Mr. Ensinger, born in 1954, is Senior Vice President and Division Manager of Human Resources of the Company. Mr. Ensinger joined Westamerica Bancorporation in 2014 and has held a variety of senior positions in Human Resources prior to joining the Company.	2014
Brian J. Donohoe	Mr. Donohoe, born in 1981, is Senior Vice President and Manager of the Operations & Systems Administration of Community Banker Services Corporation. Mr. Donohoe joined Westamerica Bancorporation in 1999 and has held a variety of positions in the Banking Division and the Operations & Systems Division, most recently, Vice President and Manager of Business Services until 2018.	2019

The Company has adopted a Code of Ethics (as defined in Item 406 of Regulation S-K of the Securities Act of 1933) that is applicable to its senior financial officers including its chief executive officer, chief financial officer, and principal accounting officer.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this Item 11 of this Annual Report on Form 10-K is incorporated by reference from the information contained under the captions “Executive Compensation” in the Company’s Proxy Statement for its 2019 Annual Meeting of Shareholders which will be filed pursuant to Regulation 14A of the Securities Exchange Act of 1934.

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-94-

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by this Item 12 of this Annual Report on Form 10-K is incorporated by reference from the information contained under the caption “Stock Ownership” in the Company’s Proxy Statement for its 2019 Annual Meeting of Shareholders which will be filed pursuant to Regulation 14A of the Securities Exchange Act of 1934.

Securities Authorized For Issuance Under Equity Compensation Plans

The following table summarizes the status of the Company’s equity compensation plans as of December 31, 2018:

	At December 31, 2018
Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights		Weighted-average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
	(In thousands, except exercise price)
	(a)		(b)		(c)
Equity compensation plans approved by security holders		946	$	54		713
Equity compensation plans not approved by security holders		-		N/A		-
Total		946	$	54		713

ITEM 13. CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

The information required by this Item 13 of this Annual Report on Form 10-K is incorporated by reference from the information contained under the caption “Certain Relationships and Related Party Transactions” in the Company’s Proxy Statement for its 2019 Annual Meeting of Shareholders which will be filed pursuant to Regulation 14A of the Securities Exchange Act of 1934.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this Item 14 of this Annual Report on Form 10-K is incorporated by reference from the information contained under the caption “Proposal 3 – Ratification of Independent Auditor” in the Company’s Proxy Statement for its 2019 Annual Meeting of Shareholders which will be filed pursuant to Regulation 14A of the Securities Exchange Act of 1934.

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)	1.	Financial Statements: See Index to Financial Statements on page 46. The consolidated financial statements included in Item 8 are filed as part of this Report.
(a)	2.	Financial statement schedules required. No financial statement schedules are filed as part of this Report since the required information is included in the consolidated financial statements, including the notes thereto, or the circumstances requiring inclusion of such schedules are not present.
(a)	3.	Exhibits: The exhibit list required by this item is incorporated by reference to the Exhibit Index filed with this Report.

-95-

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

WESTAMERICA BANCORPORATION

/s/ John “Robert” Thorson                             

John “Robert” Thorson

Senior Vice President

and Chief Financial Officer

(Principal Financial and Accounting Officer)

Date: February 28, 2019

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated.

Signature	Title	Date
/s/ David L. Payne David L. Payne	Chairman of the Board and Directors President and Chief Executive Officer (Principal Executive Officer)	February 28, 2019
/s/ John “Robert” Thorson John “Robert” Thorson	Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)	February 28, 2019
/s/ Etta Allen Etta Allen	Director	February 28, 2019
/s/ Louis E. Bartolini Louis E. Bartolini	Director	February 28, 2019
/s/ E. Joseph Bowler E. Joseph Bowler	Director	February 28, 2019
/s/ Patrick D. Lynch Patrick D. Lynch	Director	February 28, 2019
/s/ Catherine C. MacMillan Catherine C. MacMillan	Director	February 28, 2019
/s/ Ronald A. Nelson Ronald A. Nelson	Director	February 28, 2019
/s/ Edward B. Sylvester Edward B. Sylvester	Lead Independent Director	February 28, 2019

-96-

EXHIBIT INDEX

Exhibit Number
3(a)	Restated Articles of Incorporation (composite copy), incorporated by reference to Exhibit 3(a) to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 1997, filed with the Securities and Exchange Commission on March 30, 1998.
3(b)	By-laws, as amended (composite copy), incorporated by reference to Exhibit 3.2 to the Registrant’s Form 8-K, filed with the Securities and Exchange Commission on March 26, 2018.
3(c)	Certificate of Determination of Fixed Rate Cumulative Perpetual Preferred Stock, Series A of Westamerica Bancorporation dated February 10, 2009, incorporated by reference to Exhibit 99.1 to the Registrant’s Form 8-K, filed with the Securities and Exchange Commission on February 13, 2009.
4(c)	Warrant to Purchase Common Stock pursuant to the Letter Agreement between the Company and the United States Department of the Treasury dated February 13, 2009 incorporated by reference to Exhibit 4.2 to the Registrant’s Form 8-K, filed with the Securities and Exchange Commission on February 19, 2009.
10(a)*	Amended and Restated Stock Option Plan of 1995, incorporated by reference to Exhibit A to the Registrant’s definitive Proxy Statement pursuant to Regulation 14(a) filed with the Securities and Exchange Commission on March 17, 2003.
10(d)*	Westamerica Bancorporation Chief Executive Officer Deferred Compensation Agreement by and between Westamerica Bancorporation and David L. Payne, dated December 18, 1998 incorporated by reference to Exhibit 10(e) to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 1999, filed with the Securities and Exchange Commission on March 29, 2000.
10(e)*	Description of Executive Cash Bonus Program incorporated by reference to Exhibit 10(e) to Exhibit 2.1 of Registrant’s Form 8-K filed with the Securities and Exchange Commission on March 14, 2005.
10(f)*	Non-Qualified Annuity Performance Agreement with David L. Payne dated November 19, 1997 incorporated by reference to Exhibit 10(f) to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004, filed with the Securities and Exchange Commission on March 15, 2005.
10(g)*	Amended and Restated Westamerica Bancorporation Stock Option Plan of 1995 Nonstatutory Stock Option Agreement Form incorporated by reference to Exhibit 10(g) to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004, filed with the Securities and Exchange Commission on March 15, 2005.
10(h)*	Amended and Restated Westamerica Bancorporation Stock Option Plan of 1995 Restricted Performance Share Grant Agreement Form incorporated by reference to Exhibit 10(h) to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004, filed with the Securities and Exchange Commission on March 15, 2005.
10(i)*	Amended Westamerica Bancorporation and Subsidiaries Deferred Compensation Plan (As restated effective January 1, 2005) dated December 31, 2008 incorporated by reference to Exhibit 10(i) to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008, filed with the Securities and Exchange Commission on February 27, 2009.
10(j)*	Amended and Restated Westamerica Bancorporation Deferral Plan (Adopted October 26, 1995) dated December 31, 2008 incorporated by reference to Exhibit 10(j) to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008, filed with the Securities and Exchange Commission on February 27, 2009.
10(k)*	Form of Restricted Performance Share Deferral Election pursuant to the Westamerica Bancorporation Deferral Plan incorporated by reference to Exhibit 10(i) to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2005, filed with the Securities and Exchange Commission on March 10, 2006.
10(l)	Purchase and Assumption Agreement by and between Federal Deposit Insurance Corporation and Westamerica Bank dated February 6, 2009, incorporated by reference to Exhibit 99.2 to the Registrant’s Form 8-K, filed with the Securities and Exchange Commission on February 11, 2009.
10(m)	Letter Agreement between the Company and the United States Department of the Treasury dated February 13, 2009 incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K, filed with the Securities and Exchange Commission on February 19, 2009.
10(s)*	Amended and Restated Stock Option Plan of 1995, incorporated by reference to Exhibit A to the Registrant’s definitive Proxy Statement pursuant to Regulation 14(a) filed with the Securities and Exchange Commission on March 13, 2012.

10(t)	Data Processing Agreement by and between Fidelity Information Services and Westamerica Bancorporation incorporated by reference to Exhibit 10(t) to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016, filed with the Securities and Exchange Commission on February 28, 2017.
11.1	Statement re computation of per share earnings incorporated by reference to Note 18 of the notes to the consolidated financial statements of this Report.
14	Code of Ethics incorporated by reference to Exhibit 14 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2003, filed with the Securities and Exchange Commission on March 10, 2004.
21	Subsidiaries of the registrant.
23.1	Consent of Crowe LLP
31.1	Certification of Chief Executive Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a)
31.2	Certification of Chief Financial Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a)
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definitions Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

____________

* Indicates management contract or compensatory plan or arrangement.

The exhibits listed above are available through the SEC’s website (https://www.sec.gov). Alternatively, the Company will furnish to shareholders a copy of any exhibit listed above, but not contained herein, upon written request to the Office of the Corporate Secretary A-2M, Westamerica Bancorporation, P.O. Box 1200, Suisun City, California 94585-1200, and payment to the Company of $.25 per page.

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EX-21

EXHIBIT 21

WESTAMERICA BANCORPORATION

Subsidiaries as of December 31, 2018

	State of Incorporation
Westamerica Bank	California
Westamerica Mortgage Company — a subsidiary of Westamerica Bank	California
Community Banker Services Corporation — a subsidiary of Westamerica Bank	California
Weststar Mortgage Corporation — a subsidiary of Community Banker Services Corporation	California
Money Outlet, Inc.	California
Westamerica Commercial Credit, Inc.	California

EX-23.1

EXHIBIT 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement No. 333-157893 on Form S-3 and Registration Statements No. 333-105537 and 333-107329 on Form S-8 of Westamerica Bancorporation of our report dated February 28, 2019 relating to the consolidated financial statements and effectiveness of internal control over financial reporting, appearing in this Annual Report on Form 10-K.

/s/ Crowe LLP                          

Crowe LLP

Sacramento, California

February 28, 2019

EX-31.1

EXHIBIT 31.1

CERTIFICATION UNDER

SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, David L. Payne, certify that:

1. I have reviewed this report on Form 10-K of Westamerica Bancorporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ David L. Payne                                                  

David L. Payne

Chairman, President and Chief Executive Officer

Dated: February 28, 2019

EX-31.2

EXHIBIT 31.2

CERTIFICATION UNDER

SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, John “Robert” Thorson, certify that:

1. I have reviewed this report on Form 10-K of Westamerica Bancorporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ John “Robert” Thorson                                      

John “Robert” Thorson

Senior Vice President and Chief Financial Officer

Dated: February 28, 2019

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Westamerica Bancorporation (the “Company”) on Form 10-K for the period ending December 31, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David L. Payne, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ David L. Payne                                                   

David L. Payne

Chairman, President and Chief Executive Officer

Dated: February 28, 2019

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Westamerica Bancorporation (the “Company”) on Form 10-K for the period ending December 31, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John “Robert” Thorson, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ John “Robert” Thorson                                      

John “Robert” Thorson

Senior Vice President and Chief Financial Officer

Dated: February 28, 2019

XML

Document And Entity Information - USD ($)	12 Months Ended
	Dec. 31, 2018	Feb. 20, 2019	Jun. 30, 2018
Document Information [Line Items]
Entity Registrant Name	WESTAMERICA BANCORPORATION
Entity Central Index Key	0000311094
Trading Symbol	wabc
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	Yes
Entity Emerging Growth Company	false
Entity Small Business	false
Entity Common Stock, Shares Outstanding (in shares)		26,889,495
Entity Public Float			$ 1,072,647,598
Document Type	10-K
Document Period End Date	Dec. 31, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	FY
Amendment Flag	false
Entity Shell Company	false

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Assets:
Cash and due from banks	$ 420,284	$ 575,002
Equity securities	1,747	1,800
Debt securities available for sale	2,654,670	2,191,707
Debt securities held to maturity, with fair values of: $971,445 at December 31, 2018 and $1,155,342 at December 31, 2017	984,609	1,158,864
Loans	1,207,202	1,287,982
Allowance for loan losses	(21,351)	(23,009)
Loans, net of allowance for loan losses	1,185,851	1,264,973
Other real estate owned	350	1,426
Premises and equipment, net	34,507	35,301
Identifiable intangibles, net	1,929	3,850
Goodwill	121,673	121,673
Other assets	162,906	158,450
Total Assets	5,568,526	5,513,046
Liabilities:
Noninterest-bearing deposits	2,243,251	2,197,526
Interest-bearing deposits	2,623,588	2,630,087
Total deposits	4,866,839	4,827,613
Short-term borrowed funds	51,247	58,471
Other liabilities	34,849	36,723
Total Liabilities	4,952,935	4,922,807
Contingencies (Note 13)
Shareholders' Equity:
Common stock (no par value), authorized - 150,000 shares Issued and outstanding: 26,730 at December 31, 2018 and 26,425 at December 31, 2017	448,351	431,734
Deferred compensation	1,395	1,533
Accumulated other comprehensive loss	(39,996)	(16,832)
Retained earnings	205,841	173,804
Total Shareholders' Equity	615,591	590,239
Total Liabilities and Shareholders' Equity	$ 5,568,526	$ 5,513,046

XML

Consolidated Balance Sheets (Parentheticals) - USD ($) shares in Thousands, $ / shares in Thousands, $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Debt securities held to maturity, fair values	$ 971,445	$ 1,155,342
Common stock, par value (in dollars per share)	$ 0	$ 0
Common stock, authorized (in shares)	150,000	150,000
Common stock, issued (in shares)	26,730	26,425
Common stock, outstanding (in shares)	26,730	26,425

XML

Consolidated Statements of Income - USD ($) shares in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Interest and Loan Fee Income:
Loans	$ 59,030	$ 61,740	$ 69,139
Equity securities	354	293	267
Debt securities available for sale	60,383	44,371	34,009
Debt securities held to maturity	24,031	27,432	30,636
Interest bearing cash	7,925	4,476	1,868
Total Interest and Loan Fee Income	151,723	138,312	135,919
Interest Expense:
Deposits	1,922	1,856	2,077
Short-term borrowed funds	37	44	39
Total Interest Expense	1,959	1,900	2,116
Net Interest and Loan Fee Income	149,764	136,412	133,803
Reversal of Provision for Loan Losses		(1,900)	(3,200)
Net Interest and Loan Fee Income After Reversal of Provision For Loan Losses	149,764	138,312	137,003
Noninterest Income:
Life insurance gains	585
Equity securities (losses) gains	(52)	7,955
Other noninterest income	4,079	5,506	4,817
Total Noninterest Income	48,149	56,628	46,574
Noninterest Expense:
Salaries and related benefits	53,007	51,519	51,507
Occupancy and equipment	19,679	19,430	19,017
Outsourced data processing services	9,229	9,035	8,505
Loss contingency	3,500	5,542	3
Professional fees	2,842	2,161	3,980
Amortization of identifiable intangibles	1,921	3,077	3,504
Courier service	1,779	1,732	1,952
Impairment of tax credit investments		625
Other noninterest expense	14,959	14,647	15,152
Total Noninterest Expense	106,916	107,768	103,620
Income Before Income Taxes	90,997	87,172	79,957
Provision for income taxes	19,433	37,147	21,104
Net Income	$ 71,564	$ 50,025	$ 58,853
Average Common Shares Outstanding (in shares)	26,649	26,291	25,612
Diluted Average Common Shares Outstanding (in shares)	26,756	26,419	25,678
Per Common Share Data:
Basic earnings (in dollars per share)	$ 2.69	$ 1.90	$ 2.30
Diluted earnings (in dollars per share)	2.67	1.89	2.29
Dividends paid (in dollars per share)	$ 1.60	$ 1.57	$ 1.56
Deposit Account [Member]
Noninterest Income:
Noninterest income revenue	$ 18,508	$ 19,612	$ 20,854
Credit Card, Merchant Discount [Member]
Noninterest Income:
Noninterest income revenue	9,630	8,426	6,377
Debit Card [Member]
Noninterest Income:
Noninterest income revenue	6,643	6,421	6,290
Fiduciary and Trust [Member]
Noninterest Income:
Noninterest income revenue	2,938	2,875	2,686
ATM Processing Fees [Member]
Noninterest Income:
Noninterest income revenue	2,752	2,610	2,411
Financial Service, Other [Member]
Noninterest Income:
Noninterest income revenue	2,567	2,584	2,571
Financial Services Commission [Member]
Noninterest Income:
Noninterest income revenue	$ 499	$ 639	$ 568

XML

Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Net Income	$ 71,564	$ 50,025	$ 58,853
Other comprehensive loss:
Changes in net unrealized losses on debt securities available for sale	(27,939)	(3,767)	(18,610)
Deferred tax benefit	8,258	1,585	7,825
Reclassification of gains included in net income		(7,955)
Deferred tax expense on gains included in net income		3,345
Changes in unrealized losses on debt securities available for sale, net of tax	(19,681)	(6,792)	(10,785)
Post-retirement benefit transition obligation amortization		59	61
Deferred tax expense		(25)	(25)
Post-retirement benefit transition obligation amortization, net of tax		34	36
Total Other Comprehensive Loss	(19,681)	(6,758)	(10,749)
Total Comprehensive Income	$ 51,883	$ 43,267	$ 48,104

XML

Consolidated Statements of Changes in Shareholders' Equity - USD ($) $ in Thousands	Common Stock [Member]	Accumulated Deferred Compensation [Member]	AOCI Attributable to Parent [Member]	Retained Earnings [Member]	Total
Balance (in shares) at Dec. 31, 2015	25,528,000
Balance at Dec. 31, 2015	$ 378,858	$ 2,578	$ 675	$ 150,094	$ 532,205
Net income for the period				58,853	58,853
Other comprehensive loss			(10,749)		(10,749)
Exercise of stock options (in shares)	499,000
Exercise of stock options	$ 24,031				24,031
Tax benefit increase upon exercise and expiration of stock options	$ 394				394
Restricted stock activity (in shares)	15,000
Restricted stock activity	$ 1,798	(1,045)			753
Stock based compensation	$ 1,494				1,494
Stock awarded to employees (in shares)	2,000
Stock awarded to employees	$ 90				90
Retirement of common stock (in shares)	(137,000)
Retirement of common stock	$ (2,059)			(3,721)	(5,780)
Dividends				(39,924)	(39,924)
Other comprehensive loss			(10,749)		(10,749)
Balance (in shares) at Dec. 31, 2016	25,907,000
Balance at Dec. 31, 2016	$ 404,606	1,533	(10,074)	165,302	561,367
Net income for the period				50,025	50,025
Other comprehensive loss			(6,758)		$ (6,758)
Exercise of stock options (in shares)	509,000				509,000
Exercise of stock options	$ 24,583				$ 24,583
Restricted stock activity (in shares)	13,000
Restricted stock activity	$ 707				707
Stock based compensation	$ 1,824				1,824
Stock awarded to employees (in shares)	2,000
Stock awarded to employees	$ 104				104
Retirement of common stock (in shares)	(6,000)
Retirement of common stock	$ (90)			(224)	(314)
Dividends				(41,299)	(41,299)
Other comprehensive loss			(6,758)		(6,758)
Balance (in shares) at Dec. 31, 2017	26,425,000
Balance at Dec. 31, 2017	$ 431,734	1,533	(16,832)	173,804	590,239
Net income for the period				71,564	$ 71,564
Exercise of stock options (in shares)	292,000				292,000
Exercise of stock options	$ 13,373				$ 13,373
Restricted stock activity (in shares)	20,000
Restricted stock activity	$ 1,281	(138)			1,143
Stock based compensation	$ 1,988				1,988
Stock awarded to employees (in shares)	2,000
Stock awarded to employees	$ 124				124
Retirement of common stock (in shares)	(9,000)
Retirement of common stock	$ (149)			(375)	(524)
Dividends				(42,635)	(42,635)
Cumulative effect of equity securities losses reclassified at Dec. 31, 2017			142	(142)
Balance at Dec. 31, 2017	$ 431,734	1,533	(16,690)	173,662	590,239
Reclass stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017			(3,625)	3,625
Other comprehensive loss			(19,681)		(19,681)
Balance (in shares) at Dec. 31, 2018	26,730,000
Balance at Dec. 31, 2018	$ 448,351	$ 1,395	$ (39,996)	$ 205,841	$ 615,591

XML

Consolidated Statements of Changes in Shareholders' Equity (Parentheticals) - $ / shares	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Retained Earnings [Member]
Dividends per share (in dollars per share)	$ 1.60	$ 1.57	$ 1.56

XML

Consolidated Statements of Cash Flows - USD ($) $ in Thousands		12 Months Ended
		Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Net income		$ 71,564	$ 50,025	$ 58,853
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization/accretion		24,402	26,082	19,939
Reversal of Provision for Loan Losses			(1,900)	(3,200)
Net amortization of deferred loan fees		(203)	(46)	(340)
Increase in interest income receivable		(2,277)	(2,068)	(1,316)
(Increase) decrease in net deferred tax asset		(943)	27,018	4,380
Increase in other assets		(4,017)	(1,732)	(3,321)
Stock option compensation expense		1,988	1,824	1,494
Tax benefit increase upon exercise and expiration of stock options				(394)
Increase (decrease) in income taxes payable		7,554	(6,650)	(40)
Decrease in interest expense payable		(27)	(31)	(52)
(Decrease) increase in other liabilities		(580)	(3,016)	2,026
Life insurance gains		(585)
Equity securities losses		52
Gain on sale of other assets			(1,004)
Gain on sale of securities			(7,955)
(Gain) loss on disposal of premises and equipment		(216)	60	30
Net (gain) loss on sale of or write-down of foreclosed assets		(83)	147	(422)
Net Cash Provided by Operating Activities		96,629	80,754	77,637
Investing Activities:
Net repayments of loans		80,985	66,065	183,506
Net payments under FDIC(1) indemnification agreements	[1]		(63)	(127)
Proceeds from life insurance		1,169
Purchases of debt securities available for sale		(854,555)	(635,814)	(1,080,959)
Proceeds from sale/maturity/calls of debt securities available for sale		353,327	319,324	737,625
Purchases of debt securities held to maturity				(246,956)
Proceeds from maturity/calls of debt securities held to maturity		167,029	178,429	204,054
Purchases of premises and equipment		(3,123)	(2,720)	(1,818)
Proceeds from sale of premises and equipment		446
Proceeds from sale of foreclosed assets		1,159	1,521	7,412
Net Cash Used in Investing Activities		(253,563)	(73,258)	(197,263)
Financing Activities:
Net change in deposits		39,226	122,872	164,082
Net change in short-term borrowings		(7,224)	(607)	6,050
Exercise of stock options		13,373	24,583	24,031
Taxes paid by withholding shares for tax purposes				(356)
Tax benefit increase upon exercise and expiration of stock options				394
Retirement of common stock		(524)	(314)	(5,424)
Common stock dividends paid		(42,635)	(41,299)	(39,924)
Net Cash Provided by Financing Activities		2,216	105,235	148,853
Net Change In Cash and Due from Banks		(154,718)	112,731	29,227
Cash and Due from Banks at Beginning of Period		575,002	462,271	433,044
Cash and Due from Banks at End of Period		420,284	575,002	462,271
Supplemental disclosure of noncash activities:
Loan collateral transferred to other real estate owned				821
Supplemental disclosure of cash flow activities:
Interest paid for the period		1,932	1,931	2,202
Income tax payments for the period		$ 13,627	$ 17,351	$ 19,264

[1] Federal Deposit Insurance Corporation ("FDIC")

XML

Note 1 - Business and Accounting Policies

12 Months Ended

Dec. 31, 2018

Notes to Financial Statements

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

Note

1:

Business and Accounting Policies

Westamerica Bancorporation, a registered bank holding company (the “Company”), provides a full range of banking services to corporate and individual customers in Northern and Central California through its wholly-owned subsidiary bank, Westamerica Bank (the “Bank”). The Bank is subject to competition from both financial and nonfinancial institutions and to the regulations of certain agencies and undergoes periodic examinations by those regulatory authorities.

All of the financial service operations are considered by management to be aggregated in

one

reportable operating segment.

The Company has evaluated events and transactions subsequent to the balance sheet date. Based on this evaluation, the Company is

not

aware of any events or transactions that occurred subsequent to the balance sheet date but prior to filing that would require recognition or disclosure in its consolidated financial statements. Certain amounts in prior periods have been reclassified to conform to the current presentation.

Summary of Significant Accounting Policies

The consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America. The following is a summary of significant policies used in the preparation of the accompanying financial statements.

Accounting Estimates. Certain accounting policies underlying the preparation of these financial statements require Management to make estimates, assumptions, and judgments that affect the amounts reported in the financial statements and accompanying notes. These estimates, assumptions, and judgments are based on information available as of the date of the financial statements; accordingly, as this information changes, the financial statements could reflect different estimates, assumptions, and judgments and as such have a greater possibility of producing results that could be materially different than originally reported. Estimates, assumptions, and judgments are necessary when assets and liabilities are required to be recorded at fair value, when a decline in fair value of an asset

not

carried on the financial statements at fair value warrants an impairment writedown or valuation reserve to be established, or when an asset or liability needs to be recorded contingent upon a future event. The allowance for loan losses accounting is an area requiring the most subjective or complex judgments, and as such could be most subject to revision as new information becomes available. A discussion of the factors affecting the accounting for the allowance for loan losses is included in the following “Loans” and “Allowance for Credit Losses” sections. Carrying assets and liabilities at fair value inherently results in financial statement volatility. The fair values and the information used to record valuation adjustments for certain assets and liabilities are based either on quoted market prices or are provided by other

third

party sources, when available. The “Securities” section discusses the factors that

may

affect the valuation of the Company’s securities. Although the estimates contemplate current conditions and how Management expects them to change in the future, it is reasonably possible that in

2019

actual conditions could be worse than anticipated in those estimates, which could materially affect our results of operations and financial condition.

Principles of Consolidation. The consolidated financial statements include the accounts of the Company and all the Company’s subsidiaries. Significant intercompany transactions have been eliminated in consolidation. The Company does

not

maintain or conduct transactions with any unconsolidated special purpose entities.

Cash. Cash includes Due From Banks balances which are readily convertible to known amounts of cash and are generally

90

days or less from maturity at the time of initiation, presenting insignificant risk of changes in value due to interest rate changes.

Equity Securities. Equity securities consist of marketable equity securities and mutual funds which are recorded at fair value. Unrealized gains and losses are included in net income effective

January 1, 2018

prior to such date unrealized gains and losses were included in other comprehensive income.

Debt Securities. Debt securities consist of securities of the U.S. Treasury, government sponsored entities, states, counties, municipalities, corporations, agency and non-agency mortgage-backed securities and asset-backed securities. Securities transactions are recorded on a trade date basis. The Company classifies its debt securities in

one

of

three

categories: trading, available for sale or held to maturity. Trading securities are bought and held principally for the purpose of selling them in the near term. Trading securities are recorded at fair value with unrealized gains and losses included in net income. Held to maturity debt securities are those securities which the Company has the ability and intent to hold until maturity. Held to maturity debt securities are recorded at cost, adjusted for the amortization of premiums or accretion of discounts. Securities

not

included in trading or held to maturity are classified as available for sale debt securities. Available for sale debt securities are recorded at fair value. Unrealized gains and losses, net of the related tax effect, on available for sale debt securities are included in accumulated other comprehensive income.

The Company utilizes

third

-party sources to value its investment securities; securities individually valued using quoted prices in active markets are classified as Level

1

assets in the fair value hierarchy, and securities valued using quoted prices in active markets for similar securities (commonly referred to as “matrix” pricing) are classified as Level

2

assets in the fair value hierarchy. The Company validates the reliability of

third

-party provided values by comparing individual security pricing for securities between more than

one

third

-party source. When

third

-party information is

not

available, valuation adjustments are estimated in good faith by Management and classified as Level

3

in the fair value hierarchy.

A decline in the market value of any available for sale or held to maturity security below amortized cost that is deemed other than temporary results in a charge to earnings and the establishment of a new cost basis for the security. Unrealized investment securities losses are evaluated at least quarterly to determine whether such declines in value should be considered “other than temporary” and therefore be subject to immediate loss recognition in income. Although these evaluations involve significant judgment, an unrealized loss in the fair value of a debt security is generally deemed to be temporary when the fair value of the security is below the carrying value primarily due to changes in risk-free interest rates, there has

not

been significant deterioration in the financial condition of the issuer, and the Company does

not

intend to sell or be required to sell the securities before recovery of its amortized cost. An unrealized loss in the value of an equity security is generally considered temporary when the fair value of the security declined primarily due to current market conditions and

not

deterioration in the financial condition of the issuer, the Company expects the fair value of the security to recover in the near term and the Company does

not

intend to sell or be required to sell the securities before recovery of its cost basis. Other factors that

may

be considered in determining whether a decline in the value of either a debt or an equity security is “other than temporary” include ratings by recognized rating agencies, actions of commercial banks or other lenders relative to the continued extension of credit facilities to the issuer of the security, the financial condition, capital strength and near-term prospects of the issuer, and recommendations of investment advisors or market analysts.

The Company follows the guidance issued by the Board of Governors of the Federal Reserve System, “Investing in Securities without Reliance on Nationally Recognized Statistical Rating Agencies” (SR

12

-

15

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

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

Nonmarketable Equity Securities. Nonmarketable equity securities include securities that are

not

publicly traded, such as Visa Class B common stock, and securities acquired to meet regulatory requirements, such as Federal Reserve Bank stock, which are restricted. These restricted securities are accounted for under the cost method and are included in other assets. The Company reviews those assets accounted for under the cost method at least quarterly for possible declines in value that are considered “other than temporary”. The Company’s review typically includes an analysis of the facts and circumstances of each investment, the expectations for the investment’s cash flows and capital needs, the viability of its business model and any exit strategy. The asset value is reduced when a decline in value is considered to be other than temporary. The Company recognizes the estimated loss in noninterest income.

Loans. Loans are stated at the principal amount outstanding, net of unearned discount and unamortized deferred fees and costs. Interest is accrued daily on the outstanding principal balances. Loans which are more than

90

days delinquent with respect to interest or principal, unless they are well secured and in the process of collection, and other loans on which full recovery of principal or interest is in doubt, are placed on nonaccrual status. Interest previously accrued on loans placed on nonaccrual status is charged against interest income. In addition, some loans secured by real estate with temporarily impaired values and commercial loans to borrowers experiencing financial difficulties are placed on nonaccrual status (“performing nonaccrual loans”) even though the borrowers continue to repay the loans as scheduled. When the ability to fully collect nonaccrual loan principal is in doubt, payments received are applied against the principal balance of the loans on a cost-recovery method until such time as full collection of the remaining recorded balance is expected. Any additional interest payments received after that time are recorded as interest income on a cash basis. Performing nonaccrual loans are reinstated to accrual status when improvements in credit quality eliminate the doubt as to the full collectability of both interest and principal. Certain consumer loans or auto receivables are charged off against the allowance for credit losses when they become

120

days past due.

The Company evaluates all classified loans and nonaccrual loans with outstanding principal balances in excess of

$500

thousand, and all “troubled debt restructured” loans for impairment. The Company recognizes a loan as impaired when, based on current information and events, it is probable that it will be unable to collect both the contractual interest and principal payments as scheduled in the loan agreement. Income recognition on impaired loans conforms to that used on nonaccrual loans. In certain circumstances, the Company might agree to restructured loan terms with borrowers experiencing financial difficulties; such restructured loans are evaluated under ASC

310

-

40,

“Troubled Debt Restructurings by Creditors.” In general, a restructuring constitutes a troubled debt restructuring when the Company, for reasons related to a borrower’s financial difficulties, grants a concession to the borrower it would

not

otherwise consider. Loans are evaluated on an individual basis. The Company follows its general nonaccrual policy for troubled debt restructurings. Performing troubled debt restructurings are reinstated to accrual status when improvements in credit quality eliminate the doubt as to full collectability of both principal and interest.

Nonrefundable fees and certain costs associated with originating or acquiring loans are deferred and amortized as an adjustment to interest income over the contractual loan lives. Upon prepayment, unamortized loan fees, net of costs, are immediately recognized in interest income. Other fees, including those collected upon principal prepayments, are included in interest income when received. Loans held for sale are identified upon origination and are reported at the lower of cost or market value on an aggregate loan basis.

Purchased Loans. Purchased loans are recorded at estimated fair value on the date of purchase. Impaired purchased loans are accounted for under FASB ASC

310

-

30,

Loans and Debt Securities Acquired with Deteriorated Credit Quality, when the loans have evidence of credit deterioration since origination and it is probable at the date of acquisition that the Company will

not

collect all contractually required principal and interest payments. Evidence of credit quality deterioration as of the purchase date

may

include attributes such as past due and nonaccural status. Generally, purchased loans that meet the Company’s definition for nonaccrual status fall within the scope of FASB ASC

310

-

30.

The difference between contractually required payments at acquisition and the cash flows expected to be collected at acquisition is referred to as the nonaccretable difference. Subsequent decreases to the expected cash flows will generally result in a provision for loan losses. Subsequent increases in cash flows result in a reversal of the provision for loan losses to the extent of prior charges, or a reclassification of the difference from nonaccretable to accretable with a positive impact on interest income on a prospective basis. Any excess of expected cash flows over the estimated fair value is referred to as the accretable yield and is recognized into interest income over the remaining life of the loan when there is a reasonable expectation about the amount and timing of such cash flows. For covered purchased loans with an accretable difference, the corresponding FDIC receivable is amortized over the shorter of the contractual term of the indemnification asset or the remaining life of the loan. Further, the Company elected to analogize to ASC

310

-

30

and account for all other loans that had a discount due in part to credit

not

within the scope of ASC

310

-

30

using the same methodology.

Covered Loans. Loans covered under loss-sharing or similar credit protection agreements with the FDIC are reported in loans exclusive of the expected reimbursement cash flows from the FDIC. Covered loans are initially recorded at fair value at the acquisition date. Subsequent decreases in the amount expected to be collected results in a provision for loan losses and a corresponding increase in the estimated FDIC reimbursement, with the estimated net loss impacting earnings. Interest previously accrued on covered loans placed on nonaccrual status is charged against interest income, net of estimated FDIC reimbursements of such accrued interest. The FDIC reimburses the Company up to

80%

of

90

days interest on covered loans. The indemnification expired

February 6, 2019.

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

The preparation of these financial statements requires Management to estimate the amount of probable incurred losses inherent in the loan portfolio and establish an allowance for credit losses. In estimating credit losses, Management must exercise significant judgment in evaluating information deemed relevant. The amount of ultimate losses on the loan portfolio can vary from the estimated amounts. Management follows a systematic methodology to estimate loss potential in an effort to reduce the differences between estimated and actual losses.

The allowance for credit losses is established through provisions for credit losses charged to income. Losses on loans, including impaired loans, are charged to the allowance for loan losses when all or a portion of the recorded amount of a loan is deemed to be uncollectible. Recoveries of loans previously charged off are credited to the allowance when realized. The Company’s allowance for credit losses is maintained at a level considered adequate to provide for losses that can be estimated based upon specific and general conditions. These include conditions unique to individual borrowers, as well as overall credit loss experience, the amount of past due, nonperforming and classified loans, recommendations of regulatory authorities, prevailing economic conditions, FDIC loss-sharing or similar credit protection agreements and other factors. A portion of the allowance is specifically allocated to impaired loans whose full collectability is uncertain. Such allocations are determined by Management based on loan-by-loan analyses. The Company evaluates all classified loans and nonaccrual loans with outstanding principal balances in excess of

$500

thousand, and all “troubled debt restructured” loans for impairment. A

second

allocation is based in part on quantitative analyses of historical credit loss experience. The results of this analysis are applied to current loan balances to allocate the reserve to the respective segments of the loan portfolio exclusive of loans individually evaluated for impairment. In addition, consumer installment loans which have similar characteristics and are

not

usually criticized using regulatory guidelines are analyzed and reserves established based on the historical loss rates and delinquency trends, grouped by the number of days the payments on these loans are delinquent. The remainder of the reserve is considered to be unallocated. The unallocated allowance is established to provide for probable losses that have been incurred as of the reporting date but

not

reflected in the allocated allowance. It addresses additional qualitative factors consistent with Management’s analysis of the level of risks inherent in the loan portfolio, which are related to the risks of the Company’s general lending activity. Included in the unallocated allowance is the risk of losses that are attributable to national or local economic or industry trends which have occurred but have

not

yet been recognized in past loan charge-off history (external factors). The external factors evaluated by the Company include: economic and business conditions, external competitive issues, and other factors. Also included in the unallocated allowance is the risk of losses that are attributable to general attributes of the Company’s loan portfolio and credit administration (internal factors). The internal factors evaluated by the Company include: loan review system, adequacy of lending Management and staff, loan policies and procedures, problem loan trends, concentrations of credit, and other factors. By their nature, these risks are

not

readily allocable to any specific segment of the loan portfolio in a statistically meaningful manner.

