Westamerica Bank’s multimillion-dollar stake in mortgage giants Freddie Mac and Fannie Mae evaporated after the federal takeover of the lenders this week, but officials said the bank can take the punch.
The San Rafael-based bank, its stock remaining near a 52-week high, and 39 other regional banks across the nation sustained asset losses cited by Wall Street analysts.
Officials at the San Rafael-based Westamerica say the bank is so fundamentally sound that even with a write-off at the end of the quarter, the bank and its holding company, Westamerica Bancorp, will avoid trouble.
“We have such sound fundamentals, including a high level of operating profit, a very high-quality loan portfolio and very high reserves for loan losses,” said Robert Thorson, Westamerica’s chief operating officer. “There will be another write-off to reflect the change in market value, but we don’t know how much.”
With shares of Fannie Mae and Freddie Mac selling for 5 to 10 cents on the dollar, Thorson said the loss will depend on what the share price of the lenders is at the end of the quarter.
He said officials at the Federal Deposit Insurance Corp. have indicated they want to reduce Freddie Mac and Fannie Mae operations, and that could improve their financial health.
“They will have fewer mortgages they will need to finance, and the financing has been the problem,” Thorson said.
He noted Westamerica’s stock price has grown 15 percent from last year’s levels.
“I would challenge anybody to find a bank whose stock price has gone up that much in the last year,” Thorson said. “The stock market votes every single day and the price has risen every day despite the loss.”
Joe Morford, a stock analyst with RBC Capital Markets in San Francisco, said Westamerica wrote off 30 percent of its exposure to the two lenders in June, taking a charge of $18.2 million against earnings. The balance of $44.5 million will be written off in the current quarter.
The bank’s total assets are $4.2 billion.
“What is important is the company is still going to remain well-capitalized at period end at both the bank and the holding company,” Morford said. “Basically, this is unfortunate and it is a significant write-off but the company is still strong enough to absorb it.”
Morford said Westamerica is one of the highest-quality banks in the country – and one of the most profitable.
Last week, the bank’s board authorized a plan to buy back as many as 2 million shares of its common stock. The purchases are to be completed by Sept. 1, 2009.
Westamerica said the new buy-back plan represents about 6.9 percent of its outstanding common stock, and replaces the company’s current 2 million-share repurchase program, under which 777,000 shares remained available for purchase as of June 30.
Westamerica Bancorp’s stock closed up 3 percent at $56.63 Thursday. The stock has traded at a 52-week low of $35.50 and a high of $61.49.
The bank, headquartered in San Rafael, has about 86 offices in 21 California counties, including 11 offices in Marin.
Contact Nancy Isles Nation via e-mail at nnation@marinij.com; the Associated Press contributed to this report.
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