Benzinga | Oct 15, 2020 11:11AM EDT

Westamerica Bancorporation Reports Q3 Diluted EPS Of $0.74

SAN RAFAEL, Calif., Oct. 15, 2020 (GLOBE NEWSWIRE) -- Westamerica Bancorporation (NASDAQ:WABC), parent company of Westamerica Bank, generated net income for the third quarter 2020 of $20.1 million and diluted earnings per common share ("EPS") of $0.74. These results compare to net income of $19.6 million and EPS of $0.72 for the second quarter 2020 and net income of $20.4 million and EPS of $0.75 for the third quarter 2019. The third quarter 2019 results benefited from expense reducing FDIC insurance assessment credits.



"Westamerica is focusing on maintaining superior customer service during the pandemic. In keeping all our branches open, we are following all health orders affecting our business to provide a safe environment for our customers and employees. Westamerica's non-interest revenues improved $922 thousand in the third quarter 2020 compared to the prior quarter as economic activity showed some improvement. Net interest income on a fully-tax equivalent basis declined $283 thousand in the third quarter 2020 compared to the prior quarter due to low market interest rates. Operating expenses were $24.6 million for the third quarter 2020, representing only 47 percent of revenues on a fully-taxable equivalent basis. Credit quality remained stable with nonperforming loans of $4.7 million at September 30, 2020," said Chairman, President and CEO David Payne. "Third quarter 2020 results generated an annualized 11.2 percent return on average common equity, and shareholders were paid a $0.41 per common share dividend during the quarter," concluded Payne.

Net interest income on a fully-taxable equivalent (FTE) basis was $41.8 million for the third quarter 2020, compared to $42.1 million for the second quarter 2020 and $40.3 million for the third quarter 2019. The annualized net interest margin (FTE) was 2.78 percent for the third quarter 2020, compared to 2.99 percent for the second quarter 2020 and 3.11 percent for the third quarter 2019. The decline in the margin is due to lower yields on interest-earning assets. Average total deposits grew $333 million from the second quarter 2020 to the third quarter 2020. Checking and savings deposits represented ninety-seven percent of the Company's average deposit base during the third quarter 2020 generating a 0.03 percent annualized cost of funding interest-earning assets.

The Company continues to work with loan customers requesting deferral of loan payments due to economic weakness caused by the pandemic. At September 30, 2020, consumer loans granted loan deferrals totaled $5.0 million, commercial real estate loans with deferred payments totaled $19.1 million, primarily for hospitality, restaurant and retail properties, and commercial loans with deferred payments totaled $209 thousand. The commercial real estate loans with deferred payments are seasoned with low loan-to-value ratios.

Nonperforming assets were $4.8 million at September 30, 2020. The Company's allowance for credit losses was $24.2 million at September 30, 2020. The Company recognized no provision for credit losses in the third quarter 2020.

Noninterest income for the third quarter 2020 totaled $10.5 million, compared to $9.6 million for the second quarter 2020; the increase is due to an improvement in merchant processing service fees and debit card fees. Noninterest income was $1.3 million lower for the third quarter 2020 compared to the third quarter 2019; the decrease is due to lower economic activity reducing activity-based fees related to deposit accounts.

Noninterest expense for the third quarter 2020 was $24.6 million compared to $24.8 million for the second quarter 2020 and $24.0 million for the third quarter 2019.

Westamerica Bancorporation's wholly owned subsidiary Westamerica Bank, operates commercial banking and trust offices throughout Northern and Central California.



Westamerica Bancorporation Web Address: www.westamerica.com

For additional information contact:

Westamerica Bancorporation

1108 Fifth Avenue, San Rafael, CA 94901

Robert A. Thorson -- SVP & Treasurer

707-863-6840

investments@westamerica.com

FORWARD-LOOKING INFORMATION:

The following appears in accordance with the Private Securities Litigation Reform Act of 1995:

This press release may contain forward-looking statements about the Company, including descriptions of plans or objectives of its management for future operations, products or services, and forecasts of its revenues, earnings or other measures of economic performance. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include the words "believe," "expect," "anticipate," "intend," "plan," "estimate," or words of similar meaning, or future or conditional verbs such as "will," "would," "should," "could," or "may."

