wabc20190930_10q.htm
0000311094WESTAMERICA BANCORPORATIONfalse--12-31Q320190000000000000000002,308There were no transfers in to or out of level 3 during the nine months ended September 30, 2019.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.There were no transfers in to or out of level 3 during the year ended December 31, 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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 September 30, 2019

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 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 every Interactive Data File required to be submitted  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 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 ☐  

 

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 ☑

 

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

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, no par value

WABC

The Nasdaq Stock Market, LLC

 

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 October 28, 2019
Common Stock,   27,055,059
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

50

Item 4      Controls and Procedures

51

PART II - OTHER INFORMATION

 

Item 1      Legal Proceedings

51

Item 1A   Risk Factors

51

Item 2      Unregistered Sales of Equity Securities and Use of Proceeds

51

Item 3      Defaults upon Senior Securities

52

Item 4      Mine Safety Disclosures

52

Item 5      Other Information

52

Item 6      Exhibits

52

Signatures

53

Exhibit Index

54

Exhibit 10.1 - Westamerica Bancorporation 2019 Omnibus Equity Incentive Plan Stock Option Agreement Form

55

Exhibit 10.2 - Westamerica Bancorporation 2019 Omnibus Equity Incentive Plan Restricted Stock Unit Award Agreement Form

63

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

69

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

70

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

71

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

72

 

-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, 2018, 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)

 

   

At September 30,

   

At December 31,

 
   

2019

   

2018

 
   

(In thousands)

 

Assets:

               

Cash and due from banks

  $ 415,639     $ 420,284  

Equity securities

    -       1,747  

Debt securities available for sale

    2,983,767       2,654,670  

Debt securities held to maturity, with fair values of: $799,241 at September 30, 2019 and $971,445 at December 31, 2018

    793,216       984,609  

Loans

    1,133,229       1,207,202  

Allowance for loan losses

    (19,828 )     (21,351 )

Loans, net of allowance for loan losses

    1,113,401       1,185,851  

Other real estate owned

    43       350  

Premises and equipment, net

    34,080       34,507  

Identifiable intangibles, net

    1,464       1,929  

Goodwill

    121,673       121,673  

Other assets

    152,772       162,906  

Total Assets

  $ 5,616,055     $ 5,568,526  
                 

Liabilities:

               

Noninterest-bearing deposits

  $ 2,265,640     $ 2,243,251  

Interest-bearing deposits

    2,530,983       2,623,588  

Total deposits

    4,796,623       4,866,839  

Short-term borrowed funds

    45,646       51,247  

Other liabilities

    60,408       34,849  

Total Liabilities

    4,902,677       4,952,935  
                 

Contingencies (Note 10)

               
                 

Shareholders' Equity:

               
Common stock (no par value), authorized - 150,000 shares                

Issued and outstanding: 27,014 at September 30, 2019 and 26,730 at December 31, 2018

    462,653       448,351  

Deferred compensation

    771       1,395  

Accumulated other comprehensive income (loss)

    20,454       (39,996 )

Retained earnings

    229,500       205,841  

Total Shareholders' Equity

    713,378       615,591  

Total Liabilities and Shareholders' Equity

  $ 5,616,055     $ 5,568,526  

 

See accompanying notes to unaudited consolidated financial statements.

 

-4-

 

 

 

WESTAMERICA BANCORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(unaudited)

 

   

For the Three Months

   

For the Nine Months

 
   

Ended September 30,

 
   

2019

   

2018

   

2019

   

2018

 
   

(In thousands, except per share data)

 

Interest and Loan Fee Income:

                               

Loans

  $ 14,431     $ 14,593     $ 44,050     $ 44,247  

Equity securities

    92       85       289       256  

Debt securities available for sale

    18,736       15,644       54,080       43,518  

Debt securities held to maturity

    4,535       5,931       14,788       18,321  

Interest-bearing cash

    1,901       2,361       5,597       5,933  

Total Interest and Loan Fee Income

    39,695       38,614       118,804       112,275  

Interest Expense:

                               

Deposits

    447       518       1,410       1,417  

Short-term borrowed funds

    8       9       27       28  

Total Interest Expense

    455       527       1,437       1,445  

Net Interest and Loan Fee Income

    39,240       38,087       117,367       110,830  

Provision for Loan Losses

    -       -       -       -  

Net Interest and Loan Fee Income After Provision for Loan Losses

    39,240       38,087       117,367       110,830  

Noninterest Income:

                               

Service charges on deposit accounts

    4,510       4,615       13,508       14,012  

Merchant processing services

    2,494       2,464       7,708       7,190  

Debit card fees

    1,641       1,656       4,789       4,959  

Trust fees

    733       733       2,199       2,202  

ATM processing fees

    725       687       2,080       2,049  

Other service fees

    580       665       1,742       1,946  

Financial services commissions

    75       132       270       387  

Life insurance gains

    -       585       433       585  

Equity securities(losses) gains

    -       (16 )     50       (66 )

Other noninterest income

    1,051       1,007       2,897       2,988  

Total Noninterest Income

    11,809       12,528       35,676       36,252  

Noninterest Expense:

                               

Salaries and related benefits

    12,559       13,415       38,757       39,952  

Occupancy and equipment

    5,199       4,809       15,163       14,365  

Outsourced data processing services

    2,374       2,292       7,110       6,930  

Professional fees

    645       621       1,791       2,277  

Courier service

    456       448       1,349       1,333  

Amortization of identifiable intangibles

    76       451       465       1,474  

Loss contingency

    -       3,500       553       3,500  

Other noninterest expense

    2,724       3,830       9,589       11,298  

Total Noninterest Expense

    24,033       29,366       74,777       81,129  

Income Before Income Taxes

    27,016       21,249       78,266       65,953  

Provision for income taxes

    6,626       4,256       18,605       13,444  

Net Income

  $ 20,390     $ 16,993     $ 59,661     $ 52,509  
                                 

Average Common Shares Outstanding

    26,986       26,701       26,924       26,622  

Average Diluted Common Shares Outstanding

    27,027       26,815       26,976       26,736  

Per Common Share Data:

                               

Basic earnings

  $ 0.76     $ 0.64     $ 2.22     $ 1.97  

Diluted earnings

    0.75       0.63       2.21       1.96  

Dividends paid

    0.41       0.40       1.22       1.20  

 

See accompanying notes to unaudited consolidated financial statements.

 

-5-

 

 

 

WESTAMERICA BANCORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)

 

   

For the Three Months

   

For the Nine Months

 
   

Ended September 30,

 
   

2019

   

2018

   

2019

   

2018

 
   

(In thousands)

 

Net income

  $ 20,390     $ 16,993     $ 59,661     $ 52,509  

Other comprehensive income (loss):

                               

Changes in unrealized gains (losses) on debt securities available for sale

    10,407       (5,915 )     85,822       (47,915 )

Deferred tax (expense) benefit

    (3,077 )     1,749       (25,372 )     14,164  

Changes in unrealized gains (losses) on debt securities available for sale, net of tax

    7,330       (4,166 )     60,450       (33,751 )

Total comprehensive income

  $ 27,720     $ 12,827     $ 120,111     $ 18,758  

 

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

   

Income (Loss)

   

Earnings

   

Total

 
   

(In thousands)

 
                                                 

Balance, June 30, 2019

    26,962     $ 459,369     $ 771     $ 13,124     $ 220,173     $ 693,437  

Net income for the period

                                    20,390       20,390  

Other comprehensive income

                            7,330               7,330  

Exercise of stock options

    52       2,867                               2,867  

Stock based compensation

    -       402                               402  

Stock awarded to employees

    -       15                               15  

Dividends ($0.41 per share)

                                    (11,063 )     (11,063 )

Balance, September 30, 2019

    27,014     $ 462,653     $ 771     $ 20,454     $ 229,500     $ 713,378  
                                                 

Balance, June 30, 2018

    26,649     $ 443,338     $ 1,533     $ (49,900 )   $ 191,167     $ 586,138  

Net income for the period

                                    16,993       16,993  

Other comprehensive loss

                            (4,166 )             (4,166 )

Exercise of stock options

    77       3,762                               3,762  

Restricted stock activity

    -       138       (138 )                     -  

Stock based compensation

    -       525                               525  

Stock awarded to employees

    1       22                               22  

Dividends ($0.40 per share)

                                    (10,683 )     (10,683 )

Balance, September 30, 2018

    26,727     $ 447,785     $ 1,395     $ (54,066 )   $ 197,477     $ 592,591  
                                                 

Balance, December 31, 2018

    26,730     $ 448,351     $ 1,395     $ (39,996 )   $ 205,841     $ 615,591  

Cumulative effect of bond premium amortization adjustment, net of tax

                                    (2,801 )     (2,801 )

Adjusted Balance, January 1, 2019

    26,730       448,351       1,395       (39,996 )     203,040       612,790  

Net income for the period

                                    59,661       59,661  

Other comprehensive income

                            60,450               60,450  

Shares issued from stock warrant exercise, net of repurchase

    51       -                               -  

Exercise of stock options

    222       11,177                               11,177  

Restricted stock activity

    18       1,697       (624 )                     1,073  

Stock based compensation

    -       1,484                               1,484  

Stock awarded to employees

    1       80                               80  

Retirement of common stock

    (8 )     (136 )                     (352 )     (488 )

Dividends ($1.22 per share)

                                    (32,849 )     (32,849 )

Balance, September 30, 2019

    27,014     $ 462,653     $ 771     $ 20,454     $ 229,500     $ 713,378  
                                                 

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

                                    52,509       52,509  

Other comprehensive loss

                            (33,751 )             (33,751 )

Exercise of stock options

    289       13,245                               13,245  

Restricted stock activity

    20       1,281       (138 )                     1,143  

Stock based compensation

    -       1,575                               1,575  

Stock awarded to employees

    2       99                               99  

Retirement of common stock

    (9 )     (149 )                     (375 )     (524 )

Dividends ($1.20 per share)

                                    (31,944 )     (31,944 )

Balance, September 30, 2018

    26,727     $ 447,785     $ 1,395     $ (54,066 )   $ 197,477     $ 592,591  

 

See accompanying notes to unaudited consolidated financial statements.

 

-7-

 

 

 

WESTAMERICA BANCORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS 

(unaudited)

 

 

   

Ended September 30,

 
   

2019

   

2018

 
   

(In thousands)

 

Operating Activities:

               

Net income

  $ 59,661     $ 52,509  

Adjustments to reconcile net income to net cash provided by operating activities:

               

Depreciation and amortization

    15,178       18,964  

Provision for loan losses

    -       -  

Net amortization of deferred loan fees

    (215 )     (181 )

Decrease (increase) in interest income receivable

    323       (177 )

Increase in other assets

    (2,073 )     (1,896 )

(Decrease) increase in income taxes payable

    (3,386 )     7,760  

Decrease (increase) in net deferred tax asset

    6,386       (1,345 )

Stock option compensation expense

    1,484       1,575  

Increase in interest expense payable

    19       5  

(Decrease) increase in other liabilities

    (12,233 )     3,793  

Life insurance gains

    (433 )     (585 )

Equity securities (gains) losses

    (50 )     66  

Net writedown of premises and equipment

    -       3  

Net gain on sale of foreclosed assets

    -       (94 )

Writedown of foreclosed assets

    -       27  

Net Cash Provided by Operating Activities

    64,661       80,424  

Investing Activities:

               

Net repayments of loans

    73,026       91,594  

Proceeds from life insurance policies

    1,273       1,183  

Purchases of debt securities available for sale

    (732,690 )     (634,113 )

Proceeds from sale of equity securities

    1,797       -  

Proceeds from sale/maturity/calls of debt securities available for sale

    502,928       290,663  

Proceeds from maturity/calls of debt securities held to maturity

    184,525       127,578  

Purchases of premises and equipment

    (2,495 )     (2,830 )

Proceeds from sale of foreclosed assets

    307       873  

Net Cash Provided by (Used in) Investing Activities

    28,671       (125,052 )

Financing Activities:

               

Net change in deposits

    (70,216 )     8,224  

Net change in short-term borrowings

    (5,601 )     3,285  

Exercise of stock options

    11,177       13,245  

Retirement of common stock

    (488 )     (524 )

Common stock dividends paid

    (32,849 )     (31,944 )

Net Cash Used in Financing Activities

    (97,977 )     (7,714 )

Net Change In Cash and Due from Banks

    (4,645 )     (52,342 )

Cash and Due from Banks at Beginning of Period

    420,284       575,002  

Cash and Due from Banks at End of Period

  $ 415,639     $ 522,660  
                 

Supplemental Cash Flow Disclosures:

               

Supplemental disclosure of non cash activities:

               

Right-of-use assets acquired in exchange for operating lease liabilities

  $ 23,587     $ -  

Amount recognized upon initial adoption of ASU 2016-02 included above

    15,325       -  

Loan collateral transferred to other real estate owned

    -       -  

Securities purchases pending settlement

    20,114       -  

Supplemental disclosure of cash flow activities:

               

Cash paid for amounts included in operating lease liabilities

    5,123       -  

Interest paid for the period

    1,417       1,440  

Income tax payments for the period

    16,021       7,028  

 

See accompanying notes to unaudited consolidated financial statements.

 

-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 nine months ended September 30, 2019 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, 2018.

 

 

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, 2018. 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 nine months ended September 30, 2019, the Company adopted the following new accounting guidance:

 

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 adopted the ASU provisions effective January 1, 2019, and elected the modified retrospective transition approach. The Company elected the package of practical expedients provided in the ASU, which allowed the Company to rely on lease classification determinations made under prior accounting guidance and forego reevaluation of (i) whether any existing contracts are or contain a lease, (ii) whether existing leases are operating or finance leases, and (iii) the initial direct cost for any existing leases. The Company also elected to combine lease and non-lease components and exempt short-term leases with an original term of one year or less from on-balance sheet recognition. The implementing entry recognized a lease liability of $15.3 million and right-of-use asset of $15.3 million for facilities leases. The change in occupancy and equipment expense was not material.

 

-9-

 

 

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 shortens 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 adopted the ASU provisions on January 1, 2019. The implementing entry reduced the carrying value of investment securities, specifically obligations of states and political subdivisions, by $3.1 million and reduced retained earnings by $2.8 million, net of tax. The change in premium amortization method was not 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 expands and refines hedge accounting for both nonfinancial and financial risk components and aligns 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 adopted 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 evaluated the prepayable assets in the HTM portfolio and did not effect a one-time reclassification of prepayable assets from HTM to the AFS upon implementation.

 

Recently Issued Accounting Standards

 

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. Management has also segmented debt securities held to maturity, selected methods to estimate losses for each segment, and preliminarily measured a loss estimate. 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 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 December 31, 2019.

 

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 the “Fair Value Measurements” note to the unaudited 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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-10-

 

 

 

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 decrease retained earnings by $142 thousand, net of tax.

 

The Company had no equity securities at September 30, 2019 due to the sales of such securities during the third quarter 2019. The market value of equity securities was $1,747 thousand at December 31, 2018. During the nine months ended September 30, 2019, the Company recognized gross unrealized holding gains of $50 thousand in earnings. During the nine months ended September 30, 2018, the Company recognized gross unrealized holding losses of $66 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:

 

   

At September 30, 2019

 
           

Gross

   

Gross

         
   

Amortized

   

Unrealized

   

Unrealized

   

Fair

 
   

Cost

   

Gains

   

Losses

   

Value

 
   

(In thousands)

 

Debt securities available for sale

                             

U.S. Treasury securities

  $ 44,758     $ 68     $ -     $ 44,826  

Securities of U.S. Government sponsored entities

    122,245       23       (160 )     122,108  

Agency residential mortgage-backed securities (MBS)

    976,066       10,294       (6,609 )     979,751  

Non-agency residential MBS

    101       3       -       104  

Agency commercial MBS

    3,748       3       -       3,751  

Securities of U.S. Government entities

    786       -       (9 )     777  

Obligations of states and political subdivisions

    161,506       3,944       (47 )     165,403  

Corporate securities

    1,645,518       24,520       (2,991 )     1,667,047  

Total debt securities available for sale

    2,954,728       38,855       (9,816 )     2,983,767  

Debt securities held to maturity

                             

Agency residential MBS

    377,995       817       (2,647 )     376,165  

Non-agency residential MBS

    2,471       62       -       2,533  

Obligations of states and political subdivisions

    412,750       7,804       (11 )     420,543  

Total debt securities held to maturity

    793,216       8,683       (2,658 )     799,241  

Total

  $ 3,747,944     $ 47,538     $ (12,474 )   $ 3,783,008  

 

   

At December 31, 2018

 
           

Gross

   

Gross

         
   

Amortized

   

Unrealized

   

Unrealized

   

Fair

 
   

Cost

   

Gains

   

Losses

   

Value

 
   

(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 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  

 

-11-

 

 

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

 

   

At September 30, 2019

 
   

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

  $ 284,550     $ 285,060     $ 64,092     $ 64,247  

Over 1 to 5 years

    1,182,895       1,199,153       179,576       182,635  

Over 5 to 10 years

    471,434       478,841       169,082       173,661  

Over 10 years

    35,934       37,107       -       -  

Subtotal

    1,974,813       2,000,161       412,750       420,543  

MBS

    979,915       983,606       380,466       378,698  

Total

  $ 2,954,728     $ 2,983,767     $ 793,216     $ 799,241  

 

 

   

At December 31, 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

  $ 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  

 

 

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 September 30, 2019 and December 31, 2018, the Company had no high-risk collateralized mortgage obligations as defined by regulatory guidelines.

 

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-12-

 

 

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

 

   

Debt Securities Available for Sale

 
   

At September 30, 2019

 
   

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     $ 19,970     $ (30 )     4     $ 55,794     $ (130 )     6     $ 75,764     $ (160 )

Agency residential MBS

    1       3,750       (62 )     49       400,690       (6,547 )     50       404,440       (6,609 )

Securities of U.S. Government entities

    -       -       -       2       777       (9 )     2       777       (9 )

Obligations of states and political subdivisions

    -       -       -       9       4,692       (47 )     9       4,692       (47 )

Corporate securities

    16       146,067       (1,196 )     21       166,633       (1,795 )     37       312,700       (2,991 )

Total

    19     $ 169,787     $ (1,288 )     85     $ 628,586     $ (8,528 )     104     $ 798,373     $ (9,816 )

 

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

 

   

Debt Securities Held to Maturity

 
   

At September 30, 2019

 
   

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

    7     $ 13,020     $ (90 )     57     $ 306,728     $ (2,557 )     64     $ 319,748     $ (2,647 )

Obligations of states and political subdivisions

    -       -       -       9       8,562       (11 )     9       8,562       (11 )

Total

    7     $ 13,020     $ (90 )     66     $ 315,290     $ (2,568 )     73     $ 328,310     $ (2,658 )

 

 

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 an amortized cost of $15.0 million and a fair value of $13.7 million at September 30, 2019, 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 September 30, 2019.

 

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 September 30, 2019 and December 31, 2018, the Company had debt securities pledged to secure public deposits and short-term borrowed funds of $721,741 thousand and $728,161 thousand, respectively.

 

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-13-

 

 

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

 

   

For the Three Months

   

For the Nine Months

 
   

Ended September 30,

 
   

2019

   

2018

   

2019

   

2018

 
   

(In thousands)

 
                                 

Taxable

  $ 19,586     $ 16,780     $ 56,992     $ 47,327  

Tax-exempt from federal income tax

    3,777       4,880       12,165       14,768  

Total interest income from investment securities

  $ 23,363     $ 21,660     $ 69,157     $ 62,095  

 

 

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-14-

 

 

 

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

 

At December 31, 2018, the Company had $5,713 thousand in loans secured by residential real estate which are indemnified from loss by the FDIC up to 80% 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 September 30,

   

At December 31,

 
   

2019

   

2018

 
   

(In thousands)

 

Commercial

  $ 216,273     $ 275,080  

Commercial Real Estate

    579,227       580,480  

Construction

    6,678       3,982  

Residential Real Estate

    35,348       44,866  

Consumer Installment & Other

    295,703       302,794  

Total

  $ 1,133,229     $ 1,207,202  

 

 

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

 

   

For the

   

For the

 
   

Nine Months Ended

   

Year Ended

 
   

September 30, 2019

   

December 31, 2018

 

Accretable yield:

 

(In thousands)

 

Balance at the beginning of the period

  $ 182     $ 738  

Reclassification from nonaccretable difference

    1,103       1,119  

Accretion

    (368 )     (1,675 )

Balance at the end of the period

  $ 917     $ 182  
                 

Accretion

  $ (368 )   $ (1,675 )

Change in FDIC indemnification

    -       2  

(Increase) in interest income

  $ (368 )   $ (1,673 )

 

The following summarizes activity in the allowance for loan losses:

 

   

Allowance for Loan Losses

 
   

For the Three Months Ended September 30, 2019

 
                                   

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

  $ 5,235     $ 4,057     $ 1,117     $ 238     $ 5,418     $ 4,052     $ 20,117  

(Reversal) provision

    (596 )     (1 )     482       (16 )     655       (524 )     -  

Chargeoffs

    -       -       -       -       (1,039 )     -       (1,039 )

Recoveries

    233       12       -       -       505       -       750  

Total allowance for loan losses

  $ 4,872     $ 4,068     $ 1,599     $ 222     $ 5,539     $ 3,528     $ 19,828  

 

   

Allowance for Loan Losses

 
   

For the Nine Months Ended September 30, 2019

 
                                   

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

  $ 6,311     $ 3,884     $ 1,465     $ 869     $ 5,645     $ 3,177     $ 21,351  

(Reversal) provision

    (1,817 )     146       134       (647 )     1,833       351       -  

Chargeoffs

    (71 )     -       -       -       (3,332 )     -       (3,403 )

Recoveries

    449       38       -       -       1,393       -       1,880  

Total allowance for loan losses

  $ 4,872     $ 4,068     $ 1,599     $ 222     $ 5,539     $ 3,528     $ 19,828  

 

 

-15-

 

 

   

Allowance for Loan Losses

 
   

For the Three Months Ended September 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

  $ 8,275     $ 3,789     $ 210     $ 1,064     $ 5,943     $ 3,759     $ 23,040  

(Reversal) provision

    (184 )     372       44       (120 )     (137 )     25       -  

Chargeoffs

    (384 )     (240 )     -       -       (845 )     -       (1,469 )

Recoveries

    103       -       -       -       353       -       456  

Total allowance for loan losses

  $ 7,810     $ 3,921     $ 254     $ 944     $ 5,314     $ 3,784     $ 22,027  

 

   

Allowance for Loan Losses

 
   

For the Nine Months Ended September 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

    (863 )     312       (81 )     (51 )     565       118       -  

Chargeoffs

    (425 )     (240 )     -       -       (3,015 )     -       (3,680 )

Recoveries

    1,352       -       -       -       1,346       -       2,698  

Total allowance for loan losses

  $ 7,810     $ 3,921     $ 254     $ 944     $ 5,314     $ 3,784     $ 22,027  

 

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 September 30, 2019

 
   

Commercial

   

Commercial Real Estate

   

Construction

   

Residential Real Estate

   

Consumer Installment and Other

   

Unallocated

   

Total

 
   

(In thousands)

 

Allowance for loan losses:

                                                       

Individually evaluated for impairment

  $ 2,550     $ -     $ -     $ -     $ -     $ -     $ 2,550  

Collectively evaluated for impairment

    2,322       4,068       1,599       222       5,539       3,528       17,278  

Total

  $ 4,872     $ 4,068     $ 1,599     $ 222     $ 5,539     $ 3,528     $ 19,828  

Carrying value of loans:

                                                       

Individually evaluated for impairment

  $ 8,647     $ 7,445     $ -     $ 193     $ 44     $ -     $ 16,329  

Collectively evaluated for impairment

    207,626       571,782       6,678       35,155       295,659       -       1,116,900  

Total

  $ 216,273     $ 579,227     $ 6,678     $ 35,348     $ 295,703     $ -     $ 1,133,229  

 

   

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  

Total

  $ 6,311     $ 3,884     $ 1,465     $ 869     $ 5,645     $ 3,177     $ 21,351  

Carrying value of loans:

                                                       

Individually evaluated for impairment

  $ 9,944     $ 8,438     $ -     $ 717     $ 143     $ -     $ 19,242  

Collectively evaluated for impairment

    265,136       572,042       3,982       44,149       302,651       -       1,187,960  

Total

  $ 275,080     $ 580,480     $ 3,982     $ 44,866     $ 302,794     $ -     $ 1,207,202  

 

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.

 

-16-

 

 

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

 

   

Credit Risk Profile by Internally Assigned Grade

 
   

At September 30, 2019

 
   

Commercial

   

Commercial Real Estate

   

Construction

   

Residential Real Estate

   

Consumer Installment and Other

   

Total

 
   

(In thousands)

 

Grade:

                                               

Pass

  $ 207,350     $ 568,009     $ 6,678     $ 33,629     $ 293,893     $ 1,109,559  

Substandard

    8,923       11,218       -       1,719       1,395       23,255  

Doubtful

    -       -       -       -       111       111  

Loss

    -       -       -       -       304       304  

Total

  $ 216,273     $ 579,227     $ 6,678     $ 35,348     $ 295,703     $ 1,133,229  

 

   

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 in loans secured by residential real estate at December 31, 2018. The indemnification expired February 6, 2019.

The following tables summarize loans by delinquency and nonaccrual status:

 

   

Summary of Loans by Delinquency and Nonaccrual Status

 
   

At September 30, 2019

 
   

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

  $ 215,787     $ 339     $ 119     $ 2     $ 26     $ 216,273  

Commercial real estate

    574,321       729       -       -       4,177       579,227  

Construction

    6,678       -       -       -       -       6,678  

Residential real estate

    34,064       828       456       -       -       35,348  

Consumer installment and other

    291,638       2,879       737       349       100       295,703  

Total

  $ 1,122,488     $ 4,775     $ 1,312     $ 351     $ 4,303     $ 1,133,229  

 

   

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  

 

There were no commitments to lend additional funds to borrowers whose loans were on nonaccrual status at September 30, 2019 and December 31, 2018.

 

-17-

 

 

The following summarizes impaired loans:

 

   

Impaired Loans

 
   

At September 30, 2019

   

At December 31, 2018

 
           

Unpaid

                   

Unpaid

         
   

Recorded

   

Principal

   

Related

   

Recorded

   

Principal

   

Related

 
   

Investment

   

Balance

   

Allowance

   

Investment

   

Balance

   

Allowance

 
   

(In thousands)

 

With no related allowance recorded:

                                               

Commercial

  $ 72     $ 72     $ -     $ 755     $ 759     $ -  

Commercial real estate

    7,953       9,400       -       8,438       10,373       -  

Residential real estate

    193       224       -       717       747       -  

Consumer installment and other

    144       178       -       270       377       -  

Total with no related allowance recorded

    8,362       9,874       -       10,180       12,256       -  
                                                 

With an allowance recorded:

                                               

Commercial

    8,600       8,600       2,550       9,189       9,189       2,752  

Total with an allowance recorded

    8,600       8,600       2,550       9,189       9,189       2,752  

Total

  $ 16,962     $ 18,474     $ 2,550     $ 19,369     $ 21,445     $ 2,752  

 

Impaired loans include troubled debt restructured loans. Impaired loans at September 30, 2019, included $6,754 thousand of restructured loans, $3,670 thousand of which were on nonaccrual status. Impaired loans at December 31, 2018, included $8,579 thousand of restructured loans, $4,225 thousand of which were on nonaccrual status.

 

   

Impaired Loans

 
   

For the Three Months Ended September 30,

   

For the Nine Months Ended September 30,

 
   

2019

   

2018

   

2019

   

2018

 
   

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

  $ 8,701     $ 144     $ 10,426     $ 175     $ 9,404     $ 476     $ 10,671     $ 495  

Commercial real estate

    7,968       60       11,282       189       7,133       333       12,291       615  

Residential real estate

    194       4       203       4       196       10       205       12  

Consumer installment and other

    99       -       173       4       103       -       261       10  

Total

  $ 16,962     $ 208     $ 22,084     $ 372     $ 16,836     $ 819     $ 23,428     $ 1,132  

 

The following tables provide information on troubled debt restructurings:

 

   

Troubled Debt Restructurings

 
   

At September 30, 2019

 
                           

Period-End

 
                           

Individual

 
   

Number of

   

Pre-Modification

   

Period-End

   

Impairment

 
   

Contracts

   

Carrying Value

   

Carrying Value

   

Allowance

 
   

($ in thousands)

 

Commercial

    3     $ 327     $ 44     $ 18  

Commercial real estate

    6       8,830       6,517       -  

Residential real estate

    1       241       193       -  

Total

    10     $ 9,398     $ 6,754     $ 18  

 

 

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-18-

 

 

   

Troubled Debt Restructurings

 
   

At December 31, 2018

 
                           

Period-End

 
                           

Individual

 
   

Number of

   

Pre-Modification

   

Period-End

   

Impairment

 
   

Contracts

   

Carrying Value

   

Carrying Value

   

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  

 

During the three and nine months ended September 30, 2019 and September 30, 2018, the Company did not modify any loans that were considered troubled debt restructurings, and had no troubled debt restructured loans that 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 September 30, 2019 and December 31, 2018.

 

There were no loans held for sale at September 30, 2019 and December 31, 2018.

 

At September 30, 2019 and December 31, 2018, the Company held total other real estate owned (OREO) of $43 thousand net of reserve of $-0- thousand and $350 thousand net of reserve of $-0-  thousand, respectively. There were no foreclosed residential real estate properties and no covered OREO at December 31, 2018. The amount of consumer mortgage loans outstanding secured by residential real estate properties for which formal foreclosure proceedings were in process was $114 thousand at September 30, 2019 and $516 thousand at December 31, 2018.

 

 

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 September 30, 2019, the Bank did not have credit extended to any one entity exceeding these limits. At September 30, 2019, the Bank had 33 lending relationships each with aggregate amounts of $5 million or more. The Company has significant credit arrangements that are secured by real estate collateral. In addition to real estate loans outstanding as disclosed in Note 4, the Company had loan commitments related to real estate loans of $44,964 thousand and $53,891 thousand at September 30, 2019 and December 31, 2018, 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 September 30, 2019, the Bank held corporate bonds in 88 issuing entities that exceeded $5 million for each issuer.

