WESTAMERICA BANCORPORATION
For the period ended Jun 30, 2024. Filed Aug 8, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 8, 2024
WABC$59.84+0.1%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-09.
0001171843-24-002705
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-08.
0001171843-24-004595
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 122 previous paragraphs and 121 current paragraphs.
89 unchanged; 24 reworded; 8 added; 9 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 37 previous and 52 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (8)
Current report
The Federal Open Market Committee of the Federal Reserve Board (“FOMC”) adopted tightening monetary policy, including increasing the federal funds rate, beginning in March 2022 as a means to reduce inflation. Inflation has receded toward the FOMC’s inflation goal of 2 percent, although inflation has not yet reached 2 percent. The unemployment rate has recently increased. These economic conditions have caused market-based expectations for the FOMC to begin loosening monetary policy at some point in the third or fourth quarter of 2024, by reducing the federal funds rate. The interest rate paid on reserve balances at the Federal Reserve Bank was 5.40% as of June 30, 2024. The Bank maintains reserve balances at the Federal Reserve Bank; the amount that earns interest is identified as “interest-bearing cash”.
Current report
Net income for the six months ended June 30, 2024 decreased $8.8 million compared with the six months ended June 30, 2023 primarily due to decreased net interest and loan fee income. Net interest and loan fee income (FTE) decreased $9.6 million in the six months ended June 30, 2024 compared with the six months ended June 30, 2023 due to lower average balances of investment debt securities and loans, higher average balances of Bank Term Funding Program borrowings and higher rates on interest-bearing liabilities, partially offset by higher yield on interest-earning assets and higher average balances of interest-bearing cash. During the six months ended June 30, 2024, the Company provided $300 thousand for credit losses, which was recorded in the first quarter, based on the results of the CECL model and Management’s estimate of credit losses over the remaining life of its loans. The Company recorded a $1.6 million reversal of provision for credit losses in the six months ended June 30, 2023 as a result of a $2.2 million recovery on a previously charged off loan. Noninterest income for the six months ended June 30, 2024 decreased compared with the six months ended June 30, 2023 due to lower income from merchant processing services, ATM processing fees and debit card fees and because the six months ended June 30, 2023 included higher recoveries in excess of principal charged off on loans. Noninterest expense for the six months ended June 30, 2024 increased compared with the six months ended June 30, 2023 primarily due to annual merit increases and higher group health insurance costs for employees, partially offset by lower losses from unauthorized debit card use. The tax rate (FTE) was 26.8% for the six months ended June 30, 2024 and 27.0% for the six months ended June 30, 2023.** **
Current report
Net interest and loan fee income (FTE) decreased $6.2 million in the second quarter 2024 compared with the second quarter 2023 due to lower average balances of investment debt securities (down $421 million) and loans (down $89 million), higher average balances of Bank Term Funding Program borrowings (up $200 million) and higher rate on interest-bearing liabilities (up 0.63%), partially offset by higher yield on interest-earning assets (up 0.12%) and higher average balances of interest-bearing cash (up $198 million).
Current report
Net interest and loan fee income (FTE) decreased $9.6 million in the six months ended June 30, 2024 compared with the six months ended June 30, 2023 due to lower average balances of investment debt securities (down $435 million) and loans (down $90 million), higher average balances of Bank Term Funding Program borrowings (up $131 million) and higher rate on interest-bearing liabilities (up 0.49%), partially offset by higher yield on interest-earning assets (up 0.21%) and higher average balances of interest-bearing cash (up $98 million).
Current report
Noninterest income for the six months ended June 30, 2024 decreased $652 thousand compared with the six months ended June 30, 2023. Merchant processing services fees and ATM processing fees declined in the six months ended June 30, 2024 compared with six months ended June 30, 2023 due to reduced processing volumes. Debit card fees declined in the six months ended June 30, 2024 compared with six months ended June 30, 2023 primarily due to lower transaction volumes. Other noninterest income decreased in the six months ended June 30, 2024 compared with six months ended June 30, 2023 primarily because the prior period included higher recoveries in excess of principal charged off on loans.
Current report
Noninterest expense for the six months ended June 30, 2024 increased $180 thousand compared with the six months ended June 30, 2023. Salaries and benefits increased in the six months ended June 30, 2024 compared with the six months ended June 30, 2023 primarily due to annual merit increases and higher group health insurance costs for employees. Occupancy and equipment expense decreased in the six months ended June 30, 2024 compared with the six months ended June 30, 2023 primarily due to lower maintenance costs. Professional fees decreased in the six months ended June 30, 2024 compared with the six months ended June 30, 2023 primarily due to lower legal fees. Other noninterest expense decreased in the six months ended June 30, 2024 compared with the six months ended June 30, 2023 primarily because the prior period included higher losses from unauthorized debit card use.
