5 Buy-Rated Banks With Increased Upside: FBR (Update 1)

1. Fulton Financial

Shares of Fulton Financial (FULT) of Lancaster, Pa., closed at $9.49 Friday, down 3% year-to-date, following a decline of 3% during 2011. Based on a quarterly payout of six cents, the shares have a dividend yield of 2.53%.

Fulton reported fourth-quarter earnings of $36.1 million, or 18 cents a share, declining from $39.3 million, or 20 cents a share in the third quarter, but improving from $31.5 million, or 16 cents a share, in the fourth quarter of 2010.

The sequential decline mainly reflected a 14% decline in "other service charges and fees" to $10.8 million, as the Durbin Amendment took its toll, while the year-over-year earnings increase reflected securities gains of $3.1 million in , compared to losses of $443,000 in the fourth quarter of 2010.

Fulton Financial's fourth-quarter operating ROA was 0.89%, and according to SNL Financial, the ROA has ranged between 0.77% and 0.98%, over the past five quarters.

Despite "somewhat disappointing results," FBR analyst Bob Ramsey last Wednesday reiterated his "Outperform" rating for Fulton and raised his price target for the shares to $12 from $10, "to reflect stronger industry valuation multiples."

Looking beyond some one-time fourth-quarter items, including "a bulk nonperforming loan sale also added approximately $5 million to credit cost," the analyst said that "Lower-than-expected fee income will have a more lasting impact on future quarters and is the largest contributor to our reduction in 2012 EPS to $0.85 (from $0.90)."

" While 4Q11 results were unexciting, FULT's profitability remains strong (11% [return on tangible common equity] in 2011), and shares trade at a discount to peers on earnings," he said.

The shares trade for 1.3 times tangible book value, according to SNL, and for 11 times Ramsey's 2012 EPS estimate.

Interested in more on Fulton Financial? See TheStreet Ratings' report card for this stock.

>>To see these stocks in action, visit the 5 Buy-Rated Banks With Increased Upside portfolio on Stockpickr.

-- Written by Philip van Doorn in Jupiter, Fla.

To contact the writer, click here: Philip van Doorn.

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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.

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