wabc20200930_10q.htm
0000311094 WESTAMERICA BANCORPORATION false --12-31 Q3 2020 16 0 593,701 744,296 0 0 150,000 150,000 26,898 26,898 27,062 27,062 0.41 1.23 0.41 1.22 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 43 0 0 0 0 5 5 5 0 0 0 0 0 0 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 nine months ended September 30, 2020. 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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, 2020

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)

 

California94-2156203

(State or Other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer

Identification No.)

 

1108 Fifth Avenue, San Rafael, California 94901

(Address of Principal Executive Offices) (Zip Code)

 

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

 

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 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 ☒

 

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

Common Stock,

Shares outstanding as of October 29, 2020
No Par Value26,868,988

 

 

 
 

 

 

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

33

Item 3

Quantitative and Qualitative Disclosures about Market Risk

56

Item 4

Controls and Procedures

56

PART II - OTHER INFORMATION

 

Item 1

Legal Proceedings

56

Item 1A 

Risk Factors

56

Item 2

Unregistered Sales of Equity Securities and Use of Proceeds

58

Item 3

Defaults upon Senior Securities

58

Item 4

Mine Safety Disclosures

58

Item 5

Other Information

58

Item 6

Exhibits

59

Signatures

 60

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-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 credit 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 riots, terrorist threats and attacks on the United States, the actions taken in response, and the uncertain effect of these events on the local, regional and national 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, pandemics and other disasters on the Company, including 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 duration and severity of the COVID-19 pandemic and governmental responses to the pandemic; and (15) 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, 2019 and Part II – Item 1A of this report, 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,

 
  

2020

  

2019

 
  

(In thousands)

 

Assets:

        

Cash and due from banks

 $398,964  $373,421 

Debt securities available for sale

  3,983,994   3,078,846 

Debt securities held to maturity, net of allowance for credit losses of $16 at September 30, 2020 and $ - at December 31, 2019 (Fair value of $593,701 at September 30, 2020 and $744,296 at December 31, 2019)

  577,795   738,072 

Loans

  1,310,009   1,126,664 

Allowance for credit losses on loans

  (24,142)  (19,484)

Loans, net of allowance for credit losses on loans

  1,285,867   1,107,180 

Other real estate owned

  43   43 

Premises and equipment, net

  33,437   34,597 

Identifiable intangibles, net

  1,173   1,391 

Goodwill

  121,673   121,673 

Other assets

  160,269   164,332 

Total Assets

 $6,563,215  $5,619,555 
         

Liabilities:

        

Noninterest-bearing deposits

 $2,684,028  $2,240,112 

Interest-bearing deposits

  2,855,162   2,572,509 

Total deposits

  5,539,190   4,812,621 

Short-term borrowed funds

  107,973   30,928 

Other liabilities

  90,476   44,589 

Total Liabilities

  5,737,639   4,888,138 
         

Contingencies (Note 10)

          
         

Shareholders' Equity:

        

Common stock (no par value), authorized - 150,000 shares Issued and outstanding: 26,898 at September 30, 2020 and 27,062 at December 31, 2019

  467,201   465,460 

Deferred compensation

  35   771 

Accumulated other comprehensive income

  103,623   26,051 

Retained earnings

  254,717   239,135 

Total Shareholders' Equity

  825,576   731,417 

Total Liabilities and Shareholders' Equity

 $6,563,215  $5,619,555 

 

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,

 
  

2020

  

2019

  

2020

  

2019

 
  

(In thousands, except per share data)

 

Interest and Loan Fee Income:

                

Loans

 $15,291  $14,431  $44,378  $44,050 

Equity securities

  103   92   309   289 

Debt securities available for sale

  22,652   18,736   66,396   54,080 

Debt securities held to maturity

  3,235   4,535   10,759   14,788 

Interest-bearing cash

  84   1,901   1,053   5,597 

Total Interest and Loan Fee Income

  41,365   39,695   122,895   118,804 

Interest Expense:

                

Deposits

  450   447   1,308   1,410 

Short-term borrowed funds

  16   8   34   27 

Other borrowed funds

  -   -   1   - 

Total Interest Expense

  466   455   1,343   1,437 

Net Interest and Loan Fee Income

  40,899   39,240   121,552   117,367 

Provision for Credit Losses

  -   -   4,300   - 

Net Interest and Loan Fee Income After Provision for Credit Losses

  40,899   39,240   117,252   117,367 

Noninterest Income:

                

Service charges on deposit accounts

  3,298   4,510   10,697   13,508 

Merchant processing services

  2,860   2,494   7,495   7,708 

Debit card fees

  1,611   1,641   4,538   4,789 

Trust fees

  756   733   2,247   2,199 

ATM processing fees

  606   725   1,703   2,080 

Other service fees

  454   580   1,380   1,742 

Financial services commissions

  58   75   306   270 

Life insurance gains

  -   -   -   433 

Securities gains

  -   -   71   50 

Other noninterest income

  833   1,051   3,241   2,897 

Total Noninterest Income

  10,476   11,809   31,678   35,676 

Noninterest Expense:

                

Salaries and related benefits

  12,540   12,559   38,458   38,757 

Occupancy and equipment

  5,014   5,199   14,737   15,163 

Outsourced data processing services

  2,338   2,374   7,067   7,110 

Professional fees

  669   645   1,701   1,791 

Courier service

  500   456   1,499   1,349 

Amortization of identifiable intangibles

  72   76   218   465 

Loss contingency

  -   -   -   553 

Other noninterest expense

  3,470   2,724   10,341   9,589 

Total Noninterest Expense

  24,603   24,033   74,021   74,777 

Income Before Income Taxes

  26,772   27,016   74,909   78,266 

Provision for income taxes

  6,721   6,626   18,334   18,605 

Net Income

 $20,051  $20,390  $56,575  $59,661 
                 

Average Common Shares Outstanding

  26,930   26,986   26,977   26,924 

Average Diluted Common Shares Outstanding

  26,946   27,027   26,998   26,976 

Per Common Share Data:

                

Basic earnings

 $0.74  $0.76  $2.10  $2.22 

Diluted earnings

  0.74   0.75   2.10   2.21 

Dividends paid

  0.41   0.41   1.23   1.22 

 

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,

 
  

2020

  

2019

  

2020

  

2019

 
  

(In thousands)

 

Net income

 $20,051  $20,390  $56,575  $59,661 

Other comprehensive income:

                

Changes in unrealized gains on debt securities available for sale

  14,042   10,407   110,200   85,822 

Deferred tax expense

  (4,151)  (3,077)  (32,578)  (25,372)

Reclassification of gains included in net income

  -   -   (71)  - 

Deferred tax expense on gains included in net income

  -   -   21   - 

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

  9,891   7,330   77,572   60,450 

Total comprehensive income

 $29,942  $27,720  $134,147  $120,111 

 

 

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 except dividend per share)

 
                         

Balance, June 30, 2020

  26,933  $467,351  $35  $93,732  $246,958  $808,076 

Net income for the period

                  20,051   20,051 

Other comprehensive income

              9,891       9,891 

Stock based compensation

  -   450               450 

Stock awarded to employees

  -   19               19 

Retirement of common stock

  (35)  (619)          (1,249)  (1,868)

Dividends ($0.41 per share)

                  (11,043)  (11,043)

Balance, September 30, 2020

  26,898  $467,201  $35  $103,623  $254,717  $825,576 
                         

Balance, December 31, 2019

  27,062  $465,460  $771  $26,051  $239,135  $731,417 

Adoption of ASU 2016-13

                  52   52 

Adjusted Balance, January 1, 2020

  27,062   465,460   771   26,051   239,187   731,469 

Net income for the period

                  56,575   56,575 

Other comprehensive income

              77,572       77,572 

Exercise of stock options

  53   2,838               2,838 

Restricted stock activity

  10   1,270   (736)          534 

Stock based compensation

  -   1,500               1,500 

Stock awarded to employees

  1   85               85 

Retirement of common stock

  (228)  (3,952)          (7,782)  (11,734)

Dividends ($1.23 per share)

                  (33,263)  (33,263)

Balance, September 30, 2020

  26,898  $467,201  $35  $103,623  $254,717  $825,576 
                         

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, 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 

 

See accompanying notes to unaudited consolidated financial statements.

 

-7-
 

 

 

WESTAMERICA BANCORPORATION

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

(unaudited)

 
         
  

For the Nine Months

 
  

Ended September 30,

 
  

2020

  

2019

 
  

(In thousands)

 

Operating Activities:

        

Net income

 $56,575  $59,661 

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

        

Depreciation and amortization

  18,482   15,178 

Provision for credit losses

  4,300   - 

Net amortization of deferred loan fees

  (2,803)  (215)

Stock option compensation expense

  1,500   1,484 

Life insurance gains

  -   (433)

Securities gains

  (71)  (50)

Net changes in:

        

Interest income receivable

  (1,982)  323 

Other assets

  (4,397)  (2,073)

Income taxes payable

  (520)  (3,386)

Net deferred tax asset

  325   6,386 

Interest expense payable

  33   19 

Other liabilities

  24,798   (12,233)

Net Cash Provided by Operating Activities

  96,240   64,661 

Investing Activities:

        

Net (disbursements) repayments of loans

  (181,894)  73,026 

Proceeds from life insurance policies

  -   1,273 

Purchases of debt securities available for sale

  (1,612,633)  (732,690)

Proceeds from sale of equity securities

  -   1,797 

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

  807,064   502,928 

Proceeds from maturity/calls of debt securities held to maturity

  156,993   184,525 

Purchases of premises and equipment

  (1,682)  (2,495)

Proceeds from sale of foreclosed assets

  -   307 

Net Cash (Used in) Provided by Investing Activities

  (832,152)  28,671 

Financing Activities:

        

Net change in deposits

  726,569   (70,216)

Net change in short-term borrowings

  77,045   (5,601)

Exercise of stock options

  2,838   11,177 

Retirement of common stock

  (11,734)  (488)

Common stock dividends paid

  (33,263)  (32,849)

Net Cash Provided by (Used in) Financing Activities

  761,455   (97,977)

Net Change In Cash and Due from Banks

  25,543   (4,645)

Cash and Due from Banks at Beginning of Period

  373,421   420,284 

Cash and Due from Banks at End of Period

 $398,964  $415,639 
         

Supplemental Cash Flow Disclosures:

        

Supplemental disclosure of non cash activities:

        

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

 $6,457  $23,587 

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

  -   15,325 

Securities purchases pending settlement

  -   20,114 

Supplemental disclosure of cash flow activities:

        

Cash paid for amounts included in operating lease liabilities

  4,905   5,123 

Interest paid for the period

  1,310   1,417 

Income tax payments for the period

  18,708   16,021 

 

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, 2020 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, 2019.

 

 

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, 2019. 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 a 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, 2020, the Company adopted the following new accounting guidance:

 

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

 

The Company adopted the ASU provisions on a modified retrospective basis on January 1, 2020. Management evaluated available data, defined portfolio segments of loans with similar attributes, and selected loss estimate models for each identified loan portfolio segment. Management measured historical loss rates for each portfolio segment. Management also segmented debt securities held to maturity, selected methods to estimate losses for each segment, and measured a loss estimate. Agency mortgage-backed securities were assigned no credit loss allowance due to the perceived backing of government sponsored entities. Municipal securities were evaluated for risk of default based on credit rating and remaining term to maturity using Moody’s risk of default factors; Moody’s loss upon default factors were applied to the assumed defaulted principal amounts to estimate the amount for credit loss allowance. The adjustment to the allowance for credit losses was recorded through an offsetting after-tax adjustment to shareholders’ equity. The implementing entry increased allowance for credit losses by $2,017 thousand, reduced allowance for credit losses for unfunded credit commitments by $2,107 thousand and increased retained earnings by $52 thousand.

 

- 9-
 
 

The following table summarizes the impact of adoption of ASU 2016-13.

 

  

January 1, 2020

 
  

Balance,

  

Impact of

  

As reported

 
  

prior to adoption

  

adoption of

  

under

 
  

of ASU 2016-13

  

ASU 2016-13

  

ASU 2016-13

 
  

(In thousands)

 

Assets:

            

Allowance for credit losses on loans:

            

Commercial

 $4,959  $3,385  $8,344 

Commercial real estate

  4,064   618   4,682 

Construction

  109   (31)  78 

Residential real estate

  206   (132)  74 

Consumer and other installment loans

  6,445   1,878   8,323 

Unallocated

  3,701   (3,701)  - 

Allowance for credit losses on loans:

 $19,484  $2,017  $21,501 
             

Allowance for credit losses on debt securities held to maturity

  -   16   16 
             

Liabilities

            

Allowance for credit losses for unfunded commitments

  2,160   (2,107)  53 

 

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

 

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

 

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

 

To the extent that debt securities in the held-to-maturity portfolio share common risk characteristics, estimated expected credit losses are calculated in a manner like that used for loans held for investment. That is, for pools of such securities with common risk characteristics, the historical lifetime probability of default and severity of loss in the event of default is derived or obtained from external sources and adjusted for the expected effects of reasonable and supportable forecasts over the expected lives of the securities on those historical credit losses. Expected credit loss on each security in the held-to-maturity portfolio that do not share common risk characteristics with any of the pools of debt securities is individually evaluated and a reserve for credit losses is established at the difference between the discounted value of the expected future cash flows, based on the original effective interest rate, and the recorded amortized cost basis of the security. For certain classes of debt securities, the bank considers the history of credit losses, current conditions and reasonable and supportable forecasts, which may indicate that the expectation that nonpayment of the amortized cost basis is or continues to be zero. Therefore, for those securities, the bank does not record expected credit losses.

 

- 10-
 
 

AFS debt securities in unrealized loss positions are evaluated for credit related loss at least quarterly. For AFS debt securities, a decline in fair value due to credit loss results in recording an allowance for credit losses to the extent the fair value is less than the amortized cost basis. Declines in fair value that have not been recorded through an allowance for credit losses, such as declines due to changes in market interest rates, are recorded through other comprehensive income, net of applicable taxes. Although these evaluations involve significant judgment, an unrealized loss in the fair value of a debt security is generally considered to not be related to credit when the fair value of the security is below the carrying value primarily due to changes in risk-free interest rates, there has not been significant deterioration in the financial condition of the issuer, and the Company does not intend to sell nor does it believe it will be required to sell the security before the recovery of its cost basis.

 

If the Company intends to sell a debt security or more likely than not will be required to sell the security before recovery of its amortized cost basis, the debt security is written down to its fair value and the write down is charged against the allowance for credit losses with any incremental loss reported in earnings.

 

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

 

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

 

Loans. Loans are stated at the principal amount outstanding, net of unearned discount and unamortized deferred fees and costs. Interest is accrued daily on the outstanding principal balances and included in other assets. Loans which are more than 90 days delinquent with respect to interest or principal, unless they are well secured and in the process of collection, and other loans on which full recovery of principal or interest is in doubt, are placed on nonaccrual status. Interest previously accrued on loans placed on nonaccrual status is charged against interest income. In addition, some loans secured by real estate and commercial loans to borrowers experiencing financial difficulties are placed on nonaccrual status even though the borrowers continue to repay the loans as scheduled. When the ability to fully collect nonaccrual loan principal is in doubt, payments received are applied against the principal balance of the loans on a cost-recovery method until such time as full collection of the remaining recorded balance is expected. Any additional interest payments received after that time are recorded as interest income on a cash basis. Nonaccrual loans are reinstated to accrual status when none of the loan’s principal and interest is past due and improvements in credit quality eliminate doubt as to the full collectability of both principal and interest, or the loan otherwise becomes well secured and in the process of collection. Certain consumer loans or auto receivables are charged off against the allowance for credit losses when they become 120 days past due.

 

A troubled debt restructuring (“TDR”) occurs when the Company, for reasons related to a borrower’s financial difficulties, grants a concession to the borrower it would not otherwise consider. The Company follows its general nonaccrual policy for TDRs. Performing TDRs are reinstated to accrual status when improvements in credit quality eliminate the doubt as to full collectability of both principal and interest. Under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), banks may elect to deem that loan modifications do not result in TDRs if they are (1) related to the novel coronavirus disease; (2) executed on a loan that was not more than 30 days past due as of December 31, 2019; and (3) executed between March 1, 2020, and the earlier of (A) 60 days after the date of termination of the National Emergency or (B) December 31, 2020.

 

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

 

- 11-
 
 

The preparation of these financial statements requires Management to estimate the amount of expected losses over the expected contractual life of our existing loan portfolio and establish an allowance for credit losses. Loan agreements generally include a maturity date, and the Company considers the contractual life of a loan agreement to extend from the date of origination to the contractual maturity date. In estimating credit losses, Management must exercise significant judgment in evaluating information deemed relevant. The amount of ultimate losses on the loan portfolio can vary from the estimated amounts. Management follows a systematic methodology to estimate loss potential in an effort to reduce the differences between estimated and actual losses.

 

The allowance for credit losses is established through provisions for credit losses charged to income. Losses on loans are charged to the allowance for credit losses when all or a portion of the recorded amount of a loan is deemed to be uncollectible. Recoveries of loans previously charged off are credited to the allowance when realized. The Company’s allowance for credit losses is maintained at a level considered adequate to provide for expected losses based on historical loss rates adjusted for current and expected conditions over a forecast period. These include conditions unique to individual borrowers, as well as overall credit loss experience, the amount of past due, nonperforming and classified loans, recommendations of regulatory authorities, prevailing economic conditions, or credit protection agreements and other factors.

 

Loans that share common risk characteristics are segregated into pools based on common characteristics, which is primarily determined by loan, borrower, or collateral type. Historical loss rates are determined for each pool. For consumer installment loans, primarily secured by automobiles, historical loss rates are determined using a vintage methodology, which tracks losses based on period of origination. For commercial, construction, and commercial real estate, historical loss rates are determined using an open pool methodology where losses are tracked over time for all loans included in the pool at the historical measurement date. Historical loss rates are adjusted for factors that are not reflected in the historical loss rates that are attributable to national or local economic or industry trends which have occurred but have not yet been recognized in past loan charge-off history, estimated losses based on management’s reasonable and supportable expectation of economic trends over a forecast horizon of up to two years, and other factors that impact credit loss expectations that are not reflected in the historical loss rates. Other factors include, but are not limited to, the effectiveness of the Company’s loan review system, adequacy of lending Management and staff, loan policies and procedures, problem loan trends, and concentrations of credit. At the end of the two-year forecast period loss rates revert immediately to the historical loss rates. The results of this analysis are applied to the amortized cost of the loans included within each pool.

 

Loans that do not share risk characteristics with other loans in the pools are evaluated individually. A loan is considered ‘collateral-dependent’ when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. A credit loss reserve for collateral-dependent loans is established at the difference between the amortized cost basis in the loan and the fair value of the underlying collateral adjusted for costs to sell. For other individually evaluated loans that are not collateral dependent, a credit loss reserve is established at the difference between the amortized cost basis in the loan and the present value of expected future cash flows discounted at the loan’s effective interest rate. The impact of an expected TDR modification is included in the allowance for credit losses when management determines a TDR modification is likely.

 

Accrued interest is recorded in other assets and is excluded from the estimation of expected credit loss. Accrued interest is reversed through interest income when amounts are determined to be uncollectible, which generally occurs when the underlying receivable is placed on nonaccrual status or charged off.

 

Liability for Off-Balance Sheet Credit Exposures. Off-balance sheet credit exposures relate to letters of credit and unfunded loan commitments for commercial, construction and consumer loans. The Company maintains a separate allowance for credit losses from off-balance-sheet credit exposures, which is included within other liabilities on the consolidated statements of financial condition. Increases or reductions to the Company’s allowance for credit losses from off-balance sheet credit exposures are recorded in other expenses. Management estimates the amount of expected losses by estimating expected usage exposures that are not unconditionally cancellable by the Company and applying the loss factors used in the allowance for credit loss methodology to estimate the liability for credit losses related to unfunded commitments. No credit loss estimate is reported for off-balance-sheet credit exposures that are unconditionally cancellable by the Company or for undrawn amounts under such arrangements that may be drawn prior to the cancellation of the arrangement.

 

- 12-
 
 

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 were 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 was adopted by the Company January 1, 2020. The additional disclosures did not affect the financial results upon adoption.

 

Recently Issued Accounting Standards

 

FASB ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, was issued December 2019. The ASU is intended to simplify various aspects related to accounting for income taxes, eliminates certain exceptions to the general principles in ASC Topic 740 related to intra-period tax allocation, simplifies when companies recognize deferred taxes in an interim period, and clarifies certain aspects of the current guidance to promote consistent application. This guidance effective for public entities for fiscal years beginning after December 15, 2020, and for interim period within those fiscal years, with early adoption permitted. This guidance is applicable to the Company’s fiscal year beginning January 1, 2021. The Company is currently evaluating the potential effects of this guidance on its consolidated financial statements.

 

FASB ASU 2020-04, Reference Rate Reform (Topic 848): Simplifying the Accounting for Income Taxes, was issued March 2020. The ASU provides optional expedients and exceptions for applying GAAP to loan and lease agreements, derivative contracts, and other transactions affected by the anticipated transition away from LIBOR toward new interest rate benchmarks. For transactions that are modified because of reference rate reform and that meet certain scope guidance (i) modifications of loan agreements should be accounted for by prospectively adjusting the effective interest rate and the modification will be considered "minor" so that any existing unamortized origination fees/costs would carry forward and continue to be amortized and (ii) modifications of lease agreements should be accounted for as a continuation of the existing agreement with no reassessments of the lease classification and the discount rate or remeasurements of lease payments that otherwise would be required for modifications not accounted for as separate contracts. ASU 2020-04 also provides numerous optional expedients for derivative accounting. ASU 2020-04 is effective March 12, 2020 through December 31, 2022. An entity may elect to apply ASU 2020-04 for contract modifications as of January 1, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued. Once elected for a Topic or an Industry Subtopic within the Codification, the amendments in this ASU must be applied prospectively for all eligible contract modifications for that Topic or Industry Subtopic. The Company is currently evaluating the impacts of this ASU and has not yet determined whether LIBOR transition and this ASU will have material effects on our business operations and consolidated financial statements.

 

 

 

 

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- 13-
 
 
 

Note 3: Investment Securities

 

The Company’s marketable equity securities were sold in the third quarter 2019. During the nine months ended September 30, 2019, the Company recognized gross unrealized holding gains of $50 thousand in earnings. The Company had no marketable equity securities at September 30, 2020 and December 31, 2019.

 

During the quarter and nine months ended September 30, 2020, the Company provided no provision for credit loss on debt securities held to maturity. 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, before allowance for credit losses of $16 thousand, follows:

 

  

At September 30, 2020

 
      

Gross

  

Gross

     
  

Amortized

  

Unrealized

  

Unrealized

  

Fair

 
  

Cost

  

Gains

  

Losses

  

Value

 
  

(In thousands)

 

Debt securities available for sale

                

Agency residential mortgage-backed securities ("MBS")

 $720,123  $25,174  $-  $745,297 

Agency commercial MBS

  3,601   -   (16)  3,585 

Securities of U.S. Government entities

  163   -   -   163 

Obligations of states and political subdivisions

  121,951   5,223   (2)  127,172 

Corporate securities

  2,098,444   114,582   (199)  2,212,827 

Commercial paper

  224,862   29   (75)  224,816 

Collateralized loan obligations

  667,735   3,053   (654)  670,134 

Total debt securities available for sale

  3,836,879   148,061   (946)  3,983,994 

Debt securities held to maturity

                

Agency residential MBS

  272,460   7,648   (39)  280,069 

Non-agency residential MBS

  2,020   36   -   2,056 

Obligations of states and political subdivisions

  303,331   8,261   -   311,592 

Total debt securities held to maturity

  577,811   15,945   (39)  593,717 

Total

 $4,414,690  $164,006  $(985) $4,577,711 

 

 

  

At December 31, 2019

 
      

Gross

  

Gross

     
  

Amortized

  

Unrealized

  

Unrealized

  

Fair

 
  

Cost

  

Gains

  

Losses

  

Value

 
  

(In thousands)

 

Debt securities available for sale

                

U.S. Treasury securities

 $19,999  $1  $-  $20,000 

Securities of U.S. Government sponsored entities

  111,251   14   (98)  111,167 

Agency residential MBS

  934,592   10,996   (5,838)  939,750 

Agency commercial MBS

  3,711   -   (3)  3,708 

Securities of U.S. Government entities

  553   -   (9)  544 

Obligations of states and political subdivisions

  159,527   3,656   (44)  163,139 

Corporate securities

  1,805,479   29,183   (879)  1,833,783 

Collateralized loan obligations

  6,748   7   -   6,755 

Total debt securities available for sale

  3,041,860   43,857   (6,871)  3,078,846 

Debt securities held to maturity

                

Agency residential MBS

  353,937   766   (2,235)  352,468 

Non-agency residential MBS

  2,354   22   -   2,376 

Obligations of states and political subdivisions

  381,781   7,672   (1)  389,452 

Total debt securities held to maturity

  738,072   8,460   (2,236)  744,296 

Total

 $3,779,932  $52,317  $(9,107) $3,823,142 

  

- 14-
 
 

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

 

  

At September 30, 2020

 
  

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

 $452,154  $454,493  $63,044  $63,504 

Over 1 to 5 years

  973,305   1,026,667   132,750   136,640 

Over 5 to 10 years

  1,480,374   1,544,476   107,537   111,448 

Over 10 years

  207,322   209,476   -   - 

Subtotal

  3,113,155   3,235,112   303,331   311,592 

MBS

  723,724   748,882   274,480   282,125 

Total

 $3,836,879  $3,983,994  $577,811  $593,717 

 

  

At December 31, 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

 $294,698  $295,255  $70,378  $70,602 

Over 1 to 5 years

  1,104,775   1,122,391   161,911   165,126 

Over 5 to 10 years

  670,595   683,277   149,492   153,724 

Over 10 years

  33,489   34,465   -   - 

Subtotal

  2,103,557   2,135,388   381,781   389,452 

MBS

  938,303   943,458   356,291   354,844 

Total

 $3,041,860  $3,078,846  $738,072  $744,296 

 

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, 2020 and December 31, 2019, 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, 2020

 
  

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)

 

Agency residential MBS

  1  $98  $-   1  $21  $-   2  $119  $- 

Agency commercial MBS

  1   3,585   (16)  -   -   -   1   3,585   (16)

Securities of U.S. Government entities

  1   163   -   -   -   -   1   163   - 

Obligations of states and political subdivisions

  5   2,447   (2)  -   -   -   5   2,447   (2)

Corporate securities

  -   -   -   2   18,263   (199)  2   18,263   (199)

Commercial paper

  4   99,874   (75)  -   -   -   4   99,874   (75)

Collateralized loan obligations

  29   216,358   (654)  -   -   -   29   216,358   (654)

Total

  41  $322,525  $(747)  3  $18,284  $(199)  44  $340,809  $(946)

 

- 15-
 
 

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

 

  

Debt Securities Held to Maturity

 
  

At September 30, 2020

 
  

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

  2  $153  $(1)  3  $1,109  $(38)  5  $1,262  $(39)

 

Based upon the most recent evaluation, the unrealized losses on the Company’s debt securities available for sale were most likely caused by market conditions for these types of investments, particularly changes in risk-free interest rates and/or market bid-ask spreads. The Company does not intend to sell any debt securities available for sale 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 have credit related loss as of September 30, 2020.

 

The fair values of debt securities available for sale 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, significant credit loss on debt securities available for sale may occur in the future.

 

As of September 30, 2020 and December 31, 2019, the Company had debt securities pledged to secure public deposits and short-term borrowed funds of $850,245 thousand and $760,365 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, 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

  1  $9,951  $(49)  3  $45,877  $(49)  4  $55,828  $(98)

Agency residential MBS

  6   11,674   (100)  47   347,384   (5,738)  53   359,058   (5,838)

Agency commercial MBS

  1   3,708   (3)  -   -   -   1   3,708   (3)

Securities of U.S. Government entities

  -   -   -   2   544   (9)  2   544   (9)

Obligations of states and political subdivisions

  -   -   -   7   4,163   (44)  7   4,163   (44)

Corporate securities

  8   71,577   (162)  11   64,380   (717)  19   135,957   (879)

Total

  16  $96,910  $(314)  70  $462,348  $(6,557)  86  $559,258  $(6,871)

 

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

 

  

Debt Securities Held to Maturity

 
  

At December 31, 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

  6  $12,098  $(87)  54  $277,203  $(2,148)  60  $289,301  $(2,235)

Obligations of states and political subdivisions

  -   -   -   1   251   (1)  1   251   (1)

Total

  6  $12,098  $(87)  55  $277,454  $(2,149)  61  $289,552  $(2,236)

 

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 $14.9 million at September 30, 2020, is rated below investment grade. The $14.9 million corporate bond was issued by a pharmaceutical company which develops, manufactures and markets generic and branded human pharmaceuticals, as well as active pharmaceutical ingredients, to customers worldwide. The bond matures in 2021, and the issuing Company has refinanced much of its debt obligations beyond the maturity date. 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.

 

- 16-
 
 

The following table presents the activity in the allowance for credit losses for debt securities held to maturity:

 

  

For

 
  

the Nine Months

 
  

Ended September 30,

 
  

2020

 
  

(In thousands)

 

Allowance for credit losses:

    

Beginning balance, prior to adoption of ASU 2016-13

 $- 

Impact of adopting ASU 2016-13

  16 

Provision

  - 

Chargeoffs

  - 

Recoveries

  - 

Total ending balance

 $16 

 

Agency mortgage-backed securities were assigned no credit loss allowance due to the perceived backing of government sponsored entities. Municipal securities were evaluated for risk of default based on credit rating and remaining term to maturity using Moody’s risk of default factors; Moody’s loss upon default factors were applied to the assumed defaulted principal amounts to estimate the amount for credit loss allowance.

 

The following table summarizes the amortized cost of debt securities held to maturity at September 30, 2020, aggregated by credit rating:

 

  

Credit Risk Profile by Credit Rating

 
  

At September 30, 2020

 
  

(In thousands)

 
  

AAA/AA/A

  

BBB

  

BB/B

  

Total

 
                 

Agency residential MBS

 $272,460  $-  $-  $272,460 

Non-agency residential MBS

  1,005   -   1,015   2,020 

Obligations of states and political subdivisions

  303,230   101   -   303,331 

Total

 $576,695  $101  $1,015  $577,811 

 

There were no debt securities held to maturity on nonaccrual status or past due 30 days or more as of September 30, 2020.

 

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,

 
  

2020

  

2019

  

2020

  

2019

 
  

(In thousands)

 
                 

Taxable

 $23,079  $19,586  $67,963  $56,992 

Tax-exempt from federal income tax

  2,911   3,777   9,501   12,165 

Total interest income from investment securities

 $25,990  $23,363  $77,464  $69,157 

 

- 17-
 
 
 

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

 

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,

 
  

2020

  

2019

 
  

(In thousands)

 

Commercial:

        

Paycheck Protection Program ("PPP") loans

 $243,982  $- 

Other

  201,623   222,085 

Total commercial

  445,605   222,085 

Commercial Real Estate

  563,707   578,758 

Construction

  140   1,618 

Residential Real Estate

  25,076   32,748 

Consumer Installment & Other

  275,481   291,455 

Total

 $1,310,009  $1,126,664 

 

The following summarizes activity in the allowance for loan losses/credit losses:

 

  

Allowance for Credit Losses

 
  

For the Three Months Ended September 30, 2020

 
                  

Consumer

     
      

Commercial

      

Residential

  

Installment

     
  

Commercial

  

Real Estate

  

Construction

  

Real Estate

  

and Other

  

Total

 
  

(In thousands)

 

Allowance for credit losses:

                        

Balance at beginning of period

 $8,072  $4,623  $7  $57  $11,770  $24,529 

Provision (reversal)

  867   1,030   -   (5)  (1,892)  - 

Chargeoffs

  -   -   -   -   (872)  (872)

Recoveries

  46   12   -   -   427   485 

Total allowance for credit losses

 $8,985  $5,665  $7  $52  $9,433  $24,142 

 

  

Allowance for Credit Losses

 
  

For the Nine Months Ended September 30, 2020

 
                  

Consumer

         
      

Commercial

      

Residential

  

Installment

         
  

Commercial

  

Real Estate

  

Construction

  

Real Estate

  

and Other

  

Unallocated

  

Total

 
  

(In thousands)

 

Allowance for credit losses:

                            

Balance at beginning of period, prior to adoption of ASU 2016-13

 $4,959  $4,064  $109  $206  $6,445  $3,701  $19,484 

Impact of adopting ASU 2016-13

  3,385   618   (31)  (132)  1,878   (3,701)  2,017 

Adjusted beginning balance

  8,344   4,682   78   74   8,323   -   21,501 

Provision (reversal)

  537   946   (71)  (22)  2,910   -   4,300 

Chargeoffs

  (178)  -   -   -   (3,071)  -   (3,249)

Recoveries

  282   37   -   -   1,271   -   1,590 

Total allowance for credit losses

 $8,985  $5,665  $7  $52  $9,433  $-  $24,142 

 

The growth in commercial loan balances was due to originations of PPP loans which are 100% guaranteed by the Small Business Administration (“SBA”). PPP loan proceeds used for eligible payroll and certain other operating costs are to be forgiven with repayment of loan principal and accrued interest made by the SBA. Management does not expect credit losses on PPP loans.

 

  

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 

 

- 18-
 
 
  

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 

 

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

 

  

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

 
  

At December 31, 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

 $2,413  $-  $-  $-  $-  $-  $2,413 

Collectively evaluated for impairment

  2,546   4,064   109   206   6,445   3,701   17,071 

Total

 $4,959  $4,064  $109  $206  $6,445  $3,701  $19,484 

Carrying value of loans:

                            

Individually evaluated for impairment

 $8,182  $7,409  $-  $190  $43  $-  $15,824 

Collectively evaluated for impairment

  213,903   571,349   1,618   32,558   291,412   -   1,110,840 

Total

 $222,085  $578,758  $1,618  $32,748  $291,455  $-  $1,126,664 

 

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, 2020

 
  

Commercial

  

Commercial Real Estate

  

Construction

  

Residential Real Estate

  

Consumer Installment and Other

  

Total

 
  

(In thousands)

 

Grade:

                        

Pass

 $437,216  $546,714  $140  $23,699  $274,251  $1,282,020 

Substandard

  8,389   16,993   -   1,377   320   27,079 

Doubtful

  -   -   -   -   505   505 

Loss

  -   -   -   -   405   405 

Total

 $445,605  $563,707  $140  $25,076  $275,481  $1,310,009 

 

  

Credit Risk Profile by Internally Assigned Grade

 
  

At December 31, 2019

 
  

Commercial

  

Commercial Real Estate

  

Construction

  

Residential Real Estate

  

Consumer Installment and Other

  

Total

 
  

(In thousands)

 

Grade:

                        

Pass

 $213,542  $567,525  $1,618  $31,055  $289,424  $1,103,164 

Substandard

  8,543   11,233   -   1,693   1,329   22,798 

Doubtful

  -   -   -   -   308   308 

Loss

  -   -   -   -   394   394 

Total

 $222,085  $578,758  $1,618  $32,748  $291,455  $1,126,664 

 

- 19-
 
 

The following tables summarize loans by delinquency and nonaccrual status:

 

  

Summary of Loans by Delinquency and Nonaccrual Status

 
  

At September 30, 2020

 
  

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

 $444,496  $963  $39  $-  $107  $445,605 

Commercial real estate

  559,361   624   -   -   3,722   563,707 

Construction

  140   -   -   -   -   140 

Residential real estate

  24,357   558   -   -   161   25,076 

Consumer installment and other

  272,631   1,328   772   360   390   275,481 

Total

 $1,300,985  $3,473  $811  $360  $4,380  $1,310,009 

 

  

Summary of Loans by Delinquency and Nonaccrual Status

 
  

At December 31, 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

 $221,199  $531  $158  $-  $197  $222,085 

Commercial real estate

  573,809   432   421   -   4,096   578,758 

Construction

  1,618   -   -   -   -   1,618 

Residential real estate

  31,934   274   540   -   -   32,748 

Consumer installment and other

  286,391   2,960   1,517   440   147   291,455 

Total

 $1,114,951  $4,197  $2,636  $440  $4,440  $1,126,664 

 

There was no allowance for credit losses allocated to loans on nonaccrual status as of September 30, 2020. There were no commitments to lend additional funds to borrowers whose loans were on nonaccrual status at September 30, 2020 and December 31, 2019.

 

The following summarizes impaired loans as of December 31, 2019:

 

  

Impaired Loans

 
  

At December 31,

 
  

2019

 
      

Unpaid

     
  

Recorded

  

Principal

  

Related

 
  

Investment

  

Balance

  

Allowance

 
  

(In thousands)

 

With no related allowance recorded:

            

Commercial

 $21  $21  $- 

Commercial real estate

  7,408   8,856   - 

Residential real estate

  190   220   - 

Consumer installment and other

  43   43   - 

Total with no related allowance recorded

  7,662   9,140   - 
             

With an allowance recorded:

            

Commercial

  8,160   8,160   2,413 

Total with an allowance recorded

  8,160   8,160   2,413 

Total

 $15,822  $17,300  $2,413 

 

Impaired loans at December 31, 2019, included $6,713 thousand of restructured loans, $3,670 thousand of which were on nonaccrual status.