Current report
The Company’s income tax provision (FTE) was $13.0 million for the second quarter 2024 and $26.4 million for the six months ended June 30, 2024 compared with $14.9 million for the second quarter 2023 and $29.9 million for the six months ended June 30, 2023. The effective tax rates (FTE) were 26.8% for the second quarter 2024 and the six months ended June 30, 2024 compared with 27.0% for the second quarter 2023 and the six months ended June 30, 2023.
Current report
Selected financial data ($ in thousands): (At the dates indicated)
Removed paragraphs (9)
Previous report
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Previous report
The Federal Open Market Committee of the Federal Reserve Board (“FOMC”) has tightened monetary policy through increases to the overnight federal funds interest rate since March 2022. On May 1, 2024, the FOMC announced that it would maintain the target range for the federal funds rate at the range of 5.25% to 5.50%. The May 1, 2024 Federal Reserve press release stated, “Recent indicators suggest that economic activity has continued to expand at a solid pace. Job gains have remained strong, and the unemployment rate has remained low. Inflation has eased over the past year but remains elevated. In recent months, there has been a lack of further progress toward the Committee's 2 percent inflation objective. The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. The Committee judges that the risks to achieving its employment and inflation goals have moved toward better balance over the past year. The economic outlook is uncertain, and the Committee remains highly attentive to inflation risks. In support of its goals, the Committee decided to maintain the target range for the federal funds rate at 5.25% to 5.50%. In considering any adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent… The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals.” The interest rate paid on reserve balances at the Federal Reserve Bank remained at 5.40% as of March 31, 2024. The Bank maintains reserve balances at the Federal Reserve Bank; the amount that earns interest is identified as “interest-bearing cash”.
Previous report
Net income for the first quarter 2024 decreased $3.1 million compared with the fourth quarter 2023. Net interest and loan fee income (FTE) decreased $3.6 million in the first quarter 2024 compared with the fourth quarter 2023 due to lower average balances of interest-earning assets, higher rate on savings and interest-bearing transaction deposit accounts and Bank Term Funding Program borrowings. The Company recorded a $300 thousand provision for credit losses in the first quarter of 2024, based on the results of the CECL model and Management’s estimate of credit losses over the remaining life of its loans. The Company provided no provision for credit losses in the fourth quarter 2023, based on Management’s estimate of credit losses over the remaining life of its loans and debt securities held to maturity. Noninterest income for the first quarter 2024 decreased compared with the fourth quarter 2023 due to lower income from merchant processing services and debit card fees. Debit card fees in the fourth quarter 2023 included recognition of an annual volume-based incentive. Noninterest expense for the first quarter 2024 increased compared with the fourth quarter 2023. Salaries and benefits increased from the fourth quarter 2023 to the first quarter 2024 primarily due to seasonally higher payroll taxes, annual merit increases and higher group health insurance costs for the employees. The tax rate (FTE) was 26.9% for the first quarter 2024 and 28.5% for the fourth quarter 2023. The fourth quarter 2023 includes a $492 thousand increase to reconcile the 2022 income tax provision to the filed 2022 tax returns.** **
Previous report
Net interest and loan fee income (FTE) decreased $3.5 million in the first quarter 2024 compared with the first quarter 2023 due to lower average balances of interest-earning assets (down $546 million), higher rate on savings and interest-bearing transaction deposit accounts (up 0.25%) and an increase in Bank Term Funding Program borrowings (up $63 million), partially offset by higher yield on interest-earning assets (up 0.29%).
Previous report
Net interest and loan fee income (FTE) decreased $3.6 million in the first quarter 2024 compared with the fourth quarter 2023 due to lower average balances of interest-earning assets (down $132 million), higher rate on savings and interest-bearing transaction deposit accounts (up 0.08%) and an increase in Bank Term Funding Program borrowings (up $63 million).
Previous report
Noninterest income for the first quarter 2024 decreased $895 thousand compared with the fourth quarter 2023. Debit card fees declined from the fourth quarter 2023 to the first quarter 2024 primarily due to recognition of an annual volume-based incentive in the fourth quarter 2023. Merchant processing services fees declined from the fourth quarter 2023 to the first quarter 2024 due to reduced processing volumes.
Previous report
Noninterest expense for the first quarter 2024 increased $582 thousand compared with the fourth quarter 2023. Salaries and benefits increased from the fourth quarter 2023 to the first quarter 2024 primarily due to seasonally higher payroll taxes, annual merit increases and higher group health insurance costs for employees.
