UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For Quarter Ended September 30, 1995 Commission File Number: 1-9383 WESTAMERICA BANCORPORATION (Exact Name of Registrant as Specified in its Charter) CALIFORNIA (State or other jurisdiction of incorporation or organization) 94-2156203 (I.R.S. Employer Identification No.) 1108 Fifth Avenue, San Rafael, California 94901 (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, including Area Code (415) 257-8000 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 [ x ] No [ ] Indicate the number of shares outstanding of each of the registrant classes of common stock, as of the latest practicable date: Title of Class Common Stock, No Par Value Shares outstanding as of November 7, 1995 9,829,718 WESTAMERICA BANCORPORATION CONSOLIDATED BALANCE SHEETS - --------------------------- (Unaudited) <TABLE> <CAPTION> (in thousands) September 30, December 31, 1995 1994 * 1994 * -------- -------- -------- <S> <C> <C> <C> ASSETS Cash and cash equivalents $168,229 $185,389 $180,957 Money market assets 250 250 250 Investment securities available for sale 252,497 188,335 193,096 Investment securities held to maturity 583,502 659,807 633,550 Market values of: $583,596 at September 30, 1995 $640,780 at September 30, 1994 $607,232 at December 31, 1994 Loans, net of reserve for loan losses of: 1,334,546 1,340,982 1,353,404 $33,097 at September 30, 1995 $32,333 at September 30, 1994 $32,450 at December 31, 1994 Other real estate owned 7,595 11,080 8,023 Premises and equipment, net 26,154 29,607 29,332 Interest receivable and other assets 55,903 55,152 58,840 ---------- ---------- ---------- TOTAL ASSETS $2,428,676 $2,470,602 $2,457,452 ========== ========== ========== LIABILITIES Deposits: Non-interest bearing $467,402 $454,596 472,278 Interest bearing: Transaction 337,056 335,375 357,681 Savings 721,981 839,026 784,933 Time 478,943 457,035 456,776 ---------- ---------- ---------- Total deposits 2,005,382 2,086,032 2,071,668 Funds purchased 168,613 140,143 135,426 Liability for interest, taxes and other expenses 16,386 15,968 20,173 Notes and mortgages payable 20,000 27,517 25,524 ---------- ---------- ---------- Total liabilities 2,210,381 2,269,660 2,252,791 Authorized - 50,000 shares Common stock issued and outstanding: 78,975 77,561 77,515 9,842 at September 30, 1995 9,919 at September 30, 1994 9,901 at December 31, 1994 Capital surplus 16,114 16,114 16,114 Unrealized gain (loss) on securities available for sale 250 (1,281) (2,270) Retained earnings 122,956 108,548 113,302 ---------- ---------- ---------- Total shareholders' equity 218,295 200,942 204,661 ---------- ---------- ---------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $2,428,676 $2,470,602 $2,457,452 ========== ========== ========== <FN> * Restated on an historical basis to reflect the January 31, 1995 acquisition of PV Financial, the June 6, 1995 acquisition of CapitolBank Sacramento and the July 17, 1995 acquisition of North Bay Bancorp, all on a pooling-of-interests basis. </TABLE> <TABLE> WESTAMERICA BANCORPORATION CONSOLIDATED STATEMENTS OF INCOME - --------------------------------- (Unaudited) <CAPTION> (in thousands, except when indicated) Three months ended Nine months ended September 30, September 30, 1995 1994 * 1995 1994 * ------- ------- ------- ------- <S> <C> <C> <C> <C> INTEREST INCOME Loans, including fees $31,926 $30,402 $96,507 $88,618 Money market assets and funds sold 19 400 276 784 Investment securities available for sale 3,308 2,571 8,621 8,210 Investment securities held to maturity 8,143 8,894 25,313 25,180 ------- ------- ------- ------- Total interest income 43,396 42,267 130,717 122,792 INTEREST EXPENSE Transaction deposits 936 915 2,740 2,727 Savings deposits 5,061 5,336 15,612 14,657 Time deposits 6,399 4,533 17,597 13,550 Funds purchased 2,264 1,382 6,394 3,669 Long-term debt 372 604 1,373 2,061 ------- ------- ------- ------- Total interest expense 15,032 12,770 43,716 36,664 ------- ------- ------- ------- NET INTEREST INCOME 28,364 29,497 87,001 86,128 Provision for loan losses 1,150 1,597 4,320 5,673 ------- ------- ------- ------- NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 27,214 27,900 82,681 80,455 NON-INTEREST INCOME Service charges on deposit accounts 3,156 3,232 9,528 9,753 Merchant credit card 669 575 1,767 1,768 Mortgage banking 352 467 1,093 3,719 Brokerage commissions 174 144 472 515 Trust fees 178 184 494 548 Net investment securities gain (loss) 19 (41) 19 500 Other 989 1,057 2,717 3,495 ------- ------- ------- ------- Total non-interest income 5,537 5,618 16,090 20,298 ------- ------- ------- ------- NON-INTEREST EXPENSE Salaries and related benefits 9,930 10,952 31,642 34,303 Occupancy 2,797 2,694 8,005 7,759 Equipment 1,877 1,567 4,680 4,524 Professional fees 914 839 3,597 2,493 Data processing 1,128 1,173 3,213 3,381 Other real estate owned and property held for sale 159 271 604 274 Other 3,581 5,546 14,779 17,657 ------- ------- ------- ------- Total non-interest expense 20,386 23,042 66,520 70,391 ------- ------- ------- ------- INCOME BEFORE INCOME TAXES 12,365 10,476 32,251 30,362 Provision for income taxes 3,977 3,232 9,775 9,794 ------- ------- ------- ------- NET INCOME $8,388 $7,244 $22,476 $20,568 ======= ======= ======= ======= Average shares outstanding 9,864 9,918 9,893 9,914 PER SHARE DATA Earnings per share $0.85 $0.73 $2.27 $2.07 Dividends declared 0.20 0.17 0.57 0.47 <FN> * Restated on an historical basis to reflect the January 31, 1995 acquisition of PV Financial, the June 6, 1995 acquisition of CapitolBank Sacramento and the July 17, 1995 acquisition of North Bay Bancorp, all on a pooling-of-interests basis. </TABLE> WESTAMERICA BANCORPORATION STATEMENTS OF CASH FLOWS - ------------------------ (unaudited) For the nine months ended (in thousands) September 30, 1995 1995 1994 * OPERATING ACTIVITIES ------- ------- Net income $22,476 $20,568 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 3,914 3,866 Loan loss provision 4,320 5,673 Amortization of deferred net loan fees (1,419) (752) Increase in interest income receivable (1,253) (659) (Increase) decrease in other assets 437 (5,531) Decrease in income taxes payable (1,224) (66) Increase in interest expense payable 150 818 (Decrease) increase in other liabilities (762) 441 (Gain) loss on sales of investment securities (19) (500) Loss on sales/writedown of equipment 1,442 77 Originations of loans for resale (5,490) (127,847) Proceeds from sale of loans originated for resale 7,161 153,222 Gain on sale of property acquired in satisfaction of debt (192) (523) Write down on property acquired in satisfaction of debt 401 436 Maturities/sales of trading securities - 10 ------- ------- NET CASH PROVIDED BY OPERATING ACTIVITIES 29,942 49,233 INVESTING ACTIVITIES Net repayments (disbursements) of loans 14,286 (5,453) Purchases of investment securities available for sale (88,711) (89,981) Purchases of investment securities held to maturity (35,738) (191,381) Purchases of property, plant and equipment (2,224) (2,063) Proceeds from maturity of securities available for sale 51,154 42,063 Proceeds from maturity of securities held to maturity 62,658 128,897 Proceeds from sale of securities available for sale 4,310 53,615 Proceeds from sale of securities held to maturity 1,316 - Proceeds from sale of property, plant and equipment 46 - Proceeds from property acquired in satisfaction of debt 2,861 - Deletions (additions) of property acquired in satisfaction of debt (2,642) 5,966 ------- ------- NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 7,316 (58,337) WESTAMERICA BANCORPORATION STATEMENTS OF CASH FLOWS CONTINUED - ------------------------ (unaudited) For the nine months ended (in thousands) September 30, 1995 1995 1994 * ------- ------- FINANCING ACTIVITIES Net decrease in deposits (66,286) (23,687) Net increase in fed funds purchased 33,187 63,845 Principal payments on notes and mortgages (5,524) (8,835) Issuance of shares of common stock 3,409 1,026 Cash in lieu of fractional shares (32) - Retirement of stock (9,218) (1,415) Dividends paid (5,522) (4,192) ------- ------- NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (49,986) 26,742 ------- ------- NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (12,728) 17,638 Cash and cash equivalents at beginning of period 180,957 167,751 -------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $168,229 $185,389 ======== ======== Supplemental disclosure of non-cash activities activities: Loans transferred to other real estate owned 2,642 3,391 Unrealized gain (loss) on securities available for sale 2,520 (4,016) Supplemental disclosure of cash flow activity: Interest paid for the period 43,754 35,101 Income tax payments for the period 10,261 10,029 * Restated on an historical basis to reflect the January 31, 1995 acquisition of PV Financial, the June 6, 1995 acquisition of CapitolBank Sacramento and the July 17, 1995 acquisition of North Bay Bancorp, all on a pooling-of-interests basis. WESTAMERICA BANCORPORATION ========================== MANAGEMENT'S DISCUSSION AND ANALYSIS OF - --------------------------------------- FINANCIAL CONDITION AND RESULTS OF OPERATIONS - --------------------------------------------- Westamerica Bancorporation, (the "Company"), parent company of Westamerica Bank, Napa Valley Bank, Bank of Lake County and Community Banker Services Corporation, reported third quarter 1995 net income of $8.4 million or $.85 per share. On a year to-date basis, the Company reported net income of $22.5 million, or $2.27 per share. This record level of earnings represents increases of 16 percent and 9 percent, respectively, from third quarter 1994 and September 1994 year-to-date. All financial data has been restated on an historical basis, following the pooling-of interests method of accounting, to reflect the January 31, 1995 acquisition of PV Financial, the June 6, 1995 acquisition of CapitolBank Sacramento and the July 17, 1995 acquisition of North Bay Bancorp. Acquisitions - ------------ On January 31, 1995, the Company completed the acquisition of PV Financial, parent company of Pacific Valley National Bank, on a pooling-of-interests basis and, accordingly, the Company's historical consolidated financial statements were restated. The Company issued approximately 1,180,000 shares in exchange for all the outstanding shares of PV Financial. On June 6, 1995, the Company completed the acquisition of CapitolBank Sacramento, on a pooling-of-interests basis and, accordingly, the Company's historical consolidated financial statements were restated. The Company issued approximately 370,000 shares in exchange for all the outstanding shares of CapitolBank. On July 17, 1995, the Company completed the acquisition of North Bay Bancorp, parent company of Novato National Bank, on a pooling-of-interests basis and, accordingly, the Company's historical consolidated financial statements were restated. The Company issued approximately 340,000 shares in exchange for all the outstanding shares of North Bay Bancorp. The following summarizes the separate results of the combined entities for the period shown prior to the combination: <TABLE> (in thousands, except per share data) Restated <CAPTION> Westamerica PV North Bay Combined Bancorporation Financial CapitolBank Bancorp Results ------------- --------- ----------- --------- -------- <S> <C> <C> <C> <C> <C> Quarter ended 9/30/94: Net interest income $23,424 $2,826 $2,039 $1,208 $29,497 Net income 6,285 640 219 100 7,244 Earnings per share 0.78 0.29 0.05 0.09 0.73 For the nine months ended 9/30/94: Net interest income $69,588 $7,525 $5,632 $3,383 $86,128 Net income 18,304 1,701 281 282 20,568 Earnings per share 2.27 0.78 0.07 0.26 2.07 At September 30, 1994: Total assets $2,052,084 $172,989 $137,969 $107,560 $2,470,602 Total shareholders' equity 163,023 18,836 9,272 9,811 200,942 At December 31, 1994 Total assets $2,030,235 $179,391 $139,228 $108,598 $2,457,452 Total shareholders' equity 166,205 19,419 9,310 9,727 204,661 </TABLE> Components of Net Income - ------------------------ Following is a summary of the components of net income for the periods indicated: For the three For the nine months ended months ended September 30, September 30, (in millions) ------------------- ---------------- 1995 1994 1995 1994 ---- ---- ---- ---- Net interest income * $30.0 $31.0 $91.8 $90.0 Provision for loan losses (1.2) (1.6) (4.3) (5.7) Non-interest income 5.5 5.6 16.1 20.3 Non-interest expense (20.4) (23.0) (66.5) (70.4) Provision for income taxes (5.5) (4.8) (14.6) (13.6) ---- ---- ---- ---- Net income $8.4 $7.2 $22.5 $20.6 ==== ==== ==== ==== * Fully taxable equivalent basis (FTE) Components of Net Income as a Percent of Average Earning Assets. The components of net income (annualized) expressed as a percent of average earning assets are summarized in the following table for the periods indicated: For the three For the nine months ended months ended September 30, September 30, ------------------- ---------------- 1995 1994 1995 1994 ---- ---- ---- ---- Net interest income * 5.44% 5.49% 5.59% 5.40% Provision for loan losses -0.21% -0.28% -0.28% -0.31% Non-interest income 1.00% 0.99% 0.98% 1.22% Non-interest expense -3.69% -4.08% -4.03% -4.25% Provision for income taxes -1.02% -0.84% -0.89% -0.83% ----- ----- ----- ----- Net income 1.52% 1.28% 1.37% 1.23% ===== ===== ===== ===== * Fully taxable equivalent Net income (annualized) as as a percent of average total assets 1.38% 1.17% 1.25% 1.12% Analysis of Net Interest Income and Margin - ------------------------------------------ The Company continually manages its interest-earning assets and interest-bearing