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Westamerica (WABC) Q2 2024 Earnings Review: Solid Performance Amidst Challenging Environment
Published on September 24, 2024 | Ticker: WABC

Westamerica Bancorporation (NASDAQ:WABC), the holding company for Westamerica Bank, has reported its financial results for the second quarter of 2024. Despite facing a challenging macroeconomic landscape, the company has managed to deliver a solid performance, showcasing its resilience and ability to navigate through turbulent times.

Financials

For the second quarter of 2024, Westamerica reported net income of $40.4 million, or $1.33 per diluted share. This compares to net income of $45.5 million, or $1.51 per diluted share, in the same period of the previous year. The company's annual net income for the fiscal year 2023 was $161.8 million.

Westamerica's total revenue for the second quarter of 2024 was $74.27 million, a decrease from $80.58 million in the same quarter of the previous year. The company's annual revenue for the fiscal year 2023 was $327.5 million. The decrease in revenue was primarily driven by lower net interest income, which was impacted by the rising interest rate environment and increased competition for deposits.

Despite the revenue decline, Westamerica's operating performance remained strong. The company's operating cash flow for the second quarter of 2024 was $39.6 million, compared to $42.3 million in the same period of the previous year. For the full fiscal year 2023, Westamerica's operating cash flow was $158.2 million. Additionally, the company's free cash flow for the second quarter of 2024 was $39.2 million, compared to $41.9 million in the same quarter of the previous year. For the full fiscal year 2023, Westamerica's free cash flow was $157.0 million.

Westamerica's net interest margin (NIM) for the second quarter of 2024 was 4.15%, compared to 4.18% in the same period of the previous year. The company's NIM for the full fiscal year 2023 was 4.35%. The slight decrease in NIM was primarily due to the rising interest rate environment, which put pressure on the company's funding costs.

Asset Quality

In terms of asset quality, Westamerica's non-performing assets as a percentage of total assets remained low at 0.02% as of the end of the second quarter of 2024, compared to 0.01% as of the end of the previous year. The company's allowance for credit losses as a percentage of total loans was 1.95% as of the end of the second quarter of 2024, compared to 2.08% as of the end of the previous year.

Business Overview

Westamerica's balance sheet remained strong, with total assets of $6.36 billion as of the end of the second quarter of 2024, compared to $6.70 billion as of the end of the previous year. The company's total deposits were $5.47 billion as of the end of the second quarter of 2024, compared to $5.90 billion as of the end of the previous year.

Geographically, Westamerica's operations are primarily concentrated in Northern and Central California. The company has a diversified loan portfolio, with commercial, commercial real estate, construction, residential real estate, and consumer installment loans accounting for 15.8%, 56.2%, 0.6%, 1.1%, and 26.3% of the total loan portfolio, respectively, as of the end of the second quarter of 2024.

In terms of revenue breakdown, Westamerica's primary sources of revenue are net interest income and noninterest income. Net interest income accounted for 87.8% of the company's total revenue in the second quarter of 2024, while noninterest income accounted for the remaining 12.2%. The decrease in revenue was primarily driven by a decline in net interest income, which was partially offset by an increase in noninterest income.

Outlook

Looking ahead, Westamerica's management has provided guidance for the remainder of the fiscal year 2024. The company expects net interest income to remain under pressure due to the continued rise in interest rates and increased competition for deposits. However, management is optimistic about the company's ability to manage its funding costs and maintain a strong net interest margin.

In terms of asset quality, Westamerica's management expects the company's credit metrics to remain stable, with non-performing assets and the allowance for credit losses as a percentage of total loans expected to remain at similar levels to the end of the second quarter of 2024.

Conclusion

Overall, Westamerica's second quarter of 2024 results demonstrate the company's ability to navigate a challenging operating environment. While the company faced headwinds in the form of declining revenue and net interest margin, its solid balance sheet, strong asset quality, and disciplined risk management have allowed it to maintain a solid financial position. As the company continues to adapt to the evolving market conditions, investors will be closely monitoring Westamerica's ability to capitalize on opportunities and deliver sustainable growth in the quarters ahead.

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