Previous report
The Company’s income tax provision (FTE) was $13.4 million for the first quarter 2024 compared with $15.0 million for the first quarter 2023 and $15.7 million for the fourth quarter 2023, representing effective tax rates (FTE) of 26.9%, 27.1% and 28.5%, respectively. The fourth quarter 2023 effective tax rates (FTE) was higher than the first quarter 2023 and the first quarter 2024 primarily due to a $492 thousand increase to reconcile the 2022 income tax provision to the filed 2022 tax returns.
Previous report
**Item 3. Quantitative and Qualitative Disclosures about Market Risk
Reworded paragraphs (24)
Previous wording
Westamerica Bancorporation and subsidiaries (collectively, the “Company”) reported net income of $36.4 million or $1.37 diluted earnings per common share (“EPS”) in the first quarter 2024. First quarter 2023 results compare with net income of $40.5 million or $1.51 EPS for the first quarter 2023 and $39.5 million or $1.48 EPS for the fourth quarter 2023. First quarter 2023 results included a $1.6 million reversal of provision for credit losses, which increased EPS $0.04.
Current wording
Westamerica Bancorporation and subsidiaries (collectively, the “Company”) reported net income of $35.5 million or $1.33 diluted earnings per common share (“EPS”) in the second quarter 2024 compared with net income of $40.2 million or $1.51 EPS in the second quarter 2023. The Company reported net income of $71.9 million or $2.69 EPS for the six months ended June 30, 2024. The Company reported net income of $80.7 million or $3.02 EPS for the six months ended June 30, 2023, including a $1.6 million reversal of provision for credit losses, which increased EPS $0.04.
Previous wording
Net income for the first quarter 2024 decreased $4.0 million compared with the first quarter 2023. Net interest and loan fee income (FTE) decreased $3.5 million in the first quarter 2024 compared with the first quarter 2023 due to lower average balances of interest-earning assets, higher rate on savings and interest-bearing transaction deposit accounts and Bank Term Funding Program borrowings, partially offset by higher yield on interest-earning assets. The Company recorded a $300 thousand provision for credit losses in the first quarter of 2024, based on the results of its current expected credit losses (“CECL”) model and Management’s estimate of credit losses over the remaining life of its loans. The Company recorded a $1.6 million reversal of provision for credit losses in the first quarter of 2023 as a result of a $2.2 million recovery on a previously charged off loan. First quarter 2024 noninterest income decreased compared with the first quarter 2023 primarily due to lower income from merchant processing services fee and lower recoveries of interest and fees on previously charged off loans. First quarter 2024 noninterest expense decreased compared with the first quarter 2023 primarily due to lower occupancy and equipment expenses, partially offset by higher salaries and benefits. The tax rate (FTE) was 26.9% for the first quarter 2024 and 27.1% for the first quarter 2023.
Current wording
Net income for the second quarter 2024 decreased $4.8 million compared with the second quarter 2023 primarily due to decreased net interest and loan fee income. Net interest and loan fee income (FTE) decreased $6.2 million in the second quarter 2024 compared with the second quarter 2023 due to lower average balances of investment debt securities and loans, higher average balances of Bank Term Funding Program borrowings and higher rate on interest-bearing liabilities, partially offset by higher yield on interest-earning assets and higher average balances of interest-bearing cash. With $73 thousand of net loan recoveries in the second quarter 2024 and $1.6 million in nonperforming loans at June 30, 2024, the Company recorded no provision for credit losses based on the results of its current expected credit losses (“CECL”) model and Management’s estimate of credit losses over the remaining life of its loans. The Company provided no provision for credit losses in the second quarter 2023, based on Management’s estimate of credit losses over the remaining life of its loans and debt securities held to maturity. Second quarter 2024 noninterest income decreased compared with the second quarter 2023 primarily due to lower income from merchant processing services and ATM processing fees. Second quarter 2024 noninterest expense increased compared with the second quarter 2023 primarily due to higher salaries and benefits, partially offset by lower losses from unauthorized debit card use. The tax rate (FTE) was 26.8% for the second quarter 2024 and 27.0% for the second quarter 2023.
Previous wording
The annualized net interest margin (FTE) was 4.30% in the first quarter 2024, 4.18% in the first quarter 2023 and 4.41% in the fourth quarter 2023.
Current wording
The annualized net interest margin (FTE) was 4.15% in the second quarter 2024 and 4.23% in the six months ended June 30, 2024 compared with 4.34% in the second quarter 2023 and 4.26% in the six months ended June 30, 2023.
Previous wording
The Company’s funding costs were 0.20% in the first quarter 2024, 0.03% in the first quarter 2023 and 0.11% in the fourth quarter 2023. Noninterest bearing deposits represented 47% of average deposits in the first quarter 2024 while higher-cost time deposits represented 2%. Average balances of time deposits in the first quarter 2024 declined $33 million from the first quarter 2023. Average balances of checking and saving deposits accounted for 98.2% of average total deposits in the first quarter 2024, 97.9% in the first quarter 2023 and 98.2% in the fourth quarter 2023.
