NEW YORK (

TheStreet

) -- An analysis by

TheStreet Ratings

of the 10 actively-traded bank stocks with the most upside potential based on consensus 12-month price targets highlights several potential home runs, but also the pitfalls of focusing on any one approach when sifting stocks.

Using data supplied by SNL Financial, we looked at bank stocks with three-month average daily trading volume of at least 50,000 trading below $5, for which mean price targets supplied by Thomson Reuters indicated at least 50% upside potential over the next 12 months. The result was a list of 11 bank stocks, from which we excluded

The South Financial Group

( TSFG), since the company's shareholders are scheduled to vote on Sep. 28 on merger deal with Canada's

Toronto-Dominion Bank

(TD) - Get Report

.

The problem with this approach is that many analysts with neutral ratings don't provide price targets, so if a majority of analysts have neutral ratings on a stock, an attractive mean price target among analysts polled by Thomson Reuters may actually reflect a small minority viewpoint.

The approach is still useful however, as a starting point for further analysis:

10. United Community Banks

Company Profile

United Community Banks

(UCBI) - Get Report

is headquartered in Blairsville, Georgia. Shares closed at $2.42 Friday, down 29% year-to-date. Among analysts polled by Thomson Reuters, the mean 12-month price target for the shares is $3.83, indicating 58% upside potential.

Income Statement

United Community reported a second-quarter net loss to common shareholders of $62.1 million, or 66 cents a share, reflecting non-cash charge of $45.3 million from the sale of $100 million in nonperforming assets to Fletcher International. In comparison, United Community's net losses to common shareholders were $35.9 million, or 38 cents a share, during the first quarter and $18.6 million, or 38 cents, during the second quarter of 2009.

Elevated provisions for loan loss reserves have fed eight straight quarterly net losses, as the company has worked through problem loans. The second-quarter provision was $61.5 million, declining from $75 million the previous quarter and $60 million a year earlier. The annualized ratio of net charge-offs (loan losses less recoveries) to average loans for the second quarter was 4.87%, up from 4.36% the previous quarter and 4.12% in the second quarter of 2009, but down from a peak of 6.50% in the third quarter of 2009. In comparison, the aggregate second-quarter net charge-off ratio for all U.S. banks and thrifts was 2.74% according to the

Federal Deposit Insurance Corp.

.

Balance Sheet

The company had $7.7 billion in total assets as of June 30 and owed the government $180 million in bailout money received through the Troubled Assets Relief Program, or TARP.

Nonperforming assets - including loans past due 90 days or more or in nonaccrual status (less government-guaranteed balances) and repossessed real estate - comprised 4.61% of total assets, improving from 5.48% the previous quarter and 5.26% a year earlier. In comparison, the national aggregate "noncurrent assets ratio" was 3.31% as of June 30, according to the FDIC.

Stock Ratios

Shares trade for 0.5 times tangible book value, according to SNL Financial. The consensus among analysts is that the company will return to profitability during 2012, earning 45 cents a share. Shares are trading at 5.4 times the 2012 earnings estimate.

Analyst Ratings

Three out of nine analysts covering United Community Banks rate the company a buy, with the remaining analysts all recommending investors hold the shares. Adam Barkstrom of Sterne, Agee and Leach is among the analysts with neutral ratings, saying in a Sep. 3 note that although "the slowing pace of credit deterioration is encouraging, bottom-line profitability continues to struggle limiting upside movement in the near term, in our view."

9. Popular, Inc.

Company Profile

Popular, Inc.

(BPOP) - Get Report

of Hato Rey, Puerto Rico, has seen its shares rise 25% year-to-date, closing at $2.83 Friday. A consensus price-target of $4.57 indicates 61% upside potential over the next 12 months.

Income Statement

Popular reported a second quarter net loss to common shareholders of $247.5 million or 29 cents a share, following a first-quarter net loss of $85 million or 13 cents a share, and a loss of $207.8 million, or 71 cents a share a year earlier.

