Westamerica Bancorporation ( NASDAQ: WABC), parent company of Westamerica Bank, today reported fourth quarter 2010 net income applicable to common equity of $23.7 million, or $0.81 diluted earnings per share (“EPS”), compared to $23.7 million, or $0.81 EPS in the prior quarter, and $23.3 million, or $0.79 EPS in the fourth quarter 2009. Fourth quarter 2010 net income applicable to common equity represents an 18 percent annualized return on average common equity.
“Westamerica’s net interest margin was 5.39 percent in the fourth quarter 2010. Yields on loans and investment securities are relatively low in the current interest rate environment, which has caused a reduction in asset yields. Our focus on checking and savings deposits delivered a 0.29 percent cost of funding our loans and securities, a much lower funding cost than our peers. We have worked diligently to operate efficiently in spite of cyclically higher problem loan workout costs and FDIC insurance assessments. From our total revenues of $72 million in the fourth quarter 2010, only $32 million was spent on operating expenses, delivering well over one-half of our revenue as pre-tax income for our shareholders,” said Chairman, President and CEO David Payne. “The credit quality of legacy Westamerica assets improved during the quarter as nonperforming assets declined $6 million to $33 million at December 31, 2010. Purchased nonperforming assets declined $12 million to $111 million at December 31, 2010, of which $69 million are indemnified by the FDIC under loss-sharing agreements. Common shareholders’ equity increased to $545 million at December 31, 2010 resulting in a total regulatory capital ratio of 15.5 percent,” Payne added.
Net interest income on a fully taxable equivalent basis (FTE) was $56.4 million for the fourth quarter 2010, compared to $56.7 million (FTE) for the prior quarter and $58.9 million (FTE) for the fourth quarter 2009. The fourth quarter 2010 annualized net interest margin was 5.39 percent (FTE), compared to 5.54 percent (FTE) for the prior quarter and 5.50 percent (FTE) for the fourth quarter 2009. The decline in net interest margin from the prior quarter is due to a decline in yields on loans and investment securities; current market yields are generally lower than yields on existing portfolios. The decline in net interest income in the fourth quarter 2010 compared to the fourth quarter 2009 is attributable to a lower net interest margin and lower levels of loans; loans have declined due to weak economic conditions and weak loan demand.