WESTAMERICA BANCORPORATION - FORM 10-Q

Attached files

file	filename
EX-32.2 - EXHIBIT 32.2 - WESTAMERICA BANCORPORATION	exh_322.htm
EX-32.1 - EXHIBIT 32.1 - WESTAMERICA BANCORPORATION	exh_321.htm
EX-31.2 - EXHIBIT 31.2 - WESTAMERICA BANCORPORATION	exh_312.htm
EX-31.1 - EXHIBIT 31.1 - WESTAMERICA BANCORPORATION	exh_311.htm

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒

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

For the quarterly period ended June 30, 2018

☐

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

For the transition period from __________ to __________.

Commission file number: 001-09383

WESTAMERICA BANCORPORATION

(Exact Name of Registrant as Specified in Its Charter)

CALIFORNIA	94-2156203
(State or Other Jurisdiction of	(I.R.S. Employer
Incorporation or Organization)	Identification No.)

1108 FIFTH AVENUE, SAN RAFAEL, CALIFORNIA 94901

(Address of Principal Executive Offices) (Zip Code)

Registrant's Telephone Number, Including Area Code (707) 863-6000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒

No ☐

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

Yes ☒

No ☐

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. (Check one):

Large accelerated filer ☒	Accelerated filer ☐	Non-accelerated filer ☐ (Do not check if a smaller reporting company)
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 ☒

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

Title of Class		Shares outstanding as of July 26, 2018

Common Stock,		26,671,148
No Par Value

TABLE OF CONTENTS

		Page
Forward Looking Statements		3

PART I - FINANCIAL INFORMATION

Item 1	Financial Statements	4

	Notes to Unaudited Consolidated Financial Statements	9

Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	29

Item 3	Quantitative and Qualitative Disclosures about Market Risk	51

Item 4	Controls and Procedures	52

PART II - OTHER INFORMATION

Item 1	Legal Proceedings	52

Item 1A	Risk Factors	52

Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	52

Item 3	Defaults upon Senior Securities	53

Item 4	Mine Safety Disclosures	53

Item 5	Other Information	53

Item 6	Exhibits	53

Signatures		54

Exhibit Index		55

Exhibit 31.1 - Certification of Chief Executive Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a)		56

Exhibit 31.2 - Certification of Chief Financial Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a)		57

Exhibit 32.1 - Certification of Chief Executive Officer Required by 18 U.S.C. Section 1350		58

Exhibit 32.2 - Certification of Chief Financial Officer Required by 18 U.S.C. Section 1350		59

- 2 -

FORWARD-LOOKING STATEMENTS

This report on Form 10-Q contains forward-looking statements about Westamerica Bancorporation (the “Company”) 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 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, 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. The reader is directed to the Company's annual report on Form 10-K for the year ended December 31, 2017, for further discussion of factors which could affect the Company's business and cause actual results to differ materially from those expressed in any forward-looking statement made in this report.

- 3 -

PART I - FINANCIAL INFORMATION

Item 1

Financial Statements

WESTAMERICA BANCORPORATION

CONSOLIDATED BALANCE SHEETS

(unaudited)

(In thousands)

	At June 30,			At December 31,
	2018			2017
Assets:
Cash and due from banks	$	629,146		$	575,002
Equity securities		1,750			1,800
Debt securities available for sale		2,363,194			2,191,707
Debt securities held to maturity, with fair values of: $1,058,573 at June 30, 2018 and $1,155,342 at December 31, 2017		1,076,456			1,158,864
Loans		1,200,192			1,287,982
Allowance for loan losses		(23,040	)		(23,009	)
Loans, net of allowance for loan losses		1,177,152			1,264,973
Other real estate owned		939			1,426
Premises and equipment, net		35,774			35,301
Identifiable intangibles, net		2,827			3,850
Goodwill		121,673			121,673
Other assets		168,933			158,450
Total Assets	$	5,577,844		$	5,513,046

Liabilities:
Noninterest-bearing deposits	$	2,205,971		$	2,197,526
Interest-bearing deposits		2,681,151			2,630,087
Total deposits		4,887,122			4,827,613
Short-term borrowed funds		68,894			58,471
Other liabilities		35,690			36,723
Total Liabilities		4,991,706			4,922,807

Contingencies (Note 10)

Shareholders' Equity:
Common stock (no par value), authorized - 150,000 shares Issued and outstanding: 26,649 at June 30, 2018 and 26,425 at December 31, 2017		443,338			431,734
Deferred compensation		1,533			1,533
Accumulated other comprehensive loss		(49,900	)		(16,832	)
Retained earnings		191,167			173,804
Total Shareholders' Equity		586,138			590,239
Total Liabilities and Shareholders' Equity	$	5,577,844		$	5,513,046

See accompanying notes to unaudited consolidated financial statements.

