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3 Top Picks in Regional Banks: Oppenheimer

FMER Chart FMER data by YCharts

3. FirstMerit

Shares of FirstMerit (FMER - Get Report) of Akron, Ohio, closed at $17.04 Monday, returning 21% this year, following a 2% decline during 2012. The shares trade for 1.6 times tangible book value, according to Thomson Reuters Bank Insight, and for 12.0 times the consensus 2014 earnings estimate of $1.42 a share. The consensus 2013 EPS estimate is $1.29.

Based on a quarterly payout of 16 cents, the shares have a dividend yield of 3.76%.

FirstMerit on April 12 completed its acquisition of Citizens Republic Bancorp of Flint, Mich., bringing on over $9.5 billion in assets and over 170 branches. The company had a total of 415 branches in Ohio, Michigan, Wisconsin, Illinois and Pennsylvania as of March 31, with $15.3 billion in total assets.

FirstMerit reported first-quarter earnings of $37.3 million, or 33 cents a share, compared to $38.3 million, or 35 cents a share, in the fourth quarter, and $35.0 million, or 32 cents a share, in the first quarter of 2012.

Net interest income declined to $114.4 million in the first quarter from $119.2 million the previous quarter and $120.7 million a year earlier, however, the sequential decline was more than offset by a decline in expenses.

Noninterest expenses totaled $106.9 million in the first quarter, declining from $112.2 million in the fourth quarter and $119.1 million in the first quarter of 2012.

The company's first-quarter return on average assets was 1.01% and its return on average common equity was 8.83%.

McEvoy said in a report on April 23 that "we see potential upside to earnings from the recently closed acquisition of Citizens Republic as the Michigan economy grows, and feel confident in management's ability to integrate the two companies."

The analyst's 12-to-18-month price target for FirstMerit is $18, and he estimates the company will earn $1.38 a share this year, with EPS rising to $1.40 in 2014.

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

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