FR: Is This the Best Bank in the Midwest?

Article: Is This the Best Bank in the Midwest?

The final “best regional bank” article in my “Fool Revisited” series covers the Midwest region, which spans from Ohio to Minnesota. All banks were screened based on the region they fell under using, 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.

No tweet on this one either, so on to the analysis.

It looks like I narrowed my list down by excluding banks with a dividend below 3%, but if I do that now, only one of the original eight banks shows up in a current screen. With a 2% dividend yield threshold, my current list expands to 17, including the eight banks listed below (I removed Northern Trust Company from the list because they are now classified as an “asset management” company.

My list of seven banks did pretty well, beating the S&P 500 on average. Like some of the previous regions, however, the “best bank” in the region didn’t end up having the best performance. Huntington Bancshares (Nasdaq: HBAN) led the rankings 6+ years ago, and finished second this time around to Chemical Financial Corporation (Nasdaq: CHFC). It also ranks second if I re-rank the remaining banks using the screening criteria.

Does that mean it ends up back in first place? Not quite. Using the compound annual growth rate (CAGR) and total growth, since article publication on October 10, 2011 through January 26, 2018 – or acquisition in the case of FirstMerit Corporation (which was bought by Huntington in 2016):

Stock Start Price End Price CAGR Total Growth Value of $10,000
Huntington Bancshares $4.54 $16.21 22.38% 257.05% $35,705
Park National Corporation (AMEX: PRK) $40.90 $103.87 15.94% 153.96% $25,396
Fifth Third Bancorp (Nasdaq: FITB) $9.43 $33.35 22.20% 253.66% $35,366
FirstMerit Corporation $12.52 $21.61 11.90% 72.60% $17,260
First Financial Corporation (Nasdaq: THFF) $24.50 $46.60 10.74% 90.20% $19,020
Chemical Financial Corporation $14.46 $59.18 25.06% 309.27% $40,927
First Busey Corporation (Nasdaq: BUSE) $11.68 $31.33 16.95% 168.24% $26,824
First Financial Bancorp (Nasdaq: FFBC) $11.61 $28.40 15.25% 144.62% $24,462
S&P 500 $1,194.89 $2,872.87 14.94% 140.43% $24,043

Source: Yahoo! Finance & author calculation; Stock prices include dividends & stock splits

Re-examining the banks using the same criteria, I wasn’t terribly surprised to see Fifth Third Bancorp come out on top. They are currently the cheapest according to P/E ratio and have the highest profit margin. It lost a bit from its dividend yield, and isn’t nearly as cheap by P/B ratio, but it still has a fairly overall picture. Huntington and First Financial are right behind, though I’d lean towards Fifth Third if I only had to choose one. Doesn’t mean I’m going to go buy some shares today, but I would definitely use this screen as a jumping off point.

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.

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