My first “Fool Revisited” piece for today is yet another article in which I screened some bank stocks, this time focusing on savings and loans. (I warned you that there would be a lot of articles about banks, and we haven’t even got to the worst of it yet).
Savings and loan banks specialize in doing just that; unlike some bigger banks, they are focused on the work of a “traditional” bank, and tend to avoid a lot of the pitfalls that larger banks that have investment services do. If you have a local bank, chances are that it is a savings and loan. Savings and loans rose to prominence, at least in the minds of “regular” consumers, after the savings and loan crisis of the 1980s, which led to a moderate bailout of $160 billion, including $132 billion from taxpayers.
Like the previous “bank screen” articles, I evaluated all the savings and loan bank stocks on four criteria: P/E ratio (positive only), P/B ratio (less than 2), dividend yield (over 3%), and a positive net income margin. I also only looked at banks over $300 million in market cap. My initial article profiled nine banks, but I will only mention seven in this rundown, as two of the originals – Astoria Financial and First Niagara Financial – were acquired by other banks since article publication.
The average return for the seven banks did not exceed that of the S7P 500, but there were a few standouts individually. Since article publication on October 28, 2011 through February 23, 2018, here’s how they stack up according to CAGR and total return:
|Stock||Start Price||End Price||CAGR||Total Growth||Value of $10,000|
|New York Community Bancorp (NYSE: NYCB)||$9.18||$14.07||6.98%||53.27%||$15,327|
|Dime Community Bancshares (Nasdaq: DCOM)||$9.82||$18.40||10.43%||87.37%||$18,737|
|Flushing Financial (Nasdaq: FFIC)||$10.21||$27.45||16.91%||168.85%||$26,885|
|Provident Financial Services (NYSE: PFS)||$10.79||$25.96||14.88%||140.59%||$24,059|
|Brookline Bancorp (Nasdaq: BRKL)||$6.92||$16.35||14.55%||136.27%||$23,627|
|People’s United Financial (Nasdaq: PBCT)||$9.94||$19.72||11.43%||98.39%||$19,839|
|Northwest Bancshares (Nasdaq: NWBI)||$9.06||$16.97||10.42%||87.31%||$18,731|
Source: Yahoo! Finance & author calculation; Stock prices include dividends & stock splits
The stock performance doesn’t tell the whole story of whether or not these banks still make worthwhile investments going forward. But if you are looking for banks that are not as intertwined with the global financial markets, savings and loans could be an attractive option if you want to find a financial company. Unlike some of the regional banks I’ve written about, the highest P/B of any bank on this list is Brookline Bancorp, which sports a P/B of 1.55 currently. While not ideal, that bank and others on this list would still have a bit of room to grow if you subscribe to the bank investing adage of “buy at a half, sell at two,” though the upside may be pretty small as it was 6+ years ago. Either way, before you make any investment, it is important to look beyond metrics like these and get a full picture of the company.
Until next time…
Disclaimer: I do not own currently own shares in any of the mentioned companies, and I have no plans to purchase shares of either company 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.