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

5 Cheapest Bank Stocks (Update 1)

Stocks in this article: BAC C JPM DFS COF BPOP FRC EVER SBNY EVTC I:BKX

5. Everbank Financial

EVER Chart EVER data by YCharts

Shares of Everbank Financial (HTH) of Jacksonville, Fla., closed at $15.66 Friday, returning 5% this year. The shares trade for 10.0 times the consensus 2015 earnings estimate of $1.56 a share. The 2014 EPS estimate is $1.46. The company went public on May 3, 2012, at an opening share price of $10.

Everbank has built upon its national mortgage banking platform through the acquisition of General Electric (GE) Capital's business property lending unit and MetLife's (MET) mortgage warehouse business.

The company reported second-quarter net income allocated to common shareholders of $43.5 million, or 35 cents a share, increasing from $9.5 million, or 9 cents a share, a year earlier. The swing in earnings year over year mainly reflected $64.3 million in amortization and impairment charges for mortgage servicing rights during the second quarter of 2012.

Everbank also reported adjusted earnings, to net out impairment charges and recoveries on mortgage servicing rights, as well as non-recurring regulatory related expenses. Adjusted earnings allocated to common shareholders were $34.8 million, or 28 cents a share, during the second quarter, compared to $41.2 million, or 33 cents a share, in the first quarter, and $34.3 million, or 33 cents a share, during the first quarter of 2012. The year-over-year decline in EPS reflected the May 2012 common-share offering, as well as smaller share-count increases in succeeding quarters.

Everbank's second-quarter return on average assets (ROA) was 1.00% and its return on average tangible common equity (ROTCE) was 13.67%, according to Thomson Reuters Banking insight.

CEO Robert Clements, in the company's earnings release on July 30, said, "We remain confident in our ability to generate earnings growth and attractive risk-adjusted returns over the long term." Everbank's second-quarter revenue totaled $288 million, increasing 4% sequentially and 45% year over year.

Sterne Agee analyst Peyton Green rates Everbank a "buy," with a price target of $18, and in a note on July 31 wrote "we believe that management will continue to shift the business mix to higher valuation lines over the next six quarters."

"EVER will exit the wholesale mortgage broker channel (~17% of volume in 2Q13; 65% refi) in order to focus on retail, consumer direct, and correspondent," according to Green.

"Tactically, EVER sold ~$1B of loans HFS ($2B at 2Q13-end), or all of its fixed-rate jumbos, subsequent to quarter end. Going forward, EVER's concentration in jumbo ($1.1B; +50% LQ), shift toward hybrid ARMs (~$500 million in 2Q13), and retail ($1.2B; +50% LQ; 50% purchase) should keep volumes in good shape."

Green argued that the bank's concentration in jumbo mortgage lending, with shift toward hybrid adjustable-rate loans and retail distribution, "should keep volumes in good shape."

The analyst estimates Everbank will earn $1.35 a share this year, with EPS increasing to $1.45 in 2014 and $1.55 in 2015.

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

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