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Assessing 68 Community Banks that Report Quarterly Results

Stocks in this article: ABAQ

NEW YORK ( TheStreet) -- Several strategists and bank stock analysts are advising investors to consider buying the smaller community banks instead of buying the bigger regional names.

My role is to separate those that look healthy versus those who are risky.

This week investors have 68 community banks to choose from; 14 Savings & Loans, 17 from the northeast, 15 from the southeast, 10 from the midwest, 11 from the west, and one small major regional.

As I said last week in Assessing 29 Community Banks That Report Quarterly Results , this bet assumes that the housing market is in recovery, and that community banks will increase lending to home builders and developers and will ease tight lending standards for homeowners and home buyers who seek to refinance or buy a home.

This list of community banks include only five that are overexposed to construction and development loans, but there are 38 that are overexposed to the broader category of commercial real estate loans. Only 11 have pipeline risk of more than 80% of loans outstanding versus loan commitments.

My benchmark for community banks is the America's Community Bankers Index (ABAQ), which tracks more than 400 small publicly traded FDIC-insured financial institutions.

Chart Courtesy of Thomson / Reuters

ABAQ (164.50) declined by 2.4% last week, but remains up 35.5% since October 2011, and is up 11.2% year to date. The daily chart above is negative with declining momentum (12x3x3 daily slow Stochastic), with a close on Friday below its 21-day simple moving average at 163.37.

The 50-day and 200-day simple moving averages are key supports at 161.30 and 155.29. My quarterly value level is 161.51 with weekly and annual pivots at 164.66 and 166.87 and monthly risky level at 172.92.

Reading the Table

The table above shows the FDIC assets in billions, the construction and development loans in millions, the percentage of C&D loans versus risk-based capital, the percentage of CRE loans versus risk-based capital, and pipeline, which is the total real estate loans outstanding versus total real estate loan commitments.

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