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The banking sector was thrown into upheaval over the past few years due to the mortgage crises, sovereign debt issues, and in some cases, questionable management. But even then, some bank issues have come through this time period relatively unscathed.

I will look today at smaller regional banks, focusing on those with assets of from $5 billion to $30 billion. There are many banks within that cohort, so I will narrow in on a geographically diverse group whose 12 month return on assets is at least 1%, and whose Tier One capital is at least 11%. If we can find its “efficiency ratio” (non interest expense as a percentage of overall revenues) to be less than 60%, and a sustainable dividend, it is likely a bank that can fit into a growth and income portfolio.

These targets are not easy to find. Warren Buffett’s favorite bank for years has been Wells Fargo and Company (NYSE:WFC). It boasts, based upon the third quarter of 2011, an excellent 1.26 return on assets, and its efficiency ratio is a solid 59.5%, but its Tier One capital ratio is only.9.35%. I want to find companies that fit all the parameters.

Cullen/Frost Banks, Inc. (NYSE:CFR)

CFR is a San Antonio, Texas based regional bank, with nearly $19 billion in assets. Its stock was recently trading at about $49 per share, and its market capitalization is $3 billion. Its 52 week range is from $62.59 to $43.57, and its P/E is almost 14. It pays an annual dividend of $1.84, for a yield of 3.7%.

CFR’s third quarter of 2011 was essentially flat with the year earlier quarter, but it was flat at a very healthy level. Return on average assets was 1.15%, and at the end of the third quarter its Tier One capital was a robust 14.6%. On the downside, its troubled assets seem to be trending up. The Texas economy has been strong relative to the overall American economy, so CFR never reserved for losses as much as its peers did around the country. In the third quarter of 2011, CFR charged off $38 million, compared to $31 million a year earlier. Even so, CFR’s charge off rate remains a comfortable 0.64%.

CFR is a well run institution, and its efficiency ratio in the third quarter was 57%. CFR has raised its dividend 14 years in a row, and with its capital levels and profit levels, further increases are likely. Conservative or income oriented investors should take a good look.

Bank of Hawaii, Inc. (NYSE:BOH)

BOH is the dominant bank in the State of Hawaii. Its stock was trading recently at about $41 per share. Its 52 week range is from $49.26 to $34.50, and its market capitalization is just under $2 billion. It has a P/E of 12 and it pays a current annual dividend of $1.80 per share, for a yield of 4.3%

BOH had a generally positive third quarter to 2011. It ended the quarter with $13.3 billion in assets. It earned $43.3 million, or $0.92 per share, which was 1% more than the year ago quarter, but 18% more than the second quarter of 2011. In the third quarter, BOH posted a 57% efficiency ratio, and a 1.31% return on average assets. BOH boasts an exceptional Tier One capital level of 17.6%.

BOH had raised its dividend for 30 consecutive years through 2009. In light of conditions the past couple of years, BOH has kept its dividend payout stable. As the overall economy, and Hawaiian economy continue to recover, and BOH continues its strong profitability, I look for BOH to begin again to raise its dividend payout. BOH also has a long history of stock buybacks. Over the ten years ending September 30, 2011, BOH had bought almost $2 billion in company stock, and is authorized to purchase another $97 million under the current program.

BOH is a strong institution with a record of giving back to shareholders. Income oriented investors would do well to consider this issue.

BOK Financial Corporation (NASDAQ:BOKF)

I was loathe to put BOKF on this list, as I am seeking traditional retail banks. BOKF gets up to one third of its revenue from trading operations. But the numbers, you will see, speak for themselves. BOKF in a Tulsa, Oklahoma based bank with about $25 billion in assets. Its stock was trading recently at nearly $52 per share. Its 52 week range is from $56.58 to $43.77, and its market capitalization is about $3.5 billion. It trades at a P/E of 12.8, and pays an annual dividend of $1.32, for an annual yield of 2.5%

In its third quarter of 2011, BOKF reported profits of $85.1 million or $1.24 per share. This represented a 32% jump from the year earlier. A closer look shows us that most of the gain comes from the fact that BOKF reserved $20 million for loan losses in the third quarter of 2010, but nothing in the recently concluded quarter.

But sticking to the parameters outlined above, BOKF’s Tier One capital ratio was 13.1%. In the just concluded quarter, BOKF’s annualized return on assets was 1.14%, and its efficiency ratio was right at 60%.

BOKF’s geographic (it operates in five states) and revenue diversity have benefited it. Also, BOKF first began to pay dividends to shareholders in 2005, and has raised them every year since. The current dividend is only 26% of analysts’ mean projected 2011 earnings. So there is room for further growth in the dividend.

I am lukewarm on BOKF’s stock. It is obviously a well run and profitable institution, but its stock price has risen nearly 20% in the last two months, and I do not see a lot of stock price potential at today’s rather lofty price level.

Commerce Bankshares, Inc. (NASDAQ:CBSH)

CBSH is based in Kansas City, and operates in five states including Missouri. It is Midwestern to the core. It has a little over $20 billion in assets, and was one of the few banks of its size not to need nor accept any federal “TARP” money.

CBSH was trading recently at about $38 per share. Its 52 week range is from $44.00 to $33.06, and its market capitalization is about $3.2 billion. Its P/E is 12.2, and it pays a current annual dividend of $0.92 per share, for a yield of $2.4%

In the third quarter of 2011, CBSH reported earnings of $66 million, or $0.76 per share. This represented an 18% increase since the prior year’s quarter. It reported a Tier One capital ratio of 14.6%, and a return on assets of 1.32%. Its efficiency ratio was 56.7%

CBSH is the most stable of the companies in this report. It has stellar numbers across the spectrum. It has a low Beta score (0.77) and has raised its dividend every year but one since 1985. In addition to the growing cash dividend, CBSH also has paid to shareholders an annual 5% stock dividend since 2002.

The persistence of cash and stock dividends, and the safety of a historically conservative management style, enhance CBSH as a choice for conservative investors. But to those with a desire for strong stock growth, look elsewhere.

Park National Corporation (NYSEMKT:PRK)

PRK is an Ohio based bank, which recently entered an agreement to sell off its money losing operations in Florida. Its shares recently traded for about $58. Its 52 week range is from $74.80 to $49.00, and its market capitalization is a little over $900 million. It has a P/E of 13.5, and currently pays an annual dividend of $3.76, for a yield of 6.2%

PRK has assets of $7.1 billion, and reported third quarter of 2011 earnings of $16.8 million, or $1.09 per share. This was down about 8% from the year ago quarter. Its annualized return on assets is 1.02%, and its efficiency ratio is a stellar 53.6%.. Its Tier One Capital ratio is about 13%.

PRK has one of the highest dividend payouts on common stock I have seen. The dividend has been at the current level since 2008, and the $0.94 quarterly payment is perilously close to the PRK’s quarterly earnings. However, disposing of the Florida assets will relieve pressures on the balance sheet. PRK’s ability to sustain the generosity will be up to the recovery of the economy in the lower Great Lakes area. In the middle of the last decade, PRK was earning in excess of $1.50 per share, per quarter. The sooner BRK gets back to that level of profitability, the safer the dividend will become.

For now, I would avoid the stock, unless I see a price pullback below $50. At that point, the dividend yield of 7.5% would be overwhelmingly attractive, and there is more room for stock price growth at that level.

Source: 5 Regional Banks Perfect For Any Growth And Income Portfolio