Despite the many challenges facing the banking industry, a quick search can reveal a few intriguing possibilities for those looking for growth and yield in today's market. While increasing regulation, consolidation and margin compression presents sometimes significant headwinds in the industry a company that is in the right market can still perform well. An interesting subsector to explore in this space is what I have defined as "mini-regional". Earlier this year, I wrote an similar article on (UBSH) using some of the same search criteria and that equity has performed well recently. This time, I performed a quick and simple search on FINVIZ (www.finviz.com) with the following constraints:
- Financial sector
- Regional Southeastern (US) Bank*
- Pay a positive dividend
- Rated a Buy or better
- Current P/E ratio (February 15th) of less than 15
*This constraint appears to be loosely enforced but it provided me with some more diverse results.
When this screen was performed after market close on February 15th, the following results were obtained:
- Cardinal Financial Corporation (CFNL)
- Faquier Bankshares Inc (FBSS)
- Stock Yards Bank & Trust (SYBT)
- Bank of Kentucky Financial Corporation (BKYF)
- CenterState Banks Inc (CSFL)
- Regions Financial Corporation (RF)
It is my intention for this to be the first in a series of similar articles discussing the companies on this list. I will most likely not post on Regions Financial due to its size compared to the other institutions on this list.
Cardinal Financial Corporation
Cardinal Financial Corporation is a financial holding company for Cardinal Bank . Cardinal Bank operates 27 branches in Northern Virginia, Maryland and the District of Columbia. The bank is mainly divided into three segments: commercial banking, mortgage and private and wealth management.
Situated in one of the strongest economic areas in the country, it appears the performance of the $3.039 billion bank has begun to gather attention of investors. CFNL closed at $16.54 on 2/15/2013 which is very near its 52-week high of $16.90. The average ten day trading volume is nearly 140k.
CFNL has grown from $1.744 billion in total assets at 12/31/2008 to its previously mentioned size of $3.039 billion at 12/31/2012. Specifically, net loans have increased from $1.125 billion at FYE 2008 to $1.776 billion at FYE 2012. This significant increase has occurred while many of its competitors have been acquired or have experienced reductions in net loans outstanding. Over the same time frame, the company has experienced interest income growth of 31% while non-interest income has increased an substantial 255%. Finally, since 2008 the company has increased its dividend from $.01 to $.05 on a quarterly basis leading to an current annualized yield (2/15/13) of 1.21%
Like many of its peers, CFNL has been focused on expense control over the last few years. Despite significant income growth (interest and non-interest) in 2012, non-interest expenses actually decreased as a percentage of the income. The efficiency ratio of CFNL improved from 56.8% in 2011 to 51.37% in 2012.
At 12/31/12 CFNL had a decent tier 1 capital ratio of 11.94.
From a valuation standpoint, CFNL also presents a bullish argument when compared to its peers of 10.98x despite nearing its 52 week high.
This is a very high level overview of a company that I thought was worth bringing to the attention of SA readers. I plan to follow CFNL closely as it tries to follow up a very strong 2012 while operating in a very favorable footprint.
*After using FINVIZ, I obtained the remaining financial information from the investor relations page of the company's website.