On Thursday, Westamerica Bancorp. (WABC) announced its plan to repurchase up to 6.9% or approximately 2 million of its common stock as of July 23, 2010. The board of directors approved the plan to repurchase shares from the open market or private transactions by September 1, 2011.
Westamerica already had a share buyback program in place, under which about 1.7 million shares remained for repurchase, as of June 30, 2010. The present plan replaces the old program.
With the signs of economic recovery, many companies are returning value to the shareholders by either using share repurchase or dividends. Westamerica’s stable credit quality, high profitability and strong capital position favored the initiation of the share repurchase program.
Westamerica reported second quarter 2010 earnings of 80 cents per share compared with 69 cents in the year-ago quarter and in line with the Zacks Consensus Estimate. Overall results reflected increase in provision for loan losses, decrease in interest and non-interest income and increase in non-covered, non-performing assets. These were partially offset by a decrease in operating expenses, low cost of funding on loan and investment portfolios along with a risk reduction in loan portfolio.
Though weak interest rates, low investment returns and deteriorating credit quality will restrict significant bottom-line improvement in the near term, we expect continued synergies from the company’s strong expense discipline, conservative credit culture and sound balance sheet.
Westamerica shares currently retain a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating. Also, considering the fundamentals, we are maintaining a long-term Neutral recommendation on the shares.
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