 

- 20-
 
 
  

Impaired Loans

 
  

For the Three Months

  

For the Nine Months

 
  

Ended September 30, 2019

 
  

Average

  

Recognized

  

Average

  

Recognized

 
  

Recorded

  

Interest

  

Recorded

  

Interest

 
  

Investment

  

Income

  

Investment

  

Income

 
  

(In thousands)

 

Commercial

 $8,701  $144  $9,404  $476 

Commercial real estate

  7,968   60   7,133   333 

Residential real estate

  194   4   196   10 

Consumer installment and other

  99   -   103   - 

Total

 $16,962  $208  $16,836  $819 

 

The following tables provide information on troubled debt restructurings (TDRs):

 

  

Troubled Debt Restructurings

 
  

At September 30, 2020

 
              

Period-End

 
              

Individual

 
  

Number of

  

Pre-Modification

  

Period-End

  

Credit Loss

 
  

Contracts

  

Carrying Value

  

Carrying Value

  

Allowance

 
  

($ in thousands)

 

Commercial real estate

  6  $8,367  $6,121  $- 

Residential real estate

  1   241   183   - 

Total

  7  $8,608  $6,304  $- 

 

  

Troubled Debt Restructurings

 
  

At December 31, 2019

 
              

Period-End

 
              

Individual

 
  

Number of

  

Pre-Modification

  

Period-End

  

Impairment

 
  

Contracts

  

Carrying Value

  

Carrying Value

  

Allowance

 
  

($ in thousands)

 

Commercial

  2  $278  $32  $11 

Commercial real estate

  6   8,367   6,492   - 

Residential real estate

  1   241   189   - 

Total

  9  $8,886  $6,713  $11 

 

During the three and nine months ended September 30, 2020, the Company did not modify any loans that were considered TDRs for accounting purposes. Section 4013 of the CARES Act allowed certain loan modifications for borrowers impacted by the COVID-19 pandemic to be excluded from TDR accounting. During the three and nine months ended September 30, 2020, the Company modified loans under Section 4013 of the CARES Act, granting 90 day deferrals of principal and interest payments. As of September 30, 2020, 17 commercial real estate loans with deferred payments totaled $19.1 million, primarily for hospitality and retail properties. As of September 30, 2020, 140 consumer and five commercial loan deferrals were $5.0 million and $209 thousand, respectively. During the three and nine months ended September 30, 2019, the Company did not modify any loans that were considered TDRs. There were no chargeoffs related to TDRs made during the three and nine months ended September 30, 2020 and 2019. During the three and nine months ended September 30, 2020 and 2019, no troubled debt restructured loans defaulted within 12 months of the modification date. A TDR is considered to be in default when payments are ninety days or more past due.

 

TDRs of $6,304 thousand included loans of $3,420 thousand on nonaccrual status at September 30, 2020. No allowance for credit losses was allocated to one commercial real estate loan secured by real property with a balance of $3,420 thousand, which was considered collateral-dependent at September 30, 2020. Four other commercial real estate loans totaling $7.7 million were secured by real property and considered collateral-dependent at September 30, 2020. At September 30, 2020, $357 thousand of indirect consumer installment loans secured by personal property were past due 90 days or more and considered collateral-dependent and two residential real estate loans totaling $410 thousand secured by real property were considered collateral-dependent. There were no other collateral-dependent loans at September 30, 2020. A loan is considered collateral-dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral.

 

- 21-
 
 

Based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

 

  

At September 30, 2020

 
                                  

Revolving

     
                                  

Loans

     
  

Term Loans Amortized Cost Basis by Origination Year

  

Total

  

Amortized

     
  

Prior

  

2015

  

2016

  

2017

  

2018

  

2019

  

2020

  

Term Loans

  

Cost Basis

  

Total

 
  

(In thousands)

 

Commercial loans by grade

                                 

Pass

 $20,496  $5,205  $26,132  $10,860  $21,343  $42,380  $270,664  $397,080  $40,136  $437,216 

Substandard

  64   -   1   -   -   -   7,876   7,941   448   8,389 

Doubtful

  -   -   -   -   -   -   -   -   -   - 

Loss

  -   -   -   -   -   -   -   -   -   - 

Total

 $20,560  $5,205  $26,133  $10,860  $21,343  $42,380  $278,540  $405,021  $40,584  $445,605 

 

  

At September 30, 2020

 
                                  

Revolving

     
                                  

Loans

     
  

Term Loans Amortized Cost Basis by Origination Year

  

Total

  

Amortized

     
  

Prior

  

2015

  

2016

  

2017

  

2018

  

2019

  

2020

  

Term Loans

  

Cost Basis

  

Total

 
  

(In thousands)

 

Commercial real estate loans by grade

                                 

Pass

 $88,661  $50,764  $43,804  $101,731  $95,622  $94,531  $71,601  $546,714  $-  $546,714 

Substandard

  4,807   1,314   9,921   107   -   -   844   16,993   -   16,993 

Doubtful

  -   -   -   -   -   -      -   -   - 

Loss

  -   -   -   -   -   -      -   -   - 

Total

 $93,468  $52,078  $53,725  $101,838  $95,622  $94,531  $72,445  $563,707  $-  $563,707 

 

  

At September 30, 2020

 
                                  

Revolving

     
                                  

Loans

     
  

Term Loans Amortized Cost Basis by Origination Year

  

Total

  

Amortized

     
  

Prior

  

2015

  

2016

  

2017

  

2018

  

2019

  

2020

  

Term Loans

  

Cost Basis

  

Total

 
  

(In thousands)

 

Construction loans by grade

                                 

Pass

 $-  $-  $-  $-  $-  $-  $-  $-  $140  $140 

Substandard

  -   -   -   -   -   -   -   -   -   - 

Doubtful

  -   -   -   -   -   -   -   -   -   - 

Loss

  -   -   -   -   -   -   -   -   -   - 

Total

 $-  $-  $-  $-  $-  $-  $-  $-  $140  $140 

 

  

At September 30, 2020

 
                                  

Revolving

     
                                  

Loans

     
  

Term Loans Amortized Cost Basis by Origination Year

  

Total

  

Amortized

     
  

Prior

  

2015

  

2016

  

2017

  

2018

  

2019

  

2020

  

Term Loans

  

Cost Basis

  

Total

 
  

(In thousands)

 

Residential Real Estate loans by grade

                                 

Pass

 $23,699  $-  $-  $-  $-  $-  $-  $23,699  $-  $23,699 

Substandard

  1,377   -   -   -   -   -   -   1,377   -   1,377 

Doubtful

  -   -   -   -   -   -   -   -   -   - 

Loss

  -   -   -   -   -   -   -   -   -   - 

Total

 $25,076  $-  $-  $-  $-  $-  $-  $25,076  $-  $25,076 

 

The Company considers the delinquency and nonaccrual status of the consumer loan portfolio and its impact on the allowance for credit losses. The following table presents the amortized cost in consumer installment and other loans based on delinquency and nonaccrual status:

 

  

At September 30, 2020

 
                                  

Revolving

     
                                  

Loans

     
  

Term Loans Amortized Cost Basis by Origination Year

  

Total

  

Amortized

     
  

Prior

  

2015

  

2016

  

2017

  

2018

  

2019

  

2020

  

Term Loans

  

Cost Basis

  

Total

 
  

(In thousands)

 

Consumer installment and other loans by delinquency and nonaccrual status

                     

Current

 $5,087  $6,457  $19,339  $24,554  $53,347  $69,313  $64,893  $242,990  $29,641  $272,631 

30-59 days past due

  35   91   147   224   266   402   148   1,313   15   1,328 

60-89 days past due

  2   30   48   163   327   160   40   770   2   772 

Past due 90 days or more

  -   5   29   -   226   66   31   357   3   360 

Nonaccrual

  -   -   -   -   -   -   -   -   390   390 

Total

 $5,124  $6,583  $19,563  $24,941  $54,166  $69,941  $65,112  $245,430  $30,051  $275,481 

 

There were no loans held for sale at September 30, 2020 and December 31, 2019.

 

- 22-
 
 

At September 30, 2020 and December 31, 2019, the Company held total other real estate owned (OREO) of $43 thousand. There was no reserve applied against OREO at September 30, 2020 and December 31, 2019. There were no foreclosed residential real estate properties at September 30, 2020 and December 31, 2019. The amount of consumer mortgage loans outstanding secured by residential real estate properties for which formal foreclosure proceedings were in process was $410 thousand at September 30, 2020 and $124 thousand at December 31, 2019.

 

 

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 credit 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 credit losses, capital notes, and debentures of the bank. At September 30, 2020, the Bank did not have credit extended to any one entity exceeding these limits. At September 30, 2020, the Bank had 31 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 $39,779 thousand and $43,129 thousand at September 30, 2020 and December 31, 2019, 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, 2020, the Bank held corporate bonds in 97 issuing entities and commercial paper in 9 issuing entities that exceeded $5 million for each issuer.

 
 

Note 6: Other Assets and Other Liabilities

 

Other assets consisted of the following:

 

  

At September 30,

  

At December 31,

 
  

2020

  

2019

 
  

(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

  59,868   57,810 

Net deferred tax asset

  -   11,085 

Right-of-use asset

  19,098   17,136 

Limited partnership investments

  18,935   20,773 

Interest receivable

  30,779   28,797 

Prepaid assets

  3,619   3,737 

Other assets

  13,743   10,767 

Total other assets

 $160,269  $164,332 

 

(1)

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

 

The Company owns 211 thousand shares of Visa Inc. class B common stock which have transfer restrictions; the carrying value is $-0- thousand. On 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 $199.97 per share on September 30, 2020, the last day of stock market trading for the third quarter 2020. 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, 2020, this investment totaled $18,935 thousand and $13,397 thousand of this amount represents outstanding equity capital commitments that are included in other liabilities. At December 31, 2019, this investment totaled $20,773 thousand and $16,231 thousand of this amount represents outstanding equity capital commitments that are included in other liabilities. At September 30, 2020, the $13,397 thousand of outstanding equity capital commitments are expected to be paid as follows, $2,248 thousand in the remainder of 2020, $4,071 thousand in 2021, $5,983 thousand in 2022, $295 thousand in 2023, $24 thousand in 2024, $228 thousand in 2025, $74 thousand in 2026 and $474 thousand in 2027 or thereafter.

 

- 23-
 
 

The amounts recognized in net income for these investments include:

 

  

For the Three Months Ended

  

For the Nine Months Ended

 
  

September 30,

 
  

2020

  

2019

  

2020

  

2019

 
  

(In thousands)

 

Investment loss included in pre-tax income

 $640  $600  $1,840  $1,800 

Tax credits recognized in provision for income taxes

  225   225   675   675 

 

Other liabilities consisted of the following:

 

  

At September 30,

  

At December 31,

 
  

2020

  

2019

 
  

(In thousands)

 

Net deferred tax liability

 $21,819  $- 

Operating lease liability

  19,098   17,136 

Other liabilities

  49,559   27,453 

Total other liabilities

 $90,476  $44,589 

 

The deferred tax liability at September 30, 2020 of $21,819 thousand, net of deferred tax benefits of $21,942 thousand, included deferred tax obligations of $43,492 thousand related to unrealized gains of $147,115 thousand on available for sale debt securities. The net deferred tax asset at December 31, 2019 of $11,085 thousand was net of deferred tax obligations of $10,934 thousand related to available for sale debt securities unrealized gains.

 

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 five years. Certain lease arrangements contain extension options, which can be exercised at the Company’s option, for one or more additional five 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, 2020.

 

As of September 30, 2020, the Company recorded a lease liability of $19,098 thousand and a right-of-use asset of $19,098 thousand. The weighted average remaining life of operating leases and weighted average discount rate used to determine operating lease liabilities were 4.8 years and 2.25%, respectively, at September 30, 2020. The Company did not have any material lease incentives, unamortized initial direct costs, prepaid lease expense, or accrued lease expense as of September 30, 2020.

 

Total lease costs during the three and nine months ended September 30, 2020, of $1,671 thousand and $4,988 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, 2020.

 

 

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- 24-
 

 

 

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

 

  

Minimum
future lease
payments

 
  

At September 30,

 
  

2020

 
  

(In thousands)

 

The remaining three months of 2020

 $1,599 

2021

  5,353 

2022

  4,426 

2023

  3,689 

2024

  2,078 

Thereafter

  2,863 

Total minimum lease payments

  20,008 

Less: discount

  (910)

Present value of lease liability

 $19,098 

 
 

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, 2020 and year ended December 31, 2019. 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, 2020 and year ended December 31, 2019 no such adjustments were recorded.

 

The carrying values of goodwill were:

 

  

At September 30, 2020

  

At December 31, 2019

 
  

(In thousands)

 

Goodwill

 $121,673  $121,673 

 

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

 

  

At September 30, 2020

  

At December 31, 2019

 
  

Gross

      

Gross

     
  

Carrying

  

Accumulated

  

Carrying

  

Accumulated

 
  

Amount

  

Amortization

  

Amount

  

Amortization

 
  

(In thousands)

 

Core deposit intangibles

 $56,808  $(55,635) $56,808  $(55,417)

 

As of September 30, 2020, 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, 2020 (actual)

 $218 

Estimate for the remainder of year ending December 31, 2020

  69 

Estimate for year ending December 31, 2021

  269 

2022

  252 

2023

  236 

2024

  222 

2025

  125 

 

- 25-
 
 
 

Note 8: Deposits and Borrowed Funds

 

The following table provides additional detail regarding deposits.

 

  

Deposits

 
  

At September 30,

  

At December 31,

 
  

2020

  

2019

 
  

(In thousands)

 

Noninterest-bearing

 $2,684,028  $2,240,112 

Interest-bearing:

        

Transaction

  1,040,712   931,888 

Savings

  1,653,000   1,471,284 

Time deposits less than $100 thousand

  83,838   88,355 

Time deposits $100 thousand through $250 thousand

  50,378   54,874 

Time deposits more than $250 thousand

  27,234   26,108 

Total deposits

 $5,539,190  $4,812,621 

 

Demand deposit overdrafts of $1,466 thousand and $1,055 thousand were included as loan balances at September 30, 2020 and December 31, 2019, respectively. Interest expense for aggregate time deposits with individual account balances in excess of $100 thousand was $80 thousand and $238 thousand for the three and nine months ended September 30, 2020, respectively, and $81 thousand and $246 thousand for the three and nine months ended September 30, 2019, 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,

 
  

2020

  

2019

 

Repurchase agreements:

 

(In thousands)

 

Collateral securing borrowings:

        

Securities of U.S. Government sponsored entities

 $-  $65,833 

Agency residential MBS

  76,715   52,485 

Corporate securities

  183,447   146,253 

Total collateral carrying value

 $260,162  $264,571 

Total short-term borrowed funds

 $107,973  $30,928 

 
 

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. 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, loans individually evaluated for credit loss, 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:

 

- 26-
 
 

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, commercial paper, collateralized loan obligations, municipal bonds and securities of U.S government entities.

 

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 evaluates debt securities for credit loss on a quarterly basis. 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, 2020

 
  

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

                

Agency residential mortgage-backed securities (MBS)

 $745,297  $-  $745,297  $- 

Agency commercial MBS

  3,585   -   3,585   - 

Securities of U.S. Government entities

  163   -   163   - 

Obligations of states and political subdivisions

  127,172   -   127,172   - 

Corporate securities

  2,212,827   -   2,212,827   - 

Commercial paper

  224,816      224,816    

Collateralized loan obligations

  670,134   -   670,134   - 

Total debt securities available for sale

 $3,983,994  $-  $3,983,994  $- 

 

(1) There were no transfers in to or out of level 3 during the nine months ended September 30, 2020.

 

 

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- 27-
 
 
  

At December 31, 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

 $20,000  $20,000  $-  $- 

Securities of U.S. Government sponsored entities

  111,167   -   111,167   - 

Agency residential MBS

  939,750   -   939,750   - 

Agency commercial MBS

  3,708   -   3,708   - 

Securities of U.S. Government entities

  544   -   544   - 

Obligations of states and political subdivisions

  163,139   -   163,139   - 

Corporate securities

  1,833,783   -   1,833,783   - 

Collateralized loan obligations

  6,755   -   6,755   - 

Total debt securities available for sale

 $3,078,846  $20,000  $3,058,846  $- 

 

(1) There were no transfers in to or out of level 3 during the twelve months ended December 31, 2019.

 

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, 2020 and December 31, 2019, 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, 2020

  

September 30, 2020

 
  

Carrying Value

  

Level 1

  

Level 2

  

Level 3

  

Total Losses

 
  

(In thousands)

 

Other real estate owned

 $43  $-  $-  $43  $- 

Loans:

                    

Commercial

  5,354   -   -   5,354   - 

Commercial real estate

  3,773   -   -   3,773   - 

Residential real estate

  183   -   -   183   - 

Total assets measured at fair value on a nonrecurring basis

 $9,353  $-  $-  $9,353  $- 

 

 

                  

For the

 
                  

Twelve Months Ended

 
  

At December 31, 2019

  

December 31, 2019

 
  

Carrying Value

  

Level 1

  

Level 2

  

Level 3

  

Total Losses

 
  

(In thousands)

 

Other real estate owned

 $43  $-  $-  $43  $- 

Impaired loans:

                    

Commercial

  5,747   -   -   5,747   - 

Commercial real estate

  4,091   -   -   4,091   - 

Residential real estate

  190   -   -   190   - 

Total assets measured at fair value on a nonrecurring basis

 $10,071  $-  $-  $10,071  $- 

 

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 loans collateralized by real property and other business asset collateral individually evaluated for credit loss 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.

 

- 28-
 
 

Disclosures about Fair Value of Financial Instruments

 

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, 2020

 
  

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

 $398,964  $398,964  $398,964  $-  $- 

Debt securities held to maturity

  577,795   593,701   -   593,701   - 

Loans

  1,285,867   1,347,245   -   -   1,347,245 
                     

Financial Liabilities:

                    

Deposits

 $5,539,190  $5,539,300  $-  $5,377,740  $161,560 

Short-term borrowed funds

  107,973   107,973   -   107,973   - 

 

 

  

At December 31, 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

 $373,421  $373,421  $373,421  $-  $- 

Debt securities held to maturity

  738,072   744,296   -   744,296   - 

Loans

  1,107,180   1,152,949   -   -   1,152,949 
                     

Financial Liabilities:

                    

Deposits

 $4,812,621  $4,810,934  $-  $4,643,284  $167,650 

Short-term borrowed funds

  30,928   30,928   -   30,928   - 

 

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

 

 

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- 29-
 
 
 

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. Certain agreements provide the Company the right to cancel or reduce its obligations to lend to customers. The portions that are not cancellable unconditionally by the Company aggregated $39,779 thousand at September 30, 2020. 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 $279,330 thousand at September 30, 2020 and $265,311 thousand at December 31, 2019. Standby letters of credit commit the Company to make payments on behalf of customers when certain specified future events occur. Standby letters of credit are primarily issued to support customers’ short-term financing requirements and must meet the Company’s normal credit policies and collateral requirements. Financial and performance standby letters of credit outstanding totaled $2,356 thousand at September 30, 2020 and $3,099 thousand at December 31, 2019. The Company had no commitments outstanding for commercial and similar letters of credit at September 30, 2020 and December 31, 2019. The Company had $580 thousand and $550 thousand in outstanding full recourse guarantees to a 3rd party credit card company at September 30, 2020 and December 31, 2019, respectively. The Company had a reserve for unfunded commitments of $53 thousand at September 30, 2020 and $2,160 thousand at December 31, 2019, included in other liabilities.

 

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.

 

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.

 

 

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,

 
  

2020

  

2019

  

2020

  

2019

 
  

(In thousands, except per share data)

 

Net income applicable to common equity (numerator)

 $20,051  $20,390  $56,575  $59,661 

Basic earnings per common share

                

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

  26,930   26,986   26,977   26,924 

Basic earnings per common share

 $0.74  $0.76  $2.10  $2.22 

Diluted earnings per common share

                

Weighted average number of common shares outstanding - basic

  26,930   26,986   26,977   26,924 

Add common stock equivalents for options

  16   41   21   52 

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

  26,946   27,027   26,998   26,976 

Diluted earnings per common share

 $0.74  $0.75  $2.10  $2.21 

 

For the three and nine months ended September 30, 2020, options to purchase 567 thousand and 560 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, 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.

 

- 30-
 
 
 

Note 12: Impact of COVID-19

 

The COVID-19 Coronavirus Pandemic Will Have an Uncertain Impact on the Company's Financial Condition and Results of Operations

 

The COVID-19 coronavirus pandemic caused escalating infections in the United States beginning in the first quarter of 2020 that continued through the third quarter of 2020 and may continue for some time. The spread of the outbreak has disrupted the United States economy including banking and other financial activity in the market areas in which the Company and its banking subsidiary, Westamerica Bank (the "Bank"), operate.  Regions and states of the United States of America have implemented varying degrees of "stay at home" directives in an effort to prevent the spread of the virus. On March 19, 2020, the Governor of the State of California ordered all individuals living in the State of California to stay within their residence to prevent the spread of the novel coronavirus and many businesses have suspended or reduced business activities. The California "stay at home" directive excludes essential businesses, including banks, and the Bank remains open and fully operational. These "stay at home" directives have, however, significantly reduced economic activity in the United States and the State of California. In the second and third quarters of 2020 the “stay at home” directives were gradually lifted in varying stages in counties of the State of California, though restrictions could be re-imposed to some degree if infections increase. Counties with high infection rates delayed reopening and restrictions on certain economic activity remains. California-based claims for unemployment remain elevated during the third quarter of 2020.

 

The Bank's deposits are exclusively sourced within California and its loans are primarily to borrowers domiciled within California. Demand for the Bank's products and services, such as loans and deposits, could be affected as a result of the decline in economic activity within the state. 

 

The Bank's investment portfolio contains bonds for which the source of repayment is domestic mortgage repayments, domestic municipalities throughout the United States, and domestic and global corporations. The value of the Bank's investment portfolio may decline if, for example, the general economy deteriorates, inflation increases, credit ratings decline, the issuers’ financial condition deteriorates or the liquidity for debt securities declines.

 

In response to the pandemic, the Federal Reserve has engaged significant levels of monetary policy to provide liquidity and credit facilities to the financial markets. On March 15, 2020, the Federal Open Market Committee ("FOMC") reduced the target range for the federal funds rate to 0 to 0.25 percent; relatedly, the FOMC reduced the interest rate paid on deposit balances to 0.10 percent effective March 16, 2020, all of which may negatively impact net interest income. The Bank maintains deposit balances at the Federal Reserve Bank; the amount that earns interest is identified in the Company's financial statements as "interest-bearing cash".

 

In response to the pandemic, the United States federal government enacted the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") on March 27, 2020, providing an estimated $2 trillion fiscal stimulus to the United States economy. The CARES Act established the Paycheck Protection Program (PPP) with $350 billion to provide businesses with federally guaranteed loans to support payroll and certain operating expenses. The loans were guaranteed by the United States Small Business Administration (“SBA”) and funded through banks. In April 2020, the PPP program was expanded with an additional $310 billion. At June 30, 2020, the Bank funded $249 million in government guaranteed PPP loans which meaningfully increased interest-earning assets and related interest and fee income. PPP loans, net of deferred fees and costs, were $244 million at September 30, 2020.

 

On April 7, 2020, the U.S. banking agencies issued an Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (Revised). The statement describes accounting for COVID-19-related loan modifications, including clarifying the interaction between current accounting rules and the temporary relief provided by the CARES Act. The Bank continues to work with loan customers requesting deferral of loan payments due to economic weakness caused by the pandemic. At September 30, 2020, consumer loans granted loan deferrals totaled $5.0 million, commercial real estate loans with deferred payments totaled $19.1 million, primarily for hospitality and retail properties, and commercial loans with deferred payments totaled $209 thousand.

 

The extent of the spread of the coronavirus, its ultimate containment and its effects on the economy and the Company are uncertain at this time. The effectiveness of the Federal Reserve Bank's monetary policies and the federal government's fiscal policies in stimulating the United States economy is uncertain at this time.

 

- 31-
 
 

Management expects the Company's net interest margin and non-interest income to decline and credit-related losses to increase for an uncertain period given the decline in economic activity occurring due to the coronavirus. The amount of impact on the Company's financial results is uncertain.

 

In addition, the Company's future success and profitability substantially depends upon the skills and experience of its executive officers and directors, many of whom have held positions with the Company for many years. The unanticipated loss or unavailability of key employees due to the outbreak could adversely affect the Company's ability to operate its business or execute its business strategy.

 

Any one or a combination of the factors identified above, or other factors, could materially adversely affect the Company's business, financial condition, results of operations and prospects.

 

The Recent Decline in Oil Prices Could Have an Impact on the Company's Financial Condition and Results of Operations

 

Oil prices have declined considerably in the first nine months of 2020. The decline in oil prices could negatively affect the financial results of industrial sector-based and energy sector-based corporate issuers of corporate bonds owned by the Company. The Company’s corporate debt securities include 14 issuers in industrial and energy sectors with aggregate amortized cost of $275.3 million and fair value of $288.7 million at September 30, 2020. These securities continue to be investment grade rated by a major rating agency.

 

The Company’s participation in the SBA PPP loan program exposes it to risks of noncompliance with the PPP and litigation, which could have a material adverse impact on the Company’s business, financial condition and results of operations.

 

The Company is a participating lender in the PPP. The SBA guarantees 100% of loans funded under the PPP. Loan proceeds used for eligible payroll and certain other operating costs are forgiven with repayment of loan principal and accrued interest made by the SBA. There is some ambiguity in the laws, rules and guidance regarding the operation of the PPP, which exposes the Company to potential risks relating to noncompliance with the PPP. Any financial liability, litigation costs or reputational damage related to the PPP or related litigation or regulatory enforcement actions could have a material adverse impact on the Company’s business, financial condition and results of operations. In addition, the Company may be exposed to credit risk on PPP loans if the SBA determines that there is a deficiency in the manner in which the loan was originated, funded, or serviced. If the SBA identifies a deficiency, it could deny its liability under the guaranty, reduce the amount of the guaranty, or, if it has already paid under the guaranty, seek recovery of any loss related to the deficiency from the Company.

 

 

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- 32-
 
 
 

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,

  
   

2020

    

2019

    

2020

    

2019

  
   

(In thousands, except per share data)

  

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

   $ 41,780     $ 40,349     $ 124,390     $ 120,925  

Provision for Credit Losses

     -       -       4,300       -  

Noninterest Income

     10,476       11,809       31,678       35,676  

Noninterest Expense

     24,603       24,033       74,021       74,777  

Income Before Income Taxes (FTE)(1)

     27,653       28,125       77,747       81,824  

Income Tax Provision (FTE)(1)

     7,602       7,735       21,172       22,163  

Net Income

   $ 20,051     $ 20,390     $ 56,575     $ 59,661  
                                 

Average Common Shares Outstanding

     26,930       26,986       26,977       26,924  

Average Diluted Common Shares Outstanding

     26,946       27,027       26,998       26,976  

Common Shares Outstanding at Period End

     26,898       27,014                  
                                 

Per Common Share:

                                

Basic Earnings

   $ 0.74     $ 0.76     $ 2.10     $ 2.22  

Diluted Earnings

     0.74       0.75       2.10       2.21  

Book Value

     30.69       26.41                  
                                 

Financial Ratios:

                                

Return on Assets

     1.24 %     1.45 %     1.25 %     1.43 %

Return on Common Equity

     11.17 %     11.87 %     10.67 %     11.92 %

Net Interest Margin (FTE)(1)

     2.78 %     3.11 %     2.95 %     3.12 %

Net Loan Losses to Average Loans

     0.12 %     0.10 %     0.18 %     0.17 %

Efficiency Ratio(2)

     47.1 %     46.1 %     47.4 %     47.8 %
                                 

Average Balances:

                                

Assets

   $ 6,414,399     $ 5,570,843     $ 6,044,098     $ 5,580,965  

Loans

     1,312,758       1,142,668       1,223,250       1,177,057  

Investment securities

     4,360,119       3,687,049       4,055,733       3,675,102  

Deposits

     5,533,144       4,770,976       5,188,797       4,789,084  

Shareholders' Equity

     714,400       681,513       708,559       669,043  
                                 

Period End Balances:

                                

Assets

   $ 6,563,215     $ 5,616,055                  

Loans

     1,310,009       1,133,229                  

Investment securities

     4,561,805       3,776,983                  

Deposits

     5,539,190       4,796,623                  

Shareholders' Equity

     825,576       713,378                  
                                 

Capital Ratios at Period End:

                                

Total Risk Based Capital

     15.42 %     17.20 %                

Tangible Equity to Tangible Assets

     10.91 %     10.75 %                
                                 

Dividends Paid Per Common Share

   $ 0.41     $ 0.41     $ 1.23     $ 1.22  

Common Dividend Payout Ratio

    55 %     55 %     59 %     55 %

 

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).

 

-33-
 

 

Financial Overview

 

Westamerica Bancorporation and subsidiaries’ (collectively, the “Company”) reported net income of $20.1 million or $0.74 diluted earnings per common share (“EPS”) for the third quarter 2020 and net income of $56.6 million or $2.10 diluted earnings per common share for the nine months ended September 30, 2020. The COVID-19 coronavirus pandemic began in the United States and California in the first quarter 2020 and continued to cause escalating infections in the United States through the third quarter 2020. In response to the pandemic, the Company’s primary and wholly-owned subsidiary bank, Westamerica Bank (the “Bank”), funded $249 million Paycheck Protection Program (“PPP”) loans for the Bank’s customers during the second quarter 2020. PPP loans meaningfully increased interest-earning assets and related interest and fee income. The Bank continues to work with loan customers requesting deferral of loan payments due to economic weakness caused by the pandemic. At September 30, 2020, consumer loans granted loan deferrals totaled $5.0 million, commercial real estate loans with deferred payments totaled $19.1 million, primarily for hospitality and retail properties, and commercial loans with deferred payments totaled $209 thousand. The results for the nine months ended September 30, 2020 included a provision for credit losses of $4.3 million, which reduced EPS $0.11, representing Management’s estimate of additional reserves needed over the remaining life of its loans due to increased credit-risk from deteriorating economic conditions caused by the COVID-19 pandemic. These results compare to 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 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.

 

Regions and states of the United States of America, including California implemented varying degrees of “stay at home” directives in an effort to prevent the spread of the virus in the first quarter of 2020. These directives have significantly reduced economic activity in the United States and the State of California. In the second and third quarters 2020 the “stay at home” directives were gradually lifted in varying stages in counties of the State of California, though restrictions could be re-imposed to some degree if infections increase. Counties with high infection rates delayed reopening and restrictions on certain economic activity remains. California-based claims for unemployment remain elevated during the third quarter of 2020. The California “stay at home” directive excludes essential businesses including banks. The Bank remains open and fully operational.

 

In response to the pandemic, the Federal Reserve has engaged significant levels of monetary policy to provide liquidity and credit facilities to the financial markets. On March 15, 2020, the Federal Open Market Committee (“FOMC”) reduced the target range for the federal funds rate to 0 to 0.25 percent; relatedly, the FOMC reduced the interest rate paid on deposit balances to 0.10 percent effective March 16, 2020. The Bank maintains deposit balances at the Federal Reserve Bank; the amount that earns interest is identified in the Company’s financial statements as “interest-bearing cash”.

 

The extent of the spread of the coronavirus and its ultimate containment are uncertain at this time. The effectiveness of the Federal Reserve Bank’s monetary policies and the federal government’s fiscal policies in stimulating the United States economy is uncertain at this time. Management expects the Company’s net interest margin and non-interest income to decline and credit-related losses to increase for an uncertain period given the decline in economic activity occurring due to the coronavirus. The amount of impact on the Company’s financial results is uncertain. Please refer to Note 12 and Part II, Item 1A “Risk factors” in this Form 10-Q.

 

The Company presents its net interest margin and net interest income on a fully taxable equivalent (“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.

 

The Company’s significant accounting policies (see Note 1, “Summary of Significant Accounting Policies,” to Financial Statements in the Company’s 2019 Form 10-K and Note 2 “Summary of Significant Accounting Policies” in this Form 10-Q) are fundamental to understanding the Company’s results of operations and financial condition. The Company adopted the following new accounting guidance:

 

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

 

The Company adopted the ASU provisions on January 1, 2020. Management evaluated available data, defined portfolio segments of loans with similar attributes, and selected loss estimate models for each identified loan portfolio segment. Management measured historical loss rates for each portfolio segment. Management also segmented debt securities held to maturity, selected methods to estimate losses for each segment, and measured a loss estimate. Agency mortgage-backed securities were assigned no credit loss allowance due to the perceived backing of government sponsored entities. Municipal securities were evaluated for risk of default based on credit rating and remaining term to maturity using Moody’s risk of default factors; Moody’s loss upon default factors were applied to the assumed defaulted principal amounts to estimate the amount for credit loss allowance. The adjustment to the allowance for credit losses was recorded through an offsetting after-tax adjustment to shareholders’ equity. The implementing entry increased allowance for credit losses by $2,017 thousand, reduced allowance for unfunded credit commitments by $2,107 thousand and increased retained earnings by $52 thousand.

 

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.

 

-34-
 

 

The provisions of the ASU were 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 was adopted by the Company January 1, 2020. The additional disclosures did not affect the financial results upon adoption.

 

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,

  
   

2020

    

2019

    

2020

    

2019

  
   

(In thousands, except per share data)

  

Net interest and loan fee income (FTE)

   $ 41,780     $ 40,349     $ 124,390     $ 120,925  

Provision for credit losses

     -       -       4,300       -  

Noninterest income

     10,476       11,809       31,678       35,676  

Noninterest expense

     24,603       24,033       74,021       74,777  

Income before taxes (FTE)

     27,653       28,125       77,747       81,824  

Income tax provision (FTE)

     7,602       7,735       21,172       22,163  

Net income

   $ 20,051     $ 20,390     $ 56,575     $ 59,661  
                                 

Average diluted common shares

     26,946       27,027       26,998       26,976  

Diluted earnings per common share

   $ 0.74     $ 0.75     $ 2.10     $ 2.21  
                                 

Average total assets

   $ 6,414,399     $ 5,570,843     $ 6,044,098     $ 5,580,965  

Net income to average total assets (annualized)

     1.24 %     1.45 %     1.25 %     1.43 %

Net income to average common shareholders' equity (annualized)

     11.17 %     11.87 %     10.67 %     11.92 %

 

Net income for the third quarter 2020 decreased $339 thousand compared with the third quarter 2019. Net interest and loan fee income (FTE) increased $1.4 million in the third quarter 2020 compared with the third quarter 2019 mainly due to higher average balances of investments and PPP loans, partially offset by lower yield on interest-earning assets and loan payoffs and paydowns. The provision for credit losses remained zero, reflecting Management's evaluation of credit risk over the remaining life of loans and bonds. Third quarter 2020 noninterest income decreased $1.3 million due to lower economic activity related to the COVID-19 pandemic. Third quarter 2020 noninterest expense increased $570 thousand mostly because third quarter 2019 FDIC assessments were reduced by application of the Bank’s FDIC assessment credit. The tax rate (FTE) for the third quarter 2020 and the third quarter 2019 was 27.5%.

 

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Comparing the nine months ended September 30, 2020 with the nine months ended September 30, 2019 net income decreased $3.1 million. Net interest and loan fee (FTE) income increased $3.5 million due to higher average balances of investments and PPP loans, partially offset by lower yield on interest-earning assets and loan payoffs and paydowns. Results for the nine months ended September 30, 2020, include a provision of credit losses of $4.3 million, which reduced EPS $0.11, representing Management estimate of additional reserves needed over the remaining life of its loans due to credit-risk from economic weakness caused by the COVID-19 pandemic. In the nine months ended September 30, 2019, 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, 2020, noninterest income decreased $4.0 million primarily due to lower economic activity related to the COVID-19 pandemic, partially offset by a $603 thousand recovery in excess of previously charged off loan amounts in the first nine months of 2020. In the nine months ended September 30, 2020 noninterest expense decreased $756 thousand compared with the nine months ended September 30, 2019 due to lower salaries, occupancy and equipment expenses, and lower amortization of intangible assets, and because the nine months ended September 30, 2019 included $553 thousand in loss contingency. The decrease was partially offset by higher FDIC assessments in the nine months ended September 30, 2020 because FDIC assessments in the nine months ended September 30, 2019 were reduced by application of the Bank’s FDIC assessment credit. The tax rate (FTE) for the nine months ended September 30, 2020 was 27.2% compared with 27.1% for the nine months ended September 30, 2019.