Second quarter results included a one-time $192 million dividend on preferred shares, which were issued pending shareholder authorization of management's plan to issue more common shares. Upon approval in May, the new preferred shares were all converted to common, and the company raised a total of $1.15 billion in capital during the quarter, supporting its acquisition of the failed

Westernbank Puerto Rico

- one of three banks to fail in the territory on April 30.

Balance Sheet

Popular had $42.4 billion in total assets as of June 30 and was strongly capitalized following the second-quarter capital raise and acquisition of Westernbank. The $935 million in preferred stock held by the Treasury for bailout funds received through TARP was converted to trust-preferred securities which continue have a dividend rate of 5% through 2013, after which the rate jumps to 9%, so there will be pressure to redeem the trust preferred which could lead to another common equity raise down the line.

The nonperforming assets ratio was 6.55% as of June 30 and the second-quarter net charge-off ratio was 3.18%. Loan loss reserves covered 4.79% of total loans, well "ahead of the pace" of loan losses.

Stock Ratios

Shares were trading just above tangible book value and for 11 times the consensus earnings estimate of 20 cents a share for 2011, among analysts polled by Thomson Reuters.

Analyst Ratings

Out of seven analysts covering Popular, six rate the shares a buy while just one has a neutral rating. Popular is very well positioned in its home market following the Westernbank acquisition. Keefe, Bruyette & Woods analysts Brian Slack has a $6 price target on the shares, citing "lots of earnings accretion opportunity on the horizon."

Popular: How to Play It>>

8. Tennessee Commerce Bancorp

Company Profile

Shares of

Tennessee Commerce Bancorp

(TNCC)

of Franklin, Tenn. closed at $4.01 Friday, down 8% year-to-date. Based on a consensus target of $7.33, shares would appear to have upside potential of 83%.

Income Statement

Net income to common shareholders for the second quarter was $1.5 million or 26 cents a share, following $1.4 million, or 24 cents a share, the previous quarter and a net loss to common shareholders of $6.9 million, or $1.46 cents a share, a year earlier.

The company has now been profitable for four straight quarters following the loss in the second quarter of 2009, when the provision for loan losses was $13.1 million. The provision declined to $4.5 million for the second quarter of 2010.

Another bright spot for earnings is that Tennessee Commerce's net interest margin - the difference between the average yield on earning assets and the average cost of funds - for the second quarter was 4.27%, increasing from 3.85% a year earlier.

Balance Sheet

Total assets were $1.4 billion as of June 30. The company owes $30 million in TARP money and reported a Tier 1 leverage ratio of 8.96% and a total risk-based capital ratio of 10.98% as of June 30. That second ratio needs to exceed 10% for most banks to be considered

well-capitalized

by regulators, and the Tennessee Commerce took action by completing a common stock offering to raise $24.2 million on August 11.

Tennessee Commerce's nonperforming assets ratio was 2.72% as of June 30 and the second-quarter net charge-off ratio was 1.47%.

Stock Ratios

Shares were trading for just 0.3 times tangible book value and just 6 times the 2010 consensus earnings estimate of 63 cents a share among analysts polled by Thomson Reuters.

Analyst Ratings

Two out of three analysts covering Tennessee Commerce rate the shares a buy, while the other recommends investors hold the shares. Based on the company's improving earnings and decent asset quality - especially in the current environment for a southern bank - the shares are downright cheap despite the TARP overhang.

7. Center Financial Corp.

Company Profile

Shares of

Center Financial Corp.

( CLFC) of Los Angeles, Calif. closed at $4.56 Friday, down 1% year-to-date. A consensus mean price target of $8.35 indicates 83% upside potential over the next 12 months.

Income Statement

Net income to common shareholders for the second quarter was $6.8 million, or 17 cents a share, increasing from a revised $2 million or 10 cents a share in the first quarter and a net loss to common shareholders of $13.5 million during the second quarter of 2009, when the company recorded a $29.8 million provision for loan losses. The provision declined to $5 million for the second quarter of 2010.

On an operating basis, Center Financial's return on average assets (ROA) was 1.33% and its return on average equity (ROE) for the second quarter was 11.55%, for the best earnings performance since the third quarter of 2007.