Current wording
The Company’s funding costs were 0.35% in the second quarter 2024 compared with 0.04% in the second quarter 2023, and 0.27% in the six months ended June 30, 2024 and 0.03% in the six months ended June 30, 2023. Noninterest bearing deposits represented 47% of average deposits in the six months ended June 30, 2024 and the six months ended June 30, 2023. Higher-cost time deposits represented 2% of average deposits for both periods. Average balances of time deposits in the six months ended June 30, 2024 declined $31 million from the six months ended June 30, 2023. Average balances of checking and saving deposits accounted for 98% of average total deposits in the six months ended June 30, 2024 and the six months ended June 30, 2023.
Previous wording
The Company’s yield on earning assets during the first quarter 2024 increased compared with the first quarter 2023 but decreased compared with the fourth quarter 2023.The Company’s yield on earning assets has been primarily affected by collateralized loan obligations (CLOs), held in debt securities available for sale portfolio, and interest-bearing cash. The CLOs have interest coupons that change once every three months by the amount of change in the three-month SOFR base rate. The average balances and yields of CLOs for the three months ended March 31, 2024 was $1,461 million yielding 7.23%. The average balances and yields of CLOs for the three months ended March 31, 2023 and December 31, 2023 were $1,577 million yielding 6.34% and $1,508 million yielding 7.27%, respectively. The interest-bearing cash yield changes by the amount of change in the overnight federal funds rate on the effective date declared by the FOMC. The average balance and yields of interest-bearing cash for the three months ended March 31, 2024 were $167 million yielding 5.40%. The average balance and yields of interest-bearing cash for the three months ended March 31, 2023 and December 31, 2023 were $171 million yielding 4.56% and $195 million yielding 5.40%, respectively. The Company has other earning assets with variable yields such as commercial loans and lines of credit, consumer lines of credit and adjustable rate residential real estate loans, which are included in “other taxable loans” in the following “Summary of Average Balances, Yields/Rates and Interest Differential.” The rate paid on interest-bearing liabilities increased in the first quarter 2024 compared with the first quarter and fourth quarter 2023 primarily due to competitive pricing.
Current wording
The Company’s yield on earning assets during the second quarter 2024 and the six months ended June 30, 2024 increased compared with the second quarter 2023 and the six months ended June 30, 2023.The Company’s yield on earning assets has been primarily affected by collateralized loan obligations (CLOs), held in debt securities available for sale portfolio, and interest-bearing cash. The CLOs have interest coupons that change once every three months by the amount of change in the three-month SOFR base rate. The average balances and yields of CLOs for the three months ended June 30, 2024 was $1,347 million yielding 7.23% and $1,404 million yielding 7.23% for the six months ended June 30, 2024. The average balances and yields of CLOs for the three months ended June 30, 2023 was $1,555 million yielding 6.81% and $1,566 million yielding 6.57% for the six months ended June 30, 2023. The interest-bearing cash yield changes by the amount of change in the overnight federal funds rate on the effective date declared by the FOMC. The average balance and yields of interest-bearing cash for the second quarter 2024 and six months ended June 30, 2024 were $363 million yielding 5.40% and $265 million yielding 5.40%, respectively. The average balance and yields of interest-bearing cash for the second quarter 2023 and six months ended June 30, 2023 were $165 million yielding 5.06% and $168 million yielding 4.80%, respectively. The Company has other earning assets with variable yields such as commercial loans and lines of credit, consumer lines of credit and adjustable rate residential real estate loans, which are included in “other taxable loans” in the following “Summary of Average Balances, Yields/Rates and Interest Differential.” The rate paid on interest-bearing liabilities increased in the six months ended June 30, 2024 compared with the six months ended June 30, 2023 primarily due to competitive deposit pricing and higher volume on Bank Term Funding Program borrowings.
Previous wording
The Company recorded a $300 thousand provision for credit losses in the first quarter of 2024, based on the results of the CECL model and Management’s estimate of credit losses over the remaining life of its loans and debt securities held to maturity. The Company provided no provision for credit losses in the fourth quarter of 2023, based on Management’s estimate of credit losses over the remaining life of its loans and debt securities held to maturity. The Company recorded a $1.6 million reversal of provision for credit losses in the first quarter of 2023 as a result of a $2.2 million recovery on a previously charged off loan. 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.
