A Wall Street Transcript Interview with William J. Wallace IV of Raymond James & Associates, Inc. (RJF): a Barbell Investment Approach to Eastern Banking

Wall Street Transcript

67 WALL STREET, New York - January 8, 2013 - The Wall Street Transcript has just published its Northeast and Mid-Atlantic Banks 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, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Pockets of Growth in Northeastern Banking - Heightened M&A Activity - Demutualization and MHC Conversion Opportunities - Fiscal Cliff Effects on Banking

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

In the following excerpt from the Northeast and Mid-Atlantic Banks 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.

TWST: Any others?

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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