4 Western Bank Stock Picks

1. Wilshire Bancorp
Shares of Wilshire Bancorp (WIBC) of Los Angeles closed at $6.28 Tuesday, returning 73% year-to-date, following a drop of 53% during 2011.

Wilshire specializes in lending to Korean businesses in the U.S. "There are two other comparable banks in the L.A. market," according to Coffey, the largest of which is BBCN Bancorp (BBCN), "which has more of retail focus," and Hanmi Financial (HAFC), "which is trying to get out of a severe regulatory order, so Wilshire really doesn't have much competition for what it does very well."

BBCN was created through a merger-of-equals between Nara Bancorp and Center Financial in November 2011. "Nara was more retail, and they are about 55% of the company's assets, while Center was more business focused," according to Coffey. Jae Whan Yoo -- formerly the CEO of Center Financial -- is now the CEO of Wilshire Bancorp, and "has taken his model and strategies to Wilshire and is now a direct competitor with his former company," Coffey says.

The company reported second-quarter earnings available to common shareholders of $22.1 million, or 31 cents a share, increasing from $17.9 million, or 25 cents a share, in the first quarter, and $2.1 million, or 4 cents a share, in the second quarter of 2011.

Credit quality improvement was the driving factor in the sequential and year-over-year earnings improvement. During the most recent quarter, the company transferred $10 million out of loan loss reserves, while making no provision for reserves the previous quarter, and setting aside $10.3 million for reserves a year earlier. Factoring in net loan charge-offs. The company released $10.7 million in loan loss reserves during the second quarter and $3.2 million in the first quarter.

Excluding government-guaranteed assets, Wilshire's nonperforming assets totaled $46.8 million as of June 30, or 1.80% of total assets, improving from 2.04% in March, and 3.22% in June 2011.

With a second-quarter annualized net charge-off rate of just 0.09% and reserves covering 4.54% of gross loans as of June 30, "Wilshire is over-reserved," according to Coffey, who expects "a negative provision of $3 million in the third quarter," providing another boost to earnings.

Wilshire's shares trade for 1.6 times their reported June 30 tangible book value of $3.94, and for 11 times the consensus 2013 EPS estimate of 57 cents. The consensus 2012 EPS estimate is $1.10.

Coffey rates Wilshire Bancorp "Outperform," with a price target of $8.00.

WIBC data by YCharts

Interested in more on Wilshire Bancorp? See TheStreet Ratings' report card for this stock.

-- Written by Philip van Doorn in Jupiter, Fla.

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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.

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