Current wording
With $73 thousand of net loan recoveries in the second quarter 2024 and $1.6 million in nonperforming loans at June 30, 2024, the Company provided no provision for credit losses in the second quarter of 2024 based on Management’s estimate of credit losses over the remaining life of its loans and debt securities held to maturity. During the six months ended June 30, 2024, the Company provided $300 thousand for credit losses, which was recorded in the first quarter, based on the results of the CECL model and Management’s estimate of credit losses over the remaining life of its loans and debt securities held to maturity. The Company provided no provision for credit losses in the second quarter of 2023, based on Management’s estimate of credit losses over the remaining life of its loans and debt securities held to maturity. The Company recorded a $1.6 million reversal of provision for credit losses in the six months ended June 30, 2023 as a result of a $2.2 million recovery on a previously charged off loan. 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.
Previous wording
First quarter 2024 noninterest income decreased $452 thousand compared with the first quarter 2023. Merchant processing services fee income decreased in the first quarter 2024 compared with the first quarter 2023 primarily due to lower processing volumes. Other noninterest income decreased in the first quarter 2024 compared with the first quarter 2023 primarily due to lower recoveries of interest and fees on previously charged off loans.
Current wording
Second quarter 2024 noninterest income decreased $200 thousand compared with the second quarter 2023. Merchant processing services fee income and ATM processing fees decreased in the second quarter 2024 compared with the second quarter 2023 primarily due to lower processing volumes.
Previous wording
First quarter 2024 noninterest expense decreased $111 thousand compared with the first quarter 2023. Occupancy and equipment expense decreased in the first quarter 2024 compared with the first quarter 2023 primarily due to decreases in repair and maintenance. Salaries and benefits increased in the first quarter 2024 compared with the first quarter 2023 primarily due to annual merit increases and higher group health insurance costs for employees.
Current wording
Second quarter 2024 noninterest expense increased $291 thousand compared with the second quarter 2023. Salaries and benefits increased in the second quarter 2024 compared with the second quarter 2023 primarily due to annual merit increases and higher group health insurance costs for employees. Other noninterest expense decreased in the second quarter 2024 compared with the second quarter 2023 primarily because the prior period included higher losses from unauthorized debit card use.
Previous wording
The Company maintains an investment securities portfolio consisting of securities issued by U.S. Government sponsored entities, state and political subdivisions, corporations, collateralized loan obligations and agency mortgage-backed securities. The Company had no marketable equity securities at March 31, 2024 and December 31, 2023.
Current wording
The Company maintains an investment securities portfolio consisting of securities issued by U.S. Treasury securities, U.S. Government sponsored entities, state and political subdivisions, corporations, collateralized loan obligations and agency mortgage-backed securities. The Company had no marketable equity securities at June 30, 2024 and December 31, 2023.
Previous wording
Management manages the investment securities portfolio in response to anticipated changes in interest rates, and changes in deposit and loan volumes. The carrying value of the Company’s investment securities portfolio was $4.8 billion at March 31, 2024 and $4.9 billion at December 31, 2023. The following table lists debt securities in the Company’s portfolio by type as of the dates indicated. Debt securities held to maturity are listed at amortized cost before related reserve for expected credit losses of $1 thousand at March 31, 2024 and December 31, 2023. Debt securities available for sale are listed at fair value.
Current wording
Management manages the investment securities portfolio in response to anticipated changes in interest rates, and changes in deposit and loan volumes. The carrying value of the Company’s investment securities portfolio was $4.6 billion at June 30, 2024 and $4.9 billion at December 31, 2023. The following table lists debt securities in the Company’s portfolio by type as of the dates indicated. Debt securities held to maturity are listed at amortized cost before related reserve for expected credit losses of $1 thousand at June 30, 2024 and December 31, 2023. Debt securities available for sale are listed at fair value.
Previous wording
The Company’s $1.4 billion (fair value) in collateralized loan obligations at March 31, 2024, consist of investments in 136 issues that are within the senior tranches of their respective fund securitization structures. The following table summarizes total collateralized loan obligations by credit rating:
Current wording
The Company’s $1.3 billion (fair value) in collateralized loan obligations at June 30, 2024, consist of investments in 120 issues that are within the senior tranches of their respective fund securitization structures. The following table summarizes total collateralized loan obligations by credit rating:
Previous wording
At March 31, 2024, nonaccrual loans consisted of three loans with a commercial real estate loan of a carrying value of $766 thousand. Its collateral value exceeds the loan balance.
Current wording
At June 30, 2024, nonaccrual loans consisted of three loans including the addition of a commercial real estate loan with a carrying value of $766 thousand. Its collateral value exceeds the loan balance.
Previous wording
Management considers the $15.9 million allowance for credit losses on loans to be adequate as a reserve against current expected credit losses in the loan portfolio as of March 31, 2024.
Current wording
Management considers the $16.0 million allowance for credit losses on loans to be adequate as a reserve against current expected credit losses in the loan portfolio as of June 30, 2024.
