10 First Quarter Bank Stock Winners

NEW YORK ( TheStreet) -- The best-performing bank stocks during the first quarter represent a wide variety of business models, with one major credit card lender, some troubled institutions on the rebound, and others benefiting from government-assisted acquisitions of failed institutions.

TheStreet has narrowed down the first-quarter winners list by only including bank stocks with average daily trading volume of at least 50,000 shares and with consensus earnings estimates available for 2011 and 2012.

10. United Community Banks

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Shares of United Community Banks ( UCBI) of Blairsville, Ga., closed at $2.33 on Thursday, returning 19% for the first quarter of 2011.

The company's shares rose 29% to close at $1.98 on March 17, after United Community announced plans to raise $380 million in common equity through a private placement to a group of investors led by Corsair Capital LLC, and plans to sell $293 million in problem loans during the second quarter.

The shares popped another 16% on Thursday, after the company announced it had completed the capital raise.

The company owes $180 million in government bailout funds received through the Troubled Assets Relief Program, or TARP, and in February deferred its most recently quarterly dividend on preferred shares held by the U.S. Treasury Department.

United Community is scheduled to announce its first-quarter results on April 28, before the market opens. The consensus among analysts polled by Thomson Reuters is for United Community to post a net loss of $1.07 a share for the first quarter and a loss of 60 cents a share for all of 2011. The consensus EPS estimate for 2012 is 15 cents.

Out of eight analysts covering United Community, one rates the shares a buy, while the remaining analysts all have neutral ratings. On Thursday, Sandler O'Neill analyst Kevin Fitzsimmons upgraded the shares to a buy, saying that the "risk-reward on UCBI was more intriguing with the sizable raise complete, problem loans down to a much more manageable level, and an accelerated return to profitability."

Sandler O'Neill was one of United Community's advisors for the common equity raise completed in March.

9. MB Financial

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Shares of MB Financial ( MBFI) of Chicago closed at $20.96 Thursday, returning 21% during the first quarter.

The company has expanded its market footprint, with six acquisitions of failed banks during the credit crisis.

The company owes $196 million in TARP money. In late January after MB Financial announced its fourth-quarter results, CEO Mitchell Feiger said the company would wait to repay TARP, "hopefully without any common stock issuance."

The consensus among analysts is for MB Financial to earn 5 cents a share for the first quarter, 73 cents for all of 2011, and a$1.70 a share in 2012.

Out of 13 analysts covering MB Financial, seven rate the shares a buy, five have neutral ratings and one analyst recommends investors sell the shares.

8. Texas Capital Bancshares

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Texas Capital Bancshares ( TCBI) of Dallas saw its stock return 22% during the first quarter, closing at $25.99 Thursday.

On February 28, Morgan Keegan analyst Robert Patten said in a report that the company was "one of the best growth stories in the banking sectors" and would command a 40% takeout premium if it were acquired by another institution.

Texas Capital Bancshares is scheduled to report its first-quarter results on April 20. The consensus estimates are for the company to earn 31 cents a share in for the first quarter, $1.43 for all of 2011, and $1.78 a share in 2012.

Out of 13 analysts covering the company, five rate Texas Capital a buy, while the other analysts all have neutral ratings.

7. Pinnacle Financial Partners

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Shares of Pinnacle Financial Partners ( PNFP) of Nashville, Tenn., closed at 16.54 Thursday, returning 22% during the first quarter.

The company owes $95 million in TARP money. The Nashville Business Journal reported on March 10 that Pinnacle was considering enrolling in the small business lending fund created by Congress in 2010, which would be less restrictive than retaining the TARP funding.

On February 28, Sterne Agee analyst Peyton Green reiterated his buy rating for Pinnacle Financial, saying that "continued margin expansion and improved credit quality should result in PNFP posting positive surprises in 2011.

