Small Cap Regional Banks Continue to Rally
NEW YORK (TheStreet) -- Frontier Financial (FTBK) and other small cap regional bank stocks continued to rally on a surge in volume, as it appeared traders were making bets that some of the low-priced names would avoid failure.
Frontier Financial shares rallied 146.3% to $7.34, bringing its two-session gain to more than 208%. More than 11.23 million shares changed hands by 1:25 p.m. EDT Monday, compared with the 50-day average daily volume of 227,000, according to the Nasdaq.
Wunderlich Securities bank analyst Kevin Reynolds said many of the small cap regional bank stocks were rallying on such high volume as traders made speculative plays on survival being realized. Prior to the recent move higher, Reynolds says several bank stocks were priced as if there was a reasonable chance they could all fail."When you are priced as if you could go to zero on any Friday, it's a pretty eye-popping percentage gain off of such a low base," Reynolds says. "When you fail, you are a zero. With hundreds of bank failures coming, survivability is a real question for some of these companies with severe credit issues. I would simply say that people are pricing in a higher probability of survival." Reynolds adds that simply because a trader "decides to take a speculative flyer on a stock doesn't necessarily mean that it's going to make it." On Friday, regulators shuttered seven Illinois banks, bringing this year's tally of failed U.S. banks and thrifts to 57. For now, these regional bank stocks continued to rally. Among other winners, Crescent Banking Company (CSNT) jumped 70.3% to $3.32 and is now up 305% over the last two sessions. Dearborn Bancorp (DEAR) gained 22.7% to $4.86, up nearly 240% over the last week. Preferred Bank (PFBC) was up 22.2% to $2.81 Monday, good for a one-week gain of 80%. Among other big winners Monday, Independence Federal Savings Bank (IFSB) was up 59.7% Monday to $2.30. Monarch Community Bancorp (MCBF) rallied 41.4% to $2.87. -- Written by Robert Holmes in Boston. Follow Robert Holmes on Twitter and become a fan of TheStreet.com on Facebook.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
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.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
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.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV