WESTAMERICA BANCORPORATION
For the period ended Mar 31, 2025. Filed May 9, 2025.
View on SEC.govAbout this filing
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.
Mar 31, 2025 · Filed May 9, 2025
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 2024-09-30; filed 2024-11-08.
0001171843-24-006167
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-05-09.
0001171843-25-003020
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 119 current paragraphs.
79 unchanged; 29 reworded; 10 added; 13 removed; 1 previous and 1 current paragraphs rearranged.
Tables are not compared: 52 previous and 45 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 (10)
Current report
(2) The efficiency ratio is defined as noninterest expense divided by total revenue (net interest income on an FTE basis and noninterest income).
Current report
Westamerica Bancorporation and subsidiaries (collectively, the “Company”) reported net income of $31.0 million or $1.16 diluted earnings per common share (“EPS”) in the three months ended March 31, 2025. First quarter 2025 results compare with net income of $36.4 million or $1.37 EPS for the three months ended March 31, 2024 and $31.7 million or $1.19 EPS for the three months ended December 31, 2024. The results in the three months ended March 31, 2025 included a $550 thousand reversal of provision for credit losses, which increased EPS $0.01.
Current report
FASB ASU 2023-07,Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, was issued November 27, 2023. The ASU requires disclosure of certain significant segment expenses and other items, the title and position of the chief operating decision maker and information about how the reported measures of segment profit or loss are used in assessing segment performance. The ASU became effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.
Current report
Net income for the three months ended March 31, 2025 decreased $663 thousand compared with the three months ended December 31, 2024 primarily due to decreased net interest and loan fee income (FTE), partially offset by lower tax provision (FTE). Net interest and loan fee income (FTE) decreased $2.9 million in the three months ended March 31, 2025 compared with the three months ended December 31, 2024 due to lower average balances of investment debt securities and loans, lower yield on investment debt securities and interest-bearing cash, partially offset by higher average balances of interest-bearing cash. The Company recorded a $550 thousand reversal of provision for credit losses in the three months ended March 31, 2025, based on the results of its 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 three months ended December 31, 2024, based on the results of its CECL model and Management’s estimate of credit losses over the remaining life of its loans and debt securities held to maturity. Noninterest income in the three months ended March 31, 2025 decreased $312 thousand compared with the three months ended December 31, 2024 primarily due to lower income from debit card fees and service charges on deposit accounts, partially offset by a $102 thousand life insurance gain in the three months ended March 31, 2025. Debit card fees in the three months ended December 31, 2024 included annual incentives. Noninterest expense in the three months ended March 31, 2025 decreased $726 thousand compared with the three months ended December 31, 2024 primarily due to lower salaries and benefits due to fewer business days in the current period compared with the prior period, lower occupancy and equipment expense and lower estimated operating losses from limited partnership investments. The tax rate (FTE) was 26.3% for the three months ended March 31, 2025 and 28.0% for the three months ended December 31, 2024. The effective tax rates (FTE) in the three months ended December 31, 2024 was higher than the three months ended March 31, 2025 primarily due to a $305 thousand increase in book tax provision to reconcile the 2023 income tax provision to the filed 2023 tax returns.
Current report
Noninterest income in the three months ended March 31, 2025 increased $224 thousand compared with the three months ended March 31, 2024 primarily due to higher income from merchant processing services, trust fees and a $102 thousand life insurance gain, partially offset by lower ATM processing fees.
Current report
Noninterest income in the three months ended March 31, 2025 decreased $312 thousand compared with the three months ended December 31, 2024 primarily due to lower income from debit card fees and service charges on deposit accounts, partially offset by a $102 thousand life insurance gain. Debit card fees in the three months ended December 31, 2024 included annual incentives.
Current report
Noninterest expense in the three months ended March 31, 2025 decreased $972 thousand compared with the three months ended March 31, 2024 primarily due to lower salaries and benefits and lower estimated operating losses from limited partnership investments.
