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Westamerica Bancorporation Reports Fourth Quarter 2018 Financial Results

SAN RAFAEL, Calif., Jan. 17, 2019 (GLOBE NEWSWIRE) -- Westamerica Bancorporation (WABC), parent company of Westamerica Bank, generated net income for the fourth quarter 2018 of $19.1 million and diluted earnings per common share ("EPS") of $0.71 compared to $17.0 million and EPS of $0.63 for the third quarter 2018. Third quarter 2018 results include a $585 thousand tax-exempt life insurance policy gain and a $3.5 million loss contingency settlement, which on an aggregate basis reduced EPS $0.07.

"Fourth quarter 2018 net interest income demonstrated continuing improvement as higher market interest rates benefit the yields on our interest-earning loans and securities. Our annualized funding costs were unchanged at 0.04 percent of interest-earning assets due to the predominance of low-cost checking and savings accounts in our deposit portfolio. The annualized net interest margin on a fully-taxable equivalent (“FTE”) basis rose from 3.00 percent for the third quarter 2018 to 3.06 percent for the fourth quarter 2018. Asset quality remains solid with nonperforming assets totaling only $5.8 million at December 31, 2018,” said Chairman, President and CEO David Payne. “Fourth quarter 2018 results generated an annualized 11.7 percent return on average common equity. These results allowed the Board of Directors to approve a $0.40 per share dividend in the fourth quarter 2018 for our shareholders,” concluded Payne.

Net interest income (FTE) was $40.3 million for the fourth quarter 2018, compared to $39.5 million for the third quarter 2018 and $37.9 million for the fourth quarter 2017. The annualized net interest margin (FTE) was 3.06 percent for the fourth quarter 2018, compared to 3.00 percent for the third quarter 2018 and 2.96 percent for the fourth quarter 2017. Checking and savings deposits, which are less sensitive to rising interest rates than time deposits, represented ninety-six percent of the Company’s average deposit base during the fourth quarter 2018.

The Company recognized no provision for loan losses for the fourth quarter 2018 given low levels of nonperforming loans and other credit quality attributes.

Noninterest income for the fourth quarter 2018 totaled $11.9 million, compared to $12.5 million for the third quarter 2018, and $20.3 million for the fourth quarter 2017. Noninterest income for the third quarter 2018 included a tax-exempt life insurance policy gain of $585 thousand. Noninterest income for the fourth quarter 2017 included an $8.0 million gain on the sale of equity securities.

Noninterest expense for the fourth quarter 2018 totaled $25.8 million, compared to $29.4 million for the third quarter 2018 and $31.4 million for the fourth quarter 2017. Noninterest expense for the third quarter 2018 included a $3.5 million loss contingency settlement to dismiss a lawsuit. Noninterest expense for the fourth quarter 2017 included a $5.5 million loss contingency to provide refunds of revenue to some customers. Loss contingencies represent estimated liabilities which are subject to revision.

The tax rate (FTE) applied to pre-tax income (FTE) was 27.8 percent for the fourth quarter 2018, compared to 25.0 percent for the third quarter 2018 and 84.5 percent for the fourth quarter 2017. The lower tax rates for 2018 compared to 2017 reflect a reduction in the federal corporate tax rate due to the Tax Cuts and Jobs Act of 2017 (the “Act”). The Act was signed into law in the fourth quarter 2017, requiring re-measurement of deferred tax assets which resulted in a $12.3 million charge to the fourth quarter 2017 book tax provision. The book tax provisions for the fourth quarter 2018 and third quarter 2018 include tax benefits of $7 thousand and $152 thousand, respectively, for tax deductions from the exercise of employee stock options which exceed related compensation expense recognized in the financial statements.

Westamerica Bancorporation’s wholly owned subsidiary Westamerica Bank, operates commercial banking and trust offices throughout Northern and Central California.

