WESTA MERICA
WESTA MERICA
2022 ANNUAL REPORT | 2023 PROXY STATEMENT | NOTICE OF ANNUAL MEETING
2022 ANNUAL REPORT | 2023 PROXY STATEMENT | NOTICE OF ANNUAL MEETING
1108 Fifth Avenue
San Rafael, California 94901
March 17, 2023
To Our Shareholders:
You are cordially invited to attend the Annual Meeting of Shareholders of Westamerica Bancorporation. It will
be held at 10:00 a.m. Pacific Time on Thursday, April 27, 2023, at Westamerica Bancorporation, 4550 Mangels
Blvd., Fairfield, California as stated in the formal notice accompanying this letter. We hope you will plan to attend.
At the Annual Meeting, the shareholders will be asked to (i) elect eight directors; (ii) approve a non-binding
advisory vote on the compensation of our named executive officers; (iii) approve a non-binding advisory vote on the
frequency of the advisory vote on the compensation of our named executive officers; (iv) ratify the selection of the
independent auditor; and (v) conduct other business that may properly come before the Annual Meeting.
In order to ensure your shares are voted at the Annual Meeting, you can vote through the internet, by telephone
or by mail. Instructions regarding internet and telephone voting are included on the Proxy Card. If you elect to vote
by mail, please sign, date and return the Proxy Card in the accompanying postage-paid envelope. The Proxy
Statement explains more about voting in the section entitled “Voting Information – How You Can Vote.”
We look forward to seeing you at the Annual Meeting.
Sincerely,
David L. Payne
Chairman of the Board, President
and Chief Executive Officer
2023 WESTAMERICA BANCORPORATION PROXY WESTAMERICA BANCORPORATION
1108 Fifth Avenue
San Rafael, California 94901
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Date: Thursday, April 27, 2023
Time: 10:00 a.m. Pacific Time
Place: Westamerica Bancorporation, 4550 Mangels Blvd., Fairfield, California.
Items of Business
1. Elect eight directors to serve until the 2024 Annual Meeting of Shareholders;
2. Approve a non-binding advisory vote on the compensation of our named executive officers;
3. Approve a non-binding advisory vote on the frequency of the advisory vote on the compensation of our
named executive officers;
4. Ratify selection of independent auditor; and
5. Conduct other business that may properly come before the Annual Meeting and any adjournments or
postponements.
Management’s eight nominees are listed and described in the attached proxy statement.
Who Can Vote?
Shareholders of record at the close of business on March 6, 2023, are entitled to notice of, and to vote at, the Annual
Meeting or any postponement or adjournment thereof.
Admission to the Annual Meeting
No ticket will be necessary for admission to the Annual Meeting. However, to facilitate the admission process,
Shareholders of record planning to attend the Annual Meeting should check the appropriate box on the Proxy Card.
Your name will be added to a list of attendees. If you hold shares through an intermediary, such as a bank or broker,
you may need to register at the desk in the lobby. Please bring the following as evidence of ownership: 1) a legal
proxy, or your brokerage statement dated on or after March 6, 2023, evidencing your ownership on March 6, 2023,
the record date; and 2) photo identification.
Annual Report
Westamerica Bancorporation’s Annual Report on Form 10-K (“Annual Report”) to shareholders for the fiscal year
ended December 31, 2022 is enclosed or is available for viewing as indicated on the Shareholder Meeting Notice
and on the Company’s website at: www.westamerica.com, under “Shareholders.” The Annual Report contains
financial and other information about the activities of Westamerica Bancorporation, but does not constitute a part of
the proxy soliciting materials.
BY ORDER OF THE BOARD OF DIRECTORS
March 17, 2023
Kris Irvine
VP/Corporate Secretary
Important notice regarding the availability of proxy materials for the shareholder meeting being held on
Thursday, April 27, 2023:
The Proxy Statement and the Annual Report on Form 10-K are available at: www.westamerica.com.
YOUR VOTE IS IMPORTANT
PLEASE COMPLETE, SIGN, DATE AND PROMPTLY RETURN YOUR PROXY, OR VOTE BY
TELEPHONE OR ONLINE USING THE PROCEDURES DESCRIBED IN THE PROXY STATEMENT.
2023 WESTAMERICA BANCORPORATION PROXY TABLE OF CONTENTS
GENERAL ..................................................................................................................................................... 1
Voting Information ................................................................................................................................................... 1
Additional Information ............................................................................................................................................. 3
Stock Ownership ....................................................................................................................................................... 4
Anti-Hedging and Anti-Pledging Policy ................................................................................................................... 5
PROPOSAL 1: ELECTION OF DIRECTORS ...................................................................................................... 6
Board of Directors .................................................................................................................................................... 6
Nominees ................................................................................................................................................................. 6
Name of Nominees, Principal Occupations, and Qualifications ............................................................................. 6
Board of Directors and Committees ......................................................................................................................... 9
Board Diversity Table ............................................................................................................................................. 12
Director Compensation ........................................................................................................................................... 13
Director Compensation Table for Fiscal Year 2022 ............................................................................................... 14
EXECUTIVE COMPENSATION ........................................................................................................................... 14
Executive Officers ................................................................................................................................................... 14
Compensation Discussion and Analysis ................................................................................................................. 15
Employee Benefits Compensation Committee Report ........................................................................................... 25
Compensation Committee Interlocks and Insider Participation ............................................................................. 25
Summary Compensation ......................................................................................................................................... 26
Summary Compensation Table for Fiscal Year 2022 ............................................................................................ 26
Pay Versus Performance ......................................................................................................................................... 26
Grants of Plan-Based Awards Table for Fiscal Year 2022 ..................................................................................... 29
Outstanding Equity Awards Table at Fiscal Year End 2022 .................................................................................. 30
Option Exercises and Stock Vested Table for Fiscal Year 2022 ............................................................................ 30
Pension Benefits for Fiscal Year 2022 .................................................................................................................... 31
Nonqualified Deferred Compensation Table for Fiscal Year 2022 ........................................................................ 31
Potential Payments Upon Termination or Change in Control ................................................................................ 32
Certain Relationships and Related Party Transactions .......................................................................................... 33
PROPOSAL 2: APPROVE A NON-BINDING ADVISORY VOTE ON THE COMPENSATION
OF OUR NAMED EXECUTIVE OFFICERS ................................................................................................... 33
PROPOSAL 3: APPROVE A NON-BINDING ADVISORY VOTE ON THE FREQUENCY OF
THE ADVISORY VOTE ON COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS ................ 34
PROPOSAL 4: RATIFY SELECTION OF INDEPENDENT AUDITOR ...................................................... 35
AUDIT COMMITTEE REPORT ............................................................................................................................ 36
SHAREHOLDER PROPOSAL GUIDELINES ..................................................................................................... 37
SHAREHOLDER COMMUNICATION TO BOARD OF DIRECTORS .......................................................... 38
OTHER MATTERS ................................................................................................................................................... 38
EXHIBIT A – EMPLOYEE BENEFITS/COMPENSATION COMMITTEE CHARTER ..................................... A-1
2023 WESTAMERICA BANCORPORATION PROXY WESTAMERICA BANCORPORATION
1108 Fifth Avenue
San Rafael, California 94901
___________
PROXY STATEMENT
March 17, 2023
___________
GENERAL
The Westamerica Board of Directors is soliciting proxies to be used at the 2023 Annual Meeting of Shareholders of
Westamerica Bancorporation (the “Company”), which will be held at 10:00 a.m. Pacific Time, Thursday, April 27,
2023, or at any adjournment or postponement of the Annual Meeting (collectively, the “Annual Meeting”). The
Board of Directors is soliciting proxies to give all shareholders an opportunity to vote on matters to be presented at
the Annual Meeting. In the following pages of this Proxy Statement you will find information on matters to be voted
at the Annual Meeting.
Voting Information
Internet Availability of Proxy Materials. We are providing proxy materials to our shareholders primarily via the
internet, instead of mailing printed copies of those materials to each shareholder. By doing so, we save costs and
reduce the environmental impact of our Annual Meeting. On or about March 17, 2023, we mailed a Notice of Internet
Availability of Proxy Materials (“Notice”) to certain of our shareholders. The Notice contains instructions about
how to access our proxy materials and vote online or vote by telephone. If you would like to receive a paper copy of
our proxy materials, please follow the instructions included in the Notice. If you previously chose to receive our
proxy materials electronically, you will continue to receive access to these materials via email unless you elect
otherwise.
Proof of Ownership May Be Required for Attending Annual Meeting in Person. You are entitled to attend
the Annual Meeting only if you are a shareholder as of the close of business on March 6, 2023, the record date, or
hold a valid proxy for the meeting. In order to be admitted to the Annual Meeting, the Company reserves the right
to request proof of ownership of Westamerica Bancorporation common stock on the record date. This can be:
a brokerage statement or letter from a bank or broker indicating ownership on March 6, 2023;
the Notice of Internet Availability of Proxy Materials;
a printout of proxy distribution email (if you received your materials electronically);
a Proxy Card;
a voting instruction form; or
a legal proxy provided by your broker, bank or nominee.
Any holder of a proxy from a shareholder must present the Proxy Card properly executed, and a copy of the proof
of ownership. The Company reserves the right to ask shareholders and proxy holders to present a form of photo
identification such as a driver’s license.
Proxy Card. The proxies will vote the shares represented by proxies at the Annual Meeting. If you sign, date and
return your Proxy Card but do not specify how to vote your shares, the proxies will vote FOR the election of all of
the Director nominees, FOR approval of the advisory vote on the compensation of our named executive officers, for
EVERY ONE YEAR on the frequency of the advisory vote on the compensation of our named executive officers,
and FOR ratifying the selection of independent auditor. The proxies will also have discretionary authority to vote in
accordance with their judgment on any other matter that may properly come before the Annual Meeting that we did
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2023 WESTAMERICA BANCORPORATION PROXY
not have notice of by February 1, 2023. Management is not aware of any other business to come before the Annual
Meeting, and as of the date of this proxy statement, no shareholder has submitted to management any proposal to be
acted upon at the Annual Meeting.
Quorum and Shares Outstanding. A quorum, which is a majority of the total shares outstanding as of the record
date, must be present to hold the Annual Meeting. A quorum is calculated based on the number of shares represented
by shareholders attending in person or by proxy. On March 6, 2023, 26,918,002 shares of Westamerica
Bancorporation common stock were outstanding. We also count broker non-votes, which we describe below, as
shares present or represented at the Annual Meeting for the purpose of determining whether a quorum exists.
Election of Director Nominees. Each share is entitled to one vote, except in the election of Directors where a
shareholder may cumulate votes as to candidates nominated prior to voting, but only if a shareholder gives notice of
intent to cumulate votes prior to the voting at the Annual Meeting. If any shareholder gives such notice, all
shareholders may cumulate their votes for nominees. Under cumulative voting, each share carries as many votes as
the number of directors to be elected, and the shareholder may cast all of such votes for a single nominee or distribute
them in any manner among as many nominees as desired. This Proxy Statement solicits the discretionary authority
to cumulate votes and allocate them in the proxy holders’ discretion if any shareholder requests cumulative voting.
In the election of directors, the eight nominees receiving the highest number of votes will be elected. If your proxy
is marked “Withhold” with regard to the election of any nominee, your shares will be counted toward a quorum and
for other nominees but they will not be voted for the election of that nominee.
Vote Required; Effect of Abstentions and Broker Non-Votes. The shares of a shareholder whose proxy on any
or all proposals is marked as “Abstain” will be included in the number of shares present at the Annual Meeting to
determine whether a quorum is present. If you are the beneficial holder of shares held by a broker or other custodian,
you may instruct your broker how to vote your shares through the voting instruction provided by your broker or
other custodian. If you wish to vote the shares you own beneficially at the meeting in person, you must first request
and obtain a legal proxy from your broker or other custodian. If you choose not to provide instructions or a legal
proxy, your shares are referred to as “uninstructed shares.” Whether your broker or custodian has the discretion to
vote these shares on your behalf depends on the proposal. Brokers and custodians cannot vote uninstructed shares
on your behalf in the election of directors or the advisory votes on executive compensation. For your vote to be
counted on these matters, you must submit your voting instruction form to your broker or custodian.
The following table summarizes the votes required for passage of each proposal and the effect of abstentions and
uninstructed shares held by brokers:
Proposal
Number
Proposal
1
2
3
4
Election of directors
Advisory vote on executive
compensation "Say on Pay"
Advisory vote on the frequency
of "Say on Pay"
Ratification of independent
auditor
Votes Required for
Approval
Eight nominees
receiving the
most votes
Majority of
shares voted
Majority of
shares voted
Majority of
shares voted
Abstentions
Uninstructed Shares
Board Vote
Recommendation
Not voted
Not voted
Not voted
Not voted
FOR
FOR
Not voted
Not voted
EVERY ONE YEAR
Not voted
Broker
discretionary vote
FOR
Votes in favor of Proposals 2 and 4 must also constitute a majority of the required quorum for the meeting. If votes
in favor are less than a majority of the required quorum, abstentions and non-votes would have the effect of a vote
against the proposal.
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2023 WESTAMERICA BANCORPORATION PROXY
How You Can Vote. Your vote is very important and we hope that you will attend the Annual Meeting. However,
whether or not you plan to attend the Annual Meeting, please vote by proxy.
Registered Holders. If your shares are registered directly in your name with the Company’s transfer agent,
Computershare Investor Services, LLC, you are considered a registered holder of those shares. Please vote by
proxy in accordance with the instructions on your Proxy Card, or the instruction you received by email.
A registered holder can vote in one of the following four ways:
Via the Internet. Go to the website noted on your Proxy Card in order to vote via the internet. Internet
voting is available 24 hours a day. We encourage you to vote via the internet, as it is the most cost-
effective way to vote. When voting via the internet, you do not need to return your Proxy Card.
By Telephone. Call the toll-free telephone number indicated on your Proxy Card and follow the voice
prompt instructions to vote by telephone. Telephone voting is available 24 hours a day. When voting by
telephone, you do not need to return your Proxy Card.
By Mail. Mark your Proxy Card, sign and date it, and return it in the enclosed postage-paid envelope. If
you elected to electronically access the Proxy Statement and Annual Report, you will not be receiving a
Proxy Card and must vote via the internet or by telephone.
In person. You may vote your shares at the Annual Meeting if you attend in person, even if you
previously submitted a Proxy Card or voted via internet or telephone. Whether or not you plan to attend
the Annual Meeting, however, we strongly encourage you to vote your shares by proxy before the
meeting.
Beneficial Shareholders. If your shares are held in a brokerage account in the name of your bank, broker, or
other holder of record (“beneficial holder” or “street name”), you are not a registered holder, but rather are
considered a beneficial holder of those shares. Your bank, broker, or other holder of record will send you
instructions on how to vote your shares. If you are a beneficial holder, you must obtain a legal proxy, executed in
your favor, from the holder of record to be able to vote in person at the Annual Meeting.
Voting Deadlines. Shareholders voting by telephone or internet must vote by 12:01 a.m. Central Time, on April
27, 2023 to ensure that their vote is counted. If you are a participant in the Westamerica Bancorporation Tax
Deferred Savings/Retirement Plan (ESOP), however, your vote must be received by 11:59 p.m. Central Time, on
April 24, 2023.
Revocation of Proxy. Registered holders who vote by proxy, whether by telephone, internet or mail, may revoke
that proxy at any time before it is voted at the Annual Meeting. You may do this by: (a) signing another Proxy
Card with a later date and delivering it to us prior to the Annual Meeting or sending a notice of revocation to the
Corporate Secretary of Westamerica at 1108 Fifth Avenue, San Rafael, CA 94901; (b) voting at a later time by
telephone or on the internet prior to 12:01 a.m. Central Time, on April 27, 2023 (prior to 11:59 p.m. Central Time,
on April 24, 2023 for ESOP participants); or (c) attending the Annual Meeting in person and casting a ballot. If
you are a beneficial holder, you may change your vote by submitting new voting instructions to your broker or
other nominee.
Additional Information
Householding. As permitted by the Securities Exchange Act of 1934 (the “Exchange Act”) only one envelope
containing two or more Notices of Internet Availability of Proxy Materials is being delivered to shareholders
residing at the same address, unless such shareholders have notified their bank, broker, Computershare Investor
Services, or other holder of record that they wish to receive separate mailings. If you are a beneficial holder and
own your shares in street name, contact your broker, bank or other holder of record to discontinue householding
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2023 WESTAMERICA BANCORPORATION PROXY
and receive your own separate copy of the Notice in future years. If you are a registered holder and own your
shares through Computershare Investor Services, contact Computershare toll-free at 877-588-4258 or in writing
directed to Computershare Investor Services, 150 Royall Street, Suite 101, Canton, MA 02021 to discontinue
householding and receive multiple Notices in future years. To receive an additional Annual Report or Proxy
Statement this year, contact Shareholder Relations at 707-863-6992 or follow the instructions on the Notice.
Mailing of dividends, dividend reinvestment statements, and special notices will not be affected by your election
to discontinue duplicate mailings of the Notice.
Electronic Access to Proxy Materials and Annual Reports. Whether you received the Notice of Internet
Availability of Proxy Materials or paper copies of proxy materials, this Proxy Statement and the 2022 Annual
Report are available on the Company’s website at: www.westamerica.com. If you hold your Westamerica
Bancorporation common stock in street name through a broker, a bank or other nominee, you may have the option
of securing your Proxy Statement and Annual Report via the internet. If you vote this year’s proxy electronically,
you may also elect to receive future Proxy Statements, Annual Reports and other materials electronically by
following the instructions given by your bank, broker, or other holder of record when you vote. Our website is
available for information purposes only and should not be relied upon for investment purposes, nor is it
incorporated by reference into this Proxy Statement.
Stock Ownership
Security Ownership of Certain Beneficial Holders. The following table sets forth information regarding
shareholders beneficially holding more than 5% of Westamerica Bancorporation common stock outstanding as
of December 31, 2022, based on information available to the Company, including filings made with the SEC.
Title of Class
Name and Address of Beneficial Owner
BlackRock, Inc.
55 East 52nd Street, New York, NY 10055
The Vanguard Group, Inc.
100 Vanguard Boulevard, Malvern, PA 19355
12.62%
(1) The Schedule 13G filed with the SEC on January 24, 2023, disclosed that the reporting entity, BlackRock, Inc., held sole voting power
over 3,759,258 shares and sole dispositive power over 3,803,079 shares.
(2) The Schedule 13G filed with the SEC on February 9, 2023, disclosed that the reporting entity, The Vanguard Group, Inc., held shared
voting power over 29,515 shares, sole dispositive power over 3,342,144 and shared dispositive power over 55,507 shares.
Percent of Class
3,803,079
3,397,651
Common
Common
14.13%
(1)
(2)
Number of Shares
Beneficially Owned
Security Ownership of Directors and Management. The following table shows the number of common shares
and the percentage of the common shares beneficially owned (as defined below) by each of the current Directors,
by the Chief Executive Officer (“CEO”), by the Chief Financial Officer (“CFO”), by the three other most highly
compensated executive officers, and by all Directors and Officers of the Company as a group as of March 6, 2023.
As of March 6, 2023, there were 26,918,002 outstanding shares of Westamerica Bancorporation’s common stock.
For the purpose of the disclosure of ownership of shares by Directors and officers below, shares are considered
to be beneficially owned if a person, directly or indirectly, has or shares the power to vote or direct the voting of
the shares, the power to dispose of or direct the disposition of the shares, or the right to acquire beneficial
ownership of shares within 60 days of December 31, 2022.
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2023 WESTAMERICA BANCORPORATION PROXY
Amount And Nature Of Beneficial Ownership
Sole Voting
and
Investment
Power
Right to Acquire
Within 60 days of
December 31, 2022
Shared Voting
and Investment
Power
-
-
6,400
(4)
358
44,000
25,887
(3)
-
-
-
-
1,453
(5)
885,570
(6)
-
1
-
752
-
-
-
441
14,998
(7)
1,194
-
-
-
-
-
-
-
-
-
13,000
87,899
45,200
-
Name and Address**
E. Joseph Bowler
Melanie Martella Chiesa
Catherine Cope MacMillan
Michele Hassid
Ronald A. Nelson
David L. Payne
Inez Wondeh
Jesse Leavitt
John "Robert" A. Thorson
Brian Donohoe
Russell W. Rizzardi
All 12 Directors and
Officers as a Group
Edward B. Sylvester
57,490
Total(1)
25,887
-
6,400
358
44,000
887,023
57,490
-
13,442
102,897
47,146
-
Percent of
Class(2)
0.1%
*
*
*
0.2%
3.3%
0.2%
*
*
0.4%
0.2%
*
4.4%
110,454
928,090
146,099
1,184,643
* Indicates beneficial ownership of less than one-tenth of one percent (0.1%) of the Company’s common shares.
** The address of all persons listed is 1108 Fifth Avenue, San Rafael, CA 94901.
(1) None of the shares held by the Directors and Officers listed above have been pledged.
(2) In calculating the percentage of ownership, all shares which the identified person or persons have the right to acquire by exercise of options
are deemed to be outstanding for the purpose of computing the percentage of the class owned by such person, but are not deemed to be
outstanding for the purpose of computing the percentage of the class owned by any other person.
(3) Shares held in trust as to which Mr. Bowler is co-trustee with shared voting and investment power.
(4) Includes 6,000 shares held in a trust as to which Ms. MacMillan is trustee and 400 shares held in trust under the California Uniform Gift to
Minors Act as to which Ms. MacMillan is custodian.
(5) Includes 462 shares held in a trust under the California Uniform Gift to Minors Act as to which Mr. Payne is custodian.
(6) Includes 528,837 shares owned by Gibson Radio and Publishing Company, of which Mr. Payne is President and CEO, as to which Mr.
Payne disclaims beneficial ownership, and 345,808 shares held in a trust as to which Mr. Payne is co-trustee with shared voting and investment
power.
(7) Includes 13,799 shares held in a trust as to which Mr. Thorson is co-trustee with shared voting and investment power.
Delinquent Section 16(a) Reports
Section 16(a) of the Securities and Exchange Act requires the Company’s directors, executive officers, and persons
who own more than ten percent of the Company’s common stock to file with the SEC initial reports of ownership,
reports of changes in ownership of common stock of the Company, and to furnish the Company with copies of all
Section 16(a) reports they file. Based solely upon a review of such reports and written representations that no other
reports were required, the Company believes that all reports required by Section 16(a) of the Exchange Act to be filed
by its executive officers and directors during the last fiscal year were filed on a timely basis except that Mr. Rizzardi
failed to file two Form 4s on a timely basis, each reporting one transaction.
Anti-Hedging and Anti-Pledging Policy
The Company’s Insider Trading and Stock Hedging Policy prohibits our directors, executive officers, and other
employees with access to material non-public information from engaging in transactions, that hedge or offset, or
are designed to hedge or offset, any decrease in the market value of Company securities in which they have an
economic interest. Prohibited transactions include but are not limited to: (1) selling short any Company common
stock; and (2) buying or selling puts or calls or other derivatives on Company securities, or otherwise entering
into any hedging arrangements involving Company securities.
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PROPOSAL 1 – ELECTION OF DIRECTORS
Board of Directors
The Board has nominated eight candidates for election as Directors at the Annual Meeting to hold office until the
next Annual Meeting or until their successors are elected and qualified. The proxies will vote for the eight
nominees named below unless you give different voting instructions on your Proxy Card. Each nominee is
presently a Director of the Company and has consented to serve a new term. The Board does not anticipate that
any of the nominees will be unavailable to serve as a Director, but if that should occur before the Annual Meeting,
the Board reserves the right to substitute another person as nominee. The proxies will vote for any substitute
nominated by the Board of Directors. The proxies may use their discretion to cumulate votes for election of
Directors and cast all of such votes for any one or more of the nominees, to the exclusion of the others, and in
such order of preference as they may determine at their discretion.
Nominees
The nominees for election as Directors are named and certain information with respect to them is given below.
Our nominees are seasoned leaders who bring to the Board an array of financial services, public and private
company, non-profit, and other business experience. As a group they possess experience in leadership, consumer
banking, commercial and small business banking, investment banking, capital markets, financial advisory
services, finance and accounting, risk management and real estate. Many of the Board Members have seen the
Company through a variety of economic conditions. The information below has been furnished to the Company
by the respective nominees. All of the nominees have engaged in their indicated principal occupation for more
than five years, unless otherwise indicated and no nominee has served on the Board of Directors of another public
company during the past five years. Each nominee is a current director of both the Company and its subsidiary,
Westamerica Bank.
Name of Nominees, Principal Occupations, and Qualifications
E. Joseph Bowler – Director since 2003
E. Joseph Bowler (86) retired as Senior Vice President and Treasurer of the Company in 2002. He currently serves as
a member of the Audit Committee and the Loan and Investment Committee. Mr. Bowler holds a Masters of Business
Administration from Stanford University.
With many years of direct banking experience, Mr. Bowler brings strong financial and investment expertise important
to the oversight of our financial reporting and interest rate risk management. In addition, Mr. Bowler’s experience as
a director and trustee of various non-profit community and educational organizations brings strategic planning and
corporate governance skills to the Board.
Melanie Martella Chiesa – Director since 2020
Melanie Martella Chiesa (56) is an optometrist in private practice at Monte Vista Optometry in Turlock, California.
Dr. Martella Chiesa is a member of the Employee Benefits and Compensation Committee and Loan and Investment
Committee.
Dr. Martella Chiesa is a lifelong resident of Hughson, California where she is a partner in her family’s walnut and
almond farming operations. She is an owner and board member of Martella Farms, Inc., Ag Commodities, Grower
Direct Nut, Inc., ARK Development and Nutty Gourmet Nut Company. Dr. Martella Chiesa is a graduate of the
University of California, Berkeley, where she received her Doctor of Optometry degree. Dr. Martella Chiesa also
received Bachelor of Science degrees in food science and nutrition, functional biology and visual sciences.
Dr. Martella Chiesa is passionate about local community and philanthropy. She, along with her husband, founded the
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Ciara Chiesa Circle of Hope Fund. Melanie is a member of the Stanislaus Community Foundation, chaired their
Scholarship Committee and served on the Executive and Development Committees. Dr. Martella Chiesa also serves
as a trustee for the Gallo Center for the Arts.
Along with leadership and private business knowledge, Dr. Martella Chiesa brings to the Board an understanding of
agriculture, healthcare, philanthropy and issues of the Central Valley of California, which is one of Westamerica
Bank’s primary markets.
Michele Hassid – Director since 2019
Michele Hassid (60) is Principal at Macias, Gini & O’Connell LLP, an accounting firm. Ms. Hassid serves as the
Chair of the Audit Committee and is a member of the Compliance Committee and the Executive Committee. Ms.
Hassid has been designated as an Audit Committee “financial expert.” Ms. Hassid joined Eckhoff and Company in
1990, and served as Managing Partner from 2013 until 2022, when the Company merged into Macias, Gini &
O’Connell LLP.
Ms. Hassid assists clients with financial and operational needs. Ms. Hassid graduated with honors from San Francisco
State University with a B.A. in Accounting and is a graduate of the San Rafael Leadership Institute. She holds a CPA
certificate and a CGMA certification.
Ms. Hassid has memberships with AICPA, CALCPA, is the Treasurer of the Marin Leadership Foundation and is a
finance committee member for Congregation Ner Tamid in San Francisco.
Ms. Hassid’s background and education provides financial expertise and entrepreneurial skills.
Catherine Cope MacMillan – Director since 1985
Catherine Cope MacMillan (75) is a former owner of the Huntington Hotel in San Francisco and La Playa Hotel in
Carmel-by-the-Sea. She is a member of the Loan and Investment Committee, Employee Benefits and Compensation
Committee, and the Audit Committee. Ms. MacMillan previously owned and operated a prominent restaurant for
nearly 20 years. She is a graduate of the University of California at Davis and Pacific McGeorge School of Law. She
has also served in numerous leadership capacities for community organizations.
Ms. MacMillan’s experience in administration and operational aspects of various businesses and organizations
provides the Board with sound leadership.
Ronald A. Nelson – Director since 1988
Ronald A. Nelson (80) was Executive Vice President of Charles M. Schulz Creative Associates through 1995. He
serves as the Chair of the Employee Benefits and Compensation Committee, is a member of the Audit Committee,
Compliance Committee, and Nominating Committee. Mr. Nelson has a background as a Certified Public Accountant
and has been designated as an Audit Committee “financial expert.” He has been a resident of Sonoma County since
1970, which is one of Westamerica Bank’s primary markets and where he has been involved in business management,
investment management, and the development of commercial real estate. He also served as a board member and
Chairman of Santa Rosa Memorial Hospital, which is the area’s primary acute care hospital.
Mr. Nelson’s extensive business and financial expertise provides important oversight of our financial reporting and
risk management.
7
2023 WESTAMERICA BANCORPORATION PROXY David L. Payne – Director since 1984
David L. Payne (67) is Chairman, President & CEO of Westamerica Bancorporation. He was appointed Chairman in
1988 and Chief Executive Officer in 1989. Mr. Payne is Chairman of the Executive Committee and is a member of
the Compliance Committee. Mr. Payne is also Chairman, President & CEO of Westamerica Bank. He brings to the
Board strong leadership and a vision for the future. He has a thorough knowledge of the banking industry, manages
regulatory and business development issues, and has extensive financial and accounting expertise. Mr. Payne
possesses excellent management, strategic development and business skills.
Since Mr. Payne’s appointment as Chairman of the Board, Westamerica’s dividends per share have risen twelve-fold
and capital levels have increased thirteen-fold. Total assets have increased more than 500% during his tenure and net
income has risen by a multiple of 25. Return on equity was 15.2% for the year ended December 31, 2022.
Mr. Payne has successfully negotiated and led the Company through many mergers including: John Muir National
Bank, Napa Valley Bancorporation, PV Financial, CapitolBank – Sacramento, North Bay Bancorp, ValliCorp
Holdings, First Counties Bank, Kerman State Bank, Redwood Empire Bancorp, County Bank, and Sonoma Valley
Bank. Mr. Payne also manages his family printing, publishing and cable television business.
Edward B. Sylvester – Director since 1979
Edward Sylvester (86) is a California registered civil engineer and founder of Sylvester Engineering and SCO
Planning and Engineering. He currently provides pro bono technical services to non-profit organizations. Mr.
Sylvester is a member of the Executive Committee, Chair of the Loan and Investment Committee, Nominating
Committee and the Compliance Committee, and serves as the Lead Independent Director of Westamerica
Bancorporation. Mr. Sylvester is the board Chairman of Nevada County Broadcasters, which owns KNCO and STAR
94 radio stations. He also serves as a board member of Sierra Nevada Memorial Hospital Foundation and was past
president of the hospital board. Mr. Sylvester is a board member of the Nevada County Finance Authority and the
President of the Friends of Banner Mountain board, promoting preservation of trails and fire-wise issues. Mr. Sylvester
has previously served as Chairman of the California Transportation Commission, Chairman of the Nevada County
Transportation Commission, Chairman of the Board of the Grass Valley Chamber of Commerce, President of the
Grass Valley Rotary Club, Chairman and founder of the Nevada County Business Association, President of the Sierra
Trailblazers Running Club, Chairman of the California Alliance for Advanced Transportation Systems and numerous
advisory committees of the county and the city of Grass Valley on engineering and policy-related issues. Mr. Sylvester
has completed 23 marathons around the world and was the 14th person in the world to complete marathons on all
seven continents including Antarctica. Mr. Sylvester is an avid traveler and photographer, who has visited 114
countries to date searching for new things to experience and photograph.
The depth of Mr. Sylvester’s experience gives him first-hand understanding of all the nuances of development and
development funding, a current knowledge of the retail economy, and a state-wide perspective and experience in
funding allocation. His long tenure on the Board brings a historical and long-term perspective while he remains current
on financial issues with his continuing leadership role in the community and active management positions.
Inez Wondeh – Director since 2021
Inez Wondeh (55) is the Chief Executive Officer at BASS Medical Group (“BASS”) in Walnut Creek, California.
Ms. Wondeh is a member of the Audit Committee and Employee Benefits and Compensation Committee.
Ms. Wondeh joined BASS in 2015 as the Chief Operating Officer. Ms. Wondeh has over 20 years of experience as
a healthcare executive. Ms. Wondeh helped execute many of BASS’ growth strategy shifts, including increasing the
company’s physician network. Ms. Wondeh provides visionary leadership that inspires the highest level of
performance in the financial and operation administration at BASS. Ms. Wondeh holds a Master of Public
Administration and a Master of Business Administration from the University of San Francisco. Ms. Wondeh is the
8
2023 WESTAMERICA BANCORPORATION PROXY founder of Ngozi Educational and Healthcare Foundation, a non-profit dedicated to provide no-cost K-12 education
and health services to rural Liberia, West African children.
Ms. Wondeh’s experience in finance, administration and strategic planning of various businesses provides the Board
with exceptional leadership.
THE BOARD OF DIRECTORS RECOMMENDS ELECTION OF ALL NOMINEES
Board of Directors and Committees
Director Independence and Leadership Structure. The Board of Directors has considered whether any
relationships or transactions related to a Director were inconsistent with a Director’s independence. Based on this
review, the Board has determined that E.J. Bowler, M. Martella Chiesa, M. Hassid, C.C. MacMillan, R.A. Nelson,
E.B. Sylvester, and I. Wondeh are “independent” Directors as defined in NASDAQ rules. Mr. Payne is not
independent because he is an officer of the Company and the Bank.
Our Board has carefully considered the critical issue of Board leadership. In the context of risk management, the
leadership of each Board committee primarily responsible for risk management is vested in an independent committee
chair. With regard to the leadership of the meetings of the full Board, our Board of Directors has carefully evaluated
whether the positions of Chairman and CEO should be separate or combined. Our Board believes that the most
effective leadership structure for the Company at this time is to combine the responsibilities of the Chairman and
CEO, a structure that has been successful since 1989. The combined positions avoid a duplication of efforts, enable
decisive leadership, and ensure a clear accountability for the performance of the Company, a more rapid
implementation of decisions, and a consistent vision. Given the size of our employee base and our level of assets
relative to larger, more complex banking structures, our Company is particularly well suited to combine the Chairman
and CEO functions. Furthermore, our named executive officers have an average tenure of 25 years and do not require
the substantial oversight needed by a less experienced team, which has allowed our Chairman and CEO to lead the
Company through eleven acquisitions since 1992.
To ensure strong Board oversight seven of our eight Directors are, as noted above, independent as defined by
NASDAQ. Only non-management directors sit on Board committees, with the exception of the Executive Committee
and the Compliance Committee, and every non-management director sits on one or more of these Committees. All
non-management directors meet at least four times a year outside the presence of the Chairman and CEO. The Board
completes an annual board evaluation that is discussed by the Nominating Committee and presented to the full Board.
Although the Board believes that it is more effective to have one person serve as the Chairman and CEO at this time,
it also recognizes the importance of strong independent leadership on the Board, accordingly, the Board has
established a strong, Independent Lead Director, Mr. Sylvester, who serves at least one year from the date of
appointment and has the following clearly delineated and comprehensive duties:
presides at all meetings of the Board at which the Chairman is not present, including executive sessions of
the independent Directors;
serves as liaison between the Chairman and the independent Directors;
approves information sent to the Board;
approves meeting agendas for the Board;
approves meeting schedules to assure that there is sufficient time for discussion of all agenda items;
has the authority to call meetings of the independent Directors; and
if requested by major shareholders, ensures that he or she is available for consultation and direct
communication.
The Board does not believe that the fact an Independent Lead Director does not preside over the normal Board meeting
9
2023 WESTAMERICA BANCORPORATION PROXY
business sessions limits the ability of the Board to have open exchanges of views, or to address any issues the Board
chooses, independently of the Chairman.
The Board of Directors of the Company also serve as the Board of Directors of Westamerica Bank, and as such are
well informed of bank operations through regular reports and discussions on the operations of the Bank. The Directors’
longevity with the Company has exposed them to a wide range of business cycles, which plays a critical role in
managing the risk profile and profitability of the Company through the current economic environment.
Role of the Board of Directors in Risk Oversight. The Board is also responsible for overseeing all aspects of
management of the Company, including risk oversight, which is effected through all Board committees, but primarily
through the Board’s Audit Committee. The Internal Audit Department reports directly to the Board’s Audit Committee. It
presents its independently prepared company-wide annual risk assessment, its evaluation of Management’s prepared risk
assessment and its audit plan incorporating the risk assessment, including the policies and procedures utilized to monitor
and control such exposures, to the Board’s Audit Committee.
The internal loan review function reports directly to the Board’s Audit Committee. It reports ongoing evaluations of
loan portfolios and the risk rating of individual loans using guidelines established by bank regulatory authorities, to
the Board’s Audit Committee.
Meetings. The Company expects all Board members to attend all meetings, including the Annual Meeting of
Shareholders, except for reasons of health or special circumstances. The Board met on nine days during 2022. Every
Director attended at least 75% of the aggregate of: (i) the Board meetings held during that period in which they served;
and (ii) the total number of meetings of any Committee of the Board on which the Director served. Each individual
who served on the Board of the Company on the date of the 2022 Annual Meeting of Shareholders attended the
meeting.
Committees of the Board
Director Name
E. Joseph Bowler
Melanie Martella Chiesa
Michele Hassid
Catherine Cope MacMillan
Ronald A. Nelson
David L. Payne
Edward B. Sylvester
Inez Wondeh
Number of Meetings in 2022
Executive
Committee
Audit
Committee
X
X
Chair
X
X
X
5
Chair
X
9
Employee
Benefits and
Compensation
Committee
Loan and
Investment
Committee
Nominating
Committee
Compliance
Committee
X
X
Chair
X
5
X
X
X
X
X
X
X
Chair
Chair
Chair
9
1
4
Executive Committee. The Board delegates to the Executive Committee all powers and authority of the Board in the
management of the business affairs of the Company between board meetings, which the Board is allowed to delegate
under California law.
Audit Committee. The Board of Directors has determined that all members of the Audit Committee are independent,
as that term is defined by applicable rules of NASDAQ for Audit Committee purposes. The Board has also designated
Ms. Hassid and Mr. Nelson as “Audit Committee financial experts” as defined by the rules of the SEC and has
10
2023 WESTAMERICA BANCORPORATION PROXY
determined that they are “financially sophisticated” under NASDAQ rules. In concluding that Ms. Hassid and Mr.
Nelson are the Audit Committee financial experts, the Board determined that they possess:
an understanding of generally accepted accounting principles and financial statements;
the ability to assess the general application of such principles in connection with the accounting for estimates,
accruals and reserves;
experience preparing, auditing, analyzing or evaluating financial statements that present a breadth and level
of complexity of accounting issues that are generally comparable to the breadth and complexity of issues
that can reasonably be expected to be raised by the Company’s financial statements, or experience actively
supervising one or more persons engaged in such activities;
an understanding of internal control over financial reporting; and
an understanding of Audit Committee functions.
Designation of a person (or persons) as an Audit Committee financial expert does not result in the person being
deemed an expert for any purpose, including under Section 11 of the Securities Act of 1933. The designation does not
impose on the person any duties, obligations or liability greater than those imposed on any other Audit Committee
member or any other Director and does not affect the duties, obligations or liability of any other member of the Audit
Committee or Board of Directors.
The Audit Committee provides independent, objective oversight of the integrity of the Company’s financial
statements, the Company’s compliance with legal and regulatory requirements, the independence and performance of
the Company’s independent auditor as it performs audit, review or attest services, and the Company’s internal audit
and control function. It selects and retains the independent registered public accounting firm, and reviews the plan and
the results of the auditing engagement. It acts pursuant to a written charter that was reaffirmed by the Board of
Directors in January 2023 and attached as Exhibit A to the Proxy Statement for the 2021 Annual Meeting of
Shareholders.
Employee Benefits and Compensation Committee. The Employee Benefits and Compensation Committee of the
Board of Directors (the “Compensation Committee”) is comprised solely of Directors who are not current or former
employees of Westamerica or any of its affiliates. They are independent as defined by NASDAQ rules.
The Compensation Committee administers Westamerica Bancorporation’s equity incentive plan, Tax Deferred
Savings and Retirement Plan, Deferred Profit Sharing Plan, Deferred Compensation Plan, and the Westamerica
Bancorporation Deferral Plan. It administers the Company’s compensation programs and reviews and reports to the
Board the compensation level for executive officers, including the CEO, of the Company and its subsidiaries and
determines that compensation plans are balanced between financial results and prudent risk taking. The Compensation
Committee determines annual corporate performance objectives for equity compensation and cash bonuses and their
related corporate, divisional and individual goals. Based on the CEO’s assessment of the extent to which each
executive officer met those objectives and goals, the Committee determines each executive officer’s annual equity
compensation and cash bonus. The Compensation Committee also establishes the individual goals and targets for the
CEO. All compensation approved by the Compensation Committee is reported to the full Board of Directors.
The role of the Compensation Committee is described in greater detail under the section entitled “Compensation
Discussion and Analysis.”
The Compensation Committee is governed by a written charter as required by NASDAQ rules. The charter was
reaffirmed by the Board of Directors in January 2023 and is attached as Exhibit A to the Proxy Statement for this 2023
Annual Meeting of Shareholders. The Compensation Committee has the authority to seek assistance from officers
and employees of the Company as well as external legal, accounting and other advisors. It has not retained outside
11
2023 WESTAMERICA BANCORPORATION PROXY
consultants for compensation advice, but can request assistance on an as-needed basis. It does not delegate authority
to anyone outside of the Compensation Committee. The Payroll and Employee Benefits Department supports the
Compensation Committee by fulfilling certain administrative duties regarding the compensation programs.
Nominating Committee. The Board of Directors has determined that all members of the Nominating Committee
are independent, as defined in NASDAQ rules.
The Nominating Committee screens and recommends qualified candidates for Board membership. This Committee
recommends a slate of nominees for each Annual Meeting. As part of that process, it evaluates and considers all
candidates submitted by shareholders in accordance with the Company’s Bylaws, and considers each existing Board
member’s contributions. The Committee applies the same evaluation standards whether the candidate was
recommended by a shareholder or the Board. The Nominating Committee is governed by a written charter, which was
reaffirmed by the Board of Directors in January 2023 and attached as Exhibit A to the Proxy Statement for the 2022
Annual Meeting of Shareholders.
While the Board does not have a formal diversity policy, it broadly defines diversity to encompass a range of skills
and expertise sufficient to provide prudent guidance to the Company. In addition to the qualifications and
characteristics described below, it considers whether the potential Director assists in achieving a mix of Board
members that represents a diversity of background, perspective, and experience. Our Board includes Directors with
experience in public corporations and non-profit organizations, as well as entrepreneurial individuals who have
successfully run their own private enterprise. Our Board also has a broad set of skills necessary for providing oversight
to a financial institution, which includes proven leadership, and expertise in capital management, finance, accounting,
regulatory affairs, and investment management.
Compliance Committee. The Committee provides oversight of the Company’s Compliance Management System
to ensure compliance with consumer protection laws and regulations.
Board Diversity. The table below provides certain highlights of the composition of our board members and
nominees. Each of the categories listed in the below table has the meaning as it is used in Nasdaq Rule 5605(f):
Total Number of Directors
8
Board Diversity (As of December 31, 2022)
Part I: Gender Identity
Directors
Part II: Demograhic Background
African American
Asian
Hispanic or Latinx
Native Hawaiian or Pacific Islander
White
Two or More Races or Ethnicities
LGBTQ+
Did Not Disclose
Female
Male
Non-Binary
Did Not Disclose
Gender
4
-
-
-
-
4
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4
1
-
-
-
3
-
-
-
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2023 WESTAMERICA BANCORPORATION PROXY
Nominating Directors. The Nominating Committee will consider shareholder nominations submitted in accordance
with Section 2.14 of the Bylaws of the Company. That section requires, among other things, that nominations be
submitted in writing and must be received by the Corporate Secretary at least 45 days before the anniversary of the
date on which the Company first mailed its proxy materials for the prior year’s Annual Meeting of Shareholders. If
the date for the current year’s Annual Meeting changes more than 30 days from the date on which the prior year’s
meeting was held, the Company must receive notice with a reasonable amount of time before the Company mails its
proxy materials for the current year. In addition, to comply with universal proxy rules, shareholders who intend to
solicit proxies in support of nominees other than the Company’s nominees must provide notice setting forth the
information required by SEC Rule 14a-19 no later than February 27, 2024, or such earlier date as may be required by
the Company’s Bylaws.
Nominations must include the following information:
the principal occupation of the nominee;
the total number of shares of capital stock of the Company that the shareholder expects will be voted for the
nominee;
the name and address of both the nominee and the nominating shareholder; and
the number of shares of capital stock of the Company owned by the nominating shareholder.
The Committee has specified the following minimum qualifications it believes must be met by a nominee for a
position on the Board:
appropriate personal and professional attributes to meet the Company’s needs;
highest ethical standards and absolute personal integrity;
physical and mental ability to contribute effectively as a Director;
willingness and ability to participate actively in Board activities and deliberations;
ability to approach problems objectively, rationally and realistically;
ability to respond well and to function under pressure;
willingness to respect the confidences of the Board and the Company;
willingness to devote the time necessary to function effectively as a Board member;
possess independence necessary to make unbiased evaluation of Management performance;
be free of any conflict of interest that would violate applicable law or regulation or interfere with ability to
perform duties;
broad experience, wisdom, vision and integrity;
understanding of the Company’s business environment; and
significant business experience relevant to the operations of the Company.
Loan and Investment Committee. This Committee reviews major loans and investment policies.
Director Compensation
The following table and footnotes provide information regarding the compensation paid to the Company’s non-
employee Directors in the year 2022. Directors who are employees of the Company receive no compensation for their
services as Directors.
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2023 WESTAMERICA BANCORPORATION PROXY
Name(1)
Louis E. Bartolini(3)
E. Joseph Bowler
Melanie Chiesa
Michele Hassid
Catherine Cope MacMillan
Ronald A. Nelson
Edward B. Sylvester
Inez Wondeh
Director Compensation Table For Fiscal Year 2022
Fees Earned
Paid in Cash ($)
Change in Pension Value and
Nonqualified Deferred
Compensation Earnings(2) ($)
20,600
42,400
42,400
46,050
43,600
44,250
51,300
38,200
1,055
-
554
-
-
-
19,977
252
Total ($)
21,655
42,400
42,954
46,050
43,600
44,250
71,277
38,452
(1) Non-employee Directors did not receive options or stock awards in 2022 and none hold any options or stock awards. During 2022, non-
employee Directors of the Company were paid an annual retainer of $22,000. Each non-employee Director received $1,200 for each meeting
of the Board attended and $600 for each Committee meeting attended. The Chairman of each Committee received an additional $250 for each
Committee meeting attended. All non-employee Directors are reimbursed for expenses incurred in attending Board and Committee meetings.
The Chairman of the Board, David L. Payne, is compensated as an employee and did not receive any compensation as a Director.
(2) The Deferred Compensation Plan allows non-employee Directors to defer some or all of their Director compensation with interest earnings
credited on deferred compensation accounts. The amount shown is the interest on nonqualified deferred compensation that exceeds 120% of
the long-term Applicable Federal Rate, with compounding, on all cash compensation deferred in 2022 and in previous years.
(3) Mr. Bartolini did not stand for re-election in 2022.
Westamerica Bancorporation does not have a charitable donations program for Directors nor does it make donations
on behalf of any Director(s). The Company may make a nominal donation through its Community Relations program
to non-profit organizations where a Director(s) may have an affiliation.
EXECUTIVE COMPENSATION
Executive Officers
The executive officers of the Company and Westamerica Bank serve at the pleasure of the Board of Directors and are
subject to annual appointment by the Board at its first meeting following the Annual Meeting of Shareholders. It is
anticipated that each of the executive officers listed below will be appointed to serve in such capacities at that meeting.
David L. Payne – Held since 1984
David L. Payne (67) is the Chairman of the Board, President and CEO of the Company and Westamerica Bank. Mr.
Payne also manages his family printing, publishing and cable television business. For additional information regarding
Mr. Payne, please see “Proposal 1 – Election of Directors - Board of Directors” above.
Jesse Leavitt – Held since 2020
Jesse Leavitt (37) is Senior Vice President and Chief Financial Officer of the Company. Mr. Leavitt is a California
licensed certified public accountant. He held the position of Vice President and Controller upon joining the Company
in March 2019 until December 2019. Prior to joining the Company, Mr. Leavitt was a bank examiner with the Federal
Deposit Insurance Corporation from 2011 until 2016 and was Assistant Controller at Golden 1 Credit Union from
2016 until 2019.
