Top Five U.S. Regional Banks Worth a Look Right Now

Last year the financials were the worst performing sector in the S&P 500 with a loss of 56.95% compared to an overall index return of -38.49%. Some banks fared even worse or failed altogether. Others such as National City and Wachovia merged with much larger banks to survive. Large banks such as Citibank (C), Bank of America (BAC), JPMorgan Chase (JPM), PNC Financial Services (PNC), US Bank (USB) etc. had to access the Troubled Assets Relief Program (TARP), either to stay afloat or strengthen their balance sheets.

So far, 2009 is turning out to be another bad year to be in bank stocks. The S&P Financials are down another 28.98% year-to-date. Considering these facts, most investors are staying away from banks for now. However there are opportunities around if one is willing to do the research and uncover the diamonds among the rubble. Many of the failed banks such as WaMu and IndyMac were huge operations that undertook highly risky lending activities or participated in the derivatives game.

My research finding small banks that are worth looking into now led to the recent issue of the Bank Director Magazine’s “The 2008 Bank Performance Scorecard: America’s Top 150 Banks” article. This piece lists the top banks based on a performance scorecard compiled by Sandler O’Neill & Partners L.P. These banks “maintain top standing in good times and bad—often with recurring high scorers.” The scorecard is based on six different metrics like Return on average assets (ROAA), Return on average equity (ROAE), Tier 1 capital ratio, the leverage capital ratio, non-performing assets (NPAs) to total loans and “other real estate owned” and loan loss reserves to total loans.

The top five banks on this list are:

Rank	Bank	Ticker	Dividend Yield	Home Office
1	Glacier Bancorp Inc	GBCI	3.27%	Kalispell, Montana
2	First Financial Bankshares	FFIN	3.03%	Abilene, Texas
3	SVB Financial Group	SIVB	N/A	Santa Clara, California
4	Bank of Hawaii Corp	BOH	4.88%	Honolulu, Hawaii
5	Westamerica Bancorp	WABC	3.42%	San Rafeal, California

1. Glacier Bancorp Inc (GBCI) ranked as the number one bank in 2008. Based in beautiful Kalispell, Montana, this regional multi-bank holding company operates 94 branches in Idaho, Montana, Utah, Washington and Wyoming. Currently, GBCI yields 3.27%. Glacier Bancorp ranked tops in all six criteria of the scorecard analysis. In Q4, 2008, the bank earned $17.014 million, a decrease of 6% from the prior year period. The NPA stood at just 1.46% as of Dec. 31,2008.

2. The number two rank on the list is went to First Financial Bankshares Inc. (FFIN) of Abilene, Texas. This community bank holds “roughly 40% to 50% of the market share in such West Texas communities as Sweetwater, San Angelo, Stephenville, and Weatherford.” The strong economy of West Texas which is dependent on oil, natural gas, wind energy and agriculture helped the bank achieve impressive numbers. FFIN pays a dividend of 3.03%.

3. SVB Financial Group (SIVB) of Santa Clara, California “is the holding company for financial services firms that include $7.0 billion Silicon Valley Bank. In addition to operating 27 U.S. branches, SVB has offices in China, India, Israel, and the United Kingdom.” The Chief Strategy Officer, Marc Verissimo, commented “We don’t deal with developers.” SIVB does not pay regular dividends. The bank earned $3.6 million in the fourth quarter of 2008.

4. Honolulu-based Bank of Hawaii Corporation (BOH) ranked number 4 on the list. They had an excellent 23.24% ROAE (Return On Average Equity) in 2008. This traditional bank gains from the Hawaiian economy which has strong ties to Japan, tourism and defense spending. As tourism declines, BOH will be impacted.

5. Rounding out the top five is Westamerica Bancorp. (WABC) of San Rafael, California. WABC pays a dividend of 3.42%. On Jan. 22, they announced an increase in quarterly dividends of one cent. Chairman, President & CEO David Payne said that “This dividend increase recognizes Westamerica’s healthy level of profitability, asset quality, and capital,” a sentiment echoed by the Bank Director article.

To access the full list of Top 150 banks in the The 2008 Bank Performance Scorecard, click here.

Comments

[Dividend Inc:]

Good knowledge David.

BOH was a recent research recommendation of mine on Jan. 12 a few days before the publication of the 1st quarter Bank Director magazine went to press.

Feb 06 04:06 PM

[David Hunkar:]

Thanks Dividend Inc. Glad to know that you recommended BOH.

-David

Feb 14 11:19 AM

[rob smyth:]

I agree with your top 5 picks but I would also take a very strong look at First Niagra Financial Group (FNFG). This Regional Bank has a solid if not better balance sheet than some and I think maybe a top performer. Just my oppinion

May 23 07:43 AM

[David Hunkar:]

Rob
Thanks for the note about FNFG.
I will check it out.

-David

May 24 12:36 PM

[jkrishna:]

There is some more information about regional banks in general and specifically SIVB. Seems like everyone is focused on the regional banks as predictors of economic trends and financial stability.
finance.yahoo.com/news...

Aug 20 02:31 PM