10 TARP Banks with Big Returns

NEW YORK ( TheStreet) - Many of the largest banks receiving government bailout funds have yet to see their stock prices recover, but there are many smaller holding companies whose shareholders have seen very nice returns since the Troubled Assets Relief Program was signed into law by President George W. Bush on October 2, 2008.

Using data provided for publicly traded bank and thrift holding companies as defined by SNL Financial - which excludes investment banks such as Goldman Sachs and Morgan Stanley from the group - TheStreet has identified the 10 banks and thrifts with largest stock price appreciation from October 2, 2008 through Tuesday's market close.

Out of the 10 bank holding companies receiving the most TARP assistance, Citigroup's ( C) investors have suffered the most, with shares declining 79% from the day TARP came into existence, to close at $4.69 Tuesday. Over the same period, shares of Bank of America ( BAC) declined 66% to close at $12.40 Tuesday.

Only three of 10 bank holding companies receiving the largest amount of bailout funds are still participating in TARP. One of these is Fifth Third Bancorp ( FITB), which still owes the government $3.4 billion and is the only one of the group of 10 companies to see its shares rise since TARP began. The Cincinnati, Ohio lender's shares closed at $14.27 Tuesday, up 7% since October 2, 2008.

The other two holding companies among the largest 10 TARP recipients that still owe the government money are Regions Financial ( RF), which owes $3.5 billion in bailout funds and has seen its shares drop 48% since TARP began (closing at $6.21 Tuesday), and SunTrust ( STI), which owes $4.85 billion, and has seen its shares fall 47% since the beginning of TARP, closing at $26.99 Tuesday.

The following 10 banks have seen the greatest increase in their stock prices since TARP began. Half of these names have fully repaid the government.

Terms

For each of the 10 banks discussed on the following pages, we'll be looking at capital strength, earnings quality and asset quality. For an explanation of those terms you can click on the box below.

10. Northeast Bancorp

Company Profile

Shares of thinly-traded Northeast Bancorp ( NBN) of Lewiston, Maine, closed at $15.75 Tuesday, up 92% year-to-date and up 37% since October 2, 2008, the day before TARP was signed into law.

Last Monday, the company announced it had received regulatory and shareholder approval of its merger with FHB Formation LLC, Boston, in a deal expected to close at the end of the year. While Northeast Bancorp will be the surviving entity, its new president CEO will be Richard Wayne, who currently holds those positions with FHB Formation.

Under the merger agreement, FHB will purchase for cash about 40% of Northeast Bancorp's outstanding shares and also pay $16 million in cash for newly issued shares.

Income Statement

Northeast Bancorp reported third-quarter net income to common shareholders of $900,000 , or 38 cents a share, increasing from $435,000 , or 19 cents a share, a year earlier. With increased loan originations, the company reported $948,000 in gains on the sale of loans during the third quarter, increasing from $210,000 in the third quarter of 2009.

The company's net interest margin declined slightly to 2.96% during the third quarter from 3.01% a year earlier. The third-quarter return on average assets (ROA) was 061%.

Balance Sheet

The company had $628 million in assets as of September 30 and a nonperforming assets (NPA) ratio of 1.55%. The third-quarter net charge-off ratio was 0.43% and loan loss reserves covered 1.53% of total loans as of September 30.

Northeast Bancorp was well-capitalized as of September 30, with a Tier 1 leverage ratio of 8.49% and a total risk-based capital ratio of 14.69%, exceeding the 5% and 10% required for most institutions to be considered well-capitalized by regulators. The tangible common equity ratio was 5.82% as of September 30. All of the capital ratios should rise significantly, with $16 million in new capital coming in from the FHB Formation deal.

The company owes $4.2 million in TARP money.

Stock Ratios

With the coming dilution priced-in, Northeast Bancorp's shares trade right at the September 30 tangible book value, according to SNL Financial and 10.4 times earnings, based on third-quarter results.