Westamerica Bancorporation Web Address: www.westamerica.com

For additional information contact:
     Westamerica Bancorporation
     1108 Fifth Avenue, San Rafael, CA 94901
     Robert A. Thorson – SVP & Chief Financial Officer
     707-863-6840
     investments@westamerica.com


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 reports filed with the Securities and Exchange Commission, including the annual report for the year ended December 31, 2017 filed on Form 10-K and quarterly report for the quarter ended September 30, 2018 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.

...
         
WESTAMERICA BANCORPORATION        
FINANCIAL HIGHLIGHTS          
December 31, 2018          
             
1. Net Income Summary.          
    (in thousands except per-share amounts)  
        %    
    Q4'18 Q4'17 Change Q3'18  
             
  Net Interest and Fee Income (FTE) $ 40,288   $ 37,918   6.2 % $ 39,498    
  Reversal of Provision for Loan Losses     -       -   n/m       -    
  Noninterest Income   11,897     20,300   -41.4 %   12,528    
  Noninterest Expense   25,787     31,441   -18.0 %   29,366    
  Income Before Taxes (FTE)   26,398     26,777   -1.4 %   22,660    
  Income Tax Provision (FTE)   7,343     22,617   n/m     5,667    
  Net Income $ 19,055   $ 4,160   n/m   $ 16,993    
             
  Average Common Shares Outstanding   26,729     26,384   1.3 %   26,701    
  Diluted Average Common Shares   26,815     26,538   1.0 %   26,815    
             
  Operating Ratios:          
  Basic Earnings Per Common Share $ 0.71   $ 0.16   n/m   $ 0.64    
  Diluted Earnings Per Common Share   0.71     0.16   n/m     0.63    
  Return On Assets (a)   1.33 %   0.30 %     1.19 %  
  Return On Common Equity (a)   11.7 %   2.7 %     10.6 %  
  Net Interest Margin (FTE) (a)   3.06 %   2.96 %     3.00 %  
  Efficiency Ratio (FTE)   49.4 %   54.0 %     56.4 %  
             
  Dividends Paid Per Common Share $ 0.40   $ 0.40   0.0 % $ 0.40    
  Common Dividend Payout Ratio      56 %   250 %     63 %  
             
        %    
    12/31'18YTD 12/31'17YTD Change    
             
  Net Interest and Fee Income (FTE) $ 155,410   $ 148,594   4.6 %    
  Reversal of Provision for Loan Losses     -       (1,900 ) n/m      
  Noninterest Income   48,149     56,628   -15.0 %    
  Noninterest Expense   106,916     107,768   -0.8 %    
  Income Before Taxes (FTE)   96,643     99,354   -2.7 %    
  Income Tax Provision (FTE)   25,079     49,329   n/m      
  Net Income $ 71,564   $ 50,025   n/m      
             
  Average Common Shares Outstanding   26,649     26,291   1.4 %    
  Diluted Average Common Shares   26,756     26,419   1.3 %    
             
  Operating Ratios:          
  Basic Earnings Per Common Share $ 2.69   $ 1.90   n/m      
  Diluted Earnings Per Common Share   2.67     1.89   n/m      
  Return On Assets   1.27 %   0.92 %      
  Return On Common Equity   11.3 %   8.4 %      
  Net Interest Margin (FTE)   2.98 %   2.95 %      
  Efficiency Ratio (FTE)   52.5 %   52.5 %      
             
  Dividends Paid Per Common Share $ 1.60   $ 1.57   1.9 %    
  Common Dividend Payout Ratio      60 %   83 %      
             
2. Net Interest Income.          
    (dollars in thousands)  
        %    
    Q4'18 Q4'17 Change Q3'18  
             
  Interest and Fee Income (FTE) $ 40,802   $ 38,389   6.3 % $ 40,025    
  Interest Expense   514     471   9.1 %   527    
  Net Interest and Fee Income (FTE) $ 40,288   $ 37,918   6.2 % $ 39,498    
             
  Average Earning Assets $ 5,270,708   $ 5,112,354   3.1 % $ 5,231,257    
  Average Interest-          
    Bearing Liabilities   2,691,370     2,701,190   -0.4 %   2,733,670    
             