 

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-19-

 

 

 

 

Note 6: Other Assets and Other Liabilities

 

Other assets consisted of the following:

 

   

At September 30,

   

At December 31,

 
   

2019

   

2018

 
   

(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

    57,169       56,083  

Net deferred tax asset

    11,947       42,256  

Right-of-use asset

    19,721       -  

Limited partnership investments

    8,143       10,219  

Interest receivable

    25,511       25,834  

Prepaid assets

    3,530       4,658  

Other assets

    12,524       9,629  

Total other assets

  $ 152,772     $ 162,906  

 

(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 net deferred tax asset at September 30, 2019 of $11,947 thousand was net of deferred tax obligations of $8,585 thousand related to available for sale debt securities unrealized gains. The net deferred tax asset at December 31, 2018 of $42,256 thousand included deferred tax benefits of $16,787 thousand related to available for sale debt securities unrealized losses.

 

The Company owns 211 thousand shares of Visa Inc. class B common stock which have transfer restrictions; the carrying value is $-0- thousand. On September 30, 2019, Visa Inc. announced a revised conversion rate applicable to its class B common stock resulting from its September 27, 2019 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 1.6298 to 1.6228 per share, effective as of September 27, 2019. Visa Inc. class A common stock had a closing price of $172.01 per share on September 30, 2019, the last day of stock market trading for the third quarter 2019. 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 September 30, 2019, this investment totaled $8,143 thousand and $4,754 thousand of this amount represents outstanding equity capital commitments that are included in other liabilities. At December 31, 2018, this investment totaled $10,219 thousand and $4,799 thousand of this amount represented outstanding equity capital commitments. At September 30, 2019, the $4,754 thousand of outstanding equity capital commitments are expected to be paid as follows, $601 thousand in the remainder of 2019, $2,027 thousand in 2020, $138 thousand in 2021, $261 thousand in 2022, $134 thousand in 2023, $1,041 thousand in 2024 and $552 thousand in 2025 or thereafter.

 

The amounts recognized in net income for these investments include:

 

   

For the Three Months Ended

   

For the Nine Months Ended

 
   

September 30,

 
   

2019

   

2018

   

2019

   

2018

 
   

(In thousands)

 

Investment loss included in pre-tax income

  $ 600     $ 900     $ 1,800     $ 2,200  

Tax credits recognized in provision for income taxes

    225       336       675       1,008  

 

 

 

-20-

 

 

Other liabilities consisted of the following:

 

   

At September 30,

   

At December 31,

 
   

2019

   

2018

 
   

(In thousands)

 

Operating lease liability

  $ 19,721     $ -  

Other liabilities

    40,687       34,849  

Total other liabilities

  $ 60,408     $ 34,849  

 

The Company has entered into leases for most branch locations and certain other offices that were classified as operating leases primarily with original terms of 5 years. Certain lease arrangements contain extension options, which can be exercised at the Company’s option, for one or more additional 5 year terms. Unexercised extension options are not considered reasonably certain of exercise and have not been included in the lease term used to determine the lease liability or right-of-use asset. The Company did not have any finance leases as of September 30, 2019.

 

As of September 30, 2019, the Company recorded a lease liability of $19,721 thousand and a right-of-use asset of $19,721 thousand, respectively. The weighted average remaining life of operating leases and weighted average discount rate used to determine operating lease liabilities were 3.82 years and 2.93%, respectively, at September 30, 2019.  The Company did not have any material lease incentives, unamortized initial direct costs, prepaid lease expense, or accrued lease expense as of September 30, 2019.

 

Total lease costs during the three and nine months ended September 30, 2019, of $1,726 thousand and $5,145 thousand, respectively, were recorded within occupancy and equipment expense. The Company did not have any material short-term or variable leases costs or sublease income during the nine months ended September 30, 2019.    

 

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

 

   

Minimum
future lease
payments

 
   

At September 30,

 
   

2019

 
   

(In thousands)

 

Remaining three months of 2019

  $ 2,719  

2020

    6,283  

2021

    4,574  

2022

    3,632  

2023

    2,912  

Thereafter

    2,057  

Total minimum lease payments

    22,177  

Less: discount

    (2,456 )

Present value of lease liability

  $ 19,721  

 

Minimum future rental payments under noncancelable operating leases as of December 31, 2018, prior to adoption of ASU 2016-02, were as follows:

 

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-21-

 

 

   

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  

 

 

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 nine months ended September 30, 2019 and year ended December 31, 2018. 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 nine months ended September 30, 2019 and year ended December 31, 2018 no such adjustments were recorded.

 

The carrying values of goodwill were:

 

   

At September 30, 2019

   

At December 31, 2018

 
   

(In thousands)

 

Goodwill

  $ 121,673     $ 121,673  

 

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

 

   

At September 30, 2019

   

At December 31, 2018

 
   

Gross

           

Gross

         
   

Carrying

   

Accumulated

   

Carrying

   

Accumulated

 
   

Amount

   

Amortization

   

Amount

   

Amortization

 
   

(In thousands)

 

Core deposit intangibles

  $ 56,808     $ (55,344 )   $ 56,808     $ (54,879 )

 

 

As of September 30, 2019, the current period and estimated future amortization expense for identifiable intangible assets was:

   

Total

 
   

Core

 
   

Deposit

 
   

Intangibles

 
   

(In thousands)

 

For the nine months ended September 30, 2019 (actual)

  $ 465  

Estimate for the remainder of year ending December 31, 2019

    73  

Estimate for year ending December 31, 2020

    287  

   2021

    269  

   2022

    252  

   2023

    236  

   2024

    222  

 

-22-

 

 

 

Note 8: Deposits and Borrowed Funds

 

The following table provides additional detail regarding deposits.

                                                                                                               

   

Deposits

 
   

At September 30,

   

At December 31,

 
   

2019

   

2018

 
   

(In thousands)

 

Noninterest-bearing

  $ 2,265,640     $ 2,243,251  

Interest-bearing:

               

Transaction

    910,566       929,346  

Savings

    1,445,210       1,498,991  

Time deposits less than $100 thousand

    92,300       102,654  

Time deposits $100 thousand through $250 thousand

    56,066       64,512  

Time deposits more than $250 thousand

    26,841       28,085  

Total deposits

  $ 4,796,623     $ 4,866,839  

 

Demand deposit overdrafts of $1,078 thousand and $980 thousand were included as loan balances at September 30, 2019 and December 31, 2018, respectively. Interest expense for aggregate time deposits with individual account balances in excess of $100 thousand was $81 thousand and $246 thousand for the three and nine months ended September 30, 2019, respectively, and $91 thousand and $283 thousand for the three and nine months ended September 30, 2018, respectively.

 

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 September 30,

   

At December 31,

 
   

2019

   

2018

 

Repurchase agreements:

 

(In thousands)

 

Collateral securing borrowings:

               

Securities of U.S. Government sponsored entities

  $ 75,784     $ 73,803  

Agency residential MBS

    55,013       58,380  

Corporate securities

    115,018       91,837  

Total collateral carrying value

  $ 245,815     $ 224,020  

Total short-term borrowed funds

  $ 45,646     $ 51,247  

 

 

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:

 

-23-

 

 

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% 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 September 30, 2019

 
   

Fair Value

   

Quoted Prices in Active Markets for Identical Assets
(Level 1)

   

Significant Other Observable Inputs
(Level 2)

   

Significant Unobservable Inputs
(Level 3) (1)

 
   

(In thousands)

 

Debt securities available for sale

                               

U.S. Treasury securities

  $ 44,826     $ 44,826     $ -     $ -  

Securities of U.S. Government sponsored entities

    122,108       -       122,108       -  

Agency residential MBS

    979,751       -       979,751       -  

Non-agency residential MBS

    104       -       104       -  

Agency commercial MBS

    3,751       -       3,751       -  

Securities of U.S. Government entities

    777       -       777       -  

Obligations of states and political subdivisions

    165,403       -       165,403       -  

Corporate securities

    1,667,047       -       1,667,047       -  

Total debt securities available for sale

  $ 2,983,767     $ 44,826     $ 2,938,941     $ -  

 

(1)   There were no transfers in to or out of level 3 during the nine months ended September 30, 2019.

 

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-24-

 

 

   

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.

 

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 September 30, 2019 and December 31, 2018, 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

 
                                   

Nine Months Ended

 
   

At September 30, 2019

   

September 30, 2019

 
   

Carrying Value

   

Level 1

   

Level 2

   

Level 3

   

Total Losses

 
   

(In thousands)

 

Other real estate owned

  $ 43     $ -     $ -     $ 43     $ -  

Impaired loans:

                                       

Commercial

    6,050       -       -       6,050       -  

Commercial real estate

    4,099       -       -       4,099       -  

Residential real estate

    193       -       -       193       -  

Consumer installment and other

    77       -       -       77       (34 )

Total assets measured at fair value on a nonrecurring basis

  $ 10,462     $ -     $ -     $ 10,462     $ (34 )

 

                                   

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 )

 

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.

 

-25-

 

 

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.

 

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.

 

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.

 

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. 

 

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-26-

 

 

   

At September 30, 2019

 
   

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

  $ 415,639     $ 415,639     $ 415,639     $ -     $ -  

Debt securities held to maturity

    793,216       799,241       -       799,241       -  

Loans

    1,113,401       1,178,305       -       -       1,178,305  
                                         

Financial Liabilities:

                                       

Deposits

  $ 4,796,623     $ 4,794,970     $ -     $ 4,621,416     $ 173,554  

Short-term borrowed funds

    45,646       45,646       -       45,646       -  

 

   

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       -  

 

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 $286,876 thousand at September 30, 2019 and $278,598 thousand at December 31, 2018. 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 $3,099 thousand at September 30, 2019 and $2,772 thousand at December 31, 2018. The Company had no commitments outstanding for commercial and similar letters of credit at September 30, 2019 and December 31, 2018. The Company had $550 thousand and $75 thousand in outstanding full recourse guarantees to a 3rd party credit card company at September 30, 2019 and December 31, 2018, respectively. The Company had a reserve for unfunded commitments of $2,308 thousand at September 30, 2019 and December 31, 2018, 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 second quarter 2019, the Company achieved a mediated settlement to dismiss a lawsuit and paid the resulting liability of $252 thousand.

 

The Company determined that it will be obligated to provide refunds of revenue recognized in years prior to 2018 to some customers. The Company initially estimated the probable amount of these obligations to be $5,542 thousand and accrued a liability for such amount in 2017; based on additional information received in the second quarter 2019, the Company increased such liability to $5,843 thousand by recognizing an expense of $301 thousand.

 

-27-

 

 

 

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 Nine Months

 
   

Ended September 30,

 
   

2019

   

2018

   

2019

   

2018

 
   

(In thousands, except per share data)

 

Net income applicable to common equity (numerator)

  $ 20,390     $ 16,993     $ 59,661     $ 52,509  

Basic earnings per common share

                               

Weighted average number of common shares outstanding - basic (denominator)

    26,986       26,701       26,924       26,622  

Basic earnings per common share

  $ 0.76     $ 0.64     $ 2.22     $ 1.97  

Diluted earnings per common share

                               

Weighted average number of common shares outstanding - basic

    26,986       26,701       26,924       26,622  

Add common stock equivalents for options

    41       114       52       114  

Weighted average number of common shares outstanding - diluted (denominator)

    27,027       26,815       26,976       26,736  

Diluted earnings per common share

  $ 0.75     $ 0.63     $ 2.21     $ 1.96  

 

For the three and nine months ended September 30, 2019, options to purchase 379 thousand and 425 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 nine months ended September 30, 2018, options to purchase 326 thousand and 432 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 12: Income Taxes

 

In the second quarter 2019, the Company decreased unrecognized tax benefits by $909 thousand related to settlements with taxing authorities. The settlements incorporated amended tax returns for which the Company had recognized a deferred tax asset in the amount of $1,003 thousand.

 

In the second quarter 2019, the Company re-assessed its ability to realize benefits from California capital loss carryforwards. The Company established a $269 thousand valuation allowance related to the deferred tax asset.

 

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-28-

 

 

 

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

 

WESTAMERICA BANCORPORATION

FINANCIAL SUMMARY

 

   

For the Three Months

   

For the Nine Months

 
   

Ended September 30,

 
   

2019

   

2018

   

2019

   

2018

 
   

(In thousands, except per share data)

 

Net Interest and Loan Fee Income (FTE)(1)

  $ 40,349     $ 39,498     $ 120,925     $ 115,122  

Provision for Loan Losses

    -       -       -       -  

Noninterest Income:

                               

Life Insurance Gains

    -       585       433       585  

Other Noninterest income

    11,809       11,943       35,243       35,667  

Total Noninterest Income

    11,809       12,528       35,676       36,252  

Noninterest Expense:

                               

Loss Contingency

    -       3,500       553       3,500  

Other Noninterest Expense

    24,033       25,866       74,224       77,629  

Total Noninterest Expense

    24,033       29,366       74,777       81,129  

Income Before Income Taxes (FTE)(1)

    28,125       22,660       81,824       70,245  

Income Tax Provision (FTE)(1)

    7,735       5,667       22,163       17,736  

Net Income

  $ 20,390     $ 16,993     $ 59,661     $ 52,509  
                                 

Average Common Shares Outstanding

    26,986       26,701       26,924       26,622  

Average Diluted Common Shares Outstanding

    27,027       26,815       26,976       26,736  

Common Shares Outstanding at Period End

    27,014       26,727                  
                                 

Per Common Share:

                               

Basic Earnings

  $ 0.76     $ 0.64     $ 2.22     $ 1.97  

Diluted Earnings

    0.75       0.63       2.21       1.96  

Book Value

  $ 26.41     $ 22.17                  
                                 

Financial Ratios:

                               

Return on Assets

    1.45 %     1.19 %     1.43 %     1.25 %

Return on Common Equity

    11.87 %     10.58 %     11.92 %     11.22 %

Net Interest Margin (FTE)(1)

    3.11 %     3.00 %     3.12 %     2.95 %

Net Loan Losses to Average Loans

    0.10 %     0.34 %     0.17 %     0.11 %

Efficiency Ratio(2)

    46.1 %     56.4 %     47.8 %     53.6 %
                                 

Average Balances:

                               

Assets

  $ 5,570,843     $ 5,648,004     $ 5,580,965     $ 5,600,499  

Loans

    1,142,668       1,194,874       1,177,057       1,215,712  

Investment securities

    3,687,049       3,591,637       3,675,102       3,538,724  

Deposits

    4,770,976       4,893,859       4,789,084       4,856,639  

Shareholders' Equity

    681,513       636,965       669,043       625,496  
                                 

Period End Balances:

                               

Assets

  $ 5,616,055     $ 5,529,463                  

Loans

    1,133,229       1,196,955                  

Investment securities

    3,776,983       3,506,341                  

Deposits

    4,796,623       4,835,837                  

Shareholders' Equity

    713,378       592,591                  
                                 

Capital Ratios at Period End:

                               

Total Risk Based Capital

    17.20 %     16.99 %                

Tangible Equity to Tangible Assets

    10.75 %     8.67 %                
                                 

Dividends Paid Per Common Share

  $ 0.41     $ 0.40     $ 1.22     $ 1.20  

Common Dividend Payout Ratio

    55 %     63 %     55 %     61 %

 

The above financial summary has been derived from the Company's unaudited consolidated financial statements. This information should be read in conjunction with those statements, notes and the other information included elsewhere herein. Percentages under the heading "Financial Ratios" are annualized with the exception of the efficiency ratio.

 

(1) Yields on securities and certain loans have been adjusted upward to 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).

 

-29-

 

 

Financial Overview

 

Westamerica Bancorporation and subsidiaries’ (collectively, the “Company”) reported net income of $20.4 million or $0.75 diluted earnings per common share for the third quarter 2019 and net income of $59.7 million or $2.21 diluted earnings per common share for the nine months ended September 30, 2019. Results for the nine months ended September 30, 2019 include a tax-exempt life insurance gain of $433 thousand and $553 thousand in loss contingencies. The loss contingencies include a $301 thousand increase in estimated customer refunds of revenue recognized prior to 2018 and a $252 thousand settlement to dismiss a lawsuit. Although loss contingencies represent estimated liabilities, which are subject to revision, the Company does not anticipate additional losses for either of these matters. These results compare to net income of $17.0 million or $0.63 diluted earnings per common share for the third quarter 2018 and net income of $52.5 million or $1.96 diluted earnings per common share for the nine months ended September 30, 2018. The third quarter 2018 results include a $585 thousand tax-exempt life insurance gain and a $3.5 million loss contingency resulting from a mediated settlement to dismiss a lawsuit.

 

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 increased the federal funds rate by 2.00% to 2.50% through June 2019, although longer-term rates did not increase by a similar magnitude. The increase in market interest rates benefited the Company’s earning asset yields until the FOMC cut the federal funds rate in July 2019 by 0.25% and in September 2019 by 0.25%.

 

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. During the three and nine months ended September 30, 2019 the average volume of checking and savings deposits was 96.2% and 96.1%, respectively, of average total deposits.

 

Credit quality remained solid with nonperforming assets totaling $4.7 million at September 30, 2019 compared with $5.8 million at December 31, 2018 and $6.5 million at September 30, 2018. The Company did not recognize a provision for loan losses in the three months and nine months ended September 30, 2019.

 

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.

 

The Company’s significant accounting policies (see Note 1, “Summary of Significant Accounting Policies,” to Financial Statements in the Company’s 2018 Form 10-K) are fundamental to understanding the Company’s results of operations and financial condition.

 

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-30-

 

 

Net Income

 

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

 

   

For the Three Months

   

For the Nine Months

 
   

Ended September 30,

 
   

2019

   

2018

   

2019

   

2018

 
   

(In thousands, except per share data)

 

Net interest and loan fee income (FTE)

  $ 40,349     $ 39,498     $ 120,925     $ 115,122  

Provision for loan losses

    -       -       -       -  

Noninterest income

    11,809       12,528       35,676       36,252  

Noninterest expense

    24,033       29,366       74,777       81,129  

Income before taxes (FTE)

    28,125       22,660       81,824       70,245  

Income tax provision (FTE)

    7,735       5,667       22,163       17,736  

Net income

  $ 20,390     $ 16,993     $ 59,661     $ 52,509  
                                 

Average diluted common shares

    27,027       26,815       26,976       26,736  

Diluted earnings per common share

  $ 0.75     $ 0.63     $ 2.21     $ 1.96  
                                 

Average total assets

  $ 5,570,843     $ 5,648,004     $ 5,580,965     $ 5,600,499  

Net income to average total assets (annualized)

    1.45 %     1.19 %     1.43 %     1.25 %

Net income to average common shareholders' equity (annualized)

    11.87 %     10.58 %     11.92 %     11.22 %

 

Net income for the third quarter 2019 was $3.4 million more than the third quarter 2018. Net interest and loan fee income (FTE) increased $851 thousand in the third quarter 2019 compared with the third quarter 2018 mainly due to a higher net yield on earning assets and higher average balances of investments, partially offset by lower average balances of interest-bearing cash and loans. The provision for loan losses remained zero, reflecting Management's evaluation of losses inherent in the loan portfolio. Noninterest income decreased $719 thousand from the third quarter 2018 primarily due to lower income from service charges on deposit accounts in the third quarter 2019 and a life insurance gain of $585 thousand in the third quarter 2018. Noninterest expense decreased $5.3 million in the third quarter 2019 compared with the third quarter 2018 due to a $3.5 million loss contingency recognized in the third quarter 2018 and lower FDIC insurance assessments, employee benefit costs, and intangible amortization in the third quarter 2019. The lower third quarter 2019 FDIC assessments are due to application of the Bank’s assessment credit described in the Company’s December 31, 2018 Form 10-K, Part 1, Item 1, “Premiums for Deposit Insurance.” The tax rate (FTE) for the third quarter 2019 was 27.5% compared with 25.0% for the third quarter 2018. The higher tax rate in the third quarter 2019 is due to lower levels of tax-exempt interest income and stock compensation tax deductions in the third quarter 2019 and the tax exempt nature of the life insurance gains realized in the third quarter 2018.

 

Comparing the nine months ended September 30, 2019 with the nine months ended September 30, 2018 net income increased $7.2 million. Net interest and loan fee (FTE) income increased $5.8 million due to a higher net yield on earning assets and higher average balances of investments, partially offset by lower average balances of interest-bearing cash and loans. The provision for loan losses remained zero, reflecting Management's evaluation of losses inherent in the loan portfolio. In the nine months ended September 30, 2019, noninterest income decreased $576 thousand compared with the nine months ended September 30, 2018 due to lower income from service charges on deposit accounts, other service charges and debit card fees, offset in part by an increase in merchant processing services. In the nine months ended September 30, 2019 noninterest expense decreased $6.4 million compared with the nine months ended September 30, 2018 primarily due to decreases in loss contingencies, FDIC insurance assessments, employee benefit costs, and intangible amortization in the nine months ended September 30, 2019. The effective tax rates (FTE) was 27.1% for the nine months ended September 30, 2019 compared with 25.2% for the nine months ended September 30, 2018. The higher effective tax rate (FTE) in the nine months ended September 30, 2019 compared with the same period in 2018 is due to lower levels of tax-exempt interest income and stock compensation tax deductions.

 

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-31-

 

 

Net Interest and Loan Fee Income (FTE)                                                  

                                                               

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

 

   

For the Three Months

   

For the Nine Months

 
   

Ended September 30,

 
   

2019

   

2018

   

2019

   

2018

 
   

($ in thousands)

 

Interest and loan fee income

  $ 39,695     $ 38,614     $ 118,804     $ 112,275  

FTE adjustment

    1,109       1,411       3,558       4,292  

Interest expense

    455       527       1,437       1,445  

Net interest and loan fee income (FTE)

  $ 40,349     $ 39,498     $ 120,925     $ 115,122  
                                 

Average earning assets

  $ 5,176,744     $ 5,231,257     $ 5,173,581     $ 5,191,664  

Net interest margin (FTE) (annualized)

    3.11 %     3.00 %     3.12 %     2.95 %

 

Net interest and loan fee income (FTE) increased $851 thousand in the third quarter 2019 compared with the third quarter 2018 mainly due to a higher net yield on earning assets (up 0.11%) and higher average balances of investments (up $95 million), partially offset by lower average balances of interest-bearing cash (down $98 million) and loans (down $52 million).

 

Comparing the first nine months ended September 30, 2019 with the nine months ended September 30, 2018, net interest and loan fee (FTE) income increased $5.8 million due to a higher net yield on earning assets (up 0.17%) and higher average balances of investments (up $136 million), partially offset by lower average balances of interest-bearing cash (down $116 million) and loans (down $39 million).

 

The annualized net interest margin (FTE) increased to 3.11% in the third quarter 2019 and 3.12% in the nine months ended September 30, 2019 from 3.00% in the third quarter 2018 and 2.95% in the nine months ended September 30, 2018. The net interest margin (FTE) increased in 2019, reflecting earning assets repriced to higher yields. 

 

The Company’s funding costs were 0.04% in the third quarter and nine months ended September 30, 2019, unchanged from the same periods in 2018. Average balances of time deposits declined $34 million from the nine months ended September 30, 2018 to the nine months ended September 30, 2019. Average balances of checking and saving deposits accounted for 96.1% of average total deposits in the nine months ended September 30, 2019 compared with 95.5% in the nine months ended September 30, 2018.

 

Net Interest Margin (FTE)

 

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

 

   

For the Three Months

   

For the Nine Months

 
   

Ended September 30,

 
   

2019

   

2018

   

2019

   

2018

 
                                 

Yield on earning assets (FTE)

    3.15 %     3.04 %     3.16 %     2.99 %

Rate paid on interest-bearing liabilities

    0.07 %     0.08 %     0.07 %     0.07 %

Net interest spread (FTE)

    3.08 %     2.96 %     3.09 %     2.92 %

Impact of noninterest-bearing demand deposits

    0.03 %     0.04 %     0.03 %     0.03 %

Net interest margin (FTE)

    3.11 %     3.00 %     3.12 %     2.95 %

 

The FOMC increased the federal funds rate between December 2016 and December 2018. In the third quarter and first nine months of 2019 the yield on earning assets increased compared with the comparable periods of 2018 as earning assets repriced to higher yields. Rates on interest-bearing liabilities were kept low by reducing the volume of higher-cost time deposits and managing rates paid on checking and savings deposits.

 

-32-

 

 

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, rates and interest margins are annualized.

 

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

 

   

For the Three Months Ended September 30, 2019

 
           

Interest

         
   

Average

   

Income/

   

Yields/

 
   

Balance

   

Expense

   

Rates

 
   

($ in thousands)

 

Assets

                       

Investment securities:

                       

Taxable

  $ 3,096,255     $ 19,586       2.53 %

Tax-exempt (1)

    590,794       4,782       3.24 %

Total investments (1)

    3,687,049       24,368       2.64 %

Loans:

                       

Taxable

    1,094,107       14,038       5.09 %

Tax-exempt (1)

    48,561       497       4.06 %

Total loans (1)

    1,142,668       14,535       5.05 %

Total interest-bearing cash

    347,027       1,901       2.14 %

Total Interest-earning assets (1)

    5,176,744       40,804       3.15 %

Other assets

    394,099                  

Total assets

  $ 5,570,843                  
                         

Liabilities and shareholders' equity

                       

Noninterest-bearing demand

  $ 2,234,494     $ -       - %

Savings and interest-bearing transaction

    2,357,462       302       0.05 %

Time less than $100,000

    101,452       64       0.25 %

Time $100,000 or more

    77,568       81       0.41 %

Total interest-bearing deposits

    2,536,482       447       0.07 %

Short-term borrowed funds

    50,398       8       0.06 %

Total interest-bearing liabilities

    2,586,880       455       0.07 %

Other liabilities

    67,956                  

Shareholders' equity

    681,513                  

Total liabilities and shareholders' equity

  $ 5,570,843                  

Net interest spread (1) (2)

                    3.08 %

Net interest and fee income and interest margin (1) (3)

          $ 40,349       3.11 %

 

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

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

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

 

 

 

-33-

 

 

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

 

   

For the Three Months Ended September 30, 2018

 
           

Interest

         
   

Average

   

Income/

   

Yields/

 
   

Balance

   

Expense

   

Rates

 
   

($ in thousands)

 

Assets

                       

Investment securities:

                       

Taxable

  $ 2,849,187     $ 16,780       2.36 %

Tax-exempt (1)

    742,450       6,177       3.33 %

Total investments (1)

    3,591,637       22,957       2.56 %

Loans:

                       

Taxable

    1,140,448       14,161       4.93 %

Tax-exempt (1)

    54,426       546       3.98 %

Total loans (1)

    1,194,874       14,707       4.88 %

Total interest-bearing cash

    444,746       2,361       1.98 %

Total Interest-earning assets (1)

    5,231,257       40,025       3.04 %

Other assets

    416,747                  

Total assets

  $ 5,648,004                  
                         

Liabilities and shareholders' equity

                       

Noninterest-bearing demand

  $ 2,223,678     $ -       - %

Savings and interest-bearing transaction

    2,461,357       358       0.06 %

Time less than $100,000

    118,156       69       0.23 %

Time $100,000 or more

    90,668       91       0.40 %

Total interest-bearing deposits

    2,670,181       518       0.08 %

Short-term borrowed funds

    63,489       9       0.06 %

Total interest-bearing liabilities

    2,733,670       527       0.08 %

Other liabilities

    53,691                  

Shareholders' equity

    636,965                  

Total liabilities and shareholders' equity

  $ 5,648,004                  

Net interest spread (1) (2)

                    2.96 %

Net interest and fee income and interest margin (1) (3)

          $ 39,498       3.00 %

 

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

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

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

 

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-34-

 

 

 

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

 

   

For the Nine Months Ended September 30, 2019

 
           

Interest

         
   

Average

   

Income/

   

Yields/

 
   

Balance

   

Expense

   

Rates

 
   

($ in thousands)

 

Assets

                       

Investment securities:

                       

Taxable

  $ 3,037,722     $ 56,992       2.50 %

Tax-exempt (1)

    637,380       15,401       3.22 %

Total investments (1)

    3,675,102       72,393       2.63 %

Loans:

                       

Taxable

    1,126,866       42,834       5.08 %

Tax-exempt (1)

    50,191       1,538       4.10 %

Total loans (1)

    1,177,057       44,372       5.04 %

Total interest-bearing cash

    321,422       5,597       2.30 %

Total Interest-earning assets (1)

    5,173,581       122,362       3.16 %

Other assets

    407,384                  

Total assets

  $ 5,580,965                  
                         

Liabilities and shareholders' equity

                       

Noninterest-bearing demand

  $ 2,203,755     $ -       - %

Savings and interest-bearing transaction

    2,399,848       970       0.05 %

Time less than $100,000

    105,339       194       0.25 %

Time $100,000 or more

    80,142       246       0.41 %

Total interest-bearing deposits

    2,585,329       1,410       0.07 %

Short-term borrowed funds

    55,376       27       0.06 %

Total interest-bearing liabilities

    2,640,705       1,437       0.07 %

Other liabilities

    67,462                  

Shareholders' equity

    669,043                  

Total liabilities and shareholders' equity

  $ 5,580,965                  

Net interest spread (1) (2)

                    3.09 %

Net interest and fee income and interest margin (1) (3)

          $ 120,925       3.12 %

 

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

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

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

 

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-35-

 

 

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

 

   

For the Nine Months Ended September 30, 2018

 
           

Interest

         
   

Average

   

Income/

   

Yields/

 
   

Balance

   

Expense

   

Rates

 
   

($ in thousands)

 

Assets

                       

Investment securities:

                       

Taxable

  $ 2,781,814     $ 47,327       2.27 %

Tax-exempt (1)

    756,910       18,697       3.29 %

Total investments (1)

    3,538,724       66,024       2.49 %

Loans:

                       

Taxable

    1,159,049       42,876       4.95 %

Tax-exempt (1)

    56,663       1,734       4.09 %

Total loans (1)

