Westamerica Bank has taken over operation of County Bank

Note: WestAmerica has a backoffice operation located in Fairfield, CA within Solano County.

Wednesday, Feb. 11, 2009
Westamerica has history of prudent decisions
Bay Area firm hasn't been caught up in roiling economy.
By JONAH OWEN LAMB
jlamb@mercedsun-star.com

The owner of now defunct County Bank, Westamerica Bancorporation, shares much in common with its recent acquisition.

The San Rafael-based bank opened its doors five years before County Bank, in 1972, and has roots in lending to local small businesses and farmers.

That's where the similarities end. Unlike County Bank and many other failed financial institutions, Westamerica Bank held a conservative tack through much of the boom times in recent years.

Westamerica Bank has taken over operation of County Bank, which failed last week. With a tradition of conservative business practices, the bank has weathered the financial storms that have driven other institutions, like County Bank, onto the rocks.

That fiscal seamanship has kept it afloat in today's rough financial waters.

"Our stock price has performed well in these weak economic times," said Rob Thorson, the company's chief financial officer.

The acquisition of County Bank is part of a pattern of expansion for Westamerica, yet it is an unprecedented move. As the company's first failed bank purchase, the move is irregular, but as a part of a three-decade trend of growth is business as usual.

But consolidation is the bank's only bow to industry trends. Otherwise, its conservative approach to banking has gone against the grain.

With more than $4 billion in assets and 86 branches across Northern and Central California, Westamerica, the seventh-largest California-based commercial bank, according to its Web site, has weathered the financial storm quite well.

Westamerica was born when three regional north Bay Area banks consolidated, one with a charter that went back to 1886, according to a company profile by St. James Press. The first National Bank of Mendocino, the Bank of Sonoma and the Bank of Marin constituted the original triad of banks that came together in 1972.

The cautious growth of the bank from then on expanded one county at a time. By the early '80s it had acquired banks in Napa and Solano counties. What followed in the next two decades was further acquisitions of more than seven additional banks, spreading its presence into the Central Valley and the foothills.

For much of this time from the late 1980s, current chairman and president David Payne, whose grandfather was chairman of one of the bank's acquisitions, has been at the bank's helm.

Thorson attributes the bank's measured approach to lending as a direct result of Payne's personal outlook. "It's conservative practices; it's being very careful," he said.

Thorson said the bank moved to buy County Bank because it wanted more of a market share in the Central Valley. While it just bought a failed bank, Westamerica hasn't emerged from the financial troubles unscathed.

Westamerica saw a loss in 2008 of $57 million from its Fannie Mae and Freddie Mac stocks, which plummeted. But, still, it made a profit of $60 million in 2008.

Thorson says it didn't fall prey to the same trap as much of the rest of the industry for several reasons. The bank kept its loan-to-debt ratio higher than other banks. For every dollar it had on hand, it only lent out 75 cents. The usual ratio in the industry, said Thorson, is to loan out more than you have.

When it bought securitized mortgage bundles -- the ones many other banks lost out on -- it acted prudently. The bank basically did the same thing that it always did when lending: check for good credit and make sure that people had put down payments for home loans.

"We did a lot of due diligence in looking at (securities)," he said.

Analyst Aaron Deer, quoted in the San Francisco Chronicle, said Westamerica "is regarded as being one of the absolute best underwriters in the industry. They have been extremely cautious and selective in the types of loans they have underwritten over the past several years."

But one trend Westamerica has been a part of, admitted Thorson, is banking consolidation, which contributes to an ever-centralizing banking system.

Shawn Kantor, professor of economics at UC Merced, said consolidation is very much a microcosm of what's happening on the national level:

"So we have tremendous financial institutions that the feds have had to bail out or force other banks to take over. So we are sort of getting the same thing here. The fundamental problem is not being addressed -- the creation of bigger banks -- so we still face the potential problem down the road."

But Westamerica's growth hasn't always been good for everyone.

In the company's profile by St. James Press, Westamerica's history of mergers didn't always augur well for the employees of the banks they bought. "Westamerica shut branches which did not meet profitability and growth benchmarks," the book said. "Acquired and existing branches which overlapped were closed. Back-office operations throughout the system also were consolidated."

That doesn't exactly make calm bedtime reading for former County Bank employees.