FR: Is This the Best Bank in the Northeast?

Article: Is This the Best Bank in the Northeast?

The next “regional bank” article in my “Fool Revisited” series is going to cover the Northeast region, which covers all the banks from all six New England states plus New York, Pennsylvania, and New Jersey. 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 (over 3% in this case), and quality net income margin. I profiled 12 banks in the original article, but I think I will eliminate a couple from the list so I don’t have a giant chart below.

I know that you want to see it, so here is the old tweet of the article from back in the day:



Had this article been written a little later in my tenure at the Fool, my list probably would have been much smaller, if only because of the “tickering” rules in place at the time. My list of 12 banks was a bit unwieldy even at the time, and I probably should have raised the dividend yield criteria to eliminate a few more. I selected M&T Bank (NYSE: MTB) as the winner of the region because of a higher than average yield and the lowest P/E ratio of all the banks profiled.

However, M&T Bank was not the best performer over the past 6+ years. It held its own for sure, but an investor would have been better off with three other banks, and has even lost the draw of the higher dividend – which tends to happen when a stock price more than triples. Using the compound annual growth rate (CAGR) and total growth, since article publication on October 10, 2011 through January 26, 2018:

Stock Start Price End Price CAGR Total Growth Value of $10,000
M&T Bank $62.63 $189.37 19.28% 203.67% $30,367
S&T Bancorp (Nasdaq: STBA) $14.95 $40.73 17.24% 172.44% $27,244
Valley National Bancorp (NYSE: VLY) $7.95 $12.74 7.77% 60.25% $16,025
TrustCo Bank Corp NY (Nasdaq: TRST) $3.58 $8.80 15.34% 145.81% $24,581
Washington Trust (Nasdaq: WASH) $17.48 $54.15 19.65% 209.78% $30,978
First Commonwealth Financial (NYSE: FCF) $3.25 $14.83 27.24% 356.31% $45,631
Oritani Financial (Nasdaq: ORIT) $8.61 $16.45 10.82% 91.06% $19,106
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

Looking at the same screening criteria for these banks again, it’s hard to identify a bank that has a similar profile to what it did 6+ years ago. The best performer of the group, First Commonwealth Financial, has seen its P/B ratio triple and a loss of 1% of its dividend yield. M&T Bank has seen its P/E ratio double and its dividend yield more than halved.

The best yielder of the bunch in the original article – Valley National – still has a relatively robust dividend at 3.7%, but that is a pretty steep decline from its yield of 5.9% prior (and that’s with the worst performance of the group. Another poor performer, Oritani Financial, is currently the only bank in the Northeast region with a yield over 4%. Lots of options, but there may not be a solid investment in the group, at least among these banks.

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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