Forward-looking statements, by their nature, are subject to risks and uncertainties. A number of factors -- many of which are beyond the Company's control -- could cause actual conditions, events or results to differ significantly from those described in the forward-looking statements. The Company's most recent reports filed with the Securities and Exchange Commission, including the annual report for the year ended December 31, 2019 filed on Form 10-K and quarterly report for the quarter ended June 30, 2020 filed on Form 10-Q, describe some of these factors, including certain credit, interest rate, operational, liquidity and market risks associated with the Company's business and operations. Other factors described in these reports include changes in business and economic conditions, competition, fiscal and monetary policies, disintermediation, cyber security risks, legislation including the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2011, the Sarbanes-Oxley Act of 2002 and the Gramm-Leach-Bliley Act of 1999, and mergers and acquisitions.

Forward-looking statements speak only as of the date they are made. The Company does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date forward looking statements are made.

Public Information October 15, 2020 WESTAMERICA BANCORPORATION FINANCIAL HIGHLIGHTS September 30, 2020 1. Net Income Summary. (in thousands except per-share amounts) % Q3'2020 Q3'2019 Change Q2'2020 Net Interest and Fee $41,780 $40,349 3.5% $42,063 Income (FTE) Provision for Credit - - n/m - Losses Noninterest Income 10,476 11,809 -11.3% 9,554 Noninterest Expense 24,603 24,033 2.4% 24,754 Income Before Taxes 27,653 28,125 -1.7% 26,863 (FTE) Income Tax Provision 7,602 7,735 -1.7% 7,301 (FTE) Net Income $20,051 $20,390 -1.7% $19,562 Average Common Shares 26,930 26,986 -0.2% 26,935 Outstanding Diluted Average Common 26,946 27,027 -0.3% 26,951 Shares Operating Ratios: Basic Earnings Per $0.74 $0.76 -2.6% $0.72 Common Share Diluted Earnings Per 0.74 0.75 -1.3% 0.72 Common Share Return On Assets (a) 1.24% 1.45% 1.30% Return On Common Equity 11.2% 11.9% 11.1% (a) Net Interest Margin 2.78% 3.11% 2.99% (FTE) (a) Efficiency Ratio (FTE) 47.1% 46.1% 48.0% Dividends Paid Per $0.41 $0.41 0.0% $0.41 Common Share Common Dividend Payout 55% 55% 57% Ratio % 9/30'20YTD 9/30'19YTD Change Net Interest and Fee $124,390 $120,925 2.9% Income (FTE) Provision for Credit 4,300 - n/m Losses Noninterest Income 31,678 35,676 -11.2% Noninterest Expense 74,021 74,777 -1.0% Income Before Taxes 77,747 81,824 -5.0% (FTE) Income Tax Provision 21,172 22,163 -4.5% (FTE) Net Income $56,575 $59,661 -5.2% Average Common Shares 26,977 26,924 0.2% Outstanding Diluted Average Common 26,998 26,976 0.1% Shares Operating Ratios: Basic Earnings Per $2.10 $2.22 -5.4% Common Share Diluted Earnings Per 2.10 2.21 -5.0% Common Share Return On Assets (a) 1.25% 1.43% Return On Common Equity 10.7% 11.9% (a) Net Interest Margin 2.95% 