Current report
Noninterest expense in the three months ended March 31, 2025 decreased $726 thousand compared with the three months ended December 31, 2024 primarily due to lower salaries and benefits due to fewer business days in the current period compared with the prior period, lower occupancy and equipment expense and lower estimated operating losses from limited partnership investments.
Current report
The Company’s income tax provision (FTE) was $11.1 million for the first quarter 2025 compared with $13.4 million for the first quarter 2024 and $12.3 million for the fourth quarter 2024, representing effective tax rates (FTE) of 26.3%, 26.9% and 28.0%, respectively. The fourth quarter 2024 effective tax rates (FTE) was higher than the first quarter 2025 and the first quarter 2024 primarily due to a $305 thousand increase in book tax provision to reconcile the 2023 income tax provision to the filed 2023 tax returns.
Current report
**Item 3. Quantitative and Qualitative Disclosures about Market Risk
Removed paragraphs (13)
Previous report
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Previous report
FINANCIAL SUMMARY
Previous report
Westamerica Bancorporation and subsidiaries (collectively, the “Company”) reported net income of $35.1 million or $1.31 diluted earnings per common share (“EPS”) for the third quarter 2024 compared with net income of $41.6 million or $1.56 EPS for the third quarter of 2023. The third quarter 2024 results included a $202 thousand life insurance gain and a $1.4 million gain on sale of other assets equivalent to $0.04 EPS. The Company reported net income of $106.9 million or $4.01 EPS for the nine months ended September 30, 2024. The Company reported net income of $122.3 million or $4.58 EPS for the nine months ended September 30, 2023, including a $1.2 million reversal of provision for credit losses, net of a $400 thousand provision for credit losses in the third quarter 2023. Third quarter 2023 results also include a $278 thousand life insurance gain.
Previous report
FASB ASU 2020-04,Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, 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. In December 2022, the FASB issued ASU 2022-06,Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848.” The ASU 2022-06 deferred the sunset date of ASU 2020-04 to December 2024. As of March 31, 2024, all contracts and transactions within the scope of ASU 2020-04 have transitioned to alternative reference rates. The accounting effects of the transition to alternative reference rates were applied prospectively as an adjustment to the effective interest rate and did not have a material impact on the Company’s consolidated financial statements.
Previous report
FASB ASU 2022-03,Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions, was issued June 2022. The ASU clarifies the guidance in Topic 820 when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security. Additionally, the ASU requires specific disclosures related to equity securities that are subject to contractual sale restrictions. The required disclosures include (1) the fair value of such equity securities reflected in the balance sheet, (2) the nature and remaining duration of the corresponding restrictions, and (3) any circumstances that could cause a lapse in the restrictions. The ASU became effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years, with early adoption permitted. The Company adopted the ASU on January 1, 2024 on a prospective basis. The adoption did not have a material impact on the Company’s consolidated financial statements.
Previous report
Net income for the nine months ended September 30, 2024 decreased $15.4 million compared with the nine months ended September 30, 2023 primarily due to decreased net interest and loan fee income (FTE), partially offset by lower tax provision (FTE). Net interest and loan fee income (FTE) decreased $19.3 million in the nine months ended September 30, 2024 compared with the nine months ended September 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 nine months ended September 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 $1.2 million reversal of provision for credit losses, net of a $400 thousand provision in the nine months ended September 30, 2023 as a result of a $2.2 million recovery on a previously charged off loan in the first quarter 2023. Noninterest income for the nine months ended September 30, 2024 remained at the same level compared with the nine months ended September 30, 2023 primarily due to a $1.4 million gain on sale of other assets, offset by lower income from merchant processing services and ATM processing fees. Noninterest expense for the nine months ended September 30, 2024 increased compared with the nine months ended September 30, 2023 primarily due to higher salaries and benefits expense related to annual merit increases and higher group health insurance costs for employees, partially offset by decreases in losses from unauthorized debit card use, legal fees, operating losses from limited partnership investments and FDIC insurance assessments. The tax rate (FTE) was 26.9% for the nine months ended September 30, 2024 and 27.2% for the nine months ended September 30, 2023.** **
Previous report
Third quarter 2024 noninterest income increased $644 thousand compared with the third quarter 2023 primarily due to a $1.4 million gain on sale of other assets, partially offset by lower income from merchant processing services. Merchant processing services fee income decreased primarily due to increase in lower margin transactions.