  Yield on Earning Assets (FTE) (a)   3.10 %   3.00 %     3.04 %  
  Cost of Funds (a)   0.04 %   0.04 %     0.04 %  
  Net Interest Margin (FTE) (a)   3.06 %   2.96 %     3.00 %  
  Interest Expense/          
    Interest-Bearing Liabilities (a)   0.08 %   0.07 %     0.08 %  
  Net Interest Spread (FTE) (a)   3.02 %   2.93 %     2.96 %  
             
        %    
    12/31'18YTD 12/31'17YTD Change    
             
  Interest and Fee Income (FTE) $ 157,369   $ 150,494   4.6 %    
  Interest Expense   1,959     1,900   3.1 %    
  Net Interest and Fee Income (FTE) $ 155,410   $ 148,594   4.6 %    
             
  Average Earning Assets $ 5,212,635   $ 5,028,373   3.7 %    
  Average Interest-          
    Bearing Liabilities   2,722,149     2,696,399   1.0 %    
             
  Yield on Earning Assets (FTE)   3.02 %   2.99 %      
  Cost of Funds   0.04 %   0.04 %      
  Net Interest Margin (FTE)   2.98 %   2.95 %      
  Interest Expense/          
    Interest-Bearing Liabilities   0.07 %   0.07 %      
  Net Interest Spread (FTE)   2.95 %   2.92 %      
             
3. Loans & Other Earning Assets.          
    (average volume, dollars in thousands)  
        %    
    Q4'18 Q4'17 Change Q3'18  
             
  Total Assets $ 5,680,321   $ 5,534,700   2.6 % $ 5,648,004    
  Total Earning Assets   5,270,708     5,112,354   3.1 %   5,231,257    
  Total Loans   1,189,744     1,285,748   -7.5 %   1,194,874    
    Commercial Loans   271,165     327,790   -17.3 %   288,634    
    Commercial RE Loans    570,059     575,984   -1.0 %   554,081    
    Consumer Loans   348,520     381,974   -8.8 %   352,159    
  Total Investment Securities   3,692,951     3,397,149   8.7 %   3,591,637    
    Equity Securities   1,733     2,675   -35.2 %   1,749    
    Debt Securities Available For Sale   2,684,431     2,213,379   21.3 %   2,538,837    
    Debt Securities Held To Maturity   1,006,787     1,181,095   -14.8 %   1,051,051    
  Total Interest Bearing Cash   388,013     429,457   -9.7 %   444,746    
             
  Loans/Deposits   24.2 %   26.7 %     24.4 %  
             
        %    
    12/31'18YTD 12/31'17YTD Change    
             
  Total Assets $ 5,620,618   $ 5,439,682   3.3 %    
  Total Earning Assets   5,212,635     5,028,373   3.7 %    
  Total Loans   1,209,167     1,315,202   -8.1 %    
    Commercial Loans   292,893     339,234   -13.7 %    
    Commercial RE Loans    557,679     567,006   -1.6 %    
    Consumer Loans   358,595     408,962   -12.3 %    
  Total Investment Securities   3,577,597     3,307,137   8.2 %    
    Equity Securities   1,809     2,950   -38.7 %    
    Debt Securities Available For Sale   2,503,356     2,049,506   22.1 %    
    Debt Securities Held To Maturity   1,072,432     1,254,681   -14.5 %    
  Total Interest Bearing Cash   425,871     406,034   4.9 %    
             
  Loans/Deposits   24.8 %   27.9 %      
             
4. Deposits, Other Interest-Bearing Liabilities & Equity.      
    (average volume, dollars in thousands)  
        %    
    Q4'18 Q4'17 Change Q3'18  
             
