Westamerica Bancorporation Reports First Quarter 2018 Financial Results

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SAN RAFAEL, Calif., April 19, 2018 (GLOBE NEWSWIRE) -- Westamerica Bancorporation WABC, parent company of Westamerica Bank, generated net income for the first quarter 2018 of $17.5 million and diluted earnings per common share ("EPS") of $0.66, compared to first quarter 2017 net income of $15.0 million and EPS of $0.57. Fourth quarter 2017 net income of $4.2 million and EPS of $0.16 include adjustments to asset values triggered by enactment of the Tax Cuts and Jobs Act of 2017 ("Act"), recognition of a loss contingency, and securities gains which collectively reduced EPS by $0.42.

"First quarter 2018 net income benefited from higher interest income as rising market interest rates are benefiting our asset yields. Our funding costs were unchanged, however, at 0.04 percent of earning assets due to the predominance of low-cost checking and savings accounts in our deposit base. Net interest income was $34.0 million for the first quarter 2018, compared to $33.7 million for the fourth quarter 2017 and $32.8 million for the first quarter 2017. First quarter 2018 net income also benefited from Westamerica's operating efficiency; noninterest expenses were $24.2 million for the first quarter 2018 compared to $24.6 million for the first quarter 2017, said Chairman, President and CEO David Payne. "Asset quality remains strong with nonperforming assets totaling only $7.8 million at March 31, 2018, and net loan loss recoveries of $72 thousand for the first quarter 2018. First quarter 2018 results generated an 11.6 percent return on average common equity for our shareholders," concluded Payne.

Interest income earned on loans and securities was $34.5 million for the first quarter 2018, compared to $34.2 million for the fourth quarter 2017 and $33.3 million for the first quarter 2017. Interest expense paid on deposits and short-term borrowed funds was $459 thousand for the first quarter 2018, compared to $471 thousand for the fourth quarter 2017 and $480 thousand for the first quarter 2017. Checking and savings deposits represented ninety-five percent of the Company's average deposit base during the first quarter 2018; checking and savings deposits are less sensitive to rising interest rates than time deposits.

The Company recognized no provision for loan losses for the first quarter 2018 given stable nonperforming loan volumes and other credit quality attributes. At March 31, 2018, the allowance for loan losses totaled $23.1 million compared to $23.0 million at December 31, 2017.

Noninterest income for the first quarter 2018 totaled $12.0 million, compared to $20.3 million for the fourth quarter 2017 and $11.7 million for the first quarter 2017. Noninterest income for the fourth quarter 2017 included $8.0 million in securities gains.

Noninterest expense for the first quarter 2018 totaled $24.2 million, compared to $30.2 million for the fourth quarter 2017 and $24.6 million for the first quarter 2017. Noninterest expense for the fourth quarter 2017 included a $625 thousand impairment of low income housing limited partnership investments due to enactment of the Act and a $5.5 million loss contingency accrual.

The book tax provision for the first quarter 2018 was $4.3 million, compared to $19.7 million for the fourth quarter 2017 and $4.8 million for the first quarter 2017, representing effective tax rates of 19.7 percent, 82.6 percent and 24.3 percent, respectively. The book tax provisions for the first quarter 2018 and the first quarter 2017 include tax benefits of $451 thousand and $671 thousand, respectively, for tax deductions from the exercise of employee stock options which exceed related compensation expenses recognized in the financial statements; these benefits reduced the effective tax rate by 2.0 percent and 3.4 percent, respectively. The lower effective tax rate for the first quarter 2018 reflects a reduction in the federal corporate tax rate due to the Act. The book tax provision for the fourth quarter 2017 includes a charge of $12.3 million to re-measure the Company's net deferred tax asset triggered by enactment of the Act.

Westamerica Bancorporation, through its 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:

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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, 2017 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     
March 31, 2018     
       
1. Net Income Summary.     
  (in thousands except per-share amounts) 
    %  
  Q1'18Q1'17ChangeQ4'17 
       
 Net Interest and Fee Income (FTE)$35,467  $36,030  -1.6%$36,644   
 Provision for Loan Losses   -     -  n/m    -   
 Noninterest Income 11,955   11,657  2.6% 20,300   
 Noninterest Expense 24,214   24,615  -1.6% 30,167   
 Income Before Taxes (FTE) 23,208   23,072  0.6% 26,777   
 Income Tax Provision (FTE) 5,702   8,023  -28.9% 22,617   
 Net Income$17,506  $15,049  16.3%$4,160   
       
