NEW YORK (
) -- Bank stocks were mostly flat in the first quarter, with
SPDR KBW Regional Banking
, an exchange traded fund that tracks regional bank stocks, gaining just 0.68%.
SPDR KBW Bank
, which tracks larger banks like
Bank of America
, fell 0.35%.
Among the 10 worst performers, you'll see some banks that are still a ways from profitability, but the list also contains some healthier names that may be less of a gamble. Here is our list, which includes only U.S. bank stocks with an average daily trading volume of at least 50,000 shares.
Park Sterling Corp.
Charlotte-N.C.-based Park Sterling saw its shares fall 21.52% in the first quarter to finish the period at $4.85. A disappointing fourth quarter earnings announcement appeared to be the trigger for the poor shares price performance.
The fourth quarter miss was driven by a 200% rise in non performing assets, according to a Jan. 20 report from Keefe Bruyette & Woods analyst Jefferson Harralson, who noted NPAs now account for 10.5% of Park Sterling's portfolio.
Park Sterling shares caught a bit of a bounce on the last day of the quarter after it announced to $32.4 million acquisition of Greenwood, S.C.-based Community Capital Corp.
Sandler O'Neill analysts argued in a report that the deal was "transformational," and "a positive development for the stock," as it would "
get the ball rolling" on the company's M&A strategy and "is in a region that will support organic growth."
Hudson City Bancorp
Paramus, N.J.-based Hudson City saw its shares fall 22.97% in the first quarter to close at $9.68. The bank's shares dropped sharply in late January after year-end earnings showed continued low interest rates and competition from government sponsored enterprises for "jumbo" loans of up to $730,000, which is Hudson City's sweet spot. The shares fell again in early March after Hudson City disclosed in its 10-K that regulators were concerned about its interest rate risk and reliance on wholesale funding and that the bank expected "to become subject to an informal regulatory enforcement action in the form of a memorandum of understanding."
Hudson City announced a restructuring of its balance sheet on March 28, but uncertainty remains about what is expected to be a lower dividend, according to a report from Sterne Agee analysts, who have a "neutral" rating on the shares.
Union First Market Bankshares
Richmond, Va.-based Union First shares dropped 23.43% in the first quarter to close at $11.25 on March 31. Keefe, Bruyette and Woods analyst Catherine Mealor lowered estimates Jan. 28 after the bank missed analyst estimates for the fourth quarter due to what Mealor attributed to higher credit costs.
Mealor observed that net charge offs more than tripled from the third quarter to account for 1.2% of average loans and that non performing assets grew 25% to $98 million as a result of deterioration in the bank's portfolio of loans to Richmond residential home builders, Mealor wrote.
Mealor estimates Union First's earnings will drop to 56 cents per share this year from 81 cents in 2010 before climbing to $1.17 per share in 2012. She has a "market perform on the bank's stock, arguing "core earnings remain strong and capital is sufficient," at 8.2% of tangible common equity.
Shares of Vineland, N.J.-based Sun lost 25% in the first quarter, closing at $3.48 on March 31. Sun has $3.4 billion in assets and operates out of 69 branches throughout New Jersey.
The bank raised 28.8 million shares of common stock last week at $3 per share. "We expect the capital to be used to accelerate balance sheet clean-up with a potential bulk loan sale," in the first half of this year, wrote Keefe Bruyette & Woods in a March 28 report. "The additional capital allows Sun to enhance its leverage ratio at the Bank after closing in on the 8.50% minimum threshold required by the Office of the Comptroller of the Currency at year-end," states the KBW report. KBW rates Sun "market perform," with a price target of $3.50, and estimates it will lose 79 cents per share in 2011 compared to a loss of $7.31 per share last year.
San Juan, Puerto Rico-based First Bancorp saw its shares plummet 27.54% in the first quarter, closing March 31 at $5. The bank trades at just over 15% of tangible book value, making it the cheapest stock on this list by a good margin (Park Sterling is next, at 76.8% of tangible book.)
Keefe, Bruyette & Woods has a "market perform" on First Bancorp, noting the bank will need to raise additional equity to pay down TARP. The bank, Puerto Rico's second largest behind Banco Popular, lost $45.71 per share in 2010, which KBW analyst Derek Hewett estimates will fall to a loss of $4.69 per share this year before the bank reaches break-even in 2012. KBW sees First Bancorp's net interest margin expanding to 2.95% from 2.77% last year.
First Bancorp lost $176.2 million, or $8.27 per share, for the 2010 fourth quarter, compared to a loss of about $59.3 million, or $9.62 per share, in the year-ago period, according to SNL Financial.