- 4 -

WESTAMERICA BANCORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(unaudited)

	For the Three Months						For the Six Months
	Ended June 30,
	2018			2017			2018			2017
	(In thousands, except per share data)
Interest and Loan Fee Income:
Loans	$	14,957		$	15,468		$	29,654		$	31,248
Equity securities		86			70			171			144
Debt securities available for sale		14,323			10,639			27,874			20,814
Debt securities held to maturity		6,216			6,986			12,390			14,281
Total Interest and Loan Fee Income		35,582			33,163			70,089			66,487
Interest Expense:
Deposits		449			465			899			934
Short-term borrowed funds		10			11			19			22
Total Interest Expense		459			476			918			956
Net Interest and Loan Fee Income		35,123			32,687			69,171			65,531
Reversal of Provision for Loan Losses		-			(1,900	)		-			(1,900	)
Net Interest and Loan Fee Income After Reversal of Provision for Loan Losses		35,123			34,587			69,171			67,431
Noninterest Income:
Service charges on deposit accounts		4,645			4,945			9,397			9,868
Merchant processing services		2,305			2,052			4,725			3,927
Debit card fees		1,698			1,586			3,303			3,067
Trust fees		726			716			1,469			1,418
ATM processing fees		698			654			1,362			1,229
Other service fees		650			662			1,281			1,312
Financial services commissions		141			142			255			337
Equity securities losses		(14	)		-			(50	)		-
Other noninterest income		920			1,366			1,982			2,622
Total Noninterest Income		11,769			12,123			23,724			23,780
Noninterest Expense:
Salaries and related benefits		13,186			12,981			26,537			26,051
Occupancy and equipment		4,864			4,776			9,555			9,663
Outsourced data processing services		2,299			2,188			4,639			4,327
Professional fees		871			410			1,656			1,021
Amortization of identifiable intangibles		453			762			1,023			1,562
Courier service		422			438			885			859
Other noninterest expense		1,882			2,841			3,896			5,528
Total Noninterest Expense		23,977			24,396			48,191			49,011
Income Before Income Taxes		22,915			22,314			44,704			42,200
Provision for income taxes		4,905			6,515			9,188			11,352
Net Income	$	18,010		$	15,799		$	35,516		$	30,848

Average Common Shares Outstanding		26,630			26,299			26,581			26,235
Average Diluted Common Shares Outstanding		26,728			26,402			26,696			26,366
Per Common Share Data:
Basic earnings	$	0.68		$	0.60		$	1.34		$	1.18
Diluted earnings		0.67			0.60			1.33			1.17
Dividends paid		0.40			0.39			0.80			0.78

See accompanying notes to unaudited consolidated financial statements.

- 5 -

WESTAMERICA BANCORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(unaudited)

	For the Three Months						For the Six Months
	Ended June 30,
	2018			2017			2018			2017
	(In thousands)
Net income	$	18,010		$	15,799		$	35,516		$	30,848
Other comprehensive (loss) income:
Changes in unrealized gains on debt securities available for sale		(9,154	)		6,160			(42,000	)		7,234
Deferred tax benefit (expense)		2,706			(2,590	)		12,415			(3,042	)
Changes in unrealized gains on debt securities available for sale, net of tax		(6,448	)		3,570			(29,585	)		4,192
Post-retirement benefit transition obligation amortization		-			15			-			30
Deferred tax expense		-			(6	)		-			(12	)
Post-retirement benefit transition obligation amortization, net of tax		-			9			-			18
Total other comprehensive (loss) income		(6,448	)		3,579			(29,585	)		4,210
Total comprehensive (loss) income	$	11,562		$	19,378		$	5,931		$	35,058

See accompanying notes to unaudited consolidated financial statements.

- 6 -

WESTAMERICA BANCORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

(unaudited)

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

Balance, December 31, 2016		25,907		$	404,606		$	1,533	$	(10,074	)	$	165,302		$	561,367
Net income for the period													30,848			30,848
Other comprehensive income										4,210						4,210
Exercise of stock options		389			18,290											18,290
Restricted stock activity		13			707											707
Stock based compensation					912											912
Stock awarded to employees		1			54											54
Retirement of common stock		(6	)		(90	)							(224	)		(314	)
Dividends													(20,480	)		(20,480	)
Balance, June 30, 2017		26,304		$	424,479		$	1,533	$	(5,864	)	$	175,446		$	595,594

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										(3,625	)		3,625			-
Net income for the period													35,516			35,516
Other comprehensive loss										(29,585	)					(29,585	)
Exercise of stock options		212			9,483											9,483
Restricted stock activity		20			1,143											1,143
Stock based compensation		-			1,050											1,050
Stock awarded to employees		1			77											77
Retirement of common stock		(9	)		(149	)							(375	)		(524	)
Dividends													(21,261	)		(21,261	)
Balance, June 30, 2018		26,649		$	443,338		$	1,533	$	(49,900	)	$	191,167		$	586,138

See accompanying notes to unaudited consolidated financial statements.

