Westamerica Bank

January 20, 2005

For Immediate Release


San Rafael, CA: Westamerica Bancorporation (NASDAQ: WABC), parent company of Westamerica Bank, today reported net income for the fourth quarter of 2004 of $21.2 million, diluted earnings per share (EPS) of $0.65, return on common equity (ROE) of 24.0 percent, and return on average assets (ROA) of 1.81 percent. Fourth quarter 2004 results include a $4.2 million after-tax securities impairment charge related to Freddie Mac and Fannie Mae preferred stock (more fully described below), which reduced fourth quarter 2004 EPS by $0.13, ROE by 4.8 percent, and ROA by 0.35 percent. Fourth quarter 2004 EPS and ROE were further constrained by reduced share repurchase activity in order to accumulate approximately $57 million in cash required to complete the pending acquisition of Redwood Empire Bancorp (more fully described below). As a result, share repurchases, net of shares issued, declined to 76 thousand shares in the fourth quarter of 2004 and to 68 thousand shares in the previous quarter. Net share repurchases were 647 thousand shares for the year 2004, compared to 1.1 million shares for 2003.

Net income for the year ended December 31, 2004 was $95.2 million, compared to $95.1 million for 2003. EPS for 2004 was $2.93, compared to $2.85 for the year 2003. ROE for the year 2004 was 28.8 percent, while ROA was 2.10 percent, compared to 29.4 percent and 2.19 percent, respectively, for the year 2003.

"Fourth quarter and full year 2004 profitability benefited from our focus on growing noninterest income, on gathering low cost deposits, and operational efficiencies," said Chairman, President and CEO David Payne. "During 2004, new deposit-related products fueled an 8 percent increase in service charges on deposit accounts, and our low-cost deposits grew 7 percent, reducing our average cost of funds to 0.50 percent for the year. Our efforts to maintain an efficient cost structure and hold positions open for Redwood Empire employees resulted in a 3 percent decline in expenses, which improved our efficiency ratio from the prior year," continued Payne.

Net interest income on a fully taxable equivalent basis was $54.6 million in the fourth quarter of 2004 compared to $54.5 million in the prior quarter and $54.8 million in the same quarter a year ago. The fourth quarter 2004 net interest margin on a taxable equivalent basis was 5.01 percent, compared to 5.11 percent in the previous quarter and 5.26 percent in the fourth quarter of 2003. For the full year, net interest income and the net interest margin on a taxable equivalent basis were $218.0 million and 5.14 percent, compared to $217.4 million and 5.39 percent, respectively, for 2003. A reduction in high-yielding commercial real estate loans combined with a sustained period of low interest rates have resulted in an operating environment with declining net interest margins.

The provision for loan losses was $600 thousand for the fourth quarter of 2004, unchanged from the previous quarter and down from $750 thousand in the year ago quarter. The level of the loan loss provision reflects management's assessment of credit risk for the loan portfolio.

Noninterest income in the fourth quarter of 2004 totaled $4.3 million, compared to $11.8 million and $10.5 million, respectively, reported in the previous and year ago quarters. The decrease from the prior and year ago quarters includes a $7.2 million "other than temporary impairment" charge for Freddie Mac and Fannie Mae preferred stock. "This securities writedown was an ultra-conservative interpretation of current accounting literature for securities rated investment grade by all nationally recognized rating agencies, and for valuations derived primarily by prevailing interest rates and technical conditions in the capital markets," stated Chairman, President and CEO David Payne. The non-cash securities impairment charge does not affect capital levels as the securities are held in the available-for-sale investment portfolio for which market value adjustments are recorded as other comprehensive income. At December 31, 2004, Westamerica held Freddie Mac and Fannie Mae preferred stock with an adjusted book value of $63.9 million and a tax-equivalent dividend yield of 7.65 percent. The remaining $300 thousand decrease in noninterest income from the prior quarter is primarily attributable to lower service charges on deposit accounts and financial services commissions. Noninterest income other than securities impairment increased $1.0 million in the fourth quarter of 2004 from the year ago quarter primarily due to higher service charges on deposit accounts and debit card income. For the full year, noninterest income other than securities impairment increased 7 percent to $45.8 million from $42.9 million for 2003. This increase in annual results is primarily attributable to increased service charges on deposit accounts, debit card income, and financial services commissions partially offset by lower mortgage banking income.

Noninterest expense for the fourth quarter of 2004 totaled $24.3 million compared to $24.5 million in the prior quarter and $25.2 million in the year ago quarter. The decrease from the prior quarter is primarily attributable to lower salaries and benefits, offset in part by higher equipment costs and professional fees. The decrease from the year ago quarter is primarily attributable to lower salaries and benefits. For the full year, noninterest expense was $98.8 million, down 3 percent from $101.7 million for 2003. The decrease is primarily attributable to reduced salaries and benefits, occupancy and equipment expense, postage, loan expense, and amortization of core deposit intangibles, offset in part by higher telephone expense.

Shareholders' equity was $359 million at December 31, 2004, compared to $340 million at December 31, 2003. The equity-to-asset ratio was 7.6 percent at December 31, 2004, compared to 7.4 percent at December 31, 2003. At December 31, 2004, there were approximately 1.8 million shares remaining to purchase under the existing share repurchase program.

At December 31, 2004, the Company had total assets and total loans outstanding of $4.7 billion and $2.3 billion, respectively.

As announced August 25, 2004 Westamerica signed a definitive agreement to acquire Redwood Empire Bancorp (REBC), parent company of National Bank of the Redwoods. REBC shareholders approved the merger at a shareholder meeting December 14, 2004. The merger also requires customary regulatory approvals. The transaction is valued at approximately $148 million, of which, approximately $57 million will be paid in cash and the remainder by issuance of Westamerica common stock. The pricing of the transaction is subject to adjustments fully described in Westamerica's Form S-4 registration statement filed with the Securities and Exchange Commission on October 15, 2004. Westamerica Bancorporation, through its wholly owned subsidiary Westamerica Bank, operates 87 branches throughout 22 Northern and Central California counties.

Quarterly Financial Highlights PDF

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, 2004 and Form 10-K for the year ended December 31, 2003, 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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