WABC 10-K & 10-Q changes, risk factors and insider trading
Westamerica Bancorporation · Nasdaq · National Commercial Banks · CIK 311094 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
Removed heading “The effects of pandemics and their impact are highly unpredictable and could be significant, and could harm the Company’s business, financial condition, and operating results.”
Largest changes
“The effects of pandemics and their impact are highly unpredictable and could be significant, and could harm the Company’s business, financial condition, and operating results.”see in full comparison
“The Company’s business, operations and financial performance may be affected by the macroeconomic impacts resulting from pandemics, and the Company’s financial results in future periods could differ significantly from the Company’s historical results. …”see in full comparison
“For example, during the second quarter 2023, the Company was notified that there may have been a compromise of a specific set of files processed by a third party vendor that could have affected a limited number of customers. This incident did not occur on a Company system and the Company does not use the software that may have been compromised. The Company has implemented data security safeguards with its third party vendors designed to quickly identify and contain improper access to sensitive information. The Company notified the affected customers as required by law. …”see in full comparison
see in full comparisonAs a result of increases in interestInterest ratesovercouldtheriselastandyear,cause the market value of previously issued government and other debt securitieshastodeclineddecline significantly, resulting in unrealized losses in the held-to-maturity portion of the Company’s securities portfolios. While the Company does notcurrentlyexpect or intend to sell these securities, if the Company were required to sell such securities to meet liquidity needs, itmaycould incur losses, which could impair the Company’s capital financial condition and results of operations. Further, while the Company has taken actions to maximize its funding sources, there is no guarantee that such funding sources will be available or sufficient in the event of sudden liquidity needs.
Full comparison: every changed paragraph (5)
As a result of increases in interestInterest rates overcould therise lastand year,cause the market value of previously issued government and other debt securities hasto declineddecline significantly, resulting in unrealized losses in the held-to-maturity portion of the Company’s securities portfolios. While the Company does not currently expect or intend to sell these securities, if the Company were required to sell such securities to meet liquidity needs, it maycould incur losses, which could impair the Company’s capital financial condition and results of operations. Further, while the Company has taken actions to maximize its funding sources, there is no guarantee that such funding sources will be available or sufficient in the event of sudden liquidity needs.
For example, during the second quarter 2023, the Company was notified that there may have been a compromise of a specific set of files processed by a third party vendor that could have affected a limited number of customers. This incident did not occur on a Company system and the Company does not use the software that may have been compromised. The Company has implemented data security safeguards with its third party vendors designed to quickly identify and contain improper access to sensitive information. The Company notified the affected customers as required by law. As of December 31, 2024, to the Company’s knowledge, there is no indication that any information has been subject to misuse as a result of the incident.
The effects of pandemics and their impact are highly unpredictable and could be significant, and could harm the Company’s business, financial condition, and operating results.
The Company’s business, operations and financial performance may be affected by the macroeconomic impacts resulting from pandemics, and the Company’s financial results in future periods could differ significantly from the Company’s historical results. The extent to which the Company’s business will be affected will depend on a variety of factors, many of which are outside of the Company’s control, including the persistence of the pandemic, the actions of governmental authorities, changes in customer preferences, impacts on economic activity, and the possibility of recession or financial market instability.
Competition among providers of financial services in markets, particularly within California, is intense. The Company competes with other financial and bank holding companies, state and national commercial banks, savings and loan associations, consumer finance companies, credit unions, securities brokerages, insurance companies, mortgage banking companies, money market mutual funds, asset-based non-bank lenders, government sponsored or subsidized lenderslenders, Internet-based “fintech” companies and other financial services providers. Many of these competitors have substantially greater financial resources, lending limits and technological resources than the Company and are able to offer a broader range of products and services. Many competitors offer lower interest rates and more liberal loan terms that appeal to borrowers but adversely affect net interest margin and assurance of repayment. The Company is increasingly faced with competition in many of its products and services by non-bank providers who may have competitive advantages of size, access to potential customers and fewer regulatory requirements, such as “fintech” lenders. Failure to compete effectively for deposit, loan and other banking customers in any of the lines of business could cause the Company to lose market share, slow or reverse growth rate or suffer adverse effects on financial condition, results of operations or profitability.
Management's Discussion & Analysis (MD&A)
Largest changes
“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. …”see in full comparison
“FASB ASU 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures, issued March 2022, eliminates the recognition and measurement guidance for troubled debt restructurings and requires enhanced disclosures about loan modifications for borrowers experiencing financial difficulty. This ASU also requires enhanced disclosure for loans that have been charged off. The ASU became effective January 1, 2023 under a prospective approach. …”see in full comparison
The Company’ssee in full comparisonyield onnet interest margin decreased in20242025 compared with20232024 affected primarily byhigherlowerrate paidyield oninterest-bearingearningliabilitiesassets due to declining interest rates in the market. The Company’s yield on earning assets in 2025 decreased compared with 2024 primarily due tocompetitivelowerfinancialyieldsproductonpricingthe investment securities andhigherinterest-bearing cash. The volumeonofBankhigher-yieldingTermCLOsFundingdeclinedProgramdueborrowings.to calls and principal paydowns. Newly purchased investment securities have lower yields compared with CLOs. 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 2025 and 2024 were $712 million yielding 6.19%, and $1,252 million yielding 7.11%, respectively. The Company’s yield on earning assets in 2024 remained the same compared with 2023 primarily due to higher yields on the loan portfolio and interest-bearing cash, offset by lower yield on investmentdebtsecurities.The Company’s yield on net interest margin increased in 2023 compared with 2022 primarily affected by collateralized loan obligations (“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 for20232024 and20222023waswere $1,252 million yielding 7.11% and $1,543 million yielding6.99% and $1,567 million yielding 3.62%,6.99%, 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 averagebalancebalances and yields of interest-bearing cash for20232025, 2024 and20222023waswere $641 million yielding 4.34%, $375 million yielding 5.25%, and $205 million yielding5.21%5.21%, respectively. The rates on interest-bearing liabilities decreased in 2025 compared with 2024 and$691increased in 2024 compared with 2023 primarily affected by Bank Term Funding Program borrowings in 2024. The average balances and rates of Bank Term Funding program borrowings were $107 millionyieldingand1.13%,5.40%respectively.in 2024. 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.”
Management continues to evaluate the impacts of inflation, the Federal Reserve’s monetarysee in full comparisonpolicypolicy, the impacts of tariffs, international trade tensions, and climate changes on the Company’sbusiness and its customers.business. The banking industryexperiencedcould experience significant volatility as it did with several regional bank failures in2023,2023.creating industrywideIndustrywide concerns could develop related to liquidity, deposit outflows and unrealized losses on investment debt securities. These events and concerns could adversely affect the Company’sfundingabilityofto 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.