Balance Sheet

Center Financial had $2.3 billion in assets as of June 30. Capital levels were strong, with a tier 1 leverage ratio of 12.38% and a total risk-based capital ratio of 18.48%, although the company owed $55 million in TARP money.

The nonperforming assets ratio was 3.54% as of June 30, up from 3.32% in March and 1.82% a year earlier. The second-quarter net charge-off ratio was 1.86% and reserves covered 3.66% of total loans.

Stock Ratios

Shares were trading for 0.9 times tangible book value and 15 times the 2010 consensus earnings estimate of 31 cents, among analysts polled by Thomson Reuters. Moving out to 2012, the consensus estimate is "normalized earnings" of 78 cents a share. Based on that estimate, the shares were trading for just 6 times normalized earnings.

Analyst Ratings

Four of the five analysts covering Center Financial recommend buying the shares while the one remaining analyst has a hold rating on the shares. Based on the company's earnings power, the shares appear cheap and the aggressive consensus price target is well-supported.

6. Riverview Bancorp

Company Profile

Riverview Bancorp

(RVSB) - Get Report

of Vancouver, Wash. has seen its shares decline 17% year-to-date, to close at $1.85 Friday. The consensus price target for the shares is $3.50, implying 89% upside potential.

Income Statement

Riverview Bancorp's fiscal year ends on March 31. For its fiscal first quarter ended June 30, the thrift holding company reported net income of $1.8 million or 16 cents a share, following net loss of $4.7 million, or 44 cents a share, the previous quarter when the company took a $5.9 million provision for loan loss reserves. For the quarter ended June 30, 2009, the company earned 343 thousand, or 3 cents a share.

Balance Sheet

Total assets were $863 million as of June 30. The nonperforming assets ratio for main subsidiary

Riverview Community Bank

was 5.03%, declining from 5.07% the previous quarter and 5.76% a year earlier. The net charge-off ratio for the quarter ended June 30 was 1.88% and reserves covered 1.99% of total loans.

Riverview Bancorp is not a TARP participant. The holding company completed a common offering in August, to raise $18 million.

Stock Ratios

Shares trade for a low 0.3 times tangible book value and just 6 times the consensus earnings estimate of 30 cents a share for 2011.

Analyst Ratings

Both analysts covering Riverview Bancorp recommend investors buy the shares. Don Worthington of Howe Barnes Hoefer & Arnett - which acted as co-manager for the company's common stock offering -- said in an August report that the company is "well positioned to take advantage of organic growth opportunities as loan demand increases in its market area."

5. United Western Bancorp

Company Profile

Shares of

United Western Bancorp

( UWBK) of Denver, Colo. closed at 40 cents Friday, declining 86% year-to-date. Although a consensus price target of 88 cents a share would indicate 120% upside potential, none of the three analysts covering the company rate the shares a buy. Another reason for investors to take the price target with a grain of salt is that the company is in dire need of a significant capital boost, which would dilute common shareholders' stake in the company.

United Western Bancorp and main subsidiary

United Western Bank

are operating under a June 25

Cease and Desist

order from the Office of Thrift Supervision.

One of the order's many requirements was that the thrift subsidiary achieve and maintain a tier 1 leverage ratio of at least 8% and a total risk-based capital ratio of at least 12% by June 30. That requirement was missed, as the thrift reported a tier 1 leverage ratio of 7.42% and a total risk-based capital ratio of 9.02% as of June 30.

As of June 30, United Western Bancorp owed $14.25 million

to JPMorgan Chase Bank, NA

-- main banking subsidiary of

JPMorgan Chase

(JPM) - Get Report

-- and under a forbearance agreement was required to make principal payments of $500,000 a month during July, August and September. The company said in an August 31 filing with the Securities and Exchange Commission that the OTS had "informed the Company that it would not approve the Company making the Forbearance Principal Payments," and that it was negotiating with JPMorgan over further amendments to their credit agreement.

In the company's second-quarter earnings announcement, chairman Guy Gibson said that United Western was continuing "to actively explore all strategic alternatives for the Company through our lead financial advisor, Goldman Sachs."

