Last month, I took a look at some regional banks, breaking it down by region. When I looked at the Southeast region, I found seven banks that I felt that would be good investments. Now that earnings season is mostly over, I thought it would be a good time to see if the quarter helped any banks move or enter the rankings. Regional banks might also see an increase as customers of larger banks vote with their feet and move to local banks.
What is the Southeast?
When looking at the regional banks, it is important to note that some of the regions have some overlap. The Southeast region generally includes banks from Georgia to Louisiana along the Gulf of Mexico, but can also expand to banks in Kentucky and Arkansas. For instance, Republic Bancorp (Nasdaq: RBCAA ) is based in Kentucky, but it also has branches in Indiana, Florida, and Ohio.
Screening factors
As done previously, I will rank 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.
Profitability is important, so I first eliminated 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 half, sell at two." Only banks that pay a dividend will be included – the higher the better. Finally, net income margin will be used as another method of comparing the banks' profitability.
Instead of further screening based on a higher dividend yield, I ranked all 13 banks that met the minimum requirements. The top seven are presented here:
|
Company
|
P/E Ratio (TTM)
|
P/B Ratio
|
Dividend Yield
|
Net Income Margin
|
| Republic Bancorp |
4.6 |
0.93 |
3.1% |
32.5% |
| Renasant (Nasdaq: RNST ) |
14.2 |
0.71 |
4.9% |
12.6% |
| Community Trust Bancorp (Nasdaq: CTBI ) |
11.2 |
1.21 |
4.4% |
22.1% |
| F.N.B. (NYSE: FNB ) |
14.6 |
1.08 |
4.7% |
20.4% |
| Bank of the Ozarks (Nasdaq: OZRK ) |
9.1 |
2.23 |
1.5% |
36% |
| Trustmark (Nasdaq: TRMK ) |
12.6 |
1.11 |
4.3% |
20.8% |
| Simmons First National (Nasdaq: SFNC ) |
11.6 |
1.05 |
3.1% |
19.6% |
| Regional averages |
13.3 |
0.68 |
1.8% |
(0.6%) |
Source: FinViz.com, TTM = trailing 12 months.
Quarterly results cause changes
Republic Bancorp claimed the top spot from previous leader Renasat based partially on a 7.7% increase in net income in its recent quarter. It also doesn't hurt that it is the cheapest bank based on P/E in the region. Renasant still boasts the highest dividend yield of the 13 qualifying banks, but its slip from 16.7% net income margin to its current 12.6% caused it to slide down the rankings a bit. The replacement of Hancock Holding and IberiaBank prove that an above-average dividend is not enough to keep up in the rankings.
Regional opportunities abound!
While the real lesson from Bank Transfer Day will be learned in the coming months, regional banks offer a better investment in the months ahead. Keep an eye on Southeast leader Republic Bancorp by adding it to your free My Watchlist today.
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