Previous report
Noninterest income for the nine months ended September 30, 2024 remained at the same level compared with the nine months ended September 30, 2023 primarily due to a $1.4 million gain on sale of other assets, offset by lower income from merchant processing services and ATM processing fees. Merchant processing services fee income decreased primarily due to increase in lower margin transactions. ATM processing fees declined in the nine months ended September 30, 2024 compared with nine months ended September 30, 2023 due to reduced processing volumes.
Previous report
Third quarter 2024 noninterest expense increased $659 thousand compared with the third quarter 2023. Salaries and benefits increased in the third quarter 2024 compared with the third quarter 2023 primarily due to annual merit increases and higher group health insurance costs for employees. The increase was partially offset by lower operating losses from limited partnership investments in the third quarter 2024 compared with the third quarter 2023.
Previous report
Noninterest expense for the nine months ended September 30, 2024 increased $839 thousand compared with the nine months ended September 30, 2023. Salaries and benefits increased in the nine months ended September 30, 2024 compared with the nine months ended September 30, 2023 primarily due to annual merit increases and higher group health insurance costs for employees. The increase was partially offset by decreases in losses from unauthorized debit card use, legal fees, operating losses from limited partnership investments and FDIC insurance assessments.
Previous report
The Company’s income tax provision (FTE) was $13.0 million for the third quarter 2024 and $39.4 million for the nine months ended September 30, 2024 compared with $15.7 million for the third quarter 2023 and $45.6 million for the nine months ended September 30, 2023. The effective tax rates (FTE) were 27.1% for the third quarter 2024 and 26.9% for the nine months ended September 30, 2024 compared with 27.4% for the third quarter 2023 and 27.2% for the nine months ended September 30, 2023.
Previous report
At September 30, 2024, nonaccrual loans consisted of two loans.
Previous report
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 nine months ended September 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 $409,217 thousand from December 31, 2023 to September 30, 2024 due to competitive financial product pricing.
Reworded paragraphs (29)
Previous wording
The Federal Open Market Committee of the Federal Reserve Board (“FOMC”) reduced the federal funds rate in September 2024. 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 but remains low. On September 18, 2024, in light of the progress on inflation and the balance of risks, the FOMC decided to reduce the federal funds rate by 0.5 percent to the range of 4.75 to 5 percent. The interest rate paid on reserve balances at the Federal Reserve Bank was 4.90% as of September 30, 2024. The Bank maintains reserve balances at the Federal Reserve Bank; the amount that earns interest is identified as “interest-bearing cash”.
Current wording
The Federal Open Market Committee of the Federal Reserve Board (“FOMC”) reduced the federal funds rate by 0.25 percent to the range of 4.25 to 4.50 percent in December 2024 and maintained the same target range for the federal funds rate in March 2025. The FOMC press release in March stated, “Recent indicators suggest that economic activity has continued to expand at a solid pace. The unemployment rate has stabilized at a low level in recent months, and labor market conditions remain solid. Inflation remains somewhat elevated. The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the long run. Uncertainty around the economic outlook has increased.” The interest rate paid on reserve balances at the Federal Reserve Bank was 4.40% as of March 31, 2025. The Bank maintains reserve balances at the Federal Reserve Bank; the amount that earns interest is identified as “interest-bearing cash”.
Previous wording
Management continues to evaluate the impacts of inflation, the Federal Reserve’s monetary policy and climate changes on the Company’s business and its customers. The banking industry experienced significant volatility with several regional bank failures in the first half of 2023, creating industrywide concerns related to liquidity, deposit outflows and unrealized losses on debt securities. These events could adversely affect the Company’s funding of its operations. The extent of the impact on the Company’s results of operations, liquidity, and financial performance, as well as the Company’s ability to execute near- and long-term business strategies and initiatives, will depend on numerous evolving factors and future developments, which are uncertain and cannot be reasonably predicted.
