Western Alliance asking shareholders to OK banning some new stock buys

In order to protect tax benefits, Western Alliance Bancorporation is asking shareholders to approve a proposed prohibition against new stock purchases that would increase a shareholder's stake to more than 4.9 percent of outstanding shares.

The holding company, which owns Bank of Nevada and other banks in Nevada, Arizona and California, on Monday reported that its board approved a change in bylaws related to tax concerns. Western Alliance intends to hold a meeting on Nov. 30 to ask shareholders to make a similar change in its articles of incorporation.

Like many bank holding companies, Western Alliance lost money during the recession until recently.

Tax law allows companies to use some losses to reduce tax liability in following years. The company has $68 million in net operating loss carry-forwards that could be used to avoid taxes on about $200 million in future operating income.

Under a provision in the Internal Revenue Code, however, the company could lose its tax loss carry-forward if an investor bought more than 4.9 percent of its outstanding shares, said Chief Financial Officer Dale Gibbons.

The company wants authority to issue new shares and dilute the holdings of any new investor that boosts his holdings in Western Alliance to more than 4.9 percent over a three-year period.

The new provision would not require two mutual funds that own more than 5 percent of Western Alliance shares to sell shares. Nor would it force Thomas Brown, managing member of Second Curve Capital LLC, to sell any shares, although Second Curve owns 5.07 percent of Western Alliance shares, according to a recent report to the Securities and Exchange Commission.

Contact reporter John G. Edwards at jedwards@
reviewjournal.com or 702-383-0420.