 

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,

  
   

2020

    

2019

    

2020

    

2019

  
   

($ in thousands)

  

Interest and loan fee income

   $ 41,365     $ 39,695     $ 122,895     $ 118,804  

FTE adjustment

     881       1,109       2,838       3,558  

Interest expense

     466       455       1,343       1,437  

Net interest and loan fee income (FTE)

   $ 41,780     $ 40,349     $ 124,390     $ 120,925  
                                 

Average earning assets

   $ 6,001,287     $ 5,176,744     $ 5,627,517     $ 5,173,581  

Net interest margin (FTE) (annualized)

     2.78 %     3.11 %     2.95 %     3.12 %

 

Net interest and loan fee income (FTE) increased $1.4 million in the third quarter 2020 compared with the third quarter 2019 mainly due to higher average balances of investments (up $673 million) and average balances of $243 million of PPP loans, partially offset by lower yield on interest-earning assets (down 0.34%) and lower average balances of other loans (down $73 million).

 

Net interest and loan fee (FTE) income increased $3.5 million in the first nine months of 2020 compared with the first nine months of 2019 due to higher average balances of investments (up $381 million) and average balances of $126 million of PPP loans, partially offset by lower yield on interest-bearing earning assets (down 0.18%) and lower average balances of other loans (down $80 million).

 

The annualized net interest margin (FTE) was 2.78% in the third quarter 2020 and 2.95% in the first nine months of 2020 compared with 3.11% in the third quarter 2019 and 3.12% in the first nine months of 2019. The lower yield in in the third quarter 2020 and the first nine months of 2020 compared with 2019 is primarily due to lower yields on loans, investments and interest-bearing cash. Additionally, investments, which generally carry lower yield than loans, made up a higher percentage of total earning assets in the current periods (72.7% in the third quarter 2020 compared with 71.2% in the third quarter 2019 and 72.1% in the first nine months of 2020 compared with 71.0% in the first nine months of 2019).

 

The Company’s funding costs were 0.03% in the third quarter 2020 and in the first nine months of 2020 compared with 0.04% in the third quarter 2019 and in the first nine months of 2019. Average balances of time deposits in the third quarter 2020 declined $16 million from the third quarter 2019 and $20 million in the first nine months of 2020 from the first nine months of 2019. Average balances of checking and saving deposits accounted for 97.1% of average total deposits in the third quarter 2020 and 96.8% in the first nine months of 2020 compared with 96.2% in the third quarter 2019 and 96.1% in the first nine months of 2019.

 

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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,

  
   

2020

    

2019

    

2020

    

2019

  
                                 

Yield on earning assets (FTE)

     2.81 %     3.15 %     2.98 %     3.16 %

Rate paid on interest-bearing liabilities

     0.06 %     0.07 %     0.06 %     0.07 %

Net interest spread (FTE)

     2.75 %     3.08 %     2.92 %     3.09 %

Impact of noninterest-bearing demand deposits

     0.03 %     0.03 %     0.03 %     0.03 %

Net interest margin (FTE)

     2.78 %     3.11 %     2.95 %     3.12 %

 

 

 

 

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-37-
 

 

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, 2020

  
           

Interest

          
   

Average

    

Income/

    

Yields/

  
   

Balance

    

Expense

    

Rates

  
   

($ in thousands)

  

Assets

                        

Investment securities:

                        

Taxable

   $ 3,918,846     $ 23,079       2.36 %

Tax-exempt (1)

     441,273       3,689       3.34 %

Total investments (1)

     4,360,119       26,768       2.46 %

Loans:

                        

Taxable

                        

Paycheck Protection Program ("PPP") loans

     243,104       2,501       4.08 %

Other

     1,020,270       12,403       4.84 %

Total taxable

     1,263,374       14,904       4.69 %

Tax-exempt (1)

     49,384       490       3.95 %

Total loans (1)

     1,312,758       15,394       4.67 %

Total interest-bearing cash

     328,410       84       0.10 %

Total Interest-earning assets (1)

     6,001,287       42,246       2.81 %

Other assets

     413,112                  

Total assets

   $ 6,414,399                  
                         

Liabilities and shareholders' equity

                        

Noninterest-bearing demand

   $ 2,695,458     $ -       - %

Savings and interest-bearing transaction

     2,674,647       323       0.05 %

Time less than $100,000

     90,994       47       0.21 %

Time $100,000 or more

     72,045       80       0.44 %

Total interest-bearing deposits

     2,837,686       450       0.06 %

Short-term borrowed funds

     94,031       16       0.07 %

Total interest-bearing liabilities

     2,931,717       466       0.06 %

Other liabilities

     72,824                  

Shareholders' equity

     714,400                  

Total liabilities and shareholders' equity

   $ 6,414,399                  

Net interest spread (1) (2)

                     2.75 %

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

           $ 41,780       2.78 %

 

(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.

 

-38-
 

 

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.

 

 

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-39-
 

 

 

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

 

   

For the Nine Months Ended September 30, 2020

  
           

Interest

          
   

Average

    

Income/

    

Yields/

  
   

Balance

    

Expense

    

Rates

  
   

($ in thousands)

  

Assets

                        

Investment securities:

                        

Taxable

   $ 3,574,164     $ 67,963       2.54 %

Tax-exempt (1)

     481,569       12,037       3.33 %

Total investments (1)

     4,055,733       80,000       2.63 %

Loans:

                        

Taxable:

                        

PPP loans

     125,632       4,174       4.43 %

Other

     1,050,243       39,069       4.97 %

Total taxable

     1,175,875       43,243       4.91 %

Tax-exempt (1)

     47,375       1,437       4.05 %

Total loans (1)

     1,223,250       44,680       4.88 %

Total interest-bearing cash

     348,534       1,053       0.40 %

Total Interest-earning assets (1)

     5,627,517       125,733       2.98 %

Other assets

     416,581                  

Total assets

   $ 6,044,098                  
                         

Liabilities and shareholders' equity

                        

Noninterest-bearing demand

   $ 2,472,495     $ -       - %

Savings and interest-bearing transaction

     2,551,053       922       0.05 %

Time less than $100,000

     92,531       148       0.21 %

Time $100,000 or more

     72,718       238       0.44 %

Total interest-bearing deposits

     2,716,302       1,308       0.06 %

Short-term borrowed funds

     68,917       34       0.07 %

Other borrowed funds

     232       1       0.35 %

Total interest-bearing liabilities

     2,785,451       1,343       0.06 %

Other liabilities

     77,593                  

Shareholders' equity

     708,559                  

Total liabilities and shareholders' equity

   $ 6,044,098                  

Net interest spread (1) (2)

                     2.92 %

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

           $ 124,390       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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-40-
 

 

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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-41-
 

 

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, 2020

  
   

Compared with

  
   

For the Three Months Ended September 30, 2019

  
   

Volume

    

Yield/Rate

    

Total

  
   

(In thousands)

  

Increase (decrease) in interest and loan fee income:

                        

Investment securities:

                        

Taxable

   $ 5,203     $ (1,710 )   $ 3,493  

Tax-exempt (1)

     (1,210 )     117       (1,093 )

Total investments (1)

     3,993       (1,593 )     2,400  

Loans:

                        

Taxable:

                        

PPP loans

     2,501       -       2,501  

Other

     (946 )     (689 )     (1,635 )

Total taxable

     1,555       (689 )     866  

Tax-exempt (1)

     8       (15 )     (7 )

Total loans (1)

     1,563       (704 )     859  

Total interest-bearing cash

     (102 )     (1,715 )     (1,817 )

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

     5,454       (4,012 )     1,442  

Increase (decrease) in interest expense:

                        

Deposits:

                        

Savings and interest-bearing transaction

     41       (20 )     21  

Time less than $100,000

     (7 )     (10 )     (17 )

Time $100,000 or more

     (6 )     5       (1 )

Total interest-bearing deposits

     28       (25 )     3  

Short-term borrowed funds

     7       1       8  

Total increase (decrease) in interest expense

     35       (24 )     11  

Increase (decrease) in net interest and loan fee income (1)

   $ 5,419     $ (3,988 )   $ 1,431  

 

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

 

 

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-42-
 

 

Summary of Changes in Interest Income and Expense

 

   

For the Nine Months Ended September 30, 2020

  
   

Compared with

  
   

For the Nine Months Ended September 30, 2019

  
   

Volume

    

Yield/Rate

    

Total

  
   

(In thousands)

  

Increase (decrease) in interest and loan fee income:

                        

Investment securities:

                        

Taxable

   $ 10,064     $ 907     $ 10,971  

Tax-exempt (1)

     (3,765 )     401       (3,364 )

Total investments (1)

     6,299       1,308       7,607  

Loans:

                        

Taxable:

                        

PPP loans

     4,174       -       4,174  

Other

     (2,886 )     (879 )     (3,765 )

Total taxable

     1,288       (879 )     409  

Tax-exempt (1)

     (85 )     (16 )     (101 )

Total loans (1)

     1,203       (895 )     308  

Total interest-bearing cash

     474       (5,018 )     (4,544 )

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

     7,976       (4,605 )     3,371  

Increase (decrease) in interest expense:

                        

Deposits:

                        

Savings and interest-bearing transaction

     61       (109 )     (48 )

Time less than $100,000

     (24 )     (22 )     (46 )

Time $100,000 or more

     (23 )     15       (8 )

Total interest-bearing deposits

     14       (116 )     (102 )

Short-term borrowed funds

     7       -       7  

Other borrowed funds

     1       -       1  

Total increase (decrease) in interest expense

     22       (116 )     (94 )

Increase (decrease) in net interest and loan fee income (1)

   $ 7,954     $ (4,489 )   $ 3,465  

 

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

 

 

Provision for Credit 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 credit losses reflects Management's assessment of credit risk in the loan portfolio and debt securities held to maturity during each of the periods presented.

 

The Company’s first nine months of 2020 results include a provision of credit losses of $4.3 million recorded in the first quarter 2020. The provision represents Management’s estimate of additional reserves needed over the remaining life of its loans due to credit-risk from weakened economic conditions caused by the COVID-19 pandemic. The Company provided no provision for credit losses in the third quarter 2020, the third quarter 2019 and the first nine months of 2019 based on Management’s evaluation of credit quality and the adequacy of the allowance for credit losses. For further information regarding credit risk, net credit losses and the allowance for credit losses, see the “Loan Portfolio Credit Risk” and “Allowance for Credit Losses” sections of this Report.

 

-43-
 

 

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,

  
   

2020

    

2019

    

2020

    

2019

  
   

(In thousands)

  
                                 

Service charges on deposit accounts

   $ 3,298     $ 4,510     $ 10,697     $ 13,508  

Merchant processing services

     2,860       2,494       7,495       7,708  

Debit card fees

     1,611       1,641       4,538       4,789  

Trust fees

     756       733       2,247       2,199  

ATM processing fees

     606       725       1,703       2,080  

Other service fees

     454       580       1,380       1,742  

Financial services commissions

     58       75       306       270  

Life insurance gains

     -       -       -       433  

Securities gains

     -       -       71       50  

Other noninterest income

     833       1,051       3,241       2,897  

Total

   $ 10,476     $ 11,809     $ 31,678     $ 35,676  

 

Third quarter 2020 noninterest income decreased $1.3 million compared with third quarter 2019 due to lower activity based fees from reduced economic activity related to the COVID-19 pandemic. The decrease in noninterest income was partially offset by higher income from merchant processing services.

 

In the first nine months of 2020, noninterest income decreased $4.0 million compared with the first nine months of 2019 due to lower income from activity based fees due to reduced economic activity related to the COVID-19 pandemic. Additionally, the first nine months of 2019 included a life insurance gain of $433 thousand. The decrease was partially offset by a $603 thousand recovery in excess of previously charged off loan amounts in the first nine months of 2020.

 

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,

  
   

2020

    

2019

    

2020

    

2019

  
   

(In thousands)

  
                                 

Salaries and related benefits

   $ 12,540     $ 12,559     $ 38,458     $ 38,757  

Occupancy and equipment

     5,014       5,199       14,737       15,163  

Outsourced data processing services

     2,338       2,374       7,067       7,110  

Professional fees

     669       645       1,701       1,791  

Courier service

     500       456       1,499       1,349  

Amortization of identifiable intangibles

     72       76       218       465  

Loss contingency

     -       -       -       553  

Other noninterest expense

     3,470       2,724       10,341       9,589  

Total

   $ 24,603     $ 24,033     $ 74,021     $ 74,777  

 

Noninterest expense increased $570 thousand in the third quarter 2020 compared with the third quarter 2019 primarily because third quarter 2019 FDIC assessments were reduced by application of the Bank’s FDIC assessment credit; the Company’s credit is fully exhausted. Additionally, lower occupancy and equipment costs also contributed to reducing noninterest expense in the third quarter 2020.

 

In the first nine months of 2020, noninterest expense decreased $756 thousand compared with the nine months ended September 30, 2019 due to lower salaries, occupancy and equipment expenses, and lower amortization of intangible assets, and because the nine months ended September 30, 2019 included $553 thousand of loss contingency. The decrease was partially offset by higher FDIC assessments in the first nine months of 2020 because FDIC assessments in the first nine months of 2019 were reduced by application of the Bank’s FDIC assessment credit.

 

-44-
 

 

Provision for Income Tax

 

The Company’s income tax provision (FTE) was $7.6 million for the third quarter 2020 and $21.2 million for the nine months ended September 30, 2020 compared with $7.7 million for the third quarter 2019 and $22.2 million for the nine months ended September 30, 2019. The effective tax rates (FTE) of 27.5% for the third quarter 2020 and 27.2% for the nine months ended September 30, 2020 compared with 27.5% for the third quarter 2019 and 27.1% for the nine months ended September 30, 2019.

 

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 Securities Portfolio

 

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

 

Management managed the investment securities portfolio in response to changes in deposit and loan volumes. The following table indicates the carrying values of investment securities in the Company’s portfolio by type as of the indicated dates. The Company adopted ASU 2016-13 effective January 1, 2020. Debt securities of $577,795 thousand at September 30, 2020, is net of related reserve for expected credit losses of $16 thousand.

 

   

At September 30, 2020

    

At December 31, 2019

  
   

($ in thousands)

  
   

Carrying
Value

    

As a percent of
total investment
securities

    

Carrying
Value

    

As a percent of
total investment
securities

  

Agency mortgage-backed securities

   $ 1,021,342       22 %   $ 1,297,395       34 %

Obligations of states and political subdivisions

     430,487       9 %     544,920       14 %

Corporate securities

     2,212,827       49 %     1,833,783       48 %

Commercial paper

     224,816       5 %     -       - %

Collateralized loan obligations

     670,134       15 %     6,755       - %

U.S. Treasuries and agencies

     -       - %     131,167       4 %

Other

     2,183       - %     2,898       - %

Total

   $ 4,561,789       100 %   $ 3,816,918       100 %
                                 

Debt securities available for sale

   $ 3,983,994             $ 3,078,846          

Debt securities held to maturity

     577,795               738,072          

Total

   $ 4,561,789             $ 3,816,918          

 

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, 2020, 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.

 

-45-
 

 

The following table summarizes total corporate securities by credit rating:

 

   

At September 30, 2020

    

At December 31, 2019

  
   

Market value

    

As a percent of
total corporate
securities

    

Market value

    

As a percent of
total corporate
securities

  
   

($ in thousands)

  

AAA

   $ 21,926       1 %   $ 26,148       1 %

AA+

     21,058       1 %     45,697       2 %

AA

     41,381       2 %     19,776       1 %

AA-

     47,139       2 %     46,099       3 %

A+

     147,496       7 %     179,217       10 %

A

     410,904       18 %     439,017       24 %

A-

     387,321       17 %     351,909       19 %

BBB+

     528,288       24 %     384,788       21 %

BBB

     506,442       23 %     314,868       17 %

BBB-

     86,015       4 %     11,737       1 %

Investment grade

     2,197,970       99 %     1,819,256       99 %

BB

     14,857       1 %     14,527       1 %

Total Corporate securities

   $ 2,212,827       100 %   $ 1,833,783       100 %

 

The Company’s $14.9 million corporate bond rated BB represents a bond of one pharmaceutical company which develops, manufactures and markets generic and branded human pharmaceuticals, as well as active pharmaceutical ingredients, to customers worldwide. The bond matures in 2021; the issuing company has refinanced much of its debt obligations beyond the maturity date.

 

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

 

   

At September 30, 2020

    

At December 31, 2019

  
   

Market value

    

As a percent of
total corporate
securities

    

Market value

    

As a percent of
total corporate
securities

  
   

($ in thousands)

  

Financial

   $ 956,862       43 %   $ 772,852       42 %

Utilities

     237,090       11 %     222,951       12 %

Industrial

     188,866       9 %     177,051       10 %

Consumer, Non-cyclical

     188,789       9 %     185,784       10 %

Communications

     182,994       8 %     128,635       7 %

Basic Materials

     135,279       6 %     76,434       4 %

Technology

     130,312       6 %     107,632       6 %

Energy

     99,815       4 %     86,883       5 %

Consumer, Cyclical

     92,820       4 %     75,561       4 %

Total Corporate securities

   $ 2,212,827       100 %   $ 1,833,783       100 %

 

The following table summarizes total consumer, cyclical by sub-sector:

 

   

At September 30, 2020

  
   

Market value

  
   

($ in thousands)

  

Hotels

   $ -  

Restaurants

     21,184  

Department Stores

     -  

Casinos

     -  

Airlines

     -  

Other

     71,636  

Total Consumer, Cyclical

   $ 92,820  

 

The Company’s $21.2 million in corporate bonds to issuers operating in the consumer cyclical – restaurant subsector represent bonds of one company which retails, roasts and provides its own brand of specialty coffee and other complimentary products through retail locations worldwide and sells coffee through several distribution channels. The bonds mature in 2023. At September 30, 2020, the bonds were rated BBB and priced with an unrealized gain of $1.2 million.

 

-46-
 

 

   

At September 30, 2020

  
   

Amortized

    

Fair

  
   

Cost

    

Value

  
   

(In thousands)

  
                 

Energy

   $ 95,712     $ 99,815  

Industrial

     179,626       188,866  

Total

   $ 275,338     $ 288,681  

 

The $99.8M (fair value) in corporate bonds in the energy sector are issued by 4 issuers at September 30, 2020. The $188.9M (fair value) in corporate bonds in the industrial sector are issued by 10 issuers at September 30, 2020.

 

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, 2020, the Company’s investment securities portfolios included securities issued by 361 state and local government municipalities and agencies located within 40 states. The largest exposure to any one municipality or agency was $8.3 million (fair value) represented by six general obligation bonds.

 

   

At September 30, 2020

  
   

Amortized

    

Fair

  
   

Cost

    

Value

  
   

(In thousands)

  

Obligations of states and political subdivisions:

                

General obligation bonds:

                

California

   $ 67,516     $ 70,437  

New Jersey

     23,692       23,990  

Washington

     23,079       23,956  

Texas

     20,698       21,369  

Other (32 states)

     172,470       178,334  

Total general obligation bonds

   $ 307,455     $ 318,086  
                 

Revenue bonds:

                

California

   $ 18,579     $ 19,042  

Colorado

     12,133       12,385  

Kentucky

     10,825       11,243  

Indiana

     9,358       9,607  

Washington

     8,829       9,011  

Virginia

     7,611       8,037  

Arizona

     6,110       6,216  

Maryland

     5,972       6,067  

Other (19 states)

     38,410       39,070  

Total revenue bonds

   $ 117,827     $ 120,678  

Total obligations of states and political subdivisions

   $ 425,282     $ 438,764  

 

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-47-
 

 

At December 31, 2019, the Company’s investment securities portfolios included securities issued by 451 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 December 31, 2019

  
   

Amortized

    

Fair

  
   

Cost

    

Value

  
   

(In thousands)

  

Obligations of states and political subdivisions:

                

General obligation bonds:

                

California

   $ 83,984     $ 86,527  

Texas

     36,396       36,815  

New Jersey

     29,347       29,688  

Washington

     23,862       24,516  

Minnesota

     20,624       20,871  

Other (33 states)

     189,286       193,302  

Total general obligation bonds

   $ 383,499     $ 391,719  
                 

Revenue bonds:

                

California

   $ 31,829     $ 32,278  

Kentucky

     16,384       16,680  

Colorado

     12,176       12,479  

Washington

     11,208       11,509  

Indiana

     9,935       10,145  

Virginia

     8,027       8,328  

Arizona

     7,912       8,106  

Other (25 states)

     60,338       61,347  

Total revenue bonds

   $ 157,809     $ 160,872  

Total obligations of states and political subdivisions

   $ 541,308     $ 552,591  

 

At September 30, 2020 and December 31, 2019, 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 20 revenue sources at September 30, 2020 and December 31, 2019. The revenue sources that represent 5% or more individually of the total revenue bonds are summarized in the following tables.

 

   

At September 30, 2020

  
   

Amortized

    

Fair

  
   

Cost

    

Value

  
   

(In thousands)

  

Revenue bonds by revenue source:

                

Water

   $ 29,268     $ 29,752  

Sewer

     16,159       16,744  

Sales tax

     14,975       15,288  

Lease (renewal)

     9,342       9,709  

Lease (abatement)

     8,494       8,711  

Other (15 sources)

     39,589       40,474  

Total revenue bonds by revenue source

   $ 117,827     $ 120,678  

 

 

 

 

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-48-
 

 

   

At December 31, 2019

  
   

Amortized

    

Fair

  
   

Cost

    

Value

  
   

(In thousands)

  

Revenue bonds by revenue source:

                

Water

   $ 36,960     $ 37,699  

Sewer

     19,039       19,545  

Sales tax

     15,695       16,101  

Lease (renewal)

     15,230       15,539  

Lease (abatement)

     10,913       11,160  

Other (15 sources)

     59,972       60,828  

Total revenue bonds by revenue source

   $ 157,809     $ 160,872  

 

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 Bank processed customer Paycheck Protection Program loan (“PPP loan”) applications as established by the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The United States Small Business Administration guarantees PPP loans; given this guarantee, the PPP loans are not considered to have default risk. The Company funded $249 million PPP loans in the second quarter 2020. PPP loans, net of deferred fees and costs, were $244 million at September 30, 2020.

 

On April 7, 2020, the U.S. banking agencies issued an Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (Revised). The statement describes accounting for COVID-19-related loan modifications, including clarifying the interaction between current accounting rules and the temporary relief provided by the CARES Act. The Bank has been actively working with consumer and commercial borrowers requesting deferral of loan payments, granting deferrals of principal and interest payments for 90 days. At September 30, 2020, 140 consumer loans granted loan deferrals totaled $5.0 million, 17 commercial real estate loans with deferred payments totaled $19.1 million, primarily for hospitality and retail properties, and five commercial loans with deferred payments totaled $209 thousand.

 

The preparation of the financial statements requires Management to estimate the amount of expected losses 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.

 

-49-
 

 

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

 

 

●

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

 

 

●

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

 

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

 

Nonperforming Assets

                        
   

At September 30,

    

At December 31,

  
   

2020

    

2019

    

2019

  
   

(In thousands)

  
                         

Nonperforming nonaccrual loans

   $ 409     $ 633     $ 659  

Performing nonaccrual loans

     3,971       3,670       3,781  

Total nonaccrual loans

     4,380       4,303       4,440  

Accruing loans 90 or more days past due

     360       351       440  

Total nonperforming loans

     4,740       4,654       4,880  

Other real estate owned

     43       43       43  

Total nonperforming assets

   $ 4,783     $ 4,697     $ 4,923  

 

At September 30, 2020, one loan secured by commercial real estate with a balance of $3.4 million was on nonaccrual status. The remaining eight nonaccrual loans held at September 30, 2020 had an average carrying value of $120 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, pandemics, 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.

 

Allowance for Credit Losses

 

Effective January 1, 2020, the Company adopted Accounting Standards Update (ASU) 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments (“CECL”). The following table summarizes allowance for credit losses at the dates indicated:

 

   

At September 30,

    

At December 31,

  
   

2020

    

2019

    

2019

  
   

(In thousands)

  
                         

Allowance for Credit Losses on Loans

   $ 24,142     $ 19,828     $ 19,484  

Allowance for Credit Losses on Held to Maturity Debt Securities

     16       -       -  

Total Allowance for Credit Losses

   $ 24,158     $ 19,828     $ 19,484  

  

Allowance for Credit Losses on Debt Securities Held to Maturity

 

Management segmented debt securities held to maturity, selected methods to estimate losses for each segment, and measured a loss estimate. Agency mortgage-backed securities were assigned no credit loss allowance due to the perceived backing of government sponsored entities. Municipal securities were evaluated for risk of default based on credit rating and remaining term to maturity using Moody’s risk of default factors; Moody’s loss upon default factors were applied to the assumed defaulted principal amounts to estimate the amount for credit loss allowance. The adoption of the ASU resulted in establishment of allowance for credit losses related to debt securities held to maturity of $16 thousand.

 

-50-
 

 

Allowance for Credit Losses on Loans

 

The Company’s allowance for credit losses on loans represents Management’s estimate of forecasted credit losses in the loan portfolio based on the current expected credit loss (CECL) model. 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/credit losses on loans, chargeoffs and recoveries for the periods indicated:

 

   

For the Three Months

    

For the Nine Months

  
   

Ended September 30,

  
   

2020

    

2019

    

2020

    

2019

  
   

($ in thousands)

  

Analysis of the Allowance for Credit Losses

                                

Balance, beginning of period

   $ 24,529     $ 20,117     $ 19,484     $ 21,351  

Adoption of ASU 2016-13

     -       -       2,017       -  

Balance, beginning of period

     24,529       20,117       21,501       21,351  

Provision for credit losses

     -       -       4,300       -  

Loans charged off

                                

Commercial

     -       -       (178 )     (71 )

Consumer installment and other

     (872 )     (1,039 )     (3,071 )     (3,332 )

Total chargeoffs

     (872 )     (1,039 )     (3,249 )     (3,403 )

Recoveries of loans previously charged off

                                

Commercial

     46       233       282       449  

Commercial real estate

     12       12       37       38  

Consumer installment and other

     427       505       1,271       1,393  

Total recoveries

     485       750       1,590       1,880  

Net loan losses

     (387 )     (289 )     (1,659 )     (1,523 )

Balance, end of period

   $ 24,142     $ 19,828     $ 24,142     $ 19,828  
                                 

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

     0.12 %     0.10 %     0.18 %     0.17 %

 

The Company's allowance for credit losses on loans is maintained at a level considered adequate to provide for expected losses based on historical loss rates adjusted for current and expected conditions over a forecast period. These include conditions unique to individual borrowers, as well as overall credit loss experience, the amount of past due, nonperforming and classified loans, recommendations of regulatory authorities, prevailing and forecasted economic conditions, or credit protection agreements and other factors. Loans that share common risk characteristics are segregated into pools based on common characteristics, which is primarily determined by loan, borrower, or collateral type. Historical loss rates are determined for each pool. Loans that do not share risk characteristics with other loans in the pools are evaluated individually. See Note 2 to the unaudited consolidated financial statements for additional information.

 

   

Allowance for Credit Losses

  
   

For the Three Months Ended September 30, 2020

  
                                   

Consumer

          
           

Commercial

            

Residential

    

Installment

          
   

Commercial

    

Real Estate

    

Construction

    

Real Estate

    

and Other

    

Total

  
   

(In thousands)

  

Allowance for credit losses:

                                                

Balance at beginning of period

   $ 8,072     $ 4,623     $ 7     $ 57     $ 11,770     $ 24,529  

Provision (reversal)

     867       1,030       -       (5 )     (1,892 )     -  

Chargeoffs

     -       -       -       -       (872 )     (872 )

Recoveries

     46       12       -       -       427       485  

Total allowance for credit losses

   $ 8,985     $ 5,665     $ 7     $ 52     $ 9,433     $ 24,142  

 

 

-51-
 

 

   

Allowance for Credit Losses

  
   

For the Nine Months Ended September 30, 2020

  
                                   

Consumer

                  
           

Commercial

            

Residential

    

Installment

                  
   

Commercial

    

Real Estate

    

Construction

    

Real Estate

    

and Other

    

Unallocated

    

Total

  
   

(In thousands)

  

Allowance for credit losses:

                                                        

Balance at beginning of period, prior to adoption of ASU 2016-13

   $ 4,959     $ 4,064     $ 109     $ 206     $ 6,445     $ 3,701     $ 19,484  

Impact of adopting ASU 2016-13

     3,385       618       (31 )     (132 )     1,878       (3,701 )     2,017  

Adjusted beginning balance

     8,344       4,682       78       74       8,323       -       21,501  

Provision (reversal)

     537       946       (71 )     (22 )     2,910       -       4,300  

Chargeoffs

     (178 )     -       -       -       (3,071 )     -       (3,249 )

Recoveries

     282       37       -       -       1,271       -       1,590  

Total allowance for credit losses

   $ 8,985     $ 5,665     $ 7     $ 52     $ 9,433     $ -     $ 24,142  

 

Management considers the $24.1 million allowance for credit losses on loans to be adequate as a reserve against current expected credit losses in the loan portfolio as of September 30, 2020.

 

See Note 4 to the unaudited consolidated financial statements for additional information related to the loan portfolio, loan portfolio credit risk, allowance for credit losses on loans 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.

 

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, except cash flows from PPP loans are reinvested into interest-bearing cash. 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, 2020, 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.

 

 

-52-
 

 

At September 30, 2020, 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

     0.00 %     +1.00 %

First Year Change in Net Interest Income

     -6.00 %     +5.70 %

 

Dynamic Simulation (balance sheet composition changes):

                

Assumed Change in Interest Rates Over 1 Year

     0.00 %     +1.00 %

First Year Change in Net Interest Income

     -1.75 %     +2.60 %

 

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 credit 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 establish or increase reserves for credit losses. Other types of market risk, such as foreign currency exchange risk, are not significant in the normal course of the Company's business activities.

 

Liquidity and Funding

 

The objective of liquidity management is to manage cash flow and liquidity reserves so that they are adequate to fund the Company's operations and meet obligations and other commitments on a timely basis and at a reasonable cost. The Company achieves this objective through the selection of asset and liability maturity mixes that it believes best meet its needs. The Company's liquidity position is enhanced by its ability to raise additional funds as needed by selling debt securities available-for-sale or borrowing 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, 2020 and the twelve months ended December 31, 2019. 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 $4.6 billion in total investment securities at September 30, 2020. Under certain deposit, borrowing and other arrangements, the Company must hold and pledge investment securities as collateral. At September 30, 2020, such collateral requirements totaled approximately $850 million.

 

-53-
 

 

The Bank funded $249 million in PPP loans by crediting loan proceeds to the borrower’s deposit accounts. The Federal Reserve Bank established the Paycheck Protection Program Liquidity Facility (“PPPLF”) to provide funding for eligible firms extending PPP loans. Under the PPPLF, the Bank must pledge PPP loans as collateral for PPPLF borrowings. Principal reductions on the pledged PPP loans must immediately result in principal reduction of the PPPLF borrowing.

 

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. 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 $44 million in the nine months ended September 30, 2020 and the twelve months ended December 31, 2019, respectively, and retire common stock in the amount of $11.7 million and $488 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 10.7% in the nine months ended September 30, 2020 and 11.9% in the year ended December 31, 2019. The Company also raises capital as employees exercise stock options. Capital raised through the exercise of stock options was $2.8 million in the nine months ended September 30, 2020 and $14 million in the year ended December 31, 2019.

 

The Company paid common dividends totaling $33 million in the nine months ended September 30, 2020 and $44 million in the year ended December 31, 2019, which represent dividends per common share of $1.23 and $1.63, 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 228 thousand shares valued at $11.7 million in the nine months ended September 30, 2020 and 8 thousand shares valued at $488 thousand in the year ended December 31, 2019.

 

The Company's primary capital resource is shareholders' equity, which was $826 million at September 30, 2020 compared with $731 million at December 31, 2019. The Company's ratio of equity to total assets was 12.6% at September 30, 2020 and 13.0% at December 31, 2019.

 

-54-
 

 

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

 

The capital ratios for the Company and the Bank under current regulatory capital standards are presented in the tables below, on the dates indicated.

 

                           

To Be

  
                           

Well-capitalized

  
                   

Required for

    

Under Prompt

  
   

At September 30, 2020

    

Capital Adequacy

    

Corrective Action

  
   

Company

    

Bank

    

Purposes

    

Regulations (Bank)

  
                                 

Common Equity Tier I Capital

     14.82 %     11.89 %     7.00 %     6.50 %

Tier I Capital

     14.82 %     11.89 %     8.50 %     8.00 %

Total Capital

     15.42 %     12.65 %     10.50 %     10.00 %

Leverage Ratio

     9.48 %     7.57 %     4.00 %     5.00 %

 

                           

To Be

  
                           

Well-capitalized

  
                   

Required for

    

Under Prompt

  
   

At December 31, 2019

    

Capital Adequacy

    

Corrective Action

  
   

Company

    

Bank

    

Purposes

    

Regulations (Bank)

  
                                 

Common Equity Tier I Capital

     16.22 %     11.80 %     7.00 %     6.50 %

Tier I Capital

     16.22 %     11.80 %     8.50 %     8.00 %

Total Capital

     16.83 %     12.58 %     10.50 %     10.00 %

Leverage Ratio

     10.50 %     7.60 %     4.00 %     5.00 %

 

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 replaced the existing incurred loss methodology for certain financial assets. The Company adopted the CECL methodology effective January 1, 2020, which involved an implementing accounting entry to retained earnings on a net-of-tax basis. The adoption of the CECL methodology did not have a material adverse day-one impact to capital ratios and the Company did not adopt the phase in regulatory capital relief. See Note 2 to unaudited consolidated financial statements, “Recently Adopted Accounting Standards” for more information on the CECL methodology.

 

PPP loans are zero percent risk weighted for regulatory capital purposes; average PPP loans of $243 million did not affect regulatory capital ratios, other than an insignificant impact on the Leverage ratio. To the extent funding of PPP loans is through excess cash balances or PPPLF borrowings, the Leverage ratio is unaffected. However, PPP loans funded by increased non-PPPLF borrowings reduces the leverage ratio.

 

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 in excess of the minimum required to be considered well-capitalized under the prompt corrective action framework while continuing to pay quarterly dividends to shareholders. No assurance can be given that changes in capital management plans will not occur.

 

-55-
 

 

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.

 

 

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) and 15d-15(e) of the Securities Exchange Act of 1934, as amended, as of September 30, 2020.

 

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, 2020 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

 

Due to the nature of its business, the Company is subject to various threatened or filed legal cases. 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. Based on the advice of legal counsel, the Company does not expect such cases will have a material, adverse effect on its business, financial position or results of operations. Legal liabilities are accrued when obligations become probable and the amount can be reasonably estimated.

 

 

Item 1A. Risk Factors

 

The Company’s Form 10-K as of December 31, 2019 includes detailed disclosure about the risks faced by the Company’s business. The following is an update on risk factors that have changed since the Form 10-K was filed.

 

The COVID-19 Coronavirus Pandemic Will Have an Uncertain Impact on the Company's Financial Condition and Results of Operations

 

The COVID-19 coronavirus pandemic caused escalating infections in the United States beginning in the first quarter of 2020 that continued through the third quarter of 2020 and may continue for some time. The spread of the outbreak has disrupted the United States economy including banking and other financial activity in the market areas in which the Company and its banking subsidiary, Westamerica Bank (the "Bank"), operate.  Regions and states of the United States of America have implemented varying degrees of "stay at home" directives in an effort to prevent the spread of the virus. On March 19, 2020, the Governor of the State of California ordered all individuals living in the State of California to stay within their residence to prevent the spread of the novel coronavirus and many businesses have suspended or reduced business activities. The California "stay at home" directive excludes essential businesses, including banks, and the Bank remains open and fully operational. These "stay at home" directives have, however, significantly reduced economic activity in the United States and the State of California. In the second and third quarters of 2020 the “stay at home” directives were gradually lifted in varying stages in counties of the State of California, though restrictions could be re-imposed to some degree if infections increase. Counties with high infection rates delayed reopening and restrictions on certain economic activity remains. California-based claims for unemployment remain elevated during the third quarter of 2020.

 

-56-
 

 

The Bank's deposits are exclusively sourced within California and its loans are primarily to borrowers domiciled within California. Demand for the Bank's products and services, such as loans and deposits, could be affected as a result of the decline in economic activity within the state. 

 

The Bank's investment portfolio contains bonds for which the source of repayment is domestic mortgage repayments, domestic municipalities throughout the United States, and domestic and global corporations. The value of the Bank's investment portfolio may decline if, for example, the general economy deteriorates, inflation increases, credit ratings decline, the issuers’ financial condition deteriorates or the liquidity for debt securities declines.

 

In response to the pandemic, the Federal Reserve has engaged significant levels of monetary policy to provide liquidity and credit facilities to the financial markets. On March 15, 2020, the Federal Open Market Committee ("FOMC") reduced the target range for the federal funds rate to 0 to 0.25 percent; relatedly, the FOMC reduced the interest rate paid on deposit balances to 0.10 percent effective March 16, 2020, all of which may negatively impact net interest income. The Bank maintains deposit balances at the Federal Reserve Bank; the amount that earns interest is identified in the Company's financial statements as "interest-bearing cash".

 

In response to the pandemic, the United States federal government enacted the CARES Act on March 27, 2020, providing an estimated $2 trillion fiscal stimulus to the United States economy. The CARES Act established the Paycheck Protection Program (PPP) with $350 billion to provide businesses with federally guaranteed loans to support payroll and certain operating expenses. The loans were guaranteed by the United States Small Business Administration (“SBA”) and funded through banks. In April 2020, the PPP program was expanded with an additional $310 billion. At June 30, 2020, the Bank funded $249 million in government guaranteed PPP loans which meaningfully increased interest-earning assets and related interest and fee income. PPP loans, net of deferred fees and costs, were $244 million at September 30, 2020.

