Financial stocks have been taking a beating recently. Banks that usually 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 best in the Midwest.

What is the Midwest?
Most of the banks on my list are based out of Ohio, with many banks serving different areas of the state. However, the “Midwest” in this context covers a large area from Ohio to Minnesota. The third bank from my screen below, Fifth Third Bancorp (Nasdaq: FITB), has a small presence in other states outside of the region, like West Virginia and Florida.

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 over $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 the bank profitability.

My initial screen turned up 17 banks, so I refined my screen to include banks with over a 3% dividend yield. That resulted in the following nine names:

Company

P/E Ratio (TTM)

P/B Ratio

Dividend Yield

Net Income Margin

Huntington Bancshares (Nasdaq: HBAN) 11.1 0.82 3.2% 18.7%
Park National (AMEX: PRK) 11.8 1.08 7.2% 20.1%
Fifth Third Bancorp 10.7 0.77 3.1% 18.7%
FirstMerit (Nasdaq: FMER) 11.7 0.85 5.3% 16.1%
First Financial (Nasdaq: THFF) 11.6 1.08 3.3% 24.1%
Chemical Financial (Nasdaq: CHFC) 12.5 0.80 4.8% 16.2%
First Busey (Nasdaq: BUSE) 14.3 0.91 3.5% 16.9%
First Financial Bancorp (Nasdaq: FFBC) 13.7 1.18 3.3% 14.6%
Northern Trust (Nasdaq: NTRS) 14.2 1.24 3.1% 17.0%
Regional Averages 11.9 0.69 2.4% 2.1%

Source: Finviz.com, TTM = trailing 12 months.

Huntington Bancshares is the largest small business lender in the region, and the fifth largest in the country. It highlights its investments in local communities, investing nearly $100 million in neighborhoods throughout its region in 2009 and $700 million for small businesses. It did not lead any of the individual categories, but is boosted by high rankings in three of the four categories. In fact, the top three banks on this list have all been added to our resident banking expert Anand Chokkavelu's Rising Star Portfolio. Check out the reasoning for his selections right here.

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 Huntington Bancshares and adding it to My Watchlist. Feel free to do the same.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.