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10 Bank Stocks Turning the Credit Corner

9. Western Alliance Bancorporation

Shares of Western Alliance Bancorporation (WAL) of Phoenix closed at $5.17 Wednesday, down 30% year-to-date.

The company had $6.5 billion in total assets as of June 30, with a nonperforming assets ratio of 4.38%, declining from 4.63% the previous quarter and 5.16% in June 2010, according to SNL Financial.

Western Alliance announced on Wednesday that the company had received $141 million through the Treasury Department's Small Business Lending Fund (SBLF), exchanging the preferred shares held by the government for a previous investment made through the Troubled Assets Relief Program, or TARP, for new preferred shares.

Western Alliance president Ken Vecchione said the company's participation in the small business lending fund would "aid in promoting lending to this vital part of our economy and we look forward to using it to assist small businesses in our Arizona, California and Nevada markets."

The company reported second-quarter net income to common shareholders of $3.7 million, or five cents a share, increasing from a loss to common shareholders of $1.2 million, or two cents a share, in the second quarter of 2010. The main factor in the earnings improvement was a reduction in the provision for loan losses to $11.9 million in the second quarter, from $23.1 million a year earlier.

KBW analyst Brian Klock on Wednesday reiterated his "market perform" rating for Western Alliance with a $7.50 price target, saying "with the swap of the TARP with SBLF, we are lowering 3Q11 EPS by $0.09 to reflect the non-cash accelerated TARP discount amortization, but raising our '12 EPS estimate $0.05 to reflect lower SBLF funding cost (assuming 4% coupon)."

Klock now expects the company to earn 50 cents a share in 2012.

The shares trade for nine times the consensus 2012 EPS estimate of 59 cents, among analysts polled by FactSet, and just under their June 30 tangible book value of $5.43, according to SNL.

Out of 15 analysts covering Western Alliance, eight rate the shares a buy, while the remaining analysts all have neutral ratings.
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