Financial stocks have been taking a beating recently. Banks that operate in certain regional areas usually stood out in my earlier examination of smaller banks. Let's use this information to determine which bank might be the best in the mid-Atlantic.
What is the mid-Atlantic?
The region spans primarily from South Carolina to Pennsylvania. Some of the banks have a presence in states outside of the region. For example, North Carolina-based BB&T (NYSE: BBT ) has branches in all the coastal states, but also has branches in western states such as California and Washington.
Screening factors
I will rank and average the banks based on four factors: P/E ratio, P/B ratio, dividend yield, and net income margin. Only banks with a market cap over $300 million will be included.
My first screening will eliminate all banks without earnings over the past 12 months, looking for the cheapest bank according to this metric. My second factor is P/B ratio. In the banking industry, a value of 1.5 is reasonable, and the adage I like is "buy at a half, sell at two." Only banks that pay a dividend will be included -- the higher the better. Finally, I will be using net income margin as another method of comparing the banks' profitability.
My initial screen turned up seven names:
|
Company
|
P/E Ratio (TTM)
|
P/B Ratio
|
Dividend Yield
|
Net Income Margin
|
| WesBanco (Nasdaq: WSBC ) |
11.3 |
0.75 |
3.6% |
18.2% |
| City Holding (Nasdaq: CHCO ) |
11.0 |
1.33 |
5.0% |
26.6% |
| United Bankshares (Nasdaq: UBSI ) |
13.0 |
1.16 |
5.6% |
24.6% |
| First Citizens Bancshares (Nasdaq: FCNCA ) |
11.1 |
0.87 |
0.8% |
12.1% |
| Sandy Spring Bancorp (Nasdaq: SASR ) |
12.6 |
0.85 |
2.1% |
20.5% |
| BB&T Corp. |
15.6 |
0.86 |
3.1% |
11.3% |
| SCBT Financial (Nasdaq: SCBT ) |
36.0 |
0.96 |
2.7% |
5.3% |
| Regional averages |
13.6 |
0.69 |
1.7% |
(13.7%) |
Source: FinViz.com, TTM = trailing 12 months.
Wheeling, W.Va.-based WesBanco started out in 1870 as "The German Bank." Since then, it has focused on serving its region in both personal and business banking services. It recently increased its dividend 6.7% from the previous quarter, as well as increased earnings over the past year.
As you can see, the top three banks all led in one of my categories: WesBanco has the lowest P/B, City Holding has the highest net income margin, and United Bankshares pays the highest dividend. WesBanco comes out ahead when all four factors are combined because of its average rankings in the other four categories.
Regional opportunities abound!
Other Fools point to great values in some of the larger banks, and I couldn't agree more. However, there are many great opportunities in some of the regional banks. I will be paying special attention to WesBanco and adding it to My Watchlist. Feel free to do the same.
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