This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

10 Bank Stocks Bringing Home the Bacon (Mmm... Bacon)

2. Westamerica Bancorporation

Shares of Westamerica Bancorporation (WABC) of San Rafael, Calif., closed at $44.72 last Friday, down 17% year-to-date. Based on a quarterly payout of 37 cents, the shares have a dividend yield of 3.31%. The dividend was increased by a penny, on Oct. 27.

The company's year-to-date ROA was 1.79% as of Sept. 30, and its five-year average ROA was 1.91%.

Westamerica had $5.0 billion in total assets as of Sept, 30, with over 90 branches in Northern and Central California.

Third-quarter net income was $22.4 million, or 79 cents a share, increasing from $21.3 million, or 74 cents a share, in the second quarter, but declining from $23.7 million, or 81 cents, in the third quarter of 2010. The provision for loan losses was $2.8 million during all three periods.

Net interest income declined 3.5% year-over-year to a tax-adjusted $54.7 million, with reduced loan volumes "placing greater reliance on lower-yielding investment securities."

While Westamerica's earnings decline was mainly attributed to a narrowing interest rate spread, the company's third-quarter net interest margin was a stellar 5.32% (tax-adjusted), declining from 5.54% a year earlier.

The third-quarter ROA was 1.82%, according to SNL Financial. Over the past five quarters, the ROA has ranged between 1.73% and 1.95%.

CEO David Payne said that during the third quarter, Westamerica retired "$10 million in high-coupon trust-preferred debt, and repurchased 316 thousand shares of common stock."

KBW analyst Julianna Balicka has an "Outperform," on Westamerica, with a $55 price target, saying on Oct. 20 that "the fundamental thesis of our model is a sustainable tangible ROE between 23% and 25%."

A return on equity of 20% was long considered the threshold for strong earnings performance by a bank, at least before the real estate bubble burst.

Balicka also called Westamerica a "high-quality, low risk banking franchise that provides a compelling value proposition for investors looking for low volatility earnings, consistently increasing dividends, and active capital management in the form of share buybacks or well priced acquisitions."

The shares reflect Westamerica's strong and consistent earnings performance, trading for 13.5 times the consensus 2012 EPS estimate of $3.25, among analysts polled by FactSet, and just over three times tangible book value, according to SNL.

Out of nine analyst covering Westamerica Bancorporation, two rate the shares a buy, six have neutral ratings, and one analyst recommends investors sell the shares.

Like First Financial Bankshares, Westamerica trades for a premium to peers because of its strong long-term earnings performance. While most analysts are neutral on the shares, the analysts' ratings are based on "long-term" outlooks of only one year. Westamerica looks like a keeper for real long-term investors who can stay in for a period of many years.

10 of 11

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,199.88 -79.86 -0.46%
S&P 500 1,993.69 -16.71 -0.83%
NASDAQ 4,519.2870 -60.5020 -1.32%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs