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10 More Bank Stocks for Bottom-Fishing Investors

8. Park Sterling Corp.

Shares of Park Sterling Corp. (PSTB) of Charlotte, N.C., closed at $3.80 Monday, down 39% year-to-date. The shares trade for 0.6 times their tangible book value of $6.19, according to SNL Financial.

Park Sterling was formed on October 6, 2010 to serve as the holding company for Park Sterling Bank, which was chartered in September 2008. The company is rapidly expanding, and -- as is typical for a "de novo" bank -- has not yet achieved consistent profits.

During the second quarter, the company opened a loan production office in North Carolina and one in South Carolina, also receiving approval to open a new branch in Charleston, S.C.

Park Sterling Bank has four branches. The holding company had $610.7 million in total assets as of June 30.

The company on July 13 announced it had received approval from the Federal Reserve and state regulators for its acquisition of Community Capital Corp. (CPBK) of Greenwood, S.C., which is expected to be completed this quarter. Park Sterling will pay about $32.4 million in cash and stock for Community Capital, bringing on roughly $637 million in assets and 18 branches spread across South Carolina.

Park Sterling posted a second-quarter net loss of $3.1 million or 11 cents a share, following a first-quarter net loss of $2.9 million, or 10 cents a share. The second-quarter results included $632 thousand in merger expenses. The second-quarter provision for loan losses was $3.2 million, declining from $4.5 million in the first quarter. The second-quarter net interest margin -- the difference between a bank's average yield on loans and investments and its average cost of funds -- was a tax-adjusted 2.60%, contracting from 2.76% the previous quarter, reflecting declining loan balances and a decline in swap hedge income.

The company's ratio of nonperforming assets to total assets was 5.34% as of June 30, improving from 5.85% the previous quarter. The annualized ratio of net charge-offs to average loans during the second quarter was 3.93%, and reserves covered 2.96% of total loans as of June 30.

Park Sterling is obviously a work in progress, with a high level of nonperforming assets and loan losses, especially for a relatively new bank. Then again, the bank was chartered at a less than ideal moment, leading into the real estate collapse.

The company is very strongly capitalized, with a tangible common equity ratio of 28.43%, according to SNL Financial, so it is well-positioned to double in size from the Community Capital transaction, fund continued expansion plans and continue working through its nonperforming loans.

The consensus estimate among analysts polled by FactSet is for Park Sterling to post a net loss of eight cents a share in 2012.

All three analysts covering Park Sterling rate the shares a buy.

Park Sterling is a pure growth play for investors who can commit for several years, as the bank seeks to continue its growth and hit "critical mass" to achieve consistent profitability.
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