liabilities adapting to changes in market rates. During the third quarter of 1995, the adverse effect of a decrease in the average balance of low-cost deposits and the higher level of interest rates paid on interest-bearing liabilities from the third quarter of 1994, was partially offset by increased yields on interest-earning assets. During the first nine months of 1995, increased yields on interest-earning assets from the same period in 1994 more than offset the negative effect of a decrease in the average balance of low-cost deposits and the higher level of interest rates paid on interest-bearing liabilities. As a result, net interest income (FTE) in 1995 was lower in the third quarter of 1995 than the comparable period in 1994 and higher than 1994 for the first nine months of 1995. These variances are summarized as follows for the periods indicated: Net Interest Income (FTE) For the three For the nine months ended months ended (in millions) September 30, September 30, ------------------- ---------------- 1995 1994 1995 1994 ---- ---- ---- ---- Interest income $43.3 $42.3 $130.7 $122.8 Interest expense (15.0) (12.8) (43.7) (36.6) FTE adjustment 1.7 1.5 4.8 3.8 ----- ----- ----- ----- Net interest income (FTE) $30.0 $31.0 $91.8 $90.0 ===== ===== ===== ===== Average earning assets $2,190 $2,242 $2,194 $2,227 Net interest margin 5.44% 5.49% 5.59% 5.40% In the third quarter of 1995, net interest income (FTE) decreased $1.0 million or 3 percent from the third quarter of 1994 to $30.0 million. A $1.0 million increase in interest income, mostly due to the increase in market rates experienced in 1995, was offset by an increase in interest expense, principally due to a decrease in the average balances of low-cost deposits combined with higher rates paid. Completing the quarter-to-quarter variances, the FTE adjustment increased $200,000 from the third quarter of 1994, mostly due to a $23.2 million increase in the average balance of tax-exempt investment securities. Compared to the first nine months of 1994, net interest income increased $1.8 million or 2 percent as a result of a $7.9 million increase in interest income partially offset by a $7.1 million increase in interest expense. The FTE adjustment increased $1.0 million from the first nine months of 1994. These variances reflect the same rate and volume trends affecting the quarter-to-quarter variances described above. Amortized loan fees, which are included in interest and fee income on loans, were $542,000 lower during the third quarter of 1995 than 1994 and $745,000 lower in the first nine months of 1995 than in the same period in 1994. Net Interest Margin (FTE) For the three For the nine months ended months ended September 30, September 30, ------------------- ---------------- 1995 1994 1995 1994 ---- ---- ---- ---- Yield on interest earning assets 8.16% 7.75% 8.26% 7.60% Cost of interest-bearing liabilities 3.46% 2.80% 3.37% 2.71% ----- ----- ----- ----- Net interest spread 4.70% 4.95% 4.89% 4.89% Impact of non-interest bearing funds 0.74% 0.54% 0.70% 0.51% ----- ----- ----- ----- Net interest margin 5.44% 5.49% 5.59% 5.40% ===== ===== ===== ===== The average yield on earning assets for the three-month period ended September 30, 1995 was 41 basis points higher than the same period in 1994. The effect of this change, combined with a favorable impact of non-interest bearing funds, was offset by the increased costs of interest-bearing liabilities which were, for the three-month period ended September 30, 1995, 66 basis points higher than the comparable period in 1994. For the first nine months of 1995, the yield on earning assets was 66 basis points higher that the first nine months in 1994. This positive variance, added to a more favorable impact of non-interest bearing funds, more than offset the adverse effect of an increase of 66 basis points in the cost of interest-bearing liabilities. Summary of Average Balances, Yields/Rates and Interest Differential In 1995, higher market rates and a higher yielding asset mix through increases in the average balance of loans for the third quarter and the first nine months of 1995 compared with comparable periods in 1994, resulted in increases in the average yield on earning assets for the three and nine months ended September 30, 1995 of 41 and 66 basis points, respectively, from the same periods in 1994. Partially offsetting this favorable trend, the average balances of low-cost deposits for the third quarter of 1995 decreased $111 million from the third quarter of 1994. On a year-to-date basis, average low-cost deposits decreased $66 million from the same period of 1994. This change and a general rise in market interest rates, were the main reasons for increases of 66 basis points, each, in the weighted average rate paid on total interest-bearing liabilities from the third quarter and the first nine months of 1994. Distribution of assets, liabilities and shareholders' equity. Yields/rates and interest margin. Note: Yields on certain investment securities and loans have been adjusted upward to reflect the effect of income thereon exempt from federal income taxation at the current statutory tax rate. For the three months ended September 30, 1995 (dollars in thousands) -------------------------------- Interest Rates Average income/ earned/ balance expense paid Assets -------- -------- -------- Money market assets and funds sold $1,047 $19 7.20 % Investment securities available for sale 213,539 3,308 6.15 Investment securities held to maturity 608,538 9,535 6.22 Loans: Commercial 809,064 19,876 9.75 Real estate construction 61,535 1,638 10.56 Real estate residential 212,411 3,903 7.29 Consumer 284,332 6,793 9.48 --------- ------ Interest-earning assets 2,190,466 45,072 8.16 Other assets 225,009 ---------- Total assets $2,415,475 ========== Liabilities and shareholders' equity Deposits Non-interest bearing demand $457,249 $-- -- % Savings and interest-bearing transaction 1,064,654 5,997 2.23 Time less than $100,000 305,132 3,954 5.14 Time $100,000 or more 173,859 2,445 5.58 --------- ------ Total interest-bearing deposits 1,543,645 12,396 3.19 Funds purchased 159,240 2,264 5.64 Notes and mortgages payable 20,094 372 7.34 --------- ------ Total interest-bearing liabilities 1,722,979 15,032 3.46 Other liabilities 18,835 Shareholders' equity 216,412 ---------- Total liabilities and shareholders' equity $2,415,475 ========== Net interest spread (1) 4.70 % Net interest income and interest margin (2) $30,040 5.44 % ======= ==== (1) Net interest spread represents the average yield earned on interest-earning assets less the average rate paid on interest-bearing liabilities. (2) Net interest margin is computed by dividing net interest income (FTE) (annualized) by total average interest-earning assets. For the three months ended September 30, 1994 (dollars