Liability for Off-Balance Sheet Credit Exposures. A liability for off-balance sheet credit exposures is established through expense recognition. Off-balance sheet credit exposures relate to letters of credit and unfunded loan commitments for commercial, construction and consumer loans. Historical credit loss factors for commercial, construction and consumer loans are applied to the amount of these off-balance sheet credit exposures to estimate inherent losses.

Other Real Estate Owned. Other real estate owned is comprised of property acquired through foreclosure proceedings, acceptances of deeds-in-lieu of foreclosure and, if applicable, vacated bank properties. Losses recognized at the time of acquiring property in full or partial satisfaction of debt are charged against the allowance for credit losses. Other real estate owned is recorded at the fair value of the collateral, generally based upon an independent property appraisal, less estimated disposition costs. Losses incurred subsequent to acquisition due to any decline in annual independent property appraisals are recognized as noninterest expense. Routine holding costs, such as property taxes, insurance and maintenance, and losses from sales and dispositions, are recognized as noninterest expense.

Premises and Equipment. Premises and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation is computed substantially on the straight-line method over the estimated useful life of each type of asset. Estimated useful lives of premises and equipment range from

20

to

50

years and from

3

to

20

years, respectively. Leasehold improvements are amortized over the terms of the lease or their estimated useful life, whichever is shorter.

Revenue Recognition. The Company recognizes revenue as it is earned based on contractual terms, as transactions occur, or as services are provided and collectability is reasonably assured. In certain circumstances, noninterest income is reported net of associated expenses that are directly related to variable volume-based sales or revenue sharing arrangements or when the Company acts on an agency basis for others.

Life Insurance Cash Surrender Value. The Company has purchased life insurance policies on certain directors and officers as well as acquired such assets as part of the acquisition of other banks. Company owned life insurance is recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges or other amounts due that are probable at settlement. These assets are included in other assets on the consolidated balance sheets.

Intangible Assets. Intangible assets are comprised of goodwill, core deposit intangibles and other identifiable intangibles acquired in business combinations. Intangible assets with definite useful lives are amortized on an accelerated basis over their respective estimated useful lives

not

exceeding

15

years. If an event occurs that indicates the carrying amount of an intangible asset

may

not

be recoverable, Management reviews the asset for impairment. Any goodwill and any intangible asset acquired in a purchase business combination determined to have an indefinite useful life is

not

amortized, but is evaluated for impairment annually. The Company has the option to

first

assess qualitative factors to determine the likelihood of impairment pursuant to FASB ASU

2011

-

08,

Testing for Goodwill Impairment.

Although the Company has the option to

first

assess qualitative factors when determining if impairment exists, the Company has opted to perform a quantitative analysis to determine if impairment exists.

Impairment of Long-Lived Assets. The Company reviews its long-lived and certain intangible assets for impairment whenever events or changes indicate that the carrying amount of an asset

may

not

be recoverable. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

Income Taxes. The Company and its subsidiaries file consolidated tax returns. The Company accounts for income taxes in accordance with FASB ASC

740,

Income Taxes, resulting in

two

components of income tax expense: current and deferred. Current income tax expense approximates taxes to be paid or refunded for the current period. The Company determines deferred income taxes using the balance sheet method. Under this method, the net deferred tax asset or liability is based on the tax effects of the differences between the book and tax bases of assets and liabilities, and recognizes enacted changes in tax rates and laws in the period in which they occur. Deferred income tax expense results from changes in deferred tax assets and liabilities between periods. Deferred tax assets are recognized subject to Management’s judgment that realization is more likely than

not.

A tax position that meets the more likely than

not

recognition threshold is measured to determine the amount of benefit to recognize. The tax position is measured at the largest amount of benefit that is greater than

fifty

percent likely of being realized upon settlement. Interest and penalties are recognized as a component of income tax expense.

Stock Options. The Company applies FASB ASC

718

– Compensation – Stock Compensation, to account for stock based awards granted to employees using the fair value method. The Company recognizes compensation expense for restricted performance share grants over the relevant attribution period. Restricted performance share grants have

no

exercise price, therefore, the intrinsic value is measured using an estimated per share price at the vesting date for each restricted performance share. The estimated per share price is adjusted during the attribution period to reflect actual stock price performance. The Company’s obligation for unvested outstanding restricted performance share grants is classified as a liability until the vesting date due to a cash settlement feature, at which time the issued shares become classified as shareholders’ equity.

Extinguishment of Debt. Gains and losses, including fees, incurred in connection with the early extinguishment of debt are charged to current earnings as reductions in noninterest income.

Postretirement Benefits. The Company uses an actuarial-based accrual method of accounting for post-retirement benefits.

Other. Securities and other property held by the Bank in a fiduciary or agency capacity are

not

included in the financial statements since such items are

not

assets of the Company or its subsidiaries.

Recently Adopted Accounting Standards

In

2018,

the Company adopted the following new accounting guidance:

FASB Accounting Standard Update (ASU)

2014

-

09

,

Revenue (Topic

606

): Revenue from Contracts with Customers,

was issued

May 2014.

The ASU specifies a standardized approach for revenue recognition across industries and transactions. The ASU also requires additional disclosures. The scope of the ASU does

not

include revenue streams covered by other ASU topics; thus, Topic

606

does

not

apply to revenue related to financial instruments, guarantees and leases, which are the primary sources of the Company’s net interest income.

All of the Company’s net interest income and a portion of its noninterest income are out of scope of the guidance. The contracts that are in scope of the guidance are primarily related to service charges and fees on deposit accounts, merchant processing fees, debit card fees, ATM processing fees, trust fees and other service charges, commissions and fees. The Company’s revenue recognition practices within the scope of the ASU as described below did

not

change in any material regard upon adoption of the ASU.

Service Charges on Deposit Accounts, ATM Processing Fees and Other Service Fees

: The Company earns fees from its deposit customers for transaction-based, account maintenance, and overdraft services. Transaction-based fees are recognized at the time the transaction is executed as that is the point in time the Company fulfills the customer’s request. Account maintenance fees, which relate primarily to monthly maintenance, are earned over the course of a month, representing the period over which the Company satisfies the performance obligation. Overdraft fees are recognized at the point in time that the overdraft occurs. Service charges on deposits are withdrawn from the customer’s account balance. ATM processing fees and other service fees are recognized at the point in time that the transaction occurs or the services provided.

Merchant Processing Services and Debit Card Fees

: The Company earns interchange fees from cardholder transactions conducted through the payment networks. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are recognized daily, concurrently with the transaction processing services provided to the cardholder.

Trust Fees

: The Company earns trust fees from its contracts with customers to manage assets for investment or custody services. These fees are primarily earned over time as the Company provides the contracted monthly services and are generally assessed based on a tiered scale of the market value of assets under management (AUM) at month-end. Other related services provided, which are based on a fixed fee schedule, are recognized when the services are rendered.

Gains/Losses on Sales of OREO

: The Company records a gain or loss from the sale of OREO when control of the property transfers to the buyer, which generally occurs at the time of an executed deed. The Company does

not

finance the sale of OREO. Gains on sale of OREO were

$110

thousand, and

$72

thousand and

$1,185

thousand in the

twelve

months ended

December 31, 2018

and

2017

and

2016,

respectively.

The Company adopted the ASU on

January 1, 2018

and

no

cumulative adjustment was required.

FASB ASU

2016

-

01

,

Financial Instruments – Overall (Subtopic

825

-

10

): Recognition and Measurement of Financial Assets and Financial Liabilities,

was issued

January 2016.

The ASU addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. Most notably, the ASU changes the income statement impact of equity investments held by the Company and the requirement for the Company to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes (Note

11

).

The Company was required to adopt the ASU provisions on

January 1, 2018,

and for those equity securities with readily determinable fair values, the Company elected the retrospective transition approach with a cumulative effect adjustment to the balance sheet and for those equity securities that do

not

have readily determinable fair values, the Company elected the prospective transition approach. The impact of the adoption of this accounting standard on the Company’s consolidated financial statements will be subject to the price volatility of the equity investments. As a result of implementing the ASU provisions, effective

January 1, 2018,

the Company recorded a cumulative effect adjustment to decrease retained earnings by

$142

thousand.

FASB ASU

2018

-

02

,

Income Statement – Reporting Comprehensive Income (Topic

220

): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income,

was issued

February 2018.

The ASU eliminates the stranded tax effects resulting from the Tax Cuts and Jobs Act of

2017

by allowing a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act of

2017.

The Company early adopted the provisions of the ASU effective

January 1, 2018,

by reclassifying the Company’s

$3,625

thousand stranded tax effect.

Recently Issued Accounting Standards

FASB ASU

2016

-

02,

Leases (Topic

842

),

was issued

February 25, 2016.

The provisions of the new standard require lessees to recognize most leases on-balance sheet, increasing reported assets and liabilities. Lessor accounting remains substantially similar to current U.S. GAAP.

The Company will be required to adopt the ASU provisions effective

January 1, 2019,

and plans to elect the modified retrospective transition approach. The implementing entry will recognize a lease liability of

$15.3

million and right-to-use asset of

$15.3

million for facilities leases. The change in occupancy and equipment expense will

not

be material.

FASB ASU

2016

-

13,

Financial Instruments – Credit Losses (Topic

326

): Measurement of Credit Losses on Financial Instruments,

was issued on

June 16, 2016.

The ASU significantly changes estimates for credit losses related to financial assets measured at amortized cost and certain other contracts. For estimating credit losses, the FASB is replacing the incurred loss model with the current expected credit loss (CECL) model, which will accelerate recognition of credit losses. Additionally, credit losses relating to debt securities available-for-sale will be recorded through an allowance for credit losses under the new standard. The Company will also be required to provide additional disclosures related to the financial assets within the scope of the new standard.

The Company will be required to adopt the ASU provisions on

January 1, 2020.

Management has evaluated available data, defined portfolio segments of loans with similar attributes, and selected loss estimate models for each identified loan portfolio segment. Management has preliminarily measured historical loss rates for each portfolio segment. The ultimate adjustment to the allowance for loan losses will be accomplished through an offsetting after-tax adjustment to shareholders’ equity. Management has also segmented debt securities held to maturity, selected methods to estimate losses for each segment, and preliminarily measured a loss estimate. Economic conditions and the composition of the Company’s loan portfolio and debt securities held to maturity at the time of adoption will influence the extent of the adopting accounting adjustment. Management expects to develop an aggregate loss estimate by

September 30, 2019.

FASB ASU

2017

-

08

,

Receivables – Non-Refundable Fees and Other Costs (Subtopic

310

-

20

): Premium Amortization on Purchased Callable Debt Securities

, was issued

March 2017.

The ASU will shorten the amortization period for certain callable debt securities held at a premium. Specifically, the ASU requires the premium to be amortized to the earliest call date. The ASU does

not

require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. The Company will be required to adopt the ASU provisions on

January 1, 2019.

The implementing entry will reduce the carrying value of investment securities, specifically obligations of states and political subdivisions, by

$3.1

million and reduce retained earnings by

$2.8

million, net of tax. The change in premium amortization method will

not

be material to revenue recognition.

FASB ASU

2017

-

12

,

Derivatives and Hedging (Topic

815

): Targeted Improvements to Accounting for Hedging Activities

, was issued

August 2017.

The ASU will expand and refine hedge accounting for both nonfinancial and financial risk components and align the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. The ASU also provides for a

one

-time reclassification of prepayable assets from held-to-maturity (HTM) to available for sale (AFS) regardless of derivative use.

The Company will be required to adopt the ASU provisions on

January 1, 2019.

The Company does

not

currently engage in trading activities or use derivative instruments to control interest rate risk, even though such activities

may

be permitted with the approval of the Company’s Board of Directors. The Company has evaluated the prepayable assets in the HTM portfolio and will

not

effect a

one

-time reclassification of prepayable assets from HTM to the AFS upon implementation.

FASB ASU

2018

-

13

,

Fair Value Measurements (Topic

820

): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement

, was issued

August 2018.

The ASU is part of the disclosure framework project, where the primary focus is to improve the effectiveness of disclosures in the financial statements. The ASU removes, modifies and adds disclosure requirements related to Fair Value Measurements.

The provisions of the ASU are effective

January 1, 2020

with the option to early adopt any removed or modified disclosures upon issuance of the ASU. The Company early adopted the provisions to remove and/or modify relevant disclosures in Note

11

to the consolidated financial statements. The requirement to include additional disclosures will be adopted by the Company

January 1, 2020.

The additional disclosures will

not

affect the financial results upon adoption.

XML

Note 2 - Investment Securities

12 Months Ended

Dec. 31, 2018

Notes to Financial Statements

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]

Note

2:

Investment Securities

Effective

January 1, 2018,

upon adoption of ASU

2016

-

01,

equity securities included in the Company’s available for sale portfolio of

$1,800

thousand were reclassified to equity securities. The reclassification of equity securities resulted in recording a cumulative effect adjustment to decrease retained earnings by

$

142

thousand, net of tax.

At

December 31, 2018,

the market value of equity securities was

$1,747

thousand. During the

twelve

months ended

December 31, 2018,

the Company recognized gross unrealized holding losses of

$52

thousand in earnings.

An analysis of the amortized cost and fair value by major categories of debt securities available for sale, which are carried at fair value with net unrealized gains (losses) reported on an after-tax basis as a component of cumulative other comprehensive income, and debt securities held to maturity, which are carried at amortized cost, follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
At December 31, 2018	(In thousands)
Debt securities available for sale
U.S. Treasury securities	$	139,572	$	5	$	(3	)	$	139,574
Securities of U.S. Government sponsored entities		167,228		65		(3,275	)		164,018
Agency residential mortgage-backed securities (MBS)		883,715		595		(30,439	)		853,871
Non-agency residential MBS		113		1		-			114
Agency commercial MBS		1,869		-		(27	)		1,842
Securities of U.S. Government entities		1,128		-		(9	)		1,119
Obligations of states and political subdivisions		180,220		1,856		(2,985	)		179,091
Corporate securities		1,337,608		1,075		(23,642	)		1,315,041
Total debt securities available for sale		2,711,453		3,597		(60,380	)		2,654,670
Debt securities held to maturity
Agency residential MBS		447,332		249		(14,129	)		433,452
Non-agency residential MBS		3,387		40		-			3,427
Obligations of states and political subdivisions		533,890		3,403		(2,727	)		534,566
Total debt securities held to maturity		984,609		3,692		(16,856	)		971,445
Total	$	3,696,062	$	7,289	$	(77,236	)	$	3,626,115

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
At December 31, 2017	(In thousands)
Debt securities available for sale
Securities of U.S. Government sponsored entities	$	122,285	$	1	$	(2,967	)	$	119,319
Agency residential MBS		787,679		522		(20,495	)		767,706
Non-agency residential MBS		153		1		-			154
Agency commercial MBS		2,244		-		(25	)		2,219
Securities of U.S. Government entities		1,612		-		(22	)		1,590
Obligations of states and political subdivisions		182,907		3,796		(1,482	)		185,221
Corporate securities		1,123,671		1,104		(9,277	)		1,115,498
Total debt securities available for sale		2,220,551		5,424		(34,268	)		2,191,707
Debt securities held to maturity
Agency residential MBS		545,883		606		(9,850	)		536,639
Non-agency residential MBS		4,462		70		-			4,532
Agency commercial MBS		9,041		-		(66	)		8,975
Obligations of states and political subdivisions		599,478		7,736		(2,018	)		605,196
Total debt securities held to maturity		1,158,864		8,412		(11,934	)		1,155,342
Total	$	3,379,415	$	13,836	$	(46,202	)	$	3,347,049

The amortized cost and fair value of

debt

securities by contractual maturity are shown in the following table s at the dates indicated:

	At December 31, 2018
	Debt Securities Available for Sale				Debt Securities Held to Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(In thousands)
Maturity in years:
1 year or less	$	262,418	$	261,976	$	86,172	$	86,148
Over 1 to 5 years		1,438,849		1,414,020		214,137		213,829
Over 5 to 10 years		85,817		85,877		232,544		233,515
Over 10 years		38,672		36,970		1,037		1,074
Subtotal		1,825,756		1,798,843		533,890		534,566
MBS		885,697		855,827		450,719		436,879
Total	$	2,711,453	$	2,654,670	$	984,609	$	971,445

	At December 31, 2017
	Debt Securities Available for Sale				Debt Securities Held to Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(In thousands)
Maturity in years:
1 year or less	$	193,337	$	193,385	$	50,295	$	51,105
Over 1 to 5 years		1,031,807		1,023,047		269,050		269,471
Over 5 to 10 years		159,266		160,042		277,170		281,546
Over 10 years		46,065		45,154		2,963		3,074
Subtotal		1,430,475		1,421,628		599,478		605,196
MBS		790,076		770,079		559,386		550,146
Total	$	2,220,551	$	2,191,707	$	1,158,864	$	1,155,342

Expected maturities of mortgage-related securities can differ from contractual maturities because borrowers have the right to call or prepay obligations with or without call or prepayment penalties. In addition, such factors as prepayments and interest rates

may

affect the yield on the carrying value of mortgage-related securities. At

December 31, 2018

and

December 31, 2017,

the Company had

no

high-risk collateralized mortgage obligations as defined by regulatory guidelines.

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

	Debt Securities Available for Sale At December 31, 2018
	No. of		Less than 12 months					No. of		12 months or longer					No. of		Total
	Investment				Unrealized			Investment				Unrealized			Investment				Unrealized
	Positions		Fair Value		Losses			Positions		Fair Value		Losses			Positions		Fair Value		Losses
	($ in thousands)
U.S. Treasury securities		2	$	54,805	$	(3	)		-	$	-	$	-			2	$	54,805	$	(3	)
Securities of U.S. Government sponsored entities		1		990		(5	)		9		117,963		(3,270	)		10		118,953		(3,275	)
Agency residential MBS		8		107,497		(507	)		58		640,210		(29,932	)		66		747,707		(30,439	)
Agency commercial MBS		1		1,842		(27	)		-		-		-			1		1,842		(27	)
Securities of U.S. Government entities		-		-		-			2		1,119		(9	)		2		1,119		(9	)
Obligations of states and political subdivisions		32		26,452		(166	)		71		67,121		(2,819	)		103		93,573		(2,985	)
Corporate securities		38		308,157		(3,403	)		79		722,740		(20,239	)		117		1,030,897		(23,642	)
Total		82	$	499,743	$	(4,111	)		219	$	1,549,153	$	(56,269	)		301	$	2,048,896	$	(60,380	)

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

	Debt Securities Held to Maturity At December 31, 2018
	No. of		Less than 12 months					No. of		12 months or longer					No. of		Total
	Investment				Unrecognized			Investment				Unrecognized			Investment				Unrecognized
	Positions		Fair Value		Losses			Positions		Fair Value		Losses			Positions		Fair Value		Losses
	($ in thousands)
Agency residential MBS		16	$	8,495	$	(34	)		78	$	412,574	$	(14,095	)		94	$	421,069	$	(14,129	)
Non-agency residential MBS		1		26		-			-		-		-			1		26		-
Obligations of states and political subdivisions		97		83,633		(271	)		142		151,546		(2,456	)		239		235,179		(2,727	)
Total		114	$	92,154	$	(305	)		220	$	564,120	$	(16,551	)		334	$	656,274	$	(16,856	)

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

One

corporate bond with a carrying value of

$15.0

million and a market value of

$13.8

million at

December 31, 2018,

is rated below investment grade. In addition to monitoring credit rating agency evaluations, Management performs its own evaluations regarding the credit worthiness of the issuer or the securitized assets underlying asset backed securities.

The Company does

not

intend to sell any debt securities and has concluded that it is more likely than

not

that it will

not

be required to sell the debt securities prior to recovery of the amortized cost basis. Therefore, the Company does

not

consider these debt securities to be other-than-temporarily impaired as of

December 31, 2018.

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

may

occur in the future.

As of

December 31, 2018

and

December 31, 2017,

the Company had debt securities pledged to secure public deposits and short-term borrowed funds of

$728,161

 thousand and

$715,774

 thousand, respectively.

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

	Debt Securities Available for Sale
	At December 31, 2017
	No. of		Less than 12 months					No. of		12 months or longer					No. of		Total
	Investment				Unrealized			Investment				Unrealized			Investment				Unrealized
	Positions		Fair Value		Losses			Positions		Fair Value		Losses			Positions		Fair Value		Losses
	($ in thousands)
Securities of U.S. Government sponsored entities		1	$	996	$	(2	)		8	$	117,252	$	(2,965	)		9	$	118,248	$	(2,967	)
Agency residential MBS		7		238,554		(1,501	)		51		516,711		(18,994	)		58		755,265		(20,495	)
Non-agency residential MBS		1		1		-			-		-		-			1		1		-
Agency commercial MBS		2		2,219		(25	)		-		-		-			2		2,219		(25	)
Securities of U.S. Government entities		-		-		-			3		1,590		(22	)		3		1,590		(22	)
Obligations of states and political subdivisions		50		21,453		(228	)		35		52,071		(1,254	)		85		73,524		(1,482	)
Corporate securities		64		571,112		(4,047	)		38		282,924		(5,230	)		102		854,036		(9,277	)
Total		125	$	834,335	$	(5,803	)		135	$	970,548	$	(28,465	)		260	$	1,804,883	$	(34,268	)

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

	Debt Securities Held to Maturity
	At December 31, 2017
	No. of		Less than 12 months					No. of		12 months or longer					No. of		Total
	Investment				Unrecognized			Investment				Unrecognized			Investment				Unrecognized
	Positions		Fair Value		Losses			Positions		Fair Value		Losses			Positions		Fair Value		Losses
	($ in thousands)
Agency residential MBS		15	$	30,218	$	(201	)		65	$	479,775	$	(9,649	)		80	$	509,993	$	(9,850	)
Agency commercial MBS		1		1,913		(4	)		1		7,062		(62	)		2		8,975		(66	)
Obligations of states and political subdivisions		146		131,032		(553	)		59		58,979		(1,465	)		205		190,011		(2,018	)
Total		162	$	163,163	$	(758	)		125	$	545,816	$	(11,176	)		287	$	708,979	$	(11,934	)

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

	For the Years Ended December 31,
	2018		2017		2016
	(In thousands)
Taxable	$	65,330	$	51,445	$	42,718
Tax-exempt from regular federal income tax		19,438		20,651		22,194
Total interest income from investment securities	$	84,768	$	72,096	$	64,912

XML

Note 3 - Loans and Allowance for Credit Losses

12 Months Ended

Dec. 31, 2018

Notes to Financial Statements

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

Note

3:

Loans and Allowance for Credit Losses

At

December 31, 2018,

the Company had

$5.7

million in residential real estate secured loans which are indemnified from loss by the FDIC up to

eighty

percent of principal; the indemnification expired

February 6, 2019.

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

	At Decmber 31,
	2018		2017
	(In thousands)
Commercial	$	275,080	$	335,996
Commercial Real Estate		580,480		568,584
Construction		3,982		5,649
Residential Real Estate		44,866		65,183
Consumer Installment & Other		302,794		312,570
Total	$	1,207,202	$	1,287,982

Total loans outstanding reported above include loans purchased from the FDIC of

$58,247

  thousand and

$83,478

thousand at

December 31, 2018

and

December 31, 2017,

respectively.

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

	For the Years Ended December 31,
	2018			2017
Accretable yield:	(In thousands)
Balance at the beginning of the period	$	738		$	1,237
Reclassification from nonaccretable difference		1,119			1,852
Accretion		(1,675	)		(2,351	)
Balance at the end of the period	$	182		$	738
Accretion	$	(1,675	)	$	(2,351	)
Change in FDIC indemnification		2			192
(Increase) in interest income	$	(1,673	)	$	(2,159	)

The following summarizes activity in the allowance for loan losses:

	Allowance for Loan Losses For the Year Ended December 31, 2018
	Commercial			Commercial Real Estate			Construction		Residential Real Estate			Consumer Installment and Other			Unallocated			Total
	(In thousands)
Allowance for loan losses:
Balance at beginning of period	$	7,746		$	3,849		$	335	$	995		$	6,418		$	3,666		$	23,009
(Reversal) provision		(2,369	)		275			1,130		(126	)		1,579			(489	)		-
Chargeoffs		(513	)		(240	)		-		-			(4,124	)		-			(4,877	)
Recoveries		1,447			-			-		-			1,772			-			3,219
Total allowance for loan losses	$	6,311		$	3,884		$	1,465	$	869		$	5,645		$	3,177		$	21,351

	Allowance for Loan Losses For the Year Ended December 31, 2017
	Commercial			Commercial Real Estate		Construction			Residential Real Estate			Consumer Installment and Other			Unallocated			Total
	(In thousands)
Allowance for loan losses:
Balance at beginning of period	$	8,327		$	3,330	$	152		$	1,330		$	7,980		$	4,835		$	25,954
(Reversal) provision		(382	)		431		(1,716	)		(335	)		1,271			(1,169	)		(1,900	)
Chargeoffs		(961	)		-		-			-			(4,957	)		-			(5,918	)
Recoveries		762			88		1,899			-			2,124			-			4,873
Total allowance for loan losses	$	7,746		$	3,849	$	335		$	995		$	6,418		$	3,666		$	23,009

	Allowance for Credit Losses For the Year Ended December 31, 2016
	Commercial			Commercial Real Estate			Construction			Residential Real Estate			Consumer Installment and Other			Unallocated			Total
	(In thousands)
Allowance for loan losses:
Balance at beginning of period	$	9,559		$	4,212		$	235		$	1,801		$	8,001		$	5,963		$	29,771
(Reversal) provision		(3,237	)		(1,436	)		(83	)		(471	)		3,155			(1,128	)		(3,200	)
Chargeoffs		(2,023	)		-			-			-			(4,749	)		-			(6,772	)
Recoveries		4,028			554			-			-			1,573			-			6,155
Total allowance for loan losses	$	8,327		$	3,330		$	152		$	1,330		$	7,980		$	4,835		$	25,954

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

	Allowance for Loan Losses and Recorded Investment in Loans Evaluated for Impairment At December 31, 2018
	Commercial		Commercial Real Estate		Construction		Residential Real Estate		Consumer Installment and Other		Unallocated		Total
	(In thousands)
Allowance for loan losses:
Individually evaluated for impairment	$	2,752	$	-	$	-	$	-	$	-	$	-	$	2,752
Collectively evaluated for impairment		3,559		3,884		1,465		869		5,645		3,177		18,599
Purchased loans with evidence of credit deterioration		-		-		-		-		-		-		-
Total	$	6,311	$	3,884	$	1,465	$	869	$	5,645	$	3,177	$	21,351
Carrying value of loans:
Individually evaluated for impairment	$	9,921	$	8,217	$	-	$	717	$	-	$	-	$	18,855
Collectively evaluated for impairment		265,136		572,042		3,982		44,149		302,651		-		1,187,960
Purchased loans with evidence of credit deterioration		23		221		-		-		143		-		387
Total	$	275,080	$	580,480	$	3,982	$	44,866	$	302,794	$	-	$	1,207,202

	Allowance for Loan Losses and Recorded Investment in Loans Evaluated for Impairment At December 31, 2017
	Commercial		Commercial Real Estate		Construction		Residential Real Estate		Consumer Installment and Other		Unallocated		Total
	(In thousands)
Allowance for loan losses:
Individually evaluated for impairment	$	4,814	$	171	$	-	$	-	$	-	$	-	$	4,985
Collectively evaluated for impairment		2,932		3,678		335		995		6,418		3,666		18,024
Purchased loans with evidence of credit deterioration		-		-		-		-		-		-		-
Total	$	7,746	$	3,849	$	335	$	995	$	6,418	$	3,666	$	23,009
Carrying value of loans:
Individually evaluated for impairment	$	10,675	$	14,234	$	-	$	208	$	-	$	-	$	25,117
Collectively evaluated for impairment		325,291		553,769		5,649		64,975		312,406		-		1,262,090
Purchased loans with evidence of credit deterioration		30		581		-		-		164		-		775
Total	$	335,996	$	568,584	$	5,649	$	65,183	$	312,570	$	-	$	1,287,982

The Company’s customers are small businesses, professionals and consumers. Given the scale of these borrowers, corporate credit rating agencies do

not

evaluate the borrowers’ financial condition. The Company’s subsidiary, Westamerica Bank (the “Bank”) maintains a Loan Review Department which reports directly to the Audit Committee of the Board of Directors. The Loan Review Department performs independent evaluations of loans and validates management assigned credit risk grades on evaluated loans using grading standards employed by bank regulatory agencies. Loans judged to carry lower-risk attributes are assigned a “pass” grade, with a minimal likelihood of loss. Loans judged to carry higher-risk attributes are referred to as “classified loans,” and are further disaggregated, with increasing expectations for loss recognition, as “substandard,” “doubtful,” and “loss.” Loan Review Department performs continuous evaluations throughout the year. If the Bank becomes aware of deterioration in a borrower’s performance or financial condition between Loan Review Department examinations, assigned risk grades are re-evaluated promptly. Credit risk grades assigned by management and validated by the Loan Review Department are subject to review by the Bank’s regulatory authorities during regulatory examinations.

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

	Credit Risk Profile by Internally Assigned Grade At December 31, 2018
	Commercial		Commercial Real Estate		Construction		Residential Real Estate		Consumer Installment and Other		Total
	(In thousands)
Grade:
Pass	$	264,634	$	567,578	$	3,982	$	43,112	$	300,553	$	1,179,859
Substandard		10,446		12,902		-		1,754		1,556		26,658
Doubtful		-		-		-		-		135		135
Loss		-		-		-		-		550		550
Total	$	275,080	$	580,480	$	3,982	$	44,866	$	302,794	$	1,207,202

Credit risk profile reflects internally assigned grades of purchased covered loans without regard to FDIC indemnification on

$5,713

thousand residential real estate and consumer loans at

December 31, 2018.

The indemnification expired

February 6, 2019.

	Credit Risk Profile by Internally Assigned Grade At December 31, 2017
	Commercial		Commercial Real Estate		Construction		Residential Real Estate		Consumer Installment and Other		Total
	(In thousands)
Grade:
Pass	$	324,185	$	548,853	$	5,649	$	62,253	$	310,429	$	1,251,369
Substandard		11,811		19,731		-		2,930		1,370		35,842
Doubtful		-		-		-		-		1		1
Loss		-		-		-		-		770		770
Total	$	335,996	$	568,584	$	5,649	$	65,183	$	312,570	$	1,287,982

Credit risk profile reflects internally assigned grades of purchased covered loans without regard to FDIC indemnification on

$7,766

thousand residential real estate and consumer loans at

December 31, 2017.

The following tables summarize loans by delinquency and nonaccrual status:

	Summary of Loans by Delinquency and Nonaccrual Status At December 31, 2018
	Current and Accruing		30-59 Days Past Due and Accruing		60-89 Days Past Due and Accruing		Past Due 90 Days or More and Accruing		Nonaccrual		Total Loans
	(In thousands)
Commercial	$	274,045	$	781	$	254	$	-	$	-	$	275,080
Commercial real estate		574,853		617		785		-		4,225		580,480
Construction		3,982		-		-		-		-		3,982
Residential real estate		43,372		789		189		-		516		44,866
Consumer installment and other		297,601		3,408		1,107		551		127		302,794
Total	$	1,193,853	$	5,595	$	2,335	$	551	$	4,868	$	1,207,202

	Summary of Loans by Delinquency and Nonaccrual Status At December 31, 2017
	Current and Accruing		30-59 Days Past Due and Accruing		60-89 Days Past Due and Accruing		Past Due 90 Days or More and Accruing		Nonaccrual		Total Loans
	(In thousands)
Commercial	$	334,908	$	627	$	164	$	-	$	297	$	335,996
Commercial real estate		561,883		1,143		125		-		5,433		568,584
Construction		5,649		-		-		-		-		5,649
Residential real estate		65,183		-		-		-		-		65,183
Consumer installment and other		307,445		3,321		1,077		531		196		312,570
Total	$	1,275,068	$	5,091	$	1,366	$	531	$	5,926	$	1,287,982

There were

no

commitments to lend additional funds to borrowers whose loans were on nonaccrual status at

December 31, 2018

and

December 31, 2017.

The following summarizes impaired loans:

	Impaired Loans At December 31,
	2018						2017
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
	(In thousands)
With no related allowance recorded:
Commercial	$	755	$	759	$	-	$	1,212	$	1,271	$	-
Commercial real estate		8,438		10,373		-		13,169		14,985		-
Residential real estate		717		747		-		208		239		-
Consumer installment and other		270		377		-		360		466		-
Total with no related allowance recorded		10,180		12,256		-		14,949		16,961		-
With an allowance recorded:
Commercial		9,189		9,189		2,752		9,764		9,764		4,814
Commercial real estate		-		-		-		1,790		1,792		171
Total with an allowance recorded		9,189		9,189		2,752		11,554		11,556		4,985
Total	$	19,369	$	21,445	$	2,752	$	26,503	$	28,517	$	4,985

Impaired loans include troubled debt restructured loans. Impaired loans at

December 31, 2018,

included

$8,579

thousand of restructured loans,

$4,225

thousand of which were on nonaccrual status. Impaired loans at

December 31, 2017,

included

$12,081

thousand of restructured loans,

$4,285

thousand of which were on nonaccrual status.

	Impaired Loans For the Years Ended December 31,
	2018				2017				2016
	Average Recorded Investment		Recognized Interest Income		Average Recorded Investment		Recognized Interest Income		Average Recorded Investment		Recognized Interest Income
	(In thousands)
Commercial	$	10,532	$	667	$	11,156	$	508	$	12,923	$	512
Commercial real estate		11,703		758		14,806		884		16,701		725
Construction		-		-		-		-		102		-
Residential real estate		269		19		423		17		746		19
Consumer installment and other		254		14		415		20		473		25
Total	$	22,758	$	1,458	$	26,800	$	1,429	$	30,945	$	1,281

The following tables provide information on troubled debt restructurings:

	Troubled Debt Restructurings At December 31, 2018
	Number of Contracts		Pre-Modification Carrying Value		Period-End Carrying Value		Period-End Individual Impairment Allowance
	($ in thousands)
Commercial		4	$	2,274	$	811	$	19
Commercial real estate		8		9,237		7,568		-
Residential real estate		1		241		200		-
Total		13	$	11,752	$	8,579	$	19

	Troubled Debt Restructurings At December 31, 2017
	Number of Contracts		Pre-Modification Carrying Value		Period-End Carrying Value		Period-End Individual Impairment Allowance
	($ in thousands)
Commercial		7	$	2,393	$	1,085	$	43
Commercial real estate		10		11,528		10,788		-
Residential real estate		1		241		208		-
Total		18	$	14,162	$	12,081	$	43

	Troubled Debt Restructurings At December 31, 2016
	Number of Contracts		Pre-Modification Carrying Value		Period-End Carrying Value		Period-End Individual Impairment Allowance
	($ in thousands)
Commercial		7	$	2,719	$	1,489	$	113
Commercial real estate		10		11,257		10,673		-
Residential real estate		1		241		219		-
Total		18	$	14,217	$	12,381	$	113

During the year ended

December 31, 2018,

the Company did

not

modify any loans that were considered troubled debt restructurings.

During the year ended

December 31, 2017,

the Company modified

four

loans with a carrying value of

$699

thousand that were considered troubled debt restructurings. The

four

concessions granted in

2017

consisted of modifications of payment terms to extend the maturity date to allow for deferred principal repayment and under-market terms.

During the year ended

December 31, 2016,

the Company modified

four

loans with a total carrying value of

$4,731

thousand that were considered troubled debt restructurings. The concessions granted in the

four

restructurings completed in

2016

consisted of

three

modifications of payment terms to extend the maturity date to allow for deferred principal repayment and under-market terms and

one

court order requiring under-market terms.

During the year ended

December 31, 2018,

one

troubled debt restructured loan with a carrying value of

$41

thousand was charged off. During the year ended

December 31, 2017,

one

troubled debt restructured loan with a carrying value of

$58

thousand was charged off. There were

no

chargeoffs related to troubled debt restructurings made during the year ended

December 31, 2016.

