10 Bank Stocks From the South for Smart Long-Term Investors

NEW YORK ( TheStreet) -- There are plenty of cheap Southern bank stock plays out there for long-term investors.

When asked to name Southern bank stocks that would be suitable for long-term investors, FIG partners managing principal and director of research Christopher Marinac and analyst Brian Martin identified 10 community banks, in addition to major regional player BB&T ( BBT) of Winston-Salem, N.C.

BB&T's shares closed at $27.70 Monday, returning 13% year-to-date. The shares trade for 1.8 times tangible book value, according to Thomson Reuters Bank Insight, and for 9.5 times the consensus 2013 earnings estimate of $2.93, among analysts polled by Thomson Reuters. With a quarterly payout of 20 cents, the shares have a dividend yield of 2.89%. Marinac rates BB&T "Outperform," with a price target of $29.98.

BB&T on Oct. 18 reported third-quarter earnings of reported third-quarter net income available to common shareholders of $469 million, or 66 cents a share, with earnings reduced by "merger-related charges associated with the acquisition of BankAtlantic totaling $43 million pretax, or $0.04 per diluted common share." After the company provided guidance saying that its net interest margin (NIM) would narrow from 3.94% in the third quarter to "the mid 3.70s" in the fourth quarter, investors sent the shares down 7%.

Marinac on Oct. 19 said that "we feel the company has more levers to pull on offsetting NIM pressure with earning asset and loan growth, stronger expense efficiency, and a recovery in Insurance fee income which was soft in 3Q12." FIG Partners is slightly ahead of the consensus, estimating BB&T will earn $2.95 a share in 2013.

Looking at the Southern 10 community bank plays, FIG Partners currently rates seven "Outperform," and the other three "Market-Perform," however, the companies' ratings and stock price targets are based on a 12-month outlook, and Martin says that "all are well positioned as long-term investments."

Marinac says that "from an economic perspective, loan growth is getting slightly better in the Southeast, but relative to the last 10 years, it is still kind of slow. What we see the banks doing is fighting each other for the same loan, so we have shifting from one bank to the next, as loan officers move."

Martin says that Pinnacle Financial Partners ( PNFP) of Nashville, Tenn. is "probably the name that has shown that the most" poaching of loans (and loan officers) from other institutions.

"The overall net pool of loans is growing only very modestly," Marinac says. "From an annual standpoint, the loan growth is probably 1.5 to 2%," but "the important thing is that banks are a mirror of the communities they serve. If communities and the larger economy are growing, the banks will reflect that. What we see is that there's some growth, which is a big difference from three years ago. We have certainly worked through that fear and now it is a question of how well the banks will do."

Most of community bank stocks highlighted by Marinac and Martin have seen decent or better returns this year, and six out of 10 had positive returns in 2011, which was a lousy year for the sector, with the KBW Bank Index ( I:BKX) dropping 25%.

Here are the 10 Southeast community banks that FIG Partners believes are suitable for long-term investors. The list is ranked by ascending total asset size.

10. First Community Corp.


Shares of First Community Corp. ( FCCO) of Lexington, S.C., closed at $8.50 Monday, returning 39% year-to-date, following a 10% return during 2011.

The shares trade for 0.8 times their reported Sept. 30 tangible book value of $10.10, and for 11 times the consensus 2013 earnings estimate of 80 cents, among analysts polled by Thomson Reuters. Based on a quarterly payout of four cents, the shares have a dividend yield of 1.88%.

The company had $606 million in total assets as of Sept. 30. Third-quarter net income available to common shareholders was $881,000, or 19 cents a share, compared to 760,000, or 23 cents a share, in the second quarter, and $790,000, or 24 cents a share, during the third quarter of 2011.