The Federal Open Market Committee of the Federal Reserve Board (“FOMC”)see in full comparisonreduceddecided to maintain the target federal funds rate range of 3.50 to 3.75 percent in January 2026 after a 0.25 percent cut in December2024.2025. The FOMC press release in January stated, “Available indicators suggest that economic activity has been expanding at a solid pace. Job gains have remained low, and the unemployment rate has shown some signs of stabilization. Inflationhadremainsrecededsomewhattowardelevated. The Committee seeks to achieve maximum employment and inflation at theFOMC’s inflation goalrate of 2 percentbutovercontinuedthetolongberun.inUncertaintyexcessaboutofthe2economicpercent.outlook remains elevated. TheunemploymentCommitteerateishad recently increased but remained low. On December 18, 2024, in light of the progress on inflation and the balance of risks, the FOMC decided to reduce the federal funds rate by 0.25 percentattentive to therangerisks to both sides of4.25itstodual4.50 percent.mandate.” The interest rate paid on reserve balances at the Federal Reserve Bankwasremained4.40%atas3.65ofpercent after a 0.25 percent cut in December31, 2024.2025. The Bank maintains reserve balances at the Federal Reserve Bank; the amount that earns interest is identified as “interest-bearing cash”.
“The Company’s $425 million (fair value) in collateralized loan obligations at December 31, 2025, consist of investments in 41 issues that are within the senior tranches of their respective fund securitization structures. The following table summarizes total collateralized loan obligations by credit rating:”see in full comparison
Full comparison: every changed paragraph (40)
The Company reported net income of $138.6$116.2 million or $5.20$4.52 diluted earnings per common share (“EPS”) in 20242025 compared with net income of $138.6 million or $5.20 EPS in 2024 and net income of $161.8 million or $6.06 EPS in 20232023. 2025 results included a $550 thousand reversal of provision for credit losses and neta income$208 ofthousand $122.0bank millionowned orlife $4.54insurance gain, which increased EPS in 2022.$0.02. 2024 results included a $202 thousand bank owned life insurance gain and a $1.4 million gain on sale of other assets, equivalent to combined EPS of $0.04. 2023 results included a $1.2 million reversal of provision for credit losses, net of a $400 thousand provision for credit losses and a $279 thousand bank owned life insurance gain, equivalent to combined EPS of $0.04. 2022 results included a $1.2 million reconciling payment from a payments network and a $930 thousand life insurance gain equivalent to combined EPS of $0.07.
The Federal Open Market Committee of the Federal Reserve Board (“FOMC”) reduceddecided to maintain the target federal funds rate range of 3.50 to 3.75 percent in January 2026 after a 0.25 percent cut in December 2024.2025. The FOMC press release in January stated, “Available indicators suggest that economic activity has been expanding at a solid pace. Job gains have remained low, and the unemployment rate has shown some signs of stabilization. Inflation hadremains recededsomewhat towardelevated. The Committee seeks to achieve maximum employment and inflation at the FOMC’s inflation goalrate of 2 percent butover continuedthe tolong berun. inUncertainty excessabout ofthe 2economic percent.outlook remains elevated. The unemploymentCommittee rateis had recently increased but remained low. On December 18, 2024, in light of the progress on inflation and the balance of risks, the FOMC decided to reduce the federal funds rate by 0.25 percentattentive to the rangerisks to both sides of 4.25its todual 4.50 percent.mandate.” The interest rate paid on reserve balances at the Federal Reserve Bank wasremained 4.40%at as3.65 ofpercent after a 0.25 percent cut in December 31, 2024.2025. The Bank maintains reserve balances at the Federal Reserve Bank; the amount that earns interest is identified as “interest-bearing cash”.
Management continues to evaluate the impacts of inflation, the Federal Reserve’s monetary policypolicy, the impacts of tariffs, international trade tensions, and climate changes on the Company’s business and its customers.business. The banking industry experiencedcould experience significant volatility as it did with several regional bank failures in 2023,2023. creating industrywideIndustrywide concerns could develop related to liquidity, deposit outflows and unrealized losses on investment debt securities. These events and concerns could adversely affect the Company’s fundingability ofto 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.
FASB ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, was issued December 14, 2023. The ASU enhances the transparency and decision usefulness of income tax disclosures, primarily related to the rate reconciliation and income taxes paid information. The ASU primarily requires additional disclosures as part of the reconciliation of the effective tax rate to statutory tax rate, the amount of income taxes paid, net of refunds received, and income tax expense disaggregated between federal and state jurisdictions. The ASU is effective for fiscal years beginning after December 15, 2024, with early adoption permitted, and is to be applied prospectively, with retrospective application permitted. The Company adopted the ASU prospectively with retrospective application. The required disclosures are included in Note 10 “Income Taxes.”
FASB ASU 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures, issued March 2022, eliminates the recognition and measurement guidance for troubled debt restructurings and requires enhanced disclosures about loan modifications for borrowers experiencing financial difficulty. This ASU also requires enhanced disclosure for loans that have been charged off. The ASU became effective January 1, 2023 under a prospective approach. The Company adopted the provisions to remove the recognition and measurement guidance for troubled debt restructurings and/or modify relevant disclosures in the “Loans” note to the consolidated financial statements. The requirement to include additional disclosures was adopted by the Company January 1, 2023. The additional disclosures did not affect the financial results upon adoption.
Net income for 20242025 decreased $23.1$22.5 million compared with 20232024 primarily due to decreased net interest and loan fee income (FTE), and lower noninterest income, partially offset by a reversal of provision for credit losses, lower noninterest expense and lower tax provision (FTE). Net interest and loan fee income (FTE) decreased $29.8$33.6 million in 20242025 compared with 20232024 due to lower average balances of investment debt securities and loans, lower yield on investment securities and higher rates on interest-bearing deposits, partially offset by higher average balances of interest-bearing cash and lower average balances of Bank Term Funding Program borrowingsborrowings. andDuring higher2025, ratesthe onCompany interest-bearingrecorded liabilities,a partially$550 offsetthousand by higher yield on loans and higher average balancesreversal of interest-bearingprovision cash.for credit losses, which was recorded in the first quarter of 2025. During 2024, the Company provided $300 thousand for credit losses, which was recorded in the first quarter,quarter 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 recorded a $1.2 million reversal of provision for credit losses, net of a $400 thousand provision in 2023 as a result of a $2.2 million recovery on a previously charged off loan in the first quarter 2023. Noninterest income for 20242025 remained at the same leveldecreased compared with 20232024 primarily due to a $1.4 million gain on sale of other assets,assets in 2024, lower fee income from service charges on deposit accounts, debit card fees and ATM processing fees, partially offset by lowerhigher income from merchant processing services, ATM processing feesservices and debit cardtrust fees. Noninterest expense forin 20242025 increaseddecreased $2.5 million compared with 20232024 primarily due to higher salaries related to annual merit increases and higher costs for group health insurance, retirement plans for employees and stock based compensation, partially offset by decreases in lossessalaries fromand unauthorizedbenefits debit card use, legal fees,and operating losses from limited partnership investmentsinvestments, partially offset by higher expenses for outsourced data processing services, professional fees, courier services and FDICoccupancy insuranceand assessments.equipment. The tax rate (FTE) was 26.4% for 2025 and 27.2% for 2024 and 27.5% for 2023.2024.