Central Pacific Financial
Central Pacific Financial's shares lost $32.03% in the first quarter to close at $20.80 on March 31. Shares of the Honolulu-based bank are down 38.10% over the past year and more than 94% during the past three years.
Central Pacific raised $325 million in a private placement and exchanged TARP preferred stock for common stock, according to SNL Financial. The company issued 32.5 million common shares at $10 per share to a group of investors that included affiliates of each of private equity giant Carlyle Group and Anchorage Capital Group.
The bank also issued 5,620,117 common shares to the U.S. Treasury Department in the exchange, according to a Feb. 18 news release.
Now that the private placement is complete, Central Pacific Financial's capital ratios exceed the minimum levels required under a consent order and are at "well-capitalized" levels, SNL stated.
Los Angeles-based Wilshire advertises itself as "one of the few Korean-American banks to have both a multi-ethnic customer base and Board of Directors." Its shares lost 35.70% in the first quarter, to close at $4.90 on March 31. and have lost nearly 56% in the past year.
Wilshire operates 24 branch offices in California, Texas, New Jersey, and New York, as well as loan production offices across the country.
Initiating coverage with a "neutral" rating on Thursday, D.A. Davidson & Co. analyst Gary Tenner argued Wilshire has "made progress on improving its balance sheet position, took a sizable credit-related charge in the fourth quarter, and has reduced its funding costs over the past several quarters. That said, it is not clear if the company is through all of its asset quality issues, regulatory actions appear likely, and
Wilshire is still expected to raise a yet-to-be determined amount of common equity over the coming quarters to improve its capital position. Over the longer term, we think
Wilshire is in an interesting position given the pending merger of Center Financial Corporation and Nara Bancorp, Inc. With that transaction, as well as the recent naming of former
Center Financial Corp. CEO J.W. Yoo as CEO, the company could be in a position to expand its customer base and take advantage of existing relationships within the Korean business community," he wrote.
Macatawa Bank Corp.
Holland, Mich.-based Macatawa bank lost 39.81% during the first quarter, finishing the quarter at $2.48. Despite the dismal performance, Macatawa shares have gained more than 40% in the past year. Still, the bank's shares peaked in 2005 at a split-adjusted price of nearly $22
The bank said March 28 that shareholders had approved an increase in outstanding shares to 200 million shares from 40 million, and will raise $30 million in the second quarter, according to SNL Financial. The announcement may have caused a roughly 5% drop in the stock, but does not explain the weak performance of the shares during the quarter.
Macatawa, which has just under $1.6 billion in assets, lost $1.01 per share in 2010, though it managed to earn five cents per share in the fourth quarter. Still, analysts are forecasting a 2011 loss of 10 cents per share before Macatawa becomes profitable in 2012.
Old Second Bancorp
Old Second Bancorp shares lost 41.18% in the first quarter, finishing at $1. The Aurora, Il.-based institution announced March 16 that it had entered into a memorandum of understanding with the Office of the Comptroller of the Currency on Oct. 20, 2009, agreeing to maintain a Tier I capital ratio of at least 8.75% and a minimum total risk-based capital ratio of 11.25% by year-end 2009, along with various other provisions, according to SEC filings cited by SNL Financial.
Old Second reached those requirements by the end of 2009 and maintained through March 31 2010, before those capital ratios fell. Failure to maintain those levels, along with related financial difficulties, has led management to announce it expects a formal regulatory enforcement action, according to SNL.
Sandler O'Neill has a "hold" on the stock, and expects the bank to continue losing money throughout 2011 and 2012, according to a Feb. 3 report from Sandler analyst Daniel Arnold.
Integra Bank Corp.
Integra shares lost 64.13% in the first quarter, finishing the quarter at just 28 cents per share. The Evansville, Ind. bank showed "very elevated" credit costs with nearly 15% of its loan book classified as non-performing, according to a March 16 report from Keefe, Bruyette & Woods.
Keefe Bruyette has a "market perform" rating and a 50 cent target price on the bank, which saw the ongoing operating loss increase its negative equity position to a tangible common equity ratio of -4.4% at year-end, according to KBW analyst Christopher McGratty.
Despite losing $7.36 per share in 2010, Integra improved upon the previous year, when it lost $9.42 per share. KBW is forecasting a loss of $3.50 for 2011. Integra's net interest margins declined to 2.18% in 2010 from 2.37% in 2009. McGratty foresees the margins shrinking further to 1.51% in 2011.
Integra has $3 billion in assets and some 80 locations throughout southern Indian, northern Kentucy and southern Illinois.
Written by Dan Freed in New York
Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.