Earnings-per-share declined because the company issued 1,875,000 common shares in July, at a price of $8.00 a share, shares of common stock at $8.00. The common offering preceded First Community's repurchase in late August of 3,780 preferred shares held by the government, for bailout assistance received through Troubled Assets Relief Program, or TARP, in November 2008. The company exited the TARP program, as the remaining TARP shares were sold at auction by the U.S. Treasury to outside investors.

The TARP shares were originally priced at $1,000, while First Community and the outside investors paid a discounted price of $982.83 per share, which the company said was "the highest price paid to date for a company's shares in the Treasury's auctions."

The company noted in its third-quarter earnings release that it "was able to price the offering at-the-market as compared to a discount which is typically seen in this type of offering, and that "this transaction represents the only successfully executed publicly underwritten common stock offering in more than five years for a bank in the Carolinas with $1 billion or less in total assets."

First Community said that its earnings in the third quarter were reduced by $277,945, or four cents a share, because of one-time expenses associated with its exit from TARP.

A third-quarter bright spot for the company was an increase in mortgage origination fees to $1,393,000, from $877,000 the previous quarter, and $698,000 a year earlier. CEO Mike Crapps said that "the acquisition of Palmetto South Mortgage Corporation in July of 2011 continues to be beneficial and, in combination with the legacy mortgage unit, is a real story of success."

The increase in mortgage fee income helped offset a decline in net interest income and in the net interest margin (NIM), which is the difference between the average yield on loans and investments and the average cost for deposits and borrowings. First Community's third-quarter net interest income declined to $4.3 million, from $4.5 million in the second quarter, and $4.6 million in the third quarter of 2011. The net interest margin narrowed to a tax-adjusted 3.12% in the third quarter, from 3.30% the previous quarter, and 3.37% a year earlier, "driven primarily by declining yields in the investment portfolio and the loan portfolio which are only partially offset by declining funding costs.

First Community did note, however, "that during the quarter, the company had excess liquidity from the equity offering and its use to repurchase the preferred shares. The company estimates the impact of this excess liquidity to have been approximately 6 basis points on its net-interest margin."

The declining net interest margin is in line with the industry trend, since the Federal Reserve has kept its short-term target federal funds rate in a range of zero to 0.25% since the end of 2008, while the central bank September increased its monthly purchases of mortgage backed securities in an attempt to hold long-term rates at historically low levels.

The company's third-quarter operating return on average assets (ROE) was 0.81%, according to Thomson Reuters Bank Insight, while its return on average tangible common equity was 9.57%.

Brian Martin rates First Community "Outperform," with a $10 price target, saying on Oct. 19 after the earnings release that following the common equity raise and TARP exit that the company was "well positioned to capitalize on growth opportunities."

"Given the current economic landscape this will almost certainly entail a combination of organic and external growth," Martin said, adding that many of the company's "South Carolina peers are unable to participate in M&A at the moment given ongoing credit problems and regulatory constraints. We estimate FCCO could add approximately $150 million in new assets and still maintain a 7% TCE ratio."

Martin estimates that First Community will earn 84 cents a share in 2013.

FCCO Chart FCCO data by YCharts

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

9. Peoples Financial

Shares of Peoples Financial ( PFBX) of Biloxi, Miss., closed at $9.05 Monday, declining 11% during 2011.

The shares trade for just 0.4 times their reported Sept. 30 tangible book value of $21.64, and for 15 times the consensus 2013 EPS estimate of 60 cents. Based on a semiannual dividend of 10 cents, the shares have a yield of 2.21%.

Peoples Financial had $813 million in total assets as of Sept. 30. The company reported third-quarter earnings of $749,000, or 14 cents a share, increasing from $562,000, or 11 cents a share, in the second quarter, and $577,000, or 12 cents a share, during the third quarter of 2011.

Third-quarter net interest income was $5.6 million, declining from $5.7 million the previous quarter, but increasing from $5.4 million a year earlier. The net interest margin expanded to 3.07% during the third quarter, from 3.04% in the second quarter, although it narrowed from 3.24% in the third quarter of 2011.

