4 Western Bank Stock Picks

NEW YORK (TheStreet) -- Investors looking for long-term bank stock plays should look west, according to FIG Partners analyst Timothy Coffey.

Coffey recommends four Western banks, each of which "does one thing really well," while "operating in markets that will enable them to continue doing that one thing very well."

Two of the banks have major operations in the Silicon Valley area, and "because the IPO market is functioning again," the environment is favorable for good credit performance, and "there are a lot of new high net worth individuals" feeding the growth of private banking services.

Here are Coffey's four favorite western bank stock plays, counting down by the potential upside implied by the analyst's price targets:

4. SVB Financial Group
Shares of SVB Financial Group (SIVB) of Santa Clara, Calif., closed at $57.63 Tuesday, returning 21% year-to-date, following a 10% decline during 2011.

SVB's main subsidiary is Silicon Valley Bank, which has been greatly expanding its overseas operations, with offices in the United Kingdom, Israel, China and India, in addition to 27 offices throughout the United States.

Despite the international growth, the company focuses on lending to technology companies, providing multiple services to venture capital and private equity firms that invest in tech and biotech, and also on private banking services for high net worth individuals, in its home market in the Silicon Valley area.

SVB Financial Group reported second-quarter net income available to common shareholders of $47.6 million, or $1.06 a share, increasing from $34.8 million, or 78 cents a share in the first quarter, but declining from $65.8 million, or $1.53 a share, in the second quarter of 2011, when the company booked $71.7 million in gains on investment securities. Investment securities gains totaled $25.8 million in the most recent quarter.

Second-quarter net interest income totaled $151.9 million, increasing from $150.9 million the previous quarter, and $130.5 million a year earlier. The increase in net interest income reflected very strong loan growth of 9% quarter-over-quarter, and 30% year-over-year, to $7.8 billion, as of June 30.

In a tough environment for banks' margins, as long-term rates have continued to decline, while the benefit of declining short-term rates has mostly been realized, SVB's net interest margin has held up reasonably well, at 3.22% during the second quarter, declining from 3.30% in the first quarter, but increasing from 3.13% in the second quarter of 2011.