) second-quarter 2012 earnings of 75 cents per share were in line
with the Zacks Consensus Estimate. This was also at par with the
prior quarter earnings and a penny ahead of the prior-year quarter
Results were impacted by a lower top line. Nevertheless, decline in
operating expenses along with the improving credit quality and
stable capital ratios were the positives for Westamerica.
Westamerica reported a net income of $21.0 million in line with the
prior quarter but marginally down from $21.3 million in the
Quarter in Detail
Westamerica's total revenue came in at $63.9 million compared with
$66.4 million in the previous quarter and $71.1 million in the
year-ago quarter. Total revenue also lagged the Zacks Consensus
Estimate of $65.0 million.
On a fully-taxable equivalent basis, Westamerica's net interest
income (NII) fell 2.6% sequentially and 9.9% year over year to
$50.3 million. Downside in NII resulted from lower yields on loans
and investment securities, along with reduced loan volumes.
Net interest margin stood at 4.89%, down 23 basis points (bps)
sequentially and 49 bps year over year.
Westamerica's non-interest income was $13.5 million in the reported
quarter, plummeting 7.7% from $14.7 million in the prior quarter
and 11.5% from $15.3 million in the year-ago quarter, hurt by lower
service charges on deposits as well as ATM processing fees.
However, these were partially offset by rise in merchant processing
services and debit card fees. `
Non-interest expenses decreased 2.3% sequentially and 14.5% year
over year to $29.3 million in the quarter under review. Both the
declines were primarily attributable to reduction in salaries &
benefits expenses along with substantially lower other real estate
Efficiency ratio stood at 46.0%, slightly rising from 45.3% in the
prior quarter but falling from 48.2% in the previous-year quarter.
The increase in efficiency ratio indicates deterioration in
During the reported quarter, Westamerica's credit quality continued
to show marked improvement. Provision for loan losses remained
flat, sequentially as well as on a year-over-year basis, at $2.8
Annualized net loan losses, as a percentage of average originated
loans, was 0.65%, down 4 bps sequentially and 18 bps year over
year. Likewise, nonperforming assets were $79.3 million at June 30,
2012, down from $80.9 million at March 31, 2012 and $124.1 million
at June 30, 2011.
Profitability and Capital Ratios
Profitability metrics reflected a modestly cautious outlook.
Westamerica's annualized return on assets was 1.69% as of June 30,
2012 compared with 1.68% as of March 31, 2012 and 1.73% as of June
30, 2011. Moreover, as of June 30, 2012, the annualized return on
common equity was 15.6% against 15.5% as of March 31, 2012 and in
line with the prior-year period.
As of June 30, 2012, total regulatory capital ratio came in at
15.77% compared with 16.09% as of March 31, 2012 and 15.92% as of
June 30, 2011. Further, tier I capital ratio as a percentage of
risk-adjusted assets was 14.49% against 14.83% in the prior
quarter-end and 14.58% in the previous-year quarter end.
Share Repurchase Update
In the third quarter of 2011, Westamerica had announced a new share
repurchase program, under which the company will be able to
repurchase up to 2 million common shares through September 1, 2012.
During the second quarter of 2012, the company repurchased 317,000
shares worth approximately $14.4 million, at an average price of
$45.45 per share.
We believe that a weak interest rate scenario and low investment
returns will restrict any significant bottom-line improvement in
the near term. However, we anticipate continued synergies from
Westamerica's strong expense discipline, conservative credit
culture and a sound balance sheet. Once the market rebounds to a
more conducive operating environment, the company will be able to
capitalize on opportunities.
Two of Westamerica's peers,
CVB Financial Corp.
Columbia Banking System Inc.
) are slated to release their second-quarter results on July 18 and
July 26, respectively.
Currently, Westamerica retains a Zacks #4 Rank, which translates
into a short-term Sell rating. Also, considering the fundamentals,
we are maintaining long-term 'Underperform' recommendation on the
COLUMBIA BK SYS (COLB): Free Stock Analysis
CVB FINL (CVBF): Free Stock Analysis Report
WESTAMER BANCP (WABC): Free Stock Analysis
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