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WESTAMERICA BANCORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	For the Six Months
	Ended June 30,
	2018			2017
	(In thousands)
Operating Activities:
Net income	$	35,516		$	30,848
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization/accretion		12,594			12,068
Reversal of provision for loan losses		-			(1,900	)
Net amortization of deferred loan (fees) costs		(112	)		21
Increase in interest income receivable		(1,375	)		(415	)
Life insurance premiums paid		(406	)		(126	)
Decrease in income taxes receivable		2,556			91
(Increase) decrease in net deferred tax asset		(204	)		262
Decrease in other assets		60			1,155
Stock option compensation expense		1,050			912
Increase in interest expense payable		50			33
Increase (decrease) in other liabilities		137			(2,553	)
Equity securities losses		50			-
Net writedown of premises and equipment		3			60
Net gain on sale of foreclosed assets		(46	)		(72	)
Writedown of foreclosed assets		27			-
Net Cash Provided by Operating Activities		49,900			40,384

Investing Activities:
Net repayments of loans		89,041			35,852
Net payments under FDIC⁽¹⁾ indemnification agreements		-			(63	)
Purchases of debt securities available for sale		(439,212	)		(253,658	)
Proceeds from sale/maturity/calls of debt securities available for sale		220,037			171,632
Proceeds from maturity/calls of debt securities held to maturity		78,551			80,433
Purchases of premises and equipment		(2,309	)		(1,050	)
Net change in FRB⁽²⁾ stock		-			24
Proceeds from sale of foreclosed assets		506			1,521
Net Cash (Used in) Provided by Investing Activities		(53,386	)		34,691

Financing Activities:
Net increase (decrease) in deposits		59,509			(22,171	)
Net change in short-term borrowings		10,423			16,691
Exercise of stock options		9,483			18,290
Retirement of common stock		(524	)		(314	)
Common stock dividends paid		(21,261	)		(20,480	)
Net Cash Provided by (Used in) Financing Activities		57,630			(7,984	)
Net Change In Cash and Due from Banks		54,144			67,091
Cash and Due from Banks at Beginning of Period		575,002			462,271
Cash and Due from Banks at End of Period	$	629,146		$	529,362

Supplemental Cash Flow Disclosures:
Supplemental disclosure of non cash activities:
Loan collateral transferred to other real estate owned	$	-		$	-
Securities purchases pending settlement		3,159			649
Supplemental disclosure of cash flow activities:
Interest paid for the period		885			955
Income tax payments for the period		6,776			10,998

See accompanying notes to unaudited consolidated financial statements.

⁽¹⁾

Federal Deposit Insurance Corporation ("FDIC")

⁽²⁾

Federal Reserve Bank ("FRB")

- 8 -

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1: Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission and follow general practices within the banking industry. The results of operations reflect interim adjustments, all of which are of a normal recurring nature and which, in the opinion of Management, are necessary for a fair presentation of the results for the interim periods presented. The interim results for the three and six months ended June 30, 2018 are not necessarily indicative of the results expected for the full year. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes as well as other information included in the Company's Annual Report on Form 10-K for the year ended December 31, 2017.

Note 2: Accounting Policies

The most significant accounting policies followed by the Company are presented in Note 1 to the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. These policies, along with the disclosures presented in the other financial statement notes and in this discussion, provide information on how significant assets and liabilities are valued in the financial statements and how those values are determined. Based on the valuation techniques used and the sensitivity of financial statement amounts to the methods, assumptions, and estimates underlying those amounts, it is reasonably possible conditions could change materially affecting results of operations and financial conditions.

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.

Certain amounts in prior periods have been reclassified to conform to the current presentation.

Recently Adopted Accounting Standards

In the six months ended June 30, 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.

Approximately 73% of our revenue, including all of our net interest income and a portion of our noninterest income, is 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. Our 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: 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.

- 9 -

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.

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 9).

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 retained earnings of $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. Management is evaluating the impact that the ASU will have on the Company’s financial statements. As of December 31, 2017, the Company leased 58 of its operating facilities; the remaining minimum lease payments were $17.5 million. The Company does not expect a material change in noninterest expenses upon adoption of the new standard.

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.

- 10 -

The Company will be required to adopt the ASU provisions on January 1, 2020. Management is evaluating the impact that the ASU will have on the Company’s consolidated financial statements. The ultimate adjustment to the allowance for loan losses will be accomplished through an offsetting after-tax adjustment to shareholders’ equity. Economic conditions and the composition of the Company’s loan portfolio at the time of adoption will influence the extent of the adopting accounting adjustment.

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. Management is evaluating the impact the ASU will have on the Company’s financial statements.

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. However, the Company is currently evaluating the prepayable assets in the HTM portfolio to determine if a one-time reclassification of prepayable assets from HTM to the AFS will occur upon implementation.

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Note 3: 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 retained earnings of $142 thousand, net of tax.

