Westamerica Bancorporation reported an 18% yearover- year decline in first-quarter profits, which came to $17.3 million, or $0.64 a share, down from $21.0 million, or $0.75 a share, in 2012′s first quarter. We are taking a closer look at our assumptions, but at this time we are not planning on dramatic changes to our $39 fair value estimate. We continue to think that Westamerica has a narrow economic moat.
Net interest income, which makes up the largest portion of Westamerica’s net revenue, tumbled 16% to $39.2 million. As we expected, the bank was hurt by a continuing compression in the net interest margin earned. Reported NIM fell to about 4.3% (annualized) from 4.5% in the fourth quarter and 5.1% in 2012′s first quarter. We expect that low interest rates will remain a headwind for Westamerica and therefore think net interest income will be down for the year as a whole. Noninterest income fell nearly 3% to about $14.3 million. In our view, expense control will remain a priority for Westamerica, given the revenue challenges the bank is facing in the near term.
For the latest quarter, noninterest expense fell about 5% on a year-over-year basis to $28.7 million, though these costs edged higher by about 2% sequentially, driven by an increase in compensation expenses.
We do not have concerns about the company’s capital position at this juncture; its Tier 1 capital/riskadjusted assets ratio at quarter-end was 14.7%, compared with nearly 15.1% at year-end 2012. We liked the bank’s progress on the credit-quality front, as total nonperforming assets fell to about 1.1% of total assets from 1.2% at yearend 2012.
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