3.12% (FTE) (a) Efficiency Ratio (FTE) 47.4% 47.8% Dividends Paid Per $1.23 $1.22 0.8% Common Share Common Dividend Payout 59% 55% Ratio 2. Net Interest Income. (dollars in thousands) % Q3'2020 Q3'2019 Change Q2'2020 Interest and Fee Income $42,246 $40,804 3.5% $42,498 (FTE) Interest Expense 466 455 2.4% 435 Net Interest and Fee $41,780 $40,349 3.5% $42,063 Income (FTE) Average Earning Assets $6,001,287 $5,176,744 15.9% $5,635,014 Average Interest- Bearing Liabilities 2,931,717 2,586,880 13.3% 2,774,450 Yield on Earning Assets 2.81% 3.15% 3.02% (FTE) (a) Cost of Funds (a) 0.03% 0.04% 0.03% Net Interest Margin 2.78% 3.11% 2.99% (FTE) (a) Interest Expense/ Interest-Bearing 0.06% 0.07% 0.06% Liabilities (a) Net Interest Spread 2.75% 3.08% 2.96% (FTE) (a) % 9/30'20YTD 9/30'19YTD Change Interest and Fee Income $125,733 $122,362 2.8% (FTE) Interest Expense 1,343 1,437 -6.5% Net Interest and Fee $124,390 $120,925 2.9% Income (FTE) Average Earning Assets $5,627,517 $5,173,581 8.8% Average Interest- Bearing Liabilities 2,785,451 2,640,705 5.5% Yield on Earning Assets 2.98% 3.16% (FTE) (a) Cost of Funds (a) 0.03% 0.04% Net Interest Margin 2.95% 3.12% (FTE) (a) Interest Expense/ Interest-Bearing 0.06% 0.07% Liabilities (a) Net Interest Spread 2.92% 3.09% (FTE) (a) 3. Loans & Other Earning Assets. (average volume, dollars in thousands) % Q3'2020 Q3'2019 Change Q2'2020 Total Assets $6,414,399 $5,570,843 15.1% $6,058,365 Total Earning Assets 6,001,287 5,176,744 15.9% 5,635,014 Total Loans 1,312,758 1,142,668 14.9% 1,232,073 Total Commercial Loans 444,091 231,232 92.1% 344,053 Paycheck Protection 243,104 - n/m 132,500 Program (PPP) Loans Commercial Loans 200,987 231,232 -13.1% 211,553 Commercial RE Loans 566,626 579,069 -2.1% 578,572 Consumer Loans 302,041 332,367 -9.1% 309,448 Total Investment 4,360,119 3,687,049 18.3% 3,957,851 Securities Equity Securities - 352 n/m - Debt Securities 3,750,737 2,862,537 31.0% 3,293,009 Available For Sale Debt Securities Held To 609,382 824,160 -26.1% 664,842 Maturity Total Interest-Bearing 328,410 347,027 -5.4% 445,090 Cash Loans/Deposits 23.7% 24.0% 23.7% % 9/30'20YTD 9/30'19YTD Change Total Assets $6,044,098 $5,580,965 8.3% Total Earning Assets 5,627,517 5,173,581 8.8% Total Loans 1,223,250 1,177,057 3.9% Total Commercial Loans 337,566 258,317 30.7% PPP Loans 125,632 - n/m Commercial Loans 211,934 258,317 -18.0% Commercial RE Loans 574,950 580,453 -0.9% Consumer Loans 310,734 338,287 -8.1% Total Investment 4,055,733 3,675,102 10.4% Securities Equity Securities - 1,285 n/m Debt Securities 3,394,467 2,782,898 22.0% Available For Sale Debt Securities Held To 661,266 890,919 -25.8% Maturity Total Interest-Bearing 348,534 321,422 8.4% Cash Loans/Deposits 23.6% 24.6% 4. Deposits, Other Interest-Bearing Liabilities & Equity. (average volume, dollars in thousands) % Q3'2020 Q3'2019 Change Q2'2020 Total Deposits $5,533,144 $4,770,976 16.0% $5,200,475 Noninterest Demand 2,695,458 2,234,494 20.6% 2,496,840 