    1,215,712       44,610       4.91 %

Total interest-bearing cash

    437,228       5,933       1.74 %

Total Interest-earning assets (1)

    5,191,664       116,567       2.99 %

Other assets

    408,835                  

Total assets

  $ 5,600,499                  
                         

Liabilities and shareholders' equity

                       

Noninterest-bearing demand

  $ 2,186,250     $ -       - %

Savings and interest-bearing transaction

    2,450,893       924       0.05 %

Time less than $100,000

    121,619       210       0.23 %

Time $100,000 or more

    97,877       283       0.39 %

Total interest-bearing deposits

    2,670,389       1,417       0.07 %

Short-term borrowed funds

    62,131       28       0.06 %

Total interest-bearing liabilities

    2,732,520       1,445       0.07 %

Other liabilities

    56,233                  

Shareholders' equity

    625,496                  

Total liabilities and shareholders' equity

  $ 5,600,499                  

Net interest spread (1) (2)

                    2.92 %

Net interest and fee income and interest margin (1) (3)

          $ 115,122       2.95 %

 

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

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

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

 

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-36-

 

 

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

 

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

 

Summary of Changes in Interest Income and Expense

 

   

For the Three Months Ended September 30, 2019

 
   

Compared with

 
   

For the Three Months Ended September 30, 2018

 
   

Volume

   

Yield/Rate

   

Total

 
   

(In thousands)

 

Increase (decrease) in interest and loan fee income:

                       

Investment securities:

                       

Taxable

  $ 1,455     $ 1,351     $ 2,806  

Tax-exempt (1)

    (1,262 )     (133 )     (1,395 )

Total investments (1)

    193       1,218       1,411  

Loans:

                       

Taxable

    (575 )     452       (123 )

Tax-exempt (1)

    (59 )     10       (49 )

Total loans (1)

    (634 )     462       (172 )

Total interest-bearing cash

    (585 )     125       (460 )

Total (decrease) increase in interest and loan fee income (1)

    (1,026 )     1,805       779  

(Decrease) increase in interest expense:

                       

Deposits:

                       

Savings and interest-bearing transaction

    (15 )     (41 )     (56 )

Time less than $100,000

    (10 )     5       (5 )

Time $100,000 or more

    (13 )     3       (10 )

Total interest-bearing deposits

    (38 )     (33 )     (71 )

Short-term borrowed funds

    (2 )     1       (1 )

Total decrease in interest expense

    (40 )     (32 )     (72 )

(Decrease) increase in net interest and loan fee income (1)

  $ (986 )   $ 1,837     $ 851  

 

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

 

 

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-37-

 

 

Summary of Changes in Interest Income and Expense

 

   

For the Nine Months Ended September 30, 2019

 
   

Compared with

 
   

For the Nine Months Ended September 30, 2018

 
   

Volume

   

Yield/Rate

   

Total

 
   

(In thousands)

 

Increase (decrease) in interest and loan fee income:

                       

Investment securities:

                       

Taxable

  $ 4,354     $ 5,311     $ 9,665  

Tax-exempt (1)

    (2,953 )     (343 )     (3,296 )

Total investments (1)

    1,401       4,968       6,369  

Loans:

                       

Taxable

    (1,191 )     1,149       (42 )

Tax-exempt (1)

    (198 )     2       (196 )

Total loans (1)

    (1,389 )     1,151       (238 )

Total interest-bearing cash

    (1,623 )     1,287       (336 )

Total (decrease) increase in interest and loan fee income (1)

    (1,611 )     7,406       5,795  

(Decrease) increase in interest expense:

                       

Deposits:

                       

Savings and interest-bearing transaction

    (19 )     65       46  

Time less than $100,000

    (28 )     12       (16 )

Time $100,000 or more

    (51 )     14       (37 )

Total interest-bearing deposits

    (98 )     91       (7 )

Short-term borrowed funds

    (3 )     2       (1 )

Total (decrease) increase in interest expense

    (101 )     93       (8 )

(Decrease) increase in net interest and loan fee income (1)

  $ (1,510 )   $ 7,313     $ 5,803  

 

(1) Amounts calculated on an FTE 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 the third quarters of 2019 and 2018 and the nine months ended September 30, 2019 and September 30, 2018. Classified loans declined from $27 million at December 31, 2018 to $24 million at September 30, 2019. Nonaccrual loans were $4 million at September 30, 2019 compared with $5 million at September 30, 2018 and December 31, 2018. These factors were reflected in Management’s evaluation of credit quality, the level of the provision for loan losses, and the adequacy of the allowance for loan losses at September 30, 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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-38-

 

 

Noninterest Income

 

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

 

   

For the Three Months

   

For the Nine Months

 
   

Ended September 30,

 
   

2019

   

2018

   

2019

   

2018

 
   

(In thousands)

 
                                 

Service charges on deposit accounts

  $ 4,510     $ 4,615     $ 13,508     $ 14,012  

Merchant processing services

    2,494       2,464       7,708       7,190  

Debit card fees

    1,641       1,656       4,789       4,959  

Trust fees

    733       733       2,199       2,202  

ATM processing fees

    725       687       2,080       2,049  

Other service fees

    580       665       1,742       1,946  

Financial services commissions

    75       132       270       387  

Life insurance gains

    -       585       433       585  

Equity securities (losses) gains

    -       (16 )     50       (66 )

Other noninterest income

    1,051       1,007       2,897       2,988  

Total

  $ 11,809     $ 12,528     $ 35,676     $ 36,252  

 

Noninterest income for the third quarter 2019 decreased by $719 thousand from the third quarter 2018 primarily due to lower income from service charges on deposit accounts in the third quarter 2019 and a life insurance gain of $585 thousand in the third quarter 2018. Service charges on deposit accounts decreased due to declines in overdraft fees in the third quarter 2019.

 

In the nine months ended September 30, 2019, noninterest income decreased $576 thousand compared with the nine months ended September 30, 2018. Income from service charges on deposit accounts decreased due to lower overdraft fees in the nine months ended September 30, 2019. Other service charges decreased due to lower income from internet banking. Debit card fees and financial services commissions decreased in the nine months ended September 30, 2019. An increase in merchant processing services partially offset the decrease in noninterest income in the nine months ended September 30, 2019 compared with nine months ended September 30, 2018.

 

Noninterest Expense

 

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

 

   

For the Three Months

   

For the Nine Months

 
   

Ended September 30,

 
   

2019

   

2018

   

2019

   

2018

 
   

(In thousands)

 
                                 

Salaries and related benefits

  $ 12,559     $ 13,415     $ 38,757     $ 39,952  

Occupancy and equipment

    5,199       4,809       15,163       14,365  

Outsourced data processing services

    2,374       2,292       7,110       6,930  

Professional fees

    645       621       1,791       2,277  

Courier service

    456       448       1,349       1,333  

Amortization of identifiable intangibles

    76       451       465       1,474  

Loss contingency

    -       3,500       553       3,500  

Other noninterest expense

    2,724       3,830       9,589       11,298  

Total

  $ 24,033     $ 29,366     $ 74,777     $ 81,129  

 

 

Noninterest expense decreased $5.3 million in the third quarter 2019 compared with the third quarter 2018 due to a loss contingency recognized in the third quarter 2018 and lower FDIC insurance assessments, employee benefit costs, and intangible amortization in the third quarter 2019. The lower third quarter 2019 FDIC assessments are due to application of Westamerica Bank’s assessment credit described in the Company’s December 31, 2018 Form 10-K, Part 1, Item 1, “Premiums for Deposit Insurance.” 

 

-39-

 

 

In the nine months ended September 30, 2019 noninterest expense decreased $6.4 million compared with the nine months ended September 30, 2018 primarily due to decreases in loss contingencies, FDIC insurance assessments, employee benefit costs, and intangible amortization in the nine months ended September 30, 2019.

 

Provision for Income Tax

 

The Company’s income tax provision (FTE) was $7.7 million for the third quarter 2019 and $22.2 million for the nine months ended September 30, 2019 compared with $5.7 million for the third quarter 2018 and $17.7 million for the nine months ended September 30, 2018. The effective tax rates (FTE) of 27.5% for the third quarter 2019 and 27.1% for the nine months ended September 30, 2019 compared with 25.0% for the third quarter 2018 and 25.2% for the nine months ended September 30, 2018.

 

The higher effective tax rate (FTE) in the third quarter 2019 compared with the same period in 2018 is due to lower levels of tax-exempt interest income and stock compensation tax deductions in the third quarter 2019 and the tax exempt nature of the life insurance gains realized in the third quarter 2018. The tax provisions (FTE) for the third quarter 2019 and the third quarter 2018 include tax benefits of $-0- thousand and $152 thousand, respectively, for tax deductions from the exercise of employee stock options which exceed related compensation expenses recognized in the financial statements.

 

The higher effective tax rate (FTE) in the nine months ended September 30, 2019 compared with the same period in 2018 is due to lower levels of tax-exempt interest income and stock compensation tax deductions in the nine months ended September 30, 2019. The tax provisions (FTE) for the nine months ended September 30, 2019 and September 30, 2018 include tax benefits of $365 thousand and $731 thousand, respectively, for tax deductions from the exercise of employee stock options which exceed related compensation expenses recognized in the financial statements.

 

In the nine months ended September 30, 2019, the Company decreased unrecognized tax benefits by $909 thousand related to settlements with taxing authorities. The settlements incorporated amended tax returns for which the Company had recognized a deferred tax asset in the amount of $1,003 thousand.

 

Investment 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 managed the investment securities portfolio in response to changes in deposit and loan volumes. The carrying value of the Company’s investment securities portfolio was $3.8 billion at September 30, 2019 and $3.6 billion at December 31, 2018.

 

Management continually evaluates the Company’s investment securities portfolio in response to established asset/liability management objectives, changing market conditions that could affect profitability, liquidity, and the level of interest rate risk to which the Company is exposed. These evaluations may cause Management to change the level of funds the Company deploys into investment securities and change the composition of the Company’s investment securities portfolio.

 

At September 30, 2019, 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.

 

The Company had no equity securities at September 30, 2019. All of the equity securities were sold with no gains or losses from the sale during the third quarter 2019. The market value of the equity securities was $1,747 thousand at December 31, 2018. During the nine months ended September 30, 2019, the Company recognized gross unrealized holding gains of $50 thousand in earnings.

 

-40-

 

 

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

 

   

At September 30, 2019

   

At December 31, 2018

 
   

Market value

   

As a percent of total corporate securities

   

Market value

   

As a percent of total corporate securities

 
   

($ in thousands)

 

Financial

  $ 719,601       43 %   $ 531,512       40 %

Utilities

    223,428       14 %     197,568       15 %

Consumer, Non-cyclical

    184,859       11 %     169,851       13 %

Industrial

    151,452       9 %     152,636       12 %

Technology

    123,107       7 %     105,324       8 %

Communications

    89,559       5 %     49,642       4 %

Basic Materials

    66,978       4 %     30,410       2 %

Consumer, Cyclical

    61,053       4 %     58,430       5 %

Energy

    47,010       3 %     19,668       1 %

Total Corporate securities

  $ 1,667,047       100 %   $ 1,315,041       100 %

 

 

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 September 30, 2019, the Company’s investment securities portfolios included securities issued by 481 state and local government municipalities and agencies located within 42 states. The largest exposure to any one municipality or agency was $9.0 million (fair value) represented by one general obligation bond.

 

   

At September 30, 2019

 
   

Amortized

   

Fair

 
   

Cost

   

Value

 
   

(In thousands)

 

Obligations of states and political subdivisions:

               

General obligation bonds:

               

California

  $ 84,879     $ 87,392  

Texas

    38,245       38,698  

New Jersey

    29,798       30,150  

Washington

    23,924       24,626  

Minnesota

    20,661       20,918  

Other (33 states)

    203,785       207,899  

Total general obligation bonds

  $ 401,292     $ 409,683  
                 

Revenue bonds:

               

California

  $ 32,277     $ 32,787  

Kentucky

    16,399       16,680  

Colorado

    12,917       13,243  

Washington

    11,223       11,567  

Indiana

    9,944       10,149  

Other (28 states)

    90,204       91,837  

Total revenue bonds

  $ 172,964     $ 176,263  

Total obligations of states and political subdivisions

  $ 574,256     $ 585,946  

 

 

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-41-

 

 

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. 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  

 

At September 30, 2019 and December 31, 2018, 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 19 revenue sources at September 30, 2019 and 22 revenue sources December 31, 2018. The revenue sources that represent 5% or more individually of the total revenue bonds are summarized in the following tables.

   

At September 30, 2019

 
   

Amortized

   

Fair

 
   

Cost

   

Value

 
   

(In thousands)

 

Revenue bonds by revenue source:

               

Water

  $ 39,657     $ 40,489  

Sales tax

    23,030       23,532  

Sewer

    19,667       20,196  

Lease (renewal)

    15,368       15,656  

Lease (abatement)

    10,924       11,190  

Other (14 sources)

    64,318       65,200  

Total revenue bonds by revenue source

  $ 172,964     $ 176,263  

 

 

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-42-

 

 

   

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  

 

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

 

Loan Portfolio Credit Risk

 

The Company extends loans to commercial and consumer customers which expose the Company to the risk 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.

 

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”).

 

-43-

 

 

Nonperforming Assets

                       
   

At September 30,

   

At December 31,

 
   

2019

   

2018

   

2018

 
   

(In thousands)

 
                         

Nonperforming nonaccrual loans

  $ 633     $ 1,611     $ 998  

Performing nonaccrual loans

    3,670       3,870       3,870  

Total nonaccrual loans

    4,303       5,481       4,868  

Accruing loans 90 or more days past due

    351       361       551  

Total nonperforming loans

    4,654       5,842       5,419  

Other real estate owned

    43       620       350  

Total nonperforming assets

  $ 4,697     $ 6,462     $ 5,769  

 

Nonperforming assets have declined at September 30, 2019 compared with September 30, 2018 due to payoffs, chargeoffs and sale of Other Real Estate Owned. At September 30, 2019, one loan secured by commercial real estate with a balance of $3.7 million was on nonaccrual status. The remaining five nonaccrual loans held at September 30, 2019 had an average carrying value of $127 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.

 

 

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-44-

 

 

 

Allowance for Loan 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 Three Months

   

For the Nine Months

 
   

Ended September 30,

 
   

2019

   

2018

   

2019

   

2018

 
   

($ in thousands)

 

Analysis of the Allowance for Loan Losses

                               

Balance, beginning of period

  $ 20,117     $ 23,040     $ 21,351     $ 23,009  

Provision for loan losses

    -       -       -       -  

Loans charged off

                               

Commercial

    -       (384 )     (71 )     (425 )

Commercial real estate

    -       (240 )     -       (240 )

Consumer installment and other

    (1,039 )     (845 )     (3,332 )     (3,015 )

Total chargeoffs

    (1,039 )     (1,469 )     (3,403 )     (3,680 )

Recoveries of loans previously charged off

                               

Commercial

    233       103       449       1,352  

Commercial real estate

    12       -       38       -  

Consumer installment and other

    505       353       1,393       1,346  

Total recoveries

    750       456       1,880       2,698  

Net loan losses

    (289 )     (1,013 )     (1,523 )     (982 )

Balance, end of period

  $ 19,828     $ 22,027     $ 19,828     $ 22,027  
                                 

Net loan losses as a percentage of average total loans (annualized)

    0.10 %     0.34 %     0.17 %     0.11 %

 

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 all loans with outstanding principal balances in excess of $500 thousand that are classified or on nonaccrual status and all “troubled debt restructured” loans for impairment. 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 September 30, 2019 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: concentrations of credit at $1.0 million, adequacy of lending Management and staff at $1.1 million, and loan review system at $1.0 million.

 

-45-

 

 

   

Allowance for Loan Losses

 
   

For the Three Months Ended September 30, 2019

 
                                   

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

  $ 5,235     $ 4,057     $ 1,117     $ 238     $ 5,418     $ 4,052     $ 20,117  

(Reversal) provision

    (596 )     (1 )     482       (16 )     655       (524 )     -  

Chargeoffs

    -       -       -       -       (1,039 )     -       (1,039 )

Recoveries

    233       12       -       -       505       -       750  

Total allowance for loan losses

  $ 4,872     $ 4,068     $ 1,599     $ 222     $ 5,539     $ 3,528     $ 19,828  

 

 

   

Allowance for Loan Losses

 
   

For the Nine Months Ended September 30, 2019

 
                                   

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

  $ 6,311     $ 3,884     $ 1,465     $ 869     $ 5,645     $ 3,177     $ 21,351  

(Reversal) provision

    (1,817 )     146       134       (647 )     1,833       351       -  

Chargeoffs

    (71 )     -       -       -       (3,332 )     -       (3,403 )

Recoveries

    449       38       -       -       1,393       -       1,880  

Total allowance for loan losses

  $ 4,872     $ 4,068     $ 1,599     $ 222     $ 5,539     $ 3,528     $ 19,828  

 

 

   

Allowance for Loan Losses and Recorded Investment in Loans Evaluated for Impairment

 
   

At September 30, 2019

 
   

Commercial

   

Commercial Real Estate

   

Construction

   

Residential Real Estate

   

Consumer Installment and Other

   

Unallocated

   

Total

 
   

(In thousands)

 

Allowance for loan losses:

                                                       

Individually evaluated for impairment

  $ 2,550     $ -     $ -     $ -     $ -     $ -     $ 2,550  

Collectively evaluated for impairment

    2,322       4,068       1,599       222       5,539       3,528       17,278  

Total

  $ 4,872     $ 4,068     $ 1,599     $ 222     $ 5,539     $ 3,528     $ 19,828  

Carrying value of loans:

                                                       

Individually evaluated for impairment

  $ 8,672     $ 7,953     $ -     $ 193     $ 144     $ -     $ 16,962  

Collectively evaluated for impairment

    207,601       571,274       6,678       35,155       295,559       -       1,116,267  

Total

  $ 216,273     $ 579,227     $ 6,678     $ 35,348     $ 295,703     $ -     $ 1,133,229  

 

Management considers the $19.8 million allowance for loan losses to be adequate as a reserve against probable incurred loan losses in the loan portfolio as of September 30, 2019.

 

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

 

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.

 

-46-

 

 

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 September 30, 2019, 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 September 30, 2019, Management’s most recent measurements of estimated changes in net interest income were:

 

Static Simulation (balance sheet composition unchanged):

                       

Assumed Immediate Parallel Shift in Interest Rates

    -1.00 %     0.00 %     +1.00 %

First Year Change in Net Interest Income

    -6.50 %     0.00 %     +4.60 %

 

Dynamic Simulation (balance sheet composition changes):

                       

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 %     +2.00 %

 

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.

 

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.

 

-47-

 

 

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% of funding for average total assets in the nine months ended September 30, 2019 and the year ended December 31, 2018. 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 $3.8 billion in total investment securities at September 30, 2019. Under certain deposit, borrowing and other arrangements, the Company must hold and pledge investment securities as collateral. At September 30, 2019, such collateral requirements totaled approximately $722 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.

 

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 $33 million and $43 million in the nine months ended September 30, 2019 and in the year ended December 31, 2018, respectively, and retire common stock in the amount of $488 thousand and $524 thousand, respectively. Payment of dividends to the Parent Company by the Bank is limited under California and Federal laws. The Company believes these regulatory dividend restrictions will not have an impact on the Parent Company's ability to meet its ongoing cash obligations.

 

Capital Resources

 

The Company has historically generated high levels of earnings, which provide a means of accumulating capital. The Company's net income as a percentage of average shareholders' equity (“return on equity” or “ROE”) has been 11.9% in the nine months ended September 30, 2019 and 11.3% in the year ended December 31, 2018. The Company also raises capital as employees exercise stock options. Capital raised through the exercise of stock options was $11 million in the nine months ended September 30, 2019 and $13 million in the year ended December 31, 2018.

 

-48-

 

 

The Company paid common dividends totaling $33 million in the nine months ended September 30, 2019 and $43 million in the year ended December 31, 2018, which represent dividends per common share of $1.22 and $1.60, 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 8 thousand shares valued at $488 thousand in the nine months ended September 30, 2019 and 9 thousand shares valued at $524 thousand in the year ended December 31, 2018.

 

The Company's primary capital resource is shareholders' equity, which was $713 million at September 30, 2019 compared with $616 million at December 31, 2018. The Company's ratio of equity to total assets was 12.7% at September 30, 2019 and 11.1% at December 31, 2018.

 

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.

 

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.

 

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To Be

 
                           

Well-capitalized

 
                   

Required for

   

Under Prompt

 
   

At September 30, 2019

   

Capital Adequacy

   

Corrective Action

 
   

Company

   

Bank

   

Purposes

   

Regulations (Bank)

 
                                 

Common Equity Tier I Capital

    16.55 %     12.14 %     7.00%  (1)     6.50 %

Tier I Capital

    16.55 %     12.14 %     8.50%  (1)     8.00 %

Total Capital

    17.20 %     12.98 %     10.50%  (1)     10.00 %

Leverage Ratio

    10.41 %     7.60 %     4.00%       5.00 %

 

(1) Includes 2.5% capital conservation buffer.

 

                                   

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%  (2)     7.00%  (3)     6.50 %

Tier I Capital

    16.30 %     13.01 %     7.875%  (2)     8.50%  (3)     8.00 %

Total Capital

    17.03 %     13.94 %     9.875%  (2)     10.50%  (3)     10.00 %

Leverage Ratio

    9.51 %     7.55 %     4.000%       4.00%       5.00 %

 

(2) Includes 1.875% capital conservation buffer.

(3) Includes 2.5% capital conservation buffer.

 

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 on a net-of-tax basis. In December 2018, the federal bank regulatory agencies approved a final rule which became 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 2 to the unaudited consolidated financial statements, “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.

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

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

 

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

 

-50-

 

 

Item 4. Controls and Procedures

 

The Company’s principal executive officer and principal financial officer have evaluated the effectiveness of the Company’s “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended, as of September 30, 2019.

 

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 September 30, 2019 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

PART II. OTHER INFORMATION

 

Item 1. Legal Proceedings

 

Neither the Company nor any of its subsidiaries is a party to any material pending legal proceeding, nor is their property the subject of any material pending legal proceeding, other than ordinary routine legal proceedings arising in the ordinary course of the Company’s business. None of these proceedings is expected to have a material adverse impact upon the Company’s business, financial position or results of operations. Legal liabilities are accrued when obligations become probable and the amount can be reasonably estimated. In the second quarter 2019, the Company achieved a mediated settlement to dismiss a lawsuit and paid the resulting liability of $252 thousand. The Company determined that it will be obligated to provide refunds of revenue recognized in years prior to 2018 to some customers. The Company initially estimated the probable amount of these obligations to be $5,542 thousand and accrued a liability for such amount in 2017; based on additional information received in the second quarter 2019, the Company increased such liability to $5,843 thousand by recognizing an expense of $301 thousand.

 

Item 1A. Risk Factors

 

The Company’s Form 10-K as of December 31, 2018 includes detailed disclosure about the risks faced by the Company’s business; such risks have not materially changed since the Form 10-K was filed.

 

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

 

(a) None

(b) None

(c) 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 September 30, 2019.

 

   

2019

 

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 price paid)

 

July 1 through July 31

    -     $ -       -       1,750  

August 1 through August 31

    -       -       -       1,750  

September 1 through September 30

    -       -       -       1,750  

Total

    -     $ -       -       1,750  

 

-51-

 

 

The Company repurchases shares of its common stock in the open market on a discretionary basis 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.

 

No shares were repurchased during the period July 1, 2019 through September 30, 2019. A program approved by the Board of Directors on July 26, 2018 authorizing the purchase of up to 1,750 thousand shares of the Company’s common stock from time to time prior to September 1, 2019 was replaced by a program approved by the Board of Directors on July 25, 2019 authorizing the purchase of up to 1,750 thousand shares of the Company’s common stock from time to time prior to September 1, 2020.

 

Item 3. Defaults upon Senior Securities

 

None

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information

 

None

 

Item 6. Exhibits

 

The exhibit list required by this item is incorporated by reference to the Exhibit Index filed with this report.

 

[The remainder of this page intentionally left blank]

 

 

 

-52-

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

WESTAMERICA BANCORPORATION

(Registrant)

 

 

 

/s/ JOHN "ROBERT" THORSON                               

John "Robert" Thorson

Senior Vice President and Chief Financial Officer

(Principal Financial and Chief Accounting Officer)

 

Date: November 4, 2019

 

 

 

 

 

 

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EXHIBIT INDEX

 

Exhibit 10.1*: Westamerica Bancorporation 2019 Omnibus Equity Incentive Plan Stock Option Agreement Form

 

Exhibit 10.2*: Westamerica Bancorporation 2019 Omnibus Equity Incentive Plan Restricted Stock Unit Award Agreement Form

 

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

 

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

 

Exhibit 32.1: Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

Exhibit 32.2:  Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

Exhibit 101.INS: XBRL Instance Document – The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

 

Exhibit 101.SCH: XBRL Taxonomy Extension Schema Document

 

Exhibit 101.CAL: XBRL Taxonomy Extension Calculation Linkbase Document

 

Exhibit 101.DEF: XBRL Taxonomy Extension Definitions Linkbase Document

 

Exhibit 101.LAB: XBRL Taxonomy Extension Label Linkbase Document

 

Exhibit 101.PRE: XBRL Taxonomy Extension Presentation Linkbase Document

 

* Indicates management contract, compensatory plan or arrangement.

 

 

 

[The remainder of this page intentionally left blank]

 

 

 

 

 

-54-

 

ex_161876.htm

EXHIBIT 10.1

 

WESTAMERICA BANCORPORATION
EMPLOYEE STOCK OPTION GRANT NOTICE AND OPTION AGREEMENT
(2019 Omnibus Equity Incentive Plan)

 

As a key leader in our business, you are in a position to have significant influence on the performance and success of Westamerica Bancorporation (the “Company”). I am pleased to inform you that, in recognition of the role you play in our collective success, you have been granted an option to purchase shares of the Company’s common stock. This award is subject to the terms and conditions of the Westamerica Bancorporation 2019 Omnibus Equity Incentive Plan (the "Plan"), this Grant Notice, and the following Stock Option Agreement and by signing below, you agree to these terms and conditions. The details of this award are indicated below.

 

Optionee:

 

Date of Grant:

 

Number of Shares subject to the Option:

 

Exercise Price Per Share:

 

Term of Option:

 

Vesting:

Your right to exercise this Option vests one-third (1/3) on the first anniversary of the Date of Grant and one-third (1/3) on each of the two subsequent anniversaries of the Date of Grant (each such date, a “Vesting Date”). No additional shares of Common Stock will vest after your Termination for any reason.

 

Notwithstanding anything else in this Agreement to the contrary, you become fully vested in this Option if a Change in Control occurs.

 

WESTAMERICA BANCORPORATION 

 

Name:    
Title:  

 

_________________________________________________

 

Acknowledged and agreed as of __________________, 20__:

 

     
     
Name:    

 

-55-

 

 

STOCK OPTION AGREEMENT

 

THIS STOCK OPTION AGREEMENT (together with the above grant notice (the “Grant Notice”), the “Agreement”) is made and entered into as of the date set forth on the Grant Notice by and between Westamerica Bancorporation, a California corporation (the “Company”), and the individual (the “Optionee”) set forth on the Grant Notice.

 

Pursuant to the Westamerica Bancorporation 2019 Omnibus Equity Incentive Plan (the “Plan”), the Administrator has determined that it is to the advantage and best interest of the Company to grant to the Optionee an option to purchase the number of Shares (the “Shares”) set forth on the Grant Notice, at the exercise price per Share set forth on the Grant Notice, and in all respects subject to the terms, definitions and provisions of the Plan, which is incorporated herein by reference, and this Agreement (the “Option”).

 

Unless otherwise defined herein, capitalized terms used in this Agreement shall have the meanings set forth in the Plan. For purposes of this Agreement, the following definitions shall apply:

 

Termination” shall mean the termination of the employment of the Optionee with the Company and all Affiliates thereof (including because of the Optionee’s employer ceasing to be an Affiliate of the Company) shall terminate. For purposes of this Agreement, Termination will not occur when Optionee goes on a military leave, a sick leave or another bona fide leave of absence that was approved by the Company in writing if the terms of the leave provide for continued service crediting, or when continued service crediting is required by Applicable Law. Notwithstanding the foregoing, an approved leave of absence for six months or less, which does not in fact exceed six months, will not result in Termination for purposes of this Agreement. However, Termination will occur when approved leave described in this Section A ends, unless Optionee immediately returns to active work.

 

Termination Date” shall mean the date of the Termination.

 

NOW, THEREFORE, in consideration of the mutual agreements contained herein, the Optionee and the Company hereby agree as follows:

 

1.     Acceptance of Agreement. Optionee has reviewed all of the provisions of the Plan and this Agreement. Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator on questions relating to the Plan and this Agreement, and, solely as they relate to this Option, the applicable provisions (if any) contained in a written employment agreement between the Company or an Affiliate and the Optionee. The Optionee’s electronic signature of this Agreement shall have the same validity and effect as a signature affixed by hand.

 

2.     Grant and Terms of Stock Option.

 

2.1     Grant of Option. Pursuant to this Agreement, the Company has granted to the Optionee the right and option to purchase, subject to the terms and conditions set forth in the Plan and this Agreement, all or any part of the number of Shares set forth on the Grant Notice at a purchase price per Share equal to the exercise price per Share set forth on the Grant Notice. An Option granted pursuant to the Grant Notice and this Agreement shall be a Nonqualified Stock Option.

 

-56-

 

 

2.2     Vesting and Term of Option. This Section 2.2 is subject to the provisions of the Plan and the other provisions of this Agreement.

 

2.2.1     This Option shall vest and become exercisable as described in the Grant Notice.

 

2.2.2     The “Term” of this Option shall begin on the Date of Grant set forth in the Grant Notice and end on the expiration of the Term specified in the Grant Notice. No portion of this Option may be exercised after the expiration of the Term.

