5. Prosperity BancsharesProsperity Bancshares ( PB) of Houston has seen its stock return 46% this year through Friday's close at $60.73. The shares trade for 3.8 times their reported June 30 tangible book value of $16.05, and for 15.2 times the consensus 2014 earnings estimate of $4.00 a share, among analysts polled by Thomson Reuters. The consensus 2013 EPS estimate is $3.58. Based on a quarterly payout of 21.5 cents, the shares have a dividend yield of 1.42%. The company's efficiency ratio during the 12-month period ended Sept. 30 was 42.13%, according to Thomson Reuters Bank Insight. Prosperity had $16.3 billion in total assets as of June 30. On Aug. 29 the company announced an agreement to acquire F&M Bancorporation of Tulsa, Okla., for roughly $244 million in stock and cash. F&M had $2.4 billion in assets as of June 30, with 10 F&M Bank branches in the Tulsa area and three in Dallas. The deal is expected to close during the first quarter of 2014. Prosperity also has a deal in place to acquire FVNB Corp. of Victoria, Texas, for about $287.5 million in stock and cash. FVNB had $2.4 billion in assets, with 34 First Victory National Bank offices, including 12 branches in the Houston area, and one loan production office. Following the announcement of the F&M deal, KBW analyst Jefferson Harralson reiterated his "outperform" rating for Prosperity Bancshares, with a price target of $65, saying in a note to clients that "By our estimates, the deal is 2.8% accretive to 2014 EPS
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4. BOFI Holding, Inc.Shares of BOFI Holding ( BOFI) of San Diego closed at $64.72 Friday, returning 133% this year. The shares trade for 3.4 times their reported June 30 tangible book value of $19.16, and for 15.3 times the consensus fiscal 2015 EPS estimate of $3.68. The consensus 2014 EPS estimate is $3.68. The company's fiscal 2013 ended on June 30. The company's efficiency ratio for the 12-months ended June 30 was 40.73%, while its ROA was 1.46% and its ROTCE was 16.87%. BOFI Holding had $3.1 billion in total assets as of June 30. Its main subsidiary BOFI Federal Bank gathers deposits through its Bank of Internet USA Web site. The company on Sept. 9 announced it had completed the purchase of $173 million in deposits from Principal Bank. After the company reported a 35% year-over-year increase in fiscal fourth-quarter earnings available to common shareholders of $11.1 million, or 78 cents a share, KBW analyst Juliana Balicka on Aug. 15 reiterated her "market perform" rating for BOFI Holding, while increasing her price target for the shares to $64 from $48. Balicka raised her fiscal 2014 EPS estimate to $3.60 from $3.05 and introduced a fiscal 2015 EPS estimate of $3.90. In a note to clients Balicka wrote that "In 2014, we think that expense growth will moderate and that revenue will continue to ramp from the new initiatives. For example:
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3. Discover Financial ServicesShares of Discover Financial Services ( DFS) closed at $51.29 Friday, returning 34% this year. The shares trade for 2.7 times their reported tangible book value of $19.38, and for 10.3 times the consensus 2014 EPS estimate of $4.99. The consensus 2013 EPS estimate is $4.89. That forward price-to-earnings ratio is, by far, the lowest among the five banks listed here. Based on a quarterly payout of 20 cents, the shares have a dividend yield of 1.56%. Discover's efficiency ratio for the 12 month period ended June 30 was 40.29%, while the company's ROA was 3.46% and its ROTCE was 26.4%, making it one of the nation's most profitable bank holding companies. The company's continued success reflects its narrow focus on credit card lending, payment services, as well as a low-cost structure for gathering deposits. Discover has also been expanding its student lending business. The company has continued to show solid credit card loan growth, even as U.S. consumer debt in aggregate continues to fall. Discover reported average credit card loans in August of $50.1 billion, increasing from $49.6 billion in July. That's an annualized growth rate of 12%. During a conference presentation on Sept. 10, Discover CFO Mark Graf said there was no change in the company's outlook to be at the high end of a target annualized total loan growth rate of 2% to 5%. Like all credit card lenders, Discover has seen credit quality improve dramatically over the past several years. The company's credit card delinquency rate was 1.6% at the end of August, and its annualized net charge-off rate for credit card loans during August was 2.0%. That's quite a low net charge-off rate when considering how profitable credit card lending is. When asked at the conference whether credit quality could improve even more, Graf said "Yes, it could. Exactly how much, it's hard to call." He went on to say "We may have hit the plateau and we're at that point where it's hard to figure out, but we don't see anything that causes