A Few Banks Ready For A Breakout

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 |  Includes: HMPR, TRMK, UCBI
by: Matt Schilling

Unlike my last article where I featured the potential downside to some of the larger US banks, I wanted to highlight some of the rising stars in the banking industry. I strongly believe these banks have enormous potential from a long term standpoint.

When it comes to larger U.S. banks such as Bank of America (NYSE:BAC) and Citigroup (NYSE:C), investors tend to be passionate, whether they have a short or long position in the stock. However, smaller US banks such as Hampton Roads Bankshares, Inc. (NASDAQ:HMPR)], United Community Banks, Inc. (NASDAQ:UCBI), and Trustmark Corporation NASDAQ: (NASDAQ:TRMK) have plenty more to offer potential investors.

Hampton Roads Bankshares, Inc. - One of the smallest banks by market capitalization ($81.5 million) Hampton Roads Bankshares, Inc. are experiencing somewhat of a restructuring for the better. Recently naming Douglas J. Glenn as President & CEO and expanding their small business lending division, HMPR looks to make up some the ground that was lost in both 2010 and 2011 due to poor management and even poorer investment strategies. Even though HMPR is shown as losing money in 2009, 2010, and 2011, that loss has been considerably reduced over the last 3 years and the bank continues to improve its various asset based divisions.

United Community Banks, Inc. - Located in the heart of what some analysts were calling a hotbed for distressed and mismanaged banks, UCBI seems to be bucking the trend. They recently announced full year 2011 results, and compared to 2010, the annual net loss was cut roughly in half. Also noted, were the percentage of UCBI's non-performing outstanding loans, which currently stands at 3.87%. For a small cap bank, any number under 5% is pretty good. That being said, 2012 and 2013 full year outlooks have been raised to an average estimate of $0.66/share and $0.79/share respectively by several analysts. If we take into consideration the company's positive growth I see no reason why the stock can't be trading as high as $13 by the end of the year.

Trustmark Corporation - Here's a bank that carries a low P/E ratio (15.0) and a pretty nice yield (3.7%), without all the 'Big Bank' stress. Trustmark Corp. is a Mississippi based bank who is currently in talks to acquire Bay Bank & Trust for $22 million and could also be very active to the next phase M&A buying. With roughly $9.6 Billion in assets and $220 million in cash TRMK is certainly on the right track.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.