NEW YORK (
) - Among the hundreds of bank stocks that have declined in price amid the market turmoil of the past three weeks,
has identified five community bank stocks that are excellent buys right now, based on low price multiples and recent events.
In keeping with a generally conservative philosophy, we selected the five bank stocks with the lowest prices relative to tangible book value among holding companies meeting the following criteria, using data provided by SNL Financial:
Three-month average daily trading volume above 65,000 shares.
Not currently participating in the Troubled Assets Relief Program, or TARP.
First quarter annualized ratio of net charge-offs to average loans below 2%.
Nonperforming assets ratio below 3%.
Positive earnings-per-share for the first quarter of 2010.
Nonperforming assets include nonaccrual loans (less government-guaranteed balances) and repossessed real estate.
Our list of five includes two holding companies selling below tangible book value and two with dividend payouts over 4%.
Limiting the group to the cheapest relative to book value excluded some
very strong banks and thrifts with high dividend payouts
The following graphics show that all but one of these bank and thrift holding company stocks sold at much higher levels relative to book value at the end of 2007 and 2006, before the crisis hit. The numbers also show strong potential for some, based on price relative to projected earnings. While each of these banks has a different story to tell, the bottom line is that a profitable institution with good asset quality and prospects for growth should sell for considerably more than book value.