 

On April 7, 2020, the U.S. banking agencies issued an Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (Revised). The statement describes accounting for COVID-19-related loan modifications, including clarifying the interaction between current accounting rules and the temporary relief provided by the CARES Act. The Bank continues to work with loan customers requesting deferral of loan payments due to economic weakness caused by the pandemic. At September 30, 2020, consumer loans granted loan deferrals totaled $5.0 million, commercial real estate loans with deferred payments totaled $19.1 million, primarily for hospitality and retail properties, and commercial loans with deferred payments totaled $209 thousand.

 

The extent of the spread of the coronavirus, its ultimate containment and its effects on the economy and the Company are uncertain at this time. The effectiveness of the Federal Reserve Bank's monetary policies and the federal government's fiscal policies in stimulating the United States economy is uncertain at this time.

 

Management expects the Company's net interest margin and non-interest income to decline and credit-related losses to increase for an uncertain period given the decline in economic activity occurring due to the coronavirus. The amount of impact on the Company's financial results is uncertain.

 

In addition, the Company's future success and profitability substantially depends upon the skills and experience of its executive officers and directors, many of whom have held positions with the Company for many years. The unanticipated loss or unavailability of key employees due to the outbreak could adversely affect the Company's ability to operate its business or execute its business strategy.

 

Any one or a combination of the factors identified above, or other factors, could materially adversely affect the Company's business, financial condition, results of operations and prospects.

 

The Recent Decline in Oil Prices Could Have an Impact on the Company's Financial Condition and Results of Operations

 

Oil prices have declined considerably in the first nine months of 2020. The decline in oil prices could negatively affect the financial results of industrial sector-based and energy sector-based corporate issuers of corporate bonds owned by the Company. The Company’s corporate debt securities include 14 issuers in industrial and energy sectors with aggregate amortized cost of $275.3 million and fair value of $288.7 million at September 30, 2020. These securities continue to be investment grade rated by a major rating agency.

 

-57-
 

 

The Company’s participation in the SBA PPP loan program exposes it to risks of noncompliance with the PPP and litigation, which could have a material adverse impact on the Company’s business, financial condition and results of operations.

 

The Company is a participating lender in the PPP. The SBA guarantees 100% of loans funded under the PPP. Loan proceeds used for eligible payroll and certain other operating costs are forgiven with repayment of loan principal and accrued interest made by the SBA. There is some ambiguity in the laws, rules and guidance regarding the operation of the PPP, which exposes the Company to potential risks relating to noncompliance with the PPP. Any financial liability, litigation costs or reputational damage related to the PPP or related litigation or regulatory enforcement actions could have a material adverse impact on the Company’s business, financial condition and results of operations. In addition, the Company may be exposed to credit risk on PPP loans if the SBA determines that there is a deficiency in the manner in which the loan was originated, funded, or serviced. If the SBA identifies a deficiency, it could deny its liability under the guaranty, reduce the amount of the guaranty, or, if it has already paid under the guaranty, seek recovery of any loss related to the deficiency from the Company.

 

 

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, as amended (the “Exchange Act”), of common stock during the quarter ended September 30, 2020.

 

   

2020

  

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

     35       52.42       35       1,715  

Total

     35     $ 52.42       35       1,715  

 

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.

 

A share repurchase program was approved by the Company’s 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. The Board of Directors approved and adopted a replacement program on July 23, 2020 authorizing the purchase of up to 1,750 thousand shares of the Company’s common stock from time to time prior to September 1, 2021.

 

 

Item 3. Defaults upon Senior Securities

 

None

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information

 

None

 

-58-
 

 

Item 6. Exhibits

 

Exhibit No.

  

Description of Exhibit
     

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

  

Inline XBRL Taxonomy Extension Schema Document
     

Exhibit 101.CAL

  

Inline XBRL Taxonomy Extension Calculation Linkbase Document
     

Exhibit 101.DEF

  

Inline XBRL Taxonomy Extension Definitions Linkbase Document
     

Exhibit 101.LAB

  

Inline XBRL Taxonomy Extension Label Linkbase Document
     

Exhibit 101.PRE

  

Inline XBRL Taxonomy Extension Presentation Linkbase Document
     

Exhibit 104.

  

The Cover page of Westamerica Bancorporation’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, formatted in Inline XBRL (contained in Exhibit 101)

 

[The remainder of this page intentionally left blank]

 

 

 

-59-
 

 

 

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/ Jesse Leavitt

  

Jesse Leavitt

  

Senior Vice President and Chief Financial Officer

(Principal Financial and Chief Accounting Officer)

 

Date: November 5, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-60-

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 5, 2020

 

 

 

EXHIBIT 31.2

 

CERTIFICATION UNDER SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Jesse Leavitt 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/ Jesse Leavitt                                                              

Jesse Leavitt

Senior Vice President and Chief Financial Officer

Date: November 5, 2020

 

 

 

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, 2020 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 5, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EXHIBIT 32.2

 

 

 

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

 

In connection with the Quarterly Report of Westamerica Bancorporation (the Company) on Form 10-Q for the period ended September 30, 2020 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Jesse Leavitt, 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/ Jesse Leavitt                                                                        

Jesse Leavitt

Senior Vice President and Chief Financial Officer

Date: November 5, 2020

 

 
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Document And Entity Information - shares
 9 Months Ended
Sep. 30, 2020
Oct. 29, 2020
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Entity Registrant Name WESTAMERICA BANCORPORATION  
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Entity Incorporation, State or Country Code CA  
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Entity Address, Address Line One 1108 Fifth Avenue  
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City Area Code 707  
Local Phone Number 863-6000  
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Entity Common Stock, Shares Outstanding   26,868,988
v3.20.2
Consolidated Balance Sheets (Current Period Unaudited) - USD ($)
$ in Thousands
Sep. 30, 2020
Dec. 31, 2019
Assets:    
Cash and due from banks $ 398,964 $ 373,421
Debt securities available for sale 3,983,994 3,078,846
Debt securities held to maturity, net of allowance for credit losses of $16 at September 30, 2020 and $ - at December 31, 2019 (Fair value of $593,701 at September 30, 2020 and $744,296 at December 31, 2019) 577,795 738,072
Loans 1,310,009 1,126,664
Allowance for credit losses on loans (24,142) (19,484)
Loans, net of allowance for credit losses on loans 1,285,867 1,107,180
Other real estate owned 43 43
Premises and equipment, net 33,437 34,597
Identifiable intangibles, net 1,173 1,391
Goodwill 121,673 121,673
Other assets 160,269 164,332
Total Assets 6,563,215 5,619,555
Liabilities:    
Noninterest-bearing deposits 2,684,028 2,240,112
Interest-bearing deposits 2,855,162 2,572,509
Total deposits 5,539,190 4,812,621
Short-term borrowed funds 107,973 30,928
Other liabilities 90,476 44,589
Total Liabilities 5,737,639 4,888,138
Contingencies (Note 10)
Shareholders' Equity:    
Common stock (no par value), authorized - 150,000 shares Issued and outstanding: 26,898 at September 30, 2020 and 27,062 at December 31, 2019 467,201 465,460
Deferred compensation 35 771
Accumulated other comprehensive income 103,623 26,051
Retained earnings 254,717 239,135
Total Shareholders' Equity 825,576 731,417
Total Liabilities and Shareholders' Equity $ 6,563,215 $ 5,619,555
v3.20.2
Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - USD ($)
shares in Thousands, $ / shares in Thousands, $ in Thousands
Sep. 30, 2020
Dec. 31, 2019
Debt securities held to maturity, fair value $ 593,701 $ 744,296
Debt securities held to maturity, allowance for credit losses $ 16 $ 0
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) 26,898 27,062
Common stock, outstanding (in shares) 26,898 27,062
v3.20.2
Consolidated Statements of Income (Unaudited) - USD ($)
shares in Thousands, $ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Interest and Loan Fee Income:        
Loans $ 15,291 $ 14,431 $ 44,378 $ 44,050
Equity securities 103 92 309 289
Debt securities available for sale 22,652 18,736 66,396 54,080
Debt securities held to maturity 3,235 4,535 10,759 14,788
Interest-bearing cash 84 1,901 1,053 5,597
Total Interest and Loan Fee Income 41,365 39,695 122,895 118,804
Interest Expense:        
Deposits 450 447 1,308 1,410
Short-term borrowed funds 16 8 34 27
Other borrowed funds 0 0 1 0
Total Interest Expense 466 455 1,343 1,437
Net Interest and Loan Fee Income 40,899 39,240 121,552 117,367
Provision for Credit Losses 0 0 4,300 0
Net Interest and Loan Fee Income After Provision for Credit Losses 40,899 39,240 117,252 117,367
Noninterest Income:        
Life insurance gains 0 0 0 433
Securities gains 0   71  
Securities gains   0   50
Other noninterest income 833 1,051 3,241 2,897
Total Noninterest Income 10,476 11,809 31,678 35,676
Noninterest Expense:        
Salaries and related benefits 12,540 12,559 38,458 38,757
Occupancy and equipment 5,014 5,199 14,737 15,163
Outsourced data processing services 2,338 2,374 7,067 7,110
Professional fees 669 645 1,701 1,791
Courier service 500 456 1,499 1,349
Amortization of identifiable intangibles 72 76 218 465
Loss contingency 0 0 0 553
Other noninterest expense 3,470 2,724 10,341 9,589
Total Noninterest Expense 24,603 24,033 74,021 74,777
Income Before Income Taxes 26,772 27,016 74,909 78,266
Provision for income taxes 6,721 6,626 18,334 18,605
Net Income $ 20,051 $ 20,390 $ 56,575 $ 59,661
Average Common Shares Outstanding (in shares) 26,930 26,986 26,977 26,924
Average Diluted Common Shares Outstanding (in shares) 26,946 27,027 26,998 26,976
Per Common Share Data:        
Basic earnings (in dollars per share) $ 0.74 $ 0.76 $ 2.10 $ 2.22
Diluted earnings (in dollars per share) 0.74 0.75 2.10 2.21
Dividends paid (in dollars per share) $ 0.41 $ 0.41 $ 1.23 $ 1.22
Deposit Account [Member]        
Noninterest Income:        
Noninterest income revenue $ 3,298 $ 4,510 $ 10,697 $ 13,508
Credit Card, Merchant Discount [Member]        
Noninterest Income:        
Noninterest income revenue 2,860 2,494 7,495 7,708
Debit Card [Member]        
Noninterest Income:        
Noninterest income revenue 1,611 1,641 4,538 4,789
Fiduciary and Trust [Member]        
Noninterest Income:        
Noninterest income revenue 756 733 2,247 2,199
ATM Processing Fees [Member]        
Noninterest Income:        
Noninterest income revenue 606 725 1,703 2,080
Financial Service, Other [Member]        
Noninterest Income:        
Noninterest income revenue 454 580 1,380 1,742
Financial Services Commission [Member]        
Noninterest Income:        
Noninterest income revenue $ 58 $ 75 $ 306 $ 270
v3.20.2
Consolidated Statements of Comprehensive Income (Unaudited) - USD ($)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Net income $ 20,051 $ 20,390 $ 56,575 $ 59,661
Other comprehensive income:        
Changes in unrealized gains on debt securities available for sale 14,042 10,407 110,200 85,822
Deferred tax expense (4,151) (3,077) (32,578) (25,372)
Reclassification of gains included in net income 0 0 (71) 0
Deferred tax expense on gains included in net income 0 0 21 0
Changes in net unrealized gains on debt securities available for sale, net of tax 9,891 7,330 77,572 60,450
Total comprehensive income $ 29,942 $ 27,720 $ 134,147 $ 120,111
v3.20.2
Consolidated Statements of Changes in Shareholders' Equity (Unaudited) - USD ($)
shares in Thousands, $ in Thousands
Cumulative Effect, Period of Adoption, Adjustment [Member]
Common Stock [Member]
Cumulative Effect, Period of Adoption, Adjustment [Member]
Deferred Compensation, Share-based Payments [Member]
Cumulative Effect, Period of Adoption, Adjustment [Member]
AOCI Attributable to Parent [Member]
Cumulative Effect, Period of Adoption, Adjustment [Member]
Retained Earnings [Member]
Cumulative Effect, Period of Adoption, Adjustment [Member]
Cumulative Effect, Period of Adoption, Adjusted Balance [Member]
Common Stock [Member]
Cumulative Effect, Period of Adoption, Adjusted Balance [Member]
Deferred Compensation, Share-based Payments [Member]
Cumulative Effect, Period of Adoption, Adjusted Balance [Member]
AOCI Attributable to Parent [Member]
Cumulative Effect, Period of Adoption, Adjusted Balance [Member]
Retained Earnings [Member]
Cumulative Effect, Period of Adoption, Adjusted Balance [Member]
Common Stock [Member]
Deferred Compensation, Share-based Payments [Member]
AOCI Attributable to Parent [Member]
Retained Earnings [Member]
Total
Balance (in shares) at Dec. 31, 2018           26,730         26,730        
Balance at Dec. 31, 2018 $ (2,801) $ (2,801) $ 448,351 $ 1,395 $ (39,996) $ 203,040 $ 612,790 $ 448,351 $ 1,395 $ (39,996) $ 205,841 $ 615,591
Net income applicable to common equity (numerator)                           59,661 59,661
Other comprehensive income                         60,450   60,450
Stock based compensation                     1,484       1,484
Stock awarded to employees                     $ 80       80
Retirement of common stock (in shares)                     (8)        
Retirement of common stock                     $ (136)     (352) (488)
Dividends                           (32,849) (32,849)
Exercise of stock options (in shares)                     222        
Exercise of stock options                     $ 11,177       11,177
Restricted stock activity (in shares)                     18        
Restricted stock activity                     $ 1,697 (624)     1,073
Stock awarded to employees (in shares)                     1        
Shares issued from stock warrant exercise, net of repurchase (in shares)                     51        
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 applicable to common equity (numerator)                           20,390 20,390
Other comprehensive income                         7,330   7,330
Stock based compensation                     402       402
Stock awarded to employees                     $ 15       15
Dividends                           (11,063) (11,063)
Exercise of stock options (in shares)                     52        
Exercise of stock options                     $ 2,867       2,867
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 Dec. 31, 2019           27,062         27,062        
Balance at Dec. 31, 2019       $ 52 $ 52 $ 465,460 $ 771 $ 26,051 $ 239,187 $ 731,469 $ 465,460 771 26,051 239,135 731,417
Net income applicable to common equity (numerator)                           56,575 56,575
Other comprehensive income                         77,572   77,572
Stock based compensation                     1,500       1,500
Stock awarded to employees                     $ 85       85
Retirement of common stock (in shares)                     (228)        
Retirement of common stock                     $ (3,952)     (7,782) (11,734)
Dividends                           (33,263) (33,263)
Exercise of stock options (in shares)                     53        
Exercise of stock options                     $ 2,838       2,838
Restricted stock activity (in shares)                     10        
Restricted stock activity                     $ 1,270 (736)     534
Stock awarded to employees (in shares)                     1        
Balance (in shares) at Sep. 30, 2020                     26,898        
Balance at Sep. 30, 2020                     $ 467,201 35 103,623 254,717 825,576
Balance (in shares) at Jun. 30, 2020                     26,933        
Balance at Jun. 30, 2020                     $ 467,351 35 93,732 246,958 808,076
Net income applicable to common equity (numerator)                           20,051 20,051
Other comprehensive income                         9,891   9,891
Stock based compensation                     450       450
Stock awarded to employees                     $ 19       19
Retirement of common stock (in shares)                     (35)        
Retirement of common stock                     $ (619)     (1,249) (1,868)
Dividends                           (11,043) (11,043)
Balance (in shares) at Sep. 30, 2020                     26,898        
Balance at Sep. 30, 2020                     $ 467,201 $ 35 $ 103,623 $ 254,717 $ 825,576
v3.20.2
Consolidated Statements of Changes in Shareholders' Equity (Unaudited) (Parentheticals) - $ / shares
 3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Dividends per share (in dollars per share) $ 0.41 $ 0.41 $ 1.23 $ 1.22
v3.20.2
Consolidated Statements of Cash Flows (Unaudited) - USD ($)
$ in Thousands
 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Operating Activities:    
Net income $ 56,575 $ 59,661
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization 18,482 15,178
Provision for Credit Losses 4,300 0
Net amortization of deferred loan fees (2,803) (215)
Stock option compensation expense 1,500 1,484
Life insurance gains 0 (433)
Securities gains (71)  
Securities gains   (50)
Net changes in:    
Interest income receivable (1,982) 323
Other assets (4,397) (2,073)
Income taxes payable (520) (3,386)
Net deferred tax asset 325 6,386
Interest expense payable 33 19
Other liabilities 24,798 (12,233)
Net Cash Provided by Operating Activities 96,240 64,661
Investing Activities:    
Net (disbursements) repayments of loans (181,894) 73,026
Proceeds from life insurance policies 0 1,273
Purchases of debt securities available for sale (1,612,633) (732,690)
Proceeds from sale of equity securities 0 1,797
Proceeds from sale/maturity/calls of debt securities available for sale 807,064 502,928
Proceeds from maturity/calls of debt securities held to maturity 156,993 184,525
Purchases of premises and equipment (1,682) (2,495)
Proceeds from sale of foreclosed assets 0 307
Net Cash (Used in) Provided by Investing Activities (832,152) 28,671
Financing Activities:    
Net change in deposits 726,569 (70,216)
Net change in short-term borrowings 77,045 (5,601)
Exercise of stock options 2,838 11,177
Retirement of common stock (11,734) (488)
Common stock dividends paid (33,263) (32,849)
Net Cash Provided by (Used in) Financing Activities 761,455 (97,977)
Net Change In Cash and Due from Banks 25,543 (4,645)
Cash and Due from Banks at Beginning of Period 373,421 420,284
Cash and Due from Banks at End of Period 398,964 415,639
Supplemental disclosure of non cash activities:    
Right-of-use assets acquired in exchange for operating lease liabilities 6,457 23,587
Amount recognized upon initial adoption of ASU 2016-02 included above 0 15,325
Securities purchases pending settlement 0 20,114
Supplemental disclosure of cash flow activities:    
Cash paid for amounts included in operating lease liabilities 4,905 5,123
Interest paid for the period 1,310 1,417
Income tax payments for the period $ 18,708 $ 16,021
v3.20.2
Note 1 - Basis of Presentation
 9 Months Ended
Sep. 30, 2020
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, 2020 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, 2019.
v3.20.2
Note 2 - Accounting Policies
 9 Months Ended
Sep. 30, 2020
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, 2019. 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 a 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, 2020, the Company adopted the following new accounting guidance:

 

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

 

The Company adopted the ASU provisions on a modified retrospective basis on January 1, 2020. Management evaluated available data, defined portfolio segments of loans with similar attributes, and selected loss estimate models for each identified loan portfolio segment. Management measured historical loss rates for each portfolio segment. Management also segmented debt securities held to maturity, selected methods to estimate losses for each segment, and measured a loss estimate. Agency mortgage-backed securities were assigned no credit loss allowance due to the perceived backing of government sponsored entities. Municipal securities were evaluated for risk of default based on credit rating and remaining term to maturity using Moody’s risk of default factors; Moody’s loss upon default factors were applied to the assumed defaulted principal amounts to estimate the amount for credit loss allowance. The adjustment to the allowance for credit losses was recorded through an offsetting after-tax adjustment to shareholders’ equity. The implementing entry increased allowance for credit losses by $2,017 thousand, reduced allowance for credit losses for unfunded credit commitments by $2,107 thousand and increased retained earnings by $52 thousand.

 

The following table summarizes the impact of adoption of ASU 2016-13.

 

  

January 1, 2020

 
  

Balance,

  

Impact of

  

As reported

 
  

prior to adoption

  

adoption of

  

under

 
  

of ASU 2016-13

  

ASU 2016-13

  

ASU 2016-13

 
  

(In thousands)

 

Assets:

            

Allowance for credit losses on loans:

            

Commercial

 $4,959  $3,385  $8,344 

Commercial real estate

  4,064   618   4,682 

Construction

  109   (31)  78 

Residential real estate

  206   (132)  74 

Consumer and other installment loans

  6,445   1,878   8,323 

Unallocated

  3,701   (3,701)  - 

Allowance for credit losses on loans:

 $19,484  $2,017  $21,501 
             

Allowance for credit losses on debt securities held to maturity

  -   16   16 
             

Liabilities

            

Allowance for credit losses for unfunded commitments

  2,160   (2,107)  53 

 

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

 

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

 

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

 

To the extent that debt securities in the held-to-maturity portfolio share common risk characteristics, estimated expected credit losses are calculated in a manner like that used for loans held for investment. That is, for pools of such securities with common risk characteristics, the historical lifetime probability of default and severity of loss in the event of default is derived or obtained from external sources and adjusted for the expected effects of reasonable and supportable forecasts over the expected lives of the securities on those historical credit losses. Expected credit loss on each security in the held-to-maturity portfolio that do not share common risk characteristics with any of the pools of debt securities is individually evaluated and a reserve for credit losses is established at the difference between the discounted value of the expected future cash flows, based on the original effective interest rate, and the recorded amortized cost basis of the security. For certain classes of debt securities, the bank considers the history of credit losses, current conditions and reasonable and supportable forecasts, which may indicate that the expectation that nonpayment of the amortized cost basis is or continues to be zero. Therefore, for those securities, the bank does not record expected credit losses.

 

AFS debt securities in unrealized loss positions are evaluated for credit related loss at least quarterly. For AFS debt securities, a decline in fair value due to credit loss results in recording an allowance for credit losses to the extent the fair value is less than the amortized cost basis. Declines in fair value that have not been recorded through an allowance for credit losses, such as declines due to changes in market interest rates, are recorded through other comprehensive income, net of applicable taxes. Although these evaluations involve significant judgment, an unrealized loss in the fair value of a debt security is generally considered to not be related to credit when the fair value of the security is below the carrying value primarily due to changes in risk-free interest rates, there has not been significant deterioration in the financial condition of the issuer, and the Company does not intend to sell nor does it believe it will be required to sell the security before the recovery of its cost basis.

 

If the Company intends to sell a debt security or more likely than not will be required to sell the security before recovery of its amortized cost basis, the debt security is written down to its fair value and the write down is charged against the allowance for credit losses with any incremental loss reported in earnings.

 

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

 

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

 

Loans. Loans are stated at the principal amount outstanding, net of unearned discount and unamortized deferred fees and costs. Interest is accrued daily on the outstanding principal balances and included in other assets. Loans which are more than 90 days delinquent with respect to interest or principal, unless they are well secured and in the process of collection, and other loans on which full recovery of principal or interest is in doubt, are placed on nonaccrual status. Interest previously accrued on loans placed on nonaccrual status is charged against interest income. In addition, some loans secured by real estate and commercial loans to borrowers experiencing financial difficulties are placed on nonaccrual status even though the borrowers continue to repay the loans as scheduled. When the ability to fully collect nonaccrual loan principal is in doubt, payments received are applied against the principal balance of the loans on a cost-recovery method until such time as full collection of the remaining recorded balance is expected. Any additional interest payments received after that time are recorded as interest income on a cash basis. Nonaccrual loans are reinstated to accrual status when none of the loan’s principal and interest is past due and improvements in credit quality eliminate doubt as to the full collectability of both principal and interest, or the loan otherwise becomes well secured and in the process of collection. Certain consumer loans or auto receivables are charged off against the allowance for credit losses when they become 120 days past due.

 

A troubled debt restructuring (“TDR”) occurs when the Company, for reasons related to a borrower’s financial difficulties, grants a concession to the borrower it would not otherwise consider. The Company follows its general nonaccrual policy for TDRs. Performing TDRs are reinstated to accrual status when improvements in credit quality eliminate the doubt as to full collectability of both principal and interest. Under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), banks may elect to deem that loan modifications do not result in TDRs if they are (1) related to the novel coronavirus disease; (2) executed on a loan that was not more than 30 days past due as of December 31, 2019; and (3) executed between March 1, 2020, and the earlier of (A) 60 days after the date of termination of the National Emergency or (B) December 31, 2020.

 

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

 

The preparation of these financial statements requires Management to estimate the amount of expected losses over the expected contractual life of our existing loan portfolio and establish an allowance for credit losses. Loan agreements generally include a maturity date, and the Company considers the contractual life of a loan agreement to extend from the date of origination to the contractual maturity date. In estimating credit losses, Management must exercise significant judgment in evaluating information deemed relevant. The amount of ultimate losses on the loan portfolio can vary from the estimated amounts. Management follows a systematic methodology to estimate loss potential in an effort to reduce the differences between estimated and actual losses.

 

The allowance for credit losses is established through provisions for credit losses charged to income. Losses on loans are charged to the allowance for credit losses when all or a portion of the recorded amount of a loan is deemed to be uncollectible. Recoveries of loans previously charged off are credited to the allowance when realized. The Company’s allowance for credit losses is maintained at a level considered adequate to provide for expected losses based on historical loss rates adjusted for current and expected conditions over a forecast period. These include conditions unique to individual borrowers, as well as overall credit loss experience, the amount of past due, nonperforming and classified loans, recommendations of regulatory authorities, prevailing economic conditions, or credit protection agreements and other factors.

 

Loans that share common risk characteristics are segregated into pools based on common characteristics, which is primarily determined by loan, borrower, or collateral type. Historical loss rates are determined for each pool. For consumer installment loans, primarily secured by automobiles, historical loss rates are determined using a vintage methodology, which tracks losses based on period of origination. For commercial, construction, and commercial real estate, historical loss rates are determined using an open pool methodology where losses are tracked over time for all loans included in the pool at the historical measurement date. Historical loss rates are adjusted for factors that are not reflected in the historical loss rates that are attributable to national or local economic or industry trends which have occurred but have not yet been recognized in past loan charge-off history, estimated losses based on management’s reasonable and supportable expectation of economic trends over a forecast horizon of up to two years, and other factors that impact credit loss expectations that are not reflected in the historical loss rates. Other factors include, but are not limited to, the effectiveness of the Company’s loan review system, adequacy of lending Management and staff, loan policies and procedures, problem loan trends, and concentrations of credit. At the end of the two-year forecast period loss rates revert immediately to the historical loss rates. The results of this analysis are applied to the amortized cost of the loans included within each pool.

 

Loans that do not share risk characteristics with other loans in the pools are evaluated individually. A loan is considered ‘collateral-dependent’ when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. A credit loss reserve for collateral-dependent loans is established at the difference between the amortized cost basis in the loan and the fair value of the underlying collateral adjusted for costs to sell. For other individually evaluated loans that are not collateral dependent, a credit loss reserve is established at the difference between the amortized cost basis in the loan and the present value of expected future cash flows discounted at the loan’s effective interest rate. The impact of an expected TDR modification is included in the allowance for credit losses when management determines a TDR modification is likely.

 

Accrued interest is recorded in other assets and is excluded from the estimation of expected credit loss. Accrued interest is reversed through interest income when amounts are determined to be uncollectible, which generally occurs when the underlying receivable is placed on nonaccrual status or charged off.

 

Liability for Off-Balance Sheet Credit Exposures. Off-balance sheet credit exposures relate to letters of credit and unfunded loan commitments for commercial, construction and consumer loans. The Company maintains a separate allowance for credit losses from off-balance-sheet credit exposures, which is included within other liabilities on the consolidated statements of financial condition. Increases or reductions to the Company’s allowance for credit losses from off-balance sheet credit exposures are recorded in other expenses. Management estimates the amount of expected losses by estimating expected usage exposures that are not unconditionally cancellable by the Company and applying the loss factors used in the allowance for credit loss methodology to estimate the liability for credit losses related to unfunded commitments. No credit loss estimate is reported for off-balance-sheet credit exposures that are unconditionally cancellable by the Company or for undrawn amounts under such arrangements that may be drawn prior to the cancellation of the arrangement.

 

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 were 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 was adopted by the Company January 1, 2020. The additional disclosures did not affect the financial results upon adoption.

 

Recently Issued Accounting Standards

 

FASB ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, was issued December 2019. The ASU is intended to simplify various aspects related to accounting for income taxes, eliminates certain exceptions to the general principles in ASC Topic 740 related to intra-period tax allocation, simplifies when companies recognize deferred taxes in an interim period, and clarifies certain aspects of the current guidance to promote consistent application. This guidance effective for public entities for fiscal years beginning after December 15, 2020, and for interim period within those fiscal years, with early adoption permitted. This guidance is applicable to the Company’s fiscal year beginning January 1, 2021. The Company is currently evaluating the potential effects of this guidance on its consolidated financial statements.

 

FASB ASU 2020-04, Reference Rate Reform (Topic 848): Simplifying the Accounting for Income Taxes, was issued March 2020. The ASU provides optional expedients and exceptions for applying GAAP to loan and lease agreements, derivative contracts, and other transactions affected by the anticipated transition away from LIBOR toward new interest rate benchmarks. For transactions that are modified because of reference rate reform and that meet certain scope guidance (i) modifications of loan agreements should be accounted for by prospectively adjusting the effective interest rate and the modification will be considered "minor" so that any existing unamortized origination fees/costs would carry forward and continue to be amortized and (ii) modifications of lease agreements should be accounted for as a continuation of the existing agreement with no reassessments of the lease classification and the discount rate or remeasurements of lease payments that otherwise would be required for modifications not accounted for as separate contracts. ASU 2020-04 also provides numerous optional expedients for derivative accounting. ASU 2020-04 is effective March 12, 2020 through December 31, 2022. An entity may elect to apply ASU 2020-04 for contract modifications as of January 1, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued. Once elected for a Topic or an Industry Subtopic within the Codification, the amendments in this ASU must be applied prospectively for all eligible contract modifications for that Topic or Industry Subtopic. The Company is currently evaluating the impacts of this ASU and has not yet determined whether LIBOR transition and this ASU will have material effects on our business operations and consolidated financial statements.

 
v3.20.2
Note 3 - Investment Securities
 9 Months Ended
Sep. 30, 2020
Notes to Financial Statements  
Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]

Note 3: Investment Securities

 

The Company’s marketable equity securities were sold in the third quarter 2019. During the nine months ended September 30, 2019, the Company recognized gross unrealized holding gains of $50 thousand in earnings. The Company had no marketable equity securities at September 30, 2020 and December 31, 2019.

 

During the quarter and nine months ended September 30, 2020, the Company provided no provision for credit loss on debt securities held to maturity. 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, before allowance for credit losses of $16 thousand, follows:

 

  

At September 30, 2020

 
      

Gross

  

Gross

     
  

Amortized

  

Unrealized

  

Unrealized

  

Fair

 
  

Cost

  

Gains

  

Losses

  

Value

 
  

(In thousands)

 

Debt securities available for sale

                

Agency residential mortgage-backed securities ("MBS")

 $720,123  $25,174  $-  $745,297 

Agency commercial MBS

  3,601   -   (16)  3,585 

Securities of U.S. Government entities

  163   -   -   163 

Obligations of states and political subdivisions

  121,951   5,223   (2)  127,172 

Corporate securities

  2,098,444   114,582   (199)  2,212,827 

Commercial paper

  224,862   29   (75)  224,816 

Collateralized loan obligations

  667,735   3,053   (654)  670,134 

Total debt securities available for sale

  3,836,879   148,061   (946)  3,983,994 

Debt securities held to maturity

                

Agency residential MBS

  272,460   7,648   (39)  280,069 

Non-agency residential MBS

  2,020   36   -   2,056 

Obligations of states and political subdivisions

  303,331   8,261   -   311,592 

Total debt securities held to maturity

  577,811   15,945   (39)  593,717 

Total

 $4,414,690  $164,006  $(985) $4,577,711 

 

 

  

At December 31, 2019

 
      

Gross

  

Gross

     
  

Amortized

  

Unrealized

  

Unrealized

  

Fair

 
  

Cost

  

Gains

  

Losses

  

Value

 
  

(In thousands)

 

Debt securities available for sale

                

U.S. Treasury securities

 $19,999  $1  $-  $20,000 

Securities of U.S. Government sponsored entities

  111,251   14   (98)  111,167 

Agency residential MBS

  934,592   10,996   (5,838)  939,750 

Agency commercial MBS

  3,711   -   (3)  3,708 

Securities of U.S. Government entities

  553   -   (9)  544 

Obligations of states and political subdivisions

  159,527   3,656   (44)  163,139 

Corporate securities

  1,805,479   29,183   (879)  1,833,783 

Collateralized loan obligations

  6,748   7   -   6,755 

Total debt securities available for sale

  3,041,860   43,857   (6,871)  3,078,846 

Debt securities held to maturity

                

Agency residential MBS

  353,937   766   (2,235)  352,468 

Non-agency residential MBS

  2,354   22   -   2,376 

Obligations of states and political subdivisions

  381,781   7,672   (1)  389,452 

Total debt securities held to maturity

  738,072   8,460   (2,236)  744,296 

Total

 $3,779,932  $52,317  $(9,107) $3,823,142 

  

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

 

  

At September 30, 2020

 
  

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

 $452,154  $454,493  $63,044  $63,504 

Over 1 to 5 years

  973,305   1,026,667   132,750   136,640 

Over 5 to 10 years

  1,480,374   1,544,476   107,537   111,448 

Over 10 years

  207,322   209,476   -   - 

Subtotal

  3,113,155   3,235,112   303,331   311,592 

MBS

  723,724   748,882   274,480   282,125 

Total

 $3,836,879  $3,983,994  $577,811  $593,717 

 

  

At December 31, 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

 $294,698  $295,255  $70,378  $70,602 

Over 1 to 5 years

  1,104,775   1,122,391   161,911   165,126 

Over 5 to 10 years

  670,595   683,277   149,492   153,724 

Over 10 years

  33,489   34,465   -   - 

Subtotal

  2,103,557   2,135,388   381,781   389,452 

MBS

  938,303   943,458   356,291   354,844 

Total

 $3,041,860  $3,078,846  $738,072  $744,296 

 

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, 2020 and December 31, 2019, 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, 2020

 
  

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)

 

Agency residential MBS

  1  $98  $-   1  $21  $-   2  $119  $- 

Agency commercial MBS

  1   3,585   (16)  -   -   -   1   3,585   (16)

Securities of U.S. Government entities

  1   163   -   -   -   -   1   163   - 

Obligations of states and political subdivisions

  5   2,447   (2)  -   -   -   5   2,447   (2)

Corporate securities

  -   -   -   2   18,263   (199)  2   18,263   (199)

Commercial paper

  4   99,874   (75)  -   -   -   4   99,874   (75)

Collateralized loan obligations

  29   216,358   (654)  -   -   -   29   216,358   (654)

Total

  41  $322,525  $(747)  3  $18,284  $(199)  44  $340,809  $(946)

 

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

 

  

Debt Securities Held to Maturity

 
  

At September 30, 2020

 
  

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

  2  $153  $(1)  3  $1,109  $(38)  5  $1,262  $(39)

 

Based upon the most recent evaluation, the unrealized losses on the Company’s debt securities available for sale were most likely caused by market conditions for these types of investments, particularly changes in risk-free interest rates and/or market bid-ask spreads. The Company does not intend to sell any debt securities available for sale 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 have credit related loss as of September 30, 2020.

 

The fair values of debt securities available for sale 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, significant credit loss on debt securities available for sale may occur in the future.

 

As of September 30, 2020 and December 31, 2019, the Company had debt securities pledged to secure public deposits and short-term borrowed funds of $850,245 thousand and $760,365 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, 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

  1  $9,951  $(49)  3  $45,877  $(49)  4  $55,828  $(98)

Agency residential MBS

  6   11,674   (100)  47   347,384   (5,738)  53   359,058   (5,838)

Agency commercial MBS

  1   3,708   (3)  -   -   -   1   3,708   (3)

Securities of U.S. Government entities

  -   -   -   2   544   (9)  2   544   (9)

Obligations of states and political subdivisions

  -   -   -   7   4,163   (44)  7   4,163   (44)

Corporate securities

  8   71,577   (162)  11   64,380   (717)  19   135,957   (879)

Total

  16  $96,910  $(314)  70  $462,348  $(6,557)  86  $559,258  $(6,871)

 

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

 

  

Debt Securities Held to Maturity

 
  

At December 31, 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

  6  $12,098  $(87)  54  $277,203  $(2,148)  60  $289,301  $(2,235)

Obligations of states and political subdivisions

  -   -   -   1   251   (1)  1   251   (1)

Total

  6  $12,098  $(87)  55  $277,454  $(2,149)  61  $289,552  $(2,236)

 

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 $14.9 million at September 30, 2020, is rated below investment grade. The $14.9 million corporate bond was issued by a pharmaceutical company which develops, manufactures and markets generic and branded human pharmaceuticals, as well as active pharmaceutical ingredients, to customers worldwide. The bond matures in 2021, and the issuing Company has refinanced much of its debt obligations beyond the maturity date. 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 following table presents the activity in the allowance for credit losses for debt securities held to maturity:

 

  

For

 
  

the Nine Months

 
  

Ended September 30,

 
  

2020

 
  

(In thousands)

 

Allowance for credit losses:

    

Beginning balance, prior to adoption of ASU 2016-13

 $- 

Impact of adopting ASU 2016-13

  16 

Provision

  - 

Chargeoffs

  - 

Recoveries

  - 

Total ending balance

 $16 

 

Agency mortgage-backed securities were assigned no credit loss allowance due to the perceived backing of government sponsored entities. Municipal securities were evaluated for risk of default based on credit rating and remaining term to maturity using Moody’s risk of default factors; Moody’s loss upon default factors were applied to the assumed defaulted principal amounts to estimate the amount for credit loss allowance.