Previous wording
The Company monitors the climate risks of our loan customers. Borrowers with real estate loan collateral located in flood zones must carry flood insurance under the loans’ terms. At March 31, 2024, the Company had $15 million in loans to agricultural borrowers; Management continuously monitors these customers’ access to adequate water sources as well as their ability to sustain low crop yields and volatile commodity prices without encountering financial hardship. The Company makes automobile loans; changes in consumer demand, or governmental laws or policies, regarding gasoline, electric and hybrid vehicles are not considered to be material risks to the Company’s automobile lending practices.
Current wording
The Company monitors the climate risks of our loan customers. Borrowers with real estate loan collateral located in flood zones must carry flood insurance under the loans’ terms. At June 30, 2024, the Company had $6 million in loans to agricultural borrowers; Management continuously monitors these customers’ access to adequate water sources as well as their ability to sustain low crop yields and volatile commodity prices without encountering financial hardship. The Company makes automobile loans; changes in consumer demand, or governmental laws or policies, regarding gasoline, electric and hybrid vehicles are not considered to be material risks to the Company’s automobile lending practices.
Previous wording
In recent years, the Bank's deposit base has provided the majority of the Bank's funding requirements. This low-cost source of funds, along with shareholders' equity, provided 97% of funding for average total assets in the first quarter ended March 31, 2024 and the year ended December 31, 2023, respectively. The Bank’s funding from customer deposits is in part reliant on the confidence clients have in the Bank. The Bank places a very high priority in maintaining this confidence through conservative credit risk and capital management practices and by maintaining an appropriate level of liquidity.
Current wording
In recent years, the Bank's deposit base has provided the majority of the Bank's funding requirements. This low-cost source of funds, along with shareholders' equity, provided 96% of funding for average total assets in the six months ended June 30, 2024 and 97% for the year ended December 31, 2023, respectively. The Bank’s funding from customer deposits is in part reliant on the confidence clients have in the Bank. The Bank places a very high priority in maintaining this confidence through conservative credit risk and capital management practices and by maintaining an appropriate level of liquidity.
Previous wording
Total deposits were $5,355 million at March 31, 2024 and $5,474 million at December 31, 2023. Total time deposits were $93 million at March 31, 2024 and $97 million at December 31, 2023. The Company has no foreign time deposits. The standard FDIC deposit insurance amount is $250,000 per depositor, for each account ownership category. At March 31, 2024, estimated federally uninsured deposits and time deposits were $2,491 million and $4 million, respectively.
Current wording
Total deposits were $5,131 million at June 30, 2024 and $5,474 million at December 31, 2023. Total time deposits were $89 million at June 30, 2024 and $97 million at December 31, 2023. The Company has no foreign time deposits. The standard FDIC deposit insurance amount is $250,000 per depositor, for each account ownership category. At June 30, 2024, estimated federally uninsured total deposits and time deposits were $2,441 million and $4 million, respectively.
Previous wording
Banking industry deposits, including for Westamerica Bank, grew rapidly in 2020 and 2021 due to the injection of fiscal stimulus into the United States economy, including Paycheck Protection Program loans, and an easing of Federal Reserve monetary policy, both in response to the COVID pandemic. Federal Reserve monetary policy easing included reduction in the federal funds rate to a range of 0.00% to 0.25% and net purchases of Treasury securities and agency mortgage-backed securities, which increase the money supply and aggregate bank deposits. Subsequently, inflation rose considerably while employment conditions remained strong. In 2022 and 2023, the Federal Reserve’s monetary policy reversed to tightening, in an effort to reduce inflation. The monetary policy tightening included increasing and keeping the federal funds rate to a range of 5.25% to 5.50% and net reductions of Treasury securities and agency mortgage-backed securities, which reduce the money supply and aggregate bank deposits. Westamerica Bank’s deposit totals are subject to both the fiscal policies of the United States government and monetary policies of the Federal Reserve; the 2023 decline in Westamerica Bank deposits was influenced by these fiscal and monetary policies. In addition, the Internal Revenue Service (“IRS”) declared every county in which Westamerica Bank operates as Natural Disaster Areas due to 2022-2023 winter storms; the IRS and California Franchise Tax Board extended the 2022 tax filing deadline and 2023 tax installment payment due dates to November 16, 2023. Management believes this deferment of tax payment deadlines impacted deposit totals in the fourth quarter 2023 as customers paid their federal and California tax obligations. Total deposits declined $119,342 thousand from December 31, 2023 to March 31, 2024 due to competitive pricing of current market rates.
