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Stocks Under $10 with 50-100% upside potential - 14 days FREE!

7 Cheapest Bank Takeout Target Stocks From KBW (Update 2)

Stocks in this article: AF BANR EVBS FFKY LNBB PBIB BSRR

5. Sierra Bancorp

Shares of Sierra Bancorp (BSRR) of Porterville, Calif., closed at $9.04 Friday, returning 4% year-to-date, following a 16% decline during 2011. Based on a quarterly payout of six cents, the shares have a dividend yield of 2.65%.

The shares trade for 77% of tangible book value, and for 12 times the consensus 2013 earnings estimate of 70 cents. The consensus 2012 EPS estimate is 55 cents.

Sierra Bancorp had $1.3 billion in total assets as of March 31. The company reported first-quarter earnings of $1.9 million, or 13 cents a share, increasing from $1.5 million, or 11 cents a share, in the fourth quarter, and $1.5 million, or 11 cents a share, in the first quarter of 2011. The fourth quarter results included "$2.529 million in write-downs on other real estate owned (OREO), and a $1.370 million other-than-temporary impairment (OTTI) charge against equity investment securities which was offset by $1.660 million in gains taken on the sale of mortgage-backed securities," according to the company."

The year-over-year earnings improvement reflected a decline in the provision for loan losses to $2.8 million from $3.6 million. The company's ROA has ranged from 0.46% to 0.75% over the past five quarters, according to Thomson Reuters Bank Insight. The company's ratio of nonperforming assets to total assets was a rather high 7.69% as of March 31.

KBW analyst Jacquelynne Chimera on May 23 upgraded Sierra Bancorp to "Outperform," with a $12 price target, saying the discount to book value for the shares -- closing at $8.59 that day -- was not warranted "given the company's core income generation capabilities," adding that "Sierra pays a cash dividend, while the majority of its peers do not."

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

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