Peoples Financial is strongly capitalized, with a tangible common equity ratio of 13.67% as of Sept. 30, according to Thomson Reuters Bank insight, but the low price-to-book value reflects weak earnings performance, with ROA ranging from a negative 0.31% to 0.36% (in the third quarter), according to TR Bank Insight, and a relatively high ratio of nonperforming assets -- including nonaccrual loans and repossessed real estate -- of 7.53%, as of Sept. 30.

Christopher Marinac on Oct. 26 upgraded rates Peoples Financial to "Outperform," saying that "over the next 6 to 12 months, we think shares of PFBX are capable of rising 40%+ to $12.00. This is a function of the price-to-tangible book valuation improving from 39% currently based on a share price of $8.23 on Oct. 25 to 55%, as well as moderate growth in the tangible book per share to $22.10 by late-2013."

Marinac said that a portion of the company's nonperforming loans "are a senior-secured position (which has remained current) from a borrower with publicly traded equity and debt," and that the company had been "asked by regulators several quarters ago to place certain credits (such as the one referenced above) on nonaccrual status even though these have not missed payment. Their sustained positive performance could eventually trigger an easing in the examiner's interpretation on these loans which would impact the NPA ratio."

Further supporting his expectation for the company's price-to-book ratio to increase, Marinac said that "our 2013 EPS forecast is $0.60 which covers the annual dividend by 3x and permits a rising tangible book trajectory. While the earnings do not yet support a 100% price-to-tangible book valuation, we feel the enormous discount can slowly improve and reward patient investors who accumulate PFBX shares."

PFBX Chart PFBX data by YCharts

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

8. MidSouth Bancorp


Shares of MidSouth Bancorp ( MSL) of Lafayette, La., closed at $12.81 Monday, returning 18% year-to-date, after declining 14% during 2011.

The shares trade for 1.3 times their reported Sept. 30 tangible book value of $10.01, and for 10.3 times the consensus 2013 EPS estimate of $1.25. Based on a quarterly payout of seven cents, the shares have a dividend yield of 1.85%.

The company on Sept. 26 announced an agreement to acquire PSB Financial -- the holding company for The People State Bank of Many, La. -- which operates 14 branches in North Louisiana and one branch in Texarkana, Texas. PSB had $493 million in total assets as of Sept. 30. MidSouth will pay roughly $39 million in cash and stock. The acquisition is expected to close during the fourth quarter.

MidSouth Bancorp had $1.4 billion in total assets as of Sept. 30. The company reported third-quarter earnings available to common shareholders of $2.2 million, or 21 cents a share, increasing from $2.1 million, or 20 cents a share, in the second quarter, and $296,000, or three cents a share, in the third quarter of 2011.

The main factor in the year-over-year earnings improvement was an 18% increase in net interest income to $13.9 million in the third quarter. This reflected an accelerated accretion of discount of $444,000 in the third quarter of 2011, when the company redeemed $20 million in TARP preferred shares. Also in the third quarter of 2011, the company issued $32 million in preferred shares to the U.S. Treasury, in order to participate in the Small Business Lending Fund (SBLF).

The SBLF is meant to encourage banks to expand their loan portfolios, by lowering the cost of the government's capital investment as banks expand their lending activity. MidSouth Bancorp CE C.R. "Rusty" Cloutier said that "we saw very strong loan growth during the quarter across our markets in both Louisiana and Texas. This strong loan growth is also helping us to reduce the dividend rate on our SBLF preferred stock from 5.0% for the third quarter down to 4.6% for the fourth quarter of 2012 and to 2.4% in the first quarter of 2013."

The company's net interest margin was a strong 4.26%, net of purchase accounting adjustments, expanding from 4.25% in the second quarter, although it narrowed from 4.52% in the third quart of 2011.

MidSouth Bancorp's third-quarter ROA was 0.75%, according to Thomson Reuters Bank Insight, and the company's return on average tangible common equity was 7.81%.