Interest-Bearing 1,039,833 916,180 13.5% 980,872 Transaction Savings 1,634,814 1,441,282 13.4% 1,558,201 Time greater than $100K 72,045 77,568 -7.1% 72,267 Time less than $100K 90,994 101,452 -10.3% 92,295 Total Short-Term 94,031 50,398 86.6% 70,116 Borrowings Other Borrowed Funds - - n/m 699 Shareholders' Equity 714,400 681,513 4.8% 705,882 Demand Deposits/ Total Deposits 48.7% 46.8% 48.0% Transaction & Savings Deposits / Total 97.1% 96.2% 96.8% Deposits % 9/30'20YTD 9/30'19YTD Change Total Deposits $5,188,797 $4,789,084 8.3% Noninterest Demand 2,472,495 2,203,755 12.2% Interest-Bearing 987,666 935,811 5.5% Transaction Savings 1,563,387 1,464,037 6.8% Time greater than $100K 72,718 80,142 -9.3% Time less than $100K 92,531 105,339 -12.2% Total Short-Term 68,917 55,376 24.5% Borrowings Other Borrowed Funds 232 - n/m Shareholders' Equity 708,559 669,043 5.9% Demand Deposits/ Total Deposits 47.7% 46.0% Transaction & Savings Deposits / Total 96.8% 96.1% Deposits 5. Interest Yields Earned & Rates Paid. (dollars in thousands) Q3'2020 Average Income/ Yield (a) / Volume Expense Rate (a) Interest & Fee Income Earned Total Earning Assets $6,001,287 $42,246 2.81% (FTE) Total Loans (FTE) 1,312,758 15,394 4.67% Total Commercial Loans 444,091 4,648 4.16% (FTE) PPP Loans 243,104 2,501 4.08% Commercial Loans (FTE) 200,987 2,147 4.25% Commercial RE Loans 566,626 7,298 5.12% Consumer Loans 302,041 3,448 4.54% Total Investments (FTE) 4,360,119 26,768 2.46% Total Interest-Bearing 328,410 84 0.10% Cash Interest Expense Paid Total Earning Assets 6,001,287 466 0.03% Total Interest-Bearing 2,931,717 466 0.06% Liabilities Total Interest-Bearing 2,837,686 450 0.06% Deposits Interest-Bearing 1,039,833 85 0.03% Transaction Savings 1,634,814 238 0.06% Time less than $100K 90,994 47 0.21% Time greater than $100K 72,045 80 0.44% Total Short-Term 94,031 16 0.07% Borrowings Other Borrowed Funds - - n/m Net Interest Income and Margin (FTE) $41,780 2.78% Q3'2019 Average Income/ Yield (a) / Volume Expense Rate (a) Interest & Fee Income Earned Total Earning Assets $5,176,744 $40,804 3.15% (FTE) Total Loans (FTE) 1,142,668 14,535 5.05% Commercial Loans (FTE) 231,232 3,102 5.32% Commercial RE Loans 579,069 7,772 5.32% Consumer Loans 332,367 3,661 4.37% Total Investments (FTE) 3,687,049 24,368 2.64% Total Interest-Bearing 347,027 1,901 2.14% Cash Interest Expense Paid Total Earning Assets 5,176,744 455 0.04% Total Interest-Bearing 2,586,880 455 0.07% Liabilities Total Interest-Bearing 2,536,482 447 0.07% Deposits Interest-Bearing 916,180 92 0.04% Transaction Savings 1,441,282 210 0.06% Time less than $100K 101,452 64 0.25% Time greater than $100K 77,568 81 0.41% Total Short-Term 50,398 8 0.06% Borrowings Net Interest Income and Margin (FTE) $40,349 3.11% 6. Noninterest Income. (dollars in thousands except per-share amounts) % Q3'2020 Q3'2019 Change Q2'2020 Service Charges on $3,298 $4,510 -26.9% $3,151 Deposits Merchant Processing 2,860 2,494 14.7% 2,277 