During the years ended

December 31, 2018,

2017

and

2016,

no

troubled debt restructured loans defaulted within

12

months of the modification date. A troubled debt restructuring is considered to be in default when payments are

ninety

days or more past due.

There were

no

loans restricted due to collateral requirements at

December 31, 2018

and

December 31, 2017.

There were

no

loans held for sale at

December 31, 2018

and

December 31, 2017.

At

December 31, 2018

and

December 31, 2017,

the Company held total other real estate owned (OREO) of

$350

thousand net of reserve of $-

0

-

  

thousand and

$1,426

thousand net of reserve of

$1,905

thousand, respectively, of which $-

0

-  was foreclosed residential real estate properties or covered OREO at both dates. The amount of consumer mortgage loans outstanding secured by residential real estate properties for which formal foreclosure proceedings were in process was

$516

thousand at

December 31, 2018

and

$196

thousand at

December 31, 2017.

XML

Note 4 - Concentration of Credit Risk

12 Months Ended

Dec. 31, 2018

Notes to Financial Statements

Concentration Risk Disclosure [Text Block]

Note

4:

Concentration of Credit Risk

Under the California Financial Code, credit extended to any

one

person owing to a commercial bank at any

one

time shall

not

exceed the following limitations: (a) unsecured loans shall

not

exceed

15

percent of the sum of the shareholders' equity, allowance for loan losses, capital notes, and debentures of the bank, or (b) secured and unsecured loans in all shall

not

exceed

25

percent of the sum of the shareholders' equity, allowance for loan losses, capital notes, and debentures of the bank. At

December 31, 2018,

the Bank did

not

have credit extended to any

one

entity exceeding these limits. At

December 31, 2018,

the Bank had

37

lending relationships each with aggregate amounts of

$5

million or more. The Company has significant credit arrangements that are secured by real estate collateral. In addition to real estate loans outstanding as disclosed in Note

3,

the Company had loan commitments related to real estate loans of

$53,891

thousand and

$53,874

thousand at

December 31, 2018

and

December 31, 2017,

respectively. The Company requires collateral on all real estate loans with loan-to-value ratios at origination generally

no

greater than

75%

on commercial real estate loans and

no

greater than

80%

on residential real estate loans. At

December 31, 2018,

the Bank held corporate bonds in

78

issuing entities that exceeded

$5

million for each issuer.

XML

Note 5 - Premises, Equipment and Other Assets

12 Months Ended

Dec. 31, 2018

Notes to Financial Statements

Other Assets Disclosure [Text Block]

Note

5:

Premises, Equipment and Other Assets

Premises and equipment consisted of the following:

	At December 31,
	Cost		Accumulated Depreciation and Amortization			Net Book Value
	(In thousands)
2018
Land	$	11,691	$	-		$	11,691
Building and improvements		41,912		(27,178	)		14,734
Leasehold improvements		6,174		(4,968	)		1,206
Furniture and equipment		23,845		(16,969	)		6,876
Total	$	83,622	$	(49,115	)	$	34,507
2017
Land	$	11,796	$	-		$	11,796
Building and improvements		41,641		(26,249	)		15,392
Leasehold improvements		5,817		(4,790	)		1,027
Furniture and equipment		22,284		(15,198	)		7,086
Total	$	81,538	$	(46,237	)	$	35,301

Depreciation and amortization of premises and equipment included in noninterest expense amounted to

$3,677

thousand in

2018,

$3,925

thousand in

2017

and

$3,959

thousand in

2016.

Other assets consisted of the following:

	At December 31,
	2018		2017
	(In thousands)
Cost method equity investments:
Federal Reserve Bank stock (1)	$	14,069	$	14,069
Other investments		158		158
Total cost method equity investments		14,227		14,227
Life insurance cash surrender value		56,083		54,101
Net deferred tax asset		42,256		33,112
Limited partnership investments		10,219		10,119
Interest receivable		25,834		23,557
Prepaid assets		4,658		4,906
Other assets		9,629		18,428
Total other assets	$	162,906	$	158,450

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

The Company owns

211

thousand shares of Visa Inc. class B common stock which have transfer restrictions; the carrying value is $-

0

- thousand. On

July 5, 2018,

Visa Inc. announced a new conversion rate applicable to its class B common stock resulting from its

June 28, 2018

deposit of funds into its litigation escrow account. This funding reduced the conversion rate of class B common stock into class A common stock, which is unrestricted and trades actively on the New York Stock Exchange, from

1.6483

to

1.6298.

Visa Inc. class A common stock had a closing price of

$131.94

per share on

December 31, 2018,

the last day of stock market trading for the

fourth

quarter

2018.

The ultimate value of the Company’s Visa Inc. class B shares is subject to the extent of Visa Inc.’s future litigation escrow fundings, the resulting conversion rate to class A common stock, and current and future trading restrictions on the class B common stock.

The Company invests in flow-through limited liability entities that manage or invest in affordable housing projects that qualify for low-income housing tax credits. At

December 31, 2018,

this investment totaled

$10,219

thousand and

$4,799

  thousand of this amount represents outstanding equity capital commitments that are included in other liabilities. At

December 31, 2017,

this investment totaled

$10,119

thousand and

$2,299

  thousand of this amount represented outstanding equity capital commitments. At

December 31, 2018,

the

$4,799

thousand of outstanding equity capital commitments are expected to be paid as follows,

$627

thousand in

2019,

$2,026

thousand in

2020,

$138

thousand in

2021,

$261

thousand in

2022,

$134

thousand in

2023,

$1,041

thousand in

2024

and

$572

thousand in

2025

or thereafter.

The amounts recognized in net income for these investments include:

	For the Years Ended December 31,
	2018		2017		2016
	(In thousands)
Investment loss included in pre-tax income	$	2,900	$	1,800	$	2,475
Valuation impairment included in pre-tax income		-		625		-
Tax credits recognized in provision for income taxes		1,121		1,850		2,286

The

$625

thousand valuation impairment recognized in

2017

was due to a decline in future expected federal tax benefits due to the reduction in the federal corporate tax rate upon enactment of the Tax Cuts and Jobs Act of

2017.

XML

Note 6 - Goodwill and Identifiable Intangible Assets

12 Months Ended

Dec. 31, 2018

Notes to Financial Statements

Goodwill and Intangible Assets Disclosure [Text Block]

Note

6:

Goodwill and Identifiable Intangible Assets

The Company has recorded goodwill and other identifiable intangibles associated with purchase business combinations. Goodwill is

not

amortized, but is evaluated for impairment at least annually. The Company did

not

recognize impairment during the years ended

December 31, 2018,

2017

and

2016.

Identifiable intangibles are amortized to their estimated residual values over their expected useful lives. Such lives and residual values are also periodically reassessed to determine if any amortization period adjustments are indicated. During the years ended

December 31, 2018,

2017

and

2016

no

such adjustments were recorded.

The carrying values of goodwill were:

	At December 31,
	2018		2017
	(In thousands)
Goodwill	$	121,673	$	121,673

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

	At December 31,
	2018					2017
	Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization
	(In thousands)
Core Deposit Intangibles	$	56,808	$	(54,879	)	$	56,808	$	(52,987	)
Merchant Draft Processing Intangible		10,300		(10,300	)		10,300		(10,271	)
Total Identifiable Intangible Assets	$	67,108	$	(65,179	)	$	67,108	$	(63,258	)

As of

December 31, 2018,

the current period and estimated future amortization expense for identifiable intangible assets was:

	Core Deposit Intangibles		Merchant Draft Processing Intangible		Total
	(In thousands)
For the Year Ended December 31, 2018 (actual)	$	1,892	$	29	$	1,921
Estimate for the Year Ended December 31, 2019		538		-		538
2020		287		-		287
2021		269		-		269
2022		252		-		252
2023		236		-		236

XML

Note 7 - Deposits and Borrowed Funds

12 Months Ended

Dec. 31, 2018

Notes to Financial Statements

Deposits and Borrowed Funds [Text Block]

Note

7:

Deposits and Borrowed Funds

The following table provides additional detail regarding deposits.

	Deposits
	At December 31,
	2018		2017
	(In thousands)
Noninterest-bearing	$	2,243,251	$	2,197,526
Interest-bearing:
Transaction		929,346		904,245
Savings		1,498,991		1,494,024
Time deposits less than $100 thousand		102,654		117,848
Time deposits $100 thousand through $250 thousand		64,512		76,578
Time deposits more than $250 thousand		28,085		37,392
Total deposits	$	4,866,839	$	4,827,613

Demand deposit overdrafts of

$980

 thousand and

$2,786

 thousand were included as loan balances at

December 31, 2018

and

2017,

respectively. Interest expense for aggregate time deposits with individual account balances in excess of

$100

thousand was

$368

thousand in

2018,

$415

thousand in

2017

and

$509

thousand in

2016.

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

	Repurchase Agreements (Sweep) Accounted for as Secured Borrowings
	Remaining Contractual Maturity of the Agreements Overnight and Continuous
	At December 31,
	2018		2017
Repurchase agreements:	(In thousands)
Collateral securing borrowings:
Securities of U.S. Government sponsored entities	$	73,803	$	74,173
Agency residential MBS		58,380		58,251
Corporate securities		91,837		105,113
Total collateral carrying value	$	224,020	$	237,537
Total short-term borrowed funds	$	51,247	$	58,471

	For the Years Ended December 31,
	2018		2017
	Highest Balance at Any Month-end
	(In thousands)
Securities sold under repurchase agreements	$	68,894	$	82,126

XML

Note 8 - Shareholders' Equity

12 Months Ended

Dec. 31, 2018

Notes to Financial Statements

Stockholders' Equity Note Disclosure [Text Block]

Note

8:

Shareholders’ Equity

The Company grants stock options and restricted performance shares to employees in exchange for employee services, pursuant to the shareholder-approved

1995

Stock Option Plan, which was last amended and restated in

2012.

Nonqualified stock option grants (“NQSO”) are granted with an exercise price equal to the fair market value of the related common stock on the grant date. NQSO generally become exercisable in equal annual installments over a

three

-year period with each installment vesting on the anniversary date of the grant. Each NQSO has a maximum

ten

-year term. A restricted performance share grant becomes vested after

three

years of being awarded, provided the Company has attained its performance goals for such

three

-year period.

The following table summarizes information about stock options granted under the Plan as of

December 31, 2018.

The intrinsic value is calculated as the difference between the market value as of

December 31, 2018

and the exercise price of the shares. The market value as of

December 31, 2018

was

$55.68

as reported by the NASDAQ Global Select Market:

			Options Outstanding								Options Exercisable
			At December 31, 2018						For the Year Ended December 31, 2018		At December 31, 2018						For the Year Ended December 31, 2018
Range of Exercise Price			Number Outstanding		Aggregate Intrinsic Value		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price		Number Exercisable		Aggregate Intrinsic Value		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price
			(In thousands)				(Years)				(In thousands)				(Years)
$40	-	45		176	$	2,309		6.6	$	43		87	$	1,122		6.1	$	43
45	-	50		11		106		3.1		46		11		106		3.1		46
50	-	55		286		1,297		0.7		51		286		1,297		0.7		51
55	-	60		229		-		7.7		57		73		-		6.9		57
60	-	65		244		-		9.1		62		-		N/A		N/A		N/A
$40	-	65		946	$	3,712		5.7		54		457	$	2,525		2.8		50

The Company applies the Roll-Geske option pricing model (Modified Roll) to determine grant date fair value of stock option grants. This model modifies the Black-Scholes Model to take into account dividends and American options. During the year ended

December 31, 2018,

2017

and

2016,

the Company granted

249

thousand,

266

thousand and

325

thousand stock options, respectively. The following weighted average assumptions were used in the option pricing to value stock options granted in the periods indicated:

	For the Years Ended December 31,
	2018			2017			2016
Expected volatility (1)		20	%		20	%		22	%
Expected life in years (2)		4.8			4.8			4.8
Risk-free interest rate (3)		2.50	%		1.97	%		1.41	%
Expected dividend yield		2.65	%		3.28	%		4.49	%
Fair value per award	$	9.98		$	8.27		$	5.97

( 1 ) Measured using daily price changes of Company’s stock over respective expected term of the option and the implied volatility derived from the market prices of the Company’s stock and traded options.

( 2 ) The number of years that the Company estimates that the options will be outstanding prior to exercise.

( 3 ) The risk-free rate over the expected life based on the US Treasury yield curve in effect at the time of the grant.

Employee stock option grants are being expensed by the Company over the grants’

three

year vesting period. The Company issues new shares upon the exercise of options. The number of shares authorized to be issued for options at

December 31, 2018

is

713

thousand.

A summary of option activity during the year ended

December 31, 2018

is presented below:

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term
	(In thousands)					(Years)
Outstanding at January 1, 2018		1,030		$	49.44
Granted		249			62.16
Exercised		(292	)		45.76
Forfeited or expired		(41	)		52.54
Outstanding at December 31, 2018		946		$	53.78		5.7
Exercisable at December 31, 2018		457		$	50.38		2.8

A summary of the Company’s nonvested option activity during the year ended

December 31, 2018

is presented below:

	Shares			Weighted Average Grant Date Fair Value
	(In thousands)
Nonvested at January 1, 2018		561		$	6.98
Granted		249			9.98
Vested		(280	)		6.54
Forfeited		(41	)		7.66
Nonvested at December 31, 2018		489			8.71

The weighted average estimated grant date fair value for options granted under the Company’s stock option plan during the

twelve

months ended

December 31, 2018,

2017

and

2016

was

$9.98,

$8.27

and

$5.97

per share, respectively. The total remaining unrecognized compensation cost related to nonvested awards as of

December 31, 2018

is

$2,871

thousand and the weighted average period over which the cost is expected to be recognized is

1.8

years.

The total intrinsic value of options exercised during the

twelve

months ended

December 31, 2018,

2017

and

2016

was

$4,264

thousand,

$4,642

thousand and

$3,242

thousand, respectively. The total fair value of Restricted Performance Shares (“RPSs”) that vested during the

twelve

months ended

December 31, 2018,

2017

and

2016

was

$1,143

thousand,

$708

thousand and

$753

thousand, respectively. The total fair value of options vested during the

twelve

months ended

December 31, 2018,

2017

and

2016

was

$1,835

thousand,

$1,493

thousand and

$1,269

thousand, respectively. The Company adopted the ASU

2016

-

09

provisions effective

January 1, 2017,

which has the potential to create volatility in the book tax provision at the time nonqualified stock options are exercised or expire. During the

twelve

months of

2018,

292

thousand shares were issued due to the exercise of nonqualified stock options resulting in a tax deduction exceeding related share based compensation by

$2,516

thousand. During the

twelve

months of

2017,

509

thousand shares were issued due to the exercise of nonqualified stock options resulting in a tax deduction exceeding related share based compensation by

$1,667

thousand. The income tax provision was

$737

thousand lower in

2018

and

$698

thousand in

2017

lower than would have been under accounting standards prior to the adoption of ASU

2016

-

09.

The increase in tax benefits recognized for the tax deductions from the exercise of options totaled

$394

thousand for the

twelve

months ended

December 31, 2016.

A summary of the status of the Company’s restricted performance shares as of

December 31, 2018

and

2017

and changes during the

twelve

months ended on those dates, follows:

	2018			2017
	(In thousands)
Outstanding at January 1,		49			48
Granted		11			14
Issued upon vesting		(19	)		(13	)
Forfeited		(2	)		-
Outstanding at December 31,		39			49

As of

December 31, 2018

and

2017,

the restricted performance shares had a weighted-average contractual life of

1.2

years. The compensation cost that was charged against income for the Company’s restricted performance shares granted was

$660

thousand,

$827

thousand and

$1,228

thousand for the

twelve

months ended

December 31, 2018,

2017

and

2016,

respectively. There were

no

stock appreciation rights or incentive stock options granted in the

twelve

months ended

December 31, 2018

and

2017.

On

February 13, 2009,

the Company issued a warrant to purchase

246,640

shares of the Company’s common stock at an exercise price of

$50.92

per share. The warrants

may

be exercised in a manner wherein the Company withholds shares of common stock issuable upon exercise of the warrant equal in value to the aggregate exercise price, in which case the warrant holder would

not

deliver cash for the aggregate exercise price and the Company would issue a number of shares equal to the intrinsic value on the exercise date. The warrants remain outstanding at

December 31, 2018.

On

January 29, 2019,

the warrants were exercised in a cashless transaction resulting in the issuance of

50,788

shares of the Company’s common stock.

The Company repurchases and retires its common stock in accordance with Board of Directors approved share repurchase programs. At

December 31, 2018,

approximately

1,750

thousand shares remained available to repurchase under such plans.

Shareholders have authorized

two

additional classes of stock of

one million

shares each, to be denominated “Class B Common Stock” and “Preferred Stock,” respectively, in addition to the

150

million shares of common stock presently authorized. At

December 31, 2018,

no

shares of Class B Common Stock or Preferred Stock were outstanding.

XML

Note 9 - Regulatory Capital

12 Months Ended

Dec. 31, 2018

Notes to Financial Statements

Regulatory Capital Requirements under Banking Regulations [Text Block]

Note

9:

Regulatory Capital

Banks and bank holding companies are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can result in regulatory action. The final rules implementing Basel Committee on Banking Supervision’s capital guidelines for U.S. banks (Basel III rules) became effective for the Company on

January 1, 2015

with full compliance with all of the requirements being phased in over a multi-year schedule, and fully phased in by

January 1, 2019.

Under the Basel III rules, the Company must hold a capital conservation buffer above the adequately capitalized risk-based capital ratios. The capital conservation buffer was phased in from

0.0%

for

2015

to

2.50%

in

2019.

The capital conservation buffer was

1.875%

for

2018

and

1.25%

for

2017.

The net unrealized gain or loss on available for sale securities is

not

included in computing regulatory capital. Management believes as of

December 31, 2018,

the Company and Bank met all capital adequacy requirements to which they are subject.

Prompt corrective action regulations provide

five

classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are

not

used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. At year-end

2018

and

2017,

the most recent regulatory notifications categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There are

no

conditions or events since that notification that management believes have changed the institution’s category.

The capital ratios for the Company and the Bank under the new capital framework as of the dates indicated are presented in the table below.

	At December 31, 2018					Required for Capital Adequacy Purposes Effective January 1, 2018					To Be Well-capitalized Under Prompt Corrective Action Regulations
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	($ in thousands)
Common Equity Tier 1 Capital
Company	$	528,042		16.30	%	$	206,576		6.375	% (1)		N/A		N/A
Bank		415,575		13.01	%		203,664		6.375	% (1)	$	207,658		6.50	%
Tier 1 Capital
Company		528,042		16.30	%		255,182		7.875	% (1)		N/A		N/A
Bank		415,575		13.01	%		251,585		7.875	% (1)		255,579		8.00	%
Total Capital
Company		551,701		17.03	%		319,990		9.875	% (1)		N/A		N/A
Bank		445,234		13.94	%		315,480		9.875	% (1)		319,474		10.00	%
Leverage Ratio (2)
Company		528,042		9.51	%		222,111		4.000	%		N/A		N/A
Bank		415,575		7.55	%		220,312		4.000	%		275,390		5.00	%

(

1

)

Includes

1.875%

capital conservation buffer.

(

2

)

The leverage ratio consists of Tier

1

capital divided by the most recent quarterly average total assets, excluding certain intangible assets.

	At December 31, 2017					Required for Capital Adequacy Purposes Effective January 1, 2017					To Be Well-capitalized Under Prompt Corrective Action Regulations
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	($ in thousands)
Common Equity Tier 1 Capital
Company	$	479,259		15.36	%	$	179,377		5.75	% (3)		N/A		N/A
Bank		383,796		12.50	%		176,568		5.75	% (3)	$	199,599		6.50	%
Tier 1 Capital
Company		479,259		15.36	%		226,170		7.25	% (3)		N/A		N/A
Bank		383,796		12.50	%		222,630		7.25	% (3)		245,660		8.00	%
Total Capital
Company		504,576		16.17	%		288,562		9.25	% (3)		N/A		N/A
Bank		415,113		13.52	%		284,045		9.25	% (3)		307,076		10.00	%
Leverage Ratio (2)
Company		479,259		8.86	%		216,280		4.000	%		N/A		N/A
Bank		383,796		7.16	%		214,468		4.000	%		268,085		5.00	%

(

2

)

The leverage ratio consists of Tier

1capital

divided by the most recent quarterly average total assets, excluding certain intangible assets.

(

3

)

Includes

1.25%

capital conservation buffer.

XML

Note 10 - Income Taxes

12 Months Ended

Dec. 31, 2018

Notes to Financial Statements

Income Tax Disclosure [Text Block]

Note

10:

Income Taxes

Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the amounts reported in the financial statements of existing assets and liabilities and their respective tax basis and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Amounts for the current year are based upon estimates and assumptions as of the date of these financial statements and could vary significantly from amounts shown on the tax returns as filed.

The components of the net deferred tax asset are as follows:

	At December 31,
	2018		2017
	(In thousands)
Deferred tax asset
Allowance for credit losses	$	6,868	$	7,349
State franchise taxes		3,026		1,871
AMT carryforward		-		1,752
Securities available for sale		16,787		8,586
Deferred compensation		5,229		5,279
Real estate owned		553		553
Purchased assets and assumed liabilities		935		1,111
Post-retirement benefits		555		526
Employee benefit accruals		2,104		2,066
VISA Class B shares		167		96
Limited partnership investments		708		57
Impaired capital assets		3,070		3,056
Accrued liabilities		2,554		1,609
Premises and equipment		31		299
Other		721		520
Total deferred tax asset		43,308		34,730
Deferred tax liability
Net deferred loan fees		291		281
Intangible assets		761		1,247
Other		-		90
Total deferred tax liability		1,052		1,618
Net deferred tax asset	$	42,256	$	33,112

At

December 31, 2018

and

December 31, 2017,

the Company had a

$3,070

thousand and

$3,056

thousand, respectively, deferred tax asset related to a California capital loss carryforwards which will expire if unutilized within

five

years of the year incurred. The Company believes it will have sufficient California capital gains within the

five

year utilization period to absorb the carryforward.

At

December 31, 2017,

the Company had

no

net operating loss and a

$1,752

thousand AMT tax credit carryforward; the AMT tax credit carryforward was fully utilized in

2018.

Based on Management’s judgment, a valuation allowance is

not

needed to reduce the gross deferred tax asset because it is more likely than

not

that the gross deferred tax asset will be realized through recoverable taxes or future taxable income. Net deferred tax assets are included with other assets in the consolidated balance sheets.

The provision for federal and state income taxes consists of amounts currently payable and amounts deferred are as follows:

	For the Years Ended December 31,
	2018			2017		2016
	(In thousands)
Current income tax expense:
Federal	$	10,560		$	1,778	$	16,258
State		9,816			7,810		7,292
Total current		20,376			9,588		23,550
Deferred income tax (benefit) expense:
Federal		(206	)		14,461		(2,604	)
State		(737	)		783		158
Total deferred		(943	)		15,244		(2,446	)
Adjustment of net deferred tax asset for enacted changes in tax rates:
Federal		-			12,315		-
State		-			-		-
Total adjustments		-			12,315		-
Provision for income taxes	$	19,433		$	37,147	$	21,104

The provision for income taxes differs from the provision computed by applying the statutory federal income tax rate to income before taxes, as follows:

	For the Years Ended December 31,
	2018			2017			2016
	(In thousands)
Federal income taxes due at statutory rate	$	19,109		$	30,509		$	27,985
Reductions in income taxes resulting from:
Interest on state and municipal securities and loans not taxable for federal income tax purposes		(4,375	)		(7,794	)		(8,382	)
State franchise taxes, net of federal income tax benefit		7,173			5,586			4,843
Re-measurement of net deferred tax asset due to enactment of new federal tax rate		-			12,315			-
Stock compensation deduction in excess of book expense		(528	)		(583	)		-
Tax credits		(1,291	)		(1,850	)		(2,286	)
Dividend received deduction		(32	)		(60	)		(52	)
Cash value life insurance		(490	)		(603	)		(607	)
Other		(133	)		(373	)		(397	)
Provision for income taxes	$	19,433		$	37,147		$	21,104

The

2017

income tax provision includes a

$12.3

million dollar charge to re-measure the Company’s net deferred tax asset as a result of the enactment of the Tax Cuts and Jobs Act of

2017.

A reconciliation of the beginning and ending amounts of unrecognized tax benefits follow:

	2018		2017
	(In thousands)
Balance at January 1,	$	909	$	1,099
Additions for tax positions taken in the current period		-		-
Reductions for tax positions taken in the current period		-		-
Additions for tax positions taken in prior years		-		-
Reductions for tax positions taken in prior years		-		-
Decrease related to settlements with taxing authorities		-		(190	)
Decrease as a result of a lapse in statute of limitations		-		-
Balance at December 31,	$	909	$	909

The Company’s uncertain tax positions relate to positions taken on tax returns which are under examination. The timing of concluding the examinations is dependent on the taxing authorities. The examinations could conclude in

2019.

Unrecognized tax benefits at

December 31, 2018

and

2017

include accrued interest and penalties of

$13

thousand and

$13

thousand, respectively. When recognized, the entire amount of the unrecognized tax benefits will affect the effective tax rate.

The Company classifies interest and penalties as a component of the provision for income taxes. At

December 31, 2018,

the tax years ended

December 31, 2017,

2016

and

2015

remain subject to examination by the Internal Revenue Service and the tax years ended

December 31, 2017,

2016,

2015,

2014,

2013,

2012

and

2011

remain subject to examination by the California Franchise Tax Board.

XML

Note 11 - Fair Value Measurements

12 Months Ended

Dec. 31, 2018

Notes to Financial Statements

Fair Value Disclosures [Text Block]

Note

11:

Fair Value Measurements

The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Equity securities and debt securities available for sale are recorded at fair value on a recurring basis. Additionally, from time to time, the Company

may

be required to record at fair value other assets on a nonrecurring basis, such as other real estate owned, impaired loans, certain loans held for investment, debt securities held to maturity, and other assets. These nonrecurring fair value adjustments typically involve the lower-of-cost or fair-value accounting of individual assets.

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

The Company groups its assets and liabilities measured at fair value into a

three

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

Level

1

– Valuation is based upon quoted prices for identical instruments traded in active exchange markets, such as the New York Stock Exchange. Level

1

includes U.S. Treasury and equity securities, which are traded by dealers or brokers in active markets. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.

Level

2

– Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are

not

active, and model-based valuation techniques for which all significant assumptions are observable in the market. Level

2

includes mutual funds, federal agency securities, mortgage-backed securities, corporate securities, asset-backed securities, and municipal bonds.

Level

3

– Valuation is generated from model-based techniques that use significant assumptions

not

observable in the market. These unobservable assumptions reflect the Company’s estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques.

The Company relies on independent vendor pricing services to measure fair value for equity securities, debt securities available for sale and debt securities held to maturity. The Company employs

three

pricing services. To validate the pricing of these vendors, the Company compares vendors’ pricing for each of the securities for consistency; significant pricing differences, if any, are evaluated using all available independent quotes with the quote most closely reflecting the market generally used as the fair value estimate. In addition, the Company conducts “other than temporary impairment (OTTI)” analysis on a quarterly basis; debt securities selected for OTTI analysis include all debt securities at a market price below

95

percent of par value. As with any valuation technique used to estimate fair value, changes in underlying assumptions used could significantly affect the results of current and future values. Accordingly, these fair value estimates

may

not

be realized in an actual sale of the securities.

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

1,

2

or

3.

Assets Recorded at Fair Value on a Recurring Basis

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

	At December 31, 2018
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3) (1)
	(In thousands)
Equity securities
Mutual funds	$	1,747	$	-	$	1,747	$	-
Total equity securities		1,747		-		1,747		-
Debt securities available for sale
U.S. Treasury securities		139,574		139,574		-		-
Securities of U.S. Government sponsored entities		164,018		-		164,018		-
Agency residential MBS		853,871		-		853,871		-
Non-agency residential MBS		114		-		114		-
Agency commercial MBS		1,842		-		1,842		-
Securities of U.S. Government entities		1,119		-		1,119		-
Obligations of states and political subdivisions		179,091		-		179,091		-
Corporate securities		1,315,041		-		1,315,041		-
Total debt securities available for sale		2,654,670		139,574		2,515,096		-
Total	$	2,656,417	$	139,574	$	2,516,843	$	-

(

1

)

There were

no

transfers in to or out of level

3

during the year ended

December 31, 2018.

	At December 31, 2017
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3) (1)
	(In thousands)
Equity securities
Mutual funds	$	1,800	$	-	$	1,800	$	-
Total equity securities		1,800		-		1,800		-
Debt securities available for sale
Securities of U.S. Government sponsored entities		119,319		-		119,319		-
Agency residential MBS		767,706		-		767,706		-
Non-agency residential MBS		154		-		154		-
Agency commercial MBS		2,219		-		2,219		-
Securities of U.S. Government entities		1,590		-		1,590		-
Obligations of states and political subdivisions		185,221		-		185,221		-
Corporate securities		1,115,498		-		1,115,498		-
Total debt securities available for sale		2,191,707		-		2,191,707		-
Total	$	2,193,507	$	-	$	2,193,507	$	-

(

1

)

There were

no

transfers in to or out of level

3

during the year ended

December 31, 2017.

Assets Recorded at Fair Value on a Nonrecurring Basis

The Company

may

be required, from time to time, to measure certain assets at fair value on a nonrecurring basis in accordance with GAAP. These adjustments to fair value usually result from application of lower of cost or fair value accounting of individual assets. For assets measured at fair value on a nonrecurring basis that were recorded in the balance sheet at

December 31, 2018

and

December 31, 2017,

the following tables provide the level of valuation assumptions used to determine each adjustment and the carrying value of the related assets at period end.

									For the
									Year Ended
	At December 31, 2018								December 31, 2018
	Carrying Value		Level 1		Level 2		Level 3		Total Losses
	(In thousands)
Other real estate owned	$	350	$	-	$	-	$	350	$	-
Impaired loans:
Commercial		6,437		-		-		6,437		-
Commercial real estate		3,870		-		-		3,870		(240	)
Total assets measured at fair value on a nonrecurring basis	$	10,657	$	-	$	-	$	10,657	$	(240	)

									For the
									Year Ended
	At December 31, 2017								December 31, 2017
	Carrying Value		Level 1		Level 2		Level 3		Total Losses
	(In thousands)
Other real estate owned	$	1,426	$	-	$	-	$	1,426	$	(219	)
Impaired loans:
Commercial		4,950		-		-		4,950		-
Commercial real estate		5,904		-		-		5,904		-
Total assets measured at fair value on a nonrecurring basis	$	12,280	$	-	$	-	$	12,280	$	(219	)

Level

3

– Valuation is based upon present value of expected future cash flows, independent market prices, estimated liquidation values of loan collateral or appraised value of the collateral as determined by

third

-party independent appraisers, less

10%

for selling costs, generally. Level

3

includes other real estate owned that has been measured at fair value upon transfer to foreclosed assets and impaired loans collateralized by real property and other business asset collateral where a specific reserve has been established or a chargeoff has been recorded. Losses on other real estate owned represent losses recognized in earnings during the period subsequent to its initial classification as foreclosed assets. The unobservable inputs and qualitative information about the unobservable inputs are

not

presented as the inputs were

not

developed by the Company.

Disclosures about Fair Value of Financial Instruments

The following section describes the valuation methodologies used by the Company for estimating fair value of financial instruments

not

recorded at fair value in the balance sheet. The Company implemented the provisions of ASU

2016

-

01,

Financial Instruments – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities

, effective

January 1, 2018.

The provisions require the Company to use the “exit price notion” when measuring the fair value of financial instruments for disclosure purposes.

Cash and Due from Banks

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

Equity Securities

The fair values of equity securities were estimated using quoted prices as describe above for Level

2

valuation.

Debt Securities Held to Maturity

The fair values of debt securities were estimated using quoted prices as described above for Level

1

and Level

2

valuation.

Loans

Loans are valued using the exit price notion. The Company uses a net present value of cash flows methodology that seeks to incorporate interest rate, credit, liquidity and prepayment risks in the fair market value estimation. Inputs to the calculation include market rates for similarly offered products, market interest rate projections, credit spreads, estimated credit losses and prepayment assumptions.

Prior to adoption of ASU

2016

-

01,

loans were separated into

two

groups for valuation. Variable rate loans, except for those described below, that reprice frequently with changes in market rates were valued using historical cost. Fixed rate loans and variable rate loans that have reached their minimum contractual interest rates were valued by discounting the future cash flows expected to be received from the loans using current interest rates charged on loans with similar characteristics. Additionally, the allowance for loan losses of

$23,009

thousand at

December 31, 2017

was applied against the estimated fair values to recognize estimated future defaults of contractual cash flows.

Deposit Liabilities

Deposits with

no

stated maturity such as checking accounts, savings accounts and money market accounts can be readily converted to cash or used to settle transactions at face value through the broad financial system operated by the Federal Reserve Banks and financial institutions. The fair value of deposits with

no

stated maturity is equal to the amount payable on demand. The fair value of time deposits was estimated using a net present value of cash flows methodology, incorporating market interest rate projections and rates on alternative funding sources.

Prior to adoption of ASU

2016

-

01,

the fair value of time deposits were estimated by discounting estimated future contractual cash flows using current market rates for financial instruments with similar characteristics.

Short-Term Borrowed Funds

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

The tables below are a summary of fair value estimates for financial instruments and the level of the fair value hierarchy within which the fair value measurements are categorized, excluding financial instruments recorded at fair value on a recurring basis. The values assigned do

not

necessarily represent amounts which ultimately

may

be realized for assets or paid to settle liabilities. In addition, these values do

not

give effect to adjustments to fair value which

may

occur when financial instruments are sold or settled in larger quantities. The carrying amounts in the following tables are recorded in the balance sheet under the indicated captions.

The Company has

not

included assets and liabilities that are

not

financial instruments, such as goodwill, long-term relationships with deposit, merchant processing and trust customers, other purchased intangibles, premises and equipment, deferred taxes and other assets and liabilities. The total estimated fair values do

not

represent, and should

not

be construed to represent, the underlying value of the Company.

	At December 31, 2018
	Carrying Amount		Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2 )		Significant Unobservable Inputs (Level 3 )
Financial Assets:	(In thousands)
Cash and due from banks	$	420,284	$	420,284	$	420,284	$	-	$	-
Debt securities held to maturity		984,609		971,445		-		971,445		-
Loans		1,185,851		1,184,770		-		-		1,184,770
Financial Liabilities:
Deposits	$	4,866,839	$	4,862,668	$	-	$	4,671,588	$	191,080
Short-term borrowed funds		51,247		51,247		-		51,247		-

	At December 31, 2017
	Carrying Amount		Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2 )		Significant Unobservable Inputs (Level 3 )
Financial Assets:	(In thousands)
Cash and due from banks	$	575,002	$	575,002	$	575,002	$	-	$	-
Debt securities held to maturity		1,158,864		1,155,342		-		1,155,342		-
Loans		1,264,973		1,257,811		-		-		1,257,811
Financial Liabilities:
Deposits	$	4,827,613	$	4,824,586	$	-	$	4,595,795	$	228,791
Short-term borrowed funds		58,471		58,471		-		58,471		-

The majority of the Company’s standby letters of credit and other commitments to extend credit carry current market interest rates if converted to loans.

No

premium or discount was ascribed to these commitments because virtually all funding would be at current market rates.

XML

Note 12 - Lease Commitments

12 Months Ended

Dec. 31, 2018

Notes to Financial Statements

Leases of Lessee Disclosure [Text Block]

Note

12:

Lease Commitments

Twenty

eight

banking offices and a centralized administrative service center are owned and

58

facilities are leased. Substantially all the leases contain renewal options and provisions for rental increases, principally for cost of living index. The Company also leases certain pieces of equipment.

Minimum future rental payments under noncancelable operating leases as of

December 31, 2018

are as follows:

	Minimum future rental payments
	(In thousands)
2019	$	5,996
2020		4,409
2021		2,741
2022		1,921
2023		1,223
Thereafter		1,044
Total minimum lease payments	$	17,334

The total minimum future rental payments have

not

been reduced by minimum sublease rentals of

$1,319

thousand due in the future under noncancelable subleases. Total rentals for premises were

$6,794

thousand in

2018,

$6,695

thousand in

2017

and

$6,823

thousand in

2016.