Current wording
Management continues to evaluate the impacts of inflation, the Federal Reserve’s monetary policy, the impacts of tariffs, international trade tensions, and climate changes on the Company’s business. The banking industry could experience significant volatility as it did with several regional bank failures in 2023. Industrywide concerns could develop related to liquidity, deposit outflows and unrealized losses on investment debt securities. These recent events and concerns could adversely affect the Company’s ability to effectively fund its operations. Any one or a combination of such risk factors, or other factors, could materially adversely affect the Company's business, financial condition, results of operations and prospects. The extent of the impact on the Company’s results of operations, cash flow, liquidity, and financial performance, as well as the Company’s ability to execute near- and long-term business strategies and initiatives, will depend on numerous evolving factors and future developments, which are highly uncertain and cannot be reasonably predicted.
Previous wording
Net income for the third quarter 2024 decreased $6.5 million compared with the third quarter 2023 primarily due to decreased net interest and loan fee income (FTE), partially offset by lower tax provision (FTE). Net interest and loan fee income (FTE) decreased $9.6 million in the third quarter 2024 compared with the third 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 loans and higher average balances of interest-bearing cash. 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 a $400 thousand provision for credit losses in the third quarter 2023, based on the results of its CECL model and Management’s estimate of credit losses over the remaining life of its loans and debt securities held to maturity. Third quarter 2024 noninterest income increased compared with the third quarter 2023 primarily due to a $1.4 million gain on sale of other assets, partially offset by lower income from merchant processing services. Third quarter 2024 noninterest expense increased compared with the third quarter 2023 primarily due to higher salaries and benefits expense related to annual merit increases and higher group health insurance costs for employees, partially offset by lower operating losses from limited partnership investments. The tax rate (FTE) was 27.1% for the third quarter 2024 and 27.4% for the third quarter 2023.
Current wording
Net income for the three months ended March 31, 2025 decreased $5.4 million compared with the three months ended March 31, 2024 primarily due to decreased net interest and loan fee income (FTE), partially offset by lower tax provision (FTE). Net interest and loan fee income (FTE) decreased $9.7 million in the three months ended March 31, 2025 compared with the three months ended March 31, 2024 due to lower average balances of investment debt securities and loans, lower yield on investment debt securities and interest-bearing cash, and higher rate on interest-bearing deposits, partially offset by higher average balances of interest-bearing cash and lower average balances of bank term funding program borrowings. The Company recorded a $550 thousand reversal of provision for credit losses in the three months ended March 31, 2025, 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 a $300 thousand provision for credit losses in the three months ended March 31, 2024, based on the results of its CECL model and Management’s estimate of credit losses over the remaining life of its loans and debt securities held to maturity. Noninterest income in the three months ended March 31, 2025 increased $224 thousand compared with the three months ended March 31, 2024 primarily due to higher income from merchant processing services, trust fees and a $102 thousand life insurance gain, partially offset by lower ATM processing fees. Noninterest expense in the three months ended March 31, 2025 decreased $972 thousand compared with the three months ended March 31, 2024 primarily due to lower salaries and benefits and lower estimated operating losses from limited partnership investments. The tax rate (FTE) was 26.3% for the three months ended March 31, 2025 and 26.9% for the three months ended March 31, 2024.
Previous wording
Net interest and loan fee income (FTE) decreased $9.6 million in the three months ended September 30, 2024 compared with the three months ended September 30, 2023 due to lower average balances of investment debt securities (down $511 million) and loans (down $72 million), higher average balances of Bank Term Funding Program borrowings (up $167 million) and higher rate on interest-bearing liabilities (up 0.62%), partially offset by higher yield on loans (up 0.25%) and higher average balances of interest-bearing cash (up $207 million).