in thousands) -------------------------------- Interest Rates Average income/ earned/ balance expense paid Assets -------- -------- -------- Money market assets and funds sold $35,330 $400 4.49 % Investment securities available for sale 197,810 2,571 5.16 Investment securities held to maturity 654,717 10,219 6.19 Loans: Commercial 794,272 18,490 9.24 Real estate construction 79,551 2,058 10.26 Real estate residential 193,708 3,228 6.61 Consumer 286,933 6,806 9.41 --------- ------ Interest-earning assets 2,242,321 43,772 7.75 Other assets 223,891 ---------- Total assets $2,466,212 ========== Liabilities and shareholders' equity Deposits Non-interest bearing demand $444,381 $-- -- % Savings and interest-bearing transaction 1,188,968 6,250 2.09 Time less than $100,000 316,293 3,109 3.90 Time $100,000 or more 146,320 1,424 3.86 --------- ------ Total interest-bearing deposits 1,651,581 10,783 2.59 Funds purchased 126,767 1,383 4.33 Notes and mortgages payable 28,179 604 8.50 --------- ------ Total interest-bearing liabilities 1,806,527 12,770 2.80 Other liabilities 16,927 Shareholders' equity 198,377 ---------- Total liabilities and shareholders' equity $2,466,212 ========== Net interest spread (1) 4.95 % Net interest income and interest margin (2) $31,002 5.49 % ======= ==== (1) Net interest spread represents the average yield earned on interest-earning assets less the average rate paid on interest-bearing liabilities. (2) Net interest margin is computed by dividing net interest income (FTE) (annualized) by total average interest-earning assets. For the nine months ended September 30, 1995 (dollars in thousands) -------------------------------- Interest Rates Average income/ earned/ balance expense paid Assets -------- -------- -------- Money market assets and and funds sold $6,447 $276 5.72 % Investment securities available for sale 198,289 8,621 5.81 Investment securities held to maturity 619,364 29,332 6.33 Loans: Commercial 806,057 59,320 9.84 Real estate construction 64,861 5,627 11.60 Real estate residential 210,218 11,757 7.48 Consumer 289,256 20,591 9.52 --------- ------- Interest-earning assets 2,194,492 135,524 8.26 Other assets 214,144 ---------- Total assets $2,408,636 ========== Liabilities and shareholders' equity Deposits Non-interest bearing demand $442,484 $-- -- % Savings and interest-bearing transaction 1,089,798 18,352 2.25 Time less than $100,000 304,825 11,066 4.85 Time $100,000 or more 164,944 6,531 5.29 --------- ------ Total interest-bearing deposits 1,559,567 35,949 3.08 Funds purchased 151,298 6,394 5.65 Notes and mortgages payable 23,556 1,373 7.79 --------- ------ Total interest-bearing liabilities 1,734,421 43,716 3.37 Other liabilities 18,278 Shareholders' equity 213,453 ---------- Total liabilities and shareholders' equity $2,408,636 ========== Net interest spread (1) 4.89 % Net interest income and interest margin (2) $91,808 5.59 % ======= ==== (1) Net interest spread represents the average yield earned on interest-earning assets less the average rate paid on interest-bearing liabilities. (2) Net interest margin is computed by dividing net interest income (FTE) (annualized) by total average interest-earning assets. For the nine months ended September 30, 1994 (dollars in thousands) -------------------------------- Interest Rates Average income/ earned/ balance expense paid Assets -------- -------- -------- Money market assets and funds sold $32,275 $784 3.25 % Investment securities available for sale 205,707 8,210 5.34 Investment securities held to maturity 628,451 28,562 6.08 Loans: Commercial 795,783 53,641 9.01 Real estate construction 77,226 5,662 9.80 Real estate residential 194,973 10,484 7.19 Consumer 293,010 19,279 8.80 --------- ------- Interest-earning assets 2,227,425 126,622 7.60 Other assets 222,367 ---------- Total assets $2,449,792 ========== Liabilities and shareholders' equity Deposits Non-interest bearing demand $432,347 $-- -- % Savings and interest-bearing transaction 1,165,835 17,383 1.99 Time less than $100,000 325,067 9,311 3.83 Time $100,000 or more 156,415 4,240 3.62 --------- ------ Total interest-bearing deposits 1,647,317 30,934 2.51 Funds purchased 129,539 3,669 3.79 Notes and mortgages payable 30,975 2,061 8.90 --------- ----- Total interest-bearing liabilities 1,807,831 36,664 2.71 Other liabilities 16,434 Shareholders' equity 193,180 ---------- Total liabilities and shareholders' equity $2,449,792 ========== Net interest spread (1) 4.89 % Net interest income and interest margin (2) $89,958 5.40 % ======= ==== (1) Net interest spread represents the average yield earned on interest-earning assets less the average rate paid on interest-bearing liabilities. (2) Net interest margin is computed by dividing net interest income (FTE) (annualized) by total average interest-earning assets. Rate and volume variances. The following table sets forth a summary of the changes in interest income and interest expense from changes in average asset and liability balances (volume) and changes in average interest rates for the periods indicated. Changes not solely attributable to volume or rates have been allocated in proportion to the respective volume and rate components. Three months ended September 30, 1995 compared with three months ended September 30, 1994 ------------------------------ (in thousands) Volume Rate Total ------ ------ ------ Increase (decrease) in interest and fee income: MMkt. assets and funds sold ($876) $495 ($381) Investment securities available for sale 216 521 737 Investment securities held to maturity (724) 40 (684) Loans: Commercial 349 1,037 1,386 Real estate construction (482) 62 (420) Real estate residential 327 348 675 Consumer (64) 51 (13) ------ ------ ------ Total loans 130 1,498 1,628 ------ ------ ------ Total increase (decrease) in interest and fee income (1) (1,254) 2,554 1,300 Increase (decrease) in interest expense: Deposits: Savings/interest-bearing transaction (801) 548 (253) Time less than $ 100,000 (105) 950 845 Time $ 100,000 or more 303 718 1,021 ------ ------ ------ Total interest-bearing (603) 2,216 1,613 Funds purchased 403 478 881 Notes and mortgages payable (157) (75) (232) ------ ------ ------ Total increase (decrease) in interest expense (357) 2,619 2,262 ------ ------ ------ Total increase (decrease) in net interest income (1) ($897) ($65) ($962) ===== ===== ===== (1) Amounts calculated on a fully taxable equivalent basis using the current statutory federal tax rate. Nine months ended September 30, 1995 compared with nine months ended September 30, 1994 ------------------------------ (in thousands) Volume Rate Total ------ ------ ------ Increase (decrease) in interest and fee income: MMkt. assets and funds sold ($12,308) $11,800 ($508) Investment securities available for sale (278) 689 411 Investment securities held to maturity (404) 