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5 Fundamentally Strong Regional Bank Stocks

  +Follow September 23, 2013 8:39AM
Tickers Mentioned:

At Equities we’ve spotlighted sound regional bank stocks twice before, singling out ones from areas with strong housing markets and also ones with a market capitalization of over $2 billion.

But we thought it might interesting to this time eschew the geographical bias and exclusion of small-cap banks, and just look for the regional banks that have the absolutely strongest fundamentals, regardless of location or size.

Our Methodology

To find the fundamentally strongest small-cap banks in America, we looked for regional banks that have:

1) A P/C and P/B greater than 1

It is important for finance companies to have strong book value and cash in addition to validation of these assets by the market. As a result, a P/C (profit to cash ratio) or P/B (price to book ratio) of 1 should be a minimum “floor” for investing. 

2) An operating margin greater than 25%

Operating margin shows how efficiently a company is operating is business after a good is sold. Gross profit-operating costs. The operating margin is more appropriate for banks because the costs associated with operating are much more significant for a bank than the cost of goods sold.

3) An ROI greater than 25%

Return on Investment, or ROI, shows how well a company is using its invested capital. Since banks are essentially made up of all invested capital, this is a very important statistic.

4) An analyst consensus of “strong buy”

While we trust our metrics, it doesn’t hurt to have the support of other number crunchers. We decided to single out stocks that not only fit the criteria we outlined for a strong regional bank stock, but ones that analysts were bullish on as well.

5) A market capitalization under $2 billion

For our purposes, we wanted to find banks that are small-cap, or ones that have a market capitalization of less than $2 billion. Small-cap banks tend to be a little cheaper to buy into and have more room for explosive growth, and while they tend not to be as stable as their large-cap counterparts they are attractive options for investors looking to score big.


Our Findings

Out of all of the bank stocks on the market, we found a total of five regional banks that possess all five of these attributes and thus can be considered to be the fundamentally strongest regional bank stocks in America. They are:

1st Century Bancshares, Inc. (FCTY)

The regional bank holding company controls 1st Century Bank, headquartered in the Century City section of Los Angeles, CA. Ist Century offers up an interesting business model. They have just two physical branches in the LA area, but they service the entire Southern California region by offering to visit customers personally to set up accounts. The company as well has no ATMs; rather, they offer to pay ATM fees for customers, something they can afford to do since they lack the sizable overhead of comparable brick-and-mortar banks.

1st Century is up 70.17 percent on the  year to hit $7.93 a share.

Monarch Financial Holdings (MNRK)

This bank holding company’s subsidiary Monarch Bank does almost most of their business in Virginia, with two additional branches located in North Carolina and mortgage offices in Maryland. In July the bank posted their best second quarter earnings report ever, and announced they would begin paying a dividend $0.06 a share.

Monarch is up 40.12 percent on the year to hit $11.63 a share.

Valley Financial Corporation (VYFC)

This company owns and manages Valley Bank, which operates exclusively in Roanoke, Va. and Salem, Va.  Comparatively speaking, this bank is still a start-up, as it has only been in existence for 18 years and consists of just eight branches.

The youngest, and smallest bank on this list, Valley Financial has gained just 17.07 percent on the year, but is up 138.39 percent from two years ago. The stock currently sits at $10.75 a share.

Old Line Bancshares (OLBK)

Another Mid-Atlantic regional bank, Old Line Bank has 23 branches scattered throughout Maryland. Headquartered in Bowie, Maryland, Old Line has been in existence since 1989. The bank recently acquired Washington Savings Bank, and will be merging with them this fall.

Old Line is up 16.56 percent on the year to hit $13.16 a share.

Farmers National Banc Corp. (FMNB)

This proudly independent bank has been servicing the Mahoning Valley region of Ohio since 1887, with 21 branches clustered in four counties. The bank recently declaredthey would pay a cash dividend of $0.03 per share to stockholders on record as of September 13.

The bank is down 5.49 percent on the year to hit $6.20 a share.


