Another quarter has ended, and with that comes earnings releases. For investors that follow the financial sector, earnings might have started when JPMorgan Chase and Wells Fargo posted their results last Friday. However, a handful of smaller banks followed their much larger cousins with results released Tuesday morning.
Not to be forgotten, regional banks and savings and loans tend to limit operations to smaller regions of the country but are generally less exposed to the risky and exotic activities of some of their larger brethren. Their results can often be an indicator of what has been happening in smaller segments of the economy.
Average Estimated EPS
|Cathay General Bancorp (Nasdaq: CATY )||$0.30||$0.32||6.7%|
|East West Bancorp (Nasdaq: EWBC )||$0.43||$0.45||4.7%|
|Fulton Financial (Nasdaq: FULT )||$0.19||$0.19||0%|
|Northern Trust (Nasdaq: NTRS )||$0.66||$0.66||0%|
Sources: Yahoo! Finance and company press releases.
Cathay General saw net income rise 38.1% over the same quarter last year, assisted by a 26.6% decrease in nonperforming assets during the quarter. The bank's return on average stockholders' equity was up to 7.6% during the quarter. Once it's finished repaying its bailout money, the bank could boost shareholders' returns by increasing its measly $0.04 yearly dividend.
After raising its dividend during the previous quarter, East West started 2012 off by beating analysts' expectations. Net income was up 21% from the same quarter in 2011, and nonperforming assets shrank even further, checking in at 0.77% of total assets. This marks the 10th consecutive quarter that nonperforming assets were below 1%, reflecting strong performance on the company's balance sheet.
Fulton Financial also started off 2012 positively, meeting expectations after falling short last quarter. Nonperforming loans were down $2.5 million from the last quarter, helping push net income up slightly from the previous quarter.
Finally, Northern Trust followed the lead of Fulton Financial and met analysts' estimates. The New York bank is feeling the pinch of low interest rates, leading it to cut 700 jobs during the past year. Nevertheless, net income was up 23.8% from the previous quarter. It also announced a 7% increase to its dividend during the quarter, making it one of two major U.S. banks that didn't reduce its dividend during the financial crisis.
Opportunities in regional banks
I like the potential of regional banks, but they may not be for everyone. Earnings are just one thing to consider when choosing an investment, so view these results as a small piece to a much larger puzzle. In fact, a bank similar to the ones here is featured prominently in our brand-new free report, "The Stocks Only the Smartest Investors are Buying." To find out which one it is, get your copy today before it's too late.