1,174 770 Loans: Commercial 700 4,979 5,679 Real estate construction 237 (272) (35) Real estate residential 842 431 1,273 Consumer (243) 1,555 1,312 ------ ------ ------ Total loans 1,536 6,693 8,229 Total increase (decrease) in -------- ------- ------ interest and fee income (1) ($11,454) $20,356 $8,902 Increase (decrease) in interest expense: Deposits: Savings/interest-bearing transaction (985) 1,954 969 Time less than $ 100,000 (533) 2,288 1,755 Time $ 100,000 or more 242 2,049 2,291 ------ ------ ------ Total interest-bearing (1,276) 6,291 5,015 Funds purchased 693 2,032 2,725 Notes and mortgages payable (453) (235) (688) ------ ------ ------ Total increase (decrease) in interest expense (1,036) 8,088 7,052 ------ ------ ------ Total increase (decrease) in net interest income (1) ($10,418) $12,268 $1,850 ======== ======= ====== (1) Amounts calculated on a fully taxable equivalent basis using the current statutory federal tax rate. Provision for Loan Losses - ------------------------- The level of the provision for loan losses during each of the periods presented reflects the Company's continued efforts to improve loan quality by enforcing strict underwriting and administration procedures and aggressively pursuing collection efforts with troubled debtors. Continuing improvements in credit quality allowed the Company to reduce its provision for loan losses to $1.2 million in the third quarter of 1995, compared to $1.6 million in the same period in 1994. For the first nine months of 1995, the loan loss provision was $4.3 million compared to $5.7 million for the same period in 1994. For more information regarding net credit losses and the reserve for loan losses, see the "Asset Quality" section of this report. Non-Interest Income - ------------------- The following table summarizes the components of non-interest income for the periods indicated. For the three For the nine months ended months ended September 30, September 30, ---------------- ---------------- (in millions) 1995 1994 1995 1994 ----- ----- ----- ----- Service charges on deposit accounts $3.15 $3.23 $9.53 $9.75 Merchant credit card 0.67 0.58 1.77 1.77 Mortgage banking income 0.35 0.47 1.09 3.72 Trust fees 0.18 0.18 0.49 0.55 Brokerage commissions 0.17 0.14 0.47 0.52 Net investment securities gain (loss) 0.02 (0.04) 0.02 0.50 Other non-interest income 1.00 1.06 2.72 3.49 ------ ------ ------ ------ Total $5.54 $5.62 $16.09 $20.30 ====== ====== ====== ====== The $80,000 decrease in non-interest income during the third quarter of 1995 compared to the third quarter of 1994 resulted from decreases in most categories, with the exception of merchant credit card income and brokerage commissions which increased $90,000 and $30,000 respectively. The quarter-to-quarter decreases include $120,000 lower mortgage banking income resulting from a slowing down of refinancing volume in 1995, $80,000 lower service charges on deposit accounts and lower trust fee income. The sale of securities available for sale contributed $20,000 to the non-interest income realized during the third quarter of 1995 compared to a $40,000 loss in 1994. The $4.2 million decrease in non-interest income during the first nine months of 1995 compared with the same period in 1994 was due to decreases in all categories with the exception of merchant credit card income, which remained unchanged from 1994. The non-interest income decreases include $2.6 million lower mortgage banking income due to reduced mortgage refinancing volume and lower loan servicing income, $220,000 lower service charges on deposit accounts and lower trust fees and brokerage commissions, $60,000 and $50,000, respectively. The sale of investment securities available for sale contributed $500,000 to the non-interest income realized during the first nine months of 1994, compared to $20,000 during the comparable period in 1995. Non-interest expense - -------------------- The following table summarizes the components of non-interest expense for the periods indicated. For the three For the nine months ended months ended September 30, September 30, ------------------- ----------------- (in millions) 1995 1994 1995 1994 ----- ----- ----- ----- Salaries $8.72 $9.44 $26.87 $29.31 Other personnel 1.21 1.51 4.77 4.99 Occupancy 2.80 2.69 8.01 7.76 Equipment 1.88 1.57 4.68 4.52 Professional fees 0.91 0.84 3.60 2.49 Data processing services 1.13 1.17 3.21 3.38 Stationery and supplies 0.37 0.46 1.23 1.29 Postage 0.39 0.43 1.15 1.22 Advertising/public relations 0.36 0.44 1.04 1.16 Courier service 0.37 0.34 1.03 1.00 Loan expense 0.23 0.49 0.84 2.55 Operational losses 0.21 0.21 0.72 0.81 Merchant credit card 0.18 0.22 0.56 0.64 Other real estate owned and property held for sale 0.16 0.27 0.60 0.27 Other non-interest expense 1.47 2.96 8.21 9.00 ------ ------ ------ ------ Total $20.39 $23.04 $66.52 $70.39 ====== ====== ====== ====== Non-interest expense continues to show the effects of cost controls and the benefits resulting from the rapid consolidation of operations after the 1995 mergers. During the third quarter of 1995, non-interest expense decreased $2.7 million from the third quarter of 1994. Salaries and other personnel costs, the principal contributors to the variance, decreased $1.0 million, mainly from the a reduction of 141 full-time equivalent employees resulting from merger of operations following the PV Financial, CapitolBank and North Bay Bancorp acquisitions. In addition, FDIC insurance premiums, included in "other non-interest expense" was reduced by $1.3 million from the third quarter of 1994, including a $300,000 rebate for overpayments in the second quarter of 1995. Further decreases in non-interest expense from the third quarter of 1994 were realized in loan expense, $260,000 lower than prior year, other real estate owned and properties held for sale related expenses, $110,000 lower than 1994 mainly due to gains on sales partially offset by writedowns of properties to net realizable values, and stationery and supplies and advertising/public relations expenses, $90,000 and $80,000, respectively, lower than the same quarter in 1994. Decreases in non-interest expense from the third quarter of 1994, were also realized in the areas of data processing, postage and merchant credit card, $40,000, each, lower than 1994. Partially offsetting these favorable variances, equipment and occupancy expenses were $310,000 and $110,000, respectively, higher than the third quarter of 1994, as a result of merger-related fixed asset writeoffs, while professional fees, $70,000 higher than the third quarter of 1994, increased mainly due to one-time merger and acquisitions related costs. During the first nine months of 1995, non-interest expense decreased $3.9 million from the first nine months of 1994. The favorable impact of consolidation of operations, partially