John “Robert” Thorson – Held since 2020
John “Robert” Thorson (62) is Senior Vice President and Treasury Division Manager for the Company. Mr. Thorson
joined Westamerica Bancorporation in 1989, was Vice President and Manager of Human Resources from 1995 until
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2023 WESTAMERICA BANCORPORATION PROXY
2001, was Senior Vice President and Treasurer from 2002 until 2005, and was Senior Vice President and Chief
Financial Officer from 2005 until 2019.
Brian Donohoe – Held since 2019
Brian Donohoe (41) is Senior Vice President and Manager of Operations and System Administration of
Community Banker Service Corporation, a subsidiary of Westamerica Bank. Mr. Donohoe joined Westamerica
Bancorporation in 1999 and has held a variety of positions in the Banking Division and the Operations and
Systems Division, most recently, Vice President and Manager of Business Services until 2018.
Russell W. Rizzardi – Held since 2008
Russell W. Rizzardi (67) is Senior Vice President and Chief Credit Administrator of Westamerica Bank. Mr. Rizzardi
joined Westamerica Bank in 2007. He has been in the banking industry since 1979 and was previously with Wells
Fargo Bank and U.S. Bank.
Code of Ethics. The Company has adopted a Code of Ethics (as defined in Item 406 of Regulation S-K of the
Securities Act of 1933) that is applicable to its senior financial officers including its chief executive officer, chief
financial officer, and principal accounting officer.
Compensation Discussion and Analysis
The executive compensation practices described below have been followed consistently for thirty years. At each
Annual Meeting of Shareholders since 2010, a majority of our shareholders approved an advisory proposal on the
Company’s executive compensation. Last year 91 percent of the shares voting on this proposal voted to support our
Corporation’s executive compensation strategy.
The Compensation Committee governs the executive compensation program that combines three compensation
elements: base salary, annual non-equity cash incentives, and long-term stock grants. Several compensation
philosophies and practices underlie this program:
base salaries for participants in this program should be limited to foster an environment where incentive
compensation motivates and rewards corporate, divisional, and individual performance.
incentive compensation (annual non-equity cash incentives and long-term stock grants) is based on
measurement of performance against pre-established objective measurable goals. Specific criteria for each
objective are established for “threshold,” “target,” and “outstanding” performance. On any one measure,
performance below “threshold” results in no credit for that objective. “Threshold” performance results in
75% achievement, “target” performance results in 100% achievement, and “outstanding” performance
results in 150% achievement. The performance achievement level determines the size of incentive
compensation awards.
long-term incentive stock grants will be awarded to senior management if the corporate performance level
is rated “threshold” or better. The purpose of long-term incentive grants is to:
– motivate senior management to focus on long-term performance;
–
–
–
–
avoid excessive risk-taking and instill conservative management practices;
build equity ownership among Westamerica’s senior management;
link shareholder interests to management incentives; and
create ownership mentality among senior management.
In February 2013, the Board of Directors adopted a clawback policy that requires executive officers to forfeit
previously awarded incentive compensation if the incentives were based on materially inaccurate financial statements
or other performance measures that are later proven to be materially inaccurate or the achievement of which were due
15
2023 WESTAMERICA BANCORPORATION PROXY
to fraud or other misconduct. The Company’s 2019 Westamerica Omnibus Plan includes a clawback provision with
similar terms.
Establishing Incentive Levels, Determining Objectives and Measuring Performance. In administering the
executive compensation program, the Compensation Committee determines “target” incentives for each position
annually. The Compensation Committee exercises discretion in establishing “target” incentives in an effort to provide
competitive pay practices while motivating and rewarding performance that benefits the Company’s long-term
financial performance and shareholder interests, and avoids excessive risk-taking.
At the beginning of each calendar year, the Compensation Committee establishes annual corporate performance
objectives. In establishing corporate performance objectives, the Compensation Committee takes into consideration
the current operating environment for the commercial banking industry as well as internal management policies and
practices which would, in the Compensation Committee’s opinion, benefit the long-term interests of the Company
and its shareholders. Corporate performance measures include risk management elements considered to be responsive
to the impact that current operating conditions could have on the long-term performance of the Company. The
Compensation Committee monitors the economy and the banking industry’s operating environment throughout the
ensuing year, and may exercise discretion in adjusting corporate performance objectives during the year.
The operating environment for the commercial banking industry is impacted by a myriad of factors including, but not
limited to, local, national and global economic conditions, interest rate levels and trends, monetary policies of the
Federal Reserve Board and its counterparts in other countries, fiscal policies of the United States government and
other global political conditions, regulations and legislation, liquidity in capital markets, the demand for capital by
commercial enterprises and consumers, new financial products, competitive response to changing conditions within
the industry, trade balances, the changing values of real estate, currencies, commodities and other assets, and other
factors.
Management policies and practices the Board considers in establishing corporate performance objectives include, but
are not limited to, management of the Company’s balance sheet and product pricing in a manner which will benefit
the long-term financial interests of shareholders, the type and variety of financial products and services offered by the
Company, adherence to internal controls, management of the credit risk of the Company’s loan and investment
portfolios, management of liquidity to meet depository customer needs, the results of internal, regulatory and external
audits, service quality delivered to the Company’s customers, service quality of “back office” support departments
provided to those offices and departments directly delivering products and services to the Company’s customers,
maintenance of operating policies and procedures which remain appropriate for risk management in a dynamic
environment, timely and efficient integration of acquired companies, operational efficiencies, and capital management
practices.
Restricted performance shares (“RPS”) are restricted stock unit awards that vest upon the achievement of performance
objectives established by the Compensation Committee. Historically, the Company has granted RPS awards to its
executives with a three-year vesting period and vesting conditions based on performance factors including the
Company’s three year cumulative diluted earnings per share (EPS), three year average of annual return on average
total assets (ROA); three year average of annual return on average shareholders’ equity relative to industry average
ROE (ROE differential); non-performing assets to total assets (NPA); and the efficiency ratio over three years.
In addition to establishing corporate performance objectives, the Compensation Committee also establishes individual
goals for the CEO. In regard to the other executives named in the accompanying tables, the CEO recommends
divisional and individual performance objectives to the Compensation Committee, which considers, discusses, adjusts
as necessary, and adopts such performance objectives.
16
2023 WESTAMERICA BANCORPORATION PROXY
Upon the closure of each calendar year, the Compensation Committee reviews corporate, divisional, and individual
performance against the performance objectives for the year just completed. After thorough review and deliberation,
the Compensation Committee determines the recommended amount of individual non-equity cash incentives and
stock-based incentive awards. The Compensation Committee reports such incentives to the Board of Directors.
Meetings of the Compensation Committee and Board of Directors routinely occur in January, immediately following
the closure of the calendar year for which performance is measured for incentive compensation purposes.
Equity Compensation Plans. Long-term stock grants may only be awarded under shareholder approved stock-based
incentive compensation plans (the “equity incentive plans”).
In 2019, the Company’s shareholders approved the 2019 Westamerica Omnibus Plan (the “2019 Plan”). The 2019
Plan authorized the grant of up to 1,235,898 shares (plus shares that become available if awards under prior plans
expire unexercised or are cancelled, forfeited or terminated before being exercised). In addition, the 2019 Plan
authorized the issuance of shares under an award granted in the assumption of, or in substitution for, outstanding
awards previously granted by another business entity acquired by the Company. Any additional authorization of shares
available for issuance must be approved by shareholders. The 2019 Plan expires on April 25, 2029, after which
shareholder approval is again required to extend the term or approve a new equity incentive plan.
The 2019 Plan replaced the Company’s 2012 Amended and Restated Stock Option Plan of 1995 (the “2012 Amended
Plan”). The Company may no longer grant any awards under the 2012 Amended Plan, though awards previously
issued under such plan continue to be outstanding, subject to the terms of the applicable awards agreements. The
2012 Amended Plan established governing terms and conditions for all stock grants awarded from the effective date
of the plan through the effective date of the 2019 Plan.
The 2019 Plan allows the following types of stock-based compensation awards:
Incentive Stock Options (“ISO”) allow the optionee to buy a certain number of shares of Westamerica
Bancorporation common stock at a fixed price, which is established on the date of the option grant. ISOs are intended
to meet the requirements of Section 422 of the Internal Revenue Code which provide advantages if certain conditions
are met. If the optionee holds the acquired stock for the designated holding period, the optionee defers the timing of
recognizing taxable income related to exercising the ISO. If the optionee complies with the ISO requirements, the
Company does not receive a corporate tax deduction related to the shares issued.
Nonqualified Stock Options (“NQSO”) also give the optionee the option to buy a certain number of shares of
Westamerica Bancorporation common stock at a fixed price, which is established on the date of grant. Unlike ISOs,
NQSOs do not allow deferral of taxable income for the optionee. At the time NQSOs are exercised, the optionee
incurs taxable income equal to the spread between the exercise price and the market price of the stock, and the
Company receives a corporate tax deduction in the same amount.
Share Appreciation Rights (“SAR”) provide the holder a cash payment equal to the difference between the fair market
value of the Westamerica Bancorporation’s common stock on the date the SAR is surrendered and the fair market
value of the Company’s common stock on the date the SAR was granted. The optionee incurs taxable income at the
time the SAR is settled and the Company receives a corporate tax deduction in the same amount.
Restricted Shares and Restricted Stock Units. The Compensation Committee determines the vesting schedule and
performance goals, if any, applicable to the grant of restricted shares and Restricted Stock Units. Restricted Stock Units
are awards that may be settled in Westamerica Bancorporation’s common stock or cash, subject to vesting. As
17
2023 WESTAMERICA BANCORPORATION PROXY
described above, the Company has historically granted Restricted Stock Units as RPS awards that settle in shares of
Westamerica Bancorporation’s common stock, subject to the achievement of performance objectives. Award
recipients receive shares at the end of the performance measurement period only if performance objectives are
achieved. The award recipient incurs taxable income at the time any RPS vests and the Company receives a corporate
tax deduction in the same amount.
Determination of Awards to Grant. In determining which type of stock-based compensation awards to grant, the
Compensation Committee considers the attributes of each form of incentive. Examples include the ability to motivate
management to make decisions based on the long-term interests of shareholders, the desire to compensate with shares
rather than cash, and the tax consequences of each type of award. The Compensation Committee retains the latitude
to utilize all forms of incentives provided under the equity incentive plans. In the current and preceding years, the
Compensation Committee has utilized NQSO and RPS based on the motivational aspects of stock price appreciation,
the settlement in shares rather than cash, and the preservation of tax deductions for the Company. As of March 6,
2023, the Company had no ISO, SAR or restricted stock awards outstanding.
Determination of Exercise Price. The equity incentive plans require the exercise price of each NQSO, ISO or SAR
to be no less than one hundred percent (100%) of the fair market value of the Company’s common stock on the date
of grant. The equity incentive plans do not allow re-pricing stock options for poor stock price performance.
Stock-based compensation awards are submitted by the Compensation Committee to the full Board of Directors for
review. As described above, these meetings have routinely occurred in January immediately following the closure of
the calendar year for which performance is measured for incentive compensation purposes. The Compensation
Committee meeting has routinely been held during the same week as the related Board of Directors meeting. These
January meetings follow by no more than ten business days the Company’s public disclosure of its financial results
for the preceding year. As a result, stock option grants are awarded, and the exercise price of such grants are
determined at a time when the Company has broadly disseminated its financial condition and current operating results
to the public. The Company’s outstanding stock option grants are dated, and related stock option exercise prices are
determined, on the January date the Compensation Committee meets to approve such grants.
Long-Term Incentive Attributes. The Board of Directors has designated the Compensation Committee as the
administrator of the equity incentive plans. The Compensation Committee reports to the Board the terms and
conditions of awards granted under these plans. In carrying out this responsibility, the Compensation Committee
designs such awards as long-term incentives. The terms and conditions of currently outstanding awards under the
Company’s several equity incentive plans include:
NQSO grants vest one-third (1/3) on each anniversary of the grant date. As such, NQSO grants become
fully vested over a three-year period. NQSO grants expire on the tenth anniversary of the grant date. The
Company does not pay dividends on shares underlying NQSO grants until the optionee exercises the option
and the shares are outstanding on a dividend record date.
RPS awards vest three years following the grant date, only if corporate performance objectives are achieved
over the three-year period. The Company does not pay dividends on shares underlying RPS awards until
vesting occurs and shares awarded become outstanding on a dividend record date.
Compensation for the Chairman, President & CEO. Mr. Payne performs two functions for the Company. These
two functions tend to be compensated separately at similarly sized banking institutions. Mr. Payne serves as Chairman
of the Board with responsibilities including oversight of the organization and external strategic initiatives. Mr. Payne
also serves as President and CEO with responsibilities including daily management of internal operations. Mr. Payne’s
total compensation reflects these broad responsibilities. Consistent with the overall compensation philosophy for
18
2023 WESTAMERICA BANCORPORATION PROXY
senior executives, Mr. Payne’s compensation has a greater amount of pay at risk through incentives than through base
salary. Since Mr. Payne is compensated as an executive, he is not eligible to receive compensation as a Director.
As noted on page 31 of this Proxy Statement under the Pension Benefits Table, during 1997 the Company entered
into a nonqualified pension agreement (“Pension Agreement”) with Mr. Payne in consideration of Mr. Payne’s
agreement that RPS awards granted in 1995, 1996 and 1997 would be cancelled.(1) In entering the Pension Agreement,
the Board of Directors considered the following:
Mr. Payne had a significant beneficial interest in Westamerica Bancorporation common stock, which was
more than adequate to continue to provide motivation for Mr. Payne to continue managing the Company in
the best interests of shareholders.
In 1997, the Company had consummated its largest acquisition, with significant total asset growth of
approximately 51 percent. One of the Board’s objectives was to provide a compensation mechanism
providing retention features for Mr. Payne. Retention of Mr. Payne as President and CEO was desired
following the Company’s significant growth. The RPS awards surrendered for the Pension Agreement were
scheduled to vest on dates in 1998, 1999 and 2000, while the Pension Agreement was not fully vested until
December 31, 2002. Additionally, the 20-year certain pension provided under the Pension Agreement was
to commence upon Mr. Payne’s attainment of age 55. Mr. Payne was age 42 at the time of entering the
Pension Agreement.
Compensation Awarded to Named Executive Officers. Base salaries for participants in the executive compensation
program are generally limited to foster an environment where incentive compensation motivates and rewards
corporate, divisional, and individual performance. As such, base pay increases are generally infrequent and limited to
“control points” assigned to each position. The non-equity cash incentive formula has the following components:
"Target"
Cash
Incentive
X
Composite Corporate,
Divisional and Individual
Performance Level
=
Cash
Incentive
Award
In structuring performance goals for the named executive officers, the Compensation Committee emphasizes goals,
which if achieved, will benefit the overall Company. As such, senior management level positions have high relative
weighting on corporate objectives, and divisional leadership positions also have significant weighting on divisional
objectives. The “target” cash incentive and the weighting of goals for the named executive officers for 2022
performance were as follows:
“Target”
Cash
Incentive
$371,000
40,500
110,000
71,500
60,500
Goal Weighting
Divisional
–
25%
25%
25%
35%
Corporate
80%
55%
55%
55%
55%
Individual
20%
20%
20%
20%
10%
Mr. Payne
Mr. Leavitt
Mr. Thorson
Mr. Donohoe
Mr. Rizzardi
(1)The value of the surrendered RPS shares and the Pension Agreement were considered equivalent based on actuarial assumptions.
19
2023 WESTAMERICA BANCORPORATION PROXY The Compensation Committee establishes corporate goals with the intent to balance current profitability with long-
term stability of the Company and its future earnings potential. The 2022 corporate performance goals related to
current year “profitability” included return on equity, return on assets and diluted earnings per share. The performance
goals designed to maintain the long-term stability of the Company include “quality” and “control” components. The
“quality” measures include loan portfolio quality measures (classified loans and other real estate owned, non-
performing loans and other real estate owned, and net loan losses to average loans) and service quality measures
(service quality of support departments and branches). The “control” measures include non-interest expense to
revenues (efficiency ratio), the level of non-interest expenses, and internal audit results. By maintaining both current
year “profitability” goals and longer-term “quality” and “control” goals, Management has a disincentive to maximize
current earnings at the expense of longer-term results.
At the beginning of the year, the Compensation Committee’s expectations for the 2022 operating environment
included uncertain economic growth given the pandemic and relatively low interest rates. The Committee reserved
the ability to exercise a certain degree of judgment in adjusting target goals based on the ultimate operating
environment.
The Compensation Committee determined the 2022 operating environment was generally characterized as follows:
The monetary policies of the Federal Open Market Committee (FOMC) shifted rapidly, resulting in
significant increases in the federal funds rate unanticipated by the federal funds futures market in late-
2021;
An inverted Treasury yield curve signaled a likely recession;
Inflation remained meaningfully above the FOMC target in spite of increases in the federal funds rate;
Employment conditions remained solid, as defined by strong wage increases and low unemployment;
The Federal Reserve reduced its holdings of bonds, reducing liquidity in the marketplace; and
The banking industry began experiencing declining deposit volumes.
The Compensation Committee considered Management’s response to the current operating environment including:
maintaining meaningful levels of floating-rate assets which expanded the Company’s net interest income;
managing toward and maintaining a service-oriented depositor base, resulting in no increase in funding costs
consistently applying conservative credit risk practices in the loan and bond portfolios;
in spite of tightening FOMC policies;
management maintained discipline in pricing loans for long-term financial results;
management acquired a meaningful volume of fixed-rate investment grade bonds after intermediate-term
interest rates increased in response to FOMC policies;
maintaining a prudent liquidity position;
management of human resources throughout the organization during a period of tight labor conditions;
management maintained relatively low operating costs; and
management prudently managed capital enabling the Company to continue providing increasing annual
dividends per share to shareholders, and positioning the Company for growth opportunities.
The Compensation Committee exercised judgement by making adjustments to actual results to take into account the
impact of the operating environment. Adjusted actual results against “target” performance goals were:
Profitability Goals:
Return on average shareholders’ equity
Return on average assets
Diluted earnings per share
20
Performance Adjusted Actual
“Target”
11.14%
1.20%
$3.26
Results
11.72%
1.20%
$3.26
2023 WESTAMERICA BANCORPORATION PROXY
Quality Goals:
Classified loans and other real estate owned
Non-performing loans and other real estate
owned
Net loan losses to average loans
Service quality
$34 million
$18 million
$5 million
0.22%
Improving
$1 million
0.32%
Improving
Control Goals:
Non-interest expense to revenues (efficiency ratio)
Non-interest expenses
Below satisfactory internal audits
46.1%
$100.9 million
none
45.4%
$99.4 million
none
In reviewing the operating environment, Management’s response to the operating environment, and adjusted results
compared to “target” performance goals, the Compensation Committee determined corporate performance to be 116%
of target goals.
As described above, divisional and individual goals are used in conjunction with corporate performance goals to
determine cash bonus awards.
In addition to daily management responsibilities, Mr. Payne’s individual goals included:
managing the Company to achieve 2022 corporate performance financial targets approved by the Board of
Directors, including return on equity, return on assets, earnings per share and operating expenses;
achievement of satisfactory regulatory, financial and internal audit results;
resumption of routine branch visits and outbound customer calls as pandemic risk diminished;
management oversight of merchant services revenue unit and regulatory compliance function;
conducting direct communications with institutional investors and analysts; and
execution of an outbound calling program related to potential merger and acquisition opportunities.
Based on individual performance against these goals, the Committee exercised its discretion and assigned Mr. Payne
a composite corporate and individual performance level of 94%.
In addition to routine on-going divisional responsibilities, Mr. Leavitt managed the Finance Division toward
functional goals, which included:
achievement of division level customer service standards;
achievement of satisfactory regulatory examinations, external audits, and internal audits; and
completion of significant systems conversion.
Based on the Finance Division’s results, the Committee determined divisional performance to be 106%.
In addition to daily management responsibilities, Mr. Leavitt’s individual goals included:
completion of major facilities projects;
creating efficiencies in accounting processing systems; and
providing personnel training and development.
Based on individual performance against these goals, the Committee determined Mr. Leavitt’s individual performance
to be 119%. As a result Mr. Leavitt’s composite corporate, divisional and individual performance level was 114%.
21
2023 WESTAMERICA BANCORPORATION PROXY
In addition to routine on-going divisional responsibilities, Mr. Thorson managed the Treasury Division toward
functional goals, which included:
manage the balance sheet to meet financial performance objectives while maintaining appropriate liquidity
and interest rate risk;
management of the investment securities portfolio including credit risk, liquidity, and risks derived from
possible movements in interest rates;
manage rates paid on depository products and to achieve the Company’s low-cost funding objective;
achieve Community Reinvestment Act investment goals;
manage the Trust Department toward achieving fee growth goals, prudent investment portfolio management
practices, and personnel development objectives; and
satisfactory regulatory examinations, external audits, and internal audits.
Based on the Treasury Division’s results, the Committee determined divisional performance to be 130%.
In addition to daily management responsibilities, Mr. Thorson’s individual goals included:
provide training, mentoring and development to targeted personnel;
investor relations activities; and
capital management for the Company and subsidiary bank.
Based on individual performance against these goals, the Committee determined Mr. Thorson’s individual
performance to be 150%. As a result, Mr. Thorson’s composite corporate, divisional and individual performance level
was 126%.
In addition to routine on-going divisional responsibilities, Mr. Donohoe managed the Operations & Systems Division
toward functional goals, which included:
achievement of divisional customer service quality standards;
manage non-interest expense levels to budgeted goals;
manage projects to lower forward operating expenses;
satisfactory audit results; and
completed divisional projects related to systems upgrades;
Based on the Operations & Systems Division’s results, the Committee determined divisional performance to be 118%.
In addition to daily management responsibilities, Mr. Donohoe’s individual goals included:
staff development;
develop strategies for negotiating expiring vendor contracts;
develop enhancements to measure internal customer service;
support operational improvements to internal control consciousness; and
management of divisional compliance activities.
Based on individual performance against these goals, the Committee determined Mr. Donohoe’s individual
performance to be 138%. As a result, Mr. Donohoe’s composite corporate, divisional and individual performance
level was 121%.
In addition to routine on-going divisional responsibilities, Mr. Rizzardi managed the Credit Division toward functional
goals, which included:
achieve loan portfolio credit quality objectives;
meet divisional service quality standards;
22
2023 WESTAMERICA BANCORPORATION PROXY
satisfactory results from internal, third-party and regulatory examinations;
manage divisional operating expenses to budgeted levels; and
maintain consistency in loan underwriting standards.
Based on the Credit Division’s results, the Committee determined divisional performance to be 96%.
In addition to daily management responsibilities, Mr. Rizzardi’s individual goals included:
update loan pricing matrix and loan manuals; and
provide support to the Loan Review function.
Based on individual performance against these goals, the Committee determined Mr. Rizzardi’s individual
performance to be 96%. As a result, Mr. Rizzardi’s composite corporate, divisional and individual performance level
was 107%.
Based on the above described performance against objectives, the Committee determined cash incentive awards as
follows:
“Target”
Cash
Incentive
$371,000
40,500
111,000
71,500
60,500
Mr. Payne
Mr. Leavitt
Mr. Thorson
Mr. Donohoe
Mr. Rizzardi
X
Composite Corporate
Divisional and Individual
Performance Level
=
94%
114%
126%
121%
107%
Cash
Incentive
Award
$350,000
46,200
138,500
86,300
64,800
The size of stock grants is determined by corporate performance using stated formulas. The formulas used to
determine “target” NQSO and RPS grant sizes adjust for changes in the underlying value of one share of Westamerica
Bancorporation stock. For achievement of corporate performance in 2022, the following stock grants were awarded
in January 2023:
Mr. Payne
Mr. Leavitt
Mr. Thorson
Mr. Donohoe
Mr. Rizzardi
Mr. Payne
Mr. Leavitt
Mr. Thorson
Mr. Donohoe
Mr. Rizzardi
“Target”
Nonqualified
Stock Option
Grant
–
13,400
19,300
16,700
15,600
“Target”
RPS
Grant
–
500
2,000
1,800
1,600
X
X
23
Corporate
Performance
Level
116.0%
116.0%
116.0%
116.0%
116.0%
Corporate
Performance
Level
116.0%
116.0%
116.0%
116.0%
116.0%
=
=
Nonqualified
Stock
Option
Award
–
15,500
22,400
19,400
18,100
RPS
Award
–
560
2,340
2,040
1,900
2023 WESTAMERICA BANCORPORATION PROXY The NQSO grants have an exercise price equal to the fair market value of Westamerica common stock on the grant
date, vest over a three-year period beginning one year from the date of grant and expire on the tenth anniversary of
the grant date.
RPS awards vest three years following the grant date, only if certain corporate performance objectives are achieved
over the three-year period. In January 2023, the Compensation Committee evaluated whether the three-year corporate
performance objectives were met for RPS awards granted in January 2020. The performance objectives for the RPS
granted in January 2020 included:
3 year cumulative diluted earnings per share (EPS);
3 year average of annual return on average total assets (ROA);
3 year average of annual return on average subsidiary Bank shareholders’ equity relative to industry
average ROE (ROE differential);
end of period non-performing assets (NPA); and
efficiency ratio over 3 years.
The RPS would vest if any one of the following performance results were achieved:
4 of 5 objectives reaching “threshold” performance level;
3 of 5 objectives reaching “target” performance level; or
2 of 5 objectives reaching “outstanding” performance level.
The goals and achieved results were:
EPS
ROA
ROE differential
NPA
Efficiency Ratio
Threshold
$8.28
1.25%
1.00%
$25 million
54.00%
Target
$8.40
1.35%
1.50%
$15 million
50.00%
Outstanding
$8.64
1.40%
1.85%
$10 million
48.00%
Result
Outstanding
Threshold
Below Threshold
Outstanding
Outstanding
With three of the goals achieving the “outstanding” performance, the Compensation Committee determined the RPS
shares awarded in 2020 vested upon achievement of the three-year goals.
Nonqualified Deferred Compensation Programs. The Company maintains nonqualified deferred compensation
programs to provide senior and mid-level executives the ability to defer compensation in excess of the annual limits
imposed on the Company’s 401(k) plan. The Company believes these tax deferral programs enhance loyalty and
motivate retention of executives. These programs allow executives to defer cash pay and RPS shares upon vesting.
The programs also allow Directors to defer Director fees.
Cash pay deferred in the program accumulates in accounts in the names of the participating Directors and
executives. The Company credits the balance of these accounts with interest using an interest rate that
approximates the crediting rate on corporate-owned life insurance policies, under which Directors and
executives are the named insured. Deferrals and interest credits represent general obligations of the
Company.
The common stock the Company issues to executives upon the vesting of RPS grants may be deferred into
the program and deposited into a “Rabbi Trust.” Since these shares are outstanding shares of the Company’s
common stock, the Company pays dividends on these shares at the same rate paid to all shareholders. The
shares held in the “Rabbi Trust” are subject to claims by the Company’s creditors.
24
2023 WESTAMERICA BANCORPORATION PROXY Employment Contracts. None of the executives named in the accompanying tables have employment contracts
with the Company.
Compensation in the Event of a Change in Control. The banking industry has significant merger and acquisition
activity. To promote retention of senior executives, unvested NQSO and RPS grants contain a “change in control”
provision, which trigger full vesting upon a change in control. The Compensation Committee determined these
provisions were appropriate in order to retain executives to continue managing the Company after any “change in
control” was announced through its ultimate consummation. Since none of the named executive officers have entered
employment contracts with the Company, they serve in an “at-will” capacity and could terminate their employment
at any time. The Compensation Committee felt it would be in the best interests of shareholders to have a retention
mechanism in place to provide continuity of management during a “change in control” process. Further, the
Committee expects the named executive officers would be terminated by an acquiring institution rather than retained
in a similar functional capacity.
The Company also maintains a Severance Payment Plan covering all employees to promote employee retention.
The Severance Payment Plan provides salary continuation benefits for employees in the event of a “change in
control.” The amount of salary continuation benefits is based on years of service and corporate title, but in no
event exceeds the equivalent of one times annual salary. Messrs. Payne, Thorson, Donohoe and Rizzardi are
eligible for one year’s salary under the plan. Mr. Leavitt was eligible for the equivalent of 30-week’s salary
under the plan as of December 31, 2022.
Internal Revenue Code. Internal Revenue Code (“IRC”) Section 162(m) places a limit on the amount of
compensation that may be deducted by the Company in any year with respect to certain of the Company’s highest-
paid executives. Prior to enactment of the Tax Cuts and Jobs Act of 2017 (the “Act”), certain “performance-based
compensation” was not counted toward this limit. The Act eliminated the “performance-based compensation”
exemption as of November 2, 2017. The Company intends generally to qualify compensation paid to executive
officers for deductibility under the IRC but reserves the right to pay compensation that is not deductible.
Employee Benefits and Compensation Committee Report
We, the Compensation Committee of the Board of Directors of the Company, have reviewed and discussed the
Compensation Discussion and Analysis with Management. Based on that review and discussion, we have
recommended to the Board of Directors inclusion of the Compensation Discussion and Analysis in this Proxy
Statement and the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
Submitted by the Employee Benefits and Compensation Committee
Ronald A. Nelson, Chair
Catherine Cope MacMillan
Melanie Martella Chiesa
Inez Wondeh
Compensation Committee Interlocks and Insider Participation
No member of the Compensation Committee is a current or former officer or employee of the Company or any
of its subsidiaries, or entered into (or agreed to enter into) any transaction or series of transactions with the
Company or any of its subsidiaries with a value in excess of $120,000. None of the executive officers of the
Company has served on the Board of Directors or on the Compensation Committee of any other entity, where one
of that entity’s executive officers served either on the Board of Directors or on the Compensation Committee of
the Company.
25
2023 WESTAMERICA BANCORPORATION PROXY Summary Compensation
The following table sets forth summary compensation information for the chief executive officer, chief financial
officer and each of the other three most highly compensated executive officers for the fiscal years ending
December 31, 2022, 2021, and 2020. These persons are referred to as named executive officers elsewhere in this
Proxy Statement.
Summary Compensation Table For Fiscal Year 2022
Stock
Awards(1)
Option
Awards(2)
Non-Stock
Incentive Plan
Compensation(3)
Year
Salary
2022
$371,000
371,000
371,000
$-
-
-
$-
-
-
Name / Position
David L. Payne
Chairman,
President & CEO
Jesse Leavitt
SVP & Chief
Financial Officer
John "Robert" A. Thorson
SVP & Treasury
Division Manager
Russell W. Rizzardi
SVP & Credit Administrator
Division Manager
Brian Donohoe
2021
2020
2022
2021
2020
2022
2021
2020
2022
2021
2020
2022
135,000
31,010
113,760
135,000
30,252
92,250
135,000
-
-
149,000
127,552
162,740
149,000
123,864
130,500
149,000
129,500
171,936
120,960
103,563
131,930
120,960
100,461
105,750
120,960
104,928
138,240
130,008
111,169
142,990
Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings(4)
All Other
Compensation(5)
TOTAL
$-
$29,021
$750,021
-
-
-
-
-
71,350
66,657
79,609
-
-
-
-
-
29,563
750,563
27,807
698,807
19,596
345,566
18,273
320,875
9,252
187,752
34,218
683,360
32,511
639,132
31,469
695,514
12,172
433,425
10,939
404,110
10,455
438,983
39,862
510,329
37,375
476,185
$350,000
350,000
300,000
46,200
45,100
43,500
138,500
136,600
134,000
64,800
66,000
64,400
86,300
87,100
SVP & Operations & Systems
2021
130,008
108,452
113,250
-
2020
83,677
86,000
29,422
130,008
106,272
Division Manager
(1) Stock Awards represent RPS shares as described in the Compensation Discussion & Analysis. The amounts shown represent the aggregate
grant date fair market value computed in accordance with FASB ASC Topic 718. For further information, see Note 1 to the Company's audited
financial statements for the year ended December 31, 2022 included in the Company's Annual Report on Form 10-K.
(2) Option awards represent Nonqualified Stock Options as described in the Compensation Discussion & Analysis. The amounts shown
represent the aggregate grant date fair market value computed in accordance with FASB ASC Topic 718. For further information, see Note 1
to the Company's audited financial statements for the year ended December 31, 2022 included in the Company's Annual Report on Form 10-K.
(3) The amounts shown are non-equity incentive compensation only. No interest or other form of earnings was paid on the compensation.
(4) The amounts include interest paid on deferred cash compensation to the extent the interest exceeds 120% of the long-term Applicable
Federal Rates with compounding. The Company has no defined benefit pension plan. Mr. Payne has a pension agreement, which is discussed
under “Pension Benefits for Fiscal Year 2022.”
(5) Each of the above-named executive officers received less than $10,000 of aggregate perquisites and personal benefits, except for Mr.
Donohoe who received a car allowance of $12,500. All other compensation includes Company contributions to defined contribution plans
(ESOP and Deferred Profit Sharing), and amounts added to taxable wages using IRS tables for the cost of providing group term life insurance
coverage that is more than the cost of $50,000 of coverage. It also includes the dollar value of the benefit to Mr. Payne for the portion of the
premium payable by the Company with respect to a split dollar life insurance policy (projected on an actuarial basis), and a bonus paid to Mr.
Payne in the amount of his portion of the split dollar life insurance premium.
435,379
Based on the compensation disclosed in the Summary Compensation Table, approximately 33% of total
compensation comes from base salaries. See Compensation Discussion and Analysis for more details.
Pay Versus Performance
The following table discloses executive compensation and financial performance measures for the three most recently
completed fiscal years. Financial performance measures include the total shareholder return (TSR) for Westamerica
26
2023 WESTAMERICA BANCORPORATION PROXY
Bancorporation common stock and for that of our designated peer group, the NASDAQ Bank Index (CBNK), and
Westamerica Bancorporation’s return on average equity.
Value of Initial Fixed $100
Investment Based On:
Summary
Compensation
Table (SCT)
Total for
PEO(1)
Average
SCT Total
for Non-
PEO
NEOs(2)
Average
Compensation
Actually Paid
to Non-PEO
NEOs(2)
Total
Shareholder
Return (TSR)
Compensation
Actually Paid
to PEO(1)
Peer Group
(CBNK) TSR Net Income
Return on
Equity
$750,021
$750,021
$493,170
$572,347
$94.77
$110.51
$122,034,000
750,563
750,563
460,076
698,807
698,807
439,407
529,815
258,947
90.13
83.91
132.10
86,509,000
92.48
80,413,000
15.2%
11.5%
11.3%
Year
2022
2021
2020
(1) David Payne is the named PEO whose compensation is disclosed for the years 2022, 2021 and 2020.
(2) Jesse Leavitt, John “Robert” A. Thorson, Russell W. Rizzardi and Brian Donohoe are the non-PEO NEOs whose average compensation is
disclosed for the years 2022, 2021 and 2020.
Reported SCT
Total for Non-PEO
NEOs
Reported SCT
Value of Equity
Awards for Non-
PEO NEOs
Equity Award
Adjustments
Reported SCT
Change in the
Actuarial Present
Value of Pension
Benefits for Non-
PEO NEOs
Pension Benefit
Adjustments
Compensation
Actually Paid to
Non-PEO NEOs
$493,170
($231,179)
460,076
439,407
(201,195)
(183,638)
$310,356
270,934
3,178
$-
-
-
$-
-
-
$572,347
529,815
258,947
Year over year
change in fair
value of
outstanding and
unvested equity
awards
Fair value as of
vesting date of
equity awards
granted and
vested in the
year
Year over year
change of equity
awards granted
in prior years
that vested in the
year
Year end fair
value of equity
awards granted
during the year
Fair value at the
end of the prior
year of equity
awards that
failed to meet
vesting
conditions in the
year
Value of
dividends or
other earnings
paid on stock or
option awards
not otherwise
reflected in fair
value or total
compensation
$276,997
207,677
115,495
$28,935
49,934
(102,923)
$-
-
-
$4,424
13,323
(9,394)
$-
-
-
$-
-
-
Total equity
award
adjustments
$310,356
270,934
3,178
Year
2022
2021
2020
Year
2022
2021
2020
The executive compensation actually paid differs from the compensation provided in the Summary Compensation
Table due solely to changes in the value of RPSs and NQSOs between the grant date and the end of each fiscal year
or vesting date. The change in the value of the NQSOs and RPSs is based on TSR excluding dividends as dividends
are not paid on NQSOs or RPSs prior to vesting.
27
2023 WESTAMERICA BANCORPORATION PROXY
As described in the Compensation Discussion and Analysis, the financial performance measures used to determine
executive compensation levels include return on average equity, return on average assets, diluted earnings per share,
levels of non-performing assets, and the efficiency ratio (operating expenses as a percentage of total revenues). The
banking industry’s financial results and performance measures are heavily influenced by economic cycles and
changing interest rates. Westamerica Bancorporation management applies long-term strategies and business practices
to consistently maintain a conservative credit risk position and control operating expenses with the objective of
generating financial results with less volatility relative to peers.
Financial Performance Measures
- Return on Average Equity
- Return on Average Assets
- Diluted Earnings Per Share
- Levels of Non-Performing Assets
- Efficiency Ratio (Operating Expenses as a Percentage of Total Revenues)
Pay Ratio Disclosure
SEC rules require annual disclosure of the ratio of the Company’s median employee’s annual total compensation
to the total annual compensation of the principal executive officer (“PEO”). The Company’s PEO is Mr. Payne.
Median Employee total annual compensation
Mr. Payne total annual compensation
Ratio of PEO to Median Employee Compensation
$37,448
750,021
20.03:1.0
In determining the median employee total annual compensation, the Company prepared a census of all employees
as of December 31, 2022, except the PEO, with compensation annualized for those employees hired in 2022. For
simplicity, the value of benefits provided by the Company’s qualified retirement plans and welfare benefit plans
were excluded from the determination of total annual compensation as all employees are offered the same benefit
programs.
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28
2023 WESTAMERICA BANCORPORATION PROXY Grants of Plan-Based Awards Table For Fiscal Year 2022
Estimated Future Payouts Under
Non-Equity Incentive Plan Awards
Target
Threshold
Maximum
$-
$371,000
$556,500
All Other Stock
Awards: Number
of Shares
of Stock
or Units(1)
All Other Stock
Awards: Number
of Securities
Underlying
Options(2)
Exercise or
Base Price of
Option Awards
($/Share)(2)
Name
David L. Payne
Jesse Leavitt
John "Robert" A. Thorson
Brian Donohoe
Russell W. Rizzardi
Grant Date
1/27/22
1/27/22
1/27/22
1/27/22
1/27/22
1/27/22
1/27/22
1/27/22
1/27/22
1/27/22
1/27/22
1/27/22
1/27/22
1/27/22
-
-
-
-
$40,500
$60,750
-
-
-
-
$111,000
$166,500
-
-
-
-
$71,500
$107,250
-
-
-
-
$60,500
$90,750
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
530
-
-
2,180
-
-
1,900
-
-
Grant Date
Fair Value(3)
$-
-
-
-
31,010
-
-
-
-
-
$-
-
-
-
-
14,400
58.51
113,760
-
-
-
-
20,600
58.51
-
-
-
-
18,100
58.51
-
-
-
-
-
127,552
162,740
-
111,169
142,990
-
103,563
-
-
1,770
131,930
-
-
-
58.51
16,700
1/27/22
-
(1) Includes RPS grants. There is no dollar amount of consideration paid by any executive officer on the grant or vesting date of an award.
The material terms of the RPS grants are as follows:
• The performance and vesting period is three years;
• Multiple three-year performance goals are established by the Compensation Committee for each grant;
• The Compensation Committee may revise the goals upon significant events;
• Accelerated vesting occurs upon a “change in control;” and
• No dividends are paid or accrued prior to settlement or deferral delivery of shares which takes place approximately two months after vesting.
(2) Includes NQSO grants with an exercise price of not less than 100% of fair market value as of the date of grant.
The material terms of the NQSO’s listed in the table are as follows:
• Options vest ratably over three years beginning one year from date of grant;
• Options expire 10 years following grant date;
• Exercise price is 100% of fair market value as defined in the 2019 Omnibus Plan;
• Dividends are not paid on unexercised options;
• Vesting ceases upon termination of employment, whatever the reason, except if vesting is accelerated as described below;
• Vested options may be exercised within 90 days of termination of employment and within one year upon death or disability; and
• Accelerated vesting occurs upon a “change in control.”
(3) The amounts shown for NQSOs and RPS awards represent the aggregate grant date fair market value.
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29
2023 WESTAMERICA BANCORPORATION PROXY
Outstanding Equity Awards Table at Fiscal Year End 2022
Option Awards
Number of
Securities
Underlying
Unexercised
Options
(#) Exercisable(1)
Number of
Securities
Underlying
Unexercised
Options
(#) Unexercisable(1)
Option
Exercise
Price
($)(1)
Option
Expiration
Date(1)
Stock Awards
Equity Incentive
Plan Awards:
Number of
Unearned Shares,
Units or Other
Rights That
Have Not
Vested (#)(2)
Equity Incentive Plan
Awards: Market or
Payout Value of
Unearned Shares,
Units or Other Rights
That Have Not
Vested ($) valued at
12/31/22(2)
-
1,060
-
-
-
-
$-
62,551
-
-
-
-
-
$-
-
8,200
57.080
1/28/2031
14,400
58.510
1/27/2032
-
-
-
57.178
1/26/2027
62.155
1/25/2028
62.673
1/24/2029
6,633
66.410
1/23/2030
6,300
371,763
11,600
57.080
1/28/2031
20,600
58.510
1/27/2032
-
-
57.178
1/26/2027
62.155
1/25/2028
1,800
62.673
1/24/2029
-
-
-
-
-
-
-
-
-
-
4,100
66.410
1/22/2030
5,060
298,591
10,066
57.080
1/28/2031
18,100
58.510
1/27/2032
-
62.673
1/24/2029
-
-
-
-
-
-
5,333
66.410
1/23/2030
5,110
301,541
9,400
57.080
1/28/2031
16,700
58.510
1/27/2032
-
-
-
-
Name
David L. Payne
Jesse Leavitt
John "Robert" A. Thorson
Brian Donohoe
Russell W. Rizzardi
-
4,100
-
7,233
21,100
21,200
13,267
5,800
-
5,900
5,500
5,400
8,200
5,034
-
13,095
10,667
4,700
-
(1) Option Awards vest ratably over three years beginning one year from date of grant. Options expiring in 2029 fully vested in January 2022.
Options expiring in 2030 fully vest in January 2023. Options expiring in 2031 fully vest in January 2024. Options expiring in 2032 fully vest
in January 2025.
(2) RPS shares fully vest three years from date of grant if performance goals are met. RPS grants vest as follows: Messrs. Thorson - 1,950 vest in
January 2023, 2,170 vest in January 2024, and 2,180 vest in January 2025; Rizzardi - 1,580 shares vest in January 2023, 1,760 vest in January
2024, and 1,770 vest in January 2025; Donohoe - 1,260 shares vest in January 2023, 1,900 vest in January 2024, and 1,900 vest in January 2025;
Leavitt - 530 shares vest in January 2024 and 530 shares vest in 2025. Vesting may occur on a pro-rated basis for employees separating from
service due to retirement.
Option Exercises And Stock Vested Table For Fiscal Year 2022
Name
David L. Payne
Jesse Leavitt
John "Robert" A. Thorson
Brian Donohoe
Russell W. Rizzardi
Option Awards
Stock Awards
Number of Shares
Acquired on
Exercise
Value Realized
on Exercise($)
Number of Shares
Acquired on Vesting
Value Realized on
Vesting($)(1)
-
-
-
-
-
$-
-
-
-
-
-
-
1,990
-
1,620
$-
-
116,723
-
95,021
(1) Amounts represent value upon vesting of RPS shares.
30
2023 WESTAMERICA BANCORPORATION PROXY Pension Benefits For Fiscal Year 2022
Name
Plan Name
Present Value of
Accumulated Benefit
Payments during
Last Fiscal Year
David L. Payne
Non-Qualified Pension Agreement
$2,967,725
$511,950
During 1997, the Company entered into a nonqualified pension agreement with Mr. Payne in consideration of Mr.
Payne’s agreement that RPS awards granted in 1995, 1996 and 1997 would be cancelled.
In January 2001, the Compensation Committee, based on the Company’s achievement of certain performance goals
which had first been established for Mr. Payne’s 1995, 1996 and 1997 RPS awards, determined Mr. Payne’s annual
pension would be $511,950. The pension commenced in 2010 and will be paid to Mr. Payne for 20 years.
The discount rate used to determine the present value is 5.37%. The obligation is an unfunded general obligation
of the Company.
Nonqualified Deferred Compensation Table For Fiscal Year 2022
Name
David L. Payne
Jesse Leavitt
John "Robert" A. Thorson
Brian Donohoe
Executive Contributions
in Last
Fiscal Year(1)
Aggregate
Earnings in Last
Fiscal Year(2)
Aggregate
Withdrawls/
Distributions(3)
Aggregate
Balance at Last
Fiscal Year End(4)
$-
-
-
-
$-
-
127,867
-
$-
-
-
-
$-
-
2,624,464
-
-
Russell W. Rizzardi
(1) No RPS shares were deferred upon vesting in 2022.
(2) Includes interest earned on deferred cash compensation included in the Summary Compensation Table of $71,350.
(3) No dividends were paid on deferred RPS shares in 2022.
(4) Aggregate balance of deferred compensation reported as compensation prior to 2022 was $2,496,597.
-
-
-
Under the Westamerica Bancorporation and Subsidiaries Deferred Compensation Plan (the “Deferred
Compensation Plan”), Directors and Officers may defer up to 100% of their compensation, salary and/or non-
equity incentive compensation (cash bonus) into a non-qualified, unfunded deferred compensation program. The
interest rate credited during 2022 was 5.0%. The interest rate may be changed annually. Interest is compounded
semi-monthly. Participants choose in advance from the following distribution commencement dates: termination
of employment, January 1 following termination of employment, or a specific date at least five years from date
of deferral. Payment is made in a lump sum unless the participant chooses a four year, five year or ten year annual
installment.
Under the Westamerica Bancorporation Deferral Plan, 100% of vested RPS grants may be deferred. Dividends
paid on such issued and outstanding shares are paid in cash to the deferral participants, and are paid at the same
rate as is paid to all other shareholders. The distribution of deferred RPS shares occurs at least two years after
deferral, one month following termination, or the January immediately following termination as elected by the
participant at the time of deferral. If the participant is one of the named executive officers, benefit distributions
that are made upon termination of employment may not start earlier than six months after the date of termination.
31
2023 WESTAMERICA BANCORPORATION PROXY Potential Payments Upon Termination or Change in Control
Payments to be made to the named executive officers in the event of termination of employment or change in control
are described below.
Termination. Vested NQSOs may be exercised within 90 days of termination and within one year of death or
disability. RPS shares vest if the Compensation Committee determines performance goals are met. Terminated
employees will receive vested RPS shares if the settlement date of the RPS grant occurs within 90 days of termination.
Employees separating from service due to death, disability or retirement are eligible to receive a pro rata portion of
granted RPS shares if the Compensation Committee determines that the performance goals are likely to be met for the
grant period. The pro rata basis is determined by the number of full years of the vesting period completed before date
of death, disability or retirement.
Deferred compensation account balances are distributed on January 1 following termination, or a specific date at
least five years from the date of deferral in the form of annual payments over four years. Payment may also be
made in a lump sum or in annual payments for five or 10 years as elected by the participant at the time of deferral.
If the participant is one of the named executive officers, benefit distributions that are made upon termination of
employment may not start earlier than six months after the date of termination.
Change in Control. A change in control is defined under the 2012 Amended Plan as shareholder approval of a
dissolution or liquidation of the Company or a sale of substantially all of the Company’s assets to another
company, or a tender offer for 5% or more of the Company’s outstanding common stock or a merger in which
the Company’s shareholders before the merger hold less than 50% of the voting power of the surviving company after
the merger.
Under the 2019 Plan, a change in control occurs when (i) a person or entity becomes the beneficial owner of more
than 50% of voting power of the Company; (ii) there is an unapproved change in the majority membership of the
Board of Directors; (iii) a merger of the Company or any of its subsidiaries is completed, other than (A) a merger that
results in the Company’s voting securities continuing to represent 50% or more of the combined voting power of the
surviving entity and the Board of Directors immediately prior to the merger or consolidation continuing to represent
at least a majority of the Board of Directors of the surviving entity or (B) a merger or consolidation effected to
implement a recapitalization in which no person is or becomes the owner of voting securities representing more than
50% of the combined voting power of the Company; or (iv) shareholders approve of a plan of liquidation or
dissolution.