  Total Deposits $ 4,917,901   $ 4,811,035   2.2 % $ 4,893,859    
    Noninterest Demand    2,280,174     2,172,678   4.9 %   2,223,678    
    Interest Bearing Transaction   927,676     899,822   3.1 %   935,257    
    Savings   1,510,358     1,501,872   0.6 %   1,526,100    
    Time greater than $100K   86,141     106,746   -19.3 %   90,668    
    Time less than $100K   113,552     129,917   -12.6 %   118,156    
  Total Short-Term Borrowings   53,643     62,833   -14.6 %   63,489    
  Shareholders' Equity   646,129     610,200   5.9 %   636,965    
             
  Demand Deposits/          
    Total Deposits   46.4 %   45.2 %     45.4 %  
  Transaction & Savings           
    Deposits / Total Deposits   95.9 %   95.1 %     95.7 %  
             
        %    
    12/31'18YTD 12/31'17YTD Change    
             
  Total Deposits $ 4,872,081   $ 4,722,250   3.2 %    
    Noninterest Demand    2,209,924     2,095,522   5.5 %    
    Interest Bearing Transaction   928,277     888,116   4.5 %    
    Savings   1,519,375     1,492,725   1.8 %    
    Time greater than $100K   94,919     109,563   -13.4 %    
    Time less than $100K   119,586     136,324   -12.3 %    
  Total Short-Term Borrowings   59,992     69,671   -13.9 %    
  Shareholders' Equity   630,697     596,356   5.8 %    
             
  Demand Deposits/          
    Total Deposits   45.4 %   44.4 %      
  Transaction & Savings           
    Deposits / Total Deposits   95.6 %   94.8 %      
             
5. Interest Yields Earned & Rates Paid.        
    (dollars in thousands)    
    Q4'18    
    Average Income/ Yield (a) /    
    Volume Expense Rate    
             
  Interest & Fee Income Earned          
    Total Earning Assets (FTE) $ 5,270,708   $ 40,802   3.10 %    
    Total Loans (FTE)     1,189,744     14,894   4.97 %    
    Commercial Loans (FTE)   271,165     3,698   5.41 %    
    Commercial RE Loans    570,059     7,607   5.29 %    
    Consumer Loans   348,520     3,589   4.09 %    
    Total Investments (FTE)   3,692,951     23,916   2.59 %    
    Total Interest Bearing Cash   388,013     1,992   2.23 %    
             
  Interest Expense Paid          
    Total Earning Assets    5,270,708     514   0.04 %    
    Total Interest-Bearing Liabilities   2,691,370     514   0.08 %    
    Total Interest-Bearing Deposits   2,637,727     506   0.08 %    
    Interest-Bearing Transaction   927,676     124   0.05 %    
    Savings   1,510,358     227   0.06 %    
    Time less than $100K   113,552     70   0.24 %    
    Time greater than $100K   86,141     85   0.39 %    
    Total Short-Term Borrowings    53,643     8   0.06 %    
             
  Net Interest Income and           
  Margin (FTE)   $ 40,288   3.06 %    
             
    Q4'17    
    Average Income/ Yield (a) /    
    Volume Expense Rate    
             
  Interest & Fee Income Earned          
    Total Earning Assets (FTE) $ 5,112,354   $ 38,389   3.00 %    
    Total Loans (FTE)   1,285,748     15,671   4.84 %    
    Commercial Loans (FTE)   327,790     4,168   5.05 %    
    Commercial RE Loans    575,984     8,009   5.52 %    
    Consumer Loans   381,974     3,494   3.63 %    
    Total Investments (FTE)   3,397,149     21,444   2.52 %    
    Total Interest Bearing Cash   429,457     1,274   1.29 %    
             
  Interest Expense Paid          
    Total Earning Assets    5,112,354     471   0.04 %    
    Total Interest-Bearing Liabilities   2,701,190     471   0.07 %    
    Total Interest-Bearing Deposits   2,638,357     461   0.07 %    
    Interest-Bearing Transaction   899,822     60   0.03 %    
    Savings   1,501,872     225   0.06 %    
    Time less than $100K   129,917     75   0.23 %    
    Time greater than $100K   106,746     101   0.38 %    
    Total Short-Term Borrowings    62,833     10   0.06 %    
             