offset by increased merger-related expenses account for the major variances, as follows: personnel expenses decreased $2.7 million, loan expense and data processing costs were $1.7 million and $170,000, respectively, lower than the prior period, advertising/public relations and operational losses were $120,000 and $90,000 respectively, lower than 1994 and postage and stationery and supplies were $70,000 and $60,000, respectively, lower than the first nine months of 1994. Also included in the 1995 year-to-date favorable variances from prior year is the reduction of deposit insurance costs, included in other non-interest expense as described above. Partially offsetting these variances, professional fees were $ 1.1 million higher than the first nine months of 1994 due to mergers and acquisitions related costs, while property writeoffs, also resulting from 1995 mergers, were the main reason for the increase of $250,000 and $160,000, respectively, in occupancy and equipment expenses. Also included in the increases in non-interest expense from the first nine months of 1994, other real estate owned and property held for sale expenses were $330,000 higher than prior year, following the Company's policy to continue to writedown such properties to net realizable values. Provision for Income Tax - ------------------------ The Company recorded income tax expense of $4.0 million in the third quarter of 1995, representing an effective tax rate of 32 percent, compared to $3.2 million, or an effective tax rate of 31 percent, during the third quarter of 1994. For the first nine months of 1995, the Company recognized income tax expense of $9.8 million, the same level recorded in the comparable period of 1994, representing effective tax rates of 30 percent and 32 percent, respectively. Asset Quality - ------------- Classified Assets The Company closely monitors the markets in which it conducts its lending operations. The Company continues its strategy to control exposure to loans with high credit risk and increase diversification of earning assets. Asset reviews are performed using grading standards and criteria similar to those employed by bank regulatory agencies. Assets receiving lesser grades fall under the "classified assets" category which includes all non-performing assets. These loans have a higher degree of risk and receive an elevated level of attention to ensure collection. The following is a summary of classified assets on the dates indicated: September 30, December 31, (in millions) ---------------- ---------- 1995 1994 1994 ---- ---- ---- Classified loans $47.0 $60.3 $49.7 Other classified assets 7.6 11.1 8.0 ----- ----- ----- Total classified assets $54.6 $71.4 $57.7 ===== ===== ===== Reserve for loan losses as a percentage of classified loans 70% 54% 65% Classified loans at September 30, 1995, decreased $13.3 million or 22 percent to $47.0 million from September 30, 1994, reflecting improvements in borrowers' financial condition and satisfaction of debt. The improvement is primarily due to the repayment of classified real estate construction loans. Other classified assets, which decreased $3.5 million from prior year, were due to sales and writedowns of properties classified as other real estate owned. Non-performing assets Non-performing assets include non-accrual loans, loans 90 days past due and still accruing and other real estate owned. Loans are placed on non-accrual status when reaching 90 days or more delinquent, unless the loan is well secured and in the process of collection. Interest previously accrued on loans placed on non-accrual status is charged against interest income. Generally, loans secured by real estate with temporarily impaired values and commercial loans to borrowers experiencing financial difficulties are placed on non-accrual status even though the borrowers continue to repay the loans as scheduled. Such loans are classified as "performing non-accrual" and are included in total non-performing assets. Performing non-accrual loans are reinstated to accrual status when improvements in credit quality eliminate the doubt as to the full collectibility of both interest and principal. When the ability to fully collect non-accrual loan principal is in doubt, cash payments received are applied against the principal balance of the loan until such time as full collection of the remaining recorded balance is expected. Any subsequent interest received is recorded as interest income on a cash basis. The following is a summary of non-performing assets on the dates indicated: (in millions) September 30, December 31, ------------------ ---------- 1995 1994 1994 ---- ---- ---- Performing non-accrual loans $1.26 $2.13 $1.94 Non-performing non-accrual loans 7.79 10.88 8.35 ---- ---- ---- Total non-accrual loans 9.05 13.01 10.29 Loans 90 days past due and still accruing 0.25 1.63 1.77 ---- ---- ---- Total non-performing loans 9.30 14.64 12.06 Other real estate owned 7.60 11.08 8.03 ---- ---- ---- Total non-performing assets $16.90 $25.72 $20.09 ==== ==== ==== Reserve for loan losses as a percentage of non-performing loans 356% 221% 269% Performing non-accrual loans decreased $870,000 at September 30, 1995 from $2.13 million at September 30, 1994 and decreased $680,000 from $1.94 million at December 31, 1994. Non-performing non-accrual loans of $7.79 million at September 30, 1995, decreased $3.09 million from September 30, 1994 and decreased $560,000 from December 31, 1994. The $3.96 million reduction in total non-accrual loans from September 30, 1994, was principally due to construction loan payoffs and sales. The $3.48 million and the $430,000 decreases in other real estate owned balances from September 30, 1994 and December 31, 1994 were due to liquidations and sales. The amount of gross interest income that would have been recorded for non-accrual loans for the three and nine months ending September 30, 1995, if all such loans had been current in accordance with their original terms, was $243,000 and $583,000, respectively. The amount of interest income that was recognized on non-accrual loans from cash payments made during the three and nine months ended September 30, 1995 totaled $6,000 and $231,000, respectively, representing annualized yields of .23 percent and 3.20 percent, respectively. Cash payments received which were applied against the book balance of non-accrual loans outstanding at September 30, 1995, totaled $292,000. The Company's reserve for loan losses is maintained at a level estimated to be adequate to provide for losses that can be reasonably anticipated based upon specific conditions, credit loss experience, the amount of past due, non-performing and classified loans, recommendations of regulatory authorities, prevailing economic conditions and other factors. The reserve is allocated to segments of the loan