 Average Common Shares Outstanding 26,532   26,171  1.4% 26,384   
 Diluted Average Common Shares 26,665   26,329  1.3% 26,538   
       
 Operating Ratios:     
 Basic Earnings Per Common Share$0.66  $0.58  13.8%$0.16   
 Diluted Earnings Per Common Share 0.66   0.57  15.8% 0.16   
 Return On Assets (a) 1.28% 1.13%  0.30% 
 Return On Common Equity (a) 11.6% 10.5%  2.7% 
 Net Interest Margin (FTE) (a) 3.02% 3.14%  3.12% 
 Efficiency Ratio (FTE) 51.1% 51.6%  53.0% 
       
 Dividends Paid Per Common Share$0.40  $0.39  2.6%$0.40   
 Common Dividend Payout Ratio   61% 68%  250% 
       
2. Net Interest Income.     
  (dollars in thousands) 
    %  
  Q1'18Q1'17ChangeQ4'17 
       
 Interest and Fee Income (FTE)$35,926  $36,510  -1.6%$37,115   
 Interest Expense 459   480  -4.3% 471   
 Net Interest and Fee Income (FTE)$35,467  $36,030  -1.6%$36,644   
       
 Average Earning Assets$4,723,213  $4,620,001  2.2%$4,682,897   
 Average Interest-     
 Bearing Liabilities 2,734,227   2,704,472  1.1% 2,701,190   
       
 Yield on Earning Assets (FTE) (a) 3.06% 3.18%  3.16% 
 Cost of Funds (a) 0.04% 0.04%  0.04% 
 Net Interest Margin (FTE) (a) 3.02% 3.14%  3.12% 
 Interest Expense/     
 Interest-Bearing Liabilities (a) 0.07% 0.07%  0.07% 
 Net Interest Spread (FTE) (a) 2.99% 3.11%  3.09% 
       
3. Loans & Other Earning Assets.     
  (average volume, dollars in thousands) 
    %  
  Q1'18Q1'17ChangeQ4'17 
       
 Total Assets $5,564,705   $5,395,783  3.1% $5,534,700   
 Total Earning Assets 4,723,213   4,620,001  2.2% 4,682,897   
 Total Loans 1,243,750   1,355,250  -8.2% 1,285,748   
 Commercial Loans 316,345   354,896  -10.9% 327,790   
 Commercial RE Loans  556,034   558,485  -0.4% 575,984   
 Consumer Loans 371,371   441,869  -16.0% 381,974   
 Total Investment Securities 3,479,463   3,264,751  6.6% 3,397,149   
 Equity Securities 1,993   3,113  -36.0% 2,675   
 Debt Securities Available For Sale 2,341,414   1,937,915  20.8% 2,213,379   
 Debt Securities Held To Maturity 1,136,056   1,323,723  -14.2% 1,181,095   
       
 Loans/Deposits 25.8% 28.9%  26.7% 
       
4. Deposits, Other Interest-Bearing Liabilities & Equity.    
  (average volume, dollars in thousands) 
    %  
  Q1'18Q1'17ChangeQ4'17 
       
 Total Deposits $4,828,352   $4,692,746  2.9% $4,811,035   
 Noninterest Demand  2,156,626   2,056,858  4.9% 2,172,678   
 Interest Bearing Transaction 925,533   880,387  5.1% 899,822   
 Savings 1,518,028   1,501,961  1.1% 1,501,872   
 Time greater than $100K 103,145   112,140  -8.0% 106,746   
 Time less than $100K 125,020   141,400  -11.6% 129,917   
 Total Short-Term Borrowings 62,501   68,584  -8.9% 62,833   
 Shareholders' Equity 613,860   582,384  5.4% 610,200   
       
 Demand Deposits/     
 Total Deposits 44.7% 43.8%  45.2% 
 Transaction & Savings      
 Deposits / Total Deposits 95.3% 94.6%  95.1% 
       
5. Interest Yields Earned & Rates Paid.    
  (dollars in thousands)  
  Q1'18  
  AverageIncome/Yield (a) /  
  VolumeExpenseRate  
       
 Interest & Fee Income Earned     
 Total Earning Assets (FTE) $4,723,213   $35,926  3.06%  
 Total Loans (FTE)   1,243,750   14,822  4.83%  
 Commercial Loans (FTE) 316,345   3,791  4.86%  
 Commercial RE Loans  556,034   7,632  5.57%  
 Consumer Loans 371,371   3,399  3.70%  
 Total Investments (FTE) 3,479,463   21,104  2.43%  
       
