On January 18, 2024, Westamerica Bancorp (WABC, Financial) released its 8-K filing, detailing the financial results for the fourth quarter of 2023. The company, headquartered in San Rafael, California, operates Westamerica Bank, serving commercial clients with a focus on smaller businesses across central and northern California. With approximately $7.5 billion in assets, the bank's revenue is primarily derived from net interest income, complemented by deposit service charges.
Financial Performance Overview
Westamerica Bancorp's fourth quarter performance showcased a resilient banking operation, with a net income of $39.5 million, a marginal increase from the $39.3 million reported in the same period last year. The diluted EPS of $1.48, although slightly down from the third quarter's $1.56, showed an improvement from the $1.46 reported in the fourth quarter of 2022. This performance reflects the company's ability to maintain profitability in a challenging economic environment.
Net interest income on a fully-taxable equivalent (FTE) basis was $69.7 million for the fourth quarter of 2023, a slight decrease from the third quarter's $72.1 million. The annualized yield on loans, bonds, and cash increased marginally to 4.52 percent from 4.50 percent in the previous quarter. However, the cost of funding the loan and bond portfolios rose to 0.11 percent in the fourth quarter, up from 0.07 percent in the third quarter, reflecting the broader interest rate environment.
Noninterest income for the fourth quarter totaled $11.0 million, a slight decrease from the $11.3 million reported in the third quarter. This includes a $278 thousand life insurance gain recorded in the third quarter. Noninterest expenses were well managed, with a modest decrease to $25.5 million in the fourth quarter from $25.7 million in the third quarter.
"Westamerica’s fourth quarter 2023 results benefited from the Company’s valuable low-cost deposit base, of which 48 percent was represented by non-interest bearing checking accounts during the quarter," said Chairman, President and CEO David Payne. "Operating expenses remained well controlled and nonperforming assets were stable," he concluded.
Balance Sheet and Capital Strength
Westamerica Bancorp's balance sheet remained strong with customer deposits and shareholders’ equity fully funding its interest-earning assets. The company did not take in brokered deposits or borrow from the Federal Reserve Bank or correspondent banks. The bank's capital position is robust, with shareholders' equity increasing by 28.4 percent to $772.9 million from the previous year, and a tangible common equity ratio of 10.43 percent.
Outlook and Challenges
While Westamerica Bancorp has demonstrated a stable financial performance, the bank faces the ongoing challenges of a dynamic interest rate environment and economic uncertainty. The bank's focus on maintaining a low-cost deposit base and controlling operating expenses will be crucial in navigating potential headwinds. Additionally, the bank's strategy of avoiding brokered deposits and external borrowing contributes to its financial stability.
For value investors and potential GuruFocus.com members, Westamerica Bancorp's consistent performance, prudent management of expenses, and strong capital position make it a noteworthy consideration in the regional banking sector.
For further details on Westamerica Bancorp's financial results, please refer to the full 8-K filing.
Explore the complete 8-K earnings release (here) from Westamerica Bancorp for further details.