We reaffirmed our long-term recommendation on Westamerica Bancorp. at Neutral. This was based on the company's strong financials and its efficient capital deployment activities. However, a sluggish economic recovery and the existing low interest-rate environment will keep the company’s bottom line under pressure in the near term.
Why This Stance?
Westamerica’s third-quarter 2013 earnings missed the Zacks Consensus Estimate. However, the company witnessed increased non-interest income and lower operating expenses. The company also remained well capitalized.
Westamerica enjoys a competitive edge over its peers owing to its efficient cost control initiatives amid a challenging environment of rising expenses across the industry. Further, the company’s capital deployment activities reflect its efforts towards enhancing shareholder value. Apart from being consistent in raising its quarterly cash dividend since 2010, the company has an effective share repurchase program in place.
However, Westamerica’s bottom-line growth is expected to be sluggish in the next few quarters as the company is witnessing a declining net interest margin and a flat growth of its interest-earning assets. Moreover, current macroeconomic headwinds and regulatory pressure are expected to pose a threat to company’s earnings in the near term.
Further, over the last 60 days, the Zacks Consensus Estimate for 2013 and 2014 remained stable at $2.55. As a result, Westamerica currently carries a Zacks Rank #3 (Hold).
Other Stocks to Consider
Some better-ranked West Banks include BofI Holding, Inc. (BOFI - Free Report) , BBCN Bancorp, Inc. and Bank of Hawaii Corp. (BOH - Free Report) . BofI Holding carry a Zacks Rank #1 (Strong Buy) while both BBCN Bancorp and Bank of Hawaii Corporation hold a Zacks Rank #2 (Buy).