WESTAMERICA BANCORPORATION - Quarter Report: 2023 March (Form 10-Q)

wabc20230331_10q.htm

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2023

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________.

Commission file number: 001-09383

WESTAMERICA BANCORPORATION

(Exact Name of Registrant as Specified in Its Charter)

California

94-2156203

(State or Other Jurisdiction of

Incorporation or Organization)

(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 (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 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 whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§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. (Check one):

Large accelerated filer ☑	Accelerated filer ☐	Non-accelerated filer ☐
Smaller reporting company ☐	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 is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☑

Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date:

Title of Class

Shares outstanding as of April 28, 2023

Common Stock,

No Par Value

26,648,281

TABLE OF CONTENTS

		Page

Forward Looking Statements		3

PART I - FINANCIAL INFORMATION

Item 1	Financial Statements	4

	Notes to Unaudited Consolidated Financial Statements	9

Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	29

Item 3	Quantitative and Qualitative Disclosures about Market Risk	52

Item 4	Controls and Procedures	52

PART II - OTHER INFORMATION		53

Item 1	Legal Proceedings	53

Item 1A	Risk Factors	53

Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	53

Item 3	Defaults upon Senior Securities	54

Item 4	Mine Safety Disclosures	54

Item 5	Other Information	54

Item 6	Exhibits	54

Signatures		55

FORWARD-LOOKING STATEMENTS

This report on Form 10-Q contains “forward-looking statements” within the meaning of 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, stock repurchases, 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 the current knowledge and belief of the management (“Management”) of Westamerica Bancorporation (the “Company”) 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, particularly the impact of rising interest rates on the Company’s securities portfolio; (11) asset/liability management risks; (12) liquidity risks including the impact of recent adverse developments in the banking industry; (13) 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; (14) changes in the securities markets; (15) the duration and severity of the COVID-19 pandemic and governmental and customer responses to the pandemic; (16) inflation and (17) 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 the Company's annual report on Form 10-K for the year ended December 31, 2022 and Item 1A of 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.

PART I - FINANCIAL INFORMATION

Item 1 Financial Statements

WESTAMERICA BANCORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)

	At March 31,			At December 31,
	2023			2022
	(In thousands)
Assets:
Cash and due from banks	$	195,202		$	294,236
Debt securities available for sale		4,217,513			4,331,743
Debt securities held to maturity, net of allowance for credit losses of $1 at March 31, 2023 and December 31, 2022 (Fair value of $875,268 at March 31, 2023 and $873,511 at December 31, 2022)		909,319			915,913
Loans		938,628			958,488
Allowance for credit losses on loans		(19,509	)		(20,284	)
Loans, net of allowance for credit losses on loans		919,119			938,204
Premises and equipment, net		28,331			28,819
Identifiable intangibles, net		523			583
Goodwill		121,673			121,673
Other assets		308,791			319,146
Total Assets	$	6,700,471		$	6,950,317

Liabilities:
Noninterest-bearing deposits	$	2,788,992		$	2,947,277
Interest-bearing deposits		3,110,323			3,278,013
Total deposits		5,899,315			6,225,290
Short-term borrowed funds		83,088			57,792
Other liabilities		75,143			65,125
Total Liabilities		6,057,546			6,348,207

Contingencies (Note 10)

Shareholders' Equity:
Common stock (no par value), authorized: 150,000 shares Issued and outstanding: 26,648 at March 31, 2023 and 26,913 at December 31, 2022		471,124			475,086
Deferred compensation		35			35
Accumulated other comprehensive loss		(231,573	)		(256,105	)
Retained earnings		403,339			383,094
Total Shareholders' Equity		642,925			602,110
Total Liabilities and Shareholders' Equity	$	6,700,471		$	6,950,317

See accompanying notes to unaudited consolidated financial statements.

WESTAMERICA BANCORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
	For the
	Three Months Ended
	March 31,
	2023			2022
	(In thousands,
	except per share data)
Interest and Fee Income:
Loans	$	11,740		$	12,942
Equity securities		152			128
Debt securities available for sale		46,810			28,566
Debt securities held to maturity		8,980			1,644
Interest-bearing cash		1,942			479
Total Interest and Fee Income		69,624			43,759
Interest Expense:
Deposits		458			452
Short-term borrowed funds		13			28
Total Interest Expense		471			480
Net Interest and Fee Income		69,153			43,279
Reversal of Provision for Credit Losses		(1,550	)		-
Net Interest and Fee Income After Reversal of Provision For Credit Losses		70,703			43,279
Noninterest Income:
Service charges on deposit accounts		3,465			3,582
Merchant processing services		2,637			2,623
Debit card fees		1,642			2,872
Trust fees		765			843
ATM processing fees		654			451
Other service fees		399			449
Financial services commissions		89			117
Other noninterest income		898			639
Total Noninterest Income		10,549			11,576
Noninterest Expense:
Salaries and related benefits		12,067			11,920
Occupancy and equipment		5,485			4,746
Outsourced data processing services		2,444			2,437
Limited partnership operating losses		1,434			1,431
Courier service		615			582
Professional fees		476			736
Other noninterest expense		3,689			3,023
Total Noninterest Expense		26,210			24,875
Income Before Income Taxes		55,042			29,980
Provision for income taxes		14,591			7,364
Net Income	$	40,451		$	22,616

Average Common Shares Outstanding		26,859			26,870
Average Diluted Common Shares Outstanding		26,866			26,885
Per Common Share Data:
Basic earnings	$	1.51		$	0.84
Diluted earnings		1.51			0.84
Dividends paid		0.42			0.42

See accompanying notes to unaudited consolidated financial statements.

WESTAMERICA BANCORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(unaudited)

	For the Three Months Ended
	March 31,
	2023			2022
	(In thousands)
Net income	$	40,451		$	22,616
Other comprehensive income (loss):
Changes in net unrealized losses on debt securities available for sale		34,830			(195,871	)
Deferred tax (expense) benefit		(10,298	)		57,907
Changes in net unrealized losses on debt securities available for sale, net of tax		24,532			(137,964	)
Total comprehensive income (loss)	$	64,983		$	(115,348	)

See accompanying notes to unaudited consolidated financial statements.

WESTAMERICA BANCORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(unaudited)

									Accumulated
	Common								Other
	Shares			Common			Deferred		Comprehensive			Retained
	Outstanding			Stock			Compensation		Income (Loss)			Earnings			Total
	(In thousands except per share data)

Balance, December 31, 2021		26,866		$	471,008		$	35	$	49,664		$	306,395		$	827,102
Net income for the period													22,616			22,616
Other comprehensive loss										(137,964	)					(137,964	)
Exercise of stock options		11			624											624
Restricted stock activity		8			492											492
Stock based compensation		-			339											339
Stock awarded to employees		1			37											37
Retirement of common stock		(3	)		(65	)							(153	)		(218	)
Dividends ($0.42 per share)													(11,284	)		(11,284	)
Balance, March 31, 2022		26,883		$	472,435		$	35	$	(88,300	)	$	317,574		$	701,744

Balance, December 31, 2022		26,913		$	475,086		$	35	$	(256,105	)	$	383,094		$	602,110
Net income for the period													40,451			40,451
Other comprehensive income										24,532						24,532
Restricted stock activity		9			508											508
Stock based compensation		-			339											339
Stock awarded to employees		-			35											35
Retirement of common stock		(274	)		(4,844	)							(8,903	)		(13,747	)
Dividends ($0.42 per share)													(11,303	)		(11,303	)
Balance, March 31, 2023		26,648		$	471,124		$	35	$	(231,573	)	$	403,339		$	642,925

See accompanying notes to unaudited consolidated financial statements.

WESTAMERICA BANCORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
	For the Three Months
	Ended March 31,
	2023			2022
	(In thousands)
Operating Activities:
Net income	$	40,451		$	22,616
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization/accretion		3,044			5,498
Net amortization of deferred net loan fees		(128	)		(627	)
Stock option compensation expense		339			339
Net changes in:
Interest income receivable		(118	)		878
Income taxes payable		14,336			7,662
Deferred tax asset		254			(298	)
Other assets		380			(238	)
Interest expense payable		32			29
Other liabilities		(3,508	)		(4,036	)
Net Cash Provided by Operating Activities		55,082			31,823

Investing Activities:
Net repayments of loans		19,213			65,650
Purchases of debt securities available for sale		-			(331,191	)
Purchases of Federal Reserve Bank stock		(2,192	)		-
Proceeds from maturity/calls of debt securities available for sale		147,030			154,734
Proceeds from maturity/calls of debt securities held to maturity		8,073			25,454
Purchases of premises and equipment		(511	)		(198	)
Net Cash Provided by (Used in) Investing Activities		171,613			(85,551	)

Financing Activities:
Net change in deposits		(325,975	)		(8,082	)
Net change in borrowings		25,296			(21,804	)
Exercise of stock options		-			624
Retirement of common stock		(13,747	)		(218	)
Common stock dividends paid		(11,303	)		(11,284	)
Net Cash Used in Financing Activities		(325,729	)		(40,764	)
Net Change In Cash and Due from Banks		(99,034	)		(94,492	)
Cash and Due from Banks at Beginning of Period		294,236			1,132,085
Cash and Due from Banks at End of Period	$	195,202		$	1,037,593

Supplemental Cash Flow Disclosures:
Supplemental disclosure of noncash activities:
Right-of-use assets acquired in exchange for operating lease liabilities	$	1,144		$	918
Supplemental disclosure of cash flow activities:
Cash paid for amounts included in operating lease liabilities		1,519			1,518
Interest paid for the period		439			451

See accompanying notes to unaudited consolidated financial statements.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1: Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission and follow general practices within the banking industry. The results of operations reflect interim adjustments, all of which are of a normal recurring nature and which, in the opinion of Management, are necessary for a fair presentation of the results for the interim periods presented. The interim results for the three months ended March 31, 2023 are not necessarily indicative of the results expected for the full year. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes as well as other information included in the Company's Annual Report on Form 10-K for the year ended December 31, 2022.

Note 2: Accounting Policies

The most significant accounting policies followed by the Company are presented in Note 1 to the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. 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, it is reasonably possible conditions could change materially affecting results of operations and financial conditions. Certain risks, uncertainties and other factors, including those discussed in “Risk Factors” in Part I – Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 may cause actual future results to differ materially from the results discussed in this report on Form 10-Q. Management continues to evaluate the impacts of the inflation and the Federal Reserve’s monetary policy, climate changes, COVID-19 pandemic and the war in Ukraine 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. However, the effects could have a material impact on the Company’s results of operations and heighten many of the risk factors discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. During the first quarter 2023, the banking industry experienced significant volatility with multiple bank failures. Industrywide concerns have developed related to liquidity, deposit outflows and unrealized losses on investment debt securities. These recent events could adversely affect the Company’s ability to effectively fund the Company’s operations. Any one or a combination of such risk factors, or other factors, could materially adversely affect the Company's business, financial condition, results of operations and prospects.

Application of accounting 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 a 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. Fair value is generally determined based on an exit price at which an asset or liability could be exchanged in a current transaction, other than in a forced or liquidation sale. 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. Certain amounts in previous periods have been reclassified to conform to current presentation.

Debt Securities. Debt securities consist of securities of government sponsored entities, states, counties, municipalities, corporations, agency mortgage-backed securities and collateralized loan obligations. 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 does not share common risk characteristics with any of the pools of debt securities is individually evaluated and a reserve for credit losses is established based on the Company’s consideration of 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 Company 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.

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.

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 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 modification to be made to loans to borrowers experiencing financial difficulty is included in the allowance for credit losses when management determines such 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.

Recently Adopted Accounting Standards

FASB ASU 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures, issued March 2022, eliminates the recognition and measurement guidance for troubled debt restructurings and requires enhanced disclosures about loan modifications for borrowers experiencing financial difficulty. This ASU also requires enhanced disclosure for loans that have been charged off. The ASU became effective January 1, 2023 under a prospective approach. The Company adopted the provisions to remove the recognition and measurement guidance for troubled debt restructurings and/or modify relevant disclosures in the “Loans” note to the unaudited consolidated financial statements. The requirement to include additional disclosures was adopted by the Company January 1, 2023. The additional disclosures did not affect the financial results upon adoption.

Recently Issued Accounting Standards

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.

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Note 3: 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 March 31, 2023 and December 31, 2022, follows:

	At March 31, 2023
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(In thousands)
Debt securities available for sale
Agency residential mortgage-backed securities ("MBS")	$	297,547	$	11	$	(21,480	)	$	276,078
Securities of U.S. Government sponsored entities		306,944		32		(9,836	)		297,140
Obligations of states and political subdivisions		83,745		88		(1,155	)		82,678
Corporate securities		2,286,050		832		(267,642	)		2,019,240
Collateralized loan obligations		1,571,995		522		(30,140	)		1,542,377
Total debt securities available for sale		4,546,281		1,485		(330,253	)		4,217,513
Debt securities held to maturity
Agency residential MBS		98,006		16		(6,480	)		91,542
Obligations of states and political subdivisions		87,761		111		(282	)		87,590
Corporate securities		723,553		34		(27,451	)		696,136
Total debt securities held to maturity		909,320		161		(34,213	)		875,268
Total	$	5,455,601	$	1,646	$	(364,466	)	$	5,092,781

	At December 31, 2022
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(In thousands)
Debt securities available for sale
Agency residential MBS	$	311,089	$	4	$	(25,045	)	$	286,048
Securities of U.S. Government sponsored entities		306,336		3		(15,486	)		290,853
Obligations of states and political subdivisions		84,024		59		(2,079	)		82,004
Corporate securities		2,406,566		1,032		(307,643	)		2,099,955
Collateralized loan obligations		1,587,326		527		(14,970	)		1,572,883
Total debt securities available for sale		4,695,341		1,625		(365,223	)		4,331,743
Debt securities held to maturity
Agency residential MBS		104,852		13		(7,503	)		97,362
Obligations of states and political subdivisions		89,208		73		(538	)		88,743
Corporate securities		721,854		-		(34,448	)		687,406
Total debt securities held to maturity		915,914		86		(42,489	)		873,511
Total	$	5,611,255	$	1,711	$	(407,712	)	$	5,205,254

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The amortized cost and fair value of debt securities by contractual maturity are shown in the following tables at the dates indicated:

	At March 31, 2023
	Debt Securities Available				Debt Securities Held
	for Sale				to Maturity
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
	(In thousands)
Maturity in years:
1 year or less	$	145,818	$	145,099	$	17,247	$	17,240
Over 1 to 5 years		687,888		649,204		232,935		227,496
Over 5 to 10 years		2,736,621		2,486,560		561,132		538,990
Over 10 years		678,407		660,572		-		-
Subtotal		4,248,734		3,941,435		811,314		783,726
MBS		297,547		276,078		98,006		91,542
Total	$	4,546,281	$	4,217,513	$	909,320	$	875,268

	At December 31, 2022
	Debt Securities Available				Debt Securities Held
	for Sale				to Maturity
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
	(In thousands)
Maturity in years:
1 year or less	$	251,578	$	250,317	$	12,676	$	12,659
Over 1 to 5 years		584,707		554,596		161,653		158,409
Over 5 to 10 years		2,869,559		2,570,159		636,733		605,081
Over 10 years		678,408		670,623		-		-
Subtotal		4,384,252		4,045,695		811,062		776,149
MBS		311,089		286,048		104,852		97,362
Total	$	4,695,341	$	4,331,743	$	915,914	$	873,511

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 March 31, 2023
	No. of		Less than 12 months					No. of		12 months or longer					No. of		Total
	Investment				Unrealized			Investment				Unrealized			Investment				Unrealized
	Positions		Fair Value		Losses			Positions		Fair Value		Losses			Positions		Fair Value		Losses
	($ in thousands)
Agency residential MBS		42	$	83,747	$	(4,497	)		73	$	191,408	$	(16,983	)		115	$	275,155	$	(21,480	)
Securities of U.S. Government sponsored entities		20		285,536		(9,836	)		-		-		-			20		285,536		(9,836	)
Obligations of states and political subdivisions		17		23,259		(182	)		43		40,388		(973	)		60		63,647		(1,155	)
Corporate securities		39		328,761		(9,934	)		126		1,647,784		(257,708	)		165		1,976,545		(267,642	)
Collateralized loan obligations		56		564,458		(23,483	)		34		313,780		(6,657	)		90		878,238		(30,140	)
Total		174	$	1,285,761	$	(47,932	)		276	$	2,193,360	$	(282,321	)		450	$	3,479,121	$	(330,253	)

An analysis of gross unrecognized losses of the debt securities held to maturity portfolio follows:

	Debt Securities Held to Maturity
	At March 31, 2023
	No. of		Less than 12 months					No. of		12 months or longer					No. of		Total
	Investment				Unrecognized			Investment				Unrecognized			Investment				Unrecognized
	Positions		Fair Value		Losses			Positions		Fair Value		Losses			Positions		Fair Value		Losses
	($ in thousands)
Agency residential MBS		26	$	4,478	$	(194	)		72	$	85,750	$	(6,286	)		98	$	90,228	$	(6,480	)
Obligations of states and political subdivisions		28		29,115		(190	)		5		5,594		(92	)		33		34,709		(282	)
Corporate securities		49		683,439		(27,451	)		-		-		-			49		683,439		(27,451	)
Total		103	$	717,032	$	(27,835	)		77	$	91,344	$	(6,378	)		180	$	808,376	$	(34,213	)

Based upon the Company’s March 31, 2023 evaluation, the unrealized losses on debt securities were caused by market conditions for these types of securities. 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 have increased, 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 March 31, 2023.

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 interest rates increase, 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 March 31, 2023 and December 31, 2022, the Company’s debt securities pledged to secure public deposits, Federal Reserve Bank borrowings and short-term borrowed funds had a carrying amount of $1,730,989 thousand and $1,180,010 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, 2022
	No. of		Less than 12 months					No. of		12 months or longer					No. of		Total
	Investment				Unrealized			Investment				Unrealized			Investment				Unrealized
	Positions		Fair Value		Losses			Positions		Fair Value		Losses			Positions		Fair Value		Losses
	($ in thousands)
Agency residential MBS		107	$	279,139	$	(24,222	)		9	$	6,110	$	(823	)		116	$	285,249	$	(25,045	)
Securities of U.S. Government sponsored entities		22		289,067		(15,486	)		-		-		-			22		289,067		(15,486	)
Obligations of states and political subdivisions		56		65,633		(1,902	)		8		3,265		(177	)		64		68,898		(2,079	)
Corporate securities		133		1,521,294		(170,453	)		56		555,727		(137,190	)		189		2,077,021		(307,643	)
Collateralized loan obligations		58		518,074		(13,772	)		20		192,692		(1,198	)		78		710,766		(14,970	)
Total		376	$	2,673,207	$	(225,835	)		93	$	757,794	$	(139,388	)		469	$	3,431,001	$	(365,223	)

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		Less than 12 months					No. of		12 months or longer					No. of		Total
	Investment				Unrecognized			Investment				Unrecognized			Investment				Unrecognized
	Positions		Fair Value		Losses			Positions		Fair Value		Losses			Positions		Fair Value		Losses
	($ in thousands)
Agency residential MBS		97	$	95,814	$	(7,404	)		2	$	682	$	(99	)		99	$	96,496	$	(7,503	)
Obligations of states and political subdivisions		54		53,536		(538	)		-		-		-			54		53,536		(538	)
Corporate securities		49		672,406		(34,448	)		-		-		-			49		672,406		(34,448	)
Total		200	$	821,756	$	(42,390	)		2	$	682	$	(99	)		202	$	822,438	$	(42,489	)

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:

	For the Three Months Ended March 31,
	2023		2022
	(In thousands)
Allowance for credit losses:
Beginning balance	$	1	$	7
Provision		-		-
Chargeoffs		-		-
Recoveries		-		-
Total ending balance	$	1	$	7

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 March 31, 2023, 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 March 31, 2023, aggregated by credit rating:

	Credit Risk Profile by Credit Rating
	At March 31, 2023
	AAA/AA/A		BBB+		Not Rated		Total
	(In thousands)
Agency residential MBS	$	97,485	$	-	$	521	$	98,006
Obligations of states and political subdivisions		87,376		-		385		87,761
Corporate securities		469,017		254,536		-		723,553
Total	$	653,878	$	254,536	$	906	$	909,320

There were no debt securities held to maturity on nonaccrual status or past due 30 days or more as of March 31, 2023.

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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:

	For the Three Months
	Ended March 31,
	2023		2022
	(In thousands)

Taxable	$	54,749	$	28,733
Tax-exempt from regular federal income tax		1,193		1,605
Total interest income from investment securities	$	55,942	$	30,338

Note 4: Loans, Allowance for Credit Losses and Other Real Estate Owned

A summary of the major categories of loans outstanding is shown in the following tables at the dates indicated.

