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10 Bank Stocks With Up to 154% Upside for 2012

8. Washington Banking Co.

Shares of Washington Banking Co. (WBCO) of Oak Harbor, Wash., closed at $11.21 Friday, down 17% year-to-date. Based on the consensus price target of $14.69, the shares have 31% upside potential.

The shares have a 1.78% dividend yield, based on a quarterly payout of five cents.

Washington Banking Co. had $1.7 billion in total assets as of Sept. 30, with 30 branches in Northwest Washington. The company expanded through the acquisition of two failed banks from the Federal Deposit Insurance Corp. in 2010, and CEO John Wagner said during an interview with the American Banker in September, that Washington Banking Co. was looking for more FDIC deals in the Puget Sound area.

Third-quarter net income was $3.6 million, or 24 cents a share, compared to $16.0 million, or $1.04 a share, a year earlier, when the company booked a $19.9 million bargain purchase gain on its purchase of the failed institutions from the FDIC. The third-quarter net interest margin -- the difference between a bank's average yield on loans and investments and its average cost for deposits and wholesale borrowings -- was a very strong 5.43%, increasing from 5.06% a year earlier.

The third-quarter ROA was 0.86%, according to SNL Financial.

FIG Partners analyst Timothy Coffey in November reiterated his "Outperform," or "Buy" rating on Washington Banking Co., with a $14.50 price target, based on EPS estimates of $1.13 for 2012 and $1.18 for 2013, and a projected year-end 2012 tangible book value of $11.30 a share, saying that although acquired loan portfolios have been running off, "the organic loan portfolio is almost the same size it was a year ago at near $800 million, or 75% of total loans."

The shares trade for 10.2 times the consensus 2012 earnings estimate of $1.06 a share among analysts polled by FactSet, and for just above tangible book value, according to SNL.

Five out of six analysts covering Washington Banking Co. rate the shares a buy, while the remaining analyst has a neutral rating.

Investors will need Washington Banking Co. to score at least one decent-sized FDIC deal to realize the gains that analysts expect over the next year.

Interested in more on Washington Banking Co.? See TheStreet Ratings' report card for this stock.

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