 

The following table summarizes the amortized cost of debt securities held to maturity at September 30, 2020, aggregated by credit rating:

 

  

Credit Risk Profile by Credit Rating

 
  

At September 30, 2020

 
  

(In thousands)

 
  

AAA/AA/A

  

BBB

  

BB/B

  

Total

 
                 

Agency residential MBS

 $272,460  $-  $-  $272,460 

Non-agency residential MBS

  1,005   -   1,015   2,020 

Obligations of states and political subdivisions

  303,230   101   -   303,331 

Total

 $576,695  $101  $1,015  $577,811 

 

There were no debt securities held to maturity on nonaccrual status or past due 30 days or more as of September 30, 2020.

 

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,

 
  

2020

  

2019

  

2020

  

2019

 
  

(In thousands)

 
                 

Taxable

 $23,079  $19,586  $67,963  $56,992 

Tax-exempt from federal income tax

  2,911   3,777   9,501   12,165 

Total interest income from investment securities

 $25,990  $23,363  $77,464  $69,157 

 
v3.20.2
Note 4 - Loans, Allowance for Loan Losses/Credit Losses and Other Real Estate Owned
 9 Months Ended
Sep. 30, 2020
Notes to Financial Statements  
Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

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

 

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,

 
  

2020

  

2019

 
  

(In thousands)

 

Commercial:

        

Paycheck Protection Program ("PPP") loans

 $243,982  $- 

Other

  201,623   222,085 

Total commercial

  445,605   222,085 

Commercial Real Estate

  563,707   578,758 

Construction

  140   1,618 

Residential Real Estate

  25,076   32,748 

Consumer Installment & Other

  275,481   291,455 

Total

 $1,310,009  $1,126,664 

 

The following summarizes activity in the allowance for loan losses/credit losses:

 

  

Allowance for Credit Losses

 
  

For the Three Months Ended September 30, 2020

 
                  

Consumer

     
      

Commercial

      

Residential

  

Installment

     
  

Commercial

  

Real Estate

  

Construction

  

Real Estate

  

and Other

  

Total

 
  

(In thousands)

 

Allowance for credit losses:

                        

Balance at beginning of period

 $8,072  $4,623  $7  $57  $11,770  $24,529 

Provision (reversal)

  867   1,030   -   (5)  (1,892)  - 

Chargeoffs

  -   -   -   -   (872)  (872)

Recoveries

  46   12   -   -   427   485 

Total allowance for credit losses

 $8,985  $5,665  $7  $52  $9,433  $24,142 

 

  

Allowance for Credit Losses

 
  

For the Nine Months Ended September 30, 2020

 
                  

Consumer

         
      

Commercial

      

Residential

  

Installment

         
  

Commercial

  

Real Estate

  

Construction

  

Real Estate

  

and Other

  

Unallocated

  

Total

 
  

(In thousands)

 

Allowance for credit losses:

                            

Balance at beginning of period, prior to adoption of ASU 2016-13

 $4,959  $4,064  $109  $206  $6,445  $3,701  $19,484 

Impact of adopting ASU 2016-13

  3,385   618   (31)  (132)  1,878   (3,701)  2,017 

Adjusted beginning balance

  8,344   4,682   78   74   8,323   -   21,501 

Provision (reversal)

  537   946   (71)  (22)  2,910   -   4,300 

Chargeoffs

  (178)  -   -   -   (3,071)  -   (3,249)

Recoveries

  282   37   -   -   1,271   -   1,590 

Total allowance for credit losses

 $8,985  $5,665  $7  $52  $9,433  $-  $24,142 

 

The growth in commercial loan balances was due to originations of PPP loans which are 100% guaranteed by the Small Business Administration (“SBA”). PPP loan proceeds used for eligible payroll and certain other operating costs are to be forgiven with repayment of loan principal and accrued interest made by the SBA. Management does not expect credit losses on PPP loans.

 

  

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 

 

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

 

  

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

 
  

At December 31, 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

 $2,413  $-  $-  $-  $-  $-  $2,413 

Collectively evaluated for impairment

  2,546   4,064   109   206   6,445   3,701   17,071 

Total

 $4,959  $4,064  $109  $206  $6,445  $3,701  $19,484 

Carrying value of loans:

                            

Individually evaluated for impairment

 $8,182  $7,409  $-  $190  $43  $-  $15,824 

Collectively evaluated for impairment

  213,903   571,349   1,618   32,558   291,412   -   1,110,840 

Total

 $222,085  $578,758  $1,618  $32,748  $291,455  $-  $1,126,664 

 

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, 2020

 
  

Commercial

  

Commercial Real Estate

  

Construction

  

Residential Real Estate

  

Consumer Installment and Other

  

Total

 
  

(In thousands)

 

Grade:

                        

Pass

 $437,216  $546,714  $140  $23,699  $274,251  $1,282,020 

Substandard

  8,389   16,993   -   1,377   320   27,079 

Doubtful

  -   -   -   -   505   505 

Loss

  -   -   -   -   405   405 

Total

 $445,605  $563,707  $140  $25,076  $275,481  $1,310,009 

 

  

Credit Risk Profile by Internally Assigned Grade

 
  

At December 31, 2019

 
  

Commercial

  

Commercial Real Estate

  

Construction

  

Residential Real Estate

  

Consumer Installment and Other

  

Total

 
  

(In thousands)

 

Grade:

                        

Pass

 $213,542  $567,525  $1,618  $31,055  $289,424  $1,103,164 

Substandard

  8,543   11,233   -   1,693   1,329   22,798 

Doubtful

  -   -   -   -   308   308 

Loss

  -   -   -   -   394   394 

Total

 $222,085  $578,758  $1,618  $32,748  $291,455  $1,126,664 

 

The following tables summarize loans by delinquency and nonaccrual status:

 

  

Summary of Loans by Delinquency and Nonaccrual Status

 
  

At September 30, 2020

 
  

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

 $444,496  $963  $39  $-  $107  $445,605 

Commercial real estate

  559,361   624   -   -   3,722   563,707 

Construction

  140   -   -   -   -   140 

Residential real estate

  24,357   558   -   -   161   25,076 

Consumer installment and other

  272,631   1,328   772   360   390   275,481 

Total

 $1,300,985  $3,473  $811  $360  $4,380  $1,310,009 

 

  

Summary of Loans by Delinquency and Nonaccrual Status

 
  

At December 31, 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

 $221,199  $531  $158  $-  $197  $222,085 

Commercial real estate

  573,809   432   421   -   4,096   578,758 

Construction

  1,618   -   -   -   -   1,618 

Residential real estate

  31,934   274   540   -   -   32,748 

Consumer installment and other

  286,391   2,960   1,517   440   147   291,455 

Total

 $1,114,951  $4,197  $2,636  $440  $4,440  $1,126,664 

 

There was no allowance for credit losses allocated to loans on nonaccrual status as of September 30, 2020. There were no commitments to lend additional funds to borrowers whose loans were on nonaccrual status at September 30, 2020 and December 31, 2019.

 

The following summarizes impaired loans as of December 31, 2019:

 

  

Impaired Loans

 
  

At December 31,

 
  

2019

 
      

Unpaid

     
  

Recorded

  

Principal

  

Related

 
  

Investment

  

Balance

  

Allowance

 
  

(In thousands)

 

With no related allowance recorded:

            

Commercial

 $21  $21  $- 

Commercial real estate

  7,408   8,856   - 

Residential real estate

  190   220   - 

Consumer installment and other

  43   43   - 

Total with no related allowance recorded

  7,662   9,140   - 
             

With an allowance recorded:

            

Commercial

  8,160   8,160   2,413 

Total with an allowance recorded

  8,160   8,160   2,413 

Total

 $15,822  $17,300  $2,413 

 

Impaired loans at December 31, 2019, included $6,713 thousand of restructured loans, $3,670 thousand of which were on nonaccrual status.

 

  

Impaired Loans

 
  

For the Three Months

  

For the Nine Months

 
  

Ended September 30, 2019

 
  

Average

  

Recognized

  

Average

  

Recognized

 
  

Recorded

  

Interest

  

Recorded

  

Interest

 
  

Investment

  

Income

  

Investment

  

Income

 
  

(In thousands)

 

Commercial

 $8,701  $144  $9,404  $476 

Commercial real estate

  7,968   60   7,133   333 

Residential real estate

  194   4   196   10 

Consumer installment and other

  99   -   103   - 

Total

 $16,962  $208  $16,836  $819 

 

The following tables provide information on troubled debt restructurings (TDRs):

 

  

Troubled Debt Restructurings

 
  

At September 30, 2020

 
              

Period-End

 
              

Individual

 
  

Number of

  

Pre-Modification

  

Period-End

  

Credit Loss

 
  

Contracts

  

Carrying Value

  

Carrying Value

  

Allowance

 
  

($ in thousands)

 

Commercial real estate

  6  $8,367  $6,121  $- 

Residential real estate

  1   241   183   - 

Total

  7  $8,608  $6,304  $- 

 

  

Troubled Debt Restructurings

 
  

At December 31, 2019

 
              

Period-End

 
              

Individual

 
  

Number of

  

Pre-Modification

  

Period-End

  

Impairment

 
  

Contracts

  

Carrying Value

  

Carrying Value

  

Allowance

 
  

($ in thousands)

 

Commercial

  2  $278  $32  $11 

Commercial real estate

  6   8,367   6,492   - 

Residential real estate

  1   241   189   - 

Total

  9  $8,886  $6,713  $11 

 

During the three and nine months ended September 30, 2020, the Company did not modify any loans that were considered TDRs for accounting purposes. Section 4013 of the CARES Act allowed certain loan modifications for borrowers impacted by the COVID-19 pandemic to be excluded from TDR accounting. During the three and nine months ended September 30, 2020, the Company modified loans under Section 4013 of the CARES Act, granting 90 day deferrals of principal and interest payments. As of September 30, 2020, 17 commercial real estate loans with deferred payments totaled $19.1 million, primarily for hospitality and retail properties. As of September 30, 2020, 140 consumer and five commercial loan deferrals were $5.0 million and $209 thousand, respectively. During the three and nine months ended September 30, 2019, the Company did not modify any loans that were considered TDRs. There were no chargeoffs related to TDRs made during the three and nine months ended September 30, 2020 and 2019. During the three and nine months ended September 30, 2020 and 2019, no troubled debt restructured loans defaulted within 12 months of the modification date. A TDR is considered to be in default when payments are ninety days or more past due.

 

TDRs of $6,304 thousand included loans of $3,420 thousand on nonaccrual status at September 30, 2020. No allowance for credit losses was allocated to one commercial real estate loan secured by real property with a balance of $3,420 thousand, which was considered collateral-dependent at September 30, 2020. Four other commercial real estate loans totaling $7.7 million were secured by real property and considered collateral-dependent at September 30, 2020. At September 30, 2020, $357 thousand of indirect consumer installment loans secured by personal property were past due 90 days or more and considered collateral-dependent and two residential real estate loans totaling $410 thousand secured by real property were considered collateral-dependent. There were no other collateral-dependent loans at September 30, 2020. A loan is considered collateral-dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral.

 

Based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

 

  

At September 30, 2020

 
                                  

Revolving

     
                                  

Loans

     
  

Term Loans Amortized Cost Basis by Origination Year

  

Total

  

Amortized

     
  

Prior

  

2015

  

2016

  

2017

  

2018

  

2019

  

2020

  

Term Loans

  

Cost Basis

  

Total

 
  

(In thousands)

 

Commercial loans by grade

                                 

Pass

 $20,496  $5,205  $26,132  $10,860  $21,343  $42,380  $270,664  $397,080  $40,136  $437,216 

Substandard

  64   -   1   -   -   -   7,876   7,941   448   8,389 

Doubtful

  -   -   -   -   -   -   -   -   -   - 

Loss

  -   -   -   -   -   -   -   -   -   - 

Total

 $20,560  $5,205  $26,133  $10,860  $21,343  $42,380  $278,540  $405,021  $40,584  $445,605 

 

  

At September 30, 2020

 
                                  

Revolving

     
                                  

Loans

     
  

Term Loans Amortized Cost Basis by Origination Year

  

Total

  

Amortized

     
  

Prior

  

2015

  

2016

  

2017

  

2018

  

2019

  

2020

  

Term Loans

  

Cost Basis

  

Total

 
  

(In thousands)

 

Commercial real estate loans by grade

                                 

Pass

 $88,661  $50,764  $43,804  $101,731  $95,622  $94,531  $71,601  $546,714  $-  $546,714 

Substandard

  4,807   1,314   9,921   107   -   -   844   16,993   -   16,993 

Doubtful

  -   -   -   -   -   -      -   -   - 

Loss

  -   -   -   -   -   -      -   -   - 

Total

 $93,468  $52,078  $53,725  $101,838  $95,622  $94,531  $72,445  $563,707  $-  $563,707 

 

  

At September 30, 2020

 
                                  

Revolving

     
                                  

Loans

     
  

Term Loans Amortized Cost Basis by Origination Year

  

Total

  

Amortized

     
  

Prior

  

2015

  

2016

  

2017

  

2018

  

2019

  

2020

  

Term Loans

  

Cost Basis

  

Total

 
  

(In thousands)

 

Construction loans by grade

                                 

Pass

 $-  $-  $-  $-  $-  $-  $-  $-  $140  $140 

Substandard

  -   -   -   -   -   -   -   -   -   - 

Doubtful

  -   -   -   -   -   -   -   -   -   - 

Loss

  -   -   -   -   -   -   -   -   -   - 

Total

 $-  $-  $-  $-  $-  $-  $-  $-  $140  $140 

 

  

At September 30, 2020

 
                                  

Revolving

     
                                  

Loans

     
  

Term Loans Amortized Cost Basis by Origination Year

  

Total

  

Amortized

     
  

Prior

  

2015

  

2016

  

2017

  

2018

  

2019

  

2020

  

Term Loans

  

Cost Basis

  

Total

 
  

(In thousands)

 

Residential Real Estate loans by grade

                                 

Pass

 $23,699  $-  $-  $-  $-  $-  $-  $23,699  $-  $23,699 

Substandard

  1,377   -   -   -   -   -   -   1,377   -   1,377 

Doubtful

  -   -   -   -   -   -   -   -   -   - 

Loss

  -   -   -   -   -   -   -   -   -   - 

Total

 $25,076  $-  $-  $-  $-  $-  $-  $25,076  $-  $25,076 

 

The Company considers the delinquency and nonaccrual status of the consumer loan portfolio and its impact on the allowance for credit losses. The following table presents the amortized cost in consumer installment and other loans based on delinquency and nonaccrual status:

 

  

At September 30, 2020

 
                                  

Revolving

     
                                  

Loans

     
  

Term Loans Amortized Cost Basis by Origination Year

  

Total

  

Amortized

     
  

Prior

  

2015

  

2016

  

2017

  

2018

  

2019

  

2020

  

Term Loans

  

Cost Basis

  

Total

 
  

(In thousands)

 

Consumer installment and other loans by delinquency and nonaccrual status

                     

Current

 $5,087  $6,457  $19,339  $24,554  $53,347  $69,313  $64,893  $242,990  $29,641  $272,631 

30-59 days past due

  35   91   147   224   266   402   148   1,313   15   1,328 

60-89 days past due

  2   30   48   163   327   160   40   770   2   772 

Past due 90 days or more

  -   5   29   -   226   66   31   357   3   360 

Nonaccrual

  -   -   -   -   -   -   -   -   390   390 

Total

 $5,124  $6,583  $19,563  $24,941  $54,166  $69,941  $65,112  $245,430  $30,051  $275,481 

 

There were no loans held for sale at September 30, 2020 and December 31, 2019.

 

At September 30, 2020 and December 31, 2019, the Company held total other real estate owned (OREO) of $43 thousand. There was no reserve applied against OREO at September 30, 2020 and December 31, 2019. There were no foreclosed residential real estate properties at September 30, 2020 and December 31, 2019. The amount of consumer mortgage loans outstanding secured by residential real estate properties for which formal foreclosure proceedings were in process was $410 thousand at September 30, 2020 and $124 thousand at December 31, 2019.
v3.20.2
Note 5 - Concentration of Credit Risk
 9 Months Ended
Sep. 30, 2020
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 credit 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 credit losses, capital notes, and debentures of the bank. At September 30, 2020, the Bank did not have credit extended to any one entity exceeding these limits. At September 30, 2020, the Bank had 31 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 $39,779 thousand and $43,129 thousand at September 30, 2020 and December 31, 2019, 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, 2020, the Bank held corporate bonds in 97 issuing entities and commercial paper in 9 issuing entities that exceeded $5 million for each issuer.

 
v3.20.2
Note 6 - Other Assets and Other Liabilities
 9 Months Ended
Sep. 30, 2020
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,

 
  

2020

  

2019

 
  

(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

  59,868   57,810 

Net deferred tax asset

  -   11,085 

Right-of-use asset

  19,098   17,136 

Limited partnership investments

  18,935   20,773 

Interest receivable

  30,779   28,797 

Prepaid assets

  3,619   3,737 

Other assets

  13,743   10,767 

Total other assets

 $160,269  $164,332 

 

(1)

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

 

The Company owns 211 thousand shares of Visa Inc. class B common stock which have transfer restrictions; the carrying value is $-0- thousand. On 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 $199.97 per share on September 30, 2020, the last day of stock market trading for the third quarter 2020. 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, 2020, this investment totaled $18,935 thousand and $13,397 thousand of this amount represents outstanding equity capital commitments that are included in other liabilities. At December 31, 2019, this investment totaled $20,773 thousand and $16,231 thousand of this amount represents outstanding equity capital commitments that are included in other liabilities. At September 30, 2020, the $13,397 thousand of outstanding equity capital commitments are expected to be paid as follows, $2,248 thousand in the remainder of 2020, $4,071 thousand in 2021, $5,983 thousand in 2022, $295 thousand in 2023, $24 thousand in 2024, $228 thousand in 2025, $74 thousand in 2026 and $474 thousand in 2027 or thereafter.

 

The amounts recognized in net income for these investments include:

 

  

For the Three Months Ended

  

For the Nine Months Ended

 
  

September 30,

 
  

2020

  

2019

  

2020

  

2019

 
  

(In thousands)

 

Investment loss included in pre-tax income

 $640  $600  $1,840  $1,800 

Tax credits recognized in provision for income taxes

  225   225   675   675 

 

Other liabilities consisted of the following:

 

  

At September 30,

  

At December 31,

 
  

2020

  

2019

 
  

(In thousands)

 

Net deferred tax liability

 $21,819  $- 

Operating lease liability

  19,098   17,136 

Other liabilities

  49,559   27,453 

Total other liabilities

 $90,476  $44,589 

 

The deferred tax liability at September 30, 2020 of $21,819 thousand, net of deferred tax benefits of $21,942 thousand, included deferred tax obligations of $43,492 thousand related to unrealized gains of $147,115 thousand on available for sale debt securities. The net deferred tax asset at December 31, 2019 of $11,085 thousand was net of deferred tax obligations of $10,934 thousand related to available for sale debt securities unrealized gains.

 

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 five years. Certain lease arrangements contain extension options, which can be exercised at the Company’s option, for one or more additional five 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, 2020.

 

As of September 30, 2020, the Company recorded a lease liability of $19,098 thousand and a right-of-use asset of $19,098 thousand. The weighted average remaining life of operating leases and weighted average discount rate used to determine operating lease liabilities were 4.8 years and 2.25%, respectively, at September 30, 2020. The Company did not have any material lease incentives, unamortized initial direct costs, prepaid lease expense, or accrued lease expense as of September 30, 2020.

 

Total lease costs during the three and nine months ended September 30, 2020, of $1,671 thousand and $4,988 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, 2020.

 

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

 

  

Minimum
future lease
payments

 
  

At September 30,

 
  

2020

 
  

(In thousands)

 

The remaining three months of 2020

 $1,599 

2021

  5,353 

2022

  4,426 

2023

  3,689 

2024

  2,078 

Thereafter

  2,863 

Total minimum lease payments

  20,008 

Less: discount

  (910)

Present value of lease liability

 $19,098 

 
v3.20.2
Note 7 - Goodwill and Identifiable Intangible Assets
 9 Months Ended
Sep. 30, 2020
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, 2020 and year ended December 31, 2019. 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, 2020 and year ended December 31, 2019 no such adjustments were recorded.

 

The carrying values of goodwill were:

 

  

At September 30, 2020

  

At December 31, 2019

 
  

(In thousands)

 

Goodwill

 $121,673  $121,673 

 

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

 

  

At September 30, 2020

  

At December 31, 2019

 
  

Gross

      

Gross

     
  

Carrying

  

Accumulated

  

Carrying

  

Accumulated

 
  

Amount

  

Amortization

  

Amount

  

Amortization

 
  

(In thousands)

 

Core deposit intangibles

 $56,808  $(55,635) $56,808  $(55,417)

 

As of September 30, 2020, 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, 2020 (actual)

 $218 

Estimate for the remainder of year ending December 31, 2020

  69 

Estimate for year ending December 31, 2021

  269 

2022

  252 

2023

  236 

2024

  222 

2025

  125 

 
v3.20.2
Note 8 - Deposits and Borrowed Funds
 9 Months Ended
Sep. 30, 2020
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,

 
  

2020

  

2019

 
  

(In thousands)

 

Noninterest-bearing

 $2,684,028  $2,240,112 

Interest-bearing:

        

Transaction

  1,040,712   931,888 

Savings

  1,653,000   1,471,284 

Time deposits less than $100 thousand

  83,838   88,355 

Time deposits $100 thousand through $250 thousand

  50,378   54,874 

Time deposits more than $250 thousand

  27,234   26,108 

Total deposits

 $5,539,190  $4,812,621 

 

Demand deposit overdrafts of $1,466 thousand and $1,055 thousand were included as loan balances at September 30, 2020 and December 31, 2019, respectively. Interest expense for aggregate time deposits with individual account balances in excess of $100 thousand was $80 thousand and $238 thousand for the three and nine months ended September 30, 2020, respectively, and $81 thousand and $246 thousand for the three and nine months ended September 30, 2019, 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,

 
  

2020

  

2019

 

Repurchase agreements:

 

(In thousands)

 

Collateral securing borrowings:

        

Securities of U.S. Government sponsored entities

 $-  $65,833 

Agency residential MBS

  76,715   52,485 

Corporate securities

  183,447   146,253 

Total collateral carrying value

 $260,162  $264,571 

Total short-term borrowed funds

 $107,973  $30,928 

 
v3.20.2
Note 9 - Fair Value Measurements
 9 Months Ended
Sep. 30, 2020
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. 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, loans individually evaluated for credit loss, 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, commercial paper, collateralized loan obligations, municipal bonds and securities of U.S government entities.

 

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 evaluates debt securities for credit loss on a quarterly basis. 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, 2020

 
  

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

                

Agency residential mortgage-backed securities (MBS)

 $745,297  $-  $745,297  $- 

Agency commercial MBS

  3,585   -   3,585   - 

Securities of U.S. Government entities

  163   -   163   - 

Obligations of states and political subdivisions

  127,172   -   127,172   - 

Corporate securities

  2,212,827   -   2,212,827   - 

Commercial paper

  224,816      224,816    

Collateralized loan obligations

  670,134   -   670,134   - 

Total debt securities available for sale

 $3,983,994  $-  $3,983,994  $- 

 

(1) There were no transfers in to or out of level 3 during the nine months ended September 30, 2020.

  

At December 31, 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

 $20,000  $20,000  $-  $- 

Securities of U.S. Government sponsored entities

  111,167   -   111,167   - 

Agency residential MBS

  939,750   -   939,750   - 

Agency commercial MBS

  3,708   -   3,708   - 

Securities of U.S. Government entities

  544   -   544   - 

Obligations of states and political subdivisions

  163,139   -   163,139   - 

Corporate securities

  1,833,783   -   1,833,783   - 

Collateralized loan obligations

  6,755   -   6,755   - 

Total debt securities available for sale

 $3,078,846  $20,000  $3,058,846  $- 

 

(1) There were no transfers in to or out of level 3 during the twelve months ended December 31, 2019.

 

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, 2020 and December 31, 2019, 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, 2020

  

September 30, 2020

 
  

Carrying Value

  

Level 1

  

Level 2

  

Level 3

  

Total Losses

 
  

(In thousands)

 

Other real estate owned

 $43  $-  $-  $43  $- 

Loans:

                    

Commercial

  5,354   -   -   5,354   - 

Commercial real estate

  3,773   -   -   3,773   - 

Residential real estate

  183   -   -   183   - 

Total assets measured at fair value on a nonrecurring basis

 $9,353  $-  $-  $9,353  $- 

 

 

                  

For the

 
                  

Twelve Months Ended

 
  

At December 31, 2019

  

December 31, 2019

 
  

Carrying Value

  

Level 1

  

Level 2

  

Level 3

  

Total Losses

 
  

(In thousands)

 

Other real estate owned

 $43  $-  $-  $43  $- 

Impaired loans:

                    

Commercial

  5,747   -   -   5,747   - 

Commercial real estate

  4,091   -   -   4,091   - 

Residential real estate

  190   -   -   190   - 

Total assets measured at fair value on a nonrecurring basis

 $10,071  $-  $-  $10,071  $- 

 

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 loans collateralized by real property and other business asset collateral individually evaluated for credit loss 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 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, 2020

 
  

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

 $398,964  $398,964  $398,964  $-  $- 

Debt securities held to maturity

  577,795   593,701   -   593,701   - 

Loans

  1,285,867   1,347,245   -   -   1,347,245 
                     

Financial Liabilities:

                    

Deposits

 $5,539,190  $5,539,300  $-  $5,377,740  $161,560 

Short-term borrowed funds

  107,973   107,973   -   107,973   - 

 

 

  

At December 31, 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

 $373,421  $373,421  $373,421  $-  $- 

Debt securities held to maturity

  738,072   744,296   -   744,296   - 

Loans

  1,107,180   1,152,949   -   -   1,152,949 
                     

Financial Liabilities:

                    

Deposits

 $4,812,621  $4,810,934  $-  $4,643,284  $167,650 

Short-term borrowed funds

  30,928   30,928   -   30,928   - 

 

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.

 
v3.20.2
Note 10 - Commitments and Contingent Liabilities
 9 Months Ended
Sep. 30, 2020
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. Certain agreements provide the Company the right to cancel or reduce its obligations to lend to customers. The portions that are not cancellable unconditionally by the Company aggregated $39,779 thousand at September 30, 2020. 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 $279,330 thousand at September 30, 2020 and $265,311 thousand at December 31, 2019. Standby letters of credit commit the Company to make payments on behalf of customers when certain specified future events occur. Standby letters of credit are primarily issued to support customers’ short-term financing requirements and must meet the Company’s normal credit policies and collateral requirements. Financial and performance standby letters of credit outstanding totaled $2,356 thousand at September 30, 2020 and $3,099 thousand at December 31, 2019. The Company had no commitments outstanding for commercial and similar letters of credit at September 30, 2020 and December 31, 2019. The Company had $580 thousand and $550 thousand in outstanding full recourse guarantees to a 3rd party credit card company at September 30, 2020 and December 31, 2019, respectively. The Company had a reserve for unfunded commitments of $53 thousand at September 30, 2020 and $2,160 thousand at December 31, 2019, included in other liabilities.

 

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.

 

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.
v3.20.2
Note 11 - Earnings Per Common Share
 9 Months Ended
Sep. 30, 2020
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,

 
  

2020

  

2019

  

2020

  

2019

 
  

(In thousands, except per share data)

 

Net income applicable to common equity (numerator)

 $20,051  $20,390  $56,575  $59,661 

Basic earnings per common share

                

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

  26,930   26,986   26,977   26,924 

Basic earnings per common share

 $0.74  $0.76  $2.10  $2.22 

Diluted earnings per common share

                

Weighted average number of common shares outstanding - basic

  26,930   26,986   26,977   26,924 

Add common stock equivalents for options

  16   41   21   52 

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

  26,946   27,027   26,998   26,976 

Diluted earnings per common share

 $0.74  $0.75  $2.10  $2.21 

 

For the three and nine months ended September 30, 2020, options to purchase 567 thousand and 560 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, 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.

 
v3.20.2
Note 12 - Impact of COVID-19
 9 Months Ended
Sep. 30, 2020
Notes to Financial Statements  
Unusual or Infrequent Items, or Both, Disclosure [Text Block]

Note 12: Impact of COVID-19

 

The COVID-19 Coronavirus Pandemic Will Have an Uncertain Impact on the Company's Financial Condition and Results of Operations

 

The COVID-19 coronavirus pandemic caused escalating infections in the United States beginning in the first quarter of 2020 that continued through the third quarter of 2020 and may continue for some time. The spread of the outbreak has disrupted the United States economy including banking and other financial activity in the market areas in which the Company and its banking subsidiary, Westamerica Bank (the "Bank"), operate.  Regions and states of the United States of America have implemented varying degrees of "stay at home" directives in an effort to prevent the spread of the virus. On March 19, 2020, the Governor of the State of California ordered all individuals living in the State of California to stay within their residence to prevent the spread of the novel coronavirus and many businesses have suspended or reduced business activities. The California "stay at home" directive excludes essential businesses, including banks, and the Bank remains open and fully operational. These "stay at home" directives have, however, significantly reduced economic activity in the United States and the State of California. In the second and third quarters of 2020 the “stay at home” directives were gradually lifted in varying stages in counties of the State of California, though restrictions could be re-imposed to some degree if infections increase. Counties with high infection rates delayed reopening and restrictions on certain economic activity remains. California-based claims for unemployment remain elevated during the third quarter of 2020.

 

The Bank's deposits are exclusively sourced within California and its loans are primarily to borrowers domiciled within California. Demand for the Bank's products and services, such as loans and deposits, could be affected as a result of the decline in economic activity within the state. 

 

The Bank's investment portfolio contains bonds for which the source of repayment is domestic mortgage repayments, domestic municipalities throughout the United States, and domestic and global corporations. The value of the Bank's investment portfolio may decline if, for example, the general economy deteriorates, inflation increases, credit ratings decline, the issuers’ financial condition deteriorates or the liquidity for debt securities declines.

 

In response to the pandemic, the Federal Reserve has engaged significant levels of monetary policy to provide liquidity and credit facilities to the financial markets. On March 15, 2020, the Federal Open Market Committee ("FOMC") reduced the target range for the federal funds rate to 0 to 0.25 percent; relatedly, the FOMC reduced the interest rate paid on deposit balances to 0.10 percent effective March 16, 2020, all of which may negatively impact net interest income. The Bank maintains deposit balances at the Federal Reserve Bank; the amount that earns interest is identified in the Company's financial statements as "interest-bearing cash".

 

In response to the pandemic, the United States federal government enacted the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") on March 27, 2020, providing an estimated $2 trillion fiscal stimulus to the United States economy. The CARES Act established the Paycheck Protection Program (PPP) with $350 billion to provide businesses with federally guaranteed loans to support payroll and certain operating expenses. The loans were guaranteed by the United States Small Business Administration (“SBA”) and funded through banks. In April 2020, the PPP program was expanded with an additional $310 billion. At June 30, 2020, the Bank funded $249 million in government guaranteed PPP loans which meaningfully increased interest-earning assets and related interest and fee income. PPP loans, net of deferred fees and costs, were $244 million at September 30, 2020.

 

On April 7, 2020, the U.S. banking agencies issued an Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (Revised). The statement describes accounting for COVID-19-related loan modifications, including clarifying the interaction between current accounting rules and the temporary relief provided by the CARES Act. The Bank continues to work with loan customers requesting deferral of loan payments due to economic weakness caused by the pandemic. At September 30, 2020, consumer loans granted loan deferrals totaled $5.0 million, commercial real estate loans with deferred payments totaled $19.1 million, primarily for hospitality and retail properties, and commercial loans with deferred payments totaled $209 thousand.

 

The extent of the spread of the coronavirus, its ultimate containment and its effects on the economy and the Company are uncertain at this time. The effectiveness of the Federal Reserve Bank's monetary policies and the federal government's fiscal policies in stimulating the United States economy is uncertain at this time.

 

Management expects the Company's net interest margin and non-interest income to decline and credit-related losses to increase for an uncertain period given the decline in economic activity occurring due to the coronavirus. The amount of impact on the Company's financial results is uncertain.

 

In addition, the Company's future success and profitability substantially depends upon the skills and experience of its executive officers and directors, many of whom have held positions with the Company for many years. The unanticipated loss or unavailability of key employees due to the outbreak could adversely affect the Company's ability to operate its business or execute its business strategy.

 

Any one or a combination of the factors identified above, or other factors, could materially adversely affect the Company's business, financial condition, results of operations and prospects.

 

The Recent Decline in Oil Prices Could Have an Impact on the Company's Financial Condition and Results of Operations

 

Oil prices have declined considerably in the first nine months of 2020. The decline in oil prices could negatively affect the financial results of industrial sector-based and energy sector-based corporate issuers of corporate bonds owned by the Company. The Company’s corporate debt securities include 14 issuers in industrial and energy sectors with aggregate amortized cost of $275.3 million and fair value of $288.7 million at September 30, 2020. These securities continue to be investment grade rated by a major rating agency.

 

The Company’s participation in the SBA PPP loan program exposes it to risks of noncompliance with the PPP and litigation, which could have a material adverse impact on the Company’s business, financial condition and results of operations.

 

The Company is a participating lender in the PPP. The SBA guarantees 100% of loans funded under the PPP. Loan proceeds used for eligible payroll and certain other operating costs are forgiven with repayment of loan principal and accrued interest made by the SBA. There is some ambiguity in the laws, rules and guidance regarding the operation of the PPP, which exposes the Company to potential risks relating to noncompliance with the PPP. Any financial liability, litigation costs or reputational damage related to the PPP or related litigation or regulatory enforcement actions could have a material adverse impact on the Company’s business, financial condition and results of operations. In addition, the Company may be exposed to credit risk on PPP loans if the SBA determines that there is a deficiency in the manner in which the loan was originated, funded, or serviced. If the SBA identifies a deficiency, it could deny its liability under the guaranty, reduce the amount of the guaranty, or, if it has already paid under the guaranty, seek recovery of any loss related to the deficiency from the Company.

 

 
v3.20.2
Significant Accounting Policies (Policies)
 9 Months Ended
Sep. 30, 2020
Accounting Policies [Abstract]  
Credit Loss, Financial Instrument [Policy Text Block]

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

 

The Company adopted the ASU provisions on a modified retrospective basis on January 1, 2020. Management evaluated available data, defined portfolio segments of loans with similar attributes, and selected loss estimate models for each identified loan portfolio segment. Management measured historical loss rates for each portfolio segment. Management also segmented debt securities held to maturity, selected methods to estimate losses for each segment, and measured a loss estimate. Agency mortgage-backed securities were assigned no credit loss allowance due to the perceived backing of government sponsored entities. Municipal securities were evaluated for risk of default based on credit rating and remaining term to maturity using Moody’s risk of default factors; Moody’s loss upon default factors were applied to the assumed defaulted principal amounts to estimate the amount for credit loss allowance. The adjustment to the allowance for credit losses was recorded through an offsetting after-tax adjustment to shareholders’ equity. The implementing entry increased allowance for credit losses by $2,017 thousand, reduced allowance for credit losses for unfunded credit commitments by $2,107 thousand and increased retained earnings by $52 thousand.

 

The following table summarizes the impact of adoption of ASU 2016-13.

 

  

January 1, 2020

 
  

Balance,

  

Impact of

  

As reported

 
  

prior to adoption

  

adoption of

  

under

 
  

of ASU 2016-13

  

ASU 2016-13

  

ASU 2016-13

 
  

(In thousands)

 

Assets:

            

Allowance for credit losses on loans:

            

Commercial

 $4,959  $3,385  $8,344 

Commercial real estate

  4,064   618   4,682 

Construction

  109   (31)  78 

Residential real estate

  206   (132)  74 

Consumer and other installment loans

  6,445   1,878   8,323 

Unallocated

  3,701   (3,701)  - 

Allowance for credit losses on loans:

 $19,484  $2,017  $21,501 
             

Allowance for credit losses on debt securities held to maturity

  -   16   16 
             

Liabilities

            

Allowance for credit losses for unfunded commitments

  2,160   (2,107)  53 

 
Marketable Securities, Policy [Policy Text Block]

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

 

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

 

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

 

To the extent that debt securities in the held-to-maturity portfolio share common risk characteristics, estimated expected credit losses are calculated in a manner like that used for loans held for investment. That is, for pools of such securities with common risk characteristics, the historical lifetime probability of default and severity of loss in the event of default is derived or obtained from external sources and adjusted for the expected effects of reasonable and supportable forecasts over the expected lives of the securities on those historical credit losses. Expected credit loss on each security in the held-to-maturity portfolio that do not share common risk characteristics with any of the pools of debt securities is individually evaluated and a reserve for credit losses is established at the difference between the discounted value of the expected future cash flows, based on the original effective interest rate, and the recorded amortized cost basis of the security. For certain classes of debt securities, the bank considers the history of credit losses, current conditions and reasonable and supportable forecasts, which may indicate that the expectation that nonpayment of the amortized cost basis is or continues to be zero. Therefore, for those securities, the bank does not record expected credit losses.