At June 30, 2018, the market value of equity securities was $1,750 thousand. During the six months ended June 30, 2018, the Company recognized gross unrealized holding losses of $50 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:

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
At June 30, 2018	(In thousands)
Debt securities available for sale
Securities of U.S. Government sponsored entities	$	122,296	$	-	$	(4,924	)	$	117,372
Agency residential mortgage-backed securities (MBS)		894,339		348		(37,322	)		857,365
Non-agency residential MBS		127		1		-			128
Agency commercial MBS		2,219		-		(41	)		2,178
Securities of U.S. Government entities		1,441		-		(8	)		1,433
Obligations of states and political subdivisions		184,865		2,466		(3,640	)		183,691
Corporate securities		1,228,751		613		(28,337	)		1,201,027
Total debt securities available for sale		2,434,038		3,428		(74,272	)		2,363,194
Debt securities held to maturity
Agency residential MBS		493,872		256		(18,857	)		475,271
Non-agency residential MBS		3,743		74		-			3,817
Agency commercial MBS		1,886		-		(6	)		1,880
Obligations of states and political subdivisions		576,955		4,039		(3,389	)		577,605
Total debt securities held to maturity		1,076,456		4,369		(22,252	)		1,058,573
Total	$	3,510,494	$	7,797	$	(96,524	)	$	3,421,767

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			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 June 30, 2018
	Debt Securities Available				Debt Securities Held
	for Sale				to Maturity
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
	(In thousands)
Maturity in years:
1 year or less	$	124,211	$	123,868	$	77,266	$	77,884
Over 1 to 5 years		1,192,306		1,162,929		239,877		239,547
Over 5 to 10 years		180,999		179,109		256,872		257,158
Over 10 years		39,837		37,617		2,940		3,016
Subtotal		1,537,353		1,503,523		576,955		577,605
MBS		896,685		859,671		499,501		480,968
Total	$	2,434,038	$	2,363,194	$	1,076,456	$	1,058,573

	At December 31, 2017
	Debt Securities Available				Debt Securities Held
	for Sale				to Maturity
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		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 June 30, 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 June 30, 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)
Securities of U.S. Government sponsored entities		2	$	1,972	$	(18	)		8	$	115,320	$	(4,906	)		10	$	117,292	$	(4,924	)
Agency residential MBS		19		353,273		(7,324	)		50		469,052		(29,998	)		69		822,325		(37,322	)
Agency commercial MBS		1		323		(10	)		1		1,855		(31	)		2		2,178		(41	)
Securities of U.S. Government entities		-		-		-			3		1,433		(8	)		3		1,433		(8	)
Obligations of states and political subdivisions		48		32,632		(588	)		47		52,964		(3,052	)		95		85,596		(3,640	)
Corporate securities		80		794,677		(18,385	)		37		291,282		(9,952	)		117		1,085,959		(28,337	)
Total		150	$	1,182,877	$	(26,325	)		146	$	931,906	$	(47,947	)		296	$	2,114,783	$	(74,272	)

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

	Debt Securities Held to Maturity
	At June 30, 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		27	$	39,066	$	(788	)		68	$	426,277	$	(18,069	)		95	$	465,343	$	(18,857	)
Agency commercial MBS		1		1,880		(6	)		-		-		-			1		1,880		(6	)
Obligations of states and political subdivisions		224		222,929		(1,382	)		56		57,045		(2,007	)		280		279,974		(3,389	)
Total		252	$	263,875	$	(2,176	)		124	$	483,322	$	(20,076	)		376	$	747,197	$	(22,252	)

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 $13.9 million at June 30, 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 June 30, 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 June 30, 2018 and December 31, 2017, the Company had debt securities pledged to secure public deposits and short-term borrowed funds of $718,005 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 Three Months				For the Six Months
	Ended June 30,
	2018		2017		2018		2017
	(In thousands)

Taxable	$	15,598	$	12,481	$	30,547	$	24,627
Tax-exempt from regular federal income tax		5,027		5,214		9,888		10,612
Total interest income from investment securities	$	20,625	$	17,695	$	40,435	$	35,239

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Note 4: Loans, Allowance for Loan Losses and Other Real Estate Owned

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

	At June 30,		At December 31,
	2018		2017
	(In thousands)
Commercial	$	288,499	$	335,996
Commercial Real Estate		552,294		568,584
Construction		3,254		5,649
Residential Real Estate		54,030		65,183
Consumer Installment & Other		302,115		312,570
Total	$	1,200,192	$	1,287,982

Total loans outstanding reported above include loans purchased from the FDIC of $70,835 thousand and $83,478 thousand at June 30, 2018 and December 31, 2017, respectively. Loans purchased from the FDIC were separately reported in prior periods and have been reclassified into their respective categories in the current presentation.