Net income for 2024 decreased $23.1 million compared with 2023 primarily due to decreased net interest and loan fee income (FTE) and a reduction in net income resulting from a change in allowance for credit losses, partially offset by lower tax provision (FTE). Net interest and loan fee income (FTE) decreased $29.8 million in 2024 compared with 2023 due to lower average balances of investment 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 loans and higher average balances of interest-bearing cash. During 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 2023 as a result of a $2.2 million recovery on a previously charged off loan in the first quarter 2023. Noninterest income for 2024 was relatively unchanged compared with 2023 primarily due to a $1.4 million gain on sale of other assets, offset by lower income from merchant processing services, ATM processing fees and debit card fees. Noninterest expense for 2024 increased compared with 2023 primarily due to higher salaries and benefits, 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 27.2% for 2024 and 27.5% for 2023.
Net income for 2023 increased $39.7 million compared with 2022. Net interest and loan fee income (FTE) increased $59.9 million in 2023 compared with 2022 due to higher yield on interest-earning assets and higher average balances of investment debt securities, partially offset by lower average balances of loans and interest-bearing cash and higher rate on interest-bearing liabilities. The Company recorded a $1.2 million reversal of provision for credit losses in 2023, reflecting a $2.2 million recovery on a previously charged off loan in the first quarter 2023 and a $400 thousand credit loss provision, based on the results of the Company’s current expected credit loss (“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 2022, based on Management’s estimate of credit losses over the remaining life of its loans and debt securities held to maturity. Noninterest income in 2023 decreased $1.6 million compared with 2022 primarily because 2022 included a $1.2 million reconciling payment from a payments network and higher gains on life insurance. Noninterest expense in 2023 increased $3.9 million compared with 2022 primarily due to increases in salaries and benefits, occupancy and equipment expenses, and increased FDIC insurance assessments for all insured depository institutions. Lower professional fees partially offset the increases in noninterest expense in 2023 compared with 2022. The tax rate (FTE) was 27.5% in 2023 and 27.2% in 2022.
The following summarizes the components of the Company's net interest margin (FTE) for the periods indicated.
Components of Net Interest and Loan Fee Income (FTE)
Net interest and loan fee income (FTE) decreased $29.8$33.6 million in 20242025 compared with 20232024 due to lower average balances of investment debt securities (down $502$546 million) and loans (down $76$80 million), lower yield on investment securities (down 0.45%) and higher rates on interest-bearing deposits (up 0.10%), partially offset by higher average balances of interest-bearing cash (up $266 million) and lower average balances of Bank Term Funding Program borrowings (updown $107 million) and higher rates on interest-bearing liabilities (up 0.48%), partially offset by higher yield on loans (up 0.26%) and higher average balances of interest-bearing cash (up $170 million).
Net interest and loan fee income (FTE) increaseddecreased $59.9$29.8 million in 20232024 compared with 20222023 due to lower average balances of investment securities (down $502 million) and loans (down $76 million), higher average balances of Bank Term Funding Program borrowings (up $107 million) and higher rates on interest-bearing liabilities (up 0.48%), partially offset by higher yield on interest-earning assetsloans (up 1.23%0.26%) and higher average balances of investment debt securities (up $31 million), partially offset by lower average balances of loans (down $86 million) and interest-bearing cash (downup $486$170 million) and higher rate on interest-bearing liabilities (up 0.07%).
The Company’s funding costs were 0.24% in 2025, compared with 0.29% in 2024, compared withand 0.06% in 2023 and 0.03% in 2022.2023. Noninterest bearing deposits represented 47%46% of average deposits in 20242025 and 2023,47% in 2024, respectively. Average balances of time deposits in 20242025 declined $25$16 million from 2023.2024. Average balances of checking and saving deposits accounted for 98.2%98.5% of average total deposits in 20242025 compared with 98.0%98.2% in 2023.2024.
The Company’s yield on net interest margin decreased in 20242025 compared with 20232024 affected primarily by higherlower rate paidyield on interest-bearingearning liabilitiesassets due to declining interest rates in the market. The Company’s yield on earning assets in 2025 decreased compared with 2024 primarily due to competitivelower financialyields producton pricingthe investment securities and higherinterest-bearing cash. The volume onof Bankhigher-yielding TermCLOs Fundingdeclined Programdue borrowings.to calls and principal paydowns. Newly purchased investment securities have lower yields compared with CLOs. 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 2025 and 2024 were $712 million yielding 6.19%, and $1,252 million yielding 7.11%, respectively. The Company’s yield on earning assets in 2024 remained the same compared with 2023 primarily due to higher yields on the loan portfolio and interest-bearing cash, offset by lower yield on investment debt securities. The Company’s yield on net interest margin increased in 2023 compared with 2022 primarily affected by collateralized loan obligations (“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 20232024 and 20222023 waswere $1,252 million yielding 7.11% and $1,543 million yielding 6.99% and $1,567 million yielding 3.62%,6.99%, 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 balancebalances and yields of interest-bearing cash for 20232025, 2024 and 20222023 waswere $641 million yielding 4.34%, $375 million yielding 5.25%, and $205 million yielding 5.21%5.21%, respectively. The rates on interest-bearing liabilities decreased in 2025 compared with 2024 and $691increased in 2024 compared with 2023 primarily affected by Bank Term Funding Program borrowings in 2024. The average balances and rates of Bank Term Funding program borrowings were $107 million yieldingand 1.13%,5.40% respectively.in 2024. 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 Company manages credit costsrisk by consistently enforcing conservative underwriting and administration procedures and aggressively pursuing collection efforts with debtors experiencing financial difficulties. The provision for credit losses reflects Management's assessment of credit risk in the loan portfolio and debt securities held to maturity portfolio during each of the periods presented.