 

AFS debt securities in unrealized loss positions are evaluated for credit related loss at least quarterly. For AFS debt securities, a decline in fair value due to credit loss results in recording an allowance for credit losses to the extent the fair value is less than the amortized cost basis. Declines in fair value that have not been recorded through an allowance for credit losses, such as declines due to changes in market interest rates, are recorded through other comprehensive income, net of applicable taxes. Although these evaluations involve significant judgment, an unrealized loss in the fair value of a debt security is generally considered to not be related to credit when the fair value of the security is below the carrying value primarily due to changes in risk-free interest rates, there has not been significant deterioration in the financial condition of the issuer, and the Company does not intend to sell nor does it believe it will be required to sell the security before the recovery of its cost basis.

 

If the Company intends to sell a debt security or more likely than not will be required to sell the security before recovery of its amortized cost basis, the debt security is written down to its fair value and the write down is charged against the allowance for credit losses with any incremental loss reported in earnings.

 

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

 
Cost Method Investments, Policy [Policy Text Block]

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

 
Financing Receivable [Policy Text Block]

Loans. Loans are stated at the principal amount outstanding, net of unearned discount and unamortized deferred fees and costs. Interest is accrued daily on the outstanding principal balances and included in other assets. Loans which are more than 90 days delinquent with respect to interest or principal, unless they are well secured and in the process of collection, and other loans on which full recovery of principal or interest is in doubt, are placed on nonaccrual status. Interest previously accrued on loans placed on nonaccrual status is charged against interest income. In addition, some loans secured by real estate and commercial loans to borrowers experiencing financial difficulties are placed on nonaccrual status even though the borrowers continue to repay the loans as scheduled. When the ability to fully collect nonaccrual loan principal is in doubt, payments received are applied against the principal balance of the loans on a cost-recovery method until such time as full collection of the remaining recorded balance is expected. Any additional interest payments received after that time are recorded as interest income on a cash basis. Nonaccrual loans are reinstated to accrual status when none of the loan’s principal and interest is past due and improvements in credit quality eliminate doubt as to the full collectability of both principal and interest, or the loan otherwise becomes well secured and in the process of collection. Certain consumer loans or auto receivables are charged off against the allowance for credit losses when they become 120 days past due.

 

A troubled debt restructuring (“TDR”) occurs when the Company, for reasons related to a borrower’s financial difficulties, grants a concession to the borrower it would not otherwise consider. The Company follows its general nonaccrual policy for TDRs. Performing TDRs are reinstated to accrual status when improvements in credit quality eliminate the doubt as to full collectability of both principal and interest. Under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), banks may elect to deem that loan modifications do not result in TDRs if they are (1) related to the novel coronavirus disease; (2) executed on a loan that was not more than 30 days past due as of December 31, 2019; and (3) executed between March 1, 2020, and the earlier of (A) 60 days after the date of termination of the National Emergency or (B) December 31, 2020.

 
Loans and Leases Receivable, Allowance for Loan Losses Policy [Policy Text Block]

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

 

The preparation of these financial statements requires Management to estimate the amount of expected losses over the expected contractual life of our existing loan portfolio and establish an allowance for credit losses. Loan agreements generally include a maturity date, and the Company considers the contractual life of a loan agreement to extend from the date of origination to the contractual maturity date. In estimating credit losses, Management must exercise significant judgment in evaluating information deemed relevant. The amount of ultimate losses on the loan portfolio can vary from the estimated amounts. Management follows a systematic methodology to estimate loss potential in an effort to reduce the differences between estimated and actual losses.

 

The allowance for credit losses is established through provisions for credit losses charged to income. Losses on loans are charged to the allowance for credit losses when all or a portion of the recorded amount of a loan is deemed to be uncollectible. Recoveries of loans previously charged off are credited to the allowance when realized. The Company’s allowance for credit losses is maintained at a level considered adequate to provide for expected losses based on historical loss rates adjusted for current and expected conditions over a forecast period. These include conditions unique to individual borrowers, as well as overall credit loss experience, the amount of past due, nonperforming and classified loans, recommendations of regulatory authorities, prevailing economic conditions, or credit protection agreements and other factors.

 

Loans that share common risk characteristics are segregated into pools based on common characteristics, which is primarily determined by loan, borrower, or collateral type. Historical loss rates are determined for each pool. For consumer installment loans, primarily secured by automobiles, historical loss rates are determined using a vintage methodology, which tracks losses based on period of origination. For commercial, construction, and commercial real estate, historical loss rates are determined using an open pool methodology where losses are tracked over time for all loans included in the pool at the historical measurement date. Historical loss rates are adjusted for factors that are not reflected in the historical loss rates that are attributable to national or local economic or industry trends which have occurred but have not yet been recognized in past loan charge-off history, estimated losses based on management’s reasonable and supportable expectation of economic trends over a forecast horizon of up to two years, and other factors that impact credit loss expectations that are not reflected in the historical loss rates. Other factors include, but are not limited to, the effectiveness of the Company’s loan review system, adequacy of lending Management and staff, loan policies and procedures, problem loan trends, and concentrations of credit. At the end of the two-year forecast period loss rates revert immediately to the historical loss rates. The results of this analysis are applied to the amortized cost of the loans included within each pool.

 

Loans that do not share risk characteristics with other loans in the pools are evaluated individually. A loan is considered ‘collateral-dependent’ when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. A credit loss reserve for collateral-dependent loans is established at the difference between the amortized cost basis in the loan and the fair value of the underlying collateral adjusted for costs to sell. For other individually evaluated loans that are not collateral dependent, a credit loss reserve is established at the difference between the amortized cost basis in the loan and the present value of expected future cash flows discounted at the loan’s effective interest rate. The impact of an expected TDR modification is included in the allowance for credit losses when management determines a TDR modification is likely.

 

Accrued interest is recorded in other assets and is excluded from the estimation of expected credit loss. Accrued interest is reversed through interest income when amounts are determined to be uncollectible, which generally occurs when the underlying receivable is placed on nonaccrual status or charged off.

 
Off-Balance-Sheet Credit Exposure, Policy [Policy Text Block]

Liability for Off-Balance Sheet Credit Exposures. Off-balance sheet credit exposures relate to letters of credit and unfunded loan commitments for commercial, construction and consumer loans. The Company maintains a separate allowance for credit losses from off-balance-sheet credit exposures, which is included within other liabilities on the consolidated statements of financial condition. Increases or reductions to the Company’s allowance for credit losses from off-balance sheet credit exposures are recorded in other expenses. Management estimates the amount of expected losses by estimating expected usage exposures that are not unconditionally cancellable by the Company and applying the loss factors used in the allowance for credit loss methodology to estimate the liability for credit losses related to unfunded commitments. No credit loss estimate is reported for off-balance-sheet credit exposures that are unconditionally cancellable by the Company or for undrawn amounts under such arrangements that may be drawn prior to the cancellation of the arrangement.

 
Currently Adopted Accounting Pronouncements [Policy Text Block]

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 were 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 was adopted by the Company January 1, 2020. The additional disclosures did not affect the financial results upon adoption.

 
New Accounting Pronouncements, Policy [Policy Text Block]

FASB ASU 2020-04, Reference Rate Reform (Topic 848): Simplifying the Accounting for Income Taxes, was issued March 2020. The ASU provides optional expedients and exceptions for applying GAAP to loan and lease agreements, derivative contracts, and other transactions affected by the anticipated transition away from LIBOR toward new interest rate benchmarks. For transactions that are modified because of reference rate reform and that meet certain scope guidance (i) modifications of loan agreements should be accounted for by prospectively adjusting the effective interest rate and the modification will be considered "minor" so that any existing unamortized origination fees/costs would carry forward and continue to be amortized and (ii) modifications of lease agreements should be accounted for as a continuation of the existing agreement with no reassessments of the lease classification and the discount rate or remeasurements of lease payments that otherwise would be required for modifications not accounted for as separate contracts. ASU 2020-04 also provides numerous optional expedients for derivative accounting. ASU 2020-04 is effective March 12, 2020 through December 31, 2022. An entity may elect to apply ASU 2020-04 for contract modifications as of January 1, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued. Once elected for a Topic or an Industry Subtopic within the Codification, the amendments in this ASU must be applied prospectively for all eligible contract modifications for that Topic or Industry Subtopic. The Company is currently evaluating the impacts of this ASU and has not yet determined whether LIBOR transition and this ASU will have material effects on our business operations and consolidated financial statements.

 
v3.20.2
Note 2 - Accounting Policies (Tables)
 9 Months Ended
Sep. 30, 2020
Notes Tables  
Accounting Standards Update and Change in Accounting Principle [Table Text Block]
  

January 1, 2020

 
  

Balance,

  

Impact of

  

As reported

 
  

prior to adoption

  

adoption of

  

under

 
  

of ASU 2016-13

  

ASU 2016-13

  

ASU 2016-13

 
  

(In thousands)

 

Assets:

            

Allowance for credit losses on loans:

            

Commercial

 $4,959  $3,385  $8,344 

Commercial real estate

  4,064   618   4,682 

Construction

  109   (31)  78 

Residential real estate

  206   (132)  74 

Consumer and other installment loans

  6,445   1,878   8,323 

Unallocated

  3,701   (3,701)  - 

Allowance for credit losses on loans:

 $19,484  $2,017  $21,501 
             

Allowance for credit losses on debt securities held to maturity

  -   16   16 
             

Liabilities

            

Allowance for credit losses for unfunded commitments

  2,160   (2,107)  53 
v3.20.2
Note 3 - Investment Securities (Tables)
 9 Months Ended
Sep. 30, 2020
Notes Tables  
Debt Securities, Available-for-sale and Held-to-maturity [Table Text Block]
  

At September 30, 2020

 
      

Gross

  

Gross

     
  

Amortized

  

Unrealized

  

Unrealized

  

Fair

 
  

Cost

  

Gains

  

Losses

  

Value

 
  

(In thousands)

 

Debt securities available for sale

                

Agency residential mortgage-backed securities ("MBS")

 $720,123  $25,174  $-  $745,297 

Agency commercial MBS

  3,601   -   (16)  3,585 

Securities of U.S. Government entities

  163   -   -   163 

Obligations of states and political subdivisions

  121,951   5,223   (2)  127,172 

Corporate securities

  2,098,444   114,582   (199)  2,212,827 

Commercial paper

  224,862   29   (75)  224,816 

Collateralized loan obligations

  667,735   3,053   (654)  670,134 

Total debt securities available for sale

  3,836,879   148,061   (946)  3,983,994 

Debt securities held to maturity

                

Agency residential MBS

  272,460   7,648   (39)  280,069 

Non-agency residential MBS

  2,020   36   -   2,056 

Obligations of states and political subdivisions

  303,331   8,261   -   311,592 

Total debt securities held to maturity

  577,811   15,945   (39)  593,717 

Total

 $4,414,690  $164,006  $(985) $4,577,711 
  

At December 31, 2019

 
      

Gross

  

Gross

     
  

Amortized

  

Unrealized

  

Unrealized

  

Fair

 
  

Cost

  

Gains

  

Losses

  

Value

 
  

(In thousands)

 

Debt securities available for sale

                

U.S. Treasury securities

 $19,999  $1  $-  $20,000 

Securities of U.S. Government sponsored entities

  111,251   14   (98)  111,167 

Agency residential MBS

  934,592   10,996   (5,838)  939,750 

Agency commercial MBS

  3,711   -   (3)  3,708 

Securities of U.S. Government entities

  553   -   (9)  544 

Obligations of states and political subdivisions

  159,527   3,656   (44)  163,139 

Corporate securities

  1,805,479   29,183   (879)  1,833,783 

Collateralized loan obligations

  6,748   7   -   6,755 

Total debt securities available for sale

  3,041,860   43,857   (6,871)  3,078,846 

Debt securities held to maturity

                

Agency residential MBS

  353,937   766   (2,235)  352,468 

Non-agency residential MBS

  2,354   22   -   2,376 

Obligations of states and political subdivisions

  381,781   7,672   (1)  389,452 

Total debt securities held to maturity

  738,072   8,460   (2,236)  744,296 

Total

 $3,779,932  $52,317  $(9,107) $3,823,142 
Investments Classified by Contractual Maturity Date [Table Text Block]
  

At September 30, 2020

 
  

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

 $452,154  $454,493  $63,044  $63,504 

Over 1 to 5 years

  973,305   1,026,667   132,750   136,640 

Over 5 to 10 years

  1,480,374   1,544,476   107,537   111,448 

Over 10 years

  207,322   209,476   -   - 

Subtotal

  3,113,155   3,235,112   303,331   311,592 

MBS

  723,724   748,882   274,480   282,125 

Total

 $3,836,879  $3,983,994  $577,811  $593,717 
  

At December 31, 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

 $294,698  $295,255  $70,378  $70,602 

Over 1 to 5 years

  1,104,775   1,122,391   161,911   165,126 

Over 5 to 10 years

  670,595   683,277   149,492   153,724 

Over 10 years

  33,489   34,465   -   - 

Subtotal

  2,103,557   2,135,388   381,781   389,452 

MBS

  938,303   943,458   356,291   354,844 

Total

 $3,041,860  $3,078,846  $738,072  $744,296 
Schedule of Unrealized Loss on Investments [Table Text Block]
  

Debt Securities Available for Sale

 
  

At September 30, 2020

 
  

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)

 

Agency residential MBS

  1  $98  $-   1  $21  $-   2  $119  $- 

Agency commercial MBS

  1   3,585   (16)  -   -   -   1   3,585   (16)

Securities of U.S. Government entities

  1   163   -   -   -   -   1   163   - 

Obligations of states and political subdivisions

  5   2,447   (2)  -   -   -   5   2,447   (2)

Corporate securities

  -   -   -   2   18,263   (199)  2   18,263   (199)

Commercial paper

  4   99,874   (75)  -   -   -   4   99,874   (75)

Collateralized loan obligations

  29   216,358   (654)  -   -   -   29   216,358   (654)

Total

  41  $322,525  $(747)  3  $18,284  $(199)  44  $340,809  $(946)
  

Debt Securities Held to Maturity

 
  

At September 30, 2020

 
  

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

  2  $153  $(1)  3  $1,109  $(38)  5  $1,262  $(39)
  

Debt Securities Available for Sale

 
  

At December 31, 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

  1  $9,951  $(49)  3  $45,877  $(49)  4  $55,828  $(98)

Agency residential MBS

  6   11,674   (100)  47   347,384   (5,738)  53   359,058   (5,838)

Agency commercial MBS

  1   3,708   (3)  -   -   -   1   3,708   (3)

Securities of U.S. Government entities

  -   -   -   2   544   (9)  2   544   (9)

Obligations of states and political subdivisions

  -   -   -   7   4,163   (44)  7   4,163   (44)

Corporate securities

  8   71,577   (162)  11   64,380   (717)  19   135,957   (879)

Total

  16  $96,910  $(314)  70  $462,348  $(6,557)  86  $559,258  $(6,871)
  

Debt Securities Held to Maturity

 
  

At December 31, 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

  6  $12,098  $(87)  54  $277,203  $(2,148)  60  $289,301  $(2,235)

Obligations of states and political subdivisions

  -   -   -   1   251   (1)  1   251   (1)

Total

  6  $12,098  $(87)  55  $277,454  $(2,149)  61  $289,552  $(2,236)
Debt Securities, Held-to-maturity, Allowance for Credit Loss [Table Text Block]
  

For

 
  

the Nine Months

 
  

Ended September 30,

 
  

2020

 
  

(In thousands)

 

Allowance for credit losses:

    

Beginning balance, prior to adoption of ASU 2016-13

 $- 

Impact of adopting ASU 2016-13

  16 

Provision

  - 

Chargeoffs

  - 

Recoveries

  - 

Total ending balance

 $16 
Debt Securities, Held-to-maturity, Credit Quality Indicator [Table Text Block]
  

Credit Risk Profile by Credit Rating

 
  

At September 30, 2020

 
  

(In thousands)

 
  

AAA/AA/A

  

BBB

  

BB/B

  

Total

 
                 

Agency residential MBS

 $272,460  $-  $-  $272,460 

Non-agency residential MBS

  1,005   -   1,015   2,020 

Obligations of states and political subdivisions

  303,230   101   -   303,331 

Total

 $576,695  $101  $1,015  $577,811 
Interest Income from Investments [Table Text Block]
  

For the Three Months

  

For the Nine Months

 
  

Ended September 30,

 
  

2020

  

2019

  

2020

  

2019

 
  

(In thousands)

 
                 

Taxable

 $23,079  $19,586  $67,963  $56,992 

Tax-exempt from federal income tax

  2,911   3,777   9,501   12,165 

Total interest income from investment securities

 $25,990  $23,363  $77,464  $69,157 
v3.20.2
Note 4 - Loans, Allowance for Loan Losses/Credit Losses and Other Real Estate Owned (Tables)
 9 Months Ended
Sep. 30, 2020
Notes Tables  
Schedule of Loans Receivable [Table Text Block]
  

At September 30,

  

At December 31,

 
  

2020

  

2019

 
  

(In thousands)

 

Commercial:

        

Paycheck Protection Program ("PPP") loans

 $243,982  $- 

Other

  201,623   222,085 

Total commercial

  445,605   222,085 

Commercial Real Estate

  563,707   578,758 

Construction

  140   1,618 

Residential Real Estate

  25,076   32,748 

Consumer Installment & Other

  275,481   291,455 

Total

 $1,310,009  $1,126,664 
Financing Receivable, Current, Allowance for Credit Loss [Table Text Block]
  

Allowance for Credit Losses

 
  

For the Three Months Ended September 30, 2020

 
                  

Consumer

     
      

Commercial

      

Residential

  

Installment

     
  

Commercial

  

Real Estate

  

Construction

  

Real Estate

  

and Other

  

Total

 
  

(In thousands)

 

Allowance for credit losses:

                        

Balance at beginning of period

 $8,072  $4,623  $7  $57  $11,770  $24,529 

Provision (reversal)

  867   1,030   -   (5)  (1,892)  - 

Chargeoffs

  -   -   -   -   (872)  (872)

Recoveries

  46   12   -   -   427   485 

Total allowance for credit losses

 $8,985  $5,665  $7  $52  $9,433  $24,142 
  

Allowance for Credit Losses

 
  

For the Nine Months Ended September 30, 2020

 
                  

Consumer

         
      

Commercial

      

Residential

  

Installment

         
  

Commercial

  

Real Estate

  

Construction

  

Real Estate

  

and Other

  

Unallocated

  

Total

 
  

(In thousands)

 

Allowance for credit losses:

                            

Balance at beginning of period, prior to adoption of ASU 2016-13

 $4,959  $4,064  $109  $206  $6,445  $3,701  $19,484 

Impact of adopting ASU 2016-13

  3,385   618   (31)  (132)  1,878   (3,701)  2,017 

Adjusted beginning balance

  8,344   4,682   78   74   8,323   -   21,501 

Provision (reversal)

  537   946   (71)  (22)  2,910   -   4,300 

Chargeoffs

  (178)  -   -   -   (3,071)  -   (3,249)

Recoveries

  282   37   -   -   1,271   -   1,590 

Total allowance for credit losses

 $8,985  $5,665  $7  $52  $9,433  $-  $24,142 
  

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 
Schedule of Recorded Investment in Loans Evaluated for Impairment [Table Text Block]
  

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

 
  

At December 31, 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

 $2,413  $-  $-  $-  $-  $-  $2,413 

Collectively evaluated for impairment

  2,546   4,064   109   206   6,445   3,701   17,071 

Total

 $4,959  $4,064  $109  $206  $6,445  $3,701  $19,484 

Carrying value of loans:

                            

Individually evaluated for impairment

 $8,182  $7,409  $-  $190  $43  $-  $15,824 

Collectively evaluated for impairment

  213,903   571,349   1,618   32,558   291,412   -   1,110,840 

Total

 $222,085  $578,758  $1,618  $32,748  $291,455  $-  $1,126,664 
Financing Receivable Credit Quality Indicators [Table Text Block]
  

Credit Risk Profile by Internally Assigned Grade

 
  

At September 30, 2020

 
  

Commercial

  

Commercial Real Estate

  

Construction

  

Residential Real Estate

  

Consumer Installment and Other

  

Total

 
  

(In thousands)

 

Grade:

                        

Pass

 $437,216  $546,714  $140  $23,699  $274,251  $1,282,020 

Substandard

  8,389   16,993   -   1,377   320   27,079 

Doubtful

  -   -   -   -   505   505 

Loss

  -   -   -   -   405   405 

Total

 $445,605  $563,707  $140  $25,076  $275,481  $1,310,009 
  

Credit Risk Profile by Internally Assigned Grade

 
  

At December 31, 2019

 
  

Commercial

  

Commercial Real Estate

  

Construction

  

Residential Real Estate

  

Consumer Installment and Other

  

Total

 
  

(In thousands)

 

Grade:

                        

Pass

 $213,542  $567,525  $1,618  $31,055  $289,424  $1,103,164 

Substandard

  8,543   11,233   -   1,693   1,329   22,798 

Doubtful

  -   -   -   -   308   308 

Loss

  -   -   -   -   394   394 

Total

 $222,085  $578,758  $1,618  $32,748  $291,455  $1,126,664 
Financing Receivable, Past Due [Table Text Block]
  

Summary of Loans by Delinquency and Nonaccrual Status

 
  

At September 30, 2020

 
  

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

 $444,496  $963  $39  $-  $107  $445,605 

Commercial real estate

  559,361   624   -   -   3,722   563,707 

Construction

  140   -   -   -   -   140 

Residential real estate

  24,357   558   -   -   161   25,076 

Consumer installment and other

  272,631   1,328   772   360   390   275,481 

Total

 $1,300,985  $3,473  $811  $360  $4,380  $1,310,009 
  

Summary of Loans by Delinquency and Nonaccrual Status

 
  

At December 31, 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

 $221,199  $531  $158  $-  $197  $222,085 

Commercial real estate

  573,809   432   421   -   4,096   578,758 

Construction

  1,618   -   -   -   -   1,618 

Residential real estate

  31,934   274   540   -   -   32,748 

Consumer installment and other

  286,391   2,960   1,517   440   147   291,455 

Total

 $1,114,951  $4,197  $2,636  $440  $4,440  $1,126,664 
Impaired Financing Receivables [Table Text Block]
  

Impaired Loans

 
  

At December 31,

 
  

2019

 
      

Unpaid

     
  

Recorded

  

Principal

  

Related

 
  

Investment

  

Balance

  

Allowance

 
  

(In thousands)

 

With no related allowance recorded:

            

Commercial

 $21  $21  $- 

Commercial real estate

  7,408   8,856   - 

Residential real estate

  190   220   - 

Consumer installment and other

  43   43   - 

Total with no related allowance recorded

  7,662   9,140   - 
             

With an allowance recorded:

            

Commercial

  8,160   8,160   2,413 

Total with an allowance recorded

  8,160   8,160   2,413 

Total

 $15,822  $17,300  $2,413 
Impaired Financing Receivables Supplemental Schedule [Table Text Block]
  

Impaired Loans

 
  

For the Three Months

  

For the Nine Months

 
  

Ended September 30, 2019

 
  

Average

  

Recognized

  

Average

  

Recognized

 
  

Recorded

  

Interest

  

Recorded

  

Interest

 
  

Investment

  

Income

  

Investment

  

Income

 
  

(In thousands)

 

Commercial

 $8,701  $144  $9,404  $476 

Commercial real estate

  7,968   60   7,133   333 

Residential real estate

  194   4   196   10 

Consumer installment and other

  99   -   103   - 

Total

 $16,962  $208  $16,836  $819 
Financing Receivable, Troubled Debt Restructuring [Table Text Block]
  

Troubled Debt Restructurings

 
  

At September 30, 2020

 
              

Period-End

 
              

Individual

 
  

Number of

  

Pre-Modification

  

Period-End

  

Credit Loss

 
  

Contracts

  

Carrying Value

  

Carrying Value

  

Allowance

 
  

($ in thousands)

 

Commercial real estate

  6  $8,367  $6,121  $- 

Residential real estate

  1   241   183   - 

Total

  7  $8,608  $6,304  $- 
  

Troubled Debt Restructurings

 
  

At December 31, 2019

 
              

Period-End

 
              

Individual

 
  

Number of

  

Pre-Modification

  

Period-End

  

Impairment

 
  

Contracts

  

Carrying Value

  

Carrying Value

  

Allowance

 
  

($ in thousands)

 

Commercial

  2  $278  $32  $11 

Commercial real estate

  6   8,367   6,492   - 

Residential real estate

  1   241   189   - 

Total

  9  $8,886  $6,713  $11 
Financing Receivable, Loans by Risk Category [Table Text Block]
  

At September 30, 2020

 
                                  

Revolving

     
                                  

Loans

     
  

Term Loans Amortized Cost Basis by Origination Year

  

Total

  

Amortized

     
  

Prior

  

2015

  

2016

  

2017

  

2018

  

2019

  

2020

  

Term Loans

  

Cost Basis

  

Total

 
  

(In thousands)

 

Commercial loans by grade

                                 

Pass

 $20,496  $5,205  $26,132  $10,860  $21,343  $42,380  $270,664  $397,080  $40,136  $437,216 

Substandard

  64   -   1   -   -   -   7,876   7,941   448   8,389 

Doubtful

  -   -   -   -   -   -   -   -   -   - 

Loss

  -   -   -   -   -   -   -   -   -   - 

Total

 $20,560  $5,205  $26,133  $10,860  $21,343  $42,380  $278,540  $405,021  $40,584  $445,605 
  

At September 30, 2020

 
                                  

Revolving

     
                                  

Loans

     
  

Term Loans Amortized Cost Basis by Origination Year

  

Total

  

Amortized

     
  

Prior

  

2015

  

2016

  

2017

  

2018

  

2019

  

2020

  

Term Loans

  

Cost Basis

  

Total

 
  

(In thousands)

 

Commercial real estate loans by grade

                                 

Pass

 $88,661  $50,764  $43,804  $101,731  $95,622  $94,531  $71,601  $546,714  $-  $546,714 

Substandard

  4,807   1,314   9,921   107   -   -   844   16,993   -   16,993 

Doubtful

  -   -   -   -   -   -      -   -   - 

Loss

  -   -   -   -   -   -      -   -   - 

Total

 $93,468  $52,078  $53,725  $101,838  $95,622  $94,531  $72,445  $563,707  $-  $563,707 
  

At September 30, 2020

 
                                  

Revolving

     
                                  

Loans

     
  

Term Loans Amortized Cost Basis by Origination Year

  

Total

  

Amortized

     
  

Prior

  

2015

  

2016

  

2017

  

2018

  

2019

  

2020

  

Term Loans

  

Cost Basis

  

Total

 
  

(In thousands)

 

Construction loans by grade

                                 

Pass

 $-  $-  $-  $-  $-  $-  $-  $-  $140  $140 

Substandard

  -   -   -   -   -   -   -   -   -   - 

Doubtful

  -   -   -   -   -   -   -   -   -   - 

Loss

  -   -   -   -   -   -   -   -   -   - 

Total

 $-  $-  $-  $-  $-  $-  $-  $-  $140  $140 
  

At September 30, 2020

 
                                  

Revolving

     
                                  

Loans

     
  

Term Loans Amortized Cost Basis by Origination Year

  

Total

  

Amortized

     
  

Prior

  

2015

  

2016

  

2017

  

2018

  

2019

  

2020

  

Term Loans

  

Cost Basis

  

Total

 
  

(In thousands)

 

Residential Real Estate loans by grade

                                 

Pass

 $23,699  $-  $-  $-  $-  $-  $-  $23,699  $-  $23,699 

Substandard

  1,377   -   -   -   -   -   -   1,377   -   1,377 

Doubtful

  -   -   -   -   -   -   -   -   -   - 

Loss

  -   -   -   -   -   -   -   -   -   - 

Total

 $25,076  $-  $-  $-  $-  $-  $-  $25,076  $-  $25,076 
  

At September 30, 2020

 
                                  

Revolving

     
                                  

Loans

     
  

Term Loans Amortized Cost Basis by Origination Year

  

Total

  

Amortized

     
  

Prior

  

2015

  

2016

  

2017

  

2018

  

2019

  

2020

  

Term Loans

  

Cost Basis

  

Total

 
  

(In thousands)

 

Consumer installment and other loans by delinquency and nonaccrual status

                     

Current

 $5,087  $6,457  $19,339  $24,554  $53,347  $69,313  $64,893  $242,990  $29,641  $272,631 

30-59 days past due

  35   91   147   224   266   402   148   1,313   15   1,328 

60-89 days past due

  2   30   48   163   327   160   40   770   2   772 

Past due 90 days or more

  -   5   29   -   226   66   31   357   3   360 

Nonaccrual

  -   -   -   -   -   -   -   -   390   390 

Total

 $5,124  $6,583  $19,563  $24,941  $54,166  $69,941  $65,112  $245,430  $30,051  $275,481 
v3.20.2
Note 6 - Other Assets and Other Liabilities (Tables)
 9 Months Ended
Sep. 30, 2020
Notes Tables  
Schedule of Other Assets [Table Text Block]
  

At September 30,

  

At December 31,

 
  

2020

  

2019

 
  

(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

  59,868   57,810 

Net deferred tax asset

  -   11,085 

Right-of-use asset

  19,098   17,136 

Limited partnership investments

  18,935   20,773 

Interest receivable

  30,779   28,797 

Prepaid assets

  3,619   3,737 

Other assets

  13,743   10,767 

Total other assets

 $160,269  $164,332 
Schedule of Amounts Recognized in Net Income [Table Text Block]
  

For the Three Months Ended

  

For the Nine Months Ended

 
  

September 30,

 
  

2020

  

2019

  

2020

  

2019

 
  

(In thousands)

 

Investment loss included in pre-tax income

 $640  $600  $1,840  $1,800 

Tax credits recognized in provision for income taxes

  225   225   675   675 
Other Liabilities [Table Text Block]
  

At September 30,

  

At December 31,

 
  

2020

  

2019

 
  

(In thousands)

 

Net deferred tax liability

 $21,819  $- 

Operating lease liability

  19,098   17,136 

Other liabilities

  49,559   27,453 

Total other liabilities

 $90,476  $44,589 
Lessee, Operating Lease, Liability, Maturity [Table Text Block]
  

Minimum
future lease
payments

 
  

At September 30,

 
  

2020

 
  

(In thousands)

 

The remaining three months of 2020

 $1,599 

2021

  5,353 

2022

  4,426 

2023

  3,689 

2024

  2,078 

Thereafter

  2,863 

Total minimum lease payments

  20,008 

Less: discount

  (910)

Present value of lease liability

 $19,098 
v3.20.2
Note 7 - Goodwill and Identifiable Intangible Assets (Tables)
 9 Months Ended
Sep. 30, 2020
Notes Tables  
Schedule of Goodwill [Table Text Block]
  

At September 30, 2020

  

At December 31, 2019

 
  

(In thousands)

 

Goodwill

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

At September 30, 2020

  

At December 31, 2019

 
  

Gross

      

Gross

     
  

Carrying

  

Accumulated

  

Carrying

  

Accumulated

 
  

Amount

  

Amortization

  

Amount

  

Amortization

 
  

(In thousands)

 

Core deposit intangibles

 $56,808  $(55,635) $56,808  $(55,417)
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, 2020 (actual)

 $218 

Estimate for the remainder of year ending December 31, 2020

  69 

Estimate for year ending December 31, 2021

  269 

2022

  252 

2023

  236 

2024

  222 

2025

  125 
v3.20.2
Note 8 - Deposits and Borrowed Funds (Tables)
 9 Months Ended
Sep. 30, 2020
Notes Tables  
Deposit Liabilities, Type [Table Text Block]
  

Deposits

 
  

At September 30,

  

At December 31,

 
  

2020

  

2019

 
  

(In thousands)

 

Noninterest-bearing

 $2,684,028  $2,240,112 

Interest-bearing:

        

Transaction

  1,040,712   931,888 

Savings

  1,653,000   1,471,284 

Time deposits less than $100 thousand

  83,838   88,355 

Time deposits $100 thousand through $250 thousand

  50,378   54,874 

Time deposits more than $250 thousand

  27,234   26,108 

Total deposits

 $5,539,190  $4,812,621 
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,

 
  

2020

  

2019

 

Repurchase agreements:

 

(In thousands)

 

Collateral securing borrowings:

        

Securities of U.S. Government sponsored entities

 $-  $65,833 

Agency residential MBS

  76,715   52,485 

Corporate securities

  183,447   146,253 

Total collateral carrying value

 $260,162  $264,571 

Total short-term borrowed funds

 $107,973  $30,928 
v3.20.2
Note 9 - Fair Value Measurements (Tables)
 9 Months Ended
Sep. 30, 2020
Notes Tables  
Fair Value, Assets Measured on Recurring Basis [Table Text Block]
  

At September 30, 2020

 
  

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

                

Agency residential mortgage-backed securities (MBS)

 $745,297  $-  $745,297  $- 

Agency commercial MBS

  3,585   -   3,585   - 

Securities of U.S. Government entities

  163   -   163   - 

Obligations of states and political subdivisions

  127,172   -   127,172   - 

Corporate securities

  2,212,827   -   2,212,827   - 

Commercial paper

  224,816      224,816    

Collateralized loan obligations

  670,134   -   670,134   - 

Total debt securities available for sale

 $3,983,994  $-  $3,983,994  $- 
  

At December 31, 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

 $20,000  $20,000  $-  $- 

Securities of U.S. Government sponsored entities

  111,167   -   111,167   - 

Agency residential MBS

  939,750   -   939,750   - 

Agency commercial MBS

  3,708   -   3,708   - 

Securities of U.S. Government entities

  544   -   544   - 

Obligations of states and political subdivisions

  163,139   -   163,139   - 

Corporate securities

  1,833,783   -   1,833,783   - 

Collateralized loan obligations

  6,755   -   6,755   - 

Total debt securities available for sale

 $3,078,846  $20,000  $3,058,846  $- 
Fair Value Measurements, Nonrecurring [Table Text Block]
                  

For the

 
                  

Nine Months Ended

 
  

At September 30, 2020

  

September 30, 2020

 
  

Carrying Value

  

Level 1

  

Level 2

  

Level 3

  

Total Losses

 
  

(In thousands)

 

Other real estate owned

 $43  $-  $-  $43  $- 

Loans:

                    

Commercial

  5,354   -   -   5,354   - 

Commercial real estate

  3,773   -   -   3,773   - 

Residential real estate

  183   -   -   183   - 

Total assets measured at fair value on a nonrecurring basis

 $9,353  $-  $-  $9,353  $- 
                  

For the

 
                  

Twelve Months Ended

 
  

At December 31, 2019

  

December 31, 2019

 
  

Carrying Value

  

Level 1

  

Level 2

  

Level 3

  

Total Losses

 
  

(In thousands)

 

Other real estate owned

 $43  $-  $-  $43  $- 

Impaired loans:

                    

Commercial

  5,747   -   -   5,747   - 

Commercial real estate

  4,091   -   -   4,091   - 

Residential real estate

  190   -   -   190   - 

Total assets measured at fair value on a nonrecurring basis

 $10,071  $-  $-  $10,071  $- 
Fair Value, by Balance Sheet Grouping [Table Text Block]
  

At September 30, 2020

 
  

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

 $398,964  $398,964  $398,964  $-  $- 

Debt securities held to maturity

  577,795   593,701   -   593,701   - 

Loans

  1,285,867   1,347,245   -   -   1,347,245 
                     

Financial Liabilities:

                    

Deposits

 $5,539,190  $5,539,300  $-  $5,377,740  $161,560 

Short-term borrowed funds

  107,973   107,973   -   107,973   - 
  

At December 31, 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

 $373,421  $373,421  $373,421  $-  $- 

Debt securities held to maturity

  738,072   744,296   -   744,296   - 

Loans

  1,107,180   1,152,949   -   -   1,152,949 
                     

Financial Liabilities:

                    

Deposits

 $4,812,621  $4,810,934  $-  $4,643,284  $167,650 

Short-term borrowed funds

  30,928   30,928   -   30,928   - 
v3.20.2
Note 11 - Earnings Per Common Share (Tables)
 9 Months Ended
Sep. 30, 2020
Notes Tables  
Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]
  

For the Three Months

  

For the Nine Months

 
  

Ended September 30,

 
  

2020

  

2019

  

2020

  

2019

 
  

(In thousands, except per share data)

 

Net income applicable to common equity (numerator)

 $20,051  $20,390  $56,575  $59,661 

Basic earnings per common share

                

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

  26,930   26,986   26,977   26,924 

Basic earnings per common share

 $0.74  $0.76  $2.10  $2.22 

Diluted earnings per common share

                

