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10 Best Bank Stocks of 2010

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5. Western Alliance Bancorporation

Company Profile

Shares of Western Alliance Bancorporation of Phoenix, Ariz. closed at $6.49 Wednesday, rising 72% year-to-date.

The Las Vegas-based lender is in an unenviable position: It operates mostly in Nevada and Arizona, the worst housing markets and hardest-hit economies in the country. At its height in 2007, Western Alliance stock traded above $35; last year it struggled to remain above $3.50.

Income Statement

The company reported a third-quarter net loss to common shareholders of $457 thousand, or a penny a share, narrowing from a net loss to common shareholders of $26.4 million, or 37 cents a share, during the third quarter of 2009.

The provision for credit losses was still high at $23 million during the third quarter, but it declined from $50.8 million a year earlier. Third-quarter net charge-offs totaled $25.8 million, declining from $30.7 million in the third quarter of 2009.

Balance Sheet

Total assets were $6.2 billion as of September 30, and the NPA ratio was 3.96%, improving slightly from 4.14% a year earlier. The third-quarter net charge-off ratio was 2.41% and reserves covered 2.59% of total loans as of September 30.

Western Alliance owes $140 million in TARP money. The company raised $50.3 million in common equity in August. Its Tier 1 leverage ratio was 9.98% and its total risk-based capital ratio was 13.66% as of September 40. The tangible common equity ratio was 7.32% according to SNL Financial.

Chairman and CEO Robert Sarver indicated that the company's capital cushion "not only strengthens our balance sheet, but also furthers our ability to grow."

Stock Ratios

The shares trade for 1.2 times tangible book value according to SNL, and 27 times the 2011 consensus earnings estimate of 24cents a share. The forward P/E drops to 11.2 based on the 2012 consensus earnings estimate of 58 cents a share.

Analyst Ratings

Since mid-August, the stock has mostly remained locked in a $6 to $7 trading range, closing above $6.50 in recent sessions. Wall Street's average price target of $7.60 seems to indicate quite a bit more upside. Yet the analyst community is split, with three recommending clients buy Western Alliance shares and nine rating the stock a hold.

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