The company is scheduled to announce its first-quarter results on April 18, and the consensus estimate is for earnings of 3 cents a share for the quarter, 32 cents a share for 2011 and 84 cents a share for 2012.

Out of 13 analysts covering Pinnacle Financial Partners, three rate the shares a buy, nine have neutral ratings and one analyst recommends selling the shares.

6. Capital One

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Shares of Capital One ( COF) of McLean, Va., closed at $51.96 Thursday, returning 22% during the first quarter.

Chris Brendler of Stifel Nicolaus told TheStreet that the company would be "one of the primary beneficiaries," during the first quarter, of ongoing improvements in credit quality.

Data provided by SNL Financial shows the card industry continuing to improve, although it faces challenges as consumers cut their level of revolving debt. Loss rates for all six major lenders have declined over the past year, with February credit card master trust data showing that American Express ( AXP) continued to lead with the lowest annualized loss rate of 4.24% in February, followed by Capital One Financial 5.18%; Discover ( DFS), at 5.79%; JPMorgan Chase ( JPM), at 6.21%; Citigroup ( C) at 7.95%; and Bank of America ( BAC), with the worst loss rate of 8.85%.

As discussed in greater detail in TheStreet's Credit Card Winners, Capital One is in the middle of the pack, in terms of credit card lenders' net portfolio yields. The net portfolio yield is the aggregate yield on a lender's card portfolio, less the annualized loss rate.

Among the big six U.S. card lenders, American Express was in the lead with a net portfolio yield of 17.88% in February; followed by Discover Financial, in second place with a net portfolio yield of 17.49%. Bank of America was next, with a net portfolio of 15.10%; followed by Capital One at 13.39%, JPMorgan at 12.53%; and Citigroup, in last place, at 11.60%.

Capital One is set to report first-quarter results on April 21, with a consensus earnings estimate of $1.48 a share. For all of 2011, the company is expected to earn $5.43 a share, followed by $5.46 a share in 2012.

Out of 22 analysts covering Capital One, eight rate the shares a buy, 12 have neutral ratings and two analysts recommend investors sell the shares.

5. Sterling Bancshares

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Sterling Bancshares ( SBIB) of Houston, Texas, saw its shares return 23% during the first quarter, to close at $8.61 Thursday.

The company announced a on January 18 an agreement to be acquired by Comerica ( CMA) of Dallas, in an exchange of shares valued at $1 billion.

Comerica agreed to exchange 0.2365 of its shares for each share of Sterling, and valued the deal at about $10 for each share for Sterling, whose stock had closed at $7.70 on January 18.

Comerica agreed to pay about 2.3 times tangible book value for Sterling, according to SNL Financial, for a deal that was considered expensive in the current industry environment. Comerica's shares declined 13% during the first quarter, to close at $36.72 Thursday.

When factoring-in the exchange ratio and the decline in Comerica's share price, Sterling's shareholders would have received value of $8.68 a share, if the merger had been completed on Thursday.

The deal is expected to be completed by the end of the second quarter.

Sterling is scheduled to announce its first-quarter results on April 19, with analysts expecting the company to earn two cents a share.

One of the 14 analysts covering Sterling rates the shares a buy, while the all remaining analysts have neutral ratings.

4. West Coast Bancorp

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Shares of West Coast Bancorp ( WCBO) of Lake Oswego, Ore., closed at $3.47 Thursday, returning 23% during the first quarter, after an eventful 2010, which included raising $17.8 million in common equity.

The company is seeking shareholder approval for 1-for-5 reverse stock split. Shareholders will vote at the company's annual meeting on April 26.

On March 3, Sandler O'Neill's Joe Fenech upgraded his rating for West Coast Bancorp to a buy with a $3.65 price target, saying that the company is "among the more valuable in the Pacific Northwest region, given its high quality deposit base, commercial lending niche, and attractive, complementary fee-based businesses."