	At March 31,		At December 31,
	2023		2022
	(In thousands)

Commercial	$	156,294	$	169,617
Commercial Real Estate		495,941		491,107
Construction		4,066		3,088
Residential Real Estate		12,851		13,834
Consumer Installment & Other		269,476		280,842
Total	$	938,628	$	958,488

	Allowance for Credit Losses
	For theThree Months Ended March 31, 2023
										Consumer
				Commercial				Residential		Installment
	Commercial			Real Estate		Construction		Real Estate		and Other			Total
	(In thousands)
Allowance for credit losses:
Balance at beginning of period	$	6,138		$	5,888	$	150	$	32	$	8,076		$	20,284
(Reversal) provision		(2,409	)		355		50		6		448			(1,550	)
Chargeoffs		(148	)		-		-		-		(1,891	)		(2,039	)
Recoveries		2,165			15		-		-		634			2,814
Total allowance for credit losses	$	5,746		$	6,258	$	200	$	38	$	7,267		$	19,509

	Allowance for Credit Losses
	For the Three Months Ended March 31, 2022
												Consumer
				Commercial						Residential		Installment
	Commercial			Real Estate			Construction			Real Estate		and Other			Total
	(In thousands)
Allowance for credit losses:
Balance at beginning of period	$	6,966		$	6,529		$	2		$	45	$	9,972		$	23,514
(Reversal) provision		(875	)		(69	)		(2	)		3		943			-
Chargeoffs		-			-			-			-		(1,212	)		(1,212	)
Recoveries		224			15			-			-		384			623
Total allowance for credit losses	$	6,315		$	6,475		$	-		$	48	$	10,087		$	22,925

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:

	Credit Risk Profile by Internally Assigned Grade
	At March 31, 2023
	Commercial		Commercial Real Estate		Construction		Residential Real Estate		Consumer Installment and Other		Total
	(In thousands)
Grade:
Pass	$	155,874	$	485,175	$	4,066	$	12,483	$	266,486	$	924,084
Substandard		420		10,766		-		368		1,191		12,745
Doubtful		-		-		-		-		922		922
Loss		-		-		-		-		877		877
Total	$	156,294	$	495,941	$	4,066	$	12,851	$	269,476	$	938,628

	Credit Risk Profile by Internally Assigned Grade
	At Decmber 31, 2022
	Commercial		Commercial Real Estate		Construction		Residential Real Estate		Consumer Installment and Other		Total
	(In thousands)
Grade:
Pass	$	169,040	$	477,842	$	3,088	$	13,457	$	278,223	$	941,650
Substandard		577		13,265		-		377		1,079		15,298
Doubtful		-		-		-		-		752		752
Loss		-		-		-		-		788		788
Total	$	169,617	$	491,107	$	3,088	$	13,834	$	280,842	$	958,488

The following tables summarize loans by delinquency and nonaccrual status:

	Summary of Loans by Delinquency and Nonaccrual Status
	At March 31, 2023
	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		Nonaccrual		Total Loans
	(In thousands)
Commercial	$	156,037	$	-	$	257	$	-	$	-	$	156,294
Commercial real estate		495,631		119		-		-		191		495,941
Construction		4,066		-		-		-		-		4,066
Residential real estate		12,803		41		-		-		7		12,851
Consumer installment and other		262,845		5,077		967		571		16		269,476
Total	$	931,382	$	5,237	$	1,224	$	571	$	214	$	938,628

	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		Nonaccrual		Total Loans
	(In thousands)
Commercial	$	169,337	$	172	$	58	$	-	$	50	$	169,617
Commercial real estate		490,354		508		192		-		53		491,107
Construction		3,088		-		-		-		-		3,088
Residential real estate		13,430		377		-		-		27		13,834
Consumer installment and other		273,247		5,101		1,850		628		16		280,842
Total	$	949,456	$	6,158	$	2,100	$	628	$	146	$	958,488

There was no allowance for credit losses allocated to loans on nonaccrual status as of March 31, 2023 or December 31, 2022. There were no commitments to lend additional funds to borrowers whose loans were on nonaccrual status at March 31, 2023 or December 31, 2022.

There were no loan modifications made to borrowers experiencing financial difficulty during the first quarters 2023 and 2022.

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 March 31, 2023 included the following: four commercial real estate loans totaling $5.7 million secured by real property, and $571 thousand of indirect consumer installment loans secured by personal property. There were no other collateral dependent loans at March 31, 2023. 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.

Based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

	At March 31, 2023
															Line of
															Credit
	Term Loans Amortized Cost Basis by Origination Year												Total		Amortized
	Prior		2019		2020		2021		2022		2023		Term Loans		Cost Basis		Total
	(In thousands)
Commercial loans by grade
Pass	$	28,033	$	10,111	$	16,154	$	42,220	$	27,305	$	2,552	$	126,375	$	29,499	$	155,874
Substandard		10		-		-		-		-		-		10		410		420
Doubtful		-		-		-		-		-		-		-		-		-
Loss		-		-		-		-		-		-		-		-		-
Total	$	28,043	$	10,111	$	16,154	$	42,220	$	27,305	$	2,552	$	126,385	$	29,909	$	156,294

Commercial loans:
Current period gross chargeoffs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	148	$	148

	At December 31, 2022
															Line of
															Credit
	Term Loans Amortized Cost Basis by Origination Year												Total		Amortized
	Prior		2018		2019		2020		2021		2022		Term Loans		Cost Basis		Total
	(In thousands)
Commercial loans by grade
Pass	$	23,891	$	5,549	$	12,557	$	17,293	$	53,928	$	23,966	$	137,184	$	31,856	$	169,040
Substandard		12		-		-		-		-		-		12		565		577
Doubtful		-		-		-		-		-		-		-		-		-
Loss		-		-		-		-		-		-		-		-		-
Total	$	23,903	$	5,549	$	12,557	$	17,293	$	53,928	$	23,966	$	137,196	$	32,421	$	169,617

	At March 31, 2023
															Line of
															Credit
	Term Loans Amortized Cost Basis by Origination Year												Total		Amortized
	Prior		2019		2020		2021		2022		2023		Term Loans		Cost Basis		Total
	(In thousands)
Commercial real estate loans by grade
Pass	$	199,940	$	70,736	$	73,285	$	70,955	$	52,326	$	17,933	$	485,175	$	-	$	485,175
Substandard		7,865		2,100		801		-		-		-		10,766		-		10,766
Doubtful		-		-		-		-		-		-		-		-		-
Loss		-		-		-		-		-		-		-		-		-
Total	$	207,805	$	72,836	$	74,086	$	70,955	$	52,326	$	17,933	$	495,941	$	-	$	495,941

Commercial real estate loans:
Current period gross chargeoffs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

	At December 31, 2022
															Line of
															Credit
	Term Loans Amortized Cost Basis by Origination Year												Total		Amortized
	Prior		2018		2019		2020		2021		2022		Term Loans		Cost Basis		Total
	(In thousands)
Commercial real estate loans by grade
Pass	$	146,588	$	58,473	$	71,440	$	74,016	$	71,618	$	55,707	$	477,842	$	-	$	477,842
Substandard		8,083		-		2,112		806		-		2,264		13,265		-		13,265
Doubtful		-		-		-		-		-		-		-		-		-
Loss		-		-		-		-		-		-		-		-		-
Total	$	154,671	$	58,473	$	73,552	$	74,822	$	71,618	$	57,971	$	491,107	$	-	$	491,107

	At March 31, 2023
															Line of
															Credit
	Term Loans Amortized Cost Basis by Origination Year												Total		Amortized
	Prior		2019		2020		2021		2022		2023		Term Loans		Cost Basis		Total
	(In thousands)
Residential real estate loans by grade
Pass	$	12,483	$	-	$	-	$	-	$	-	$	-	$	12,483	$	-	$	12,483
Substandard		368		-		-		-		-		-		368		-		368
Doubtful		-		-		-		-		-		-		-		-		-
Loss		-		-		-		-		-		-		-		-		-
Total	$	12,851	$	-	$	-	$	-	$	-	$	-	$	12,851	$	-	$	12,851

Residential real estate loans:
Current period gross chargeoffs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

	At December 31, 2022
															Line of
															Credit
	Term Loans Amortized Cost Basis by Origination Year												Total		Amortized
	Prior		2018		2019		2020		2021		2022		Term Loans		Cost Basis		Total
	(In thousands)
Residential real estate loans by grade
Pass	$	13,457	$	-	$	-	$	-	$	-	$	-	$	13,457	$	-	$	13,457
Substandard		377		-		-		-		-		-		377		-		377
Doubtful		-		-		-		-		-		-		-		-		-
Loss		-		-		-		-		-		-		-		-		-
Total	$	13,834	$	-	$	-	$	-	$	-	$	-	$	13,834	$	-	$	13,834

	At Mach 31, 2023
															Line of
															Credit
	Term Loans Amortized Cost Basis by Origination Year												Total		Amortized
	Prior		2019		2020		2021		2022		2023		Term Loans		Cost Basis		Total
	(In thousands)
Construction loans by grade
Pass	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	4,066	$	4,066
Substandard		-		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-		-
Loss		-		-		-		-		-		-		-		-		-
Total	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	4,066	$	4,066

Construction loans:
Current period gross chargeoffs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

	At December 31, 2022
															Line of
															Credit
	Term Loans Amortized Cost Basis by Origination Year												Total		Amortized
	Prior		2018		2019		2020		2021		2022		Term Loans		Cost Basis		Total
	(In thousands)
Construction loans by grade
Pass	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	3,088	$	3,088
Substandard		-		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-		-
Loss		-		-		-		-		-		-		-		-		-
Total	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	3,088	$	3,088

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:

	At March 31, 2023
															Line of
															Credit
	Term Loans Amortized Cost Basis by Origination Year												Total		Amortized
	Prior		2019		2020		2021		2022		2023		Term Loans		Cost Basis		Total
	(In thousands)
Consumer installment and other loans by delinquency and nonaccrual status
Current	$	14,977	$	19,632	$	32,122	$	69,066	$	91,423	$	16,809	$	244,029	$	18,816	$	262,845
30-59 days past due		493		343		732		2,071		1,336		-		4,975		102		5,077
60-89 days past due		22		86		236		275		318		-		937		30		967
Past due 90 days or more		46		35		46		172		272		-		571		-		571
Nonaccrual		-		-		-		-		-		-		-		16		16
Total	$	15,538	$	20,096	$	33,136	$	71,584	$	93,349	$	16,809	$	250,512	$	18,964	$	269,476

Consumer installment and other loans:
Current period gross chargeoffs	$	122	$	14	$	278	$	501	$	934	$	-	$	1,849	$	42	$	1,891

	At December 31, 2022
															Line of
															Credit
	Term Loans Amortized Cost Basis by Origination Year												Total		Amortized
	Prior		2018		2019		2020		2021		2022		Term Loans		Cost Basis		Total
	(In thousands)
Consumer installment and other loans by delinquency and nonaccrual status
Current	$	6,017	$	13,147	$	22,330	$	35,783	$	76,126	$	99,414	$	252,817	$	20,430	$	273,247
30-59 days past due		117		268		572		1,014		1,709		1,359		5,039		62		5,101
60-89 days past due		42		65		67		275		635		750		1,834		16		1,850
Past due 90 days or more		3		20		16		61		284		241		625		3		628
Nonaccrual		-		-		-		-		-		-		-		16		16
Total	$	6,179	$	13,500	$	22,985	$	37,133	$	78,754	$	101,764	$	260,315	$	20,527	$	280,842

There were no loans held for sale at March 31, 2023 and December 31, 2022.

The Company held no other real estate owned (OREO) at March 31, 2023 and December 31, 2022. 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 March 31, 2023 and December 31, 2022.

Note 5: Concentration of Credit Risk

Under the California Financial Code, credit extended to any one person at any one time shall not exceed the following limitations: (a) unsecured credits shall not exceed 15 percent of the sum of the Bank’s shareholders’ equity, allowance for loan losses, capital notes, and debentures, or (b) secured and unsecured credits in all shall not exceed 25 percent of the sum of the Bank’s shareholders’ equity, allowance for loan losses, capital notes, and debentures. At March 31, 2023, the Bank did not have credit extended to any one entity exceeding these limits. At March 31, 2023, the Bank had 25 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 4, the Company had loan commitments related to real estate loans of $33,475 thousand and $34,790 thousand at March 31, 2023 and December 31, 2022, 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 March 31, 2023, the Bank held corporate bonds in 113 issuing entities that exceeded $5 million for each issuer.

