Overlooked Bank Earnings From Last Week

Earnings season is here once again. We're about a week in, but all of the banking behemoths have already reported, with JPMorgan Chase (NYSE: JPM  ) , Wells Fargo (NYSE: WFC  ) , Citigroup (NYSE: C  ) , and Bank of America (NYSE: BAC  ) releasing earnings showing various levels of success during the quarter. While these results are important to those of us that follow the banking sector, my interest lies in some of the smaller banks beyond the behemoths.

With that in mind, there were many smaller banks that reported earnings last week that you may have missed. Though not the same size as the "too big to fail banks," they are all still important to the overall health of the banking sector. Here's how five banks did during the recently completed quarter:

Bank

Expected EPS

Actual EPS

Difference

BancorpSouth (NYSE: BXS  )

$0.22

$0.25

13.6%

Hanmi Financial (Nasdaq: HAFC  )

$0.41

$0.42

2.4%

People's United Financial (Nasdaq: PBCT  )

$0.19

$0.18

(5.3%)

State Street Corporation (NYSE: STT  )

$0.96

$0.99

3.1%

Taylor Capital Group (Nasdaq: TAYC  )

$0.35

$0.49

40%

Source: Yahoo! Finance.

Inside the earnings
BancorpSouth exceeded expectations despite a pre-tax mortgage valuation adjustment of $3.2 million. This was offset by a record level of mortgage production, which generated $16.8 million in revenue. Furthermore, nonperforming loans declined by $115.5 million from the same quarter last year, accounting for 2.85% of total loans and leases. If the bank can continue having quarters like this, they may be able to move past paying a nominal quarterly dividend of $0.01 per share, though it may be some time before they return to the $0.22 per share last paid in 2010.

California-based Hanmi Financial couldn't quite match its 400% earnings beat from last quarter, but it was still a successful quarter for the bank. They are still reaping the benefits from the reversal of a valuation of a "deferred tax asset" that boosted them so much last quarter. Nevertheless, with eight consecutive quarters of profitability, the bank seems to be turning the corner.

Despite the slight miss on earnings expectations, People's United still had a successful quarter. Net income was up 20.8% from the same quarter last year, and nonperforming loans have declined 44% since December 2010. The bank is also working to return value to shareholders, continuing a $0.16 quarterly dividend and repurchasing another 4.5 million shares. This should continue into next quarter as well, as the bank has another 4.5 million shares to repurchase as part of its repurchase authorization.

State Street Corporation completed the acquisition of Goldman Sachs' (NYSE: GS  ) Administration Services, a hedge fund administration service that will help establish State Street as the market leader in a fast-growing market. Net income was up 36.3% from the previous quarter, in part because of a near 4% decrease in total expenses. In addition to declaring another quarterly dividend of $0.24 for the quarter, the bank also repurchased $480 million of its common stock, joining People's in directly returning value to shareholders.

Taylor Capital appears to be reaping the benefits of repaying its TARP loans at the end of the second quarter, continuing an impressive run of greatly exceeding analysts' expectations over the past few quarters. Reaching record levels of revenue and net income helped the Chicago bank continue this trend. Nonperforming assets declined by 52 basis points from the previous quarter, further improving the bank's balance sheet.

The five banks profiled here are but a few of the hundreds of smaller banks that make the sector worth following. In fact some of the best opportunities over the next few years can be found there, including one small, under-the-radar bank. It's been called one of The Stocks Only the Smartest Investors Are Buying. You can learn about it, and more, in our exclusive free report. Just click here to keep reading.

Robert Eberhard has no positions in the stocks mentioned above. Follow him on Twitter to see some more regional bank earnings this week. The Motley Fool owns shares of Bank of America, Citigroup, JPMorgan Chase, and Wells Fargo. Motley Fool newsletter services recommend Goldman Sachs and Wells Fargo. Try any of our Foolish newsletter services free for 30 days.

We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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