9. New Hampshire Thrift Bancshares

Company Profile

New Hampshire Thrift Bancshares ( NHTB) of Newport has seen its shares rise 35% year-to-date and 39% since TARP began, closing at $12.50 Tuesday. Based on a quarterly payout of 13 cents, the shares have a dividend yield of 4.16%.

Income Statement

Third-quarter net income available to common shareholders was $2 million, or 34 cents a share, increasing from $1.7 million, or 27 cents a share during the third quarter of 2009. The ROA for the third quarter was 0.78%, up slightly from 0.73% a year earlier.

Balance Sheet

New Hampshire Thrift Bancshares had $1 billion in total assets as of September 30. For main subsidiary Lake Sunapee Bank, the NPA ratio was a very low 0.15% and loan losses were minimal.

The holding company owes $10 million in TARP money and reported a Tier 1 leverage ratio of 8.40% as of September 30. The tangible common equity ratio was 5.59% according to SNL Financial.

Stock Ratios

The shares trade for 1.3 times tangible book value according to SNL and 9.2 times earnings based on third-quarter results.

8. Alliance Financial

Company Profile

Shares of Alliance Financial ( ALNC) of Syracuse, N.Y. closed at $32.37 Tuesday, increasing 23% year-to-date and 41% since TARP began. Based on a quarterly payout of 30 cents, the shares have a dividend yield of 3.71%.

Income Statement

Alliance Financial reported third-quarter net income of $3.1 million, or 66 cents a share, compared to $3.0 million, or 64 cents a share, a year earlier. The third-quarter ROA was 0.86%, compared to 0.82% in the third quarter of 2009. The net interest margin for the third quarter was 3.57%, declining slightly from 3.62% a year earlier.

Earnings performance was in line with is in-line with the previous five years and the company's dividend is well-supported by earnings, as it pays out less than half of what it earns.

Balance Sheet

Total assets were $1.5 billion as of September 30 and the NPA ratio was 0.55%. The annualized ratio of net charge-offs to average loans for the third quarter was 0.41% and reserves covered 1.16% of total loans as of September 30.

Alliance Financial fully repaid TARP in May 2009, repaying the government $26.9 million. The company's Tier 1 leverage ratio was 8.06% and its total risk-based capital ratio was 14.27%, both significantly higher than they were a year earlier. The tangible common equity ratio was 6.63% as of September 30, according to SNL Financial.

Stock Ratios

The shares trade for 1.6 times tangible book value according to SNL and 12.2 times the 2011 consensus earnings estimate of $2.66 a share, among analysts polled by Thomson Reuters. The forward P/E increases to 12.5, based on the 2012 consensus earnings estimate of $2.60 a share.

Analyst Ratings

Both analysts covering Alliance Financial recommend investors hold the shares.

7. Bank of the Ozarks

Company Profile

Shares of Bank of the Ozarks ( OZRK) of Little Rock, Ark. closed at $40.76 Tuesday, rising 42% year-to-date and 47% since TARP began.

The bank has expanded its geographic footprint this year, purchasing four failed banks from the Federal Deposit Insurance Corporation, including Chestatee State Bank of Dawsonville, Ga. on Friday, Unity National Bank of Cartersville, Ga. in March, Woodlands Bank of Bluffton, S.C. in July and Horizon Bank of Bradenton, Fla. in September.

Income Statement

Third-quarter net income was $20.2 million, or $1.19 a share, compared to net income to common shareholders of $8.4 million, or 50 cents a share, in the third quarter of 2009, when the company still owed $75 million in TARP money and paid $1.1 million in dividends on preferred shares held by the government.

Earnings during the third quarter of 2010 were boosted by $8.8 million, or 51 cents a share, in after-tax gains on two of the FDIC-assisted acquisitions.

The company has been a relatively strong earner over the past several years, with the ROA staying well above 1%.

Balance Sheet

Total assets were $3.2 billion as of September 30, increasing 10% over the previous year. The NPA ratio was 2.39%, improving from 2.87% a year earlier. The third-quarter net charge-off ratio was 0.77% and reserves covered 1.76% of total loans as of September 30.

