Westamerica Ban Corp. (WABC) filed Quarterly Report for the period ended 2009-09-30.
Westamerica Bancorp. is a bank holding company. The company provides a full range of banking services to individual and corporate customers in Northern and Central California through its subsidiary banks Westamerica Bank and Bank of Lake County. It also owns Westamerica CommercialCredit Inc. a company engaged in financing accounts receivable and inventory lines of credit and term business loans and Community Banker Services Corporation a company engaged in providing the companyand its subsidiaries data processing services and other support functions. Westamerica Ban Corp. has a market cap of $1.43 billion; its shares were traded at around $48.81 with a P/E ratio of 15 and P/S ratio of 6.9. The dividend yield of Westamerica Ban Corp. stocks is 2.9%. Westamerica Ban Corp. had an annual average earning growth of 8.6% over the past 10 years. GuruFocus rated Westamerica Ban Corp. the business predictability rank of 3.5-star.
Highlight of Business Operations:
The Company reported net income applicable to common equity of $98.1 million or $3.35 diluted earnings per common share for the nine months ended September 30, 2009, compared with $39.0 million or $1.33 diluted earnings per common share for the same period of 2008. The first nine months of 2009 included a $48.8 million FAS 141R gain resulting from the acquisition of County Bank (“County”) which increased net income by $28.3 million and earnings per diluted common share by $0.97. The first nine months of 2008 included $34 million in after-tax losses on sale and impairment in the value of FHLMC and FNMA preferred stock, $4.7 million in after-tax benefits from Visa’s initial public offering and $2.3 million in reduced expenses as known litigation contingencies were satisfied as a part of the VISA IPO, which combined to reduce net income by $27 million and earnings per diluted common share by $0.92. Results for this period also included the approximate $1.0 million reduction in the Company’s tax provision primarily due to filing its 2007 federal tax return, which increased diluted earnings per common share by $0.03.
County was acquired from the FDIC on February 6, 2009. Net income applicable to common equity for the third quarter of 2009 was $23.7 million more than the same quarter of 2008, largely attributable to a $24 million after-tax FHLMC and FNMA preferred stock loss on sale and impairment charge in the third quarter of 2008, higher net interest income (FTE) and higher service fee income on deposit accounts, partially offset by higher provision for loan losses, higher noninterest expense and an increase in income tax provision (FTE). A $12.9 million or 26.5% increase in net interest income (FTE) was mostly attributed to growth in average balances of loans due to the acquisition, lower rates paid on interest-bearing liabilities and lower average balances of borrowings, partially offset by lower yields on earning assets and higher average balances of interest-bearing deposits and lower average balances of investments. The provision for loan losses increased $2.2 million, reflecting Management’s evaluation of losses inherent in the loan portfolio not covered by loss-sharing agreements with the FDIC. Noninterest income rose by $43.5 million mainly due to higher service charges on deposit accounts and because the third quarter of 2008 included securities losses and impairment charge of $41.2 million. Noninterest expense increased $9.9 million mostly due to acquisition-related increases in salaries and related benefits, occupancy and equipment expenses and higher FDIC insurance assessments and amortization of intangibles. The provision for income taxes (FTE) increased $19.0 million primarily due to higher profitability and because the third quarter of 2008 included the $17.3 million tax benefit on the investment security losses on sale and impairment charge.
The growth in the average earning assets in the third quarter of 2009 compared with the same period in 2008 was substantially attributable to the acquisition of County loans from the FDIC. The average balance of such loans for the third quarter of 2009 was $974.1 million. The growth in average balances of loans were mainly due to increases in the average balance of commercial real estate loans (up $483.5 million), taxable commercial loans (up $319.9 million), and other consumer loans (up $119.6 million), partially offset by a $21.5 million decline in average tax-exempt commercial loans, a $37.8 million decline in average residential real estate loans and a $20.3 million decline in indirect automobile loans. The acquired County loan portfolio did not contain significant volumes of tax-exempt commercial loans or residential real estate loans. The average investment portfolio decreased $123.3 million largely due to declines in average balances of U.S. government sponsored entity obligations (down $94.7 million), municipal securities (down $15.8 million) and a $42.9 million decline in average balances of FHLMC and FNMA stock resulting from impairment charges in the second, third and fourth quarters of 2008, partially offset by a $21.7 million increase in the average balance of mortgage backed securities and collateralized mortgage obligations which were purchased from the FDIC as a part of the County acquisition. The Bank has not been actively purchasing investment securities in the current environment. The resulting liquidity has been applied to reduce high-cost and interest-sensitive funding sources.