Current wording
Banking industry deposits, including for Westamerica Bank, grew rapidly in 2020 and 2021 due to the injection of fiscal stimulus into the United States economy, including Paycheck Protection Program loans, and an easing of Federal Reserve monetary policy, both in response to the COVID pandemic. Federal Reserve monetary policy easing included reduction in the federal funds rate to a range of 0.00% to 0.25% and net purchases of Treasury securities and agency mortgage-backed securities, which increase the money supply and aggregate bank deposits. Subsequently, inflation rose considerably while employment conditions remained strong. In 2022 and 2023, the Federal Reserve’s monetary policy reversed to tightening, in an effort to reduce inflation. The monetary policy tightening included increasing and keeping the federal funds rate to a range of 5.25% to 5.50% and net reductions of Treasury securities and agency mortgage-backed securities, which reduce the money supply and aggregate bank deposits. Westamerica Bank’s deposit totals are subject to both the fiscal policies of the United States government and monetary policies of the Federal Reserve; the decline in Westamerica Bank deposits during 2023 and the six months ended June 30, 2024 was influenced by these fiscal and monetary policies. In addition, the Internal Revenue Service (“IRS”) declared every county in which Westamerica Bank operates as Natural Disaster Areas due to 2022-2023 winter storms; the IRS and California Franchise Tax Board extended the 2022 tax filing deadline and 2023 tax installment payment due dates to November 16, 2023. Management believes this deferment of tax payment deadlines impacted deposit totals in the fourth quarter 2023 as customers paid their federal and California tax obligations. Total deposits declined $342,827 thousand from December 31, 2023 to June 30, 2024 due to competitive deposit pricing.
Previous wording
Liquidity is further provided by assets such as balances held at the Federal Reserve Bank, investment securities, and amortizing loans. At March 31, 2024, the Company had $434,250 thousand in cash balances. During the twelve months ending March 31, 2025, the Company expects to receive $303,000 thousand in principal payments from its debt securities. If additional operational liquidity is required, the Company can pledge debt securities as collateral for borrowing purposes; at March 31, 2024, the Company’s debt securities which qualify as collateral for borrowing totaled $3,820,309 thousand. In the ordinary course of business, the Company pledges debt securities as collateral for certain depository customers; at March 31, 2024, the Company had pledged $697,846 thousand in debt securities for depository customers. In the ordinary course of business, the Company pledges debt securities as collateral for borrowing from the Federal Reserve Bank; at March 31, 2024, the Company had pledged $863,987 thousand in debt securities at the Federal Reserve Bank. During the quarter ended March 31, 2024, the Company’s average borrowings from the Federal Reserve Bank and other correspondent banks were $62,582 thousand and $-0- thousand, respectively, and at March 31, 2024, the Company’s borrowings from the Federal Reserve Bank and other correspondent banks were $200,000 thousand and $-0- thousand, respectively. At December 31, 2023, the Company’s estimated unpledged collateral qualifying debt securities totaled $1,995,076 thousand based on the Federal Reserve Bank borrowing programs. The Federal Reserve’s Bank Term Funding Program ceased making new loans on March 11, 2024. Debt securities eligible as collateral are shown at market value unless noted otherwise:
Current wording
Liquidity is further provided by assets such as balances held at the Federal Reserve Bank, and principal and interest payments from debt securities and loans. At June 30, 2024, the Company had $486,124 thousand in cash balances. During the twelve months ending June 30, 2025, the Company expects to receive $309,000 thousand in principal payments from its debt securities. If additional operational liquidity is required, the Company can pledge debt securities as collateral for borrowing purposes; at June 30, 2024, the Company’s debt securities which qualify as collateral for borrowing totaled $3,693,459 thousand. In the ordinary course of business, the Company pledges debt securities as collateral for certain depository customers; at June 30, 2024, the Company had pledged $759,338 thousand in debt securities for depository customers. In the ordinary course of business, the Company pledges debt securities as collateral for borrowing from the Federal Reserve Bank; at June 30, 2024, the Company had pledged $1,067,510 thousand in debt securities at the Federal Reserve Bank. During the six months ended June 30, 2024, the Company’s average borrowings from the Federal Reserve Bank and other correspondent banks were $131,291 thousand and $-0- thousand, respectively, and at June 30, 2024, the Company’s borrowings from the Federal Reserve Bank and other correspondent banks were $200,000 thousand and $-0- thousand, respectively. At June 30, 2024, the Company had access to borrowing from the Federal Reserve up to $867,510 thousand based on collateral pledged at June 30, 2024. At June 30, 2024, the Company’s estimated unpledged collateral qualifying debt securities totaled $1,462,966 thousand based on the Federal Reserve Bank borrowing programs. The Federal Reserve’s Bank Term Funding Program ceased making new loans on March 11, 2024. Debt securities eligible as collateral are shown at market value unless noted otherwise:
Previous wording
Liquidity risk can result from the mismatching of asset and liability cash flows, or from disruptions in the financial markets. The Bank performs liquidity stress tests on a periodic basis to evaluate the sustainability of its liquidity. Under the stress testing, the Bank assumes outflows of funds increase beyond expected levels. Measurement of such heightened outflows considers the composition of the Bank’s deposit base, including any concentration of deposits, non-deposit funding such as short-term borrowings, and unfunded lending commitments. The composition of the Bank’s deposits is considered including the broad industry and geographic diversification in the Bank’s market area. The Bank 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 any 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. However, no assurance can be given the Bank will not experience a period of reduced liquidity.