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

	For the			For the
	Six Months Ended			Year Ended
	June 30, 2018			December 31, 2017
Accretable yield:	(In thousands)
Balance at the beginning of the period	$	738		$	1,237
Reclassification from nonaccretable difference		696			1,852
Accretion		(1,114	)		(2,351	)
Balance at the end of the period	$	320		$	738

Accretion	$	(1,114	)	$	(2,351	)
Change in FDIC indemnification		2			192
(Increase) in interest income	$	(1,112	)	$	(2,159	)

The following summarizes activity in the allowance for loan losses:

	Allowance for Loan Losses
	For the Three Months Ended June 30, 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	$	8,517		$	3,824		$	175	$	908	$	5,739		$	3,918		$	23,081
(Reversal) provision		(662	)		(35	)		35		156		665			(159	)		-
Chargeoffs		-			-			-		-		(805	)		-			(805	)
Recoveries		420			-			-		-		344			-			764
Total allowance for loan losses	$	8,275		$	3,789		$	210	$	1,064	$	5,943		$	3,759		$	23,040

	Allowance for Loan Losses
	For the Six Months Ended June 30, 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		(679	)		(60	)		(125	)		69		702			93		-
Chargeoffs		(41	)		-			-			-		(2,170	)		-		(2,211	)
Recoveries		1,249			-			-			-		993			-		2,242
Total allowance for loan losses	$	8,275		$	3,789		$	210		$	1,064	$	5,943		$	3,759	$	23,040

- 16 -

	Allowance for Loan Losses
	For the Three Months Ended June 30, 2017
													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	$	8,593		$	3,522		$	112		$	1,214		$	6,984		$	4,494		$	24,919
(Reversal) provision		(38	)		(55	)		(1,851	)		(109	)		736			(583	)		(1,900	)
Chargeoffs		(726	)		-			-			-			(1,158	)		-			(1,884	)
Recoveries		338			78			1,899			-			653			-			2,968
Total allowance for loan losses	$	8,167		$	3,545		$	160		$	1,105		$	7,215		$	3,911		$	24,103

	Allowance for Loan Losses
	For the Six Months Ended June 30, 2017
												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	$	8,327		$	3,330	$	152		$	1,330		$	7,980		$	4,835		$	25,954
Provision (reversal)		171			127		(1,891	)		(225	)		842			(924	)		(1,900	)
Chargeoffs		(829	)		-		-			-			(2,897	)		-			(3,726	)
Recoveries		498			88		1,899			-			1,290			-			3,775
Total allowance for loan losses	$	8,167		$	3,545	$	160		$	1,105		$	7,215		$	3,911		$	24,103

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 June 30, 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	$	4,720	$	168	$	-	$	-	$	-	$	-	$	4,888
Collectively evaluated for impairment		3,555		3,621		210		1,064		5,943		3,759		18,152
Purchased loans with evidence of credit deterioration		-		-		-		-		-		-		-
Total	$	8,275	$	3,789	$	210	$	1,064	$	5,943	$	3,759	$	23,040
Carrying value of loans:
Individually evaluated for impairment	$	10,328	$	10,338	$	-	$	204	$	-	$	-	$	20,870
Collectively evaluated for impairment		278,137		541,729		3,254		53,826		301,962		-		1,178,908
Purchased loans with evidence of credit deterioration		34		227		-		-		153		-		414
Total	$	288,499	$	552,294	$	3,254	$	54,030	$	302,115	$	-	$	1,200,192

	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 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 evaluations occur every calendar quarter. If the Bank becomes aware of deterioration in a borrower’s performance or financial condition between Loan Review Department examinations, assigned risk grades are re-evaluated promptly. Credit risk grades assigned by management and validated by the Loan Review Department are subject to review by the Bank’s regulatory authorities during regulatory examinations.

- 17 -

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

	Loan Credit Risk Profile by Internally Assigned Grade
	At June 30, 2018
	Commercial		Commercial Real Estate		Construction		Residential Real Estate		Consumer Installment and Other		Total
	(In thousands)
Grade:
Pass	$	276,492	$	536,256	$	3,254	$	52,960	$	300,173	$	1,169,135
Substandard		12,007		16,038		-		1,070		1,645		30,760
Doubtful		-		-		-		-		105		105
Loss		-		-		-		-		192		192
Total	$	288,499	$	552,294	$	3,254	$	54,030	$	302,115	$	1,200,192

Credit risk profile reflects internally assigned grade of purchased covered loans without regard to FDIC indemnification on $6,473 thousand residential real estate and consumer loans.

	Loan 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 grade of purchased covered loans without regard to FDIC indemnification on $7,766 thousand residential real estate and consumer loans.

The following tables summarize loans by delinquency and nonaccrual status:

	Summary of Loans by Delinquency and Nonaccrual Status
	At June 30, 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	$	287,123	$	899	$	253	$	-	$	224	$	288,499
Commercial real estate		543,502		3,320		803		-		4,669		552,294
Construction		3,254		-		-		-		-		3,254
Residential real estate		53,099		-		931		-		-		54,030
Consumer installment and other		298,436		2,779		707		193		-		302,115
Total	$	1,185,414	$	6,998	$	2,694	$	193	$	4,893	$	1,200,192

	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 June 30, 2018 and December 31, 2017.