portfolio based in part on quantitative analyses of historical credit loss experience. Criticized and classified loan balances are analyzed using both a linear regression model and standard allocation percentages. The results of these analyses are applied to current criticized and classified loan balances to allocate the reserve to the respective segments of the loan portfolio. In addition, loans with similar characteristics not usually criticized using regulatory guidelines due to their small balances and numerous accounts, are analyzed based on the historical rate of net losses and delinquency trends grouped by the number of days the payments on these loans are delinquent. While these factors are judgmental and may not be reduced to a purely mathematical formula, the $33.1 million reserve for loan losses, which constituted 2.42 percent of total loans at September 30, 1995, is considered to be adequate as a reserve against inherent losses. The loan portfolio is continuously evaluated considering current economic conditions that dictate required reserve levels. The following table summarizes the loan loss provision, net credit losses and loan loss reserve for the periods indicated: For the three For the nine (in millions) months ended months ended September 30 September 30, ---------------- ---------------- 1995 1994 1995 1994 ----- ----- ----- ----- Balance, beginning of period $33.6 $32.1 $32.5 $30.0 Loan loss provision 1.2 1.6 4.3 5.7 Credit losses (2.2) (2.1) (5.4) (5.3) Credit loss recoveries 0.5 0.7 1.7 1.9 ---- ---- ---- ---- Net credit losses (1.7) (1.4) (3.7) (3.4) ----- ----- ----- ----- Balance, end of period $33.1 $32.3 $33.1 $32.3 ===== ===== ===== ===== Reserve for loan losses as a percentage of loans outstanding 2.42% 2.35% Effective January 1, 1995, the Company adopted Statement of Financial Accounting Standards No.114, "Accounting by Creditors for Impairment of a Loan ("SFAS 114"), as amended by Statement of Financial Accounting Standards No. 118, "Accounting by Creditors for Impairment of a Loan - Income Recognition and Disclosures" ("SFAS 118"). Under SFAS 114, a loan is impaired when, based on current information and events, it is "probable" that a creditor will be unable to collect all amounts due (principal and interest) according to the contractual terms of the loan agreement. The measurement of impairment may be based on (i) the present value of the expected cash flows of the impaired loan discounted at the loan's original effective interest rate, (ii) the observable market price of the impaired loan, or (iii) the fair value of the collateral of a collateral-dependent loan. SFAS 114 does not apply to large groups of smaller balance homogeneous loans that are collectively evaluated for impairment. The Company generally identifies loans to be reported as impaired when such loans are in non-accrual status or are considered troubled debt restructurings due to the granting of a below market rate of interest or a partial forgiveness of indebtedness on an existing loan. In measuring impairment for the purpose of establishing specific loan loss reserves, the Company reviews all impaired commercial and construction loans classified "Substandard" and "Doubtful" that meet materiality thresholds of $250,000 and $100,000, respectively. All "Loss" classified loans are reserved at 100 percent under the Company's standard loan loss reserve methodology. The Company considers classified loans below the established thresholds to represent immaterial loss risk. Commercial and construction loans that are not classified, and large groups of smaller balance homogeneous loans such as installment, personal revolving credit, residential real estate and student loans, are evaluated collectively for impairment under the Company's standard loan loss reserve methodology and are, therefore, excluded from the provisions of SFAS 114. The following summarizes the Company's impaired loans at September 30, 1995: Troubled Total Memo: Non-accrual Debt Impaired Specific Loans Restructurings Loans Reserves (in thousands) ----------- ------------ ------- -------- $9,052 $77 $9,129 $899 The average balances of the Company's impaired loans for the nine months ended September 1995, was $10.3 million. All these credits, with the exception of one restructured troubled credit were on non-accrual status. In general, the Company does not recognize any interest income on loans that are classified as impaired. Asset and Liability Management - ------------------------------ 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. The Company's principal sources of liquidity are current period earnings and investment securities available for sale. At September 30, 1995, investment securities available for sale totaled $252.5 million. The Company generates significant liquidity from its operating activities. The Company's profitability in the first nine months of 1995 and 1994 was the main contributor to the cash flows provided from operations for such years of $29.9 million and $49.2 million, respectively. Additional cash flow is provided through net proceeds from sales of loans originated for resale which were $1.7 million and $25.4 million for the first nine months of 1995 and 1994, respectively. Additional cash flow is provided by and used in financing activities, primarily customer deposits and short-term borrowings from banks. In the first nine months of 1995, $50.0 million were used in financing activities, as a $66.3 million decrease in deposits combined with other cash flow uses including long-term debt maturities, dividends paid to shareholders and retirement of stock was partially offset by a $33.2 million increase in purchase funds and other sources, including issuance of shares of the Company's common stock from exercises of stock options. This compares with financing activities providing $26.7 million during the first nine months of 1994, including a $63.8 million increase in purchase funds, partially offset by a $23.7 million decrease in customers' deposits and an $8.8 million decrease in long term debt. The Company uses cash flows from operating and financing activities primarily to make investments in investment securities and loans. During the first nine months of 1995, net repayments of loans totaled $14.3 million compared with net loan disbursements of $5.5 million during the same period in 1994. Due to the sluggish growth in loan balances, the Company continued to grow its investment securities portfolio. Purchases of investment securities net of maturities and sales totaled $5.0 million in the first nine months of 1995, compared to $56.8 in the same period of 1994. The Company anticipates of increasing its cash provided by operations through the end of 1995 due to retained profits. For the same period, it is anticipated that the investment