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10 Bank Stocks With Up to 154% Upside for 2012

4. Metro Bancorp

Shares of Metro Bancorp (METR) of Harrisburg, Pa., closed at $8.69 Friday, down 21% year-to-date. Based on the mean price target of $12.33 among analysts polled by FactSet, the shares have 42% upside.

The company's main subsidiary Metro Bank is operating under an April 2010 consent order, agreeing with state regulators and the FDIC "to correct and prevent certain unsafe or unsound banking practices," and to analyze Bank Secrecy Act and Office of Foreign Assets Control staffing needs, as well as "qualifications and an analysis and assessment of the independence and performance of the Bank's directors and senior executive officers,"

The company reported a third-quarter net loss of $5.7 million, or 41 cents a share, compared to earnings of $2 million, or 14 cents in the second quarter, and a net loss of $6.2 million, or 46 cents, in the third quarter of 2010.

During the third quarter, Metro Bancorp recorded a $13.8 million provision for loan losses, after setting aside just $1.7 million for reserves the previous quarter. A year earlier, the provision totaled $13.4 million.

The company's annualized ratio of net charge-offs (loan losses less recoveries) to average loans during the third quarter was a high 3.34%, with loan losses rising "as a result of updated appraisals of collateral and financial information during the period associated with seven loan relationships," all of which were "originated in the years 2004 through 2008," according to CEO Gary Nalbandian.

While the company's nonperforming assets "trended lower for the fifth consecutive quarter to $45.5 million, or 1.87%, of total assets at September 30, 2011 from a high of $70.6 million, or 3.22%, or total assets at June 30, 2010," according to Nalbandian, a relatively low 1.61% ratio of loan loss reserves to total loans could point to additional quarterly losses if the bank is surprised again by declining collateral values.

The shares trade for 0.6 times tangible book value, according to SNL Financial, and 15.9 times the consensus 2012 EPS estimate of 52 cents.

All three analyst covering Metro Bancorp rate the shares a buy.

Metro Bancorp is a book value play, until its asset quality settles down, and it moves past the FDIC consent order.

Interested in more on Metro Bancorp? See TheStreet Ratings' report card for this stock.

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