(image of Farmers National Bank courtesy of Wikimedia Commons)

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

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Results for fcty
Christopher Angus
25 Nov 15 06:20:03
Stocks with strong multiple-top pattern: $CHOC, $MLVF, $NUTR, $FCTY
Dakota Financial
24 Nov 15 23:14:59
1st Century Bancshares Downgraded to Sell at Zacks Investment Research $FCTY https://t.co/d4MnMVGj2s
Consumer News
24 Nov 15 23:11:32
1st Century Bancshares Downgraded to Sell at Zacks Investment Research $FCTY https://t.co/RM6IRtMJmg #acn
Ticker Report
24 Nov 15 23:10:51
1st Century Bancshares Downgraded to Sell at Zacks Investment Research $FCTY https://t.co/DUEAZOUpIE
Media Sentiment
24 Nov 15 23:09:42
$FCTY received a new alert. Find out why at https://t.co/nZwqRf3BRT #stocks #daytrading #trading #mkt #NYSE #NASDAQ #markets 3
US Banking News
24 Nov 15 23:09:00
1st Century Bancshares Downgraded to Sell at Zacks Investment Research $FCTY https://t.co/w68wkCcbFh
23 Nov 15 15:58:32
$71,000 in ONE TRADE!! By Follwing Their Signals More Info Here https://t.co/8WvnrVmkBS .. $FCTY $PAHC $CHRW
Syed Waqas Nabi
20 Nov 15 12:00:05
A bullish Big MAC (Bullish) has occurred at 2:00 PM Nov 20 at $8.37 on 1st Century Bancshares Inc (FCTY) $FCTY
Consumer News
19 Nov 15 19:49:32
1st Century Bancshares Lifted to “Hold” at Zacks Investment Research $FCTY https://t.co/CrmTdu3Mu1 #acn
Media Sentiment
19 Nov 15 16:17:08
$FCTY received a new alert. Find out why at https://t.co/nZwqReM0tj #stocks #daytrading #trading #mkt #NYSE #NASDAQ #markets 445
US Banking News
19 Nov 15 16:14:06
1st Century Bancshares Upgraded by Zacks Investment Research to Hold $FCTY https://t.co/oN0iBsujtF
Dakota Financial
19 Nov 15 16:04:36
1st Century Bancshares Upgraded to Hold by Zacks Investment Research $FCTY https://t.co/RqKH5vP6M9
Breaking News Now
19 Nov 15 16:03:16
$FCTY: 1st Century Bancshares Upgraded to Hold by Zacks Investment …: https://t.co/YIkMef97UT
Consumer News
19 Nov 15 16:01:35
1st Century Bancshares Upgraded to Hold by Zacks Investment Research $FCTY https://t.co/9UCX5KbFmP #acn
19 Nov 15 13:05:02
PIRS DD 4 investors.Read here: https://t.co/vD9rNW2f06 $JMBA $FCTY $FDML $OPHC $CME $AHL $AEL $ULTA
19 Nov 15 10:03:02
$FCTY: Wall Street analysts bullish on FCTY's earnings growth: https://t.co/twnyaYDNJO https://t.co/pWrQ9zY8sF
Daily Contracts
19 Nov 15 06:02:09
Real-Time feed of company contracts, original agreements and executive updates from $FCTY https://t.co/hOmuK4uwAk
19 Nov 15 00:27:01
JBEM new pick 'PIRS'.Read here: https://t.co/vD9rNW2f06 $FCSC $FCT $FCTY $FCVA $FCX $FDC $FDD $FDEF
18 Nov 15 16:12:02
$FCTY: New Insider Transaction on FCTY by President and COO: https://t.co/gg8VwHHJzl
Insider Alerts
18 Nov 15 16:11:17
NEW insider transaction on $FCTY reported a moment ago: https://t.co/hvldnXpiCa
Daily Contracts
17 Nov 15 05:21:00
Real-Time feed of company contracts, original agreements and executive updates from $FCTY https://t.co/hOmuK4uwAk
  +Follow September 23, 2013 8:39AM



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