Current wording
Net interest and loan fee income (FTE) decreased $9.7 million in the three months ended March 31, 2025 compared with the three months ended March 31, 2024 due to lower average balances of investment debt securities (down $703 million) and loans (down $64 million), lower yield on investment debt securities (down 0.47%) and interest-bearing cash (down 1.00%), and higher rate on interest-bearing deposits (up 0.19%), partially offset by higher average balances of interest-bearing cash (up $442 million) and lower average balances of bank term funding program borrowings (down $63 million).
Previous wording
Net interest and loan fee income (FTE) decreased $19.3 million in the nine months ended September 30, 2024 compared with the nine months ended September 30, 2023 due to lower average balances of investment debt securities (down $460 million) and loans (down $84 million), higher average balances of Bank Term Funding Program borrowings (up $143 million) and higher rates on interest-bearing liabilities (up 0.54%), partially offset by higher yield on interest-earning assets (up 0.12%) and higher average balances of interest-bearing cash (up $134 million).
Current wording
Net interest and loan fee income (FTE) decreased $2.9 million in the three months ended March 31, 2025 compared with the three months ended December 31, 2024 due to lower average balances of investment debt securities (down $162 million) and loans (down $32 million), lower yield on investment debt securities (down 0.14%) and interest-bearing cash (down 0.30%), partially offset by higher average balances of interest-bearing cash (up $138 million).
Previous wording
The annualized net interest margin (FTE) was 4.08% in the third quarter 2024 and 4.18% in the nine months ended September 30, 2024 compared with 4.43% in the third quarter 2023 and 4.32% in the nine months ended September 30, 2023.
Current wording
The annualized net interest margin (FTE) was 3.90% in the three months ended March 31, 2025, 4.30% in the three months ended March 31, 2024 and 4.01% in the three months ended December 31, 2024.
Previous wording
The Company’s annualized funding costs were 0.37% in the third quarter 2024 and 0.30% in the nine months ended September 30, 2024 compared with 0.07% in the third quarter 2023 and 0.04% in the nine months ended September 30, 2023. Noninterest bearing deposits represented 48% of average deposits in the nine months ended September 30, 2024 and the nine months ended September 30, 2023. Average balances of time deposits in the nine months ended September 30, 2024 declined $28 million from the nine months ended September 30, 2023. Average balances of checking and saving deposits accounted for 98% of average total deposits in the nine months ended September 30, 2024 and the nine months ended September 30, 2023.
Current wording
The Company’s annualized funding costs were 0.24% in the three months ended March 31, 2025, 0.20% in the three months ended March 31, 2024 and 0.24% in the three months ended December 31, 2024. Noninterest bearing deposits represented 46% of average deposits in the three months ended March 31, 2025, and 47% in both the three months ended March 31, 2024 and December 31, 2024. Average balances of checking and saving deposits accounted for 98% of average total deposits in each of the three months ended March 31, 2025, March 31, 2024 and December 31, 2024.
Previous wording
The Company’s yield on earning assets during the three months ended September 30, 2024 decreased compared with the three months ended September 30, 2023 primarily affected by collateralized loan obligations (CLOs), held in debt securities available for sale portfolio. The Company’s yield on earning assets during the nine months ended September 30, 2024 increased compared with the same period in 2023 primarily affected by CLOs 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 and nine months ended September 30, 2024 were $1,166 million yielding 7.20% and $1,324 million yielding 7.22%, respectively. The average balances and yields of CLOs for the three and nine months ended September 30, 2023 were $1,531 million yielding 7.16% and $1,554 million yielding 6.77%, 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 balances and yields of interest-bearing cash for the three and nine months ended September 30, 2024 were $495 million yielding 5.35% and $342 million yielding 5.37%, respectively. The average balance and yields of interest-bearing cash for the three and nine months ended September 30, 2023 were $287 million yielding 5.35% and $208 million yielding 5.06%, 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 three and nine months ended September 30, 2024 compared with the three and nine months ended September 30, 2023 primarily due to competitive financial product pricing and higher volume on Bank Term Funding Program borrowings.