 

2.2.3     In the event of Termination for any reason other than death, Disability, or Cause:

 

2.2.3.1     the portion of this Option that is not vested and exercisable as of the Termination Date shall not continue to vest and shall be immediately cancelled and terminated; and

 

2.2.3.2     the portion of this Option that is vested and exercisable as of the Termination Date shall terminate and be cancelled on the earlier of:

 

(a)     the expiration of the Term and

 

(b)     ninety (90) days after such Termination Date.

 

2.2.4     In the event of Termination due to death or Disability:

 

2.2.4.1     the portion of this Option that is not vested and exercisable as of the Termination Date shall not continue to vest and shall be immediately cancelled and terminated; and

 

2.2.4.2     the portion of this Option that is vested and exercisable as of the Termination Date shall terminate and be cancelled on the earlier of (a) the expiration of the Term and (b) the date that is twelve (12) months after such of the Termination Date.

 

2.2.5     In the event of Termination for Cause, or if, after the Termination, the Administrator determines that Cause existed before such Termination, this entire Option shall not continue to vest, shall be cancelled and terminated as of the Termination Date, and shall no longer be exercisable as to any Shares, whether or not previously vested.

 

 

-57-

 

 

3.     Method of Exercise.

 

3.1     Method of Exercise. Each election to exercise the Option shall be subject to the terms and conditions of the Plan and shall be in writing, signed by the Optionee or by his or her executor, administrator, or permitted transferee (subject to any restrictions provided under the Plan), made pursuant to and in accordance with the terms and conditions set forth in the Plan and received by the Company at its principal offices, accompanied by payment in full as provided in the Plan or in this Agreement. Notwithstanding any of the foregoing, the Administrator shall have the right to specify all conditions of the manner of exercise. Upon the Company’s determination that the Option has been validly exercised as to any of the Shares, the Company may issue such Shares in the Optionee’s name in certificate or book-entry form. However, the Company shall not be liable to the Optionee for damages relating to any reasonable delays in issuing the Shares to the Optionee, any loss of the certificates, any mistakes or errors in the issuance of the certificates or in the creation of the book-entry forms, or in the certificates or the book-entry forms themselves which it promptly undertakes to correct.

 

3.2     Restrictions on Exercise. No Shares will be issued pursuant to the exercise of this Option unless and until there shall have been full compliance with all applicable requirements of the Securities Act of 1933 (“Securities Act”), as amended (whether by registration or satisfaction of exemption conditions), all applicable listing requirements of any national securities exchange or other market system on which the Common Stock is then listed and all applicable requirements of any Applicable Laws and of any regulatory bodies having jurisdiction over such issuance. As a condition to the exercise of this Option, the Company may require the Optionee to make any representation and warranty to the Company as may be necessary or appropriate, in the judgment of the Administrator, to comply with any Applicable Law. In addition, Optionee shall not sell any Shares acquired upon exercise of this Option at a time when Applicable Laws, regulations or Company's insider trading policies prohibit such sale. Any other provision of this Agreement notwithstanding, the Company shall have the right to designate one or more periods of time, each of which shall not exceed 180 days in length, during which this Option shall not be exercisable if the Administrator determines (in its sole discretion) that such limitation on exercise could in any way facilitate a lessening of any restriction on transfer pursuant to the Securities Act or any state securities laws with respect to any issuance of securities by the Company, facilitate the registration or qualification of any securities by the Company under the Securities Act or any state securities laws, or facilitate the perfection of any exemption from the registration or qualification requirements of the Securities Act or any applicable state securities laws for the issuance or transfer of any securities. Such limitation on exercise shall not alter the vesting schedule set forth in this Agreement other than to limit the periods during which this Option shall be exercisable.

 

3.3     Method of Payment. Payment of the exercise price shall be made in full at the time of exercise (a) by the delivery of cash or check acceptable to the Administrator, including an amount to cover the withholding taxes (as provided in Section 7.11) with respect to such exercise, or (b) any other method, if any, approved by the Administrator, including (i) by means of consideration received under any cashless exercise procedure, if any, approved by the Administrator (including the withholding of Shares otherwise issuable upon exercise) or (ii) any other form of consideration approved by the Administrator and permitted by Applicable Laws.

 

3.4     No Rights as a Shareholder. Until the Shares are issued to the Optionee (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a shareholder will exist with respect to the Shares, notwithstanding the exercise of the Option.

 

-58-

 

 

4.     Non-Transferability of Option. Except as provided below, this Option may not be sold, assigned transferred in any manner, pledged or otherwise encumbered other than by will or by the laws of descent or distribution or to a beneficiary designated pursuant to the Plan, and may be exercised during the lifetime of Optionee only by Optionee or the Optionee’s guardian or legal representative. Subject to all of the other terms and conditions of this Agreement, following the death of Optionee, this Option may, to the extent it is vested and exercisable by Optionee in accordance with its terms on the Termination Date, be exercised by Optionee’s executor or administrator, or the person or persons to whom the Optionee’s rights under this Agreement shall pass by will or by the laws of descent and distribution as the case may be. Any heir or legatee of the Optionee shall take rights herein granted subject to the terms and conditions hereof.

 

5.     Restrictions; Restrictive Legends. Ownership and transfer of Shares issued pursuant to the exercise of this Option will be subject to the provisions of, including ownership and transfer restrictions contained in, the Company’s Certificate of Incorporation, as amended from time to time, restrictions imposed by Applicable Laws and restrictions set forth or referenced in legends imprinted on certificates, if any, representing such Shares.

 

6.     Dissolution or Liquidation. In the event of the proposed dissolution or liquidation of the Company, to the extent that this Option had not been previously exercised, it will terminate immediately prior to the consummation of such proposed dissolution or liquidation. In such instance, the Administrator may, in the exercise of its sole discretion, declare that this Option will terminate as of a date fixed by the Administrator and give the Optionee the right to exercise this Option prior to such date as to all or any part of the optioned stock, including Shares as to which this Option would not otherwise be exercisable.

 

7.     General.

 

7.1     Governing Law. This Agreement shall be governed by and construed under the laws of the State of California applicable to agreements made and to be performed entirely in California, without regard to the conflicts of law provisions of California or any other jurisdiction.

 

7.2     Community Property. Without prejudice to the actual rights of the spouses as between each other, for all purposes of this Agreement, the Optionee shall be treated as agent and attorney-in-fact for that interest held or claimed by his or her spouse with respect to this Option and the parties hereto shall act in all matters as if the Optionee was the sole owner of this Option. This appointment is coupled with an interest and is irrevocable.

 

7.3     No Employment Rights. Nothing herein contained shall be construed as an agreement by the Company or any of its subsidiaries, express or implied, to employ the Optionee or contract for the Optionee’s services, to restrict the Company’s or such subsidiary’s right to discharge the Optionee or cease contracting for the Optionee’s services or to modify, extend or otherwise affect in any manner whatsoever the terms of any employment agreement or contract for services which may exist between the Optionee and the Company or any Affiliate.

 

-59-

 

 

7.4     Application to Other Stock. In the event any capital stock of the Company or any other corporation shall be distributed on, with respect to, or in exchange for Shares as a stock dividend, stock split, reclassification or recapitalization in connection with any merger or reorganization or otherwise, all restrictions, rights and obligations set forth in this Agreement shall apply with respect to such other capital stock to the same extent as they are, or would have been applicable, to the Shares on or with respect to which such other capital stock was distributed, and references to “Company” in respect of such distributed stock shall be deemed to refer to the company to which such distributed stock relates.

 

7.5     No Third-Party Benefits. Except as otherwise expressly provided in this Agreement, none of the provisions of this Agreement shall be for the benefit of, or enforceable by, any third-party beneficiary.

 

7.6     Successors and Assigns. Except as provided herein to the contrary, this Agreement shall be binding upon and inure to the benefit of the parties, their respective successors and permitted assigns.

 

7.7     No Assignment. Except as otherwise provided in this Agreement, the Optionee may not assign any of his or her rights under this Agreement without the prior written consent of the Company, which consent may be withheld in its sole discretion. The Company shall be permitted to assign its rights or obligations under this Agreement so long as such assignee agrees to perform all of the Company’s obligations hereunder.

 

7.8     Severability. The validity, legality or enforceability of the remainder of this Agreement shall not be affected even if one or more of the provisions of this Agreement shall be held to be invalid, illegal or unenforceable in any respect.

 

7.9     Equitable Relief. The Optionee acknowledges that, in the event of a threatened or actual breach of any of the provisions of this Agreement, damages alone will be an inadequate remedy, and such breach will cause the Company great, immediate and irreparable injury and damage. Accordingly, the Optionee agrees that the Company shall be entitled to injunctive and other equitable relief, and that such relief shall be in addition to, and not in lieu of, any remedies it may have at law or under this Agreement.

 

7.10     Jurisdiction. Any suit, action or proceeding with respect to this Agreement, or any judgment entered by any court in respect of any thereof, shall be brought in any court of competent jurisdiction in the State of California, and the Company and the Optionee hereby submit to the exclusive jurisdiction of such courts for the purpose of any such suit, action, proceeding or judgment. The Optionee and the Company hereby irrevocably waive (i) any objections which it may now or hereafter have to the laying of the venue of any suit, action or proceeding arising out of or relating to this Agreement brought in any court of competent jurisdiction in the State of California, (ii) any claim that any such suit, action or proceeding brought in any such court has been brought in any inconvenient forum and (iii) any right to a jury trial.

 

7.11     Taxes. By agreeing to this Agreement, the Optionee represents that he or she has reviewed with his or her own tax advisors the federal, state, local and foreign tax consequences of the transactions contemplated by this Agreement and that he or she is relying solely on such advisors and not on any statements or representations of the Company or any of its agents. The Company shall be entitled to require a cash payment by or on behalf of the Optionee and/or to deduct from the Shares or cash otherwise issuable hereunder or other compensation payable to the Optionee the minimum amount of any sums required by federal, state or local tax law to be withheld (or other such sums that will not cause adverse accounting consequences for the Company and is permitted under applicable withholding rules promulgated by the Internal Revenue Service or another applicable governmental entity) in respect of the Option, its exercise or any payment or transfer under or with respect to the Option.

 

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7.12     Headings. The section headings in this Agreement are inserted only as a matter of convenience, and in no way define, limit, extend or interpret the scope of this Agreement or of any particular section.

 

7.13     Number and Gender. Throughout this Agreement, as the context may require, (a) the masculine gender includes the feminine and the neuter gender includes the masculine and the feminine; (b) the singular tense and number includes the plural, and the plural tense and number includes the singular; (c) the past tense includes the present, and the present tense includes the past; (d) references to parties, sections, paragraphs and exhibits mean the parties, sections, paragraphs and exhibits of and to this Agreement; and (e) periods of days, weeks or months mean calendar days, weeks or months.

 

7.14     Data Privacy. Optionee agrees that all of Optionee’s information that is described or referenced in this Agreement and the Plan may be used by the Company, its affiliates and the designated broker and its affiliates to administer and manage Optionee’s participation in the Plan.

 

7.15     Acknowledgments of Optionee. Optionee has reviewed the Plan and this Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Agreement, fully understands all provisions of the Plan and this Agreement and, by accepting the Notice of Grant, acknowledges and agrees to all of the provisions of the Grant Notice, the Plan and this Agreement.

 

7.16     Complete Agreement. The Grant Notice, this Stock Option Agreement, the Plan constitute the parties’ entire agreement with respect to the subject matter hereof and supersede all agreements, representations, warranties, statements, promises and understandings, whether oral or written, with respect to the subject matter hereof. In the event of any inconsistency between the Plan and this Agreement, the terms of the Plan shall control.

 

7.17     Waiver. The Optionee acknowledges that a waiver by the Company of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any other provision of this Agreement, or of any subsequent breach by the Optionee.

 

7.18     Signature in Counterparts. This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

 

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7.19     Amendments and Termination. To the extent permitted by the Plan, this Agreement may be wholly or partially amended, altered or terminated at any time or from time to time by the Administrator or the Board, but no amendment, alteration or termination shall be made that would materially impair the rights of an Optionee under the Option without such Optionee’s consent. If it is determined that the terms of this Agreement have been structured in a manner that would result in adverse tax treatment under Section 409A of the Code, the parties agree to cooperate in taking all reasonable measures to restructure the arrangement to minimize or avoid such adverse tax treatment without materially impairing Optionee’s economic rights.

 

7.20     Electronic Delivery and Disclosure. The Company may, in its sole discretion, decide to deliver or disclose, as applicable, any documents related to this Award granted under the Plan, future awards that may be granted under the Plan, the prospectus related to the Plan, the Company’s annual reports or proxy statements by electronic means or to request Optionee’s consent to participate in the Plan by electronic means, including, but not limited to, the Securities and Exchange Commission’s Electronic Data Gathering, Analysis, and Retrieval system or any successor system (“EDGAR”). Optionee hereby consents to receive such documents delivered electronically or to retrieve such documents furnished electronically (including on EDGAR), as applicable, and agrees to participate in the Plan through any online or electronic system established and maintained by the Company or another third party designated by the Company.

 

 

 

 

 

 

-62-

 

ex_161877.htm

EXHIBIT 10.2

 

WESTAMERICA BANCORPORATION
EMPLOYEE RESTRICTED STOCK UNIT AWARD GRANT NOTICE
(2019 Omnibus Equity Incentive Plan)

 

As a key leader in our business, you are in a position to have significant influence on the performance and success of Westamerica Bancorporation (the “Company”). I am pleased to inform you that, in recognition of the role you play in our collective success, you have been granted a Restricted Stock Unit Award. This award is subject to the terms and conditions of the Westamerica Bancorporation 2019 Omnibus Equity Incentive Plan, this Grant Notice, and the following Restricted Stock Unit Agreement, and by signing below, you agree to these terms and conditions. The details of this award are indicated below.

 

Grantee:

 

Date of Grant:

 

Number of Restricted Stock Units:

 

Vesting Commencement Date:

 

Performance-Vesting Period:

 

Performance-Vesting Criteria:

 

   

Delivery Date:

Applicable Vesting Date

 

WESTAMERICA BANCORPORATION

 

By:    
Name:    
Title:    

 

Acknowledged and agreed as of the __________________, 20__:

 

     
     
Name:    

 

 

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RESTRICTED STOCK UNIT AWARD AGREEMENT

 

THIS RESTRICTED STOCK UNIT AWARD AGREEMENT (together with the above grant notice (the “Grant Notice”), this “Agreement”) is made and entered into as of the date set forth on the Grant Notice by and between the Company and the individual (the “Grantee”) set forth on the Grant Notice.

 

WHEREAS, pursuant to the Westamerica Bancorporation 2019 Omnibus Equity Incentive Plan (the “Plan”), the Administrator (the “Administrator”) has determined that it is to the advantage and best interest of the Company to grant to the Grantee this award of performance-vested Restricted Stock Units (the “Restricted Stock Units”) as set forth in the Grant Notice and subject to the terms and provisions of the Plan, which is incorporated herein by reference, and this Agreement (the “Award”).

 

NOW, THEREFORE, in consideration of the mutual agreements contained herein, the Grantee and the Company hereby agree as follows:

 

1.     Acceptance of Agreement. Grantee has reviewed all of the provisions of the Plan, the Grant Notice and this Restricted Stock Unit Award Agreement. By accepting this Award, Grantee agrees that this Award is granted under and governed by the terms and conditions of the Plan, the Grant Notice and this Restricted Stock Unit Award Agreement. Grantee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator on questions relating to the Plan, the Grant Notice, this Agreement. If Grantee signs this Agreement and Grant Notice electronically, Grantee’s electronic signature of this Agreement shall have the same validity and effect as a signature affixed by hand.

 

2.     Grant of Award. The Restricted Stock Units granted hereunder pursuant to Section 9 of the Plan shall be subject to the terms and provisions of the Plan, and all capitalized terms not otherwise defined herein shall have the meaning ascribed to them in the Plan. For purposes of this Agreement, “Termination” shall mean the termination of the employment of the Grantee with the Company and all Affiliates thereof (including because of the Grantee’s employer ceasing to be an Affiliate of the Company) shall terminate; and “Termination Date” shall mean the date of the Termination. For purposes of this Agreement, Termination will not occur when Grantee goes on a military leave, a sick leave or another bona fide leave of absence that was approved by the Company in writing if the terms of the leave provide for continued service crediting, or when continued service crediting is required by Applicable Law. Notwithstanding the foregoing, an approved leave of absence for six months or less, which does not in fact exceed six months, will not result in Termination for purposes of this Agreement. However, Termination will occur when approved leave described in this Section 2 ends, unless Grantee immediately returns to active work. Until the Shares covered by Restricted Stock Units are issued to Grantee (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a shareholder will exist with respect to such Shares.

 

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3.     Vesting.

 

3.1     Subject to the provisions of the Plan and Sections 3.2 and 3.3 of this Agreement, and except as otherwise provided in a written employment agreement between the Company or an Affiliate and the Grantee (if any):

 

3.1.1     The Restricted Stock Units shall vest based on achievement of the Performance Vesting Criteria, as described in the Grant Notice, during the Performance Period (the last date of the Performance Vesting Period, unless such other date or dates is indicated in the Performance Vesting Criteria (each, a “Vesting Date”)), subject to the Grantee not experiencing a Termination prior to each applicable Vesting Date. If any Restricted Stock Units do not vest on the applicable Vesting Date, such Restricted Stock Units shall be forfeited on such Vesting Date.

 

3.1.2     The Restricted Stock Units shall vest, regardless of whether the Performance Vesting Criteria are met, if, prior to Grantee’s Termination Date, a Change in Control occurs.

 

3.2     If the Grantee experiences a Termination for any reason other than due to death or Disability following the first anniversary of the Date of Grant, but prior to an applicable Vesting Date, as of the Termination Date, the Grantee shall forfeit any unvested Restricted Stock Units. If the Grantee experiences a Termination due to death or Disability following the first anniversary of the Date of Grant, but prior to an applicable Vesting Date, all then-unvested Restricted Stock Units which could by their terms otherwise become vested during the 90-day period following such Termination (and all other Restricted Stock Units will become forfeited on the date of such Termination) will remain outstanding for 90 days. Any such unvested Restricted Stock Units which do not become vested during such 90-day period will be forfeited upon expiration of such 90-day period.

 

4.     Transfer and Settlement of Restricted Stock Units. The Restricted Stock Units issued under this Agreement may not be sold, transferred or otherwise disposed of and may not be pledged or otherwise hypothecated (each, a “Transfer”). In addition, Grantee shall not sell any Shares received with respect to Restricted Stock Units (even following settlement of Restricted Stoc Units) at a time when Applicable Laws, regulations or Company or insider trading policies prohibit such sale. This Award (to the extent vested) shall be settled by the Company by the issuance and delivery of Shares as soon as reasonably practical after (but no later than 74 days after) the Delivery Date, as indicated in the Grant Notice, to the Grantee (or if applicable, the beneficiaries of the Grantee). Any issuance of Shares shall be made only in whole Shares, and any fractional shares shall be distributed in an equivalent cash amount.

 

5.     General.

 

5.1     Governing Law. This Agreement shall be governed by and construed under the laws of the State of California.

 

5.2     Community Property. Without prejudice to the actual rights of the spouses as between each other, for all purposes of this Agreement, the Grantee shall be treated as agent and attorney-in-fact for that interest held or claimed by his or her spouse with respect to this Award and the parties hereto shall act in all matters as if the Grantee was the sole owner of this Award. This appointment is coupled with an interest and is irrevocable.

 

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5.3     No Employment Rights. Nothing contained herein shall be construed as an agreement by the Company or any of its subsidiaries, express or implied, to employ the Grantee or contract for the Grantee’s services, to restrict the Company’s or such subsidiary’s right to discharge the Grantee or cease contracting for the Grantee’s services or to modify, extend or otherwise affect in any manner whatsoever the terms of any employment agreement or contract for services which may exist between the Grantee and the Company or any Affiliate.

 

5.4     Application to Other Stock. In the event any capital stock of the Company or any other corporation shall be distributed on, with respect to or in exchange for Shares underlying Restricted Stock Units as a stock dividend, stock split, reclassification, recapitalization or similar transaction in connection with any merger or reorganization or otherwise, all restrictions, rights and obligations set forth in this Agreement shall apply with respect to such other capital stock to the same extent as they are, or would have been applicable, to the Shares underlying Restricted Stock Units on or with respect to which such other capital stock was distributed, and references to “Company” in respect of such distributed stock shall be deemed to refer to the company to which such distributed stock relates.

 

5.5     No Third-Party Benefits. Except as otherwise expressly provided in this Agreement, none of the provisions of this Agreement shall be for the benefit of, or enforceable by, any third-party beneficiary.

 

5.6     Successors and Assigns. Except as provided herein to the contrary, this Agreement shall be binding upon and inure to the benefit of the parties, their respective successors and permitted assigns.

 

5.7     No Assignment. Except as otherwise provided in this Agreement, the Grantee may not assign any of his or her rights under this Agreement without the prior written consent of the Company, which consent may be withheld in its sole discretion. The Company shall be permitted to assign its rights or obligations under this Agreement so long as such assignee agrees to perform all of the Company’s obligations hereunder.

 

5.8     Severability. The validity, legality or enforceability of the remainder of this Agreement shall not be affected even if one or more of the provisions of this Agreement shall be held to be invalid, illegal or unenforceable in any respect.

 

5.9     Equitable Relief. The Grantee acknowledges that, in the event of a threatened or actual breach of any of the provisions of this Agreement, damages alone will be an inadequate remedy, and such breach will cause the Company great, immediate and irreparable injury and damage. Accordingly, the Grantee agrees that the Company shall be entitled to injunctive and other equitable relief, and that such relief shall be in addition to, and not in lieu of, any remedies it may have at law or under this Agreement.

 

5.10     Jurisdiction. Any suit, action or proceeding with respect to this Agreement, or any judgment entered by any court in respect of any thereof, shall be brought in any court of competent jurisdiction in the State of California, and the Company and the Grantee hereby submit to the exclusive jurisdiction of such courts for the purpose of any such suit, action, proceeding or judgment. The Grantee and the Company hereby irrevocably waive (i) any objections which it may now or hereafter have to the laying of the venue of any suit, action or proceeding arising out of or relating to this Agreement brought in any court of competent jurisdiction in the State of California and (ii) any claim that any such suit, action or proceeding brought in any such court has been brought in any inconvenient forum.

 

-66-

 

 

5.11     Taxes. By agreeing to this Agreement, the Grantee represents that he or she has reviewed with his or her own tax advisors the federal, state, local and foreign tax consequences of the transactions contemplated by this Agreement and that he or she is relying solely on such advisors and not on any statements or representations of the Company or any of its agents. The Company shall be entitled to require a cash payment by or on behalf of the Grantee and/or to deduct from the Shares or cash issuable hereunder or from other compensation payable to the Grantee the minimum amount of any sums required by federal, state or local tax law to be withheld (or other such sums that that will not cause adverse accounting consequences for the Company and is permitted under applicable withholding rules promulgated by the Internal Revenue Service or another applicable governmental entity) with respect to the Restricted Stock Unit Award.

 

5.12     Section 409A Compliance. The intent of the parties is that payments and benefits under this Agreement comply with Section 409A of Code to the extent subject thereto, and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted and be administered to be in compliance therewith. Notwithstanding anything contained herein to the contrary, to the extent required to avoid accelerated taxation and/or tax penalties under Section 409A of the Code, the Grantee shall not be considered to have separated from service with the Company for purposes of this Agreement and no payment shall be due to the Grantee under this Agreement on account of a separation from service until the Grantee would be considered to have incurred a “separation from service” from the Company within the meaning of Section 409A of the Code. Any payments described in this Agreement that are due within the “short-term deferral period” as defined in Section 409A of the Code shall not be treated as deferred compensation unless applicable law requires otherwise. Notwithstanding anything to the contrary in this Agreement, to the extent that any amounts are payable upon a separation from service and such payment would result in accelerated taxation and/or tax penalties under Section 409A of the Code, such payment, under this Agreement or any other agreement of the Company, shall be made on the first business day after the date that is six (6) months following such separation from service (or death, if earlier). The Company makes no representation that any or all of the payments described in this Agreement will be exempt from or comply with Section 409A of the Code and makes no undertaking to preclude Section 409A of the Code from applying to any such payment. If it is determined that the terms of this Agreement have been structured in a manner that would result in adverse tax treatment under Section 409A of the Code, the parties agree to cooperate in taking all reasonable measures to restructure the arrangement to minimize or avoid such adverse tax treatment without materially impairing Grantee’s economic rights. The Grantee shall be solely responsible for the payment of any taxes and penalties incurred under Section 409A.

 

5.13     Headings. The section headings in this Agreement are inserted only as a matter of convenience, and in no way define, limit, extend or interpret the scope of this Agreement or of any particular section.

 

5.14     Number and Gender. Throughout this Agreement, as the context may require, (a) the masculine gender includes the feminine and the neuter gender includes the masculine and the feminine; (b) the singular tense and number includes the plural, and the plural tense and number includes the singular; (c) the past tense includes the present, and the present tense includes the past; (d) references to parties, sections, paragraphs and exhibits mean the parties, sections, paragraphs and exhibits of and to this Agreement; and (e) periods of days, weeks or months mean calendar days, weeks or months.

 

-67-

 

 

5.15     Electronic Delivery and Disclosure. The Company may, in its sole discretion, decide to deliver or disclose, as applicable, any documents related to this Award granted under the Plan, future awards that may be granted under the Plan, the prospectus related to the Plan, the Company’s annual reports or proxy statements by electronic means or to request Grantee’s consent to participate in the Plan by electronic means, including, but not limited to, the Securities and Exchange Commission’s Electronic Data Gathering, Analysis, and Retrieval system or any successor system (“EDGAR”). Grantee hereby consents to receive such documents delivered electronically or to retrieve such documents furnished electronically (including on EDGAR), as applicable, and agrees to participate in the Plan through any online or electronic system established and maintained by the Company or another third party designated by the Company.

 

5.16     Data Privacy. Grantee agrees that all of Grantee’s information that is described or referenced in this Agreement and the Plan may be used by the Company, its affiliates and the designated broker and its affiliates to administer and manage Grantee’s participation in the Plan.

 

5.17     Acknowledgments of Grantee. Grantee has reviewed the Plan and this Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Agreement, fully understands all provisions of the Plan and this Agreement and, by accepting the Notice of Grant, acknowledges and agrees to all of the provisions of the Plan and this Agreement.

 

5.18     Complete Agreement. The Grant Notice, this Agreement, and the Plan constitute the parties’ entire agreement with respect to the subject matter hereof and supersede all agreements, representations, warranties, statements, promises and understandings, whether oral or written, with respect to the subject matter hereof.

 

5.19     Waiver. The Grantee acknowledges that a waiver by the Company of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any other provision of this Agreement, or of any subsequent breach by the Grantee.

 

5.20     Signature in Counterparts. This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

 

5.21     Amendments and Termination. To the extent permitted by the Plan, this Agreement may be wholly or partially amended, altered or terminated at any time or from time to time by the Administrator or the Board, but no amendment, alteration or termination shall be made that would materially impair the rights of a Grantee under this Restricted Stock Unit Award Agreement without such Grantee’s consent.

