Westamerica Bancorp. share roared to life Monday after Thomas K. Brown of Donaldson. Lufkin & Jenrette Securities Corp. initiated coverage with a "buy" rating.

The stock, stuck in a light trading range most of the year, jumped $2.365 -- or 9.25% -- to $28 before easing back to $27.375 in late trading.

Mr. Brown called Westamerica. which is based in San Rafael, Calif., "an undiscovered jewel" offering strong fundamentals and dividend growth as well as takeover potential.

A Focus on Fundamentals

He said he picked Westamerica as a smaller California banking company to focus on after his precious selection, San Jose-based Pacific Western Bancshares, agreed 10 days ago to be acquired by Comerica Inc.

"Pacific Western as a pick was based 80% on its takeover potential," Mr. Brown said. "But Westamerica is nearly the opposite at 75% for fundamentals and 25% for takeover potential."

Mark Alpert, a banking analyst at Alex. Brown & Sons who has a "neutral" rating on the stock. called Westamerica "the strongest and most profitable bank in California."

|Excellent Coverage'

They're a solid banking organization with excellent coverage of a good banking market in northern California," said bank analyst Campbell K. Chaney of Dakin Securities Corp., San Francisco.

Westamerica had a 1.02% return of assets during 1992, a difficult year for many banks in California because of the state's deep and lingering recession.

The bank reported a second quarter loss of 50 cents per share due to a $10.4 million after-tax charge -- equal to $1.29 per share -- related to its acquisition of Napa Valley Bancorp. That deal was completed on April 15.

Mr. Brown expects Westamerica to earn $1.18 per share this year and $3 next year. Mr. Alpert also forecasts a $3 figure for 1994. In 1992 the bank earned $2.40 per share.

A Turnaround Story

Westamerica has $2 billion of assets and 53 branch offices in 11 northern California counties. The bank's market area ranges from suburban San Francisco to Sacramento.

Westamerica is a turnaround story. Analysts say the bank was mismanaged during much of the 1980s and suffered from high overhead and credit quality problems.

Although the Westamerica never lost money, the company's rage return on assets from 1982 to 1989 was a sickly 0.48%.

Last November, Joseph A. Mano 3d, former executive vice president of the bank, was sentenced to five years in prison for defrauding the bank and for filling false income tax returns.

Led by Banking Newcomer

According to court papers, Mr. Mano defrauded Westamerica through real estate development loans he approved in return for cash, stock, and limited partnership interests in the projects that were financed.

David L. Payne, Westamerica's major shareholder and a director, took command in late 1989 and slashed both costs and real estate loans before the state's economy weakened.

Mr. Payne, a 33-year-old nonbanker when he got the top job, has overcome initial skepticism with a tough and direct management style.

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