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Financial stocks have been taking a beating recently. Banks that usually 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 Midwest.
What is the Midwest?
Most of the banks on my list are based out of Ohio, with many banks serving different areas of the state. However, the “Midwest” in this context covers a large area from Ohio to Minnesota. The third bank from my screen below, Fifth Third Bancorp (Nasdaq: FITB ) , has a small presence in other states outside of the region, like West Virginia and Florida.
Screening Factors
We 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 bank profitability.
My initial screen turned up 17 banks, so I refined my screen to include banks with over a 3% dividend yield. That resulted in the following nine names:
|
Company |
P/E Ratio (TTM) |
P/B Ratio |
Dividend Yield |
Net Income Margin |
|---|---|---|---|---|
| Huntington Bancshares (Nasdaq: HBAN ) | 11.1 | 0.82 | 3.2% | 18.7% |
| Park National (AMEX: PRK ) | 11.8 | 1.08 | 7.2% | 20.1% |
| Fifth Third Bancorp | 10.7 | 0.77 | 3.1% | 18.7% |
| FirstMerit (Nasdaq: FMER ) | 11.7 | 0.85 | 5.3% | 16.1% |
| First Financial (Nasdaq: THFF ) | 11.6 | 1.08 | 3.3% | 24.1% |
| Chemical Financial (Nasdaq: CHFC ) | 12.5 | 0.80 | 4.8% | 16.2% |
| First Busey (Nasdaq: BUSE ) | 14.3 | 0.91 | 3.5% | 16.9% |
| First Financial Bancorp (Nasdaq: FFBC ) | 13.7 | 1.18 | 3.3% | 14.6% |
| Northern Trust (Nasdaq: NTRS ) | 14.2 | 1.24 | 3.1% | 17.0% |
| Regional Averages | 11.9 | 0.69 | 2.4% | 2.1% |
Source: Finviz.com, TTM = trailing 12 months.
Huntington Bancshares is the largest small business lender in the region, and the fifth largest in the country. It highlights its investments in local communities, investing nearly $100 million in neighborhoods throughout its region in 2009 and $700 million for small businesses. It did not lead any of the individual categories, but is boosted by high rankings in three of the four categories. In fact, the top three banks on this list have all been added to our resident banking expert Anand Chokkavelu's Rising Star Portfolio. Check out the reasoning for his selections right here.
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 Huntington Bancshares and adding it to My Watchlist. Feel free to do the same.
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Report this Comment On October 10, 2011, at 4:53 PM, Teacherman1 wrote:
To answer the question in your caption, yes it is,
and I have it on my "own" list. :)
This is a very good pick for a longer term hold , even at the current price; but I would not be adverse to picking up some more shares if we get a "Schitzo" market nosedive.
I have owned it since their current CEO took over, even before they paid back TARP.
He laid out a plan, and has been following it toward the "pot of gold" at the end of the "banking rainbow".
I expect in time, as they continue to make progress, there will be both a good share appreciation and a significant increase in the dividend.
This one is well worth owning.
JMO and worth exactly what I am charging for it.
Report this Comment On October 10, 2011, at 5:02 PM, Teacherman1 wrote:
I meant to add this to that last reply, but forgot there is no "preview" here.
Thanks for bringing BUSE to my attention.
I will need to look more closely at it, but my "gut" feeling is that I would need a better start price to put this one on my "own" list, but I will most certainly put it on my "watch" list.
Some of the others look interesting, but being basically a "penny stock" person, I will probably be passing on them.
Thanks for the article.
Report this Comment On October 10, 2011, at 7:29 PM, XMFGuruEbby wrote:
Thank you for your comments and thank you for reading!
TMFGuruEbby
Report this Comment On October 12, 2011, at 6:49 PM, BradTrish1900 wrote:
Informed consumers make wiser decisions....
www.state.il.us/court/SupremeCourt/PLA_Ann/2011/033011.pdFil... Format: PDF/Adobe
http://www.leagle.com/xmlResult.aspx?xmldoc=In%20FDCO%2020 10325E67.xml&docbase=CSLWAR3-2007-CURR
http://media.naplesnews.com/media/static/CollierSale
http://money.cnn.com/2009/10/27/news/companies/bear_stearns_...
http://www.subprimelosses.com/blog/index.php/category/bear-s...
Report this Comment On October 12, 2011, at 6:58 PM, BradTrish1900 wrote:
Informed consumers make better decisions, pt. 2
www.state.il.us/court/supremecourt/Docket/2011/03-11.pdf
http://challengeyourmortgage.info/blog/news/fl-2dca-reverses...
http://www.leagle.com/xmlResult.aspx?xmldoc=In%20FDCO%2020 10325E67.xml&docbase=CSLWAR3-2007-CURR
Report this Comment On November 06, 2011, at 1:01 AM, CROIC wrote:
Warren Buffett thinks USB, based in Minneapolis, is the best bank in the Midwest. Which is why he owns a big chunk.
Among the smaller regional banks, I suppose FFBC might be the best run.
Report this Comment On November 06, 2011, at 11:18 PM, XMFGuruEbby wrote:
CROIC,
USB was on my original screen but was eliminated due to a sub-3% dividend. But if Uncle Warren likes it, I might have to give it a few bonus points!
Thanks for reading!
TMFGuruEbby
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