Total sublease rentals were

$397

thousand in

2018,

$406

thousand in

2017

and

$435

thousand in

2016.

Total rentals for premises, net of sublease income, included in noninterest expense were

$6,397

thousand in

2018,

$6,289

thousand in

2017

and

$6,388

thousand in

2016.

XML

Note 13 - Commitments and Contingent Liabilities

12 Months Ended

Dec. 31, 2018

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

Note

13:

Commitments and Contingent Liabilities

Loan commitments are agreements to lend to a customer provided there is

no

violation of any condition established in the agreement. Commitments generally have fixed expiration dates or other termination clauses. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do

not

necessarily represent future funding requirements. Loan commitments are subject to the Company’s normal credit policies and collateral requirements. Unfunded loan commitments were

$278,598

thousand and

$272,646

thousand at

December 31, 2018

and

December 31, 2017,

respectively. Standby letters of credit commit the Company to make payments on behalf of customers when certain specified future events occur. Standby letters of credit are primarily issued to support customers’ short-term financing requirements and must meet the Company’s normal credit policies and collateral requirements. Financial and performance standby letters of credit outstanding totaled

$2,772

thousand and

$19,263

thousand at

December 31, 2018

and

December 31, 2017,

respectively. The Company had

no

commitments outstanding for commercial and similar letters of credit at

December 31, 2018

and

December 31, 2017.

The Company had

$75

thousand in outstanding full recourse guarantees to a

3

rd

party credit card company at

December 31, 2018.

The Company had a reserve for unfunded commitments of

$

2,308

thousand at

December 31, 2018

and

2017,

included in other liabilities.

Due to the nature of its business, the Company is subject to various threatened or filed legal cases. Based on the advice of legal counsel, the Company does

not

expect such cases will have a material, adverse effect on its financial position or results of operations. Legal liabilities are accrued when obligations become probable and the amount can be reasonably estimated. In the

third

quarter

2018,

the Company achieved a mediated settlement to dismiss a lawsuit, subject to court approval, and accrued a liability for

$3,500

thousand.

The Company has determined that it will be obligated to provide refunds of revenue recognized in years prior to

2017

to some customers. The Company estimates the probable amount of these obligations will be

$5,542

thousand and accrued a liability for such amount in

2017;

the estimated liability is subject to revision.

XML

Note 14 - Retirement Benefit Plans

12 Months Ended

Dec. 31, 2018

Notes to Financial Statements

Pension and Other Postretirement Benefits Disclosure [Text Block]

Note

14:

Retirement Benefit Plans

The Company sponsors a qualified defined contribution Deferred Profit-Sharing Plan covering substantially all of its salaried employees with

one

or more years of service. The costs charged to noninterest expense related to discretionary Company contributions to the Deferred Profit-Sharing Plan were

$1,057

thousand in

2018,

$944

thousand in

2017

and

$1,000

thousand in

2016.

The Company also sponsors a qualified defined contribution Tax Deferred Savings/Retirement Plan (ESOP) covering salaried employees who become eligible to participate upon completion of a

90

-day introductory period. The Tax Deferred Savings/ Retirement Plan (ESOP) allows employees to defer, on a pretax or after-tax basis, a portion of their salaries as contributions to this Plan. Participants

may

invest in several funds, including

one

fund that invests primarily in Westamerica Bancorporation common stock. The Company funds contributions to match participating employees’ contributions, subject to certain limits. The matching contributions charged to compensation expense were

$1,052

thousand in

2018,

$1,098

thousand in

2017

and

$1,075

thousand in

2016.

The Company offers a continuation of group insurance coverage to eligible employees electing early retirement, for the period from the date of retirement until age

65.

For eligible employees the Company pays a portion of these early retirees’ group insurance premiums. The Company also reimburses a portion of Medicare Part B premiums for all qualifying retirees over age

65

and, if eligible, their spouses. Eligibility for post-retirement medical benefits is based on age and years of service, and restricted to employees hired prior to

February 1, 2006

who elect early retirement prior to

January 1, 2019.

The Company uses an actuarial-based accrual method of accounting for post-retirement benefits. The Company used a

December 31

measurement date for determining post-retirement medical benefit calculations.

The following tables set forth the net periodic post-retirement benefit cost and the change in the benefit obligation for the years ended

December 31

and the funded status of the post-retirement benefit plan as of

December 31:

Net Periodic Benefit Cost

	At December 31,
	2018		2017			2016
	(In thousands)
Service benefit	$	24	$	(311	)	$	(153	)
Interest cost		72		95			108
Amortization of unrecognized transition obligation		-		61			61
Net periodic (benefit) cost	$	96	$	(155	)	$	16

Other Changes in Benefit Obligations Recognized in Other Comprehensive Income

Amortization of unrecognized transition obligation, net of tax		-		(34	)		(36	)
Total recognized in net periodic (benefit) cost and accumulated other comprehensive income	$	96	$	(189	)	$	(20	)

The transition obligation for this post-retirement benefit plan became fully amortized during the

twelve

months ended

December 31, 2017.

Obligation and Funded Status

	At December 31,
	2018			2017			2016
Change in benefit obligation	(In thousands)
Benefit obligation at beginning of year	$	1,958		$	2,319		$	2,522
Service benefit		24			(311	)		(153	)
Interest cost		72			95			108
Benefits paid		(141	)		(145	)		(158	)
Benefit obligation at end of year	$	1,913		$	1,958		$	2,319
Accumulated post-retirement benefit obligation attributable to:
Retirees	$	1,913		$	1,575		$	1,705
Fully eligible participants		-			382			606
Other		-			1			8
Total	$	1,913		$	1,958		$	2,319
Fair value of plan assets		-			-			-
Accumulated post-retirement benefit obligation in excess of plan assets	$	1,913		$	1,958		$	2,319

Additional Information

Assumptions

	At December 31,
	2018			2017			2016
Weighted-average assumptions used to determine benefit obligations
Discount rate		3.76	%		3.70	%		4.10	%
Weighted-average assumptions used to determine net periodic benefit cost
Discount rate		3.70	%		4.10	%		4.30	%

The above discount rate is based on the Corporate Aa

25

-year rate, the term of which approximates the term of the benefit obligations. The Company reserves the right to terminate or alter post-employment health benefits. Post-retirement medical benefits are currently fixed amounts without provision for future increases; as a result, the assumed annual average rate of inflation used to measure the expected cost of benefits covered by this program is

zero

percent for

2018

and beyond.

Assumed benefit inflation rates are

not

applicable for this program.

	Estimated future benefit payments
	(In thousands)
2019	$	143
2020		143
2021		143
2022		140
2023		138
Years 2024-2028		624

XML

Note 15 - Related Party Transactions

12 Months Ended

Dec. 31, 2018

Notes to Financial Statements

Related Party Transactions Disclosure [Text Block]

Note

15:

Related Party Transactions

Certain of the Directors, executive officers and their associates have had banking transactions with subsidiaries of the Company in the ordinary course of business. The table below reflects information concerning loans to certain directors and executive officers and/or family members during

2018

and

2017:

	2018			2017
	(In thousands)
Balance at January 1,	$	622		$	867
Originations		-			-
Principal reductions		(45	)		(245	)
Balance at December 31,	$	577		$	622
Percent of total loans outstanding.		0.05	%		0.05	%

XML

Note 16 - Regulatory Matters

12 Months Ended

Dec. 31, 2018

Notes to Financial Statements

Regulatory Matters [Text Block]

Note

16:

Regulatory Matters

Payment of dividends to the Company by the Bank is limited under regulations for state chartered banks. The amount that can be paid in any calendar year, without prior approval from regulatory agencies, cannot exceed the net profits (as defined) for the preceding

three

calendar years less dividends paid. The Company consistently has paid quarterly dividends to its shareholders since its formation in

1972.

The Bank is required to maintain reserves with the Federal Reserve Bank equal to a percentage of its reservable deposits. The Bank’s daily average on deposit at the Federal Reserve Bank was

$473,250

thousand in

2018

and

$458,186

thousand in

2017,

which amounts exceed the Bank’s required reserves.

XML

Note 17 - Other Comprehensive Income

12 Months Ended

Dec. 31, 2018

Notes to Financial Statements

Comprehensive Income (Loss) Note [Text Block]

Note

17:

Other Comprehensive Income

The components of other comprehensive (loss) income and other related tax effects were:

	2018
	Before tax			Tax effect		Net of tax
	(In thousands)
Debt securities available for sale:
Net unrealized losses arising during the year	$	(27,939	)	$	8,258	$	(19,681	)
Reclassification of losses included in net income		-			-		-
Net unrealized losses arising during the year		(27,939	)		8,258		(19,681	)
Post-retirement benefit obligation		-			-		-
Other comprehensive loss	$	(27,939	)	$	8,258	$	(19,681	)

	2017
	Before tax			Tax effect			Net of tax
	(In thousands)
Debt securities available for sale:
Net unrealized losses arising during the year	$	(3,767	)	$	1,585		$	(2,182	)
Reclassification of gains included in net income		(7,955	)		3,345			(4,610	)
Net unrealized losses arising during the year		(11,722	)		4,930			(6,792	)
Post-retirement benefit obligation		59			(25	)		34
Other comprehensive loss	$	(11,663	)	$	4,905		$	(6,758	)

	2016
	Before tax			Tax effect			Net of tax
	(In thousands)
Debt securities available for sale:
Net unrealized losses arising during the year	$	(18,610	)	$	7,825		$	(10,785	)
Reclassification of (gains) losses included in net income		-			-			-
Net unrealized losses arising during the year		(18,610	)		7,825			(10,785	)
Post-retirement benefit obligation		61			(25	)		36
Other comprehensive loss	$	(18,549	)	$	7,800		$	(10,749	)

Accumulated other comprehensive income (loss) balances were:

	Post-retirement Benefit Obligation			Net Unrealized Gains (losses) on Securities			Accumulated Other Comprehensive Income (loss)
	(In thousands)
Balance, December 31, 2015	$	(70	)	$	745		$	675
Net change		36			(10,785	)		(10,749	)
Balance, December 31, 2016		(34	)		(10,040	)		(10,074	)
Net change		34			(6,792	)		(6,758	)
Balance, December 31, 2017		-			(16,832	)		(16,832	)
Cumulative effect of equity securities losses reclassified		-			142			142
Adjusted Balance, January 1, 2018		-			(16,690	)		(16,690	)
Reclass stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017		-			(3,625	)		(3,625	)
Net change		-			(19,681	)		(19,681	)
Balance, December 31, 2018	$	-		$	(39,996	)	$	(39,996	)

The transition obligation for this post-retirement benefit plan became fully amortized during the

twelve

months ended

December 31, 2017.

XML

Note 18 - Earnings Per Common Share

12 Months Ended

Dec. 31, 2018

Notes to Financial Statements

Earnings Per Share [Text Block]

Note

18:

Earnings Per Common Share

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

	For the Years Ended December 31,
	2018		2017		2016
	(In thousands, except per share data)
Net income (numerator)	$	71,564	$	50,025	$	58,853
Basic earnings per common share
Weighted average number of common shares outstanding - basic (denominator)		26,649		26,291		25,612
Basic earnings per common share	$	2.69	$	1.90	$	2.30
Diluted earnings per common share
Weighted average number of common shares outstanding - basic		26,649		26,291		25,612
Add common stock equivalents for options		107		128		66
Weighted average number of common shares outstanding - diluted (denominator)		26,756		26,419		25,678
Diluted earnings per common share	$	2.67	$	1.89	$	2.29

For the years ended

December 31, 2018,

2017

and

2016,

options to purchase

423

thousand,

323

thousand and

773

thousand shares of common stock, respectively, were outstanding but

not

included in the computation of diluted earnings per common share because the option exercise price exceeded the fair value of the stock such that their inclusion would have had an anti-dilutive effect.

XML

Note 19 - Westamerica Bancorporation (Parent Company Only Condensed Financial Information)

12 Months Ended

Dec. 31, 2018

Notes to Financial Statements

Condensed Financial Information of Parent Company Only Disclosure [Text Block]

Note

19:

Westamerica Bancorporation (Parent Company Only Condensed Financial Information)

Statements of Income and Comprehensive Income

	For the Years Ended December 31,
	2018			2017			2016
	(In thousands)
Dividends from subsidiaries	$	43,892		$	12,728		$	56,824
Interest income		33			43			25
Other income		9,447			8,590			8,315
Total income		53,372			21,361			65,164
Interest on borrowings		-			-			-
Salaries and benefits		7,575			7,163			7,079
Other expense		3,181			3,416			3,290
Total expense		10,756			10,579			10,369
Income before taxes and equity in undistributed income of subsidiaries		42,616			10,782			54,795
Income tax benefit		919			241			1,025
Earnings of subsidiaries greater than subsidiary dividends		28,029			39,002			3,033
Net income		71,564			50,025			58,853
Other comprehensive loss, net of tax		(19,681	)		(6,758	)		(10,749	)
Comprehensive income	$	51,883		$	43,267		$	48,104

Balance Sheets

	At December 31,
	2018		2017
	(In thousands)
Assets
Cash	$	72,878	$	53,409
Investment securities available for sale		-		-
Investment in Westamerica Bank		509,125		500,776
Investment in non-bank subsidiaries		455		455
Premises and equipment, net		10,400		9,639
Accounts receivable from Westamerica Bank		580		538
Other assets		36,990		40,547
Total assets	$	630,428	$	605,364
Liabilities
Accounts payable to Westamerica Bank	$	46	$	92
Other liabilities		14,791		15,033
Total liabilities		14,837		15,125
Shareholders' equity		615,591		590,239
Total liabilities and shareholders' equity	$	630,428	$	605,364

Statements of Cash Flows

	For the Years Ended December 31,
	2018			2017			2016
	(In thousands)
Operating Activities
Net income	$	71,564		$	50,025		$	58,853
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		361			319			305
(Increase) decrease in accounts receivable from affiliates		(43	)		(16	)		299
Increase in other assets		(2,638	)		(2,203	)		(1,940	)
Stock option compensation expense		1,988			1,824			1,494
Tax benefit increase upon exercise of stock options and expiration of stock options		-			-			(394	)
Provision (benefit) for deferred income tax		5,028			(3,971	)		1,983
Increase in other liabilities		978			202			1,392
Earnings of subsidiaries greater than subsidiary dividends		(28,029	)		(39,002	)		(3,033	)
Life insurance gains		(585	)		-			-
Gain on sales of premises and equipment		(538	)		(793	)		(79	)
Net Cash Provided by Operating Activities		48,086			6,385			58,880
Investing Activities
Proceeds from life insurance		1,169			-			-
Net Cash Provided by Investing Activities		1,169			-			-
Financing Activities
Exercise of stock options/issuance of shares		13,373			24,583			24,031
Taxes paid by withholding shares for tax purposes		-			-			(356	)
Tax benefit increase (decrease) upon exercise of stock options and expiration of stock options		-			-			394
Retirement of common stock		(524	)		(314	)		(5,424	)
Dividends		(42,635	)		(41,299	)		(39,924	)
Net Cash Used in Financing Activities		(29,786	)		(17,030	)		(21,279	)
Net change in cash		19,469			(10,645	)		37,601
Cash at Beginning of Period		53,409			64,054			26,453
Cash at End of Period	$	72,878		$	53,409		$	64,054
Supplemental Cash Flow Disclosures:
Supplemental disclosure of cash flow activities:
Interest paid for the period	$	-		$	-		$	-
Income tax payments for the period		13,627			17,351			19,264

XML

Note 20 - Quarterly Financial Information

12 Months Ended

Dec. 31, 2018

Notes to Financial Statements

Quarterly Financial Information [Text Block]

Note

20:

Quarterly Financial Information

(Unaudited)

	For the Three Months Ended
	March 31,				June 30,					September 30,					December 31,
	(In thousands, expect per share data and price range of common stock)
2018
Interest and loan fee income	$	36,315			$	37,346				$	38,614				$	39,448
Net interest income		35,856				36,887					38,087					38,934
Provision for loan losses		-				-					-					-
Noninterest income		11,955				11,769					12,528					11,897
Noninterest expense		26,022				25,741					29,366					25,787
Income before taxes		21,789				22,915					21,249					25,044
Net income		17,506				18,010					16,993					19,055
Basic earnings per common share		0.66				0.68					0.64					0.71
Diluted earnings per common share		0.66				0.67					0.63					0.71
Dividends paid per common share		0.40				0.40					0.40					0.40
Price range, common stock		55.72	-	62.52		55.81	-	60.68			57.56	-	64.52			52.75	-	63.20
2017
Interest and loan fee income	$	34,128			$	34,083				$	34,623				$	35,478
Net interest income		33,648				33,607					34,150					35,007
(Reversal of) provision for loan losses		-				(1,900			)		-					-
Noninterest income		11,657				12,123					12,548					20,300
Noninterest expense		25,419				25,316					25,592					31,441
Income before taxes		19,886				22,314					21,106					23,866
Net income		15,049				15,799					15,017					4,160
Basic earnings per common share		0.58				0.60					0.57					0.16
Diluted earnings per common share		0.57				0.60					0.57					0.16
Dividends paid per common share		0.39				0.39					0.39					0.40
Price range, common stock		54.12	-	64.07		51.31	-	57.78			49.54	-	59.54			53.96	-	63.03
2016
Interest and loan fee income	$	34,001			$	34,248				$	33,955				$	33,715
Net interest income		33,449				33,707					33,432					33,215
(Reversal of) provision for loan losses		-				-					(3,200			)		-
Noninterest income		11,729				11,702					11,598					11,545
Noninterest expense		26,212				25,750					26,575					25,083
Income before taxes		18,966				19,659					21,655					19,677
Net income		14,226				14,546					15,628					14,453
Basic earnings per common share		0.56				0.57					0.61					0.56
Diluted earnings per common share		0.56				0.57					0.61					0.56
Dividends paid per common share		0.39				0.39					0.39					0.39
Price range, common stock		40.72	-	49.63		45.86	-	51.53			46.61	-	50.96			48.20	-	65.34

XML

Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2018

Accounting Policies [Abstract]

Use of Estimates, Policy [Policy Text Block]

Accounting Estimates. Certain accounting policies underlying the preparation of these financial statements require Management to make estimates, assumptions, and judgments that affect the amounts reported in the financial statements and accompanying notes. These estimates, assumptions, and judgments are based on information available as of the date of the financial statements; accordingly, as this information changes, the financial statements could reflect different estimates, assumptions, and judgments and as such have a greater possibility of producing results that could be materially different than originally reported. Estimates, assumptions, and judgments are necessary when assets and liabilities are required to be recorded at fair value, when a decline in fair value of an asset

not

carried on the financial statements at fair value warrants an impairment writedown or valuation reserve to be established, or when an asset or liability needs to be recorded contingent upon a future event. The allowance for loan losses accounting is an area requiring the most subjective or complex judgments, and as such could be most subject to revision as new information becomes available. A discussion of the factors affecting the accounting for the allowance for loan losses is included in the following “Loans” and “Allowance for Credit Losses” sections. Carrying assets and liabilities at fair value inherently results in financial statement volatility. The fair values and the information used to record valuation adjustments for certain assets and liabilities are based either on quoted market prices or are provided by other

third

party sources, when available. The “Securities” section discusses the factors that

may

affect the valuation of the Company’s securities. Although the estimates contemplate current conditions and how Management expects them to change in the future, it is reasonably possible that in

2019

actual conditions could be worse than anticipated in those estimates, which could materially affect our results of operations and financial condition.

Consolidation, Policy [Policy Text Block]

Principles of Consolidation. The consolidated financial statements include the accounts of the Company and all the Company’s subsidiaries. Significant intercompany transactions have been eliminated in consolidation. The Company does

not

maintain or conduct transactions with any unconsolidated special purpose entities.

Cash and Cash Equivalents, Policy [Policy Text Block]

Cash. Cash includes Due From Banks balances which are readily convertible to known amounts of cash and are generally

90

days or less from maturity at the time of initiation, presenting insignificant risk of changes in value due to interest rate changes.

Marketable Securities, Policy [Policy Text Block]

quity Securities. Equity securities consist of marketable equity securities and mutual funds which are recorded at fair value. Unrealized gains and losses are included in net income effective

January 1, 2018

prior to such date unrealized gains and losses were included in other comprehensive income.

Debt Securities. Debt securities consist of securities of the U.S. Treasury, government sponsored entities, states, counties, municipalities, corporations, agency and non-agency mortgage-backed securities and asset-backed securities. Securities transactions are recorded on a trade date basis. The Company classifies its debt securities in

one

of

three

categories: trading, available for sale or held to maturity. Trading securities are bought and held principally for the purpose of selling them in the near term. Trading securities are recorded at fair value with unrealized gains and losses included in net income. Held to maturity debt securities are those securities which the Company has the ability and intent to hold until maturity. Held to maturity debt securities are recorded at cost, adjusted for the amortization of premiums or accretion of discounts. Securities

not

included in trading or held to maturity are classified as available for sale debt securities. Available for sale debt securities are recorded at fair value. Unrealized gains and losses, net of the related tax effect, on available for sale debt securities are included in accumulated other comprehensive income.

The Company utilizes

third

-party sources to value its investment securities; securities individually valued using quoted prices in active markets are classified as Level

1

assets in the fair value hierarchy, and securities valued using quoted prices in active markets for similar securities (commonly referred to as “matrix” pricing) are classified as Level

2

assets in the fair value hierarchy. The Company validates the reliability of

third

-party provided values by comparing individual security pricing for securities between more than

one

third

-party source. When

third

-party information is

not

available, valuation adjustments are estimated in good faith by Management and classified as Level

3

in the fair value hierarchy.

A decline in the market value of any available for sale or held to maturity security below amortized cost that is deemed other than temporary results in a charge to earnings and the establishment of a new cost basis for the security. Unrealized investment securities losses are evaluated at least quarterly to determine whether such declines in value should be considered “other than temporary” and therefore be subject to immediate loss recognition in income. Although these evaluations involve significant judgment, an unrealized loss in the fair value of a debt security is generally deemed to be temporary when the fair value of the security is below the carrying value primarily due to changes in risk-free interest rates, there has

not

been significant deterioration in the financial condition of the issuer, and the Company does

not

intend to sell or be required to sell the securities before recovery of its amortized cost. An unrealized loss in the value of an equity security is generally considered temporary when the fair value of the security declined primarily due to current market conditions and

not

deterioration in the financial condition of the issuer, the Company expects the fair value of the security to recover in the near term and the Company does

not

intend to sell or be required to sell the securities before recovery of its cost basis. Other factors that

may

be considered in determining whether a decline in the value of either a debt or an equity security is “other than temporary” include ratings by recognized rating agencies, actions of commercial banks or other lenders relative to the continued extension of credit facilities to the issuer of the security, the financial condition, capital strength and near-term prospects of the issuer, and recommendations of investment advisors or market analysts.

The Company follows the guidance issued by the Board of Governors of the Federal Reserve System, “Investing in Securities without Reliance on Nationally Recognized Statistical Rating Agencies” (SR

12

-

15

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

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

Cost Method Investments, Policy [Policy Text Block]

Nonmarketable Equity Securities. Nonmarketable equity securities include securities that are

not

publicly traded, such as Visa Class B common stock, and securities acquired to meet regulatory requirements, such as Federal Reserve Bank stock, which are restricted. These restricted securities are accounted for under the cost method and are included in other assets. The Company reviews those assets accounted for under the cost method at least quarterly for possible declines in value that are considered “other than temporary”. The Company’s review typically includes an analysis of the facts and circumstances of each investment, the expectations for the investment’s cash flows and capital needs, the viability of its business model and any exit strategy. The asset value is reduced when a decline in value is considered to be other than temporary. The Company recognizes the estimated loss in noninterest income.

Finance, Loans and Leases Receivable, Policy [Policy Text Block]

Loans. Loans are stated at the principal amount outstanding, net of unearned discount and unamortized deferred fees and costs. Interest is accrued daily on the outstanding principal balances. Loans which are more than

90

days delinquent with respect to interest or principal, unless they are well secured and in the process of collection, and other loans on which full recovery of principal or interest is in doubt, are placed on nonaccrual status. Interest previously accrued on loans placed on nonaccrual status is charged against interest income. In addition, some loans secured by real estate with temporarily impaired values and commercial loans to borrowers experiencing financial difficulties are placed on nonaccrual status (“performing nonaccrual loans”) even though the borrowers continue to repay the loans as scheduled. When the ability to fully collect nonaccrual loan principal is in doubt, payments received are applied against the principal balance of the loans on a cost-recovery method until such time as full collection of the remaining recorded balance is expected. Any additional interest payments received after that time are recorded as interest income on a cash basis. Performing nonaccrual loans are reinstated to accrual status when improvements in credit quality eliminate the doubt as to the full collectability of both interest and principal. Certain consumer loans or auto receivables are charged off against the allowance for credit losses when they become

120

days past due.

The Company evaluates all classified loans and nonaccrual loans with outstanding principal balances in excess of

$500

thousand, and all “troubled debt restructured” loans for impairment. The Company recognizes a loan as impaired when, based on current information and events, it is probable that it will be unable to collect both the contractual interest and principal payments as scheduled in the loan agreement. Income recognition on impaired loans conforms to that used on nonaccrual loans. In certain circumstances, the Company might agree to restructured loan terms with borrowers experiencing financial difficulties; such restructured loans are evaluated under ASC

310

-

40,

“Troubled Debt Restructurings by Creditors.” In general, a restructuring constitutes a troubled debt restructuring when the Company, for reasons related to a borrower’s financial difficulties, grants a concession to the borrower it would

not

otherwise consider. Loans are evaluated on an individual basis. The Company follows its general nonaccrual policy for troubled debt restructurings. Performing troubled debt restructurings are reinstated to accrual status when improvements in credit quality eliminate the doubt as to full collectability of both principal and interest.

Nonrefundable fees and certain costs associated with originating or acquiring loans are deferred and amortized as an adjustment to interest income over the contractual loan lives. Upon prepayment, unamortized loan fees, net of costs, are immediately recognized in interest income. Other fees, including those collected upon principal prepayments, are included in interest income when received. Loans held for sale are identified upon origination and are reported at the lower of cost or market value on an aggregate loan basis.

Purchased Loans. Purchased loans are recorded at estimated fair value on the date of purchase. Impaired purchased loans are accounted for under FASB ASC

310

-

30,

Loans and Debt Securities Acquired with Deteriorated Credit Quality, when the loans have evidence of credit deterioration since origination and it is probable at the date of acquisition that the Company will

not

collect all contractually required principal and interest payments. Evidence of credit quality deterioration as of the purchase date

may

include attributes such as past due and nonaccural status. Generally, purchased loans that meet the Company’s definition for nonaccrual status fall within the scope of FASB ASC

310

-

30.

The difference between contractually required payments at acquisition and the cash flows expected to be collected at acquisition is referred to as the nonaccretable difference. Subsequent decreases to the expected cash flows will generally result in a provision for loan losses. Subsequent increases in cash flows result in a reversal of the provision for loan losses to the extent of prior charges, or a reclassification of the difference from nonaccretable to accretable with a positive impact on interest income on a prospective basis. Any excess of expected cash flows over the estimated fair value is referred to as the accretable yield and is recognized into interest income over the remaining life of the loan when there is a reasonable expectation about the amount and timing of such cash flows. For covered purchased loans with an accretable difference, the corresponding FDIC receivable is amortized over the shorter of the contractual term of the indemnification asset or the remaining life of the loan. Further, the Company elected to analogize to ASC

310

-

30

and account for all other loans that had a discount due in part to credit

not

within the scope of ASC

310

-

30

using the same methodology.

Covered Loans. Loans covered under loss-sharing or similar credit protection agreements with the FDIC are reported in loans exclusive of the expected reimbursement cash flows from the FDIC. Covered loans are initially recorded at fair value at the acquisition date. Subsequent decreases in the amount expected to be collected results in a provision for loan losses and a corresponding increase in the estimated FDIC reimbursement, with the estimated net loss impacting earnings. Interest previously accrued on covered loans placed on nonaccrual status is charged against interest income, net of estimated FDIC reimbursements of such accrued interest. The FDIC reimburses the Company up to

80%

of

90

days interest on covered loans. The indemnification expired

February 6, 2019.

Loans and Leases Receivable, Allowance for Loan Losses Policy [Policy Text Block]

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

The preparation of these financial statements requires Management to estimate the amount of probable incurred losses inherent in the loan portfolio and establish an allowance for credit losses. In estimating credit losses, Management must exercise significant judgment in evaluating information deemed relevant. The amount of ultimate losses on the loan portfolio can vary from the estimated amounts. Management follows a systematic methodology to estimate loss potential in an effort to reduce the differences between estimated and actual losses.

The allowance for credit losses is established through provisions for credit losses charged to income. Losses on loans, including impaired loans, are charged to the allowance for loan losses when all or a portion of the recorded amount of a loan is deemed to be uncollectible. Recoveries of loans previously charged off are credited to the allowance when realized. The Company’s allowance for credit losses is maintained at a level considered adequate to provide for losses that can be estimated based upon specific and general conditions. These include conditions unique to individual borrowers, as well as overall credit loss experience, the amount of past due, nonperforming and classified loans, recommendations of regulatory authorities, prevailing economic conditions, FDIC loss-sharing or similar credit protection agreements and other factors. A portion of the allowance is specifically allocated to impaired loans whose full collectability is uncertain. Such allocations are determined by Management based on loan-by-loan analyses. The Company evaluates all classified loans and nonaccrual loans with outstanding principal balances in excess of

$500

thousand, and all “troubled debt restructured” loans for impairment. A

second

allocation is based in part on quantitative analyses of historical credit loss experience. The results of this analysis are applied to current loan balances to allocate the reserve to the respective segments of the loan portfolio exclusive of loans individually evaluated for impairment. In addition, consumer installment loans which have similar characteristics and are

not

usually criticized using regulatory guidelines are analyzed and reserves established based on the historical loss rates and delinquency trends, grouped by the number of days the payments on these loans are delinquent. The remainder of the reserve is considered to be unallocated. The unallocated allowance is established to provide for probable losses that have been incurred as of the reporting date but

not

reflected in the allocated allowance. It addresses additional qualitative factors consistent with Management’s analysis of the level of risks inherent in the loan portfolio, which are related to the risks of the Company’s general lending activity. Included in the unallocated allowance is the risk of losses that are attributable to national or local economic or industry trends which have occurred but have

not

yet been recognized in past loan charge-off history (external factors). The external factors evaluated by the Company include: economic and business conditions, external competitive issues, and other factors. Also included in the unallocated allowance is the risk of losses that are attributable to general attributes of the Company’s loan portfolio and credit administration (internal factors). The internal factors evaluated by the Company include: loan review system, adequacy of lending Management and staff, loan policies and procedures, problem loan trends, concentrations of credit, and other factors. By their nature, these risks are

not

readily allocable to any specific segment of the loan portfolio in a statistically meaningful manner.

Off-Balance-Sheet Credit Exposure, Policy [Policy Text Block]

Liability for Off-Balance Sheet Credit Exposures. A liability for off-balance sheet credit exposures is established through expense recognition. Off-balance sheet credit exposures relate to letters of credit and unfunded loan commitments for commercial, construction and consumer loans. Historical credit loss factors for commercial, construction and consumer loans are applied to the amount of these off-balance sheet credit exposures to estimate inherent losses.

Loans and Leases Receivable, Real Estate Acquired Through Foreclosure, Policy [Policy Text Block]

Other Real Estate Owned. Other real estate owned is comprised of property acquired through foreclosure proceedings, acceptances of deeds-in-lieu of foreclosure and, if applicable, vacated bank properties. Losses recognized at the time of acquiring property in full or partial satisfaction of debt are charged against the allowance for credit losses. Other real estate owned is recorded at the fair value of the collateral, generally based upon an independent property appraisal, less estimated disposition costs. Losses incurred subsequent to acquisition due to any decline in annual independent property appraisals are recognized as noninterest expense. Routine holding costs, such as property taxes, insurance and maintenance, and losses from sales and dispositions, are recognized as noninterest expense.

Property, Plant and Equipment, Policy [Policy Text Block]

Premises and Equipment. Premises and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation is computed substantially on the straight-line method over the estimated useful life of each type of asset. Estimated useful lives of premises and equipment range from

20

to

50

years and from

3

to

20

years, respectively. Leasehold improvements are amortized over the terms of the lease or their estimated useful life, whichever is shorter.

Revenue Recognition, Policy [Policy Text Block]

Revenue Recognition. The Company recognizes revenue as it is earned based on contractual terms, as transactions occur, or as services are provided and collectability is reasonably assured. In certain circumstances, noninterest income is reported net of associated expenses that are directly related to variable volume-based sales or revenue sharing arrangements or when the Company acts on an agency basis for others.

Life Insurance Cash Surrender Value [Policy Text Block]

Life Insurance Cash Surrender Value. The Company has purchased life insurance policies on certain directors and officers as well as acquired such assets as part of the acquisition of other banks. Company owned life insurance is recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges or other amounts due that are probable at settlement. These assets are included in other assets on the consolidated balance sheets.

Goodwill and Intangible Assets, Policy [Policy Text Block]

Intangible Assets. Intangible assets are comprised of goodwill, core deposit intangibles and other identifiable intangibles acquired in business combinations. Intangible assets with definite useful lives are amortized on an accelerated basis over their respective estimated useful lives

not

exceeding

15

years. If an event occurs that indicates the carrying amount of an intangible asset

may

not

be recoverable, Management reviews the asset for impairment. Any goodwill and any intangible asset acquired in a purchase business combination determined to have an indefinite useful life is

not

amortized, but is evaluated for impairment annually. The Company has the option to

first

assess qualitative factors to determine the likelihood of impairment pursuant to FASB ASU

2011

-

08,

Testing for Goodwill Impairment.

Although the Company has the option to

first

assess qualitative factors when determining if impairment exists, the Company has opted to perform a quantitative analysis to determine if impairment exists.

Impairment of Long Lived Assets [Policy Text Block]

Impairment of Long-Lived Assets. The Company reviews its long-lived and certain intangible assets for impairment whenever events or changes indicate that the carrying amount of an asset

may

not

be recoverable. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

Income Tax, Policy [Policy Text Block]

Income Taxes. The Company and its subsidiaries file consolidated tax returns. The Company accounts for income taxes in accordance with FASB ASC

740,

Income Taxes, resulting in

two

components of income tax expense: current and deferred. Current income tax expense approximates taxes to be paid or refunded for the current period. The Company determines deferred income taxes using the balance sheet method. Under this method, the net deferred tax asset or liability is based on the tax effects of the differences between the book and tax bases of assets and liabilities, and recognizes enacted changes in tax rates and laws in the period in which they occur. Deferred income tax expense results from changes in deferred tax assets and liabilities between periods. Deferred tax assets are recognized subject to Management’s judgment that realization is more likely than

not.

A tax position that meets the more likely than

not

recognition threshold is measured to determine the amount of benefit to recognize. The tax position is measured at the largest amount of benefit that is greater than

fifty

percent likely of being realized upon settlement. Interest and penalties are recognized as a component of income tax expense.

Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block]

Stock Options. The Company applies FASB ASC

718

– Compensation – Stock Compensation, to account for stock based awards granted to employees using the fair value method. The Company recognizes compensation expense for restricted performance share grants over the relevant attribution period. Restricted performance share grants have

no

exercise price, therefore, the intrinsic value is measured using an estimated per share price at the vesting date for each restricted performance share. The estimated per share price is adjusted during the attribution period to reflect actual stock price performance. The Company’s obligation for unvested outstanding restricted performance share grants is classified as a liability until the vesting date due to a cash settlement feature, at which time the issued shares become classified as shareholders’ equity.

Extinguishment of Debt [Policy Text Block]

Extinguishment of Debt. Gains and losses, including fees, incurred in connection with the early extinguishment of debt are charged to current earnings as reductions in noninterest income.

Postemployment Benefit Plans, Policy [Policy Text Block]

Postretirement Benefits. The Company uses an actuarial-based accrual method of accounting for post-retirement benefits.

Fiduciary [Policy Text Block]

Other. Securities and other property held by the Bank in a fiduciary or agency capacity are

not

included in the financial statements since such items are

not

assets of the Company or its subsidiaries.

New Accounting Pronouncements, Policy [Policy Text Block]

Recently Adopted Accounting Standards

In

2018,

the Company adopted the following new accounting guidance:

FASB Accounting Standard Update (ASU)

2014

-

09

,

Revenue (Topic

606

): Revenue from Contracts with Customers,

was issued

May 2014.