In the event of a change in control, unvested NQSOs and RPS shares immediately vest. The value of NQSOs is
computed by multiplying the difference between the market value on December 31, 2022 and the exercise price
of each option by the number of options subject to accelerated vesting. The value of NQSOs subject to accelerated
vesting for each of the named executive officers is as follows: Messrs. Payne: $0; Thorson: $32,688; Donohoe:
$28,477; Rizzardi: $26,492; and Leavitt: $23,026. The value of RPS shares is computed by multiplying the
market price at December 31, 2022 by the number of shares. The value of RPS shares subject to accelerated
vesting for each of the named executive officers is as follows: Messrs. Payne: $0; Thorson: $371,763; Donohoe:
$298,591; Rizzardi: $301,541; and Leavitt: $62,551.
Under the Company’s Severance Payment Plan, executive officers receive six week’s pay for every year or partial
year of service up to one year’s base salary (see Summary Compensation Table for Fiscal Year 2022 for annual
base salary for all named executive officers). Messrs. Payne, Thorson, Donohoe and Rizzardi are eligible for one
32
2023 WESTAMERICA BANCORPORATION PROXY year’s salary under the plan. Mr. Leavitt was eligible for 30-week’s pay under the plan at December 31, 2022.
Severance pay is paid in a lump sum or on a semi-monthly basis at the discretion of the Company. The
Severance Payment Plan is subject to Section 409A of the Internal Revenue Code.
Certain Relationships and Related Party Transactions
In accordance with the Audit Committee Charter, the Audit Committee is responsible for reviewing and approving
or disapproving all related party transactions required to be disclosed by Item 404 of Regulation S-K for potential
conflicts of interest. The Company is also required by NASDAQ Rule 5250(b)(3) to disclose all agreements and
arrangements between any director or nominee for director, and any person or entity other than the Company relating
to compensation or other payment in connection with such person’s candidacy or service as a director of the Company.
The Company is not aware of any such agreements. Additionally, the Company’s Code of Conduct and Ethics
provides rules that restrict transactions with affiliated persons.
Certain of the Directors, executive officers and their associates have had banking transactions with subsidiaries
of the Company in the ordinary course of business. With the exception of the Company’s Employee Loan
Program, all outstanding loans and commitments included in such transactions were made on substantially the
same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with
other persons not related to the Company, did not involve more than a normal risk of collectability, and did not
present other favorable features. As part of the Employee Loan Program, all employees, including executive
officers, were eligible to receive mortgage loans with interest rates one percent (1%) below Westamerica Bank’s
prevailing interest rate at the time of loan origination. Westamerica Bank made all loans to executive officers
under the Employee Loan Program in compliance with the applicable restrictions of Section 22(h) of the Federal
Reserve Act. Messrs. Payne and Thorson have mortgage loans through this Program. The largest aggregate
amount of principal during 2022 was $287,693 and $165,814, respectively. The principal amount outstanding at
December 31, 2022 was $266,085 and $133,489, respectively. The amount of principal paid during 2022 was
$21,608 and $32,326, respectively. The amount of interest paid during 2022 was $7,117 and $2,892, respectively.
The rate of interest payable on the loans is 3.75% and 3.875%, respectively.
PROPOSAL 2 – APPROVE A NON-BINDING ADVISORY VOTE ON THE
COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
SEC rules requires the Company to permit shareholders a non-binding advisory vote on the executive
compensation paid to the executive officers listed in the Summary Compensation Table (a so-called “say on pay”
vote) as well as an advisory vote with respect to whether future say on pay votes will be held every one, two or
three years. The result of the most recent shareholder vote on the proposal to determine the frequency of future
say on pay proposals was that shareholders should review executive compensation annually. Therefore, Proposal
2 requests that shareholders again approve the compensation paid to our named executive officers.
Last year 90.7% of the shares voting on this proposal voted to support the Company’s executive compensation
strategy.
We believe that our compensation policies and procedures are centered on a pay-for-performance culture and are
strongly aligned with the long-term interests of our shareholders. Our incentive compensation plan provides for
the grant of incentive stock options, non-qualified stock options, stock appreciation rights, and restricted
performance shares. The Summary Compensation Table shows very stable base salaries indicative of our greater
emphasis on performance-based stock and non-stock awards. Our RPS and option awards are based on a minimum
33
2023 WESTAMERICA BANCORPORATION PROXY achievement of meeting the “threshold” level for each pre-established objective. Vesting of our RPS award is
conditioned upon the achievement of performance criteria. Both awards have a three-year vesting period. Our
annual incentive plan incorporates at least four financial and/or strategic performance metrics in order to properly
balance risk with the incentives to drive our key annual financial and/or strategic initiatives; in addition, the annual
incentive program incorporates a 150% maximum payout to further manage risk and the possibility of excessive
payments.
Consistent with our pay-for-performance philosophy, the 2019 Plan and the 2012 Amended Plan, which were
approved by shareholders, include the following features:
disallow re-pricing stock options for poor stock performance;
limits the number of shares that may be awarded; and
includes a clawback provision.
Vote Required. The “say on pay” proposal gives you as a shareholder the opportunity to endorse or not endorse
our executive pay program through the following resolution:
“Resolved, that the shareholders approve, on an advisory basis, the compensation of the named
executive officers, as disclosed pursuant to the compensation disclosure rules of the Securities
and Exchange Commission, which disclosure includes the compensation discussion and analysis,
the compensation tables and any related footnotes and narratives in the Company’s proxy
statement for the Annual Meeting of Shareholders.”
Because your vote is advisory, it will not be binding on the Board or create or imply any additional fiduciary duty
by the Board. However, the Compensation Committee may take into account the outcome of the vote when
considering future executive compensation arrangements.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A
VOTE “FOR” THE APPROVAL OF THE COMPENSATION OF OUR NAMED
EXECUTIVE OFFICERS, AS DISCLOSED IN THIS PROXY STATEMENT
PROPOSAL 3 – APPROVE A NON-BINDING ADVISORY VOTE ON THE
FREQUENCY OF THE ADVISORY VOTE ON THE COMPENSATION OF OUR
NAMED EXECUTIVE OFFICERS
Background
In addition to the non-binding advisory vote on executive compensation, the Dodd-Frank Act required the Securities
and Exchange Commission to amend its rules to require that a non-binding advisory proposal be submitted to
shareholders once every six years that would determine the frequency of the advisory vote on the compensation paid
to the Corporation’s named executive officers as seen in Proposal 2 above.
After careful consideration of this proposal, our Board has determined that continuing an advisory vote on executive
compensation annually is most appropriate for the Company, and therefore our Board recommends that you vote for
a one-year interval for the advisory vote on executive compensation.
In formulation of its recommendation, our Board considered that an advisory vote on executive compensation every
year will allow our shareholders to provide us with their direct input on our compensation philosophy, policies and
34
2023 WESTAMERICA BANCORPORATION PROXY
practices and disclosed in the proxy statement every year. Setting a one year period for holding this shareholder vote
will enhance shareholder communication by providing a clear, simple means for the Company to obtain information
on investor sentiment about our executive compensation philosophy.
You may cast your vote on your preferred voting frequency by choosing the option of one year, two years, three years
or abstain from voting when you vote.
The choice of frequency that receives the highest number of votes will be considered the advisory vote of the
shareholders. Abstentions and broker non-votes will not count as votes cast for any frequency choice, and will have
no direct effect on the outcome of this proposal. A signed, uninstructed proxy will be voted for “EVERY ONE
YEAR”. However, because this vote is advisory and not binding on the Board in any way, the Board may decide that
it is in the best interest of our shareholders and the Company to hold an advisory vote on executive compensation
more or less frequently than the option approved by shareholders.
THE BOARD OF DIRECTORS RECOMMENDS A
VOTE FOR “EVERY ONE YEAR”
PROPOSAL 4 – RATIFY SELECTION OF INDEPENDENT AUDITOR
Ratify Selection of Independent Auditor. At the Annual Meeting, shareholders will be asked to ratify the Audit
Committee’s selection of Crowe LLP to serve as the Company’s independent auditors for the fiscal year ending
December 31, 2023. If the proposal is approved, the Audit Committee, in its discretion, may direct the
appointment of different independent auditors at any time during the year if it determines that such a change
would be in the best interests of the Company and its shareholders. If the proposal to ratify the selection of Crowe
LLP as the Company’s independent auditors is rejected by the shareholders, then the Audit Committee will
reconsider its choice of independent auditors. A representative of Crowe LLP is expected to be present at the
Annual Meeting and will have an opportunity to make a statement if they so desire and will be available to respond
to appropriate questions.
Audit Fees. The aggregate fees billed to the Company by Crowe LLP with respect to services performed for
fiscal 2022 and 2021 are as follows:
Audit fees(1)
Audit related fees(2)
Tax fees(3)
All other fees(4)
Total
2022
2021
$605,733
43,500
47,900
-
$697,133
$585,000
38,300
45,723
-
$669,023
(1) Audit fees consisted of fees billed by Crowe LLP for professional services rendered for the audit of the Company’s consolidated financial
statements, reviews of the consolidated financial statements included in the Company’s quarterly reports on Form 10-Q, and the audit of the
Company’s internal controls over financial reporting. The audit fees also relate to services such as consents and audits of mortgage banking
subsidiaries.
(2) Audit-related fees consisted of fees billed by Crowe LLP for audits of certain employee benefits plans.
(3) Tax fees consisted of fees billed by Crowe LLP for the compilation and review of the Company’s tax returns.
Preapproval Policies and Procedures. The Audit Committee is responsible for the appointment, compensation,
retention and oversight of the work of any public accounting firm engaged by the Company for the purpose of
35
2023 WESTAMERICA BANCORPORATION PROXY
preparing or issuing an audit report or performing other audit, review or attest services for the Company. Any
accounting firm appointed by the Company reports directly to the Audit Committee.
The Audit Committee must preapprove all auditing services and permitted non-audit services by its independent
auditors and the fees to be paid by the Company for these services, except for those fees qualifying for the “de
minimis exception” which provides that the preapproval requirement for certain non-audit services may be waived
if certain express standards and requirements are satisfied prior to completion of the audit under certain
conditions. This exception requires that the aggregate amount of all such services provided constitutes no more
than five percent of the total amount of revenue paid to the audit firm by the Company during the fiscal year in
which the services are provided. This exception also requires that at the time of the engagement, the Company
did not recognize such services to be non-audit services, and such services are promptly brought to the attention
of the Audit Committee and approved prior to the completion of the audit by the Audit Committee. During fiscal
year 2022, there were no non-audit services that were provided using this exception.
The Audit Committee may delegate to one or more members of the Audit Committee the authority to grant
preapprovals of non-audit services and fees. In such event, the decisions of the member or members of the
Committee regarding preapprovals are presented to the full Audit Committee at its next meeting. The Audit
Committee preapproved 100% of all services performed for the Company by Crowe LLP during fiscal year 2022.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” THE
RATIFICATION OF THE SELECTION OF CROWE LLP AS OUR INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
AUDIT COMMITTEE REPORT
The material in this report is not soliciting material and is not deemed filed with the SEC. It is not incorporated
by reference in any of the Company’s filings under the Securities Act of 1933 or the Exchange Act, whether made
in the past or in the future even if any of those filings contain any general incorporation language.
The Audit Committee is composed of six Directors who are neither officers nor employees of the Company, and
who meet the NASDAQ independence requirements for Audit Committee members. The Audit Committee
selects, appoints and retains the Company’s independent auditors and is responsible for their compensation and
oversight.
In performing its functions, the Audit Committee acts only in an oversight capacity and necessarily relies on the
work and assurances of the Company’s management, which has the primary responsibility for financial statements
and reports, and of the independent auditors. The auditors express an opinion on the conformity of the Company’s
annual financial statements to United States generally accepted accounting principles and on internal control over
financial reporting. In fulfilling its oversight responsibilities, the Audit Committee reviewed the audited
consolidated financial statements for the fiscal year 2022 and discussed them with Management and with Crowe
LLP, the Corporation’s independent registered public accountants.
Management represented to the Audit Committee that the Company’s consolidated financial statements were
prepared in accordance with generally accepted accounting principles. Management also represented that it
performed an assessment of the effectiveness of internal control over financial reporting as of December 31, 2022,
and that internal control over financial reporting was effective. The independent auditor discussed with the Audit
36
2023 WESTAMERICA BANCORPORATION PROXY
Committee matters required to be discussed by Auditing Standard of the Public Accounting Oversight Board
(PCAOB), including certain matters related to the conduct of an audit and to obtain certain information from the
Audit Committee relevant to the audit.
The auditors also provided to the Audit Committee the written disclosures and the letter from the independent
auditors required by PCAOB standards. The Audit Committee discussed with auditors the firm’s independence.
Based on the Audit Committee’s discussion with Management and the independent auditors, the Audit
Committee’s review of the representations of Management and the Report of the Independent Auditors to the
Audit Committee, the Audit Committee recommended that the Board of Directors include the audited
consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended
December 31, 2022 for filing with the SEC.
Submitted by the Audit Committee
Michele Hassid, Chair
E. Joseph Bowler
Catherine C. MacMillan
Ronald Nelson
Inez Wondeh
SHAREHOLDER PROPOSAL GUIDELINES
To be considered for inclusion in the Company’s Proxy Statement and form of proxy for next year’s Annual
Meeting, shareholder proposals must be delivered to the Corporate Secretary, Westamerica Bancorporation A-
2M, P.O. Box 1200, Suisun City, CA 94585, no later than 5:00 p.m. on November 17, 2023. However, if the date
of next year’s Annual Meeting is changed by more than 30 days from the date of this year’s meeting, the notice
must be received by the Corporate Secretary a reasonable time before we begin to produce and distribute our
Proxy Statement. All such proposals must meet the requirements of Rule 14a-8 under the Exchange Act.
In order for business, other than a shareholder proposal submitted for the Company’s Proxy Statement, to be
properly brought before next year’s Annual Meeting by a shareholder, the shareholder must give timely written
notice to the Corporate Secretary. To be timely, written notice must be received by the Corporate Secretary at
least 45 days before the anniversary of the day our Proxy Statement was mailed to shareholders in connection
with the previous year’s Annual Meeting, which will be January 31, 2024, for the 2024 Annual Meeting. If the
date of the Annual Meeting is changed by more than 30 days, the deadline is a reasonable time before we begin
to produce and distribute our Proxy Statement. A shareholder’s notice must set forth a brief description of the
proposed business, the name and residence address of the shareholder, the number of shares of the Company’s
common stock that the shareholder owns and any material interest the shareholder has in the proposed business.
The Company will have discretionary voting authority with respect to any non-Rule 14a-8 proposals for the next
annual shareholders meeting that are not received by January 31, 2024.
The requirements and process for shareholder nominations of director candidates are described under the heading
“Nominating Directors” on page 13.
The Company reserves the right to reject, to rule out of order, or to take other appropriate action with respect to
any proposal that does not comply with these and other applicable legal requirements.
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2023 WESTAMERICA BANCORPORATION PROXY
SHAREHOLDER COMMUNICATION TO BOARD OF DIRECTORS
Shareholders and other interested parties who wish to communicate with the Board may do so by writing to: Kris
Irvine, VP/Corporate Secretary, Westamerica Bancorporation A-2M, P.O. Box 1200, Suisun City, CA 94585.
The Directors have established procedures for the handling of communications from shareholders and other
interested parties and have directed the Corporate Secretary to act as their agent in processing any communications
received. All communications that relate to matters that are within the responsibility of one of the Board
Committees are to be forwarded to the Chair of the appropriate Committee. Communications that relate to
ordinary business matters that are not within the scope of the Board’s responsibilities, such as customer
complaints, are to be sent to Management. Solicitations, junk mail and obviously frivolous or inappropriate
communications are not to be forwarded, but will be made available to any Director who wishes to review them.
OTHER MATTERS
The Board of Directors does not know of any matters to be presented at the Annual Meeting other than those
specifically referred to in this Proxy Statement. If any other matters should properly come before the meeting or
any postponement or adjournment of the meeting, the persons named in the enclosed proxy intend to vote thereon
in accordance with their best business judgment. If a nominee for Director becomes unavailable to serve as a
Director, the Proxies will vote for any substitute nominated by the Board of Directors.
The Company will pay the cost of proxy solicitation. The Company has retained the services of Georgeson to
assist in the proxy distribution at a cost not to exceed $2,000 plus reasonable out-of-pocket expenses. The
Company will reimburse banks, brokers and others holding stock in their names or names of nominees or
otherwise, for reasonable out-of-pocket expenses incurred in sending proxies and proxy materials to the holders
of such stock.
BY ORDER OF THE BOARD OF DIRECTORS
March 17, 2023
Fairfield, California
Kris Irvine
VP/Corporate Secretary
38
2023 WESTAMERICA BANCORPORATION PROXY
EXHIBIT A
Westamerica Bancorporation
Employee Benefits/Compensation Committee Charter – Reaffirmed January 25, 2023
Purpose
The Employee Benefits Committee (the “Committee”) is appointed by the Board of Directors (the “Board”) to
discharge the Board’s responsibilities relating to compensation of the Westamerica Bancorporation (the
“Company”) Chief Executive Officer (the “CEO”) and the Company’s other Executive Officers, as defined by
Rule 3b-7 of the Securities Exchange Act of 1934 as amended (the “Exchange Act”) (collectively, including the
CEO, the “Executive Officers”). The Committee has overall responsibility for approving and evaluating all
compensation plans, policies and procedures of the Company as they affect the Executive Officers.
Committee Membership
The Committee shall consist of no fewer than three members. The members of the Committee shall meet the
independence requirements of the Nasdaq Stock Market. At least two members of the Committee also shall
qualify as “outside” directors within the meaning of Internal Revenue Code Section 162(m) and as “non-
employee” directors within the meaning of Rule 16b-3 under the Exchange Act. The members of the Committee
shall be appointed by the Board. One member of the Committee shall be appointed as Committee Chair by the
Board. Committee members may be replaced by the Board.
Meetings
The Committee shall meet as often as necessary to carry out its responsibilities, meeting no less than four times
each year. The Committee Chair shall preside at each meeting. In the event the Committee Chair is not present at
a meeting, the Committee Chair shall designate a member to act as chair of such meeting.
Committee Responsibilities and Authority
1.
2.
3.
The Committee shall, at least annually, review and approve the annual base salaries and annual incentive
opportunities of the Executive Officers. The CEO shall not be present during any Committee
deliberations or voting with respect to their compensation.
The Committee shall, periodically and as and when appropriate, review and approve the following as
they affect the Executive Officers: (a) all other incentive awards and opportunities, including both cash-
based and equity-based awards and opportunities; (b) any employment agreements and severance
arrangements; (c) any change-in-control agreements and change-in-control provisions affecting any
elements of compensation and benefits; and (d) any special or supplemental compensation and benefits
for the Executive Officers and individuals who formerly served as Executive Officers, including
supplemental retirement benefits and the perquisites provided to them during and after employment.
The Committee shall review and discuss the Compensation Discussion and Analysis (the “CD&A”)
required to be included in the Company’s proxy statement and annual report on Form 10-K by the rules
and regulations of the Securities and Exchange Commission (the “SEC”) with management and, based
on such review and discussion, determine whether or not to recommend to the Board that the CD&A be
so included.
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2023 WESTAMERICA BANCORPORATION PROXY
4.
5.
6.
7.
8.
9.
10.
11.
The Committee shall produce the annual Compensation Committees Report for inclusion in the
Company’s proxy statement in compliance with the rules and regulations promulgated by the SEC.
The Committee shall monitor the Company’s compliance with the requirements under the Sarbanes-
Oxley Act of 2002 relating to loans to directors and officers, and with all other applicable laws affecting
employee compensation and benefits.
The Committee shall oversee the Company’s compliance with SEC rules and regulations regarding
shareholder approval of certain executive compensation matters, including advisory votes on executive
compensation and the frequency of such votes, and the requirement under the Nasdaq rules that, with
limited exceptions, shareholders approve equity compensation plans.
The Committee shall receive periodic reports on the Company’s compensation programs as they affect
all employees.
The Committee shall make regular reports to the Board.
The Committee shall have the authority, in its sole discretion, to retain and terminate or obtain the advice
of any adviser to assist it in performance of its duties, but only after taking into consideration factors
relevant to the adviser’s independence from management specified in Nasdaq Listing Rule 5605(d)(3).
The Committee shall be directly responsible for the appointment, compensation and oversight of the
work of any adviser retained by the Committee and shall have sole authority to approve the adviser’s
fees and the other terms and conditions of the adviser’s retention. The Company must provide for
appropriate funding, as determined by the Committee, for payment of reasonable compensation to any
adviser retained by the Committee.
The Committee may form and delegate authority to subcommittees as it deems appropriate.
The Committee will annually review and reassess this Charter.
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2023 WESTAMERICA BANCORPORATION PROXY
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark one)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2022
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to______________.
or
Commission File Number: 001-09383
WESTAMERICA BANCORPORATION
(Exact name of the registrant as specified in its charter)
CALIFORNIA
(State or Other Jurisdiction
of Incorporation or Organization)
94-2156203
(I.R.S. Employer
Identification Number)
1108 FIFTH AVENUE, SAN RAFAEL, CALIFORNIA 94901
(Address of principal executive offices) (zip code)
Registrant’s telephone number, including area code: (707) 863-6000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, no par value
WABC
The Nasdaq Stock Market, LLC
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES NO
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES NO
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. YES NO
Indicate by check mark if whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files.) YES NO
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging
growth company. See the definitions of "large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2
of the Exchange Act.
Large accelerated filer
Smaller reporting company
Accelerated filer
Non-accelerated filer
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised
financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over
financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit
report.
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing
reflect the correction of an error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any
of the registrant’s executive officers during the relevant recovery period pursuant
to §240.10D-1(b).
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES NO
The aggregate market value of the Common Stock held by non-affiliates of the registrant as of June 30, 2022 as reported on the NASDAQ Global Select Market,
was $860,255,341.78. Shares of Common Stock held by each executive officer and director and by each person who owns 10% or more of the outstanding Common
Stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for
other purposes.
Number of shares outstanding of each of the registrant’s classes of common stock, as of the close of business on February 15, 2023: 26,912,772 Shares
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive Proxy Statement relating to registrant’s 2023 Annual Meeting of Shareholders, are incorporated by reference in Items 10, 11, 12, 13 and
14 of Part III to the extent described therein.
2022 WESTAMERICA BANCORPORATION FORM 10-K
TABLE OF CONTENTS
PART I
Item 1 Business ................................................................................................................................................................
Item 1A Risk Factors .........................................................................................................................................................
Item 1B Unresolved Staff Comments .................................................................................................................................
Item 2 Properties ..............................................................................................................................................................
Item 3 Legal Proceedings .................................................................................................................................................
Item 4 Mine Safety Disclosures .......................................................................................................................................
PART II
Item 5 Market for Registrant’s Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities ...................................................................................................................
Item 6
[Reserved] .............................................................................................................................................................
Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations ...............................
Item 7A Quantitative and Qualitative Disclosures About Market Risk ..............................................................................
Item 8 Financial Statements and Supplementary Data .....................................................................................................
Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ...............................
Item 9A Controls and Procedures .......................................................................................................................................
Item 9B Other Information .................................................................................................................................................
Item 9C Disclosure Regarding Foreign Jurisdictions that Prevent Inspections ..................................................................
PART III
Item 10 Directors, Executive Officers and Corporate Governance ....................................................................................
Item 11 Executive Compensation ......................................................................................................................................
Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters .............
Item 13 Certain Relationships, Related Transactions and Director Independence ............................................................
Item 14 Principal Accountant Fees and Services ...............................................................................................................
PART IV
Item 15 Exhibits, Financial Statement Schedules ..............................................................................................................
Item 16 Form 10-K Summary ............................................................................................................................................
Signatures .............................................................................................................................................................................
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2022 WESTAMERICA BANCORPORATION FORM 10-K
FORWARD-LOOKING STATEMENTS
This Report on Form 10-K contains forward-looking statements about Westamerica Bancorporation for which it claims the
protection of the safe harbor provisions contained in the Private Securities Litigation Reform Act of 1995.
Examples of forward-looking statements include, but are not limited to: (i) projections of revenues, expenses, future credit quality
and performance, the appropriateness of the allowance for credit losses, loan growth or reduction, mitigation of risk in the
Company’s loan and investment securities portfolios, income or loss, earnings or loss per share, the payment or nonpayment of
dividends, capital structure and other financial items; (ii) statements of plans, objectives and expectations of the Company or its
management or board of directors, including those relating to products or services; (iii) statements of future economic performance;
and (iv) statements of assumptions underlying such statements. Words such as "believes", "anticipates", "expects", “estimates”,
"intends", "targeted", "projected", “forecast”, "continue", "remain", "will", "should", "may" and other similar expressions are
intended to identify forward-looking statements but are not the exclusive means of identifying such statements.
These forward-looking statements are based on Management’s current knowledge and belief and include information concerning
the Company’s possible or assumed future financial condition and results of operations. A number of factors, some of which are
beyond the Company’s ability to predict or control, could cause future results to differ materially from those contemplated. These
factors include but are not limited to (1) the length and severity of any difficulties in the global, national and California economies
and the effects of government efforts to address those difficulties; (2) liquidity levels in capital markets; (3) fluctuations in asset
prices including, but not limited to stocks, bonds, real estate, and commodities; (4) the effect of acquisitions and integration of
acquired businesses; (5) economic uncertainty created by riots, terrorist threats and attacks on the United States, the actions taken
in response, and the uncertain effect of these events on the local, regional and national economies; (6) changes in the interest rate
environment and monetary policy; (7) changes in the regulatory environment; (8) competitive pressure in the banking industry; (9)
operational risks including a failure or breach in data processing or security systems or those of third party vendors and other service
providers, including as a result of cyber attacks or fraud; (10) volatility of interest rate sensitive loans, deposits and investments;
(11) asset/liability management risks and liquidity risks; (12) the effect of climate change, natural disasters, including earthquakes,
hurricanes, fire, flood, drought, and other disasters, on the uninsured value of the Company’s assets and of loan collateral, the
financial condition of debtors and issuers of investment securities, the economic conditions affecting the Company’s market place,
and commodities and asset values; (13) changes in the securities markets; (14) the duration and severity of the COVID-19 pandemic
and governmental and customer responses to the pandemic; (15) inflation and (16) the outcome of contingencies, such as legal
proceedings. However, the reader should not consider the above-mentioned factors to be a complete set of all potential risks or
uncertainties.
Forward-looking statements speak only as of the date they are made. The Company undertakes no obligation to update any forward-
looking statements in this report to reflect circumstances or events that occur after the date forward looking statements are made,
except as may be required by law. The reader is directed to Part II – Item 1A “Risk Factors” of this report and other risk factors
discussed elsewhere in this report, for further discussion of factors which could affect the Company's business and cause actual
results to differ materially from those expressed in any forward-looking statement made in this report.
ITEM 1. BUSINESS
PART I
Westamerica Bancorporation (the “Company”) is a bank holding company registered under the Bank Holding Company Act of
1956, as amended (“BHCA”). Its legal headquarters are located at 1108 Fifth Avenue, San Rafael, California 94901. Its principal
administrative offices are located at 4550 Mangels Boulevard, Fairfield, California 94534, its telephone number is (707) 863-6000
and its website address is www.westamerica.com. The Company provides a full range of banking services to individual and
commercial customers in Northern and Central California through its subsidiary bank, Westamerica Bank (the “Bank”). The Bank
is a California-chartered commercial bank whose deposit are insurance by the Federal Deposit Insurance Corporation (the “FDIC”)
up to applicable limits. The principal communities served are located in Northern and Central California, from Mendocino, Lake
and Nevada Counties in the north to Kern County in the south. The Company’s strategic focus is on the banking needs of small
businesses. In addition, the Bank owns 100% of the capital stock of Community Banker Services Corporation (“CBSC”), a company
engaged in providing the Company and its subsidiaries with data processing services and other support functions.
The Company was incorporated under the laws of the State of California in 1972 as “Independent Bankshares Corporation” pursuant
to a plan of reorganization among three previously unaffiliated Northern California banks. The Company operated as a multi-bank
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2022 WESTAMERICA BANCORPORATION FORM 10-K
holding company until mid-1983, at which time the then six subsidiary banks were merged into a single bank named Westamerica
Bank and the name of the holding company was changed to Westamerica Bancorporation.
The Company acquired five banks within its immediate market area during the early to mid 1990’s. In April 1997, the Company
acquired ValliCorp Holdings, Inc., parent company of ValliWide Bank, the largest independent bank holding company
headquartered in Central California. Under the terms of all of the merger agreements, the Company issued shares of its common
stock in exchange for all of the outstanding shares of the acquired institutions. The subsidiary banks acquired were merged with
and into the Bank. These six aforementioned business combinations were accounted for as poolings-of-interests.
During the period 2000 through 2005, the Company acquired three additional banks. These acquisitions were accounted for using
the purchase accounting method.
On February 6, 2009, Westamerica Bank acquired the banking operations of County Bank (“County”) from the Federal Deposit
Insurance Corporation (“FDIC”). On August 20, 2010, Westamerica Bank acquired assets and assumed liabilities of the former
Sonoma Valley Bank (“Sonoma”) from the FDIC. The County and Sonoma acquired assets and assumed liabilities were measured
at estimated fair values, as required by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification
(“ASC”) 805, Business Combinations.
At December 31, 2022, the Company had consolidated assets of approximately $7.0 billion, deposits of approximately $6.2 billion
and shareholders’ equity of approximately $602 million.
The Company assesses and is careful to address potential health, safety, and environmental risks. The Company cares for the
environment and works to mitigate pollution and the potential risks related to climate change by implementing practices such as
recycling and reusing materials, and controlling energy usage.
The Company’s Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments
to those reports as well as beneficial ownership reports on Forms 3, 4 and 5 are available through the SEC’s website
(https://www.sec.gov). Such documents as well as the Company’s director, officer and employee Code of Conduct and Ethics are
also available free of charge from the Company by request to:
Westamerica Bancorporation
Corporate Secretary A-2M
Post Office Box 1200
Suisun City, California 94585-1200
Human Capital Resources
The Company and its subsidiaries employed 594 full-time equivalent staff or 664 employees as of December 31, 2022. The
employees are not represented by a collective bargaining unit, and the Company believes its relationship with its employees is good.
The Company’s ability to attract and retain employees is a key to its success. Employees receive a comprehensive benefits package
that includes paid time off, sick time, company contributions of up to 6% to qualified retirement plans, discretionary profit-sharing
retirement plan contributions, and other health and wellness benefits including participation in Company paid or subsidized medical,
dental, term-life, accidental death and dismemberment (AD&D), long-term disability, and employee assistance programs. Certain
employees participate in one of the Company’s performance-based incentive programs, which may include additional bonus and
incentive compensation, company contributions to supplemental retirement plans, and equity-based awards. Certain benefits are
subject to eligibility, vesting, and performance requirements. Employee performance is measured at least quarterly and formal
performance evaluations are conducted at least annually.
The Company’s code of ethics prohibits discrimination or harassment. The Company requires all employees to agree to the code
of ethics and participate in harassment prevention training annually.
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2022 WESTAMERICA BANCORPORATION FORM 10-K
Supervision and Regulation
The following is not intended to be an exhaustive description of the statutes and regulations applicable to the Company’s or the
Bank’s business. The description of statutory and regulatory provisions is qualified in its entirety by reference to the particular
statutory or regulatory provisions. Moreover, major new legislation and other regulatory changes affecting the Company, the Bank,
and the financial services industry in general have occurred in the last several years and can be expected to occur in the future. The
nature, timing and impact of new and amended laws and regulations cannot be accurately predicted.
Regulation and Supervision of Bank Holding Companies
The Company is a bank holding company that is subject to the BHCA. The Company files reports with and is subject to examination
and supervision by the Board of Governors of the Federal Reserve System (“FRB”). The FRB also has the authority to examine the
Company’s subsidiaries. The Company is a bank holding company within the meaning of Section 3700 of the California Financial
Code. As such, the Company and the Bank are subject to examination by, and may be required to file reports with, the Commissioner
of the California Department of Financial Protection and Innovation (the “Commissioner”).
The FRB has significant supervisory and regulatory authority over the Company and its affiliates. Among other things, the FRB
requires the Company to maintain certain levels of capital. See “Capital Standards.” The FRB also has the authority to take
enforcement action against any bank holding company that commits any unsafe or unsound practice, or violates certain laws,
regulations or conditions imposed in writing by the FRB. Under the BHCA, the Company is required to obtain the prior approval
of the FRB before it acquires, merges or consolidates with any bank or bank holding company. Any company seeking to acquire
control of or to merge or consolidate with the Company also would be required to obtain the prior approval of the FRB.
The Company is generally prohibited under the BHCA from acquiring ownership or control of more than 5% of any class of voting
shares of any company that is not a bank or bank holding company and from engaging directly or indirectly in activities other than
banking, managing banks, or providing services to affiliates of the holding company. However, a bank holding company, with the
approval of the FRB, may engage, or acquire the voting shares of companies engaged, in activities that the FRB has determined to
be closely related to banking or managing or controlling banks. A bank holding company must demonstrate that the benefits to the
public of the proposed activity will outweigh the possible adverse effects associated with such activity.
The FRB generally prohibits a bank holding company from declaring or paying a cash dividend that would impose undue pressure
on the capital of subsidiary banks or would be funded only through borrowing or other arrangements which might adversely affect
a bank holding company’s financial position. Under the FRB policy, a bank holding company should not continue its existing rate
of cash dividends on its common stock unless its net income is sufficient to fully fund each dividend and its prospective rate of
earnings retention appears consistent with its capital needs, asset quality and overall financial condition. See the section entitled
“Restrictions on Dividends and Other Distributions” for additional restrictions on the ability of the Company and the Bank to pay
dividends.
Transactions between the Company and the Bank are restricted under the FRB’s Regulation W and Sections 23A and 23B of the
Federal Reserve Act. In general, subject to certain specified exemptions, a bank or its subsidiaries are limited in their ability to
engage in “covered transactions” with affiliates: (a) to an amount equal to 10% of the bank’s capital and surplus, in the case of
covered transactions with any one affiliate; and (b) to an amount equal to 20% of the bank’s capital and surplus, in the case of
covered transactions with all affiliates. The Company is considered to be an affiliate of the Bank. A “covered transaction” includes,
among other things, a loan or extension of credit to an affiliate; a purchase of securities issued by an affiliate; a purchase of assets
from an affiliate, with some exceptions; and the issuance of a guarantee, acceptance or letter of credit on behalf of an affiliate.
Federal regulations governing bank holding companies and change in bank control (Regulation Y) provide for a streamlined and
expedited review process for bank acquisition proposals submitted by well-run bank holding companies. These provisions of
Regulation Y are subject to numerous qualifications, limitations and restrictions. In order for a bank holding company to qualify as
“well-run,” both it and the insured depository institutions which it controls must meet the “well capitalized” and “well managed”
criteria set forth in Regulation Y.
The Gramm-Leach-Bliley Act (the “GLBA”), or the Financial Services Act of 1999, repealed provisions of the Glass-Steagall Act,
which had prohibited commercial banks and securities firms from affiliating with each other and engaging in each other’s
businesses. Thus, many of the barriers prohibiting affiliations between commercial banks and securities firms have been eliminated.
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2022 WESTAMERICA BANCORPORATION FORM 10-K
The BHCA was also amended by the GLBA to allow new “financial holding companies” (“FHCs”) to offer banking, insurance,
securities and other financial products to consumers. Specifically, the GLBA amended section 4 of the BHCA in order to provide
for a framework for the engagement in new financial activities. A bank holding company (“BHC”) may elect to become an FHC if
all its subsidiary depository institutions are well capitalized and well managed. If these requirements are met, a BHC may file a
certification to that effect with the FRB and declare that it elects to become an FHC. After the certification and declaration is filed,
the FHC may engage either de novo or through an acquisition in any activity that has been determined by the FRB to be financial
in nature or incidental to such financial activity. BHCs may engage in financial activities without prior notice to the FRB if those
activities qualify under the list of permissible activities in section 4(k) of the BHCA. However, notice must be given to the FRB
within 30 days after an FHC has commenced one or more of the financial activities. The Company has not elected to become an
FHC.
Regulation and Supervision of Banks
The Bank is a California state-chartered Federal Reserve member bank and its deposits are insured by the FDIC. The Bank is subject
to regulation, supervision and regular examination by the California Department of Financial Protection and Innovation and the
FRB. The regulations of these agencies affect most aspects of the Bank’s business and prescribe permissible types of loans and
investments, the amount of required reserves, requirements for branch offices, the permissible scope of its activities and various
other requirements.
In addition to federal banking law, the Bank is also subject to applicable provisions of California law. Under California law, the
Bank is subject to various restrictions on, and requirements regarding, its operations and administration including the maintenance
of branch offices and automated teller machines, capital requirements, deposits and borrowings, and investment and lending
activities.
In addition, the Federal Deposit Insurance Corporation Improvement Act (“FDICIA”) imposes limitations on the activities and
equity investments of state chartered, federally insured banks. FDICIA also prohibits a state bank from making an investment or
engaging in any activity as a principal that is not permissible for a national bank, unless the Bank is adequately capitalized and the
FDIC approves the investment or activity after determining that such investment or activity does not pose a significant risk to the
deposit insurance fund.
On July 21, 2010, financial regulatory reform legislation entitled the "Dodd-Frank Wall Street Reform and Consumer Protection
Act" (the "Dodd-Frank Act") was signed into law. The Dodd-Frank Act implemented far-reaching changes across the financial
regulatory landscape, including provisions that, among other things:
Centralized responsibility for consumer financial protection by creating a new agency, the Consumer Financial Protection
Bureau, responsible for implementing, examining and (as to banks with $10 billion or more in assets) enforcing compliance
with federal consumer financial laws.
Required large, publicly traded bank holding companies to create a risk committee responsible for the oversight of
enterprise risk management.
Made permanent the $250 thousand limit for federal deposit insurance.
Amended the Electronic Fund Transfer Act ("EFTA") to, among other things, give the FRB the authority to establish rules
regarding interchange fees charged for electronic debit transactions by payment card issuers having assets over $10 billion
and to enforce a new statutory requirement that such fees be reasonable and proportional to the actual cost of a transaction
to the issuer. While the Company’s assets were less than $10 billion as of December 31, 2022, interchange fees charged
by larger institutions may dictate the level of fees smaller institutions will be able to charge to remain competitive.
Provisions in the legislation that affect the payment of interest on demand deposits and interchange fees may increase the costs
associated with deposits as well as place limitations on certain revenues those deposits may generate.
Capital Standards
The federal banking agencies have adopted pursuant the Dodd-Frank Act, which are risk-based capital adequacy guidelines intended
to provide a measure of capital adequacy that reflects the degree of risk associated with a banking organization’s operations for
both transactions resulting in assets being recognized on the balance sheet as assets, and the extension of credit facilities such as
letters of credit and recourse arrangements, which are recorded as off balance sheet items. Under these guidelines, nominal dollar
amounts of assets and credit equivalent amounts of off balance sheet items are multiplied by one of several risk adjustment
percentages, which range from 0% for assets with low credit risk, such as certain U.S. government securities, to 1250% for assets
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2022 WESTAMERICA BANCORPORATION FORM 10-K
with relatively higher credit risk, such as certain securitizations. A banking organization’s risk-based capital ratios are obtained by
dividing its qualifying capital by its total risk-adjusted assets and off balance sheet items.
The federal banking agencies take into consideration concentrations of credit risk and risks from nontraditional activities, as well
as an institution’s ability to manage those risks, when determining the adequacy of an institution’s capital. This evaluation is made
as a part of the institution’s regular safety and soundness examination. The federal banking agencies also consider interest rate risk
(related to the interest rate sensitivity of an institution’s assets and liabilities, and its off balance sheet financial instruments) in the
evaluation of a bank’s capital adequacy.
On July 2, 2013, the Federal Reserve Board approved a final rule that implements changes to the regulatory capital framework for
all banking organizations over a transitional period 2015 through 2018. As of December 31, 2022, the Company’s and the Bank’s
respective regulatory capital ratios exceeded applicable regulatory minimum capital requirements. See Note 9 to the consolidated
financial statements included in this Report for capital ratios of the Company and the Bank, compared to minimum capital
requirements and for the Bank the standards for well capitalized depository institutions.
In November 2019, the federal banking regulators published final rules implementing community bank leverage ratio, which is a
simplified measure of capital adequacy for certain banking organizations that have less than $10 billion in total consolidated assets.
A qualifying community banking organization that elects to use the community bank leverage ratio framework and that maintains
a leverage ratio of greater than 9% is considered to have satisfied the generally applicable risk-based and leverage capital
requirements and, if applicable, is considered to have met the “well capitalized” ratio requirements for purposes of its primary
federal regulator’s prompt corrective action rules, discussed below. The Company does not have any immediate plans to elect to
use the community bank leverage ratio framework but may make such an election in the future.
See the sections entitled “Capital Resources and Capital to Risk-Adjusted Assets” in Item 7, Management’s Discussion and Analysis
of Financial Condition and Results of Operations for additional information.
Prompt Corrective Action and Other Enforcement Mechanisms
FDICIA requires each federal banking agency to take prompt corrective action to resolve the problems of insured depository
institutions, including but not limited to those that fall below one or more prescribed minimum capital ratios.
An institution that, based upon its capital levels, is classified as “well capitalized,” “adequately capitalized” or “undercapitalized”
may be treated as though it were in the next lower capital category if the appropriate federal banking agency, after notice and
opportunity for hearing, determines that an unsafe or unsound condition or an unsafe or unsound practice warrants such treatment.
At each successive lower capital category, an insured depository institution is subject to more restrictions. In addition to measures
taken under the prompt corrective action provisions, commercial banking organizations may be subject to potential enforcement
actions by the federal banking agencies for unsafe or unsound practices in conducting their businesses or for violations of any law,
rule, regulation or any condition imposed in writing by the agency or any written agreement with the agency.
Safety and Soundness Standards
FDICIA has implemented certain specific restrictions on transactions and required federal banking regulators to adopt overall safety
and soundness standards for depository institutions related to internal control, loan underwriting and documentation, and asset
growth. Among other things, FDICIA limits the interest rates paid on deposits by undercapitalized institutions, restricts the use of
brokered deposits, limits the aggregate extensions of credit by a depository institution to an executive officer, director, principal
shareholder or related interest, and reduces deposit insurance coverage for deposits offered by undercapitalized institutions for
deposits by certain employee benefits accounts. The federal banking agencies may require an institution to submit an acceptable
compliance plan as well as have the flexibility to pursue other more appropriate or effective courses of action given the specific
circumstances and severity of an institution’s noncompliance with one or more standards.
Federal banking agencies require banks to maintain adequate valuation allowances for potential credit losses. The Company has an
internal staff that continually reviews loan quality and reports to the Board of Directors. This analysis includes a detailed review of
the classification and categorization of problem loans, assessment of the overall quality and collectability of the loan portfolio,
consideration of loan loss experience, trends in problem loans, concentration of credit risk, and current economic conditions,
particularly in the Bank’s market areas. Based on this analysis, Management, with the review and approval of the Board, determines
the adequate level of allowance required. The allowance is allocated to different segments of the loan portfolio, but the entire
allowance is available for the loan portfolio in its entirety.
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2022 WESTAMERICA BANCORPORATION FORM 10-K
Restrictions on Dividends and Other Distributions
The Company’s ability to pay dividends to its shareholders is subject to the restrictions set forth in the California General
Corporation Law (“CGCL”). The CGCL provides that a corporation may make a distribution to its shareholders if (i) the
corporation’s retained earnings equal or exceed the amount of the proposed distribution plus unpaid accrued dividends (if any) on
securities with a dividend preference, or (ii) immediately after the dividend, the corporation’s total assets equal or exceed total
liabilities plus unpaid accrued dividends (if any) on securities with a dividend preference.
The Company’s ability to pay dividends depends in part on the Bank’s ability to pay cash dividends to the Company. The power of
the board of directors of an insured depository institution to declare a cash dividend or other distribution with respect to capital is
subject to statutory and regulatory restrictions which limit the amount available for such distribution depending upon the earnings,
financial condition and cash needs of the institution, as well as general business conditions. FDICIA prohibits insured depository
institutions from paying management fees to any controlling persons or, with certain limited exceptions, making capital
distributions, including dividends, if, after such transaction, the institution would be undercapitalized.
In addition to the restrictions imposed under federal law, banks chartered under California law generally may only pay cash
dividends to the extent such payments do not exceed the lesser of retained earnings of the bank or the bank’s net income for its last
three fiscal years (less any distributions to shareholders during this period). In the event a bank desires to pay cash dividends in
excess of such amount, the bank may pay a cash dividend with the prior approval of the Commissioner in an amount not exceeding
the greatest of the bank’s retained earnings, the bank’s net income for its last fiscal year or the bank’s net income for its current
fiscal year.
The federal banking agencies also have the authority to prohibit a depository institution or its holding company from engaging in
business practices which are considered to be unsafe or unsound, possibly including payment of dividends or other payments under
certain circumstances even if such payments are not expressly prohibited by statute. The Federal Reserve Board has issued guidance
indicating its expectations that a bank holding company will inform and consult with Federal Reserve supervisory staff sufficiently
in advance of (i) declaring and paying a dividend that could raise safety and soundness concerns (e.g., declaring and paying a
dividend that exceeds earnings for the period for which the dividend is being paid); (ii) redeeming or repurchasing regulatory capital
instruments when the bank holding company is experiencing financial weaknesses; or (iii) redeeming or repurchasing common
stock or perpetual preferred stock that would result in a net reduction as of the end of the quarter in the amount of such equity
instruments outstanding compared with the beginning of the quarter in which the redemption or repurchase occurred.
Premiums for Deposit Insurance and FDIC Regulation
Substantially all of the deposits of the Bank are insured up to applicable limits by the DIF of the FDIC and are subject to deposit
insurance assessments to maintain the DIF. The FDIC utilizes a risk-based assessment system that imposes insurance premiums
based upon a risk matrix that takes into account a bank's capital level, asset quality and supervisory rating.
In July 2010, Congress in the Dodd-Frank Act increased the minimum for the DIF reserve ratio, the ratio of the amount in the fund
to insured deposits, from 1.15% to 1.35% and required that the ratio reach that level by September 30, 2020. Further, the Dodd-
Frank Act made banks with $10 billion or more in assets responsible for the increase from 1.15% to 1.35%, among other provisions.
Extraordinary growth in insured deposits during the first and second quarters of 2020 caused the DIF reserve ratio to decline below
the statutory minimum of 1.35%. The Federal Deposit Insurance Act (the “FDI Act”) requires that the FDIC’s Board of Directors
adopt a restoration plan when the DIF reserve ratio falls below 1.35% or is expected to within 6 months. Under the FDI Act, the
restoration plan must restore the reserve ratio to at least 1.35% within 8 years of establishing the Plan, absent extraordinary
circumstances. The FDIC established the following Restoration Plan (the “Plan”) on September 15, 2020.
•
•
•
The FDIC will monitor deposit balance trends, potential losses, and other factors that affect the reserve ratio;
The FDIC will maintain the current schedule of assessment rates for all insured depository institutions; and
At least semiannually, the FDIC will update its analysis and projections for the DIF and, if necessary, recommend any
modifications to the Plan, such as increasing assessment rates.
The Plan was amended in June 2022, to restore the DIF reserve ratio to at least 1.35% by September 30, 2028. On October 18, 2022
the FDIC adopted a final rule to increase initial base deposit insurance assessment rates for insured depository institutions by 2
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2022 WESTAMERICA BANCORPORATION FORM 10-K
basis points, beginning with the first quarterly assessment period of 2023. The increased assessment rate schedules will remain in
effect unless and until the reserve ratio of the DIF meets or exceeds 2%. A significant increase in DIF insurance premiums would
have an adverse effect on the operating expenses and results of operations of the Bank. The Company cannot provide any assurance
as to the effect of any future changes in its deposit insurance premium rates.
While the FDIC is not Bank's primary federal regulator, as the insurer of the Bank's deposits, the FDIC is authorized to conduct
examinations of and to require reporting by FDIC-insured institutions. It also may prohibit any FDIC-insured institution from
engaging in any activity the FDIC determines by regulation or order poses a serious risk to the DIF. The FDIC also has authority to
initiate enforcement actions against any FDIC-insured institution after giving its primary federal regulator the opportunity to take
such action, and may seek to terminate the deposit insurance if it determines that the institution has engaged in unsafe or unsound
practices or is in an unsafe or unsound condition. Finally, the FDIC may terminate deposit insurance upon a finding that the
institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations, or has violated
any applicable law, regulation, rule, order, or condition imposed by the FDIC.
