Another quarter has ended, and with that comes earnings releases. For those investors who follow the financial sector, earnings might have started when JPMorgan Chase and Wells Fargo posted their results. However, a handful of smaller banks followed their much larger cousins with results released this week.
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 a small indicator of what has been happening in smaller segments of the economy.
Average Estimated EPS
|Banner Corporation (Nasdaq: BANR )||$0.22||$0.40||81.8%|
|F.N.B. Corporation (NYSE: FNB )||$0.19||$0.15||(21.1%)|
|TrustCo Bank (Nasdaq: TRST )||$0.10||$0.10||0%|
|Wilshire Bancorp (Nasdaq: WIBC )||$0.13||$0.25||92.3%|
|Zions Bancorp (Nasdaq: ZION )||$0.27||$0.14||(48.1%)|
Sources: Yahoo! Finance and company press releases.
The first quarter of 2012 was much better for Banner than the first quarter of 2011, with the Washington bank swinging to a $9.2 million profit from a $7.8 million loss last year. Nonperforming assets also decreased 59% over the previous year, further strengthening the bank's balance sheet.
If not for costs associated with merger and severance expenses, F.N.B. would have only missed earnings expectations by $0.02 per share. However, the acquisition of Parkvale's branches in the lucrative Pittsburgh market should help the bank going forward. Combined with its dividend yield of around 4%, it is easy to see why F.N.B. was one of the best-performing regional banks in 2011.
TrustCo met expectations this quarter after falling just short during the previous quarter. Earnings were up 24.6% from the same quarter last year, helped by increases in average loans and deposits during the same period. Its dividend also remains strong, yielding 4.7% with a payout ratio around 70%.
Wilshire Bank was also looking to recover from a loss during the first quarter last year, and it did so in a big way, nearly doubling up on expectations. Net income was at an all-time high, and the Los Angeles bank overcame many of the issues plaguing it over the past few years, including a class action lawsuit, internal control issues, and the presence of preferred stock related to TARP. With these issues behind it, the bank feels that it can once again focus on growing the business.
Zions' earnings look worse than they actually were, since the Utah bank experienced large charges during the quarter. The bank adjusted some acquired loans, as well as the amortization of $700 million of TARP preferred stock, accounting for $0.19 per share in earnings. The bank also announced plans to repay the remaining $700 million in TARP stock during the second half of the year.
Opportunities in regional banks
I like the potential of regional banks personally, 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 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.