A lot of banks are hated. They're hated by the government, sued by state attorney generals, the subject of endless and costly law suits. I'm talking about Bank of America (BAC), J.P. Morgan (JPM), Citigroup (C), and Wells Fargo (WFC). A lot of the bad press is justified. However, I'm not going to argue the merits of the endless bashing of the big banks.
If you're tired of owning banks forever caught in the cross hairs, look at the regional banks.
If you're willing to dig, there are actually regional banks the government loves. No investigations, big law suits, angry senators. I'm talking about the regional banks that are acquiring the assets and deposits of failed financial institutions. The FDIC gives them its stamp of approval, allowing these banks to bid on failed banks, in effect, verifying their sound financial structure. I've dubbed these regionals the REBS, an acronym standing for Regional Banks Eating Other Banks. I suggest researching this group. They often obtain deposits and assets at very favorable terms. For instance, the FDIC guarantees each loan acquired against an 80% loss.
The following REBS have repeatedly won failed banks from the FDIC:
1. Bank of the OZARKS (OZRK), based in Arkansas, won a kingly 7 failed banks. Mkt cap 900 million. PE 14.
2. Home BancShares (HOMB), also from Arkansas, captured 6. Mkt cap 690 million. PE 47.
(Arkansas is becoming the mecca of banking for takeovers! There is no law that you can't be a shareholder if you don't live in Little Rock.)
3. UMPQA (UMPQ), out of Washington State, took 4. Mkt cap 1.3 billion. PE 41.
4. Columbia Banking (COLB), also of Washington, bought 4. Mkt cap 700 million. PE 26.
5. City National Corporation (CYN), from California, with 3. Mkt cap 3 billion. PE 23.
6. First Citizens BancShares (FCNCA), from North Carolina, bought 4. Mkt cap 2 billion. PE 13.
7. Valley National Bancorp (VLY) of New York obtained 2. Mkt cap 2.5 billion. PE 17.
8. New York Community Bank (NYB) scored 2. The bank disappointed last quarter. The CEO indicated in his conference call that this quarter should be stronger. We'll see if NYB delivers the goods. Mkt cap 6.8 billion. PE 13.
9. BB&T (BBT), North Carolina, acquired 2. Mkt cap 19 billion. PE 22.
10. U.S. Bancorp (USB), Minnesota, gobbled up 13. USB, while not a regional bank, is included because of its voracious appetite for FDIC-assisted transactions. Mkt cap 50 billion. PE 13.
It just might be the time to swap out of BAC and into OZRK or leave C for CYN. These regional banks have been taking advantage of the economy's weakness to expand with the FDIC's help.
Disclaimer: The opinions in this document are for informational and educational purposes only and should not be construed as a recommendation to buy or sell the stocks mentioned. Past performance of the companies discussed may not continue and the companies may not achieve the earnings growth as predicted. The information in this document is believed to be accurate, but under no circumstances should a person act upon the information contained within. We do not recommend that anyone act upon any investment information without first consulting an investment advisor as to the suitability of such investments for his specific situation.
Disclosure: I am long OZRK, NYB.