Economic Growth, Regulatory Relief and Consumer Protection Act
On May 24, 2018, President Trump signed into law the first major financial services reform bill since the enactment of the Dodd-
Frank Act. The Economic Growth, Regulatory Relief, and Consumer Protection Act (the “Relief Act”) modifies or eliminates
certain requirements on community and regional banks and nonbank financial institutions. For instance, under the Relief Act and
related rule making:
•
•
banks that have less than $10 billion in total consolidated assets and total trading assets and trading liabilities of less than
five percent of total consolidated assets are exempt from Section 619 of the Dodd-Frank Act, known as the “Volcker
Rule”, which prohibits “proprietary trading” and the ownership or sponsorship of private equity or hedge funds that are
referred to as “covered funds”; and
a new “community bank leverage ratio” was adopted, which is applicable to certain banks and bank holding companies
with total assets of less than $10 billion (as described above under “Capital Requirements”).
Community Reinvestment Act and Fair Lending Laws
The Bank is subject to certain fair lending requirements and reporting obligations involving home mortgage lending operations and
Community Reinvestment Act (“CRA”) activities. The CRA generally requires the federal banking agencies to evaluate the record
of financial institutions in meeting the credit needs of their local communities, including low and moderate income neighborhoods.
In addition to substantive penalties and corrective measures that may be required for a violation of certain fair lending laws, the
federal banking agencies may take compliance with such laws and CRA into account when regulating and supervising other
activities including merger applications. In May 2022, the federal banking agencies released for public comment proposed rules to
modernize CRA regulations. The Company continues to evaluate the impact of any changes to the CRA regulations.
Financial Privacy Legislation and Customer Information Security
The GLBA, in addition to the previously described changes in permissible nonbanking activities permitted to banks, BHCs and
FHCs, also required the federal banking agencies, among other federal regulatory agencies, to adopt regulations governing the
privacy of consumer financial information. The Bank is subject to the FRB’s regulations in this area. The federal bank regulatory
agencies have established standards for safeguarding nonpublic personal information about customers that implement provisions of
the GLBA (the “Guidelines”). Among other things, the Guidelines require each financial institution, under the supervision and
ongoing oversight of its Board of Directors or an appropriate committee thereof, to develop, implement and maintain a
comprehensive written information security program designed to ensure the security and confidentiality of customer information,
to protect against any anticipated threats or hazards to the security or integrity of such information, and to protect against
unauthorized access to or use of such information that could result in substantial harm or inconvenience to any customer.
Anti-Money Laundering Laws
The Bank Secrecy Act, as amended by the USA PATRIOT Act, gives the federal government powers to address money laundering
and terrorist threats through enhanced domestic security measures, expanded surveillance powers and mandatory transaction
reporting obligations. The Bank Secrecy Act and related regulations require financial institutions to report currency transactions
that exceed certain thresholds and transactions determined to be suspicious, establish due diligence requirements for accounts and
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2022 WESTAMERICA BANCORPORATION FORM 10-K take certain steps to verify customer identification when accounts are opened. The Bank Secrecy Act also requires financial
institutions to develop and maintain a program reasonably designed to ensure and monitor compliance with its requirements, to
train employees to comply with and to test the effectiveness of the program. Any failure to meet the requirements of the Bank
Secrecy Act can result in the imposition of substantial penalties and in adverse regulatory action against the offending bank.
The Anti-Money Laundering Act of 2020 (“AMLA”), which amends the Bank Secrecy Act, was enacted in January 2021. The
AMLA is a comprehensive reform and modernization to U.S. bank secrecy and anti-money laundering laws. Among other things,
it codifies a risk-based approach to anti-money laundering compliance for financial institutions; requires the development of
standards for evaluating technology and internal processes for Bank Secrecy Act compliance; expands enforcement and
investigative authority, including increasing available sanctions for certain Bank Secrecy Act violations and instituting Bank
Secrecy Act whistleblower incentives and protections.
Programs To Mitigate Identity Theft
In November 2007, federal banking agencies together with the National Credit Union Administration and Federal Trade
Commission adopted regulations under the Fair and Accurate Credit Transactions Act of 2003 to require financial institutions and
other creditors to develop and implement a written identity theft prevention program to detect, prevent and mitigate identity theft
in connection with certain new and existing accounts. Covered accounts generally include consumer accounts and other accounts
that present a reasonably foreseeable risk of identity theft. Each institution’s program must include policies and procedures designed
to: (i) identify indicators, or “red flags,” of possible risk of identity theft; (ii) detect the occurrence of red flags; (iii) respond
appropriately to red flags that are detected; and (iv) ensure that the program is updated periodically as appropriate to address
changing circumstances. The regulations include guidelines that each institution must consider and, to the extent appropriate,
include in its program.
Pending Legislation
Changes to state laws and regulations (including changes in interpretation or enforcement) can affect the operating environment of
BHCs and their subsidiaries in substantial and unpredictable ways. From time to time, various legislative and regulatory proposals
are introduced. These proposals, if codified, may change banking statutes and regulations and the Company’s operating environment
in substantial and unpredictable ways. If codified, these proposals could increase or decrease the cost of doing business, limit or
expand permissible activities or affect the competitive balance among banks, savings associations, credit unions and other financial
institutions. The Company cannot accurately predict whether those changes in laws and regulations will occur, and, if those changes
occur, the ultimate effect they would have upon its financial condition or results of operations. It is likely, however, that the current
level of enforcement and compliance-related activities of federal and state authorities will continue and potentially increase.
Competition
The Bank’s principal competitors for deposits and loans are major banks and smaller community banks, savings and loan
associations and credit unions. To a lesser extent, competitors include thrift and loans, mortgage brokerage companies and insurance
companies. Other institutions, such as brokerage houses, mutual fund companies, credit card companies, and certain retail
establishments offer investment vehicles that also compete with banks for deposit business. Federal legislation in recent years has
encouraged competition between different types of financial institutions and fostered new entrants into the financial services market.
Legislative changes, as well as technological and economic factors, can be expected to have an ongoing impact on competitive
conditions within the financial services industry. While the future impact of regulatory and legislative changes cannot be predicted
with certainty, the business of banking will remain highly competitive.
ITEM 1A. RISK FACTORS
Readers and prospective investors in the Company’s securities should carefully consider the following risk factors as well as the
other information contained or incorporated by reference in this Report.
The risks and uncertainties described below are not the only ones facing the Company. Additional risks and uncertainties that
Management is not aware of or focused on or that Management currently deems immaterial may also impair the Company’s business
operations. This Report is qualified in its entirety by these risk factors.
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2022 WESTAMERICA BANCORPORATION FORM 10-K
If any of the following risks actually occur, the Company’s financial condition and results of operations could be materially and
adversely affected. If this were to happen, the value of the company’s securities could decline significantly, and investors could
lose all or part of their investment in the Company’s common stock.
Market and Interest Rate Risk
Changes in interest rates could reduce income and cash flow.
The Company’s income and cash flow depend to a great extent on the difference between the interest earned on loans and investment
securities and the interest paid on deposits and other borrowings, and the Company’s success in competing for loans and deposits.
The Company cannot control or prevent changes in the level of interest rates which fluctuate in response to general economic
conditions, the policies of various governmental and regulatory agencies, in particular, the FRB’s FOMC, and pricing practices of
the Company’s competitors. Changes in monetary policy, including changes in interest rates, will influence the origination of loans,
the purchase of investments, the generation of deposits and other borrowings, and the rates received on loans and investment
securities and paid on deposits and other liabilities. The discussion in this Report under “Item 7 Management’s Discussion and
Analysis of Financial Condition and Results of Operations – Asset, Liability and Market Risk Management” and “- Liquidity and
Funding” and “Item 7A Quantitative and Qualitative Disclosures About Market Risk” is incorporated by reference in this paragraph.
Changes in capital market conditions could reduce asset valuations.
Capital market conditions, including interest rates, liquidity, investor confidence, bond issuer credit worthiness, perceived counter-
party risk, the supply of and demand for financial instruments, the financial strength of market participants, and other factors can
materially impact the value of the Company’s assets. An impairment in the value of the Company’s assets could result in asset
write-downs, reducing the Company’s asset values, earnings, and equity.
The value of securities in the Company’s investment securities portfolio may be negatively affected by disruptions in securities
markets.
The market for some of the investment securities held in the Company’s portfolio can be extremely volatile. Volatile market
conditions may detrimentally affect the value of these securities, such as through reduced valuations due to the perception of
heightened credit and liquidity risks. There can be no assurance that the declines in market value will not result in other than
temporary impairments of these assets, which would lead to loss recognition that could have a material adverse effect on the
Company’s net income and capital levels.
The weakness of other financial institutions could adversely affect the Company.
Financial services institutions are interrelated as a result of trading, clearing, counterparty, or other relationships. The Company
routinely executes transactions with counterparties in the financial services industry, including brokers and dealers, commercial
banks, investment banks, and other institutional clients. Many of these transactions expose the Company to credit risk in the event
of default of the Company’s counterparty or client. In addition, the Company’s credit risk may be increased when the collateral the
Company holds cannot be realized or is liquidated at prices not sufficient to recover the full amount of the secured obligation. There
is no assurance that any such losses would not materially and adversely affect the Company’s results of operations or earnings.
Shares of Company common stock eligible for future sale or grant of stock options and other equity awards could have a dilutive
effect on the market for Company common stock and could adversely affect the market price.
The Articles of Incorporation of the Company authorize the issuance of 150 million shares of common stock (and two additional
classes of 1 million shares each, denominated “Class B Common Stock” and “Preferred Stock”, respectively) of which
approximately 26.9 million shares of common stock were outstanding at December 31, 2022. Pursuant to its stock option plans, at
December 31, 2022, the Company had outstanding options for 854 thousand shares of common stock, of which 508 thousand were
currently exercisable. As of December 31, 2022, 856 thousand shares of Company common stock remained available for grants
under the Company’s equity incentive plans. Sales of substantial amounts of Company common stock in the public market could
adversely affect the market price of its common stock.
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2022 WESTAMERICA BANCORPORATION FORM 10-K
The Company’s payment of dividends on common stock could be eliminated or reduced.
Holders of the Company’s common stock are entitled to receive dividends only when, as, and if declared by the Company’s Board
of Directors. The Company’s ability to pay dividends is limited by banking and corporate laws, and depends, among other things,
on the Company’s regulatory capital levels and earnings prospectus, as well as the Bank’s ability to pay cash dividends to the
Company. Although the Company has historically paid cash dividends on the Company’s common stock, the Company is not
required to do so and the Company’s Board of Directors could reduce or eliminate the Company’s common stock dividend in the
future.
The Company could repurchase shares of its common stock at price levels considered excessive.
The Company repurchases and retires its common stock in accordance with Board of Directors-approved share repurchase
programs. At December 31, 2022, 1.75 million shares remained available to repurchase under such plans. The Company has been
active in repurchasing and retiring shares of its common stock when alternative uses of excess capital, such as acquisitions, have
been limited. The Company could repurchase shares of its common stock at price levels considered excessive, thereby spending
more cash on such repurchases as deemed reasonable and effectively retiring fewer shares than would be retired if repurchases were
effected at lower prices.
Risks Related to the Nature and Geographical Location of the Company’s Business
The Company invests in loans that contain inherent credit risks that may cause the Company to incur losses.
The risk that borrowers may not pay interest or repay their loans as agreed is an inherent risk of the banking business. The Company
strives to mitigate this risk by adhering to sound and proven underwriting practices, managed by experienced and knowledgeable
credit professionals. Nonetheless, the Company may incur losses on loans that meet its underwriting criteria, and these losses may
exceed the amounts set aside as reserves. The Company can provide no assurance that the credit quality of the loan portfolio will
not deteriorate in the future and that such deterioration will not adversely affect the Company or its results of operations.
The Company’s operations are concentrated geographically in California, and poor economic conditions may cause the
Company to incur losses.
Substantially all of the Company’s business is located in California. A portion of the loan portfolio of the Company is dependent
on real estate. At December 31, 2022, real estate served as the principal source of collateral with respect to approximately 54% of
the Company’s loan portfolio. The Company’s financial condition and operating results will be subject to changes in economic
conditions in California. Much of the California real estate market could experience a decline in values of varying degrees. This
decline could have an adverse impact on the business of some of the Company’s borrowers and on the value of the collateral for
many of the Company’s loans. Generally, the counties surrounding and near San Francisco Bay could recover more soundly from
the recession than counties in the California “Central Valley,” from Sacramento in the north to Bakersfield in the south, where many
of the Bank’s customers are located . Approximately 22% of the Company’s loans were to borrowers in the California “Central
Valley” as of December 31, 2022. Economic conditions in California’s diverse geographic markets can be vastly different and are
subject to various uncertainties, including the condition of the construction and real estate sectors, the effect of drought on the
agricultural sector and its infrastructure, and the California state and municipal governments’ budgetary and fiscal conditions. The
Company can provide no assurance that conditions in any sector or geographic market of the California economy will not deteriorate
in the future and that such deterioration will not adversely affect the Company.
The markets in which the Company operates are subject to the risk of earthquakes, fires, storms and other natural disasters.
All of the properties of the Company are located in California. Also, most of the real and personal properties which currently secure
a majority of the Company’s loans are located in California. Further, the Company invests in securities issued by companies and
municipalities operating throughout the United States, and in mortgage-backed securities collateralized by real property located
throughout the United States. California and other regions of the United States are prone to earthquakes, brush and wildfires,
flooding, drought and other natural disasters. In addition to possibly sustaining uninsured damage to its own properties, if there is
a major earthquake, flood, drought, fire or other natural disaster, the Company faces the risk that many of its debtors may experience
uninsured property losses, or sustained business or employment interruption and/or loss which may materially impair their ability
to meet the terms of their debt obligations. A major earthquake, flood, prolonged drought, fire or other natural disaster in California
or other regions of the United States could have a material adverse effect on the Company’s business, financial condition, results
of operations and cash flows.
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2022 WESTAMERICA BANCORPORATION FORM 10-K
Adverse changes in general business or economic conditions, including inflation, could have a material adverse effect on the
Company’s financial condition and results of operations.
A sustained or continuing weakness or weakening in business and economic conditions generally or specifically in the principal
markets in which the Company does business could have one or more of the following adverse impacts on the Company’s business:
a decrease in the demand for loans and other products and services offered by the Company;
an increase or decrease in the usage of unfunded credit commitments;
an increase or decrease in the amount of deposits;
a decrease in non-depository funding available to the Company;
an impairment of certain intangible assets, including goodwill;
an increase in the number of clients and counterparties who become delinquent, file for protection under bankruptcy laws
or default on their loans or other obligations to the Company, which could result in a higher level of nonperforming assets,
net charge-offs, provision for credit losses, reduced interest revenue and cash flows, and valuation adjustments on assets;
an impairment in the value of investment securities;
an impairment in the value of life insurance policies owned by the Company;
an impairment in the value of real estate owned by the Company; and
an increase in operating costs
The 2008 - 2009 financial crisis led to the failure or merger of a number of financial institutions. Financial institution failures can
result in further losses as a consequence of defaults on securities issued by them and defaults under contracts entered into with such
entities as counterparties. The failure of institutions with FDIC insured deposits can cause the DIF reserve ratio to decline, resulting
in increased deposit insurance assessments on surviving FDIC insured institutions. Weak economic conditions can significantly
weaken the strength and liquidity of financial institutions.
The Company’s financial performance generally, and in particular the ability of borrowers to pay interest on and repay principal of
outstanding loans and the value of collateral securing those loans, is highly dependent upon the business environment in the markets
where the Company operates, in the State of California and in the United States as a whole. A favorable business environment is
generally characterized by, among other factors, economic growth, healthy labor markets, efficient capital markets, low inflation,
high business and investor confidence, and strong business earnings. Unfavorable or uncertain economic and market conditions can
be caused by: declines in economic growth, high rates of unemployment, deflation, pandemics, declines in business activity or
consumer, investor or business confidence; limitations on the availability of or increases in the cost of credit and capital; increases
in inflation; natural disasters; or a combination of these or other factors.
Such business conditions could adversely affect the credit quality of the Company’s loans, the demand for loans, loan volumes and
related revenue, securities valuations, amounts of deposits, availability of funding, results of operations and financial condition.
Regulatory Risks
Restrictions on dividends and other distributions could limit amounts payable to the Company.
As a holding company, a substantial portion of the Company’s cash flow typically comes from dividends paid by the Bank. Various
statutory provisions restrict the amount of dividends the Company’s subsidiaries can pay to the Company without regulatory
approval. A reduction in subsidiary dividends paid to the Company could limit the capacity of the Company to pay dividends. In
addition, if any of the Company’s subsidiaries were to liquidate, that subsidiary’s creditors will be entitled to receive distributions
from the assets of that subsidiary to satisfy their claims against it before the Company, as a holder of an equity interest in the
subsidiary, will be entitled to receive any of the assets of the subsidiary.
Adverse effects of changes in banking or other laws and regulations or governmental fiscal or monetary policies could adversely
affect the Company.
The Company is subject to significant federal and state regulation and supervision, which is primarily for the benefit and protection
of the Company’s customers and not for the benefit of investors. In the past, the Company’s business has been materially affected
by these regulations.
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2022 WESTAMERICA BANCORPORATION FORM 10-K
Laws, regulations or policies, including accounting standards and interpretations currently affecting the Company and the
Company’s subsidiaries, may change at any time. Regulatory authorities may also change their interpretation of these statutes and
regulations. Therefore, the Company’s business may be adversely affected by any future changes in laws, regulations, policies or
interpretations or regulatory approaches to compliance and enforcement including future acts of terrorism, major U.S. corporate
bankruptcies and reports of accounting irregularities at U.S. public companies.
Additionally, the Company’s business is affected significantly by the fiscal and monetary policies of the federal government and
its agencies. The Company is particularly affected by the policies of the FRB, which regulates the supply of money and credit in
the United States of America. Among the instruments of monetary policy available to the FRB are (a) conducting open market
operations in U.S. government securities, (b) changing the discount rates of borrowings by depository institutions, (c) changing
interest rates paid on balances financial institutions deposit with the FRB, and (d) imposing or changing reserve requirements against
certain borrowings by banks and their affiliates. These methods are used in varying degrees and combinations to directly affect the
availability of bank loans and deposits, as well as the interest rates charged on loans and paid on deposits. The policies of the FRB
may have a material effect on the Company’s business, results of operations and financial condition. Under long- standing policy
of the FRB, a BHC is expected to act as a source of financial strength for its subsidiary banks. As a result of that policy, the Company
may be required to commit financial and other resources to its subsidiary bank in circumstances where the Company might not
otherwise do so.
Federal and state governments could pass legislation detrimental to the Company’s performance.
As an example, the Company could experience higher credit losses because of federal or state legislation or regulatory action that
reduces the amount the Bank's borrowers are otherwise contractually required to pay under existing loan contracts. Also, the
Company could experience higher credit losses because of federal or state legislation or regulatory action that limits or delays the
Bank's ability to foreclose on property or other collateral or makes foreclosure less economically feasible. Federal, state and local
governments could pass tax legislation causing the Company to pay higher levels of taxes.
The FDIC insures deposits at insured financial institutions up to certain limits. The FDIC charges insured financial institutions
premiums to maintain the Deposit Insurance Fund. The FDIC may increase premium assessments to maintain adequate funding of
the Deposit Insurance Fund.
The behavior of depositors in regard to the level of FDIC insurance could cause the Bank’s existing customers to reduce the amount
of deposits held at the Bank, and could cause new customers to open deposit accounts at the Bank. The level and composition of
the Bank's deposit portfolio directly impacts the Bank's funding cost and net interest margin.
Systems, Accounting and Internal Control Risks
The accuracy of the Company’s judgments and estimates about financial and accounting matters will impact operating results
and financial condition.
The Company makes certain estimates and judgments in preparing its financial statements. For example, the Company maintains a
reserve for potential loan defaults and non-performance. There is no precise method of predicting loans losses and determining the
adequacy of the reserve requires the Company’s management to make a number of estimates and judgments. If the estimates or
judgments prove to be incorrect, the Company could be required to increase its provisions for credit losses, which could reduce its
income or could cause it to incur operating losses in the future. The Company also uses models to estimate the effects of changing
interest rates, which are based on estimates and assumptions that may prove to be inaccurate, particularly in times of market stress
or unforeseen circumstances. Therefore, the quality and accuracy of management’s estimates and judgments will have an impact
on the Company’s operating results and financial condition. For additional information, please see the discussion under “Item 7
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies” in this
Report, which is incorporated by reference in this paragraph.
The Company’s information systems may experience an interruption or breach in security.
The Company relies heavily on communications and information systems, including those of third party vendors and other service
providers, to conduct its business. Any failure, interruption or breach in security of these systems could result in failures or
disruptions in the Company’s data processing, accounting, customer relationship management and other systems. Communication
and information systems failures can result from a variety of risks including, but not limited to, events that are wholly or partially
out of the Company’s control, such as telecommunication line integrity, weather, terrorist acts, natural disasters, accidental disasters,
- 13 -
2022 WESTAMERICA BANCORPORATION FORM 10-K
unauthorized breaches of security systems, energy delivery systems, cyber attacks, and other events. Although the Company devotes
significant resources to maintain and regularly upgrade its systems and processes that are designed to protect the security of the
Company’s computer systems, software, networks and other technology assets and the confidentiality, integrity and availability of
information belonging to the Company and its customers, there is no assurance that any such failures, interruptions or security
breaches will not occur or, if they do occur, that they will be adequately corrected by the Company or its vendors. The occurrence
of any such failures, interruptions or security breaches could damage the Company’s reputation, result in a loss of customer business,
subject the Company to additional regulatory scrutiny, or expose the Company to litigation and possible financial liability, any of
which could have a material adverse effect on the Company’s financial condition and results of operations.
The Company’s controls and procedures may fail or be circumvented.
Management regularly reviews and updates the Company’s internal control over financial reporting, disclosure controls and
procedures, and corporate governance policies and procedures. The Company maintains controls and procedures to mitigate against
risks such as processing system failures and errors, and customer or employee fraud, and maintains insurance coverage for certain
of these risks. Any system of controls and procedures, however well designed and operated, is based in part on certain assumptions
and can provide only reasonable, not absolute, assurances that the objectives of the system are met. Events could occur which are
not prevented or detected by the Company’s internal controls or are not insured against or are in excess of the Company’s insurance
limits or insurance underwriters’ financial capacity. Any failure or circumvention of the Company’s controls and procedures or
failure to comply with regulations related to controls and procedures could have a material adverse effect on the Company’s
business, results of operations and financial condition.
Operational Risks
Climate change and the transition to renewable energy and a net zero emissions economy pose operational, commercial and
regulatory risks.
Climate change may increase the frequency or severity of extreme weather events, and if the Company is not adequately resilient
to deal with acute climate events, its operations may be impacted. Extreme weather events could also impact the activities of its
customers or third-party vendors. The physical commodities and assets underlying some of its markets or investments may also be
impacted by climate change.
Our risk management practices incorporate the challenges brought about by climate change. The operations conducted in our
centralized facilities and branch locations can be disrupted by acute physical risks such as flooding and windstorms, and by chronic
physical risks such as rising sea levels, sustained higher temperatures, drought, and increased wildfires. Over the intermediate and
longer-term, the Company can be subject to transition risks such as market demand, and policy and law changes.
None of the Company’s physical locations are located near sea level, and only a limited number of branches are located in flood
zones. Our principal electricity supplier reports a Power Content Label of 100% greenhouse gas free using the California Energy
Commission’s methodology. Our principal information technology vendor’s goal is to achieve 100% carbon neutrality for Scope
1 and 2 greenhouse gas emissions by 2025. The Company and its critical vendors maintain property and casualty insurance, and
maintain and regularly test disaster recovery plans, which include redundant operational locations and power sources. The
Company’s operations do not use a significant amount of water in producing our products and services.
The Company monitors the climate risks of our loan customers. Borrowers with real estate loan collateral located in flood zones
must carry flood insurance under the loans’ terms. The Company has $21 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 without
encountering financial hardship. The Company makes automobile loans; changes in consumer demand, or governmental laws or
policies, regarding gasoline, electric and hybrid vehicles is not considered a risk 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.
In addition, the transition to renewable energy and a net zero emissions economy involves changes to consumer and institutional
preferences for energy consumption, and other products and services, and the possible failure of its services to facilitate the needs
of customers during the transition to renewable energy and changes in customer preferences could adversely impact its business
and revenues. Changing preferences could also have an adverse impact on the operations or financial condition of its customers,
which could result in reduced revenues from those customers. The Company is also subject to risks relating to new or heightened
climate change-related regulations or legislation, which could impact its customers.
- 14 -
2022 WESTAMERICA BANCORPORATION FORM 10-K The risks associated with climate change and the transition to renewable energy and a net zero emissions economy continue to
evolve rapidly, and climate change-related risks may change or increase over time.
The continuing effects of the COVID-19 pandemic and its 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 have been, and may continue to be, affected by the macroeconomic
impacts resulting from COVID-19, and the Company’s financial results in future periods may differ significantly from the
Company’s historical results. The extent to which the Company’s business will continue to 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 continued financial
market instability.
If the Company loses the services of any of our key management personnel, its business could suffer.
Our future success significantly depends on the continued service and performance of our key management personnel. Our senior
management team has significant industry experience and would be difficult to replace. In particular, David L. Payne, our Chairman,
President and Chief Executive Officer, has led the Company for over 30 years. Competition for these employees is intense and we
may not be able to attract and retain key personnel. If we are unable to attract or retain appropriately qualified personnel, we may
not be successful in originating loans and servicing our customers, which could have a materially adverse effect on our business,
financial condition and results of operations.
The Company competes with many banks and other traditional, non-traditional, brick and mortar and online financial service
providers.
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 lenders 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.
The Company must continue to attract, retain and develop key personnel.
The Company’s success depends to a significant extent upon its ability to attract, develop and retain experienced personnel in each
of its lines of business and markets including managers in operational areas, compliance and other support areas to build and
maintain the infrastructure and controls required to support continuing growth. Competition for the best people in the industry can
be intense, and there is no assurance that the Company will continue to attract or retain talent or develop personnel. Factors that
affect its ability to attract, develop and retain key employees include compensation and benefits programs, profitability, ability to
establish appropriate succession plans for key talent, reputation for rewarding and promoting qualified employees and market
competition for employees with certain skills, including information systems development and security. The cost of employee
compensation is a significant portion of operating expenses and can materially impact results of operations or profitability,
especially during periods of wage inflation. The unanticipated loss of the services of key personnel could have an adverse effect on
the business.
The Company is subject to environmental liability risk associated with lending activities
A significant portion of our loan portfolio is secured by real property. During the ordinary course of business, we foreclose on and
take title to properties securing certain loans. In doing so, there is a risk that hazardous or toxic substances could be found on these
properties. If hazardous or toxic substances are found, we may be liable for remediation costs, as well as for personal injury and
property damage. Environmental laws may require us to incur substantial expenses and may materially reduce the affected
property’s value or limit our ability to use or ability to sell the affected property. Environmental reviews of real property before
initiating foreclosure actions may not be sufficient to detect all potential environmental hazards. The remediation costs and any
- 15 -
2022 WESTAMERICA BANCORPORATION FORM 10-K other financial liabilities associated with an environmental hazard could have a material adverse effect on our business, financial
condition and results of operations.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None
ITEM 2. PROPERTIES
Branch Offices and Facilities
The Bank is engaged in the banking business through 77 branch offices in 20 counties in Northern and Central California. The Bank
believes all of its offices are constructed and equipped to meet prescribed security requirements.
The Company owns 28 banking office locations and one centralized administrative service center facility and leases 55 facilities.
Most of the leases contain renewal options and provisions for rental increases, principally for changes in the cost of living index,
and for changes in other operating costs such as property taxes and maintenance.
ITEM 3. LEGAL PROCEEDINGS
Due to the nature of its business, the Company is subject to various threatened or filed legal cases. Neither the Company nor any of
its subsidiaries is a party to any material pending legal proceeding, nor is their property the subject of any material pending legal
proceeding, other than ordinary routine legal proceedings arising in the ordinary course of the Company’s business. Based on the
advice of legal counsel, the Company does not expect such cases will have a material, adverse effect on its business, financial
position or results of operations. Legal liabilities are accrued when obligations become probable and the amount can be reasonably
estimated.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
The Company’s common stock is traded on the NASDAQ Stock Market (“NASDAQ”) under the symbol “WABC”. As of January
31, 2023, there were approximately 4,800 shareholders of record of the Company’s common stock.
The Company has paid cash dividends on its common stock in every quarter since its formation in 1972. See Item 8, Financial
Statements and Supplementary Data, Note 19 to the consolidated financial statements for recent quarterly dividend information. It
is currently the intention of the Board of Directors of the Company to continue payment of cash dividends on a quarterly basis.
There is no assurance, however, that any dividends will be paid since they are dependent upon earnings, cash balances, financial
condition and capital requirements of the Company and its subsidiaries as well as policies of the FRB pursuant to the BHCA. See
Item 1, “Business - Supervision and Regulation.”
The notes to the consolidated financial statements included in this Report contain additional information regarding the Company’s
capital levels, capital structure, regulations affecting subsidiary bank dividends paid to the Company, the Company’s earnings,
financial condition and cash flows, and cash dividends declared and paid on common stock.
Stock performance
The following chart compares the cumulative return on the Company’s stock during the ten years ended December 31, 2022 with
the cumulative return on the S&P 500 composite stock index and NASDAQ’S Bank Index. The comparison assumes $100 invested
in each on December 31, 2012 and reinvestment of all dividends.
- 16 -
2022 WESTAMERICA BANCORPORATION FORM 10-K Ten-Year Return Performance
$450
$400
$350
$300
$250
$200
$150
$100
$50
$0
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Westamerica Bancorporation (WABC)
S&P 500 (SPX)
NASDAQ Bank Index (CBNK)
Westamerica Bancorporation (WABC) ......................................
S&P 500 (SPX)...........................................................................
NASDAQ Bank Index (CBNK)..................................................
December 31,
2012
$100.00
100.00
100.00
2013
$136.76
132.31
141.82
2014
$122.46
150.27
148.71
2015
$120.76
152.29
161.71
2016
$167.59
170.46
222.84
2017
$163.13
207.60
234.72
Westamerica Bancorporation (WABC) .......................................................
S&P 500 (SPX)............................................................................................
NASDAQ Bank Index (CBNK)...................................................................
2018
$156.62
198.40
196.44
2019
$195.64
260.65
243.39
December 31,
2020
$164.17
308.81
225.65
2021
$176.33
397.30
322.32
2022
$185.41
325.17
269.64
The following chart compares the cumulative return on the Company’s stock during the five years ended December 31, 2022 with
the cumulative return on the S&P 500 composite stock index and NASDAQ’S Bank Index. The comparison assumes $100 invested
in each on December 31, 2017 and reinvestment of all dividends.
[The remainder of this page intentionally left blank]
- 17 -
2022 WESTAMERICA BANCORPORATION FORM 10-K $250
$200
$150
$100
$50
$-
2017
Five-Year Return Performance
2018
2019
2020
2021
2022
Westamerica Bancorporation (WABC)
S&P 500 (SPX)
NASDAQ Bank Index (CBNK)
Westamerica Bancorporation (WABC) ......................................
S&P 500 (SPX) ...........................................................................
NASDAQ Bank Index (CBNK)..................................................
ISSUER PURCHASES OF EQUITY SECURITIES
December 31,
2019
2018
2017
2022
$100.00 $96.01 $119.93 $100.63 $108.09 $113.65
95.57 125.56 148.75 191.38 156.63
100.00
96.14 137.32 114.88
83.69 103.95
100.00
2021
2020
The table below sets forth the information with respect to purchases made by or on behalf of Westamerica Bancorporation or any
“affiliated purchaser”, as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), of common stock during the quarter ended December 31, 2022 (in thousands, except per share data).
Period
October 1 through October 31
November 1 through November 30
December 1 through December 31
Total
2022
(a) Total Number of
shares Purchased
(c) Number of Shares
Purchased as Part of
Publicly Announced
Plans or Programs
(In thousands, except exercise price)
(b) Average Price Paid
per Share
(d) Maximum Number
of Shares that May
Yet Be Purchased
Under the Plans or
Programs
-
-
-
-
$ -
-
-
$ -
-
-
-
-
1,750
1,750
1,750
1,750
The Company repurchases shares of its common stock in the open market to optimize the Company’s use of equity capital and
enhance shareholder value and with the intention of lessening the dilutive impact of issuing new shares under stock option plans,
and other ongoing requirements. No shares were repurchased during the period from October 1, 2022 through December 31, 2022.
The current repurchase program was approved by the Board of Directors on July 28, 2022 authorizing the purchase of up to 1,750
thousand shares of the Company’s common stock from time to time prior to September 1, 2023.
ITEM 6. [RESERVED]
- 18 -
2022 WESTAMERICA BANCORPORATION FORM 10-K
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following financial information for the five years ended December 31, 2022 has been derived from the Company’s audited consolidated financial statements.
This information should be read in conjunction with those statements, notes and other information included elsewhere herein.
WESTAMERICA BANCORPORATION
FINANCIAL SUMMARY
Interest and loan fee income
Interest expense
Net interest and loan fee income
Provision for credit losses
Noninterest income:
Life insurance gains
Gains on sales of property
Securities gains (losses)
Other noninterest income
Total noninterest income
Noninterest expense:
Loss contingency
Other noninterest expense
Total noninterest expense
Income before income taxes
Income tax provision
Net income
Average common shares outstanding
Average diluted common shares outstanding
Common shares outstanding at December 31,
Per common share:
Basic earnings
Diluted earnings
Book value at December 31,
Financial ratios:
Return on assets
Return on common equity
Net interest margin (FTE)(1)
Net loan losses to average loans
Efficiency ratio(2)
Equity to assets
Period end balances:
Assets
Loans
Allowance for credit losses
Investment securities
Deposits
Identifiable intangible assets and goodwill
Short-term borrowed funds
Shareholders' equity
Capital ratios at period end:
Total risk based capital
Tangible equity to tangible assets
Dividends paid per common share
Common dividend payout ratio
2022
$221,756
1,925
219,831
-
930
-
-
44,191
45,121
-
99,361
99,361
165,591
43,557
$122,034
26,895
26,907
26,913
$4.54
4.54
22.37
1.65%
15.21%
3.17%
0.32%
37.2%
8.66%
$6,950,317
958,488
20,284
5,247,657
6,225,290
122,256
57,792
602,110
15.64%
7.03%
$1.68
37%
For the Years Ended December 31,
2021
2020
2019
(In thousands, except per share data and ratios)
$173,443
1,955
171,488
$158,682
1,888
156,794
$165,856
1,824
164,032
4,300
-
-
-
34
43,311
43,345
-
97,806
97,806
117,027
30,518
$86,509
26,855
26,870
26,866
$3.22
3.22
30.79
1.23%
11.52%
2.62%
0.03%
45.0%
11.09%
$7,461,026
1,068,126
23,514
4,945,258
6,413,956
122,508
146,246
827,102
15.47%
9.60%
$1.65
51%
-
3,536
71
42,030
45,637
-
98,566
98,566
106,803
26,390
$80,413
26,942
26,960
26,807
$2.98
2.98
31.51
1.30%
11.30%
2.91%
0.16%
46.2%
12.52%
$6,747,931
1,256,243
23,854
4,578,783
5,687,979
122,777
102,545
844,809
16.68%
10.90%
$1.64
55%
-
433
-
217
46,758
47,408
553
98,433
98,986
105,216
24,827
$80,389
26,956
27,006
27,062
$2.98
2.98
27.03
1.44%
11.90%
3.11%
0.16%
47.4%
13.02%
$5,619,555
1,126,664
19,484
3,816,918
4,812,621
123,064
30,928
731,417
16.83%
11.07%
$1.63
55%
2018
$151,723
1,959
149,764
-
585
216
(52)
47,400
48,149
3,500
103,416
106,916
90,997
19,433
$71,564
26,649
26,756
26,730
$2.69
2.67
23.03
1.27%
11.35%
2.98%
0.14%
52.5%
11.05%
$5,568,526
1,207,202
21,351
3,641,026
4,866,839
123,602
51,247
615,591
17.03%
9.04%
$1.60
60%
(1) Yields on securities and certain loans have been adjusted upward to a "fully taxable equivalent" ("FTE") basis in order to reflect the effect of income which is exempt from
federal income taxation at the current statutory tax rate.
(2) The efficiency ratio is defined as noninterest expense divided by total revenue (net interest income on an FTE basis and noninterest income).
- 19 -
2022 WESTAMERICA BANCORPORATION FORM 10-K
The following discussion addresses information pertaining to the financial condition and results of operations of Westamerica
Bancorporation and subsidiaries (the “Company”) that may not be otherwise apparent from a review of the consolidated financial
statements and related footnotes. It should be read in conjunction with those statements and notes found on pages 51 through 90, as
well as with the other information presented throughout this Report.
Critical Accounting Policies
The Company’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the
United States of America and follow general practices within the banking industry. Application of these principles requires the
Company to make certain estimates, assumptions, and judgments that affect the amounts reported in the financial statements and
accompanying notes. These estimates, assumptions, and judgments are based on information available as of the date of the financial
statements; accordingly, as this information changes, the financial statements could reflect different estimates, assumptions, and
judgments. Certain accounting policies inherently have a greater reliance on the use of estimates, assumptions and judgments and
as such have a greater possibility of producing results that could be materially different than originally reported. Estimates,
assumptions and judgments are necessary when assets and liabilities are required to be recorded at fair value, when a decline in the
value of an asset not carried on the financial statements at fair value warrants an impairment writedown or valuation reserve to be
established, or when an asset or liability needs to be recorded contingent upon a future event. Carrying assets and liabilities at fair
value inherently results in more financial statement volatility. The fair values and the information used to record valuation
adjustments for certain assets and liabilities are based either on quoted market prices or are provided by other third-party sources,
when available.
The most significant accounting policies followed by the Company are presented in Note 1 to the consolidated financial statements.
These policies, along with the disclosures presented in the other financial statement notes and in this discussion, provide information
on how significant assets and liabilities are valued in the financial statements and how those values are determined. Based on the
valuation techniques used and the sensitivity of financial statement amounts to the methods, assumptions, and estimates underlying
those amounts, Management has identified the allowance for credit losses on loans accounting to be a critical accounting estimate.
The accounting for the allowance for credit losses on loans requires the most subjective or complex judgments, and as such could
be most subject to revision as new information becomes available. The methodology, significant inputs and assumptions for the
allowance for credit losses on loans are discussed in the section “Allowance for Credit Losses on Loans” below. Additional
discussion of the factors affecting accounting for the allowance for credit losses on loans is included in the “Loan Portfolio Credit
Risk” discussion below. The Company’s allowance for credit losses on loans is established to provide for expected losses based on
the available estimates at that point in time. Changes in economic conditions could significantly impact the estimated losses and
could materially affect the Company’s operating results.
Financial Overview
Westamerica Bancorporation and subsidiaries’ (collectively, the “Company”) reported net income of $122.0 million or $4.54 diluted
earnings per common share (“EPS”) in 2022 compared with net income of $86.5 million or $3.22 EPS in 2021 and net income of
$80.4 million or $2.98 EPS in 2020. 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. 2021 results included “make-whole” interest income on corporate
bonds redeemed prior to maturity of $2.8 million. 2020 results included a provision for credit losses of $4.3 million, which reduced
EPS $0.11, representing Management’s estimate of additional reserves needed over the remaining life of its loans due to increased
credit-risk from deteriorating economic conditions caused by the COVID-19 pandemic, and $3.5 million gain on sales of a closed
branch building.
The Company’s primary and wholly-owned subsidiary, Westamerica Bank (the “Bank”), continued to support its customers during
the pandemic. The Bank originated $106 million in loans under the second round of the Paycheck Protection Program (“PPP”)
during the first six months of 2021. PPP loans meaningfully increased interest-earning assets and related interest and fee income.
The Bank continues to work with loan customers who requested deferral of loan payments due to economic weakness caused by
the pandemic. At December 31, 2021, loans granted deferrals under the CARES Act included $84 thousand, all of which were
consumer automobile loans.
In response to the high levels of inflation during a period of tight employment conditions, the Federal Open Market Committee of
the Federal Reserve Board (“FOMC”) has tightened monetary policy through reduced bond purchases and increases to the overnight
federal funds interest rate. The FOMC started to increase the target federal funds rate in March 2022. A February 1, 2023 Federal
Reserve press release stated, “Recent indicators point to modest growth in spending and production. Job gains have been robust in
recent months, and the unemployment rate has remained low. Inflation has eased somewhat but remains elevated. Russia’s war
- 20 -
2022 WESTAMERICA BANCORPORATION FORM 10-K against Ukraine is causing tremendous human and economic hardship and is contributing to elevated global uncertainty. The
Committee is highly attentive to inflation risks…The Committee anticipates that ongoing increases in the target range will be
appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time.”
On February 1, 2023, the FOMC announced its decision to increase the target federal funds ranging from 4.50% to 4.75% and the
interest rate paid on reserve balances to 4.65% effective February 2, 2023. The Bank maintains deposit 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 policy, climate changes, the COVID-
19 pandemic and the tensions in Ukraine on the Company’s business and its customers. 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 Company presents its net interest margin and net interest income on a fully taxable equivalent (“FTE”) basis using the current
statutory federal tax rate. Management believes the FTE basis is valuable to the reader because the Company’s loan and investment
securities portfolios contain municipal loans and securities that are federally tax exempt. The Company’s tax exempt loans and
securities composition may not be similar to that of other banks, therefore in order to reflect the impact of the federally tax exempt
loans and securities on the net interest margin and net interest income for comparability with other banks, the Company presents its
net interest margin and net interest income on an FTE basis.
The Company’s significant accounting policies (see Note 1 “Summary of Significant Accounting Policies” to the Consolidated
Financial Statements below) are fundamental to understanding the Company’s results of operations and financial condition. The
Company adopted the following new accounting guidance:
FASB Accounting Standards Update (“ASU”) 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes,
was issued December 2019. The ASU is intended to simplify various aspects related to accounting for income taxes, eliminates
certain exceptions to the general principles in ASC Topic 740 related to intra-period tax allocation, simplifies when companies
recognize deferred taxes in an interim period, and clarifies certain aspects of the current guidance to promote consistent application.
This guidance effective for public entities for fiscal years beginning after December 15, 2020, and for interim period within those
fiscal years, with early adoption permitted. The Company adopted the ASU provisions on January 1, 2021 and the adoption of the
ASU provisions did not have a significant impact on the Company’s consolidated financial statements.
FASB ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,
was issued on June 16, 2016. The ASU significantly changed estimates for credit losses related to financial assets measured at
amortized cost and certain other contracts. For estimating credit losses, the FASB replaced the incurred loss model with the current
expected credit loss (CECL) model, which accelerated recognition of credit losses. Additionally, credit losses relating to debt
securities available-for-sale are recorded through an allowance for credit losses under the new standard. The Company is also
required to provide additional disclosures related to the financial assets within the scope of the new standard.
The Company adopted the ASU provisions on January 1, 2020. Management evaluated available data, defined portfolio segments
of loans with similar attributes, and selected loss estimate models for each identified loan portfolio segment. Management measured
historical loss rates for each portfolio segment. Management also segmented debt securities held to maturity, selected methods to
estimate losses for each segment, and measured a loss estimate. Agency mortgage-backed securities were assigned no credit loss
allowance due to the perceived backing of government sponsored entities. Municipal securities were evaluated for risk of default
based on credit rating and remaining term to maturity using Moody’s risk of default factors; Moody’s loss upon default factors were
applied to the assumed defaulted principal amounts to estimate the amount for credit loss allowance. The adjustment to the
allowance for credit losses was recorded through an offsetting after-tax adjustment to shareholders’ equity. The implementing entry
increased allowance for credit losses on loans by $2,017 thousand, reduced allowance for unfunded credit commitments by $2,107
thousand and increased retained earnings by $52 thousand.
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- 21 -
2022 WESTAMERICA BANCORPORATION FORM 10-K Net Income
Following is a summary of the components of net income for the periods indicated:
Net interest and loan fee income
FTE adjustment
Net interest and loan fee income (FTE)
Provision for credit losses
Noninterest income
Noninterest expense
Income before income taxes (FTE)
Income taxes (FTE)
Net income
For the Years Ended December 31,
2022
2020
2021
($ in thousands, except per share data)
$219,831
1,944
221,775
-
45,121
(99,361)
167,535
(45,501)
$122,034
$171,488
2,663
174,151
-
43,345
(97,806)
119,690
(33,181)
$86,509
$164,032
3,650
167,682
(4,300)
45,637
(98,566)
110,453
(30,040)
$80,413
Net income per average fully-diluted common share
Net income as a percentage of average shareholders' equity
Net income as a percentage of average total assets
$4.54
15.21%
1.65%
$3.22
11.52%
1.23%
$2.98
11.30%
1.30%
Net income for 2022 increased $35.5 million compared with 2021. Net interest and loan fee income (FTE) increased $47.6 million
in 2022 compared with 2021 due to higher average balances of investment debt securities and higher yield on interest-earning assets,
partially offset by lower average balances of loans. The provision for credit losses was zero for 2022 and 2021, reflecting
Management's estimate of credit losses over the remaining life of its loans and investment debt securities. Noninterest income in
2022 increased $1.8 million compared with 2021 primarily due to a $1.2 million reconciling payment from a payments network, a
$930 thousand life insurance gain and higher fee income on deposit accounts. The increases in 2022 compared 2021 was partially
offset by decreases in merchant processing service income and other noninterest income. Noninterest expense in 2022 increased
$1.6 million compared with 2021. Limited partnership operating losses increased $3.1 million due to higher estimated operating
losses on limited partnership investments in low-income housing and occupancy and equipment expense increased primarily due to
software upgrades. The increase in 2022 compared with 2021 was partially offset by a decrease in salaries and related benefits
resulting from attrition and lower professional fees. The effective tax rates (FTE) were 27.2% in 2022 compared with 27.7% in
2021.
Comparing 2021 with 2020, net income increased $6.1 million. Net interest and loan fee (FTE) income increased $6.5 million due
to higher average balances of investments, higher average balances of interest-bearing cash and higher yield on PPP loans, partially
offset by lower yield on investments, interest-earning cash and loans excluding PPP loans. Results for 2021 included “make-whole”
interest income on corporate bonds redeemed prior to maturity of $2.8 million. The Company provided no provision for credit
losses in 2021, reflecting Management's evaluation of credit risk over the remaining life of loans and bonds. Results for 2020
included a provision of credit losses of $4.3 million, representing Management’s estimate of additional reserves needed over the
remaining life of its loans due to credit-risk from economic weakness caused by the COVID-19 pandemic. Noninterest income
decreased $2.3 million in 2021 compared with 2020 primarily because 2020 included $3.5 million in gains on sales of a closed
branch building and a $603 thousand recovery on previously charged off loans. Fee income from merchant card processing, debit
cards and trust accounts increased in 2021 compared with 2020. In 2021 noninterest expense decreased $760 thousand compared
with 2020 due to lower salaries and related benefits, partially offset by higher professional fees and other noninterest expense. The
tax rate (FTE) was 27.7% for 2021 and 27.2% for 2020.
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2022 WESTAMERICA BANCORPORATION FORM 10-K
Net Interest and Loan Fee Income (FTE)
The Company's primary source of revenue is net interest income, or the difference between interest income earned on loans and
investment securities and interest expense paid on interest-bearing deposits and other borrowings.
Components of Net Interest and Loan Fee Income (FTE)
2022
For the Years Ended December 31,
2021
($ in thousands)
2020
Interest and loan fee income
FTE adjustment
Interest and loan fee income (FTE)
Interest expense
Net interest and loan fee income (FTE)
$221,756
1,944
223,700
(1,925)
$221,775
$173,443
2,663
176,106
(1,955)
$174,151
$165,856
3,650
169,506
(1,824)
$167,682
Net interest margin (FTE)
3.17%
2.62%
2.91%
Net interest and loan fee income (FTE) increased $47.6 million in 2022 compared with 2021 due to higher average balances of
investment securities (up $723 million) and higher yield on interest-earning assets (up 0.55%), partially offset by lower average
balances of loans (down $197 million).
Net interest and loan fee income (FTE) increased $6.5 million in 2021 compared with 2020 due to higher average balances of
investments (up $431 million), higher average balances of interest-bearing cash (up $486 million) and higher yield on PPP loans
(up 0.71%), partially offset by lower yield on investments (down 0.20%), interest-earning cash (down 0.18%) and loans excluding
PPP loans. Results for 2021 included “make-whole” interest income on corporate bonds redeemed prior to maturity of $2.8 million.