West Coast Bancorp is scheduled to report its first-quarter results on April 25. The consensus among analysts is for the company to report earnings of 4 cents a share for the first quarter, 20 cents a share of 2011 and 24 cents a share in 2012.

Two of the four analysts covering West Coast Bancorp rate the shares a buy, while the other two analysts have neutral ratings.

3. Rockville Financial

Shares of Rockville Financial ( RCKB) of Vernon Rockville, Conn., closed at $10.43 Thursday, returning 30% during the first quarter.

The company completed its conversion from a mutual holding company to full stock ownership on March 3, raising $171.1 million in common equity in the process.

KBW analyst Damon DelMonte initiated his firm's coverage of Rockville Financial on March 24, with a neutral rating and price target of $12, saying that while the company's "valuation looks attractive, we think near-term catalysts are lacking to propel the shares forward at this time."

DelMonte expects Rockville Financial to report earnings of 9 cents a share for the first quarter. The analyst estimates full-year earnings of 44 cents a share for 2011 and 48 cents a share in 2012.

2. First California Financial

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Shares of First California Financial Group ( FCAL) of Westlake Village closed at $3.75 Thursday, returning 34% during the first quarter.

The company has been expanding by purchasing failed institutions from the Federal Deposit Insurance Corporation, including San Luis Trust Bank, FSB, of San Luis Obispo, Calif., on February 18 and Western Commercial Bank of Woodland Hills, Calif., in November.

First California owes $25 million in TARP money.

On February 23, Don Worthington of Howe Barnes Hoefer & Arnett reiterated his buy rating and $4 price target for the company's shares, saying the San Luis Trust Bank transaction would be "immediately accretive to earnings," and that the acquisition fit "within FCAL's strategy of cobbling together a regional bank franchise, through both organic growth and acquisitions, that will eventually encompass most of Southern California."

Analysts expect First California to earn 4 cents a share during the first quarter, 27 cents a share for all of 2011 and 40 cents a share in 2012.

Two of the three analysts covering First California rate the shares a buy, while the remaining analyst has a neutral rating.

1. Citizens Republic Bancorp

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Shares of Citizens Republic Bancorp ( CRBC) of Flint, Mich. saw its shares come back to life during the first quarter, rising 45% to close at 89 cents on Thursday. The shares were down slightly in 2010, after falling 77% in 2009, over credit concerns.

Citizens Republic is operating under a July agreement with the Federal Reserve Bank of Chicago and the Michigan Office of Financial and Insurance Regulation, requiring it to submit plans to improve its capital strength, asset quality and risk management and assess the quality of its management. The company said in its annual report that it is in full compliance with the agreement.

The company is seeking shareholder approval for a reverse stock split, with a proposed range of 1-for-2 to 1-for 10, to take place before the end of this year. Shareholders will vote at Citizens Republic's annual meeting on May 18.

Citizens Republic owes $300 million in TARP money, and has deferred its last five quarterly dividend payment to the government.

For 2010, Citizens Republic reported a net loss to common shareholders of $314.6 million, or 79 cents a share for 2010, improving from a loss of $534 million, or $2.71 a share in 2009. The provision for loan losses was $392.9 million in 2010, increasing from $323.8 million in 2009.

Nonperforming assets made up 2.58% of total assets as of December 31, declining from 4.73% a year earlier. During the fourth quarter, Citizens Republic accelerated its effots to reduce problem credits, which CEO Cathleen Nash said would be "substantially complete" during the first quarter of 2011. The company resolved $466.2 million in problem assets during the fourth quarter, leading to $159.3 in net charge-offs.

On February 4, Brett Scheiner of FBR Capital Markets upgraded Citizens Republic to "outperform," with a price target of $1.30, saying "the company's aggressive problem loan workout strategy and sufficient regulatory capital ratios should drive positive net income at the bank in 3Q11."

Two of the four analysts covering Citizens Republic Bancorp rate the shares a buy, while the other two have neutral ratings.

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

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

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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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