Note 6: Other Assets and Other Liabilities

	At March 31,		At December 31,
	2023		2022
	(In thousands)
Cost method equity investments:
Federal Reserve Bank stock ⁽¹⁾	$	13,935	$	11,743
Other investments		158		158
Total cost method equity investments		14,093		11,901
Life insurance cash surrender value		64,521		63,816
Net deferred tax asset		114,588		125,140
Right-of-use asset		15,447		15,746
Limited partnership investments		32,987		34,421
Interest receivable		53,676		53,558
Prepaid assets		4,531		4,894
Other assets		8,948		9,670
Total other assets	$	308,791	$	319,146

⁽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 $225.46 per share on March 31, 2023, the last day of stock market trading for the first quarter 2023. 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 March 31, 2023, these investments totaled $32,987 thousand and $20,842 thousand of this amount represents outstanding equity capital commitments that are included in other liabilities. At December 31, 2022, these investments totaled $34,421 thousand and $22,647 thousand of this amount represents outstanding equity capital commitments that are included in other liabilities. At March 31, 2023, the $20,842 thousand of outstanding equity capital commitments are expected to be paid as follows: $9,187 thousand in the remainder of 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 Three Months Ended
	March 31,
	2023		2022
	(In thousands)
Investment loss included in pre-tax income	$	1,434	$	1,431
Tax credits recognized in provision for income taxes		1,020		804

Other liabilities consisted of the following:

	At March 31,		At December 31,
	2023		2022
	(In thousands)
Operating lease liability	$	15,447	$	15,746
Other liabilities		59,696		49,379
Total other liabilities	$	75,143	$	65,125

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 March 31, 2023.

As of March 31, 2023, the Company’s lease liability and right-of-use asset were $15,447 thousand. The weighted average remaining life of operating leases and weighted average discount rate used to determine operating lease liabilities were 3.3 years and 2.05%, respectively, at March 31, 2023. The Company did not have any material lease incentives, unamortized initial direct costs, prepaid lease expense, or accrued lease expense as of March 31, 2023.

Total lease costs were $1,656 thousand and $1,633 thousand in the three months ended March 31, 2023 and March 31, 2022, respectively, and 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 three months ended March 31, 2023 and March 31, 2022.

[The remainder of this page intentionally left blank]

The following table summarizes the remaining lease payments of operating lease liabilities:

	Minimum future lease payments
	At March 31,
	2023
	(In thousands)
The remainder of 2023	$	4,442
2024		4,516
2025		3,291
2026		1,674
2027		982
Thereafter		1,153
Total minimum lease payments		16,058
Less: discount		(611	)
Present value of lease liability	$	15,447

Note 7: 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 three months ended March 31, 2023 and year ended December 31, 2022, as no triggering events occurred during such periods. 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 three months ended March 31, 2023 and the year ended December 31, 2022, no such adjustments were recorded.

The carrying values of goodwill were:

	At March 31, 2023		At December 31, 2022
	(In thousands)
Goodwill	$	121,673	$	121,673

The gross carrying amount of identifiable intangible assets and accumulated amortization was:

	At March 31, 2023					At December 31, 2022
	Gross					Gross
	Carrying		Accumulated			Carrying		Accumulated
	Amount		Amortization			Amount		Amortization
	(In thousands)
Core deposit intangibles	$	56,808	$	(56,285	)	$	56,808	$	(56,225	)

As of March 31, 2023, the current period and estimated future amortization expense for identifiable intangible assets, to be fully amortized in 2025, was:

	Total
	Core
	Deposit
	Intangibles
	(In thousands)
For the three months ended March 31, 2023 (actual)	$	60
The remainder of 2023		176
2024		222
2025		125

Note 8: Deposits and Borrowed Funds

The following table provides additional detail regarding deposits.

	Deposits
	At March 31,		At December 31,
	2023		2022
	(In thousands)
Noninterest-bearing	$	2,788,992	$	2,947,277
Interest-bearing:
Transaction		1,201,356		1,273,143
Savings		1,783,667		1,874,115
Time deposits less than $100 thousand		63,891		65,962
Time deposits $100 thousand through $250 thousand		40,334		42,733
Time deposits more than $250 thousand		21,075		22,060
Total deposits	$	5,899,315	$	6,225,290

Demand deposit overdrafts of $818 thousand and $995 thousand were included as loan balances at March 31, 2023 and December 31, 2022, respectively. Interest expense for aggregate time deposits with individual account balances in excess of $100 thousand was $34 thousand in the three months ended March 31, 2023 and $41 thousand in the three months ended March 31, 2022.

The following table provides additional detail regarding short-term borrowed funds.

	Repurchase Agreements (Sweep) Accounted for as Secured Borrowings
	Remaining Contractual Maturity of the Agreements
	Overnight and Continuous
	At March 31,		At December 31,
	2023		2022
Repurchase agreements:	(In thousands)
Collateral securing borrowings:
Agency residential MBS	$	29,160	$	30,108
Corporate securities		247,439		203,774
Total collateral carrying value	$	276,599	$	233,882
Total short-term borrowed funds	$	83,088	$	57,792

At March 31, 2023, the Company had uncommitted lines of credit for overnight borrowings from correspondent banks totaling $100 million. Additionally, the Company had access to borrowing from the Federal Reserve up to $671 million based on the collateral pledged at March 31, 2023. There were no outstanding amounts under the above-mentioned borrowings at March 31, 2023. For the three months ended March 31, 2023, the average balances of the above-mentioned borrowings were $1 thousand. At March 31, 2023, the Company’s unpledged debt securities collateral qualifying for Federal Reserve borrowing totaled $2,574,254 thousand.

Note 9: 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.

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 March 31, 2023
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3) ⁽¹⁾
	(In thousands)
Debt securities available for sale:
Agency residential MBS	$	276,078	$	-	$	276,078	$	-
Securities of U.S. Government sponsored entities		297,140		-		297,140		-
Obligations of states and political subdivisions		82,678		-		82,678		-
Corporate securities		2,019,240		-		2,019,240		-
Collateralized loan obligations		1,542,377		-		1,542,377		-
Total debt securities available for sale	$	4,217,513	$	-	$	4,217,513	$	-

⁽¹⁾	There were no transfers in to or out of level 3 during the three months ended March 31, 2023.

	At December 31, 2022
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3) ⁽¹⁾
	(In thousands)
Debt securities available for sale:
Agency residential MBS	$	286,048	$	-	$	286,048	$	-
Securities of U.S. Government sponsored entities		290,853		-		290,853		-
Obligations of states and political subdivisions		82,004		-		82,004		-
Corporate securities		2,099,955		-		2,099,955		-
Collateralized loan obligations		1,572,883		-		1,572,883		-
Total debt securities available for sale	$	4,331,743	$	-	$	4,331,743	$	-

⁽¹⁾	There were no transfers in to or out of level 3 during the year ended December 31, 2022.

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 March 31, 2023 and December 31, 2022, 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.

									For the Three
									Months Ended
	At March 31, 2023								March 31, 2023
	Carrying Value		Level 1		Level 2		Level 3		Total Losses
	(In thousands)
Loans:
Commercial real estate	$	110	$	-	$	-	$	110	$	-
Total assets measured at fair value on a nonrecurring basis	$	110	$	-	$	-	$	110	$	-

									For the
									Year Ended
	At December 31, 2022								December 31, 2022
	Carrying Value		Level 1		Level 2		Level 3		Total Losses
	(In thousands)
Loans:
Commercial real estate	$	225	$	-	$	-	$	225	$	-
Total assets measured at fair value on a nonrecurring basis	$	225	$	-	$	-	$	225	$	-

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.

	At March 31, 2023
	Carrying Amount		Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2 )		Significant Unobservable Inputs (Level 3 )
Financial Assets:	(In thousands)
Cash and due from banks	$	195,202	$	195,202	$	195,202	$	-	$	-
Debt securities held to maturity		909,319		875,268		-		875,268		-
Loans		919,119		898,767		-		-		898,767

Financial Liabilities:
Deposits	$	5,899,315	$	5,895,669	$	-	$	5,774,015	$	121,654
Short-term borrowed funds		83,088		83,088		-		83,088		-

	At December 31, 2022
	Carrying Amount		Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2 )		Significant Unobservable Inputs (Level 3 )
Financial Assets:	(In thousands)
Cash and due from banks	$	294,236	$	294,236	$	294,236	$	-	$	-
Debt securities held to maturity		915,913		873,511		-		873,511		-
Loans		938,204		905,720		-		-		905,720

Financial Liabilities:
Deposits	$	6,225,290	$	6,224,791	$	-	$	6,094,535	$	130,256
Short-term borrowed funds		57,792		57,792		-		57,792		-

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 10: 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 $31,550 thousand at March 31, 2023 and $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 $208,051 thousand at March 31, 2023 and $202,696 thousand at December 31, 2022. 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 $1,951 thousand at March 31, 2023 and $1,948 thousand at December 31, 2022. Commitments for commercial and similar letters of credit totaled $95 thousand at March 31, 2023 and December 31, 2022. The Company had $950 thousand in outstanding full recourse guarantees to a third party credit card company at March 31, 2023 and December 31, 2022. At March 31, 2023, the Company had a reserve for unfunded commitments of $201 thousand for the above-mentioned loan commitments of $31,550 thousand that are not unconditionally cancellable by the Company. The Company’s reserve for unfunded commitments was $201 thousand at December 31, 2022. 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 11: Earnings Per Common Share

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.

	For the Three Months Ended
	March 31,
	2023		2022
	(In thousands, except per share data)
Net income (numerator)	$	40,451	$	22,616
Basic earnings per common share
Weighted average number of common shares outstanding - basic (denominator)		26,859		26,870
Basic earnings per common share	$	1.51	$	0.84
Diluted earnings per common share
Weighted average number of common shares outstanding - basic		26,859		26,870
Add common stock equivalents for options		7		15
Weighted average number of common shares outstanding - diluted (denominator)		26,866		26,885
Diluted earnings per common share	$	1.51	$	0.84

For the three months ended March 31, 2023 and March 31, 2022, options to purchase 977 thousand and 802 thousand shares of common stock, respectively, were outstanding but not included in the computation of diluted earnings per 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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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

	For the Three Months Ended
	March 31,						December 31,
	2023			2022			2022
	(In thousands, except per share data)
Net Interest and Fee Income (FTE)⁽¹⁾	$	69,562		$	43,807		$	69,155
Reversal of Provision for Credit Losses		(1,550	)		-			-
Noninterest Income		10,549			11,576			10,463
Noninterest Expense		26,210			24,875			25,090
Income Before Income Taxes (FTE)⁽¹⁾		55,451			30,508			54,528
Provision for Income Taxes (FTE)⁽¹⁾		15,000			7,892			15,184
Net Income	$	40,451		$	22,616		$	39,344

Average Common Shares Outstanding		26,859			26,870			26,912
Average Diluted Common Shares Outstanding		26,866			26,885			26,924
Common Shares Outstanding at Period End		26,648			26,883			26,913

Per Common Share:
Basic Earnings	$	1.51		$	0.84		$	1.46
Diluted Earnings		1.51			0.84			1.46
Book Value Per Common Share		24.13			26.10			22.37

Financial Ratios:
Return On Assets		2.31	%		1.24	%		2.12	%
Return On Common Equity		19.11	%		11.82	%		18.64	%
Net Interest Margin (FTE)⁽¹⁾		4.18	%		2.51	%		3.95	%
Net Loan (Recoveries) Chargeoffs to Average Loans		(0.33	)%		0.23	%		0.39	%
Efficiency Ratio⁽²⁾		32.7	%		44.9	%		31.5	%

Average Balances:
Assets	$	7,112,317		$	7,406,321		$	7,353,270
Loans		945,864			1,029,724			964,287
Investment securities		5,548,780			4,947,846			5,694,280
Deposits		6,061,923			6,393,458			6,349,401
Shareholders' Equity		858,473			776,225			837,499

Period End Balances:
Assets	$	6,700,471		$	7,306,417		$	6,950,317
Loans		938,628			1,002,514			958,488
Investment securities		5,126,833			4,897,115			5,247,657
Deposits		5,899,315			6,405,874			6,225,290
Shareholders' Equity		642,925			701,744			602,110

Capital Ratios at Period End:
Total Risk Based Capital		16.47	%		15.60	%		15.64	%
Tangible Equity to Tangible Assets		7.92	%		8.06	%		7.03	%

Dividends Paid Per Common Share	$	0.42		$	0.42		$	0.42
Common Dividend Payout Ratio		28	%		50	%		29	%

The above financial summary has been derived from the Company's unaudited consolidated financial statements. This information should be read in conjunction with those statements, notes and the other information included elsewhere herein. Percentages under the heading "Financial Ratios" are annualized with the exception of the efficiency ratio.