Services Debit Card Fees 1,611 1,641 -1.8% 1,459 Trust Fees 756 733 3.1% 714 ATM Processing Fees 606 725 -16.4% 518 Other Service Fees 454 580 -21.7% 420 Financial Services 58 75 -22.7% 123 Commissions Securities Gains - - n/m 71 Other Operating 833 1,051 -20.7% 821 Total Noninterest Income $10,476 $11,809 -11.3% $9,554 Total Revenue (FTE) $52,256 $52,158 0.2% $51,617 Noninterest Income/ 20.0% 22.6% 18.5% Revenue (FTE) Service Charges/Avg. 0.24% 0.38% 0.24% Deposits (a) Total Revenues (FTE) Per Avg. Common Share (a) $7.72 $7.67 0.7% $7.71 % 9/30'20YTD 9/30'19YTD Change Service Charges on $10,697 $13,508 -20.8% Deposits Merchant Processing 7,495 7,708 -2.8% Services Debit Card Fees 4,538 4,789 -5.2% Trust Fees 2,247 2,199 2.2% ATM Processing Fees 1,703 2,080 -18.1% Other Service Fees 1,380 1,742 -20.8% Financial Services 306 270 13.4% Commissions Life Insurance Gains - 433 n/m Securities Gains 71 50 n/m Other Operating (4) 3,241 2,897 11.9% Total Noninterest Income $31,678 $35,676 -11.2% Total Revenue (FTE) $156,068 $156,601 -0.3% Noninterest Income/ 20.3% 22.8% Revenue (FTE) Service Charges/Avg. 0.28% 0.38% Deposits (a) Total Revenues (FTE) Per Avg./ Common Share (a) $7.73 $7.78 -0.6% 7. Noninterest Expense. (dollars in thousands) % Q3'2020 Q3'2019 Change Q2'2020 Salaries & Benefits $12,540 $12,559 -0.2% $12,900 Occupancy and Equipment 5,014 5,199 -3.6% 4,791 Outsourced Data 2,338 2,374 -1.5% 2,324 Processing Professional Fees 669 645 3.7% 643 Courier Service 500 456 9.6% 508 Amortization of Identifiable Intangibles 72 76 -5.3% 73 Other Operating 3,470 2,724 27.4% 3,515 Total Noninterest $24,603 $24,033 2.4% $24,754 Expense Noninterest Expense/ Avg. Earning Assets (a) 1.63% 1.84% 1.77% Noninterest Expense/ 47.1% 46.1% 48.0% Revenues (FTE) % 9/30'20YTD 9/30'19YTD Change Salaries & Benefits $38,458 $38,757 -0.8% Occupancy and Equipment 14,737 15,163 -2.8% Outsourced Data 7,067 7,110 -0.6% Processing Professional Fees 1,701 1,791 -5.0% Courier Service 1,499 1,349 11.1% Amortization of Identifiable Intangibles 218 465 -53.1% Loss Contingency (1) - 553 n/m Other Operating 10,341 9,589 7.8% Total Noninterest $74,021 $74,777 -1.0% Expense Noninterest Expense/ Avg. Earning Assets (a) 1.76% 1.93% Noninterest Expense/ 47.4% 47.8% Revenues (FTE) 8. Allowance for Credit Losses. (dollars in thousands) % Q3'2020 Q3'2019 Change Q2'2020 Average Total Loans $1,312,758 $1,142,668 14.9% $1,232,073 Beginning of Period Allowance for Credit Losses on Loans $24,529 $20,117 21.9% $24,804 (ACLL) Provision for Credit - - n/m - Losses Net ACLL Losses (387) (289) 33.9% (275) End of Period ACLL $24,142 $19,828 21.8% $24,529 Gross ACLL Recoveries / Gross ACLL Losses 56% 72% 66% Net ACLL Losses / Avg. Total Loans (a) 0.12% 0.10% 0.09% % 9/30'20YTD 9/30'19YTD Change Average Total Loans $1,223,250 $1,177,057 3.9% Prior Period Allowance for Credit Losses on Loans $19,484 $21,351 -8.7% (ACLL) Adoption of ASU 2016-13 2,017 - n/m (2) Beginning of