The ASU specifies a standardized approach for revenue recognition across industries and transactions. The ASU also requires additional disclosures. The scope of the ASU does

not

include revenue streams covered by other ASU topics; thus, Topic

606

does

not

apply to revenue related to financial instruments, guarantees and leases, which are the primary sources of the Company’s net interest income.

All of the Company’s net interest income and a portion of its noninterest income are out of scope of the guidance. The contracts that are in scope of the guidance are primarily related to service charges and fees on deposit accounts, merchant processing fees, debit card fees, ATM processing fees, trust fees and other service charges, commissions and fees. The Company’s revenue recognition practices within the scope of the ASU as described below did

not

change in any material regard upon adoption of the ASU.

Service Charges on Deposit Accounts, ATM Processing Fees and Other Service Fees

: The Company earns fees from its deposit customers for transaction-based, account maintenance, and overdraft services. Transaction-based fees are recognized at the time the transaction is executed as that is the point in time the Company fulfills the customer’s request. Account maintenance fees, which relate primarily to monthly maintenance, are earned over the course of a month, representing the period over which the Company satisfies the performance obligation. Overdraft fees are recognized at the point in time that the overdraft occurs. Service charges on deposits are withdrawn from the customer’s account balance. ATM processing fees and other service fees are recognized at the point in time that the transaction occurs or the services provided.

Merchant Processing Services and Debit Card Fees

: The Company earns interchange fees from cardholder transactions conducted through the payment networks. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are recognized daily, concurrently with the transaction processing services provided to the cardholder.

Trust Fees

: The Company earns trust fees from its contracts with customers to manage assets for investment or custody services. These fees are primarily earned over time as the Company provides the contracted monthly services and are generally assessed based on a tiered scale of the market value of assets under management (AUM) at month-end. Other related services provided, which are based on a fixed fee schedule, are recognized when the services are rendered.

Gains/Losses on Sales of OREO

: The Company records a gain or loss from the sale of OREO when control of the property transfers to the buyer, which generally occurs at the time of an executed deed. The Company does

not

finance the sale of OREO. Gains on sale of OREO were

$110

thousand, and

$72

thousand and

$1,185

thousand in the

twelve

months ended

December 31, 2018

and

2017

and

2016,

respectively.

The Company adopted the ASU on

January 1, 2018

and

no

cumulative adjustment was required.

FASB ASU

2016

-

01

,

Financial Instruments – Overall (Subtopic

825

-

10

): Recognition and Measurement of Financial Assets and Financial Liabilities,

was issued

January 2016.

The ASU addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. Most notably, the ASU changes the income statement impact of equity investments held by the Company and the requirement for the Company to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes (Note

11

).

The Company was required to adopt the ASU provisions on

January 1, 2018,

and for those equity securities with readily determinable fair values, the Company elected the retrospective transition approach with a cumulative effect adjustment to the balance sheet and for those equity securities that do

not

have readily determinable fair values, the Company elected the prospective transition approach. The impact of the adoption of this accounting standard on the Company’s consolidated financial statements will be subject to the price volatility of the equity investments. As a result of implementing the ASU provisions, effective

January 1, 2018,

the Company recorded a cumulative effect adjustment to decrease retained earnings by

$142

thousand.

FASB ASU

2018

-

02

,

Income Statement – Reporting Comprehensive Income (Topic

220

): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income,

was issued

February 2018.

The ASU eliminates the stranded tax effects resulting from the Tax Cuts and Jobs Act of

2017

by allowing a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act of

2017.

The Company early adopted the provisions of the ASU effective

January 1, 2018,

by reclassifying the Company’s

$3,625

thousand stranded tax effect.

Recently Issued Accounting Standards

FASB ASU

2016

-

02,

Leases (Topic

842

),

was issued

February 25, 2016.

The provisions of the new standard require lessees to recognize most leases on-balance sheet, increasing reported assets and liabilities. Lessor accounting remains substantially similar to current U.S. GAAP.

The Company will be required to adopt the ASU provisions effective

January 1, 2019,

and plans to elect the modified retrospective transition approach. The implementing entry will recognize a lease liability of

$15.3

million and right-to-use asset of

$15.3

million for facilities leases. The change in occupancy and equipment expense will

not

be material.

FASB ASU

2016

-

13,

Financial Instruments – Credit Losses (Topic

326

): Measurement of Credit Losses on Financial Instruments,

was issued on

June 16, 2016.

The ASU significantly changes estimates for credit losses related to financial assets measured at amortized cost and certain other contracts. For estimating credit losses, the FASB is replacing the incurred loss model with the current expected credit loss (CECL) model, which will accelerate recognition of credit losses. Additionally, credit losses relating to debt securities available-for-sale will be recorded through an allowance for credit losses under the new standard. The Company will also be required to provide additional disclosures related to the financial assets within the scope of the new standard.

The Company will be required to adopt the ASU provisions on

January 1, 2020.

Management has evaluated available data, defined portfolio segments of loans with similar attributes, and selected loss estimate models for each identified loan portfolio segment. Management has preliminarily measured historical loss rates for each portfolio segment. The ultimate adjustment to the allowance for loan losses will be accomplished through an offsetting after-tax adjustment to shareholders’ equity. Management has also segmented debt securities held to maturity, selected methods to estimate losses for each segment, and preliminarily measured a loss estimate. Economic conditions and the composition of the Company’s loan portfolio and debt securities held to maturity at the time of adoption will influence the extent of the adopting accounting adjustment. Management expects to develop an aggregate loss estimate by

September 30, 2019.

FASB ASU

2017

-

08

,

Receivables – Non-Refundable Fees and Other Costs (Subtopic

310

-

20

): Premium Amortization on Purchased Callable Debt Securities

, was issued

March 2017.

The ASU will shorten the amortization period for certain callable debt securities held at a premium. Specifically, the ASU requires the premium to be amortized to the earliest call date. The ASU does

not

require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. The Company will be required to adopt the ASU provisions on

January 1, 2019.

The implementing entry will reduce the carrying value of investment securities, specifically obligations of states and political subdivisions, by

$3.1

million and reduce retained earnings by

$2.8

million, net of tax. The change in premium amortization method will

not

be material to revenue recognition.

FASB ASU

2017

-

12

,

Derivatives and Hedging (Topic

815

): Targeted Improvements to Accounting for Hedging Activities

, was issued

August 2017.

The ASU will expand and refine hedge accounting for both nonfinancial and financial risk components and align the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. The ASU also provides for a

one

-time reclassification of prepayable assets from held-to-maturity (HTM) to available for sale (AFS) regardless of derivative use.

The Company will be required to adopt the ASU provisions on

January 1, 2019.

The Company does

not

currently engage in trading activities or use derivative instruments to control interest rate risk, even though such activities

may

be permitted with the approval of the Company’s Board of Directors. The Company has evaluated the prepayable assets in the HTM portfolio and will

not

effect a

one

-time reclassification of prepayable assets from HTM to the AFS upon implementation.

FASB ASU

2018

-

13

,

Fair Value Measurements (Topic

820

): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement

, was issued

August 2018.

The ASU is part of the disclosure framework project, where the primary focus is to improve the effectiveness of disclosures in the financial statements. The ASU removes, modifies and adds disclosure requirements related to Fair Value Measurements.

The provisions of the ASU are effective

January 1, 2020

with the option to early adopt any removed or modified disclosures upon issuance of the ASU. The Company early adopted the provisions to remove and/or modify relevant disclosures in Note

11

to the consolidated financial statements. The requirement to include additional disclosures will be adopted by the Company

January 1, 2020.

The additional disclosures will

not

affect the financial results upon adoption.

XML

Note 2 - Investment Securities (Tables)

12 Months Ended

Dec. 31, 2018

Notes Tables

Debt Securities, Available-for-sale and Held-to-maturity [Table Text Block]

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
At December 31, 2018	(In thousands)
Debt securities available for sale
U.S. Treasury securities	$	139,572	$	5	$	(3	)	$	139,574
Securities of U.S. Government sponsored entities		167,228		65		(3,275	)		164,018
Agency residential mortgage-backed securities (MBS)		883,715		595		(30,439	)		853,871
Non-agency residential MBS		113		1		-			114
Agency commercial MBS		1,869		-		(27	)		1,842
Securities of U.S. Government entities		1,128		-		(9	)		1,119
Obligations of states and political subdivisions		180,220		1,856		(2,985	)		179,091
Corporate securities		1,337,608		1,075		(23,642	)		1,315,041
Total debt securities available for sale		2,711,453		3,597		(60,380	)		2,654,670
Debt securities held to maturity
Agency residential MBS		447,332		249		(14,129	)		433,452
Non-agency residential MBS		3,387		40		-			3,427
Obligations of states and political subdivisions		533,890		3,403		(2,727	)		534,566
Total debt securities held to maturity		984,609		3,692		(16,856	)		971,445
Total	$	3,696,062	$	7,289	$	(77,236	)	$	3,626,115

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
At December 31, 2017	(In thousands)
Debt securities available for sale
Securities of U.S. Government sponsored entities	$	122,285	$	1	$	(2,967	)	$	119,319
Agency residential MBS		787,679		522		(20,495	)		767,706
Non-agency residential MBS		153		1		-			154
Agency commercial MBS		2,244		-		(25	)		2,219
Securities of U.S. Government entities		1,612		-		(22	)		1,590
Obligations of states and political subdivisions		182,907		3,796		(1,482	)		185,221
Corporate securities		1,123,671		1,104		(9,277	)		1,115,498
Total debt securities available for sale		2,220,551		5,424		(34,268	)		2,191,707
Debt securities held to maturity
Agency residential MBS		545,883		606		(9,850	)		536,639
Non-agency residential MBS		4,462		70		-			4,532
Agency commercial MBS		9,041		-		(66	)		8,975
Obligations of states and political subdivisions		599,478		7,736		(2,018	)		605,196
Total debt securities held to maturity		1,158,864		8,412		(11,934	)		1,155,342
Total	$	3,379,415	$	13,836	$	(46,202	)	$	3,347,049

Investments Classified by Contractual Maturity Date [Table Text Block]

	At December 31, 2018
	Debt Securities Available for Sale				Debt Securities Held to Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(In thousands)
Maturity in years:
1 year or less	$	262,418	$	261,976	$	86,172	$	86,148
Over 1 to 5 years		1,438,849		1,414,020		214,137		213,829
Over 5 to 10 years		85,817		85,877		232,544		233,515
Over 10 years		38,672		36,970		1,037		1,074
Subtotal		1,825,756		1,798,843		533,890		534,566
MBS		885,697		855,827		450,719		436,879
Total	$	2,711,453	$	2,654,670	$	984,609	$	971,445

	At December 31, 2017
	Debt Securities Available for Sale				Debt Securities Held to Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(In thousands)
Maturity in years:
1 year or less	$	193,337	$	193,385	$	50,295	$	51,105
Over 1 to 5 years		1,031,807		1,023,047		269,050		269,471
Over 5 to 10 years		159,266		160,042		277,170		281,546
Over 10 years		46,065		45,154		2,963		3,074
Subtotal		1,430,475		1,421,628		599,478		605,196
MBS		790,076		770,079		559,386		550,146
Total	$	2,220,551	$	2,191,707	$	1,158,864	$	1,155,342

Schedule of Unrealized Loss on Investments [Table Text Block]

	Debt Securities Available for Sale At December 31, 2018
	No. of		Less than 12 months					No. of		12 months or longer					No. of		Total
	Investment				Unrealized			Investment				Unrealized			Investment				Unrealized
	Positions		Fair Value		Losses			Positions		Fair Value		Losses			Positions		Fair Value		Losses
	($ in thousands)
U.S. Treasury securities		2	$	54,805	$	(3	)		-	$	-	$	-			2	$	54,805	$	(3	)
Securities of U.S. Government sponsored entities		1		990		(5	)		9		117,963		(3,270	)		10		118,953		(3,275	)
Agency residential MBS		8		107,497		(507	)		58		640,210		(29,932	)		66		747,707		(30,439	)
Agency commercial MBS		1		1,842		(27	)		-		-		-			1		1,842		(27	)
Securities of U.S. Government entities		-		-		-			2		1,119		(9	)		2		1,119		(9	)
Obligations of states and political subdivisions		32		26,452		(166	)		71		67,121		(2,819	)		103		93,573		(2,985	)
Corporate securities		38		308,157		(3,403	)		79		722,740		(20,239	)		117		1,030,897		(23,642	)
Total		82	$	499,743	$	(4,111	)		219	$	1,549,153	$	(56,269	)		301	$	2,048,896	$	(60,380	)

	Debt Securities Held to Maturity At December 31, 2018
	No. of		Less than 12 months					No. of		12 months or longer					No. of		Total
	Investment				Unrecognized			Investment				Unrecognized			Investment				Unrecognized
	Positions		Fair Value		Losses			Positions		Fair Value		Losses			Positions		Fair Value		Losses
	($ in thousands)
Agency residential MBS		16	$	8,495	$	(34	)		78	$	412,574	$	(14,095	)		94	$	421,069	$	(14,129	)
Non-agency residential MBS		1		26		-			-		-		-			1		26		-
Obligations of states and political subdivisions		97		83,633		(271	)		142		151,546		(2,456	)		239		235,179		(2,727	)
Total		114	$	92,154	$	(305	)		220	$	564,120	$	(16,551	)		334	$	656,274	$	(16,856	)

	Debt Securities Available for Sale
	At December 31, 2017
	No. of		Less than 12 months					No. of		12 months or longer					No. of		Total
	Investment				Unrealized			Investment				Unrealized			Investment				Unrealized
	Positions		Fair Value		Losses			Positions		Fair Value		Losses			Positions		Fair Value		Losses
	($ in thousands)
Securities of U.S. Government sponsored entities		1	$	996	$	(2	)		8	$	117,252	$	(2,965	)		9	$	118,248	$	(2,967	)
Agency residential MBS		7		238,554		(1,501	)		51		516,711		(18,994	)		58		755,265		(20,495	)
Non-agency residential MBS		1		1		-			-		-		-			1		1		-
Agency commercial MBS		2		2,219		(25	)		-		-		-			2		2,219		(25	)
Securities of U.S. Government entities		-		-		-			3		1,590		(22	)		3		1,590		(22	)
Obligations of states and political subdivisions		50		21,453		(228	)		35		52,071		(1,254	)		85		73,524		(1,482	)
Corporate securities		64		571,112		(4,047	)		38		282,924		(5,230	)		102		854,036		(9,277	)
Total		125	$	834,335	$	(5,803	)		135	$	970,548	$	(28,465	)		260	$	1,804,883	$	(34,268	)

	Debt Securities Held to Maturity
	At December 31, 2017
	No. of		Less than 12 months					No. of		12 months or longer					No. of		Total
	Investment				Unrecognized			Investment				Unrecognized			Investment				Unrecognized
	Positions		Fair Value		Losses			Positions		Fair Value		Losses			Positions		Fair Value		Losses
	($ in thousands)
Agency residential MBS		15	$	30,218	$	(201	)		65	$	479,775	$	(9,649	)		80	$	509,993	$	(9,850	)
Agency commercial MBS		1		1,913		(4	)		1		7,062		(62	)		2		8,975		(66	)
Obligations of states and political subdivisions		146		131,032		(553	)		59		58,979		(1,465	)		205		190,011		(2,018	)
Total		162	$	163,163	$	(758	)		125	$	545,816	$	(11,176	)		287	$	708,979	$	(11,934	)

Interest Income from Investments [Table Text Block]

	For the Years Ended December 31,
	2018		2017		2016
	(In thousands)
Taxable	$	65,330	$	51,445	$	42,718
Tax-exempt from regular federal income tax		19,438		20,651		22,194
Total interest income from investment securities	$	84,768	$	72,096	$	64,912

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Note 3 - Loans and Allowance for Credit Losses (Tables)

12 Months Ended

Dec. 31, 2018

Notes Tables

Schedule of Loans Receivable [Table Text Block]

	At Decmber 31,
	2018		2017
	(In thousands)
Commercial	$	275,080	$	335,996
Commercial Real Estate		580,480		568,584
Construction		3,982		5,649
Residential Real Estate		44,866		65,183
Consumer Installment & Other		302,794		312,570
Total	$	1,207,202	$	1,287,982

Accretable Yield Reconciliation Schedule [Table Text Block]

	For the Years Ended December 31,
	2018			2017
Accretable yield:	(In thousands)
Balance at the beginning of the period	$	738		$	1,237
Reclassification from nonaccretable difference		1,119			1,852
Accretion		(1,675	)		(2,351	)
Balance at the end of the period	$	182		$	738
Accretion	$	(1,675	)	$	(2,351	)
Change in FDIC indemnification		2			192
(Increase) in interest income	$	(1,673	)	$	(2,159	)

Schedule of Credit Losses Related to Financing Receivables, Current and Noncurrent [Table Text Block]

	Allowance for Loan Losses For the Year Ended December 31, 2018
	Commercial			Commercial Real Estate			Construction		Residential Real Estate			Consumer Installment and Other			Unallocated			Total
	(In thousands)
Allowance for loan losses:
Balance at beginning of period	$	7,746		$	3,849		$	335	$	995		$	6,418		$	3,666		$	23,009
(Reversal) provision		(2,369	)		275			1,130		(126	)		1,579			(489	)		-
Chargeoffs		(513	)		(240	)		-		-			(4,124	)		-			(4,877	)
Recoveries		1,447			-			-		-			1,772			-			3,219
Total allowance for loan losses	$	6,311		$	3,884		$	1,465	$	869		$	5,645		$	3,177		$	21,351

	Allowance for Loan Losses For the Year Ended December 31, 2017
	Commercial			Commercial Real Estate		Construction			Residential Real Estate			Consumer Installment and Other			Unallocated			Total
	(In thousands)
Allowance for loan losses:
Balance at beginning of period	$	8,327		$	3,330	$	152		$	1,330		$	7,980		$	4,835		$	25,954
(Reversal) provision		(382	)		431		(1,716	)		(335	)		1,271			(1,169	)		(1,900	)
Chargeoffs		(961	)		-		-			-			(4,957	)		-			(5,918	)
Recoveries		762			88		1,899			-			2,124			-			4,873
Total allowance for loan losses	$	7,746		$	3,849	$	335		$	995		$	6,418		$	3,666		$	23,009

	Allowance for Credit Losses For the Year Ended December 31, 2016
	Commercial			Commercial Real Estate			Construction			Residential Real Estate			Consumer Installment and Other			Unallocated			Total
	(In thousands)
Allowance for loan losses:
Balance at beginning of period	$	9,559		$	4,212		$	235		$	1,801		$	8,001		$	5,963		$	29,771
(Reversal) provision		(3,237	)		(1,436	)		(83	)		(471	)		3,155			(1,128	)		(3,200	)
Chargeoffs		(2,023	)		-			-			-			(4,749	)		-			(6,772	)
Recoveries		4,028			554			-			-			1,573			-			6,155
Total allowance for loan losses	$	8,327		$	3,330		$	152		$	1,330		$	7,980		$	4,835		$	25,954

Schedule of Recorded Investment in Loans Evaluated for Impairment [Table Text Block]

	Allowance for Loan Losses and Recorded Investment in Loans Evaluated for Impairment At December 31, 2018
	Commercial		Commercial Real Estate		Construction		Residential Real Estate		Consumer Installment and Other		Unallocated		Total
	(In thousands)
Allowance for loan losses:
Individually evaluated for impairment	$	2,752	$	-	$	-	$	-	$	-	$	-	$	2,752
Collectively evaluated for impairment		3,559		3,884		1,465		869		5,645		3,177		18,599
Purchased loans with evidence of credit deterioration		-		-		-		-		-		-		-
Total	$	6,311	$	3,884	$	1,465	$	869	$	5,645	$	3,177	$	21,351
Carrying value of loans:
Individually evaluated for impairment	$	9,921	$	8,217	$	-	$	717	$	-	$	-	$	18,855
Collectively evaluated for impairment		265,136		572,042		3,982		44,149		302,651		-		1,187,960
Purchased loans with evidence of credit deterioration		23		221		-		-		143		-		387
Total	$	275,080	$	580,480	$	3,982	$	44,866	$	302,794	$	-	$	1,207,202

	Allowance for Loan Losses and Recorded Investment in Loans Evaluated for Impairment At December 31, 2017
	Commercial		Commercial Real Estate		Construction		Residential Real Estate		Consumer Installment and Other		Unallocated		Total
	(In thousands)
Allowance for loan losses:
Individually evaluated for impairment	$	4,814	$	171	$	-	$	-	$	-	$	-	$	4,985
Collectively evaluated for impairment		2,932		3,678		335		995		6,418		3,666		18,024
Purchased loans with evidence of credit deterioration		-		-		-		-		-		-		-
Total	$	7,746	$	3,849	$	335	$	995	$	6,418	$	3,666	$	23,009
Carrying value of loans:
Individually evaluated for impairment	$	10,675	$	14,234	$	-	$	208	$	-	$	-	$	25,117
Collectively evaluated for impairment		325,291		553,769		5,649		64,975		312,406		-		1,262,090
Purchased loans with evidence of credit deterioration		30		581		-		-		164		-		775
Total	$	335,996	$	568,584	$	5,649	$	65,183	$	312,570	$	-	$	1,287,982

Financing Receivable Credit Quality Indicators [Table Text Block]

	Credit Risk Profile by Internally Assigned Grade At December 31, 2018
	Commercial		Commercial Real Estate		Construction		Residential Real Estate		Consumer Installment and Other		Total
	(In thousands)
Grade:
Pass	$	264,634	$	567,578	$	3,982	$	43,112	$	300,553	$	1,179,859
Substandard		10,446		12,902		-		1,754		1,556		26,658
Doubtful		-		-		-		-		135		135
Loss		-		-		-		-		550		550
Total	$	275,080	$	580,480	$	3,982	$	44,866	$	302,794	$	1,207,202

	Credit Risk Profile by Internally Assigned Grade At December 31, 2017
	Commercial		Commercial Real Estate		Construction		Residential Real Estate		Consumer Installment and Other		Total
	(In thousands)
Grade:
Pass	$	324,185	$	548,853	$	5,649	$	62,253	$	310,429	$	1,251,369
Substandard		11,811		19,731		-		2,930		1,370		35,842
Doubtful		-		-		-		-		1		1
Loss		-		-		-		-		770		770
Total	$	335,996	$	568,584	$	5,649	$	65,183	$	312,570	$	1,287,982

Past Due Financing Receivables [Table Text Block]

	Summary of Loans by Delinquency and Nonaccrual Status At December 31, 2018
	Current and Accruing		30-59 Days Past Due and Accruing		60-89 Days Past Due and Accruing		Past Due 90 Days or More and Accruing		Nonaccrual		Total Loans
	(In thousands)
Commercial	$	274,045	$	781	$	254	$	-	$	-	$	275,080
Commercial real estate		574,853		617		785		-		4,225		580,480
Construction		3,982		-		-		-		-		3,982
Residential real estate		43,372		789		189		-		516		44,866
Consumer installment and other		297,601		3,408		1,107		551		127		302,794
Total	$	1,193,853	$	5,595	$	2,335	$	551	$	4,868	$	1,207,202

	Summary of Loans by Delinquency and Nonaccrual Status At December 31, 2017
	Current and Accruing		30-59 Days Past Due and Accruing		60-89 Days Past Due and Accruing		Past Due 90 Days or More and Accruing		Nonaccrual		Total Loans
	(In thousands)
Commercial	$	334,908	$	627	$	164	$	-	$	297	$	335,996
Commercial real estate		561,883		1,143		125		-		5,433		568,584
Construction		5,649		-		-		-		-		5,649
Residential real estate		65,183		-		-		-		-		65,183
Consumer installment and other		307,445		3,321		1,077		531		196		312,570
Total	$	1,275,068	$	5,091	$	1,366	$	531	$	5,926	$	1,287,982

Impaired Financing Receivables [Table Text Block]

	Impaired Loans At December 31,
	2018						2017
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
	(In thousands)
With no related allowance recorded:
Commercial	$	755	$	759	$	-	$	1,212	$	1,271	$	-
Commercial real estate		8,438		10,373		-		13,169		14,985		-
Residential real estate		717		747		-		208		239		-
Consumer installment and other		270		377		-		360		466		-
Total with no related allowance recorded		10,180		12,256		-		14,949		16,961		-
With an allowance recorded:
Commercial		9,189		9,189		2,752		9,764		9,764		4,814
Commercial real estate		-		-		-		1,790		1,792		171
Total with an allowance recorded		9,189		9,189		2,752		11,554		11,556		4,985
Total	$	19,369	$	21,445	$	2,752	$	26,503	$	28,517	$	4,985

Impaired Financing Receivables Supplemental Schedule [Table Text Block]

	Impaired Loans For the Years Ended December 31,
	2018				2017				2016
	Average Recorded Investment		Recognized Interest Income		Average Recorded Investment		Recognized Interest Income		Average Recorded Investment		Recognized Interest Income
	(In thousands)
Commercial	$	10,532	$	667	$	11,156	$	508	$	12,923	$	512
Commercial real estate		11,703		758		14,806		884		16,701		725
Construction		-		-		-		-		102		-
Residential real estate		269		19		423		17		746		19
Consumer installment and other		254		14		415		20		473		25
Total	$	22,758	$	1,458	$	26,800	$	1,429	$	30,945	$	1,281

Troubled Debt Restructurings on Financing Receivables [Table Text Block]

	Troubled Debt Restructurings At December 31, 2018
	Number of Contracts		Pre-Modification Carrying Value		Period-End Carrying Value		Period-End Individual Impairment Allowance
	($ in thousands)
Commercial		4	$	2,274	$	811	$	19
Commercial real estate		8		9,237		7,568		-
Residential real estate		1		241		200		-
Total		13	$	11,752	$	8,579	$	19

	Troubled Debt Restructurings At December 31, 2017
	Number of Contracts		Pre-Modification Carrying Value		Period-End Carrying Value		Period-End Individual Impairment Allowance
	($ in thousands)
Commercial		7	$	2,393	$	1,085	$	43
Commercial real estate		10		11,528		10,788		-
Residential real estate		1		241		208		-
Total		18	$	14,162	$	12,081	$	43

	Troubled Debt Restructurings At December 31, 2016
	Number of Contracts		Pre-Modification Carrying Value		Period-End Carrying Value		Period-End Individual Impairment Allowance
	($ in thousands)
Commercial		7	$	2,719	$	1,489	$	113
Commercial real estate		10		11,257		10,673		-
Residential real estate		1		241		219		-
Total		18	$	14,217	$	12,381	$	113

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Note 5 - Premises, Equipment and Other Assets (Tables)

12 Months Ended

Dec. 31, 2018

Notes Tables

Premises and Equipment [Table Text Block]

	At December 31,
	Cost		Accumulated Depreciation and Amortization			Net Book Value
	(In thousands)
2018
Land	$	11,691	$	-		$	11,691
Building and improvements		41,912		(27,178	)		14,734
Leasehold improvements		6,174		(4,968	)		1,206
Furniture and equipment		23,845		(16,969	)		6,876
Total	$	83,622	$	(49,115	)	$	34,507
2017
Land	$	11,796	$	-		$	11,796
Building and improvements		41,641		(26,249	)		15,392
Leasehold improvements		5,817		(4,790	)		1,027
Furniture and equipment		22,284		(15,198	)		7,086
Total	$	81,538	$	(46,237	)	$	35,301

Schedule of Other Assets [Table Text Block]

	At December 31,
	2018		2017
	(In thousands)
Cost method equity investments:
Federal Reserve Bank stock (1)	$	14,069	$	14,069
Other investments		158		158
Total cost method equity investments		14,227		14,227
Life insurance cash surrender value		56,083		54,101
Net deferred tax asset		42,256		33,112
Limited partnership investments		10,219		10,119
Interest receivable		25,834		23,557
Prepaid assets		4,658		4,906
Other assets		9,629		18,428
Total other assets	$	162,906	$	158,450

Schedule of Amounts Recognized in Net Income [Table Text Block]

	For the Years Ended December 31,
	2018		2017		2016
	(In thousands)
Investment loss included in pre-tax income	$	2,900	$	1,800	$	2,475
Valuation impairment included in pre-tax income		-		625		-
Tax credits recognized in provision for income taxes		1,121		1,850		2,286

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Note 6 - Goodwill and Identifiable Intangible Assets (Tables)

12 Months Ended

Dec. 31, 2018

Notes Tables

Schedule of Goodwill [Table Text Block]

	At December 31,
	2018		2017
	(In thousands)
Goodwill	$	121,673	$	121,673

Schedule of Finite-Lived Intangible Assets [Table Text Block]

	At December 31,
	2018					2017
	Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization
	(In thousands)
Core Deposit Intangibles	$	56,808	$	(54,879	)	$	56,808	$	(52,987	)
Merchant Draft Processing Intangible		10,300		(10,300	)		10,300		(10,271	)
Total Identifiable Intangible Assets	$	67,108	$	(65,179	)	$	67,108	$	(63,258	)

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense [Table Text Block]

	Core Deposit Intangibles		Merchant Draft Processing Intangible		Total
	(In thousands)
For the Year Ended December 31, 2018 (actual)	$	1,892	$	29	$	1,921
Estimate for the Year Ended December 31, 2019		538		-		538
2020		287		-		287
2021		269		-		269
2022		252		-		252
2023		236		-		236

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Note 7 - Deposits and Borrowed Funds (Tables)

12 Months Ended

Dec. 31, 2018

Notes Tables

Deposit Liabilities, Type [Table Text Block]

	Deposits
	At December 31,
	2018		2017
	(In thousands)
Noninterest-bearing	$	2,243,251	$	2,197,526
Interest-bearing:
Transaction		929,346		904,245
Savings		1,498,991		1,494,024
Time deposits less than $100 thousand		102,654		117,848
Time deposits $100 thousand through $250 thousand		64,512		76,578
Time deposits more than $250 thousand		28,085		37,392
Total deposits	$	4,866,839	$	4,827,613

Schedule of Repurchase Agreements [Table Text Block]

	Repurchase Agreements (Sweep) Accounted for as Secured Borrowings
	Remaining Contractual Maturity of the Agreements Overnight and Continuous
	At December 31,
	2018		2017
Repurchase agreements:	(In thousands)
Collateral securing borrowings:
Securities of U.S. Government sponsored entities	$	73,803	$	74,173
Agency residential MBS		58,380		58,251
Corporate securities		91,837		105,113
Total collateral carrying value	$	224,020	$	237,537
Total short-term borrowed funds	$	51,247	$	58,471

Borrowed Funds Highest Month End Balance [Table Text Block]

	For the Years Ended December 31,
	2018		2017
	Highest Balance at Any Month-end
	(In thousands)
Securities sold under repurchase agreements	$	68,894	$	82,126

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Note 8 - Shareholders' Equity (Tables)

12 Months Ended

Dec. 31, 2018

Notes Tables

Schedule of Share-based Compensation, Shares Authorized under Stock Option Plans, by Exercise Price Range [Table Text Block]

			Options Outstanding								Options Exercisable
			At December 31, 2018						For the Year Ended December 31, 2018		At December 31, 2018						For the Year Ended December 31, 2018
Range of Exercise Price			Number Outstanding		Aggregate Intrinsic Value		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price		Number Exercisable		Aggregate Intrinsic Value		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price
			(In thousands)				(Years)				(In thousands)				(Years)
$40	-	45		176	$	2,309		6.6	$	43		87	$	1,122		6.1	$	43
45	-	50		11		106		3.1		46		11		106		3.1		46
50	-	55		286		1,297		0.7		51		286		1,297		0.7		51
55	-	60		229		-		7.7		57		73		-		6.9		57
60	-	65		244		-		9.1		62		-		N/A		N/A		N/A
$40	-	65		946	$	3,712		5.7		54		457	$	2,525		2.8		50

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]

	For the Years Ended December 31,
	2018			2017			2016
Expected volatility (1)		20	%		20	%		22	%
Expected life in years (2)		4.8			4.8			4.8
Risk-free interest rate (3)		2.50	%		1.97	%		1.41	%
Expected dividend yield		2.65	%		3.28	%		4.49	%
Fair value per award	$	9.98		$	8.27		$	5.97

Share-based Compensation, Stock Options, Activity [Table Text Block]

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term
	(In thousands)					(Years)
Outstanding at January 1, 2018		1,030		$	49.44
Granted		249			62.16
Exercised		(292	)		45.76
Forfeited or expired		(41	)		52.54
Outstanding at December 31, 2018		946		$	53.78		5.7
Exercisable at December 31, 2018		457		$	50.38		2.8

Schedule of Nonvested Share Activity [Table Text Block]

	Shares			Weighted Average Grant Date Fair Value
	(In thousands)
Nonvested at January 1, 2018		561		$	6.98
Granted		249			9.98
Vested		(280	)		6.54
Forfeited		(41	)		7.66
Nonvested at December 31, 2018		489			8.71

Schedule of Share-based Compensation, Restricted Stock Units Award Activity [Table Text Block]

	2018			2017
	(In thousands)
Outstanding at January 1,		49			48
Granted		11			14
Issued upon vesting		(19	)		(13	)
Forfeited		(2	)		-
Outstanding at December 31,		39			49

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Note 9 - Regulatory Capital (Tables)

12 Months Ended

Dec. 31, 2018

Notes Tables

Schedule of Compliance with Regulatory Capital Requirements under Banking Regulations [Table Text Block]

	At December 31, 2018					Required for Capital Adequacy Purposes Effective January 1, 2018					To Be Well-capitalized Under Prompt Corrective Action Regulations
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	($ in thousands)
Common Equity Tier 1 Capital
Company	$	528,042		16.30	%	$	206,576		6.375	% (1)		N/A		N/A
Bank		415,575		13.01	%		203,664		6.375	% (1)	$	207,658		6.50	%
Tier 1 Capital
Company		528,042		16.30	%		255,182		7.875	% (1)		N/A		N/A
Bank		415,575		13.01	%		251,585		7.875	% (1)		255,579		8.00	%
Total Capital
Company		551,701		17.03	%		319,990		9.875	% (1)		N/A		N/A
Bank		445,234		13.94	%		315,480		9.875	% (1)		319,474		10.00	%
Leverage Ratio (2)
Company		528,042		9.51	%		222,111		4.000	%		N/A		N/A
Bank		415,575		7.55	%		220,312		4.000	%		275,390		5.00	%

	At December 31, 2017					Required for Capital Adequacy Purposes Effective January 1, 2017					To Be Well-capitalized Under Prompt Corrective Action Regulations
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	($ in thousands)
Common Equity Tier 1 Capital
Company	$	479,259		15.36	%	$	179,377		5.75	% (3)		N/A		N/A
Bank		383,796		12.50	%		176,568		5.75	% (3)	$	199,599		6.50	%
Tier 1 Capital
Company		479,259		15.36	%		226,170		7.25	% (3)		N/A		N/A
Bank		383,796		12.50	%		222,630		7.25	% (3)		245,660		8.00	%
Total Capital
Company		504,576		16.17	%		288,562		9.25	% (3)		N/A		N/A
Bank		415,113		13.52	%		284,045		9.25	% (3)		307,076		10.00	%
Leverage Ratio (2)
Company		479,259		8.86	%		216,280		4.000	%		N/A		N/A
Bank		383,796		7.16	%		214,468		4.000	%		268,085		5.00	%

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Note 10 - Income Taxes (Tables)

12 Months Ended

Dec. 31, 2018

Notes Tables

Schedule of Deferred Tax Assets and Liabilities [Table Text Block]

	At December 31,
	2018		2017
	(In thousands)
Deferred tax asset
Allowance for credit losses	$	6,868	$	7,349
State franchise taxes		3,026		1,871
AMT carryforward		-		1,752
Securities available for sale		16,787		8,586
Deferred compensation		5,229		5,279
Real estate owned		553		553
Purchased assets and assumed liabilities		935		1,111
Post-retirement benefits		555		526
Employee benefit accruals		2,104		2,066
VISA Class B shares		167		96
Limited partnership investments		708		57
Impaired capital assets		3,070		3,056
Accrued liabilities		2,554		1,609
Premises and equipment		31		299
Other		721		520
Total deferred tax asset		43,308		34,730
Deferred tax liability
Net deferred loan fees		291		281
Intangible assets		761		1,247
Other		-		90
Total deferred tax liability		1,052		1,618
Net deferred tax asset	$	42,256	$	33,112

Schedule of Components of Income Tax Expense (Benefit) [Table Text Block]

