The language in previous statements didn't include the words "increase or reduce," and with several recent indicators of slowing U.S. economic growth, including a disappointing employment growth report on Wednesday from Automatic Data Processing, the FOMC may decide next month to bump up the Fed's securities purchases, thus increasing the economic stimulus. For the 17 small-to-medium-sized banks he covers, Rodis said the median sequential decline in net interest income was 2.9%, following a much smaller decline of 0.16% in the fourth quarter. Rodis followed the earnings reports by lowering his 2014 earnings estimates for nine, raising estimates for two, and leaving estimates for 2014 unchanged for the remaining six. Investors of course don't like to see earnings estimates cut for the coming year, since that can place a drag on stock prices. "For the majority of the banks I cover, loan growth was lower than expected," Rodis says. "I would say that the outlook was that pipelines were building from March into April, and that we will see better trends in the second, third and fourth quarters." With little to drive increases to 2014 earnings estimates and expected declines in credit related costs "factored in" for most companies, Rodis has neutral "market perform" ratings on most of the banks he covers. One bank he still rates "market perform" is Old National Bancorp (ONB - Get Report) of Evansville, Indiana. The shares closed at $11.76 Wednesday, declining 3.5% for the day. The shares are down slightly year-to-date, and Rodis says the "This is a very high quality bank," and that "the recent sell-off is a little overdone."
Old National on Monday reported first-quarter earnings of $23.9 million, or 24 cents a share, which Rodis says "was right in line with my estimate," but a bit below consensus. The bank's first-quarter return on average assets (ROA) was 1.01% and its return on average common equity was 8.00%. Old National's shares trade for 1.4 times tangible book value and for 11.0 times Rodis's 2014 earnings estimate of $1.07 a share. That is the lowest forward price-to-earnings ratio for the bank stocks he covers. Rodis is slightly ahead of the 2014 consensus EPS estimate among analysts polled by Thomson Reuters, which is $1.05. His price target for the shares is $13. Here are the three small and mid-sized bank stocks with "outperform" ratings from Rodis, ordered by ascending upside to his price targets: