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Westamerica Bancorporation Reports Third Quarter 2012 Earnings

Stocks in this article: WABC

SAN RAFAEL, Calif., Oct. 17, 2012 (GLOBE NEWSWIRE) -- 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.

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