The following summarizes impaired loans:

	Impaired Loans
	At June 30,						At December 31,
	2018						2017
			Unpaid						Unpaid
	Recorded		Principal		Related		Recorded		Principal		Related
	Investment		Balance		Allowance		Investment		Balance		Allowance
	(In thousands)
With no related allowance recorded:
Commercial	$	1,065	$	1,107	$	-	$	1,212	$	1,271	$	-
Commercial real estate		9,359		11,067		-		13,169		14,985		-
Residential real estate		204		234		-		208		239		-
Consumer installment and other		153		260		-		360		466		-
Total with no related allowance recorded		10,781		12,668		-		14,949		16,961		-

With an allowance recorded:
Commercial		9,496		9,496		4,720		9,764		9,764		4,814
Commercial real estate		1,765		1,767		168		1,790		1,792		171
Total with an allowance recorded		11,261		11,263		4,888		11,554		11,556		4,985
Total	$	22,042	$	23,931	$	4,888	$	26,503	$	28,517	$	4,985

Impaired loans include troubled debt restructured loans. Impaired loans at June 30, 2018, included $9,089 thousand of restructured loans, $4,134 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 Three Months Ended June 30,								For the Six Months Ended June 30,
	2018				2017				2018				2017
	Average		Recognized		Average		Recognized		Average		Recognized		Average		Recognized
	Recorded		Interest		Recorded		Interest		Recorded		Interest		Recorded		Interest
	Investment		Income		Investment		Income		Investment		Income		Investment		Income
	(In thousands)
Commercial	$	10,689	$	145	$	11,194	$	118	$	10,793	$	320	$	11,243	$	236
Commercial real estate		11,837		211		15,297		224		12,796		426		14,898		461
Residential real estate		205		4		368		5		206		8		558		9
Consumer installment and other		254		3		514		7		305		6		529		14
Total	$	22,985	$	363	$	27,373	$	354	$	24,100	$	760	$	27,228	$	720

The following tables provide information on troubled debt restructurings:

	Troubled Debt Restructurings
	At June 30, 2018
							Period-End
							Individual
	Number of		Pre-Modification		Period-End		Impairment
	Contracts		Carrying Value		Carrying Value		Allowance
	($ in thousands)
Commercial		6	$	2,377	$	978	$	36
Commercial real estate		8		9,237		7,907		-
Residential real estate		1		241		204		-
Total		15	$	11,855	$	9,089	$	36

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	Troubled Debt Restructurings
	At December 31, 2017
							Period-End
							Individual
	Number of		Pre-Modification		Period-End		Impairment
	Contracts		Carrying Value		Carrying Value		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

During the three and six months ended June 30, 2018, the Company did not modify any loans that were considered troubled debt restructurings. During the three and six months ended June 30, 2017, the Company modified one loan with a carrying value of $407 thousand and three loans with an aggregate carrying value of $680 thousand, respectively, that were considered troubled debt restructurings. The concessions granted in the first six months of 2017 consisted of modifications of payment terms to extend the maturity date to allow for deferred principal repayment and under-market terms. There were no chargeoffs related to troubled debt restructurings made during the three and six months ended June 30, 2018 and 2017. During the three and six months ended June 30, 2018 and 2017, 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 June 30, 2018 and December 31, 2017.

There were no loans held for sale at June 30, 2018 and December 31, 2017.

At June 30, 2018 and December 31, 2017, the Company held total other real estate owned (OREO) of $939 thousand net of reserve of $1,264 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, respectively. At June 30, 2018 and December 31, 2017 there were no consumer mortgage loans outstanding secured by residential real estate properties for which formal foreclosure proceedings were in process.

Note 5: 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 June 30, 2018, the Bank did not have credit extended to any one entity exceeding these limits. At June 30, 2018, the Bank had 36 lending relationships each with aggregate amounts exceeding $5 million. The Company has significant credit arrangements that are secured by real estate collateral. In addition to real estate loans outstanding as disclosed in Note 4, the Company had loan commitments related to real estate loans of $56,137 thousand and $53,874 thousand at June 30, 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 June 30, 2018, the Bank held corporate bonds in 78 issuing entities that exceeded $5 million for each issuer.

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Note 6: Other Assets

Other assets consisted of the following:

	At June 30,		At December 31,
	2018		2017
	(In thousands)
Equity securities without readily determinable fair values:
Federal Reserve Bank stock ⁽¹⁾	$	14,069	$	14,069
Other investments		158		158
Total equity securities without readily determinable fair values		14,227		14,227
Life insurance cash surrender value		55,384		54,101
Net deferred tax asset		45,733		33,112
Limited partnership investments		8,819		10,119
Interest receivable		24,932		23,557
Prepaid assets		3,945		4,906
Other assets		15,893		18,428
Total other assets	$	168,933	$	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 invests in flow-through limited liability entities that manage or invest in affordable housing projects that qualify for low-income housing tax credits. At June 30, 2018, this investment totaled $8,819 thousand and $2,088 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 June 30, 2018, the $2,088 thousand of outstanding equity capital commitments are expected to be paid as follows, $425 thousand in 2018, $131 thousand in 2023, $1,038 thousand in 2024 and $494 thousand in 2025 or thereafter.

