Five Fetching Bank Stocks

Susquehanna Bancshares (SUSQ Quote) is by far the cheapest stock on the list, relative to book value. Shares slid in late July, when the company announced second quarter earnings of $9.8 million, slipping from $19.3 million a year earlier. The main factor in the earnings decline was a loss of $11.7 million on the sale of securities, as Susquehanna realigned its balance sheet. Susquehanna's dividend payout ratio is the highest on the list, with the company paying out dividends of 85% of earnings during the first half of 2007.

As one would expect in this environment, asset quality declined over the past year, with nonperforming assets of 0.63% of total assets as of June 30, 2007, compared with 0.33% in June 2006. Susquehanna is maintaining solid reserves, with an allowance for loan and lease losses covering 163.7% of nonperforming loans.

Susquehanna has an agreement in place to acquire Community Banks Inc(CMTY Quote), of Harrisburg, Pa., for $860 million in cash and stock. The merger is expected to be completed Nov. 16, and will bring Susquehanna's total assets to about $12 billion, with about 230 branches (after some branch consolidation) in its core market, in Pennsylvania and Maryland.

Finally, Bank of America has made a lot of headlines recently, with its lovely $2 billion purchase of convertible preferred stock from Countrywide Financial(CW Quote). It also appears to have shrugged off challenges to its acquisition of LaSalle Bank from ABN Amro Holding(ABN Quote). The deal is expected to be completed during the fourth quarter, and will give Bank of America a strong presence in the Chicago market.

Interestingly, Bank of America's quarterly dividend was raised in July, to 64 cents from 56 cents per share. It looks like they were quite an influence on Wachovia, which also increased its dividend to 64 cents from 56 cents per share.

Bank of America's asset quality is strong, with adjusted nonperforming assets comprising 0.34% of total assets, as of June 30, only a slight increase from June 2006, when the nonperforming assets ratio was 0.29%.