Martin rates MidSouth Bancorp "Outperform," with a price target of $18.50, saying on Nov. 2 that the PSB acquisition will boost the company's "EPS by 35% via cost saves and accretion of loan discounts. We project ROA improves to 0.90% bps by 4Q13 with a 1% level achievable in 2014," while the combined company's return on tangible common equity "is expected to increase to 13.5% by 4Q13."

Martin estimates that MidSouth Bancorp will earn $1.28 a share in 2013 and said that "Our estimate and price target may prove conservative to the extent our estimate of discount accretion is too low. A growing Texas Franchise and superior funding base support our estimate."

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

7. Fidelity Southern Corp.

Shares of Fidelity Southern Corp. ( LION) of Atlanta closed at $9.10 Monday, returning 59% year-to-date, following a 12% decline during 2011.

The shares trade just below their reported tangible book value of $9.52 as of Sept. 30, and for eight times the consensus 2013 EPS estimate of $1.09.

Fidelity Southern had $2.4 billion in total assets as of Sept. 30. The company reported third-quarter net income available to common shareholders of $7.3 million, or 45 cents a share, increasing from $5.6 million, or 45 cents a share, in the second quarter, and $1.3 million, or eight cents a share, during the third quarter of 2011. The main factor in the earnings improvement was an increase in mortgage banking revenue to $14.8 million in the third quarter, from $10.8 million the previous quarter, and $5.2 million a year earlier, which was partially offset by an increase in noninterest expenses.

Third-quarter net interest income was $20.7 million, increasing from $19.9 million in the second quarter, and $17.6 million a year earlier. The third-quarter net interest margin was 3.74%, narrowing from 3.86% the previous quarter, but expanding from 3.55% a year earlier. Excluding loans acquired from failed institutions and covered by Federal Deposit Insurance Corp. loss-sharing agreements and the accretion of loan discounts, the net interest margin was 3.56% in the third quarter.

The company reported a third-quarter ROA of 1.33% and a return on average equity of 17.93%.

Marinac rates Fidelity Southern "Outperform," with a price target of $11.75, saying on Oct. 19 that "the company excelled in Fee Income as Mortgage, Indirect, and Small Business Administration lending each had record quarters in 3Q12 and expanded above 30% in past 90 days."

"We note solid operating leverage on fee revenues rising much faster than salary expenses (i.e., which considers production-based pay to certain lenders)," Marinac said, adding that the company used some of its one-time revenues to increase loan loss reserves and "clear out" some of its repossessed real estate.

Marinac also said that Fidelity Southern "may continue to feel pressure" on its net interest margin, "however, we think LION has strong loan pipelines which can offset weaker spreads and maintain steady NII-Net Interest Income."

Fidelity Southern received $48.2 million in TARP money in 2008, although the Treasury auctioned off the TARP preferred shares in June. Marinac expects the company to achieve a return on tangible common equity of nearly 11% in 2013, with the company's tangible common equity ratio rising "above 6% by late next year." He added that "eventually, paying off TARP preferred and also Trust preferred securities must be considered, but the current valuation affords accretive tangible book opportunities."

LION Chart LION data by YCharts

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

6. Eagle Bancorp

Shares of Eagle Bancorp ( EGBN) of Bethesda, Md., closed at $20.52 Monday, returning 41% year-to-date, following a 1% return last year.

The shares trade for 1.7 times their reported Sept. 30 tangible book value of $11.97, and for 12 times the consensus 2013 EPS estimate of $1.70.

Eagle Bancorp had $3.0 billion in total assets as of Sept. 30. The Company in May began a $40 million "at-the-market" common equity raise, with net proceeds from the sale of new shares totaling $28.8 million as of Sept. 30.