The amounts recognized in net income for these investments include:

	For the Three Months Ended				For the Six Months Ended
	June 30,
	2018		2017		2018		2017
	(In thousands)
Investment loss included in pre-tax income	$	700	$	450	$	1,300	$	900
Tax credits recognized in provision for income taxes		336		462		672		925

Note 7: Goodwill and Identifiable Intangible Assets

The Company has recorded goodwill and other identifiable intangibles associated with purchase business combinations. Goodwill is not amortized, but is evaluated for impairment at least annually. The Company did not recognize impairment during the three and six months ended June 30, 2018 and year ended December 31, 2017. Identifiable intangibles are amortized to their estimated residual values over their expected useful lives. Such lives and residual values are also periodically reassessed to determine if any amortization period adjustments are indicated. During the three and six months ended June 30, 2018 and year ended December 31, 2017 no such adjustments were recorded.

The carrying values of goodwill were:

	At June 30, 2018		At December 31, 2017
	(In thousands)
Goodwill	$	121,673	$	121,673

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

	At June 30,					At December 31,
	2018					2017
	Gross					Gross
	Carrying		Accumulated			Carrying		Accumulated
	Amount		Amortization			Amount		Amortization
	(In thousands)
Core Deposit Intangibles	$	56,808	$	(53,981	)	$	56,808	$	(52,987	)
Merchant Draft Processing Intangible		10,300		(10,300	)		10,300		(10,271	)
Total Identifiable Intangible Assets	$	67,108	$	(64,281	)	$	67,108	$	(63,258	)

As of June 30, 2018, the current period and estimated future amortization expense for identifiable intangible assets was:

			Merchant
	Core		Draft
	Deposit		Processing
	Intangibles		Intangible		Total
	(In thousands)
For the Six Months ended June 30, 2018 (actual)	$	994	$	29	$	1,023
Estimate for the remainder of year ending December 31, 2018		898		-		898
Estimate for year ending December 31, 2019		538		-		538
2020		287		-		287
2021		269		-		269
2022		252		-		252
2023		236		-		236

Note 8: Deposits and Borrowed Funds

The following table provides additional detail regarding deposits.

	Deposits
	At June 30,		At December 31,
	2018		2017
	(In thousands)
Noninterest-bearing	$	2,205,971	$	2,197,526
Interest-bearing:
Transaction		939,002		904,245
Savings		1,526,228		1,494,024
Time deposits less than $100 thousand		110,723		117,848
Time deposits $100 thousand through $250 thousand		70,818		76,578
Time deposits more than $250 thousand		34,380		37,392
Total deposits	$	4,887,122	$	4,827,613

Demand deposit overdrafts of $918 thousand and $2,786 thousand were included as loan balances at June 30, 2018 and December 31, 2017, respectively. Interest expense for aggregate time deposits with individual account balances in excess of $100 thousand was $95 thousand and $192 thousand for the three and six months ended June 30, 2018, respectively and $105 thousand and $211 thousand for the three and six months ended June 30, 2017, respectively.

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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 June 30, 2018		At December 31, 2017
Repurchase agreements:	(In thousands)
Collateral securing borrowings:
Securities of U.S. Government sponsored entities	$	72,771	$	74,173
Agency residential MBS		61,555		58,251
Corporate securities		91,904		105,113
Total collateral carrying value	$	226,230	$	237,537
Total short-term borrowed funds	$	68,894	$	58,471

Note 9: Fair Value Measurements

The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. 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.

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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. When the Company changes its valuation assumptions for measuring financial assets and financial liabilities at fair value, either due to changes in current market conditions or other factors, or reevaluates the valuation techniques and assumptions used by its vendors, it may need to transfer those assets or liabilities to another level in the hierarchy based on the new information. The Company recognizes these transfers at the end of the reporting period that the transfers occur. For the six months ended June 30, 2018 and year ended December 31, 2017, there were no transfers in to or out of levels 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 June 30, 2018
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In thousands)
Equity securities
Mutual funds	$	1,750	$	-	$	1,750	$	-
Total equity securities		1,750		-		1,750		-
Debt securities available for sale
Securities of U.S. Government sponsored entities		117,372		-		117,372		-
Agency residential MBS		857,365		-		857,365		-
Non-agency residential MBS		128		-		128		-
Agency commercial MBS		2,178		-		2,178		-
Securities of U.S. Government entities		1,433		-		1,433		-
Obligations of states and political subdivisions		183,691		-		183,691		-
Corporate securities		1,201,027		-		1,201,027		-
Total debt securities available for sale		2,363,194		-		2,363,194		-
Total	$	2,364,944	$	-	$	2,364,944	$	-

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	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)
	(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	$	-

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 June 30, 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
									Six Months Ended
	At June 30, 2018								June 30, 2018
	Carrying Value		Level 1		Level 2		Level 3		Total Losses
	(In thousands)
Other real estate owned	$	939	$	-	$	-	$	939	$	-
Impaired loans:
Commercial		4,776		-		-		4,776		-
Commercial real estate		5,707		-		-		5,707		-
Total assets measured at fair value on a nonrecurring basis	$	11,422	$	-	$	-	$	11,422	$	-

									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.

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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.