In 2024, the Company provided $300 thousand for credit losses, which was recorded in the first quarter, basedBased 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.maturity, Thethe Company recorded a $550 thousand reversal of provision for credit losses in 2025, which was recorded in the first quarter of 2025. In 2024, the Company provided $300 thousand for credit losses, which was recorded in the first quarter of 2024. In 2023, the Company recorded a $1.2 million reversal of provision for credit losses in 2023 which reflected a $2.2 million recovery in the first quarter 2023 on a previously charged off loan and 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 provided no provision for credit losses in 2022 based on Management’s estimate of reserves needed over the remaining life of its loans and investments.2023. For further information regarding credit risk, net credit losseslosses, and the allowance for credit losses, see the “Loan Portfolio Credit Risk” and “Allowance for Credit Losses” sections of this Report.
Noninterest income in 2025 decreased $2.4 million compared with 2024 primarily because 2024 results included a $1.4 million gain on sale of other assets. Service charges on deposit accounts decreased in 2025 compared with 2024 primarily due to a decrease in overdraft charges. Debit card fees and ATM processing fees decreased in 2025 compared with 2024 primarily due to lower transaction volumes. The decreases in 2025 compared with 2024 were partially offset by higher income from merchant processing services and trust fees.
Noninterest income in 2024 remained atrelatively theunchanged same levelwhen compared with 2023 primarily due to a $1.4 million gain on sale of other assets, offset by lower income from merchant processing services, ATM processing fees and debit card fees. Merchant processing services fee income decreased in 2024 from 2023 primarily due to an increase in lower margin transactions. ATM processing fees declined in 2024 compared with 2023 due to reduced processing volumes.
Noninterest income in 2023 decreased $1.6 million compared with 2022 primarily due to lower gains on life insurance and because debit card fees in 2022 included a $1.2 million reconciling payment from a payments network. Merchant processing service fees decreased in 2023 compared with 2022 primarily due to lower transaction volumes and increased lower-margin transactions. Service charges on deposit accounts decreased in 2023 compared with 2022 primarily due to lower fee income on analyzed deposit accounts, partially offset by fees generated from time deposits redeemed before maturity. ATM processing fee income increased in 2023 compared with 2022 primarily due to increased transaction volumes. Other noninterest income in 2023 included higher recoveries of interest and fees on previously charged off loans compared 2022.
Noninterest expense in 2025 decreased $2.5 million compared with 2024 primarily due to decreases in salaries and benefits and operating losses from limited partnership investments. The decreases in 2025 from 2024 were partially offset by higher expenses for outsourced data processing services, professional fees, courier services and occupancy and equipment.
Noninterest expense in 2024 increased $1.2 million compared with 2023. Salaries and benefits increased in 2024 compared with 2023 primarily due to annualincreases meritin increases, higher group health insurance costs for employees, higher expenses for deferred retirement plans for employeessalaries and stockbenefits basedand compensation.outsourced data processing. The increases in 2024 from 2023 were partially offset by decreases in losses from unauthorized debit card use, legal fees, operating losses from limited partnership investments and FDIC insurance assessments.
Noninterest expense in 2023 increased $3.9 million compared with 2022. Salaries and benefits increased in 2023 compared with 2022 due to increased staff, annual merit increases and higher group health insurance costs for the employees. Occupancy and equipment expenses increased in 2023 compared with 2022 primarily due to increases in repair and maintenance. Other noninterest expense increased in 2023 compared with 2022 primarily due to higher FDIC insurance assessments for all insured depository institutions and losses on unauthorized transactions of customer debit and ATM cards. Professional fees decreased in 2023 compared with 2022 primarily due to lower legal fees.
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 obligationscorporations and agencybanks. mortgage-backedThe securities.Company had marketable equity securities held for trading at fair value of $466 thousand at December 31, 2025. The Company had no marketable equity securities not held for trading at December 31, 20242025 and December 31, 2023.2024.
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 $4.3 billion at December 31, 2025 and $4.2 billion at December 31, 2024 and $4.9 billion at December 31, 2023.2024. 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 December 31, 20242025 and $1 thousand at December 31, 2023.2024. Debt securities available for sale are listed at fair value.
The Company’s $425 million (fair value) in collateralized loan obligations at December 31, 2025, consist of investments in 41 issues that are within the senior tranches of their respective fund securitization structures. The following table summarizes total collateralized loan obligations by credit rating:
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:
The following table summarizes net (chargeoffs) recoveries and the ratio of net (charge-offschargeoffs) recoveries to average loans for the periods indicated:
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 1 “Business and Accounting Policies” to the consolidated financial statements for additional information.
The following table presents the allocation of the allowance for credit losses as of December 31 for the periods indicated.
Management monitors the Company’s interest rate risk using a purchasedlicensed 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.
Dynamic simulation (balance sheet composition changes):
Static simulation (balance sheet composition unchanged):
Total deposits were $4,840 million at December 31, 2025 and $5,012 million at December 31, 20242024. andTotal $5,474time deposits were $67 million at December 31, 2023.2025 Total time deposits wereand $82 million at December 31, 2024 and $97 million at December 31, 2023.2024. The Company has no foreign time deposits. The standard FDIC deposit insurance amount is $250,000 per depositor, for each account ownership category. At December 31, 2024,2025, estimated federally uninsured total deposits and time deposits were $2,491$2,457 million and $4 million, respectively.
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 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 $462,417 thousand from December 31, 2023 to December 31, 2024 due to competitive financial product pricing.
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 December 31, 2024,2025, the Company had $601,494$567,801 thousand in cash balances. During the twelve months ending December 31, 2025,2026, the Company expects to receive $309,000$397,000 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 December 31, 2024,2025, the Company’s debt securities which qualify as collateral for borrowing totaled $3,534,099$4,013,502 thousand. In the ordinary course of business, the Company pledges debt securities as collateral for certain depository customers; at December 31, 2024,2025, the Company had pledged $726,784$710,092 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 December 31, 2024,2025, the Company had pledged $766,606$741,923 thousand in debt securities at the Federal Reserve Bank. During the year ended December 31, 2024,2025, the Company’s average borrowings from the Federal Reserve Bank and other correspondent banks were $107,364 thousand and $-0- thousand, respectively, and at December 31, 2024,2025, the Company had no borrowings from the Federal Reserve Bank or other correspondent banks. At December 31, 2024,2025, the Company had access to borrowing from the Federal Reserve Bank up to $766,606$741,923 thousand based on collateral pledged at December 31, 2024.2025. At December 31, 2024,2025, the Company’s estimated unpledged collateral qualifying debt securities totaled $1,597,486$2,137,832 thousand. Debt securities eligible as collateral are shown at market value unless noted otherwise:
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 ofat December 31, 2024.2025. Substantially all of the Parent Company's revenues are obtained from subsidiary dividends and service fees.