The net interest margin (FTE) was 3.17% in 2022, 2.62% in 2021 and 2.91% in 2020. The yield on earning assets (FTE) was 3.20%
in 2022, 2.65% in 2021 and 2.94% in 2020. Market interest rates increased in 2022 compared with 2021 and 2020.
The Company’s funding costs were 0.03% in 2022, 2021 and 2020. Average balances of time deposits in 2022 declined $13 million
from 2021 while average balances of checking and savings deposits grew 6% from 2021 to 2022. Average balances of checking
and saving deposits accounted for 97.8% of average total deposits in 2022 compared with 97.5% in 2021 and 96.9% in 2020.
Net Interest Margin (FTE)
The following summarizes the components of the Company's net interest margin (FTE) for the periods indicated.
For the Years Ended December 31,
2021
2020
2022
Yield on earning assets (FTE)
Rate paid on interest-bearing liabilities
Net interest spread (FTE)
Benefit of noninterest-bearing demand deposits
Net interest margin (FTE)
3.20%
0.05%
3.15%
0.02%
3.17%
2.65%
0.06%
2.59%
0.03%
2.62%
2.94%
0.06%
2.88%
0.03%
2.91%
The increase in the Company’s yield on earning assets has been generated primarily 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 LIBOR and SOFR base rates. The average balances and yields of CLOs
for 2022 and 2021 was $1,567 million yielding 3.62% and $1,177 million yielding 2.02%, respectively. The interest-bearing cash
yield changes by the amount of change in the overnight federal funds rate on the effective date declared by the FOMC. The average
balance and yields of interest-bearing cash for 2022 and 2021 was $691 million yielding 1.13% and $857 million yielding 0.13%,
respectively. The Company has other earning assets with variable yields such as commercial loans and lines of credit, consumer
lines of credit and adjustable rate residential real estate loans, which are included in “other taxable loans” in the following “Summary
of Average Balances, Yields/Rates and Interest Differential.”
- 23 -
2022 WESTAMERICA BANCORPORATION FORM 10-K
Summary of Average Balances, Yields/Rates and Interest Differential
The following tables present information regarding the consolidated average assets, liabilities and shareholders’ equity, the amounts
of interest income earned from average interest earning assets and the resulting yields, and the amounts of interest expense incurred
on average interest-bearing liabilities and the resulting rates. Average loan balances include nonperforming loans. Interest income
includes reversal of previously accrued interest on loans placed on non-accrual status during the period and proceeds from loans on
nonaccrual status only to the extent cash payments have been received and applied as interest income and accretion of purchased
loan discounts. Yields on tax-exempt securities and loans have been adjusted upward to reflect the effect of income exempt from
federal income taxation at the federal statutory tax rate of 21 percent.
Distribution of Assets, Liabilities & Shareholders’ Equity and Yields, Rates & Interest Margin
For the Year Ended December 31, 2022
Interest
Income/
Expense
($ in thousands)
Yields/
Rates
Average
Balance
Assets
Investment securities:
Taxable
Tax-exempt (1)
Total investments (1)
Loans:
Taxable:
PPP loans
Other
Total taxable
Tax-exempt (1)
Total loans (1)
Total interest-bearing cash
Total Interest-earning assets (1)
Other assets
Total assets
Liabilities and shareholders' equity
Noninterest-bearing demand
Savings and interest-bearing transaction
Time less than $100,000
Time $100,000 or more
Total interest-bearing deposits
Securities sold under agreements to repurchase
Federal funds purchased
Total interest-bearing liabilities
Other liabilities
Shareholders' equity
Total liabilities and shareholders' equity
Net interest spread (1) (2)
Net interest and fee income and interest margin (1) (3)
$5,093,921
209,725
5,303,646
17,604
933,912
951,516
46,448
997,964
691,086
6,992,696
420,312
$7,413,008
$3,018,350
3,257,858
77,007
62,411
3,397,276
109,282
1
3,506,559
85,610
802,489
$7,413,008
$158,465
7,390
165,855
2,435
45,839
48,274
1,781
50,055
7,790
223,700
$-
1,510
180
156
1,846
79
-
1,925
$221,775
3.11%
3.52%
3.13%
13.83%
4.91%
5.07%
3.83%
5.02%
1.13%
3.20%
- %
0.05%
0.23%
0.25%
0.05%
0.07%
4.68%
0.05%
3.15%
3.17%
(1) Amounts calculated on an FTE basis using the current statutory federal tax rate.
(2) Net interest spread represents the average yield earned on interest-earning assets less the average rate incurred on interest-bearing
liabilities.
(3) Net interest margin is computed by calculating the difference between interest income and expense, divided by the average balance
of interest-earning assets. The net interest margin is greater than the net interest spread due to the benefit of noninterest-bearing
demand deposits.
- 24 -
2022 WESTAMERICA BANCORPORATION FORM 10-K
Distribution of Assets, Liabilities & Shareholders’ Equity and Yields, Rates & Interest Margin
For the Year Ended December 31, 2021
Interest
Income/
Expense
($ in thousands)
Yields/
Rates
Average
Balance
Assets
Investment securities:
Taxable
Tax-exempt (1)
Total investments (1)
Loans:
Taxable:
PPP loans
Other
Total taxable
Tax-exempt (1)
Total loans (1)
Total interest-bearing cash
Total Interest-earning assets (1)
Other assets
Total assets
Liabilities and shareholders' equity
Noninterest-bearing demand
Savings and interest-bearing transaction
Time less than $100,000
Time $100,000 or more
Total interest-bearing deposits
Securities sold under agreements to repurchase
Federal Funds purchased
Other borrowed funds
Total interest-bearing liabilities
Other liabilities
Shareholders' equity
Total liabilities and shareholders' equity
Net interest spread (1) (2)
Net interest and fee income and interest margin (1) (3)
$4,267,522
312,946
4,580,468
152,149
992,454
1,144,603
50,532
1,195,135
857,029
6,632,632
406,652
$7,039,284
$2,897,244
3,050,859
83,580
69,165
3,203,604
114,266
1
53
3,317,924
73,447
750,669
$7,039,284
$106,329
10,677
117,006
7,639
48,376
56,015
1,953
57,968
1,132
176,106
$-
1,445
167
265
1,877
78
-
-
1,955
$174,151
2.49%
3.41%
2.55%
5.02%
4.87%
4.89%
3.87%
4.85%
0.13%
2.65%
- %
0.05%
0.20%
0.38%
0.06%
0.07%
0.87%
0.35%
0.06%
2.59%
2.62%
(1) Amounts calculated on an FTE basis using the current statutory federal tax rate.
(2) Net interest spread represents the average yield earned on interest-earning assets less the average rate incurred on interest-bearing
liabilities.
(3) Net interest margin is computed by calculating the difference between interest income and expense, divided by the average balance
of interest-earning assets. The net interest margin is greater than the net interest spread due to the benefit of noninterest-bearing
demand deposits.
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2022 WESTAMERICA BANCORPORATION FORM 10-K
Distribution of Assets, Liabilities & Shareholders’ Equity and Yields, Rates & Interest Margin
For the Year Ended December 31, 2020
Interest
Income/
Expense
($ in thousands)
Yields/
Rates
Average
Balance
Assets
Investment securities:
Taxable
Tax-exempt (1)
Total investments (1)
Loans:
Taxable:
PPP loans
Other
Total taxable
Tax-exempt (1)
Total loans (1)
Total interest-bearing cash
Total Interest-earning assets (1)
Other assets
Total assets
Liabilities and shareholders' equity
Noninterest-bearing demand
Savings and interest-bearing transaction
Time less than $100,000
Time $100,000 or more
Total interest-bearing deposits
Securities sold under agreements to repurchase
Federal funds purchased
Other borrowed funds
Total interest-bearing liabilities
Other liabilities
Shareholders' equity
Total liabilities and shareholders' equity
Net interest spread (1) (2)
Net interest and fee income and interest margin (1) (3)
$3,689,769
460,191
4,149,960
151,320
1,039,724
1,191,044
48,100
1,239,144
371,444
5,760,548
413,922
$6,174,470
$2,538,819
2,603,476
91,519
72,363
2,767,358
80,455
1
174
2,847,988
76,109
711,554
$6,174,470
$93,163
15,395
108,558
6,516
51,336
57,852
1,931
59,783
1,165
169,506
$-
1,258
193
319
1,770
53
-
1
1,824
$167,682
2.52%
3.35%
2.62%
4.31%
4.94%
4.86%
4.01%
4.82%
0.31%
2.94%
- %
0.05%
0.21%
0.44%
0.06%
0.07%
0.88%
0.35%
0.06%
2.88%
2.91%
(1) Amounts calculated on an FTE basis using the current statutory federal tax rate.
(2) Net interest spread represents the average yield earned on interest-earning assets less the average rate incurred on interest-bearing
liabilities.
(3) Net interest margin is computed by calculating the difference between interest income and expense, divided by the average balance
of interest-earning assets. The net interest margin is greater than the net interest spread due to the benefit of noninterest-bearing
demand deposits.
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2022 WESTAMERICA BANCORPORATION FORM 10-K
Summary of Changes in Interest Income and Expense due to Changes in Average Asset & Liability Balances and Yields
Earned & Rates Paid
The following tables set forth a summary of the changes in interest income and interest expense due to changes in average assets
and liability balances (volume) and changes in average interest yields/rates for the periods indicated. Changes not solely attributable
to volume or yields/rates have been allocated in proportion to the respective volume and yield/rate components.
Summary of Changes in Interest Income and Expense
For the Year Ended December 31, 2022
Compared with
For the Year Ended December 31, 2021
Yield/Rate
(In thousands)
Total
Volume
Increase (decrease) in interest and loan fee income:
Investment securities:
Taxable
Tax-exempt (1)
Total investments (1)
Loans:
Taxable:
PPP loans
Other
Total taxable
Tax-exempt (1)
Total loans (1)
Total interest-bearing cash
Total (decrease) increase in interest and loan fee income (1)
Increase (decrease) in interest expense:
Deposits:
Savings and interest-bearing transaction
Time less than $100,000
Time $100,000 or more
Total interest-bearing deposits
Securities sold under agreements to repurchase
Total increase (decrease) in interest expense
(Decrease) increase in net interest and loan fee income (1)
$20,590
(3,522)
17,068
$31,546
235
31,781
(18,610)
(2,854)
(21,464)
(158)
(21,622)
(219)
(4,773)
98
(13)
(26)
59
(3)
56
($4,829)
13,406
317
13,723
(14)
13,709
6,877
52,367
(33)
26
(83)
(90)
4
(86)
$52,453
$52,136
(3,287)
48,849
(5,204)
(2,537)
(7,741)
(172)
(7,913)
6,658
47,594
65
13
(109)
(31)
1
(30)
$47,624
(1) Amounts calculated on an FTE basis using the current statutory federal tax rate.
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2022 WESTAMERICA BANCORPORATION FORM 10-K
Summary of Changes in Interest Income and Expense
Increase (decrease) in interest and loan fee income:
Investment securities:
Taxable
Tax-exempt (1)
Total investments (1)
Loans:
Taxable:
PPP loans
Other
Total taxable
Tax-exempt (1)
Total loans (1)
Total interest-bearing cash
Total increase (decrease) in interest and loan fee income (1)
Increase (decrease) in interest expense:
Deposits:
Savings and interest-bearing transaction
Time less than $100,000
Time $100,000 or more
Total interest-bearing deposits
Securities sold under agreements to repurchase
Other borrowed funds
Total increase (decrease) in interest expense
Increase (decrease) in net interest and loan fee income (1)
For the Year Ended December 31, 2021
Compared with
For the Year Ended December 31, 2020
Yield/Rate
(In thousands)
Total
Volume
$14,588
(4,926)
9,662
($1,422)
208
(1,214)
$13,166
(4,718)
8,448
42
(2,334)
(2,292)
98
(2,194)
1,523
8,991
216
(17)
(14)
185
22
(1)
206
$8,785
1,081
(626)
455
(76)
379
(1,556)
(2,391)
(29)
(9)
(40)
(78)
3
-
(75)
($2,316)
1,123
(2,960)
(1,837)
22
(1,815)
(33)
6,600
187
(26)
(54)
107
25
(1)
131
$6,469
(1) Amounts calculated on an FTE basis using the current statutory federal tax rate.
Provision for Credit Losses
The Company manages credit costs by consistently enforcing conservative underwriting and administration procedures and
aggressively pursuing collection efforts with debtors experiencing financial difficulties. The provision for credit losses reflects
Management's assessment of credit risk in the loan portfolio and debt securities held to maturity during each of the periods presented.
The Company provided no provision for credit losses in 2022 and 2021 based on Management’s estimate of reserves needed over
the remaining life of its loans and investments. The Company provided a provision for credit losses of $4.3 million recorded in
2020. The 2020 provision represented Management’s estimate of additional reserves needed over the remaining life of its loans and
investments due to credit-risk from weakened economic conditions caused by the COVID-19 pandemic. 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.
- 28 -
2022 WESTAMERICA BANCORPORATION FORM 10-K
Noninterest Income
Components of Noninterest Income
Service charges on deposit accounts
Merchant processing services
Debit card fees
Trust fees
ATM processing fees
Other service fees
Financial services commissions
Life insurance gains
Gains on sales of real property
Securities gains
Other noninterest income
Total Noninterest Income
2022
2020
For the Years Ended December 31,
2021
(In thousands)
$13,697
11,998
6,859
3,311
2,280
1,884
356
-
-
34
2,926
$43,345
$14,490
11,623
7,879
3,216
2,160
1,808
417
930
-
-
2,598
$45,121
$14,149
10,208
6,181
3,012
2,273
1,837
372
-
3,536
71
3,998
$45,637
Noninterest income in 2022 increased $1.8 million compared with 2021 primarily due to a $1.2 million reconciling payment from
a payments network, a $930 thousand life insurance gain and higher fee income on deposit accounts. Higher fee income deposit
accounts in 2022 compared with 2021 was primarily attributable to increased fee income from overdrawn deposit accounts. The
increases in 2022 compared 2021 were partially offset by decreases in merchant processing service income and other noninterest
income.
In 2021, noninterest income decreased $2.3 million compared with 2020 primarily because 2020 results included a $3.5 million
gain on the sale of a closed branch building, a $603 thousand recovery in excess of previously charged off loan amounts, and higher
service charges on deposit accounts. Decreases in 2021 results, compared with 2020, were partially offset by higher transaction
volumes from merchant processing services and debit cards, and increases in trust fees.
Noninterest Expense
Components of Noninterest Expense
Salaries and related benefits
Occupancy and equipment
Outsourced data processing services
Limited partnership operating losses
Professional fees
Courier service
Other noninterest expense
Total Noninterest Expense
2022
2020
For the Years Ended December 31,
2021
(In thousands)
$48,011
19,139
9,601
2,620
3,253
2,177
13,005
$97,806
$46,125
19,884
9,684
5,724
2,628
2,614
12,702
$99,361
$50,749
19,637
9,426
2,440
2,423
2,001
11,890
$98,566
Noninterest expense in 2022 increased $1.6 million compared with 2021. Limited partnership operating losses increased $3.1
million due to higher estimated operating losses on limited partnership investments in low-income housing. Occupancy and
equipment expense in 2022 increased primarily due to computer software upgrades. The increase in 2022 compared with 2021 was
partially offset by a decrease in salaries and related benefits resulting from attrition. Professional fees decreased in 2022 compared
with 2021 due to lower legal fees.
In 2021, noninterest expense decreased $760 thousand compared with 2020. The decrease in salaries and related benefits in 2021
compared with 2020 was attributable to attrition. Occupancy and equipment expenses decreased due to lower depreciation expense.
These decreases were partially offset by higher professional fees and other noninterest expense.
- 29 -
2022 WESTAMERICA BANCORPORATION FORM 10-K
Provision for Income Tax
The Company’s income tax provision (FTE) was $45.5 million in 2022 compared with $33.2 million in 2021 and $30.0 million in
2020. The effective tax rates (FTE) were 27.2% in 2022 compared with 27.7% in 2021 and 27.2% in 2020. See Note 10 to the
consolidated financial statements for additional information related to income taxes.
Investment Securities Portfolio
The Company maintains an investment securities portfolio consisting of securities issued by U.S. Government sponsored entities,
state and political subdivisions, corporations, collateralized loan obligations and agency mortgage-backed securities.
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 $5.2 billion at December 31, 2022 and
$4.9 billion at December 31, 2021. The following table lists debt securities in the Company’s portfolio by type as of the indicated
dates. Debt securities held to maturity are listed at amortized cost before related reserve for expected credit losses of $1 thousand
at December 31, 2022 and $7 thousand at December 31, 2021. Debt securities available for sale are listed at fair value.
Securities of U.S. Government sponsored entities
Agency residential mortgage-backed securities ("MBS")
Obligations of states and political subdivisions
Corporate securities
Collateralized loan obligations
Other
Total
Debt securities available for sale
Debt securities held to maturity
Total
At December 31, 2022
At December 31, 2021
As a percent
of total
investment
securities
As a percent
of total
investment
securities
Carrying
Value
($ in thousands)
- %
11%
5%
56%
28%
- %
100%
6%
7%
3%
54%
30%
- %
100%
$ -
559,358
251,933
2,746,735
1,386,355
877
$4,945,258
$4,638,855
306,403
$4,945,258
Carrying
Value
$290,853
390,900
171,212
2,821,809
1,572,883
-
$5,247,657
$4,331,743
915,914
$5,247,657
Management continually evaluates the Company’s investment securities portfolio in response to established asset/liability
management objectives, changing market conditions that could affect profitability, liquidity, and the level of interest rate risk to
which the Company is exposed. These evaluations may cause Management to change the level of funds the Company deploys into
investment securities and change the composition of the Company’s investment securities portfolio.
At December 31, 2022, 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 had no marketable equity securities at December 31, 2022 and December 31, 2021.
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2022 WESTAMERICA BANCORPORATION FORM 10-K
The following table shows the fair value carrying amount of the Company’s equity securities and debt securities available for sale
as of the dates indicated:
Debt securities available for sale:
Securities of U.S. Government sponsored entities
Agency residential MBS
Securities of U.S. Government entities
Obligations of states and political subdivisions
Corporate securities
Commercial paper
Collateralized Loan Obligations
Total debt securities available for sale
2022
At December 31,
2021
(In thousands)
2020
$290,853
286,048
-
82,004
2,099,955
-
1,572,883
$4,331,743
$ -
411,726
119
93,920
2,746,735
-
1,386,355
$4,638,855
$ -
652,952
154
111,010
2,117,978
24,990
1,156,101
$4,063,185
The following table sets forth the relative maturities and contractual yields of the Company’s debt securities available for sale
(stated at fair value) at December 31, 2022. Yields on state and political subdivision securities have been calculated on a fully
taxable equivalent basis using the current federal statutory rate. Mortgage-backed securities are shown separately because they are
typically paid in monthly installments over a number of years.
Debt Securities Available for Sale Maturity Distribution
Securities of U.S. Government sponsored entities
Interest rate
Obligations of states and political subdivisions
Interest rate
Corporate securities
Interest rate
Collaterized loan obligations
Interest rate
Subtotal
Interest rate
MBS
Interest rate
Total
Interest rate
Within one year
After one but
within five
years
After five but
within ten
years
After ten years
Mortgage-
backed
At December 31, 2022
($ in thousands)
$ -
- %
8,795
3.15%
241,522
3.08%
-
- %
250,317
3.09%
-
- %
$250,317
3.09%
$16,619
4.13%
31,406
3.25%
500,762
3.47%
5,809
5.99%
554,596
3.51%
-
- %
$554,596
3.51%
$274,234
3.49%
41,803
2.96%
1,357,671
2.57%
896,451
5.83%
2,570,159
3.81%
-
- %
$2,570,159
3.81%
$ -
- %
-
- %
-
- %
670,623
5.84%
670,623
5.84%
-
- %
$670,623
5.84%
$ -
- %
-
- %
-
- %
-
- %
-
- %
286,048
2.41%
$286,048
2.41%
Total
$290,853
3.63%
82,004
3.04%
2,099,955
2.80%
1,572,883
5.83%
4,045,695
4.04%
286,048
2.41%
$4,331,743
3.85%
The following table shows the amortized cost carrying amount and fair value before related reserve for expected credit losses of $1
thousand at December 31, 2022 and $7 thousand at December 31, 2021 and $9 thousand at December 31, 2020, of the Company’s
debt securities held to maturity as of the dates indicated:
Agency residential MBS
Obligations of states and political subdivisions
Corporate securities
Total
Fair value
2022
$104,852
89,208
721,854
$915,914
$873,511
At December 31,
2021
(In thousands)
$148,390
158,013
-
$306,403
$312,562
2020
$241,676
273,922
-
$515,598
$529,687
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2022 WESTAMERICA BANCORPORATION FORM 10-K
The following table sets forth the relative maturities and contractual yields of the Company’s debt securities held to maturity at
December 31, 2022. Yields on state and political subdivision securities have been calculated on a fully taxable equivalent basis
using the current federal statutory rate. Mortgage-backed securities are shown separately because they are typically paid in monthly
installments over a number of years.
Debt Securities Held to Maturity Maturity Distribution
Obligations of states and political subdivisions
Interest rate
Corporate securities
Interest rate
Subtotal
Interest rate
MBS
Interest rate
Total
Interest rate
Within one year
After one but
within five
years
After five but
within ten
years
After ten years
Mortgage-
backed
At December 31, 2022
($ in thousands)
$12,676
3.84%
-
- %
12,676
3.84%
-
- %
$12,676
3.84%
$74,465
3.49%
87,188
4.08%
161,653
3.81%
-
- %
$161,653
3.81%
$2,067
4.00%
634,666
4.36%
636,733
4.36%
-
- %
$636,733
4.36%
$ -
- %
-
- %
-
- %
-
- %
$ -
- %
$ -
- %
-
- %
-
- %
104,852
2.09%
$104,852
2.09%
Total
$89,208
3.54%
721,854
4.33%
811,062
4.24%
104,852
2.09%
$915,914
3.99%
The Company had corporate securities as shown below at the dates indicated:
Corporate securities
At December 31, 2022
Fair
Value
Amortized
Cost
At December 31, 2021
Fair
Value
Amortized
Cost
(In thousands)
Debt securities available for sale
Debt securities held to maturity
Total corporate securities
$2,406,566
721,854
$3,128,420
$2,099,955
687,406
$2,787,361
$2,692,792
-
$2,692,792
$2,746,735
-
$2,746,735
The following table summarizes total corporate securities by credit rating:
AAA
AA+
AA
AA-
A+
A
A-
BBB+
BBB
BBB-
Total corporate securities
At December 31, 2022
At December 31, 2021
As a percent of
total corporate
securities
Fair value
As a percent of
total corporate
securities
($ in thousands)
1%
1%
1%
4%
9%
18%
25%
29%
11%
1%
100%
$21,400
20,479
19,781
105,373
128,325
539,062
628,089
797,860
474,648
11,718
$2,746,735
1%
1%
1%
4%
5%
19%
23%
29%
17%
-%
100%
Fair value
$20,667
19,840
19,234
110,552
255,381
503,437
695,865
821,102
304,957
36,326
$2,787,361
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2022 WESTAMERICA BANCORPORATION FORM 10-K
The following table summarizes total corporate securities by the industry sector in which the issuing companies operate:
At December 31, 2022
At December 31, 2021
As a percent of
total corporate
securities
Fair value
As a percent of
total corporate
securities
($ in thousands)
55%
10%
9%
6%
6%
4%
4%
3%
3%
100%
$1,421,317
208,522
217,065
271,069
161,537
125,686
127,853
114,964
98,722
$2,746,735
52%
7%
8%
10%
6%
4%
5%
4%
4%
100%
Fair value
$1,539,361
285,016
237,554
173,736
162,270
103,666
101,255
98,072
86,431
$2,787,361
Financial
Utilities
Industrial
Consumer, Non-cyclical
Communications
Consumer, Cyclical
Technology
Basic Materials
Energy
Total corporate securities
The following table summarizes total corporate securities by the location of the issuers’ headquarters; all the bonds are denominated
in United States dollars:
At December 31, 2022
As a percent of
total corporate
securities
Fair value
($ in thousands)
United States of America
Canada
United Kingdom
Japan
France
Switzerland
Netherlands
Australia
Belgium
Germany
Total corporate securities
$1,997,328
192,475
171,819
161,804
87,781
86,396
33,216
23,870
20,243
12,429
$2,787,361
72%
7%
6%
6%
3%
3%
1%
1%
1%
- %
100%
The following table summarizes the above corporate securities with issuer’s headquarters located outside of the United States of
America by the industry sector in which the issuing companies operate; all the bonds are denominated in United States dollars:
Financial
Consumer, Non-cyclical
Energy
Basic Materials
Consumer, Cyclical
Utilities
Total foreign corporate securities
At December 31, 2022
As a percent of
total foreign
corporate
securities
Fair value
($ in thousands)
$680,956
32,684
30,600
23,870
12,429
9,494
$790,033
86%
4%
4%
3%
2%
1%
100%
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2022 WESTAMERICA BANCORPORATION FORM 10-K
The Company’s $1.6 billion (fair value) in collateralized loan obligations at December 31, 2022, consist of investments in 169
issues that are within the senior tranches of their respective fund securitization structures. The following table summarizes total
collateralized loan obligations by credit rating:
AAA
AA
Total
At December 31, 2022
Amortized
Cost
Fair
Value
(In thousands)
$559,239
1,028,087
$1,587,326
$553,673
1,019,210
$1,572,883
The following tables summarize the total general obligation and revenue bonds issued by states and political subdivisions held in
the Company’s investment securities portfolios as of the dates indicated, identifying the state in which the issuing government
municipality or agency operates.
At December 31, 2022, the Company’s investment securities portfolios included securities issued by 142 state and local government
municipalities and agencies located within 32 states. The largest exposure to any one municipality or agency was $4.8 million (fair
value) represented by three general obligation bonds.
Obligations of states and political subdivisions:
General obligation bonds:
California
Washington
Texas
Massachusetts
Michigan
Other (23 states)
Total general obligation bonds
Revenue bonds:
California
Kentucky
Virginia
Colorado
Washington
Other (8 states)
Total revenue bonds
Total obligations of states and political subdivisions
At December 31, 2022
Amortized
Cost
Fair
Value
(In thousands)
$34,621
11,445
8,561
8,214
7,126
63,818
$133,785
$13,917
7,605
3,684
3,155
2,070
9,016
$39,447
$173,232
$34,252
11,332
8,405
8,073
7,017
62,679
$131,758
$13,620
7,556
3,618
3,124
2,068
9,003
$38,989
$170,747
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2022 WESTAMERICA BANCORPORATION FORM 10-K
At December 31, 2021, the Company’s investment securities portfolios included securities issued by 197 state and local government
municipalities and agencies located within 33 states. The largest exposure to any one municipality or agency was $7.4 million (fair
value) represented by five general obligation bonds.
Obligations of states and political subdivisions:
General obligation bonds:
California
Washington
Texas
Other (27 states)
Total general obligation bonds
Revenue bonds:
California
Kentucky
Virginia
Colorado
Indiana
Other (12 states)
Total revenue bonds
Total obligations of states and political subdivisions
At December 31, 2021
Amortized
Cost
Fair
Value
(In thousands)
$48,332
13,460
11,653
110,722
$184,167
$14,912
8,846
7,576
6,158
5,747
20,714
$63,953
$248,120
$49,829
13,924
12,024
114,132
$189,909
$15,208
9,093
7,809
6,241
5,821
20,934
$65,106
$255,015
At December 31, 2022 and December 31, 2021, the revenue bonds in the Company’s investment securities portfolios were issued
by state and local government municipalities and agencies to fund public services such as water utility, sewer utility, recreational
and school facilities, and general public and economic improvements. The revenue bonds were payable from 11 revenue sources at
December 31, 2022 and 14 revenue sources at December 31, 2021. The revenue sources that represent 5% or more individually of
the total revenue bonds are summarized in the following tables.
Revenue bonds by revenue source:
Water
Lease (renewal)
Sewer
Lease (appropriation)
Special Assessment
Lease (abatement)
Sales tax
Other (4 sources)
Total revenue bonds by revenue source
At December 31, 2022
Amortized
Cost
Fair
Value
(In thousands)
$6,105
5,590
5,523
4,556
4,080
3,702
3,185
6,706
$39,447
$6,115
5,536
5,480
4,518
3,788
3,694
3,187
6,671
$38,989
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2022 WESTAMERICA BANCORPORATION FORM 10-K
Revenue bonds by revenue source:
Water
Sewer
Sales tax
Lease (renewal)
Lease (abatement)
Lease (appropriation)
Special Assessment
Intergovernmental Agreement
Other (6 sources)
Total revenue bonds by revenue source
At December 31, 2021
Amortized
Cost
Fair
Value
(In thousands)
$10,123
8,525
8,203
6,969
6,922
4,564
4,080
3,860
10,707
$63,953
$10,222
8,828
8,304
7,175
7,010
4,618
4,197
3,926
10,826
$65,106
See Note 2 to the consolidated financial statements for additional information related to the investment securities.
Loan Portfolio
The Company originates loans with the intent to hold such assets until principal is repaid. Management follows written loan
underwriting policies and procedures which are approved by the Bank’s Board of Directors. Loans are underwritten following
approved underwriting standards and lending authorities within a formalized organizational structure. The Board of Directors also
approves independent real estate appraisers to be used in obtaining estimated values for real property serving as loan collateral.
Prevailing economic trends and conditions are also taken into consideration in loan underwriting practices.
All loan applications must be for clearly defined legitimate purposes with a determinable primary source of repayment, and as
appropriate, secondary sources of repayment. All loans are supported by appropriate documentation such as current financial
statements, tax returns, credit reports, collateral information, guarantor asset verification, title reports, appraisals, and other relevant
documentation.
During 2020 and the first six months of 2021, the Bank processed customer PPP loan applications as established by the Coronavirus
Aid, Relief, and Economic Security Act (the “CARES Act”). The United States Small Business Administration guarantees PPP
loans; given this guarantee, the PPP loans are not considered to have default risk. PPP loans, net of deferred fees and costs, were
$586 thousand at December 31, 2022 and $46 million at December 31, 2021.
Commercial loans represent term loans used to acquire durable business assets or revolving lines of credit used to finance working
capital. Underwriting practices evaluate each borrower’s cash flow as the principal source of loan repayment. Commercial loans
are generally secured by the borrower’s business assets as a secondary source of repayment. Commercial loans are evaluated for
credit-worthiness based on prior loan performance and borrower financial information including cash flow, borrower net worth and
aggregate debt. PPP loans are included in commercial loans.
Commercial real estate loans represent term loans used to acquire or refinance real estate to be operated by the borrower in a
commercial capacity. Underwriting practices evaluate each borrower’s global cash flow as the principal source of loan repayment,
independent appraisal of value of the property, and other relevant factors. Commercial real estate loans are generally secured by a
first lien on the property as a secondary source of repayment.
Real estate construction loans represent the financing of real estate development. Loan principal disbursements are controlled
through the use of project budgets, and disbursements are approved based on construction progress, which is validated by project
site inspections. A first lien on the real estate serves as collateral to secure the loan.
Residential real estate loans generally represent first lien mortgages used by the borrower to purchase or refinance a principal
residence. For interest-rate risk purposes, the Company offers only fully-amortizing, adjustable-rate mortgages. In underwriting
first lien mortgages, the Company evaluates each borrower’s ability to repay the loan, an independent appraisal of the value of the
property, and other relevant factors. The Company does not offer riskier mortgage products, such as non-amortizing “interest-only”
mortgages and “negative amortization” mortgages.
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2022 WESTAMERICA BANCORPORATION FORM 10-K
For loans secured by real estate, the Bank requires title insurance to insure the status of its lien and each borrower is obligated to
insure the real estate collateral, naming the Company as loss payee, in an amount sufficient to repay the principal amount outstanding
in the event of a property casualty loss.
Consumer installment and other loans are predominantly comprised of indirect automobile loans with underwriting based on
credit history and scores, personal income, debt service capacity, and collateral values.
Loan volumes have declined due to payoffs and problem loan workout activities, particularly with purchased loans, and reduced
volumes of loan originations. The Company did not take an aggressive posture relative to loan portfolio growth during the post-
recession period of historically low interest rates. Management increased investment securities as loan volumes declined.
The following table shows the composition of the loan portfolio of the Company by type of loan and type of borrower, on the dates
indicated:
Loan Portfolio
PPP loans
Other commercial
Total commercial
Commercial real estate
Construction
Residential real estate
Consumer installment and other
Total loans
2022
2021
$586
169,031
169,617
491,107
3,088
13,834
280,842
$958,488
$45,888
187,202
233,090
535,261
48
18,133
281,594
1,068,126
At December 31,
2020
(In thousands)
$186,945
207,861
394,806
564,300
129
23,471
273,537
1,256,243
2019
2018
$ -
222,085
222,085
578,758
1,618
32,748
291,455
1,126,664
$ -
275,080
275,080
580,480
3,982
44,866
302,794
1,207,202
The following table shows the maturity distribution and interest rate sensitivity of loans at December 31, 2022. There were no loans
with a remaining maturity of over fifteen years as of December 31, 2022.
Loan Maturity Distribution
Commercial
Commercial real estate
Construction
Residential real estate
Consumer and other installment
Total
Loans with fixed interest rates
Loans with floating or adjustable interest rates
Total
Commitments and Letters of Credit
At December 31, 2022
Within One
Year
One to Five
Years
Five to Fifteen
Years
(In thousands)
$54,580
95,529
3,088
4,187
78,440
$235,824
147,496
88,328
$235,824
$62,705
216,927
-
5,681
188,050
$473,363
246,411
226,952
$473,363
$52,332
178,651
-
3,966
14,352
$249,301
15,849
233,452
$249,301
Total
$169,617
491,107
3,088
13,834
280,842
$958,488
409,756
548,732
$958,488
The Company issues formal commitments on lines of credit to well-established and financially responsible commercial enterprises.
Such commitments can be either secured or unsecured and are typically in the form of revolving lines of credit for seasonal working
capital needs. Occasionally, such commitments are in the form of letters of credit to facilitate the customers’ particular business
transactions. Commitment fees are generally charged for commitments and letters of credit. Commitments on lines of credit and
letters of credit typically mature within one year. For further information, see the accompanying notes to the consolidated financial
statements.
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2022 WESTAMERICA BANCORPORATION FORM 10-K
Loan Portfolio Credit Risk
The Company extends loans to commercial and consumer customers which expose the Company to the risk that the borrowers will
default, causing loss. The Company’s lending activities are exposed to various qualitative risks. All loan segments are exposed to
risks inherent in the economy and market conditions. Significant risk characteristics related to the commercial loan segment include
the borrowers’ business performance and financial condition, and the value of collateral for secured loans. Significant risk
characteristics related to the commercial real estate segment include the borrowers’ business performance and the value of properties
collateralizing the loans. Significant risk characteristics related to the construction loan segment include the borrowers’ performance
in successfully developing the real estate into the intended purpose and the value of the property collateralizing the loans. Significant
risk characteristics related to the residential real estate segment include the borrowers’ financial wherewithal to service the
mortgages and the value of the property collateralizing the loans. Significant risk characteristics related to the consumer loan
segment include the financial condition of the borrowers and the value of collateral securing the loans.
During 2020 and the first six months of 2021, the Bank processed customer PPP loan applications pursuant to the CARES Act. The
United States Small Business Administration guarantees PPP loans; given this guarantee, the PPP loans are not considered to have
default risk and do not carry an allowance for credit losses. The outstanding balances of PPP loans, net of deferred fees and costs,
were $586 thousand at December 31, 2022.
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.
The Company closely monitors the markets in which it conducts its lending operations and follows a strategy to control exposure
to loans with high credit risk. The Bank’s organizational structure separates the functions of business development and loan
underwriting; Management believes this segregation of duties avoids inherent conflicts of combining business development and
loan approval functions. In measuring and managing credit risk, the Company adheres to the following practices:
The Bank maintains a Loan Review Department which reports directly to the audit committee of the Board of Directors.
The Loan Review Department performs independent evaluations of loans to challenge the credit risk grades assigned by
Management, using grading standards employed by bank regulatory agencies. Those loans judged to carry higher risk
attributes are referred to as “classified loans.” Classified loans receive elevated Management attention in order to maximize
collection.
The Bank maintains two loan administration offices whose sole responsibility is to manage and collect classified loans.
Classified loans with higher levels of credit risk are further designated as “nonaccrual loans.” Management places classified loans
on nonaccrual status when full collection of contractual interest and principal payments is in doubt. Uncollected interest previously
accrued on loans placed on nonaccrual status is reversed as a charge against interest income. The Company does not accrue interest
income on loans following placement on nonaccrual status. Interest payments received on nonaccrual loans are applied to reduce
the carrying amount of the loan unless the carrying amount is well secured by loan collateral. “Nonperforming assets” include
nonaccrual loans, loans 90 or more days past due and still accruing, and repossessed loan collateral (commonly referred to as “Other
Real Estate Owned”).
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2022 WESTAMERICA BANCORPORATION FORM 10-K
Nonperforming Assets
Nonperforming nonaccrual loans
Performing nonaccrual loans
Total nonaccrual loans
Accruing loans 90 or more days past due
Total nonperforming loans
Other real estate owned
Total nonperforming assets
2022
2021
At December 31,
2020
(In thousands)
2019
2018
$146
-
146
628
774
-
$774
$265
427
692
339
1,031
-
$1,031
$526
3,803
4,329
450
4,779
-
$4,779
$659
3,781
4,440
440
4,880
43
$4,923
$998
3,870
4,868
551
5,419
350
$5,769
At December 31, 2022, nonaccrual loans consisted of six loans with an average carrying value of $24 thousand.
Management believes the overall credit quality of the loan portfolio is reasonably stable; however, classified and nonperforming
assets could fluctuate from period to period. The performance of any individual loan can be affected by external factors such as the
interest rate environment, economic conditions, pandemics, and collateral values or factors particular to the borrower. No assurance
can be given that additional increases in nonaccrual and delinquent loans will not occur in the future.
Allowance for Credit Losses
The following table summarizes allowance for credit losses at the dates indicated:
At December 31,
2022
2021
(In thousands)
Allowance for Credit Losses on Loans
Allowance for Credit Losses on Held to Maturity Debt Securities
Total Allowance for Credit Losses
$20,284
1
$20,285
$23,514
7
$23,521
Allowance for unfunded credit commitments
$201
$201
Allowance for Credit Losses on Debt Securities Held to Maturity
Management segmented debt securities held to maturity, selected methods to estimate losses for each segment, and measured a loss
estimate. Agency mortgage-backed securities were assigned no credit loss allowance due to the perceived backing of government
sponsored entities. 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. At December 31, 2022, no credit loss allowance was
assigned to corporate securities held to maturity. 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 credit loss related to municipal securities at December 31, 2022 and $7 thousand at December 31,
2021, reflecting the expected credit losses on debt securities held to maturity.
Allowance for Credit Losses on Loans
The Company’s allowance for credit losses on loans represents Management’s estimate of forecasted credit losses in the loan
portfolio based on the current expected credit loss model. In evaluating credit risk for loans, Management measures the loss potential
of the carrying value of loans. As described above, payments received on nonaccrual loans may be applied against the principal
balance of the loans until such time as full collection of the remaining recorded balance is expected.
The Company extends loans to commercial and consumer customers primarily in Northern and Central California. These lending
activities expose the Company to the risk borrowers will default, causing loan losses. The Company’s lending activities are exposed
to various qualitative risks. All loan segments are exposed to risks inherent in the economy and market conditions. Significant risk
characteristics related to the commercial loan segment include the borrowers’ business performance and financial condition, and
the value of collateral for secured loans. Significant risk characteristics related to the commercial real estate segment include the
- 39 -
2022 WESTAMERICA BANCORPORATION FORM 10-K
borrowers’ business performance and the value of properties collateralizing the loans. Significant risk characteristics related to the
construction loan segment include the borrowers’ performance in successfully developing the real estate into the intended purpose
and the value of the property collateralizing the loans. Significant risk characteristics related to the residential real estate segment
include the borrowers’ financial wherewithal to service the mortgages and the value of the property collateralizing the loans.
Significant risk characteristics related to the consumer loan segment include the financial condition of the borrowers and the value
of collateral securing the loans.
The preparation of these financial statements requires Management to estimate the amount of expected losses over the expected
contractual life of the Bank’s existing loan portfolio and establish an allowance for credit losses. Loan agreements generally include
a maturity date, and the Company considers the contractual life of a loan agreement to extend from the date of origination to the
contractual maturity date. In estimating credit losses, Management must exercise significant judgment in evaluating information
deemed relevant. The amount of ultimate losses on the loan portfolio can vary from the estimated amounts. Management follows a
systematic methodology to estimate loss potential in an effort to reduce the differences between estimated and actual losses.
The allowance for credit losses is established through provisions for credit losses charged to income. Losses on loans are charged
to the allowance for credit losses when all or a portion of the recorded amount of a loan is deemed to be uncollectible. Recoveries
of loans previously charged off are credited to the allowance when realized. The Company’s allowance for credit losses is
maintained at a level considered adequate to provide for expected losses based on historical loss rates adjusted for current and
expected conditions over a forecast period. These include conditions unique to individual borrowers, as well as overall credit loss
experience, the amount of past due, nonperforming and classified loans, recommendations of regulatory authorities, prevailing
economic conditions, or credit protection agreements and other factors.
Loans that share common risk characteristics are segregated into pools based on common characteristics, which is primarily
determined by loan, borrower, or collateral type. Historical loss rates are determined for each pool. For consumer installment loans,
primarily secured by automobiles, historical loss rates are determined using a vintage methodology, which tracks losses based on
period of origination. For commercial, construction, and commercial real estate, historical loss rates are determined using an open
pool methodology where losses are tracked over time for all loans included in the pool at the historical measurement date. Historical
loss rates are adjusted for factors that are not reflected in the historical loss rates that are attributable to national or local economic
or industry trends which have occurred but have not yet been recognized in past loan charge-off history, estimated losses based on
management’s reasonable and supportable expectation of economic trends over a forecast horizon of up to two years, and other
factors that impact credit loss expectations that are not reflected in the historical loss rates. Other factors include, but are not limited
to, the effectiveness of the Company’s loan review system, adequacy of lending Management and staff, loan policies and procedures,
problem loan trends, and concentrations of credit. At the end of the two-year forecast period loss rates revert immediately to the
historical loss rates. The results of this analysis are applied to the amortized cost of the loans included within each pool.
Loans that do not share risk characteristics with other loans in the pools are evaluated individually. A loan is considered ‘collateral-
dependent’ when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through
the operation or sale of the collateral. A credit loss reserve for collateral-dependent loans is established at the difference between
the amortized cost basis in the loan and the fair value of the underlying collateral adjusted for costs to sell. For other individually
evaluated loans that are not collateral dependent, a credit loss reserve is established at the difference between the amortized cost
basis in the loan and the present value of expected future cash flows discounted at the loan’s effective interest rate. The impact of
an expected TDR modification is included in the allowance for credit losses when management determines a TDR modification is
likely.
Accrued interest is recorded in other assets and is excluded from the estimation of expected credit loss. Accrued interest is reversed
through interest income when amounts are determined to be uncollectible, which generally occurs when the underlying receivable
is placed on nonaccrual status or charged off.
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2022 WESTAMERICA BANCORPORATION FORM 10-K
The following table summarizes the allowance for credit losses, chargeoffs and recoveries for the periods indicated. The allowance
for loan losses for 2018 and 2019 is shown under legacy GAAP.
Analysis of the Allowance for Credit Losses
Balance, end of prior period
Adoption of ASU 2016-13
Balance, beginning of period
Provision for (reversal of) credit losses on loans
Loans charged off:
Commercial
Commercial real estate
Consumer and other installment
Total chargeoffs
Recoveries of loans previously charged off:
Commercial
Commercial real estate
Consumer and other installment
Total recoveries
Net loan losses
Balance, end of period
2022
$23,514
-
23,514
6
(20)
-
(6,205)
(6,225)
376
62
2,551
2,989
(3,236)
$20,284
2021
At and For the Years Ended December 31,
2020
($ in thousands)
2019
$23,854
-
23,854
2
(56)
-
(3,192)
(3,248)
228
743
1,935
2,906
(342)
$23,514
$19,484
2,017
21,501
4,307
(236)
-
(3,963)
(4,199)
351
49
1,845
2,245
(1,954)
$23,854
$21,351
-
21,351
-
(97)
-
(4,473)
(4,570)
768
196
1,739
2,703
(1,867)
$19,484
2018
$23,009
-
23,009
-
(513)
(240)
(4,124)
(4,877)
1,447
-
1,772
3,219
(1,658)
$21,351
Net loan losses as a percentage of average loans
0.32%
0.03%
0.16%
0.16%
0.14%
Selected financial data:
Loans
Nonaccrual loans
Allowance for credit losses as a percentage of loans
Nonaccrual loans as a percentage of loans
Allowance for credit losses to nonaccrual loans
$958,488
146
2.12%
0.02%
13893.15%
$1,068,126
692
2.20%
0.06%
3397.98%
$1,256,243
4,329
$1,126,664
4,440
$1,207,202
4,868
1.90%
0.34%
551.03%
1.73%
0.39%
438.83%
1.77%
0.40%
438.60%
The following table summarizes net (chargeoffs) recoveries and the ratio of net charge-offs (recoveries) to average loans for the
periods indicated:
2022
As a percentage
of Net chargeoffs
(recoveries)
to Average loans
Net (chargeoffs)
Recoveries
For the Years ended December 31,
2021
Net (chargeoffs)
Recoveries
As a percentage
of Net chargeoffs
(recoveries)
to Average loans
($ in thousands)
2020
As a percentage
of Net chargeoffs
(recoveries)
to Average loans
Net (chargeoffs)
Recoveries
Commercial
Commercial real estate
Construction
Residential real estate
Consumer and other installment
Total
$356
62
-
-
(3,654)
($3,236)
(0.19)%
(0.01)%
- %
- %
1.29%
0.32%
$172
743
-
-
(1,257)
($342)
(0.05)%
(0.14)%
- %
- %
0.45%
0.03%
$115
49
-
-
(2,118)
($1,954)
(0.03)%
(0.01)%
- %
- %
0.76%
0.16%
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 is
primarily determined by loan, borrower, or collateral type. Historical loss rates are determined for each pool. Loans that do not
share risk characteristics with other loans in the pools are evaluated individually. See Note 1 to the consolidated financial statements
for additional information.
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2022 WESTAMERICA BANCORPORATION FORM 10-K
The following table presents the allocation of the allowance for credit losses as of December 31 for the periods indicated. The
allowance for loan losses for 2018 and 2019 is shown under legacy GAAP.
2022
2021
At December 31,
2020
2019
2018
Allocation of
the
Allowance
Balance
Loans as
Percent of
Total Loans
Allocation of
the
Allowance
Balance
Loans as
Percent of
Total Loans
Allocation of
the
Allowance
Balance
Loans as
Percent of
Total Loans
Allocation of
the
Allowance
Balance
Loans as
Percent of
Total Loans
Allocation of
the
Allowance
Balance
Loans as
Percent of
Total Loans
Commercial
Commercial real estate
Construction
Residential real estate
Consumer installment and other
Unallocated portion
Total
$6,138
5,888
150
32
8,076
-
$20,284
18%
51%
- %
2%
29%
- %
100%
$6,966
6,529
2
45
9,972
-
$23,514
22%
50%
- %
2%
26%
- %
100%
($ in thousands)
$9,205
5,660
6
47
8,936
-
$23,854
31%
45%
- %
2%
22%
- %
100%
$4,959
4,064
109
206
6,445
3,701
$19,484
20%
51%
- %
3%
26%
- %
100%
$6,311
3,884
1,465
869
5,645
3,177
$21,351
23%
48%
- %
4%
25%
- %
100%
Allowance for Credit Losses
For the Year Ended Decmber 31, 2022
Commercial
Commercial
Real Estate
Construction
Residential
Real Estate
(In thousands)
Consumer
Installment
and Other
$6,966
(1,184)
(20)
376
$6,138
$6,529
(703)
-
62
$5,888
$2
148
-
-
$150
$45
(13)
-
-
$32
$9,972
1,758
(6,205)
2,551
$8,076
Total
$23,514
6
(6,225)
2,989
$20,284
Allowance for credit losses:
Balance at beginning of period
(Reversal) provision
Chargeoffs
Recoveries
Total allowance for credit losses
Management considers the $20.3 million allowance for credit losses on loans to be adequate as a reserve against current expected
credit losses in the loan portfolio as of December 31, 2022.
