7 Highest Rated Small-Cap Bank Stocks

NEW YORK ( TheStreet) -- There are only seven bank stocks assigned A-Plus (Excellent) ratings by TheStreet Ratings, all of which have market capitalizations of less than $1 billion.

As we saw in last week's look at three A-rated mid-cap bank stocks, the highest-rated names trade at higher multiples to book value and to forward (or trailing) earnings estimates than the largest U.S. bank holding companies, but most have seen much stronger earnings performance over the past five quarters. All but one saw five-year total returns of 23% or higher.

TheStreet Ratings takes a very conservative, long-term approach to stock ratings, placing its emphasis on long-term total returns as well as revenue trends and capital strength and dividends. The ratings also consider short-term performance, financial stability and volatility.

In contrast, most sell-side brokers have to consider much shorter investor outlooks -- since this is what their customers want -- focusing on 12-month price targets based on forward book value and earnings estimates, the way most sell-side analysts do.

The seven small-cap A-Plus rated banks discussed below trade for more than their tangible book value, according to Thomson Reuters Bank Insight, and for at least 10 times forward earnings estimates, or trailing estimates, for the names not covered by any analysts polled by Thomson Reuters.

The largest three U.S. bank holding companies saw much lower valuations as of Thursday's market close:
  • Shares of JPMorgan Chase (JPM) closed at $33.97 Thursday, returning 4% year-to-date, following a 20% decline during 2011. The five-year total return was a negative 21%. The shares traded for 1.1 times tangible book value, according to Thomson Reuters Bank Insight, and for six times the consensus 2013 earnings estimate of $5.40, among analysts polled by Thomson Reuters. Based on a 30-cent quarterly payout, the shares have a dividend yield of 3.53%. The company's operating returns on average assets (ROA) have ranged between 0.66% and 1.06% over the past five quarters, according to Thomson Reuters Bank insight.
  • Bank of America (BAC) closed at $7.14 Thursday, returning 28% year-to-date, following last year's 58% drop. The five year total return was a negative 84%. The shares traded for 0.6 times tangible book value, and for seven times the consensus 2013 EPS estimate of $1.03. Bank of America's ROA has ranged from a negative 1.51% to 1.08%, over the past five quarters.
  • Shares of Citigroup (C) closed at $26.66 Thursday, returning 1% year-to-date, following a 44% decline during 2011. The stock's five-year total return was a negative 94%. Citigroup's shares were trading for just over half their tangible book value, and for six times the consensus 2013 earnings estimate of $4.66 a share, among analysts polled by Thomson Reuters. Citi's ROA has ranged from 0.20% to 0.77% over the past five quarters.

Five of the seven A+ rated banks below have all achieved ROA of at least 0.91% in each of the past five quarters.

While there's no question that investors could be looking at long-term bargains with the "big three" listed above, the past month has shown just how volatile these names can be, and the company's continue to face serious regulatory and headline risks, as they continue working through the mortgage mess and deal with the continued phase-in of the Dodd-Frank bank reform legislation.

Here are all seven small-cap bank or thrift stocks rated A+ by TheStreet ratings, ordered by ascending asset size :

7. Greene County Bancorp

Shares of Greene County Bancorp ( GCBC) of Catskill, N.Y., closed at $18.00 Thursday, returning 8% year-to-date, following a 9% decline during 2011. The thinly traded shares have returned 49% over the past three years, and 75% over the past five years.

Based on a quarterly payout of 17.5 cents, the shares have a dividend yield of 3.89%.

Greene County Bancorp is part of a mutual holding company structure, with Green County Bancorp MHC holding 56% of outstanding shares as of Dec. 31, with the public holding the remaining shares. The mutual holding company's practice is to waive its dividend, o that the 17.5 cents is paid only on publicly-held shares.

Greene County Bancorp had $578.7 million in total assets as of March 31, with 12 Greene County Savings Bank branches in Greene County, Columbia County and southern Albany County, in New York.

The company's ROA has been solid, ranging from 0.91% to 1.10% over the past five quarters.

The shares trade for 1.4 times tangible book value and for 12 times trailing earnings, according to Thomson Reuters Bank Insight. There are no sell-side analysts polled by Thomson Reuters covering Greene County Bancorp.

While the stock price multiples aren't cheap, especially in the current environment, Greene County Bancorp has certainly been a steady performer. When announcing the company's fiscal third-quarter results on April 24, CEO Donald Gibson touted the company's naming to KBW's 2011 Bank Honor Roll, meeting three conditions, including "no annual loss reported in net income per share before extraordinary items over the past 10 years," 2011 "annual reported net income per share before extraordinary items equal to or greater than peak net income per share over the past 10 years," and "consecutive increases in net income per share before extraordinary items since 2009."

Interested in more on Greene County Bancorp? See TheStreet Ratings' report card for this stock.

6. Oneida Financial

Shares of Oneida Financial ( ONFC) of Oneida, N.Y., closed at $9.83 Thursday, returning 6% year-to-date, following a 26% return last year. The shares have returned 34% over the past three years, and 1% over the past five years, according to Thomson Reuters Bank Insight.

Based on a quarterly dividend of 12 cents, the shares have a yield of 4.88%.

Oneida Financial had $699.8 million in total assets as of March 31, with 12 Oneida Savings Bank branches in Madison, Oneida and Onondaga counties, in New York.

The company's ROA has ranged from 0.58% to 1.17% over the past five quarters.

The shares trade for 1.1 times tangible book value, and for 11 times trailing earnings.

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

5. Penns Woods Bancorp

Shares of Penns Woods Bancorp ( PWOD) of Jersey Shore, Penn., closed at $37.61 Thursday, down 2% year-to-date, following a 2.5% return during 2011.