 

 

 

-68-

ex_162050.htm

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-Q 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; and

 

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

Date: November 4, 2019

 

- 69 -

ex_162051.htm

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-Q 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; and

 

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

Date: November 4, 2019

 

- 70 -

ex_162052.htm

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 Quarterly Report of Westamerica Bancorporation (the Company) on Form 10-Q for the period ended September 30, 2019 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

Date: November 4, 2019

 

- 71 -

ex_162053.htm

EXHIBIT 32.2

 

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of Westamerica Bancorporation (the Company) on Form 10-Q for the period ended September 30, 2019 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

Date: November 4, 2019

 

- 72 -

v3.19.3
Note 6 - Other Assets and Other Liabilities - Other Liabilities (Details) - USD ($)
$ in Thousands
Sep. 30, 2019
Dec. 31, 2018
Operating lease liability $ 19,721 $ 0
Other liabilities 40,687 34,849
Total other liabilities $ 60,408 $ 34,849
v3.19.3
Note 4 - Loans, Allowance for Loan Losses and Other Real Estate Owned - Loans by Delinquency and Nonaccrual Status (Details) - USD ($)
$ in Thousands
Sep. 30, 2019
Dec. 31, 2018
Current and accruing $ 1,122,488 $ 1,193,853
Nonaccrual 4,303 4,868
Total loans 1,133,229 1,207,202
Financial Asset, 30 to 59 Days Past Due [Member]    
Past due and accruing 4,775 5,595
Financial Asset, 60 to 89 Days Past Due [Member]    
Past due and accruing 1,312 2,335
Financial Asset, Equal to or Greater than 90 Days Past Due [Member]    
Past due and accruing 351 551
Commercial Portfolio Segment [Member]    
Current and accruing 215,787 274,045
Nonaccrual 26 0
Total loans 216,273 275,080
Commercial Portfolio Segment [Member] | Financial Asset, 30 to 59 Days Past Due [Member]    
Past due and accruing 339 781
Commercial Portfolio Segment [Member] | Financial Asset, 60 to 89 Days Past Due [Member]    
Past due and accruing 119 254
Commercial Portfolio Segment [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member]    
Past due and accruing 2 0
Commercial Real Estate Portfolio Segment [Member]    
Current and accruing 574,321 574,853
Nonaccrual 4,177 4,225
Total loans 579,227 580,480
Commercial Real Estate Portfolio Segment [Member] | Financial Asset, 30 to 59 Days Past Due [Member]    
Past due and accruing 729 617
Commercial Real Estate Portfolio Segment [Member] | Financial Asset, 60 to 89 Days Past Due [Member]    
Past due and accruing 0 785
Commercial Real Estate Portfolio Segment [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member]    
Past due and accruing 0 0
Construction Portfolio Segment [Member]    
Current and accruing 6,678 3,982
Nonaccrual 0 0
Total loans 6,678 3,982
Construction Portfolio Segment [Member] | Financial Asset, 30 to 59 Days Past Due [Member]    
Past due and accruing 0 0
Construction Portfolio Segment [Member] | Financial Asset, 60 to 89 Days Past Due [Member]    
Past due and accruing 0 0
Construction Portfolio Segment [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member]    
Past due and accruing 0 0
Residential Portfolio Segment [Member]    
Current and accruing 34,064 43,372
Nonaccrual 0 516
Total loans 35,348 44,866
Residential Portfolio Segment [Member] | Financial Asset, 30 to 59 Days Past Due [Member]    
Past due and accruing 828 789
Residential Portfolio Segment [Member] | Financial Asset, 60 to 89 Days Past Due [Member]    
Past due and accruing 456 189
Residential Portfolio Segment [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member]    
Past due and accruing 0 0
Consumer Portfolio Segment [Member]    
Current and accruing 291,638 297,601
Nonaccrual 100 127
Total loans 295,703 302,794
Consumer Portfolio Segment [Member] | Financial Asset, 30 to 59 Days Past Due [Member]    
Past due and accruing 2,879 3,408
Consumer Portfolio Segment [Member] | Financial Asset, 60 to 89 Days Past Due [Member]    
Past due and accruing 737 1,107
Consumer Portfolio Segment [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member]    
Past due and accruing $ 349 $ 551
v3.19.3
Note 5 - Concentration of Credit Risk (Details Textual) - USD ($)
$ in Thousands
Sep. 30, 2019
Dec. 31, 2018
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 88  
Loan Commitments and Standby Letters of Credit Related to Real Estate Loans $ 44,964 $ 53,891
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 33  
Concentration Risk, Aggregate Loans Amount $ 5,000  
v3.19.3
Note 12 - Income Taxes (Details Textual)
$ in Thousands
3 Months Ended
Jun. 30, 2019
USD ($)
Unrecognized Tax Benefits, Decrease Resulting from Current Period Tax Positions $ 909
Deferred Tax Assets, Gross, Total 1,003
Deferred Tax Assets, Valuation Allowance, Total $ 269
v3.19.3
Note 9 - Fair Value Measurements - Fair Value Estimates for Financial Instruments, Excluding Financial Instruments Recorded at Fair Value on a Recurring Basis (Details) - USD ($)
$ in Thousands
Sep. 30, 2019
Dec. 31, 2018
Reported Value Measurement [Member]    
Cash and due from banks $ 415,639 $ 420,284
Debt securities held to maturity 793,216 984,609
Loans 1,113,401 1,185,851
Deposits 4,796,623 4,866,839
Short-term borrowed funds 45,646 51,247
Estimate of Fair Value Measurement [Member]    
Cash and due from banks 415,639 420,284
Debt securities held to maturity 799,241 971,445
Loans 1,178,305 1,184,770
Deposits 4,794,970 4,862,668
Short-term borrowed funds 45,646 51,247
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 1 [Member]    
Cash and due from banks 415,639 420,284
Debt securities held to maturity 0 0
Loans 0 0
Deposits 0 0
Short-term borrowed funds 0 0
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 2 [Member]    
Cash and due from banks 0 0
Debt securities held to maturity 799,241 971,445
Loans 0 0
Deposits 4,621,416 4,671,588
Short-term borrowed funds 45,646 51,247
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 3 [Member]    
Cash and due from banks 0 0
Debt securities held to maturity 0 0
Loans 1,178,305 1,184,770
Deposits 173,554 191,080
Short-term borrowed funds $ 0 $ 0
v3.19.3
Note 6 - Other Assets and Other Liabilities (Tables)
9 Months Ended
Sep. 30, 2019
Notes Tables  
Schedule of Other Assets [Table Text Block]
   

At September 30,

   

At December 31,

 
   

2019

   

2018

 
   

(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

    57,169       56,083  

Net deferred tax asset

    11,947       42,256  

Right-of-use asset

    19,721       -  

Limited partnership investments

    8,143       10,219  

Interest receivable

    25,511       25,834  

Prepaid assets

    3,530       4,658  

Other assets

    12,524       9,629  

Total other assets

  $ 152,772     $ 162,906  
Schedule of Amounts Recognized in Net Income [Table Text Block]
   

For the Three Months Ended

   

For the Nine Months Ended

 
   

September 30,

 
   

2019

   

2018

   

2019

   

2018

 
   

(In thousands)

 

Investment loss included in pre-tax income

  $ 600     $ 900     $ 1,800     $ 2,200  

Tax credits recognized in provision for income taxes

    225       336       675       1,008  
Other Liabilities [Table Text Block]
   

At September 30,

   

At December 31,

 
   

2019

   

2018

 
   

(In thousands)

 

Operating lease liability

  $ 19,721     $ -  

Other liabilities

    40,687       34,849  

Total other liabilities

  $ 60,408     $ 34,849  
Lessee, Operating Lease, Liability, Maturity [Table Text Block]
   

Minimum
future lease
payments

 
   

At September 30,

 
   

2019

 
   

(In thousands)

 

Remaining three months of 2019

  $ 2,719  

2020

    6,283  

2021

    4,574  

2022

    3,632  

2023

    2,912  

Thereafter

    2,057  

Total minimum lease payments

    22,177  

Less: discount

    (2,456 )

Present value of lease liability

  $ 19,721  
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  
v3.19.3
Note 12 - Income Taxes
9 Months Ended
Sep. 30, 2019
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

Note 12: Income Taxes

 

In the second quarter 2019, the Company decreased unrecognized tax benefits by $909 thousand related to settlements with taxing authorities. The settlements incorporated amended tax returns for which the Company had recognized a deferred tax asset in the amount of $1,003 thousand.

 

In the second quarter 2019, the Company re-assessed its ability to realize benefits from California capital loss carryforwards. The Company established a $269 thousand valuation allowance related to the deferred tax asset.

v3.19.3
Note 11 - Earnings Per Common Share (Tables)
9 Months Ended
Sep. 30, 2019
Notes Tables  
Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]
   

For the Three Months

   

For the Nine Months

 
   

Ended September 30,

 
   

2019

   

2018

   

2019

   

2018

 
   

(In thousands, except per share data)

 

Net income applicable to common equity (numerator)

  $ 20,390     $ 16,993     $ 59,661     $ 52,509  

Basic earnings per common share

                               

Weighted average number of common shares outstanding - basic (denominator)

    26,986       26,701       26,924       26,622  

Basic earnings per common share

  $ 0.76     $ 0.64     $ 2.22     $ 1.97  

Diluted earnings per common share

                               

Weighted average number of common shares outstanding - basic

    26,986       26,701       26,924       26,622  

Add common stock equivalents for options

    41       114       52       114  

Weighted average number of common shares outstanding - diluted (denominator)

    27,027       26,815       26,976       26,736  

Diluted earnings per common share

  $ 0.75     $ 0.63     $ 2.21     $ 1.96  
v3.19.3
Note 8 - Deposits and Borrowed Funds
9 Months Ended
Sep. 30, 2019
Notes to Financial Statements  
Deposits and Borrowed Funds [Text Block]

Note 8: Deposits and Borrowed Funds

 

The following table provides additional detail regarding deposits.

                                                                                                               

   

Deposits

 
   

At September 30,

   

At December 31,

 
   

2019

   

2018

 
   

(In thousands)

 

Noninterest-bearing

  $ 2,265,640     $ 2,243,251  

Interest-bearing:

               

Transaction

    910,566       929,346  

Savings

    1,445,210       1,498,991  

Time deposits less than $100 thousand

    92,300       102,654  

Time deposits $100 thousand through $250 thousand

    56,066       64,512  

Time deposits more than $250 thousand

    26,841       28,085  

Total deposits

  $ 4,796,623     $ 4,866,839  

 

Demand deposit overdrafts of $1,078 thousand and $980 thousand were included as loan balances at September 30, 2019 and December 31, 2018, respectively. Interest expense for aggregate time deposits with individual account balances in excess of $100 thousand was $81 thousand and $246 thousand for the three and nine months ended September 30, 2019, respectively, and $91 thousand and $283 thousand for the three and nine months ended September 30, 2018, respectively.

 

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 September 30,

   

At December 31,

 
   

2019

   

2018

 

Repurchase agreements:

 

(In thousands)

 

Collateral securing borrowings:

               

Securities of U.S. Government sponsored entities

  $ 75,784     $ 73,803  

Agency residential MBS

    55,013       58,380  

Corporate securities

    115,018       91,837  

Total collateral carrying value

  $ 245,815     $ 224,020  

Total short-term borrowed funds

  $ 45,646     $ 51,247  

 

v3.19.3
Note 4 - Loans, Allowance for Loan Losses and Other Real Estate Owned
9 Months Ended
Sep. 30, 2019
Notes to Financial Statements  
Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

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

 

At December 31, 2018, the Company had $5,713 thousand in loans secured by residential real estate which are indemnified from loss by the FDIC up to 80% 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 September 30,

   

At December 31,

 
   

2019

   

2018

 
   

(In thousands)

 

Commercial

  $ 216,273     $ 275,080  

Commercial Real Estate

    579,227       580,480  

Construction

    6,678       3,982  

Residential Real Estate

    35,348       44,866  

Consumer Installment & Other

    295,703       302,794  

Total

  $ 1,133,229     $ 1,207,202  

 

 

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

 

   

For the

   

For the

 
   

Nine Months Ended

   

Year Ended

 
   

September 30, 2019

   

December 31, 2018

 

Accretable yield:

 

(In thousands)

 

Balance at the beginning of the period

  $ 182     $ 738  

Reclassification from nonaccretable difference

    1,103       1,119  

Accretion

    (368 )     (1,675 )

Balance at the end of the period

  $ 917     $ 182  
                 

Accretion

  $ (368 )   $ (1,675 )

Change in FDIC indemnification

    -       2  

(Increase) in interest income

  $ (368 )   $ (1,673 )

 

The following summarizes activity in the allowance for loan losses:

 

   

Allowance for Loan Losses

 
   

For the Three Months Ended September 30, 2019

 
                                   

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

  $ 5,235     $ 4,057     $ 1,117     $ 238     $ 5,418     $ 4,052     $ 20,117  

(Reversal) provision

    (596 )     (1 )     482       (16 )     655       (524 )     -  

Chargeoffs

    -       -       -       -       (1,039 )     -       (1,039 )

Recoveries

    233       12       -       -       505       -       750  

Total allowance for loan losses

  $ 4,872     $ 4,068     $ 1,599     $ 222     $ 5,539     $ 3,528     $ 19,828  

 

   

Allowance for Loan Losses

 
   

For the Nine Months Ended September 30, 2019

 
                                   

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

  $ 6,311     $ 3,884     $ 1,465     $ 869     $ 5,645     $ 3,177     $ 21,351  

(Reversal) provision

    (1,817 )     146       134       (647 )     1,833       351       -  

Chargeoffs

    (71 )     -       -       -       (3,332 )     -       (3,403 )

Recoveries

    449       38       -       -       1,393       -       1,880  

Total allowance for loan losses

  $ 4,872     $ 4,068     $ 1,599     $ 222     $ 5,539     $ 3,528     $ 19,828  

 

 

 

   

Allowance for Loan Losses

 
   

For the Three Months Ended September 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

  $ 8,275     $ 3,789     $ 210     $ 1,064     $ 5,943     $ 3,759     $ 23,040  

(Reversal) provision

    (184 )     372       44       (120 )     (137 )     25       -  

Chargeoffs

    (384 )     (240 )     -       -       (845 )     -       (1,469 )

Recoveries

    103       -       -       -       353       -       456  

Total allowance for loan losses

  $ 7,810     $ 3,921     $ 254     $ 944     $ 5,314     $ 3,784     $ 22,027  

 

   

Allowance for Loan Losses

 
   

For the Nine Months Ended September 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

    (863 )     312       (81 )     (51 )     565       118       -  

Chargeoffs

    (425 )     (240 )     -       -       (3,015 )     -       (3,680 )

Recoveries

    1,352       -       -       -       1,346       -       2,698  

Total allowance for loan losses

  $ 7,810     $ 3,921     $ 254     $ 944     $ 5,314     $ 3,784     $ 22,027  

 

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 September 30, 2019

 
   

Commercial

   

Commercial Real Estate

   

Construction

   

Residential Real Estate

   

Consumer Installment and Other

   

Unallocated

   

Total

 
   

(In thousands)

 

Allowance for loan losses:

                                                       

Individually evaluated for impairment

  $ 2,550     $ -     $ -     $ -     $ -     $ -     $ 2,550  

Collectively evaluated for impairment

    2,322       4,068       1,599       222       5,539       3,528       17,278  

Total

  $ 4,872     $ 4,068     $ 1,599     $ 222     $ 5,539     $ 3,528     $ 19,828  

Carrying value of loans:

                                                       

Individually evaluated for impairment

  $ 8,647     $ 7,445     $ -     $ 193     $ 44     $ -     $ 16,329  

Collectively evaluated for impairment

    207,626       571,782       6,678       35,155       295,659       -       1,116,900  

Total

  $ 216,273     $ 579,227     $ 6,678     $ 35,348     $ 295,703     $ -     $ 1,133,229  

 

   

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  

Total

  $ 6,311     $ 3,884     $ 1,465     $ 869     $ 5,645     $ 3,177     $ 21,351  

Carrying value of loans:

                                                       

Individually evaluated for impairment

  $ 9,944     $ 8,438     $ -     $ 717     $ 143     $ -     $ 19,242  

Collectively evaluated for impairment

    265,136       572,042       3,982       44,149       302,651       -       1,187,960  

Total

  $ 275,080     $ 580,480     $ 3,982     $ 44,866     $ 302,794     $ -     $ 1,207,202  

 

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 September 30, 2019

 
   

Commercial

   

Commercial Real Estate

   

Construction

   

Residential Real Estate

   

Consumer Installment and Other

   

Total

 
   

(In thousands)

 

Grade:

                                               

Pass

  $ 207,350     $ 568,009     $ 6,678     $ 33,629     $ 293,893     $ 1,109,559  

Substandard

    8,923       11,218       -       1,719       1,395       23,255  

Doubtful

    -       -       -       -       111       111  

Loss

    -       -       -       -       304       304  

Total

  $ 216,273     $ 579,227     $ 6,678     $ 35,348     $ 295,703     $ 1,133,229  

 

   

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 in loans secured by residential real estate at December 31, 2018. The indemnification expired February 6, 2019.

The following tables summarize loans by delinquency and nonaccrual status:

 

   

Summary of Loans by Delinquency and Nonaccrual Status

 
   

At September 30, 2019

 
   

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

  $ 215,787     $ 339     $ 119     $ 2     $ 26     $ 216,273  

Commercial real estate

    574,321       729       -       -       4,177       579,227  

Construction

    6,678       -       -       -       -       6,678  

Residential real estate

    34,064       828       456       -       -       35,348  

Consumer installment and other

    291,638       2,879       737       349       100       295,703  

Total

  $ 1,122,488     $ 4,775     $ 1,312     $ 351     $ 4,303     $ 1,133,229  

 

   

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  

 

There were no commitments to lend additional funds to borrowers whose loans were on nonaccrual status at September 30, 2019 and December 31, 2018.

 

 

The following summarizes impaired loans:

 

   

Impaired Loans

 
   

At September 30, 2019

   

At December 31, 2018

 
           

Unpaid

                   

Unpaid

         
   

Recorded

   

Principal

   

Related

   

Recorded

   

Principal

   

Related

 
   

Investment

   

Balance

   

Allowance

   

Investment

   

Balance

   

Allowance

 
   

(In thousands)

 

With no related allowance recorded:

                                               

Commercial

  $ 72     $ 72     $ -     $ 755     $ 759     $ -  

Commercial real estate

    7,953       9,400       -       8,438       10,373       -  

Residential real estate

    193       224       -       717       747       -  

Consumer installment and other

    144       178       -       270       377       -  

Total with no related allowance recorded

    8,362       9,874       -       10,180       12,256       -  
                                                 

With an allowance recorded:

                                               

Commercial

    8,600       8,600       2,550       9,189       9,189       2,752  

Total with an allowance recorded

    8,600       8,600       2,550       9,189       9,189       2,752  

Total

  $ 16,962     $ 18,474     $ 2,550     $ 19,369     $ 21,445     $ 2,752  

 

Impaired loans include troubled debt restructured loans. Impaired loans at September 30, 2019, included $6,754 thousand of restructured loans, $3,670 thousand of which were on nonaccrual status. Impaired loans at December 31, 2018, included $8,579 thousand of restructured loans, $4,225 thousand of which were on nonaccrual status.

 

   

Impaired Loans

 
   

For the Three Months Ended September 30,

   

For the Nine Months Ended September 30,

 
   

2019

   

2018

   

2019

   

2018

 
   

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

  $ 8,701     $ 144     $ 10,426     $ 175     $ 9,404     $ 476     $ 10,671     $ 495  

Commercial real estate

    7,968       60       11,282       189       7,133       333       12,291       615  

Residential real estate

    194       4       203       4       196       10       205       12  

Consumer installment and other

    99       -       173       4       103       -       261       10  

Total

  $ 16,962     $ 208     $ 22,084     $ 372     $ 16,836     $ 819     $ 23,428     $ 1,132  

 

The following tables provide information on troubled debt restructurings:

 

   

Troubled Debt Restructurings

 
   

At September 30, 2019

 
                           

Period-End

 
                           

Individual

 
   

Number of

   

Pre-Modification

   

Period-End

   

Impairment

 
   

Contracts

   

Carrying Value

   

Carrying Value

   

Allowance

 
   

($ in thousands)

 

Commercial

    3     $ 327     $ 44     $ 18  

Commercial real estate

    6       8,830       6,517       -  

Residential real estate

    1       241       193       -  

Total

    10     $ 9,398     $ 6,754     $ 18  

 

 

[The remainder of this page intentionally left blank]

 

 

   

Troubled Debt Restructurings

 
   

At December 31, 2018

 
                           

Period-End

 
                           

Individual

 
   

Number of

   

Pre-Modification

   

Period-End

   

Impairment

 
   

Contracts

   

Carrying Value

   

Carrying Value

   

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  

 

During the three and nine months ended September 30, 2019 and September 30, 2018, the Company did not modify any loans that were considered troubled debt restructurings, and had no troubled debt restructured loans that 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 September 30, 2019 and December 31, 2018.

 

There were no loans held for sale at September 30, 2019 and December 31, 2018.

 

At September 30, 2019 and December 31, 2018, the Company held total other real estate owned (OREO) of $43 thousand net of reserve of $-0- thousand and $350 thousand net of reserve of $-0-  thousand, respectively. There were no foreclosed residential real estate properties and no covered OREO at December 31, 2018. The amount of consumer mortgage loans outstanding secured by residential real estate properties for which formal foreclosure proceedings were in process was $114 thousand at September 30, 2019 and $516 thousand at December 31, 2018.

 

v3.19.3
Note 4 - Loans, Allowance for Loan Losses and Other Real Estate Owned - Recorded Investment in Loans Evaluated for Impairment (Details) - USD ($)
$ in Thousands
Sep. 30, 2019
Jun. 30, 2019
Dec. 31, 2018
Sep. 30, 2018
Jun. 30, 2018
Dec. 31, 2017
Individually evaluated for impairment $ 2,550   $ 2,752      
Collectively evaluated for impairment 17,278   18,599      
Total 19,828 $ 20,117 21,351 $ 22,027 $ 23,040 $ 23,009
Individually evaluated for impairment 16,329   19,242      
Collectively evaluated for impairment 1,116,900   1,187,960      
Total loans 1,133,229   1,207,202      
Unallocated Financing Receivable [Member]            
Individually evaluated for impairment 0   0      
Collectively evaluated for impairment 3,528   3,177      
Total 3,528 4,052 3,177 3,784 3,759 3,666
Individually evaluated for impairment 0   0      
Collectively evaluated for impairment 0   0      
Total loans 0   0      
Commercial Portfolio Segment [Member]            
Individually evaluated for impairment 2,550   2,752      
Collectively evaluated for impairment 2,322   3,559      
Total 4,872 5,235 6,311 7,810 8,275 7,746
Individually evaluated for impairment 8,647   9,944      
Collectively evaluated for impairment 207,626   265,136      
Total loans 216,273   275,080      
Commercial Real Estate Portfolio Segment [Member]            
Individually evaluated for impairment 0   0      
Collectively evaluated for impairment 4,068   3,884      
Total 4,068 4,057 3,884 3,921 3,789 3,849
Individually evaluated for impairment 7,445   8,438      
Collectively evaluated for impairment 571,782   572,042      
Total loans 579,227   580,480      
Construction Portfolio Segment [Member]            
Individually evaluated for impairment 0   0      
Collectively evaluated for impairment 1,599   1,465      
Total 1,599 1,117 1,465 254 210 335
Individually evaluated for impairment 0   0      
Collectively evaluated for impairment 6,678   3,982      
Total loans 6,678   3,982      
Residential Portfolio Segment [Member]            
Individually evaluated for impairment 0   0      
Collectively evaluated for impairment 222   869      
Total 222 238 869 944 1,064 995
Individually evaluated for impairment 193   717      
Collectively evaluated for impairment 35,155   44,149      
Total loans 35,348   44,866      
Consumer Portfolio Segment [Member]            
Individually evaluated for impairment 0   0      
Collectively evaluated for impairment 5,539   5,645      
Total 5,539 $ 5,418 5,645 $ 5,314 $ 5,943 $ 6,418
Individually evaluated for impairment 44   143      
Collectively evaluated for impairment 295,659   302,651      
Total loans $ 295,703   $ 302,794      
v3.19.3
Note 3 - Investment Securities - Amortized Cost, Unrealized Gains and Losses, and Estimated Fair Value of Investment Securities Portfolio (Details) - USD ($)
$ in Thousands
Sep. 30, 2019
Dec. 31, 2018
Debt securities available for sale, amortized cost $ 2,954,728 $ 2,711,453
Debt securities available for sale, gross unrealized gains 38,855 3,597
Debt securities available for sale, gross unrealized losses (9,816) (60,380)
Debt securities available for sale 2,983,767 2,654,670
Debt securities held to maturity, amortized cost 793,216 984,609
Debt securities held to maturity, gross unrecognized gains 8,683 3,692
Debt securities held to maturity, gross unrecognized losses (2,658) (16,856)
Debt securities held to maturity, fair value 799,241 971,445
Debt securities, amortized cost 3,747,944 3,696,062
Debt securities, gross unrecognized gains 47,538 7,289
Debt securities, gross unrecognized losses (12,474) (77,236)
Debt securities, fair value 3,783,008 3,626,115
US Treasury Securities [Member]    
Debt securities available for sale, amortized cost 44,758 139,572
Debt securities available for sale, gross unrealized gains 68 5
Debt securities available for sale, gross unrealized losses 0 (3)
Debt securities available for sale 44,826 139,574
US Government-sponsored Enterprises Debt Securities [Member]    
Debt securities available for sale, amortized cost 122,245 167,228
Debt securities available for sale, gross unrealized gains 23 65
Debt securities available for sale, gross unrealized losses (160) (3,275)
Debt securities available for sale 122,108 164,018
Agency Residential MBS [Member]    
Debt securities available for sale, amortized cost 976,066 883,715
Debt securities available for sale, gross unrealized gains 10,294 595
Debt securities available for sale, gross unrealized losses (6,609) (30,439)
Debt securities available for sale 979,751 853,871
Debt securities held to maturity, amortized cost 377,995 447,332
Debt securities held to maturity, gross unrecognized gains 817 249
Debt securities held to maturity, gross unrecognized losses (2,647) (14,129)
Debt securities held to maturity, fair value 376,165 433,452
Non-agency Residential MBS [Member]    
Debt securities available for sale, amortized cost 101 113
Debt securities available for sale, gross unrealized gains 3 1
Debt securities available for sale, gross unrealized losses 0 0
Debt securities available for sale 104 114
Debt securities held to maturity, amortized cost 2,471 3,387
Debt securities held to maturity, gross unrecognized gains 62 40
Debt securities held to maturity, gross unrecognized losses 0 0
Debt securities held to maturity, fair value 2,533 3,427
Agency Commercial MBS [Member]    
Debt securities available for sale, amortized cost 3,748 1,869
Debt securities available for sale, gross unrealized gains 3 0
Debt securities available for sale, gross unrealized losses 0 (27)
Debt securities available for sale 3,751 1,842
US Government Agencies Debt Securities [Member]    
Debt securities available for sale, amortized cost 786 1,128
Debt securities available for sale, gross unrealized gains 0 0
Debt securities available for sale, gross unrealized losses (9) (9)
Debt securities available for sale 777 1,119
US States and Political Subdivisions Debt Securities [Member]    
Debt securities available for sale, amortized cost 161,506 180,220
Debt securities available for sale, gross unrealized gains 3,944 1,856
Debt securities available for sale, gross unrealized losses (47) (2,985)
Debt securities available for sale 165,403 179,091
Debt securities held to maturity, amortized cost 412,750 533,890
Debt securities held to maturity, gross unrecognized gains 7,804 3,403
Debt securities held to maturity, gross unrecognized losses (11) (2,727)
Debt securities held to maturity, fair value 420,543 534,566
Debt Security, Corporate, US [Member]    
Debt securities available for sale, amortized cost 1,645,518 1,337,608
Debt securities available for sale, gross unrealized gains 24,520 1,075
Debt securities available for sale, gross unrealized losses (2,991) (23,642)
Debt securities available for sale $ 1,667,047 $ 1,315,041
v3.19.3
Note 4 - Loans, Allowance for Loan Losses and Other Real Estate Owned (Details Textual)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2019
USD ($)
Sep. 30, 2018
Sep. 30, 2019
USD ($)
Sep. 30, 2018
Dec. 31, 2018
USD ($)
FDIC Indemnification Asset, Ending Balance         $ 5,713
Percent of Principal Covered by FDIC         80.00%
Loans and Leases Receivable, Nonaccrual, Commitment to Lend $ 0   $ 0   $ 0
Financing Receivable, Troubled Debt Restructuring $ 6,754   $ 6,754   8,579
Troubled Debt Restructurings During Period 0 0 0 0  
Financing Receivable, Troubled Debt Restructuring, Subsequent Default, Number of Contracts 0 0 0 0  
Pledged Financial Instruments, Not Separately Reported, Loans Receivable Pledged as Collateral, Total $ 0   $ 0   0
Loans Receivable Held-for-sale, Amount 0   0   0
Other Real Estate, Ending Balance 43   43   350
Other Real Estate, Reserve 0   0   0
Real Estate Acquired Through Foreclosure         0
Mortgage Loans in Process of Foreclosure, Amount 114   114   516
Residential Real Estate Included in OREO [Member]          
Real Estate Acquired Through Foreclosure         0
Restructured Loans [Member]          
Financing Receivable, Troubled Debt Restructuring 6,754   6,754   8,579
Impaired Loans, Restructured, Nonaccrual Status $ 3,670   $ 3,670   $ 4,225
v3.19.3
Note 7 - Goodwill and Identifiable Intangible Assets - Gross Carrying Amount of Intangible Assets and Accumulated Amortization (Details) - Core Deposits [Member] - USD ($)
$ in Thousands
Sep. 30, 2019
Dec. 31, 2018
Gross Carrying Amount $ 56,808 $ 56,808
Accumulated Amortization $ (55,344) $ (54,879)
v3.19.3
Note 6 - Other Assets and Other Liabilities - Maturity of Operating Lease Liabilities (Details) - USD ($)
$ in Thousands
Sep. 30, 2019
Dec. 31, 2018
Remaining three months of 2019 $ 2,719  
2020 6,283  
2021 4,574  
2022 3,632  
2023 2,912  
Thereafter 2,057  
Total minimum lease payments 22,177  
Less: discount (2,456)  
Operating lease liability $ 19,721 $ 0
v3.19.3
Note 8 - Deposits and Borrowed Funds - Short-term Borrowed Funds (Details) - USD ($)
$ in Thousands
Sep. 30, 2019
Dec. 31, 2018
Collateral Carrying Value $ 245,815 $ 224,020
Short-term borrowed funds 45,646 51,247
US Government-sponsored Enterprises Debt Securities [Member]    
Collateral Carrying Value 75,784 73,803
Agency Residential MBS [Member]    
Collateral Carrying Value 55,013 58,380
Corporate Debt Securities [Member]    
Collateral Carrying Value $ 115,018 $ 91,837
v3.19.3
Consolidated Statements of Changes in Shareholders' Equity (Unaudited) - USD ($)
shares in Thousands, $ in Thousands
Common Stock [Member]
Accumulated Deferred Compensation [Member]
AOCI Attributable to Parent [Member]
Retained Earnings [Member]
Total
Balance (in shares) at Dec. 31, 2017 26,425        
Balance at Dec. 31, 2017 $ 431,734 $ 1,533 $ (16,832) $ 173,804 $ 590,239
Net income for the period       52,509 52,509
Other comprehensive income (loss)     (33,751)   (33,751)
Exercise of stock options (in shares) 289        
Exercise of stock options $ 13,245       13,245
Stock based compensation 1,575       1,575
Stock awarded to employees 99       99
Dividends       (31,944) (31,944)
Restricted stock activity $ 1,281 (138)     1,143
Stock awarded to employees (in shares) 2        
Cumulative effect at Dec. 31, 2017     142 (142) 0
Adjusted Balance (in shares) at Dec. 31, 2017 26,425        
Adjusted Balance at Dec. 31, 2017 $ 431,734 1,533 (16,690) 173,662 590,239
Restricted stock activity (in shares) 20        
Retirement of common stock (in shares) (9)        
Retirement of common stock $ (149)     (375) (524)
Reclass stranded tax effects resulting from the Tax Cuts and Jobs Act     (3,625) 3,625  
Balance (in shares) at Sep. 30, 2018 26,727        
Balance at Sep. 30, 2018 $ 447,785 1,395 (54,066) 197,477 592,591
Balance (in shares) at Jun. 30, 2018 26,649        
Balance at Jun. 30, 2018 $ 443,338 1,533 (49,900) 191,167 586,138
Net income for the period       16,993 16,993
Other comprehensive income (loss)     (4,166)   (4,166)
Exercise of stock options (in shares) 77        
Exercise of stock options $ 3,762       3,762
Stock based compensation 525       525
Stock awarded to employees 22       22
Dividends       (10,683) (10,683)
Restricted stock activity $ 138 (138)      
Stock awarded to employees (in shares) 1        
Balance (in shares) at Sep. 30, 2018 26,727        
Balance at Sep. 30, 2018 $ 447,785 1,395 (54,066) 197,477 592,591
Balance (in shares) at Dec. 31, 2018 26,730        
Balance at Dec. 31, 2018 $ 448,351 1,395 (39,996) 205,841 615,591
Net income for the period       59,661 59,661
Other comprehensive income (loss)     60,450   60,450
Exercise of stock options (in shares) 222        
Exercise of stock options $ 11,177       11,177
Stock based compensation 1,484       1,484
Stock awarded to employees 80       80
Dividends       (32,849) (32,849)
Restricted stock activity $ 1,697 (624)     1,073
Stock awarded to employees (in shares) 1        
Cumulative effect at Dec. 31, 2018       (2,801) (2,801)
Adjusted Balance (in shares) at Dec. 31, 2018 26,730        
Adjusted Balance at Dec. 31, 2018 $ 448,351 1,395 (39,996) 203,040 612,790
Shares issued from stock warrant exercise, net of repurchase (in shares) 51        
Restricted stock activity (in shares) 18        
Retirement of common stock (in shares) (8)        
Retirement of common stock $ (136)     (352) (488)
Balance (in shares) at Sep. 30, 2019 27,014        
Balance at Sep. 30, 2019 $ 462,653 771 20,454 229,500 713,378
Balance (in shares) at Jun. 30, 2019 26,962        
Balance at Jun. 30, 2019 $ 459,369 771 13,124 220,173 693,437
Net income for the period       20,390 20,390
Other comprehensive income (loss)     7,330   7,330
Exercise of stock options (in shares) 52        
Exercise of stock options $ 2,867       2,867
Stock based compensation 402       402
Stock awarded to employees $ 15       15
Dividends       (11,063) (11,063)
Balance (in shares) at Sep. 30, 2019 27,014        
Balance at Sep. 30, 2019 $ 462,653 $ 771 $ 20,454 $ 229,500 $ 713,378
v3.19.3
Consolidated Balance Sheets (Current Period Unaudited) - USD ($)
$ in Thousands
Sep. 30, 2019
Dec. 31, 2018
Assets:    
Cash and due from banks $ 415,639 $ 420,284
Equity securities 0 1,747
Debt securities available for sale 2,983,767 2,654,670
Debt securities held to maturity, with fair values of: $799,241 at September 30, 2019 and $971,445 at December 31, 2018 793,216 984,609
Loans 1,133,229 1,207,202
Allowance for loan losses (19,828) (21,351)
Loans, net of allowance for loan losses 1,113,401 1,185,851
Other real estate owned 43 350
Premises and equipment, net 34,080 34,507
Identifiable intangibles, net 1,464 1,929
Goodwill 121,673 121,673
Other assets 152,772 162,906
Total Assets 5,616,055 5,568,526
Liabilities:    
Noninterest-bearing deposits 2,265,640 2,243,251
Interest-bearing deposits 2,530,983 2,623,588
Total deposits 4,796,623 4,866,839
Short-term borrowed funds 45,646 51,247
Other liabilities 60,408 34,849
Total Liabilities 4,902,677 4,952,935
Shareholders' Equity:    
Common stock (no par value), authorized - 150,000 shares Issued and outstanding: 27,014 at September 30, 2019 and 26,730 at December 31, 2018 462,653 448,351
Deferred compensation 771 1,395
Accumulated other comprehensive income (loss) 20,454 (39,996)
Retained earnings 229,500 205,841
Total Shareholders' Equity 713,378 615,591
Total Liabilities and Shareholders' Equity $ 5,616,055 $ 5,568,526
v3.19.3
Note 9 - Fair Value Measurements
9 Months Ended
Sep. 30, 2019
Notes to Financial Statements  
Fair Value Disclosures [Text Block]

