3 Heavily Undervalued Regional Banks Offering An Opportunity For Both Growth And Income

Includes: C, FFCH, KEY, STL, UBNK
by: Matt Schilling

When it comes to examining the upside potential of a stock I tend to examine its average daily volume, discount to book value and current yield. In this article I'm taking a look a total of three regional banks in an effort to highlight their upside potential. The minimum criteria I've set for this screen is as follows:

  • Each Company Much Possess An Average Daily Volume Below 90,000 Shares
  • Each Company Much Trade At Least 11.25% Below Book Value
  • Each Company Must Yield At Least 1.20%

First Financial Holdings, Inc. (NASDAQ:FFCH): Based in Charleston, South Carolina, First Financial Holdings, Inc. operates as the holding company for First Federal Savings and Loan Association of Charleston that provides integrated financial solutions to individuals and businesses. It offers deposit products comprising non interest-bearing checking, interest-bearing checking, savings, money market, time deposits, certificate of deposit account registry service, and brokered time deposits. According to the company's website, 'First Financial serves individuals and businesses throughout coastal South Carolina, as well as the Florence, Columbia, and upstate regions of South Carolina, and Wilmington, North Carolina."

From a fundamental perspective, FFCH currently yields 1.20% ($0.20), trades on volume of roughly 50,031 shares per day and possess a book value per share of $18.13. Based on Friday's closed of $16.25/share, shares of First Financial Holdings are trading at an 11.56% discount to their current BVPS.

Provident New York Bancorp (PBNY): Based in Montebello, New York, Provident New York Bancorp operates as the bank holding company for Provident Bank that provides commercial, business and consumer banking products and services to business owners and consumers in New York and New Jersey. According to the company's website, "Provident, with over $4 billion in assets, specializes in the delivery of service and solutions to business owners, their families, and consumers in communities within the greater New York City marketplace through teams of dedicated and experienced relationship managers."

From a fundamental perspective, PBNY currently yields 2.70% ($0.24), trades on volume of roughly 85,190 shares per day and possess a book value per share of $11.32. Based on Friday's closed of $8.86/share, shares of Provident New York Bancorp are trading at a 27.76% discount to their current BVPS.

United Financial Bancorp, Inc. (NASDAQ:UBNK): Based in West Springfield, Massachusetts, United Financial Bancorp operates as the holding company for United Bank that provides various banking products and services in Massachusetts. The company offers a range of deposit products, such as demand accounts, NOW accounts, money market accounts, savings accounts, retirement accounts, and certificates of deposits. According to the company's website, "the Bank has approximately $2.4 billion in assets and is one of the largest publicly traded banks headquartered in New England (as measured by asset size) with 40 branch offices located throughout Massachusetts and Connecticut as well as Loan Production Offices in Beverly, MA and Glastonbury, CT."

From a fundamental perspective, UBNK currently yields 2.70% ($0.40), trades on volume of roughly 55,144 shares per day and possess a book value per share of $17.88. Based on Friday's close of $14.85/share, shares of United Financial Bancorp are trading at a 20.40% discount to their current BVPS.

Now that I've gotten into the individual analysis of each regional bank, I wanted to look at a few things from a collective perspective. First and foremost is the fact potential investors should note that the average yield of these three companies is 2.20%. The second thing to consider is the fact that all three companies currently trade an average of 19.90% below their current BVPS. Last and certainly not least is the fact that the shares of these companies trade an average of 63,455 shares per day.

Final Analysis

If you're in the market for a moderate-yielding, low-volume play then these three regional banks may be a very viable option. Unlike some of their larger cousins in the U.S. Banking sector such as KeyCorp (NYSE:KEY) or Citigroup (NYSE:C), which trade at an average of nearly 13.94 million and 35.52 million shares per day, respectively, the above mentioned regional banks offer much lower volatility and are less exposed to such ancillary factors as the Treasury-based purchases of the Federal Reserve. The best thing, in my opinion, about these three regional banks is the fact they are substantially undervalued and offer a sustainable income stream by way of a very moderate yield.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.