|Westamerica Bancorporation reports third quarter 2012 earnings|
october 17, 2012
For Immediate Release
San Rafael, CA: Westamerica Bancorporation (NASDAQ: WABC), parent company of Westamerica Bank, today reported net income for the third quarter 2012 of $20.0 million and diluted earnings per common share (“EPS”) of $0.73. Third quarter 2012 results compare to net income of $21.0 million and EPS of $0.75 for the prior quarter, and net income of $22.4 million and EPS of $0.79 for the third quarter 2011. Third quarter 2012 net income represented an annualized return on shareholders’ equity of 14.7 percent.
“Westamerica continues to deliver relatively high levels of profitability in a difficult operating environment. We are focused on operating in a low-cost, efficient manner while banking industry revenues are pressured by low interest rates, increased regulation, and aggressive competition. During the third quarter, we spent only 46 percent of our revenue on operating costs, delivering approximately 32 percent of our revenue, after-taxes, to the bottom line for shareholders. Credit quality continued to improve with nonperforming assets declining to $71 million at September 30, 2012,” said Chairman, President and CEO David Payne. “Westamerica paid a $0.37 per common share dividend in the third quarter 2012, and retired 225 thousand common shares using our share repurchase plan. Westamerica’s capital ratios remain at historically high levels exceeding the highest regulatory guidelines,” added Payne.
Net interest income on a fully taxable equivalent basis was $48.7 million for the third quarter 2012, compared to $50.3 million for the prior quarter and $54.7 million for the third quarter 2011. The change in net interest income is due to reductions in yields on loans and investment securities, which have declined during this period of low market interest rates. The change in net interest income is also attributable to reduced loan volumes, placing greater reliance on lower-yielding investment securities. Loan volumes have declined due to problem loan workout activities, particularly with purchased loans, and reduced volumes of loan originations. In Management’s opinion, current levels of competitive loan pricing do not provide adequate forward earnings potential, and competitive loan underwriting standards are loosening, causing newly originated loans to contain higher levels of credit risk; Management is avoiding low-yielding higher-risk loan originations. To offset the decline in interest income, interest expense has been reduced by lowering rates paid on interest-bearing deposits and borrowings and by reducing the volume of higher-cost funding sources. The interest cost of funding the Company’s loans and investment securities has declined to 0.13 percent in the third quarter 2012 from 0.15 percent in the prior quarter and 0.20 percent in the third quarter 2011. The third quarter 2012 net interest margin on a fully taxable equivalent basis was 4.67 percent, compared to 4.89 percent for the prior quarter and 5.32 percent for the third quarter 2011.
The provision for loan losses was $2.8 million for the third quarter 2012, unchanged from the prior quarter and third quarter 2011. Net loan losses charged against the allowance for loan losses totaled $3.4 million for the third quarter 2012, compared to $3.2 million for the prior quarter and $2.9 million for the third quarter 2011. At September 30, 2012, the allowance for loan losses totaled $31.0 million; nonperforming originated loans totaled $13.5 million; nonperforming purchased FDIC-indemnified loans totaled $20.7 million, net of purchase discounts of $2.8 million; and nonperforming purchased non-indemnified loans totaled $10.1 million, net of purchase discounts of $2.2 million.
Noninterest income for the third quarter 2012 totaled $14.6 million, compared to $13.5 million in the second quarter 2012 and $15.2 million for the third quarter 2011. The decline in second quarter 2012 noninterest income is primarily due to a $1.3 million loss realized from the sale of a collateralized mortgage obligation bond, which reduced net income $750 thousand.
Noninterest expense for the third quarter 2012 totaled $29.3 million, compared to $29.3 million in the prior quarter and $31.4 million in the third quarter 2011. Management is focused on reducing operating expenses over the near-term, primarily professional fees, repossessed loan collateral expenses and other problem loan related costs.
The Company’s fully tax-equivalent tax rate was 36 percent in the third quarter 2012 compared to 34 percent in the second quarter 2012 and 37 percent in the third quarter 2011. The decline in tax rate in the second quarter 2012 is attributable to a tax refund from an amended tax return which increased net income $950 thousand.
At September 30, 2012, Westamerica Bancorporation’s tangible common equity-to-asset ratio was 8.8 percent, assets totaled $4.9 billion and loans outstanding totaled $2.2 billion. Westamerica Bancorporation, through its wholly owned subsidiary Westamerica Bank, operates commercial banking and trust offices throughout Northern and Central California.
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, 2011 filed on Form 10-K and quarterly report for the quarter ended June 30, 2012 filed on Form 10-Q, describe some of these factors, including certain credit, market, operational, liquidity and interest rate 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, 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.
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