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% 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 September 30, 2019

 
   

Fair Value

   

Quoted Prices in Active Markets for Identical Assets
(Level 1)

   

Significant Other Observable Inputs
(Level 2)

   

Significant Unobservable Inputs
(Level 3) (1)

 
   

(In thousands)

 

Debt securities available for sale

                               

U.S. Treasury securities

  $ 44,826     $ 44,826     $ -     $ -  

Securities of U.S. Government sponsored entities

    122,108       -       122,108       -  

Agency residential MBS

    979,751       -       979,751       -  

Non-agency residential MBS

    104       -       104       -  

Agency commercial MBS

    3,751       -       3,751       -  

Securities of U.S. Government entities

    777       -       777       -  

Obligations of states and political subdivisions

    165,403       -       165,403       -  

Corporate securities

    1,667,047       -       1,667,047       -  

Total debt securities available for sale

  $ 2,983,767     $ 44,826     $ 2,938,941     $ -  

 

(1)   There were no transfers in to or out of level 3 during the nine months ended September 30, 2019.

 

 

   

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.

 

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 September 30, 2019 and December 31, 2018, 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

 
                                   

Nine Months Ended

 
   

At September 30, 2019

   

September 30, 2019

 
   

Carrying Value

   

Level 1

   

Level 2

   

Level 3

   

Total Losses

 
   

(In thousands)

 

Other real estate owned

  $ 43     $ -     $ -     $ 43     $ -  

Impaired loans:

                                       

Commercial

    6,050       -       -       6,050       -  

Commercial real estate

    4,099       -       -       4,099       -  

Residential real estate

    193       -       -       193       -  

Consumer installment and other

    77       -       -       77       (34 )

Total assets measured at fair value on a nonrecurring basis

  $ 10,462     $ -     $ -     $ 10,462     $ (34 )

 

                                   

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 )

 

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.

 

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.

 

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.

 

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 September 30, 2019

 
   

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

  $ 415,639     $ 415,639     $ 415,639     $ -     $ -  

Debt securities held to maturity

    793,216       799,241       -       799,241       -  

Loans

    1,113,401       1,178,305       -       -       1,178,305  
                                         

Financial Liabilities:

                                       

Deposits

  $ 4,796,623     $ 4,794,970     $ -     $ 4,621,416     $ 173,554  

Short-term borrowed funds

    45,646       45,646       -       45,646       -  

 

   

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       -  

 

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.

 

v3.19.3
Note 5 - Concentration of Credit Risk
9 Months Ended
Sep. 30, 2019
Notes to Financial Statements  
Concentration Risk Disclosure [Text Block]

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 September 30, 2019, the Bank did not have credit extended to any one entity exceeding these limits. At September 30, 2019, the Bank had 33 lending relationships each with aggregate amounts of $5 million or more. The Company has significant credit arrangements that are secured by real estate collateral. In addition to real estate loans outstanding as disclosed in Note 4, the Company had loan commitments related to real estate loans of $44,964 thousand and $53,891 thousand at September 30, 2019 and December 31, 2018, 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 September 30, 2019, the Bank held corporate bonds in 88 issuing entities that exceeded $5 million for each issuer.

v3.19.3
Note 3 - Investment Securities (Details Textual) - USD ($)
$ in Thousands
9 Months Ended
Sep. 30, 2019
Sep. 30, 2018
Dec. 31, 2018
Jan. 01, 2018
Dec. 31, 2017
Equity Securities, FV-NI $ 0   $ 1,747 $ 1,800  
Cumulative Effect of New Accounting Principle in Period of Adoption     (2,801)   $ 0
Unrealized Gain (Loss) on Securities 50 $ (66)      
High Risk Collateralized Mortgage Obligations 0   0    
Debt Securities, Available-for-sale, Amortized Cost, Total 2,954,728   2,711,453    
Debt Securities, Available-for-sale, Total 2,983,767   2,654,670    
Other-than-temporary Impairment Loss, Debt Securities, Available-for-sale, Total 0        
Pledged Financial Instruments, Not Separately Reported, Securities, Total 721,741   728,161    
Debt Security, Corporate, US [Member]          
Debt Securities, Available-for-sale, Amortized Cost, Total 1,645,518   1,337,608    
Debt Securities, Available-for-sale, Total 1,667,047   1,315,041    
Debt Security, Corporate, US [Member] | External Credit Rating, Non Investment Grade [Member]          
Debt Securities, Available-for-sale, Amortized Cost, Total 15,000        
Debt Securities, Available-for-sale, Total $ 13,700        
Retained Earnings [Member]          
Cumulative Effect of New Accounting Principle in Period of Adoption     $ (2,801)   $ (142)
Retained Earnings [Member] | Accounting Standards Update 2016-01 [Member]          
Cumulative Effect of New Accounting Principle in Period of Adoption       $ (142)  
v3.19.3
Note 3 - Investment Securities - Interest Income From Investment Securities (Details) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2019
Sep. 30, 2018
Sep. 30, 2019
Sep. 30, 2018
Taxable $ 19,586 $ 16,780 $ 56,992 $ 47,327
Tax-exempt from federal income tax 3,777 4,880 12,165 14,768
Total interest income from investment securities $ 23,363 $ 21,660 $ 69,157 $ 62,095
v3.19.3
Note 4 - Loans, Allowance for Loan Losses and Other Real Estate Owned - Allowance for Loan Losses (Details) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2019
Sep. 30, 2018
Sep. 30, 2019
Sep. 30, 2018
Balance at beginning of period $ 20,117 $ 23,040 $ 21,351 $ 23,009
(Reversal) provision 0 0 0 0
Chargeoffs (1,039) (1,469) (3,403) (3,680)
Recoveries 750 456 1,880 2,698
Total allowance for loan losses 19,828 22,027 19,828 22,027
Unallocated Financing Receivable [Member]        
Balance at beginning of period 4,052 3,759 3,177 3,666
(Reversal) provision (524) 25 351 118
Chargeoffs 0 0 0 0
Recoveries 0 0 0 0
Total allowance for loan losses 3,528 3,784 3,528 3,784
Commercial Portfolio Segment [Member]        
Balance at beginning of period 5,235 8,275 6,311 7,746
(Reversal) provision (596) (184) (1,817) (863)
Chargeoffs 0 (384) (71) (425)
Recoveries 233 103 449 1,352
Total allowance for loan losses 4,872 7,810 4,872 7,810
Commercial Real Estate Portfolio Segment [Member]        
Balance at beginning of period 4,057 3,789 3,884 3,849
(Reversal) provision (1) 372 146 312
Chargeoffs 0 (240) 0 (240)
Recoveries 12 0 38 0
Total allowance for loan losses 4,068 3,921 4,068 3,921
Construction Portfolio Segment [Member]        
Balance at beginning of period 1,117 210 1,465 335
(Reversal) provision 482 44 134 (81)
Chargeoffs 0 0 0 0
Recoveries 0 0 0 0
Total allowance for loan losses 1,599 254 1,599 254
Residential Portfolio Segment [Member]        
Balance at beginning of period 238 1,064 869 995
(Reversal) provision (16) (120) (647) (51)
Chargeoffs 0 0 0 0
Recoveries 0 0 0 0
Total allowance for loan losses 222 944 222 944
Consumer Portfolio Segment [Member]        
Balance at beginning of period 5,418 5,943 5,645 6,418
(Reversal) provision 655 (137) 1,833 565
Chargeoffs (1,039) (845) (3,332) (3,015)
Recoveries 505 353 1,393 1,346
Total allowance for loan losses $ 5,539 $ 5,314 $ 5,539 $ 5,314
v3.19.3
Note 9 - Fair Value Measurements (Details Textual)
6 Months Ended
Jun. 30, 2019
Securities Selected for OTTI Analysis, Market Price, Threshold 95.00%
Fair Value, Inputs, Level 3 [Member]  
Fair Value Inputs, Appraisal Rate 10.00%
v3.19.3
Note 7 - Goodwill and Identifiable Intangible Assets - Estimated Future Amortization Expense for Identifiable Intangible Assets (Details) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2019
Sep. 30, 2018
Sep. 30, 2019
Sep. 30, 2018
For the nine months ended September 30, 2019 (actual) $ 76 $ 451 $ 465 $ 1,474
Core Deposits [Member]        
For the nine months ended September 30, 2019 (actual)     465  
Estimate for the remainder of year ending December 31, 2019 73   73  
Estimate for year ending December 31, 2020 287   287  
2021 269   269  
2022 252   252  
2023 236   236  
2024 $ 222   $ 222  
v3.19.3
Note 6 - Other Assets and Other Liabilities - 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
v3.19.3
Consolidated Statements of Changes in Shareholders' Equity (Unaudited) (Parentheticals) - $ / shares
3 Months Ended 9 Months Ended
Sep. 30, 2019
Sep. 30, 2018
Sep. 30, 2019
Sep. 30, 2018
Dividends per share (in dollars per share) $ 0.41 $ 0.40 $ 1.22 $ 1.2
v3.19.3
Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - USD ($)
shares in Thousands, $ / shares in Thousands, $ in Thousands
Sep. 30, 2019
Dec. 31, 2018
Debt securities held to maturity, fair value $ 799,241 $ 971,445
Common stock, no par value (in dollars per share) $ 0 $ 0
Common stock, authorized (in shares) 150,000 150,000
Common stock, issued (in shares) 27,014 26,730
Common stock, outstanding (in shares) 27,014 26,730
v3.19.3
Note 4 - Loans, Allowance for Loan Losses and Other Real Estate Owned - Credit Risk Profile by Internally Assigned Grade (Details) - USD ($)
$ in Thousands
Sep. 30, 2019
Dec. 31, 2018
Loans $ 1,133,229 $ 1,207,202
Pass [Member]    
Loans 1,109,559 1,179,859
Substandard [Member]    
Loans 23,255 26,658
Doubtful [Member]    
Loans 111 135
Unlikely to be Collected Financing Receivable [Member]    
Loans 304 550
Commercial Portfolio Segment [Member]    
Loans 216,273 275,080
Commercial Portfolio Segment [Member] | Pass [Member]    
Loans 207,350 264,634
Commercial Portfolio Segment [Member] | Substandard [Member]    
Loans 8,923 10,446
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 579,227 580,480
Commercial Real Estate Portfolio Segment [Member] | Pass [Member]    
Loans 568,009 567,578
Commercial Real Estate Portfolio Segment [Member] | Substandard [Member]    
Loans 11,218 12,902
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 6,678 3,982
Construction Portfolio Segment [Member] | Pass [Member]    
Loans 6,678 3,982
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 35,348 44,866
Residential Portfolio Segment [Member] | Pass [Member]    
Loans 33,629 43,112
Residential Portfolio Segment [Member] | Substandard [Member]    
Loans 1,719 1,754
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 295,703 302,794
Consumer Portfolio Segment [Member] | Pass [Member]    
Loans 293,893 300,553
Consumer Portfolio Segment [Member] | Substandard [Member]    
Loans 1,395 1,556
Consumer Portfolio Segment [Member] | Doubtful [Member]    
Loans 111 135
Consumer Portfolio Segment [Member] | Unlikely to be Collected Financing Receivable [Member]    
Loans $ 304 $ 550
v3.19.3
Note 4 - Loans, Allowance for Loan Losses and Other Real Estate Owned - Troubled Debt Restructurings (Details)
$ in Thousands
9 Months Ended 12 Months Ended
Sep. 30, 2019
USD ($)
Dec. 31, 2018
USD ($)
Number of Contracts 10 13
Pre-Modification Carrying Value $ 9,398 $ 11,752
Financing Receivable, Troubled Debt Restructuring 6,754 8,579
Period-End Individual Impairment Allowance $ 18 $ 19
Commercial Portfolio Segment [Member]    
Number of Contracts 3 4
Pre-Modification Carrying Value $ 327 $ 2,274
Financing Receivable, Troubled Debt Restructuring 44 811
Period-End Individual Impairment Allowance $ 18 $ 19
Commercial Real Estate Portfolio Segment [Member]    
Number of Contracts 6 8
Pre-Modification Carrying Value $ 8,830 $ 9,237
Financing Receivable, Troubled Debt Restructuring 6,517 7,568
Period-End Individual Impairment Allowance $ 0 $ 0
Residential Portfolio Segment [Member]    
Number of Contracts 1 1
Pre-Modification Carrying Value $ 241 $ 241
Financing Receivable, Troubled Debt Restructuring 193 200
Period-End Individual Impairment Allowance $ 0 $ 0
v3.19.3
Note 6 - Other Assets and Other Liabilities - Amounts Recognized in Net Income (Details) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2019
Sep. 30, 2018
Sep. 30, 2019
Sep. 30, 2018
Investment loss included in pre-tax income $ 600 $ 900 $ 1,800 $ 2,200
Tax credits recognized in provision for income taxes $ 225 $ 336 $ 675 $ 1,008
v3.19.3
Note 10 - Commitments and Contingent Liabilities (Details Textual) - USD ($)
$ in Thousands
3 Months Ended
Jun. 30, 2019
Sep. 30, 2019
Dec. 31, 2018
Dec. 31, 2017
Unfunded Loan Commitments   $ 286,876 $ 278,598  
Guarantor Obligations, Current Carrying Value   550 75  
Other Liabilities [Member]        
Reserve for Unfunded Commitments   2,308 2,308  
Financial Standby Letter of Credit [Member]        
Letters of Credit Outstanding, Amount   3,099 2,772  
Commercial Standby Letters of Credit [Member]        
Letters of Credit Outstanding, Amount   $ 0 $ 0  
Settlement to Dismiss Lawsuit [Member]        
Loss Contingency Accrual, Ending Balance $ 252      
Customer Refunds [Member]        
Loss Contingency Accrual, Ending Balance 5,843     $ 5,542
Loss Contingency Accrual, Period Increase (Decrease), Total $ 301      
v3.19.3
Note 2 - Accounting Policies (Details Textual) - USD ($)
$ in Thousands
Sep. 30, 2019
Jan. 01, 2019
Dec. 31, 2018
Operating Lease, Liability, Total $ 19,721   $ 0
Operating Lease, Right-of-Use Asset 19,721   0
Debt Securities, Available-for-sale, Total 2,983,767   2,654,670
Retained Earnings (Accumulated Deficit), Ending Balance $ 229,500   $ 205,841
Accounting Standards Update 2016-02 [Member]      
Operating Lease, Liability, Total   $ 15,300  
Operating Lease, Right-of-Use Asset   15,300  
Accounting Standards Update 2017-08 [Member]      
Debt Securities, Available-for-sale, Total   (3,100)  
Retained Earnings (Accumulated Deficit), Ending Balance   $ (2,800)  
v3.19.3
Note 7 - Goodwill and Identifiable Intangible Assets (Tables)
9 Months Ended
Sep. 30, 2019
Notes Tables  
Schedule of Goodwill [Table Text Block]
   

At September 30, 2019

   

At December 31, 2018

 
   

(In thousands)

 

Goodwill

  $ 121,673     $ 121,673  
Schedule of Finite-Lived Intangible Assets [Table Text Block]
   

At September 30, 2019

   

At December 31, 2018

 
   

Gross

           

Gross

         
   

Carrying

   

Accumulated

   

Carrying

   

Accumulated

 
   

Amount

   

Amortization

   

Amount

   

Amortization

 
   

(In thousands)

 

Core deposit intangibles

  $ 56,808     $ (55,344 )   $ 56,808     $ (54,879 )
Schedule of Finite-Lived Intangible Assets, Future Amortization Expense [Table Text Block]
   

Total

 
   

Core

 
   

Deposit

 
   

Intangibles

 
   

(In thousands)

 

For the nine months ended September 30, 2019 (actual)

  $ 465  

Estimate for the remainder of year ending December 31, 2019

    73  

Estimate for year ending December 31, 2020

    287  

   2021

    269  

   2022

    252  

   2023

    236  

   2024

    222  
v3.19.3
Significant Accounting Policies (Policies)
9 Months Ended
Sep. 30, 2019
Accounting Policies [Abstract]  
New Accounting Pronouncements, Policy [Policy Text Block]

Recently Adopted Accounting Standards

 

In the nine months ended September 30, 2019, the Company adopted the following new accounting guidance:

 

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 adopted the ASU provisions effective January 1, 2019, and elected the modified retrospective transition approach. The Company elected the package of practical expedients provided in the ASU, which allowed the Company to rely on lease classification determinations made under prior accounting guidance and forego reevaluation of (i) whether any existing contracts are or contain a lease, (ii) whether existing leases are operating or finance leases, and (iii) the initial direct cost for any existing leases. The Company also elected to combine lease and non-lease components and exempt short-term leases with an original term of one year or less from on-balance sheet recognition. The implementing entry recognized a lease liability of $15.3 million and right-of-use asset of $15.3 million for facilities leases. The change in occupancy and equipment expense was not material.

 

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 shortens 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 adopted the ASU provisions on January 1, 2019. The implementing entry reduced the carrying value of investment securities, specifically obligations of states and political subdivisions, by $3.1 million and reduced retained earnings by $2.8 million, net of tax. The change in premium amortization method was not 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 expands and refines hedge accounting for both nonfinancial and financial risk components and aligns 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 adopted 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 evaluated the prepayable assets in the HTM portfolio and did not effect a one-time reclassification of prepayable assets from HTM to the AFS upon implementation.

 

Recently Issued Accounting Standards

 

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. Management has also segmented debt securities held to maturity, selected methods to estimate losses for each segment, and preliminarily measured a loss estimate. 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 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 December 31, 2019.

 

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 the “Fair Value Measurements” note to the unaudited 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.

v3.19.3
Note 3 - Investment Securities - Amortized Cost and Estimated Market Value of Securities by Contractual Maturity (Details) - USD ($)
$ in Thousands
Sep. 30, 2019
Dec. 31, 2018
Investment securities available for sale, amortized cost, 1 year or less $ 284,550 $ 262,418
Investment securities available for sale, fair value, 1 year or less 285,060 261,976
Investment securities held to maturity, amortized cost, 1 year or less 64,092 86,172
Investment securities held to maturity, fair value, 1 year or less 64,247 86,148
Investment securities available for sale, amortized cost, over 1 to 5 years 1,182,895 1,438,849
Investment securities available for sale, fair value, over 1 to 5 years 1,199,153 1,414,020
Investment securities held to maturity, amortized cost, over 1 to 5 years 179,576 214,137
Investment securities held to maturity, fair value, over 1 to 5 years 182,635 213,829
Investment securities available for sale, amortized cost, over 5 to 10 years 471,434 85,817
Investment securities available for sale, fair value, over 5 to 10 years 478,841 85,877
Investment securities held to maturity, amortized cost, over 5 to 10 years 169,082 232,544
Investment securities held to maturity, fair value, over 5 to 10 years 173,661 233,515
Investment securities available for sale, amortized cost, over 10 years 35,934 38,672
Investment securities available for sale, fair value, over 10 years 37,107 36,970
Investment securities held to maturity, amortized cost, over 10 years 0 1,037
Investment securities held to maturity, fair value, over 10 years 0 1,074
Investment securities available for sale, amortized cost, subtotal 1,974,813 1,825,756
Investment securities available for sale, fair value, subtotal 2,000,161 1,798,843
Investment securities held to maturity, amortized cost, subtotal 412,750 533,890
Investment securities held to maturity, fair value, subtotal 420,543 534,566
Investment securities available for sale, amortized cost 979,915 885,697
Investment securities available for sale, fair value 983,606 855,827
Investment securities held to maturity, amortized cost 380,466 450,719
Investment securities held to maturity, fair value 378,698 436,879
Investment securities available for sale, amortized cost 2,954,728 2,711,453
Investment securities available for sale, fair value 2,983,767 2,654,670
Investment securities held to maturity, amortized cost 793,216 984,609
Investment securities held to maturity, fair value $ 799,241 $ 971,445
v3.19.3
Note 4 - Loans, Allowance for Loan Losses and Other Real Estate Owned - Loans Receivable at Carrying Amount (Details) - USD ($)
$ in Thousands
Sep. 30, 2019
Dec. 31, 2018
Loans $ 1,133,229 $ 1,207,202
Commercial Portfolio Segment [Member]    
Loans 216,273 275,080
Commercial Real Estate Portfolio Segment [Member]    
Loans 579,227 580,480
Construction Portfolio Segment [Member]    
Loans 6,678 3,982
Residential Portfolio Segment [Member]    
Loans 35,348 44,866
Consumer Portfolio Segment [Member]    
Loans $ 295,703 $ 302,794
v3.19.3
Note 7 - Goodwill and Identifiable Intangible Assets
9 Months Ended
Sep. 30, 2019
Notes to Financial Statements  
Goodwill and Intangible Assets Disclosure [Text Block]

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 nine months ended September 30, 2019 and year ended December 31, 2018. 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 nine months ended September 30, 2019 and year ended December 31, 2018 no such adjustments were recorded.

 

The carrying values of goodwill were:

 

   

At September 30, 2019

   

At December 31, 2018

 
   

(In thousands)

 

Goodwill

  $ 121,673     $ 121,673  

 

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

 

   

At September 30, 2019

   

At December 31, 2018

 
   

Gross

           

Gross

         
   

Carrying

   

Accumulated

   

Carrying

   

Accumulated

 
   

Amount

   

Amortization

   

Amount

   

Amortization

 
   

(In thousands)

 

Core deposit intangibles

  $ 56,808     $ (55,344 )   $ 56,808     $ (54,879 )

 

 

As of September 30, 2019, the current period and estimated future amortization expense for identifiable intangible assets was:

   

Total

 
   

Core

 
   

Deposit

 
   

Intangibles

 
   

(In thousands)

 

For the nine months ended September 30, 2019 (actual)

  $ 465  

Estimate for the remainder of year ending December 31, 2019

    73  

Estimate for year ending December 31, 2020

    287  

   2021

    269  

   2022

    252  

   2023

    236  

   2024

    222  

 

v3.19.3
Note 3 - Investment Securities
9 Months Ended
Sep. 30, 2019
Notes to Financial Statements  
Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]

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 decrease retained earnings by $142 thousand, net of tax.

 

The Company had no equity securities at September 30, 2019 due to the sales of such securities during the third quarter 2019. The market value of equity securities was $1,747 thousand at December 31, 2018. During the nine months ended September 30, 2019, the Company recognized gross unrealized holding gains of $50 thousand in earnings. During the nine months ended September 30, 2018, the Company recognized gross unrealized holding losses of $66 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:

 

   

At September 30, 2019

 
           

Gross

   

Gross

         
   

Amortized

   

Unrealized

   

Unrealized

   

Fair

 
   

Cost

   

Gains

   

Losses

   

Value

 
   

(In thousands)

 

Debt securities available for sale

                             

U.S. Treasury securities

  $ 44,758     $ 68     $ -     $ 44,826  

Securities of U.S. Government sponsored entities

    122,245       23       (160 )     122,108  

Agency residential mortgage-backed securities (MBS)

    976,066       10,294       (6,609 )     979,751  

Non-agency residential MBS

    101       3       -       104  

Agency commercial MBS

    3,748       3       -       3,751  

Securities of U.S. Government entities

    786       -       (9 )     777  

Obligations of states and political subdivisions

    161,506       3,944       (47 )     165,403  

Corporate securities

    1,645,518       24,520       (2,991 )     1,667,047  

Total debt securities available for sale

    2,954,728       38,855       (9,816 )     2,983,767  

Debt securities held to maturity

                             

Agency residential MBS

    377,995       817       (2,647 )     376,165  

Non-agency residential MBS

    2,471       62       -       2,533  

Obligations of states and political subdivisions

    412,750       7,804       (11 )     420,543  

Total debt securities held to maturity

    793,216       8,683       (2,658 )     799,241  

Total

  $ 3,747,944     $ 47,538     $ (12,474 )   $ 3,783,008  

 

   

At December 31, 2018

 
           

Gross

   

Gross

         
   

Amortized

   

Unrealized

   

Unrealized

   

Fair

 
   

Cost

   

Gains

   

Losses

   

Value

 
   

(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 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  

 

 

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

 

   

At September 30, 2019

 
   

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

  $ 284,550     $ 285,060     $ 64,092     $ 64,247  

Over 1 to 5 years

    1,182,895       1,199,153       179,576       182,635  

Over 5 to 10 years

    471,434       478,841       169,082       173,661  

Over 10 years

    35,934       37,107       -       -  

Subtotal

    1,974,813       2,000,161       412,750       420,543  

MBS

    979,915       983,606       380,466       378,698  

Total

  $ 2,954,728     $ 2,983,767     $ 793,216     $ 799,241  

 

 

   

At December 31, 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

  $ 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  

 

 

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 September 30, 2019 and December 31, 2018, 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 September 30, 2019

 
   

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     $ 19,970     $ (30 )     4     $ 55,794     $ (130 )     6     $ 75,764     $ (160 )

Agency residential MBS

    1       3,750       (62 )     49       400,690       (6,547 )     50       404,440       (6,609 )

Securities of U.S. Government entities

    -       -       -       2       777       (9 )     2       777       (9 )

Obligations of states and political subdivisions

    -       -       -       9       4,692       (47 )     9       4,692       (47 )

Corporate securities

    16       146,067       (1,196 )     21       166,633       (1,795 )     37       312,700       (2,991 )

Total

    19     $ 169,787     $ (1,288 )     85     $ 628,586     $ (8,528 )     104     $ 798,373     $ (9,816 )

 

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

 

   

Debt Securities Held to Maturity

 
   

At September 30, 2019

 
   

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

    7     $ 13,020     $ (90 )     57     $ 306,728     $ (2,557 )     64     $ 319,748     $ (2,647 )

Obligations of states and political subdivisions

    -       -       -       9       8,562       (11 )     9       8,562       (11 )

Total

    7     $ 13,020     $ (90 )     66     $ 315,290     $ (2,568 )     73     $ 328,310     $ (2,658 )

 

 

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 an amortized cost of $15.0 million and a fair value of $13.7 million at September 30, 2019, 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 September 30, 2019.

 

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 September 30, 2019 and December 31, 2018, the Company had debt securities pledged to secure public deposits and short-term borrowed funds of $721,741 thousand and $728,161 thousand, respectively.

