Westamerica

Westamerica Bancorporation reports quarterly earnings for third quarter 2006

October 17, 2006

For Immediate Release

San Rafael, CA: Westamerica Bancorporation (NASDAQ: WABC), parent company of Westamerica Bank, today reported net income of $24.2 million for the third quarter of 2006, compared to $24.5 million for the second quarter of 2006. Third quarter 2006 diluted earnings per share were $0.77, unchanged from the second quarter of 2006. Return on average common equity (ROE) for the third quarter of 2006 was 22.7 percent and return on assets (ROA) was 1.98 percent. Third quarter 2005 net income of $28.9 million, or $0.88 diluted earnings per share, includes a gain on the sale of a facility vacated following the Redwood Empire Bancorp acquisition and recognition of company owned life insurance proceeds which, on a combined basis, account for $0.06 diluted earnings per share.

For the first nine months of 2006, net income totaled $74.9 million, compared to $78.9 million for the same period in 2005. Diluted earnings per share were $2.34 for the first nine months of 2006, compared to $2.39 for the same period in 2005. Results for the first nine months of 2005 include a realized loss on sale of securities, and gains from the sale of property, and company owned life insurance proceeds, which, on a combined basis, reduced net income by $100 thousand.

"Results for the third quarter of 2006 include a stabilizing net interest margin and controlled expense levels," said Chairman, President and CEO David Payne. "Our 1.52 percent cost of funds reflects the value of our significant noninterest bearing demand deposits and other low-cost deposits comprising 79 percent of Westamerica's deposit base. Our relatively low cost of funds supported a 4.54 percent margin for the third quarter 2006. Cost consciousness throughout the Company has helped reduce our noninterest expenses 3.8 percent in the first nine months of 2006, compared to the same period last year," added Payne.

Net interest income on a fully taxable equivalent basis was $50.2 million in the third quarter of 2006 compared to $51.5 million and $56.0 million in the second quarter of 2006 and the third quarter of 2005, respectively. The third quarter of 2006 net interest margin (fully taxable equivalent) was 4.54 percent, down from 4.58 percent and 4.76 percent in the second quarter of 2006 and the third quarter of 2005, respectively. Rising short-term interest rates combined with limited change in intermediate interest rates and highly competitive loan and deposit pricing has resulted in an operating environment with declining net interest margins.

Noninterest income for the first nine months of 2006 totaled $41.6 million, compared to $40.1 million in the first nine months of 2005. The $1.5 million increase is primarily due to:

$860 thousand higher merchant credit card income attributable to the acquisition of Redwood Empire Bancorp on March 1, 2005.
$335 thousand increase in debit card and ATM fees.
$480 thousand decrease in service charges on deposit accounts, primarily account analysis fees.
$600 thousand increase due to $4.9 million in securities losses and $4.3 million in gains from the sale of real estate and life insurance proceeds recognized in 2005.

Noninterest expense for the third quarter of 2006 was $25.4 million, reduced from $26.3 million for the prior quarter and $27.3 million for the third quarter of 2005. The efficiency ratio for the third quarter of 2006 was 39.6 percent, compared to 40.2 percent for the prior quarter and 37.2 percent for the third quarter of 2005.

The provision for credit losses was $75 thousand for the third quarter of 2006, reduced from $150 thousand for the previous quarter and for the third quarter of 2005. The reduced provision for credit losses reflects management's assessment of credit risk for the loan portfolio.

At September 30, 2006, shareholders' equity was $427 million and the Company's total regulatory capital ratio was 11.0 percent, which exceeds the "well-capitalized" level of 10 percent under regulatory requirements. During the third quarter 2006, shares repurchased, net of shares issued, totaled 291 thousand shares. At September 30, 2006, 1.9 million shares remain authorized under the Company's stock repurchase plan.

Westamerica Bancorporation, through its wholly owned subsidiary Westamerica Bank, operates 87 branches throughout 21 Northern and Central California counties. At September 30, 2006, the company had total assets outstanding of $4.8 billion.

Quarterly Financial Highlights pdf image

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 annual and quarterly reports filed with the Securities and Exchange Commission, including the Company's Form 10-Q for the quarter ended June 30, 2006 and Form 10-K for the year ended December 31, 2005, 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 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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