(1)	Yields on securities and certain loans have been adjusted upward to an FTE basis in order to reflect the effect of income which is exempt from federal income taxation at the current statutory tax rate.

(2)	The efficiency ratio is defined as noninterest expense divided by total revenue (net interest income on an FTE basis and noninterest income).

Financial Overview

Westamerica Bancorporation and subsidiaries (collectively, the “Company”) reported net income of $40.5 million or $1.51 diluted earnings per common share (“EPS”) in the first quarter 2023, including a $1.6 million reversal of provision for credit losses, which increased EPS $0.04. First quarter 2023 results compare with net income of $22.6 million or $0.84 EPS for the first quarter 2022 and $39.3 million or $1.46 EPS for the fourth quarter 2022. First quarter 2022 results included a $1.2 million reconciling payment from a payments network.

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. The raised target range was 0.25% to 0.50% in March 2022 and increases in the target federal funds rate continued successively. A March 22, 2023 Federal Reserve press release stated, “Recent indicators point to modest growth in spending and production. Job gains have picked up in recent months and are running at a robust pace; the unemployment rate has remained low. Inflation remains elevated. The U.S. banking system is sound and resilient. Recent developments are likely to result in tighter credit conditions for households and businesses and to weigh on economic activity, hiring, and inflation. The Committee is highly attentive to inflation risks… the Committee decided to raise the target range for the federal funds rate to 4.75 to 5.00%... The Committee anticipates that some additional policy firming may be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time. In determining the extent of future increases in the target range, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.” The interest rate paid on reserve balances to 4.90% effective March 23, 2023 compared with 0.40% effective March 2022. 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. During the first quarter 2023, the banking industry experienced significant volatility with multiple bank failures. Industrywide concerns have developed related to liquidity, deposit outflows and unrealized losses on investment debt securities. These recent events could affect the Company’s funding of its operations. 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 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 Financial Statements in the Company’s 2022 Form 10-K and Note 2 “Summary of Significant Accounting Policies” in this Form 10-Q) are fundamental to understanding the Company’s results of operations and financial condition. The Company adopted the following new accounting guidance:

FASB ASU 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures, issued March 2022, eliminates the recognition and measurement guidance for troubled debt restructurings and requires enhanced disclosures about loan modifications for borrowers experiencing financial difficulty. This ASU also requires enhanced disclosure for loans that have been charged off. The ASU became effective January 1, 2023 under a prospective approach. The Company adopted the provisions to remove the recognition and measurement guidance for troubled debt restructurings and/or modify relevant disclosures in the “Loans” note to the unaudited consolidated financial statements. The requirement to include additional disclosures was adopted by the Company January 1, 2023. The additional disclosures did not affect the financial results upon adoption.

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Net Income

Following is a summary of the components of net income for the periods indicated:

	For the Three Months Ended
	March 31,						December 31,
	2023			2022			2022
	(In thousands, except per share data)
Net interest and loan fee income (FTE)	$	69,562		$	43,807		$	69,155
Reversal of provision for credit losses		(1,550	)		-			-
Noninterest income		10,549			11,576			10,463
Noninterest expense		26,210			24,875			25,090
Income before taxes (FTE)		55,451			30,508			54,528
Income tax provision (FTE)		15,000			7,892			15,184
Net income	$	40,451		$	22,616		$	39,344

Average diluted common shares		26,866			26,885			26,924
Diluted earnings per common share	$	1.51		$	0.84		$	1.46

Average total assets	$	7,112,317		$	7,406,321		$	7,353,270
Net income to average total assets (annualized)		2.31	%		1.24	%		2.12	%
Net income to average common shareholders' equity (annualized)		19.11	%		11.82	%		18.64	%

Net income for the first quarter 2023 increased $17.8 million compared with the first quarter 2022. Net interest and loan fee income (FTE) increased $25.8 million in the first quarter 2023 compared with the first quarter 2022 due to higher average balances of investment debt securities and higher yield on investment debt securities and interest-bearing cash, partially offset by lower average balances of loans. The Company recorded a $1.6 million reversal of provision for credit losses in the first quarter of 2023 as a result of a $2.2 million recovery on a previously charged off loan. The Company provided no provision for credit losses in the first quarter of 2022, based on Management’s estimate of credit losses over the remaining life of its loans and debt securities held to maturity. First quarter 2023 noninterest income decreased $1.0 million compared with the first quarter 2022 primarily because first quarter 2022 included a $1.2 million reconciling payment from a payments network. First quarter 2023 noninterest expense increased $1.3 million primarily due to an increase in occupancy and equipment expense and increased FDIC insurance assessments for all insured depository institutions. The tax rate (FTE) was 27.1% for the first quarter 2023 and 25.9% for the first quarter 2022.

Net income for the first quarter 2023 increased $1.1 million compared with the fourth quarter 2022. Net interest and loan fee income (FTE) increased $407 thousand in the first quarter 2023 compared with the fourth quarter 2022 due to higher yield on investment debt securities and interest-bearing cash, partially offset by lower average balances of interest-earning assets. The Company recorded a $1.6 million reversal of provision for credit losses in the first quarter of 2023 as a result of a $2.2 million recovery on a previously charged off loan. The Company provided no provision for credit losses in the fourth quarter of 2022, based on Management’s estimate of credit losses over the remaining life of its loans and debt securities held to maturity. First quarter 2023 noninterest income remained at the same level as the fourth quarter 2022. First quarter 2023 noninterest expense increased $1.1 million compared with the fourth quarter 2022 primarily due to an increase in seasonal payroll taxes and increased FDIC insurance assessments for all insured depository institutions. The tax rate (FTE) was 27.1% for the first quarter 2023 and 27.8% for the fourth quarter 2022.

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Net Interest and Loan Fee Income (FTE)

Following is a summary of the components of net interest and loan fee income (FTE) for the periods indicated:

	For the Three Months Ended
	March 31,						December 31,
	2023			2022			2022
	(In thousands)
Interest and loan fee income	$	69,624		$	43,759		$	69,198
Interest expense		471			480			475
FTE adjustment		409			528			432
Net interest and loan fee income (FTE)	$	69,562		$	43,807		$	69,155

Average earning assets	$	6,665,156		$	6,998,234		$	6,930,584
Net interest margin (FTE) (annualized)		4.18	%		2.51	%		3.95	%

Net interest and loan fee income (FTE) increased $25.8 million in the first quarter 2023 compared with the first quarter 2022 due to higher average balances of investment debt securities (up $601 million) and higher yield on investment debt securities (up 1.57%) and interest-bearing cash (up 4.37%), partially offset by lower average balances of loans (down $84 million).

Net interest and loan fee income (FTE) increased $407 thousand in the first quarter 2023 compared with the fourth quarter 2022 due to higher yield on investment debt securities (up 0.25%) and interest-bearing cash (up 0.87%), partially offset by lower average balances of interest-earning assets (down $265 million).

The annualized net interest margin (FTE) was 4.18% in the first quarter 2023, 2.51% in the first quarter 2022 and 3.95% in the fourth quarter 2022.

The Company’s funding costs were 0.03% in the first quarter 2023, first quarter 2022 and fourth quarter 2022. Noninterest bearing deposits represented 47% of average deposits in the first quarter 2023 while higher-cost time deposits represented 2%. Average balances of time deposits in the first quarter 2023 declined $14 million from the first quarter 2022. Average balances of checking and saving deposits accounted for 97.9% of average total deposits in the first quarter 2023, 97.8% in the first quarter 2022 and 97.9% in the fourth quarter 2022.

Net Interest Margin (FTE)

The following summarizes the components of the Company's net interest margin (FTE) for the periods indicated (percentages are annualized.)

	For the Three Months Ended
	March 31,						December 31,
	2023			2022			2022

Yield on earning assets (FTE)		4.21	%		2.54	%		3.98	%
Rate paid on interest-bearing liabilities		0.06	%		0.05	%		0.06	%
Net interest spread (FTE)		4.15	%		2.49	%		3.92	%
Impact of noninterest-bearing funds		0.03	%		0.02	%		0.03	%
Net interest margin (FTE)		4.18	%		2.51	%		3.95	%

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 the three months ended March 31, 2023 was $1,577 million yielding 6.34%. The average balances and yields of CLOs for the three months ended March 31, 2022 and December 31, 2022 were $1,464 million yielding 1.92% and $1,590 million yielding 5.61%, respectively. The interest-bearing cash yield changes by the amount of change in the overnight federal funds rate on the effective date declared by the FOMC. The average balance and yields of interest-bearing cash for the three months ended March 31, 2023 were $171 million yielding 4.56%. The average balance and yields of interest-bearing cash for the three months ended March 31, 2022 and December 31, 2022 were $1,021 million yielding 0.19% and $272 million yielding 3.69%, 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.”

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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 the reversal of previously accrued interest on loans placed on nonaccrual status during the period, 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, rates and interest margins are annualized. 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 Three Months Ended March 31, 2023
			Interest
	Average		Income/		Yields/
	Balance		Expense		Rates
	($ in thousands)
Assets
Investment securities:
Taxable	$	5,379,275	$	54,749		4.07	%
Tax-exempt ⁽¹⁾		169,505		1,508		3.56	%
Total investments ⁽¹⁾		5,548,780		56,257		4.06	%
Loans:
Taxable		900,183		11,390		5.13	%
Tax-exempt ⁽¹⁾		45,681		444		3.94	%
Total loans ⁽¹⁾		945,864		11,834		5.07	%
Total interest-bearing cash		170,512		1,942		4.56	%
Total Interest-earning assets ⁽¹⁾		6,665,156		70,033		4.21	%
Other assets		447,161
Total assets	$	7,112,317

Liabilities and shareholders' equity
Noninterest-bearing demand	$	2,851,600	$	-		-	%
Savings and interest-bearing transaction		3,080,867		374		0.05	%
Time less than $100,000		71,826		50		0.28	%
Time $100,000 or more		57,630		34		0.24	%
Total interest-bearing deposits		3,210,323		458		0.06	%
Short-term borrowed funds		76,835		13		0.07	%
Total interest-bearing liabilities		3,287,158		471		0.06	%
Other liabilities		115,086
Shareholders' equity		858,473
Total liabilities and shareholders' equity	$	7,112,317
Net interest spread ^{(1) (2)}						4.15	%
Net interest and fee income and interest margin ^{(1) (3)}			$	69,562		4.18	%

(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.

