While most investors pay attention to the bigger global banks and often view them as a bellwether in the financial sector, the real action in banks stocks has been among the smaller regional and community banks. These banks got hit just as hard during the credit crisis and their stock prices got walloped right along with the bailed-out with the too-big-to-fail banks.
Although they suffered from the weak economy and falling real estate prices causing loans to go bad they did not have any of the exotic and toxic derivatives an securities the big banks were choking o, and the fundamentals have recovered much quicker than the TBTF banks.
The best small banks are going to be able to take market share as many consumers are still fed up and disappointed with the big banks due to their reckless ways (which in many cases have led to fines and penalties), excessive fees and poor customer service records.
Indeed, regional banks should be the real stars among financial stocks this earnings season, and I’ve highlighted three that I like right now:
Glacier Bancorp (GBCI) operates 110 banking offices in Montana, Idaho, Colorado, Utah, Washington and Wyoming. These areas of the country have fared much better than the rest of the country the past five years as they have exposure to industries that have done very well, like oil and gas as well as agriculture.
The bank has a solid balance sheet and loan portfolio. Non-performing assets are just 1.29% of total assets compared to an average of 2.3% industry wide, while earnings are up 25% so far this year as conditions just keep improving for the bank.
The continued excellent performance was noticed by Portfolio Grader which upgraded the stock to a strong buy this week.
Capital Bank Financial (CBF) is a creation of the credit crisis. Founded in December 2009, Capital Bank Financial raised approximately $900 million to make acquisitions of troubled and undercapitalized community banks.
Capital Bank Financial has acquired seven community banks so far and currently has 163 branches in Florida, North Carolina, South Carolina, Tennessee and Virginia. Earnings have been exploding with profits up 130% year over year in the most recent quarter.
Analysts have raised their estimates for both the current quarter and the rest of the year for CBF. Portfolio Grader upgraded the stock to an A last month and the stock is a strong buy at the current price.
Old Line Bancshares (OLBK) has 23 branches in Maryland many of which are in the suburbs of Washington DC. This region has a more resilient economy than most of the nation because of the huge presence of the Federal Government and its many agencies in the area.
The bank has made smart acquisitions in the past few years and has seen its total assets almost tripled since 2010. They are also seeing strong organic growth in their loan portfolio with 22% growth in the previous quarter. Earnings were also up 157% compared to the fourth quarter of 2012.
Portfolio Grader upgraded the stock to an A back in December and the stock remains a strong buy.