Weighted average number of common shares outstanding - basic

  26,930   26,986   26,977   26,924 

Add common stock equivalents for options

  16   41   21   52 

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

  26,946   27,027   26,998   26,976 

Diluted earnings per common share

 $0.74  $0.75  $2.10  $2.21 
v3.20.2
Note 2 - Accounting Policies (Details Textual) - USD ($)
$ in Thousands
Sep. 30, 2020
Jun. 30, 2020
Jan. 01, 2020
Dec. 31, 2019
Sep. 30, 2019
Jun. 30, 2019
Dec. 31, 2018
Loans and Leases Receivable, Allowance, Ending Balance $ 24,142 $ 24,529   $ 19,484 $ 19,828 $ 20,117 $ 21,351
Reserve for Unfunded Commitments     $ 2,160        
Retained Earnings (Accumulated Deficit), Ending Balance $ 254,717     $ 239,135      
Accounting Standards Update 2016-13 [Member]              
Loans and Leases Receivable, Allowance, Ending Balance     2,017        
Retained Earnings (Accumulated Deficit), Ending Balance     52        
Accounting Standards Update 2016-13 [Member] | Unfunded Loan Commitment [Member]              
Reserve for Unfunded Commitments     $ (2,107)        
v3.20.2
Note 2 - Accounting Policies - Impact of Adoption of ASU 2016-13 (Details) - USD ($)
$ in Thousands
Sep. 30, 2020
Jan. 01, 2020
Dec. 31, 2019
Allowance for credit losses (loans)   $ 19,484  
Debt Securities, Held-to-maturity, Allowance for Credit Loss, Ending Balance $ 16 0 $ 0
Allowance for credit losses for unfunded commitments   2,160  
Cumulative Effect, Period of Adoption, Adjustment [Member] | Accounting Standards Update 2016-13 [Member]      
Allowance for credit losses (loans)   2,017  
Debt Securities, Held-to-maturity, Allowance for Credit Loss, Ending Balance   16  
Allowance for credit losses for unfunded commitments   (2,107)  
Cumulative Effect, Period of Adoption, Adjusted Balance [Member]      
Allowance for credit losses (loans)   21,501  
Debt Securities, Held-to-maturity, Allowance for Credit Loss, Ending Balance $ 16 16  
Allowance for credit losses for unfunded commitments   53  
Commercial Portfolio Segment [Member]      
Allowance for credit losses (loans)   4,959  
Commercial Portfolio Segment [Member] | Cumulative Effect, Period of Adoption, Adjustment [Member] | Accounting Standards Update 2016-13 [Member]      
Allowance for credit losses (loans)   3,385  
Commercial Portfolio Segment [Member] | Cumulative Effect, Period of Adoption, Adjusted Balance [Member]      
Allowance for credit losses (loans)   8,344  
Commercial Real Estate Portfolio Segment [Member]      
Allowance for credit losses (loans)   4,064  
Commercial Real Estate Portfolio Segment [Member] | Cumulative Effect, Period of Adoption, Adjustment [Member] | Accounting Standards Update 2016-13 [Member]      
Allowance for credit losses (loans)   618  
Commercial Real Estate Portfolio Segment [Member] | Cumulative Effect, Period of Adoption, Adjusted Balance [Member]      
Allowance for credit losses (loans)   4,682  
Construction Portfolio Segment [Member]      
Allowance for credit losses (loans)   109  
Construction Portfolio Segment [Member] | Cumulative Effect, Period of Adoption, Adjustment [Member] | Accounting Standards Update 2016-13 [Member]      
Allowance for credit losses (loans)   (31)  
Construction Portfolio Segment [Member] | Cumulative Effect, Period of Adoption, Adjusted Balance [Member]      
Allowance for credit losses (loans)   78  
Residential Portfolio Segment [Member]      
Allowance for credit losses (loans)   206  
Residential Portfolio Segment [Member] | Cumulative Effect, Period of Adoption, Adjustment [Member] | Accounting Standards Update 2016-13 [Member]      
Allowance for credit losses (loans)   (132)  
Residential Portfolio Segment [Member] | Cumulative Effect, Period of Adoption, Adjusted Balance [Member]      
Allowance for credit losses (loans)   74  
Consumer Portfolio Segment [Member]      
Allowance for credit losses (loans)   6,445  
Consumer Portfolio Segment [Member] | Cumulative Effect, Period of Adoption, Adjustment [Member] | Accounting Standards Update 2016-13 [Member]      
Allowance for credit losses (loans)   1,878  
Consumer Portfolio Segment [Member] | Cumulative Effect, Period of Adoption, Adjusted Balance [Member]      
Allowance for credit losses (loans)   8,323  
Unallocated Financing Receivables [Member]      
Allowance for credit losses (loans)   3,701  
Unallocated Financing Receivables [Member] | Cumulative Effect, Period of Adoption, Adjustment [Member] | Accounting Standards Update 2016-13 [Member]      
Allowance for credit losses (loans)   (3,701)  
Unallocated Financing Receivables [Member] | Cumulative Effect, Period of Adoption, Adjusted Balance [Member]      
Allowance for credit losses (loans)   $ 0  
v3.20.2
Note 3 - Investment Securities (Details Textual) - USD ($)
$ in Thousands
 9 Months Ended
Sep. 30, 2020
Jan. 01, 2020
Dec. 31, 2019
Unrealized Gain (Loss) on Securities $ 50    
Equity Securities, FV-NI 0   $ 0
Debt Securities, Held-to-maturity, Allowance for Credit Loss, Ending Balance 16 $ 0 0
High Risk Collateralized Mortgage Obligations 0   0
Other-than-temporary Impairment Loss, Debt Securities, Available-for-sale, Total 0    
Pledged Financial Instruments, Not Separately Reported, Securities, Total 850,245   760,365
Debt Securities, Available-for-sale, Amortized Cost, Total 3,836,879   3,041,860
Debt Securities, Available-for-sale, Total 3,983,994   3,078,846
Debt Securities, Held-to-maturity, Nonaccrual 0    
Debt Security, Corporate, US [Member]      
Debt Securities, Available-for-sale, Amortized Cost, Total 2,098,444   1,805,479
Debt Securities, Available-for-sale, Total 2,212,827   $ 1,833,783
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 14,900    
Cumulative Effect, Period of Adoption, Adjusted Balance [Member]      
Debt Securities, Held-to-maturity, Allowance for Credit Loss, Ending Balance $ 16 $ 16  
v3.20.2
Note 3 - Investment Securities - Amortized Cost, Unrealized Gains and Losses, and Estimated Fair Value of Investment Securities Portfolio (Details) - USD ($)
$ in Thousands
Sep. 30, 2020
Dec. 31, 2019
Debt securities available for sale, amortized cost $ 3,836,879 $ 3,041,860
Debt securities available for sale, gross unrealized gains 148,061 43,857
Debt securities available for sale, gross unrealized losses (946) (6,871)
Debt securities available for sale 3,983,994 3,078,846
Held to maturity 577,811 738,072
Debt securities held to maturity, gross unrecognized gains 15,945 8,460
Debt securities held to maturity, gross unrecognized losses (39) (2,236)
Debt securities held to maturity, fair value 593,717 744,296
Debt securities, amortized cost 4,414,690 3,779,932
Debt securities, gross unrecognized gains 164,006 52,317
Debt securities, gross unrecognized losses (985) (9,107)
Debt securities, fair value 4,577,711 3,823,142
Agency Residential MBS [Member]    
Debt securities available for sale, amortized cost 720,123 934,592
Debt securities available for sale, gross unrealized gains 25,174 10,996
Debt securities available for sale, gross unrealized losses 0 (5,838)
Debt securities available for sale 745,297 939,750
Held to maturity 272,460 353,937
Debt securities held to maturity, gross unrecognized gains 7,648 766
Debt securities held to maturity, gross unrecognized losses (39) (2,235)
Debt securities held to maturity, fair value 280,069 352,468
US Treasury Securities [Member]    
Debt securities available for sale, amortized cost   19,999
Debt securities available for sale, gross unrealized gains   1
Debt securities available for sale, gross unrealized losses   0
Debt securities available for sale   20,000
Agency Commercial MBS [Member]    
Debt securities available for sale, amortized cost 3,601 3,711
Debt securities available for sale, gross unrealized gains 0 0
Debt securities available for sale, gross unrealized losses (16) (3)
Debt securities available for sale 3,585 3,708
US Government-sponsored Enterprises Debt Securities [Member]    
Debt securities available for sale, amortized cost   111,251
Debt securities available for sale, gross unrealized gains   14
Debt securities available for sale, gross unrealized losses   (98)
Debt securities available for sale   111,167
US Government Agencies Debt Securities [Member]    
Debt securities available for sale, amortized cost 163 553
Debt securities available for sale, gross unrealized gains 0 0
Debt securities available for sale, gross unrealized losses 0 (9)
Debt securities available for sale 163 544
US States and Political Subdivisions Debt Securities [Member]    
Debt securities available for sale, amortized cost 121,951 159,527
Debt securities available for sale, gross unrealized gains 5,223 3,656
Debt securities available for sale, gross unrealized losses (2) (44)
Debt securities available for sale 127,172 163,139
Held to maturity 303,331 381,781
Debt securities held to maturity, gross unrecognized gains 8,261 7,672
Debt securities held to maturity, gross unrecognized losses 0 (1)
Debt securities held to maturity, fair value 311,592 389,452
Debt Security, Corporate, US [Member]    
Debt securities available for sale, amortized cost 2,098,444 1,805,479
Debt securities available for sale, gross unrealized gains 114,582 29,183
Debt securities available for sale, gross unrealized losses (199) (879)
Debt securities available for sale 2,212,827 1,833,783
Commercial Paper, Not Included with Cash and Cash Equivalents [Member]    
Debt securities available for sale, amortized cost 224,862  
Debt securities available for sale, gross unrealized gains 29  
Debt securities available for sale, gross unrealized losses (75)  
Debt securities available for sale 224,816  
Collateralized Debt Obligations [Member]    
Debt securities available for sale, amortized cost 667,735 6,748
Debt securities available for sale, gross unrealized gains 3,053 7
Debt securities available for sale, gross unrealized losses (654) 0
Debt securities available for sale 670,134 6,755
Non-agency Residential MBS [Member]    
Held to maturity 2,020 2,354
Debt securities held to maturity, gross unrecognized gains 36 22
Debt securities held to maturity, gross unrecognized losses 0 0
Debt securities held to maturity, fair value $ 2,056 $ 2,376
v3.20.2
Note 3 - Investment Securities - Amortized Cost and Estimated Market Value of Securities by Contractual Maturity (Details) - USD ($)
$ in Thousands
Sep. 30, 2020
Dec. 31, 2019
Investment securities available for sale, amortized cost, 1 year or less $ 452,154 $ 294,698
Investment securities available for sale, fair value, 1 year or less 454,493 295,255
Investment securities held to maturity, amortized cost, 1 year or less 63,044 70,378
Investment securities held to maturity, fair value, 1 year or less 63,504 70,602
Investment securities available for sale, amortized cost, over 1 to 5 years 973,305 1,104,775
Investment securities available for sale, fair value, over 1 to 5 years 1,026,667 1,122,391
Investment securities held to maturity, amortized cost, over 1 to 5 years 132,750 161,911
Investment securities held to maturity, fair value, over 1 to 5 years 136,640 165,126
Investment securities available for sale, amortized cost, over 5 to 10 years 1,480,374 670,595
Investment securities available for sale, fair value, over 5 to 10 years 1,544,476 683,277
Investment securities held to maturity, amortized cost, over 5 to 10 years 107,537 149,492
Investment securities held to maturity, fair value, over 5 to 10 years 111,448 153,724
Investment securities available for sale, amortized cost, over 10 years 207,322 33,489
Investment securities available for sale, fair value, over 10 years 209,476 34,465
Investment securities held to maturity, amortized cost, over 10 years 0 0
Investment securities held to maturity, fair value, over 10 years 0 0
Investment securities available for sale, amortized cost, subtotal 3,113,155 2,103,557
Investment securities available for sale, fair value, subtotal 3,235,112 2,135,388
Investment securities held to maturity, amortized cost, subtotal 303,331 381,781
Investment securities held to maturity, fair value, subtotal 311,592 389,452
Investment securities available for sale, amortized cost 723,724 938,303
Investment securities available for sale, fair value 748,882 943,458
Investment securities held to maturity, amortized cost 274,480 356,291
Investment securities held to maturity, fair value 282,125 354,844
Investment securities available for sale, amortized cost 3,836,879 3,041,860
Investment securities available for sale, fair value 3,983,994 3,078,846
Investment securities held to maturity, amortized cost 577,811 738,072
Investment securities held to maturity, fair value $ 593,717 $ 744,296
v3.20.2
Note 3 - Investment Securities - Gross Unrealized Losses, Investment Securities Portfolio (Details)
$ in Thousands
Sep. 30, 2020
USD ($)
Dec. 31, 2019
USD ($)
Available for sale securities, less than 12 months, number of investment positions 41 16
Available for sale securities, less than 12 months, fair value $ 322,525 $ 96,910
Available for sale securities, less than 12 months, unrealized losses $ (747) $ (314)
Available for sale securities, 12 months or longer, number of investment positions 3 70
Available for sale securities, 12 months or longer, fair value $ 18,284 $ 462,348
Available for sale securities, 12 months or longer, unrealized losses $ (199) $ (6,557)
Available for sale securities, total, number of investment positions 44 86
Available for sale securities, total, fair value $ 340,809 $ 559,258
Available for sale securities, total, unrealized losses $ (946) $ (6,871)
Held to Maturity securities, less than 12 months, number of investment positions   6
Held to Maturity securities, less than 12 months, fair value   $ 12,098
Held to Maturity securities, less than 12 months, unrecognized losses   $ (87)
Held to Maturity securities, 12 months or longer, number of investment positions   55
Held to Maturity securities, 12 months or longer, fair value   $ 277,454
Held to Maturity securities, 12 months or longer, unrecognized losses   $ (2,149)
Held to Maturity securities, total, number of investment positions   61
Held to Maturity securities, total, fair value   $ 289,552
Held to Maturity securities, total, unrecognized losses   $ (2,236)
Agency Residential MBS [Member]    
Available for sale securities, less than 12 months, number of investment positions 1 6
Available for sale securities, less than 12 months, fair value $ 98 $ 11,674
Available for sale securities, less than 12 months, unrealized losses $ 0 $ (100)
Available for sale securities, 12 months or longer, number of investment positions 1 47
Available for sale securities, 12 months or longer, fair value $ 21 $ 347,384
Available for sale securities, 12 months or longer, unrealized losses $ 0 $ (5,738)
Available for sale securities, total, number of investment positions 2 53
Available for sale securities, total, fair value $ 119 $ 359,058
Available for sale securities, total, unrealized losses $ 0 $ (5,838)
Held to Maturity securities, less than 12 months, number of investment positions 2 6
Held to Maturity securities, less than 12 months, fair value $ 153 $ 12,098
Held to Maturity securities, less than 12 months, unrecognized losses $ (1) $ (87)
Held to Maturity securities, 12 months or longer, number of investment positions 3 54
Held to Maturity securities, 12 months or longer, fair value $ 1,109 $ 277,203
Held to Maturity securities, 12 months or longer, unrecognized losses $ (38) $ (2,148)
Held to Maturity securities, total, number of investment positions 5 60
Held to Maturity securities, total, fair value $ 1,262 $ 289,301
Held to Maturity securities, total, unrecognized losses $ (39) $ (2,235)
US Government-sponsored Enterprises Debt Securities [Member]    
Available for sale securities, less than 12 months, number of investment positions   1
Available for sale securities, less than 12 months, fair value   $ 9,951
Available for sale securities, less than 12 months, unrealized losses   $ (49)
Available for sale securities, 12 months or longer, number of investment positions   3
Available for sale securities, 12 months or longer, fair value   $ 45,877
Available for sale securities, 12 months or longer, unrealized losses   $ (49)
Available for sale securities, total, number of investment positions   4
Available for sale securities, total, fair value   $ 55,828
Available for sale securities, total, unrealized losses   $ (98)
Agency Commercial MBS [Member]    
Available for sale securities, less than 12 months, number of investment positions 1 1
Available for sale securities, less than 12 months, fair value $ 3,585 $ 3,708
Available for sale securities, less than 12 months, unrealized losses $ (16) $ (3)
Available for sale securities, 12 months or longer, number of investment positions 0 0
Available for sale securities, 12 months or longer, fair value $ 0 $ 0
Available for sale securities, 12 months or longer, unrealized losses $ 0 $ 0
Available for sale securities, total, number of investment positions 1 1
Available for sale securities, total, fair value $ 3,585 $ 3,708
Available for sale securities, total, unrealized losses $ (16) $ (3)
US States and Political Subdivisions Debt Securities [Member]    
Available for sale securities, less than 12 months, number of investment positions 5 0
Available for sale securities, less than 12 months, fair value $ 2,447 $ 0
Available for sale securities, less than 12 months, unrealized losses $ (2) $ 0
Available for sale securities, 12 months or longer, number of investment positions 0 7
Available for sale securities, 12 months or longer, fair value $ 0 $ 4,163
Available for sale securities, 12 months or longer, unrealized losses $ 0 $ (44)
Available for sale securities, total, number of investment positions 5 7
Available for sale securities, total, fair value $ 2,447 $ 4,163
Available for sale securities, total, unrealized losses $ (2) $ (44)
Held to Maturity securities, less than 12 months, number of investment positions   0
Held to Maturity securities, less than 12 months, fair value   $ 0
Held to Maturity securities, less than 12 months, unrecognized losses   $ 0
Held to Maturity securities, 12 months or longer, number of investment positions   1
Held to Maturity securities, 12 months or longer, fair value   $ 251
Held to Maturity securities, 12 months or longer, unrecognized losses   $ (1)
Held to Maturity securities, total, number of investment positions   1
Held to Maturity securities, total, fair value   $ 251
Held to Maturity securities, total, unrecognized losses   $ (1)
US Government Agencies Debt Securities [Member]    
Available for sale securities, less than 12 months, number of investment positions 1 0
Available for sale securities, less than 12 months, fair value $ 163 $ 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 0 2
Available for sale securities, 12 months or longer, fair value $ 0 $ 544
Available for sale securities, 12 months or longer, unrealized losses $ 0 $ (9)
Available for sale securities, total, number of investment positions 1 2
Available for sale securities, total, fair value $ 163 $ 544
Available for sale securities, total, unrealized losses $ 0 $ (9)
Debt Security, Corporate, US [Member]    
Available for sale securities, less than 12 months, number of investment positions 0 8
Available for sale securities, less than 12 months, fair value $ 0 $ 71,577
Available for sale securities, less than 12 months, unrealized losses $ 0 $ (162)
Available for sale securities, 12 months or longer, number of investment positions 2 11
Available for sale securities, 12 months or longer, fair value $ 18,263 $ 64,380
Available for sale securities, 12 months or longer, unrealized losses $ (199) $ (717)
Available for sale securities, total, number of investment positions 2 19
Available for sale securities, total, fair value $ 18,263 $ 135,957
Available for sale securities, total, unrealized losses $ (199) $ (879)
Commercial Paper, Not Included with Cash and Cash Equivalents [Member]    
Available for sale securities, less than 12 months, number of investment positions 4  
Available for sale securities, less than 12 months, fair value $ 99,874  
Available for sale securities, less than 12 months, unrealized losses $ (75)  
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 4  
Available for sale securities, total, fair value $ 99,874  
Available for sale securities, total, unrealized losses $ (75)  
Collateralized Loan Obligations [Member]    
Available for sale securities, less than 12 months, number of investment positions 29  
Available for sale securities, less than 12 months, fair value $ 216,358  
Available for sale securities, less than 12 months, unrealized losses $ (654)  
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 29  
Available for sale securities, total, fair value $ 216,358  
Available for sale securities, total, unrealized losses $ (654)  
v3.20.2
Note 3 - Investment Securities - Allowance for Credit Losses (Details)
$ in Thousands
 9 Months Ended
Sep. 30, 2020
USD ($)
Beginning balance, prior to adoption of ASU 2016-13 $ 0
Impact of adopting ASU 2016-13 16
Provision 0
Chargeoffs 0
Recoveries 0
Total ending balance 16
Cumulative Effect, Period of Adoption, Adjusted Balance [Member]  
Total ending balance $ 16
v3.20.2
Note 3 - Investment Securities - Credit Quality (Details) - USD ($)
$ in Thousands
Sep. 30, 2020
Dec. 31, 2019
Held to maturity $ 577,811 $ 738,072
AAA/AA/A [Member]    
Held to maturity 576,695  
BBB [Member]    
Held to maturity 101  
BB/B [Member]    
Held to maturity 1,015  
Agency Residential MBS [Member]    
Held to maturity 272,460 353,937
Agency Residential MBS [Member] | AAA/AA/A [Member]    
Held to maturity 272,460  
Agency Residential MBS [Member] | BBB [Member]    
Held to maturity 0  
Agency Residential MBS [Member] | BB/B [Member]    
Held to maturity 0  
Non-agency Residential MBS [Member]    
Held to maturity 2,020 2,354
Non-agency Residential MBS [Member] | AAA/AA/A [Member]    
Held to maturity 1,005  
Non-agency Residential MBS [Member] | BBB [Member]    
Held to maturity 0  
Non-agency Residential MBS [Member] | BB/B [Member]    
Held to maturity 1,015  
US States and Political Subdivisions Debt Securities [Member]    
Held to maturity 303,331 $ 381,781
US States and Political Subdivisions Debt Securities [Member] | AAA/AA/A [Member]    
Held to maturity 303,230  
US States and Political Subdivisions Debt Securities [Member] | BBB [Member]    
Held to maturity 101  
US States and Political Subdivisions Debt Securities [Member] | BB/B [Member]    
Held to maturity $ 0  
v3.20.2
Note 3 - Investment Securities - Interest Income From Investment Securities (Details) - USD ($)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Taxable $ 23,079 $ 19,586 $ 67,963 $ 56,992
Tax-exempt from federal income tax 2,911 3,777 9,501 12,165
Total interest income from investment securities $ 25,990 $ 23,363 $ 77,464 $ 69,157
v3.20.2
Note 4 - Loans, Allowance for Loan Losses/Credit Losses and Other Real Estate Owned (Details Textual)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2020
USD ($)
Sep. 30, 2019
USD ($)
Sep. 30, 2020
USD ($)
Sep. 30, 2019
USD ($)
Jun. 30, 2020
USD ($)
Dec. 31, 2019
USD ($)
Jun. 30, 2019
USD ($)
Dec. 31, 2018
USD ($)
Loans and Leases Receivable, Allowance, Ending Balance $ 24,142 $ 19,828 $ 24,142 $ 19,828 $ 24,529 $ 19,484 $ 20,117 $ 21,351
Loans and Leases Receivable, Nonaccrual, Commitment to Lend 0   0     0    
Financing Receivable, Troubled Debt Restructuring $ 6,304   $ 6,304     6,713    
Troubled Debt Restructurings During Period 0 0 0 0        
Financing Receivables, Impaired, Troubled Debt Restructuring, Write-down $ 0 $ 0 $ 0 $ 0        
Financing Receivable, Troubled Debt Restructuring, Subsequent Default, Number of Contracts 0 0 0 0        
Financing Receivable, Held-for-Sale $ 0   $ 0     0    
Other Real Estate, Ending Balance 43   43     43    
Other Real Estate, Reserve 0   0     0    
Mortgage Loans in Process of Foreclosure, Amount 410   410     124    
Residential Real Estate Included in OREO [Member]                
Real Estate Acquired Through Foreclosure 0   0     0    
Commercial Real Estate Portfolio Segment [Member]                
Loans and Leases Receivable, Allowance, Ending Balance 5,665 $ 4,068 5,665 $ 4,068 4,623 4,064 4,057 3,884
Financing Receivable, Troubled Debt Restructuring 6,121   6,121     6,492    
Allowance for Credit Losses, Collateral-dependent Loans $ 0   $ 0          
Number of Collateral-dependent Loans 1   1          
Collateral-dependent Loans, Balance $ 3,420   $ 3,420          
Consumer Portfolio Segment [Member]                
Loans and Leases Receivable, Allowance, Ending Balance 9,433 5,539 9,433 5,539 11,770 6,445 5,418 5,645
Collateral-dependent Loans, Balance 357   357          
Residential Portfolio Segment [Member]                
Loans and Leases Receivable, Allowance, Ending Balance 52 $ 222 52 $ 222 $ 57 206 $ 238 $ 869
Financing Receivable, Troubled Debt Restructuring $ 183   $ 183     189    
Number of Collateral-dependent Loans 2   2          
Collateral-dependent Loans, Balance $ 410   $ 410          
Restructured Loans [Member]                
Financing Receivable, Troubled Debt Restructuring 6,304   6,304     6,713    
Impaired Loans, Restructured, Nonaccrual Status $ 3,420   $ 3,420     $ 3,670    
Commercial Real Estate [Member]                
Financing Receivable, Number of Loans With Deferred Payments 17   17          
Financing Receivable, Principal and Interest Deferred Payments $ 19,100   $ 19,100          
Other Consumer Loan [Member]                
Financing Receivable, Number of Loans With Deferred Payments 140   140          
Financing Receivable, Principal and Interest Deferred Payments $ 5,000   $ 5,000          
Commercial Loan [Member]                
Financing Receivable, Number of Loans With Deferred Payments 5   5          
Financing Receivable, Principal and Interest Deferred Payments $ 209   $ 209          
Other Commercial Real Estate Loans [Member]                
Number of Collateral-dependent Loans 4   4          
Collateral-dependent Loans, Balance $ 7,700   $ 7,700          
Nonperforming Financial Instruments [Member]                
Loans and Leases Receivable, Allowance, Ending Balance $ 0   $ 0          
v3.20.2
Note 4 - Loans, Allowance for Loan Losses/Credit Losses and Other Real Estate Owned - Loans Receivable at Carrying Amount (Details) - USD ($)
$ in Thousands
Sep. 30, 2020
Dec. 31, 2019
Loans $ 1,310,009 $ 1,126,664
Commercial Portfolio Segment [Member]    
Loans 445,605 222,085
Commercial Portfolio Segment [Member] | Paycheck Protection Program Loans [Member]    
Loans 243,982 0
Commercial Portfolio Segment [Member] | Other Commercial Portfolio Segment [Member]    
Loans 201,623 222,085
Commercial Real Estate Portfolio Segment [Member]    
Loans 563,707 578,758
Construction Portfolio Segment [Member]    
Loans 140 1,618
Residential Portfolio Segment [Member]    
Loans 25,076 32,748
Consumer Portfolio Segment [Member]    
Loans $ 275,481 $ 291,455
v3.20.2
Note 4 - Loans, Allowance for Loan Losses/Credit Losses and Other Real Estate Owned - Allowance for Loan Losses (Details) - USD ($)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Balance at beginning of period $ 24,529 $ 20,117 $ 19,484 $ 21,351
Provision (reversal) 0 0 4,300 0
Chargeoffs (872) (1,039) (3,249) (3,403)
Recoveries 485 750 1,590 1,880
Total allowance for credit losses 24,142 19,828 24,142 19,828
Cumulative Effect, Period of Adoption, Adjustment [Member]        
Balance at beginning of period     2,017  
Cumulative Effect, Period of Adoption, Adjusted Balance [Member]        
Balance at beginning of period     21,501  
Unallocated Financing Receivable [Member]        
Balance at beginning of period   4,052 3,701 3,177
Provision (reversal)   (524) 0 351
Chargeoffs   0 0 0
Recoveries   0 0 0
Total allowance for credit losses 0 3,528 0 3,528
Unallocated Financing Receivable [Member] | Cumulative Effect, Period of Adoption, Adjustment [Member]        
Balance at beginning of period     (3,701)  
Unallocated Financing Receivable [Member] | Cumulative Effect, Period of Adoption, Adjusted Balance [Member]        
Balance at beginning of period     0  
Commercial Portfolio Segment [Member]        
Balance at beginning of period 8,072 5,235 4,959 6,311
Provision (reversal) 867 (596) 537 (1,817)
Chargeoffs 0 0 (178) (71)
Recoveries 46 233 282 449
Total allowance for credit losses 8,985 4,872 8,985 4,872
Commercial Portfolio Segment [Member] | Cumulative Effect, Period of Adoption, Adjustment [Member]        
Balance at beginning of period     3,385  
Commercial Portfolio Segment [Member] | Cumulative Effect, Period of Adoption, Adjusted Balance [Member]        
Balance at beginning of period     8,344  
Commercial Real Estate Portfolio Segment [Member]        
Balance at beginning of period 4,623 4,057 4,064 3,884
Provision (reversal) 1,030 (1) 946 146
Chargeoffs 0 0 0 0
Recoveries 12 12 37 38
Total allowance for credit losses 5,665 4,068 5,665 4,068
Commercial Real Estate Portfolio Segment [Member] | Cumulative Effect, Period of Adoption, Adjustment [Member]        
Balance at beginning of period     618  
Commercial Real Estate Portfolio Segment [Member] | Cumulative Effect, Period of Adoption, Adjusted Balance [Member]        
Balance at beginning of period     4,682  
Construction Portfolio Segment [Member]        
Balance at beginning of period 7 1,117 109 1,465
Provision (reversal) 0 482 (71) 134
Chargeoffs 0 0 0 0
Recoveries 0 0 0 0
Total allowance for credit losses 7 1,599 7 1,599
Construction Portfolio Segment [Member] | Cumulative Effect, Period of Adoption, Adjustment [Member]        
Balance at beginning of period     (31)  
Construction Portfolio Segment [Member] | Cumulative Effect, Period of Adoption, Adjusted Balance [Member]        
Balance at beginning of period     78  
Residential Portfolio Segment [Member]        
Balance at beginning of period 57 238 206 869
Provision (reversal) (5) (16) (22) (647)
Chargeoffs 0 0 0 0
Recoveries 0 0 0 0
Total allowance for credit losses 52 222 52 222
Residential Portfolio Segment [Member] | Cumulative Effect, Period of Adoption, Adjustment [Member]        
Balance at beginning of period     (132)  
Residential Portfolio Segment [Member] | Cumulative Effect, Period of Adoption, Adjusted Balance [Member]        
Balance at beginning of period     74  
Consumer Portfolio Segment [Member]        
Balance at beginning of period 11,770 5,418 6,445 5,645
Provision (reversal) (1,892) 655 2,910 1,833
Chargeoffs (872) (1,039) (3,071) (3,332)
Recoveries 427 505 1,271 1,393
Total allowance for credit losses $ 9,433 $ 5,539 9,433 $ 5,539
Consumer Portfolio Segment [Member] | Cumulative Effect, Period of Adoption, Adjustment [Member]        
Balance at beginning of period     1,878  
Consumer Portfolio Segment [Member] | Cumulative Effect, Period of Adoption, Adjusted Balance [Member]        
Balance at beginning of period     $ 8,323  
v3.20.2
Note 4 - Loans, Allowance for Loan Losses/Credit Losses and Other Real Estate Owned - Recorded Investment in Loans Evaluated for Impairment (Details) - USD ($)
$ in Thousands
Sep. 30, 2020
Jun. 30, 2020
Dec. 31, 2019
Sep. 30, 2019
Jun. 30, 2019
Dec. 31, 2018
Individually evaluated for impairment     $ 2,413      
Collectively evaluated for impairment     17,071      
Total allowance for loan losses $ 24,142 $ 24,529 19,484 $ 19,828 $ 20,117 $ 21,351
Individually evaluated for impairment     15,824      
Collectively evaluated for impairment     1,110,840      
Financing Receivable, before Allowance for Credit Loss, Total 1,310,009   1,126,664      
Unallocated Financing Receivable [Member]            
Individually evaluated for impairment     0      
Collectively evaluated for impairment     3,701      
Total allowance for loan losses 0   3,701 3,528 4,052 3,177
Individually evaluated for impairment     0      
Collectively evaluated for impairment     0      
Financing Receivable, before Allowance for Credit Loss, Total     0      
Commercial Portfolio Segment [Member]            
Individually evaluated for impairment     2,413      
Collectively evaluated for impairment     2,546      
Total allowance for loan losses 8,985 8,072 4,959 4,872 5,235 6,311
Individually evaluated for impairment     8,182      
Collectively evaluated for impairment     213,903      
Financing Receivable, before Allowance for Credit Loss, Total 445,605   222,085      
Commercial Real Estate Portfolio Segment [Member]            
Individually evaluated for impairment     0      
Collectively evaluated for impairment     4,064      
Total allowance for loan losses 5,665 4,623 4,064 4,068 4,057 3,884
Individually evaluated for impairment     7,409      
Collectively evaluated for impairment     571,349      
Financing Receivable, before Allowance for Credit Loss, Total 563,707   578,758      
Construction Portfolio Segment [Member]            
Individually evaluated for impairment     0      
Collectively evaluated for impairment     109      
Total allowance for loan losses 7 7 109 1,599 1,117 1,465
Individually evaluated for impairment     0      
Collectively evaluated for impairment     1,618      
Financing Receivable, before Allowance for Credit Loss, Total 140   1,618      
Residential Portfolio Segment [Member]            
Individually evaluated for impairment     0      
Collectively evaluated for impairment     206      
Total allowance for loan losses 52 57 206 222 238 869
Individually evaluated for impairment     190      
Collectively evaluated for impairment     32,558      
Financing Receivable, before Allowance for Credit Loss, Total 25,076   32,748      
Consumer Portfolio Segment [Member]            
Individually evaluated for impairment     0      
Collectively evaluated for impairment     6,445      
Total allowance for loan losses 9,433 $ 11,770 6,445 $ 5,539 $ 5,418 $ 5,645
Individually evaluated for impairment     43      
Collectively evaluated for impairment     291,412      
Financing Receivable, before Allowance for Credit Loss, Total $ 275,481   $ 291,455      
v3.20.2
Note 4 - Loans, Allowance for Loan Losses/Credit Losses and Other Real Estate Owned - Credit Risk Profile by Internally Assigned Grade (Details) - USD ($)
$ in Thousands
Sep. 30, 2020
Dec. 31, 2019
Loans $ 1,310,009 $ 1,126,664
Pass [Member]    
Loans 1,282,020 1,103,164
Substandard [Member]    
Loans 27,079 22,798
Doubtful [Member]    
Loans 505 308
Unlikely to be Collected Financing Receivable [Member]    
Loans 405 394
Commercial Portfolio Segment [Member]    
Loans 445,605 222,085
Commercial Portfolio Segment [Member] | Pass [Member]    
Loans 437,216 213,542
Commercial Portfolio Segment [Member] | Substandard [Member]    
Loans 8,389 8,543
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 563,707 578,758
Commercial Real Estate Portfolio Segment [Member] | Pass [Member]    
Loans 546,714 567,525
Commercial Real Estate Portfolio Segment [Member] | Substandard [Member]    
Loans 16,993 11,233
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 140 1,618
Construction Portfolio Segment [Member] | Pass [Member]    
Loans 140 1,618
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 25,076 32,748
Residential Portfolio Segment [Member] | Pass [Member]    
Loans 23,699 31,055
Residential Portfolio Segment [Member] | Substandard [Member]    
Loans 1,377 1,693
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 275,481 291,455
Consumer Portfolio Segment [Member] | Pass [Member]    
Loans 274,251 289,424
Consumer Portfolio Segment [Member] | Substandard [Member]    
Loans 320 1,329
Consumer Portfolio Segment [Member] | Doubtful [Member]    
Loans 505 308
Consumer Portfolio Segment [Member] | Unlikely to be Collected Financing Receivable [Member]    
Loans $ 405 $ 394
v3.20.2
Note 4 - Loans, Allowance for Loan Losses/Credit Losses and Other Real Estate Owned - Loans by Delinquency and Nonaccrual Status (Details) - USD ($)
$ in Thousands
Sep. 30, 2020
Dec. 31, 2019
Current and accruing $ 1,300,985 $ 1,114,951
Nonaccrual 4,380 4,440
Financing Receivable, before Allowance for Credit Loss, Total 1,310,009 1,126,664
Financial Asset, 30 to 59 Days Past Due [Member]    
Past due and accruing 3,473 4,197
Financial Asset, 60 to 89 Days Past Due [Member]    
Past due and accruing 811 2,636
Financial Asset, Equal to or Greater than 90 Days Past Due [Member]    
Past due and accruing 360 440
Commercial Portfolio Segment [Member]    
Current and accruing 444,496 221,199
Nonaccrual 107 197