Income Statement

On the holding company level, United Western reported a second-quarter net loss of $18.8 million or 64 cents a share, following a first-quarter net loss of $25 million or 86 cents a share. In the second quarter of 2009, the company earned $4 million or 55 cents a share.

Balance Sheet

United Western Bancorp had $2.2 billion in total assets as of June 30. At United Western Bank, the nonperforming assets ratio was 3.72% and the second-quarter net charge-off ratio was just 0.23%.

Stock Ratios

Shares were trading for 0.1 times tangible book value, according to SNL Financial.

Analyst Ratings

All three analysts covering United Western Bancorp recommend investors hold the shares. With the company out of compliance with the cease and desist order, owing a significant amount of money to JPMorgan and considering its strategic options, investors considering the shares should be cautious.

4. Flagstar Bancorp

Company Profile

Shares of

Flagstar Bancorp

(FBC) - Get Report

of Troy, Mich. closed at $1.92 Friday, down 68% year-to-date. A consensus price target of $4.58 would indicate 139% upside potential, but only one analyst rates the shares a buy.

MatlinPatterson LLC

held 69% of Flagstar's common shares as of June 30. In 2009, MatlinPatterson invested $350 million in convertible preferred and trust-preferred shares, most of which were later converted to common shares. MatlinPatterson invested another $300 million through a rights offering during the first quarter of 2010, and Flagstar raised an additional $276 million in common equity.

Bloomberg reported on Sep. 15 that Flagstar was looking to raise another $600 million in capital and had engaged in discussions with private equity firms, and was also planning to sell shares to current investors. Citing sources, Bloomberg also said the company was looking to sell $1 billion in loans.

The company owes $267 million in TARP money.

Income Statement

Flagstar reported a second-quarter net loss to common shareholders of $97 million, or 63 cents a share, following a first-quarter loss of $81.9 million, or $1.05 a share, and a loss of $76.6 million, or $3.20 a share, in the second quarter of 2009.

Balance Sheet

Flagstar had total assets of $13.7 billion as of June 30. Main thrift subsidiary

Flagstar Bank, FSB

was well capitalized as of June 30, with a Tier 1 leverage ratio of 9.24% and a total risk-based capital ratio of 17.20%. Nonperforming assets at the thrift subsidiary were 8.61%, declining from 14.59% the previous quarter. The net charge-off ratio for the second quarter was 2.08% and reserves covered 4.17% of total loans.

Stock Ratios

The shares trade for .4 times tangible book value, according to SNL Financial.

Analyst Ratings

Just one out of four analysts covering Flagstar recommend buying the shares, while the other three have hold ratings. Although he has a Market Perform or neutral rating on Flagstar, Bose George of KBW has a 12-month target of $5.00, saying in a note published after the second-quarter earnings release that his firm expects "higher asset resolution costs to be offset by strong gain-on-sale income."

3. Old Second Bancorp

Company Profile

Old Second Bancorp

(OSBC) - Get Report

is headquartered in Aurora, Ill. Shares closed at $1.05 Friday, down 85% year-to-date. A consensus mean price target of $2.92 implies 178% upside for the shares, but none of the analysts covering the company have buy recommendations on the shares.

The company owes $73 million in TARP money and said in an Aug. 31 filing that it would suspend dividends on the preferred shares held by the government, as well as on its trust-preferred securities.

Income Statement

The company reported a second-quarter net loss to common shareholders of $24.5 million or $1.75 a share, following a loss of $9.7 million or 69 cents the previous quarter and a loss of $59.7 million or $4.29 a share a year earlier, when Old Second took a non-cash goodwill impairment charge of $57.6 million.

The main factor in the increased loss from the first quarter was a $44.6 million provision for loan loss reserves, increasing from $19.2 million the previous quarter.

Balance Sheet

Total assets were $2.5 billion as of June 30. The nonperforming assets ratio was 11.27%, increasing from 9.10% the previous quarter and 7.00% a year earlier. Loan losses also increased, with a second-quarter net charge-off ratio of 6.26%, compared to 3.34% in the first quarter and 3.39% a year earlier.

