Financial stocks have taken a beating recently. But banks that operate in certain regional areas tended to stand out in my earlier examination of smaller banks. Let's use this information to determine which bank might be the beast of the Northeast.
What is the Northeast?
The American Northeast is generally considered the six New England states plus New York, Pennsylvania, and New Jersey. Regional leader M&T Bank (NYSE: MTB ) is headquartered in Buffalo, N.Y., and has branches in Pennsylvania, Maryland, and Delaware. Independent Bank (Nasdaq: INDB ) does business primarily in Massachusetts under the name Rockland Trust.
We'll 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 of more than $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. My initial screen turned up 18 names, so I refined my screen to include banks with more than a 3% dividend yield. That resulted in the following 12.
P/E Ratio (TTM)
Net Income Margin
|Community Bank System (NYSE: CBU )||11.8||1.16||4.5%||24.0%|
|S&T Bancorp (Nasdaq: STBA )||12.4||0.79||3.6%||23.2%|
|Valley National Bancorp (NYSE: VLY )||12.6||1.38||6.5%||24.2%|
|TrustCo Bank Corp (Nasdaq: TRST )||11.3||1.27||5.9%||20.5%|
|Washington Trust Bancorp (Nasdaq: WASH )||11.6||1.16||4.4%||20.9%|
|First Commonwealth Financial (NYSE: FCF )||10.8||0.50||3.3%||14.0%|
|NBT Bancorp (Nasdaq: NBTB )||11.2||1.19||4.3%||20.4%|
|Tompkins Financial (AMEX: TMP )||11.6||1.34||4.0%||21.8%|
|Hudson Valley Holding (NYSE: HVB )||12.5||1.00||4.8%||18.2%|
|Oritani Financial (Nasdaq: ORIT )||23.7||1.10||3.1%||33.0%|
|Average of All Banks in Region||39.2||0.92||2.8%||10.0%|
Source: FinViz.com, TTM = trailing 12 months.
M&T Bank started in 1856 and is now one of the largest 20 banks headquartered in the United States. Valley National rode a high yield and impressive income margin to the top half of the list, overcoming the lowest P/B and a high P/E. Independent Bank was near the bottom in dividend yield but still managed to nab a top three spot because of a low P/E.
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'll be paying special attention to M&T Bank and adding it to My Watchlist. Feel free to do the same.