See Note 3 to the consolidated financial statements for additional information related to the loan portfolio, loan portfolio credit risk,
and allowance for credit losses.
Climate-Related Financial Risk
Climate change presents risk to the Company, our critical vendors and our customers. Our risk management practices incorporate
the challenges brought about by climate change. The operations conducted in our centralized facilities and branch locations can be
disrupted by acute physical risks such as flooding and windstorms, and by chronic physical risks such as rising sea levels, sustained
higher temperatures, drought, and increased wildfires. Over the intermediate and longer-term, the Company can be subject to
transition risks such as market demand, and policy and law changes.
None of the Company’s physical locations are located near sea level, and only a limited number of branches are located in flood
zones. Our principal electricity supplier reports a Power Content Label of 100% greenhouse gas free using the California Energy
Commission’s methodology. Our principal information technology vendor’s goal is to achieve 100% carbon neutrality for Scope
1 and 2 greenhouse gas emissions by 2025. The Company and its critical vendors maintain property and casualty insurance, and
maintain and regularly test disaster recovery plans, which include redundant operational locations and power sources. The
Company’s operations do not use a significant amount of water in producing our products and services.
The Company monitors the climate risks of our loan customers. Borrowers with real estate loan collateral located in flood zones
must carry flood insurance under the loans’ terms. The Company has $21 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 without
encountering financial hardship. The Company makes automobile loans; changes in consumer demand, or governmental laws or
policies, regarding gasoline, electric and hybrid vehicles is not considered a risk 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.
While the Company follows risk management practices related to climate risk, financial losses could occur in the future.
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2022 WESTAMERICA BANCORPORATION FORM 10-K
Asset/Liability and Market Risk Management
Asset/liability management involves the evaluation, monitoring and management of interest rate risk, market risk, liquidity and
funding. The fundamental objective of the Company's management of assets and liabilities is to maximize its economic value while
maintaining adequate liquidity and a conservative level of interest rate risk.
Interest Rate Risk
Interest rate risk is a significant market risk affecting the Company. Many factors affect the Company’s exposure to interest rates,
such as general economic and financial conditions, customer preferences, historical pricing relationships, and re-pricing
characteristics of financial instruments. Financial instruments may mature or re-price at different times. Financial instruments may
re-price at the same time but by different amounts. Short-term and long-term market interest rates may change by different amounts.
The timing and amount of cash flows of various financial instruments may change as interest rates change. In addition, the changing
levels of interest rates may have an impact on bond portfolio volumes, accumulated other comprehensive (loss) income, loan
demand and demand for various deposit products.
The Company’s earnings are affected not only by general economic conditions, but also by the monetary and fiscal policies of the
United States government and its agencies, particularly the FOMC. The monetary policies of the FOMC can influence the overall
demand for loans and growth of deposits and the level of interest rates earned on loans and investment securities and paid fo r
deposits and other borrowings. The nature and impact of future changes in monetary policies are generally not predictable.
Management attempts to manage interest rate risk while enhancing the net interest margin and net interest income. At times,
depending on expected increases or decreases in market interest rates, the relationship between long and short-term interest rates,
market conditions and competitive factors, Management may adjust the Company's interest rate risk position. The Company's results
of operations and net portfolio values remain subject to changes in interest rates and to fluctuations in the difference between long,
intermediate, and short-term interest rates.
Management monitors the Company’s interest rate risk using a purchased 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, except cash flows from PPP loans are reinvested
into interest-bearing cash. Both simulations are used to measure expected changes in net interest income assuming various levels
of change in market interest rates.
The Company’s asset and liability position was “asset sensitive” at December 31, 2022, 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.
At December 31, 2022, Management’s most recent measurements of estimated changes in net interest income were:
Dynamic Simulation (balance sheet composition changes):
Assumed Change in Interest Rates Over 1 Year
First Year Change in Net Interest Income
Static Simulation (balance sheet composition unchanged):
Assumed Immediate Change in Interest Rates
First Year Change in Net Interest Income
-1.00%
+0.3%
-1.00%
-7.6%
+1.00%
+2.7%
+2.00%
+5.1%
+1.00%
+6.7%
+2.00%
+12.9%
Simulation estimates depend on, and will change with, the size and mix of the actual and projected composition of financial
instruments at the time of each simulation. Assumptions made in the simulation may not materialize and unanticipated events and
circumstances may occur. In addition, the simulation does not take into account any future actions Management may undertake to
mitigate the impact of interest rate changes, loan prepayment estimates and spread relationships, which may change regularly.
The Company does not currently engage in trading activities or use derivative instruments to manage interest rate risk, even though
such activities may be permitted with the approval of the Company's Board of Directors.
- 43 -
2022 WESTAMERICA BANCORPORATION FORM 10-K Market Risk - Equity Markets
Equity price risk can affect the Company. Preferred or common stock holdings, as permitted by banking regulations, can fluctuate
in value. Changes in value of preferred or common stock holdings are recognized in the Company's income statement.
Fluctuations in the Company's common stock price can impact the Company's financial results in several ways. First, the Company
has at times repurchased and retired its common stock; the market price paid to retire the Company's common stock affects the level
of the Company's shareholders' equity, cash flows and shares outstanding. Second, the Company's common stock price impacts the
number of dilutive equivalent shares used to compute diluted earnings per share. Third, fluctuations in the Company's common
stock price can motivate holders of options to purchase Company common stock through the exercise of such options thereby
increasing the number of shares outstanding and potentially adding volatility to the book tax provision. Finally, the amount of
compensation expense and tax deductions associated with share based compensation fluctuates with changes in and the volatility
of the Company's common stock price.
Market Risk - Other
Market values of loan collateral can directly impact the level of loan chargeoffs and the provision for credit losses. The financial
condition and liquidity of debtors issuing bonds and debtors whose mortgages or other obligations are securitized can directly
impact the credit quality of the Company’s investment securities portfolio requiring the Company to establish or increase reserves
for expected credit losses. Other types of market risk, such as foreign currency exchange risk, are not significant in the normal
course of the Company's business activities.
Liquidity and Funding
The objective of liquidity management is to manage cash flow and liquidity reserves so that they are adequate to fund the Bank's
operations and meet obligations and other commitments on a timely basis and at a reasonable cost. The Bank achieves this objective
through the selection of asset and liability maturity mixes that it believes best meet its needs. The Bank's liquidity position is
enhanced by its ability to raise additional funds as needed by selling debt securities available-for-sale or borrowing in the wholesale
markets.
In recent years, the Bank's deposit base has provided the majority of the Bank's funding requirements. This relatively stable and
low-cost source of funds, along with shareholders' equity, provided 97% of funding for average total assets in the years ended
December 31, 2022 and December 31, 2021. The stability of 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
and capital management practices and by maintaining an appropriate level of liquidity.
Liquidity is further provided by assets such as balances held at the Federal Reserve Bank, investment securities, and amortizing
loans. The Bank's investment securities portfolio provides a substantial secondary source of liquidity. The Bank held $5.2 billion
in total investment securities at December 31, 2022. Under certain deposit, borrowing and other arrangements, the Bank must hold
and pledge investment securities as collateral. At December 31, 2022, such collateral requirements totaled approximately $1.2
billion. At December 31, 2022, the Company had lines of credit for overnight borrowings from corresponding banks totaling $100
million. Additionally, the Company had access to borrowing from the Federal Reserve up to $225 million based on the collateral
pledged at December 31, 2022. There were no outstanding amounts under the above-mentioned borrowings at December 31, 2022.
Liquidity risk can result from the mismatching of asset and liability cash flows, or from disruptions in the financial markets. The
Bank performs liquidity stress tests on a periodic basis to evaluate the sustainability of its liquidity. Under the stress testing, the
Bank assumes outflows of funds increase beyond expected levels. Measurement of such heightened outflows considers the
composition of the Bank’s deposit base, including any concentration of deposits, non-deposit funding such as short-term
borrowings, and unfunded lending commitments. The Bank evaluates its stock of highly liquid assets to meet the assumed higher
levels of outflows. Highly liquid assets include cash and amounts due from other banks from daily transaction settlements, reduced
by branch cash needs and Federal Reserve Bank reserve requirements, and investment securities based on regulatory risk-weighting
guidelines. Based on the results of the most recent liquidity stress test, Management is satisfied with the liquidity condition of the
Bank. However, no assurance can be given the Bank will not experience a period of reduced liquidity.
Management continually monitors the Bank’s cash levels. Loan demand from credit worthy borrowers will be dictated by economic
and competitive conditions. The Bank aggressively solicits non-interest bearing demand deposits and money market checking
deposits, which are the least sensitive to changes in interest rates. The growth of these deposit balances is subject to heightened
competition, the success of the Bank's sales efforts, delivery of superior customer service, new regulations and market conditions.
- 44 -
2022 WESTAMERICA BANCORPORATION FORM 10-K
The Bank does not aggressively solicit higher-costing time deposits. Changes in interest rates, most notably rising interest rates or
increased consumer spending, could impact deposit volumes. Depending on economic conditions, interest rate levels, liquidity
management and a variety of other conditions, deposit growth may be used to fund loans or purchase investment securities.
However, due to possible volatility in economic conditions, competition and political uncertainty, loan demand and levels of
customer deposits are not certain. Shareholder dividends are expected to continue subject to the Board's discretion and continuing
evaluation of capital levels, earnings, asset quality and other factors.
Westamerica Bancorporation ("Parent Company") is a separate entity apart from the Bank and must provide for its own liquidity.
In addition to its operating expenses, the Parent Company is responsible for the payment of dividends declared for its shareholders,
and interest and principal on any outstanding debt. The Parent Company currently has no debt. Substantially all of the Parent
Company's revenues are obtained from subsidiary dividends and service fees.
The Bank’s dividends paid to the Parent Company, proceeds from the exercise of stock options, and Parent Company cash balances
provided adequate cash for the Parent Company to pay shareholder dividends of $45 million in the year ended December 31, 2022
and $44 million in the year ended December 31, 2021 and retire common stock in the amounts of $218 thousand and $232 thousand,
respectively. Payment of dividends to the Parent Company by the Bank is limited under California and Federal laws. The Company
believes these regulatory dividend restrictions will not have an impact on the Parent Company's ability to meet its ongoing cash
obligations.
Capital Resources
The Company has historically generated high levels of earnings, which provide a means of accumulating capital. The Company's
net income as a percentage of average shareholders' equity (“return on equity” or “ROE”) was 15.2% for the year ended December
31, 2022 and 11.5% for the year ended December 31, 2021. The Company also raises capital as employees exercise stock options.
Capital raised through the exercise of stock options was $2.3 million in the year ended December 31, 2022 and $3.0 million in the
year ended December 31, 2021.
The Company paid common dividends totaling $45 million in the year ended December 31, 2022 and $44 million in the year ended
December 31, 2021, which represent dividends per common share of $1.68 and $1.65, 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 3 thousand shares valued at $218 thousand in the year ended December 31, 2022 and 4
thousand shares valued at $232 thousand in the year ended December 31, 2021.
The Company's primary capital resource is shareholders' equity, which was $602 million at December 31, 2022 compared with
$827 million at December 31, 2021. The Company's ratio of equity to total assets was 8.7% at December 31, 2022 and 11.1% at
December 31, 2021.
The Company performs capital stress tests on a periodic basis to evaluate the sustainability of its capital. Under the stress testing,
the Company assumes various scenarios such as deteriorating economic and operating conditions, and unanticipated asset
devaluations. The Company measures the impact of these scenarios on its earnings and capital. Based on the results of the most
recent stress tests, Management is satisfied with the capital condition of the Bank and the Company. However, no assurance can be
given the Bank or Company will not experience a period of reduced earnings or a reduction in capital from unanticipated events
and circumstances.
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2022 WESTAMERICA BANCORPORATION FORM 10-K
Capital to Risk-Adjusted Assets
The capital ratios for the Company and the Bank under current regulatory capital standards are presented in the tables below, on the
dates indicated. For Common Equity Tier I Capital, Tier 1 Capital and Total Capital, the minimum percentage required for
regulatory capital adequacy purposes include a 2.5% “capital conservation buffer.”
At December 31, 2022
Company
Bank
To Be
Well-capitalized
Under Prompt
Corrective Action
Regulations (Bank)
Required for
Capital Adequacy
Purposes
Common Equity Tier I Capital
Tier I Capital
Total Capital
Leverage Ratio
15.22%
15.22%
15.64%
10.18%
12.37%
12.37%
12.93%
8.26%
7.00%
8.50%
10.50%
4.00%
6.50%
8.00%
10.00%
5.00%
At December 31, 2021
Company
Bank
To Be
Well-capitalized
Under Prompt
Corrective Action
Regulations (Bank)
Required for
Capital Adequacy
Purposes
Common Equity Tier I Capital
Tier I Capital
Total Capital
Leverage Ratio
14.93%
14.93%
15.47%
9.06%
12.48%
12.48%
13.17%
7.55%
7.00%
8.50%
10.50%
4.00%
6.50%
8.00%
10.00%
5.00%
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.
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2022 WESTAMERICA BANCORPORATION FORM 10-K
Deposit Categories
The Company primarily attracts deposits from local businesses and professionals, as well as through retail savings and checking
accounts, and, to a more limited extent, certificates of deposit. The following table summarizes the Company’s average daily amount
of deposits and the rates paid for the periods indicated:
Deposit Distribution and Average Rates Paid
2022
Percentage of
Total
Deposits
Average
Balance
Rate
For the Years Ended December 31,
2021
Percentage of
Total
Deposits
($ In thousands)
Average
Balance
Rate
2020
Percentage of
Total
Deposits
Average
Balance
Rate
Noninterest-bearing demand
Interest bearing:
Transaction
Savings
Time less than $100 thousand
Time $100 thousand or more
Total (1)
$3,018,350
47.0%
- %
$2,897,244
47.5%
- %
$2,538,819
47.8%
- %
1,289,956
1,967,902
77,007
62,411
20.1%
30.7%
1.2%
1.0%
$6,415,626
100.0%
0.03%
0.06%
0.23%
0.25%
0.05%
1,208,269
1,842,590
83,580
69,165
19.8%
30.2%
1.4%
1.1%
$6,100,848
100.0%
0.03%
0.06%
0.20%
0.38%
0.06%
1,008,758
1,594,718
91,519
72,363
19.0%
30.1%
1.7%
1.4%
$5,306,177
100.0%
0.03%
0.06%
0.21%
0.44%
0.06%
(1) The rates for total deposits were calculated using the average balances of interest-bearing deposits.
The Company’s strategy includes building the value of its deposit base by building balances of lower-costing deposits and avoiding
reliance on higher-costing time deposits. Average balances of higher costing time deposits declined 15% to $139 million from 2020
to 2022. The Company’s average balances of checking and savings accounts represented 98% of average balances of total deposits
in 2022 compared with 97% in 2021 and 2020. Estimated uninsured deposits were $2.9 billion at December 31, 2022 and $3.1
billion at December 31, 2021.
Total time deposits were $131 million and $144 million at December 31, 2022 and December 31, 2021, respectively. The following
table sets forth, by time remaining to maturity, the Company’s total domestic time deposits. The Company has no foreign time
deposits.
Time Deposits Maturity Distribution
2023
2024
2025
2026
2027
Thereafter
Total
At December 31, 2022
(In thousands)
$98,771
18,844
7,764
2,511
2,833
32
$130,755
The standard FDIC deposit insurance amount is $250,000 per depositor, for each account ownership category. The following table
shows the time remaining to maturity of the Company’s time deposits with a balance greater than $250,000:
Three months or less
Over three through six months
Over six through twelve months
Over twelve months
Total
At December 31, 2022
(In thousands)
$8,989
2,362
4,962
5,747
$22,060
- 47 -
2022 WESTAMERICA BANCORPORATION FORM 10-K
Short-term Borrowings
The following table sets forth the short-term borrowings of the Company:
Short-Term Borrowings Distribution
Securities sold under agreements to repurchase the securities
Total short-term borrowings
Further detail of federal funds purchased and other borrowed funds is as follows:
2022
$57,792
$57,792
At December 31,
2021
(In thousands)
$146,246
$146,246
2020
$102,545
$102,545
2022
For the Years Ended December 31,
2021
($ in thousands)
2020
Federal funds purchased balances and rates paid on outstanding amount:
Average balance for the year
Maximum month-end balance during the year
Average interest rate for the year
Average interest rate at period end
Securities sold under agreements to repurchase the securities balances and rates paid
on outstanding amount:
Average balance for the year
Maximum month-end balance during the year
Average interest rate for the year
Average interest rate at period end
PPPLF balances and rates paid on outstanding amount:
Average balance for the year
Maximum month-end balance during the year
Average interest rate for the year
Average interest rate at period end
$1
-
4.68%
- %
$1
-
0.87%
- %
$109,282
257,560
0.07%
0.06%
$114,266
146,552
0.07%
0.07%
$ -
-
- %
- %
$53
-
0.35%
- %
$1
-
0.88%
- %
$80,455
110,846
0.07%
0.07%
$174
-
0.35%
- %
Financial Ratios
The following table shows key financial ratios for the periods indicated:
Return on average total assets
Return on average common shareholders' equity
Average shareholders' equity as a percentage of:
Average total assets
Average total loans
Average total deposits
Common dividend payout ratio
At and For the Years Ended December 31,
2021
1.23%
11.52%
2022
1.65%
15.21%
2020
1.30%
11.30%
10.83%
80.41%
12.51%
37%
10.66%
62.81%
12.30%
51%
11.52%
57.42%
13.41%
55%
[The remainder of this page intentionally left blank]
- 48 -
2022 WESTAMERICA BANCORPORATION FORM 10-K
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company does not currently engage in trading activities or use derivative instruments to control interest rate risk, even though
such activities may be permitted with the approval of the Company’s Board of Directors.
Credit risk and interest rate risk are the most significant market risks affecting the Company, and equity price risk can also affect
the Company’s financial results. These risks are described in the preceding sections regarding “Loan Portfolio Credit Risk,” and
“Asset/Liability and Market Risk Management.” Other types of market risk, such as foreign currency exchange risk and commodity
price risk, are not significant in the normal course of the Company’s business activities.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS
Management’s Report on Internal Control Over Financial Reporting ....................................................................
Consolidated Balance Sheets as of December 31, 2022 and 2021 ........................................................................
Consolidated Statements of Income for the years ended December 31, 2022, 2021 and 2020 .............................
Page
50
51
52
Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2022, 2021 and
2020 ....................................................................................................................................................................
53
Consolidated Statements of Changes in Shareholders’ Equity for the years ended December 31, 2022, 2021
and 2020..............................................................................................................................................................
Consolidated Statements of Cash Flows for the years ended December 31, 2022, 2021 and 2020 ......................
Notes to the Consolidated Financial Statements ...................................................................................................
Report of Independent Registered Public Accounting Firm (PCAOB ID 173) ....................................................
54
55
56
91
- 49 -
2022 WESTAMERICA BANCORPORATION FORM 10-K
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management of Westamerica Bancorporation and subsidiaries (the “Company”) is responsible for establishing and maintaining
adequate internal control over financial reporting, and for performing an assessment of the effectiveness of internal control over
financial reporting as of December 31, 2022. Internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. The Company’s system of internal control over financial reporting
includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded
as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that
receipts and expenditures of the Company are being made only in accordance with authorizations of Management and Directors of
the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or
disposition of the Company’s assets that could have a material effect on the financial statements.
Management performed an assessment of the effectiveness of the Company’s internal control over financial reporting as of
December 31, 2022 based upon criteria in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission (“COSO”). Based on this assessment, Management determined that the Company’s
internal control over financial reporting was effective as of December 31, 2022 based on the criteria in Internal Control - Integrated
Framework (2013) issued by COSO.
The Company’s independent registered public accounting firm has issued an attestation report on the Company’s internal control
over financial reporting. Their opinion and attestation on internal control over financial reporting appear on page 91.
Dated: February 28, 2023
- 50 -
2022 WESTAMERICA BANCORPORATION FORM 10-K
WESTAMERICA BANCORPORATION
CONSOLIDATED BALANCE SHEETS
Assets:
Cash and due from banks
Debt securities available for sale
Debt securities held to maturity, net of allowance for credit losses of
$1 at December 31, 2022 and $7 at December 31, 2021
(Fair value of $873,511 at December 31, 2022 and $312,562 at December 31, 2021)
Loans
Allowance for credit losses on loans
Loans, net of allowance for credit losses on loans
Premises and equipment, net
Identifiable intangibles, net
Goodwill
Other assets
Total Assets
Liabilities:
Noninterest-bearing deposits
Interest-bearing deposits
Total deposits
Short-term borrowed funds
Other liabilities
Total Liabilities
Contingencies (Note 12)
Shareholders' Equity:
Common stock (no par value), authorized - 150,000 shares
Issued and outstanding: 26,913 at December 31, 2022 and 26,866 at December 31, 2021
Deferred compensation
Accumulated other comprehensive (loss) income
Retained earnings
Total Shareholders' Equity
Total Liabilities and Shareholders' Equity
See accompanying notes to consolidated financial statements.
At December 31,
2022
2021
(In thousands)
$294,236
4,331,743
$1,132,085
4,638,855
915,913
958,488
(20,284)
938,204
28,819
583
121,673
319,146
$6,950,317
$2,947,277
3,278,013
6,225,290
57,792
65,125
6,348,207
306,396
1,068,126
(23,514)
1,044,612
31,155
835
121,673
185,415
$7,461,026
$3,069,080
3,344,876
6,413,956
146,246
73,722
6,633,924
475,086
35
(256,105)
383,094
602,110
$6,950,317
471,008
35
49,664
306,395
827,102
$7,461,026
- 51 -
2022 WESTAMERICA BANCORPORATION FORM 10-K
WESTAMERICA BANCORPORATION
CONSOLIDATED STATEMENTS OF INCOME
WESTAMERICA BANCORPORATION
CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended December 31,
2020
2022
2021
For the Years Ended December 31,
(In thousands, except per share data)
2022
2020
2021
(In thousands, except per share data)
Interest and Loan Fee Income:
Loans
Interest and Loan Fee Income:
Equity securities
Debt securities available for sale
Debt securities held to maturity
Interest-bearing cash
Loans
Equity securities
Debt securities available for sale
Debt securities held to maturity
Total Interest and Loan Fee Income
Interest-bearing cash
Interest Expense:
Total Interest and Loan Fee Income
Deposits
Short-term borrowed funds
Interest Expense:
Other borrowed funds
Deposits
Total Interest Expense
Short-term borrowed funds
Net Interest and Loan Fee Income
Other borrowed funds
Provision for Credit Losses
Net Interest and Loan Fee Income After Provision For Credit Losses
Noninterest Income:
Total Interest Expense
Net Interest and Loan Fee Income
Provision for Credit Losses
Service charges on deposit accounts
Net Interest and Loan Fee Income After Provision For Credit Losses
Merchant processing services
Debit card fees
Noninterest Income:
Trust fees
Service charges on deposit accounts
ATM processing fees
Merchant processing services
Other service fees
Debit card fees
Financial services commissions
Trust fees
Gains on sales of real property
ATM processing fees
Life insurance gains
Other service fees
Securities gains
Financial services commissions
Other noninterest income
Gains on sales of real property
Total Noninterest Income
Noninterest Expense:
Life insurance gains
Salaries and related benefits
Securities gains
Occupancy and equipment
Other noninterest income
Outsourced data processing services
Total Noninterest Income
Limited Partnership Operating Losses
Noninterest Expense:
Professional fees
Courier service
Other noninterest expense
Salaries and related benefits
Occupancy and equipment
Outsourced data processing services
Total Noninterest Expense
Limited Partnership Operating Losses
Income Before Income Taxes
Provision for income taxes
Professional fees
Courier service
Other noninterest expense
Average Common Shares Outstanding
Diluted Average Common Shares Outstanding
Per Common Share Data:
Income Before Income Taxes
Provision for income taxes
Total Noninterest Expense
Net Income
Basic earnings
Net Income
Diluted earnings
Dividends paid
Average Common Shares Outstanding
Diluted Average Common Shares Outstanding
Per Common Share Data:
See accompanying notes to consolidated financial statements.
Basic earnings
Diluted earnings
Dividends paid
See accompanying notes to consolidated financial statements.
$49,682
537
144,646
19,101
7,790
221,756
1,846
79
-
1,925
219,831
-
219,831
14,490
11,623
7,879
3,216
2,160
1,808
417
-
930
-
2,598
45,121
46,125
19,884
9,684
5,724
2,628
2,614
12,702
99,361
165,591
43,557
$122,034
26,895
26,907
$4.54
4.54
1.68
$57,558
458
$49,682
105,420
537
8,875
144,646
1,132
19,101
173,443
7,790
221,756
1,877
78
-
1,846
1,955
79
171,488
-
-
1,925
171,488
219,831
-
219,831
13,697
11,998
6,859
3,311
14,490
2,280
11,623
1,884
7,879
356
3,216
-
2,160
-
1,808
34
417
2,926
43,345
-
930
48,011
-
19,139
2,598
9,601
45,121
2,620
3,253
46,125
2,177
19,884
13,005
9,684
97,806
5,724
117,027
30,518
2,628
$86,509
2,614
12,702
99,361
165,591
43,557
$122,034
26,855
26,870
$3.22
3.22
1.65
$59,377
419
$57,558
91,343
458
13,552
105,420
1,165
8,875
165,856
1,132
1,770
173,443
53
1
1,877
1,824
78
164,032
-
4,300
1,955
159,732
171,488
-
14,149
171,488
10,208
6,181
3,012
13,697
2,273
11,998
1,837
6,859
372
3,311
3,536
2,280
-
1,884
71
356
3,998
45,637
-
-
50,749
34
19,637
2,926
9,426
43,345
2,440
2,423
48,011
2,001
19,139
11,890
9,601
98,566
2,620
106,803
26,390
3,253
$80,413
2,177
13,005
26,942
97,806
26,960
117,027
30,518
$2.98
$86,509
2.98
1.64
26,855
26,870
$3.22
3.22
1.65
$59,377
419
91,343
13,552
1,165
165,856
1,770
53
1
1,824
164,032
4,300
159,732
14,149
10,208
6,181
3,012
2,273
1,837
372
3,536
-
71
3,998
45,637
50,749
19,637
9,426
2,440
2,423
2,001
11,890
98,566
106,803
26,390
$80,413
26,942
26,960
$2.98
2.98
1.64
26,895
26,907
$4.54
4.54
1.68
- 52 -
- 52 -
2022 WESTAMERICA BANCORPORATION FORM 10-K
WESTAMERICA BANCORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Net Income
Other comprehensive (loss) income:
Changes in net unrealized (losses) gains on debt securities available for sale
Deferred tax benefit (expense)
Reclassification of gains included in net income
Deferred tax expense on gains included in net income
Changes in unrealized (losses) gains on debt securities available for sale, net of tax
Total Comprehensive (Loss) Income
See accompanying notes to consolidated financial statements.
2022
For the Years Ended December 31,
2021
(In thousands)
$86,509
$122,034
2020
$80,413
(434,107)
128,338
-
-
(305,769)
($183,735)
(91,891)
27,167
(34)
10
(64,748)
$21,761
125,519
(37,108)
(71)
21
88,361
$168,774
- 53 -
2022 WESTAMERICA BANCORPORATION FORM 10-K
WESTAMERICA BANCORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Common
Shares
Outstanding
Common
Stock
Deferred
Compensation
Accumulated
Other
Comprehensive
Income (Loss)
(In thousands, except per share data)
Retained
Earnings
Total
$731,417
52
731,469
80,413
88,361
2,838
534
1,875
100
(16,496)
(44,285)
844,809
86,509
(64,748)
3,017
526
1,419
106
(232)
(44,304)
827,102
122,034
(305,769)
2,255
492
1,309
87
(218)
(45,182)
$602,110
(10,959)
(44,285)
264,356
86,509
(166)
(44,304)
306,395
122,034
(153)
(45,182)
$383,094
Balance, December 31, 2019
Adoption of ASU 2016-13
Adjusted Balance, January 1, 2020
Net income for the year 2020
Other comprehensive income
Exercise of stock options
Restricted stock activity
Stock based compensation
Stock awarded to employees
Retirement of common stock
Dividends ($1.64 per share)
Balance, December 31, 2020
Net income for the year 2021
Other comprehensive loss
Exercise of stock options
Restricted stock activity
Stock based compensation
Stock awarded to employees
Retirement of common stock
Dividends ($1.65 per share)
27,062
$465,460
27,062
465,460
52
10
-
2
(319)
2,838
1,270
1,875
100
(5,537)
$26,051
26,051
88,361
$239,135
52
239,187
80,413
$771
771
(736)
26,807
466,006
35
114,412
(64,748)
53
9
-
1
(4)
3,017
526
1,419
106
(66)
Balance, December 31, 2021
26,866
471,008
35
49,664
Net income for the year 2022
Other comprehensive loss
Exercise of stock options
Restricted stock activity
Stock based compensation
Stock awarded to employees
Retirement of common stock
Dividends ($1.68 per share)
(305,769)
40
8
-
2
(3)
2,255
492
1,309
87
(65)
Balance, December 31, 2022
26,913
$475,086
$35
($256,105)
See accompanying notes to consolidated financial statements.
- 54 -
2022 WESTAMERICA BANCORPORATION FORM 10-K
2022
For the Years Ended December 31,
2021
(In thousands)
$86,509
$122,034
2020
$80,413
16,565
-
(1,704)
1,309
(930)
-
-
-
(18,037)
697
(2,415)
3,020
(10)
(6,827)
113,702
108,107
3,041
(636,228)
500,160
(718,940)
111,059
2,326
(811)
-
-
(631,286)
(188,666)
(88,454)
2,255
(218)
(45,182)
(320,265)
(837,849)
1,132,085
$294,236
$3,533
-
6,037
1,935
39,840
16,617
-
(5,576)
1,419
-
(34)
-
-
(2,499)
3,899
(3,534)
(1,054)
(72)
(6,940)
88,735
193,755
-
(1,909,370)
1,204,455
-
206,400
-
(1,324)
-
-
(306,084)
725,977
43,701
3,017
(232)
(44,304)
728,159
510,810
621,275
$1,132,085
$5,105
-
6,309
2,027
27,673
22,647
4,300
(4,442)
1,875
-
(71)
(3,536)
(71)
(4,225)
(246)
(3,528)
353
(5)
14,280
107,744
(126,682)
-
(2,102,983)
1,260,846
-
218,164
-
(2,200)
3,819
114
(748,922)
875,358
71,617
2,838
(16,496)
(44,285)
889,032
247,854
373,421
$621,275
$7,697
29,000
6,516
1,830
26,462
WESTAMERICA BANCORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Operating Activities:
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization/accretion
Provision for credit losses
Net amortization of deferred loan fees
Stock option compensation expense
Life insurance gains
Securities gains
Gains on sales of premises and equipment
Gain on disposal of premises and equipment
Net changes in:
Interest income receivable
Net deferred tax liability
Other assets
Income taxes payable
Interest expense payable
Other liabilities
Net Cash Provided by Operating Activities
Investing Activities:
Net repayments (disbursements) of loans
Proceeds from life insurance policies
Purchases of debt securities available for sale
Proceeds from sale/maturity/calls of debt securities available for sale
Purchases of debt securities held to maturity
Proceeds from maturity/calls of debt securities held to maturity
Proceeds from redemption of Federal Reserve Bank stock
Purchases of premises and equipment
Proceeds from sale of premises and equipment
Proceeds from sale of foreclosed assets
Net Cash Used in Investing Activities
Financing Activities:
Net change in deposits
Net change in short-term borrowings
Exercise of stock options
Retirement of common stock
Common stock dividends paid
Net Cash (Used in) Provided by Financing Activities
Net Change In Cash and Due from Banks
Cash and Due from Banks at Beginning of Period
Cash and Due from Banks at End of Period
Supplemental Cash Flow Disclosures:
Supplemental disclosure of noncash activities:
Right-of-use assets acquired in exchange for operating lease liabilities
Securities purchases pending settlement
Supplemental disclosure of cash flow activities:
Cash paid for amounts included in operating lease liabilities
Interest paid for the period
Income tax payments for the period
See accompanying notes to consolidated financial statements.
- 55 -
2022 WESTAMERICA BANCORPORATION FORM 10-K
WESTAMERICA BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1: Business and Accounting Policies
Westamerica Bancorporation, a registered bank holding company (the “Company”), provides a full range of banking services to
corporate and individual customers in Northern and Central California through its wholly-owned subsidiary bank, Westamerica
Bank (the “Bank”). The Bank is subject to competition from both financial and nonfinancial institutions and to the regulations of
certain agencies and undergoes periodic examinations by those regulatory authorities. All of the financial service operations are
considered by management to be aggregated in one reportable operating segment.
The Company has evaluated events and transactions subsequent to the balance sheet date. Based on this evaluation, the Company
is not aware of any events or transactions that occurred subsequent to the balance sheet date but prior to filing that would require
recognition or disclosure in its consolidated financial statements. Certain amounts in prior periods have been reclassified to conform
to the current presentation.
Certain risks, uncertainties and other factors may cause actual future results to differ materially from the results discussed in this
report on Form 10-K. Recent events that could affect the Company’s operations include the COVID-19 pandemic, inflation and the
Federal Reserve’s monetary policy, climate changes and the war in Ukraine. Management continues to actively monitor their impact
on the Company’s business. 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. 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.
Summary of Significant Accounting Policies
The consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States
of America. The following is a summary of significant policies used in the preparation of the accompanying financial statements.
Accounting Estimates. Certain accounting policies underlying the preparation of these financial statements require Management to
make estimates, assumptions, and judgments that affect the amounts reported in the financial statements and accompanying notes.
These estimates, assumptions, and judgments are based on information available as of the date of the financial statements;
accordingly, as this information changes, the financial statements could reflect different estimates, assumptions, and judgments and
as such have a greater possibility of producing results that could be materially different than originally reported. Estimates,
assumptions, and judgments are necessary when assets and liabilities are required to be recorded at fair value, when a decline in
fair value of an asset not carried on the financial statements at fair value warrants an impairment writedown or valuation reserve to
be established, or when an asset or liability needs to be recorded contingent upon a future event. The allowance for credit losses
accounting is an area requiring the most subjective or complex judgments, and as such could be most subject to revision as new
information becomes available. A discussion of the factors affecting the accounting for the allowance for credit losses on loans is
included in the following “Loans” and “Allowance for Credit Losses” sections. Carrying assets and liabilities at fair value inherently
results in financial statement volatility. The fair values and the information used to record valuation adjustments for certain assets
and liabilities are based either on quoted market prices or are provided by other third party sources, when available. The “Securities”
section discusses the factors that may affect the valuation of the Company’s securities. Although the estimates contemplate current
conditions actual results can change.
Principles of Consolidation. The consolidated financial statements include the accounts of the Company and all the Company’s
subsidiaries. Significant intercompany transactions have been eliminated in consolidation. The Company does not maintain or
conduct transactions with any unconsolidated special purpose entities.
Cash. Cash includes Due From Banks balances which are readily convertible to known amounts of cash and are generally 90 days
or less from maturity at the time of initiation, presenting insignificant risk of changes in value due to interest rate changes.
Equity Securities. Equity securities consist of marketable equity securities and mutual funds which are recorded at fair value.
Unrealized gains and losses are included in net income. There were no equity securities at December 31, 2022 and December 31,
2021.
Debt Securities. Debt securities consist of the U.S. Treasury, securities of government sponsored entities, states, counties,
municipalities, corporations, agency and non-agency mortgage-backed securities, collateralized loan obligations and commercial
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2022 WESTAMERICA BANCORPORATION FORM 10-K
paper. Securities transactions are recorded on a trade date basis. The Company classifies its debt securities in one of three categories:
trading, available for sale or held to maturity. Trading securities are bought and held principally for the purpose of selling them in
the near term. Trading securities are recorded at fair value with unrealized gains and losses included in net income. Held to maturity
debt securities are those securities which the Company has the ability and intent to hold until maturity. Held to maturity debt
securities are recorded at cost, adjusted for the amortization of premiums or accretion of discounts. Securities not included in trading
or held to maturity are classified as available for sale debt securities. Available for sale debt securities are recorded at fair value.
Unrealized gains and losses, net of the related tax effect, on available for sale debt securities are included in accumulated other
comprehensive income. Accrued interest is recorded within other assets and reversed against interest income if it is not received.
The Company utilizes third-party sources to value its investment securities; securities individually valued using quoted prices in
active markets are classified as Level 1 assets in the fair value hierarchy, and securities valued using quoted prices in active markets
for similar securities (commonly referred to as “matrix” pricing) are classified as Level 2 assets in the fair value hierarchy. The
Company validates the reliability of third-party provided values by comparing individual security pricing for securities between
more than one third-party source. When third-party information is not available, valuation adjustments are estimated in good faith
by Management and classified as Level 3 in the fair value hierarchy.
The Company follows the guidance issued by the Board of Governors of the Federal Reserve System, “Investing in Securities
without Reliance on Nationally Recognized Statistical Rating Agencies” (SR 12-15) and other regulatory guidance when performing
investment security pre-purchase analysis or evaluating investment securities for credit loss. Credit ratings issued by recognized
rating agencies are considered in the Company’s analysis only as a guide to the historical default rate associated with similarly-
rated bonds.
To the extent that debt securities in the held-to-maturity portfolio share common risk characteristics, estimated expected credit
losses are calculated in a manner like that used for loans held for investment. That is, for pools of such securities with common risk
characteristics, the historical lifetime probability of default and severity of loss in the event of default is derived or obtained from
external sources and adjusted for the expected effects of reasonable and supportable forecasts over the expected lives of the
securities on those historical credit losses. Expected credit loss on each security in the held-to-maturity portfolio that do not share
common risk characteristics with any of the pools of debt securities is individually evaluated and a reserve for credit losses is
established at the difference between the discounted value of the expected future cash flows, based on the original effective interest
rate, and the recorded amortized cost basis of the security. For certain classes of debt securities, the bank considers the history of
credit losses, current conditions and reasonable and supportable forecasts, which may indicate that the expectation that nonpayment
of the amortized cost basis is or continues to be zero. Therefore, for those securities, the bank does not record expected credit losses.
Available for sale debt securities in unrealized loss positions are evaluated for credit related loss at least quarterly. For available for
sale debt securities, a decline in fair value due to credit loss results in recording an allowance for credit losses to the extent the fair
value is less than the amortized cost basis. Declines in fair value that have not been recorded through an allowance for credit losses,
such as declines due to changes in market interest rates, are recorded through other comprehensive income, net of applicable taxes.
Although these evaluations involve significant judgment, an unrealized loss in the fair value of a debt security is generally
considered to not be related to credit when the fair value of the security is below the carrying value primarily due to changes in risk-
free interest rates, there has not been significant deterioration in the financial condition of the issuer, and the Company does not
intend to sell nor does it believe it will be required to sell the security before the recovery of its cost basis.
If the Company intends to sell a debt security or more likely than not will be required to sell the security before recovery of its
amortized cost basis, the debt security is written down to its fair value and the write down is charged against the allowance for credit
losses with any incremental loss reported in earnings.
Purchase premiums are amortized to the earliest call date and purchase discounts are amortized to maturity as an adjustment to yield
using the effective interest method. Unamortized premiums, unaccreted discounts, and early payment premiums are recognized as
a component of gain or loss on sale upon disposition of the related security. Interest and dividend income are recognized when
earned. Realized gains and losses from the sale of available for sale debt securities are included in earnings using the specific
identification method.
Nonmarketable Equity Securities. Nonmarketable equity securities include securities that are not publicly traded, such as Visa Class
B common stock, and securities acquired to meet regulatory requirements, such as Federal Reserve Bank stock, which are restricted.
These restricted securities are accounted for under the cost method and are included in other assets. The Company reviews those
assets accounted for under the cost method at least quarterly. The Company’s review typically includes an analysis of the facts and
circumstances of each investment, the expectations for the investment’s cash flows and capital needs, the viability of its business
model and any exit strategy. When the review indicates that impairment exists the asset value is reduced to fair value. The Company
recognizes the estimated loss in noninterest income.
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2022 WESTAMERICA BANCORPORATION FORM 10-K
Loans. Loans are stated at the principal amount outstanding, net of unearned discount and unamortized deferred fees and costs.
Interest is accrued daily on the outstanding principal balances and included in other assets. Loans which are more than 90 days
delinquent with respect to interest or principal, unless they are well secured and in the process of collection, and other loans on
which full recovery of principal or interest is in doubt, are placed on nonaccrual status. Interest previously accrued on loans placed
on nonaccrual status is charged against interest income. In addition, some loans secured by real estate and commercial loans to
borrowers experiencing financial difficulties are placed on nonaccrual status even though the borrowers continue to repay the loans
as scheduled. When the ability to fully collect nonaccrual loan principal is in doubt, payments received are applied against the
principal balance of the loans on a cost-recovery method until such time as full collection of the remaining recorded balance is
expected. Any additional interest payments received after that time are recorded as interest income on a cash basis. Nonaccrual
loans are reinstated to accrual status when none of the loan’s principal and interest is past due and improvements in credit quality
eliminate doubt as to the full collectability of both principal and interest, or the loan otherwise becomes well secured and in the
process of collection. Certain consumer loans or auto receivables are charged off against the allowance for credit losses when they
become 120 days past due.
A troubled debt restructuring (“TDR”) occurs when the Company, for reasons related to a borrower’s financial difficulties, grants
a concession to the borrower it would not otherwise consider. The Company follows its general nonaccrual policy for TDRs.
Performing TDRs are reinstated to accrual status when improvements in credit quality eliminate the doubt as to full collectability
of both principal and interest. Under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), banks may elect
to deem that loan modifications do not result in TDRs if they are (1) related to the novel coronavirus disease; (2) executed on a loan
that was not more than 30 days past due as of December 31, 2019; and (3) executed between March 1, 2020, and the earlier of (A)
60 days after the date of termination of the National Emergency or (B) December 31, 2020.The Consolidated Appropriations Act,
2021, extended the period during which banks may elect to deem that qualified loan modifications do not result in TDR classification
through January 1, 2022.
Allowance for Credit Losses. The Company extends loans to commercial and consumer customers primarily in Northern and Central
California. These lending activities expose the Company to the risk borrowers will default, causing loan losses. The Company’s
lending activities are exposed to various qualitative risks. All loan segments are exposed to risks inherent in the economy and market
conditions. Significant risk characteristics related to the commercial loan segment include the borrowers’ business performance and
financial condition, and the value of collateral for secured loans. Significant risk characteristics related to the commercial real estate
segment include the borrowers’ business performance and the value of properties collateralizing the loans. Significant risk
characteristics related to the construction loan segment include the borrowers’ performance in successfully developing the real
estate into the intended purpose and the value of the property collateralizing the loans. Significant risk characteristics related to the
residential real estate segment include the borrowers’ financial wherewithal to service the mortgages and the value of the property
collateralizing the loans. Significant risk characteristics related to the consumer loan segment include the financial condition of the
borrowers and the value of collateral securing the loans.
The preparation of these financial statements requires Management to estimate the amount of expected losses over the expected
contractual life of the Bank’s existing loan portfolio and establish an allowance for credit losses. Loan agreements generally include
a maturity date, and the Company considers the contractual life of a loan agreement to extend from the date of origination to the
contractual maturity date. In estimating credit losses, Management must exercise significant judgment in evaluating information
deemed relevant. The amount of ultimate losses on the loan portfolio can vary from the estimated amounts. Management follows a
systematic methodology to estimate loss potential in an effort to reduce the differences between estimated and actual losses.
The allowance for credit losses is established through provisions for credit losses charged to income. Losses on loans are charged
to the allowance for credit losses when all or a portion of the recorded amount of a loan is deemed to be uncollectible. Recoveries
of loans previously charged off are credited to the allowance when realized. The Company’s allowance for credit losses is
maintained at a level considered adequate to provide for expected losses based on historical loss rates adjusted for current and
expected conditions over a forecast period. These include conditions unique to individual borrowers, as well as overall credit loss
experience, the amount of past due, nonperforming and classified loans, recommendations of regulatory authorities, prevailing
economic conditions, or credit protection agreements and other factors.
Loans that share common risk characteristics are segregated into pools based on common characteristics, which is primarily
determined by loan, borrower, or collateral type. Historical loss rates are determined for each pool. For consumer installment loans,
primarily secured by automobiles, historical loss rates are determined using a vintage methodology, which tracks losses based on
period of origination. For commercial, construction, and commercial real estate, historical loss rates are determined using an open
pool methodology where losses are tracked over time for all loans included in the pool at the historical measurement date. Historical
loss rates are adjusted for factors that are not reflected in the historical loss rates that are attributable to national or local economic
or industry trends which have occurred but have not yet been recognized in past loan charge-off history, estimated losses based on
management’s reasonable and supportable expectation of economic trends over a forecast horizon of up to two years, and other
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2022 WESTAMERICA BANCORPORATION FORM 10-K
factors that impact credit loss expectations that are not reflected in the historical loss rates. Other factors include, but are not limited
to, the effectiveness of the Company’s loan review system, adequacy of lending Management and staff, loan policies and procedures,
problem loan trends, and concentrations of credit. At the end of the two-year forecast period loss rates revert immediately to the
historical loss rates. The results of this analysis are applied to the amortized cost of the loans included within each pool.
Loans that do not share risk characteristics with other loans in the pools are evaluated individually. A loan is considered ‘collateral-
dependent’ when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through
the operation or sale of the collateral. A credit loss reserve for collateral-dependent loans is established at the difference between
the amortized cost basis in the loan and the fair value of the underlying collateral adjusted for costs to sell. For other individually
evaluated loans that are not collateral dependent, a credit loss reserve is established at the difference between the amortized cost
basis in the loan and the present value of expected future cash flows discounted at the loan’s effective interest rate. The impact of
an expected TDR modification is included in the allowance for credit losses when management determines a TDR modification is
likely.
Accrued interest is recorded in other assets and is excluded from the estimation of expected credit loss. Accrued interest is reversed
through interest income when amounts are determined to be uncollectible, which generally occurs when the underlying receivable
is placed on nonaccrual status or charged off.
Liability for Off-Balance Sheet Credit Exposures. Off-balance sheet credit exposures relate to letters of credit and unfunded loan
commitments for commercial, construction and consumer loans. The Company maintains a separate allowance for credit losses
from off-balance-sheet credit exposures, which is included within other liabilities on the consolidated statements of financial
condition. Increases or reductions to the Company’s allowance for credit losses from off-balance sheet credit exposures are recorded
in other expenses. Management estimates the amount of expected losses by estimating expected usage exposures that are not
unconditionally cancellable by the Company and applying the loss factors used in the allowance for credit loss methodology to
estimate the liability for credit losses related to unfunded commitments. No credit loss estimate is reported for off-balance-sheet
credit exposures that are unconditionally cancellable by the Company or for undrawn amounts under such arrangements that may
be drawn prior to the cancellation of the arrangement.
Nonrefundable fees and certain costs associated with originating or acquiring loans are deferred and amortized as an adjustment to
interest income over the contractual loan lives. Upon prepayment, unamortized loan fees, net of costs, are immediately recognized
in interest income. Other fees, including those collected upon principal prepayments, are included in interest income when received.
Loans held for sale are identified upon origination and are reported at the lower of cost or market value on an aggregate loan basis.
Other Real Estate Owned. Other real estate owned is comprised of property acquired through foreclosure proceedings, acceptances
of deeds-in-lieu of foreclosure and, if applicable, vacated bank properties. Losses recognized at the time of acquiring property in
full or partial satisfaction of debt are charged against the allowance for credit losses. Other real estate owned is recorded at the fair
value of the collateral, generally based upon an independent property appraisal, less estimated disposition costs. Losses incurred
subsequent to acquisition due to any decline in annual independent property appraisals are recognized as noninterest expense.
Routine holding costs, such as property taxes, insurance and maintenance, and losses from sales and dispositions, are recognized as
noninterest expense.
Premises and Equipment. Premises and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation
is computed substantially on the straight-line method over the estimated useful life of each type of asset. Estimated useful lives of
premises and equipment range from 20 to 50 years and from 3 to 20 years, respectively. Leasehold improvements are amortized
over the terms of the lease or their estimated useful life, whichever is shorter.
Revenue Recognition. The Company recognizes revenue as it is earned based on contractual terms, as transactions occur, or as
services are provided and collectability is reasonably assured. In certain circumstances, noninterest income is reported net of
associated expenses that are directly related to variable volume-based sales or revenue sharing arrangements or when the Company
acts on an agency basis for others.
Life Insurance Cash Surrender Value. The Company has purchased life insurance policies on certain directors and officers as well as
acquired such assets as part of the acquisition of other banks. Company owned life insurance is recorded at the amount that can be
realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges or other
amounts due that are probable at settlement. These assets are included in other assets on the consolidated balance sheets.