The Bank’s dividends paid to the Parent Company, proceeds from the exercise of stock options,Company and Parent Company cash balances provided adequate cash for the Parent Company to pay shareholder dividends of $47 million infor the year ended December 31, 20242025 and $46$47 million in the year ended December 31, 20232024 and retire common stock in the amounts of $104 million in the year ended December 31, 2025 and $210 thousand in the year ended December 31, 2024 and $14 million in the year ended December 31, 2023.2024. 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 $268 million at December 31, 2025 and $263 million at December 31, 2024 and $155 million at December 31, 2023.2024.
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 11.2% for the year ended December 31, 2025 and 13.8% for the year ended December 31, 2024 and 18.1% for the year ended December 31, 2023.2024. The Company also raises capital as employees exercise stock options. CapitalThe Company raised $376 thousand through the exercise of stock options in the year ended December 31, 2025 while $1.5 million was raised through the exercise of stock options was $1.5 million in the year ended December 31, 2024 and $950 thousand in the year ended December 31, 2023.2024.
The Company paid cash dividends on its common dividendsstock totaling $47 million in the year ended December 31, 20242025 and $46$47 million in the year ended December 31, 2023,2024, which represent dividends per common share of $1.76$1.82 and $1.72,$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 approximately 2 million shares valued at $104 million in the year ended December 31, 2025 and 4 thousand shares valued at $210 thousand in the year ended December 31, 2024 and 274 thousand shares valued at $14 million in the year ended December 31, 2023.2024.
Further detail of federal funds purchased and other borrowed funds is as follows:
What changed in the latest 10-Q
Risk Factors
The Company’s Annual Report on Form 10-K for the year ended December 31, 2025 includes detailed disclosure about the risks faced by the Company’s business.
No wording changes found in this section.
Full comparison: every changed paragraph (0)
Management's Discussion & Analysis (MD&A)
Removed heading “FINANCIAL SUMMARY”
Removed heading “Distribution of Assets, Liabilities & Shareholders’ Equity and Yields, Rates & Interest Margin”
Removed heading “Distribution of Assets, Liabilities & Shareholders’ Equity and Yields, Rates & Interest Margin”
Removed heading “Distribution of Assets, Liabilities & Shareholders’ Equity and Yields, Rates & Interest Margin”
Largest changes
The Federal Open Market Committee of the Federal Reserve Board (“FOMC”) maintained the target federal funds rate range of 3.50 to 3.75 percent insee in full comparisonMarchJune 2026 after a 0.25 percent cut in December 2025. The FOMC press release inMarchJune 2026 stated, “Available indicators suggest that economicEconomic activityhas beenis expanding at a solidpace.pace despite elevated uncertainty that owes, in part, to the conflict in the Middle East. Productivity growth and capital investment are strong. Job gains haveremainedkeptlow,pace with the workforce, and the unemployment rate hasbeen littlechangedin recent months.little. Inflation remainssomewhatelevatedelevated.relative to the Committee’s 2 percent goal, in part reflecting supply shocks that have driven price increases in certain sectors, including energy. The Committeeseekswilltodeliverachievepricemaximum employment and inflation at the rate of 2 percent over the long run. Uncertainty about the economic outlook remains elevated. The implications of developments in the Middle East for the U.S. economy are uncertain. The Committee is attentive to the risks to both sides of its dual mandate.stability.” The interest rate paid on reserve balances at the Federal Reserve Bank remained at 3.65 percent after a 0.25 percent cut in December 2025. The Bank maintains reserve balances at the Federal Reserve Bank; the amount that earns interest is identified as “interest-bearing cash”.
“Distribution of Assets, Liabilities & Shareholders’ Equity and Yields, Rates & Interest Margin”see in full comparison
“Distribution of Assets, Liabilities & Shareholders’ Equity and Yields, Rates & Interest Margin”see in full comparison
“Distribution of Assets, Liabilities & Shareholders’ Equity and Yields, Rates & Interest Margin”see in full comparison
“(2) The efficiency ratio is defined as noninterest expense divided by total revenue (net interest income on an FTE basis and noninterest income).”see in full comparison
Full comparison: every changed paragraph (48)
FINANCIAL SUMMARY
The above financial summary has been derived from the Company's unaudited consolidated financial statements. This information should be read in conjunction with those statements, notes and the other information included elsewhere herein. Percentages under the heading "Financial Ratios" are annualized with the exception of the efficiency ratio.
(1) Yields on securities and certain loans have been adjusted upward to an FTE basis in order to reflect the effect of income which is exempt from federal income taxation at the current statutory tax rate.
(2) The efficiency ratio is defined as noninterest expense divided by total revenue (net interest income on an FTE basis and noninterest income).
Westamerica Bancorporation and subsidiaries (collectively, the “Company”) reported net income of $27.4 million or $1.13$1.17 diluted earnings per common share (“EPS”) in the three months endedended, MarchJune 31, 2026. The results in the three months ended March 31,30, 2026 included a $300 thousand reversal of provision for credit losses, which increased EPS $0.01. The results in the three months ended March 31, 2026 comparecompared with net income of $31.0 million or $1.16 EPS in the three months ended March 31, 2025 and $27.8$29.1 million or $1.12 EPS in the three months ended DecemberJune 31,30, 2025. The resultsCompany inreported net income of $54.7 million or $2.30 EPS for the threesix months ended MarchJune 31,30, 20252026. includedThe aCompany $550reported thousandnet reversalincome of provision$60.1 million or $2.29 EPS for credit losses, which increased EPS $0.01. The results in the threesix months ended DecemberJune 31,30, 2025 included a $628 thousand increase to the book tax provision to reconcile the 2024 income tax provision to the filed 2024 tax returns, which reduced EPS $0.02.2025.
The Federal Open Market Committee of the Federal Reserve Board (“FOMC”) maintained the target federal funds rate range of 3.50 to 3.75 percent in MarchJune 2026 after a 0.25 percent cut in December 2025. The FOMC press release in MarchJune 2026 stated, “Available indicators suggest that economicEconomic activity has beenis expanding at a solid pace.pace despite elevated uncertainty that owes, in part, to the conflict in the Middle East. Productivity growth and capital investment are strong. Job gains have remainedkept low,pace with the workforce, and the unemployment rate has been little changed in recent months.little. Inflation remains somewhatelevated elevated.relative to the Committee’s 2 percent goal, in part reflecting supply shocks that have driven price increases in certain sectors, including energy. The Committee seekswill todeliver achieveprice maximum employment and inflation at the rate of 2 percent over the long run. Uncertainty about the economic outlook remains elevated. The implications of developments in the Middle East for the U.S. economy are uncertain. The Committee is attentive to the risks to both sides of its dual mandate.stability.” The interest rate paid on reserve balances at the Federal Reserve Bank remained at 3.65 percent after a 0.25 percent cut in December 2025. The Bank maintains reserve balances at the Federal Reserve Bank; the amount that earns interest is identified as “interest-bearing cash”.
