Cost Containment Continues at Westamerica - Analyst Blog

On March 25, 2014, we have issued an updated research report on Westamerica Bancorp. WABC. Though the company reported lower-than-expected fourth-quarter results, lower expenses as well as a decline in provision for loan losses were the positives for the quarter.

In the present economic scenario wherein most of the companies are finding it difficult to manage expenses, Westamerica has recorded a consistent fall in the same since 2009.

Further, improving credit quality is a major strength for Westamerica. While nonperforming assets have been declining at a steady pace since 2009, provision for loan losses dropped 28.6% year over year in 2013.

The Zacks Consensus Estimate for 2014 increased slightly to $2.42 per share over the last 60 days. For 2015, the Zacks Consensus Estimate remained unchanged at $2.50 per share over the same time period. Currently, Westamerica has a Zacks Rank #2 (Buy).

On the flip side Westamerica's fourth-quarter 2013 results lagged the Zacks Consensus Estimate. Moreover, it decreased 14.3% on a year-over-year basis.

Low interest rates continue to weigh on Westamerica's interest income, thereby compressing net interest margin NIM. The company has been witnessing a persistent decline in NIM since 2010.

Westamerica's performance in terms of profitability remains unimpressive as well. Though the equity market has recovered substantially and interest rate environment is expected to improve in the future, we do not see any significant improvement in profitability ratios in the near term.

Stocks That Warrant a Look

Some better-ranked west banks include Central Valley Community Bancorp CVCY, Columbia Banking System Inc. COLB and Summit State Bank SSBI. All these stocks have a Zacks Rank #1 (Strong Buy).