Intangible Assets. Intangible assets are comprised of goodwill, core deposit intangibles and other identifiable intangibles acquired
in business combinations. Intangible assets with finite useful lives are amortized on an accelerated basis over their respective
estimated useful lives not exceeding 15 years. Intangible assets with a finite useful life are reviewed at least annually for impairment.
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2022 WESTAMERICA BANCORPORATION FORM 10-K
Any goodwill and any intangible asset acquired in a business combination determined to have an indefinite useful life is not
amortized and is reviewed at least annually for impairment. If management determines, based on a qualitative review of events and
circumstances, that it is more likely than not that the carrying value of the intangible asset will not be realized, an impairment test
is performed to determine whether the asset’s fair value is less than the carrying amount of the asset.
Impairment of Long-Lived Assets. The Company reviews its long-lived and certain intangible assets for impairment whenever
events or changes indicate that the carrying amount of an asset may not be recoverable. If such assets are considered to be impaired,
the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of
the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.
Income Taxes. The Company and its subsidiaries file consolidated tax returns. The Company accounts for income taxes in
accordance with FASB ASC 740, Income Taxes, resulting in two components of income tax expense: current and deferred. Current
income tax expense approximates taxes to be paid or refunded for the current period. The Company determines deferred income
taxes using the balance sheet method. Under this method, the net deferred tax asset or liability is based on the tax effects of the
differences between the book and tax bases of assets and liabilities, and recognizes enacted changes in tax rates and laws in the
period in which they occur. Deferred income tax expense results from changes in deferred tax assets and liabilities between periods.
Deferred tax assets are recognized subject to Management’s judgment that realization is more likely than not. A tax position that
meets the more likely than not recognition threshold is measured to determine the amount of benefit to recognize. The tax position
is measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon settlement. Interest and
penalties are recognized as a component of income tax expense.
Stock-based Compensation. The Company applies FASB ASC 718 – Compensation – Stock Compensation, to account for stock
based awards granted to employees using the fair value method. The Company recognizes compensation expense for restricted
performance share grants over the relevant attribution period. Restricted performance share grants have no exercise price, therefore,
the intrinsic value is measured using an estimated per share price at the vesting date for each restricted performance share. The
estimated per share price is adjusted during the attribution period to reflect actual stock price performance. The Company’s
obligation for unvested outstanding restricted performance share grants is classified as a liability until the vesting date due to a cash
settlement feature, at which time the issued shares become classified as shareholders’ equity.
Other. Securities and other property held by the Bank in a fiduciary or agency capacity are not included in the financial statements
since such items are not assets of the Company or its subsidiaries.
Recently Adopted Accounting Standards
In the year ended December 31, 2021, the Company adopted the following new accounting guidance:
FASB ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, was issued December 2019. The
ASU is intended to simplify various aspects related to accounting for income taxes, eliminates certain exceptions to the general
principles in ASC Topic 740 related to intra-period tax allocation, simplifies when companies recognize deferred taxes in an interim
period, and clarifies certain aspects of the current guidance to promote consistent application. This guidance effective for public
entities for fiscal years beginning after December 15, 2020, and for interim period within those fiscal years, with early adoption
permitted. The Company adopted the ASU provisions on January 1, 2021 and the adoption of the ASU provisions did not have a
significant impact on the Company’s consolidated financial statements.
In 2020, the Company adopted the following new accounting guidance:
FASB ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,
was issued on June 16, 2016. The ASU significantly changed estimates for credit losses related to financial assets measured at
amortized cost and certain other contracts. For estimating credit losses, the FASB replaced the incurred loss model with the current
expected credit loss (CECL) model, which accelerated recognition of credit losses. Additionally, credit losses relating to debt
securities available-for-sale are recorded through an allowance for credit losses under the new standard. The Company is also
required to provide additional disclosures related to the financial assets within the scope of the new standard.
The Company adopted the ASU provisions on a modified retrospective basis on January 1, 2020. Management evaluated available
data, defined portfolio segments of loans with similar attributes, and selected loss estimate models for each identified loan portfolio
segment. Management measured historical loss rates for each portfolio segment. Management also segmented debt securities held
to maturity, selected methods to estimate losses for each segment, and measured a loss estimate. Agency mortgage-backed securities
were assigned no credit loss allowance due to the perceived backing of government sponsored entities. Municipal securities were
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2022 WESTAMERICA BANCORPORATION FORM 10-K
evaluated for risk of default based on credit rating and remaining term to maturity using Moody’s risk of default factors; Moody’s
loss upon default factors were applied to the assumed defaulted principal amounts to estimate the amount for credit loss allowance.
The adjustment to the allowance for credit losses was recorded through an offsetting after-tax adjustment to shareholders’ equity.
The implementing entry increased allowance for credit losses by $2,017 thousand, reduced allowance for credit losses for unfunded
credit commitments by $2,107 thousand and increased retained earnings by $52 thousand.
The following table summarizes the impact of adoption of ASU 2016-13.
Balance,
prior to adoption
of ASU 2016-13
January 1, 2020
Impact of
adoption of
ASU 2016-13
(In thousands)
As reported
under
ASU 2016-13
Assets:
Allowance for credit losses on loans:
Commercial
Commercial real estate
Construction
Residential real estate
Consumer and other installment loans
Unallocated
Allowance for credit losses on loans:
$4,959
4,064
109
206
6,445
3,701
$19,484
$3,385
618
(31)
(132)
1,878
(3,701)
$2,017
Allowance for credit losses on debt securities
held to maturity
-
16
Liabilities:
Allowance for credit losses for unfunded
commitments
Recently Issued Accounting Standards
2,160
(2,107)
$8,344
4,682
78
74
8,323
-
$21,501
16
53
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. Once elected for a Topic or an
Industry Subtopic within the Codification, the amendments in this ASU must be applied prospectively for all eligible contract
modifications for that Topic or Industry Subtopic. The Company does not expect any material impact on its consolidated financial
statements since the Company has an insignificant number of financial instruments applicable to this ASU.
FASB ASU 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures,
was issued March 2022. The ASU 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 is effective in January 1, 2023 under a prospective approach.
Adoption of this ASU is not expected to have a material impact on the Company’s consolidated financial statements.
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2022 WESTAMERICA BANCORPORATION FORM 10-K
Note 2: Investment Securities
An analysis of the amortized cost and fair value by major categories of debt securities available for sale, which are carried at fair
value with net unrealized gains (losses) reported on an after-tax basis as a component of accumulated other comprehensive income,
and debt securities held to maturity, which are carried at amortized cost, before allowance for credit losses of $1 thousand at
December 31, 2022 and $7 thousand at December 31, 2021, follows:
Debt securities available for sale
Agency residential mortgage-backed securities ("MBS")
Securities of U.S. Government sponsored entities
Obligations of states and political subdivisions
Corporate securities
Collateralized loan obligations
Total debt securities available for sale
Debt securities held to maturity
Agency residential MBS
Obligations of states and political subdivisions
Corporate securities
Total debt securities held to maturity
Total
Debt securities available for sale
Agency residential MBS
Securities of U.S. Government entities
Obligations of states and political subdivisions
Corporate securities
Collateralized loan obligations
Total debt securities available for sale
Debt securities held to maturity
Agency residential MBS
Obligations of states and political subdivisions
Total debt securities held to maturity
Total
At December 31, 2022
Gross
Gross
Unrealized
Unrealized
Losses
Gains
(In thousands)
$4
3
59
1,032
527
1,625
13
73
-
86
$1,711
($25,045)
(15,486)
(2,079)
(307,643)
(14,970)
(365,223)
(7,503)
(538)
(34,448)
(42,489)
($407,712)
At December 31, 2021
Gross
Gross
Unrealized
Unrealized
Losses
Gains
(In thousands)
$11,766
-
3,842
63,573
1,743
80,924
3,114
3,082
6,196
$87,120
($37)
-
(29)
(9,630)
(719)
(10,415)
(37)
-
(37)
($10,452)
Amortized
Cost
$311,089
306,336
84,024
2,406,566
1,587,326
4,695,341
104,852
89,208
721,854
915,914
$5,611,255
Amortized
Cost
$399,997
119
90,107
2,692,792
1,385,331
4,568,346
148,390
158,013
306,403
$4,874,749
Fair
Value
$286,048
290,853
82,004
2,099,955
1,572,883
4,331,743
97,362
88,743
687,406
873,511
$5,205,254
Fair
Value
$411,726
119
93,920
2,746,735
1,386,355
4,638,855
151,467
161,095
312,562
$4,951,417
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2022 WESTAMERICA BANCORPORATION FORM 10-K
The amortized cost and fair value of debt securities by contractual maturity are shown in the following tables at the dates indicated:
Maturity in years:
1 year or less
Over 1 to 5 years
Over 5 to 10 years
Over 10 years
Subtotal
MBS
Total
Maturity in years:
1 year or less
Over 1 to 5 years
Over 5 to 10 years
Over 10 years
Subtotal
MBS
Total
At December 31, 2022
Debt Securities Available
for Sale
Debt Securities Held
to Maturity
Amortized
Cost
Fair
Value
Amortized
Cost
(In thousands)
Fair
Value
$251,578
584,707
2,869,559
678,408
4,384,252
311,089
$4,695,341
$250,317
554,596
2,570,159
670,623
4,045,695
286,048
$4,331,743
$12,676
161,653
636,733
-
811,062
104,852
$915,914
$12,659
158,409
605,081
-
776,149
97,362
$873,511
At December 31, 2021
Debt Securities Available
for Sale
Debt Securities Held
to Maturity
Amortized
Cost
Fair
Value
Amortized
Cost
(In thousands)
Fair
Value
$306,333
707,062
2,320,559
834,395
4,168,349
399,997
$4,568,346
$309,257
738,057
2,347,242
832,573
4,227,129
411,726
$4,638,855
$15,836
125,001
17,176
-
158,013
148,390
$306,403
$15,941
127,539
17,615
-
161,095
151,467
$312,562
Expected maturities of mortgage-related securities can differ from contractual maturities because borrowers have the right to call
or prepay obligations with or without call or prepayment penalties. In addition, such factors as prepayments and interest rates may
affect the yield on the carrying value of mortgage-related securities.
An analysis of the gross unrealized losses of the debt securities available for sale portfolio follows:
Debt Securities Available for Sale
At December 31, 2022
No. of
Investment
Positions
Less than 12 months
Fair Value
Unrealized
Losses
No. of
Investment
Positions
Agency residential MBS
Securities of U.S.
Government sponsored
entities
Obligations of states
and political
subdivisions
Corporate securities
Collateralized loan
obligations
107
$279,139
($24,222)
22
289,067
(15,486)
56
133
58
65,633
1,521,294
(1,902)
(170,453)
518,074
(13,772)
Total
376
$2,673,207
($225,835)
9
-
8
56
20
93
12 months or longer
Unrealized
Losses
Fair Value
($ in thousands)
No. of
Investment
Positions
Total
Fair Value
Unrealized
Losses
$6,110
($823)
116
$285,249
($25,045)
-
-
22
289,067
(15,486)
3,265
555,727
(177)
(137,190)
192,692
(1,198)
64
189
78
68,898
2,077,021
(2,079)
(307,643)
710,766
(14,970)
$757,794
($139,388)
469
$3,431,001
($365,223)
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2022 WESTAMERICA BANCORPORATION FORM 10-K
An analysis of gross unrecognized losses of the debt securities held to maturity portfolio follows:
Debt Securities Held to Maturity
At December 31, 2022
No. of
Investment
Positions
Less than 12 months
Fair Value
Unrecognized
Losses
No. of
Investment
Positions
Agency residential MBS
Obligations of states
and political
subdivisions
Corporate securities
Total
97
$95,814
($7,404)
54
49
200
53,536
672,406
$821,756
(538)
(34,448)
($42,390)
2
-
-
2
12 months or longer
Unrecognized
Losses
Fair Value
($ in thousands)
No. of
Investment
Positions
Total
Fair Value
Unrecognized
Losses
$682
($99)
99
$96,496
($7,503)
-
-
$682
-
-
($99)
54
49
202
53,536
672,406
$822,438
(538)
(34,448)
($42,489)
Based upon the Company’s December 31, 2022 evaluation, the unrealized losses on debt securities were caused by market
conditions for these types of securities. In the twelve months ended December 31, 2022, the market yields on five-year and ten-year
Treasury notes increased 2.74% and 2.36%, respectively; these increasing risk-free interest rates have caused large declines in bond
values generally. Additionally, market rates for non-Treasury bonds are determined by the risk-free interest rate plus a risk premium
spread; such spreads for investment grade, fixed rate, taxable corporate bonds increased 0.38% in the twelve months ended
December 31, 2022, also broadly reducing corporate bond values. The Company continually monitors interest rate changes, risk
premium spread changes, credit rating changes for issuers of bonds owned, collateralized loan obligations’ collateral levels, and
corporate bond issuers’ common stock price changes. All collateralized loan obligations and corporate bonds were investment grade
rated at December 31, 2022.
The Company does not intend to sell any debt securities available for sale with an unrealized loss and has concluded that it is more
likely than not that it will not be required to sell the debt securities prior to recovery of the amortized cost basis.
The Company evaluates held to maturity corporate securities individually, monitoring each issuer’s financial condition, profitability,
cash flows and credit rating agency conclusions. The Company has an expectation that nonpayment of the amortized cost basis
continues to be zero.
The fair values of debt securities could decline in the future if the general economy deteriorates, inflation increases, credit ratings
decline, the issuers’ financial condition deteriorates, or the liquidity for debt securities declines. As a result, significant credit losses
on debt securities may occur in the future.
As of December 31, 2022 and December 31, 2021, the Company had debt securities pledged to secure public deposits and short-
term borrowed funds of $1,180,010 thousand and $1,021,566 thousand, respectively.
An analysis of the gross unrealized losses of the debt securities available for sale portfolio follows:
Debt Securities Available for Sale
At December 31, 2021
No. of
Investment
Positions
Less than 12 months
Fair Value
Unrealized
Losses
No. of
Investment
Positions
12 months or longer
Unrealized
Losses
Fair Value
($ in thousands)
No. of
Investment
Positions
Total
Fair Value
Unrealized
Losses
7
-
6
56
19
88
$8,900
($37)
-
-
2,859
691,555
208,199
$911,513
(27)
(9,630)
(521)
($10,215)
2
1
2
-
8
13
$47
119
669
-
$ -
-
(2)
-
51,523
$52,358
(198)
($200)
9
1
8
56
27
101
$8,947
($37)
119
-
3,528
691,555
259,722
$963,871
(29)
(9,630)
(719)
($10,415)
Agency residential MBS
Securities of U.S.
Government entities
Obligations of states
and political
subdivisions
Corporate securities
Collateralized loan
obligations
Total
- 64 -
2022 WESTAMERICA BANCORPORATION FORM 10-K
An analysis of gross unrecognized losses of the debt securities held to maturity portfolio follows:
No. of
Investment
Positions
Less than 12 months
Fair Value
Unrecognized
Losses
No. of
Investment
Positions
12 months or longer
Unrecognized
Losses
Fair Value
($ in thousands)
No. of
Investment
Positions
Total
Fair Value
Unrecognized
Losses
Agency residential MBS
Total
1
1
$542
$542
($19)
($19)
3
3
$530
$530
($18)
($18)
4
4
$1,072
$1,072
($37)
($37)
Debt Securities Held to Maturity
At December 31, 2021
The Company evaluates debt securities on a quarterly basis including changes in security ratings issued by rating agencies, changes
in the financial condition of the issuer, and, for mortgage-backed and asset-backed securities, collateral levels, delinquency and loss
information with respect to the underlying collateral, changes in the levels of subordination for the Company’s particular position
within the repayment structure and remaining credit enhancement as compared to expected credit losses of the security. In addition
to monitoring credit rating agency evaluations, Management performs its own evaluations regarding the credit worthiness of the
issuer or the securitized assets underlying asset backed securities.
The following table presents the activity in the allowance for credit losses for debt securities held to maturity:
2022
For the Years Ended December 31,
2021
(In thousands)
2020
Allowance for credit losses:
Balance, end of prior period
Impact of adopting ASU 2016-13
Beginning balance
Reversal of provision for credit losses
Chargeoffs
Recoveries
Total ending balance
$7
-
7
(6)
-
-
$1
$9
-
9
(2)
-
-
$7
$ -
16
16
(7)
-
-
$9
Agency mortgage-backed securities were assigned no credit loss allowance due to the perceived backing of government sponsored
entities. Municipal securities were evaluated for risk of default based on credit rating and remaining term to maturity using Moody’s
risk of default factors; Moody’s loss upon default factors were applied to the assumed defaulted principal amounts to estimate the
amount for credit loss allowance. 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. At December 31, 2022, no credit loss
allowance was assigned to corporate securities held to maturity.
The following table summarizes the amortized cost of debt securities held to maturity at December 31, 2022, aggregated by credit
rating:
Agency residential MBS
Obligations of states and political subdivisions
Corporate securities
Total
AAA/AA/A
$104,324
88,943
467,962
$661,229
Credit Risk Profile by Credit Rating
At December 31, 2022
B-
BBB+
Not Rated
(In thousands)
$ -
-
253,892
$253,892
$481
-
-
$481
$47
265
-
$312
Total
$104,852
89,208
721,854
$915,914
There were no debt securities held to maturity on nonaccrual status or past due 30 days or more as of December 31, 2022.
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2022 WESTAMERICA BANCORPORATION FORM 10-K
The following table provides information about the amount of interest income earned on investment securities which is fully taxable
and which is exempt from federal income tax:
2022
For the Years Ended December 31,
2021
(In thousands)
2020
Taxable
Tax-exempt from regular federal income tax
Total interest income from investment securities
$158,465
5,819
$164,284
$106,329
8,424
$114,753
$93,163
12,151
$105,314
Note 3: Loans and Allowance for Credit Losses
A summary of the major categories of loans outstanding is shown in the following tables at the dates indicated.
Commercial:
Paycheck Protection Program ("PPP") loans
Other
Total Commercial
Commercial Real Estate
Construction
Residential Real Estate
Consumer Installment & Other
Total
At December 31,
2022
2021
(In thousands)
$586
169,031
169,617
491,107
3,088
13,834
280,842
958,488
$45,888
187,202
233,090
535,261
48
18,133
281,594
$1,068,126
PPP loans are guaranteed by the Small Business Administration (“SBA”). PPP loan proceeds used for eligible payroll and certain
other operating costs are eligible for forgiveness, with repayment of loan principal and accrued interest made by the SBA.
Management does not expect credit losses on PPP loans. Therefore, there is no allowance for such loans. The following summarizes
activity in the allowance for credit losses.
Allowance for Credit Losses
For the Year Ended Decmber 31, 2022
Commercial
Commercial
Real Estate
Construction
Residential
Real Estate
(In thousands)
Consumer
Installment
and Other
$6,966
(1,184)
(20)
376
$6,138
$6,529
(703)
-
62
$5,888
$2
148
-
-
$150
$45
(13)
-
-
$32
$9,972
1,758
(6,205)
2,551
$8,076
Allowance for Credit Losses
For the Year Ended December 31, 2021
Commercial
Commercial
Real Estate
Construction
Residential
Real Estate
(In thousands)
Consumer
Installment
and Other
$9,205
(2,411)
(56)
228
$6,966
$5,660
126
-
743
$6,529
$6
(4)
-
-
$2
$47
(2)
-
-
$45
$8,936
2,293
(3,192)
1,935
$9,972
Total
$23,514
6
(6,225)
2,989
$20,284
Total
$23,854
2
(3,248)
2,906
$23,514
Allowance for credit losses:
Balance at beginning of period
(Reversal) provision
Chargeoffs
Recoveries
Total allowance for credit losses
Allowance for credit losses:
Balance at beginning of period
(Reversal) provision
Chargeoffs
Recoveries
Total allowance for credit losses
- 66 -
2022 WESTAMERICA BANCORPORATION FORM 10-K
Allowance for Credit Losses
For the Year Ended December 31, 2020
Commercial
Commercial
Real Estate
Construction
Residential
Real Estate
(In thousands)
Consumer
Installment
and Other
Unallocated
Total
$4,959
3,385
8,344
746
(236)
351
$9,205
$4,064
618
4,682
929
-
49
$5,660
$109
(31)
78
(72)
-
-
$6
$206
(132)
74
(27)
-
-
$47
$6,445
1,878
8,323
2,731
(3,963)
1,845
$8,936
$3,701
(3,701)
-
-
-
-
$ -
$19,484
2,017
21,501
4,307
(4,199)
2,245
$23,854
Allowance for credit losses:
Balance at beginning of period, prior
to adoption of ASU 2016-13
Impact of adopting ASU 2016-13
Adjusted beginning balance
Provision (reversal)
Chargeoffs
Recoveries
Total allowance for credit losses
The Company’s customers are primarily small businesses, professionals and consumers. Given the scale of these borrowers,
corporate credit rating agencies do not evaluate the borrowers’ financial condition. The Bank maintains a Loan Review Department
which reports directly to the Audit Committee of the Board of Directors. The Loan Review Department performs independent
evaluations of loans and validates management assigned credit risk grades on evaluated loans using grading standards employed by
bank regulatory agencies. Loans judged to carry lower-risk attributes are assigned a “pass” grade, with a minimal likelihood of loss.
Loans judged to carry higher-risk attributes are referred to as “classified loans,” and are further disaggregated, with increasing
expectations for loss recognition, as “substandard,” “doubtful,” and “loss.” The Loan Review Department performs continuous
evaluations throughout the year. If the Bank becomes aware of deterioration in a borrower’s performance or financial condition
between Loan Review Department examinations, assigned risk grades are re-evaluated promptly. Credit risk grades assigned by
management and validated by the Loan Review Department are subject to review by the Bank’s regulatory authorities during
regulatory examinations.
The following summarizes the credit risk profile by internally assigned grade:
Grade:
Pass
Substandard
Doubtful
Loss
Total
Grade:
Pass
Substandard
Doubtful
Loss
Total
Credit Risk Profile by Internally Assigned Grade
At Decmber 31, 2022
Commercial
Commercial
Real Estate
Construction
Residential
Real Estate
(In thousands)
Consumer
Installment and
Other
$169,040
577
-
-
$169,617
$477,842
13,265
-
-
$491,107
$3,088
-
-
-
$3,088
$13,457
377
-
-
$13,834
$278,223
1,079
752
788
$280,842
Total
$941,650
15,298
752
788
$958,488
Credit Risk Profile by Internally Assigned Grade
At December 31, 2021
Commercial
Commercial
Real Estate
Construction
Residential
Real Estate
(In thousands)
Consumer
Installment and
Other
Total
$232,710
380
-
-
$233,090
$521,300
13,961
-
-
$535,261
$48
-
-
-
$48
$16,874
1,259
-
-
$18,133
$278,922
1,207
931
534
$281,594
$1,049,854
16,807
931
534
$1,068,126
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2022 WESTAMERICA BANCORPORATION FORM 10-K
The following tables summarize loans by delinquency and nonaccrual status:
Summary of Loans by Delinquency and Nonaccrual Status
At December 31, 2022
Current and
Accruing
30-59 Days
Past Due and
Accruing
60-89 Days
Past Due and
Accruing
Past Due 90
Days or More
and Accruing
(In thousands)
Nonaccrual
Total Loans
Commercial
Commercial real estate
Construction
Residential real estate
Consumer installment and other
Total
$169,337
490,354
3,088
13,430
273,247
$949,456
$172
508
-
377
5,101
$6,158
$58
192
-
-
1,850
$2,100
$ -
-
-
-
628
$628
$50
53
-
27
16
$146
$169,617
491,107
3,088
13,834
280,842
$958,488
Summary of Loans by Delinquency and Nonaccrual Status
At December 31, 2021
30-59 Days
Past Due and
Accruing
60-89 Days
Past Due and
Accruing
Past Due 90
Days or More
and Accruing
Nonaccrual
Total Loans
$383
223
-
141
3,184
$3,931
(In thousands)
$263
-
-
-
1,013
$1,276
$ -
-
-
-
339
$339
$ -
290
-
137
265
$692
$233,090
535,261
48
18,133
281,594
$1,068,126
Current and
Accruing
$232,444
534,748
48
17,855
276,793
$1,061,888
Commercial
Commercial real estate
Construction
Residential real estate
Consumer installment and other
Total
There was no allowance for credit losses allocated to loans on nonaccrual status as of December 31, 2022 or December 31, 2021.
There were no commitments to lend additional funds to borrowers whose loans were on nonaccrual status at December 31, 2022 or
December 31, 2021.
The following tables provide information on troubled debt restructurings (TDRs):
Commercial real estate
Total
Commercial real estate
Residential real estate
Total
Troubled Debt Restructurings
At December 31, 2022
Number of
Contracts
Pre-Modification
Carrying Value
Period-End
Carrying Value
2
2
($ in thousands)
$2,785
$2,785
$1,752
$1,752
Troubled Debt Restructurings
At December 31, 2021
Number of
Contracts
Pre-Modification
Carrying Value
Period-End
Carrying Value
2
1
3
($ in thousands)
$2,785
241
$3,026
$1,793
172
$1,965
Period-End
Individual
Credit Loss
Allowance
$ -
$ -
Period-End
Individual
Credit Loss
Allowance
$ -
-
$ -
- 68 -
2022 WESTAMERICA BANCORPORATION FORM 10-K
During the year ended December 31, 2022, the Company did not modify any loans that were considered TDRs. During the year
ended December 31, 2021, the Company did not modify any loans that were considered TDRs for accounting purposes. Section
4013 of the CARES Act allowed certain loan modifications for borrowers impacted by the COVID-19 pandemic to be excluded
from TDR accounting. This relief ended on January 1, 2022. During the year ended December 31, 2021, the Company modified
loans under Section 4013 of the CARES Act, granting 90 day deferrals of principal and interest payments. As of December 31,
2021, loans deferred under the CARES Act that are not considered TDRs consisted of consumer loans totaling $84 thousand. There
were no chargeoffs related to TDRs made during the years ended December 31, 2022 and December 31, 2021. During the years
ended December 31, 2022 and December 31, 2021, no TDR loans defaulted within 12 months of the modification date. A TDR is
considered to be in default when payments are 90 days or more past due.
No loans on nonaccrual status were included in TDRs of $1,752 thousand at December 31, 2022 and $1,965 thousand at December
31, 2021.
A loan is considered collateral dependent when the borrower is experiencing financial difficulty and repayment is expected to be
provided substantially through the operation or sale of the collateral. Loans that were considered collateral dependent at December
31, 2022 included the following: five commercial real estate loans totaling $8.1 million secured by real property, and $625 thousand
of indirect consumer installment loans secured by personal property. There were no other collateral dependent loans at December
31, 2022. Loans that were considered collateral dependent at December 31, 2021 included the following: five commercial real estate
loans totaling $8.4 million secured by real property, $394 thousand of indirect consumer installment loans secured by personal
property, one commercial loan with a balance of $57 thousand secured by business assets, and three residential real estate loans
totaling $420 thousand secured by real property. There were no other collateral dependent loans at December 31, 2021.
Based on the most recent analysis performed, the risk category of loans by class of loans is as follows:
Term Loans Amortized Cost Basis by Origination Year
Prior
2018
2019
2020
2021
(In thousands)
2022
Total
Term Loans
Line of
Credit
Amortized
Cost Basis
At December 31, 2022
Commercial loans by grade
Pass
Substandard
Doubtful
Loss
Total
$23,891
12
-
-
$23,903
$5,549
-
-
-
$5,549
$12,557
-
-
-
$12,557
$17,293
-
-
-
$17,293
$53,928
-
-
-
$53,928
$23,966
-
-
-
$23,966
$137,184
12
-
-
$137,196
$31,856
565
-
-
$32,421
Term Loans Amortized Cost Basis by Origination Year
Prior
2017
2018
2019
2020
(In thousands)
2021
Total
Term Loans
Line of
Credit
Amortized
Cost Basis
At December 31, 2021
Commercial loans by grade
Pass
Substandard
Doubtful
Loss
Total
$34,784
32
-
-
$34,816
$3,999
-
-
-
$3,999
$8,690
-
-
-
$8,690
$16,919
-
-
-
$16,919
$30,694
-
-
-
$30,694
$98,799
57
-
-
$98,856
$193,885
89
-
-
$193,974
$38,825
291
-
-
$39,116
Term Loans Amortized Cost Basis by Origination Year
Prior
2018
2019
2020
2021
(In thousands)
2022
Total
Term Loans
Line of
Credit
Amortized
Cost Basis
At December 31, 2022
Commercial real estate loans by grade
Pass
Substandard
Doubtful
Loss
Total
$146,588
8,083
-
-
$154,671
$58,473
-
-
-
$58,473
$71,440
2,112
-
-
$73,552
$74,016
806
-
-
$74,822
$71,618
-
-
-
$71,618
$55,707
2,264
-
-
$57,971
$477,842
13,265
-
-
$491,107
$ -
-
-
-
$ -
Total
$169,040
577
-
-
$169,617
Total
$232,710
380
-
-
$233,090
Total
$477,842
13,265
-
-
$491,107
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2022 WESTAMERICA BANCORPORATION FORM 10-K
Term Loans Amortized Cost Basis by Origination Year
Prior
2017
2018
2019
2020
(In thousands)
2021
Total
Term Loans
Line of
Credit
Amortized
Cost Basis
At December 31, 2021
Commercial real estate loans by grade
Pass
Substandard
Doubtful
Loss
Total
$116,181
10,993
-
-
$127,174
$87,921
-
-
-
$87,921
$78,200
-
-
-
$78,200
$78,647
2,016
-
-
$80,663
$83,642
823
-
-
$84,465
$76,709
129
-
-
$76,838
$521,300
13,961
-
-
$535,261
$ -
-
-
-
$ -
At December 31, 2022
Term Loans Amortized Cost Basis by Origination Year
Prior
2018
2019
2020
2021
(In thousands)
2022
Residential real estate loans by grade
Pass
Substandard
Doubtful
Loss
Total
$13,457
377
-
-
$13,834
$ -
-
-
-
$ -
$ -
-
-
-
$ -
$ -
-
-
-
$ -
$ -
-
-
-
$ -
At December 31, 2021
Term Loans Amortized Cost Basis by Origination Year
Prior
2017
2018
2019
2020
(In thousands)
2021
Residential Real Estate loans by grade
Pass
Substandard
Doubtful
Loss
Total
$16,874
1,259
-
-
$18,133
$ -
-
-
-
$ -
$ -
-
-
-
$ -
$ -
-
-
-
$ -
$ -
-
-
-
$ -
At December 31, 2022
Term Loans Amortized Cost Basis by Origination Year
Prior
2018
2019
2020
2021
(In thousands)
2022
Construction loans by grade
Pass
Substandard
Doubtful
Loss
Total
$ -
-
-
-
$ -
$ -
-
-
-
$ -
$ -
-
-
-
$ -
$ -
-
-
-
$ -
$ -
-
-
-
$ -
At December 31, 2021
Term Loans Amortized Cost Basis by Origination Year
Prior
2017
2018
2019
2020
(In thousands)
2021
Construction loans by grade
Pass
Substandard
Doubtful
Loss
Total
$ -
-
-
-
$ -
$ -
-
-
-
$ -
$ -
-
-
-
$ -
$ -
-
-
-
$ -
$ -
-
-
-
$ -
Total
Term Loans
Line of
Credit
Amortized
Cost Basis
$13,457
377
-
-
$13,834
$ -
-
-
-
$ -
Total
Term Loans
Line of
Credit
Amortized
Cost Basis
$16,874
1,259
-
-
$18,133
$ -
-
-
-
$ -
Total
Term Loans
Line of
Credit
Amortized
Cost Basis
$ -
-
-
-
$ -
$3,088
-
-
-
$3,088
Total
Term Loans
Line of
Credit
Amortized
Cost Basis
$ -
-
-
-
$ -
$48
-
-
-
$48
$ -
-
-
-
$ -
$ -
-
-
-
$ -
$ -
-
-
-
$ -
$ -
-
-
-
$ -
Total
$521,300
13,961
-
-
$535,261
Total
$13,457
377
-
-
$13,834
Total
$16,874
1,259
-
-
$18,133
Total
$3,088
-
-
-
$3,088
Total
$48
-
-
-
$48
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2022 WESTAMERICA BANCORPORATION FORM 10-K
The Company considers the delinquency and nonaccrual status of the consumer loan portfolio and its impact on the allowance for
credit losses. The following table presents the amortized cost in consumer installment and other loans based on delinquency and
nonaccrual status:
Prior
2018
2019
2020
2021
2022
Term Loans Amortized Cost Basis by Origination Year
(In thousands)
Total
Term Loans
Line of
Credit
Amortized
Cost Basis
At December 31, 2022
Consumer installment and other loans by delinquency and nonaccrual status
Current
30-59 days past due
60-89 days past due
Past due 90 days or more
Nonaccrual
Total
$6,017
117
42
3
-
$6,179
$13,147
268
65
20
-
$13,500
$22,330
572
67
16
-
$22,985
$35,783
1,014
275
61
-
$37,133
$76,126
1,709
635
284
-
$78,754
$99,414
1,359
750
241
-
$101,764
$252,817
5,039
1,834
625
-
$260,315
$20,430
62
16
3
16
$20,527
Prior
2017
2018
2019
2020
2021
Term Loans Amortized Cost Basis by Origination Year
(In thousands)
Total
Term Loans
Line of
Credit
Amortized
Cost Basis
At December 31, 2021
Consumer installment and other loans by delinquency and nonaccrual status
Current
30-59 days past due
60-89 days past due
Past due 90 days or more
Nonaccrual
Total
$7,884
197
5
1
-
$8,087
$10,162
139
20
17
-
$10,338
$25,932
634
156
81
-
$26,803
$37,999
504
150
62
-
$38,715
$58,178
662
186
109
-
$59,135
$113,899
1,034
408
40
-
$115,381
$254,054
3,170
925
310
-
$258,459
$22,739
14
88
29
265
$23,135
There were no loans held for sale at December 31, 2022 and December 31, 2021.
Total
$273,247
5,101
1,850
628
16
$280,842
Total
$276,793
3,184
1,013
339
265
$281,594
The Company held no other real estate owned (OREO) at December 31, 2022 and December 31, 2021. The amount of consumer
mortgage loans outstanding secured by residential real estate properties for which formal foreclosure proceedings were in process
was $-0- thousand at December 31, 2022 and $247 thousand at December 31, 2021.
Note 4: Concentration of Credit Risk
Under the California Financial Code, credit extended to any one person owing to a commercial bank at any one time shall not
exceed the following limitations as applicable to the Bank: (a) unsecured credits shall not exceed 15% of the sum of the
common stock outstanding and unimpaired, perpetual preferred stock outstanding and unimpaired, capital surplus, undivided
profits, and allowance for credit losses less intangible assets of the Bank, or (b) secured and unsecured credits in all shall not
exceed 25% of the sum of the common stock outstanding and unimpaired, perpetual preferred stock outstanding and
unimpaired, capital surplus, undivided profits, and allowance for credit losses less intangible assets of the Bank. At December
31, 2022, the Bank did not have credit extended to any one entity exceeding these limits. At December 31, 2022, the Bank
had 27 lending relationships each with aggregate amounts of $5 million or more. The Company has significant credit
arrangements that are secured by real estate collateral. In addition to real estate loans outstanding as disclosed in Note 3, the
Company had loan commitments related to real estate loans of $34,790 thousand and $34,226 thousand at December 31, 2022 and
December 31, 2021, respectively. The Company requires collateral on all real estate loans with loan-to-value ratios at origination
generally no greater than 75% on commercial real estate loans and no greater than 80% on residential real estate loans. At
December 31, 2022, the Bank held corporate bonds in 118 issuing entities that exceeded $5 million for each issuer.
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2022 WESTAMERICA BANCORPORATION FORM 10-K
Note 5: Premises, Equipment, Other Assets and Other Liabilities
Premises and equipment consisted of the following:
2022
Land
Building and improvements
Leasehold improvements
Furniture and equipment
Total
2021
Land
Building and improvements
Leasehold improvements
Furniture and equipment
Total
At December 31,
Accumulated
Depreciation
and
Amortization
(In thousands)
Net Book
Value
$ -
(30,601)
(6,897)
(22,587)
($60,085)
$ -
(30,069)
(5,967)
(21,480)
($57,516)
$11,453
11,927
1,260
4,179
$28,819
$11,453
12,940
1,600
5,162
$31,155
Cost
$11,453
42,528
8,157
26,766
$88,904
$11,453
43,009
7,567
26,642
$88,671
Depreciation and amortization of premises and equipment included in noninterest expense amounted to $2,899 thousand in 2022,
$2,978 thousand in 2021 and $3,683 thousand in 2020.
Other assets consisted of the following:
Cost method equity investments:
Federal Reserve Bank stock (1)
Other investments
Total cost method equity investments
Life insurance cash surrender value
Net deferred tax asset
Right-of-use asset
Limited partnership investments
Interest receivable
Prepaid assets
Other assets
Total other assets
At December 31,
2022
At December 31,
2021
(In thousands)
$11,743
158
11,901
63,816
125,140
15,746
34,421
53,558
4,894
9,670
$319,146
$14,069
158
14,227
63,107
-
17,980
37,145
35,521
4,757
12,678
$185,415
(1) A bank applying for membership in the Federal Reserve System is required to subscribe to stock in the Federal Reserve Bank (FRB) in its district in a sum equal
to six percent of the bank’s paid-up capital stock and surplus. One-half of the amount of the bank's subscription shall be paid to the FRB and the remaining half
will be subject to call when deemed necessary by the Board of Governors of the Federal Reserve System.
The Company owns 211 thousand shares of Visa Inc. class B common stock which have transfer restrictions; the carrying value is
$-0- thousand. Visa Inc. disclosed a revised conversion rate applicable to its class B common stock in its Form 8-K dated January
5, 2023. The conversion rate of class B common stock into class A common stock, which is unrestricted and trades actively on the
New York Stock Exchange, was reduced from 1.6059 to 1.5991 per share, effective as of December 29, 2022. Visa Inc. class A
common stock had a closing price of $207.76 per share on December 30, 2022, the last day of stock market trading for the fourth
quarter 2022. The ultimate value of the Company’s Visa Inc. class B shares is subject to the extent of Visa Inc.’s future litigation
escrow fundings, the resulting conversion rate to class A common stock, and current and future trading restrictions on the class B
common stock.
The Company invests in flow-through limited liability entities that manage or invest in affordable housing projects that qualify for
low-income housing tax credits. At December 31, 2022, these investments totaled $34,421 thousand and $22,647 thousand of this
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2022 WESTAMERICA BANCORPORATION FORM 10-K
amount represents outstanding equity capital commitments that are included in other liabilities. At December 31, 2021, these
investments totaled $37,145 thousand and $26,485 thousand of this amount represents outstanding equity capital commitments that
are included in other liabilities. At December 31, 2022, the $22,647 thousand of outstanding equity capital commitments are
expected to be paid as follows: $10,992 thousand in 2023, $10,499 thousand in 2024, $359 thousand in 2025, $59 thousand in 2026,
$190 thousand in 2027, and $548 thousand in 2028 or thereafter.
The amounts recognized in net income for these investments include:
For the Years Ended December 31,
2021
(In thousands)
2022
2020
Investment loss included in pre-tax income
Tax credits recognized in provision for income taxes
$5,724
3,250
$2,620
2,300
$2,440
900
Other liabilities consisted of the following:
Net deferred tax liability
Operating lease liability
Other liabilities
Total other liabilities
At December 31,
2022
2021
(In thousands)
$ -
15,746
49,379
$65,125
$2,501
17,980
53,241
$73,722
The Company has entered into leases for most branch locations and certain other offices that were classified as operating leases
primarily with original terms of five years. Certain lease arrangements contain extension options, which can be exercised at the
Company’s option, for one or more additional five year terms. Unexercised extension options are not considered reasonably certain
of exercise and have not been included in the lease term used to determine the lease liability or right-of-use asset. The Company
did not have any finance leases as of December 31, 2022.
As of December 31, 2022, the Company’s lease liability and right-of-use asset were $15,746 thousand. The weighted average
remaining life of operating leases and weighted average discount rate used to determine operating lease liabilities were 3.7 years
and 1.87%, respectively, at December 31, 2022. The Company did not have any material lease incentives, unamortized initial direct
costs, prepaid lease expense, or accrued lease expense as of December 31, 2022.
Total lease costs of $6,575 thousand, $6,581 thousand and $6,699 thousand, during the year ended December 31, 2022, December
31, 2021 and December 31, 2020, respectively, were recorded within occupancy and equipment expense. The Company did not
have any material short-term or variable leases costs or sublease income during the year ended December 31, 2022, December 31,
2021 and December 31, 2020.
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2022 WESTAMERICA BANCORPORATION FORM 10-K
The following table summarizes the remaining lease payments of operating lease liabilities:
2023
2024
2025
2026
2027
Thereafter
Total minimum lease payments
Less: discount
Present value of lease liability
Minimum
future lease
payments
At December 31,
2022
(In thousands)
$5,843
4,267
3,033
1,408
709
1,015
16,275
(529)
$15,746
See Note 10 to the consolidated financial statements for additional information related to the net deferred tax liability.
Note 6: Goodwill and Identifiable Intangible Assets
The Company has recorded goodwill and other identifiable intangibles associated with purchase business combinations. Goodwill
is not amortized, but is evaluated for impairment at least annually. The Company did not recognize impairment during the year
ended December 31, 2022 and December 31, 2021. Identifiable intangibles are amortized to their estimated residual values over
their expected useful lives. Such lives and residual values are also periodically reassessed to determine if any amortization period
adjustments are indicated. During the year ended December 31, 2022 and December 31, 2021 no such adjustments were recorded.
The carrying values of goodwill were:
Goodwill
At December 31, 2022
At December 31, 2021
(In thousands)
$121,673
$121,673
The gross carrying amount of identifiable intangible assets and accumulated amortization was:
At December 31, 2022
Gross
Carrying
Amount
Accumulated
Amortization
At December 31, 2021
Gross
Carrying
Amount
Accumulated
Amortization
(In thousands)
Core deposit intangibles
$56,808
($56,225)
$56,808
($55,973)
As of December 31, 2022, the current period and estimated future amortization expense for identifiable intangible assets, to be fully
amortized in 2025, was:
For the year ended December 31, 2022 (actual)
2023
2024
2025
Total
Core
Deposit
Intangibles
(In thousands)
$252
236
222
125
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2022 WESTAMERICA BANCORPORATION FORM 10-K
Note 7: Deposits and Borrowed Funds
The following table provides additional detail regarding deposits.
Noninterest-bearing
Interest-bearing:
Transaction
Savings
Time deposits less than $100 thousand
Time deposits $100 thousand through $250 thousand
Time deposits more than $250 thousand
Total deposits
Deposits
At December 31,
2022
At December 31,
2021
(In thousands)
$2,947,277
$3,069,080
1,273,143
1,874,115
65,962
42,733
22,060
$6,225,290
1,260,869
1,940,395
72,527
47,666
23,419
$6,413,956
Demand deposit overdrafts of $995 thousand and $611 thousand were included as loan balances at December 31, 2022 and
December 31, 2021, respectively. Interest expense for aggregate time deposits with individual account balances in excess of $100
thousand was $156 thousand in 2022, $265 thousand in 2021 and $319 thousand in 2020.
The following table provides additional detail regarding short-term borrowed funds.
Repurchase agreements:
Collateral securing borrowings:
Agency residential MBS
Corporate securities
Total collateral carrying value
Total short-term borrowed funds
Repurchase Agreements (Sweep)
Accounted for as Secured Borrowings
Remaining Contractual Maturity of the Agreements
Overnight and Continuous
At December 31,
2022
At December 31,
2021
(In thousands)
$30,108
203,774
$233,882
$57,792
$42,295
254,005
$296,300
$146,246
For the Years Ended December 31,
2022
2021
Highest Balance at Any Month-end
(In thousands)
Securities sold under repurchase agreements
$257,560
$146,552
At December 31, 2022, the Company had lines of credit for overnight borrowings from corresponding banks totaling $100 million.
Additionally, the Company had access to borrowing from the Federal Reserve up to $225 million based on the collateral pledged at
December 31, 2022. There were no outstanding amounts under the above-mentioned borrowings at December 31, 2022.
Note 8: Shareholders’ Equity
The Company grants stock options and restricted performance shares to employees in exchange for employee services, pursuant to
the shareholder-approved 2019 Omnibus Equity Incentive Plan. Prior to shareholder approval of the 2019 Omnibus Equity Incentive
Plan on April 25, 2019, the Company granted stock options and restricted performance shares under its 1995 Stock Option Plan,
which was last amended and restated in 2012. Nonqualified stock option grants (“NQSO”) are granted with an exercise price equal
to the fair market value of the related common stock on the grant date. NQSO generally become exercisable in equal annual
installments over a three-year period with each installment vesting on the anniversary date of the grant. Each NQSO has a maximum
ten-year term. A restricted performance share grant becomes vested after three years of being awarded, provided the Company has
attained its performance goals for such three-year period.
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2022 WESTAMERICA BANCORPORATION FORM 10-K
The following table summarizes information about stock options granted under the Plans as of December 31, 2022. The intrinsic
value is calculated as the difference between the market value as of December 31, 2022 and the exercise price of the shares. The
market value as of December 30, 2022, the last day of stock market trading for the fourth quarter 2022, was $59.01 as reported by
the NASDAQ Global Select Market:
Options Outstanding
Options Exercisable
At December 31, 2022
Range of Exercise
Price
Number
Outstanding
Aggregate
Intrinsic Value
(In thousands)
$40 - 45
45 - 50
50 - 55
55 - 60
60 - 65
65 - 70
$40 - 70
32
-
6
416
258
142
854
$527
-
33
515
-
-
$1,075
Weighted
Average
Remaining
Contractual
Life
(Years)
2.8
-
1.1
7.9
5.6
7.1
6.8
For the Year
Ended
December 31,
2022
Weighted
Average
Exercise Price
$42
-
53
58
62
66
60
At December 31, 2022
Number
Exercisable
Aggregate
Intrinsic Value
(In thousands)
32
-
6
117
258
95
508
$527
-
33
220
-
-
$780
Weighted
Average
Remaining
Contractual
Life
(Years)
2.8
-
1.1
5.8
5.6
7.1
5.7
For the Year
Ended
December 31,
2022
Weighted
Average
Exercise Price
$42
-
53
57
62
66
61
The Company applies the Roll-Geske option pricing model (Modified Roll) to determine grant date fair value of stock option grants.
This model modifies the Black-Scholes Model to take into account dividends and American options. During the year ended
December 31, 2022, 2021 and 2020, the Company granted 229 thousand, 193 thousand and 184 thousand stock options, respectively.
The following weighted average assumptions were used in the option pricing to value stock options granted in the periods indicated:
Expected volatility (1)
Expected life in years (2)
Risk-free interest rate (3)
Expected dividend yield
Fair value per award
For the Years Ended December 31,
2022
2021
2020
19%
4.6
1.73%
3.02%
$7.90
20%
4.7
0.46%
2.79%
$7.50
20%
3.5
1.52%
2.59%
$8.64
(1) Measured using daily price changes of Company’s stock over respective expected term of the option and the implied volatility derived from the
market prices of the Company’s stock and traded options.
(2) The number of years that the Company estimates that the options will be outstanding prior to exercise.
(3) The risk-free rate over the expected life based on the US Treasury yield curve in effect at the time of the grant.
Employee stock option grants are being expensed by the Company over the grants’ three year vesting period. The Company issues
new shares upon the exercise of options. The number of shares authorized to be issued for options at December 31, 2022 is 856
thousand.
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2022 WESTAMERICA BANCORPORATION FORM 10-K
A summary of option activity during the year ended December 31, 2022 is presented below:
Weighted
Average
Exercise Price
$60.48
58.51
56.03
61.46
60.02
60.60
Shares
(In thousands)
793
229
(40)
(128)
854
508
Weighted
Average
Remaining
Contractual
Term
(Years)
6.8
5.7
Outstanding at January 1, 2022
Granted
Exercised
Forfeited or expired
Outstanding at December 31, 2022
Exercisable at December 31, 2022
A summary of the Company’s nonvested option activity during the year ended December 31, 2022 is presented below:
Nonvested at January 1, 2022
Granted
Vested
Forfeited
Nonvested at December 31, 2022
Weighted
Average Grant
Date Fair
Value
$8.31
7.90
8.76
7.98
$7.88
Shares
(In thousands)
347
229
(168)
(62)
346
The estimated grant date fair value for options granted under the Company’s stock option plan during the twelve months ended
December 31, 2022, 2021 and 2020 was $7.90, $7.50 and $8.64 per share, respectively. The total remaining unrecognized
compensation cost related to nonvested awards as of December 31, 2022 is $2,164 thousand and the weighted average period over
which the cost is expected to be recognized is 1.7 years.