 Interest Expense Paid     
 Total Earning Assets  4,723,213   459  0.04%  
 Total Interest-Bearing Liabilities 2,734,227   459  0.07%  
 Total Interest-Bearing Deposits 2,671,726   450  0.07%  
 Interest-Bearing Transaction 925,533   60  0.03%  
 Savings 1,518,028   222  0.06%  
 Time less than $100K 125,020   71  0.23%  
 Time greater than $100K 103,145   97  0.38%  
 Total Short-Term Borrowings  62,501   9  0.06%  
       
 Net Interest Income and      
 Margin (FTE)  $35,467  3.02%  
       
  Q1'17  
  AverageIncome/Yield (a) /  
  VolumeExpenseRate  
       
 Interest & Fee Income Earned     
 Total Earning Assets (FTE) $4,620,001   $36,510  3.18%  
 Total Loans (FTE) 1,355,250   16,069  4.81%  
 Commercial Loans (FTE) 354,896   4,136  4.73%  
 Commercial RE Loans 558,485   8,072  5.86%  
 Consumer Loans 441,869   3,861  3.53%  
 Total Investments (FTE) 3,264,751   20,441  2.50%  
       
 Interest Expense Paid     
 Total Earning Assets 4,620,001   480  0.04%  
 Total Interest-Bearing Liabilities 2,704,472   480  0.07%  
 Total Interest-Bearing Deposits 2,635,888   469  0.07%  
 Interest-Bearing Transaction 880,387   57  0.03%  
 Savings 1,501,961   223  0.06%  
 Time less than $100K 141,400   83  0.24%  
 Time greater than $100K 112,140   106  0.38%  
 Total Short-Term Borrowings 68,584   11  0.06%  
       
 Net Interest Income and     
 Margin (FTE)  $36,030  3.14%  
       
6. Noninterest Income.     
  (dollars in thousands except per-share amounts) 
    %  
  Q1'18Q1'17ChangeQ4'17 
       
 Service Charges on Deposits $4,752   $4,923  -3.5% $4,756   
 Merchant Processing Services 2,420   1,875  29.1% 2,346   
 Debit Card Fees 1,605   1,481  8.4% 1,569   
 Other Service Fees 631   650  -2.9% 620   
 ATM Processing Fees 664   575  15.4% 696   
 Trust Fees 743   702  5.8% 739   
 Financial Services Commissions 114   195  -41.5% 155   
 Equity Securities (Losses) Gains (36)   -    n/m    7,955   
 Other Income 1,062   1,256  -15.5% 1,464   
 Total Noninterest Income $11,955   $11,657  2.6% $20,300   
       
 Total Revenue (FTE) $47,422   $47,687  -0.6% $56,944   
 Noninterest Income/Revenue (FTE) 25.2% 24.4%  35.6% 
 Service Charges/Avg. Deposits (a) 0.40% 0.43%  0.39% 
 Total Revenues (FTE) Per Avg.     
 Common Share (a) $7.25   $7.39  -1.9% $8.56   
       
7. Noninterest Expense.     
  (dollars in thousands) 
    %  
  Q1'18Q1'17ChangeQ4'17 
       
 Salaries & Benefits $13,351   $13,070  2.1% $12,652   
 Loss Contingency (2)   -     -  n/m    5,542   
 Occupancy and Equipment 4,691   4,887  -4.0% 4,860   
 Outsourced Data Processing 2,340   2,139  9.4% 2,325   
 Amortization of      
 Identifiable Intangibles 570   800  -28.7% 755   
 Professional Fees 785   611  28.3% 627   
 Impairment of Tax Credit Investments   -     -  n/m    625   
 Courier Service 463   421  10.1% 423   
 Other Operating 2,014   2,687  -25.0% 2,358   
 Total Noninterest Expense $24,214   $24,615  -1.6% $30,167   
       
 Noninterest Expense/     
 Avg. Earning Assets (a) 2.08% 2.16%  2.56% 
 Noninterest Expense/Revenues (FTE) 51.1% 51.6%  53.0% 
       
8. Allowance for Loan Losses.     
  (dollars in thousands) 
    %  
  Q1'18Q1'17ChangeQ4'17 
       
 Average Total Loans $1,243,750   $1,355,250  -8.2% $1,285,748   
       
 Allowance for Loan Loss (ALL)      
 Beginning of Period   $23,009   $25,954  -11.3% $23,628   
 Provision for Loan Losses     -     -  n/m    -   
 Net ALL Recoveries (Losses) 72   (1,035)n/m  (619) 
 ALL End of Period $23,081   $24,919  -7.4% 23,009   
 ALL Recoveries/Gross ALL Losses   105% 44%  47% 
       
