This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

4 Western Bank Stock Picks

3. Western Alliance Bancorporation
Shares of Western Alliance Bancorporation (WAL - Get Report) of Phoenix closed at $9.08 Tuesday, returning 46% year-to-date, after declining 15% last year.

The company on Aug. 17 announced an agreement to acquire Western Liberty Bancorp (WLBC) of Las Vegas, for roughly $55 million, or $4.02 a share, which was a premium of 49% over the target company's closing share price of $2.85 before the announcement, but only 75% of Western Liberty's total stockholder's equity of $73.7 million, as of June 30.

Western Alliance will take on $199 million in assets, along with three offices in the Las Vegas area. The deal is subject to the approval of Western Liberty's shareholders, and is expected to be completed during the fourth quarter.

Western Alliance reported second-quarter net income of $14.0 million, or 15 cents a share, increasing from $11.3 million, or 12 cents a share, during the first quarter, and $7.1 million, or seven cents a share, during the second quarter of 2011.

Net interest income increased to $70.8 million during the second quarter, from $70.1 million the previous quarter, and $68.7 million, a year earlier. The net interest margin was a strong 4.46% in the second quarter, declining from 4.53% tin the first quarter, but increasing from 4.34% in the second quarter of last year.

The main factor in the bottom line earnings improvement has been a decline in expenses on the sale and valuation of repossessed assets, to $901 thousand during the second quarter, from $2.7 million the previous quarter, and $7.7 million, a year earlier. Despite the declining expenses, Western Alliance's relatively high level of nonperforming assets continues to place a drag on earnings, with a second-quarter provision for loan losses of $13.3 million, which is slightly higher than in the previous quarter and a year earlier.

Nonperforming assets made up 2.5% of total assets as of June 30, improving from 2.7% in March, and 3.1% in June 2011.

Total loans increased 5% sequentially and 17% year-over-year, to $5.2 billion, as of June 30, with strong increases in commercial real estate and non-real estate lending.

Western Alliance Bancorporation's second-quarter ROA was 0.80%, improving from 0.67% the previous quarter, and 0.39% a year earlier. The return on average equity (ROE) was 8.48%, improving from 6.97% in the first quarter, and 3.98% in the second quarter of 2011.

With such a strong net interest margin, solid loan growth, and improving asset quality, Western Alliance looks like a golden late-cycle opportunity for investors.

Coffey says that growing loans is "what they do best," which "hurt them when they were growing loans in Nevada," after which Western Alliance "retooled and focused on Arizona and California."

"Loans have grown nine consecutive quarters and are on pace to grow 15% this year," he said.

The shares trade for 1.5 times their reported June 30 tangible book value of $6.01, and 12 times the consensus 2013 EPS estimate of 77 cents. The consensus 2012 EPS estimate is 59 cents.

Coffey rates Western Alliance "Outperform," with an $11 price target, and after raising his 2012 EPS estimate for the company by six cents to 75 cents on Aug. 20, the analyst on Wednesday raised the estimate by another two cents to 77 cents.

After lowering his 2013 EPS estimate by a nickel to 88 cents on Aug. 20, Coffee on Wednesday raised his 2013 EPS estimate to 92 cents, after Western Alliance late on Tuesday filed merger documents that included estimates of "nearly $16 million in credit marks (14.3% on loans and 16.7% on OREO), a net bargain purchase gain of $11.7 million and acquisition consideration of 50% cash/50% stock."

The analyst now estimates that Western Alliance will issue 2.9 million new shares to partially fund the Western Liberty deal, and since Western Liberty is so strongly capitalized, with a total ratio of Tier 1 capital to average assets of 34.77% as of June 30, and cash making up with cash making up 43% of total assets, "we are also estimating tangible book values of $6.18 for 3Q-12 and 2012 and $7.05 for 2013."

WAL Chart WAL data by YCharts

Interested in more on Western Alliance Bancorporation? See TheStreet Ratings' report card for this stock.
2 of 4

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
BBCN $15.62 0.00%
FRC $70.32 0.00%
SIVB $104.28 0.00%
WAL $36.58 0.00%
WIBC $10.77 0.00%


Chart of I:DJI
DOW 17,773.64 -57.12 -0.32%
S&P 500 2,065.30 -10.51 -0.51%
NASDAQ 4,775.3580 -29.9330 -0.62%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs