This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

In Year of Crash, These Bank Stocks Soared

When it comes to banking shares, smaller is better.

First Financial Bankshares (FFIN), Tompkins Financial (TMP), NBT Bancorp (NBTB), SY Bancorp (SYBT) and Arrow Financial (AROW) have outperformed larger financial companies such as Goldman Sachs (GS) and BlackRock (BLK).

First Financial, which carries a "buy" recommendation from TheStreet.com Ratings, is a top performer, based not only on stock performance but also on fundamentals. Focusing on the regional market in Texas, the bank has carved out a profitable niche. Although third-quarter revenue declined 5.57%, the company managed to boost earnings per share by 8.5%, outperforming the industry average and the S&P 500. Gross margins widened to 81.39% from 71.97% a year earlier, and operating margins stretched to 46.06% from 40.71%.

Regional, national and international banks have reported massive losses as a result of exposure to subprime mortgages. First Financial, which has a market value of about $1 billion, has avoided common pitfalls by staying true to the fundamentals of sound lending, maintaining regional focus and providing outstanding customer service.

Investors have recognized the bank's potential, fueling a one-year price appreciation of 34.6%. Consequently, the stock is trading at a premium to its industry peers based on price to earnings, price to book and price to sales. However, the stock is below its 52-week high of $67.

Other regional banks demonstrated a similar resistance to the pessimism that plagued financial stocks in 2008. The aforementioned stocks aren't cheap on an absolute basis, but there may be upside potential for people looking to play a trodden sector.

Small Banks, Big Returns
Company
Ticker
MCap
(millions)
Grade
Rating
Price
P/B
P/S
ROE
Div. Yield
1-Year
TOMPKINS FINANCIAL
TMP
526
A
Buy
52.5
2.5x
2.8x
14.1
2.59
39.76%
FIRST FIN'L BANKSHARES
FFIN
1013.1
A-
Buy
49.36
2.9x
4.7x
15
2.68
34.64%
NBT BANCORP
NBTB
823.1
A-
Buy
26.12
2.0x
2.3x
12.5
2.93
31.81%
SY BANCORP
SYBT
334.8
B
Buy
24.7
2.4x
2.8x
16.4
2.6
9.00%
ARROW FINANCIAL
AROW
256.1
B
Buy
24.66
2.0x
2.4x
15.9
4.14
16.60%

There are numerous risks facing small-cap financials. Many have a high institutionally owned percentage and thin trading volume. Also, while large banks have sustained heavy losses from subprime-related investments, most have survived and will live to fight another day. However, these regional players are susceptible to immediate bankruptcy if bets turn against them. Rescuing small-cap financials doesn't top the list of Treasury priorities.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,102.04 +15.41 0.09%
S&P 500 1,990.62 +3.61 0.18%
NASDAQ 4,481.6280 +7.9310 0.18%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs