Westamerica Bancorporation (WABC)

Regional bank Westamerica Bancorporation (NASDAQ:WABC) beat Wall Street’s revenue expectations in Q4 CY2025, but sales fell by 9.1% year on year to $63.55 million. Its non-GAAP profit of $1.12 per share was 5.2% above analysts’ consensus estimates.

Company Overview

Founded in 1884 and serving communities from Mendocino County in the north to Kern County in the south, Westamerica Bancorporation (NASDAQ:WABC) provides banking services to individuals and small businesses throughout Northern and Central California.

Regional banks, financial institutions operating within specific geographic areas, serve as intermediaries between local depositors and borrowers. They benefit from rising interest rates that improve net interest margins (the difference between loan yields and deposit costs), digital transformation reducing operational expenses, and local economic growth driving loan demand. However, these banks face headwinds from fintech competition, deposit outflows to higher-yielding alternatives, credit deterioration (increasing loan defaults) during economic slowdowns, and regulatory compliance costs. Recent concerns about regional bank stability following high-profile failures and significant commercial real estate exposure present additional challenges.

Westamerica Bancorporation competes with other California regional banks such as Bank of Marin Bancorp (NASDAQ:BMRC), TriCo Bancshares (NASDAQ:TCBK), and SVB Financial Group (NASDAQ:SIVB), as well as larger national banks with California operations including Bank of America (NYSE:BAC), Wells Fargo (NYSE:WFC), and JPMorgan Chase (NYSE:JPM).

Two primary revenue streams drive bank earnings. While net interest income, which is earned by charging higher rates on loans than paid on deposits, forms the foundation, fee-based services across banking, credit, wealth management, and trading operations provide additional income. Over the last five years, Westamerica Bancorporation grew its revenue at a sluggish 4% compounded annual growth rate. This fell short of our benchmark for the banking sector and is a rough starting point for our analysis.

Long-term growth is the most important, but within financials, a half-decade historical view may miss recent interest rate changes and market returns. Westamerica Bancorporation’s performance shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 10.7% annually. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, Westamerica Bancorporation’s revenue fell by 9.1% year on year to $63.55 million but beat Wall Street’s estimates by 2.7%.

Net interest income made up 83.2% of the company’s total revenue during the last five years, meaning Westamerica Bancorporation barely relies on non-interest income to drive its overall growth.

Our experience and research show the market cares primarily about a bank’s net interest income growth as non-interest income is considered a lower-quality and non-recurring revenue source.

Topline growth alone doesn't tell the complete story - the profitability of that growth shapes actual earnings impact. Banks track this dynamic through efficiency ratios, which compare non-interest expenses such as personnel, rent, IT, and marketing costs to total revenue streams.

Investors focus on efficiency ratio changes rather than absolute levels, understanding that expense structures vary by revenue mix. Counterintuitively, lower efficiency ratios indicate better performance since they represent lower costs relative to revenue.

Over the last five years, Westamerica Bancorporation’s efficiency ratio has swelled by 8.1 percentage points, going from 45.2% to 39.4%. Said differently, the company’s expenses have grown at a slower rate than revenue, which typically signals prudent management.

Westamerica Bancorporation’s efficiency ratio came in at 40.1% this quarter, beating analysts’ expectations by 150 basis points (100 basis points = 1 percentage point).

For the next 12 months, Wall Street expects Westamerica Bancorporation to become less profitable as it anticipates an efficiency ratio of 44.7%.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Westamerica Bancorporation’s EPS grew at an unimpressive 9.8% compounded annual growth rate over the last five years. This performance was better than its flat revenue but doesn’t tell us much about its business quality because its efficiency ratio didn’t improve.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Westamerica Bancorporation, its two-year annual EPS declines of 13.7% show it’s continued to underperform. These results were bad no matter how you slice the data.

In Q4, Westamerica Bancorporation reported adjusted EPS of $1.12, down from $1.19 in the same quarter last year. Despite falling year on year, this print beat analysts’ estimates by 5.2%. Over the next 12 months, Wall Street expects Westamerica Bancorporation’s full-year EPS of $4.52 to shrink by 11%.

Leverage is core to a financial firm’s business model (loans funded by deposits). To ensure economic stability and avoid a repeat of the 2008 GFC, regulators require certain levels of capital and liquidity, focusing on the Tier 1 capital ratio.

Tier 1 capital is the highest-quality capital that a firm holds, consisting primarily of common stock and retained earnings, but also physical gold. It serves as the primary cushion against losses and is the first line of defense in times of financial distress.

This capital is divided by risk-weighted assets to derive the Tier 1 capital ratio. Risk-weighted means that cash and US treasury securities are assigned little risk while unsecured consumer loans and equity investments get much higher risk weights, for example.

New regulation after the 2008 financial crisis requires that all firms must maintain a Tier 1 capital ratio greater than 4.5%. On top of this, there are additional buffers based on scale, risk profile, and other regulatory classifications, so that at the end of the day, firms generally must maintain a 7-10% ratio at minimum.

Over the last two years, Westamerica Bancorporation has averaged a Tier 1 capital ratio of 22%, which is considered safe and well capitalized in the event that macro or market conditions suddenly deteriorate.

Return on equity (ROE) reveals the profit generated per dollar of shareholder equity, which represents a key source of bank funding. Banks maintaining elevated ROE levels tend to accelerate wealth creation for shareholders via earnings retention, buybacks, and distributions.

Over the last five years, Westamerica Bancorporation has averaged an ROE of 16.8%, excellent for a company operating in a sector where the average shakes out around 7.5% and those putting up 15%+ are greatly admired. This is a bright spot for Westamerica Bancorporation.

We enjoyed seeing Westamerica Bancorporation beat analysts’ net interest income expectations this quarter. We were also glad its revenue outperformed Wall Street’s estimates. Overall, we think this was a decent quarter with some key metrics above expectations. The stock remained flat at $50.92 immediately following the results.

Updated: January 15, 2026 at 11:41 PM EST

Are you wondering whether to buy Westamerica Bancorporation or pass? We urge investors to not only consider the latest earnings results but also longer-term business quality and valuation as well.

Westamerica Bancorporation falls short of our quality standards. For starters, its revenue growth was weak over the last five years, and analysts expect its demand to deteriorate over the next 12 months. And while its improving efficiency ratio shows the business has become more productive, the downside is its projected EPS for the next year is lacking. On top of that, its anticipated efficiency ratio over the next year signals its day-to-day expenses will rise.

Westamerica Bancorporation’s P/B ratio based on the next 12 months is 1.2x. This valuation tells us it’s a bit of a market darling with a lot of good news priced in - we think there are better opportunities elsewhere.

Wall Street analysts have a consensus one-year price target of $53 on the company (compared to the current share price of $50.92).