Westamerica of Calif. Buying Back Shares To Shore Up Its Price

Under pressure from analysts to deploy excess capital, Westamerica Corp., said last week that it would repurchase 7% of its 42.7 million outstanding shares.

San Rafael, Calif.-based Westamerica was carrying a capital-to-asset ratio of about 11%. By buying back its stock, the $3.8 billion-asset bank is aiming to boost per-share earnings and its stock price, which has plunged in recent months.

"The company was operating at high capital levels, and they weren't oblivious to it," said David H. Winton, an analyst with Keefe, Bruyette & Woods Inc. in New York.

David Payne, chairman and chief executive officer, was not available to comment on Westamerica's announcement. In a prepared statement, he said that Westamerica's strong capital position and healthy profitability contributed to launching the initiative.

Westamerica's decision comes on the heels of analyst reports that called for the company to use its excess capital to either make an acquisition or implement a stock buyback program. The repurchase strategy could add between 5 cents to 10 cents to Westamerica's 1999 fiscal earnings estimate of $1.95 per share, said Joseph K. Morford 3d, an analyst at Van Kasper & Company in San Francisco.

The announcement should boost Westamerica's stock price, which had declined 20% after analysts trimmed fiscal-1998 estimates by as much as 5 cents per share. The stock hit a 52-week high April 15, closing at $36.125, but by June 25 it was trading at $29.062. That compared with a 6% decline in the Standard & Poors Bank Index.

The stock has rebounded somewhat and was trading at $33.062 midday Monday.

Kirstin B. Gard, an analyst at Bear, Stearns & Co., cited three factors for the stock slide: slower agricultural loan growth, fierce loan competition in California, and continued deposit runoff from its acquisition of Fresno, Calif.-based ValliCorp.

And because Westamerica prefers to buy banks with stock rather than cash, analysts feared the stock slide would imperil future acquisitions. "The company now has a stronger currency to do deals if it chooses to do so," said Mr. Morford.

Sources said the bank is structuring two yet-to-be-announced acquisitions that would close next year.

Fast-growing Westamerica, which has tripled its size since 1992 by acquiring six banks, is widely considered one of California's premier independent institutions. It is the largest independent bank headquartered north of Los Angeles, with the state's ninth-largest deposit market share and 85 branches.

Despite recent setbacks, Westamerica's stock remains a favorite among analysts who continue to rate it a "buy."

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