Net income for the three months ended MarchJune 31,30, 2026 decreased $3.7$1.7 million compared with the three months ended MarchJune 31,30, 2025 primarily due to lower net interest and loan fee income (FTE), lower noninterest income and higher noninterest expense, partially offset by lower tax provision (FTE). Net interest and loan fee income (FTE) decreased $3.7$1.9 million in the three months ended MarchJune 31,30, 2026 compared with the three months ended MarchJune 31,30, 2025 primarily due to lower average balances of loans and interest-bearing cash,cash and lower yield on investment securities and interest-bearing cash, partially offset by higher average balances of investment securities. 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 recordedprovided a $300 thousand reversal ofno provision for credit losses in the three months ended MarchJune 31,30, 2026 and a $550 thousand reversal of provision for credit losses in the three months ended MarchJune 31,30, 2025. Noninterest income for the three months ended MarchJune 31,30, 2026 decreasedwas relatively equal compared with the three months ended MarchJune 31,30, 20252025. dueMerchant toprocessing lower debit card feesservices and recognitiontrust offee unrealizedincome securitieswas losses of $247 thousandhigher in the three months ended MarchJune 31,30, 2026.2026, partially offset by lower debit card fee income and the three months ended June 30, 2025 included bank owned life insurance gains. Noninterest expense for the three months ended MarchJune 31,30, 2026 increased compared with the three months ended MarchJune 31,30, 2025 primarily due to increases in salaries and benefitsrelated expense,benefits, occupancyprofessional and equipment expensefees and estimated operating losses from limited partnership investments.operating losses. The tax rate (FTE) was 25.4%25.8% for the three months ended MarchJune 31,30, 2026 and 26.3%26.1% for the three months ended MarchJune 31,30, 2025.
Net income for the threesix months ended MarchJune 31,30, 2026 decreased $452$5.4 thousandmillion compared with the threesix months ended DecemberJune 31,30, 2025 primarily due to lower net interest and loan fee income (FTE), lower noninterest income and higher noninterest expense, partially offset by lower tax provision (FTE). Net interest and loan fee income (FTE) decreased $859$5.6 thousandmillion in the threesix months ended MarchJune 31,30, 2026 compared with the threesix months ended DecemberJune 31,30, 2025 primarily due to lower average balances of loans andloans, interest-bearing cashcash, and lower yield on investment securities and interest-bearing cash, partially offset by higher average balances of investment securities. Based on the results of its CECL model and Management’s estimate of credit losses over the remaining life of its loans, the Company recorded a $300 thousand reversal of provision for credit losses in the threesix months ended MarchJune 31,30, 20262026, andwhich providedwas noincluded in the first quarter of 2026. The Company recorded a $550 thousand reversal of provision for credit losses in the threesix months ended DecemberJune 31,30, 2025, which was included in the first quarter of 2025. Noninterest income for the threesix months ended MarchJune 31,30, 2026 decreased compared with the threesix months ended DecemberJune 31,30, 2025 primarily due to lower debit card fees andfees, recognition of unrealized securities losses ofand $247the thousandsix months ended June 30, 2025 included bank owned life insurance gains, partially offset by higher merchant processing services and trust fee income. The decrease in noninterest income in the threesix months ended MarchJune 31,30, 2026.2026 compared with the six months ended June 30, 2025 was partially offset by increases in merchant processing services and trust fees. Noninterest expense for the threesix months ended MarchJune 31,30, 2026 increased compared with the threesix months ended DecemberJune 31,30, 2025 primarily due to higher salaries and benefitsrelated expensebenefits, occupancy and equipment, outsourced data processing services, professional fees and estimated operating losses from limited partnership investments.operating losses, partially offset by lower courier service expense. The tax rate (FTE) was 25.4%25.6% for the threesix months ended MarchJune 31,30, 2026 and 27.0%26.2% for the threesix months ended DecemberJune 31,30, 2025. The results in the three months ended December 31, 2025 included a $628 thousand increase to the book tax provision to reconcile the 2024 income tax provision to the filed 2024 tax returns.
Net interest and loan fee income (FTE) decreased $3.7 million in the three months ended March 31, 2026 compared with the three months ended March 31, 2025 due to lower average balances of loans (down $81 million) and interest-bearing cash (down $143 million), lower yield on investment securities (down 0.11%) and interest-bearing cash (down 0.75%), partially offset by higher average balances of investment securities (up $74 million).
Net interest and loan fee income (FTE) decreased $859$1.9 thousandmillion in the three months ended MarchJune 31,30, 2026 compared with the three months ended DecemberJune 31,30, 2025 primarily due to lower average balances of loans (down $19$79 million) and interest-bearing cash (down $130$329 million) and lower yield on interest-bearing cash (down 0.28%0.75%), partially offset by higher average balances of investment securities (up $126$333 million).
Net interest and loan fee income (FTE) decreased $5.6 million in the six months ended June 30, 2026 compared with the six months ended June 30, 2025 primarily due to lower average balances of loans (down $80 million) and interest-bearing cash (down $236 million) and lower yield on investment securities (down 0.04%) and interest-bearing cash (down 0.75%), partially offset by higher average balances of investment securities (up $204 million).
The annualized yield on earning assets (FTE) was 4.01% in the three months ended June 30, 2026 and 3.99% in the six months ended June 30, 2026 compared with 4.07% in the three months ended June 30, 2025 and 4.11% in the six months ended June 30, 2025. The annualized net interest margin (FTE) was 3.77% in the three months ended June 30, 2026 and 3.75% in the six months ended June 30, 2026 compared with 3.85% in the three months ended June 30, 2025 and 3.87% in the six months ended June 30, 2025.
The net interest margin (FTE) was 3.74% in the three months ended March 31, 2026, 3.90% in the three months ended March 31, 2025, and 3.76% in the three months ended December 31, 2025. The yield on earning assets (FTE) was 3.98% in the three months ended March 31, 2026, 4.14% in the three months ended March 31, 2025, and 4.00% in the three months ended December 31, 2025.
The Company’s annualized funding costs were 0.24% in the three and six months ended MarchJune 31,30, 2026,2026 Marchcompared 31,with 20250.22% and December0.24% 31,in 2025.the three and six months ended June 30, 2025, respectively. Noninterest bearing deposits represented 46% of average deposits in the threesix months ended MarchJune 31,30, 2026, March 31, 20252026 and DecemberJune 31,30, 2025. Average balances of checking and saving deposits accounted for 98.6%99% of average total deposits in the threesix months ended MarchJune 31,30, 2026,2026 98.4%and 98% in the threesix months ended MarchJune 31, 2025 and 98.6% in the three months ended December 31,30, 2025.
The Company’s netyield intereston marginearning assets during the three and six months ended MarchJune 31,30, 2026 decreased compared with the three and six months ended MarchJune 31,30, 20252025. andThe December 31, 2025 primarily affected by lowerCompany’s yield on earning assets duehas tobeen decliningprimarily marketaffected interestby rates.collateralized Theloan yieldobligations on(CLOs), investment securities decreasedheld in the threedebt monthssecurities endedavailable Marchfor 31,sale 2026 compared with the three months ended March 31, 2025,portfolio, and stabilizedinterest-bearing compared with the three months ended December 31, 2025.cash. The volume of higher-yielding CLOs declined due to calls and principal paydowns. Newly purchased investment securities have lower yields compared with CLOs. 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 balancesbalance and yieldsyield of CLOs for the three and six months ended MarchJune 31,30, 2026 andwas March 31, 2025 were $349$247 million yielding 5.64%5.61% and $916$298 million yielding 6.30%,5.63%, respectively. The average balancesbalance and yieldsyield of CLOs for the three and six months ended June 30, 2025 was $793 million yielding 6.19% and $854 million yielding 6.25%, respectively. The average balance and yield of agency mortgage backed securities for the three and six months ended MarchJune 31,30, 2026 andwas March 31, 2025 were $1,061$1,280 million yielding 4.67%4.74% and $310$1,171 million yielding 3.05%,4.70%, respectively. The average balance and yield of agency mortgage backed securities for the three and six months ended June 30, 2025 was $325 million yielding 3.25% and $318 million yielding 3.15%, 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 yieldsbalance of interest-bearing cash decreasedfor the three and six months ended June 30, 2026 was $325 million yielding 3.65% and $395 million yielding 3.65%, respectively. The average balance and yield of interest-bearing cash for the three and six months ended MarchJune 31, 2026, March 31,30, 2025 andwas December 31, 2025, which were $466$654 million yielding 3.65%,4.40% $609and $632 million yielding 4.40%, and $596 million yielding 3.93%, 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.”
Distribution of Assets, Liabilities & Shareholders’ Equity and Yields, Rates & Interest Margin
(2) Net interest spread represents the average yield earned on interest-earning assets less the average rate incurred on interest-bearing liabilities.
(3) Net interest margin is computed by calculating the difference between interest income and expense, divided by the average balance of interest-earning assets. The net interest margin is greater than the net interest spread due to the benefit of noninterest-bearing demand deposits.
Distribution of Assets, Liabilities & Shareholders’ Equity and Yields, Rates & Interest Margin
(2) Net interest spread represents the average yield earned on interest-earning assets less the average rate incurred on interest-bearing liabilities.
(3) Net interest margin is computed by calculating the difference between interest income and expense, divided by the average balance of interest-earning assets. The net interest margin is greater than the net interest spread due to the benefit of noninterest-bearing demand deposits.
Distribution of Assets, Liabilities & Shareholders’ Equity and Yields, Rates & Interest Margin
(2) Net interest spread represents the average yield earned on interest-earning assets less the average rate incurred on interest-bearing liabilities.
(3) Net interest margin is computed by calculating the difference between interest income and expense, divided by the average balance of interest-earning assets. The net interest margin is greater than the net interest spread due to the benefit of noninterest-bearing demand deposits.
Based on Management’s estimate of credit losses over the remaining life of its loans and debt securities held to maturity, the Company recordedprovided no provision for credit losses in the three and six months ended June 30, 2026 and June 30, 2025. The six months ended June 30, 2026 and June 30, 2025 included a $300 thousand reversal of provision for credit losses recorded in the three months ended MarchJune 31,30, 2026,2026 and a $550 thousand reversal of provision for credit lossesrecorded in the three months ended MarchJune 31,30, 2025.2025, respectively. 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.
Noninterest income for the three months ended MarchJune 31,30, 2026 decreasedwas $714relatively thousandequal compared with the three months ended MarchJune 31,30, 2025. DebitMerchant cardprocessing feesservices declinedand $257trust thousandfee fromincome thewas three months ended March 31, 2025 to the three months ended March 31, 2026. The Company recognized unrealized securities losses of $247 thousandhigher in the three months ended MarchJune 31,30, 2026.2026, Thepartially sameoffset periodby inlower debit card fee income and the three months ended June 30, 2025 included a $102 thousand gain on bank owned life insurance.insurance gains.
Noninterest income for the threesix months ended MarchJune 31,30, 2026 decreased $396 thousand compared with the threesix months ended DecemberJune 31,30, 2025.2025 Debitprimarily due to lower debit card feesfee declinedincome, $174recognition thousand from the three months ended December 31, 2025 to the three months ended March 31, 2026. The Company recognizedof unrealized securities losses of $247 thousand inand the threesix months ended MarchJune 31,30, 2026.2025 included bank owned life insurance gains, partially offset by higher merchant processing services and trust fee income.
Noninterest expense for the three months ended MarchJune 31,30, 2026 increased $784 thousand compared with the three months ended MarchJune 31,30, 2025 primarily due to increases in salaries and benefitsrelated expense,benefits, occupancyprofessional and equipment expensefees and estimated operating losses from limited partnership investments.operating losses.
Noninterest expense for the threesix months ended MarchJune 31,30, 2026 increased $445 thousand compared with the threesix months ended DecemberJune 31,30, 2025.2025 Salaries and benefits expense increased in the three months ended March 31, 2026primarily due to seasonally higher payroll taxessalaries and higherrelated benefitbenefits, costs.occupancy Estimatedand operatingequipment, lossesoutsourced fromdata processing services, professional fees and estimated limited partnership investmentsoperating increasedlosses, frompartially theoffset threeby monthslower endedcourier Decemberservice 31, 2025 to the three months ended March 31, 2026.expense.
The Company’s income tax provision (FTE) was $9.3$9.5 million for the three months ended MarchJune 31,30, 2026 comparedand with $11.1$18.9 million for the threesix months ended MarchJune 31,30, 20252026 andcompared with $10.3 million for the three months ended DecemberJune 31,30, 2025, representing effective tax rates (FTE) of 25.4%, 26.3%2025 and 27.0%,$21.4 respectively.million for the six months ended June 30, 2025. The effective tax rates (FTE) were 25.8% and 25.6%, for the three and six months ended DecemberJune 31,30, 20252026, wasrespectively, highercompared thanwith 26.1% and 26.2%, for the three months ended March 31, 2026 and the threesix months ended MarchJune 31,30, 20252025, primarily due to a $628 thousand increase in book tax provision to reconcile the 2024 income tax provision to the filed 2024 tax returns.respectively.
