Note 10 - Risk-Based Capital

12 Months Ended

Dec. 31, 2012

Regulatory Capital Requirements under Banking Regulations [Text Block]

Note 10: Risk-Based Capital

The Company and the Bank are subject to various regulatory capital adequacy requirements administered by federal and state agencies. The Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”) required that regulatory agencies adopt regulations defining five capital tiers for banks: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized. Failure to meet minimum capital requirements can initiate discretionary actions by regulators that, if undertaken, could have a direct, material effect on the Company’s financial statements. Quantitative measures, established by the regulators to ensure capital adequacy, require that the Company and the Bank maintain minimum ratios of capital to risk-weighted assets. There are two categories of capital under the guidelines. Tier 1 capital includes common shareholders’ equity and qualifying preferred stock less goodwill, identifiable intangible assets, and other adjustments including the unrealized net gains and losses, after taxes, on available for sale securities. Tier 2 capital includes preferred stock not qualifying for Tier 1 capital, mandatory convertible debt, subordinated debt, certain unsecured senior debt and the allowance for loan losses, subject to limitations within the guidelines. Under the guidelines, capital is compared to the relative risk of the balance sheet, derived from applying one of four risk weights (0%, 20%, 50% and 100%) to various categories of balance sheet assets and unfunded commitments to extend credit, primarily based on the credit risk of the counterparty. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weighting and other factors.

As of December 31, 2012, the Company and the Bank met all capital adequacy requirements to which they are subject.

The Company and the Bank are well capitalized under the FDICIA regulatory framework for prompt corrective action. To be well capitalized, the institution must maintain a total risk-based capital ratio as set forth in the following table and not be subject to a capital directive order. The following tables show capital ratios for the Company and the Bank as of December 31, 2012 and 2011:

						For Capital Adequacy Purposes					To Be Well Capitalized Under the FDICIA Prompt Corrective Action Provisions
At December 31, 2012	Amount		Ratio			Amount		Ratio			Amount		Ratio
	(Dollars in thousands)
Total Capital (to risk-weighted assets)
Consolidated Company	$	444,205		16.33	%	$	217,627		8.00	%	$	272,033		10.00	%
Westamerica Bank		418,746		15.62	%		214,452		8.00	%		268,065		10.00	%
Tier 1 Capital (to risk-weighted assets)
Consolidated Company		409,763		15.06	%		108,813		4.00	%		163,220		6.00	%
Westamerica Bank		378,921		14.14	%		107,226		4.00	%		160,839		6.00	%
Leverage Ratio *
Consolidated Company		409,763		8.56	%		191,396		4.00	%		239,245		5.00	%
Westamerica Bank		378,921		7.99	%		189,788		4.00	%		237,236		5.00	%

						For Capital Adequacy Purposes					To Be Well Capitalized Under the FDICIA Prompt Corrective Action Provisions
At December 31, 2011	Amount		Ratio			Amount		Ratio			Amount		Ratio
	(Dollars in thousands)
Total Capital (to risk-weighted assets)
Consolidated Company	$	444,659		15.83	%	$	224,664		8.00	%	$	280,830		10.00	%
Westamerica Bank		424,446		15.32	%		221,578		8.00	%		276,973		10.00	%
Tier 1 Capital (to risk-weighted assets)
Consolidated Company		408,266		14.54	%		112,332		4.00	%		168,498		6.00	%
Westamerica Bank		383,375		13.84	%		110,789		4.00	%		166,184		6.00	%
Leverage Ratio *
Consolidated Company		408,266		8.38	%		194,969		4.00	%		243,711		5.00	%
Westamerica Bank		383,375		7.93	%		193,406		4.00	%		241,757		5.00	%

* The leverage ratio consists of Tier 1 capital divided by average assets, excluding certain intangible assets, during the most recent calendar quarter. The minimum leverage ratio guideline is 3.00% for banking organizations that do not anticipate significant growth and that have well-diversified risk, excellent asset quality, high liquidity, good earnings and, in general, are considered top-rated, strong banking organizations.

FDIC-covered assets are included in the 20% risk-weight category until the loss-sharing agreements terminate; the residential loss-sharing agreement expires February 6, 2019 and the non-residential loss-sharing agreement expires (as to losses) February 6, 2014.