Average earning assets increased $662.6 million or 17.1% for the first nine months of 2009 compared with the same period of 2008 due to the County acquisition. A $817.9 million increase in the average balance of the loan portfolio was attributable to increases in average balances of commercial real estate loans (up $447.8 million), taxable commercial loans (up $328.1 million) and consumer loans (up $96.5 million), partially offset by a $29.0 million decrease in the average balance of residential real estate loans and a $22.7 million decrease in the average balance of tax-exempt commercial loans. The acquired County loan portfolio did not contain significant volumes of tax-exempt commercial loans or residential real estate loans. Average investments decreased by $155.3 million due to declines in the average balances of U.S. government sponsored entity obligations (down $112.6 million), municipal securities (down $17.5 million) and a $55.3 million decline in average balances of FHLMC and FNMA stock resulting from the impairment charge in the second, third and fourth quarters of 2008, partially offset by a $22.4 million increase in the average balance of mortgage backed securities and collateralized mortgage obligations. The Bank has not been actively purchasing investment securities in the current environment. The resulting liquidity has been applied to reduce high-cost and interest-sensitive funding sources.
Interest expense in the third quarter of 2009 decreased $2.9 million compared with the same period in 2008. The decrease was attributable to lower rates paid on the interest-bearing liabilities, lower balances of borrowings and higher levels of shareholders’ equity, partially offset by higher average interest-bearing deposits. The average rate paid on interest-bearing liabilities decreased from 1.19% in the third quarter of 2008 to 0.58% in the same quarter of 2009. Rates paid on most interest-bearing liabilities moved with general market conditions. Rates on interest-bearing deposits decreased 53 bp to 0.47% primarily due to decreases in rates paid on CDs over $100 thousand (down 108 bp) , CDs less than $100 thousand (down 180 bp) and preferred money market savings (down 87 bp). Rates on short-term borrowings also decreased 59 bp mostly due to lower rates on federal funds purchased (down 180 bp) and sweep accounts (down 35 bp). Average interest-bearing liabilities rose by $607.4 million or 24.4% for the third quarter of 2009 over the same period of 2008 primarily through acquisition. Interest-bearing deposits grew $778.9 million primarily due to increases in CDs less than $100 thousand (up $298.4 million), CDs over $100 thousand (up $97.3 million), money market checking accounts (up $169.1 million), money market savings (up $148.9 million) and regular savings (up $81.5 million). Offsetting the increase were decreases in average balances of short-term borrowings (down $162.8 million) and long-term debt (down $8.6 million). Average short-term borrowings decreased due to a $341.5 million decline in the average balance of federal funds purchased, partially offset by FHLB advances assumed through the County acquisition averaging $86.2 million and a $95.2 million increase in average balances of repurchase agreements due to the County acquisition.
Comparing the first nine months of 2009 with the same period of 2008, interest expense decreased $13.6 million, due to lower rates paid, lower average balances of borrowing and higher levels of shareholders’ equity, offset in part by higher average balances of interest-bearing deposits. Average interest-bearing liabilities during the first nine months of 2009 rose by $571.2 million or 21.8% over the same period of 2008 mainly through the County acquisition. A $739.0 million growth in interest-bearing deposits was mostly attributable to increases in average balances of CDs less than $100 thousand (up $271.9 million), CDs over $100 thousand (up $129.4 million), money market checking accounts (up $161.4 million), money market savings (up $116.6 million) and regular savings (up $72.0 million). Short-term borrowings decreased $158.2 million, mainly the net result of lower average balances of federal funds purchased (down $296.4 million) and sweep accounts (down $15.8 million), partially offset by higher average balances of repurchase agreements (up $76.7 million) and FHLB advances (up $77.3 million). Average balances of long-term debt also declined $9.6 million. Rates paid on interest-bearing liabilities averaged 0.63% during the first nine months of 2009 compared with 1.46% for the first nine months of 2008. The average rate paid on interest-bearing deposits declined 62 bp to 0.56% in the first nine months of 2009 mainly due to lower rates on CDs less than $100 thousand (down 212 bp), CDs over $100 thousand (down 125 bp) and preferred money market savings (down 109 bp). Rates on short-term borrowings were also lower by 139 bp largely due to federal funds (down 236 bp) and repurchase agreements (down 118 bp).
WABC is in the portfolios of Kenneth Fisher of Fisher Asset Management, LLC.
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