WABC

Westamerica is a conservatively run Northern/Central California commercial bank (76 branches, 20 counties) with one of the strongest balance sheets you will find: total risk-based capital of 23.05%, tangible equity to tangible assets of 13.90%, and equity/assets of 15.66%. Credit is pristine — the company recorded a $0.55M *reversal* of provision in 2025 and net loan losses are negative (recoveries), so there is essentially no credit risk dragging earnings. It has paid a dividend every quarter since 1972, the payout ratio is a comfortable 40%, and at $58.48 the ~$1.82 dividend yields roughly 3.1%. On 12.9x earnings and ~1.5x the $37.91 book value, the stock is not expensive. That quality-and-value combination is why this is a hold, not a sell.

The problem is direction. Earnings have fallen three years running — net income $162M (2023) → $139M (2024) → $116M (2025), with diluted EPS sliding from $6.06 to $4.52. The cause is visible in the MD&A: net interest margin (FTE) compressed from 4.37% to 4.14% to 3.82%, and net interest and loan-fee income dropped from $280M to $217M in just two years. This is a securities-heavy bank — $4.29B of debt securities against only $726M of loans — so its earnings hinge on the yield and size of that investment book, and that book plus the deposit base are shrinking (deposits $5.47B → $5.01B → $4.84B; assets -1.9%). ROE has more than halved, from 18.08% to 11.23%. The efficiency ratio is still excellent at 39.3% but has crept up from 31.7%, confirming revenue is falling faster than costs can be cut.