2 Ohio Regional Banks Yielding 4+%

Includes: FMER, PRK
by: Matt Schilling

Let me start off by saying my confidence in the Big Banks is wearing very thin. From Bank of America's (NYSE:BAC) calling out of JPMorgan Chase (NYSE:JPM) over who happens to be the smarter bank when it comes to derivatives, and Morgan Stanley (NYSE:MS) at the center of the Facebook (NASDAQ:FB) IPO scandal, there really isn't any short term benefit to the retail investor. The Big Banks may have the capability of posting some nice returns, but I strongly believe they will be short lived. As an alternative to the Big Banks, I've compiled a list of Midwest Regional banks that yield at least 4% and allow retail investors the ability to sleep much easier at night.

Park National Corporation (NYSEMKT:PRK) - Founded in 1908 and based in Newark, Ohio, Park National Corporation currently trades at a P/E ratio of 11.91 and yields 5.8% making the stock very inexpensive by most investing standards. Analysts are expecting to PRK to earn $1.14/share on revenue of $76.25 million, which they should considering their most recent earnings trend. PRK has surpassed analysts' estimates in three of the last four quarters by an average beat of 25.36%. One thing that should sit very well with investors is the fact the company announced on April 20th that it has the ability to repay the TARP package the Federal Government had allocated as part of their 2008 bailout package.

The strategy here is to start small and then build up your position as you move forward. In the beginning I'd establish a small to moderate position, and then as the company's earnings announcement draws near begin to increase my position.

First Merit Corporation (NASDAQ:FMER) - Founded in 1855, and based in Akron, Ohio, First Merit Corporation currently trades at a P/E ratio of 14.22 and currently yields 4% which makes the stock cheap by most standards. Analysts are expecting FMER to earn $0.28/share on revenue of $174.94 million dollars in revenue. If we examine the last three quarters FMER reported, investors will be pleased to see that they've beaten EPS estimates by an average of 9%, which leads me to believe that posting EPS results of $0.32/share on revenue of $181.44 million isn't out of the question. In an effort to cut capital spending FMER announced they were recently closing 8 branches and reducing their workforce by 340 employees.

I'd begin be establishing a moderate to medium sized position at these levels for two reasons. The company has a great dividend and management is very conscious of the way it utilizes certain type of capital. By implementing a cost-cutting strategy the company will begin to save nearly $45 million dollars over the next 18-24 months, I would consider increasing my position on a regular position over the next few quarters.

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