Period ACLL 21,501 21,351 0.7% Provision for Credit 4,300 - n/m Losses Net ACLL Losses (1,659) (1,523) 8.9% End of Period ACLL $24,142 $19,828 21.8% Gross ACLL Recoveries / Gross ACLL Losses 49% 55% Net ACLL Losses / Avg. Total Loans (a) 0.18% 0.17% (dollars in thousands) % 9/30/20 9/30/19 Change 6/30/20 Allowance for Credit $24,142 $19,828 21.8% $24,529 Losses on Loans Allowance for Credit Losses on HTM Securities 16 - n/m 16 Total Allowance for $24,158 $19,828 21.8% $24,545 Credit Losses Allowance for Unfunded Credit Commitments 53 2,308 -97.7% 53 9. Credit Quality. (dollars in thousands) % 9/30/20 9/30/19 Change 6/30/20 Nonperforming Loans: Nonperforming Nonaccrual $409 $633 -35.4% $590 Performing Nonaccrual 3,971 3,670 8.2% 3,643 Total Nonaccrual Loans 4,380 4,303 1.8% 4,233 90+ Days Past Due 360 351 2.6% 290 Accruing Loans Total 4,740 4,654 1.8% 4,523 Repossessed Loan 43 43 0.0% 43 Collateral Total Nonperforming $4,783 $4,697 1.8% $4,566 Assets Total Loans Outstanding $1,310,009 $1,133,229 15.6% $1,316,359 Total Assets $6,563,215 $5,616,055 16.9% $6,463,889 Loans: Allowance for Credit $24,142 $19,828 21.8% $24,529 Losses on Loans Allowance for Credit Losses on Loans / Loans 1.84% 1.75% 1.86% Nonperforming Loans/ 0.36% 0.41% 0.34% Total Loans 10. Capital. (in thousands, except per-share amounts) % 9/30/20 9/30/19 Change 6/30/20 Shareholders' Equity $825,576 $713,378 15.7% $808,076 Total Assets 6,563,215 5,616,055 16.9% 6,463,889 Shareholders' Equity/ Total Assets 12.58% 12.70% 12.50% Shareholders' Equity/ Total Loans 63.02% 62.95% 61.39% Tangible Common Equity 10.91% 10.75% 10.81% Ratio Common Shares 26,898 27,014 -0.4% 26,933 Outstanding Common Equity Per Share $30.69 $26.41 16.2% $30.00 Market Value Per Common 54.35 62.18 -12.6% 57.42 Share Share Repurchase Programs (shares in thousands) % Q3'2020 Q3'2019 Change Q2'2020 Total Shares Repurchased 35 - n/m 13 Average Repurchase Price $52.42 $- n/m $52.27 Net Shares Repurchased 35 (52) n/m (1) (Issued) % 9/30'20YTD 9/30'19YTD Change Total Shares Repurchased 228 8 n/m Average Repurchase Price $51.39 $61.98 n/m Net Shares Repurchased ( 164 (284) n/m Issued) 11. Period-End Balance Sheets. (unaudited, dollars in thousands) % 9/30/20 9/30/19 Change 6/30/20 Assets: Cash and Due from Banks $398,964 $415,639 -4.0% $500,820 Investment Securities: Equity Securities - - n/m - Debt Securities 3,983,994 2,983,767 33.5% 3,708,370 Available For Sale Debt Securities Held To 577,795 793,216 -27.2% 638,281 Maturity (3) Loans 1,310,009 1,133,229 15.6% 1,316,359 Allowance For Credit (24,142) (19,828) 21.8% (24,529) Losses on Loans Total Loans, net 1,285,867 1,113,401 15.5% 1,291,830 Other Real Estate Owned 43 43 0.0% 43 Premises and Equipment, 33,437 34,080 -1.9% 34,061 net Identifiable 1,173 1,464 -19.9% 1,245 Intangibles, net Goodwill 121,673 121,673 0.0% 121,673 Other Assets 160,269 152,772 4.9% 167,566 Total Assets $6,563,215 $5,616,055 16.9% $6,463,889 Liabilities and