Distribution of Assets, Liabilities & Shareholders’ Equity and Yields, Rates & Interest Margin

	For the Three Months Ended March 31, 2022
			Interest
	Average		Income/		Yields/
	Balance		Expense		Rates
	($ in thousands)
Assets
Investment securities:
Taxable	$	4,710,561	$	28,733		2.44	%
Tax-exempt ⁽¹⁾		237,285		2,037		3.43	%
Total investments ⁽¹⁾		4,947,846		30,770		2.49	%
Loans:
Taxable		982,531		12,582		5.19	%
Tax-exempt ⁽¹⁾		47,193		456		3.92	%
Total loans ⁽¹⁾		1,029,724		13,038		5.14	%
Total interest-bearing cash		1,020,664		479		0.19	%
Total Interest-earning assets ⁽¹⁾		6,998,234		44,287		2.54	%
Other assets		408,087
Total assets	$	7,406,321

Liabilities and shareholders' equity
Noninterest-bearing demand	$	3,005,065	$	-		-	%
Savings and interest-bearing transaction		3,245,192		371		0.05	%
Time less than $100,000		79,029		40		0.21	%
Time $100,000 or more		64,172		41		0.26	%
Total interest-bearing deposits		3,388,393		452		0.05	%
Short-term borrowed funds		157,753		28		0.07	%
Total interest-bearing liabilities		3,546,146		480		0.05	%
Other liabilities		78,885
Shareholders' equity		776,225
Total liabilities and shareholders' equity	$	7,406,321
Net interest spread ^{(1) (2)}						2.49	%
Net interest and fee income and interest margin ^{(1) (3)}			$	43,807		2.51	%

(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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Distribution of Assets, Liabilities & Shareholders’ Equity and Yields, Rates & Interest Margin

	For the Three Months Ended December 31, 2022
			Interest
	Average		Income/		Yields/
	Balance		Expense		Rates
	($ in thousands)
Assets
Investment securities:
Taxable	$	5,515,274	$	53,179		3.86	%
Tax-exempt ⁽¹⁾		179,006		1,591		3.56	%
Total investments ⁽¹⁾		5,694,280		54,770		3.81	%
Loans:
Taxable		918,757		11,855		5.12	%
Tax-exempt ⁽¹⁾		45,530		438		3.82	%
Total loans ⁽¹⁾		964,287		12,293		5.06	%
Total interest-bearing cash		272,017		2,567		3.69	%
Total Interest-earning assets ⁽¹⁾		6,930,584		69,630		3.98	%
Other assets		422,686
Total assets	$	7,353,270

Liabilities and shareholders' equity
Noninterest-bearing demand	$	3,010,806	$	-		-	%
Savings and interest-bearing transaction		3,204,674		376		0.05	%
Time less than $100,000		74,201		51		0.27	%
Time $100,000 or more		59,720		36		0.24	%
Total interest-bearing deposits		3,338,595		463		0.05	%
Short-term borrowed funds		73,594		12		0.06	%
Total interest-bearing liabilities		3,412,189		475		0.06	%
Other liabilities		92,776
Shareholders' equity		837,499
Total liabilities and shareholders' equity	$	7,353,270
Net interest spread ^{(1) (2)}						3.92	%
Net interest and fee income and interest margin ^{(1) (3)}			$	69,155		3.95	%

(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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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 Three Months Ended March 31, 2023
	Compared with
	For the Three Months Ended March 31, 2022
	Volume			Yield/Rate			Total
	(In thousands)
Increase (decrease) in interest and loan fee income:
Investment securities:
Taxable	$	4,079		$	21,937		$	26,016
Tax-exempt ⁽¹⁾		(582	)		53			(529	)
Total investments ⁽¹⁾		3,497			21,990			25,487
Loans:
Taxable		(1,042	)		(150	)		(1,192	)
Tax-exempt ⁽¹⁾		(15	)		3			(12	)
Total loans ⁽¹⁾		(1,057	)		(147	)		(1,204	)
Total interest-bearing cash		(399	)		1,862			1,463
Total increase in interest and loan fee income ⁽¹⁾		2,041			23,705			25,746
Increase (decrease) in interest expense:
Deposits:
Savings and interest-bearing transaction		(19	)		22			3
Time less than $100,000		(4	)		14			10
Time $100,000 or more		(4	)		(3	)		(7	)
Total interest-bearing deposits		(27	)		33			6
Short-term borrowed funds		(14	)		(1	)		(15	)
Total (decrease) increase in interest expense		(41	)		32			(9	)
Increase in net interest and loan fee income ⁽¹⁾	$	2,082		$	23,673		$	25,755

(1)	Amounts calculated on an FTE basis using the current statutory federal tax rate.

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Summary of Changes in Interest Income and Expense

	For the Three Months Ended March 31, 2023
	Compared with
	For the Three Months Ended December 31, 2022
	Volume			Yield/Rate		Total
	(In thousands)
Increase (decrease) in interest and loan fee income:
Investment securities:
Taxable	$	(1,311	)	$	2,881	$	1,570
Tax-exempt ⁽¹⁾		(84	)		1		(83	)
Total investments ⁽¹⁾		(1,395	)		2,882		1,487
Loans:
Total taxable		(485	)		20		(465	)
Tax-exempt ⁽¹⁾		1			5		6
Total loans ⁽¹⁾		(484	)		25		(459	)
Total interest-bearing cash		(958	)		333		(625	)
Total (decrease) increase in interest and loan fee income ⁽¹⁾		(2,837	)		3,240		403
Increase (decrease) in interest expense:
Deposits:
Savings and interest-bearing transaction		(2	)		-		(2	)
Time less than $100,000		(1	)		-		(1	)
Time $100,000 or more		(2	)		-		(2	)
Total interest-bearing deposits		(5	)		-		(5	)
Short-term borrowed funds		-			1		1
Total (decrease) increase in interest expense		(5	)		1		(4	)
(Decrease) increase in net interest and loan fee income ⁽¹⁾	$	(2,832	)	$	3,239	$	407

(1)	Amounts calculated on an FTE basis using the current statutory federal tax rate.

Provision for Credit Losses

The Company manages credit risk by enforcing conservative underwriting and administration procedures and aggressively pursuing collection efforts with debtors experiencing financial difficulties. The provision for credit losses reflects Management's assessment of credit risk in the loan portfolio and debt securities held to maturity portfolio during each of the periods presented.

The Company recorded a $1.6 million reversal of provision for credit losses in the first quarter of 2023 as a result of a $2.2 million recovery on a previously charged off loan. The Company provided no provision for credit losses in the first quarter of 2022, based on Management’s estimate of credit losses over the remaining life of its loans and debt securities held to maturity. For further information regarding credit risk, net credit losses, and the allowance for credit losses, see the “Loan Portfolio Credit Risk” and “Allowance for Credit Losses” sections of this Report.

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Noninterest Income

The following table summarizes the components of noninterest income for the periods indicated.

	For the Three Months Ended
	March 31,				December 31,
	2023		2022		2022
	(In thousands)

Service charges on deposit accounts	$	3,465	$	3,582	$	3,484
Merchant processing services		2,637		2,623		2,701
Debit card fees		1,642		2,872		1,704
Trust fees		765		843		754
ATM processing fees		654		451		646
Other service fees		399		449		416
Financial services commissions		89		117		103
Other noninterest income		898		639		655
Total	$	10,549	$	11,576	$	10,463

First quarter 2023 noninterest income decreased $1.0 million compared with the first quarter 2022 primarily because first quarter 2022 included a $1.2 million reconciling payment from a payments network. Service charges on deposit accounts decreased in the first quarter 2023 compared with the first quarter 2022 primarily due to lower fee income on analyzed deposit accounts. First quarter 2023 other noninterest income included higher recoveries on previously charged off loans compared with first quarter 2022.

First quarter 2023 noninterest income remained at the same level as the fourth quarter 2022. First quarter 2023 other noninterest income included higher recoveries on previously charged off loans compared with first quarter 2022.

Noninterest Expense

The following table summarizes the components of noninterest expense for the periods indicated.

	For the Three Months Ended
	March 31,				December 31,
	2023		2022		2022
	(In thousands)

Salaries and related benefits	$	12,067	$	11,920	$	11,482
Occupancy and equipment		5,485		4,746		5,218
Outsourced data processing services		2,444		2,437		2,390
Limited Partnership Operating Losses		1,434		1,431		1,431
Professional fees		476		736		574
Courier service		615		582		700
Other noninterest expense		3,689		3,023		3,295
Total	$	26,210	$	24,875	$	25,090

First quarter 2023 noninterest expense increased $1.3 million compared with the first quarter 2022. Occupancy and equipment expense increased primarily due to software upgrades and increases in repair and maintenance. FDIC insurance assessments increased for all insured depository institutions.

First quarter 2023 noninterest expense increased $1.1 million compared with the fourth quarter 2022 primarily due to an increase in seasonal payroll taxes and increased FDIC insurance assessments for all insured depository institutions. Occupancy and equipment expense increased primarily due to increases in repair and maintenance.

Provision for Income Tax

The Company’s income tax provision (FTE) was $15.0 million for the first quarter 2023 compared with $7.9 million for the first quarter 2022 and $15.2 million for the fourth quarter 2022, representing effective tax rates (FTE) of 27.1%, 25.9% and 27.8%, respectively.

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 $5.1 billion at March 31, 2023 and $5.2 billion at December 31, 2022. The following table lists debt securities in the Company’s portfolio by type as of the dates indicated. Debt securities held to maturity are listed at amortized cost before related reserve for expected credit losses of $1 thousand at March 31, 2023 and December 31, 2022. Debt securities available for sale are listed at fair value.

	At March 31, 2023					At December 31, 2022
	Carrying Value		As a percent of total investment securities			Carrying Value		As a percent of total investment securities
	($ in thousands)
Securities of U.S. Government sponsored entities	$	297,140		6	%	$	290,853		6	%
Agency residential mortgage-backed securities ("MBS")		374,084		7	%		390,900		7	%
Obligations of states and political subdivisions		170,439		3	%		171,212		3	%
Corporate securities		2,742,793		54	%		2,821,809		54	%
Collateralized loan obligations		1,542,377		30	%		1,572,883		30	%
Total	$	5,126,833		100	%	$	5,247,657		100	%

Debt securities available for sale	$	4,217,513				$	4,331,743
Debt securities held to maturity		909,320					915,914
Total	$	5,126,833				$	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 March 31, 2023, substantially all of the Company’s investment securities were investment grade as rated by one or more major rating agency. 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 March 31, 2023 and December 31, 2022.