securities portfolio and demand for loans will moderately increase. It is also anticipated that deposit balances will moderately increase through the end of the current year. In evaluating exposure to interest rate risk, the Company considers the effects of various factors in implementing interest rate risk management activities, including interest rate swaps, utilized to hedge the impact of interest rate fluctuations on interest-bearing assets and liabilities in the current interest rate environment. Interest rate swaps are agreements to exchange interest payments computed on notional amounts. The notional amounts do not represent exposure to credit risk. However, these agreements expose the Company to market risks associated with fluctuations of interest rates and credit risk associated with the counterparty's ability to meet its interest payment obligation. The Company minimizes this credit risk by entering into contracts with well-capitalized money-center banks, and by requiring settlement of only the net difference between the exchanged interest payments. During the month of August 1995, the last two of these contracts, with notional amounts totaling $60.0 million expired. The Company paid a variable rate based on three-month LIBOR and received an average fixed rate of interest of 4.11 percent. The Company had entered into four interest rate swaps at June 30, 1994, with notional amounts totaling $110.0 million, including the two outstanding through part of August 1995. The two other swaps, with notional amounts totaling $50.0 million expired in November and December of 1994. The effect of entering into these contracts resulted in a decrease to net interest income of $763,000 for the first nine months of 1995 compared to a decrease of $403,000 during the comparable period in 1994. The primary analytical tool used by the Company to gauge interest-rate sensitivity is a simulation model used by many major banks and bank regulators. This industry standard model is used to simulate, based on the current and projected portfolio mix, the effects on net interest income of changes in market interest rates. Under the Company's policy and practice, the projected amount of net interest income over the ensuing twelve months is not allowed to fluctuate more than ten percent even under alternate assumed interest rate changes of plus or minus 200 basis points. The results of the model indicate that the mix of interest rate sensitive assets and liabilities at September 30, 1995 does not expose the Company to an unacceptable level of interest rate risk. Capital Resources - ----------------- The Company's capital position represents the level of capital available to support continued operations and expansion. The Company's primary capital resource is shareholders' equity which was $218.3 million at September 30, 1995, representing an increase of $17.4 million or 9 percent from September 30, 1994 and an increase of $13.6 million, or 7 percent, from December 31, 1994. As a result of the Company's profitability and the retention of earnings, the ratio of equity to total assets increased to 9.0 percent at September 30, 1995, from 8.1 percent a year ago and 8.3 percent at year-end 1994. The ratio of Tier I capital to risk-adjusted assets increased to 13.05 percent at September 30, 1995 compared to 12.38 percent at September 30, 1994 and 12.53 percent at December 31, 1994. Total capital to risk-adjusted assets increased to 15.51 percent at September 30, 1995 compared to 14.86 percent at September 30, 1994 and 15.01 percent at December 31, 1994. The following summarizes the ratios of capital to risk-adjusted assets for the periods indicated: September 30, December 31, -------------------- ---------- 1995 1994 1994 ---- ---- ---- Tier I Capital 13.05% 12.38% 12.53% Total Capital 15.51% 14.86% 15.01% Leverage ratio 9.02% 8.19% 8.37% The risk-based capital ratios rose in 1995 due to a more rapid growth in equity than total assets. Capital ratios are reviewed on a regular basis to ensure that capital exceeds the prescribed regulatory minimums and is adequate to meet the Company's future needs. All ratios are in excess of regulatory definitions of "well capitalized". During 1994 and in 1995, the Board of Directors approved the repurchase of up to 238,500 shares of common stock from time to time, subject to appropriate regulatory and acquisition accounting requirements for reissuance through stock performance and option plans. These purchases are made periodically in the open market and will lessen the dilutive impact of these plans on the calculation of earnings per share. On October 23, 1995, the Financial Accounting Standards Board issued Statement No. 123, "Accounting for Stock-Based Compensation". Statement No. 123 allows an entity to either (1) retain the current method of accounting for stock compensation (principally APB Opinion No. 25) for purposes of preparing its basic financial statements or (2) to adopt a new fair value based method that is established by the provisions of the new Statement. The impact on the Company's financial statements from the adoption of Statement No. 123 is not expected to be material. Interim Periods - --------------- The financial information of the Company included herein for September 1995 and 1994 is unaudited; however, such information reflects all adjustments which are, in the opinion of Management, necessary for a fair statement of results for the interim periods. Those adjustments are normal and recurring in nature. The results of operations for the three and nine-month period ended September 30, 1995 are not necessarily indicative of the results to be expected for the full year. This report should be read in conjunction with Westamerica Bancorporation's annual report on Form 10-K for the year ended December 31, 1994. Certain amounts in prior periods have been restated to conform to the current presentation. SIGNATURES - ---------- Pursuant to the requirements of Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. WESTAMERICA BANCORPORATION (Registrant) Date: November 11, 1995 /s/ DENNIS R. HANSEN -------------------- Dennis R. Hansen Senior Vice President and Controller PART II - OTHER INFORMATION - --------------------------- Item 1 - Legal Proceedings Due to the nature of the banking business, the Subsidiary Banks are at times party to various legal actions; all such actions are of a routine nature and arise in the normal course of business of the Subsidiary Banks. Item 2 - Changes in Securities None Item 3 - Defaults upon Senior Securities None Item 4 - Submission of Matters to a Vote of Security Holders None Item 5 - Other Information None Item 6 - Exhibits and Reports on Form 8-K (a) Exhibit 11: Computation of Earnings Per Share on Common and Common Equivalent Shares and on Common Shares Assuming Full Dilution