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Bear of the Day

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Westamerica Bancorp (WABC)

WABC

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We are downgrading our long-term recommendation on Westamerica Bancorp (WABC) from Neutral to Underperform based on weak fourth-quarter results and an overall sluggish economic environment. The company's fourth quarter 2011 earnings slightly missed the Zacks Consensus Estimate.

Results were negatively impacted by reduced revenues, partially offset by lower non-interest expenses. The company's credit quality continued to show improvement in the quarter. We believe that a weak interest rate environment, and low investment returns will restrict any significant bottom-line improvement in the near term.

Our six-month target price of $43.00 equates to about 14.0x our earnings estimate for 2012. Combined with the $1.48 per share annual dividend, this price target implies an expected negative return of 8.5% over that period, which is consistent with our long-term Underperform recommendation on the shares.

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