an upward turn on that in the credit profile at this point in time in the next 12 months." By "upward turn," Graf means a sufficient decline in credit quality to cause the company to greatly increase its quarterly provision for loan losses. The provision is the amount added to reserves each quarter, which directly lowers operating revenue. Discover's second-quarter provision for loan losses was $240 million, declining from $262 million a year earlier. In a note to clients Sept. 11, Citigroup analyst Donald Fandetti reiterated his neutral rating on Discover, with a price target of $53, writing that Graf's "positive commentary around credit should be well received by investors, as sentiment can quickly turn once card issuers begin building reserves." DFS data by YCharts
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2. Signature Bank
Shares of Signature Bank ( SBNY) of New York closed at $90.50 Friday, returning 27% this year. The shares trade for 2.5 times their reported June 30 book value of $36.10, and for 17.7 times the consensus 2014 EPS estimate of $5.10. The consensus 2013 EPS estimate is $4.55. The bank's efficiency ratio for the 12-months ended June 30 was 37.28%. Its ROA for the same period was 1.10% and its ROTCE was 12.32%. Signature Bank had $19.7 billion in total assets as of June 30. The bank is very much a growth story, with net loans and leases growing by 13% year-over-year, through the second quarter. The company in August announced the hiring of " seven seasoned sales professionals" to help grow its equipment leasing subsidiary, Signature Financial LLC, which was formed in March 2012. KBW analyst Christopher McGratty in August underlined the importance of Signature Bank's leasing business. "Only 16 months old, Signature Financial has now added 19 sales executives in 17 locations throughout the country, and has already booked over $1.3B in new originations since creation," the analyst wrote in a note to clients on Aug. 20. McGratty rates Signature Bank a "market perform," with a price target of $93.00. In his August note, he added "Signature remains on pace to exceed previous loan growth guidance of $2.2B, in our view." KBW estimates the bank will grow its loans by $2.6 billion this year. The analyst is in the minority with his rating for Signature bank. Out of 21 sell-side analysts polled by Thomson Reuters, 15 rate Signature Bank a "buy," while the remaining six have neutral ratings. SBNY data by YCharts
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1. Oritani FinancialShares of Oritani Financial ( ORIT) closed at $16.28 Friday, returning 10% this year. The shares trade for 1.4 times tangible book value, according to Thomson Reuters Bank Insight, and for 17.1 times the consensus fiscal 2015 EPS estimate of 95 cents. The consensus fiscal 2014 EPS estimate is 86 cents. Oritani's Fiscal 2013 ended on June 30. Based on a quarterly payout of 17.5 cents, the shares have an attractive dividend yield of 4.30%. Oritani Financial has been the most efficient of actively traded U.S. banks, with an efficiency ratio of 36.68% for the 12-month period ended June 30. The company's ROA for the same period was 1.43% and its ROTCE was 7.71%. That last figure may seem low, but it reflects a very strong tangible common equity ratio of 18.32% as of June 30, according to Thomson Reuters Bank Insight. The company reported net income for the quarter ended June 30 of $11.7 million, or 27 cents a share, increasing from $9.9 million, or 23 cents a share the previous quarter, and $8.3 million, or 19 cents a share, a year earlier. Earnings were boosted, in part, by a decline in the provision for loan losses to $250,000 in the most recent quarter from $1.5 million a year earlier. Another major factor in the earnings improvement was income from bank-owned life insurance, which increased to $1.9 million in the quarter ended June 30 from $460,000 the previous quarter and $399,000 a year earlier. FIG Partners analyst Christopher Marinac on Aug. 9 initiated his firm's coverage of Oritani with a "market perform" rating and a price target of $17.50, and discussed the company's "different (but successful) operating model" in a note to clients. "The company utilizes a different business model than most community banks with a high Loans-to-Deposits ratio and larger-than-average use of Borrowings to fund its balance sheet," Marinac wrote, adding that the high level of borrowings is offset with the high tangible common equity ratio, "which is worth over $5.80 per share (i.e., amount above a 9% TCE ratio)." Oritani's management "has numerous options with this excess capital to benefit shareholders," according to Marinac, who also wrote that "A special dividend or an accretive acquisition could be considered in the future." ORIT data by YCharts
Interested in more on Oritani Financial? See TheStreet Ratings' report card for this stock. -- Written by Philip van Doorn in Jupiter, Fla. >Contact by Email. Follow @PhilipvanDoorn