 

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

 

   

For the Three Months

   

For the Nine Months

 
   

Ended September 30,

 
   

2019

   

2018

   

2019

   

2018

 
   

(In thousands)

 
                                 

Taxable

  $ 19,586     $ 16,780     $ 56,992     $ 47,327  

Tax-exempt from federal income tax

    3,777       4,880       12,165       14,768  

Total interest income from investment securities

  $ 23,363     $ 21,660     $ 69,157     $ 62,095  

 

v3.19.3
Note 11 - Earnings Per Common Share
9 Months Ended
Sep. 30, 2019
Notes to Financial Statements  
Earnings Per Share [Text Block]

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 Nine Months

 
   

Ended September 30,

 
   

2019

   

2018

   

2019

   

2018

 
   

(In thousands, except per share data)

 

Net income applicable to common equity (numerator)

  $ 20,390     $ 16,993     $ 59,661     $ 52,509  

Basic earnings per common share

                               

Weighted average number of common shares outstanding - basic (denominator)

    26,986       26,701       26,924       26,622  

Basic earnings per common share

  $ 0.76     $ 0.64     $ 2.22     $ 1.97  

Diluted earnings per common share

                               

Weighted average number of common shares outstanding - basic

    26,986       26,701       26,924       26,622  

Add common stock equivalents for options

    41       114       52       114  

Weighted average number of common shares outstanding - diluted (denominator)

    27,027       26,815       26,976       26,736  

Diluted earnings per common share

  $ 0.75     $ 0.63     $ 2.21     $ 1.96  

 

For the three and nine months ended September 30, 2019, options to purchase 379 thousand and 425 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 nine months ended September 30, 2018, options to purchase 326 thousand and 432 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.

 

v3.19.3
Consolidated Statements of Comprehensive Income (Loss) (Unaudited) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2019
Sep. 30, 2018
Sep. 30, 2019
Sep. 30, 2018
Net income $ 20,390 $ 16,993 $ 59,661 $ 52,509
Other comprehensive income (loss):        
Changes in unrealized gains (losses) on debt securities available for sale 10,407 (5,915) 85,822 (47,915)
Deferred tax (expense) benefit (3,077) 1,749 (25,372) 14,164
Changes in unrealized gains (losses) on debt securities available for sale, net of tax 7,330 (4,166) 60,450 (33,751)
Total comprehensive income $ 27,720 $ 12,827 $ 120,111 $ 18,758
v3.19.3
Document And Entity Information - shares
9 Months Ended
Sep. 30, 2019
Oct. 29, 2019
Document Information [Line Items]    
Entity Central Index Key 0000311094  
Entity Registrant Name WESTAMERICA BANCORPORATION  
Amendment Flag false  
Current Fiscal Year End Date --12-31  
Document Fiscal Period Focus Q3  
Document Fiscal Year Focus 2019  
Document Type 10-Q  
Document Quarterly Report true  
Document Period End Date Sep. 30, 2019  
Document Transition Report false  
Entity File Number 001-09383  
Entity Incorporation, State or Country Code CA  
Entity Tax Identification Number 94-2156203  
Entity Address, Address Line One 1108 Fifth Avenue  
Entity Address, City or Town San Rafael  
Entity Address, State or Province CA  
Entity Address, Postal Zip Code 94901  
City Area Code 707  
Local Phone Number 863-6000  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Large Accelerated Filer  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Shell Company false  
Title of 12(b) Security Common Stock, no par value  
Trading Symbol WABC  
Security Exchange Name NASDAQ  
Entity Common Stock, Shares Outstanding   27,055,059
v3.19.3
Note 1 - Basis of Presentation
9 Months Ended
Sep. 30, 2019
Notes to Financial Statements  
Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

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 nine months ended September 30, 2019 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, 2018.

 

v3.19.3
Note 8 - Deposits and Borrowed Funds - Deposits Detail (Details) - USD ($)
$ in Thousands
Sep. 30, 2019
Dec. 31, 2018
Noninterest-bearing deposits $ 2,265,640 $ 2,243,251
Interest-bearing:    
Transaction 910,566 929,346
Savings 1,445,210 1,498,991
Time deposits less than $100 thousand 92,300 102,654
Time deposits $100 thousand through $250 thousand 56,066 64,512
Time deposits more than $250 thousand 26,841 28,085
Total deposits $ 4,796,623 $ 4,866,839
v3.19.3
Note 7 - Goodwill and Identifiable Intangible Assets - Carrying Values of Goodwill (Details) - USD ($)
$ in Thousands
Sep. 30, 2019
Dec. 31, 2018
Goodwill $ 121,673 $ 121,673
v3.19.3
Note 11 - 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 9 Months Ended
Sep. 30, 2019
Sep. 30, 2018
Sep. 30, 2019
Sep. 30, 2018
Net income applicable to common equity (numerator) $ 20,390 $ 16,993 $ 59,661 $ 52,509
Basic earnings per common share        
Weighted average number of common shares outstanding - basic (in shares) 26,986 26,701 26,924 26,622
Basic earnings per common share (in dollars per share) $ 0.76 $ 0.64 $ 2.22 $ 1.97
Diluted earnings per common share        
Weighted average number of common shares outstanding - basic (in shares) 26,986 26,701 26,924 26,622
Add common stock equivalents for options (in shares) 41 114 52 114
Weighted average number of common shares outstanding - diluted (denominator) (in shares) 27,027 26,815 26,976 26,736
Diluted earnings per common share (in dollars per share) $ 0.75 $ 0.63 $ 2.21 $ 1.96
v3.19.3
Note 9 - Fair Value Measurements - Assets Measured at Fair Value on a Nonrecurring Basis (Details) - Fair Value, Nonrecurring [Member] - USD ($)
$ in Thousands
9 Months Ended 12 Months Ended
Sep. 30, 2019
Dec. 31, 2018
Fair Value $ 10,462 $ 10,657
Total Losses (34) (240)
Fair Value, Inputs, Level 1 [Member]    
Fair Value 0 0
Fair Value, Inputs, Level 2 [Member]    
Fair Value 0 0
Fair Value, Inputs, Level 3 [Member]    
Fair Value 10,462 10,657
Other Real Estate Owned [Member]    
Fair Value 43 350
Total Losses 0 0
Other Real Estate Owned [Member] | Fair Value, Inputs, Level 1 [Member]    
Fair Value 0 0
Other Real Estate Owned [Member] | Fair Value, Inputs, Level 2 [Member]    
Fair Value 0 0
Other Real Estate Owned [Member] | Fair Value, Inputs, Level 3 [Member]    
Fair Value 43 350
Impaired Loans [Member] | Commercial Portfolio Segment [Member]    
Fair Value 6,050 6,437
Total Losses 0 0
Impaired Loans [Member] | Commercial Real Estate Portfolio Segment [Member]    
Fair Value 4,099 3,870
Total Losses 0 (240)
Impaired Loans [Member] | Residential Portfolio Segment [Member]    
Fair Value 193  
Total Losses 0  
Impaired Loans [Member] | Consumer Portfolio Segment [Member]    
Fair Value 77  
Total Losses (34)  
Impaired Loans [Member] | Fair Value, Inputs, Level 1 [Member] | Commercial Portfolio Segment [Member]    
Fair Value 0 0
Impaired Loans [Member] | Fair Value, Inputs, Level 1 [Member] | Commercial Real Estate Portfolio Segment [Member]    
Fair Value 0 0
Impaired Loans [Member] | Fair Value, Inputs, Level 1 [Member] | Residential Portfolio Segment [Member]    
Fair Value 0  
Impaired Loans [Member] | Fair Value, Inputs, Level 1 [Member] | Consumer Portfolio Segment [Member]    
Fair Value 0  
Impaired Loans [Member] | Fair Value, Inputs, Level 2 [Member] | Commercial Portfolio Segment [Member]    
Fair Value 0 0
Impaired Loans [Member] | Fair Value, Inputs, Level 2 [Member] | Commercial Real Estate Portfolio Segment [Member]    
Fair Value 0 0
Impaired Loans [Member] | Fair Value, Inputs, Level 2 [Member] | Residential Portfolio Segment [Member]    
Fair Value 0  
Impaired Loans [Member] | Fair Value, Inputs, Level 2 [Member] | Consumer Portfolio Segment [Member]    
Fair Value 0  
Impaired Loans [Member] | Fair Value, Inputs, Level 3 [Member] | Commercial Portfolio Segment [Member]    
Fair Value 6,050 6,437
Impaired Loans [Member] | Fair Value, Inputs, Level 3 [Member] | Commercial Real Estate Portfolio Segment [Member]    
Fair Value 4,099 $ 3,870
Impaired Loans [Member] | Fair Value, Inputs, Level 3 [Member] | Residential Portfolio Segment [Member]    
Fair Value 193  
Impaired Loans [Member] | Fair Value, Inputs, Level 3 [Member] | Consumer Portfolio Segment [Member]    
Fair Value $ 77  
v3.19.3
Note 4 - Loans, Allowance for Loan Losses and Other Real Estate Owned - Impaired Loans (Details) - USD ($)
$ in Thousands
Sep. 30, 2019
Dec. 31, 2018
Impaired loans with no related allowance recorded, recorded investment $ 8,362 $ 10,180
Impaired loans with no related allowance recorded, unpaid principal balance 9,874 12,256
Impaired loans with an allowance recorded, recorded investment 8,600 9,189
Impaired loans with an allowance recorded, unpaid principal balance 8,600 9,189
Impaired loans with an allowance recorded, related allowance 2,550 2,752
Total impaired loans, recorded investment 16,962 19,369
Total impaired loans, unpaid principal balance 18,474 21,445
Commercial Portfolio Segment [Member]    
Impaired loans with no related allowance recorded, recorded investment 72 755
Impaired loans with no related allowance recorded, unpaid principal balance 72 759
Impaired loans with an allowance recorded, recorded investment 8,600 9,189
Impaired loans with an allowance recorded, unpaid principal balance 8,600 9,189
Impaired loans with an allowance recorded, related allowance 2,550 2,752
Commercial Real Estate Portfolio Segment [Member]    
Impaired loans with no related allowance recorded, recorded investment 7,953 8,438
Impaired loans with no related allowance recorded, unpaid principal balance 9,400 10,373
Residential Portfolio Segment [Member]    
Impaired loans with no related allowance recorded, recorded investment 193 717
Impaired loans with no related allowance recorded, unpaid principal balance 224 747
Consumer Portfolio Segment [Member]    
Impaired loans with no related allowance recorded, recorded investment 144 270
Impaired loans with no related allowance recorded, unpaid principal balance $ 178 $ 377
v3.19.3
Note 6 - Other Assets and Other Liabilities (Details Textual)
$ / shares in Units, shares in Thousands, $ in Thousands
3 Months Ended 9 Months Ended
Sep. 27, 2019
Jun. 28, 2018
Sep. 30, 2019
USD ($)
$ / shares
shares
Sep. 30, 2019
USD ($)
$ / shares
shares
Dec. 31, 2018
USD ($)
Deferred Tax Assets, Net, Total     $ 11,947 $ 11,947 $ 42,256
Deferred Tax Assets, Other Comprehensive Loss     8,585 8,585 16,787
LIHTC Investments     8,143 8,143 10,219
Qualified Affordable Housing Project Investments, Commitment     $ 4,754 $ 4,754 4,799
Lessee, Operating Lease, Term of Contract     5 years 5 years  
Lessee, Operating Lease, Renewal Term     5 years 5 years  
Operating Lease, Liability, Total     $ 19,721 $ 19,721 0
Operating Lease, Right-of-Use Asset     $ 19,721 $ 19,721 $ 0
Operating Lease, Weighted Average Remaining Lease Term     3 years 9 months 25 days 3 years 9 months 25 days  
Operating Lease, Weighted Average Discount Rate, Percent     2.93% 2.93%  
Operating Lease, Cost     $ 1,726 $ 5,145  
Contingent Commitment, Remainder of Fiscal Year [Member]          
Qualified Affordable Housing Project Investments, Commitment     601 601  
Contingent Commitment, Year 2 [Member]          
Qualified Affordable Housing Project Investments, Commitment     2,027 2,027  
Contingent Commitment, Year 3 [Member]          
Qualified Affordable Housing Project Investments, Commitment     138 138  
Contingent Commitment, Year 4 [Member]          
Qualified Affordable Housing Project Investments, Commitment     261 261  
Contingent Commitment, Year 5 [Member]          
Qualified Affordable Housing Project Investments, Commitment     134 134  
Contingent Commitment, Year 6 [Member]          
Qualified Affordable Housing Project Investments, Commitment     1,041 1,041  
Contingent Commitment, Year 7 or Thereafter [Member]          
Qualified Affordable Housing Project Investments, Commitment     $ 552 $ 552  
Visa Inc. [Member] | Common Class A [Member]          
Share Price | $ / shares     $ 172.01 $ 172.01  
VISA Class B Common Stock [Member]          
Investment Owned, Balance, Shares | shares     211 211  
Conversion Rate of Class B Common Stock into Class A Common Stock 1.6228 1.6298      
VISA Class B Common Stock [Member] | Reported Value Measurement [Member]          
Investment Owned, at Fair Value     $ 0 $ 0  
v3.19.3
Note 9 - Fair Value Measurements (Tables)
9 Months Ended
Sep. 30, 2019
Notes Tables  
Fair Value, Assets Measured on Recurring Basis [Table Text Block]
   

At September 30, 2019

 
   

Fair Value

   

Quoted Prices in Active Markets for Identical Assets
(Level 1)

   

Significant Other Observable Inputs
(Level 2)

   

Significant Unobservable Inputs
(Level 3) (1)

 
   

(In thousands)

 

Debt securities available for sale

                               

U.S. Treasury securities

  $ 44,826     $ 44,826     $ -     $ -  

Securities of U.S. Government sponsored entities

    122,108       -       122,108       -  

Agency residential MBS

    979,751       -       979,751       -  

Non-agency residential MBS

    104       -       104       -  

Agency commercial MBS

    3,751       -       3,751       -  

Securities of U.S. Government entities

    777       -       777       -  

Obligations of states and political subdivisions

    165,403       -       165,403       -  

Corporate securities

    1,667,047       -       1,667,047       -  

Total debt securities available for sale

  $ 2,983,767     $ 44,826     $ 2,938,941     $ -  
   

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     $ -  
Fair Value Measurements, Nonrecurring [Table Text Block]
                                   

For the

 
                                   

Nine Months Ended

 
   

At September 30, 2019

   

September 30, 2019

 
   

Carrying Value

   

Level 1

   

Level 2

   

Level 3

   

Total Losses

 
   

(In thousands)

 

Other real estate owned

  $ 43     $ -     $ -     $ 43     $ -  

Impaired loans:

                                       

Commercial

    6,050       -       -       6,050       -  

Commercial real estate

    4,099       -       -       4,099       -  

Residential real estate

    193       -       -       193       -  

Consumer installment and other

    77       -       -       77       (34 )

Total assets measured at fair value on a nonrecurring basis

  $ 10,462     $ -     $ -     $ 10,462     $ (34 )
                                   

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 )
Fair Value, by Balance Sheet Grouping [Table Text Block]
   

At September 30, 2019

 
   

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

  $ 415,639     $ 415,639     $ 415,639     $ -     $ -  

Debt securities held to maturity

    793,216       799,241       -       799,241       -  

Loans

    1,113,401       1,178,305       -       -       1,178,305  
                                         

Financial Liabilities:

                                       

Deposits

  $ 4,796,623     $ 4,794,970     $ -     $ 4,621,416     $ 173,554  

Short-term borrowed funds

    45,646       45,646       -       45,646       -  
   

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       -  
v3.19.3
Note 4 - Loans, Allowance for Loan Losses and Other Real Estate Owned (Tables)
9 Months Ended
Sep. 30, 2019
Notes Tables  
Schedule of Loans Receivable [Table Text Block]
   

At September 30,

   

At December 31,

 
   

2019

   

2018

 
   

(In thousands)

 

Commercial

  $ 216,273     $ 275,080  

Commercial Real Estate

    579,227       580,480  

Construction

    6,678       3,982  

Residential Real Estate

    35,348       44,866  

Consumer Installment & Other

    295,703       302,794  

Total

  $ 1,133,229     $ 1,207,202  
Accretable Yield Reconciliation Schedule [Table Text Block]
   

For the

   

For the

 
   

Nine Months Ended

   

Year Ended

 
   

September 30, 2019

   

December 31, 2018

 

Accretable yield:

 

(In thousands)

 

Balance at the beginning of the period

  $ 182     $ 738  

Reclassification from nonaccretable difference

    1,103       1,119  

Accretion

    (368 )     (1,675 )

Balance at the end of the period

  $ 917     $ 182  
                 

Accretion

  $ (368 )   $ (1,675 )

Change in FDIC indemnification

    -       2  

(Increase) in interest income

  $ (368 )   $ (1,673 )
Financing Receivable, Current, Allowance for Credit Loss [Table Text Block]
   

Allowance for Loan Losses

 
   

For the Three Months Ended September 30, 2019

 
                                   

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

  $ 5,235     $ 4,057     $ 1,117     $ 238     $ 5,418     $ 4,052     $ 20,117  

(Reversal) provision

    (596 )     (1 )     482       (16 )     655       (524 )     -  

Chargeoffs

    -       -       -       -       (1,039 )     -       (1,039 )

Recoveries

    233       12       -       -       505       -       750  

Total allowance for loan losses

  $ 4,872     $ 4,068     $ 1,599     $ 222     $ 5,539     $ 3,528     $ 19,828  
   

Allowance for Loan Losses

 
   

For the Nine Months Ended September 30, 2019

 
                                   

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

  $ 6,311     $ 3,884     $ 1,465     $ 869     $ 5,645     $ 3,177     $ 21,351  

(Reversal) provision

    (1,817 )     146       134       (647 )     1,833       351       -  

Chargeoffs

    (71 )     -       -       -       (3,332 )     -       (3,403 )

Recoveries

    449       38       -       -       1,393       -       1,880  

Total allowance for loan losses

  $ 4,872     $ 4,068     $ 1,599     $ 222     $ 5,539     $ 3,528     $ 19,828  
   

Allowance for Loan Losses

 
   

For the Three Months Ended September 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

  $ 8,275     $ 3,789     $ 210     $ 1,064     $ 5,943     $ 3,759     $ 23,040  

(Reversal) provision

    (184 )     372       44       (120 )     (137 )     25       -  

Chargeoffs

    (384 )     (240 )     -       -       (845 )     -       (1,469 )

Recoveries

    103       -       -       -       353       -       456  

Total allowance for loan losses

  $ 7,810     $ 3,921     $ 254     $ 944     $ 5,314     $ 3,784     $ 22,027  
   

Allowance for Loan Losses

 
   

For the Nine Months Ended September 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

    (863 )     312       (81 )     (51 )     565       118       -  

Chargeoffs

    (425 )     (240 )     -       -       (3,015 )     -       (3,680 )

Recoveries

    1,352       -       -       -       1,346       -       2,698  

Total allowance for loan losses

  $ 7,810     $ 3,921     $ 254     $ 944     $ 5,314     $ 3,784     $ 22,027  
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 September 30, 2019

 
   

Commercial

   

Commercial Real Estate

   

Construction

   

Residential Real Estate

   

Consumer Installment and Other

   

Unallocated

   

Total

 
   

(In thousands)

 

Allowance for loan losses:

                                                       

Individually evaluated for impairment

  $ 2,550     $ -     $ -     $ -     $ -     $ -     $ 2,550  

Collectively evaluated for impairment

    2,322       4,068       1,599       222       5,539       3,528       17,278  

Total

  $ 4,872     $ 4,068     $ 1,599     $ 222     $ 5,539     $ 3,528     $ 19,828  

Carrying value of loans:

                                                       

Individually evaluated for impairment

  $ 8,647     $ 7,445     $ -     $ 193     $ 44     $ -     $ 16,329  

Collectively evaluated for impairment

    207,626       571,782       6,678       35,155       295,659       -       1,116,900  

Total

  $ 216,273     $ 579,227     $ 6,678     $ 35,348     $ 295,703     $ -     $ 1,133,229  
   

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  

Total

  $ 6,311     $ 3,884     $ 1,465     $ 869     $ 5,645     $ 3,177     $ 21,351  

Carrying value of loans:

                                                       

Individually evaluated for impairment

  $ 9,944     $ 8,438     $ -     $ 717     $ 143     $ -     $ 19,242  

Collectively evaluated for impairment

    265,136       572,042       3,982       44,149       302,651       -       1,187,960  

Total

  $ 275,080     $ 580,480     $ 3,982     $ 44,866     $ 302,794     $ -     $ 1,207,202  
Financing Receivable Credit Quality Indicators [Table Text Block]
   

Credit Risk Profile by Internally Assigned Grade

 
   

At September 30, 2019

 
   

Commercial

   

Commercial Real Estate

   

Construction

   

Residential Real Estate

   

Consumer Installment and Other

   

Total

 
   

(In thousands)

 

Grade:

                                               

Pass

  $ 207,350     $ 568,009     $ 6,678     $ 33,629     $ 293,893     $ 1,109,559  

Substandard

    8,923       11,218       -       1,719       1,395       23,255  

Doubtful

    -       -       -       -       111       111  

Loss

    -       -       -       -       304       304  

Total

  $ 216,273     $ 579,227     $ 6,678     $ 35,348     $ 295,703     $ 1,133,229  
   

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  
Financing Receivable, Past Due [Table Text Block]
   

Summary of Loans by Delinquency and Nonaccrual Status

 
   

At September 30, 2019

 
   

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

  $ 215,787     $ 339     $ 119     $ 2     $ 26     $ 216,273  

Commercial real estate

    574,321       729       -       -       4,177       579,227  

Construction

    6,678       -       -       -       -       6,678  

Residential real estate

    34,064       828       456       -       -       35,348  

Consumer installment and other

    291,638       2,879       737       349       100       295,703  

Total

  $ 1,122,488     $ 4,775     $ 1,312     $ 351     $ 4,303     $ 1,133,229  
   

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  
Impaired Financing Receivables [Table Text Block]
   

Impaired Loans

 
   

At September 30, 2019

   

At December 31, 2018

 
           

Unpaid

                   

Unpaid

         
   

Recorded

   

Principal

   

Related

   

Recorded

   

Principal

   

Related

 
   

Investment

   

Balance

   

Allowance

   

Investment

   

Balance

   

Allowance

 
   

(In thousands)

 

With no related allowance recorded:

                                               

Commercial

  $ 72     $ 72     $ -     $ 755     $ 759     $ -  

Commercial real estate

    7,953       9,400       -       8,438       10,373       -  

Residential real estate

    193       224       -       717       747       -  

Consumer installment and other

    144       178       -       270       377       -  

Total with no related allowance recorded

    8,362       9,874       -       10,180       12,256       -  
                                                 

With an allowance recorded:

                                               

Commercial

    8,600       8,600       2,550       9,189       9,189       2,752  

Total with an allowance recorded

    8,600       8,600       2,550       9,189       9,189       2,752  

Total

  $ 16,962     $ 18,474     $ 2,550     $ 19,369     $ 21,445     $ 2,752  
Impaired Financing Receivables Supplemental Schedule [Table Text Block]
   

Impaired Loans

 
   

For the Three Months Ended September 30,

   

For the Nine Months Ended September 30,

 
   

2019

   

2018

   

2019

   

2018

 
   

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

  $ 8,701     $ 144     $ 10,426     $ 175     $ 9,404     $ 476     $ 10,671     $ 495  

Commercial real estate

    7,968       60       11,282       189       7,133       333       12,291       615  

Residential real estate

    194       4       203       4       196       10       205       12  

Consumer installment and other

    99       -       173       4       103       -       261       10  

Total

  $ 16,962     $ 208     $ 22,084     $ 372     $ 16,836     $ 819     $ 23,428     $ 1,132  
Financing Receivable, Troubled Debt Restructuring [Table Text Block]
   

Troubled Debt Restructurings

 
   

At September 30, 2019

 
                           

Period-End

 
                           

Individual

 
   

Number of

   

Pre-Modification

   

Period-End

   

Impairment

 
   

Contracts

   

Carrying Value

   

Carrying Value

   

Allowance

 
   

($ in thousands)

 

Commercial

    3     $ 327     $ 44     $ 18  

Commercial real estate

    6       8,830       6,517       -  

Residential real estate

    1       241       193       -  

Total

    10     $ 9,398     $ 6,754     $ 18  
   

Troubled Debt Restructurings

 
   

At December 31, 2018

 
                           

Period-End

 
                           

Individual

 
   

Number of

   

Pre-Modification

   

Period-End

   

Impairment

 
   

Contracts

   

Carrying Value

   

Carrying Value

   

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  
v3.19.3
Note 11 - Earnings Per Common Share (Details Textual) - shares
shares in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2019
Sep. 30, 2018
Sep. 30, 2019
Sep. 30, 2018
Share-based Payment Arrangement, Option [Member]        
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount 379 326 425 432
v3.19.3
Note 9 - Fair Value Measurements - Assets Measured at Fair Value on a Recurring Basis (Details) - USD ($)
$ in Thousands
Sep. 30, 2019
Dec. 31, 2018
Jan. 01, 2018
Investment securities available for sale $ 2,983,767 $ 2,654,670  
Equity securities 0 1,747 $ 1,800
US Treasury Securities [Member]      
Investment securities available for sale 44,826 139,574  
US Government-sponsored Enterprises Debt Securities [Member]      
Investment securities available for sale 122,108 164,018  
Agency Residential MBS [Member]      
Investment securities available for sale 979,751 853,871  
Non-agency Residential MBS [Member]      
Investment securities available for sale 104 114  
Agency Commercial MBS [Member]      
Investment securities available for sale 3,751 1,842  
US Government Agencies Debt Securities [Member]      
Investment securities available for sale 777 1,119  
US States and Political Subdivisions Debt Securities [Member]      
Investment securities available for sale 165,403 179,091  
Debt Security, Corporate, US [Member]      
Investment securities available for sale 1,667,047 1,315,041  
Fair Value, Recurring [Member]      
Investment securities available for sale 2,983,767 2,654,670  
Equity securities   1,747  
Total   2,656,417  
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]      
Investment securities available for sale 44,826 139,574  
Equity securities   0  
Total   139,574  
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]      
Investment securities available for sale 2,938,941 2,515,096  
Equity securities   1,747  
Total   2,516,843  
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]      
Investment securities available for sale 0 [1] 0 [2]  
Equity securities [2]   0  
Total [2]   0  
Fair Value, Recurring [Member] | US Treasury Securities [Member]      
Investment securities available for sale 44,826 139,574  
Fair Value, Recurring [Member] | US Treasury Securities [Member] | Fair Value, Inputs, Level 1 [Member]      
Investment securities available for sale 44,826 139,574  
Fair Value, Recurring [Member] | US Treasury Securities [Member] | Fair Value, Inputs, Level 2 [Member]      
Investment securities available for sale 0 0  
Fair Value, Recurring [Member] | US Treasury Securities [Member] | Fair Value, Inputs, Level 3 [Member]      
Investment securities available for sale 0 [1] 0 [2]  
Fair Value, Recurring [Member] | Mutual Fund [Member]      
Equity securities   1,747  
Fair Value, Recurring [Member] | Mutual Fund [Member] | Fair Value, Inputs, Level 1 [Member]      
Equity securities   0  
Fair Value, Recurring [Member] | Mutual Fund [Member] | Fair Value, Inputs, Level 2 [Member]      
Equity securities   1,747  
Fair Value, Recurring [Member] | Mutual Fund [Member] | Fair Value, Inputs, Level 3 [Member]      
Equity securities [2]   0  
Fair Value, Recurring [Member] | US Government-sponsored Enterprises Debt Securities [Member]      
Investment securities available for sale 122,108 164,018  
Fair Value, Recurring [Member] | US Government-sponsored Enterprises Debt Securities [Member] | Fair Value, Inputs, Level 1 [Member]      
Investment securities available for sale 0 0  
Fair Value, Recurring [Member] | US Government-sponsored Enterprises Debt Securities [Member] | Fair Value, Inputs, Level 2 [Member]      
Investment securities available for sale 122,108 164,018  
Fair Value, Recurring [Member] | US Government-sponsored Enterprises Debt Securities [Member] | Fair Value, Inputs, Level 3 [Member]      
Investment securities available for sale 0 [1] 0 [2]  
Fair Value, Recurring [Member] | Agency Residential MBS [Member]      
Investment securities available for sale 979,751 853,871  
Fair Value, Recurring [Member] | Agency Residential MBS [Member] | Fair Value, Inputs, Level 1 [Member]      
Investment securities available for sale 0 0  
Fair Value, Recurring [Member] | Agency Residential MBS [Member] | Fair Value, Inputs, Level 2 [Member]      
Investment securities available for sale 979,751 853,871  
Fair Value, Recurring [Member] | Agency Residential MBS [Member] | Fair Value, Inputs, Level 3 [Member]      
Investment securities available for sale 0 [1] 0 [2]  
Fair Value, Recurring [Member] | Non-agency Residential MBS [Member]      
Investment securities available for sale 104 114  
Fair Value, Recurring [Member] | Non-agency Residential MBS [Member] | Fair Value, Inputs, Level 1 [Member]      
Investment securities available for sale 0 0  
Fair Value, Recurring [Member] | Non-agency Residential MBS [Member] | Fair Value, Inputs, Level 2 [Member]      
Investment securities available for sale 104 114  
Fair Value, Recurring [Member] | Non-agency Residential MBS [Member] | Fair Value, Inputs, Level 3 [Member]      
Investment securities available for sale 0 [1] 0 [2]  
Fair Value, Recurring [Member] | Agency Commercial MBS [Member]      
Investment securities available for sale 3,751 1,842  
Fair Value, Recurring [Member] | Agency Commercial MBS [Member] | Fair Value, Inputs, Level 1 [Member]      
Investment securities available for sale 0 0  
Fair Value, Recurring [Member] | Agency Commercial MBS [Member] | Fair Value, Inputs, Level 2 [Member]      
Investment securities available for sale 3,751 1,842  
Fair Value, Recurring [Member] | Agency Commercial MBS [Member] | Fair Value, Inputs, Level 3 [Member]      
Investment securities available for sale 0 [1] 0 [2]  
Fair Value, Recurring [Member] | US Government Agencies Debt Securities [Member]      
Investment securities available for sale 777 1,119  
Fair Value, Recurring [Member] | US Government Agencies Debt Securities [Member] | Fair Value, Inputs, Level 1 [Member]      
Investment securities available for sale 0 0  
Fair Value, Recurring [Member] | US Government Agencies Debt Securities [Member] | Fair Value, Inputs, Level 2 [Member]      
Investment securities available for sale 777 1,119  
Fair Value, Recurring [Member] | US Government Agencies Debt Securities [Member] | Fair Value, Inputs, Level 3 [Member]      
Investment securities available for sale 0 [1] 0 [2]  
Fair Value, Recurring [Member] | US States and Political Subdivisions Debt Securities [Member]      
Investment securities available for sale 165,403 179,091  
Fair Value, Recurring [Member] | US States and Political Subdivisions Debt Securities [Member] | Fair Value, Inputs, Level 1 [Member]      
Investment securities available for sale 0 0  
Fair Value, Recurring [Member] | US States and Political Subdivisions Debt Securities [Member] | Fair Value, Inputs, Level 2 [Member]      
Investment securities available for sale 165,403 179,091  
Fair Value, Recurring [Member] | US States and Political Subdivisions Debt Securities [Member] | Fair Value, Inputs, Level 3 [Member]      
Investment securities available for sale 0 [1] 0 [2]  
Fair Value, Recurring [Member] | Debt Security, Corporate, US [Member]      
Investment securities available for sale 1,667,047 1,315,041  
Fair Value, Recurring [Member] | Debt Security, Corporate, US [Member] | Fair Value, Inputs, Level 1 [Member]      
Investment securities available for sale 0 0  
Fair Value, Recurring [Member] | Debt Security, Corporate, US [Member] | Fair Value, Inputs, Level 2 [Member]      
Investment securities available for sale 1,667,047 1,315,041  
Fair Value, Recurring [Member] | Debt Security, Corporate, US [Member] | Fair Value, Inputs, Level 3 [Member]      
Investment securities available for sale $ 0 [1] $ 0 [2]  
[1] There were no transfers in to or out of level 3 during the nine months ended September 30, 2019.
[2] There were no transfers in to or out of level 3 during the year ended December 31, 2018.
v3.19.3
Note 4 - Loans, Allowance for Loan Losses and Other Real Estate Owned - Impaired Loans, Supplemental Schedule (Details) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2019
Sep. 30, 2018
Sep. 30, 2019
Sep. 30, 2018
Average Recorded Investment $ 16,962 $ 22,084 $ 16,836 $ 23,428
Recognized Interest Income 208 372 819 1,132
Commercial Portfolio Segment [Member]        
Average Recorded Investment 8,701 10,426 9,404 10,671
Recognized Interest Income 144 175 476 495
Commercial Real Estate Portfolio Segment [Member]        
Average Recorded Investment 7,968 11,282 7,133 12,291
Recognized Interest Income 60 189 333 615
Residential Portfolio Segment [Member]        
Average Recorded Investment 194 203 196 205
Recognized Interest Income 4 4 10 12
Consumer Portfolio Segment [Member]        
Average Recorded Investment 99 173 103 261
Recognized Interest Income $ 0 $ 4 $ 0 $ 10
v3.19.3
Note 6 - Other Assets and Other Liabilities - Summary of Other Assets (Details) - USD ($)
$ in Thousands
Sep. 30, 2019
Dec. 31, 2018
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 57,169 56,083
Net deferred tax asset 11,947 42,256
Right-of-use asset 19,721 0
Limited partnership investments 8,143 10,219
Interest receivable 25,511 25,834
Prepaid assets 3,530 4,658
Other assets 12,524 9,629
Total other assets $ 152,772 $ 162,906
[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.
v3.19.3
Note 8 - Deposits and Borrowed Funds (Tables)
9 Months Ended
Sep. 30, 2019
Notes Tables  
Deposit Liabilities, Type [Table Text Block]
   