The company exited TARP in November 2009, repaying the government $75 million. As of September 30, its Tier 1 leverage ratio was 11.73% and its total risk-based capital ratio was 16.71%. The tangible common equity ratio was 9.74% according to SNL Financial.

Stock Ratios

The shares trade for 2.2 times tangible book value according to SNL and 14.2 times the 2011 consensus earnings estimate of $2.88 a share. The forward P/E declines to 13.3, based on the 2012 consensus earnings estimate of $3.06 a share.

Analyst Ratings

Five out of the six analysts covering Bank of the Ozarks rate the shares a buy, while the remaining analyst recommends investors sell the shares.

6. Washington Banking Company

Company Profile

Shares of Washington Banking Company of Oak Harbor, Wash. closed at $13.54 Tuesday, climbing 15% this year and 50% since TARP began.

The company has purchased two failed institutions from the FDIC this year, including City Bank of Lynnwood, Wash. in April and North County Bank of Arlington, Wash. in September.

Income Statement

Third-quarter net income to common shareholders was $13.3 million, or 87 cents a share, increasing from $1.3 million, or 13 cents a share, a year earlier. Third-quarter earnings were boosted by $17.5 million in gains from the two acquisitions.

The third-quarter provision for loan losses was $4 million, increasing from $2.5 million in the third quarter of 2009. The company was still building loan loss reserves, as third-quarter net charge-offs totaled $3 million.

The company reported a tax-adjusted net interest margin of 4.68%, down slightly from 4.72% a year earlier.

Balance Sheet

Total assets were $1.8 billion as of September 30, nearly double from a year earlier because of the acquisitions. The NPA ratio (excluding government-guaranteed balances) was 1.40% as of September 30. The third-quarter net charge-off ratio was 1.06% and reserves covered 1.45% of total loans as of September 30.

The company owes $26.4 million in TARP money. Its Tier 1 leverage ratio was 12.40% and its total risk-based capital ratio was 18.88% as of September 30. The tangible common equity ratio was 8.30% according to SNL Financial.

Stock Ratios

The shares trade for 1.4 times tangible book value according to SNL and 15.4 times the 2011 consensus earnings estimate of 88 cents a share. The forward P/E drops to 12.1, based on the 2012 consensus earnings estimate of $1.12 a share.

Analyst Ratings

All Three analysts covering Washington Banking Company recommend buying the shares.

5. California Oaks State Bank

Company Profile

Shares of California Oaks State Bank ( COSB) of Thousand Oaks closed at $11.20 Tuesday, rising 54% since TARP began, although they were up 93% year-to-date, as the bank's board of directors agreed in August to sell the institution to California United Bank ( CUNB) of Encino for $17.3 million in cash and stock, which was slightly more than California Oaks State Bank's book value.

Shareholders of both banks approved the deal on December 9 after receiving regulatory approval in November. The deal is expected to close by the end of the year.

Income Statement

California Oaks State Bank lost $149 thousand during the third quarter, with high noninterest expenses keeping the institution from turning a profit. The bank's third-quarter net interest margin was a healthy 4.52% according to SNL Financial, increasing from 4.28% a year earlier.

Balance Sheet

California Oaks is by far the smallest institution among this group of 10 banks, with total assets of$137 million as of September 30. The NPA ratio was 1.96% and the third-quarter net charge-off ratio was 0.59%.

The bank exited TARP on December 8, repaying the U.S. Treasury $3.3 million, and was well-capitalized, with a Tier 1 leverage ratio of 12.08% and a total risk-based capital ratio of 17.04% as of September 30.

Stock Ratios

The shares trade for 1.3 times tangible book value according to SNL Financial.

4. Fidelity Southern Corp.

Company Profile

Shares of Fidelity Southern ( LION) of Atlanta closed at $6.64 Tuesday, returning 88% year-to-date and 63% since TARP began.

