Magazine article American Banker

Merger Dry Spell Hurting California's Westamerica

Magazine article American Banker

Merger Dry Spell Hurting California's Westamerica

Article excerpt

For the past year and a half David L. Payne has been telling the investment community that his company, $3.7 billion-asset Westamerica Bancorp. of San Rafael, Calif., is on the verge of making more acquisitions.

But so far the chairman and chief executive officer of what had been one of California's most acquisitive banking companies has come up empty handed and analysts are becoming impatient.

Two analysts recently downgraded the stock to "sell" and "hold" over concerns that Westamerica's lack of dealmaking was hurting earnings. One even suggested that if Mr. Payne does not come through this year, Westamerica may have to look at alternatives to growth through acquisition.

"He may seriously have to think about selling his bank," said Erick J. Reim, a bank analyst at U.S. Bancorp Piper Jaffray in Minneapolis.

Westamerica, which purchased six banks between 1992 and 1997, has a history of boosting its earnings by slashing costs, firing management at its new banks, and making the deals accretive to its bottom line within three months. But that slash-and-burn reputation that may be causing some potential sellers to think twice before merging with Westamerica.

For instance, in a recent research report Hoefer & Arnett's Steve Didion quoted an unidentified California bank CEO as saying, "Mr. Payne would have to pry the keys from my dead hands to purchase my bank."

Mr. Payne, 44, has heard the criticism and called it "unfair." He said he typically offers potential sellers two choices: The first is a low offering price and the promise to retain most jobs. The second is a high price with no such guarantees.

"It's disconcerting that this reputation trails my company and me," Mr. Payne said. He added, however, that the banks he had been negotiating with are still available.

"Ultimately, I think our prospects for acquisition are good," he said. …

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