 Net ALL (Recoveries) Losses /     
 Avg. Total Loans (a) -0.02% 0.31%  0.19% 
       
9. Credit Quality.     
  (dollars in thousands) 
    %  
  3/31/183/31/17Change12/31/17 
       
 Nonperforming Loans (1):     
 Nonperforming Nonaccrual $2,030   $2,382  -14.8% $1,641   
 Performing Nonaccrual   4,110     4,285  -4.1%   4,285   
 Total Nonaccrual Loans 6,140   6,667  -7.9% 5,926   
 90+ Days Past Due Accruing Loans 255   373  -31.6% 531   
 Total 6,395   7,040  -9.2% 6,457   
 Repossessed Loan Collateral (1) 1,376   2,136  -35.6% 1,426   
 Total Nonperforming Assets (1) $7,771   $9,176  -15.3% $7,883   
       
 Total Loans Outstanding  $1,228,584   $1,351,090  -9.1% $1,287,982   
       
 Total Assets  $5,551,036   $5,395,947  2.9% $5,513,046   
       
 Loans:     
 Allowance for Loan Losses $23,081   $24,919  -7.4% $23,009   
 Allowance/Loans 1.88% 1.84%  1.79% 
 Nonperforming Loans/Total Loans 0.52% 0.52%  0.50% 
       
10. Capital.     
  (in thousands, except per-share amounts) 
    %  
  3/31/183/31/17Change12/31/17 
       
 Shareholders' Equity $582,083   $584,888  -0.5% $590,239   
 Total Assets 5,551,036   5,395,947  2.9% 5,513,046   
       
 Shareholders' Equity/     
 Total Assets 10.49% 10.84%  10.71% 
 Shareholders' Equity/     
 Total Loans 47.38% 43.29%  45.83% 
 Tangible Common Equity Ratio 8.42% 8.68%  8.63% 
 Common Shares Outstanding 26,591   26,283  1.2% 26,425   
 Common Equity Per Share $21.89   $22.25  -1.6% $22.34   
 Market Value Per Common Share $58.08   $55.83  4.0% $59.55   
       
 Share Repurchase Programs     
  (shares in thousands) 
    %  
  Q1'18Q1'17ChangeQ4'17 
       
 Total Shares Repurchased   -     -  n/m    -   
 Average Repurchase Price $-   $-  n/m  $-   
 Net Shares Issued (166) (376)n/m  (106) 
       
11. Period-End Balance Sheets.     
  (unaudited, dollars in thousands) 
    %  
  3/31/183/31/17Change12/31/17 
 Assets:     
 Cash and Due from Banks $555,607   $546,815  1.6% $575,002   
       
 Investment Securities:     
 Equity Securities 1,764   11,671  -84.9% 1,800   
 Debt Securities Available For Sale 2,351,970   1,881,638  25.0% 2,191,707   
 Debt Securities Held to Maturity 1,114,287   1,298,414  -14.2% 1,158,864   
       
 Loans 1,228,584   1,351,090  -9.1% 1,287,982   
 Allowance For Loan Losses (23,081) (24,919)-7.4% (23,009) 
 Total Loans, net 1,205,503   1,326,171  -9.1% 1,264,973   
       
 Other Real Estate Owned 1,376   2,136  -35.6% 1,426   
 Premises and Equipment, net 35,790   36,025  -0.7% 35,301   
 Identifiable Intangibles, net 3,280   6,127  -46.5% 3,850   
 Goodwill 121,673   121,673  0.0% 121,673   
 Other Assets 159,786   165,277  -3.3% 158,450   
       
 Total Assets $5,551,036   $5,395,947  2.9% $5,513,046   
       
 Liabilities and Shareholders' Equity:     
 Deposits:     
 Noninterest Bearing $2,179,157   $2,046,390  6.5% $2,197,526   
 Interest-Bearing Transaction 924,081   905,588  2.0% 904,245   
 Savings 1,540,192   1,494,854  3.0% 1,494,024   
 Time 224,437   251,141  -10.6% 231,818   
 Total Deposits 4,867,867   4,697,973  3.6% 4,827,613   
       
 Short-Term Borrowed Funds 65,356   73,611  -11.2% 58,471   
 Other Liabilities 35,730   39,475  -9.5% 36,723   
 Total Liabilities 4,968,953   4,811,059  3.3% 4,922,807   
       