Income Statement

Third-quarter net income to common shareholders was $1.3 million, or 10 cents a share, compared to a net loss to common shareholders of $425 thousand, or 4 cents a share, a year earlier. The earnings improvement mainly reflected a drastic reduction in interest paid on deposits to $5.5 million in the third quarter from $9.5 million a year earlier, as the company worked to move its deposit mix away from certificates of deposit. The net interest margin for the third quarter was 3.59%, rising from 2.82% a year earlier.

Another positive earnings development was strong mortgage origination volume of $834 million during the third quarter, increasing 24% from a year earlier. Mortgage banking revenue was $7 million during the third quarter, increasing from $3.1 million a year earlier.

The third-quarter provision for loan losses was $5 million, increasing from $4.5 million a year earlier. The provision exceeded net charge-offs, which totaled $3.8 million during the third quarter.

Balance Sheet

Total assets were $1.9 billion as of September 30, with a nonperforming assets ratio of 4.12%. The third-quarter net charge-off ratio was 1.03% and reserves covered 1.84% of total loans as of September 30.

The company owes $48.2 million in TARP money. Its Tier 1 leverage ratio was 9.69% and its total risk-based capital ratio was 14.02% as of September 30. Fidelity Southern's tangible common equity ratio was 4.92% according to SNL Financial.

Stock Ratios

The shares trade for low 0.8 times tangible book value according to SNL and 14.4 times the 2011 consensus earnings estimate of 46 cents a share. The forward P/E drops to 10.7, based on the 2012 consensus earnings estimate of 62 cents a share.

Analyst Ratings

Out of three analysts covering Fidelity Southern, one has a buy rating and the other two recommend holding the shares. Christopher Marinac of FIG Partners rates has an "Outperform" or buy rating on the company, saying in an October 26 report that the shares have a present value of $8.55.

3. Eagle Bancorp

Company Profile

Shares of Eagle Bancorp ( EGBN) of Bethesda, Md. closed at $13.84 Tuesday, rising 32% year-to-date and 72% since TARP began.

According to a late-October report in the American Banker, the company considering six to 9 banks in the Washington D.C. area for acquisitions, having raised $50 million in capital in 2009.

Income Statement

Third-quarter net income available to common shareholders was $10.6 million, or 53 cents a share, increasing from $5.7 million, or 43 cents a share a year earlier, as the bank increased its net interest income 30% year-over-year, to $55.5 million, as the company grew its deposits and increased lending activity.

The net interest margin was 4.06% during the third quarter, increasing from 3.81% a year earlier. The third-quarter ROA was 0.82%.

Balance Sheet

Total assets were $2 billion as of September 30, increasing 20% from a year earlier, and the nonperforming assets ratio was 1.45%. The third-quarter net charge-off ratio was 0.38%, and reserves covered 1.39% of total loans as of September 30.

The company owes $23.2 million in TARP money, having repaid the government $15 million in December 2009. The Tier 1 leverage ratio was 9.66% and the total risk-based capital ratio was 12.66% as of September 30. The tangible common equity ratio was 7.25% according to SNL Financial.

Stock Ratios

The shares trade for 1.6 times tangible book value according to SNL and 15.7 times the 2011 consensus earnings estimate of 88 cents a share. The forward P/E drops to 11.6, based on the 2012 consensus earnings estimate of $1.19 cents a share.

Analyst Ratings

Two of the three analysts covering Eagle Bancorp rate the shares a buy. The remaining analyst recommends investors hold the shares.

2. Great Southern Bancorp

Company Profile

Shares of Great Southern Bancorp ( GSBC) of Springfield, Mo. closed at $24.34 Tuesday, up 17% year-to-date and 89% since TARP began. Based on a quarterly payout of 18 cents, the shares have a dividend yield of 2.96%.

Income Statement

Third-quarter net income available to common shareholders was $5.3 million, or 38 cents a share, compared to $26.6 million, or $1.90 a share, in the third quarter of 2009, when earnings were elevated by a $45.9 million on the FDIC-assisted purchase of the failed Vantus Bank of Sioux City, Iowa in September 2009.

Earnings during the third quarter were lifted by $5.4 million in gains on securities. A year earlier, this figure was $2 million.