Deposits

 
   

At September 30,

   

At December 31,

 
   

2019

   

2018

 
   

(In thousands)

 

Noninterest-bearing

  $ 2,265,640     $ 2,243,251  

Interest-bearing:

               

Transaction

    910,566       929,346  

Savings

    1,445,210       1,498,991  

Time deposits less than $100 thousand

    92,300       102,654  

Time deposits $100 thousand through $250 thousand

    56,066       64,512  

Time deposits more than $250 thousand

    26,841       28,085  

Total deposits

  $ 4,796,623     $ 4,866,839  
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 September 30,

   

At December 31,

 
   

2019

   

2018

 

Repurchase agreements:

 

(In thousands)

 

Collateral securing borrowings:

               

Securities of U.S. Government sponsored entities

  $ 75,784     $ 73,803  

Agency residential MBS

    55,013       58,380  

Corporate securities

    115,018       91,837  

Total collateral carrying value

  $ 245,815     $ 224,020  

Total short-term borrowed funds

  $ 45,646     $ 51,247  
v3.19.3
Note 3 - Investment Securities (Tables)
9 Months Ended
Sep. 30, 2019
Notes Tables  
Debt Securities, Available-for-sale and Held-to-maturity [Table Text Block]
   

At September 30, 2019

 
           

Gross

   

Gross

         
   

Amortized

   

Unrealized

   

Unrealized

   

Fair

 
   

Cost

   

Gains

   

Losses

   

Value

 
   

(In thousands)

 

Debt securities available for sale

                             

U.S. Treasury securities

  $ 44,758     $ 68     $ -     $ 44,826  

Securities of U.S. Government sponsored entities

    122,245       23       (160 )     122,108  

Agency residential mortgage-backed securities (MBS)

    976,066       10,294       (6,609 )     979,751  

Non-agency residential MBS

    101       3       -       104  

Agency commercial MBS

    3,748       3       -       3,751  

Securities of U.S. Government entities

    786       -       (9 )     777  

Obligations of states and political subdivisions

    161,506       3,944       (47 )     165,403  

Corporate securities

    1,645,518       24,520       (2,991 )     1,667,047  

Total debt securities available for sale

    2,954,728       38,855       (9,816 )     2,983,767  

Debt securities held to maturity

                             

Agency residential MBS

    377,995       817       (2,647 )     376,165  

Non-agency residential MBS

    2,471       62       -       2,533  

Obligations of states and political subdivisions

    412,750       7,804       (11 )     420,543  

Total debt securities held to maturity

    793,216       8,683       (2,658 )     799,241  

Total

  $ 3,747,944     $ 47,538     $ (12,474 )   $ 3,783,008  
   

At December 31, 2018

 
           

Gross

   

Gross

         
   

Amortized

   

Unrealized

   

Unrealized

   

Fair

 
   

Cost

   

Gains

   

Losses

   

Value

 
   

(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 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  
Investments Classified by Contractual Maturity Date [Table Text Block]
   

At September 30, 2019

 
   

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

  $ 284,550     $ 285,060     $ 64,092     $ 64,247  

Over 1 to 5 years

    1,182,895       1,199,153       179,576       182,635  

Over 5 to 10 years

    471,434       478,841       169,082       173,661  

Over 10 years

    35,934       37,107       -       -  

Subtotal

    1,974,813       2,000,161       412,750       420,543  

MBS

    979,915       983,606       380,466       378,698  

Total

  $ 2,954,728     $ 2,983,767     $ 793,216     $ 799,241  
   

At December 31, 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

  $ 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  
Schedule of Unrealized Loss on Investments [Table Text Block]
   

Debt Securities Available for Sale

 
   

At September 30, 2019

 
   

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     $ 19,970     $ (30 )     4     $ 55,794     $ (130 )     6     $ 75,764     $ (160 )

Agency residential MBS

    1       3,750       (62 )     49       400,690       (6,547 )     50       404,440       (6,609 )

Securities of U.S. Government entities

    -       -       -       2       777       (9 )     2       777       (9 )

Obligations of states and political subdivisions

    -       -       -       9       4,692       (47 )     9       4,692       (47 )

Corporate securities

    16       146,067       (1,196 )     21       166,633       (1,795 )     37       312,700       (2,991 )

Total

    19     $ 169,787     $ (1,288 )     85     $ 628,586     $ (8,528 )     104     $ 798,373     $ (9,816 )
   

Debt Securities Held to Maturity

 
   

At September 30, 2019

 
   

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

    7     $ 13,020     $ (90 )     57     $ 306,728     $ (2,557 )     64     $ 319,748     $ (2,647 )

Obligations of states and political subdivisions

    -       -       -       9       8,562       (11 )     9       8,562       (11 )

Total

    7     $ 13,020     $ (90 )     66     $ 315,290     $ (2,568 )     73     $ 328,310     $ (2,658 )
   

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 )
Interest Income from Investments [Table Text Block]
   

For the Three Months

   

For the Nine Months

 
   

Ended September 30,

 
   

2019

   

2018

   

2019

   

2018

 
   

(In thousands)

 
                                 

Taxable

  $ 19,586     $ 16,780     $ 56,992     $ 47,327  

Tax-exempt from federal income tax

    3,777       4,880       12,165       14,768  

Total interest income from investment securities

  $ 23,363     $ 21,660     $ 69,157     $ 62,095  
v3.19.3
Note 3 - Investment Securities - Gross Unrealized Losses, Investment Securities Portfolio (Details)
$ in Thousands
Sep. 30, 2019
USD ($)
Dec. 31, 2018
USD ($)
Available for sale securities, less than 12 months, number of investment positions 19 82
Available for sale securities, less than 12 months, fair value $ 169,787 $ 499,743
Available for sale securities, less than 12 months, unrealized losses $ (1,288) $ (4,111)
Available for sale securities, 12 months or longer, number of investment positions 85 219
Available for sale securities, 12 months or longer, fair value $ 628,586 $ 1,549,153
Available for sale securities, 12 months or longer, unrealized losses $ (8,528) $ (56,269)
Available for sale securities, total, number of investment positions 104 301
Available for sale securities, total, fair value $ 798,373 $ 2,048,896
Available for sale securities, total, unrealized losses $ (9,816) $ (60,380)
Held to Maturity securities, less than 12 months, number of investment positions 7 114
Held to Maturity securities, less than 12 months, fair value $ 13,020 $ 92,154
Held to Maturity securities, less than 12 months, unrecognized losses $ (90) $ (305)
Held to Maturity securities, 12 months or longer, number of investment positions 66 220
Held to Maturity securities, 12 months or longer, fair value $ 315,290 $ 564,120
Held to Maturity securities, 12 months or longer, unrecognized losses $ (2,568) $ (16,551)
Held to Maturity securities, total, number of investment positions 73 334
Held to Maturity securities, total, fair value $ 328,310 $ 656,274
Held to Maturity securities, total, unrecognized losses $ (2,658) $ (16,856)
US Government-sponsored Enterprises Debt Securities [Member]    
Available for sale securities, less than 12 months, number of investment positions 2 1
Available for sale securities, less than 12 months, fair value $ 19,970 $ 990
Available for sale securities, less than 12 months, unrealized losses $ (30) $ (5)
Available for sale securities, 12 months or longer, number of investment positions 4 9
Available for sale securities, 12 months or longer, fair value $ 55,794 $ 117,963
Available for sale securities, 12 months or longer, unrealized losses $ (130) $ (3,270)
Available for sale securities, total, number of investment positions 6 10
Available for sale securities, total, fair value $ 75,764 $ 118,953
Available for sale securities, total, unrealized losses $ (160) $ (3,275)
Agency Residential MBS [Member]    
Available for sale securities, less than 12 months, number of investment positions 1 8
Available for sale securities, less than 12 months, fair value $ 3,750 $ 107,497
Available for sale securities, less than 12 months, unrealized losses $ (62) $ (507)
Available for sale securities, 12 months or longer, number of investment positions 49 58
Available for sale securities, 12 months or longer, fair value $ 400,690 $ 640,210
Available for sale securities, 12 months or longer, unrealized losses $ (6,547) $ (29,932)
Available for sale securities, total, number of investment positions 50 66
Available for sale securities, total, fair value $ 404,440 $ 747,707
Available for sale securities, total, unrealized losses $ (6,609) $ (30,439)
Held to Maturity securities, less than 12 months, number of investment positions 7 16
Held to Maturity securities, less than 12 months, fair value $ 13,020 $ 8,495
Held to Maturity securities, less than 12 months, unrecognized losses $ (90) $ (34)
Held to Maturity securities, 12 months or longer, number of investment positions 57 78
Held to Maturity securities, 12 months or longer, fair value $ 306,728 $ 412,574
Held to Maturity securities, 12 months or longer, unrecognized losses $ (2,557) $ (14,095)
Held to Maturity securities, total, number of investment positions 64 94
Held to Maturity securities, total, fair value $ 319,748 $ 421,069
Held to Maturity securities, total, unrecognized losses $ (2,647) $ (14,129)
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   0
Available for sale securities, 12 months or longer, fair value   $ 0
Available for sale securities, 12 months or longer, unrealized losses   $ 0
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)
US States and Political Subdivisions Debt Securities [Member]    
Available for sale securities, less than 12 months, number of investment positions 0 32
Available for sale securities, less than 12 months, fair value $ 0 $ 26,452
Available for sale securities, less than 12 months, unrealized losses $ 0 $ (166)
Available for sale securities, 12 months or longer, number of investment positions 9 71
Available for sale securities, 12 months or longer, fair value $ 4,692 $ 67,121
Available for sale securities, 12 months or longer, unrealized losses $ (47) $ (2,819)
Available for sale securities, total, number of investment positions 9 103
Available for sale securities, total, fair value $ 4,692 $ 93,573
Available for sale securities, total, unrealized losses $ (47) $ (2,985)
Held to Maturity securities, less than 12 months, number of investment positions 0 97
Held to Maturity securities, less than 12 months, fair value $ 0 $ 83,633
Held to Maturity securities, less than 12 months, unrecognized losses $ 0 $ (271)
Held to Maturity securities, 12 months or longer, number of investment positions 9 142
Held to Maturity securities, 12 months or longer, fair value $ 8,562 $ 151,546
Held to Maturity securities, 12 months or longer, unrecognized losses $ (11) $ (2,456)
Held to Maturity securities, total, number of investment positions 9 239
Held to Maturity securities, total, fair value $ 8,562 $ 235,179
Held to Maturity securities, total, unrecognized losses $ (11) $ (2,727)
Non-agency Residential MBS [Member]    
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   $ 0
Held to Maturity securities, 12 months or longer, number of investment positions   0
Held to Maturity securities, 12 months or longer, fair value   $ 0
Held to Maturity securities, 12 months or longer, unrecognized losses   $ 0
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   $ 0
US Government Agencies Debt Securities [Member]    
Available for sale securities, less than 12 months, number of investment positions 0 0
Available for sale securities, less than 12 months, fair value $ 0 $ 0
Available for sale securities, less than 12 months, unrealized losses $ 0 $ 0
Available for sale securities, 12 months or longer, number of investment positions 2 2
Available for sale securities, 12 months or longer, fair value $ 777 $ 1,119
Available for sale securities, 12 months or longer, unrealized losses $ (9) $ (9)
Available for sale securities, total, number of investment positions 2 2
Available for sale securities, total, fair value $ 777 $ 1,119
Available for sale securities, total, unrealized losses $ (9) $ (9)
Agency Commercial 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   $ 1,842
Available for sale securities, less than 12 months, unrealized losses   $ (27)
Available for sale securities, 12 months or longer, number of investment positions   0
Available for sale securities, 12 months or longer, fair value   $ 0
Available for sale securities, 12 months or longer, unrealized losses   $ 0
Available for sale securities, total, number of investment positions   1
Available for sale securities, total, fair value   $ 1,842
Available for sale securities, total, unrealized losses   $ (27)
Debt Security, Corporate, US [Member]    
Available for sale securities, less than 12 months, number of investment positions 16 38
Available for sale securities, less than 12 months, fair value $ 146,067 $ 308,157
Available for sale securities, less than 12 months, unrealized losses $ (1,196) $ (3,403)
Available for sale securities, 12 months or longer, number of investment positions 21 79
Available for sale securities, 12 months or longer, fair value $ 166,633 $ 722,740
Available for sale securities, 12 months or longer, unrealized losses $ (1,795) $ (20,239)
Available for sale securities, total, number of investment positions 37 117
Available for sale securities, total, fair value $ 312,700 $ 1,030,897
Available for sale securities, total, unrealized losses $ (2,991) $ (23,642)
v3.19.3
Note 4 - Loans, Allowance for Loan Losses and Other Real Estate Owned - Changes in the Accretable Yield for Purchased Loans (Details) - USD ($)
$ in Thousands
9 Months Ended 12 Months Ended
Sep. 30, 2019
Dec. 31, 2018
Balance at the beginning of the period $ 182 $ 738
Reclassification from nonaccretable difference 1,103 1,119
Accretion (368) (1,675)
Balance at the end of the period 917 182
Change in FDIC indemnification 0 2
(Increase) in interest income $ (368) $ (1,673)
v3.19.3
Note 10 - Commitments and Contingent Liabilities
9 Months Ended
Sep. 30, 2019
Notes to Financial Statements  
Commitments and Contingencies Disclosure [Text Block]

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 $286,876 thousand at September 30, 2019 and $278,598 thousand at December 31, 2018. 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 $3,099 thousand at September 30, 2019 and $2,772 thousand at December 31, 2018. The Company had no commitments outstanding for commercial and similar letters of credit at September 30, 2019 and December 31, 2018. The Company had $550 thousand and $75 thousand in outstanding full recourse guarantees to a 3rd party credit card company at September 30, 2019 and December 31, 2018, respectively. The Company had a reserve for unfunded commitments of $2,308 thousand at September 30, 2019 and December 31, 2018, 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 second quarter 2019, the Company achieved a mediated settlement to dismiss a lawsuit and paid the resulting liability of $252 thousand.

 

The Company determined that it will be obligated to provide refunds of revenue recognized in years prior to 2018 to some customers. The Company initially estimated the probable amount of these obligations to be $5,542 thousand and accrued a liability for such amount in 2017; based on additional information received in the second quarter 2019, the Company increased such liability to $5,843 thousand by recognizing an expense of $301 thousand.

v3.19.3
Note 6 - Other Assets and Other Liabilities
9 Months Ended
Sep. 30, 2019
Notes to Financial Statements  
Other Assets and Liabilities Disclosure [Text Block]

Note 6: Other Assets and Other Liabilities

 

Other assets consisted of the following:

 

   

At September 30,

   

At December 31,

 
   

2019

   

2018

 
   

(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

    57,169       56,083  

Net deferred tax asset

    11,947       42,256  

Right-of-use asset

    19,721       -  

Limited partnership investments

    8,143       10,219  

Interest receivable

    25,511       25,834  

Prepaid assets

    3,530       4,658  

Other assets

    12,524       9,629  

Total other assets

  $ 152,772     $ 162,906  

 

(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 net deferred tax asset at September 30, 2019 of $11,947 thousand was net of deferred tax obligations of $8,585 thousand related to available for sale debt securities unrealized gains. The net deferred tax asset at December 31, 2018 of $42,256 thousand included deferred tax benefits of $16,787 thousand related to available for sale debt securities unrealized losses.

 

The Company owns 211 thousand shares of Visa Inc. class B common stock which have transfer restrictions; the carrying value is $-0- thousand. On September 30, 2019, Visa Inc. announced a revised conversion rate applicable to its class B common stock resulting from its September 27, 2019 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 1.6298 to 1.6228 per share, effective as of September 27, 2019. Visa Inc. class A common stock had a closing price of $172.01 per share on September 30, 2019, the last day of stock market trading for the third quarter 2019. 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 September 30, 2019, this investment totaled $8,143 thousand and $4,754 thousand of this amount represents outstanding equity capital commitments that are included in other liabilities. At December 31, 2018, this investment totaled $10,219 thousand and $4,799 thousand of this amount represented outstanding equity capital commitments. At September 30, 2019, the $4,754 thousand of outstanding equity capital commitments are expected to be paid as follows, $601 thousand in the remainder of 2019, $2,027 thousand in 2020, $138 thousand in 2021, $261 thousand in 2022, $134 thousand in 2023, $1,041 thousand in 2024 and $552 thousand in 2025 or thereafter.

 

The amounts recognized in net income for these investments include:

 

   

For the Three Months Ended

   

For the Nine Months Ended

 
   

September 30,

 
   

2019

   

2018

   

2019

   

2018

 
   

(In thousands)

 

Investment loss included in pre-tax income

  $ 600     $ 900     $ 1,800     $ 2,200  

Tax credits recognized in provision for income taxes

    225       336       675       1,008  

 

 

Other liabilities consisted of the following:

 

   

At September 30,

   

At December 31,

 
   

2019

   

2018

 
   

(In thousands)

 

Operating lease liability

  $ 19,721     $ -  

Other liabilities

    40,687       34,849  

Total other liabilities

  $ 60,408     $ 34,849  

 

The Company has entered into leases for most branch locations and certain other offices that were classified as operating leases primarily with original terms of 5 years. Certain lease arrangements contain extension options, which can be exercised at the Company’s option, for one or more additional 5 year terms. Unexercised extension options are not considered reasonably certain of exercise and have not been included in the lease term used to determine the lease liability or right-of-use asset. The Company did not have any finance leases as of September 30, 2019.

 

As of September 30, 2019, the Company recorded a lease liability of $19,721 thousand and a right-of-use asset of $19,721 thousand, respectively. The weighted average remaining life of operating leases and weighted average discount rate used to determine operating lease liabilities were 3.82 years and 2.93%, respectively, at September 30, 2019.  The Company did not have any material lease incentives, unamortized initial direct costs, prepaid lease expense, or accrued lease expense as of September 30, 2019.

 

Total lease costs during the three and nine months ended September 30, 2019, of $1,726 thousand and $5,145 thousand, respectively, were recorded within occupancy and equipment expense. The Company did not have any material short-term or variable leases costs or sublease income during the nine months ended September 30, 2019.    

 

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

 

   

Minimum
future lease
payments

 
   

At September 30,

 
   

2019

 
   

(In thousands)

 

Remaining three months of 2019

  $ 2,719  

2020

    6,283  

2021

    4,574  

2022

    3,632  

2023

    2,912  

Thereafter

    2,057  

Total minimum lease payments

    22,177  

Less: discount

    (2,456 )

Present value of lease liability

  $ 19,721  

 

Minimum future rental payments under noncancelable operating leases as of December 31, 2018, prior to adoption of ASU 2016-02, were 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  

 

v3.19.3
Note 2 - Accounting Policies
9 Months Ended
Sep. 30, 2019
Notes to Financial Statements  
Significant Accounting Policies [Text Block]

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, 2018. 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 nine months ended September 30, 2019, the Company adopted the following new accounting guidance:

 

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 adopted the ASU provisions effective January 1, 2019, and elected the modified retrospective transition approach. The Company elected the package of practical expedients provided in the ASU, which allowed the Company to rely on lease classification determinations made under prior accounting guidance and forego reevaluation of (i) whether any existing contracts are or contain a lease, (ii) whether existing leases are operating or finance leases, and (iii) the initial direct cost for any existing leases. The Company also elected to combine lease and non-lease components and exempt short-term leases with an original term of one year or less from on-balance sheet recognition. The implementing entry recognized a lease liability of $15.3 million and right-of-use asset of $15.3 million for facilities leases. The change in occupancy and equipment expense was not material.

 

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 shortens 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 adopted the ASU provisions on January 1, 2019. The implementing entry reduced the carrying value of investment securities, specifically obligations of states and political subdivisions, by $3.1 million and reduced retained earnings by $2.8 million, net of tax. The change in premium amortization method was not 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 expands and refines hedge accounting for both nonfinancial and financial risk components and aligns 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 adopted 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 evaluated the prepayable assets in the HTM portfolio and did not effect a one-time reclassification of prepayable assets from HTM to the AFS upon implementation.

 

Recently Issued Accounting Standards

 

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. Management has also segmented debt securities held to maturity, selected methods to estimate losses for each segment, and preliminarily measured a loss estimate. 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 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 December 31, 2019.

 

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 the “Fair Value Measurements” note to the unaudited 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.

v3.19.3
Consolidated Statements of Cash Flows (Unaudited) - USD ($)
$ in Thousands
9 Months Ended
Sep. 30, 2019
Sep. 30, 2018
Operating Activities:    
Net income $ 59,661 $ 52,509
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization 15,178 18,964
Provision for loan losses 0 0
Net amortization of deferred loan fees (215) (181)
Decrease (increase) in interest income receivable 323 (177)
Increase in other assets (2,073) (1,896)
(Decrease) increase in income taxes payable (3,386) 7,760
Decrease (increase) in net deferred tax asset 6,386 (1,345)
Stock option compensation expense 1,484 1,575
Increase in interest expense payable 19 5
(Decrease) increase in other liabilities (12,233) 3,793
Life insurance gains (433) (585)
Equity securities (gains) losses (50) 66
Net writedown of premises and equipment 0 3
Net gain on sale of foreclosed assets 0 (94)
Writedown of foreclosed assets 0 27
Net Cash Provided by Operating Activities 64,661 80,424
Investing Activities:    
Net repayments of loans 73,026 91,594
Proceeds from life insurance policies 1,273 1,183
Purchases of debt securities available for sale (732,690) (634,113)
Proceeds from sale of equity securities 1,797 0
Proceeds from sale/maturity/calls of debt securities available for sale 502,928 290,663
Proceeds from maturity/calls of debt securities held to maturity 184,525 127,578
Purchases of premises and equipment (2,495) (2,830)
Proceeds from sale of foreclosed assets 307 873
Net Cash Provided by (Used in) Investing Activities 28,671 (125,052)
Financing Activities:    
Net change in deposits (70,216) 8,224
Net change in short-term borrowings (5,601) 3,285
Exercise of stock options 11,177 13,245
Retirement of common stock (488) (524)
Common stock dividends paid (32,849) (31,944)
Net Cash Used in Financing Activities (97,977) (7,714)
Net Change In Cash and Due from Banks (4,645) (52,342)
Cash and Due from Banks at Beginning of Period 420,284 575,002
Cash and Due from Banks at End of Period 415,639 522,660
Supplemental disclosure of non cash activities:    
Right-of-use assets acquired in exchange for operating lease liabilities 23,587 0
Amount recognized upon initial adoption of ASU 2016-02 included above 15,325 0
Loan collateral transferred to other real estate owned 0 0
Securities purchases pending settlement 20,114 0
Supplemental disclosure of cash flow activities:    
Cash paid for amounts included in operating lease liabilities 5,123 0
Interest paid for the period 1,417 1,440
Income tax payments for the period $ 16,021 $ 7,028
v3.19.3
Consolidated Statements of Income (Unaudited) - USD ($)
shares in Thousands, $ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2019
Sep. 30, 2018
Sep. 30, 2019
Sep. 30, 2018
Interest and Loan Fee Income:        
Loans $ 14,431 $ 14,593 $ 44,050 $ 44,247
Equity securities 92 85 289 256
Debt securities available for sale 18,736 15,644 54,080 43,518
Debt securities held to maturity 4,535 5,931 14,788 18,321
Interest-bearing cash 1,901 2,361 5,597 5,933
Total Interest and Loan Fee Income 39,695 38,614 118,804 112,275
Interest Expense:        
Deposits 447 518 1,410 1,417
Short-term borrowed funds 8 9 27 28
Total Interest Expense 455 527 1,437 1,445
Net Interest and Loan Fee Income 39,240 38,087 117,367 110,830
Provision for Loan Losses 0 0 0 0
Net Interest and Loan Fee Income After Provision for Loan Losses 39,240 38,087 117,367 110,830
Noninterest Income:        
Life insurance gains 0 585 433 585
Equity securities(losses) gains 0 (16) 50 (66)
Other noninterest income 1,051 1,007 2,897 2,988
Total Noninterest Income 11,809 12,528 35,676 36,252
Noninterest Expense:        
Salaries and related benefits 12,559 13,415 38,757 39,952
Occupancy and equipment 5,199 4,809 15,163 14,365
Outsourced data processing services 2,374 2,292 7,110 6,930
Professional fees 645 621 1,791 2,277
Courier service 456 448 1,349 1,333
Amortization of identifiable intangibles 76 451 465 1,474
Loss contingency 0 3,500 553 3,500
Other noninterest expense 2,724 3,830 9,589 11,298
Total Noninterest Expense 24,033 29,366 74,777 81,129
Income Before Income Taxes 27,016 21,249 78,266 65,953
Provision for income taxes 6,626 4,256 18,605 13,444
Net Income $ 20,390 $ 16,993 $ 59,661 $ 52,509
Average Common Shares Outstanding (in shares) 26,986 26,701 26,924 26,622
Average Diluted Common Shares Outstanding (in shares) 27,027 26,815 26,976 26,736
Per Common Share Data:        
Basic earnings (in dollars per share) $ 0.76 $ 0.64 $ 2.22 $ 1.97
Diluted earnings (in dollars per share) 0.75 0.63 2.21 1.96
Dividends paid (in dollars per share) $ 0.41 $ 0.40 $ 1.22 $ 1.20
Deposit Account [Member]        
Noninterest Income:        
Noninterest income revenue $ 4,510 $ 4,615 $ 13,508 $ 14,012
Credit Card, Merchant Discount [Member]        
Noninterest Income:        
Noninterest income revenue 2,494 2,464 7,708 7,190
Debit Card [Member]        
Noninterest Income:        
Noninterest income revenue 1,641 1,656 4,789 4,959
Fiduciary and Trust [Member]        
Noninterest Income:        
Noninterest income revenue 733 733 2,199 2,202
ATM Processing Fees [Member]        
Noninterest Income:        
Noninterest income revenue 725 687 2,080 2,049
Financial Service, Other [Member]        
Noninterest Income:        
Noninterest income revenue 580 665 1,742 1,946
Financial Services Commission [Member]        
Noninterest Income:        
Noninterest income revenue $ 75 $ 132 $ 270 $ 387
v3.19.3
Note 8 - Deposits and Borrowed Funds (Details Textual) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2019
Sep. 30, 2018
Sep. 30, 2019
Sep. 30, 2018
Dec. 31, 2018
Demand Deposit Overdrafts $ 1,078   $ 1,078   $ 980
Interest Expense, Time Deposits, $100,000 or More $ 81 $ 91 $ 246 $ 283  
v3.19.3
Note 7 - Goodwill and Identifiable Intangible Assets (Details Textual) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended 12 Months Ended
Sep. 30, 2019
Sep. 30, 2019
Dec. 31, 2018
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