Current wording
Liquidity risk can result from the mismatching of asset and liability cash flows, or from disruptions in the financial markets. The Bank performs liquidity stress tests on a periodic basis to evaluate the sustainability of its liquidity. Under the stress testing, the Bank assumes outflows of funds increase beyond expected levels. Measurement of such heightened outflows considers the composition of the Bank’s deposit base, including any concentration of deposits, non-deposit funding such as short-term borrowings, and unfunded lending commitments. The composition of the Bank’s deposits is considered including the broad industry and geographic diversification in the Bank’s market area. The Bank 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 any Federal Reserve Bank reserve requirements, and investment securities based on regulatory guidelines. Based on the results of the most recent liquidity stress test, Management is satisfied with the liquidity condition of the Bank. However, no assurance can be given the Bank will not experience a period of reduced liquidity.
Previous wording
Management continually monitors the Bank’s cash levels. Loan demand from credit worthy borrowers will be dictated by economic and competitive conditions. The Bank 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 Bank's sales efforts, delivery of superior customer service, new regulations and market conditions. The Bank does not aggressively solicit higher-costing time deposits. Changes in interest rates, most notably rising interest rates or increased consumer spending, could impact deposit volumes. Depending on economic conditions, interest rate levels, liquidity management and a variety of other conditions, any 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.
Current wording
Management continually monitors the Bank’s cash levels. Loan demand from credit worthy borrowers will be dictated by economic and competitive conditions. The Bank 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 Bank's sales efforts, delivery of superior customer service, new regulations and market conditions. The Bank does not aggressively solicit higher-costing time deposits. Changes in interest rates, most notably rising or elevated interest rates or increased consumer spending, could impact deposit volumes. Depending on economic conditions, interest rate levels, liquidity management and a variety of other conditions, any 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.
Previous wording
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 $12 million in the quarter ended March 31, 2024 and $46 million in the year ended December 31, 2023 and retire common stock in the amounts of $14 million in the year ended December 31, 2023. 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 impact Parent Company's ability to meet its ongoing cash obligations. Parent Company’s cash balance was $178 million at March 31, 2024 and $155 million at December 31, 2023.
Current wording
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 $23 million in the six months ended June 30, 2024 and $46 million in the year ended December 31, 2023 and retire common stock in the amounts of $210 thousand in the six months ended June 30, 2024 and $14 million in the year ended December 31, 2023. 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 impact Parent Company's ability to meet its ongoing cash obligations. Parent Company’s cash balance was $202 million at June 30, 2024 and $155 million at December 31, 2023.
Previous wording
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”) was annualized 15.2% for the first quarter 2024 and 18.1% for the year ended December 31, 2023. The Company also raises capital as employees exercise stock options. Capital raised through the exercise of stock options was $950 thousand in the year ended December 31, 2023.
Current wording
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”) was annualized 14.8% for the six months ended June 30, 2024 and 18.1% for the year ended December 31, 2023. The Company also raises capital as employees exercise stock options. Capital raised through the exercise of stock options was $203 thousand in the six months ended June 30, 2024 and $950 thousand in the year ended December 31, 2023.
Previous wording
The Company paid common dividends totaling $12 million in the quarter ended March 31, 2024 and $46 million in the year ended December 31, 2023, which represent dividends per common share of $0.44 and $1.72, 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 capital to shareholders. The Company repurchased and retired 274 thousand shares valued at $14 million in the year ended December 31, 2023.
Current wording
The Company paid common dividends totaling $23 million in the six months ended June 30, 2024 and $46 million in the year ended December 31, 2023, which represent dividends per common share of $0.88 and $1.72, 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 capital to shareholders. The Company repurchased and retired 4 thousand shares valued at $210 thousand in the six months ended June 30, 2024 and 274 thousand shares valued at $14 million in the year ended December 31, 2023.
Previous wording
The Company's primary capital resource is shareholders' equity, which was $792 million at March 31, 2024 compared with $773 million at December 31, 2023. The Company's ratio of equity to total assets was 12.25% at March 31, 2024 and 12.14% at December 31, 2023.
Current wording
The Company's primary capital resource is shareholders' equity, which was $816 million at June 30, 2024 compared with $773 million at December 31, 2023. The Company's ratio of equity to total assets was 12.92% at June 30, 2024 and 12.14% at December 31, 2023.