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On Feb 4, 2013, we reiterated our long-term recommendation on Westamerica Bancorp. (WABC - Analyst Report) at ‘Underperform’. This reflects the company’s dismal fourth-quarter results, which went down both sequentially and on a year-over-year basis.

Why Underperform?

Westamerica’s fourth-quarter earnings of 70 cents per share declined from the prior-quarter earnings of 73 cents and the year-ago earnings of 77 cents. The results were adversely impacted by sluggish top-line growth, partially offset by lower operating expenses. However, improving credit quality and stable capital ratios were the tailwinds for the quarter.

Following the fourth-quarter results, the Zacks Consensus Estimate for 2013 has gone down 1.8% to $2.75 per share. Likewise, the Zacks Consensus Estimate for 2014 has also declined (down 1.4% to $2.77 per share). With the Zacks Consensus Estimates for both 2013 and 2014 going down, the company now has a Zacks Rank #4 (Sell).

Further, Westamerica’s net interest margin (NIM) has been falling over the last several quarters owing to the challenging economic environment. Sluggish economic recovery and the Federal Reserve’s decision to keep short-term interest rates low through mid-2015 are expected to keep NIM under pressure going forward.

Other Banks Worth Considering

While we prefer to avoid Westamerica until we see signs of improvement in the company's overall performance, other west bank stocks worth a look include Columbia Banking System Inc. (COLB - Snapshot Report), Western Alliance Bancorporation (WAL - Snapshot Report) and Pacific Continental Corp. (PCBK - Snapshot Report). While the first two stocks carry a Zacks Rank #1 (Strong Buy), the third one retains a Zacks Rank #2 (Buy).

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