Shareholders' Equity: Deposits: Noninterest-Bearing $2,684,028 $2,265,640 18.5% $2,702,885 Interest-Bearing 1,040,712 910,566 14.3% 997,593 Transaction Savings 1,653,000 1,445,210 14.4% 1,605,169 Time 161,450 175,207 -7.9% 162,765 Total Deposits 5,539,190 4,796,623 15.5% 5,468,412 Short-Term Borrowed 107,973 45,646 136.5% 86,170 Funds Other Liabilities 90,476 60,408 49.8% 101,231 Total Liabilities 5,737,639 4,902,677 17.0% 5,655,813 Shareholders' Equity: Common Equity: Paid-In Capital 467,236 463,424 0.8% 467,386 Accumulated Other Comprehensive Income 103,623 20,454 n/m 93,732 Retained Earnings 254,717 229,500 11.0% 246,958 Total Shareholders' 825,576 713,378 15.7% 808,076 Equity Total Liabilities and Shareholders' Equity $6,563,215 $5,616,055 16.9% $6,463,889 12. Income Statements. (unaudited, in thousands except per-share amounts) % Q3'2020 Q3'2019 Change Q2'2020 Interest & Fee Income: Loans $15,291 $14,431 6.0% $15,278 Investment Securities: Equity Securities 103 92 12.0% 103 Debt Securities 22,652 18,736 20.9% 22,429 Available For Sale Debt Securities Held To 3,235 4,535 -28.7% 3,616 Maturity Interest-Bearing Cash 84 1,901 -95.6% 113 Total Interest & Fee 41,365 39,694 4.2% 41,539 Income Interest Expense: Transaction Deposits 85 92 -7.6% 74 Savings Deposits 238 210 13.3% 224 Time Deposits 127 145 -12.4% 126 Short-Term Borrowed 16 8 95.1% 10 Funds Other Borrowed Funds - - n/m 1 Total Interest Expense 466 455 2.4% 435 Net Interest Income 40,899 39,240 4.2% 41,104 Provision for Credit - - n/m - Losses Noninterest Income: Service Charges 3,298 4,510 -26.9% 3,151 Merchant Processing 2,860 2,494 14.7% 2,277 Services Debit Card Fees 1,611 1,641 -1.9% 1,459 Trust Fees 756 733 3.0% 714 ATM Processing Fees 606 725 -16.4% 518 Other Service Fees 454 580 -21.7% 420 Financial Services 58 75 -22.7% 123 Commissions Securities Gains - - n/m 71 Other Operating 833 1,051 -20.7% 821 Total Noninterest Income 10,476 11,809 -11.3% 9,554 Noninterest Expense: Salaries and Benefits 12,540 12,559 -0.2% 12,900 Occupancy and Equipment 5,014 5,199 -3.6% 4,791 Outsourced Data 2,338 2,374 -1.5% 2,324 Processing Professional Fees 669 645 3.7% 643 Courier Service 500 456 9.6% 508 Amortization of 72 76 -5.3% 73 Identifiable Intangibles Other Operating 3,470 2,724 27.4% 3,515 Total Noninterest 24,603 24,033 2.4% 24,754 Expense Income Before Income 26,772 27,016 -0.9% 25,904 Taxes Income Tax Provision 6,721 6,626 1.4% 6,342 Net Income $20,051 $20,390 -1.7% $19,562 Average Common Shares 26,930 26,986 -0.2% 26,935 Outstanding Diluted Common Shares 26,946 27,027 -0.3% 26,951 Outstanding Per Common Share Data: Basic Earnings $0.74 $0.76 -2.6% $0.72 Diluted Earnings 0.74 0.75 -1.3% 0.72 Dividends Paid 0.41 0.41 0.0% 0.41 % 9/30'20YTD 9/30'19YTD Change Interest & Fee Income: Loans $44,378 $44,050 0.7% Investment Securities: Equity Securities 309 289 6.9% Debt Securities 66,396 54,080 22.8% Available For Sale Debt Securities Held To 10,759 14,788 -27.2% Maturity