Debt Securities Held to Maturity The fair values of debt securities were estimated using quoted prices as described above for 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 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, which reprice frequently with changes in market rates were valued using historical cost. Fixed rate loans and variable rate loans that have reached their minimum contractual interest rates were valued by discounting the future cash flows expected to be received from the loans using current interest rates charged on loans with similar characteristics. Additionally, the allowance for loan losses of $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.

- 26 -

	At June 30, 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	$	629,146	$	629,146	$	629,146	$	-	$	-
Debt securities held to maturity		1,076,456		1,058,573		-		1,058,573		-
Loans		1,177,152		1,211,071		-		-		1,211,071

Financial Liabilities:
Deposits	$	4,887,122	$	4,883,659	$	-	$	4,671,201	$	212,458
Short-term borrowed funds		68,894		68,894		-		68,894		-

	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.

Note 10: Commitments and Contingent Liabilities

Loan commitments are agreements to lend to a customer provided there is no violation of any condition established in the agreement. Commitments generally have fixed expiration dates or other termination clauses. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future funding requirements. Loan commitments are subject to the Company’s normal credit policies and collateral requirements. Unfunded loan commitments were $295,027 thousand and $272,646 thousand at June 30, 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 $2,824 thousand and $19,263 thousand at June 30, 2018 and December 31, 2017, respectively. The Company had no commitments outstanding for commercial and similar letters of credit at June 30, 2018 and December 31, 2017. The Company had a reserve for unfunded commitments of $2,308 thousand at June 30, 2018 and $2,308 thousand at December 31, 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.

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

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Note 11: Earnings Per Common Share

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

	For the Three Months				For the Six Months
	Ended June 30,
	2018		2017		2018		2017
	(In thousands, except per share data)
Net income applicable to common equity (numerator)	$	18,010	$	15,799	$	35,516	$	30,848
Basic earnings per common share
Weighted average number of common shares outstanding - basic (denominator)		26,630		26,299		26,581		26,235
Basic earnings per common share	$	0.68	$	0.60	$	1.34	$	1.18
Diluted earnings per common share
Weighted average number of common shares outstanding - basic		26,630		26,299		26,581		26,235
Add common stock equivalents for options		98		103		115		131
Weighted average number of common shares outstanding - diluted (denominator)		26,728		26,402		26,696		26,366
Diluted earnings per common share	$	0.67	$	0.60	$	1.33	$	1.17

For the three and six months ended June 30, 2018, options to purchase 482 thousand and 486 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.

For the three and six months ended June 30, 2017, options to purchase 352 thousand and 326 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.

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

WESTAMERICA BANCORPORATION

FINANCIAL SUMMARY

	For the Three Months						For the Six Months
	Ended June 30,
	2018			2017			2018			2017
	(In thousands, except per share data)
Net Interest and Loan Fee Income (FTE)⁽¹⁾	$	36,585		$	35,764		$	72,052		$	71,794
Reversal of Provision for Loan Losses		-			(1,900	)		-			(1,900	)
Noninterest Income:
Securities Losses		(14	)		-			(50	)		-
Other Noninterest Income		11,783			12,123			23,774			23,780
Total Noninterest Income		11,769			12,123			23,724			23,780
Noninterest Expense		23,977			24,396			48,191			49,011
Income Before Income Taxes (FTE)⁽¹⁾		24,377			25,391			47,585			48,463
Income Tax Provision (FTE)⁽¹⁾		6,367			9,592			12,069			17,615
Net Income	$	18,010		$	15,799		$	35,516		$	30,848

Average Common Shares Outstanding		26,630			26,299			26,581			26,235
Average Diluted Common Shares Outstanding		26,728			26,402			26,696			26,366
Common Shares Outstanding at Period End		26,649			26,304

Per Common Share:
Basic Earnings	$	0.68		$	0.60		$	1.34		$	1.18
Diluted Earnings		0.67			0.60			1.33			1.17
Book Value	$	21.99		$	22.64

Financial Ratios:
Return on Assets		1.29	%		1.18	%		1.28	%		1.15	%
Return on Common Equity		11.55	%		10.69	%		11.56	%		10.58	%
Net Interest Margin (FTE)⁽¹⁾		3.08	%		3.12	%		3.05	%		3.13	%
Net Loan Losses (Recoveries) to Average Loans		0.01	%		(0.33	%)		(0.01	%)		(0.01	%)
Efficiency Ratio⁽²⁾		49.6	%		50.9	%		50.3	%		51.3	%

Average Balances:
Assets	$	5,587,871		$	5,385,085		$	5,576,352		$	5,390,404
Earning Assets		4,752,887			4,598,296			4,738,132			4,609,089
Loans		1,209,049			1,333,135			1,226,304			1,344,132
Deposits		4,846,986			4,669,424			4,837,721			4,681,021
Shareholders' Equity		625,409			593,028			619,666			587,736

Period End Balances:
Assets	$	5,577,844		$	5,393,350
Earning Assets		4,641,592			4,555,818

WESTAMERICA BANCORPORATION - FORM 10-Q - August 3, 2018

Attached files