October 20 , 2016
For Immediate Release
San Rafael, CA: Westamerica Bancorporation (NASDAQ: WABC), parent company of Westamerica Bank, generated net income for the third quarter 2016 of $15.6 million and diluted earnings per common share ("EPS") of $0.61, compared to net income of $14.5 million and EPS of $0.57 for the prior quarter, and net income of $14.9 million and EPS of $0.58 for the third quarter 2015.
Nonperforming delinquent loans declined $7.1 million during the third quarter 2016; the resolution of these problem loans contributed to net recoveries of prior loan losses of $649 thousand during the quarter. Given the level of improvement in credit quality, Westamerica recorded a reversal of the provision for loan losses of $3.2 million for the third quarter 2016. Operating expenses increased approximately $900 thousand for the third quarter 2016 relative to the prior quarter due in part to higher legal fees related to loan administration and collection activities. Our net interest margin was 3.21 percent in the third quarter 2016, down 0.06 percent from the prior quarter due to persistently low market interest rates,” said Chairman, President and CEO David Payne. “Westamerica continued to generate relatively high returns within our industry, realizing an annualized return on shareholders’ common equity of 11.4 percent for the third quarter 2016. Westamerica paid its shareholders a $0.39 per share dividend in the third quarter,” concluded Payne.
The annualized net interest margin on a fully taxable equivalent basis was 3.21 percent for the third quarter 2016, compared to 3.27 percent for the prior quarter, and 3.31 percent for the third quarter 2015. Net interest income on a fully taxable equivalent basis was $36.2 million for the third quarter 2016, compared to $36.5 million for the prior quarter, and $37.2 million for the third quarter 2015. The Company’s loan portfolio has declined from the third quarter 2015 through the third quarter 2016; Management has avoided originating long-term, low-yielding loans given historically low interest rates. Management has also maintained conservative loan underwriting, terms and conditions. During this period, the investment portfolio has grown. The changing composition of interest earning assets and low market interest rates has pressured the net interest margin. The funding cost of deposits and other interest-bearing borrowings, as a percentage of average loans and investment securities, was 0.05 percent for the third quarter 2016, unchanged from the prior quarter and the third quarter 2015. Checking and savings deposits, which earn relatively low interest rates and are less volatile than time deposits during periods of rising market interest rates, represented 94 percent of average total deposits during the third quarter 2016.
During the third quarter 2016, Westamerica’s recoveries of loan losses exceeded gross loan losses by $649 thousand. In contrast, gross loan losses exceeded recoveries of loan losses by $577 thousand for the second quarter 2016 and by $792 thousand for the third quarter 2015. Westamerica recorded a reversal of the provision for loan losses of $3.2 million for the third quarter 2016 while the provision for loan losses was zero for both the second quarter 2016 and third quarter 2015. At September 30, 2016, the allowance for loan losses totaled $26.4 million.
Noninterest income for the third quarter 2016 totaled $11.6 million, compared to $11.7 million for the prior quarter and $12.0 million for the third quarter 2015.
Noninterest expense for the third quarter 2016 totaled $26.1 million, compared to $25.2 million for the prior quarter, and $26.2 million for the third quarter 2015. The approximate $900 thousand increase in noninterest expense from the second quarter 2016 to the third quarter 2016 is attributable to higher legal fees related to loan administration and collection efforts as well as increased occupancy costs and higher net OREO costs, offset in part by lower other expenses. The approximate $100 thousand reduction in noninterest expense from the third quarter 2015 to the third quarter 2016 is due to lower net OREO costs and other expenses, offset in part by higher legal fees and employee benefit costs.
At September 30, 2016, Westamerica Bancorporation's tangible common equity-to-asset ratio was 8.4 percent, and assets totaled $5.3 billion. Westamerica Bancorporation, through its wholly owned subsidiary Westamerica Bank, operates commercial banking and trust offices throughout Northern and Central California.
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 reports filed with the Securities and Exchange Commission, including the annual report for the year ended December 31, 2015 filed on Form 10-K and quarterly report for the quarter ended June 30, 2016 filed on Form 10-Q, describe some of these factors, including certain credit, interest rate, operational, liquidity and market 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 Dodd-Frank Wall Street Reform and Consumer Protection Act of 2011, 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.
For additional information contact:
Robert A. Thorson, Senior Vice President and Chief Financial Officer, (707) 863-6840