Current wording
The Company’s yield on earning assets during the three months ended March 31, 2025 decreased compared with the three months ended March 31, 2024 and December 31, 2024. 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, 2025 was $916 million yielding 6.30%. The average balances and yields of CLOs was $1,461 million yielding 7.23% for the three months ended March 31, 2024 and $1,037 million yielding 6.67% for the three months ended December 31, 2024. 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, 2025 were $609 million yielding 4.40%. The average balance and yields of interest-bearing cash were $167 million yielding 5.40% for the three months ended March 31, 2024 and $471 million yielding 4.70% for the three months ended December 31, 2024, 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.”
Previous wording
The Company provided no provision for credit losses in the third 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 nine months ended September 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 a $400 thousand provision for credit losses in the third quarter of 2023, 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 recorded a $1.2 million reversal of provision for credit losses in the nine months ended September 30, 2023 which reflected a $2.2 million recovery on a previously charged off loan in the first quarter 2023. 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
The Company recorded a $550 thousand reversal of provision for credit losses in the first quarter of 2025 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 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. 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
The Company maintains an investment securities portfolio consisting of securities issued by U.S. Treasury, 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 September 30, 2024 and December 31, 2023.
Current wording
The Company maintains an investment securities portfolio consisting of securities issued by U.S. Treasury, U.S. Government sponsored entities, state and political subdivisions, corporations and banks. The Company had no marketable equity securities at March 31, 2025 and December 31, 2024.
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 $4.4 billion at September 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 September 30, 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 $4.1 billion at March 31, 2025 and $4.2 billion at December 31, 2024. 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, 2025 and December 31, 2024. Debt securities available for sale are listed at fair value.
Previous wording
The Company’s $1.1 billion (fair value) in collateralized loan obligations at September 30, 2024, consist of investments in 102 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 $822 million (fair value) in collateralized loan obligations at March 31, 2025, consist of investments in 82 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
The Company’s $1.5 billion (fair value) in collateralized loan obligations at December 31, 2023, consist of investments in 142 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 $983 million (fair value) in collateralized loan obligations at December 31, 2024, consist of investments in 96 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
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. Corporate securities held to maturity were individually evaluated for expected credit loss by evaluating the issuer’s financial condition, profitability, cash flows, and credit ratings. The Company has evaluated each issuer’s historical financial performance and ability to service debt payments, including throughout and following the 2008-2009 recession. The Company has an expectation that nonpayment of the amortized cost basis continues to be zero. At September 30, 2024, no credit loss allowance was assigned to corporate securities held to maturity based on evaluation of each individual issuer’s historical financial performance throughout full business cycles. 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. Allowance for credit losses related to debt securities held to maturity was $1 thousand related to municipal securities at September 30, 2024 and December 31, 2023, respectively, reflecting the expected credit losses on debt securities held to maturity.
Current wording
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. Corporate securities held to maturity were individually evaluated for expected credit loss by evaluating the issuer’s financial condition, profitability, cash flows, and credit ratings. The Company has evaluated each issuer’s historical financial performance and ability to service debt payments throughout and following the 2008-2009 recession. The Company has an expectation that nonpayment of the amortized cost basis continues to be zero. At March 31, 2025, no credit loss allowance was assigned to corporate securities held to maturity based on evaluation of each individual issuer’s historical financial performance throughout full business cycles. 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. Allowance for credit losses related to debt securities held to maturity was $1 thousand related to municipal securities at March 31, 2025 and December 31, 2024, reflecting the expected credit losses on debt securities held to maturity.
Previous wording
The following table summarizes net (chargeoffs) recoveries and the ratio of net (charge-offs) recoveries to average loans for the periods indicated:
Current wording
The following table summarizes net (chargeoffs) recoveries and the ratio of net (chargeoffs) recoveries to average loans for the periods indicated:
Previous wording
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 loan 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 are 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 related to accounting policies.
Current wording
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 loan 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 are 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.
Previous wording
Management considers the $15.3 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, 2024.
Current wording
Management considers the $13.9 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, 2025.
