The next “regional bank” article in my “Fool Revisited” series is going to cover the Mid-Atlantic region, which covers all the banks from South Carolina to Pennsylvania, though some banks have acquired banks outside that geographic footprint. All banks were screened based on the region they fell under using FinViz.com, my screener of choice back when I was writing for the Fool (it still is pretty cool, though a lot of the things I used it for in the past are no longer free and I don’t have the resources at present to pay for them).
As with the other articles within this mini “series within a series,” instead of writing about all of the banks in the region, I screened them down to a much more manageable list. First, I eliminated all banks with a market cap below $300 million. Then I used four other factors to get to my final list: only profitable banks (over the prior 12 months), a low P/B (looks like I only featured banks under 2, though lower is better), a positive dividend, and quality net income margin. It looks like I profiled the seven banks that came up in my screen, though when I run a similar screen today, I get over 20 banks. Either some banks have grown over the past 6+ years (very possible) or I messed up previously (also possible).
No tweet for this one, so let’s get straight to the analysis of these banks’ performance.
My list of seven banks did pretty well, all things considered. Like some of the previous regions, however, the “best bank” in the region didn’t end up having the best performance. WesBanco (Nasdaq: WSBC) had a lot going for it at the time: cheap according to P/B, below average (for the region) P/E ratio, and a relatively decent dividend yield. Yet four of the other banks outperformed WesBanco in the interceding years: BB&T Corporation (NYSE: BBT) (which has been moved to the Southeast according to FinViz), First Citizens (Nasdaq: FCNCA), City Holding Company (Nasdaq: CHCO), and Sandy Spring Bancorp (Nasdaq: SASR).
On average, the banks in this region did quite well, exceeding the S&P 500 by a pretty significant amount. But it is the worst performer that may make a compelling investment case going forward. Using the compound annual growth rate (CAGR) and total growth, since article publication on October 10, 2011 through January 26, 2018 (or merger in the case of SCBT Financial):
|Stock||Start Price||End Price||CAGR||Total Growth||Value of $10,000|
|City Holding Company||$23.06||$68.63||18.90%||197.61%||$29.761|
|United Bancshares (Nasdaq: UBSI)||$17.18||$35.90||12.41%||108.96%||$20,896|
|First Citizens Bancshares||$145.30||$437.16||19.10%||200.87%||$30,087|
|Sandy Spring Bancorp||$13.29||$38.70||18.49%||191.20%||$29,120|
|SCBT Financial (merged 6/27/14)||$26.80||$60.67||35.11%||126.38%||$22,638|
Source: Yahoo! Finance & author calculation; Stock prices include dividends & stock splits
Looking at the same screening criteria for the banks in this region again, there may be another diamond in the rough out there that either didn’t meet my criteria in 2011 or was moved from elsewhere. But without going down and trying to rate all 24 banks that show up on my screen now, I’ll instead focus on the seven from my original article. Of those seven, one stands out to me as a potential investment with a bit more room to grow than the others.
United Bancshares, which is headquartered in West Virginia looks intriguing. It currently has the lowest P/B ratio of all six remaining banks, as well as the highest dividend yield. Do those two factors alone make it the best option in the region? I’d have to dig deeper, but had I done a through ranking of all the remaining banks, it appears that it would come out on top now, though Sandy Spring would give it a run for it money.
Until next time…
Disclaimer: I do not personally own shares of the companies mentioned here, and I have no plans to purchase shares of any company mentioned within the next 60 days in any account in which I manage investment funds. You can read a little about my personal investment philosophy here.