Financing Receivable, before Allowance for Credit Loss, Total 445,605 222,085
Commercial Portfolio Segment [Member] | Financial Asset, 30 to 59 Days Past Due [Member]    
Past due and accruing 963 531
Commercial Portfolio Segment [Member] | Financial Asset, 60 to 89 Days Past Due [Member]    
Past due and accruing 39 158
Commercial Portfolio Segment [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member]    
Past due and accruing 0 0
Commercial Real Estate Portfolio Segment [Member]    
Current and accruing 559,361 573,809
Nonaccrual 3,722 4,096
Financing Receivable, before Allowance for Credit Loss, Total 563,707 578,758
Commercial Real Estate Portfolio Segment [Member] | Financial Asset, 30 to 59 Days Past Due [Member]    
Past due and accruing 624 432
Commercial Real Estate Portfolio Segment [Member] | Financial Asset, 60 to 89 Days Past Due [Member]    
Past due and accruing 0 421
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 140 1,618
Nonaccrual 0 0
Financing Receivable, before Allowance for Credit Loss, Total 140 1,618
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 24,357 31,934
Nonaccrual 161 0
Financing Receivable, before Allowance for Credit Loss, Total 25,076 32,748
Residential Portfolio Segment [Member] | Financial Asset, 30 to 59 Days Past Due [Member]    
Past due and accruing 558 274
Residential Portfolio Segment [Member] | Financial Asset, 60 to 89 Days Past Due [Member]    
Past due and accruing 0 540
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 272,631 286,391
Nonaccrual 390 147
Financing Receivable, before Allowance for Credit Loss, Total 275,481 291,455
Consumer Portfolio Segment [Member] | Financial Asset, 30 to 59 Days Past Due [Member]    
Past due and accruing 1,328 2,960
Consumer Portfolio Segment [Member] | Financial Asset, 60 to 89 Days Past Due [Member]    
Past due and accruing 772 1,517
Consumer Portfolio Segment [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member]    
Past due and accruing $ 360 $ 440
v3.20.2
Note 4 - Loans, Allowance for Loan Losses/Credit Losses and Other Real Estate Owned - Impaired Loans (Details)
$ in Thousands
Dec. 31, 2019
USD ($)
Impaired loans with no related allowance recorded, recorded investment $ 7,662
Impaired loans with no related allowance recorded, unpaid principal balance 9,140
Impaired loans with an allowance recorded, recorded investment 8,160
Impaired loans with an allowance recorded, unpaid principal balance 8,160
Impaired loans with an allowance recorded, related allowance 2,413
Total impaired loans, recorded investment 15,822
Total impaired loans, unpaid principal balance 17,300
Commercial Portfolio Segment [Member]  
Impaired loans with no related allowance recorded, recorded investment 21
Impaired loans with no related allowance recorded, unpaid principal balance 21
Impaired loans with an allowance recorded, recorded investment 8,160
Impaired loans with an allowance recorded, unpaid principal balance 8,160
Impaired loans with an allowance recorded, related allowance 2,413
Commercial Real Estate Portfolio Segment [Member]  
Impaired loans with no related allowance recorded, recorded investment 7,408
Impaired loans with no related allowance recorded, unpaid principal balance 8,856
Residential Portfolio Segment [Member]  
Impaired loans with no related allowance recorded, recorded investment 190
Impaired loans with no related allowance recorded, unpaid principal balance 220
Consumer Portfolio Segment [Member]  
Impaired loans with no related allowance recorded, recorded investment 43
Impaired loans with no related allowance recorded, unpaid principal balance $ 43
v3.20.2
Note 4 - Loans, Allowance for Loan Losses/Credit 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, 2019
Average Recorded Investment $ 16,962 $ 16,836
Recognized Interest Income 208 819
Commercial Portfolio Segment [Member]    
Average Recorded Investment 8,701 9,404
Recognized Interest Income 144 476
Commercial Real Estate Portfolio Segment [Member]    
Average Recorded Investment 7,968 7,133
Recognized Interest Income 60 333
Residential Portfolio Segment [Member]    
Average Recorded Investment 194 196
Recognized Interest Income 4 10
Consumer Portfolio Segment [Member]    
Average Recorded Investment 99 103
Recognized Interest Income $ 0 $ 0
v3.20.2
Note 4 - Loans, Allowance for Loan Losses/Credit Losses and Other Real Estate Owned - Troubled Debt Restructurings (Details)
$ in Thousands
 9 Months Ended 12 Months Ended
Sep. 30, 2020
USD ($)
Dec. 31, 2019
USD ($)
Number of Contracts 7 9
Pre-Modification Carrying Value $ 8,608 $ 8,886
Financing Receivable, Troubled Debt Restructuring 6,304 6,713
Period-End Individual Impairment Allowance $ 0 $ 11
Commercial Real Estate Portfolio Segment [Member]    
Number of Contracts 6 6
Pre-Modification Carrying Value $ 8,367 $ 8,367
Financing Receivable, Troubled Debt Restructuring 6,121 6,492
Period-End Individual Impairment Allowance $ 0 $ 0
Commercial Portfolio Segment [Member]    
Number of Contracts   2
Pre-Modification Carrying Value   $ 278
Financing Receivable, Troubled Debt Restructuring   32
Period-End Individual Impairment Allowance   $ 11
Residential Portfolio Segment [Member]    
Number of Contracts 1 1
Pre-Modification Carrying Value $ 241 $ 241
Financing Receivable, Troubled Debt Restructuring 183 189
Period-End Individual Impairment Allowance $ 0 $ 0
v3.20.2
Note 4 - Loans, Allowance for Loan Losses/Credit Losses and Other Real Estate Owned - Risk Category of Loans by Class (Details) - USD ($)
$ in Thousands
Sep. 30, 2020
Dec. 31, 2019
Loans $ 1,310,009 $ 1,126,664
Current 1,300,985 1,114,951
Nonaccrual 4,380 4,440
Financial Asset, 30 to 59 Days Past Due [Member]    
Past due 3,473 4,197
Financial Asset, 60 to 89 Days Past Due [Member]    
Past due 811 2,636
Financial Asset, Equal to or Greater than 90 Days Past Due [Member]    
Past due 360 440
Commercial Portfolio Segment [Member]    
Originated prior 20,560  
Originated 2015 5,205  
Originated 2016 26,133  
Originated 2017 10,860  
Originated 2018 21,343  
Originated 2019 42,380  
Originated 2020 278,540  
Total term loans 405,021  
Revolving loans 40,584  
Loans 445,605 222,085
Current 444,496 221,199
Nonaccrual 107 197
Commercial Portfolio Segment [Member] | Financial Asset, 30 to 59 Days Past Due [Member]    
Past due 963 531
Commercial Portfolio Segment [Member] | Financial Asset, 60 to 89 Days Past Due [Member]    
Past due 39 158
Commercial Portfolio Segment [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member]    
Past due 0 0
Commercial Real Estate Portfolio Segment [Member]    
Originated prior 93,468  
Originated 2015 52,078  
Originated 2016 53,725  
Originated 2017 101,838  
Originated 2018 95,622  
Originated 2019 94,531  
Originated 2020 72,445  
Total term loans 563,707  
Revolving loans 0  
Loans 563,707 578,758
Current 559,361 573,809
Nonaccrual 3,722 4,096
Commercial Real Estate Portfolio Segment [Member] | Financial Asset, 30 to 59 Days Past Due [Member]    
Past due 624 432
Commercial Real Estate Portfolio Segment [Member] | Financial Asset, 60 to 89 Days Past Due [Member]    
Past due 0 421
Commercial Real Estate Portfolio Segment [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member]    
Past due 0 0
Construction Portfolio Segment [Member]    
Originated prior 0  
Originated 2015 0  
Originated 2016 0  
Originated 2017 0  
Originated 2018 0  
Originated 2019 0  
Originated 2020 0  
Total term loans 0  
Revolving loans 140  
Loans 140 1,618
Current 140 1,618
Nonaccrual 0 0
Construction Portfolio Segment [Member] | Financial Asset, 30 to 59 Days Past Due [Member]    
Past due 0 0
Construction Portfolio Segment [Member] | Financial Asset, 60 to 89 Days Past Due [Member]    
Past due 0 0
Construction Portfolio Segment [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member]    
Past due 0 0
Residential Portfolio Segment [Member]    
Originated prior 25,076  
Originated 2015 0  
Originated 2016 0  
Originated 2017 0  
Originated 2018 0  
Originated 2019 0  
Originated 2020 0  
Total term loans 25,076  
Revolving loans 0  
Loans 25,076 32,748
Current 24,357 31,934
Nonaccrual 161 0
Residential Portfolio Segment [Member] | Financial Asset, 30 to 59 Days Past Due [Member]    
Past due 558 274
Residential Portfolio Segment [Member] | Financial Asset, 60 to 89 Days Past Due [Member]    
Past due 0 540
Residential Portfolio Segment [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member]    
Past due 0 0
Consumer Portfolio Segment [Member]    
Loans 275,481 291,455
Current 272,631 286,391
Nonaccrual 390 147
Consumer Portfolio Segment [Member] | Financial Asset, 30 to 59 Days Past Due [Member]    
Past due 1,328 2,960
Consumer Portfolio Segment [Member] | Financial Asset, 60 to 89 Days Past Due [Member]    
Past due 772 1,517
Consumer Portfolio Segment [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member]    
Past due 360 440
Consumer Portfolio Segment [Member] | Term Loan Originated Prior [Member]    
Loans 5,124  
Current 5,087  
Nonaccrual 0  
Consumer Portfolio Segment [Member] | Term Loan Originated Prior [Member] | Financial Asset, 30 to 59 Days Past Due [Member]    
Past due 35  
Consumer Portfolio Segment [Member] | Term Loan Originated Prior [Member] | Financial Asset, 60 to 89 Days Past Due [Member]    
Past due 2  
Consumer Portfolio Segment [Member] | Term Loan Originated Prior [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member]    
Past due 0  
Consumer Portfolio Segment [Member] | Term Loans Originated in 2015 [Member]    
Loans 6,583  
Current 6,457  
Nonaccrual 0  
Consumer Portfolio Segment [Member] | Term Loans Originated in 2015 [Member] | Financial Asset, 30 to 59 Days Past Due [Member]    
Past due 91  
Consumer Portfolio Segment [Member] | Term Loans Originated in 2015 [Member] | Financial Asset, 60 to 89 Days Past Due [Member]    
Past due 30  
Consumer Portfolio Segment [Member] | Term Loans Originated in 2015 [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member]    
Past due 5  
Consumer Portfolio Segment [Member] | Term Loans Originated in 2016 [Member]    
Loans 19,563  
Current 19,339  
Nonaccrual 0  
Consumer Portfolio Segment [Member] | Term Loans Originated in 2016 [Member] | Financial Asset, 30 to 59 Days Past Due [Member]    
Past due 147  
Consumer Portfolio Segment [Member] | Term Loans Originated in 2016 [Member] | Financial Asset, 60 to 89 Days Past Due [Member]    
Past due 48  
Consumer Portfolio Segment [Member] | Term Loans Originated in 2016 [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member]    
Past due 29  
Consumer Portfolio Segment [Member] | Term Loans Originated in 2017 [Member]    
Loans 24,941  
Current 24,554  
Nonaccrual 0  
Consumer Portfolio Segment [Member] | Term Loans Originated in 2017 [Member] | Financial Asset, 30 to 59 Days Past Due [Member]    
Past due 224  
Consumer Portfolio Segment [Member] | Term Loans Originated in 2017 [Member] | Financial Asset, 60 to 89 Days Past Due [Member]    
Past due 163  
Consumer Portfolio Segment [Member] | Term Loans Originated in 2017 [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member]    
Past due 0  
Consumer Portfolio Segment [Member] | Term Loans Originated in 2018 [Member]    
Loans 54,166  
Current 53,347  
Nonaccrual 0  
Consumer Portfolio Segment [Member] | Term Loans Originated in 2018 [Member] | Financial Asset, 30 to 59 Days Past Due [Member]    
Past due 266  
Consumer Portfolio Segment [Member] | Term Loans Originated in 2018 [Member] | Financial Asset, 60 to 89 Days Past Due [Member]    
Past due 327  
Consumer Portfolio Segment [Member] | Term Loans Originated in 2018 [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member]    
Past due 226  
Consumer Portfolio Segment [Member] | Term Loans Originated in 2019 [Member]    
Loans 69,941  
Current 69,313  
Nonaccrual 0  
Consumer Portfolio Segment [Member] | Term Loans Originated in 2019 [Member] | Financial Asset, 30 to 59 Days Past Due [Member]    
Past due 402  
Consumer Portfolio Segment [Member] | Term Loans Originated in 2019 [Member] | Financial Asset, 60 to 89 Days Past Due [Member]    
Past due 160  
Consumer Portfolio Segment [Member] | Term Loans Originated in 2019 [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member]    
Past due 66  
Consumer Portfolio Segment [Member] | Term Loans Originated in 2020 [Member]    
Loans 65,112  
Current 64,893  
Nonaccrual 0  
Consumer Portfolio Segment [Member] | Term Loans Originated in 2020 [Member] | Financial Asset, 30 to 59 Days Past Due [Member]    
Past due 148  
Consumer Portfolio Segment [Member] | Term Loans Originated in 2020 [Member] | Financial Asset, 60 to 89 Days Past Due [Member]    
Past due 40  
Consumer Portfolio Segment [Member] | Term Loans Originated in 2020 [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member]    
Past due 31  
Consumer Portfolio Segment [Member] | Total Term Loans [Member]    
Loans 245,430  
Current 242,990  
Nonaccrual 0  
Consumer Portfolio Segment [Member] | Total Term Loans [Member] | Financial Asset, 30 to 59 Days Past Due [Member]    
Past due 1,313  
Consumer Portfolio Segment [Member] | Total Term Loans [Member] | Financial Asset, 60 to 89 Days Past Due [Member]    
Past due 770  
Consumer Portfolio Segment [Member] | Total Term Loans [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member]    
Past due 357  
Consumer Portfolio Segment [Member] | Revolving Loans Amortized Cost Basis [Member]    
Loans 30,051  
Current 29,641  
Nonaccrual 390  
Consumer Portfolio Segment [Member] | Revolving Loans Amortized Cost Basis [Member] | Financial Asset, 30 to 59 Days Past Due [Member]    
Past due 15  
Consumer Portfolio Segment [Member] | Revolving Loans Amortized Cost Basis [Member] | Financial Asset, 60 to 89 Days Past Due [Member]    
Past due 2  
Consumer Portfolio Segment [Member] | Revolving Loans Amortized Cost Basis [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member]    
Past due 3  
Pass [Member]    
Loans 1,282,020 1,103,164
Pass [Member] | Commercial Portfolio Segment [Member]    
Originated prior 20,496  
Originated 2015 5,205  
Originated 2016 26,132  
Originated 2017 10,860  
Originated 2018 21,343  
Originated 2019 42,380  
Originated 2020 270,664  
Total term loans 397,080  
Revolving loans 40,136  
Loans 437,216 213,542
Pass [Member] | Commercial Real Estate Portfolio Segment [Member]    
Originated prior 88,661  
Originated 2015 50,764  
Originated 2016 43,804  
Originated 2017 101,731  
Originated 2018 95,622  
Originated 2019 94,531  
Originated 2020 71,601  
Total term loans 546,714  
Revolving loans 0  
Loans 546,714 567,525
Pass [Member] | Construction Portfolio Segment [Member]    
Originated prior 0  
Originated 2015 0  
Originated 2016 0  
Originated 2017 0  
Originated 2018 0  
Originated 2019 0  
Originated 2020 0  
Total term loans 0  
Revolving loans 140  
Loans 140 1,618
Pass [Member] | Residential Portfolio Segment [Member]    
Originated prior 23,699  
Originated 2015 0  
Originated 2016 0  
Originated 2017 0  
Originated 2018 0  
Originated 2019 0  
Originated 2020 0  
Total term loans 23,699  
Revolving loans 0  
Loans 23,699 31,055
Pass [Member] | Consumer Portfolio Segment [Member]    
Loans 274,251 289,424
Substandard [Member]    
Loans 27,079 22,798
Substandard [Member] | Commercial Portfolio Segment [Member]    
Originated prior 64  
Originated 2015 0  
Originated 2016 1  
Originated 2017 0  
Originated 2018 0  
Originated 2019 0  
Originated 2020 7,876  
Total term loans 7,941  
Revolving loans 448  
Loans 8,389 8,543
Substandard [Member] | Commercial Real Estate Portfolio Segment [Member]    
Originated prior 4,807  
Originated 2015 1,314  
Originated 2016 9,921  
Originated 2017 107  
Originated 2018 0  
Originated 2019 0  
Originated 2020 844  
Total term loans 16,993  
Revolving loans 0  
Loans 16,993 11,233
Substandard [Member] | Construction Portfolio Segment [Member]    
Originated prior 0  
Originated 2015 0  
Originated 2016 0  
Originated 2017 0  
Originated 2018 0  
Originated 2019 0  
Originated 2020 0  
Total term loans 0  
Revolving loans 0  
Loans 0 0
Substandard [Member] | Residential Portfolio Segment [Member]    
Originated prior 1,377  
Originated 2015 0  
Originated 2016 0  
Originated 2017 0  
Originated 2018 0  
Originated 2019 0  
Originated 2020 0  
Total term loans 1,377  
Revolving loans 0  
Loans 1,377 1,693
Substandard [Member] | Consumer Portfolio Segment [Member]    
Loans 320 1,329
Doubtful [Member]    
Loans 505 308
Doubtful [Member] | Commercial Portfolio Segment [Member]    
Originated prior 0  
Originated 2015 0  
Originated 2016 0  
Originated 2017 0  
Originated 2018 0  
Originated 2019 0  
Originated 2020 0  
Total term loans 0  
Revolving loans 0  
Loans 0 0
Doubtful [Member] | Commercial Real Estate Portfolio Segment [Member]    
Originated prior 0  
Originated 2015 0  
Originated 2016 0  
Originated 2017 0  
Originated 2018 0  
Originated 2019 0  
Originated 2020  
Total term loans 0  
Revolving loans 0  
Loans 0 0
Doubtful [Member] | Construction Portfolio Segment [Member]    
Originated prior 0  
Originated 2015 0  
Originated 2016 0  
Originated 2017 0  
Originated 2018 0  
Originated 2019 0  
Originated 2020 0  
Total term loans 0  
Revolving loans 0  
Loans 0 0
Doubtful [Member] | Residential Portfolio Segment [Member]    
Originated prior 0  
Originated 2015 0  
Originated 2016 0  
Originated 2017 0  
Originated 2018 0  
Originated 2019 0  
Originated 2020 0  
Total term loans 0  
Revolving loans 0  
Loans 0 0
Doubtful [Member] | Consumer Portfolio Segment [Member]    
Loans 505 308
Unlikely to be Collected Financing Receivable [Member]    
Loans 405 394
Unlikely to be Collected Financing Receivable [Member] | Commercial Portfolio Segment [Member]    
Originated prior 0  
Originated 2015 0  
Originated 2016 0  
Originated 2017 0  
Originated 2018 0  
Originated 2019 0  
Originated 2020 0  
Total term loans 0  
Revolving loans 0  
Loans 0 0
Unlikely to be Collected Financing Receivable [Member] | Commercial Real Estate Portfolio Segment [Member]    
Originated prior 0  
Originated 2015 0  
Originated 2016 0  
Originated 2017 0  
Originated 2018 0  
Originated 2019 0  
Originated 2020  
Total term loans 0  
Revolving loans 0  
Loans 0 0
Unlikely to be Collected Financing Receivable [Member] | Construction Portfolio Segment [Member]    
Originated prior 0  
Originated 2015 0  
Originated 2016 0  
Originated 2017 0  
Originated 2018 0  
Originated 2019 0  
Originated 2020 0  
Total term loans 0  
Revolving loans 0  
Loans 0 0
Unlikely to be Collected Financing Receivable [Member] | Residential Portfolio Segment [Member]    
Originated prior 0  
Originated 2015 0  
Originated 2016 0  
Originated 2017 0  
Originated 2018 0  
Originated 2019 0  
Originated 2020 0  
Total term loans 0  
Revolving loans 0  
Loans 0 0
Unlikely to be Collected Financing Receivable [Member] | Consumer Portfolio Segment [Member]    
Loans $ 405 $ 394
v3.20.2
Note 5 - Concentration of Credit Risk (Details Textual) - USD ($)
$ in Thousands
Sep. 30, 2020
Dec. 31, 2019
Unsecured Loan Limit, Percentage of Shareholders' Equity, California Financial Code 15.00%  
Secured and Unsecured Loan Limit Percentage, California Financial Code 25.00%  
Loan Commitments and Standby Letters of Credit Related to Real Estate Loans $ 39,779 $ 43,129
Corporate Debt Securities [Member]    
Concentration Risk, Issuer Relationships 97  
Concentration Risk, Aggregate Securities Amount $ 5,000  
Commercial Paper, Not Included with Cash and Cash Equivalents [Member]    
Concentration Risk, Issuer Relationships 9  
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 31  
Concentration Risk, Aggregate Loans Amount $ 5,000  
v3.20.2
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, 2020
USD ($)
$ / shares
Sep. 30, 2020
USD ($)
$ / shares
Dec. 31, 2019
USD ($)
Sep. 30, 2019
USD ($)
shares
LIHTC Investments     $ 18,935 $ 18,935 $ 20,773  
Qualified Affordable Housing Project Investments, Commitment     13,397 13,397 16,231  
Deferred Tax Liabilities, Net, Total     21,819 21,819 0  
Deferred Income Tax Expense (Benefit), Total       (21,942)    
Deferred Tax Liabilities, Investments     43,492 43,492    
Debt Securities, Available-for-sale, Unrealized Gain (Loss), Total       147,115    
Deferred Tax Assets, Net, Total     $ 0 $ 0 11,085  
Deferred Tax Assets, Unrealized Losses on Available-for-Sale Securities, Gross         10,934  
Lessee, Operating Lease, Term of Contract (Year)     5 years 5 years    
Lessee, Operating Lease, Renewal Term (Year)     5 years 5 years    
Operating Lease, Liability, Total     $ 19,098 $ 19,098 17,136  
Operating Lease, Right-of-Use Asset     $ 19,098 $ 19,098 $ 17,136  
Operating Lease, Weighted Average Remaining Lease Term (Year)     4 years 9 months 18 days 4 years 9 months 18 days    
Operating Lease, Weighted Average Discount Rate, Percent     2.25% 2.25%    
Operating Lease, Cost     $ 1,671 $ 4,988    
Contingent Commitment, Remainder of Fiscal Year [Member]            
Qualified Affordable Housing Project Investments, Commitment     2,248 2,248    
Contingent Commitment, Year 2 [Member]            
Qualified Affordable Housing Project Investments, Commitment     4,071 4,071    
Contingent Commitment, Year 3 [Member]            
Qualified Affordable Housing Project Investments, Commitment     5,983 5,983    
Contingent Commitment, Year 4 [Member]            
Qualified Affordable Housing Project Investments, Commitment     295 295    
Contingent Commitment, Year 5 [Member]            
Qualified Affordable Housing Project Investments, Commitment     24 24    
Contingent Commitment, Year 6 [Member]            
Qualified Affordable Housing Project Investments, Commitment     228 228    
Contingent Commitment, Year 7 [Member]            
Qualified Affordable Housing Project Investments, Commitment     74 74    
Contingent Commitment, Year 8 or Thereafter [Member]            
Qualified Affordable Housing Project Investments, Commitment     $ 474 $ 474    
Visa Inc. [Member]            
Share Price (in dollars per share) | $ / shares     $ 199.97 $ 199.97    
VISA Class B Common Stock [Member]            
Investment Owned, Balance, Shares (in shares) | shares           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
v3.20.2
Note 6 - Other Assets and Other Liabilities - Summary of Other Assets (Details) - USD ($)
$ in Thousands
Sep. 30, 2020
Dec. 31, 2019
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 59,868 57,810
Net deferred tax asset 0 11,085
Right-of-use asset 19,098 17,136
Limited partnership investments 18,935 20,773
Interest receivable 30,779 28,797
Prepaid assets 3,619 3,737
Other assets 13,743 10,767
Total other assets $ 160,269 $ 164,332
[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.
v3.20.2
Note 6 - Other Assets and Other Liabilities - Amounts Recognized in Net Income (Details) - USD ($)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Investment loss included in pre-tax income $ 640 $ 600 $ 1,840 $ 1,800
Tax credits recognized in provision for income taxes $ 225 $ 225 $ 675 $ 675
v3.20.2
Note 6 - Other Assets and Other Liabilities - Other Liabilities (Details) - USD ($)
$ in Thousands
Sep. 30, 2020
Dec. 31, 2019
Net deferred tax liability $ 21,819 $ 0
Operating lease liability 19,098 17,136
Other liabilities 49,559 27,453
Total other liabilities $ 90,476 $ 44,589
v3.20.2
Note 6 - Other Assets and Other Liabilities - Maturity of Operating Lease Liabilities (Details) - USD ($)
$ in Thousands
Sep. 30, 2020
Dec. 31, 2019
The remaining three months of 2020 $ 1,599  
2021 5,353  
2022 4,426  
2023 3,689  
2024 2,078  
Thereafter 2,863  
Total minimum lease payments 20,008  
Less: discount (910)  
Operating lease liability $ 19,098 $ 17,136
v3.20.2
Note 7 - Goodwill and Identifiable Intangible Assets (Details Textual) - USD ($)
$ in Thousands
 3 Months Ended 9 Months Ended 12 Months Ended
Sep. 30, 2020
Sep. 30, 2020
Dec. 31, 2019
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
v3.20.2
Note 7 - Goodwill and Identifiable Intangible Assets - Carrying Values of Goodwill (Details) - USD ($)
$ in Thousands
Sep. 30, 2020
Dec. 31, 2019
Goodwill $ 121,673 $ 121,673
v3.20.2
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, 2020
Dec. 31, 2019
Gross Carrying Amount $ 56,808 $ 56,808
Accumulated Amortization $ (55,635) $ (55,417)
v3.20.2
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, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
For the nine months ended September 30, 2020 (actual) $ 72 $ 76 $ 218 $ 465
Core Deposits [Member]        
For the nine months ended September 30, 2020 (actual)     218  
Estimate for the remainder of year ending December 31, 2020 69   69  
Estimate for year ending December 31, 2021 269   269  
2022 252   252  
2023 236   236  
2024 222   222  
2025 $ 125   $ 125  
v3.20.2
Note 8 - Deposits and Borrowed Funds (Details Textual) - USD ($)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Dec. 31, 2019
Demand Deposit Overdrafts $ 1,466   $ 1,466   $ 1,055
Interest Expense, Time Deposits, $100,000 or More $ 80 $ 81 $ 238 $ 246  
v3.20.2
Note 8 - Deposits and Borrowed Funds - Deposits Detail (Details) - USD ($)
$ in Thousands
Sep. 30, 2020
Dec. 31, 2019
Noninterest-bearing $ 2,684,028 $ 2,240,112
Interest-bearing:    
Transaction 1,040,712 931,888
Savings 1,653,000 1,471,284
Time deposits less than $100 thousand 83,838 88,355
Time deposits $100 thousand through $250 thousand 50,378 54,874
Time deposits more than $250 thousand 27,234 26,108
Total deposits $ 5,539,190 $ 4,812,621
v3.20.2
Note 8 - Deposits and Borrowed Funds - Short-term Borrowed Funds (Details) - USD ($)
$ in Thousands
Sep. 30, 2020
Dec. 31, 2019
Collateral Carrying Value $ 260,162 $ 264,571
Short-term borrowed funds 107,973 30,928
US Government-sponsored Enterprises Debt Securities [Member]    
Collateral Carrying Value 0 65,833
Agency Residential MBS [Member]    
Collateral Carrying Value 76,715 52,485
Corporate Debt Securities [Member]    
Collateral Carrying Value $ 183,447 $ 146,253
v3.20.2
Note 9 - Fair Value Measurements (Details Textual)
 9 Months Ended
Sep. 30, 2020
Fair Value, Inputs, Level 3 [Member]  
Fair Value Inputs, Appraisal Rate 10.00%
v3.20.2
Note 9 - Fair Value Measurements - Assets Measured at Fair Value on a Recurring Basis (Details) - USD ($)
$ in Thousands
Sep. 30, 2020
Dec. 31, 2019
Investment securities available for sale $ 3,983,994 $ 3,078,846
Agency Residential MBS [Member]    
Investment securities available for sale 745,297 939,750
US Treasury Securities [Member]    
Investment securities available for sale   20,000
Agency Commercial MBS [Member]    
Investment securities available for sale 3,585 3,708
US Government-sponsored Enterprises Debt Securities [Member]    
Investment securities available for sale   111,167
US Government Agencies Debt Securities [Member]    
Investment securities available for sale 163 544
US States and Political Subdivisions Debt Securities [Member]    
Investment securities available for sale 127,172 163,139
Debt Security, Corporate, US [Member]    
Investment securities available for sale 2,212,827 1,833,783
Commercial Paper, Not Included with Cash and Cash Equivalents [Member]    
Investment securities available for sale 224,816  
Fair Value, Recurring [Member]    
Investment securities available for sale 3,983,994 3,078,846
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]    
Investment securities available for sale 0 20,000
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]    
Investment securities available for sale 3,983,994 3,058,846
Fair Value, Recurring [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 745,297 939,750
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 745,297 939,750
Fair Value, Recurring [Member] | Agency Residential MBS [Member] | Fair Value, Inputs, Level 3 [Member]    
Investment securities available for sale 0 [1] 0
Fair Value, Recurring [Member] | US Treasury Securities [Member]    
Investment securities available for sale   20,000
Fair Value, Recurring [Member] | US Treasury Securities [Member] | Fair Value, Inputs, Level 1 [Member]    
Investment securities available for sale   20,000
Fair Value, Recurring [Member] | US Treasury Securities [Member] | Fair Value, Inputs, Level 2 [Member]    
Investment securities available for sale   0
Fair Value, Recurring [Member] | US Treasury Securities [Member] | Fair Value, Inputs, Level 3 [Member]    
Investment securities available for sale [2]   0
Fair Value, Recurring [Member] | Agency Commercial MBS [Member]    
Investment securities available for sale 3,585 3,708
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 3,585 3,708
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-sponsored Enterprises Debt Securities [Member]    
Investment securities available for sale   111,167
Fair Value, Recurring [Member] | US Government-sponsored Enterprises Debt Securities [Member] | Fair Value, Inputs, Level 1 [Member]    
Investment securities available for sale   0
Fair Value, Recurring [Member] | US Government-sponsored Enterprises Debt Securities [Member] | Fair Value, Inputs, Level 2 [Member]    
Investment securities available for sale   111,167
Fair Value, Recurring [Member] | US Government-sponsored Enterprises Debt Securities [Member] | Fair Value, Inputs, Level 3 [Member]    
Investment securities available for sale [2]   0
Fair Value, Recurring [Member] | US Government Agencies Debt Securities [Member]    
Investment securities available for sale 163 544
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 163 544
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 127,172 163,139
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 127,172 163,139
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 2,212,827 1,833,783
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 2,212,827 1,833,783
Fair Value, Recurring [Member] | Debt Security, Corporate, US [Member] | Fair Value, Inputs, Level 3 [Member]    
Investment securities available for sale 0 [1] 0 [2]
Fair Value, Recurring [Member] | Commercial Paper, Not Included with Cash and Cash Equivalents [Member]    
Investment securities available for sale 224,816  
Fair Value, Recurring [Member] | Commercial Paper, Not Included with Cash and Cash Equivalents [Member] | Fair Value, Inputs, Level 1 [Member]    
Investment securities available for sale  
Fair Value, Recurring [Member] | Commercial Paper, Not Included with Cash and Cash Equivalents [Member] | Fair Value, Inputs, Level 2 [Member]    
Investment securities available for sale 224,816  
Fair Value, Recurring [Member] | Commercial Paper, Not Included with Cash and Cash Equivalents [Member] | Fair Value, Inputs, Level 3 [Member]    
Investment securities available for sale  
Fair Value, Recurring [Member] | Collateralized Loan Obligations [Member]    
Investment securities available for sale 670,134 6,755
Fair Value, Recurring [Member] | Collateralized Loan Obligations [Member] | Fair Value, Inputs, Level 1 [Member]    
Investment securities available for sale 0 0
Fair Value, Recurring [Member] | Collateralized Loan Obligations [Member] | Fair Value, Inputs, Level 2 [Member]    
Investment securities available for sale 670,134 6,755
Fair Value, Recurring [Member] | Collateralized Loan Obligations [Member] | Fair Value, Inputs, Level 3 [Member]    
Investment securities available for sale $ 0 [1] $ 0
[1] There were no transfers in to or out of level 3 during the nine months ended September 30, 2020.
[2] There were no transfers in to or out of level 3 during the twelve months ended December 31, 2019.
v3.20.2
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, 2020
Dec. 31, 2019
Fair Value $ 9,353 $ 10,071
Total Losses 0 0
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 9,353 10,071
Other Real Estate Owned [Member]    
Fair Value 43 43
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 43
Impaired Loans [Member] | Commercial Portfolio Segment [Member]    
Fair Value 5,354 5,747
Total Losses 0 0
Impaired Loans [Member] | Commercial Real Estate Portfolio Segment [Member]    
Fair Value 3,773 4,091
Total Losses 0 0
Impaired Loans [Member] | Residential Portfolio Segment [Member]    
Fair Value 183 190
Total Losses 0 0
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 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 0
Impaired Loans [Member] | Fair Value, Inputs, Level 3 [Member] | Commercial Portfolio Segment [Member]    
Fair Value 5,354 5,747
Impaired Loans [Member] | Fair Value, Inputs, Level 3 [Member] | Commercial Real Estate Portfolio Segment [Member]    
Fair Value 3,773 4,091
Impaired Loans [Member] | Fair Value, Inputs, Level 3 [Member] | Residential Portfolio Segment [Member]    
Fair Value $ 183 $ 190
v3.20.2
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, 2020
Dec. 31, 2019
Reported Value Measurement [Member]    
Cash and due from banks $ 398,964 $ 373,421
Debt securities held to maturity 577,795 738,072
Loans 1,285,867 1,107,180
Deposits 5,539,190 4,812,621
Short-term borrowed funds 107,973 30,928
Estimate of Fair Value Measurement [Member]    
Cash and due from banks 398,964 373,421
Debt securities held to maturity 593,701 744,296
Loans 1,347,245 1,152,949
Deposits 5,539,300 4,810,934
Short-term borrowed funds 107,973 30,928
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 1 [Member]    
Cash and due from banks 398,964 373,421
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 593,701 744,296
Loans 0 0
Deposits 5,377,740 4,643,284
Short-term borrowed funds 107,973 30,928
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 1,347,245 1,152,949
Deposits 161,560 167,650
Short-term borrowed funds $ 0 $ 0
v3.20.2
Note 10 - Commitments and Contingent Liabilities (Details Textual) - USD ($)
$ in Thousands
 3 Months Ended
Jun. 30, 2019
Sep. 30, 2020
Jan. 01, 2020
Dec. 31, 2019
Dec. 31, 2017
Loan Commitments, Not Unconditionally Cancellable   $ 39,779      
Unfunded Loan Commitments   279,330   $ 265,311  
Guarantor Obligations, Current Carrying Value   580   550  
Reserve for Unfunded Commitments     $ 2,160    
Other Liabilities [Member]          
Reserve for Unfunded Commitments   53   2,160  
Financial Standby Letter of Credit [Member]          
Letters of Credit Outstanding, Amount   2,356   3,099  
Commercial Standby Letters of Credit [Member]          
Letters of Credit Outstanding, Amount   $ 0   $ 0  
Customer Refunds [Member]          
Loss Contingency Accrual, Ending Balance $ 5,843       $ 5,542
Loss Contingency Accrual, Period Increase (Decrease), Total $ 301        
v3.20.2
Note 11 - Earnings Per Common Share (Details Textual) - shares
shares in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Share-based Payment Arrangement, Option [Member]        
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount (in shares) 567 379 560 425
v3.20.2
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, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Net income applicable to common equity (numerator) $ 20,051 $ 20,390 $ 56,575 $ 59,661
Weighted average number of common shares outstanding - basic (in shares) 26,930 26,986 26,977 26,924
Basic earnings per common share (in dollars per share) $ 0.74 $ 0.76 $ 2.10 $ 2.22
Add common stock equivalents for options (in shares) 16 41 21 52
Weighted average number of common shares outstanding - diluted (denominator) (in shares) 26,946 27,027 26,998 26,976
Diluted earnings per common share (in dollars per share) $ 0.74 $ 0.75 $ 2.10 $ 2.21
v3.20.2
Note 12 - Impact of COVID-19 (Details Textual)
$ in Thousands
Sep. 30, 2020
USD ($)
Jun. 30, 2020
USD ($)
Dec. 31, 2019
USD ($)
Financing Receivable, before Allowance for Credit Loss, Total $ 1,310,009   $ 1,126,664
Debt Securities, Available-for-sale, Amortized Cost, Total 3,836,879   3,041,860
Debt Securities, Available-for-sale, Total $ 3,983,994   $ 3,078,846
Corporate Debt Securities in Industrial and Energy Sectors [Member]      
Debt Securities, Available-for-Sale, Number of Issuers 14    
Debt Securities, Available-for-sale, Amortized Cost, Total $ 275,300    
Debt Securities, Available-for-sale, Total 288,700    
Other Consumer Loan [Member]      
Financing Receivable, Principal and Interest Deferred Payments 5,000    
Commercial Real Estate [Member]      
Financing Receivable, Principal and Interest Deferred Payments 19,100    
Commercial Loan [Member]      
Financing Receivable, Principal and Interest Deferred Payments 209    
SBA CARES Act Paycheck Protection Program [Member]      
Financing Receivable, before Allowance for Credit Loss, Total $ 244,000 $ 249,000