  Net Interest Income and          
  Margin (FTE)   $ 37,918   2.96 %    
             
6. Noninterest Income.          
    (dollars in thousands except per-share amounts)  
        %    
    Q4'18 Q4'17 Change Q3'18  
             
  Service Charges on Deposits $ 4,496   $ 4,756   -5.5 % $ 4,615    
  Merchant Processing Services   2,440     2,346   4.0 %   2,464    
  Debit Card Fees   1,685     1,569   7.3 %   1,656    
  Other Service Fees   620     620   0.0 %   665    
  ATM Processing Fees   703     696   1.0 %   687    
  Trust Fees   737     739   -0.3 %   733    
  Life Insurance Gains     -       -     n/m       585    
  Financial Services Commissions   112     155   -28.0 %   132    
  Equity Securities Gains (Losses)   14       7,955   n/m       (16 )  
  Other Income   1,090     1,464   -25.5 %   1,007    
  Total Noninterest Income $ 11,897   $ 20,300   -41.4 % $ 12,528    
             
    Total Revenue (FTE) $ 52,185   $ 58,218   -10.4 % $ 52,026    
    Noninterest Income/Revenue (FTE)   22.8 %   34.9 %     24.1 %  
    Service Charges/Avg. Deposits (a)   0.36 %   0.39 %     0.37 %  
    Total Revenues (FTE) Per Avg.           
  Common Share (a) $ 7.75   $ 8.75   -11.5 % $ 7.73    
             
        %    
    12/31'18YTD 12/31'17YTD Change    
             
  Service Charges on Deposits $ 18,508   $ 19,612   -5.6 %    
  Merchant Processing Services   9,630     8,426   14.3 %    
  Debit Card Fees   6,643     6,421   3.5 %    
  Other Service Fees   2,567     2,584   -0.7 %    
  ATM Processing Fees   2,752     2,610   5.4 %    
  Trust Fees   2,938     2,875   2.2 %    
  Life Insurance Gains   585       -     n/m      
  Financial Services Commissions   499     639   -21.9 %    
  Equity Securities (Losses) Gains   (52 )     7,955   n/m      
  Other Income   4,079     5,506   -25.9 %    
  Total Noninterest Income $ 48,149   $ 56,628   -15.0 %    
             
    Total Revenue (FTE) $ 203,559   $ 205,222   -0.8 %    
    Noninterest Income/Revenue (FTE)   23.7 %   27.6 %      
    Service Charges/Avg. Deposits   0.38 %   0.42 %      
    Total Revenues (FTE) Per Avg.           
  Common Share $ 7.64   $ 7.81   -2.1 %    
             
7. Noninterest Expense.          
    (dollars in thousands)  
        %    
    Q4'18 Q4'17 Change Q3'18  
             
  Salaries & Benefits $ 13,055   $ 12,652   3.2 % $ 13,415    
  Occupancy and Equipment   5,314     4,860   9.3 %   4,809    
  Loss Contingency (1)     -       5,542   n/m       3,500    
  Outsourced Data Processing   2,299     2,325   -1.1 %   2,292    
  Amortization of           
    Identifiable Intangibles   447     755   -40.8 %   451    
  Professional Fees   565     627   -9.9 %   621    
  Impairment of Tax Credit Investments     -       625   n/m       -    
  Courier Service   446     423   5.5 %   448    
  Other Operating   3,661     3,632   0.8 %   3,830    
  Total Noninterest Expense $ 25,787   $ 31,441   -18.0 % $ 29,366    
             
  Noninterest Expense/          
    Avg. Earning Assets (a)   1.94 %   2.44 %     2.23 %  
  Noninterest Expense/Revenues (FTE)   49.4 %   54.0 %     56.4 %  
             
        %    
    12/31'18YTD 12/31'17YTD Change    
             
  Salaries & Benefits $ 53,007   $ 51,519   2.9 %    
  Occupancy and Equipment   19,679     19,430   1.3 %