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10 Buy-Rated Bank Stocks With Highest Dividend Yields

9. FirstMerit

Shares of FirstMerit (FMER - Get Report) of Akron, Ohio, closed at $15.13 Thursday, returning 8% year-to-date, after a decline of 2% during 2012. The shares trade for 1.4 times tangible book value and for 10.6 times the consensus 2014 EPS estimate of $1.42. The consensus 2013 EPS estimate is $1.28.

Based on a quarterly payout of $0.16, the shares have a dividend yield of 4.23%.

FirstMerit is rated a B-minus (Good) by TheStreet Ratings.

The company had $14.9 billion in total assets as of Dec. 31 and reported 2012 net income applicable to common shares of $134.1 million, or $1.22 a share, increasing from $119.6 million, or $1.10 a share, in 2011. FirstMerit's 2012 ROA was 0.91%, improving from 0.82% the previous year.

The company in September agreed to acquire Citizens Republic Bancorp (CRBC) of Flint, Mich., in an all-stock deal valued at $912 million. Citizens Republic has $9.6 billion in total assets and owes $300 million in federal bailout funds received through the Troubled Assets Relief Program, or TARP.

FirstMerit said in its annual 10-K filing on Thursday that upon completion of the merger, it would purchase Citizens Republic's TARP preferred shares without itself becoming subject to TARP's restrictions, while also paying the government deferred dividends totaling $48.5 million. The merger is expected to be completed in the second quarter.

Oppenheimer analyst Terry McEvoy rates FirstMerit "outperform," with a 12-18 month price target of $18. The analyst said in a report on Jan. 22 that the Citizens Republic deal was "looking better by the quarter," because of improved credit quality.

McEvoy said that nonperforming assets at Citizens Republic declined by 21% in the fourth quarter from the third quarter, and that net loan charge-offs were down 50% from a year earlier. The analyst said that FirstMerit's original estimate of a $378 credit mark against loans to be acquired from Citizens Republic was "conservative," and that "given the decline in nonperforming assets and stable delinquency trends over the last two quarters, we see the final loan mark coming in below the original figure or higher levels of purchase accounting accretion (positive to net interest income and EPS) after the deal closes."

"In either case, this reduces the tangible book value dilution earn-back time, which was a large contributor to the stock's underperformance following the deal announcement," McEvoy wrote.

The analyst estimates that FirstMerit will earn $1.35 a share in 2013 and 2014, while maintaining the quarterly dividend of $0.16.

FMER Chart FMER data by YCharts

Interested in more on FirstMerit? See TheStreet Ratings' report card for this stock.
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BAC $14.77 1.44%
C $46.68 0.86%
FMER $22.38 0.99%
NYCB $15.11 0.53%
PBCT $15.55 0.32%


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