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The Company had corporate securities as shown below at the dates indicated:

	Corporate securities
	At March 31, 2023				At December 31, 2022
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
	(In thousands)
Debt securities available for sale	$	2,286,050	$	2,019,240	$	2,406,566	$	2,099,955
Debt securities held to maturity		723,553		696,136		721,854		687,406
Total corporate securities	$	3,009,603	$	2,715,376	$	3,128,420	$	2,787,361

The following table summarizes total corporate securities by credit rating:

	At March 31, 2023					At December 31, 2022
	Fair value		As a percent of total corporate securities			Fair value		As a percent of total corporate securities
	($ in thousands)
AAA	$	20,788		1	%	$	20,667		1	%
AA+		19,963		1	%		19,840		1	%
AA		19,346		1	%		19,234		1	%
AA-		72,055		3	%		110,552		4	%
A+		229,071		8	%		255,381		9	%
A		492,302		18	%		503,437		18	%
A-		699,645		26	%		695,865		25	%
BBB+		822,264		30	%		821,102		29	%
BBB		300,799		11	%		304,957		11	%
BBB-		39,143		1	%		36,326		1	%
Total corporate securities	$	2,715,376		100	%	$	2,787,361		100	%

The following table summarizes total corporate securities by the industry sector in which the issuing companies operate:

	At March 31, 2023					At December 31, 2022
	Fair value		As a percent of total corporate securities			Fair value		As a percent of total corporate securities
	($ in thousands)
Financial	$	1,509,958		56	%	$	1,539,361		55	%
Utilities		291,296		11	%		285,016		10	%
Industrial		223,431		8	%		237,554		9	%
Consumer, Non-cyclical		168,374		6	%		173,736		6	%
Communications		165,406		6	%		162,270		6	%
Technology		102,984		4	%		101,255		4	%
Basic Materials		100,201		4	%		98,072		4	%
Consumer, Cyclical		85,348		3	%		103,666		4	%
Energy		68,378		2	%		86,431		3	%
Total corporate securities	$	2,715,376		100	%	$	2,787,361		100	%

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The following table summarizes total corporate securities by the location of the issuers’ headquarters; all the bonds are denominated in United States dollars:

	At March 31, 2023					At December 31, 2022
	Fair value		As a percent of total corporate securities			Fair value		As a percent of total corporate securities
	($ in thousands)
United States of America	$	1,923,376		71	%	$	1,997,328		72	%
Canada		195,474		7	%		192,475		7	%
Japan		165,701		6	%		161,804		6	%
United Kingdom		160,652		6	%		171,819		6	%
Switzerland		89,384		3	%		86,396		3	%
France		88,612		3	%		87,781		3	%
Netherlands		34,027		1	%		33,216		1	%
Australia		24,460		1	%		23,870		1	%
Belgium		20,819		1	%		20,243		1	%
Germany		12,871		1	%		12,429		-	%
Total corporate securities	$	2,715,376		100	%	$	2,787,361		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:

	At March 31, 2023					At December 31, 2022
	Fair value		As a percent of total foreign corporate securities			Fair value		As a percent of total foreign corporate securities
	($ in thousands)
Financial	$	692,637		87	%	$	680,956		86	%
Energy		31,503		4	%		30,600		4	%
Basic Materials		24,460		3	%		23,870		3	%
Consumer, Non-cyclical		20,819		3	%		32,684		4	%
Consumer, Cyclical		12,872		2	%		12,429		2	%
Utilities		9,709		1	%		9,494		1	%
Total foreign corporate securities	$	792,000		100	%	$	790,033		100	%

The Company’s $1.5 billion (fair value) in collateralized loan obligations at March 31, 2023, consist of investments in 147 issues that are within the senior tranches of their respective fund securitization structures. The following table summarizes total collateralized loan obligations by credit rating:

	At March 31, 2023
	Amortized		Fair
	Cost		Value
	(In thousands)
AAA	$	533,657	$	525,666
AA		1,038,338		1,016,711
Total	$	1,571,995	$	1,542,377

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:

	At December 31, 2022
	Amortized		Fair
	Cost		Value
	(In thousands)
AAA	$	559,239	$	553,673
AA		1,028,087		1,019,210
Total	$	1,587,326	$	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 March 31, 2023, 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 two general obligation bonds.

	At March 31, 2023
	Amortized		Fair
	Cost		Value
	(In thousands)
Obligations of states and political subdivisions:
General obligation bonds:
California	$	34,478	$	34,288
Washington		11,418		11,403
Texas		8,228		8,159
Massachusetts		8,183		8,135
Michigan		7,106		7,025
Minnesota		6,632		6,573
Other (22 states)		56,033		55,512
Total general obligation bonds	$	132,078	$	131,095

Revenue bonds:
California	$	13,909	$	13,698
Kentucky		7,602		7,583
Virginia		3,675		3,654
Colorado		3,156		3,148
Washington		2,070		2,071
Other (8 states)		9,016		9,019
Total revenue bonds	$	39,428	$	39,173
Total obligations of states and political subdivisions	$	171,506	$	170,268

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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.

	At December 31, 2022
	Amortized		Fair
	Cost		Value
	(In thousands)
Obligations of states and political subdivisions:
General obligation bonds:
California	$	34,621	$	34,252
Washington		11,445		11,332
Texas		8,561		8,405
Massachusetts		8,214		8,073
Michigan		7,126		7,017
Other (23 states)		63,818		62,679
Total general obligation bonds	$	133,785	$	131,758

Revenue bonds:
California	$	13,917	$	13,620
Kentucky		7,605		7,556
Virginia		3,684		3,618
Colorado		3,155		3,124
Washington		2,070		2,068
Other (8 states)		9,016		9,003
Total revenue bonds	$	39,447	$	38,989
Total obligations of states and political subdivisions	$	173,232	$	170,747

At March 31, 2023 and December 31, 2022, 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 March 31, 2023 and December 31, 2022. The revenue sources that represent 5% or more individually of the total revenue bonds are summarized in the following tables.

	At March 31, 2023
	Amortized		Fair
	Cost		Value
	(In thousands)
Revenue bonds by revenue source:
Water	$	6,106	$	6,118
Lease (renewal)		5,587		5,561
Sewer		5,509		5,519
Lease (appropriation)		4,555		4,544
Special Assessment		4,080		3,854
Lease (abatement)		3,698		3,695
Sales tax		3,185		3,186
Appropriations		1,978		1,960
Other (3 sources)		4,730		4,736
Total revenue bonds by revenue source	$	39,428	$	39,173

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	At December 31, 2022
	Amortized		Fair
	Cost		Value
	(In thousands)
Revenue bonds by revenue source:
Water	$	6,105	$	6,115
Lease (renewal)		5,590		5,536
Sewer		5,523		5,480
Lease (appropriation)		4,556		4,518
Special Assessment		4,080		3,788
Lease (abatement)		3,702		3,694
Sales tax		3,185		3,187
Other (4 sources)		6,706		6,671
Total revenue bonds by revenue source	$	39,447	$	38,989

See Note 3 to the unaudited consolidated financial statements for additional information related to the investment securities.

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.

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”).

Nonperforming Loans

	At March 31,				At December 31,
	2023		2022		2022
	(In thousands)
Nonperforming nonaccrual loans	$	207	$	63	$	146
Performing nonaccrual loans		7		421		-
Total nonaccrual loans		214		484		146
Accruing loans 90 or more days past due		571		431		628
Total nonperforming loans	$	785	$	915	$	774

At March 31, 2023, nonaccrual loans consisted of four loans with an average carrying value of $54 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 March 31,		At December 31,
	2023		2022
	(In thousands)
Allowance for Credit Losses on Loans	$	19,509	$	20,284
Allowance for Credit Losses on Held to Maturity Debt Securities		1		1
Total Allowance for Credit Losses	$	19,510	$	20,285

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 March 31, 2023, no credit loss allowance was assigned to corporate securities held to maturity based on evaluation of each individual issuer’s financial performance throughout full business cycles. Municipal securities were evaluated for risk of default based on credit rating and remaining term to maturity using Moody’s risk of default factors; Moody’s loss upon default factors were applied to the assumed defaulted principal amounts to estimate the amount for credit loss allowance. Allowance for credit losses related to debt securities held to maturity was $1 thousand related to municipal securities at March 31, 2023 and December 31, 2022, 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 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.

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 modification to be made to loans to borrowers experiencing financial difficulty is included in the allowance for credit losses when management determines such modification is likely.

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The following table summarizes the allowance for credit losses, chargeoffs and recoveries for the periods indicated.

	For the Three Months Ended
	March 31,						December 31,
	2023			2022			2022
	(In thousands)
Analysis of the Allowance for Credit Losses on Loans
Balance, beginning of period	$	20,284		$	23,514		$	21,218
(Reversal of) provision for credit losses		(1,550	)		-			6
Loans charged off:
Commercial		(148	)		-			-
Consumer installment and other		(1,891	)		(1,212	)		(1,683	)
Total chargeoffs		(2,039	)		(1,212	)		(1,683	)
Recoveries of loans previously charged off:
Commercial		2,165			224			41
Commercial real estate		15			15			16
Consumer installment and other		634			384			686
Total recoveries		2,814			623			743
Net recoveries (chargeoffs)		775			(589	)		(940	)
Balance, end of period	$	19,509		$	22,925		$	20,284

Net (recoveries) chargeoffs as a percentage of average total loans (annualized)		(0.33	)%		0.23	%		0.39	%

Selected financial data: (At the dates indicated)

	At March 31,						At December 31,
	2023			2022			2022
Loans	$	938,628		$	1,002,514		$	958,488
Nonaccrual loans		214			484			146
Allowance for credit losses as a percentage of loans		2.08	%		2.29	%		2.12	%
Nonaccrual loans as a percentage of loans		0.02	%		0.05	%		0.02	%
Allowance for credit losses to nonaccrual loans		9116.36	%		4736.57	%		13893.15	%

The following table summarizes net (chargeoffs) recoveries and the ratio of net charge-offs (recoveries) to average loans for the periods indicated:

	For the Three Months Ended
	March 31,												December 31,
	2023						2022						2022
				As a percentage						As a percentage						As a percentage
				of Net chargeoffs						of Net chargeoffs						of Net chargeoffs
	Net (chargeoffs)			(recoveries)			Net (chargeoffs)			(recoveries)			Net (chargeoffs)			(recoveries)
	Recoveries			to Average loans			Recoveries			to Average loans			Recoveries			to Average loans
	($ in thousands)
Commercial	$	2,017			(1.24	)%	$	224			(0.11	)%	$	41			(0.02	)%
Commercial real estate		15			-	%		15			-	%		16			-	%
Construction		-			-	%		-			-	%		-			-	%
Residential real estate		-			-	%		-			-	%		-			-	%
Consumer and other installment		(1,257	)		0.46	%		(828	)		0.30	%		(997	)		0.35	%
Total	$	775			(0.08	)%	$	(589	)		0.06	%	$	(940	)		0.10	%

The Company's allowance for credit losses on loans is maintained at a level considered adequate to provide for expected losses based on historical loss rates adjusted for current and expected conditions over a forecast period. These include conditions unique to individual borrowers, as well as overall loan loss experience, the amount of past due, nonperforming and classified loans, recommendations of regulatory authorities, prevailing and forecasted economic conditions, or credit protection agreements and other factors. Loans that share common risk characteristics are segregated into pools based on common characteristics, which are primarily determined by loan, borrower, or collateral type. Historical loss rates are determined for each pool. Loans that do not share risk characteristics with other loans in the pools are evaluated individually. See Note 2 to the unaudited consolidated financial statements for additional information.

