What happened

Western Alliance Bancorporation (WAL 0.09%) ran hot in July, as the stock price rose 42% in the month, according to S&P Global Market Intelligence. Western Alliance is still down about 11.8% as of Aug. 7 but has bounced back to almost $53 per share after falling to $18 per share in early May. 

It outperformed the markets, as the S&P 500 was up 3.2%, the Dow Jones Industrial Average gained 3.4%, and the Nasdaq Composite jumped 4.1% in July.

So what

Western Alliance Bancorporation was hit as hard as just about anyone after the banking meltdown in March that ultimately brought down three banks. It was more about panic selling than anything else, as Western Alliance Bank had some exposure to technology start-ups and venture capital investors, but a relatively small percentage. But deposit outflows soon stabilized, as the bank has a diversified deposit base, and liquidity remained strong, with a common equity tier 1 (CET1) ratio of 7.9% after the first quarter.

The picture improved even more after Western Alliance posted strong second-quarter earnings on July 18 -- which was a major catalyst for July's growth. The stock price went from about $38 per share before earnings to over 52%, a climb of nearly 37%. 

Net income rose to $217 million from $142 million in the first quarter, while revenue of $669 million was up 21% from the previous quarter. Further, its deposits increased 7.3% in the quarter to $51 billion, while its loans rose 3.1% to $47.9 billion. In addition, its loans-to-deposit ratio dropped from 98% to 94%, and its CET1 ratio jumped to 10.1% -- well over the regulatory minimum.

"Western Alliance continued to successfully execute its balance sheet repositioning strategy and return to normal business operations by bolstering liquidity and capital, sustaining profitability, and expanding core client relationships," said Kenneth Vecchione, president and CEO. 

Now what

Even with its July surge, Western Alliance is still a really cheap bank stock, given the turmoil it endured earlier this year. It has a price-to-earnings ratio of just 6.3, and its balance sheet is rock solid. Also, it has a low efficiency ratio of 50.5% -- which is higher than the 40.4% ratio in the second quarter of 2022, but still low compared to that of most banks.

Western Alliance has outperformed over the years, with an 11.3% annualized return over the past 10 years, and it continues to do so. Investors interested in a good regional bank stock will find one here.