Interest-Bearing Cash 1,053 5,597 -81.2% Total Interest & Fee 122,895 118,804 3.4% Income Interest Expense: Transaction Deposits 243 333 -27.0% Savings Deposits 679 637 6.5% Time Deposits 386 440 -12.3% Short-Term Borrowed 34 27 25.9% Funds Other Borrowed Funds 1 - n/m Total Interest Expense 1,343 1,437 -6.5% Net Interest Income 121,552 117,367 3.6% Provision for Credit 4,300 - n/m Losses Noninterest Income: Service Charges 10,697 13,508 -20.8% Merchant Processing 7,495 7,708 -2.8% Services Debit Card Fees 4,538 4,789 -5.2% Trust Fees 2,247 2,199 2.2% ATM Processing Fees 1,703 2,080 -18.1% Other Service Fees 1,380 1,742 -20.8% Financial Services 306 270 13.3% Commissions Life Insurance Gains - 433 n/m Securities Gains 71 50 n/m Other Operating (4) 3,241 2,897 11.9% Total Noninterest Income 31,678 35,676 -11.2% Noninterest Expense: Salaries and Benefits 38,458 38,757 -0.8% Occupancy and Equipment 14,737 15,163 -2.8% Outsourced Data 7,067 7,110 -0.6% Processing Professional Fees 1,701 1,791 -5.0% Courier Service 1,499 1,349 11.1% Amortization of 218 465 -53.1% Identifiable Intangibles Loss Contingency (1) - 553 n/m Other Operating 10,341 9,589 7.8% Total Noninterest 74,021 74,777 -1.0% Expense Income Before Income 74,909 78,266 -4.3% Taxes Income Tax Provision 18,334 18,605 -1.5% Net Income $56,575 $59,661 -5.2% Average Common Shares 26,977 26,924 0.2% Outstanding Diluted Common Shares 26,998 26,976 0.1% Outstanding Per Common Share Data: Basic Earnings $2.10 $2.22 -5.4% Diluted Earnings 2.10 2.21 -5.0% Dividends Paid 1.23 1.22 0.8% Footnotes and Abbreviations: (1) In the second quarter 2019, the Company recorded a $301 thousand increase in estimated customer refunds of revenue recognized prior to 2018 and a $252 thousand loss settlement to dismiss a lawsuit. (2) Effective January 1, 2020, the Company adopted Accounting Standards Update (ASU) 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments ("CECL"), resulting in a period opening adjustment to the allowance for credit losses for loans and held-to-maturity debt securities, other liabilities, deferred tax assets, and shareholders' equity. (3) The Company adopted ASU 2016-13, effective January 1, 2020. Debt Securities Held To Maturity of $577,795 thousand at September 30, 2020 and $638,281 thousand at June 30, 2020 are net of related reserve for expected credit losses of $16 thousand. (4) The Company received $603 thousand in excess of amounts charged-off in prior periods on a purchased loan during the first quarter 2020, representing the recovery of a purchased loan credit-risk discount. (FTE) Fully Taxable Equivalent. The Company presents its net interest margin and net interest income on a 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 a relatively large portion of 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 a FTE basis. (a) Annualized Certain amounts in prior periods have been reclassified to conform to the current presentation.