On Sep 24, 2013, we upgraded our long-term recommendation on
) to Neutral from Underperform. Our decision was based on a
steady decline in the company's operating expenses.
The Rationale Behind the Upgrade
In the present economic scenario where many companies are facing
the challenge of rising expenses, Westamerica's decreasing
operating expenses is its strength. Moreover, the company is
still performing well in terms of profitability, as indicated by
its strong return on equity (ROE) and return on assets (ROA).
Additionally, Westamerica maintains a healthy capital position.
Going forward, we expect the company to continue building capital
over the next two years, leading to a better financial position.
However, the company's second-quarter 2013 results were
disappointing. On Jul 16, Westamerica reported earnings per share
of 64 cents, missing the Zacks Consensus Estimate by a penny.
Results were adversely impacted by lower net interest income,
partially offset by almost stable fee revenues and a drop in
The Zacks Consensus Estimate for 2013 and 2014 were constant at
$2.56 and $2.53 respectively, over the last 60 days. Hence,
Westamerica currently carries a Zacks Rank #3 (Hold).
While we do not expect any significant improvement in interest
income in the near term due to the prevalent low interest-rate
scenario, we anticipate continued synergies from the company's
conservative credit culture and stable balance sheet. Further,
once the market rebounds to a more conducive operating
environment, Westamerica will be able to capitalize on growth
Other Stocks Worth Considering
Some better-performing banks include
BofI Holding, Inc.
Glacier Bancorp Inc.
City National Corporation
). While BofI Holding and Glacier Bancorp carry a Zacks Rank #1
(Strong Buy), City National Corporation has a Zacks Rank #2
BOFI HLDG INC (BOFI): Free Stock Analysis
CITY NATIONAL (CYN): Free Stock Analysis
GLACIER BANCORP (GBCI): Free Stock Analysis
WESTAMER BANCP (WABC): Free Stock Analysis
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