	For the Years Ended December 31,
	2018			2017		2016
	(In thousands)
Current income tax expense:
Federal	$	10,560		$	1,778	$	16,258
State		9,816			7,810		7,292
Total current		20,376			9,588		23,550
Deferred income tax (benefit) expense:
Federal		(206	)		14,461		(2,604	)
State		(737	)		783		158
Total deferred		(943	)		15,244		(2,446	)
Adjustment of net deferred tax asset for enacted changes in tax rates:
Federal		-			12,315		-
State		-			-		-
Total adjustments		-			12,315		-
Provision for income taxes	$	19,433		$	37,147	$	21,104

Schedule of Effective Income Tax Rate Reconciliation [Table Text Block]

	For the Years Ended December 31,
	2018			2017			2016
	(In thousands)
Federal income taxes due at statutory rate	$	19,109		$	30,509		$	27,985
Reductions in income taxes resulting from:
Interest on state and municipal securities and loans not taxable for federal income tax purposes		(4,375	)		(7,794	)		(8,382	)
State franchise taxes, net of federal income tax benefit		7,173			5,586			4,843
Re-measurement of net deferred tax asset due to enactment of new federal tax rate		-			12,315			-
Stock compensation deduction in excess of book expense		(528	)		(583	)		-
Tax credits		(1,291	)		(1,850	)		(2,286	)
Dividend received deduction		(32	)		(60	)		(52	)
Cash value life insurance		(490	)		(603	)		(607	)
Other		(133	)		(373	)		(397	)
Provision for income taxes	$	19,433		$	37,147		$	21,104

Summary of Income Tax Contingencies [Table Text Block]

	2018		2017
	(In thousands)
Balance at January 1,	$	909	$	1,099
Additions for tax positions taken in the current period		-		-
Reductions for tax positions taken in the current period		-		-
Additions for tax positions taken in prior years		-		-
Reductions for tax positions taken in prior years		-		-
Decrease related to settlements with taxing authorities		-		(190	)
Decrease as a result of a lapse in statute of limitations		-		-
Balance at December 31,	$	909	$	909

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Note 11 - Fair Value Measurements (Tables)

12 Months Ended

Dec. 31, 2018

Notes Tables

Fair Value, Assets Measured on Recurring Basis [Table Text Block]

	At December 31, 2018
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3) (1)
	(In thousands)
Equity securities
Mutual funds	$	1,747	$	-	$	1,747	$	-
Total equity securities		1,747		-		1,747		-
Debt securities available for sale
U.S. Treasury securities		139,574		139,574		-		-
Securities of U.S. Government sponsored entities		164,018		-		164,018		-
Agency residential MBS		853,871		-		853,871		-
Non-agency residential MBS		114		-		114		-
Agency commercial MBS		1,842		-		1,842		-
Securities of U.S. Government entities		1,119		-		1,119		-
Obligations of states and political subdivisions		179,091		-		179,091		-
Corporate securities		1,315,041		-		1,315,041		-
Total debt securities available for sale		2,654,670		139,574		2,515,096		-
Total	$	2,656,417	$	139,574	$	2,516,843	$	-

	At December 31, 2017
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3) (1)
	(In thousands)
Equity securities
Mutual funds	$	1,800	$	-	$	1,800	$	-
Total equity securities		1,800		-		1,800		-
Debt securities available for sale
Securities of U.S. Government sponsored entities		119,319		-		119,319		-
Agency residential MBS		767,706		-		767,706		-
Non-agency residential MBS		154		-		154		-
Agency commercial MBS		2,219		-		2,219		-
Securities of U.S. Government entities		1,590		-		1,590		-
Obligations of states and political subdivisions		185,221		-		185,221		-
Corporate securities		1,115,498		-		1,115,498		-
Total debt securities available for sale		2,191,707		-		2,191,707		-
Total	$	2,193,507	$	-	$	2,193,507	$	-

Fair Value Measurements, Nonrecurring [Table Text Block]

									For the
									Year Ended
	At December 31, 2018								December 31, 2018
	Carrying Value		Level 1		Level 2		Level 3		Total Losses
	(In thousands)
Other real estate owned	$	350	$	-	$	-	$	350	$	-
Impaired loans:
Commercial		6,437		-		-		6,437		-
Commercial real estate		3,870		-		-		3,870		(240	)
Total assets measured at fair value on a nonrecurring basis	$	10,657	$	-	$	-	$	10,657	$	(240	)

									For the
									Year Ended
	At December 31, 2017								December 31, 2017
	Carrying Value		Level 1		Level 2		Level 3		Total Losses
	(In thousands)
Other real estate owned	$	1,426	$	-	$	-	$	1,426	$	(219	)
Impaired loans:
Commercial		4,950		-		-		4,950		-
Commercial real estate		5,904		-		-		5,904		-
Total assets measured at fair value on a nonrecurring basis	$	12,280	$	-	$	-	$	12,280	$	(219	)

Fair Value, by Balance Sheet Grouping [Table Text Block]

	At December 31, 2018
	Carrying Amount		Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2 )		Significant Unobservable Inputs (Level 3 )
Financial Assets:	(In thousands)
Cash and due from banks	$	420,284	$	420,284	$	420,284	$	-	$	-
Debt securities held to maturity		984,609		971,445		-		971,445		-
Loans		1,185,851		1,184,770		-		-		1,184,770
Financial Liabilities:
Deposits	$	4,866,839	$	4,862,668	$	-	$	4,671,588	$	191,080
Short-term borrowed funds		51,247		51,247		-		51,247		-

	At December 31, 2017
	Carrying Amount		Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2 )		Significant Unobservable Inputs (Level 3 )
Financial Assets:	(In thousands)
Cash and due from banks	$	575,002	$	575,002	$	575,002	$	-	$	-
Debt securities held to maturity		1,158,864		1,155,342		-		1,155,342		-
Loans		1,264,973		1,257,811		-		-		1,257,811
Financial Liabilities:
Deposits	$	4,827,613	$	4,824,586	$	-	$	4,595,795	$	228,791
Short-term borrowed funds		58,471		58,471		-		58,471		-

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Note 12 - Lease Commitments (Tables)

12 Months Ended

Dec. 31, 2018

Notes Tables

Schedule of Future Minimum Rental Payments for Operating Leases [Table Text Block]

	Minimum future rental payments
	(In thousands)
2019	$	5,996
2020		4,409
2021		2,741
2022		1,921
2023		1,223
Thereafter		1,044
Total minimum lease payments	$	17,334

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Note 14 - Retirement Benefit Plans (Tables)

12 Months Ended

Dec. 31, 2018

Notes Tables

Schedule of Net Benefit Costs [Table Text Block]

	At December 31,
	2018		2017			2016
	(In thousands)
Service benefit	$	24	$	(311	)	$	(153	)
Interest cost		72		95			108
Amortization of unrecognized transition obligation		-		61			61
Net periodic (benefit) cost	$	96	$	(155	)	$	16

Amortization of unrecognized transition obligation, net of tax		-		(34	)		(36	)
Total recognized in net periodic (benefit) cost and accumulated other comprehensive income	$	96	$	(189	)	$	(20	)

Schedule of Accumulated Benefit Obligations in Excess of Fair Value of Plan Assets [Table Text Block]

	At December 31,
	2018			2017			2016
Change in benefit obligation	(In thousands)
Benefit obligation at beginning of year	$	1,958		$	2,319		$	2,522
Service benefit		24			(311	)		(153	)
Interest cost		72			95			108
Benefits paid		(141	)		(145	)		(158	)
Benefit obligation at end of year	$	1,913		$	1,958		$	2,319
Accumulated post-retirement benefit obligation attributable to:
Retirees	$	1,913		$	1,575		$	1,705
Fully eligible participants		-			382			606
Other		-			1			8
Total	$	1,913		$	1,958		$	2,319
Fair value of plan assets		-			-			-
Accumulated post-retirement benefit obligation in excess of plan assets	$	1,913		$	1,958		$	2,319

Schedule of Assumptions Used [Table Text Block]

	At December 31,
	2018			2017			2016
Weighted-average assumptions used to determine benefit obligations
Discount rate		3.76	%		3.70	%		4.10	%
Weighted-average assumptions used to determine net periodic benefit cost
Discount rate		3.70	%		4.10	%		4.30	%

Schedule of Expected Benefit Payments [Table Text Block]

	Estimated future benefit payments
	(In thousands)
2019	$	143
2020		143
2021		143
2022		140
2023		138
Years 2024-2028		624

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Note 15 - Related Party Transactions (Tables)

12 Months Ended

Dec. 31, 2018

Notes Tables

Schedule of Related Party Transactions [Table Text Block]

	2018			2017
	(In thousands)
Balance at January 1,	$	622		$	867
Originations		-			-
Principal reductions		(45	)		(245	)
Balance at December 31,	$	577		$	622
Percent of total loans outstanding.		0.05	%		0.05	%

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Note 17 - Other Comprehensive Income (Tables)

12 Months Ended

Dec. 31, 2018

Notes Tables

Comprehensive Income (Loss) [Table Text Block]

	2018
	Before tax			Tax effect		Net of tax
	(In thousands)
Debt securities available for sale:
Net unrealized losses arising during the year	$	(27,939	)	$	8,258	$	(19,681	)
Reclassification of losses included in net income		-			-		-
Net unrealized losses arising during the year		(27,939	)		8,258		(19,681	)
Post-retirement benefit obligation		-			-		-
Other comprehensive loss	$	(27,939	)	$	8,258	$	(19,681	)

	2017
	Before tax			Tax effect			Net of tax
	(In thousands)
Debt securities available for sale:
Net unrealized losses arising during the year	$	(3,767	)	$	1,585		$	(2,182	)
Reclassification of gains included in net income		(7,955	)		3,345			(4,610	)
Net unrealized losses arising during the year		(11,722	)		4,930			(6,792	)
Post-retirement benefit obligation		59			(25	)		34
Other comprehensive loss	$	(11,663	)	$	4,905		$	(6,758	)

	2016
	Before tax			Tax effect			Net of tax
	(In thousands)
Debt securities available for sale:
Net unrealized losses arising during the year	$	(18,610	)	$	7,825		$	(10,785	)
Reclassification of (gains) losses included in net income		-			-			-
Net unrealized losses arising during the year		(18,610	)		7,825			(10,785	)
Post-retirement benefit obligation		61			(25	)		36
Other comprehensive loss	$	(18,549	)	$	7,800		$	(10,749	)

Schedule of Accumulated Other Comprehensive Income (Loss) [Table Text Block]

	Post-retirement Benefit Obligation			Net Unrealized Gains (losses) on Securities			Accumulated Other Comprehensive Income (loss)
	(In thousands)
Balance, December 31, 2015	$	(70	)	$	745		$	675
Net change		36			(10,785	)		(10,749	)
Balance, December 31, 2016		(34	)		(10,040	)		(10,074	)
Net change		34			(6,792	)		(6,758	)
Balance, December 31, 2017		-			(16,832	)		(16,832	)
Cumulative effect of equity securities losses reclassified		-			142			142
Adjusted Balance, January 1, 2018		-			(16,690	)		(16,690	)
Reclass stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017		-			(3,625	)		(3,625	)
Net change		-			(19,681	)		(19,681	)
Balance, December 31, 2018	$	-		$	(39,996	)	$	(39,996	)

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Note 18 - Earnings Per Common Share (Tables)

12 Months Ended

Dec. 31, 2018

Notes Tables

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	For the Years Ended December 31,
	2018		2017		2016
	(In thousands, except per share data)
Net income (numerator)	$	71,564	$	50,025	$	58,853
Basic earnings per common share
Weighted average number of common shares outstanding - basic (denominator)		26,649		26,291		25,612
Basic earnings per common share	$	2.69	$	1.90	$	2.30
Diluted earnings per common share
Weighted average number of common shares outstanding - basic		26,649		26,291		25,612
Add common stock equivalents for options		107		128		66
Weighted average number of common shares outstanding - diluted (denominator)		26,756		26,419		25,678
Diluted earnings per common share	$	2.67	$	1.89	$	2.29

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Note 19 - Westamerica Bancorporation (Parent Company Only Condensed Financial Information) (Tables)

12 Months Ended

Dec. 31, 2018

Notes Tables

Statements of Income and Comprehensive Income, Parent Only [Table Text Block]

	For the Years Ended December 31,
	2018			2017			2016
	(In thousands)
Dividends from subsidiaries	$	43,892		$	12,728		$	56,824
Interest income		33			43			25
Other income		9,447			8,590			8,315
Total income		53,372			21,361			65,164
Interest on borrowings		-			-			-
Salaries and benefits		7,575			7,163			7,079
Other expense		3,181			3,416			3,290
Total expense		10,756			10,579			10,369
Income before taxes and equity in undistributed income of subsidiaries		42,616			10,782			54,795
Income tax benefit		919			241			1,025
Earnings of subsidiaries greater than subsidiary dividends		28,029			39,002			3,033
Net income		71,564			50,025			58,853
Other comprehensive loss, net of tax		(19,681	)		(6,758	)		(10,749	)
Comprehensive income	$	51,883		$	43,267		$	48,104

Balance Sheets Parent Only [Table Text Block]

	At December 31,
	2018		2017
	(In thousands)
Assets
Cash	$	72,878	$	53,409
Investment securities available for sale		-		-
Investment in Westamerica Bank		509,125		500,776
Investment in non-bank subsidiaries		455		455
Premises and equipment, net		10,400		9,639
Accounts receivable from Westamerica Bank		580		538
Other assets		36,990		40,547
Total assets	$	630,428	$	605,364
Liabilities
Accounts payable to Westamerica Bank	$	46	$	92
Other liabilities		14,791		15,033
Total liabilities		14,837		15,125
Shareholders' equity		615,591		590,239
Total liabilities and shareholders' equity	$	630,428	$	605,364

Statement of Cash Flows Parent Only [Table Text Block]

	For the Years Ended December 31,
	2018			2017			2016
	(In thousands)
Operating Activities
Net income	$	71,564		$	50,025		$	58,853
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		361			319			305
(Increase) decrease in accounts receivable from affiliates		(43	)		(16	)		299
Increase in other assets		(2,638	)		(2,203	)		(1,940	)
Stock option compensation expense		1,988			1,824			1,494
Tax benefit increase upon exercise of stock options and expiration of stock options		-			-			(394	)
Provision (benefit) for deferred income tax		5,028			(3,971	)		1,983
Increase in other liabilities		978			202			1,392
Earnings of subsidiaries greater than subsidiary dividends		(28,029	)		(39,002	)		(3,033	)
Life insurance gains		(585	)		-			-
Gain on sales of premises and equipment		(538	)		(793	)		(79	)
Net Cash Provided by Operating Activities		48,086			6,385			58,880
Investing Activities
Proceeds from life insurance		1,169			-			-
Net Cash Provided by Investing Activities		1,169			-			-
Financing Activities
Exercise of stock options/issuance of shares		13,373			24,583			24,031
Taxes paid by withholding shares for tax purposes		-			-			(356	)
Tax benefit increase (decrease) upon exercise of stock options and expiration of stock options		-			-			394
Retirement of common stock		(524	)		(314	)		(5,424	)
Dividends		(42,635	)		(41,299	)		(39,924	)
Net Cash Used in Financing Activities		(29,786	)		(17,030	)		(21,279	)
Net change in cash		19,469			(10,645	)		37,601
Cash at Beginning of Period		53,409			64,054			26,453
Cash at End of Period	$	72,878		$	53,409		$	64,054
Supplemental Cash Flow Disclosures:
Supplemental disclosure of cash flow activities:
Interest paid for the period	$	-		$	-		$	-
Income tax payments for the period		13,627			17,351			19,264

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Note 20 - Quarterly Financial Information (Tables)

12 Months Ended

Dec. 31, 2018

Notes Tables

Quarterly Financial Information [Table Text Block]

	For the Three Months Ended
	March 31,				June 30,					September 30,					December 31,
	(In thousands, expect per share data and price range of common stock)
2018
Interest and loan fee income	$	36,315			$	37,346				$	38,614				$	39,448
Net interest income		35,856				36,887					38,087					38,934
Provision for loan losses		-				-					-					-
Noninterest income		11,955				11,769					12,528					11,897
Noninterest expense		26,022				25,741					29,366					25,787
Income before taxes		21,789				22,915					21,249					25,044
Net income		17,506				18,010					16,993					19,055
Basic earnings per common share		0.66				0.68					0.64					0.71
Diluted earnings per common share		0.66				0.67					0.63					0.71
Dividends paid per common share		0.40				0.40					0.40					0.40
Price range, common stock		55.72	-	62.52		55.81	-	60.68			57.56	-	64.52			52.75	-	63.20
2017
Interest and loan fee income	$	34,128			$	34,083				$	34,623				$	35,478
Net interest income		33,648				33,607					34,150					35,007
(Reversal of) provision for loan losses		-				(1,900			)		-					-
Noninterest income		11,657				12,123					12,548					20,300
Noninterest expense		25,419				25,316					25,592					31,441
Income before taxes		19,886				22,314					21,106					23,866
Net income		15,049				15,799					15,017					4,160
Basic earnings per common share		0.58				0.60					0.57					0.16
Diluted earnings per common share		0.57				0.60					0.57					0.16
Dividends paid per common share		0.39				0.39					0.39					0.40
Price range, common stock		54.12	-	64.07		51.31	-	57.78			49.54	-	59.54			53.96	-	63.03
2016
Interest and loan fee income	$	34,001			$	34,248				$	33,955				$	33,715
Net interest income		33,449				33,707					33,432					33,215
(Reversal of) provision for loan losses		-				-					(3,200			)		-
Noninterest income		11,729				11,702					11,598					11,545
Noninterest expense		26,212				25,750					26,575					25,083
Income before taxes		18,966				19,659					21,655					19,677
Net income		14,226				14,546					15,628					14,453
Basic earnings per common share		0.56				0.57					0.61					0.56
Diluted earnings per common share		0.56				0.57					0.61					0.56
Dividends paid per common share		0.39				0.39					0.39					0.39
Price range, common stock		40.72	-	49.63		45.86	-	51.53			46.61	-	50.96			48.20	-	65.34

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Note 1 - Business and Accounting Policies (Details Textual) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016	Jan. 01, 2019	Jan. 01, 2018
Loans and Leases Receivable, Days Before Nonaccrual Status		90 days
Loans and Leases Receivable, Certain Consumer Loans and Auto Receivables, Days Before Chargeoff		120 days
Financing Receivable, Impairment Evaluation Criterion, Minimum Outstanding Principal Balance	$ 500	$ 500
FDIC Indemnification Rate	80.00%
FDIC Indemnification Rate, Duration of Interest Covered	90 days
Gains (Losses) on Sales of Other Real Estate	$ 110	72	$ 1,185
Debt Securities, Available-for-sale, Total	2,654,670	2,191,707
Retained Earnings (Accumulated Deficit), Ending Balance	205,841	173,804
Accounting Standards Update 2016-02 [Member] | Subsequent Event [Member]
Operating Lease, Liability, Total				$ 15,300
Operating Lease, Right-of-Use Asset				15,300
Accounting Standards Update 2017-08 [Member] | Subsequent Event [Member]
Debt Securities, Available-for-sale, Total				(3,100)
Retained Earnings (Accumulated Deficit), Ending Balance				$ (2,800)
Retained Earnings [Member]
Cumulative Effect of New Accounting Principle in Period of Adoption		$ (142)
Tax Cuts and Jobs Act of 2017, Reclassification From Aoci to Retained Earnings	3,625
Retained Earnings [Member] | Accounting Standards Update 2016-01 [Member]
Cumulative Effect of New Accounting Principle in Period of Adoption	142				$ (142)
Retained Earnings [Member] | Accounting Standards Update 2018-02 [Member]
Tax Cuts and Jobs Act of 2017, Reclassification From Aoci to Retained Earnings	$ 3,625
Maximum [Member]
Finite-Lived Intangible Asset, Useful Life	15 years
Land and Land Improvements [Member] | Minimum [Member]
Property, Plant and Equipment, Useful Life	20 years
Land and Land Improvements [Member] | Maximum [Member]
Property, Plant and Equipment, Useful Life	50 years
Equipment [Member] | Minimum [Member]
Property, Plant and Equipment, Useful Life	3 years
Equipment [Member] | Maximum [Member]
Property, Plant and Equipment, Useful Life	20 years

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Note 2 - Investment Securities (Details Textual) $ in Thousands	12 Months Ended
	Dec. 31, 2018 USD ($)	Dec. 31, 2017 USD ($)	Dec. 31, 2016 USD ($)	Jan. 01, 2018 USD ($)
Equity Securities, FV-NI	$ 1,747	$ 1,800		$ 1,800
Unrealized Gain (Loss) on Securities	(52)
High Risk Collateralized Mortgage Obligations	0	0
Debt Securities, Available-for-sale, Amortized Cost, Total	2,711,453	2,220,551
Debt Securities, Available-for-sale, Total	2,654,670	2,191,707
Other-than-temporary Impairment Loss, Debt Securities, Available-for-sale, Total	0
Pledged Financial Instruments, Not Separately Reported, Securities, Total	728,161	715,774
Debt Security, Corporate, US [Member]
Debt Securities, Available-for-sale, Amortized Cost, Total	1,337,608	1,123,671
Debt Securities, Available-for-sale, Total	$ 1,315,041	1,115,498
Debt Security, Corporate, US [Member] | External Credit Rating, Non Investment Grade [Member]
Available-for-sale Debt Securities, Number Below Investment Grade	1
Debt Securities, Available-for-sale, Amortized Cost, Total	$ 15,000
Debt Securities, Available-for-sale, Total	13,800
Retained Earnings [Member]
Cumulative Effect of New Accounting Principle in Period of Adoption		(142)
Retained Earnings [Member] | Accounting Standards Update 2016-01 [Member]
Cumulative Effect of New Accounting Principle in Period of Adoption	$ 142			(142)
AOCI Attributable to Parent [Member]
Cumulative Effect of New Accounting Principle in Period of Adoption		$ 142
AOCI Attributable to Parent [Member] | Accounting Standards Update 2016-01 [Member]
Cumulative Effect of New Accounting Principle in Period of Adoption				$ 142

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Note 2 - Investment Securities - Amortized Cost, Unrealized Gains and Losses, and Estimated Fair Value of Investment Securities Portfolio (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Debt securities available for sale, amortized cost	$ 2,711,453	$ 2,220,551
Debt securities available for sale, gross unrealized gains	3,597	5,424
Debt securities available for sale, gross unrealized losses	(60,380)	(34,268)
Debt securities available for sale	2,654,670	2,191,707
Debt securities held to maturity, amortized cost	984,609	1,158,864
Debt securities held to maturity, gross unrecognized gains	3,692	8,412
Debt securities held to maturity, gross unrecognized losses	(16,856)	(11,934)
Debt securities held to maturity, fair values	971,445	1,155,342
Debt securities, amortized cost	3,696,062	3,379,415
Debt securities, gross unrecognized gains	7,289	13,836
Debt securities, gross unrecognized losses	(77,236)	(46,202)
Debt securities, fair value	3,626,115	3,347,049
US Treasury Securities [Member]
Debt securities available for sale, amortized cost	139,572
Debt securities available for sale, gross unrealized gains	5
Debt securities available for sale, gross unrealized losses	(3)
Debt securities available for sale	139,574
US Government-sponsored Enterprises Debt Securities [Member]
Debt securities available for sale, amortized cost	167,228	122,285
Debt securities available for sale, gross unrealized gains	65	1
Debt securities available for sale, gross unrealized losses	(3,275)	(2,967)
Debt securities available for sale	164,018	119,319
Agency Residential MBS [Member]
Debt securities available for sale, amortized cost	883,715	787,679
Debt securities available for sale, gross unrealized gains	595	522
Debt securities available for sale, gross unrealized losses	(30,439)	(20,495)
Debt securities available for sale	853,871	767,706
Debt securities held to maturity, amortized cost	447,332	545,883
Debt securities held to maturity, gross unrecognized gains	249	606
Debt securities held to maturity, gross unrecognized losses	(14,129)	(9,850)
Debt securities held to maturity, fair values	433,452	536,639
Non-agency Residential MBS [Member]
Debt securities available for sale, amortized cost	113	153
Debt securities available for sale, gross unrealized gains	1	1
Debt securities available for sale, gross unrealized losses
Debt securities available for sale	114	154
Debt securities held to maturity, amortized cost	3,387	4,462
Debt securities held to maturity, gross unrecognized gains	40	70
Debt securities held to maturity, gross unrecognized losses
Debt securities held to maturity, fair values	3,427	4,532
Agency Commercial MBS [Member]
Debt securities available for sale, amortized cost	1,869	2,244
Debt securities available for sale, gross unrealized gains
Debt securities available for sale, gross unrealized losses	(27)	(25)
Debt securities available for sale	1,842	2,219
Debt securities held to maturity, amortized cost		9,041
Debt securities held to maturity, gross unrecognized gains
Debt securities held to maturity, gross unrecognized losses		(66)
Debt securities held to maturity, fair values		8,975
US Government Agencies Debt Securities [Member]
Debt securities available for sale, amortized cost	1,128	1,612
Debt securities available for sale, gross unrealized gains
Debt securities available for sale, gross unrealized losses	(9)	(22)
Debt securities available for sale	1,119	1,590
US States and Political Subdivisions Debt Securities [Member]
Debt securities available for sale, amortized cost	180,220	182,907
Debt securities available for sale, gross unrealized gains	1,856	3,796
Debt securities available for sale, gross unrealized losses	(2,985)	(1,482)
Debt securities available for sale	179,091	185,221
Debt securities held to maturity, amortized cost	533,890	599,478
Debt securities held to maturity, gross unrecognized gains	3,403	7,736
Debt securities held to maturity, gross unrecognized losses	(2,727)	(2,018)
Debt securities held to maturity, fair values	534,566	605,196
Debt Security, Corporate, US [Member]
Debt securities available for sale, amortized cost	1,337,608	1,123,671
Debt securities available for sale, gross unrealized gains	1,075	1,104
Debt securities available for sale, gross unrealized losses	(23,642)	(9,277)
Debt securities available for sale	$ 1,315,041	$ 1,115,498

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Note 2 - Investment Securities - Amortized Cost and Estimated Market Value of Securities by Contractual Maturity (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Investment securities available for sale, amortized cost, 1 year or less	$ 262,418	$ 193,337
Investment securities available for sale, fair value, 1 year or less	261,976	193,385
Investment securities held to maturity, amortized cost, 1 year or less	86,172	50,295
Investment securities held to maturity, fair value, 1 year or less	86,148	51,105
Investment securities available for sale, amortized cost, over 1 to 5 years	1,438,849	1,031,807
Investment securities available for sale, fair value, over 1 to 5 years	1,414,020	1,023,047
Investment securities held to maturity, amortized cost, over 1 to 5 years	214,137	269,050
Investment securities held to maturity, fair value, over 1 to 5 years	213,829	269,471
Investment securities available for sale, amortized cost, over 5 to 10 years	85,817	159,266
Investment securities available for sale, fair value, over 5 to 10 years	85,877	160,042
Investment securities held to maturity, amortized cost, over 5 to 10 years	232,544	277,170
Investment securities held to maturity, fair value, over 5 to 10 years	233,515	281,546
Investment securities available for sale, amortized cost, over 10 years	38,672	46,065
Investment securities available for sale, fair value, over 10 years	36,970	45,154
Investment securities held to maturity, amortized cost, over 10 years	1,037	2,963
Investment securities held to maturity, fair value, over 10 years	1,074	3,074
Investment securities available for sale, amortized cost, subtotal	1,825,756	1,430,475
Investment securities available for sale, fair value, subtotal	1,798,843	1,421,628
Investment securities held to maturity, amortized cost, subtotal	533,890	599,478
Investment securities held to maturity, fair value, subtotal	534,566	605,196
Investment securities available for sale, amortized cost	885,697	790,076
Investment securities available for sale, fair value	855,827	770,079
Investment securities held to maturity, amortized cost	450,719	559,386
Investment securities held to maturity, fair value	436,879	550,146
Investment securities available for sale, amortized cost	2,711,453	2,220,551
Investment securities available for sale, fair value	2,654,670	2,191,707
Investment securities held to maturity, amortized cost	984,609	1,158,864
Investment securities held to maturity, fair value	$ 971,445	$ 1,155,342

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Note 2 - Investment Securities - Gross Unrealized Losses, Investment Securities Portfolio (Details) $ in Thousands	Dec. 31, 2018 USD ($)	Dec. 31, 2017 USD ($)
Available for sale securities, less than 12 months, number of investment positions	82	125
Available for sale securities, less than 12 months, fair value	$ 499,743	$ 834,335
Available for sale securities, less than 12 months, unrealized losses	$ (4,111)	$ (5,803)
Available for sale securities, 12 months or longer, number of investment positions	219	135
Available for sale securities, 12 months or longer, fair value	$ 1,549,153	$ 970,548
Available for sale securities, 12 months or longer, unrealized losses	$ (56,269)	$ (28,465)
Available for sale securities, total, number of investment positions	301	260
Available for sale securities, total, fair value	$ 2,048,896	$ 1,804,883
Available for sale securities, total, unrealized losses	$ (60,380)	$ (34,268)
Held to Maturity securities, less than 12 months, number of investment positions	114	162
Held to Maturity securities, less than 12 months, fair value	$ 92,154	$ 163,163
Held to Maturity securities, less than 12 months, unrecognized losses	$ (305)	$ (758)
Held to Maturity securities, 12 months or longer, number of investment positions	220	125
Held to Maturity securities, 12 months or longer, fair value	$ 564,120	$ 545,816
Held to Maturity securities, 12 months or longer, unrecognized losses	$ (16,551)	$ (11,176)
Held to Maturity securities, total, number of investment positions	334	287
Held to Maturity securities, total, fair value	$ 656,274	$ 708,979
Held to Maturity securities, total, unrecognized losses	$ (16,856)	$ (11,934)
US Treasury Securities [Member]
Available for sale securities, less than 12 months, number of investment positions	2
Available for sale securities, less than 12 months, fair value	$ 54,805
Available for sale securities, less than 12 months, unrealized losses	$ (3)
Available for sale securities, 12 months or longer, number of investment positions
Available for sale securities, 12 months or longer, fair value
Available for sale securities, 12 months or longer, unrealized losses
Available for sale securities, total, number of investment positions	2
Available for sale securities, total, fair value	$ 54,805
Available for sale securities, total, unrealized losses	$ (3)
Agency Residential MBS [Member]
Available for sale securities, less than 12 months, number of investment positions	8	7
Available for sale securities, less than 12 months, fair value	$ 107,497	$ 238,554
Available for sale securities, less than 12 months, unrealized losses	$ (507)	$ (1,501)
Available for sale securities, 12 months or longer, number of investment positions	58	51
Available for sale securities, 12 months or longer, fair value	$ 640,210	$ 516,711
Available for sale securities, 12 months or longer, unrealized losses	$ (29,932)	$ (18,994)
Available for sale securities, total, number of investment positions	66	58
Available for sale securities, total, fair value	$ 747,707	$ 755,265
Available for sale securities, total, unrealized losses	$ (30,439)	$ (20,495)
Held to Maturity securities, less than 12 months, number of investment positions	16	15
Held to Maturity securities, less than 12 months, fair value	$ 8,495	$ 30,218
Held to Maturity securities, less than 12 months, unrecognized losses	$ (34)	$ (201)
Held to Maturity securities, 12 months or longer, number of investment positions	78	65
Held to Maturity securities, 12 months or longer, fair value	$ 412,574	$ 479,775
Held to Maturity securities, 12 months or longer, unrecognized losses	$ (14,095)	$ (9,649)
Held to Maturity securities, total, number of investment positions	94	80
Held to Maturity securities, total, fair value	$ 421,069	$ 509,993
Held to Maturity securities, total, unrecognized losses	$ (14,129)	$ (9,850)
US Government-sponsored Enterprises Debt Securities [Member]
Available for sale securities, less than 12 months, number of investment positions	1	1
Available for sale securities, less than 12 months, fair value	$ 990	$ 996
Available for sale securities, less than 12 months, unrealized losses	$ (5)	$ (2)
Available for sale securities, 12 months or longer, number of investment positions	9	8
Available for sale securities, 12 months or longer, fair value	$ 117,963	$ 117,252
Available for sale securities, 12 months or longer, unrealized losses	$ (3,270)	$ (2,965)
Available for sale securities, total, number of investment positions	10	9
Available for sale securities, total, fair value	$ 118,953	$ 118,248
Available for sale securities, total, unrealized losses	$ (3,275)	$ (2,967)
Non-agency Residential MBS [Member]
Available for sale securities, less than 12 months, number of investment positions		1
Available for sale securities, less than 12 months, fair value		$ 1
Available for sale securities, less than 12 months, unrealized losses
Available for sale securities, 12 months or longer, number of investment positions
Available for sale securities, 12 months or longer, fair value
Available for sale securities, 12 months or longer, unrealized losses
Available for sale securities, total, number of investment positions		1
Available for sale securities, total, fair value		$ 1
Available for sale securities, total, unrealized losses
Held to Maturity securities, less than 12 months, number of investment positions	1
Held to Maturity securities, less than 12 months, fair value	$ 26
Held to Maturity securities, less than 12 months, unrecognized losses
Held to Maturity securities, 12 months or longer, number of investment positions
Held to Maturity securities, 12 months or longer, fair value
Held to Maturity securities, 12 months or longer, unrecognized losses
Held to Maturity securities, total, number of investment positions	1
Held to Maturity securities, total, fair value	$ 26
Held to Maturity securities, total, unrecognized losses
Agency Commercial MBS [Member]
Available for sale securities, less than 12 months, number of investment positions	1	2
Available for sale securities, less than 12 months, fair value	$ 1,842	$ 2,219
Available for sale securities, less than 12 months, unrealized losses	$ (27)	$ (25)
Available for sale securities, 12 months or longer, number of investment positions
Available for sale securities, 12 months or longer, fair value
Available for sale securities, 12 months or longer, unrealized losses
Available for sale securities, total, number of investment positions	1	2
Available for sale securities, total, fair value	$ 1,842	$ 2,219
Available for sale securities, total, unrealized losses	$ (27)	$ (25)
Held to Maturity securities, less than 12 months, number of investment positions		1
Held to Maturity securities, less than 12 months, fair value		$ 1,913
Held to Maturity securities, less than 12 months, unrecognized losses		$ (4)
Held to Maturity securities, 12 months or longer, number of investment positions		1
Held to Maturity securities, 12 months or longer, fair value		$ 7,062
Held to Maturity securities, 12 months or longer, unrecognized losses		$ (62)
Held to Maturity securities, total, number of investment positions		2
Held to Maturity securities, total, fair value		$ 8,975
Held to Maturity securities, total, unrecognized losses		$ (66)
US States and Political Subdivisions Debt Securities [Member]
Available for sale securities, less than 12 months, number of investment positions	32	50
Available for sale securities, less than 12 months, fair value	$ 26,452	$ 21,453
Available for sale securities, less than 12 months, unrealized losses	$ (166)	$ (228)
Available for sale securities, 12 months or longer, number of investment positions	71	35
Available for sale securities, 12 months or longer, fair value	$ 67,121	$ 52,071
Available for sale securities, 12 months or longer, unrealized losses	$ (2,819)	$ (1,254)
Available for sale securities, total, number of investment positions	103	85
Available for sale securities, total, fair value	$ 93,573	$ 73,524
Available for sale securities, total, unrealized losses	$ (2,985)	$ (1,482)
Held to Maturity securities, less than 12 months, number of investment positions	97	146
Held to Maturity securities, less than 12 months, fair value	$ 83,633	$ 131,032
Held to Maturity securities, less than 12 months, unrecognized losses	$ (271)	$ (553)
Held to Maturity securities, 12 months or longer, number of investment positions	142	59
Held to Maturity securities, 12 months or longer, fair value	$ 151,546	$ 58,979
Held to Maturity securities, 12 months or longer, unrecognized losses	$ (2,456)	$ (1,465)
Held to Maturity securities, total, number of investment positions	239	205
Held to Maturity securities, total, fair value	$ 235,179	$ 190,011
Held to Maturity securities, total, unrecognized losses	$ (2,727)	$ (2,018)
US Government Agencies Debt Securities [Member]
Available for sale securities, less than 12 months, number of investment positions
Available for sale securities, less than 12 months, fair value
Available for sale securities, less than 12 months, unrealized losses
Available for sale securities, 12 months or longer, number of investment positions	2	3
Available for sale securities, 12 months or longer, fair value	$ 1,119	$ 1,590
Available for sale securities, 12 months or longer, unrealized losses	$ (9)	$ (22)
Available for sale securities, total, number of investment positions	2	3
Available for sale securities, total, fair value	$ 1,119	$ 1,590
Available for sale securities, total, unrealized losses	$ (9)	$ (22)
Debt Security, Corporate, US [Member]
Available for sale securities, less than 12 months, number of investment positions	38	64
Available for sale securities, less than 12 months, fair value	$ 308,157	$ 571,112
Available for sale securities, less than 12 months, unrealized losses	$ (3,403)	$ (4,047)
Available for sale securities, 12 months or longer, number of investment positions	79	38
Available for sale securities, 12 months or longer, fair value	$ 722,740	$ 282,924
Available for sale securities, 12 months or longer, unrealized losses	$ (20,239)	$ (5,230)
Available for sale securities, total, number of investment positions	117	102
Available for sale securities, total, fair value	$ 1,030,897	$ 854,036
Available for sale securities, total, unrealized losses	$ (23,642)	$ (9,277)