Previous wording
The Company monitors the climate risks of its loan customers. Borrowers with real estate loan collateral located in flood zones must carry flood insurance under the loans’ terms. At September 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. The Company considers climate risk in its underwriting of corporate bonds, and avoids purchasing bonds of issuers, which, in Management’s judgement, have elevated climate risk.
Current wording
The Company monitors the climate risks of its loan customers. Borrowers with real estate loan collateral located in flood zones must carry flood insurance under the loans’ terms. At March 31, 2025, the Company had $2 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. The Company considers climate risk in its underwriting of corporate bonds, and avoids purchasing bonds of issuers, which, in Management’s judgement, have elevated climate risk.
Previous wording
Management monitors the Company’s interest rate risk using a simulation model, which is periodically assessed using supervisory guidance issued by the Board of Governors of the Federal Reserve System, SR 11-7 “Guidance on Model Risk Management.” Management measures exposure to interest rate risk using a dynamic composition simulation and static composition simulation. Within the dynamic composition simulation, interest rate changes are assumed to occur over time and Management makes assumptions regarding the expected change in the volume of financial instruments given the assumed change in market interest rates. Within the static composition simulation, interest rate changes are assumed to occur immediately and cash flows are assumed redeployed into like financial instruments at prevailing rates and yields. Both simulations are used to measure expected changes in net interest income assuming various levels of change in market interest rates.
Current wording
Management monitors the Company’s interest rate risk using a licensed third party simulation model, which is periodically assessed 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 a dynamic composition simulation and static simulation. 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. Within the static simulation, cash flows are assumed redeployed into like financial instruments at prevailing rates and yields. Both simulations are used to measure expected changes in net interest income assuming various levels of change in market interest rates.
Previous wording
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 in accordance with generally accepted accounting principles.
Current wording
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.
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 95% of funding for average total assets in the nine months ended September 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.
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 97% of funding for average total assets for the three months ended March 31, 2025 and 96% for the year ended December 31, 2024. 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 $5,065 million at September 30, 2024 and $5,474 million at December 31, 2023. Total time deposits were $86 million at September 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 September 30, 2024, estimated federally uninsured total deposits and time deposits were $2,482 million and $5 million, respectively.
Current wording
Total deposits were $4,874 million at March 31, 2025 and $5,012 million at December 31, 2024. Total time deposits were $78 million at March 31, 2025 and $82 million at December 31, 2024. The Company has no foreign time deposits. FDIC deposit insurance is $250,000 per depositor, for each account ownership category. At March 31, 2025, estimated federally uninsured total deposits and time deposits were $2,359 million and $4 million, respectively.
Previous 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 September 30, 2024, the Company had $502,945 thousand in cash balances. During the twelve months ending September 30, 2025, the Company expects to receive $321,000 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 September 30, 2024, the Company’s debt securities which qualify as collateral for borrowing totaled $3,696,256 thousand. In the ordinary course of business, the Company pledges debt securities as collateral for certain depository customers; at September 30, 2024, the Company had pledged $764,404 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 September 30, 2024, the Company had pledged $815,919 thousand in debt securities at the Federal Reserve Bank. During the nine months ended September 30, 2024, the Company’s average borrowings from the Federal Reserve Bank and other correspondent banks were $143,412 thousand and $-0- thousand, respectively, and at September 30, 2024, the Company had no borrowings from the Federal Reserve Bank or other correspondent banks. At September 30, 2024, the Company had access to borrowing from the Federal Reserve up to $815,919 thousand based on collateral pledged at September 30, 2024. At September 30, 2024, the Company’s estimated unpledged collateral qualifying debt securities totaled $1,663,673 thousand. 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 March 31, 2025, the Company had $727,336 thousand in cash balances. During the twelve months ending March 31, 2026, the Company expects to receive $265,000 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, 2025, the Company’s debt securities which qualify as collateral for borrowing totaled $3,498,151 thousand. In the ordinary course of business, the Company pledges debt securities as collateral for certain depository customers; at March 31, 2025, the Company had pledged $713,752 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, 2025, the Company had pledged $724,966 thousand in debt securities at the Federal Reserve Bank. During the three months ended March 31, 2025, the Company’s average borrowings from the Federal Reserve Bank and other correspondent banks were $-0- thousand, respectively, and at March 31, 2025, the Company had no borrowings from the Federal Reserve Bank or other correspondent banks. At March 31, 2025, the Company had access to borrowing from the Federal Reserve up to $724,966 thousand based on collateral pledged at March 31, 2025. At March 31, 2025, the Company’s estimated unpledged collateral qualifying debt securities totaled $1,615,433 thousand. Debt securities eligible as collateral are shown at market value unless noted otherwise:
Previous wording
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 had no debt as of September 30, 2024. Substantially all of the Parent Company's revenues are obtained from subsidiary dividends and service fees.