The Company maintains an investment securities portfolio consisting of securities issued by U.S. Government sponsored entities, state and political subdivisions, corporations and banks. The Company had marketable equity securities held for trading at fair value of $219$255 thousand at MarchJune 31,30, 2026 and $466 thousand at December 31, 2025. The Company had no marketable equity securities not held for trading at MarchJune 31,30, 2026 and December 31, 2025.
Management manages the investment debt 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 debt securities portfolio was $4.4 billion at MarchJune 31,30, 2026 and $4.3 billion at December 31, 2025. 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 MarchJune 31,30, 2026 and December 31, 2025. Debt securities available for sale are listed at fair value.
At MarchJune 31,30, 2026, substantially all of the Company’s investment securities were investment grade as rated by one or more major rating agencies. In addition to monitoring credit rating agency evaluations, Management performs its own evaluations regarding the credit worthiness of the issuer or the securitized assets underlying asset-backed securities. The Company’s procedures for evaluating investments in securities are in accordance with guidance issued by the Board of Governors of the Federal Reserve System, “Investing in Securities without Reliance on Nationally Recognized Statistical Rating Agencies” (SR 12-15) and other regulatory guidance.
The Company’s $294$208 million (fair value) in collateralized loan obligations at MarchJune 31,30, 2026, consist of investments in 3124 issues that are within the senior tranches of their respective fund securitization structures. The following table summarizes total collateralized loan obligations by credit rating:
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 MarchJune 31,30, 2026, 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 MarchJune 31,30, 2026 and December 31, 2025, reflecting the expected credit losses on debt securities held to maturity.
Selected financial data: (At the dates indicated)
Management considers the $11.2$10.8 million allowance for credit losses on loans to be adequate as a reserve against current expected credit losses in the loan portfolio as of MarchJune 31,30, 2026.
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 MarchJune 31,30, 2026, the Company had $14$13 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.
The Company’s asset and liability position was generally “asset sensitive” at MarchJune 31,30, 2026, based on the interest rate assumptions applied to the simulation model. An “asset sensitive” position results in a larger change in interest income than in interest expense resulting from application of assumed interest rate changes. However, in the dynamic simulation, an assumed decline in interest rates is expected to result in improved deposit balances funding higher earning asset levels. Further, in the dynamic simulation, no change in interest rates is expected to result in a decline in net interest income as asset yields remain stable and deposit costs rise as the Bank negotiates deposit rates with customers in the current environment.
At MarchJune 31,30, 2026, Management’s most recent measurements of estimated changes in net interest income were:
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 threesix months ended MarchJune 31,30, 2026 and the year ended December 31, 2025. 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.
Total deposits were $4,784$4,773 million at MarchJune 31,30, 2026 and $4,840 million at December 31, 2025. Total time deposits were $65$62 million at MarchJune 31,30, 2026 and $67 million at December 31, 2025. The Company has no foreign time deposits. FDIC deposit insurance is $250,000 per depositor, for each account ownership category. At MarchJune 31,30, 2026, estimated federally uninsured total deposits and time deposits were $2,363$2,368 million and $4$3 million, respectively.
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 MarchJune 31,30, 2026, the Company had $397,284$301,934 thousand in cash balances. During the twelve months ending MarchJune 31,30, 2027, the Company expects to receive $402,000$386,000 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 MarchJune 31,30, 2026, the Company had access to borrowing from the Federal Reserve Bank up to $765,854$761,326 thousand based on collateral pledged at MarchJune 31,30, 2026. Additionally, the Company had access to a $60,000 thousand line of credit with a correspondent bank at MarchJune 31,30, 2026.
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 MarchJune 31,30, 2026. Substantially all of the Parent Company's revenues are obtained from subsidiary dividends and service fees.
The Bank’s dividends paid to the Parent Company and Parent Company cash balances provided adequate cash for the Parent Company to pay shareholder dividends of $11$23 million for the threesix months ended MarchJune 31,30, 2026 and $47 million for the year ended December 31, 2025 and retire common stock in the amounts of $51$93 million in the threesix months ended MarchJune 31,30, 2026 and $104 million in the year ended December 31, 2025. 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 the Parent Company's ability to meet its ongoing cash obligations. The Parent Company’s cash balance was $233$210 million at MarchJune 31,30, 2026 and $268 million at December 31, 2025.
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 11.0%11.1% for the threesix months ended MarchJune 31,30, 2026 and 11.2% for the year ended December 31, 2025. The Company also raises capital as employees exercise stock options. There were no stock option exercises during the three months ended March 31, 2026. The Company raised $376$6 thousandmillion through the exercise of stock options in the six months ended June 30, 2026 and $376 thousand in the year ended December 31, 2025.
The Company paid cash dividends on its common stock totaling $11$23 million in the threesix months ended MarchJune 31,30, 2026 and $47 million in the year ended December 31, 2025, which represent dividends per common share of $0.46$0.94 and $1.82, 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 approximately 12 million shares valued at $51$93 million in the threesix months ended MarchJune 31,30, 2026 and 2 million shares valued at $104 million in the year ended December 31, 2025.
The Company's primary capital resource is shareholders' equity, which was $883$853 million at MarchJune 31,30, 2026 compared with $934 million at December 31, 2025. The Company's ratio of equity to total assets was 15.05%14.70% at MarchJune 31,30, 2026 and 15.66% at December 31, 2025.
WABC insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 1 Form 4 filing (1 insider, 1 trade date, 61 shares, about $3.3K) and open-market sales in 1 filing (1 insider, 1 trade date, 759 shares, about $40.9K). Net open-market shares: -698 (purchases minus sales); net value about -$37.6K.Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-04-22 | Wondeh Inez |
Open-market purchase | 61 | $53.79 | $3.3K |
| 2026-04-20 | Baker Robert James Jr |
Open-market sale | 759 | $53.83 | $40.9K |
Well-known investors holding WABC (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| AQR Capital Management (Cliff Asness) | 2026-06-30 | 495,223 | $29.1M | 0.01% | Added 24% |
| Two Sigma Investments | 2026-06-30 | 303,836 | $17.8M | 0.01% | Reduced 14% |
| Citadel Advisors (Ken Griffin) | 2026-06-30 | 108,509 | $6.4M | 0.0% | Reduced 13% |
| Renaissance Technologies | 2026-06-30 | 72,499 | $4.3M | 0.01% | Reduced 52% |
| Millennium Management (Israel Englander) | 2026-06-30 | 56,201 | $2.9M | — | Sold out |
| Point72 Asset Management (Steve Cohen) | 2026-06-30 | 23,670 | $1.2M | — | Sold out |
| D. E. Shaw & Co. | 2026-06-30 | 9,693 | $568.7K | 0.0% | Added 75% |