Based on a quarterly payout of 47 cents, the shares have a dividend yield of 5.00%.

The company had $793.1 million in total assets as of March 31, with 13 Jersey Shore Savings Bank offices in Lycoming, Clinton, Centre, and Montour Counties, in Pennsylvania.

Penns Woods Bancorp has been the strongest earnings performer over the past year among this group of seven A-plus rated banks and thrifts, with returns on average assets ranging from 1.64% and 1.90%.

The shares trade for 1.8 times tangible book value, and for 10 times trailing earnings.

While the shares have not seen an exciting year-to-date performance, the 5.00% dividend yield is very attractive and well-supported by earnings, and the company's strong and steady performance warrants the premium to book value.

Interested in more on Penns Woods Bancorp? See TheStreet Ratings' report card for this stock.

4. Access National Corp.

Shares of Access National Corp. ( ANCX) of Reston, Va., closed at $12.23 Thursday, returning 40% year-to-date, following a 38% return during 2011.

Based on a six-cent quarterly payout, the shares have a dividend yield of 1.96%.

The company had $8.48 million in total assets, with five Access National Bank branches.

Access National's earnings performance has been quite strong over the past year, with ROA ranging from 1.20% to 1.69%.

The shares trade for 1.5 times tangible book value, and for 11 times the consensus 2013 earnings estimate of $1.08 a share, among analysts polled by Thomson Reuters. The consensus 2012 EPS estimate is $1.20.

BB&T Capital Markets analyst Cary Morris has a "Hold" rating on Access National, saying on April 25 after the company reported record earnings results that because of the multiple to tangible book value "and given the relative contribution of the mortgage segment (55% of total revenues in Q1), we view the shares fairly valued at current levels."

Morris estimates that Access National will earn $1.15 a share during 2012, followed by 2013 EPS of $1.10.

Interested in more on Access National Corp.? See TheStreet Ratings' report card for this stock.

3. American National Bankshares

American National Bankshares ( AMNB) of Danville, Va., has seen its stock return 15% year-to-date, closing Thursday at $22.24. The shares declined 13% during 2011.

Based on a 23-cent quarterly payout, the shares have a dividend yield of 4.14%.

The company had $1.3 billion in total assets as of March 31, with 25 branches in Virginia and North Carolina.

American National's ROA has ranged between 0.48% and 1.43% over the past year. During the second quarter of 2011, earnings were down because of $835,000 in expenses related to the acquisition of MidCarolina Financial Corp., which included eight branches.

The shares trade for 1.6 times tangible book value, and for 12 times the consensus 2013 EPS estimate of $1.88. The consensus 2012 EPS estimate is also $1.88.

Morris rates American National Bankshares a "Buy," with a price target of $24.50, saying on April 27 that "the shares represent an attractive total return from current levels," adding that "the MidCarolina transaction continues to bear fruit and coupled with the likely entry into the Russell 3000 in June should provide both support and a near term catalyst for the shares."

Morris estimates the company will earn two dollars a share this year, followed by EPS of $2.07 during 2013.

Interested in more on American National Bankshares? See TheStreet Ratings' report card for this stock.

2. Oritani Financial

Shares of Oritani Financial ( ORIT) of Washington, N.J., closed at $14.04 Thursday, returning 12% year-to-date, following last year's 8% return.

Based on a 15-cent quarterly payout, the shares have a dividend yield of 4.27%.

Oritani Financial had $2.6 billion in total assets as of March 31, with 25 branches in the Bergen, Hudson and Passaic counties, in New Jersey.

The company's ROA has ranged from 1.11% to 1.28%, over the past five quarters.

The shares trade for 1.2 times tangible book value, and for 17 times the consensus 2013 EPS estimate of 82 cents. The consensus 2012 EPS estimate is 73 cents.

KBW analyst Fred Cannon rates Oritani Financial "Outperform," with a $16 price target, and said on April 25 after the company reported its fiscal third-quarter results that he was "incrementally more positive about shares," and that the stock was trading "at an attractive valuation especially when considering the company's strong core profitability and capital generation."

Cannon estimates Oritani will earn 75 cents a share for fiscal 2012, followed by fiscal 2013 EPS of 90 cents.

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

1. Home Bancshares

Home Bancshares ( HOMB) of Conway, Ark., closed at $28.59 Thursday, returning 11% year-to-date, following a 19% return during 2011.

Based on a 10-cent quarterly payout, the shares have a dividend yield of 1.40%.

Home Bancshares had $4.1 billion in total assets as of March 31, with 84 branches in Arkansas, Alabama and Florida. The company has been expanding over the past few years through a series of acquisitions, the most recent of which was Vision Bank of Panama City, Fla., which was purchased from Park National Corp. ( PRK), and included 17 branches in Alabama and Florida.

The company's ROA has ranged from 1.38% to 1.58% over the past five quarters.

The shares trade for just over twice their tangible book value, and for 13 times the consensus 2013 EPS estimate of $2.26. The consensus 2012 EPS estimate is $2.17.

FIG Partners analyst Brian Martin rates Home Bancshares "Outperform," with a $32 price target, saying in late April that "upside from current levels exists as profitability ramps up at the company's Florida/Alabama operations."

Home Bancshares repurchased 205,600 shares during the first quarter, and Martin believes that "excess capital and strong earnings power should allow for increased dividends and additional share repurchase; however, the priority is deploying excess capital into M&A."

The analyst estimates that Home Bancshares will earn $2.18 a share this year, followed by 2013 EPS of $2.29.

Interested in more Home Bancshares? See TheStreet Ratings' report card for this stock.

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

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

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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.

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