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Westamerica Earnings Miss on Low Revenues, Shares Dip

Shares of Westamerica BancorpWABC fell nearly 3% following the third-quarter 2015 earnings miss. Earnings of 58 cents per share came a penny below the Zacks Consensus Estimate. Further, the bottom line came in line with the year-ago quarter figure.

Westamerica Bancorporation - Earnings Surprise | FindTheBest

Pressurized revenues and a declining loan balance contributed to the lower-than-expected results. However, a reduction in expenses and no provision for loan losses remained the tailwinds. While credit quality represented a mixed bag, profitability ratios reflected weakness.

Westamerica's net income amounted to $14.9 million, down 2.0% from the prior-year quarter.

Performance in Detail

Total revenue (net of interest expense) came in at $45.7 million, down 3.0% year over year. The fall was caused by a decline in both net interest income and non-interest income.

Net interest and fee income, on a fully-taxable equivalent ("FTE") basis, fell 1.9% year over year to $37.2 million. The 2.5% decline in interest and fee income as a result of low market interest rates on loan was partially offset by a 31% fall in interest expense.

Further, net interest margin slipped 35 basis points (bps) year over year to 3.31%.

Non-interest income totaled $12.0 million, down 8.1% from the year-ago quarter. The reduction was due to a decrease in all components, except for trust fees.

Non-interest expenses fell 1.7% year over year to $26.2 million. Lower salaries and benefits expenses, amortization of identifiable intangibles, courier service and occupancy costs were partially offset by a rise in professional fees, furniture & equipment costs as well as other operating costs.

Efficiency ratio increased to 53.2% from 52.2% in the prior-year quarter. An increase in efficiency ratio indicates a decline in profitability.

Westamerica's average loans declined 9.6% year over year to $1.59 billion as of Sep 30, 2015. However, average deposits summed to $4.41 billion, up 2.6% from the prior-year quarter.

Credit Quality

Westamerica's credit quality displayed a mixed picture during the quarter. Provision for loan losses was nil as compared with $0.6 million in the prior-year quarter. However, nonperforming assets totaled $26.2 million as of Sep 30, 2015, up 0.8% year over year.

Profitability Ratios

Westamerica's profitability ratios deteriorated during the quarter. As of Sep 30, 2015, annualized return on assets stood at 1.16%, down from 1.21% as of Sep 30, 2014. Likewise, annualized return on common equity slightly declined to 11.3% from 11.5% as of Sep 30, 2014.

Share Repurchase

In the reported quarter, Westamerica repurchased nearly 26,000 shares for approximately $1.3 million.

Our Viewpoint

We believe that Westamerica's efforts to lower its exposure to rising interest rates by buying shorter-duration investment securities with lower yields will work in its favor going forward. Also, the company's improving credit quality and cost control initiatives continue to be impressive.

Though the company's stable balance sheet position is expected to support growth, soft revenues and persistent margin compression owing to the prevailing low interest rate scenario will likely weigh on profitability in the near term.

Currently, Westamerica carries a Zacks Rank #4 (Sell).

Among other West banks, BofI Holding, Inc. BOFI is slated to announce its fiscal first quarter 2016 results on Oct 29, while SVB Financial Group SIVB and City National Corporation CYN are expected to report their third-quarter 2015 results on Oct 22.

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WESTAMER BANCP (WABC): Free Stock Analysis Report

CITY NATIONAL (CYN): Free Stock Analysis Report

SVB FINL GP (SIVB): Free Stock Analysis Report

BOFI HLDG INC (BOFI): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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