 Shareholders' Equity:     
 Common Equity:     
 Paid-In Capital 441,350   424,203  4.0% 433,267   
 Accumulated Other     
 Comprehensive Loss (43,452) (9,443)n/m  (16,832) 
 Retained Earnings 184,185   170,128  8.3% 173,804   
 Total Shareholders' Equity 582,083   584,888  -0.5% 590,239   
       
 Total Liabilities and      
 Shareholders' Equity $5,551,036   $5,395,947  2.9% $5,513,046   
       
12. Income Statements.     
  (unaudited, in thousands except per-share amounts) 
    %  
  Q1'18Q1'17ChangeQ4'17 
 Interest & Fee Income:     
 Loans $14,697   $15,780  -6.9% $15,410   
 Investment Securities:     
 Equity Securities 85   74  14.8% 80   
 Debt Securities Available for Sale 13,551   10,175  33.2% 12,279   
 Debt Securities Held to Maturity 6,174   7,295  -15.4% 6,435   
 Total Interest & Fee Income 34,507   33,324  3.6% 34,204   
       
 Interest Expense:     
 Transaction Deposits 60   57  5.4% 60   
 Savings Deposits 222   223  -0.6% 225   
 Time Deposits 168   189  -11.1% 176   
 Short-Term Borrowed Funds 9   11  -10.5% 10   
 Total Interest Expense 459   480  -4.3% 471   
       
 Net Interest Income 34,048   32,844  3.7% 33,733   
       
 Reversal of Provision for Loan Losses   -     -  n/m    -   
       
 Noninterest Income:     
 Service Charges 4,752   4,923  -3.5% 4,756   
 Merchant Processing Services 2,420   1,875  29.1% 2,346   
 Debit Card Fees 1,605   1,481  8.4% 1,569   
 Other Service Fees 631   650  -2.9% 620   
 ATM Processing Fees 664   575  15.4% 696   
 Trust Fees 743   702  5.8% 739   
 Financial Services Commissions 114   195  -41.5% 155   
 Equity Securities (Losses) Gains (36)   -  n/m    7,955   
 Other 1,062   1,256  -15.5% 1,464   
 Total Noninterest Income 11,955   11,657  2.6% 20,300   
       
 Noninterest Expense:     
 Salaries and  Benefits 13,351   13,070  2.1% 12,652   
 Loss Contingency (2)   -     -  n/m    5,542   
 Occupancy and Equipment 4,691   4,887  -4.0% 4,860   
 Outsourced Data Processing 2,340   2,139  9.4% 2,325   
 Amortization of Identifiable Intangibles 570   800  -28.7% 755   
 Professional Fees 785   611  28.3% 627   
 Impairment of Tax Credit Investments   -     -  n/m    625   
 Courier Service 463   421  10.1% 423   
 Other 2,014   2,687  -25.0% 2,358   
 Total Noninterest Expense 24,214   24,615  -1.6% 30,167   
       
 Income Before Income Taxes 21,789   19,886  9.6% 23,866   
 Income Tax Provision 4,283   4,837  -11.5% 19,706   
 Net Income $17,506   $15,049  16.3% $4,160   
       
 Average Common Shares Outstanding 26,532   26,171  1.4% 26,384   
 Diluted Common Shares Outstanding 26,665   26,329  1.3% 26,538   
       
 Per Common Share Data:     
 Basic Earnings $0.66   $0.58  13.8% $0.16   
 Diluted Earnings 0.66   0.57  15.8% 0.16   
 Dividends Paid 0.40   0.39  2.6% 0.40   
       
 Footnotes and Abbreviations:     
 Certain amounts in prior periods have been reclassified to conform to the current presentation.   
 (FTE) Fully Taxable Equivalent. The Company presents its net interest margin and net interest income on a FTE basis using the current statutory federal tax rate.  Management believes the FTE basis is valuable to the reader because the Company's loan and investment securities portfolios contain a relatively large portion of municipal loans and securities that are federally tax exempt.  The Company's tax exempt loans and securities composition may not be similar to that of other banks, therefore in order to reflect the impact of the federally tax exempt loans and securities on the net interest margin and net interest income for comparability with other banks, the Company presents its net interest margin and net interest income on a FTE basis.  
 (a) Annualized     
 (1) All originated and purchased non performing loans and repossessed loan collateral have been combined as of Q1 '17.  Prior period presentation has been updated, accordingly.  
 (2) Represents the Company's estimated refunds to customers of revenue recognized in prior years.  
       

 

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