	Allowance for Credit Losses
	For theThree Months Ended March 31, 2023
										Consumer
				Commercial				Residential		Installment
	Commercial			Real Estate		Construction		Real Estate		and Other			Total
	(In thousands)
Allowance for credit losses:
Balance at beginning of period	$	6,138		$	5,888	$	150	$	32	$	8,076		$	20,284
(Reversal) provision		(2,409	)		355		50		6		448			(1,550	)
Chargeoffs		(148	)		-		-		-		(1,891	)		(2,039	)
Recoveries		2,165			15		-		-		634			2,814
Total allowance for credit losses	$	5,746		$	6,258	$	200	$	38	$	7,267		$	19,509

Management considers the $19.5 million allowance for credit losses on loans to be adequate as a reserve against current expected credit losses in the loan portfolio as of March 31, 2023.

See Note 4 to the unaudited consolidated financial statements for additional information related to the loan portfolio, loan portfolio credit risk, allowance for credit losses on loans, and other real estate owned.

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 percent 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. At March 31, 2023, the Company has $19 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.

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 for 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. 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 March 31, 2023, based on the interest rate assumptions applied to the simulation model. An “asset sensitive” position results in a larger change in interest income than in interest expense resulting from application of assumed interest rate changes. However, in the dynamic simulation, an assumed decline in interest rates is expected to result in improved deposit balances funding higher earning asset levels.

In Management’s judgement, evaluation of interest rate risk for the twelve months ending March 31, 2024 of a one-percent increase or decrease in market rates is appropriate given recent trends in inflation measurements, the March 22, 2023 economic projections of Federal Reserve Board members and Federal Reserve Bank presidents, and market expectations for the federal funds rate. At March 31, 2023, 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			-1.00	%			+1.00	%
First Year Change in Net Interest Income			+3.1	%			+2.1	%

Static Simulation (balance sheet composition unchanged):

Assumed Immediate Change in Interest Rates			-1.00	%			+1.00	%
First Year Change in Net Interest Income			-5.6	%			+6.3	%

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.

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 borrowing from correspondent banks or in the wholesale markets, or by selling debt securities available for sale.

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 first quarter ended March 31, 2023 and in the year ended December 31, 2022. 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. At March 31, 2023, the Company had $195,202 thousand in cash balances. During the twelve months ending March 31, 2024, the Company expects to receive $337,000 thousand in principal payments from its debt securities. If additional operational liquidity is required, the Company can pledge debt securities as collateral for borrowing purposes; at March 31, 2023, the Company’s debt securities which qualify as collateral for borrowing totaled $4,107,153 thousand. In the ordinary course of business, the Company pledges debt securities as collateral for certain depository customers; at March 31, 2023, the Company had pledged $686,533 thousand in debt securities for depository customers. In the ordinary course of business, the Company pledges debt securities as collateral for borrowing from the Federal Reserve Bank; at March 31, 2023, the Company’s had pledged $670,649 thousand in debt securities at the Federal Reserve Bank. During the three months ended March 31, 2023, the Company’s average borrowings from the Federal Reserve Bank and other correspondent banks were $1 thousand, and at March 31, 2023, the Company’s borrowings from the Federal Reserve Bank and other correspondent banks were $-0- thousand. At March 31, 2023, the Company’s unpledged collateral qualifying debt securities totaled $2,574,254 thousand based on the Federal Reserve Bank borrowing program. The following schedule is shown in market value unless otherwise noted:

	At March 31, 2023
	(in thousands)
Debt Securities Eligible as Collateral:
Corporate Securities	$	2,715,376
Collateralized Loan Obligations rated AAA		525,666
Obligations of States and Political Subdivisions		170,268
Agency Mortgage Backed Securities		369,010
Securities of U.S. Government Sponsored Entities (Par Value)		326,833
Total Debt Securities Eligible as Collateral	$	4,107,153

Debt Securities Pledged as Collateral:
Public funds	$	(686,533	)
Short-term borrowed funds (Deposit Sweep)		(169,352	)
Other		(6,365	)
Total Debt Securities Pledged as Collateral	$	(862,250	)

Debt Securities Pledged at the Federal Reserve Bank	$	(670,649	)

Debt Securities Available to Pledge	$	2,574,254

Liquidity risk can result from the mismatching of asset and liability cash flows, or from disruptions in the financial markets. The Bank performs liquidity stress tests on a periodic basis to evaluate the sustainability of its liquidity. Under the stress testing, the Bank assumes outflows of funds increase beyond expected levels. Measurement of such heightened outflows considers the composition of the Bank’s deposit base, including any concentration of deposits, non-deposit funding such as short-term borrowings, and unfunded lending commitments. The composition of the Bank’s deposits is considered including the broad industry and geographic diversification in the Bank’s market area. The Bank evaluates its stock of highly liquid assets to meet the assumed higher levels of outflows. Highly liquid assets include cash and amounts due from other banks from daily transaction settlements, reduced by branch cash needs and 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. 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 $11 million in the first quarter 2023 and $45 million in the year ended December 31, 2022 and retire common stock in the amounts of $14 million and $218 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. The Parent Company’s cash balance was $72 million at March 31, 2023 and $99 million at December 31, 2022.

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 annualized 19.1% for the first quarter 2023 and 15.2% for the year ended December 31, 2022. 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.

The Company paid common dividends totaling $11 million in the quarter ended March 31, 2023 and $45 million in the year ended December 31, 2022, which represent dividends per common share of $0.42 and $1.68, respectively. The Company's earnings have historically exceeded dividends paid to shareholders. The amount of earnings in excess of dividends provides the Company resources to finance growth and maintain appropriate levels of shareholders' equity. In the absence of profitable growth opportunities, the Company has at times repurchased and retired its common stock as another means to return capital to shareholders. The Company repurchased and retired 274 thousand shares valued at $13.7 million in the first quarter 2023 and 3 thousand shares valued at $218 thousand in the year ended December 31, 2022.

The Company's primary capital resource is shareholders' equity, which was $643 million at March 31, 2023 compared with $602 million at December 31, 2022. The Company's ratio of equity to total assets was 9.6% at March 31, 2023 and 8.7% at December 31, 2022.

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.

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.”

										To Be
										Well-capitalized
							Required for			Under Prompt
	At March 31, 2023						Capital Adequacy			Corrective Action
	Company			Bank			Purposes			Regulations (Bank)

Common Equity Tier I Capital		16.05	%		13.63	%		7.00	%		6.50	%
Tier I Capital		16.05	%		13.63	%		8.50	%		8.00	%
Total Capital		16.47	%		14.18	%		10.50	%		10.00	%
Leverage Ratio		10.77	%		9.11	%		4.00	%		5.00	%

										To Be
										Well-capitalized
							Required for			Under Prompt
	At December 31, 2022						Capital Adequacy			Corrective Action
	Company			Bank			Purposes			Regulations (Bank)

Common Equity Tier I Capital		15.22	%		12.37	%		7.00	%		6.50	%
Tier I Capital		15.22	%		12.37	%		8.50	%		8.00	%
Total Capital		15.64	%		12.93	%		10.50	%		10.00	%
Leverage Ratio		10.18	%		8.26	%		4.00	%		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.

Item 3. 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 4. 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) and 15d-15(e) of the Securities Exchange Act of 1934, as amended, as of March 31, 2023.

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 March 31, 2023 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. 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 1A. Risk Factors

The Company’s Annual Report on Form 10-K for the year ended December 31, 2022 includes detailed disclosure about the risks faced by the Company’s business. The following risk factors supplement, and should be read in conjunction with, the risk factors described in the Company’s Annual Report on Form 10-K.

Recent negative developments affecting the banking industry, such as bank failures, may have a material adverse effect on the Company.

During the first quarter 2023, the banking industry experienced significant volatility with multiple bank failures. Industrywide concerns have developed related to liquidity, deposit outflows and unrealized losses on investment debt securities. While the Company cannot predict with certainty whether or how theses developments may affect the banking industry, the Company faces the risks of increased FDIC deposit insurance premium expenses; increased regulation or supervisory scrutiny; and decreased confidence in banks among depositors and investors, any of which could, adversely affect the trading price of the Company’s common stock or its ability to effectively fund its operations. Any one or a combination of such risk factors, or other factors, could materially adversely affect the Company's business, financial condition, results of operations and prospects.

The Company could realize losses if it were required to sell securities in its held-to-maturity securities portfolio to meet liquidity needs.

As a result of increases in interest rates over the last year, the market value of previously issued government and other debt securities has declined significantly, resulting in unrealized losses in the held-to-maturity portion of the Company’s securities portfolios. While the Company does not currently expect or intend to sell these securities, if the Company were required to sell such securities to meet liquidity needs, it may incur losses, which could impair the Company’s capital financial condition and results of operations. Further, while the Company has taken actions to maximize its funding sources, there is no guarantee that such funding sources will be available or sufficient in the event of sudden liquidity needs.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(a)

None

(b)

None

(c)	Issuer Purchases of Equity Securities

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 March 31, 2023.

	2023
Period	(a) Total Number of Shares Purchased		(b) Average Price Paid per Share		(c) Number of Shares Purchased as Part of Publicly Announced Plans or Programs		(d) Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
	(In thousands, except price paid)
January 1 through January 31		-	$	-		-		1,750
February 1 through February 28		-		-		-		1,750
March 1 through March 31		274		50.11		274		1,476
Total		274	$	50.11		274		1,476

The Company repurchases shares of its common stock in the open market on a discretionary basis from time to time 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 equity incentive plans, and other ongoing requirements.

Shares were repurchased during the period from January 1, 2023 through March 31, 2023 pursuant to a share repurchase program that 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 3. Defaults upon Senior Securities

None

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None

Item 6. Exhibits

Exhibit No.	Description of Exhibit

Exhibit 31.1	Certification of Chief Executive Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a)

Exhibit 31.2	Certification of Chief Financial Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a)

Exhibit 32.1	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

Exhibit 32.2	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

Exhibit 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.

Exhibit 101.SCH	Inline XBRL Taxonomy Extension Schema Document

Exhibit 101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document

Exhibit 101.DEF	Inline XBRL Taxonomy Extension Definitions Linkbase Document

Exhibit 101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document

Exhibit 101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document

Exhibit 104	The Cover page of Westamerica Bancorporation’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, formatted in Inline XBRL (contained in Exhibit 101)

[The remainder of this page intentionally left blank]

SIGNATURES

Pursuant to the requirements 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.

WESTAMERICA BANCORPORATION

(Registrant)

/s/ John “Robert” Thorson

John “Robert” Thorson

Senior Vice President and Chief Financial Officer

(Principal Financial and Chief Accounting Officer)

Date: May 9, 2023