Third-quarter net income available to common shareholders was $9.5 million, or 45 cents a share, increasing from $7.6 million, or 38 cents a share, in the second quarter, and $6.3 million, 32 cents a share, in the third quarter of 2011. Net interest income increased to $33.3 million in the third quarter, from $31.0 million the previous quarter, and $25.4 million a year earlier.

Eagle Bancorp's net interest margin continued to impress, widening to 4.44% in the third quarter, from 4.39% the previous quarter, and 3.98% a year earlier. Following similar improvement in the second quarter, Marinac said that the margin expansion meant that in addition to acquiring new customers, the company was "doing more business with the same customers."

Marinac rates Eagle Bancorp "Outperform," with a price target of $22.50, saying on Oct. 22 that "new personnel hires with deep relationships are transferring business to EGBN at a strong and sustained pace. Yet, average loan sizes remain small and focused below the radar-screen of regional & national bank competitors."

"Average commercial and industrial loans are still just $600k and CRE loans are $1.2 million," Marinac said, adding that "a lack of attention to smaller borrowers by larger banks still benefits EGBN even though it is moving up the size ladder to from the past."

With the company's success in its at-the-market share offerings, which dilute shareholders less than traditional discounted offerings, Marinac said that "concern of a persistent 'overhang' of ATM shares should subside and boost the valuation of EGBN."

FIG Partners estimates that Eagle Bancorp will earn $1.75 a share in 2013.

EGBN Chart EGBN data by YCharts

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

5. Bank of the Ozarks


Shares of Bank of the Ozarks ( OZRK) of Little Rock, Ark., closed at $29.16 Monday, returning 9% year-to-date, following a 39% return last year.

The shares trade for 2.1 times their reported Sept. 30 tangible book value of $13.78, and for 13 times the consensus 2013 EPS estimate of $2.30. Based on a quarterly dividend of 14 cents, the shares have a dividend yield of 1.76%.

The company had $3.8 billion in total assets as of Sept. 30 and reported third-quarter earnings available to common shareholders of $19.3 million, or 55 cents a share, increasing from $191 million, or 55 cents a share, in the second quarter, and $18.9 million, or 55 cents a share, in the third quarter of 2011. The company reported a second-quarter ROA of 2.05% and a "stout" return on average common equity, according to Martin.

Bank of the Ozarks reported a most impressive tax-adjusted net interest margin of 5.97% in the third quarter, increasing from 5.90% in the third quarter of 2011. The company has acquired four failed institutions from the FDIC over the past two years, and the discounted value of the acquired loans covered by FDIS loss-sharing agreements boosts the net interest margin. Martin said on Oct. 15 that the "NIM has a downward bias as lower yielding non-covered loans replace runoff in the higher yielding covered portfolio." Then again, "OZRK's 5.97% NIM gives them greater flexibility than peers" when it comes to pricing new loans.

The company has acquired four failed institutions over the past two years, and Martin said that "M&A is a key priority for OZRK as they continue to build capital at a faster rate than they can deploy it with any deal announced expected to be additive to EPS and TBV given pricing disciplines. Both regular way and FDIC assisted deals are of interest and equally likely."

Martin rates Bank of The Ozarks "Market-Perform," with a $35 price target, and said that the rating "primarily is valuation driven." He estimates that the company will earn $2.34 a share in 2013.

"On a fundamental basis, OZRK remains one of the best performing banks in our coverage universe and industry," Martin said.

OZRK Chart OZRK data by YCharts

Interested in more on Bank of the Ozarks? See TheStreet Ratings' report card for this stock.

4. Home BancShares


Home BancShares ( HOMB) of Conway, Ark., has seen its stock return 31% year-to-date, through Monday's close at $33.46. The stock returned 19% during 2011.

The shares trades for 2.2 times their reported Sept. 30 tangible book value of $15.01, and for 13.5 times the consensus 2013 EPS estimate of $2.48. Based on a quarterly payout of 12 cents, the shares have a dividend yield of 1.43%.