Current wording
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 had no debt at March 31, 2025. Substantially all of the Parent Company's revenues are obtained from subsidiary dividends and service fees.
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 $35 million in the nine months ended September 30, 2024 and $46 million in the year ended December 31, 2023 and retire common stock in the amounts of $210 thousand in the nine months ended September 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. The Parent Company’s cash balance was $231 million at September 30, 2024 and $155 million at December 31, 2023.
Current wording
The Bank’s dividends paid to the Parent Company and Parent Company cash balances provided adequate cash for the Parent Company to pay shareholder dividends of $12 million in the three months ended March 31, 2025 and $47 million in the year ended December 31, 2024 and retire common stock in the amounts of $18 million in the three months ended March 31, 2025 and $210 thousand in the year ended December 31, 2024. 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. The Parent Company’s cash balance was $275 million at March 31, 2025 and $263 million at December 31, 2024.
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 14.4% for the nine months ended September 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 $298 thousand in the nine months ended September 30, 2024 and $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 11.9% (annualized) for the three months ended March 31, 2025 and 13.8% for the year ended December 31, 2024. The Company also raises capital as employees exercise stock options. Capital was not raised through the exercise of stock options in the three months ended March 31, 2025 while $1.5 million was raised through the exercise of stock options in the year ended December 31, 2024.
Previous wording
The Company paid common dividends totaling $35 million in the nine months ended September 30, 2024 and $46 million in the year ended December 31, 2023, which represent dividends per common share of $1.32 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 s4 thousand shares valued at $210 thousand in the nine months ended September 30, 2024 and 274 thousand shares valued at $14 million in the year ended December 31, 2023.
Current wording
The Company paid common dividends totaling $12 million in the three months ended March 31, 2025 and $47 million in the year ended December 31, 2024, which represent dividends per common share of $0.44 and $1.76, 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 retired 361 thousand shares valued at $18 million in the three months ended March 31, 2025 and 4 thousand shares valued at $210 thousand in the year ended December 31, 2024.
Previous wording
The Company's primary capital resource is shareholders' equity, which was $909 million at September 30, 2024 compared with $773 million at December 31, 2023. The Company's ratio of equity to total assets was 14.75% at September 30, 2024 and 12.14% at December 31, 2023.
Current wording
The Company's primary capital resource is shareholders' equity, which was $923 million at March 31, 2025 compared with $890 million at December 31, 2024. The Company's ratio of equity to total assets was 15.47% at March 31, 2025 and 14.65% at December 31, 2024.
Previous wording
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 Bank expects to maintain regulatory capital levels in excess of the minimum required to be considered well-capitalized under the prompt corrective action framework. The Company expects to continue paying quarterly dividends to shareholders. No assurance can be given that changes in capital management plans will not occur.
Current wording
The Cmpany 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 Bank expects to maintain regulatory capital levels in excess of the minimum required to be considered well-capitalized under the prompt corrective action framework. The Company expects to continue paying quarterly dividends to shareholders. No assurance can be given that changes in capital management plans will not occur.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
(1) Yields on securities and certain loans have been adjusted upward to an FTE basis in order to reflect the effect of income which is exempt from federal income taxation at the current statutory tax rate.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
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 credit 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 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.