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Note 2 - Investment Securities - Interest Income From Investment Securities (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Taxable	$ 65,330	$ 51,445	$ 42,718
Tax-exempt from regular federal income tax	19,438	20,651	22,194
Total interest income from investment securities	$ 84,768	$ 72,096	$ 64,912

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Note 3 - Loans and Allowance for Credit Losses (Details Textual) $ in Thousands	12 Months Ended
	Dec. 31, 2018 USD ($)	Dec. 31, 2017 USD ($)	Dec. 31, 2016 USD ($)
FDIC Indemnification Asset, Ending Balance	$ 5,713	$ 7,766
Percent of Principal Covered by FDIC	80.00%
Purchased Loans	$ 58,247	83,478
Loans and Leases Receivable, Nonaccrual, Commitment to Lend	0	0
Financing Receivable, Modifications, Recorded Investment	$ 8,579	$ 12,081	$ 12,381
Troubled Debt Restructurings During Period	0	4	4
Financing Receivables, Impaired, Troubled Debt Restructuring, Write-down	$ 41	$ 58	$ 0
Financing Receivable, Modifications, Subsequent Default, Number of Contracts	0	0	0
Pledged Financial Instruments, Not Separately Reported, Loans Receivable Pledged as Collateral, Total	$ 0	$ 0
Loans Receivable Held-for-sale, Amount	0	0
Other Real Estate, Ending Balance	350	1,426
Other Real Estate, Reserve	0	1,905
Mortgage Loans in Process of Foreclosure, Amount	516	196
Residential Real Estate Included in OREO [Member]
Real Estate Acquired Through Foreclosure	0	$ 0
Under-market Modification to Payment Terms and Extended Maturity Date [Member]
Troubled Debt Restructurings During Period		4	3
Under-Market Terms, Extended Maturity Date and Court Orders [Member]
Financing Receivable, Modifications, Recorded Investment			$ 4,731
Court Order [Member]
Troubled Debt Restructurings During Period			1
Restructured Loans [Member]
Financing Receivable, Modifications, Recorded Investment	8,579	$ 12,081
Impaired Loans, Restructured, Nonaccrual Status	$ 4,225	4,285
Four Concessions With Modifications of Extended Maturity and Under-market Terms [Member]
Financing Receivable, Recorded Investment, Modifications in Period		$ 699

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Note 3 - Loans and Allowance for Credit Losses - Loans Receivable at Carrying Amount (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Loans	$ 1,207,202	$ 1,287,982
Commercial Portfolio Segment [Member]
Loans	275,080	335,996
Commercial Real Estate Portfolio Segment [Member]
Loans	580,480	568,584
Construction Portfolio Segment [Member]
Loans	3,982	5,649
Residential Portfolio Segment [Member]
Loans	44,866	65,183
Consumer Portfolio Segment [Member]
Loans	$ 302,794	$ 312,570

XML

Note 3 - Loans and Allowance for Credit Losses - Changes in the Accretable Yield for Purchased Loans (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Balance at the beginning of the period	$ 738	$ 1,237
Reclassification from nonaccretable difference	1,119	1,852
Accretion	(1,675)	(2,351)
Balance at the end of the period	182	738
Change in FDIC indemnification	2	192
(Increase) in interest income	$ (1,673)	$ (2,159)

XML

Note 3 - Loans and Allowance for Credit Losses - Allowance for Loan Losses (Details) - USD ($) $ in Thousands	3 Months Ended												12 Months Ended
	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Balance at beginning of period				$ 23,009				$ 25,954				$ 29,771	$ 23,009	$ 25,954	$ 29,771
(Reversal) provision							$ (1,900)			$ (3,200)				(1,900)	(3,200)
Chargeoffs													(4,877)	(5,918)	(6,772)
Recoveries													3,219	4,873	6,155
Total allowance for loan losses	21,351				23,009				25,954				21,351	23,009	25,954
Unallocated Financing Receivable [Member]
Balance at beginning of period				3,666				4,835				5,963	3,666	4,835	5,963
(Reversal) provision													(489)	(1,169)	(1,128)
Chargeoffs
Recoveries
Total allowance for loan losses	3,177				3,666				4,835				3,177	3,666	4,835
Commercial Portfolio Segment [Member]
Balance at beginning of period				7,746				8,327				9,559	7,746	8,327	9,559
(Reversal) provision													(2,369)	(382)	(3,237)
Chargeoffs													(513)	(961)	(2,023)
Recoveries													1,447	762	4,028
Total allowance for loan losses	6,311				7,746				8,327				6,311	7,746	8,327
Commercial Real Estate Portfolio Segment [Member]
Balance at beginning of period				3,849				3,330				4,212	3,849	3,330	4,212
(Reversal) provision													275	431	(1,436)
Chargeoffs													(240)
Recoveries														88	554
Total allowance for loan losses	3,884				3,849				3,330				3,884	3,849	3,330
Construction Portfolio Segment [Member]
Balance at beginning of period				335				152				235	335	152	235
(Reversal) provision													1,130	(1,716)	(83)
Chargeoffs
Recoveries														1,899
Total allowance for loan losses	1,465				335				152				1,465	335	152
Residential Portfolio Segment [Member]
Balance at beginning of period				995				1,330				1,801	995	1,330	1,801
(Reversal) provision													(126)	(335)	(471)
Chargeoffs
Recoveries
Total allowance for loan losses	869				995				1,330				869	995	1,330
Consumer Portfolio Segment [Member]
Balance at beginning of period				$ 6,418				$ 7,980				$ 8,001	6,418	7,980	8,001
(Reversal) provision													1,579	1,271	3,155
Chargeoffs													(4,124)	(4,957)	(4,749)
Recoveries													1,772	2,124	1,573
Total allowance for loan losses	$ 5,645				$ 6,418				$ 7,980				$ 5,645	$ 6,418	$ 7,980

XML

Note 3 - Loans and Allowance for Credit Losses - Recorded Investment in Loans Evaluated for Impairment (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
wabc_AllowanceForLoanLossesAbstract
Individually evaluated for impairment	$ 2,752	$ 4,985
Collectively evaluated for impairment	18,599	18,024
Total allowance for loan losses	21,351	23,009	$ 25,954	$ 29,771
wabc_CarryingValueOfLoansAbstract
Individually evaluated for impairment	18,855	25,117
Collectively evaluated for impairment	1,187,960	1,262,090
Loans	1,207,202	1,287,982
Financial Asset Acquired with Credit Deterioration [Member]
wabc_AllowanceForLoanLossesAbstract
Total allowance for loan losses	0	0
wabc_CarryingValueOfLoansAbstract
Loans	387	775
Unallocated Financing Receivable [Member]
wabc_AllowanceForLoanLossesAbstract
Individually evaluated for impairment	0	0
Collectively evaluated for impairment	3,177	3,666
Total allowance for loan losses	3,177	3,666	4,835	5,963
wabc_CarryingValueOfLoansAbstract
Individually evaluated for impairment	0	0
Collectively evaluated for impairment	0	0
Loans	0	0
Unallocated Financing Receivable [Member] | Financial Asset Acquired with Credit Deterioration [Member]
wabc_AllowanceForLoanLossesAbstract
Total allowance for loan losses	0	0
wabc_CarryingValueOfLoansAbstract
Loans	0	0
Commercial Portfolio Segment [Member]
wabc_AllowanceForLoanLossesAbstract
Individually evaluated for impairment	2,752	4,814
Collectively evaluated for impairment	3,559	2,932
Total allowance for loan losses	6,311	7,746	8,327	9,559
wabc_CarryingValueOfLoansAbstract
Individually evaluated for impairment	9,921	10,675
Collectively evaluated for impairment	265,136	325,291
Loans	275,080	335,996
Commercial Portfolio Segment [Member] | Financial Asset Acquired with Credit Deterioration [Member]
wabc_AllowanceForLoanLossesAbstract
Total allowance for loan losses	0	0
wabc_CarryingValueOfLoansAbstract
Loans	23	30
Commercial Real Estate Portfolio Segment [Member]
wabc_AllowanceForLoanLossesAbstract
Individually evaluated for impairment		171
Collectively evaluated for impairment	3,884	3,678
Total allowance for loan losses	3,884	3,849	3,330	4,212
wabc_CarryingValueOfLoansAbstract
Individually evaluated for impairment	8,217	14,234
Collectively evaluated for impairment	572,042	553,769
Loans	580,480	568,584
Commercial Real Estate Portfolio Segment [Member] | Financial Asset Acquired with Credit Deterioration [Member]
wabc_AllowanceForLoanLossesAbstract
Total allowance for loan losses	0	0
wabc_CarryingValueOfLoansAbstract
Loans	221	581
Construction Portfolio Segment [Member]
wabc_AllowanceForLoanLossesAbstract
Individually evaluated for impairment	0	0
Collectively evaluated for impairment	1,465	335
Total allowance for loan losses	1,465	335	152	235
wabc_CarryingValueOfLoansAbstract
Individually evaluated for impairment	0	0
Collectively evaluated for impairment	3,982	5,649
Loans	3,982	5,649
Construction Portfolio Segment [Member] | Financial Asset Acquired with Credit Deterioration [Member]
wabc_AllowanceForLoanLossesAbstract
Total allowance for loan losses	0	0
wabc_CarryingValueOfLoansAbstract
Loans	0	0
Residential Portfolio Segment [Member]
wabc_AllowanceForLoanLossesAbstract
Individually evaluated for impairment	0	0
Collectively evaluated for impairment	869	995
Total allowance for loan losses	869	995	1,330	1,801
wabc_CarryingValueOfLoansAbstract
Individually evaluated for impairment	717	208
Collectively evaluated for impairment	44,149	64,975
Loans	44,866	65,183
Residential Portfolio Segment [Member] | Financial Asset Acquired with Credit Deterioration [Member]
wabc_AllowanceForLoanLossesAbstract
Total allowance for loan losses	0	0
wabc_CarryingValueOfLoansAbstract
Loans	0	0
Consumer Portfolio Segment [Member]
wabc_AllowanceForLoanLossesAbstract
Individually evaluated for impairment	0	0
Collectively evaluated for impairment	5,645	6,418
Total allowance for loan losses	5,645	6,418	$ 7,980	$ 8,001
wabc_CarryingValueOfLoansAbstract
Individually evaluated for impairment	0	0
Collectively evaluated for impairment	302,651	312,406
Loans	302,794	312,570
Consumer Portfolio Segment [Member] | Financial Asset Acquired with Credit Deterioration [Member]
wabc_AllowanceForLoanLossesAbstract
Total allowance for loan losses	0	0
wabc_CarryingValueOfLoansAbstract
Loans	$ 143	$ 164

XML

Note 3 - Loans and Allowance for Credit Losses - Credit Risk Profile by Internally Assigned Grade (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Loans	$ 1,207,202	$ 1,287,982
Pass [Member]
Loans	1,179,859	1,251,369
Substandard [Member]
Loans	26,658	35,842
Doubtful [Member]
Loans	135	1
Unlikely to be Collected Financing Receivable [Member]
Loans	550	770
Commercial Portfolio Segment [Member]
Loans	275,080	335,996
Commercial Portfolio Segment [Member] | Pass [Member]
Loans	264,634	324,185
Commercial Portfolio Segment [Member] | Substandard [Member]
Loans	10,446	11,811
Commercial Portfolio Segment [Member] | Doubtful [Member]
Loans	0	0
Commercial Portfolio Segment [Member] | Unlikely to be Collected Financing Receivable [Member]
Loans	0	0
Commercial Real Estate Portfolio Segment [Member]
Loans	580,480	568,584
Commercial Real Estate Portfolio Segment [Member] | Pass [Member]
Loans	567,578	548,853
Commercial Real Estate Portfolio Segment [Member] | Substandard [Member]
Loans	12,902	19,731
Commercial Real Estate Portfolio Segment [Member] | Doubtful [Member]
Loans	0	0
Commercial Real Estate Portfolio Segment [Member] | Unlikely to be Collected Financing Receivable [Member]
Loans	0	0
Construction Portfolio Segment [Member]
Loans	3,982	5,649
Construction Portfolio Segment [Member] | Pass [Member]
Loans	3,982	5,649
Construction Portfolio Segment [Member] | Substandard [Member]
Loans	0	0
Construction Portfolio Segment [Member] | Doubtful [Member]
Loans	0	0
Construction Portfolio Segment [Member] | Unlikely to be Collected Financing Receivable [Member]
Loans	0	0
Residential Portfolio Segment [Member]
Loans	44,866	65,183
Residential Portfolio Segment [Member] | Pass [Member]
Loans	43,112	62,253
Residential Portfolio Segment [Member] | Substandard [Member]
Loans	1,754	2,930
Residential Portfolio Segment [Member] | Doubtful [Member]
Loans	0	0
Residential Portfolio Segment [Member] | Unlikely to be Collected Financing Receivable [Member]
Loans	0	0
Consumer Portfolio Segment [Member]
Loans	302,794	312,570
Consumer Portfolio Segment [Member] | Pass [Member]
Loans	300,553	310,429
Consumer Portfolio Segment [Member] | Substandard [Member]
Loans	1,556	1,370
Consumer Portfolio Segment [Member] | Doubtful [Member]
Loans	135	1
Consumer Portfolio Segment [Member] | Unlikely to be Collected Financing Receivable [Member]
Loans	$ 550	$ 770

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Note 3 - Loans and Allowance for Credit Losses - Loans by Delinquency and Nonaccrual Status (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Current and accruing	$ 1,193,853	$ 1,275,068
Nonaccrual	4,868	5,926
Loans	1,207,202	1,287,982
Financing Receivables, 30 to 59 Days Past Due [Member]
Past due and accruing	5,595	5,091
Financing Receivables, 60 to 89 Days Past Due [Member]
Past due and accruing	2,335	1,366
Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Past due and accruing	551	531
Commercial Portfolio Segment [Member]
Current and accruing	274,045	334,908
Nonaccrual		297
Loans	275,080	335,996
Commercial Portfolio Segment [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Past due and accruing	781	627
Commercial Portfolio Segment [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Past due and accruing	254	164
Commercial Portfolio Segment [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Past due and accruing	0	0
Commercial Real Estate Portfolio Segment [Member]
Current and accruing	574,853	561,883
Nonaccrual	4,225	5,433
Loans	580,480	568,584
Commercial Real Estate Portfolio Segment [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Past due and accruing	617	1,143
Commercial Real Estate Portfolio Segment [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Past due and accruing	785	125
Commercial Real Estate Portfolio Segment [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Past due and accruing	0	0
Construction Portfolio Segment [Member]
Current and accruing	3,982	5,649
Nonaccrual	0	0
Loans	3,982	5,649
Construction Portfolio Segment [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Past due and accruing	0	0
Construction Portfolio Segment [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Past due and accruing	0	0
Construction Portfolio Segment [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Past due and accruing	0	0
Residential Portfolio Segment [Member]
Current and accruing	43,372	65,183
Nonaccrual	516	0
Loans	44,866	65,183
Residential Portfolio Segment [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Past due and accruing	789	0
Residential Portfolio Segment [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Past due and accruing	189	0
Residential Portfolio Segment [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Past due and accruing	0	0
Consumer Portfolio Segment [Member]
Current and accruing	297,601	307,445
Nonaccrual	127	196
Loans	302,794	312,570
Consumer Portfolio Segment [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Past due and accruing	3,408	3,321
Consumer Portfolio Segment [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Past due and accruing	1,107	1,077
Consumer Portfolio Segment [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Past due and accruing	$ 551	$ 531

XML

Note 3 - Loans and Allowance for Credit Losses - Impaired Loans (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Impaired loans with no related allowance recorded, recorded investment	$ 10,180	$ 14,949
Impaired loans with no related allowance recorded, unpaid principal balance	12,256	16,961
Impaired loans with an allowance recorded, recorded investment	9,189	11,554
Impaired loans with an allowance recorded, unpaid principal balance	9,189	11,556
Impaired loans with an allowance recorded, related allowance	2,752	4,985
Total impaired loans, recorded investment	19,369	26,503
Total impaired loans, unpaid principal balance	21,445	28,517
Commercial Portfolio Segment [Member]
Impaired loans with no related allowance recorded, recorded investment	755	1,212
Impaired loans with no related allowance recorded, unpaid principal balance	759	1,271
Impaired loans with an allowance recorded, recorded investment	9,189	9,764
Impaired loans with an allowance recorded, unpaid principal balance	9,189	9,764
Impaired loans with an allowance recorded, related allowance	2,752	4,814
Commercial Real Estate Portfolio Segment [Member]
Impaired loans with no related allowance recorded, recorded investment	8,438	13,169
Impaired loans with no related allowance recorded, unpaid principal balance	10,373	14,985
Impaired loans with an allowance recorded, recorded investment		1,790
Impaired loans with an allowance recorded, unpaid principal balance		1,792
Impaired loans with an allowance recorded, related allowance		171
Residential Portfolio Segment [Member]
Impaired loans with no related allowance recorded, recorded investment	717	208
Impaired loans with no related allowance recorded, unpaid principal balance	747	239
Consumer Portfolio Segment [Member]
Impaired loans with no related allowance recorded, recorded investment	270	360
Impaired loans with no related allowance recorded, unpaid principal balance	$ 377	$ 466

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Note 3 - Loans and Allowance for Credit Losses - Impaired Loans, Supplemental Schedule (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Average Recorded Investment	$ 22,758	$ 26,800	$ 30,945
Recognized Interest Income	1,458	1,429	1,281
Commercial Portfolio Segment [Member]
Average Recorded Investment	10,532	11,156	12,923
Recognized Interest Income	667	508	512
Commercial Real Estate Portfolio Segment [Member]
Average Recorded Investment	11,703	14,806	16,701
Recognized Interest Income	758	884	725
Construction Portfolio Segment [Member]
Average Recorded Investment			102
Recognized Interest Income
Residential Portfolio Segment [Member]
Average Recorded Investment	269	423	746
Recognized Interest Income	19	17	19
Consumer Portfolio Segment [Member]
Average Recorded Investment	254	415	473
Recognized Interest Income	$ 14	$ 20	$ 25

XML

Note 3 - Loans and Allowance for Credit Losses - Troubled Debt Restructurings (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2018 USD ($)	Dec. 31, 2017 USD ($)	Dec. 31, 2016 USD ($)
Number of Contracts	13	18	18
Pre-Modification Carrying Value	$ 11,752	$ 14,162	$ 14,217
Financing Receivable, Modifications, Recorded Investment	8,579	12,081	12,381
Period-End Individual Impairment Allowance	$ 19	$ 43	$ 113
Commercial Portfolio Segment [Member]
Number of Contracts	4	7	7
Pre-Modification Carrying Value	$ 2,274	$ 2,393	$ 2,719
Financing Receivable, Modifications, Recorded Investment	811	1,085	1,489
Period-End Individual Impairment Allowance	$ 19	$ 43	$ 113
Commercial Real Estate Portfolio Segment [Member]
Number of Contracts	8	10	10
Pre-Modification Carrying Value	$ 9,237	$ 11,528	$ 11,257
Financing Receivable, Modifications, Recorded Investment	7,568	10,788	10,673
Period-End Individual Impairment Allowance		$ 0	$ 0
Residential Portfolio Segment [Member]
Number of Contracts	1	1	1
Pre-Modification Carrying Value	$ 241	$ 241	$ 241
Financing Receivable, Modifications, Recorded Investment	200	208	219
Period-End Individual Impairment Allowance		$ 0	$ 0

XML

Note 4 - Concentration of Credit Risk (Details Textual) $ in Thousands	Dec. 31, 2018 USD ($)	Dec. 31, 2017 USD ($)
Unsecured Loan Limit, Percentage of Shareholders' Equity, California Financial Code	15.00%
Secured and Unsecured Loan Limit Percentage, California Financial Code	25.00%
Concentration Risk, Issuer Relationships	78
Loan Commitments and Standby Letters of Credit Related to Real Estate Loans	$ 53,891	$ 53,874
Concentration Risk, Aggregate Securities Amount	$ 5,000
Commercial Real Estate Loans [Member]
Loan To Value Ratio Requirement	75.00%
Residential Real Estate Loans [Member]
Loan To Value Ratio Requirement	80.00%
Aggregate Loans [Member] | Customer Concentration Risk [Member]
Concentration Risk, Issuer Relationships	37
Concentration Risk, Aggregate Loans Amount	$ 5,000

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Note 5 - Premises, Equipment and Other Assets (Details Textual) $ / shares in Units, shares in Thousands, $ in Thousands			12 Months Ended
	Jun. 28, 2018	Jun. 27, 2018	Dec. 31, 2018 USD ($) $ / shares shares	Dec. 31, 2017 USD ($)	Dec. 31, 2016 USD ($)
Depreciation, Depletion and Amortization, Nonproduction, Total			$ 3,677	$ 3,925	$ 3,959
FRB Membership, Stock Subscription, Percent of Paid-Up Capital Stock and Surplus Requirement			6.00%
Share Price | $ / shares			$ 55.68
LIHTC Investments			$ 10,219	10,119
Qualified Affordable Housing Project Investments, Commitment			4,799	2,299
Affordable Housing Project Investment, Write-down, Amount				$ 625
Contingent Commitment, Year 1 [Member]
Qualified Affordable Housing Project Investments, Commitment			627
Contingent Commitment, Year 2 [Member]
Qualified Affordable Housing Project Investments, Commitment			2,026
Contingent Commitment, Year 3 [Member]
Qualified Affordable Housing Project Investments, Commitment			138
Contingent Commitment, Year 4 [Member]
Qualified Affordable Housing Project Investments, Commitment			261
Contingent Commitment, Year 5 [Member]
Qualified Affordable Housing Project Investments, Commitment			134
Contingent Commitment, Year 6 [Member]
Qualified Affordable Housing Project Investments, Commitment			1,041
Contingent Commitment, Year 7 or Thereafter [Member]
Qualified Affordable Housing Project Investments, Commitment			$ 572
VISA Class B Common Stock [Member]
Investment Owned, Balance, Shares | shares			211
Conversion Rate of Class B Common Stock into Class A Common Stock	1.6298	1.6483
Share Price | $ / shares			$ 131.94
VISA Class B Common Stock [Member] | Reported Value Measurement [Member]
Investment Owned, at Fair Value			$ 0

XML

Note 5 - Premises, Equipment and Other Assets - Premises and Equipment (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Cost	$ 83,622	$ 81,538
Accumulated Depreciation and Amortization	(49,115)	(46,237)
Premises and equipment, net	34,507	35,301
Land [Member]
Cost	11,691	11,796
Accumulated Depreciation and Amortization
Premises and equipment, net	11,691	11,796
Building and Building Improvements [Member]
Cost	41,912	41,641
Accumulated Depreciation and Amortization	(27,178)	(26,249)
Premises and equipment, net	14,734	15,392
Leasehold Improvements [Member]
Cost	6,174	5,817
Accumulated Depreciation and Amortization	(4,968)	(4,790)
Premises and equipment, net	1,206	1,027
Furniture and Fixtures [Member]
Cost	23,845	22,284
Accumulated Depreciation and Amortization	(16,969)	(15,198)
Premises and equipment, net	$ 6,876	$ 7,086

XML

Note 5 - Premises, Equipment and Other Assets - Other Assets (Details) - USD ($) $ in Thousands		Dec. 31, 2018	Dec. 31, 2017
Cost method equity investments:
Federal Reserve Bank stock (1)	[1]	$ 14,069	$ 14,069
Other investments		158	158
Total cost method equity investments		14,227	14,227
Life insurance cash surrender value		56,083	54,101
Net deferred tax asset		42,256	33,112
Limited partnership investments		10,219	10,119
Interest receivable		25,834	23,557
Prepaid assets		4,658	4,906
Other assets		9,629	18,428
Total other assets		$ 162,906	$ 158,450

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

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Note 5 - Premises, Equipment and Other Assets - Amounts Recognized in Net Income (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Investment loss included in pre-tax income	$ 2,900	$ 1,800	$ 2,475
Valuation impairment included in pre-tax income		625
Tax credits recognized in provision for income taxes	$ 1,121	$ 1,850	$ 2,286

XML

Note 6 - Goodwill and Identifiable Intangible Assets (Details Textual) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Goodwill and Intangible Asset Impairment, Total	$ 0	$ 0	$ 0
Amortization Expense, Adjustment Resulting from a Change in Estimates of Useful Lives or Residual Values	$ 0	$ 0	$ 0

XML

Note 6 - Goodwill and Identifiable Intangible Assets - Carrying Values of Goodwill (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Goodwill	$ 121,673	$ 121,673

XML

Note 6 - Goodwill and Identifiable Intangible Assets - Gross Carrying Amount of Intangible Assets and Accumulated Amortization (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Gross Carrying Amount	$ 67,108	$ 67,108
Accumulated Amortization	(65,179)	(63,258)
Core Deposits [Member]
Gross Carrying Amount	56,808	56,808
Accumulated Amortization	(54,879)	(52,987)
Mechant Draft Processing [Member]
Gross Carrying Amount	10,300	10,300
Accumulated Amortization	$ (10,300)	$ (10,271)

XML

Note 6 - Goodwill and Identifiable Intangible Assets - Estimated Future Amortization Expense for Identifiable Intangible Assets (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
For the Year Ended December 31, 2018 (actual)	$ 1,921	$ 3,077	$ 3,504
Estimate for the Year Ended December 31, 2019	538
2020	287
2021	269
2022	252
2023	236
Core Deposits [Member]
For the Year Ended December 31, 2018 (actual)	1,892
Estimate for the Year Ended December 31, 2019	538
2020	287
2021	269
2022	252
2023	236
Mechant Draft Processing [Member]
For the Year Ended December 31, 2018 (actual)	29
Estimate for the Year Ended December 31, 2019
2020
2021
2022
2023

XML

Note 7 - Deposits and Borrowed Funds (Details Textual) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Demand Deposit Overdrafts	$ 980	$ 2,786
Interest Expense, Time Deposits, $100,000 or More	$ 368	$ 415	$ 509

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Note 7 - Deposits and Borrowed Funds - Deposits Detail (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Noninterest-bearing deposits	$ 2,243,251	$ 2,197,526
Interest-bearing:
Transaction	929,346	904,245
Savings	1,498,991	1,494,024
Time deposits less than $100 thousand	102,654	117,848
Time deposits $100 thousand through $250 thousand	64,512	76,578
Time deposits more than $250 thousand	28,085	37,392
Total deposits	$ 4,866,839	$ 4,827,613

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Note 7 - Deposits and Borrowed Funds - Short-term Borrowed Funds (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Collateral Carrying Value	$ 224,020	$ 237,537
Short-term borrowed funds	51,247	58,471
US Government-sponsored Enterprises Debt Securities [Member]
Collateral Carrying Value	73,803	74,173
Agency Residential MBS [Member]
Collateral Carrying Value	58,380	58,251
Corporate Debt Securities [Member]
Collateral Carrying Value	$ 91,837	$ 105,113

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Note 7 - Deposits and Borrowed Funds - Borrowed Funds, Highest Month End Balances (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Securities Sold under Agreements to Repurchase [Member]
Securities sold under repurchase agreements	$ 68,894	$ 82,126

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Note 8 - Shareholders' Equity (Details Textual) $ / shares in Units, $ in Thousands	3 Months Ended	12 Months Ended
	Dec. 31, 2018 USD ($) $ / shares shares	Dec. 31, 2018 USD ($) $ / shares shares	Dec. 31, 2017 USD ($) $ / shares shares	Dec. 31, 2016 USD ($) $ / shares shares	Feb. 13, 2009 $ / shares shares
Share Price | $ / shares	$ 55.68	$ 55.68
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross		249,000	266,000	325,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value | $ / shares		$ 9.98	$ 8.27	$ 5.97
Employee Service Share-based Compensation, Nonvested Awards, Compensation Not yet Recognized, Stock Options | $	$ 2,871	$ 2,871
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period, Intrinsic Value | $		4,264	$ 4,642	$ 3,242
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested in Period, Fair Value | $		$ 1,835	$ 1,493	1,269
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period		292,000	509,000
Excess Tax Deduction Exceeding Related Share-based Compensation, Operating Activities | $		$ 2,516	$ 1,667
Income Tax Expense (Benefit), Total | $		$ 19,433	$ 37,147	21,104
Employee Service Share-based Compensation, Tax Benefit from Compensation Expense | $				394
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period		11,000	14,000
Class of Warrant or Right, Number of Securities Called by Warrants or Rights					246,640
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ / shares					$ 50.92
Stock Issued During Period, Shares, Warrants Exercised		50,788
Stock Repurchase Program, Remaining Number of Shares Authorized to be Repurchased	1,750,000	1,750,000
Additional Classes of Stock Authorized	2	2
Additional Classes of Stock Authorized, Shares Authorized, Per Class	1,000,000	1,000,000
Common Stock, Shares Authorized	150,000,000	150,000,000	150,000,000
Common Stock, Shares, Outstanding, Ending Balance	26,730,000	26,730,000	26,425,000
Common Class B [Member]
Common Stock, Shares, Outstanding, Ending Balance	0	0
Accounting Standards Update 2016-09 [Member]
Income Tax Expense (Benefit), Total | $	$ (737)		$ (698)
NQSO [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period		3 years
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period		10 years
Restricted Performance Shares [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period		3 years
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period, Fair Value | $		$ 1,143	708	753
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Outstanding, Weighted Average Remaining Contractual Terms		1 year 73 days
Allocated Share-based Compensation Expense, Total | $		$ 660	$ 827	$ 1,228
Employee Stock Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period		3 years
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized	713,000	713,000
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition		1 year 292 days
Stock Appreciation Rights (SARs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period		0	0

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Note 8 - Shareholders' Equity - Information About Stock Options Granted (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Options outstanding, range of exercise price, lower range (in dollars per share)	$ 40
Options outstanding, range of exercise price, upper range (in dollars per share)	$ 65
Options outstanding, number outstanding (in shares)	946	1,030
Options outstanding, aggregate intrinsic value	$ 3,712
Options outstanding, weighted average remaining contractual life (Year)	5 years 255 days
Options outstanding, weighted average exercise price (in dollars per share)	$ 54
Options exercisable, number outstanding (in shares)	457
Options exercisable, aggregate intrinsic value	$ 2,525
Options exercisable, weighted average remaining contractual life (Year)	2 years 292 days
Options exercisable, weighted average exercise price (in dollars per share)	$ 50
Range 1 [Member]
Options outstanding, range of exercise price, lower range (in dollars per share)	40
Options outstanding, range of exercise price, upper range (in dollars per share)	$ 45
Options outstanding, number outstanding (in shares)	176
Options outstanding, aggregate intrinsic value	$ 2,309
Options outstanding, weighted average remaining contractual life (Year)	6 years 219 days
Options outstanding, weighted average exercise price (in dollars per share)	$ 43
Options exercisable, number outstanding (in shares)	87
Options exercisable, aggregate intrinsic value	$ 1,122
Options exercisable, weighted average remaining contractual life (Year)	6 years 36 days
Options exercisable, weighted average exercise price (in dollars per share)	$ 43
Range 2 [Member]
Options outstanding, range of exercise price, lower range (in dollars per share)	45
Options outstanding, range of exercise price, upper range (in dollars per share)	$ 50
Options outstanding, number outstanding (in shares)	11
Options outstanding, aggregate intrinsic value	$ 106
Options outstanding, weighted average remaining contractual life (Year)	3 years 36 days
Options outstanding, weighted average exercise price (in dollars per share)	$ 46
Options exercisable, number outstanding (in shares)	11
Options exercisable, aggregate intrinsic value	$ 106
Options exercisable, weighted average remaining contractual life (Year)	3 years 36 days
Options exercisable, weighted average exercise price (in dollars per share)	$ 46
Range 3 [Member]
Options outstanding, range of exercise price, lower range (in dollars per share)	50
Options outstanding, range of exercise price, upper range (in dollars per share)	$ 55
Options outstanding, number outstanding (in shares)	286
Options outstanding, aggregate intrinsic value	$ 1,297
Options outstanding, weighted average remaining contractual life (Year)	255 days
Options outstanding, weighted average exercise price (in dollars per share)	$ 51
Options exercisable, number outstanding (in shares)	286
Options exercisable, aggregate intrinsic value	$ 1,297
Options exercisable, weighted average remaining contractual life (Year)	255 days
Options exercisable, weighted average exercise price (in dollars per share)	$ 51
Range 4 [Member]
Options outstanding, range of exercise price, lower range (in dollars per share)	55
Options outstanding, range of exercise price, upper range (in dollars per share)	$ 60
Options outstanding, number outstanding (in shares)	229
Options outstanding, aggregate intrinsic value
Options outstanding, weighted average remaining contractual life (Year)	7 years 255 days
Options outstanding, weighted average exercise price (in dollars per share)	$ 57
Options exercisable, number outstanding (in shares)	73
Options exercisable, aggregate intrinsic value
Options exercisable, weighted average remaining contractual life (Year)	6 years 328 days
Options exercisable, weighted average exercise price (in dollars per share)	$ 57
Range 5 [Member]
Options outstanding, range of exercise price, lower range (in dollars per share)	60
Options outstanding, range of exercise price, upper range (in dollars per share)	$ 65
Options outstanding, number outstanding (in shares)	244
Options outstanding, aggregate intrinsic value
Options outstanding, weighted average remaining contractual life (Year)	9 years 36 days
Options outstanding, weighted average exercise price (in dollars per share)	$ 62

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Note 8 - Shareholders' Equity - Weighted Average Assumptions Used in the Option Pricing to Value Stock Options Granted (Details) - $ / shares		12 Months Ended
		Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Expected volatility (1)	[1]	20.00%	20.00%	22.00%
Expected life in years (2) (Year)	[2]	4 years 292 days	4 years 292 days	4 years 292 days
Risk-free interest rate (3)	[3]	2.50%	1.97%	1.41%
Expected dividend yield		2.65%	3.28%	4.49%
Fair value per award (in dollars per share)		$ 9.98	$ 8.27	$ 5.97

[1] Measured using daily price changes of Company's stock over respective expected term of the option and the implied volatility derived from the market prices of the Company's stock and traded options.

[2] The number of years that the Company estimates that the options will be outstanding prior to exercise.

[3] The risk-free rate over the expected life based on the US Treasury yield curve in effect at the time of the grant.