The company had $3.9 billion in total assets as of Sept. 30, and has expanded rapidly through several opportunistic acquisitions over the past few years, including the $27.9 million purchase in February of Vision Bank of Panama City, Fla., from Park National Corp. ( PRK) of Newark, Ohio.

Home Bancshares on Aug. 15 announced a deal to acquire Premier Bank of Tallahassee, Fla., for $1.4 million, in connection with a bankruptcy filing by the target bank's parent, Premier Bank Holding Company. Premier Bank had $272 million in assets as of Sept 30, with six branches. The deal is expected to be completed during the fourth quarter, subject to court approved final sale order, in addition to approval from bank regulators.

Third-quarter earnings were $16.1 million, or 57 cents a share, increasing from $15.5 million, or 51 cents a share, the previous quarter, and $14.3 million, or 48 cents a share, a year earlier.

Third-quarter net interest income was $38.6 million, declining from $39.2 million in the second quarter, but increasing from $35.7 million during the third quarter of 2011. The third-quarter net interest margin was a very strong 4.65%, matching the previous quarter, but declining from 4.75% a year earlier.

The company reported a third-quarter ROA of 1.61% and a return on average tangible common equity of 12.78%.

Martin rates Home Bancshares "Market-Perform," with a price target of $38, and said on Oct. 22 that although he has a neutral rating on the share because of "valuation," he said that "we positive on the company's future prospects and continue to believe shares have upside from current levels a management executes on its growth strategy and profitably deploys its excess capital."

Martin estimates that Home Bancshares will earn $2.38 a share in 2013.

HOMB Chart HOMB data by YCharts

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

3. Pinnacle Financial Partners


Shares of Pinnacle Financial Partners of Nashville, Tenn., closed at $18.31 Monday, returning 13% year-to-date, following a 19% return during 2011.

The shares trade for 1.5 times their reported Sept. 30 tangible book value of $12.19, and for 14 times the consensus 2013 EPS estimate of $1.32.

Pinnacle Financial Partners had $4.9 billion in total assets as of Sept. 30. The company reported third-quarter net income available to common shareholders of $11.3 million, or 33 cents a share, increasing from $7.8 million, or 23 cents a share, the previous quarter, but declining from $24.5 million, or 72 cents, in the third quarter of 2011, when Pinnacle recaptured its entire $22.5 valuation allowance for deferred tax assets.

Pinnacle reported third-quarter net interest income of $40.9 million, increasing from $40.2 million the previous quarter, and $38.4 million a year earlier. CEO Terry Turner said that the company "continued the meaningful expansion of the core earnings capacity of the firm during the third quarter, increasing loans at a linked-quarter annualized growth rate of 9.4 percent and increasing our net interest margin for the eighth consecutive quarter." The net interest margin expanded to 3.78% in the third quarter, from 3.76% the previous quarter and 3.60% a year earlier.

Martin rates Pinnacle Financial Partners "Market-Perform," with a price target of $21, saying on Oct. 19 after the company reported its third-quarter results that "PNFP delivered a solid quarter posting core profits of $0.33 per share underscored by continued loan growth, modest NIM expansion, good expense controls and improvement in credit."

The analyst explained Pinnacle's margin improvement: "Loans increased $80 million, or nearly 10% annualized with C&I plus owner occupied CRE accounting for $53 million, or 65% of the growth. Growth continues to be funded by the investment portfolio which is down ~$190 million YTD. Deposits increased modestly with good mix improvements noted."

Martin said that "we are encouraged by recent trends and future prospects as PNFP transitions back to an offensive growth story; however, believe current valuation levels at 15x our 2013 EPS and ~150% of projected tangible book value support this rating."

The analyst estimates that Pinnacle will earn $1.34 a share in 2013.

PNFP Chart PNFP data by YCharts

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

2. Prosperity Bancshares

Prosperity Bancshares ( PB) of Houston has seen its stock return 3% year-to-date through Monday's close at $40.85, following a 5% return during 2011.

