A Barbell Approach to Eastern Banking Ahead of Fiscal Cliff Worries: A Wall Street Transcript Interview with William J. Wallace IV, Analyst at Raymond James & Associates, Inc.

Wall Street Transcript

67 WALL STREET, New York - June 28, 2013 - The Wall Street Transcript has just published its U.S. Banking Review 2013 Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs and Equity Analysts. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: U.S. Banking Review 2013

Companies include: United Bankshares Inc. (UBSI), American National Bankshares I (AMNB), First Community Bancshares, In (FCBC), StellarOne Corporation (STEL), Virginia Commerce Bancorp Inc. (VCBI) and many more.

In the following excerpt from the U.S. Banking Review 2013 Report, an expert analyst discusses the outlook for the sector for investors:

TWST: Where are you pointing investors now? What are some of your favorite stories on the defensive side of the barbell?

Mr. Wallace: One is United Bankshares (UBSI), with dual headquarters in West Virginia and Virginia. They trade with a roughly 5% dividend yield. They've got a low-teen p/e on both 2013 and 2014 consensus estimates. They look expensive on a price to tangible book value at over two times, but I think with their strong balance sheet, strong returns on equity and good capital levels, this is a story where you can get paid to wait. They are a good acquirer and I think the dividend is safe.

I also like a smaller bank, American National (AMNB) out of Danville, Virginia. They have a similar profile to UBSI, but they're a little bit cheaper on a price to tangible book value basis, 1.3 times, and you get a mid-4% dividend yield.

I would also point to First Community Bancshares (FCBC) out of Bluefield, Virginia. They've got a good credit profile and a management team that has proven that they know how to acquire with a proven history of growth through acquisitions. They recently did two acquisitions, one in Richmond, Virginia, and another in North Carolina, and their dividend yield is nearly 3%.

TWST: How about on the other end of the barbell, the story stocks?

Mr. Wallace: My favorite is StellarOne Corporation (STEL). They are out of Charlottesville, Virginia. They trade cheap on a price to tangible book value basis, right at 1.0 times. They have a bloated expense base with an efficiency ratio of 68%, by my calculations. They have announced an efficiency initiative that will get that efficiency down, which over time has the potential to drive an additional $0.40 in annual EPS. The thesis is that if they are successfully able to execute this initiative, there should be meaningful upside to the stock. I'm basically betting on management there...

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

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