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Note 8 - Shareholders' Equity - Summary of Option Activity (Details) - $ / shares	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Outstanding at January 1, 2018 (in shares)	1,030,000
Outstanding at January 1, 2018 (in dollars per share)	$ 49.44
Granted (in shares)	249,000	266,000	325,000
Granted (in dollars per share)	$ 62.16
Exercised (in shares)	(292,000)	(509,000)
Exercised (in dollars per share)	$ 45.76
Forfeited or expired (in shares)	(41,000)
Forfeited or expired (in dollars per share)	$ 52.54
Outstanding at December 31, 2018 (in shares)	946,000	1,030,000
Outstanding at December 31, 2018 (in dollars per share)	$ 53.78	$ 49.44
Outstanding at December 31, 2018 (Year)	5 years 255 days
Exercisable at December 31, 2018 (in shares)	457,000
Exercisable at December 31, 2018 (in dollars per share)	$ 50.38
Exercisable at December 31, 2018 (Year)	2 years 292 days

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Note 8 - Shareholders' Equity - Summary of Nonvested Option Activity (Details) - $ / shares	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Nonvested at January 1, 2018 (in shares)	561,000
Nonvested at January 1, 2018 (in dollars per share)	$ 6.98
Granted (in shares)	249,000	266,000	325,000
Granted (in dollars per share)	$ 9.98
Vested (in shares)	(280,000)
Vested (in dollars per share)	$ 6.54
Forfeited (in shares)	(41,000)
Forfeited (in dollars per share)	$ 7.66
Nonvested at December 31, 2018 (in shares)	489,000	561,000
Nonvested at December 31, 2018 (in dollars per share)	$ 8.71

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Note 8 - Shareholders' Equity - Summary of the Status of Restricted Performance Shares (Details) - shares shares in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Outstanding at January 1, (in shares)	49	48
Granted (in shares)	11	14
Issued upon vesting (in shares)	(19)	(13)
Forfeited (in shares)	(2)
Outstanding at December 31, (in shares)	39	49

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Note 9 - Regulatory Capital (Details Textual)	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2015
Capital Conservation Buffer		1.875%	1.25%	0.00%
Scenario, Forecast [Member]
Capital Conservation Buffer	2.50%

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Note 9 - Regulatory Capital - Capital Ratios for the Company and the Bank (Details) - USD ($) $ in Thousands		Dec. 31, 2018	Dec. 31, 2017
Common Equity Tier 1 Capital		$ 528,042	$ 479,259
Common Equity Tier 1 Capital, ratio		16.30%	15.36%
Common Equity Tier 1 Capital Required for Capital Adequacy		$ 206,576	$ 179,377
Common Equity Tier 1 Capital Required for Capital Adequacy, ratio	[1]	6.375%	5.75%
Common Equity Tier 1 Capital To Be Well-capitalized
Common Equity Tier 1 Capital To Be Well-capitalized, ratio
Tier 1 Capital		$ 528,042	$ 479,259
Tier 1 Capital, raio		16.30%	15.36%
Tier 1 Capital Required for Capital Adequacy		$ 255,182	$ 226,170
Tier 1 Capital Required for Capital Adequacy, ratio	[1]	7.875%	7.25%
Tier 1 Capital To Be Well-capitalized
Tier 1 Capital To Be Well-capitalized, ratio
Total Capital		$ 551,701	$ 504,576
Total Capital, ratio		17.03%	16.17%
Total Capital Required for Capital Adequacy		$ 319,990	$ 288,562
Total Capital Required for Capital Adequacy, ratio	[1]	9.875%	9.25%
Total Capital To Be Well-capitalized
Total Capital To Be Well-capitalized, ratio
Leverage Ratio, amount	[2]	$ 528,042	$ 479,259
Leverage Ratio	[2]	9.51%	8.86%
Leverage Ratio Required for Capital Adequacy, amount	[2]	$ 222,111	$ 216,280
Leverage Ratio Required for Capital Adequacy	[2]	4.00%	4.00%
Leverage Ratio To Be Well-capitalized, amount	[2]
Leverage Ratio To Be Well-capitalized	[2]
Westamerica Bank [Member]
Common Equity Tier 1 Capital		$ 415,575	$ 383,796
Common Equity Tier 1 Capital, ratio		13.01%	12.50%
Common Equity Tier 1 Capital Required for Capital Adequacy		$ 203,664	$ 176,568
Common Equity Tier 1 Capital Required for Capital Adequacy, ratio	[1]	6.375%	5.75%
Common Equity Tier 1 Capital To Be Well-capitalized		$ 207,658	$ 199,599
Common Equity Tier 1 Capital To Be Well-capitalized, ratio		6.50%	6.50%
Tier 1 Capital		$ 415,575	$ 383,796
Tier 1 Capital, raio		13.01%	12.50%
Tier 1 Capital Required for Capital Adequacy		$ 251,585	$ 222,630
Tier 1 Capital Required for Capital Adequacy, ratio	[1]	7.875%	7.25%
Tier 1 Capital To Be Well-capitalized		$ 255,579	$ 245,660
Tier 1 Capital To Be Well-capitalized, ratio		8.00%	8.00%
Total Capital		$ 445,234	$ 415,113
Total Capital, ratio		13.94%	13.52%
Total Capital Required for Capital Adequacy		$ 315,480	$ 284,045
Total Capital Required for Capital Adequacy, ratio	[1]	9.875%	9.25%
Total Capital To Be Well-capitalized		$ 319,474	$ 307,076
Total Capital To Be Well-capitalized, ratio		10.00%	10.00%
Leverage Ratio, amount	[2]	$ 415,575	$ 383,796
Leverage Ratio	[2]	7.55%	7.16%
Leverage Ratio Required for Capital Adequacy, amount	[2]	$ 220,312	$ 214,468
Leverage Ratio Required for Capital Adequacy	[2]	4.00%	4.00%
Leverage Ratio To Be Well-capitalized, amount	[2]	$ 275,390	$ 268,085
Leverage Ratio To Be Well-capitalized	[2]	5.00%	5.00%

[1] Includes 1.25% capital conservation buffer.

[2] The leverage ratio consists of Tier 1capital divided by the most recent quarterly average total assets, excluding certain intangible assets.

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Note 10 - Income Taxes (Details Textual) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Operating Loss Carryforwards, Total	$ 0	$ 0
Deferred Tax Assets, Tax Credit Carryforwards, Alternative Minimum Tax			$ 1,752
Income Tax Expense (Benefit), Continuing Operations, Adjustment of Deferred Tax (Asset) Liability			12,315
Unrecognized Tax Benefits, Income Tax Penalties and Interest Accrued, Total	13	13	13
State and Local Jurisdiction [Member]
Income Tax Expense (Benefit), Continuing Operations, Adjustment of Deferred Tax (Asset) Liability
California Franchise Tax Board [Member]
Open Tax Year		2011 2012 2013 2014 2015 2016 2017
California Franchise Tax Board [Member] | State and Local Jurisdiction [Member]
Deferred Tax Assets, Tax Credit Carryforwards, Total	$ 3,070	$ 3,070	$ 3,056
Operating Loss Carryforwards, Expiration Period	5 years		5 years
Internal Revenue Service (IRS) [Member]
Open Tax Year		2015 2016 2017

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Note 10 - Income Taxes - Components of Net Deferred Tax Asset (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Deferred tax asset
Allowance for credit losses	$ 6,868	$ 7,349
State franchise taxes	3,026	1,871
AMT carryforward		1,752
Securities available for sale	16,787	8,586
Deferred compensation	5,229	5,279
Real estate owned	553	553
Purchased assets and assumed liabilities	935	1,111
Post-retirement benefits	555	526
Employee benefit accruals	2,104	2,066
VISA Class B shares	167	96
Limited partnership investments	708	57
Impaired capital assets	3,070	3,056
Accrued liabilities	2,554	1,609
Premises and equipment	31	299
Other	721	520
Total deferred tax asset	43,308	34,730
Deferred tax liability
Net deferred loan fees	291	281
Intangible assets	761	1,247
Other		90
Total deferred tax liability	1,052	1,618
Net deferred tax asset	$ 42,256	$ 33,112

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Note 10 - Income Taxes - Provision for Federal and State Income Taxes (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Federal	$ 10,560	$ 1,778	$ 16,258
State	9,816	7,810	7,292
Total current	20,376	9,588	23,550
Federal	(206)	14,461	(2,604)
State	(737)	783	158
Total deferred	(943)	15,244	(2,446)
Income Tax Expense (Benefit), Continuing Operations, Adjustment of Deferred Tax (Asset) Liability		12,315
Provision for income taxes	19,433	37,147	21,104
Domestic Tax Authority [Member] | Internal Revenue Service (IRS) [Member]
Income Tax Expense (Benefit), Continuing Operations, Adjustment of Deferred Tax (Asset) Liability		12,315
State and Local Jurisdiction [Member]
Income Tax Expense (Benefit), Continuing Operations, Adjustment of Deferred Tax (Asset) Liability

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Note 10 - Income Taxes - Reconciliation of Income Tax Provision (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Federal income taxes due at statutory rate	$ 19,109	$ 30,509	$ 27,985
Reductions in income taxes resulting from:
Interest on state and municipal securities and loans not taxable for federal income tax purposes	(4,375)	(7,794)	(8,382)
State franchise taxes, net of federal income tax benefit	7,173	5,586	4,843
Re-measurement of net deferred tax asset due to enactment of new federal tax rate		12,315
Stock compensation deduction in excess of book expense	(528)	(583)
Tax credits	(1,291)	(1,850)	(2,286)
Dividend received deduction	(32)	(60)	(52)
Cash value life insurance	(490)	(603)	(607)
Other	(133)	(373)	(397)
Provision for income taxes	$ 19,433	$ 37,147	$ 21,104

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Note 10 - Income Taxes - Reconciliation of Unrecognized Tax Benefits (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Balance	$ 909	$ 1,099
Additions for tax positions taken in the current period
Reductions for tax positions taken in the current period
Additions for tax positions taken in prior years
Reductions for tax positions taken in prior years
Decrease related to settlements with taxing authorities		(190)
Decrease as a result of a lapse in statute of limitations
Balance	$ 909	$ 909

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Note 11 - Fair Value Measurements (Details Textual) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Securities Selected for OTTI Analysis, Market Price, Threshold	95.00%
Loans and Leases Receivable, Allowance, Ending Balance	$ 21,351	$ 23,009
Fair Value, Inputs, Level 3 [Member]
Fair Value Inputs, Appraisal Rate	10.00%

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Note 11 - Fair Value Measurements - Assets Measured at Fair Value on a Recurring Basis (Details) - USD ($) $ in Thousands		Dec. 31, 2018	Jan. 01, 2018	Dec. 31, 2017
Equity securities		$ 1,747	$ 1,800	$ 1,800
Debt securities available for sale		2,654,670		2,191,707
US Treasury Securities [Member]
Debt securities available for sale		139,574
US Government-sponsored Enterprises Debt Securities [Member]
Debt securities available for sale		164,018		119,319
Agency Residential MBS [Member]
Debt securities available for sale		853,871		767,706
Non-agency Residential MBS [Member]
Debt securities available for sale		114		154
Agency Commercial MBS [Member]
Debt securities available for sale		1,842		2,219
US Government Agencies Debt Securities [Member]
Debt securities available for sale		1,119		1,590
US States and Political Subdivisions Debt Securities [Member]
Debt securities available for sale		179,091		185,221
Debt Security, Corporate, US [Member]
Debt securities available for sale		1,315,041		1,115,498
Fair Value, Measurements, Recurring [Member]
Equity securities		1,747		1,800
Debt securities available for sale		2,654,670		2,191,707
Total		2,656,417		2,193,507
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Equity securities
Debt securities available for sale		139,574
Total		139,574
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Equity securities		1,747		1,800
Debt securities available for sale		2,515,096		2,191,707
Total		2,516,843		2,193,507
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]
Equity securities	[1]
Debt securities available for sale	[1]
Total	[1]
Fair Value, Measurements, Recurring [Member] | Mutual Fund [Member]
Equity securities		1,747		1,800
Fair Value, Measurements, Recurring [Member] | Mutual Fund [Member] | Fair Value, Inputs, Level 1 [Member]
Equity securities
Fair Value, Measurements, Recurring [Member] | Mutual Fund [Member] | Fair Value, Inputs, Level 2 [Member]
Equity securities		1,747		1,800
Fair Value, Measurements, Recurring [Member] | Mutual Fund [Member] | Fair Value, Inputs, Level 3 [Member]
Equity securities	[1]
Fair Value, Measurements, Recurring [Member] | US Treasury Securities [Member]
Debt securities available for sale		139,574
Fair Value, Measurements, Recurring [Member] | US Treasury Securities [Member] | Fair Value, Inputs, Level 1 [Member]
Debt securities available for sale		139,574
Fair Value, Measurements, Recurring [Member] | US Treasury Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Debt securities available for sale
Fair Value, Measurements, Recurring [Member] | US Treasury Securities [Member] | Fair Value, Inputs, Level 3 [Member]
Debt securities available for sale	[1]
Fair Value, Measurements, Recurring [Member] | US Government-sponsored Enterprises Debt Securities [Member]
Debt securities available for sale		164,018		119,319
Fair Value, Measurements, Recurring [Member] | US Government-sponsored Enterprises Debt Securities [Member] | Fair Value, Inputs, Level 1 [Member]
Debt securities available for sale
Fair Value, Measurements, Recurring [Member] | US Government-sponsored Enterprises Debt Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Debt securities available for sale		164,018		119,319
Fair Value, Measurements, Recurring [Member] | US Government-sponsored Enterprises Debt Securities [Member] | Fair Value, Inputs, Level 3 [Member]
Debt securities available for sale	[1]
Fair Value, Measurements, Recurring [Member] | Agency Residential MBS [Member]
Debt securities available for sale		853,871		767,706
Fair Value, Measurements, Recurring [Member] | Agency Residential MBS [Member] | Fair Value, Inputs, Level 1 [Member]
Debt securities available for sale
Fair Value, Measurements, Recurring [Member] | Agency Residential MBS [Member] | Fair Value, Inputs, Level 2 [Member]
Debt securities available for sale		853,871		767,706
Fair Value, Measurements, Recurring [Member] | Agency Residential MBS [Member] | Fair Value, Inputs, Level 3 [Member]
Debt securities available for sale	[1]
Fair Value, Measurements, Recurring [Member] | Non-agency Residential MBS [Member]
Debt securities available for sale		114		154
Fair Value, Measurements, Recurring [Member] | Non-agency Residential MBS [Member] | Fair Value, Inputs, Level 1 [Member]
Debt securities available for sale
Fair Value, Measurements, Recurring [Member] | Non-agency Residential MBS [Member] | Fair Value, Inputs, Level 2 [Member]
Debt securities available for sale		114		154
Fair Value, Measurements, Recurring [Member] | Non-agency Residential MBS [Member] | Fair Value, Inputs, Level 3 [Member]
Debt securities available for sale	[1]
Fair Value, Measurements, Recurring [Member] | Agency Commercial MBS [Member]
Debt securities available for sale		1,842		2,219
Fair Value, Measurements, Recurring [Member] | Agency Commercial MBS [Member] | Fair Value, Inputs, Level 1 [Member]
Debt securities available for sale
Fair Value, Measurements, Recurring [Member] | Agency Commercial MBS [Member] | Fair Value, Inputs, Level 2 [Member]
Debt securities available for sale		1,842		2,219
Fair Value, Measurements, Recurring [Member] | Agency Commercial MBS [Member] | Fair Value, Inputs, Level 3 [Member]
Debt securities available for sale	[1]
Fair Value, Measurements, Recurring [Member] | US Government Agencies Debt Securities [Member]
Debt securities available for sale		1,119		1,590
Fair Value, Measurements, Recurring [Member] | US Government Agencies Debt Securities [Member] | Fair Value, Inputs, Level 1 [Member]
Debt securities available for sale
Fair Value, Measurements, Recurring [Member] | US Government Agencies Debt Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Debt securities available for sale		1,119		1,590
Fair Value, Measurements, Recurring [Member] | US Government Agencies Debt Securities [Member] | Fair Value, Inputs, Level 3 [Member]
Debt securities available for sale	[1]
Fair Value, Measurements, Recurring [Member] | US States and Political Subdivisions Debt Securities [Member]
Debt securities available for sale		179,091		185,221
Fair Value, Measurements, Recurring [Member] | US States and Political Subdivisions Debt Securities [Member] | Fair Value, Inputs, Level 1 [Member]
Debt securities available for sale
Fair Value, Measurements, Recurring [Member] | US States and Political Subdivisions Debt Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Debt securities available for sale		179,091		185,221
Fair Value, Measurements, Recurring [Member] | US States and Political Subdivisions Debt Securities [Member] | Fair Value, Inputs, Level 3 [Member]
Debt securities available for sale	[1]
Fair Value, Measurements, Recurring [Member] | Debt Security, Corporate, US [Member]
Debt securities available for sale		1,315,041		1,115,498
Fair Value, Measurements, Recurring [Member] | Debt Security, Corporate, US [Member] | Fair Value, Inputs, Level 1 [Member]
Debt securities available for sale
Fair Value, Measurements, Recurring [Member] | Debt Security, Corporate, US [Member] | Fair Value, Inputs, Level 2 [Member]
Debt securities available for sale		1,315,041		1,115,498
Fair Value, Measurements, Recurring [Member] | Debt Security, Corporate, US [Member] | Fair Value, Inputs, Level 3 [Member]
Debt securities available for sale	[1]

[1] There were no transfers in to or out of level 3 during the year ended December 31, 2017.

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Note 11 - Fair Value Measurements - Assets Measured at Fair Value on a Nonrecurring Basis (Details) - Fair Value, Measurements, Nonrecurring [Member] - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Fair Value	$ 10,657	$ 12,280
Total Losses	(240)	(219)
Fair Value, Inputs, Level 1 [Member]
Fair Value
Fair Value, Inputs, Level 2 [Member]
Fair Value
Fair Value, Inputs, Level 3 [Member]
Fair Value	10,657	12,280
Other Real Estate Owned [Member]
Fair Value	350	1,426
Total Losses		(219)
Other Real Estate Owned [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value
Other Real Estate Owned [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value
Other Real Estate Owned [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value	350	1,426
Impaired Loans [Member] | Commercial Portfolio Segment [Member]
Fair Value	6,437	4,950
Total Losses
Impaired Loans [Member] | Commercial Real Estate Portfolio Segment [Member]
Fair Value	3,870	5,904
Total Losses	(240)
Impaired Loans [Member] | Fair Value, Inputs, Level 1 [Member] | Commercial Portfolio Segment [Member]
Fair Value
Impaired Loans [Member] | Fair Value, Inputs, Level 1 [Member] | Commercial Real Estate Portfolio Segment [Member]
Fair Value
Impaired Loans [Member] | Fair Value, Inputs, Level 2 [Member] | Commercial Portfolio Segment [Member]
Fair Value
Impaired Loans [Member] | Fair Value, Inputs, Level 2 [Member] | Commercial Real Estate Portfolio Segment [Member]
Fair Value
Impaired Loans [Member] | Fair Value, Inputs, Level 3 [Member] | Commercial Portfolio Segment [Member]
Fair Value	6,437	4,950
Impaired Loans [Member] | Fair Value, Inputs, Level 3 [Member] | Commercial Real Estate Portfolio Segment [Member]
Fair Value	$ 3,870	$ 5,904

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Note 11 - Fair Value Measurements - Fair Value Estimates for Financial Instruments, Excluding Financial Instruments Recorded at Fair Value on a Recurring Basis (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Reported Value Measurement [Member]
Cash and due from banks	$ 420,284	$ 575,002
Debt securities held to maturity	984,609	1,158,864
Loans	1,185,851	1,264,973
Deposits	4,866,839	4,827,613
Short-term borrowed funds	51,247	58,471
Estimate of Fair Value Measurement [Member]
Cash and due from banks	420,284	575,002
Debt securities held to maturity	971,445	1,155,342
Loans	1,184,770	1,257,811
Deposits	4,862,668	4,824,586
Short-term borrowed funds	51,247	58,471
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 1 [Member]
Cash and due from banks	420,284	575,002
Debt securities held to maturity
Loans
Deposits
Short-term borrowed funds
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 2 [Member]
Cash and due from banks
Debt securities held to maturity	971,445	1,155,342
Loans
Deposits	4,671,588	4,595,795
Short-term borrowed funds	51,247	58,471
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 3 [Member]
Cash and due from banks
Debt securities held to maturity
Loans	1,184,770	1,257,811
Deposits	191,080	228,791
Short-term borrowed funds

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Note 12 - Lease Commitments (Details Textual) $ in Thousands	12 Months Ended
	Dec. 31, 2018 USD ($)	Dec. 31, 2017 USD ($)	Dec. 31, 2016 USD ($)
Facilities Leased	58
Operating Leases, Future Minimum Payments Due, Future Minimum Sublease Rentals	$ 1,319
Operating Leases, Rent Expense, Minimum Rentals	6,794	$ 6,695	$ 6,823
Operating Leases, Rent Expense, Sublease Rentals	397	406	435
Operating Leases, Rent Expense, Net, Total	$ 6,397	$ 6,289	$ 6,388

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Note 12 - Lease Commitments - Minimum Future Rental Payments Under Noncancelable Operating Leases (Details) $ in Thousands	Dec. 31, 2018 USD ($)
2019	$ 5,996
2020	4,409
2021	2,741
2022	1,921
2023	1,223
Thereafter	1,044
Total minimum lease payments	$ 17,334

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Note 13 - Commitments and Contingent Liabilities (Details Textual) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Unfunded Loan Commitments	$ 278,598	$ 272,646
Guarantor Obligations, Current Carrying Value	75
Other Liabilities [Member]
Reserve for Unfunded Commitments	2,308	2,308
Financial Standby Letter of Credit [Member]
Letters of Credit Outstanding, Amount	2,772	19,263
Commercial Standby Letters of Credit [Member]
Letters of Credit Outstanding, Amount	0	$ 0
Settlement to Dismiss Lawsuit [Member]
Loss Contingency Accrual, Ending Balance	3,500
Customer Refunds [Member]
Loss Contingency Accrual, Ending Balance	$ 5,542

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Note 14 - Retirement Benefit Plans (Details Textual) - USD ($) xbrli-pure in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Defined Contribution Plan, Cost	$ 1,057	$ 944	$ 1,000
Employee Stock Ownership Plan (ESOP), Compensation Expense	$ 1,052	$ 1,098	$ 1,075
Defined Benefit Plan, Health Care Cost Trend Rate Assumed, Next Fiscal Year	0.00%

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Note 14 - Retirement Benefit Plans - Net Periodic Benefit Cost (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Service benefit	$ 24	$ (311)	$ (153)
Interest cost	72	95	108
Amortization of unrecognized transition obligation		61	61
Net periodic (benefit) cost	96	(155)	16
Amortization of unrecognized transition obligation, net of tax		(34)	(36)
Total recognized in net periodic (benefit) cost and accumulated other comprehensive income	$ 96	$ (189)	$ (20)

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Note 14 - Retirement Benefit Plans - Obligation and Funded Status (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Benefit obligation at beginning of year	$ 1,958	$ 2,319	$ 2,522
Service benefit	24	(311)	(153)
Interest cost	72	95	108
Benefits paid	(141)	(145)	(158)
Benefit obligation at end of year	1,913	1,958	2,319
Accumulated post-retirement benefit obligation	1,958	1,958	2,319	$ 1,913	$ 1,958	$ 2,319
Fair value of plan assets
Accumulated post-retirement benefit obligation in excess of plan assets				1,913	1,958	2,319
Retirees [Member]
Benefit obligation at beginning of year	1,575	1,705
Benefit obligation at end of year	1,913	1,575	1,705
Accumulated post-retirement benefit obligation	1,913	1,575	1,705	1,913	1,575	1,705
Fully Eligible Participants [Member]
Benefit obligation at beginning of year	382	606
Benefit obligation at end of year		382	606
Accumulated post-retirement benefit obligation		382	606		382	606
Other Participants [Member]
Benefit obligation at beginning of year	1	8
Benefit obligation at end of year		1	8
Accumulated post-retirement benefit obligation		$ 1	$ 8		$ 1	$ 8

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Note 14 - Retirement Benefit Plans - Assumptions (Details)	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Discount rate	3.76%	3.70%	4.10%
Discount rate	3.70%	4.10%	4.30%

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Note 14 - Retirement Benefit Plans - Estimated Future Benefit Payments (Details) $ in Thousands	Dec. 31, 2018 USD ($)
2019	$ 143
2020	143
2021	143
2022	140
2023	138
Years 2024-2028	$ 624

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Note 15 - Related Party Transactions - Related Party Loans (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Balance at January 1,	$ 622	$ 867
Originations
Principal reductions	(45)	(245)
Balance at December 31,	$ 577	$ 622
Percent of total loans outstanding.	0.05%	0.05%

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Note 16 - Regulatory Matters (Details Textual) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Federal Reserve Bank Average Balance Deposit	$ 473,250	$ 458,186

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Note 17 - Other Comprehensive Income - Components of Other Comprehensive Income (Loss) and Other Related Tax Effects (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Net unrealized gains (losses) arising during the year, before tax	$ (27,939)	$ (3,767)	$ (18,610)
Net unrealized gains (losses) arising during the year, tax	8,258	1,585	7,825
Net unrealized gains (losses) arising during the year, net of tax	(19,681)	(2,182)	(10,785)
Net unrealized losses arising during the year, before tax	(27,939)	(11,722)	(18,610)
Net unrealized gains (losses) arising during the year, tax	8,258	4,930	7,825
Changes in unrealized losses on debt securities available for sale, net of tax	(19,681)	(6,792)	(10,785)
Post-retirement benefit obligation, before tax		59	61
Post-retirement benefit obligation, tax		(25)	(25)
Post-retirement benefit obligation, net of tax		34	36
Other comprehensive income (loss), before tax	(27,939)	(11,663)	(18,549)
Other comprehensive income (loss), tax	8,258	4,905	7,800
Other comprehensive loss	(19,681)	(6,758)	(10,749)
Reclassification of gains (losses) included in net income, before tax		(7,955)
Reclassification of gains (losses) included in net income, tax		3,345
Reclassification of gains (losses) included in net income, net of tax		$ (4,610)

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Note 17 - Other Comprehensive Income - Cumulative Other Comprehensive Income (Loss) Balances (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Balance	$ 590,239	$ 561,367	$ 532,205
Net change	(19,681)	(6,758)	(10,749)
Balance	590,239
Balance	615,591	590,239	561,367
Accumulated Defined Benefit Plans Adjustment Attributable to Parent [Member]
Balance		(34)	(70)
Net change		34	36
Cumulative effect of equity securities losses reclassified
Balance
Reclass stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017
Balance			(34)
Accumulated Net Investment Gain (Loss) Attributable to Parent [Member]
Balance	(16,832)	(10,040)	745
Net change	(19,681)	(6,792)	(10,785)
Cumulative effect of equity securities losses reclassified	142
Balance	(16,690)
Reclass stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017	(3,625)
Balance	(39,996)	(16,832)	(10,040)
AOCI Attributable to Parent [Member]
Balance	(16,832)	(10,074)	675
Net change	(19,681)	(6,758)	(10,749)
Cumulative effect of equity securities losses reclassified	142
Balance	(16,690)
Reclass stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017	(3,625)
Balance	$ (39,996)	$ (16,832)	$ (10,074)

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Note 18 - Earnings Per Common Share (Details Textual) - shares shares in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Employee Stock Option [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	423	323	773

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Note 18 - Earnings Per Common Share - Earnings Per Common Share and Diluted Earnings Per Common Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended												12 Months Ended
	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Net Income	$ 19,055	$ 16,993	$ 18,010	$ 17,506	$ 4,160	$ 15,017	$ 15,799	$ 15,049	$ 14,453	$ 15,628	$ 14,546	$ 14,226	$ 71,564	$ 50,025	$ 58,853
Weighted average number of common shares outstanding - basic (in shares)													26,649	26,291	25,612
Basic earnings per common share (in dollars per share)	$ 0.71	$ 0.64	$ 0.68	$ 0.66	$ 0.16	$ 0.57	$ 0.60	$ 0.58	$ 0.56	$ 0.61	$ 0.57	$ 0.56	$ 2.69	$ 1.90	$ 2.30
Add common stock equivalents for options (in shares)													107	128	66
Weighted average number of common shares outstanding - diluted (denominator) (in shares)													26,756	26,419	25,678
Diluted earnings per common share (in dollars per share)	$ 0.71	$ 0.63	$ 0.67	$ 0.66	$ 0.16	$ 0.57	$ 0.60	$ 0.57	$ 0.56	$ 0.61	$ 0.57	$ 0.56	$ 2.67	$ 1.89	$ 2.29

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Note 19 - Westamerica Bancorporation (Parent Company Only Condensed Financial Information) - Statements of Income and Comprehensive Income (Details) - USD ($) $ in Thousands	3 Months Ended												12 Months Ended
	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Salaries and related benefits													$ 53,007	$ 51,519	$ 51,507
Income before taxes and equity in undistributed income of subsidiaries	$ 25,044	$ 21,249	$ 22,915	$ 21,789	$ 23,866	$ 21,106	$ 22,314	$ 19,886	$ 19,677	$ 21,655	$ 19,659	$ 18,966	90,997	87,172	79,957
Income tax benefit													(19,433)	(37,147)	(21,104)
Earnings of subsidiaries greater than subsidiary dividends													28,029	39,002	3,033
Net income for the period	$ 19,055	$ 16,993	$ 18,010	$ 17,506	$ 4,160	$ 15,017	$ 15,799	$ 15,049	$ 14,453	$ 15,628	$ 14,546	$ 14,226	71,564	50,025	58,853
Other comprehensive loss, net of tax														(6,758)	(10,749)
Comprehensive income													51,883	43,267	48,104
Parent Company [Member]
Dividends from subsidiaries													43,892	12,728	56,824
Interest income													33	43	25
Other income													9,447	8,590	8,315
Total income													53,372	21,361	65,164
Interest on borrowings
Salaries and related benefits													7,575	7,163	7,079
Other expense													3,181	3,416	3,290
Total expense													10,756	10,579	10,369
Income before taxes and equity in undistributed income of subsidiaries													42,616	10,782	54,795
Income tax benefit													919	241	1,025
Earnings of subsidiaries greater than subsidiary dividends													28,029	39,002	3,033
Net income for the period													71,564	50,025	58,853
Other comprehensive loss, net of tax													(19,681)	(6,758)	(10,749)
Comprehensive income													$ 51,883	$ 43,267	$ 48,104

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Note 19 - Westamerica Bancorporation (Parent Company Only Condensed Financial Information) - Balance Sheets (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Premises and equipment, net	$ 34,507	$ 35,301
Other assets	162,906	158,450
Total assets	5,568,526	5,513,046
Other liabilities	34,849	36,723
Total liabilities	4,952,935	4,922,807
Shareholders' equity	615,591	590,239	$ 561,367	$ 532,205
Total liabilities and shareholders' equity	5,568,526	5,513,046
Parent Company [Member]
Cash	72,878	53,409	$ 64,054	$ 26,453
Investment securities available for sale
Premises and equipment, net	10,400	9,639
Accounts receivable from Westamerica Bank	580	538
Other assets	36,990	40,547
Total assets	630,428	605,364
Accounts payable to Westamerica Bank	46	92
Other liabilities	14,791	15,033
Total liabilities	14,837	15,125
Shareholders' equity	615,591	590,239
Total liabilities and shareholders' equity	630,428	605,364
Parent Company [Member] | Westamerica Bank [Member]
Investment	509,125	500,776
Parent Company [Member] | Non-bank Subsidiaries [Member]
Investment	$ 455	$ 455

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Note 19 - Westamerica Bancorporation (Parent Company Only Condensed Financial Information) - Cash Flows Statement (Details) - USD ($) $ in Thousands	3 Months Ended												12 Months Ended
	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Net income for the period	$ 19,055	$ 16,993	$ 18,010	$ 17,506	$ 4,160	$ 15,017	$ 15,799	$ 15,049	$ 14,453	$ 15,628	$ 14,546	$ 14,226	$ 71,564	$ 50,025	$ 58,853
Depreciation and amortization/accretion													24,402	26,082	19,939
Increase in other assets													(4,017)	(1,732)	(3,321)
Stock option compensation expense													1,988	1,824	1,494
Provision (benefit) for deferred income tax													(943)	15,244	(2,446)
(Decrease) increase in other liabilities													(580)	(3,016)	2,026
Earnings of subsidiaries greater than subsidiary dividends													(28,029)	(39,002)	(3,033)
Life insurance gains													(585)
Gain on sales of premises and equipment													(538)	(793)	(79)
Net Cash Provided by Operating Activities													96,629	80,754	77,637
Proceeds from life insurance													1,169
Net Cash Provided by Investing Activities													(253,563)	(73,258)	(197,263)
Financing Activities:
Exercise of stock options													13,373	24,583	24,031
Taxes paid by withholding shares for tax purposes															(356)
Tax benefit increase (decrease) upon exercise of stock options and expiration of stock options															394
Retirement of common stock													(524)	(314)	(5,424)
Common stock dividends paid													(42,635)	(41,299)	(39,924)
Net Cash Used in Financing Activities													2,216	105,235	148,853
Net change in cash													(154,718)	112,731	29,227
Interest paid for the period													1,932	1,931	2,202
Income tax payments for the period													13,627	17,351	19,264
Parent Company [Member]
Net income for the period													71,564	50,025	58,853
Depreciation and amortization/accretion													361	319	305
(Increase) decrease in accounts receivable from affiliates													(43)	(16)	299
Increase in other assets													(2,638)	(2,203)	(1,940)
Stock option compensation expense													1,988	1,824	1,494
Tax benefit increase upon exercise of stock options and expiration of stock options															(394)
Provision (benefit) for deferred income tax													5,028	(3,971)	1,983
(Decrease) increase in other liabilities													978	202	1,392
Earnings of subsidiaries greater than subsidiary dividends													(28,029)	(39,002)	(3,033)
Net Cash Provided by Operating Activities													48,086	6,385	58,880
Net Cash Provided by Investing Activities													1,169
Financing Activities:
Exercise of stock options													13,373	24,583	24,031
Taxes paid by withholding shares for tax purposes															(356)
Retirement of common stock													(524)	(314)	(5,424)
Common stock dividends paid													(42,635)	(41,299)	(39,924)
Net Cash Used in Financing Activities													(29,786)	(17,030)	(21,279)
Net change in cash													19,469	(10,645)	37,601
Cash at Beginning of Period				$ 53,409				$ 64,054				$ 26,453	53,409	64,054	26,453
Cash at End of Period	$ 72,878				$ 53,409				$ 64,054				72,878	53,409	64,054
Interest paid for the period
Income tax payments for the period													$ 13,627	$ 17,351	$ 19,264

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Note 20 - Quarterly Financial Information - Quarterly Financial Information (Unaudited) (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended												12 Months Ended
	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Interest and loan fee income	$ 39,448	$ 38,614	$ 37,346	$ 36,315	$ 35,478	$ 34,623	$ 34,083	$ 34,128	$ 33,715	$ 33,955	$ 34,248	$ 34,001	$ 151,723	$ 138,312	$ 135,919
Net interest income	38,934	38,087	36,887	35,856	35,007	34,150	33,607	33,648	33,215	33,432	33,707	33,449	149,764	136,412	133,803
Provision for loan losses							(1,900)			(3,200)				(1,900)	(3,200)
Total Noninterest Income	11,897	12,528	11,769	11,955	20,300	12,548	12,123	11,657	11,545	11,598	11,702	11,729	48,149	56,628	46,574
Noninterest expense	25,787	29,366	25,741	26,022	31,441	25,592	25,316	25,419	25,083	26,575	25,750	26,212	106,916	107,768	103,620
Income before taxes and equity in undistributed income of subsidiaries	25,044	21,249	22,915	21,789	23,866	21,106	22,314	19,886	19,677	21,655	19,659	18,966	90,997	87,172	79,957
Net income for the period	$ 19,055	$ 16,993	$ 18,010	$ 17,506	$ 4,160	$ 15,017	$ 15,799	$ 15,049	$ 14,453	$ 15,628	$ 14,546	$ 14,226	$ 71,564	$ 50,025	$ 58,853
Basic earnings per common share (in dollars per share)	$ 0.71	$ 0.64	$ 0.68	$ 0.66	$ 0.16	$ 0.57	$ 0.60	$ 0.58	$ 0.56	$ 0.61	$ 0.57	$ 0.56	$ 2.69	$ 1.90	$ 2.30
Diluted earnings per common share (in dollars per share)	0.71	0.63	0.67	0.66	0.16	0.57	0.60	0.57	0.56	0.61	0.57	0.56	2.67	1.89	2.29
Dividends paid (in dollars per share)	0.40	0.40	0.40	0.40	0.40	0.39	0.39	0.39	0.39	0.39	0.39	0.39	1.60	1.57	1.56
Share price, common stock (in dollars per share)	55.68												55.68
Minimum [Member]
Share price, common stock (in dollars per share)	52.75	57.56	55.81	55.72	53.96	49.54	51.31	54.12	48.20	46.61	45.86	40.72	52.75	53.96	48.20
Maximum [Member]
Share price, common stock (in dollars per share)	$ 63.20	$ 64.52	$ 60.68	$ 62.52	$ 63.03	$ 59.54	$ 57.78	$ 64.07	$ 65.34	$ 50.96	$ 51.53	$ 49.63	$ 63.20	$ 63.03	$ 65.34