The shares trade for 2.8 times their reported Sept. 30 tangible book value of $14.45, and for 12 times the consensus 2013 EPS estimate of $3.35. With a quarterly payout of 21.5 cents, the shares have a dividend yield of 2.11%.

The company acquired American State Financial Corp. of Lubbock, Texas, in July, bringing on roughly $3.2 billion in total assets and adding 37 branches spread across 18 counties in West Texas.

Prosperity Bancshares had $13.7 billion in total assets and 213 branches as of Sept. 30. The company reported third-quarter net income available to common shareholders of $46.2 million, or 82 cents a share, increasing from $37.0 million, or 78 cents a share, in the second quarter, and $36.4 million, or 77 cents a share, in the third quarter of 2011.

The company's tax-adjusted net interest margin was 3.56% in the third quarter, expanding from 3.55% the previous quarter, but narrowing from 4.03% a year earlier. Prosperity reported a third-quarter ROA of 1.32% and a return on average tangible common equity of 21.59%.

Marinac on Oct. 23 upgraded Pinnacle Financial Partners to an "Outperform," with a price target of $47.25, "based on solid 3Q12 EPS and the initial positive integration of several acquisitions recently by the company," and said that "quarterly EPS have superb opportunity to consistently rise through 2013 given flexibility on NIM-Net Interest Margin and NII-Net Interest Income via loan discount accretion from recent mergers (i.e., as loans already credit marked experience payoffs) and as loans rise relative to securities."

Illustrating the potential for a balance-sheet realignment and margin improvement, Marinac said that "in 3Q12, Loans were only 42% of Average Earning Assets."

Marinac also said that "PB continues to run a highly-efficient banking model with less than 42% Expenses-to-Revenues (i.e., Efficiency Ratio) on a core basis in 3Q12," adding that an even better (lower) efficiency ratio is possible, "as cost savings are realized, particularly in the West Texas merger integration."

Marinac estimates that Prosperity Bancshares will earn $3.50 a share in 2013.

PB Chart PB data by YCharts

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

1. Hancock Holding Company

Shares of Hancock Holding Company ( HBHC) of Gulfport, Miss, closed at $30.84 Monday, down 1% year-to-date, following a 5% decline during 2011.

The shares trade for 1.6 times their reported Sept. 30 tangible book value of $18.97, and for 12 times the consensus 2013 EPS estimate of $2.62. Based on a quarterly payout of 24 cents, the shares have a dividend yield of 3.11%.

Hancock Holding Company had $18.5 billion in total assets as of Sept. 30. The company reported third-quarter net income of $47.0 million, or 55 cents a share, increasing from $39.3 million, or 46 cents a share, in the second quarter, and $30.4 million, or 36 cents a share, in the third quarter of 2011. The main factor in the earnings improvement was the lack of merger expenses in the third quarter, compared to merger-related expenses of $11.9 million the previous quarter, and $22.8 million a year earlier

The third-quarter net interest margin was a tax-adjusted 4.54%, expanding from 4.48% the previous quarter, and 4.32% a year earlier. The company reported a third-quarter operating ROA of 1.07% and an operating return on average common equity of 8.24%.

Marinac rates Hancock Holding company "Outperform," with a price target of $37.25, although on Nov. 9 he lowered his 2013 earnings estimate for the company to $2.75 from $3.00, "on our perception that balance sheet growth will be slower than we previously projected."

Marinac said that the company "should still earn strong ROA-Return On Assets above 1.20% in 2013 and turn in 13.5% ROTCE-Return on Tangible Common Equity which support a solid P/E and Price-to-Tang. Book valuation. Moreover, our EPS reduction is a function of lower earning assets and not an issue with NIM-Net Interest Margin or overhead costs."

HBHC Chart HBHC data by YCharts

Interested in more on Hancock Holding Company? See TheStreet Ratings' report card for this stock.

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

>Contact by Email.

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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