Main subsidiary Old Second National Bank is operating under an order from the Office of the Comptroller of the Currency to maintain a tier 1 leverage ratio of at least 8.75% and a total risk-based capital ratio of at least 11.25%. The bank was out of compliance with the order as of June 30, as these ratios were 7.76% and 10.73%.

Stock Ratios

Shares trade for 0.2 times tangible book value, according to SNL Financial.

Analyst Ratings

All five analysts covering Old Second Bancorp recommend investors hold the shares. With problem assets still rising and the company under orders to raise capital, investors had best tread lightly.

2. First BanCorp

Company Profile

Shares of

First BanCorp

(FBP) - Get Report

of San Juan, Puerto Rico, closed at 30 cents Friday, declining 87% year-to-date. A consensus price target of 90 cents implies 200% upside, but only one analyst has a buy rating on the shares.

Income Statement

First BanCorp reported a second-quarter net loss to common shareholders of $96.8 million or $1.05 a share, following a loss of $113.2 million or $1.22 a share the previous quarter and a net loss to common shareholders of $94.8 million or $1.03 a share a year earlier, with elevated provisions for loan losses being the main factor in the poor earnings performance.

Balance Sheet

First BanCorp had $18.1 billion in total assets as of June 30. The nonperforming assets ratio was 9.78%, down slightly from the previous quarter and the second-quarter net charge-off ratio was 3.44%.

After missing four TARP dividend payments, First Bancorp exchanged the $400 million in preferred shares held by the Treasury for bailout money received via TARP for $424.2 million in mandatorily convertible preferred shares.

In August, the company converted $487 million in various preferred shares to common shares, which according to CEO Aurelio Alemán increased the company's tangible common equity ratio to a pro forma 5.22%, from a reported 2.57%.

First BanCorp is also in the midst of another $500 million common stock offering, which has yet to be priced. The conversion of the Treasury's new convertible shares to common hinges upon the successful completion of this offering.

Stock Ratios

Shares trade for 0.1 times tangible book value, according to SNL Financial.

Analyst Ratings

One of the five analysts covering First BanCorp rates the shares a buy, while the other four recommend holding the shares. In an Aug. 30 report, Adam Barkstrom said the shares were likely to be "range bound around current levels for the foreseeable future."

1. Cascade Financial Corp.

Company Profile

Cascade Financial

( CASB) of Everett, Wash. closed at 42 cents Friday, down 81% year-to-date. A consensus mean price target of $2.25 would imply upside of over 400%, but no analysts recommend buying the shares.

Income Statement

The company reported a second-quarter net loss to common shareholders of $24.8 million or $2.02 a share, compared to a loss of $32.8 million or $2.69 a share the previous quarter and $22 million or $1.82 a share a year earlier.

Balance Sheet

Cascade had $1.9 billion in total assets as of June 30. Capital levels at the holding company were quite low, as the tier 1 leverage ratio was 0.53% and the total risk-based capital ratio was 1.40%. For main subsidiary

Cascade Bank

, the tier 1 leverage ratio was 5.84% and the total risk-based capital ratio was 10.28%, above the 5% and 10% minimums required for most banks and thrifts need to maintain a tier 1 leverage ratio of 5% and a total risk-based capital ratio of 10% to be considered

well-capitalized

by regulators.

Cascade is operating under a July 20 consent order with the FDIC and Washington State Department of Financial Institutions, Cascade Bank to "to increase Tier 1 capital to 10% and Risk Based Capital to 12% within 120 days."

The holding company owes $39 million in TARP money and has deferred four quarterly dividends to the government.

Nonperforming assets comprised 7.22% of total assets, improving from 7.59% the previous quarter and 8.92% a year earlier. The net charge-off ratio for the second quarter was 1.36%, down from 3.25% in the first quarter and 7.50% a year earlier. Loan loss reserves covered 4.28% of total loans.

Stock Ratios

The shares are trading for .1 times tangible book value.

Analyst Ratings

Both analysts covering Cascade Financial recommend holding the shares. Investors should be very cautious, in the face of a coming capital raise or further action by regulators.

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--

Written by Philip van Doorn in Jupiter, Fla.

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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.