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 beast of the Southeast.
What is the Southeast?
When referring to banks, the Southeast region generally means banks from Georgia to Louisiana along the Gulf of Mexico, but also covers banks in Kentucky and Arkansas. While I don't have any Florida banks on my list, it would also include any banks from that state.
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 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. Finally, I will be using net income margin as another method of comparing bank profitability. My initial screen turned up 10 names, so I refined my screen to include banks with over a 2% dividend yield. That resulted in the following seven:
|
Company
|
P/E Ratio (TTM)
|
P/B Ratio
|
Dividend Yield
|
Net Income Margin
|
| Renasant Corp (Nasdaq: RNST ) |
9.2 |
0.73 |
4.9% |
16.7% |
| Republic Bancorp (Nasdaq: RBCAA ) |
4.2 |
0.91 |
3.2% |
32.7% |
| Community Trust Bancorp (Nasdaq: CTBI ) |
10.8 |
1.11 |
4.9% |
21.3% |
| Simmons First National (Nasdaq: SFNC ) |
11.2 |
1.00 |
3.3% |
19.8% |
| Hancock Holding (Nasdaq: HBHC ) |
19.5 |
1.02 |
3.3% |
13.1% |
| Trustmark Corp (Nasdaq: TRMK ) |
12.1 |
1.08 |
4.6% |
20.4% |
| IberiaBank Corp (Nasdaq: IBKC ) |
28.8 |
0.99 |
2.8% |
10.9% |
| Regional Averages |
13.8 |
0.67 |
2.2% |
1.2% |
Source: FinViz.com, TTM = trailing 12 months.
Tupelo, Mississippi-based Renasant has a history of being a strong bank in troubled times, having survived the 1929 "National Bank Holiday" that closed 68 banks in Mississippi. It has spent much of the past century expanding throughout the Southeast, with locations in Mississippi, Alabama, Tennessee, and Georgia. For shareholders, it returned 2.3% annually over the past 10 years, which is comparable to the S&P 500 (INDEX: ^GSPC). Renasant wasn't one of his selections, but Foolish banking expert Anand Chokkavelu recently added two of the other banks listed above to his real money Rising Star Portfolio.
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 Renasant and adding it to My Watchlist. Feel free to do the same.
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