Westamerica Bancorp.’s (NASDAQ:WABC) reported fourth quarter earnings per share of 79 cents and missed the Zacks Consensus Estimate of 82 cents. Earnings were higher from 71 cents reported in the year-ago quarter but a couple of pennies below 81 cents reported in the prior quarter. During the reported quarter 2009, Westamerica redeemed $42 million in preferred stock requiring accelerated discount accretion of $0.52 million, which reduced earnings per share by 2 cents.
 
Overall results reflected low cost of funding on loan and investment portfolios, risk reduction in loan portfolio and decrease in non-covered non-performing assets. These were partially offset by increase in the provision for loan losses and decrease in non-interest income.
 
During the reported quarter, net income applicable to common equity was $23.3 million, up from $20.8 million in the year-ago quarter but marginally down from $23.8 million in the prior quarter.
 
On a fully-taxable equivalent basis, Westamerica’s net interest income was $58.9 million, up from $49.9 million in the year-ago period but down from $61.6 million in the prior quarter. Total non-interest expense increased 25.5% year-over-year but decreased 6.6% sequentially, to $32.8 million. However, interest expense decreased 6.3% year-over-year and 4.4% sequentially to $4.3 million.
 
For full year 2009, Westamerica generated net income applicable to common equity of $121 million or $4.14 per share, compared to $60 million or $2.04 per share in 2008. Results for 2009 include a $28.3 million net of tax gain from the acquisition of assets and assumption of liabilities of County Bank. Net interest income increased 23.4% year-over-year to $242.2 million in 2009, primarily due to acquired assets and a higher net interest margin.
 
Credit metrics deteriorated during the reported quarter. Provision for loan losses increased substantially by 267% year-over-year and by 17.9% sequentially to $3.3 million. Annualized net loan losses on non-FDIC covered loans as a percentage of average non-FDIC covered loans increased to 0.88% from 0.56% in the third quarter of 2009. However, non-performing assets not covered by FDIC loss-sharing agreements were $33 million at Dec 31, 2009, down $4 million from $37 million at Sep 30, 2009.
 
Total earnings assets were $4.27 billion, up 16.8% year-over-year but down 4.5% sequentially. Total deposits were $4.07 billion, up 30.7% year-over-year but down 1.4% sequentially.
 
Profitability metrics also reflected a challenging outlook. Westamerica’s annualized return on assets decreased to 1.85% from  2.04% in the year-ago quarter and 1.86% in the sequential quarter. Also annualized return on common equity declined to 18.8% from 20.6% in the year-ago quarter and 19.7% in the sequential quarter.
 
At Dec 31, 2009, total regulatory capital ratios for Westamerica Bancorp and its subsidiary, Westamerica Bank, were 14.5% and 14.9%, respectively, exceeding the 10% requirement for adequate capitalization under regulatory standards. Westamerica’s long-tem debt was marginally reduced to $26.5 million at the end of fourth quarter 2009.

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