Westamerica Bank

For Immediate Release


San Rafael, CA: Westamerica Bancorporation (NASDAQ: WABC), parent company of Westamerica Bank, today reported record net income for the year ended December 31, 2005 of $107.4 million, compared to $95.2 million for 2004. Diluted earnings per share (EPS) for 2005 were $3.27, an 11 percent increase over $2.93 for the year 2004. Results for the year 2005 include available-for-sale securities losses, gains on the sale of real estate, and company owned life insurance proceeds, which combined to increase net income $247 thousand. Results for the year 2004 included an impairment charge related to Freddie Mac and Fannie Mae preferred stock, which reduced net income $4.2 million, or EPS of $0.13. Return on shareholders’ equity for the year 2005 was 26.0 percent and return on assets was 2.12 percent, compared to 28.8 percent and 2.10 percent, respectively, for the year 2004. For the year 2005, shareholder dividends totaled $1.22 per share, an 11 percent increase over $1.10 per share for the year 2004.

“Fourth quarter 2005 results benefited from an increased net interest margin, strength in merchant card processing and debit card fees, and cost containment,” said Chairman, President and CEO David Payne. “During the fourth quarter, our focus on reducing high-cost funding sources helped our net interest margin increase to 4.80 percent from 4.76 percent in the prior quarter. The March 2005 Redwood Empire Bancorp acquisition helped grow our fee income to 20 percent of revenues in 2005, while our efficiency ratio remains low at 37.7 percent. We are pleased to be generating a 26 percent return on our shareholders’ equity,” continued Payne.

Net income for the fourth quarter 2005 totaled $27.6 million, or EPS of $0.85. Fourth quarter results include company owned life insurance proceeds, which account for $0.01 EPS. Fourth quarter 2005 results compare to EPS of $0.89 for the third quarter 2005, which included a gain on the sale of a facility vacated following the Redwood Empire Bancorp acquisition and company owned life insurance proceeds combining to account for $0.06 EPS. Fourth quarter 2005 results also compare to EPS of $0.65 for the fourth quarter 2004, which included the impairment charge, which reduced EPS $0.13. Fourth quarter 2005 return on shareholders’ equity was 26.0 percent and return on assets was 2.15 percent.

Net interest income on a fully taxable equivalent basis was $55.8 million in the fourth quarter of 2005 compared to $56.0 million in the prior quarter and $54.6 million in the same quarter a year ago. The fourth quarter 2005 net interest margin on a taxable equivalent basis was 4.80 percent, compared to 4.76 percent for the previous quarter and 5.01 percent for the fourth
quarter of 2004. For the full year 2005, net interest income and the net interest margin on a fully taxable equivalent basis were $223.9 million and 4.82 percent, compared to $218.0 million and 5.14 percent, respectively, for 2004.

The provision for credit losses was $150 thousand for the fourth quarter of 2005, unchanged from the previous quarter and down from $600 thousand for the year ago quarter. The level of the credit loss provision reflects management's assessment of credit risk for the loan portfolio.

Noninterest income in the fourth quarter of 2005 totaled $14.4 million, compared to $17.4 million reported in the previous quarter. The decrease from the prior quarter is primarily attributable to a third quarter $2.4 million gain on the sale of a facility vacated following the Redwood Empire Bancorp acquisition. Noninterest income for the fourth quarter 2005 increased $10.2 million from noninterest income for the fourth quarter 2004. The fourth quarter 2004 included a $7.2 million “other than temporary impairment” charge for Freddie Mac and Fannie Mae preferred stock. The remaining $3.0 million increase in fourth quarter 2005 noninterest income from fourth quarter 2004 levels is primarily attributable to higher merchant card processing fees, service charges on deposit accounts, and debit card income. For the full year 2005, noninterest income increased to $54.5 million from $38.6 million for 2004. Of the $15.9 million annual increase, $6.9 million of the increase is attributable to the 2004 impairment charge and the 2005 securities losses, gains from the sale of real estate and company owned life insurance proceeds. The remaining $9.0 million increase in noninterest income from the prior year is primarily attributable to higher merchant card processing fees, debit card income, service charges on deposit accounts, and ATM fees.

Noninterest expense for the fourth quarter of 2005 totaled $26.2 million compared to $26.8 million in the prior quarter and $24.3 million in the year ago quarter. The decrease from the prior quarter is primarily attributable to lower salaries and benefits. The increase from the year ago quarter is primarily attributable to higher amortization of intangible assets, personnel costs, and occupancy expense as a result of the Redwood Empire Bancorp acquisition. For the full year, noninterest expense was $104.9 million, up six percent from $98.8 million for 2004. The increase is primarily attributable to higher amortization of intangible assets, salaries and benefits, occupancy and equipment expense, and professional fees.

Shareholders' equity was $427 million at December 31, 2005, and the equity-to-asset ratio was 8.3 percent. At December 31, 2005, there were approximately 1.5 million shares remaining to purchase under the Company’s existing share repurchase program. At December 31, 2005, the Company had total assets of $5.1 billion and total loans outstanding of $2.7 billion.

Westamerica Bancorporation, through its wholly owned subsidiary Westamerica Bank, operates 87 branches throughout 21 Northern and Central California counties.


Quarterly Financial Highlights

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 September 30, 2005 and Form 10-K for the year ended December 31, 2004, 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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