Stocks Under $10: Overvalued and Undervalued Community Banks

Richard Suttmeier |

Stocks Under $10: Overvalued and Undervalued Community Banks

According to www.ValuEngine.com, the Finance sector is 11.4% overvalued. Each banking region is local with different industry valuations; the Northeast is 20.9% overvalued, the Midwest is 4.1% undervalued, the Southeast is 21.7% overvalued, the West is 2.6% overvalued, and the Southwest is 1.6% overvalued. All fifteen of the stocks in today’s table have complete ValuEngine data and most have enough price data to have enough value levels, risky levels and pivots. Among these fifteen bank stocks, three are rated strong buy, six are rated buy, five are rated hold and one is rated strong sell.

The eight banks highlighted in RED are overexposed to Commercial Real Estate (CRE) loans and/or Construction & Development (C&D) loans and this data is not factored into ValuEngine ratings. ValuEngine ratings are based upon data from filings related to quarterly earnings reports. Real estate loan exposures are submitted in separate quarterly filings to the Federal Deposit Insurance Corporation (FDIC). Given this knowledge investors should consider selling holdings in the RED banks.
The FDIC has closed 49 banks in 2012 bringing the total since the end of 2007 to 463. With the FDIC’s non-published List of Problem Banks still above 700 insured institutions, look for additional Bank Failure Fridays over the next few years. At ValuEngine we have an excellent track record of tracking the publicly-traded community banks that have the overexposures that could cause an FDIC knock on the door some Friday afternoon.

Boston Private Financial Holdings, Inc. (BPFH) – has only been below $10 since September 20, 2012.
First Busey Corporation (BUSE) – has been below $10 since the week of April 24, 2009.
First Bancorp (FBP) – has been below $10 since the week of July 16, 2010.
First California Financial Group, Inc. (FCAL) – has been below $10 since the week of October 19, 2007.
First Commonwealth Financial Corp. (FCF) – has been below $10 since the week of May 1, 2009.
Fulton Financial Corp. (FULT) – has only been below $10 since October 18, 2010.
Huntington Bancshares Inc. (HBAN) – has been below $10 since the week of November 14, 2008.
National Penn Bancshares Inc. (NPBC) – has been below $10 since the week if April 24, 2009.
Park Sterling Corp. (PSTB) – has been below $10 since the end of October 2008.
Regions Financial Corp. (RF) – has been below $10 since the week of December 19, 2008.
Synovus Financial Corp. (SNV) – has been below $10 since the week of November 14, 2008.
TrustCo Bank Corp. (TRST) – has been below $10 since the week of January 2, 2009.
United Community Banks, Inc. (UCBI) – has only been below $10 since April 2, 2012.
Valley National Bancorp (VLY) – has only been below $10 since last Friday, November 2, 2012.
Wilshire Bancorp Inc. (WIBC) – has been below $10 since the week of June 11, 2010.

(Click to Enlarge)

Reading the Table

OV / UN Valued – The stocks with a red number are undervalued by this percentage. Those with a black number are overvalued by that percentage according to ValuEngine. The only overvalued stock in this table is TRST by 300.0%. The most undervalued stocks are FBP and UCBL by 75.0%.

VE Rating – A “1-Engine” rating is a Strong Sell, a “2-Engine” rating is a Sell, a “3-Engine” rating is a Hold, a “4-Engine” rating is a Buy and a “5-Engine” rating is a Strong Buy.

Last 12-Month Return (%) – Stocks with a Red number declined by that percentage over the last twelve months. Stocks with a Black number increased by that percentage. The best performer over the past twelve months is FCAL with a gain of 103.6%. The worst performer is VLY with a loss of 8.0%.

Forecast 1-Year Return – Stocks with a Red number are projected to decline by that percentage over the next twelve months. Stocks with a Black number in the Table are projected to move higher by that percentage over the next twelve months. Fourteen of fifteen are projected to move sideways to up over the next twelve months. The only projected loser is TRST by 18.5%.

P/E Ratios – Three stocks (FBP, HBAN & WIBC) have single digit P/E ratios. Four have elevated P/E ratios; BUSE, FCF, PSTB & SNV.

Value Level: is the price at which to enter a GTC Limit Order to buy on weakness. The letters mean; W-Weekly, M-Monthly, Q-Quarterly, S-Semiannual and A- Annual.

Pivot: A level between a value level and risky level that should be a magnet during the time frame noted.

Risky Level: is the price at which to enter a GTC Limit Order to sell on strength.

Where to Buy and Where to Sell

A “Value Level” is a price at which buyers should add to positions on market price weakness. A “Risky Level” is a price at which sellers should reduce holdings on market price gains. A "Pivot" is a support or resistance (Value Level or Risky Level) that was violated in its time horizon, acting as a magnet during the remainder of that time horizon.  These levels are calculated in weekly (W), monthly (M), quarterly (Q), semiannual (S) and annual (A) time horizons, based on the past nine closes in each time horizon. My theory is that the closes over a nine-year period are the summation of all bullish and bearish events for that market or specific stock. These levels are the most important element of my Buy and Trade Strategy.

Buy and Trade Guidelines

Investors should consider entering good until cancelled (GTC) orders to buy weakness to a value level, or to sell strength to a risky level.

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

Companies

Symbol Name Price Change % Volume
TRST TrustCo Bank Corp NY 8.20 0.00 0.00 92,542
VLY Valley National Bancorp 11.53 0.13 1.14 788,958
NPBC National Penn Bancshares Inc (Boyertown Penn.) n/a n/a n/a 0
RY.PR.B:CA Royal Bank of Canada Non-Cumulative First Preferre 25.19 0.01 0.04 300
BPFH Boston Private Financial Holdings Inc. 15.30 0.50 3.38 303,759
UCBI United Community Banks Inc. 28.08 0.47 1.70 572,831
BUSE First Busey Corporation 28.34 0.23 0.82 45,456
FBP First BanCorp. New 5.99 0.03 0.50 2,370,357
HBAN Huntington Bancshares Incorporated 12.98 0.04 0.31 10,878,056
PSTB Park Sterling Corporation 9.75 -0.01 -0.05 174,093
RF Regions Financial Corporation 13.90 0.16 1.16 16,617,479
WIBC Wilshire Bancorp Inc. n/a n/a n/a 0
FCF First Commonwealth Financial Corporation 12.94 0.20 1.57 152,486
FULT Fulton Financial Corporation 18.10 0.25 1.40 377,101
SNV Synovus Financial Corp. 39.44 0.27 0.69 494,636

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