The provision for loan losses declined to $10.8 million from $16.5 million a year earlier, although this was still a high level of credit expense. Net charge-offs during the third quarter totaled $11.2 million.

The net interest margin widened to 4.03% during the third quarter from 3.2% a year earlier, "primarily due to additional yield accretion of the discount on acquired loan pools recorded during the third quarter of 2010," since a reassessment of the acquired loans indicated that losses would be lower than previously expected.

After the third-quarter results were announced, Howe Barnes Hoefer & Arnett analyst John Rodis reiterated his neutral rating on the shares, saying that his firm had projected a much lower provision of $6 million. However, Rodis raised his 2011 earnings estimate for Great Southern to $1.61 from $1.45 a share.

Balance Sheet

Total assets were $3.4 billion as of September 30, with NPA of 2.36%, rising from 1.82% a year earlier. The third-quarter net charge-off ratio was 2.38% and loan loss reserves covered 2.04% of total loans as of September 30.

Great Southern owes $58 million in TARP money. The company's Tier 1 leverage ratio was 9.72% and its total risk-based capital ratio was 17.56%. The tangible common equity ratio was 7.17% according to SNL Financial.

Stock Ratios

The shares trade for 1.3 times tangible book value according to SNL and 14.6 times the 2011 consensus earnings estimate of $1.67 cents a share. The forward P/E declines to 12.7 based on the 2012 consensus earnings estimate of $1.91 cents a share.

Analyst Ratings

All three analysts covering Great Southern Bancorp rate the shares a hold.

1. The Bancorp

Company Profile

Among bank and thrift holding companies receiving TARP assistance, The Bancorp ( TBBK) of Wilmington, Del. has seen the greatest price appreciation since the program began. Shares closed at $9.92 Tuesday, rising 45% year-to-date and 101% since TARP was signed into law.

The company filed a shelf registration on November 15 for the sale of up to $80 million in securities, with the filing covering common and preferred shares, as well as warrants and debt securities.

The Bancorp specializes in providing customized on-line banking services through private-label partnerships. Services include prepaid cards; healthcare offerings including health savings accounts and employee benefit cards; wealth management, leasing and SBA lending.

Income Statement

Third quarter net income was $588 thousand, or 2 cents a share, compared to net income to common shareholders of $787 thousand, or 4 cents a share during the third quarter of 2009. The provision for loan losses increased to $5.2 million from $3.5 million, and was very high against core operating earnings of $6.1 million.

The company was building loan loss reserves, as net charge-offs totaled $3.9 million during the quarter.

Balance Sheet

Total assets were $2.7 billion as of September 30, increasing 30% from a year earlier and the nonperforming assets ratio was 0.91%. The third-quarter net charge-off ratio was 1.43% and reserves covered 1.37% of total loans as of September 30.

The company exited TARP in March, repaying the government $45.2 million. The Bancorp's Tier 1 leverage ratio was 8.67% and its total risk-based capital ratio was 13.51%. The tangible common equity ratio was 7.25% according to SNL Financial.

Stock Ratios

Analysts expect the company to return to profitability in the fourth quarter, earning seven cents a share. The shares are trading for 1.4 times tangible book value according to SNL and 19.8 times the 2011 consensus earnings estimate of 50 cents a share. The forward P/E drops to 11.7, based on the 2012 consensus earnings estimate of 85 cents a share.

Analyst Ratings

Three out of the five analysts covering The Bancorp rate the shares a buy, while the other two analysts recommend investors hold the shares. Matthew Kelly of Sterne Agee rates the company a buy with an $11 price target, saying that "while the bottom line for the quarter was a disappointment," his firm believes "the growth and market share story for The Bancorp remains on track."

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-- Written by Philip van Doorn in Jupiter, Fla.

To contact the writer, click here: Philip van Doorn.

To follow the writer on Twitter, go to http://twitter.com/PhilipvanDoorn.

To submit a news tip, send an email to: tips@thestreet.com.

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.

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