The total intrinsic value of options exercised during the year ended December 31, 2022, 2021 and 2020 was $165 thousand, $454
thousand and $693 thousand, respectively. The total fair value of Restricted Performance Shares (“RPSs”) that vested during the
year ended December 31, 2022, 2021 and 2020 was $492 thousand, $527 thousand and $534 thousand, respectively. The total fair
value of options vested during the year ended December 31, 2022, 2021 and 2020 was $1,464 thousand, $1,783 thousand and $1,735
thousand, respectively. During the year ended December 31, 2022, 40 thousand shares were issued due to the exercise of
nonqualified stock options resulting in a tax deduction less than the related share based compensation expense by $143 thousand.
The lesser deduction in 2022 resulted in a $30 thousand increase in tax provision. During the year ended December 31, 2021, 53
thousand shares were issued due to the exercise of nonqualified stock options resulting in a tax deduction equal to the related share
based compensation expense. During the year ended December 31, 2020, 52 thousand shares were issued due to the exercise of
nonqualified stock options resulting in a tax deduction exceeding related share based compensation by $295 thousand. The excess
deductions resulting from the exercise of nonqualified stock options reduced the income tax provision by $-0- thousand in 2021
and $87 thousand in 2020.
A summary of the status of the Company’s restricted performance shares as of December 31, 2022 and 2021 and changes during
the years ended on those dates, follows:
Outstanding at January 1,
Granted
Issued upon vesting
Forfeited
Outstanding at December 31,
2022
2021
(In thousands)
30
12
(8)
(3)
31
28
13
(9)
(2)
30
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2022 WESTAMERICA BANCORPORATION FORM 10-K
As of December 31, 2022 and 2021, the restricted performance shares had a weighted-average contractual life of 1.2 years and 1.4
years, respectively. The compensation cost that was charged against income for the Company’s restricted performance shares
granted was $525 thousand, $610 thousand and $533 thousand for the year ended December 31, 2022, 2021 and 2020, respectively.
There were no stock appreciation rights or incentive stock options granted in the year ended December 31, 2022, 2021 and 2020.
The Company repurchases and retires its common stock in accordance with Board of Directors approved share repurchase programs.
At December 31, 2022, 1,750 thousand shares remained available to repurchase under such plans.
The Company’s articles of incorporation authorized two additional classes of stock of one million shares each, to be denominated
“Class B Common Stock” and “Preferred Stock,” respectively, in addition to the 150 million shares of common stock presently
authorized. At December 31, 2022, no shares of Class B Common Stock or Preferred Stock were outstanding.
Note 9: Regulatory Capital
Banks and bank holding companies are subject to regulatory capital requirements administered by federal banking agencies. Capital
adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets,
liabilities, and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications
are also subject to qualitative judgments by regulators. Failure to meet capital requirements can result in regulatory action. The
Basel Committee on Banking Supervision’s capital guidelines for U.S. banks (Basel III rules) require the Company to maintain a
capital conservation buffer of 2.5% above the adequately capitalized risk-based capital ratios to avoid restrictions on dividends and
equity repurchases and other payments such as discretionary bonuses to executive officers. The net unrealized gain or loss on
available for sale securities is not included in computing regulatory capital. Management believes as of December 31, 2022 and
December 31, 2021, the Company and Bank met all capital adequacy requirements to which they are subject.
Prompt corrective action regulations provide five classifications: well capitalized, adequately capitalized, undercapitalized,
significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial
condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital
distributions are limited, as is asset growth and expansion, and capital restoration plans are required. At year-end 2022 and 2021,
the Bank met the capital requirements to be well capitalized under the regulatory framework for prompt corrective action.
Management believes that there are no conditions or events that would change the institution’s category since December 31, 2022.
The capital ratios for the Company and the Bank as of the dates indicated are presented in the table below. For Common Equity
Tier 1 Capital, Tier 1 Capital and Total Capital, the required percentages for capital adequacy purposes include the 2.5% capital
conservation buffer.
Common Equity Tier 1 Capital
Company
Bank
Tier 1 Capital
Company
Bank
Total Capital
Company
Bank
Leverage Ratio (1)
Company
Bank
At December 31, 2022
Required
for Capital
Adequacy Purposes
To Be Well-capitalized
Under Prompt Corrective
Action Regulations
Amount
Ratio
Amount
Ratio
Amount
Ratio
($ in thousands)
$736,414
592,804
736,414
592,804
756,900
619,290
736,414
592,804
15.22%
12.37%
15.22%
12.37%
15.64%
12.93%
10.18%
8.26%
$338,748
335,351
411,337
407,212
508,123
503,026
289,259
287,229
7.00%
7.00%
8.50%
8.50%
10.50%
10.50%
4.00%
4.00%
N/A
$311,397
N/A
6.50%
N/A
383,258
N/A
8.00%
N/A
479,073
N/A
10.00%
N/A
359,036
N/A
5.00%
(1) The leverage ratio consists of Tier 1capital divided by the most recent quarterly average total assets, excluding certain intangible assets.
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2022 WESTAMERICA BANCORPORATION FORM 10-K
At December 31, 2021
Required
for Capital
Adequacy Purposes
To Be Well-capitalized
Under Prompt Corrective
Action Regulations
Amount
Ratio
Amount
Ratio
Amount
Ratio
($ in thousands)
$653,026
540,538
653,026
540,538
676,749
570,260
653,026
540,538
14.93%
12.48%
14.93%
12.48%
15.47%
13.17%
9.06%
7.55%
$306,277
303,111
371,908
368,063
459,416
454,666
288,423
286,432
7.00%
7.00%
8.50%
8.50%
10.50%
10.50%
4.00%
4.00%
N/A
$281,460
N/A
6.50%
N/A
346,412
N/A
433,016
N/A
358,040
N/A
8.00%
N/A
10.00%
N/A
5.00%
Common Equity Tier 1 Capital
Company
Bank
Tier 1 Capital
Company
Bank
Total Capital
Company
Bank
Leverage Ratio (1)
Company
Bank
(1) The leverage ratio consists of Tier 1capital divided by the most recent quarterly average total assets, excluding certain intangible assets.
Note 10: Income Taxes
Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the amounts
reported in the financial statements of existing assets and liabilities and their respective tax basis and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or settled. Amounts for the current year are based upon
estimates and assumptions as of the date of these financial statements and could vary significantly from amounts shown on the tax
returns as filed. Net deferred tax assets are included with other assets in the consolidated balance sheets.
The components of the net deferred tax liability is as follows:
Deferred tax asset
Allowance for credit losses
Unrealized losses on securities available for sale
State franchise taxes
Deferred compensation
Purchased assets and assumed liabilities
Post-retirement benefits
Employee benefit accruals
VISA Class B shares
Impaired capital assets
Accrued liabilities
Premises and equipment
Lease liability
Other
Sub total deferred tax asset
Tax valuation
Total deferred tax asset
Deferred tax liability
Net deferred loan fees
Unrealized gains on securities available for sale
Right-of-use asset
Intangible assets
Limited partnership investments
Total deferred tax liability
Net deferred tax asset (liability)
At December 31,
2022
2021
(In thousands)
$5,858
107,493
3,805
4,091
229
405
3,096
507
-
840
1,193
4,548
99
132,164
-
132,164
193
-
4,548
453
1,830
7,024
$125,140
$6,852
-
2,518
4,524
475
445
2,792
348
2,673
748
1,001
5,263
103
27,742
(1,776)
25,966
196
20,845
5,263
459
1,704
28,467
($2,501)
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2022 WESTAMERICA BANCORPORATION FORM 10-K
At December 31, 2021, the Company had $2,673 thousand deferred tax asset related to California capital loss carryforwards, which
will expire if unutilized within five years of the year incurred. At December 31, 2021, a valuation allowance recorded for the portion
of the tax benefit that was expected to expire was $1,776 thousand. At December 31, 2022, the California capital loss carryforwards
and related valuation allowance were zero due to expiration in 2022.
The provision for federal and state income taxes consists of amounts currently payable and amounts deferred as follows:
2022
For the Years Ended December 31,
2021
(In thousands)
2020
Current income tax expense:
Federal
State
Total current
Deferred income tax (benefit) expense:
Federal
State
Total deferred
Provision for income taxes
Federal
State
Total change in valuation reserve
Provision for income taxes
$26,785
16,075
42,860
(1,349)
2,046
697
-
-
-
$43,557
$15,299
11,320
26,619
1,281
842
2,123
(472)
2,248
1,776
$30,518
$15,982
10,654
26,636
(538)
292
(246)
-
-
-
$26,390
The provision for income taxes differs from the provision computed by applying the statutory federal income tax rate to income
before taxes, as follows:
Federal income taxes due at statutory rate
Additions (reductions) in income taxes resulting from:
Interest on state and municipal securities and loans not taxable for
federal income tax purposes
State franchise taxes, net of federal income tax benefit
Change in valuation reserve
Stock compensation deduction less than (in excess of) book expense
Tax credits
Dividend received deduction
Cash value life insurance
Other
Provision for income taxes
2022
For the Years Ended December 31,
2021
(In thousands)
$24,576
$34,774
2020
$22,429
(1,484)
14,315
-
30
(3,439)
(56)
(421)
(162)
$43,557
(2,070)
9,757
1,776
-
(2,621)
(48)
(389)
(463)
$30,518
(2,808)
8,647
-
(62)
(1,061)
(44)
(383)
(328)
$26,390
At December 31, 2022 and December 31, 2021, the Company had no uncertain tax positions related to previous years’ tax returns
which were under examination.
The Company classifies interest and penalties as a component of the provision for income taxes. For tax years 2022, 2021 and 2020,
no interest or penalties were recognized as a component of the provision for income taxes. At December 31, 2022, the tax years
ended December 31, 2021, 2020 and 2019 remain subject to examination by the Internal Revenue Service and the tax years ended
December 31, 2021, 2020, 2019 and 2018 remain subject to examination by the California Franchise Tax Board.
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2022 WESTAMERICA BANCORPORATION FORM 10-K
Note 11: Fair Value Measurements
The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair
value disclosures. Debt securities available for sale are recorded at fair value on a recurring basis. Additionally, from time to time,
the Company may be required to record at fair value other assets on a nonrecurring basis, such as other real estate owned, loans
individually evaluated for credit loss, certain loans held for investment, debt securities held to maturity, and other assets. These
nonrecurring fair value adjustments typically involve the lower-of-cost or fair-value accounting of individual assets.
In accordance with the Fair Value Measurement and Disclosure topic of the FASB Accounting Standards Codification, the
Company bases its fair values on the price that would be received to sell an asset or paid to transfer a liability in the principal market
or most advantageous market for an asset or liability in an orderly transaction between market participants on the measurement date
under current market conditions. A fair value measurement reflects all of the assumptions that market participants would use in
pricing the asset or liability, including assumptions about the risk inherent in a particular valuation technique, the effect of a
restriction on the sale or use of an asset, and the risk of nonperformance.
The Company groups its assets and liabilities measured at fair value into a three-level hierarchy, based on the markets in which the
assets and liabilities are traded and the reliability of the assumptions used to determine fair value. When the valuation assumptions
used to measure the fair value of the asset or liability are categorized within different levels of the fair value hierarchy, the asset or
liability is categorized in its entirety within the lowest level of the hierarchy. These levels are:
Level 1 – Valuation is based upon quoted prices for identical instruments traded in active exchange markets, such as the New York
Stock Exchange. Level 1 includes U.S. Treasury and equity securities, which are traded by dealers or brokers in active markets.
Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.
Level 2 – Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar
instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are
observable in the market. Level 2 includes mutual funds, federal agency securities, mortgage-backed securities, corporate securities,
commercial paper, collateralized loan obligations, municipal bonds and securities of U.S government entities and U.S. government
sponsored entities.
Level 3 – Valuation is generated from model-based techniques that use significant assumptions not observable in the market. These
unobservable assumptions reflect the Company’s estimates of assumptions that market participants would use in pricing the asset
or liability. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques.
The Company relies on independent vendor pricing services to measure fair value for equity securities, debt securities available for
sale and debt securities held to maturity. The Company employs three pricing services. To validate the pricing of these vendors, the
Company compares vendors’ pricing for each of the securities for consistency; significant pricing differences, if any, are evaluated
using all available independent quotes with the quote most closely reflecting the market generally used as the fair value estimate.
In addition, the Company evaluates debt securities for credit losses on a quarterly basis. As with any valuation technique used to
estimate fair value, changes in underlying assumptions used could significantly affect the results of current and future values.
Accordingly, these fair value estimates may not be realized in an actual sale of the securities.
The Company regularly reviews the valuation techniques and assumptions used by its vendors and determines which valuation
techniques are utilized based on observable market inputs for the type of securities being measured. The Company uses the
information to determine the placement in the fair value hierarchy as level 1, 2 or 3.
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2022 WESTAMERICA BANCORPORATION FORM 10-K
Assets Recorded at Fair Value on a Recurring Basis
The tables below present assets measured at fair value on a recurring basis on the dates indicated.
At December 31, 2022
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3) (1)
(In thousands)
$ -
-
-
-
-
$ -
$286,048
290,853
82,004
2,099,955
1,572,883
$4,331,743
$ -
-
-
-
-
$ -
Fair Value
$286,048
290,853
82,004
2,099,955
1,572,883
$4,331,743
Debt securities available for sale:
Agency residential MBS
Securities of U.S. Government sponsored entities
Obligations of states and political subdivisions
Corporate securities
Collateralized loan obligations
Total debt securities available for sale
(1) There were no transfers in to or out of level 3 during the year ended December 31, 2022.
At December 31, 2021
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3) (1)
(In thousands)
$ -
-
-
-
-
$ -
$411,726
119
93,920
2,746,735
1,386,355
$4,638,855
$ -
-
-
-
-
$ -
Fair Value
$411,726
119
93,920
2,746,735
1,386,355
$4,638,855
Debt securities available for sale:
Agency residential MBS
Securities of U.S. Government entities
Obligations of states and political subdivisions
Corporate securities
Collateralized loan obligations
Total debt securities available for sale
(1) There were no transfers in to or out of level 3 during the year ended December 31, 2021.
Assets Recorded at Fair Value on a Nonrecurring Basis
The Company may be required, from time to time, to measure certain assets at fair value on a nonrecurring basis in accordance with
GAAP. These adjustments to fair value usually result from the application of lower-of-cost or fair-value accounting of individual
assets. For assets measured at fair value on a nonrecurring basis that were recorded in the balance sheet at December 31, 2022 and
December 31, 2021, the following tables provide the level of valuation assumptions used to determine each adjustment and the
carrying value of the related assets at period end.
Carrying Value
At December 31, 2022
Level 1
Level 2
(In thousands)
Level 3
For the
Year Ended
December 31, 2022
Total Losses
Loans:
Commercial real estate
Total assets measured at fair value on a nonrecurring basis
$225
$225
$ -
$ -
$ -
$ -
$225
$225
$ -
$ -
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2022 WESTAMERICA BANCORPORATION FORM 10-K
Carrying Value
At December 31, 2021
Level 1
Level 2
(In thousands)
Level 3
For the
Year Ended
December 31, 2021
Total Losses
Loans:
Commercial real estate
Residential real estate
Total assets measured at fair value on a nonrecurring basis
$225
172
$397
$ -
-
$ -
$ -
-
$ -
$225
172
$397
$ -
-
$ -
Level 3 – Valuation is based upon present value of expected future cash flows, independent market prices, estimated liquidation
values of loan collateral or appraised value of the collateral as determined by third-party independent appraisers, less 10% for selling
costs, generally. The unobservable inputs and qualitative information about the unobservable inputs are not presented as the inputs
were not developed by the Company.
Disclosures about Fair Value of Financial Instruments
The tables below are a summary of fair value estimates for financial instruments and the level of the fair value hierarchy within
which the fair value measurements are categorized, excluding financial instruments recorded at fair value on a recurring basis. The
values assigned do not necessarily represent amounts which ultimately may be realized for assets or paid to settle liabilities. In
addition, these values do not give effect to adjustments to fair value which may occur when financial instruments are sold or settled
in larger quantities. The carrying amounts in the following tables are recorded in the balance sheet under the indicated captions.
The Company has not included assets and liabilities that are not financial instruments such as goodwill, long-term relationships
with deposit, merchant processing and trust customers, other purchased intangibles, premises and equipment, deferred taxes, and
other assets and liabilities. The total estimated fair values do not represent, and should not be construed to represent, the underlying
value of the Company.
Financial Assets:
Cash and due from banks
Debt securities held to maturity
Loans
Financial Liabilities:
Deposits
Short-term borrowed funds
Financial Assets:
Cash and due from banks
Debt securities held to maturity
Loans
Financial Liabilities:
Deposits
Short-term borrowed funds
At December 31, 2022
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
(In thousands)
$294,236
-
-
Significant
Other
Observable
Inputs
(Level 2 )
Significant
Unobservable
Inputs
(Level 3 )
$ -
873,511
-
$ -
-
905,720
Carrying
Amount
$294,236
915,913
938,204
Estimated Fair
Value
$294,236
873,511
905,720
$6,225,290
57,792
$6,224,791
57,792
$ -
-
$6,094,535
57,792
$130,256
-
At December 31, 2021
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
(In thousands)
$1,132,085
-
-
Significant
Other
Observable
Inputs
(Level 2 )
Significant
Unobservable
Inputs
(Level 3 )
$ -
312,562
-
$ -
-
1,059,072
Carrying
Amount
$1,132,085
306,396
1,044,612
Estimated Fair
Value
$1,132,085
312,562
1,059,072
$6,413,956
146,246
$6,413,244
146,246
$ -
-
$6,270,344
146,246
$142,900
-
- 83 -
2022 WESTAMERICA BANCORPORATION FORM 10-K
The majority of the Company’s standby letters of credit and other commitments to extend credit carry current market interest rates
if converted to loans. No premium or discount was ascribed to these commitments because virtually all funding would be at current
market rates.
Note 12: Commitments and Contingent Liabilities
Loan commitments are agreements to lend to a customer provided there is no violation of any condition established in the agreement.
Certain agreements provide the Company the right to cancel or reduce its obligations to lend to customers. The portions that are not
unconditionally cancellable by the Company aggregated $31,889 thousand at December 31, 2022. Commitments generally have
fixed expiration dates or other termination clauses. Since many of the commitments are expected to expire without being drawn
upon, the total commitment amounts do not necessarily represent future funding requirements. Loan commitments are subject to
the Company’s normal credit policies and collateral requirements. Unfunded loan commitments were $202,696 thousand at
December 31, 2022 and $233,850 thousand at December 31, 2021. Standby letters of credit commit the Company to make payments
on behalf of customers when certain specified future events occur. Standby letters of credit are primarily issued to support
customers’ short-term financing requirements and must meet the Company’s normal credit policies and collateral requirements.
Financial and performance standby letters of credit outstanding totaled $1,948 thousand at December 31, 2022 and $3,693 thousand
at December 31, 2021. Commitments for commercial and similar letters of credit totaled $95 thousand at December 31, 2022 and
December 31, 2021. The Company had $950 thousand in outstanding full recourse guarantees to a third party credit card company
at December 31, 2022 and $580 thousand at December 31, 2021. At December 31, 2022, the Company had a reserve for unfunded
commitments of $201 thousand for the above-mentioned loan commitments of $31,889 thousand that are not unconditionally
cancellable by the Company. The Company’s reserve for unfunded commitments was $201 thousand at December 31, 2021. The
reserve for unfunded commitments is included in other liabilities.
Due to the nature of its business, the Company is subject to various threatened or filed legal cases. Based on the advice of legal
counsel, the Company does not expect such cases will have a material, adverse effect on its financial position or results of operations.
Legal liabilities are accrued when obligations become probable and the amount can be reasonably estimated.
Note 13: Retirement Benefit Plans
The Company sponsors a qualified defined contribution Deferred Profit-Sharing Plan covering substantially all of its salaried
employees with one or more years of service. The costs charged to noninterest expense related to discretionary Company
contributions to the Deferred Profit-Sharing Plan were $1,030 thousand in 2022, $1,028 thousand in 2021 and $917 thousand in
2020.
The Company also sponsors a qualified defined contribution Tax Deferred Savings/Retirement Plan (ESOP) covering salaried
employees who become eligible to participate upon completion of a 90-day introductory period. The Tax Deferred Savings/
Retirement Plan (ESOP) allows employees to defer, on a pretax or after-tax basis, a portion of their salaries as contributions to this
Plan. Participants may invest in several funds, including one fund that invests primarily in Westamerica Bancorporation common
stock. The Company funds contributions to match participating employees’ contributions, subject to certain limits. The matching
contributions charged to compensation expense were $921 thousand in 2022, $972 thousand in 2021 and $995 thousand in 2020.
The Company offers a continuation of group insurance coverage to eligible employees electing early retirement, for the period from
the date of retirement until age 65. For eligible employees the Company pays a portion of these early retirees’ group insurance
premiums. The Company also reimburses a portion of Medicare Part B premiums for all qualifying retirees over age 65 and, if
eligible, their spouses. Eligibility for post-retirement medical benefits is based on age and years of service, and restricted to
employees hired prior to February 1, 2006 who elect early retirement prior to January 1, 2023. The Company uses an actuarial-
based accrual method of accounting for post-retirement benefits. The Company used a December 31 measurement date for
determining post-retirement medical benefit calculations.
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2022 WESTAMERICA BANCORPORATION FORM 10-K
The following tables set forth the net periodic post-retirement benefit cost and the change in the benefit obligation for the year
ended December 31 and the funded status of the post-retirement benefit plan as of December 31:
Net Periodic Benefit Cost
Service benefit
Interest cost
Net periodic cost
Obligation and Funded Status
Change in benefit obligation
Benefit obligation at beginning of year
Service benefit
Interest cost
Benefits paid
Benefit obligation at end of year
Accumulated post-retirement benefit obligation attributable to:
Retirees
Other
Total
Fair value of plan assets
Accumulated post-retirement benefit obligation in excess of plan assets
Additional Information
Assumptions
Weighted-average assumptions used to determine benefit obligations
Discount rate
Weighted-average assumptions used to determine net periodic benefit cost
Discount rate
2022
At December 31,
2021
(In thousands)
($15)
30
$15
($19)
38
$19
2022
$1,527
($19)
38
(145)
$1,401
At December 31,
2021
(In thousands)
$1,654
(15)
30
(142)
$1,527
$1,401
-
$1,401
-
$1,401
$1,527
-
$1,527
-
$1,527
2020
($35)
52
$17
2020
$1,782
(35)
52
(145)
$1,654
$1,654
-
$1,654
-
$1,654
2022
At December 31,
2021
2020
5.01%
2.46%
1.80%
2.46%
1.80%
2.90%
The above discount rate is based on the expected return of a portfolio of Corporate Aa debt, the term of which approximates the
term of the benefit obligations. The Company reserves the right to terminate or alter post-employment health benefits. Post-
retirement medical benefits are currently fixed amounts without provision for future increases; as a result, the assumed annual
average rate of inflation used to measure the expected cost of benefits covered by this program is zero percent for 2022 and beyond.
2023
2024
2025
2026
2027
Years 2028-2032
Estimated
future benefit
payments
(In thousands)
$144
144
144
141
132
522
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2022 WESTAMERICA BANCORPORATION FORM 10-K
Note 14: Related Party Transactions
Certain of the Directors, executive officers and their associates have had banking transactions with subsidiaries of the Company in
the ordinary course of business. The table below reflects information concerning loans to certain directors and executive officers
and/or family members during 2022 and 2021:
Balance at January 1,
Originations
Principal reductions
Balance at December 31,
Percent of total loans outstanding.
Note 15: Regulatory Matters
2022
2021
($ in thousands)
$454
-
($54)
$400
0.04%
$499
-
(45)
$454
0.04%
Payment of dividends to the Company by the Bank is limited under regulations for state chartered banks. The amount that can be
paid in any calendar year, without prior approval from regulatory agencies, cannot exceed the net profits (as defined) for the
preceding three calendar years less dividends paid. The Company consistently has paid quarterly dividends to its shareholders since
its formation in 1972.
Note 16: Other Comprehensive Income (loss)
The components of other comprehensive income (loss) and other related tax effects were:
Debt securities available for sale:
Changes in net unrealized losses/gains arising during the year
Other comprehensive loss
Debt securities available for sale:
Changes in net unrealized gains arising during the year
Reclassification of gains included in net income
Other comprehensive loss
Debt securities available for sale:
Changes in net unrealized gains arising during the year
Reclassification of gains included in net income
Other comprehensive income
Before tax
2022
Tax effect
(In thousands)
Net of tax
($434,107)
($434,107)
$128,338
$128,338
($305,769)
($305,769)
Before tax
2021
Tax effect
(In thousands)
Net of tax
($91,891)
(34)
($91,925)
$27,167
10
$27,177
($64,724)
(24)
($64,748)
Before tax
2020
Tax effect
(In thousands)
Net of tax
$125,519
(71)
$125,448
($37,108)
21
($37,087)
$88,411
(50)
$88,361
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2022 WESTAMERICA BANCORPORATION FORM 10-K
Accumulated other comprehensive income (loss) balances were:
Balance, December 31, 2019
Changes in unrealized gains on debt securities available for sale, net of tax
Balance, December 31, 2020
Changes in unrealized gains on debt securities available for sale, net of tax
Balance, December 31, 2021
Changes in unrealized losses/gains on debt securities available for sale, net of tax
Balance, December 31, 2022
Note 17: Earnings Per Common Share
Accumulated
Other
Comprehensive
Income (Loss)
(In thousands)
$26,051
88,361
114,412
(64,748)
49,664
(305,769)
($256,105)
The table below shows earnings per common share and diluted earnings per common share. Basic earnings per common share are
computed by dividing net income by the average number of common shares outstanding during the period. Diluted earnings per
common share are computed by dividing net income by the average number of common shares outstanding during the period plus
the impact of common stock equivalents.
Net income (numerator)
Basic earnings per common share
Weighted average number of common shares outstanding - basic (denominator)
Basic earnings per common share
Diluted earnings per common share
Weighted average number of common shares outstanding - basic
Add common stock equivalents for options
Weighted average number of common shares outstanding - diluted (denominator)
Diluted earnings per common share
For the Years Ended December 31,
2022
2020
2021
(In thousands, except per share data)
$122,034
$86,509
$80,413
26,895
$4.54
26,895
12
26,907
$4.54
26,855
$3.22
26,855
15
26,870
$3.22
26,942
$2.98
26,942
18
26,960
$2.98
For the years ended December 31, 2022, 2021 and 2020, options to purchase 787 thousand, 649 thousand and 577 thousand shares
of common stock, respectively, were outstanding but not included in the computation of diluted earnings per common share because
the option exercise price exceeded the fair value of the stock such that their inclusion would have had an anti-dilutive effect.
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2022 WESTAMERICA BANCORPORATION FORM 10-K
Note 18: Westamerica Bancorporation (Parent Company Only Condensed Financial Information)
Statements of Income and Comprehensive Income
Dividends from subsidiaries
Interest income
Other income
Total income
Salaries and benefits
Other expense
Total expense
Income before taxes and equity in undistributed income of subsidiaries
Income tax expense
Earnings of subsidiaries greater than subsidiary dividends
Net income
Other comprehensive (loss) income, net of tax
Comprehensive (loss) income
Balance Sheets
Assets
Cash
Investment in Westamerica Bank
Investment in non-bank subsidiaries
Premises and equipment, net
Accounts receivable from Westamerica Bank
Other assets
Total assets
Liabilities
Accounts payable to Westamerica Bank
Other liabilities
Total liabilities
Shareholders' equity
Total liabilities and shareholders' equity
For the Years Ended December 31,
2021
2022
2020
(In thousands)
$29,279
44
11,608
40,931
6,612
2,279
8,891
32,040
(645)
55,114
86,509
(64,748)
$21,761
$70,267
49
11,386
81,702
5,832
2,609
8,441
73,261
(881)
49,654
122,034
(305,769)
($183,735)
$10,783
56
11,438
22,277
7,107
2,206
9,313
12,964
(454)
67,903
80,413
88,361
$168,774
At December 31,
2022
2021
(In thousands)
$99,478
464,500
453
9,411
245
44,831
$618,918
$40
16,768
16,808
602,110
$618,918
$69,943
720,614
454
9,968
224
42,026
$843,229
$62
16,065
16,127
827,102
$843,229
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2022 WESTAMERICA BANCORPORATION FORM 10-K
Statements of Cash Flows
Operating Activities
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
(Increase) decrease in accounts receivable from affiliates
Increase in other assets
Stock option compensation expense
Provision for deferred income tax
(Decrease) increase in other liabilities
Earnings of subsidiaries greater than subsidiary dividends
Gain on disposal of premises and equipment
Net Cash Provided by Operating Activities
Investing Activities
Purchases of equipment
Net Cash Used in Investing Activities
Financing Activities
Exercise of stock options
Retirement of common stock
Common stock dividends paid
Net Cash Used in Financing Activities
Net change in cash and due from banks
Cash and due from banks at beginning of period
Cash and due from banks at end of period
Supplemental Cash Flow Disclosures:
Supplemental disclosure of cash flow activities:
Interest paid for the period
Income tax payments for the period
For the Years Ended December 31,
2022
2020
2021
(In thousands)
$122,034
$86,509
$80,413
563
(771)
(1,639)
1,309
881
(38)
(49,654)
-
72,685
(5)
(5)
2,255
(218)
(45,182)
(43,145)
29,535
69,943
$99,478
569
117
(1,223)
1,419
645
254
(55,114)
-
33,176
(78)
(78)
3,017
(232)
(44,304)
(41,519)
(8,421)
78,364
$69,943
608
(150)
(2,421)
1,875
428
855
(67,903)
(61)
13,644
-
-
2,838
(16,496)
(44,285)
(57,943)
(44,299)
122,663
$78,364
$-
39,840
$-
27,673
$-
26,462
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2022 WESTAMERICA BANCORPORATION FORM 10-K
Note 19: Quarterly Financial Information (Unaudited)
2022
Interest and loan fee income
Net interest income
Provision for loan losses
Noninterest income
Noninterest expense
Income before taxes
Net income
Basic earnings per common share
Diluted earnings per common share
Dividends paid per common share
Price range, common stock
2021
Interest and loan fee income
Net interest income
Provision for loan losses
Noninterest income
Noninterest expense
Income before taxes
Net income
Basic earnings per common share
Diluted earnings per common share
Dividends paid per common share
Price range, common stock
2020
Interest and loan fee income
Net interest income
Provision for loan losses
Noninterest income
Noninterest expense
Income before taxes
Net income
Basic earnings per common share
Diluted earnings per common share
Dividends paid per common share
Price range, common stock
March 31,
For the Three Months Ended
June 30,
September 30, December 31,
(In thousands, except per share data and
price range of common stock)
$43,759
43,279
-
11,576
24,875
29,980
22,616
0.84
0.84
0.42
57.54 - 62.76
$42,316
41,841
-
10,189
24,906
27,124
20,147
0.75
0.75
0.41
55.82 - 66.43
$39,991
39,549
4,300
11,648
24,664
22,233
16,962
0.63
0.63
0.41
47.37 - 68.01
$47,997
47,514
-
11,264
24,629
34,149
25,314
0.94
0.94
0.42
55.66 - 61.30
$44,276
43,792
-
11,032
24,291
30,533
22,579
0.84
0.84
0.41
57.67 - 64.80
$41,539
41,104
-
9,554
24,754
25,904
19,562
0.72
0.72
0.41
53.40 - 64.86
$60,802
60,315
-
11,818
24,767
47,366
34,760
1.29
1.29
0.42
52.29 - 61.52
$43,810
43,318
-
11,282
24,697
29,903
22,063
0.82
0.82
0.41
54.03 - 58.55
$41,365
40,899
-
10,476
24,603
26,772
20,051
0.74
0.74
0.41
51.84 - 63.58
$69,198
68,723
-
10,463
25,090
54,096
39,344
1.46
1.46
0.42
52.22 - 63.39
$43,041
42,537
-
10,842
23,912
29,467
21,720
0.81
0.81
0.42
53.78 - 58.00
$42,961
42,480
-
13,959
24,545
31,894
23,838
0.89
0.89
0.41
51.49 - 59.70
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- 90 -
2022 WESTAMERICA BANCORPORATION FORM 10-K
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Shareholders and the Board of Directors of
Westamerica Bancorporation
San Rafael, California
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Westamerica Bancorporation (the "Company") as of December
31, 2022 and 2021, the related consolidated statements of income, comprehensive income (loss), changes in shareholders’ equity,
and cash flows for each of the years in the three-year period ended December 31, 2022, and the related notes (collectively referred
to as the "financial statements"). We also have audited the Company’s internal control over financial reporting as of December 31,
2022, based on criteria established in Internal Control – Integrated Framework: (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO).
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the
Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the three-
year period ended December 31, 2022 in conformity with accounting principles generally accepted in the United States of America.
Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of
December 31, 2022, based on criteria established in Internal Control – Integrated Framework: (2013) issued by COSO.
Basis for Opinions
The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial
reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying
Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s
financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public
accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to
be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error
or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding
of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design
and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures
as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
_______________________________________________________________________________________________________
(Continued)
- 91 -
2022 WESTAMERICA BANCORPORATION FORM 10-K
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain
to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets
of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that
could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was
communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are
material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The
communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and
we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the
accounts or disclosures to which it relates.
Allowance for Credit Losses on Loans – Reasonable and Supportable Forecasts - Refer to Notes 1 and 3 to the financial
statements
The allowance for credit losses on loans is an accounting estimate of expected credit losses over the estimated life of loans. ASC
326, Financial Instruments – Credit Losses, requires a financial asset (or a group of financial assets), including the Company's loan
portfolio, measured at amortized cost, to be presented at the net amount expected to be collected. The allowance for credit losses
on loans as of December 31, 2022 was $20,284,000.
The Company estimates the amount of expected losses over the life of its existing loan portfolio and establishes an allowance for
credit losses. Loans that share common risk characteristics are segregated into pools based on those characteristics. Historical loss
rates are determined for each pool. Historical loss rates are adjusted for estimated losses based on current conditions and
management’s reasonable and supportable forecasts of economic trends over a forecast horizon of up to two years. Significant
management judgments are required in the development and application of reasonable and supportable forecasts.
We identified the development and application of reasonable and supportable forecasts as a critical audit matter because of the
significant auditor judgment and audit effort to evaluate the subject judgments made by management, including the need to involve
more experienced audit personnel.
The primary procedures we performed to address this critical audit matter included:
Testing the effectiveness of controls over the application of reasonable and supportable forecasts, including controls addressing:
o The reasonable and supportable forecasts methodology,
o Significant judgments and assumptions in the reasonable and supportable forecasts methodology, including the selection
and application of economic variables,
o The accuracy of the reasonable and supportable forecasts calculation, including the completeness, accuracy and relevance
of underlying data.
_____________________________________________________________________________________________
(Continued)
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2022 WESTAMERICA BANCORPORATION FORM 10-K
Substantively testing management’s process for the application of reasonable and supportable forecasts, including:
o Evaluation of the reasonable and supportable forecasts methodology,
o Evaluation of significant judgments and assumptions in the reasonable and supportable forecasts methodology, including
the selection and application of economic variables,
o Evaluation of the accuracy of the reasonable and supportable forecasts calculation, including the completeness, accuracy
and relevance of underlying data.
/s/ Crowe LLP
Crowe LLP
We have served as the Company's auditor since 2015.
Sacramento, California
February 28, 2023
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2022 WESTAMERICA BANCORPORATION FORM 10-K
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
The Company’s principal executive officer and principal financial officer have evaluated the effectiveness of the Company’s
“disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended,
as of December 31, 2022.
Based upon their evaluation, the principal executive officer and principal financial officer concluded that the Company’s disclosure
controls and procedures are effective to ensure that material information required to be disclosed by the Company in the reports
that it files or submits under the Exchange Act is recorded, processed, summarized and reported as and when required and that such
information is communicated to the Company’s management, including the principal executive officer and the principal financial
officer, to allow for timely decisions regarding required disclosures. The evaluation did not identify any change in the Company’s
internal control over financial reporting that occurred during the quarter ended December 31, 2022 that has materially affected, or
is reasonably likely to materially affect, the Company’s internal control over financial reporting. Management’s Report on Internal
Control Over Financial Reporting and the attestation Report of Independent Registered Public Accounting Firm are found on pages
50 and 91, respectively.
ITEM 9B. OTHER INFORMATION
None.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS OF THE REGISTRANT AND CORPORATE GOVERNANCE
The information required by this Item 10 of this Annual Report on Form 10-K is incorporated by reference from the information
contained in the Company’s Proxy Statement for its 2023 Annual Meeting of Shareholders which will be filed pursuant to
Regulation 14A of the Exchange Act.
The Company has adopted a Code of Ethics (as defined in Item 406 of Regulation S-K of the Securities Act of 1933) that is
applicable to its senior financial officers including its chief executive officer, chief financial officer, and principal accounting officer.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item 11 of this Annual Report on Form 10-K is incorporated by reference from the information
contained in the Company’s Proxy Statement for its 2023 Annual Meeting of Shareholders which will be filed pursuant to
Regulation 14A of the Exchange Act.
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2022 WESTAMERICA BANCORPORATION FORM 10-K
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
The information required by this Item 12 of this Annual Report on Form 10-K is incorporated by reference from the information
contained in the Company’s Proxy Statement for its 2023 Annual Meeting of Shareholders which will be filed pursuant to
Regulation 14A of the Exchange Act.
Securities Authorized for Issuance Under Equity Compensation Plans
The following table summarizes the status of the Company’s equity compensation plans as of December 31, 2022:
Plan category
At December 31, 2022
Number of securities to be
issued upon exercise of
outstanding options,
warrants and rights
Weighted-average exercise
price of outstanding
options, warrants and
rights
(In thousands, except exercise price)
(b)
(a)
Number of securities
remaining available for
future issuance under
equity compensation plans
(excluding securities
reflected in column (a))
(c)
856
-
856
Equity compensation plans approved by security holders
Equity compensation plans not approved by security holders
Total
854
-
854
$60
N/A
$60
ITEM 13. CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
The information required by this Item 13 of this Annual Report on Form 10-K is incorporated by reference from the information
contained in the Company’s Proxy Statement for its 2023 Annual Meeting of Shareholders, which will be filed pursuant to
Regulation 14A of the Exchange Act.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this Item 14 of this Annual Report on Form 10-K is incorporated by reference from the information
contained in the Company’s Proxy Statement for its 2023 Annual Meeting of Shareholders which will be filed pursuant to
Regulation 14A of the Exchange Act.
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)
1. Financial Statements:
PART IV
See Index to Financial Statements on page 49. The consolidated financial statements included in Item 8 are filed as part
of this Report.
(a)
2. Financial statement schedules required. No financial statement schedules are filed as part of this Report since the required
information is included in the consolidated financial statements, including the notes thereto, or the circumstances
requiring inclusion of such schedules are not present.
(a)
3. Exhibits:
The following documents are included or incorporated by reference in this Annual Report on Form 10‑K.
- 95 -
2022 WESTAMERICA BANCORPORATION FORM 10-K
Exhibit
Number
3(a)
3(b)
3(c)
4.1
10(d)*
10(e)*
10(f)*
10(g)*
10(i)*
10(j)*
10(k)*
10(s)*
10(u)*
10(v)*
10(w)*
10(x)
10(y)
Restated Articles of Incorporation (composite copy), incorporated by reference to Exhibit 3(a) to the Registrant’s
Annual Report on Form 10-K for the fiscal year ended December 31, 1997, filed with the Securities and Exchange
Commission on March 30, 1998. https://www.sec.gov/Archives/edgar/data/311094/0000311094-98-000004.txt
By-laws, as amended (composite copy), incorporated by reference to Exhibit 3.2 to the Registrant’s Form 8-K, filed
with the Securities and Exchange Commission on March 26, 2018.
https://www.sec.gov/Archives/edgar/data/311094/000117184318002262/exh_32.htm
Certificate of Determination of Fixed Rate Cumulative Perpetual Preferred Stock, Series A of Westamerica
Bancorporation dated February 10, 2009, incorporated by reference to Exhibit 99.1 to the Registrant’s Form 8-K,
filed with the Securities and Exchange Commission on February 13, 2009.
https://www.sec.gov/Archives/edgar/data/311094/000095013409002844/f51541exv99w1.htm
Description of registered securities, incorporated by reference to Exhibit 4.1 to the Registrant’s Annual Report on
Form 10-K for the fiscal year ended December 31, 2019, filed with the Securities and Exchange Commission on
February 28, 2020. https://www.sec.gov/Archives/edgar/data/311094/000117184320001355/ex_173691.htm
Westamerica Bancorporation Chief Executive Officer Deferred Compensation Agreement by and between
Westamerica Bancorporation and David L. Payne, dated December 18, 1998 incorporated by reference to Exhibit
10(e) to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 1999, filed with the
Securities and Exchange Commission on March 29, 2000.
https://www.sec.gov/Archives/edgar/data/311094/000031109400000002/0000311094-00-000002.txt
Description of Executive Cash Bonus Program incorporated by reference to Exhibit 10(e) to Exhibit 2.1 of
Registrant’s Form 8-K filed with the Securities and Exchange Commission on March 14, 2005.
https://www.sec.gov/Archives/edgar/data/311094/000031109405000008/mar8k05c.txt
Non-Qualified Annuity Performance Agreement with David L. Payne dated November 19, 1997 incorporated by
reference to Exhibit 10(f) to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31,
2004, filed with the Securities and Exchange Commission on March 15, 2005.
https://www.sec.gov/Archives/edgar/data/311094/000095013405005077/f06799exv10wxfy.htm
Amended and Restated Westamerica Bancorporation Stock Option Plan of 1995 Nonstatutory Stock Option
Agreement Form incorporated by reference to Exhibit 10(g) to the Registrant’s Annual Report on Form 10-K for the
fiscal year ended December 31, 2004, filed with the Securities and Exchange Commission on March 15, 2005.
https://www.sec.gov/Archives/edgar/data/311094/000095013405005077/f06799exv10wxgy.htm
Amended Westamerica Bancorporation and Subsidiaries Deferred Compensation Plan (As restated effective January
1, 2005) dated December 31, 2008 incorporated by reference to Exhibit 10(i) to the Registrant’s Annual Report on
Form 10-K for the fiscal year ended December 31, 2008, filed with the Securities and Exchange Commission on
February 27, 2009.
https://www.sec.gov/Archives/edgar/data/311094/000095013409004041/f51636exv10wxiy.htm
Amended and Restated Westamerica Bancorporation Deferral Plan (Adopted October 26, 1995) dated December 31,
2008 incorporated by reference to Exhibit 10(j) to the Registrant’s Annual Report on Form 10-K for the fiscal year
ended December 31, 2008, filed with the Securities and Exchange Commission on February 27, 2009.
https://www.sec.gov/Archives/edgar/data/311094/000095013409004041/f51636exv10wxjy.htm
Form of Restricted Performance Share Deferral Election pursuant to the Westamerica Bancorporation Deferral Plan
incorporated by reference to Exhibit 10(i) to the Registrant’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2005, filed with the Securities and Exchange Commission on March 10, 2006.
https://www.sec.gov/Archives/edgar/data/311094/000095013406004693/f18098exv10wxky.htm
Amended and Restated Stock Option Plan of 1995, incorporated by reference to Exhibit A to the Registrant’s
definitive Proxy Statement pursuant to Regulation 14(a) filed with the Securities and Exchange Commission on
March 13, 2012. https://www.sec.gov/Archives/edgar/data/311094/000120677412001027/westamerica_def14a.htm
Westamerica Bancorporation 2019 Omnibus Equity Incentive Plan, incorporated by reference to Exhibit 4 to the
Registrant’s Form S-8, filed with the Securities and Exchange Commission on September 27, 2019.
https://sec.gov/Archives/edgar/data/311094/000117184319006163/exh_4.htm
Westamerica Bancorporation 2019 Omnibus Equity Incentive Plan Stock Option Agreement Form, incorporated by
reference to Exhibit 10.1 to the Registrant’s Form 10-Q, filed with the Securities and Exchange Commission on
November 4, 2019.
https://sec.gov/Archives/edgar/data/311094/000117184319007133/ex_161876.htm
Westamerica Bancorporation 2019 Omnibus Equity Incentive Plan Restricted Stock Unit Award Agreement Form,
incorporated by reference to Exhibit 10.2 to the Registrant’s Form 10-Q, filed with the Securities and Exchange
Commission on November 4, 2019.
https://sec.gov/Archives/edgar/data/311094/000117184319007133/ex_161877.htm
Form of Indemnification Agreement between Westamerica Bancorporation and its directors, incorporated by
reference to the Exhibit 10.1 to the Registrant’s Form 8-K filed with the Securities and Exchange Commission on
June 28, 2019.
http://www.sec.gov/Archives/edgar/data/311094/000117184319004244/exh_101.htm
Form of Indemnification Agreement between Westamerica Bancorporation and its directors, incorporated by
reference to the Exhibit 10.2 to the Registrant’s Form 8-K filed with the Securities and Exchange Commission on
June 28, 2019.
- 96 -
2022 WESTAMERICA BANCORPORATION FORM 10-K
11.1
14
21
23.1
31.1
31.2
32.1
32.2
https://www.sec.gov/Archives/edgar/data/311094/000117184319004244/exh_102.htm
Statement re computation of per share earnings incorporated by reference to Note 17 of the notes to the consolidated
financial statements of this Report.
Code of Ethics incorporated by reference to Exhibit 14 to the Registrant’s Annual Report on Form 10-K for the fiscal
year ended December 31, 2003, filed with the Securities and Exchange Commission on March 10, 2004.
https://www.sec.gov/Archives/edgar/data/311094/000095014904000595/f97139exv14.txt
Subsidiaries of the registrant.
Consent of Crowe LLP
Certification of Chief Executive Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a)
Certification of Chief Financial Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a)
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
101.INS XBRL Instance Document – The instance document does not appear in the Interactive Data File because its XBRL
tags are embedded within the Inline XBRL document.
101.SCH XBRL Taxonomy Extension Schema Document
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF XBRL Taxonomy Extension Definitions Linkbase Document
101.LAB XBRL Taxonomy Extension Label Linkbase Document
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document
104
The Cover page of Westamerica Bancorporation’s Annual Report on Form 10-K for the year ended December 31,
2022, formatted in Inline XBRL (contained in Exhibit 101)
____________
*
Indicates management contract or compensatory plan or arrangement.
The exhibits listed above are available through the SEC’s website (https://www.sec.gov). Alternatively, the Company will furnish
to shareholders a copy of any exhibit listed above, but not contained herein, upon written request to the Office of the Corporate
Secretary A-2M, Westamerica Bancorporation, P.O. Box 1200, Suisun City, California 94585-1200, and payment to the Company
of $.25 per page.
Item 16. FORM 10-K SUMMARY.
None
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- 97 -
2022 WESTAMERICA BANCORPORATION FORM 10-K
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
WESTAMERICA BANCORPORATION
/s/ Jesse Leavitt
Jesse Leavitt
Senior Vice President
and Chief Financial Officer
(Principal Financial and Accounting Officer)
Date: February 28, 2023
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the date indicated.
Signature
Title
/s/ David L. Payne
David L. Payne
/s/ Jesse Leavitt
Jesse Leavitt
/s/ E. Joseph Bowler
E. Joseph Bowler
/s/ Melanie Martella Chiesa
Melanie Martella Chiesa
/s/ Michele Hassid
Michele Hassid
/s/ Catherine C. MacMillan
Catherine C. MacMillan
/s/ Ronald A. Nelson
Ronald A. Nelson
/s/ Edward B. Sylvester
Edward B. Sylvester
/s/ Inez Wondeh
Inez Wondeh
Chairman of the Board and Directors
President and Chief Executive Officer
(Principal Executive Officer)
Senior Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
Director
Director
Director
Director
Director
Date
February 28, 2023
February 28, 2023
February 28, 2023
February 28, 2023
February 28, 2023
February 28, 2023
February 28, 2023
Lead Independent Director
February 28, 2023
Director
February 28, 2023
- 98 -
2022 WESTAMERICA BANCORPORATION FORM 10-K
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1108 FIFTH AVENUE | SAN RAFAEL, CA 94901 | WESTAMERICA.COM
1108 FIFTH AVENUE | SAN RAFAEL, CA 94901 | WESTAMERICA.COM