NEW YORK (TheStreet) -- Regional banks often reflect how the economy is doing and with the economy doing fairly well and the stock market roaring, now may be a good time to invest in regional banks.

"The tailwinds for this sector are incredible, and they will be long-lasting," writes Real Money columnist Tim Melvin, who has invested half his portfolio in small banks. "Credit is improving, the economy is oh-so-slowly grinding higher, and real estate is doing the same."

So what are the best regional banks investors should be buying? Here are the top three, according to TheStreet Ratings, TheStreet's proprietary ratings tool.

TheStreet Ratings projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Based on 32 major data points, TheStreet Ratings uses a quantitative approach to rating over 4,300 stocks to predict return potential for the next year. The model is both objective, using elements such as volatility of past operating revenues, financial strength, and company cash flows, and subjective, including expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings.

Buying an S&P 500 stock that TheStreet Ratings rated a "buy" yielded a 16.56% return in 2014 beating the S&P 500 Total Return Index by 304 basis points. Buying a Russell 2000 stock that TheStreet Ratings rated a "buy" yielded a 9.5% return in 2014, beating the Russell 2000 index, including dividends reinvested, by 460 basis points last year.

Check out which three regional banks made the list. And when you're done be sure to read about which big bank stocks to buy now. Year-to-date returns are based on April 13, 2015 closing prices.

UBSI Chart UBSI data by YCharts
 
1. United Bankshares Inc. (UBSI)
Rating: Buy, A+
Market Cap: $2.6 billion
Year-to-date return: 0.67%

United Bankshares, through its subsidiaries, provides commercial and retail banking services and products in the United States.

"We rate UNITED BANKSHARES INC/WV (UBSI) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its robust revenue growth, expanding profit margins, growth in earnings per share, compelling growth in net income and good cash flow from operations. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth greatly exceeded the industry average of 1.6%. Since the same quarter one year prior, revenues rose by 46.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • UNITED BANKSHARES INC/WV has improved earnings per share by 23.1% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, UNITED BANKSHARES INC/WV increased its bottom line by earning $1.92 versus $1.70 in the prior year. This year, the market expects an improvement in earnings ($2.01 versus $1.92).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Commercial Banks industry. The net income increased by 69.2% when compared to the same quarter one year prior, rising from $19.66 million to $33.26 million.
  • The gross profit margin for UNITED BANKSHARES INC/WV is currently very high, coming in at 86.67%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 25.36% significantly outperformed against the industry average.
  • Net operating cash flow has increased to $45.29 million or 27.74% when compared to the same quarter last year. Despite an increase in cash flow of 27.74%, UNITED BANKSHARES INC/WV is still growing at a significantly lower rate than the industry average of 318.99%.
Must Read: These 10 S&P 500 Stocks Were the Best Performers in the First Quarter

ISBC Chart ISBC data by YCharts
2. Investors Bancorp Inc. (ISBC)
Rating: Buy, A+
Market Cap: $4.09 billion
Year-to-date return: 5.9%

Investors Bancorp, Inc. operates as the holding company for Investors Bank that provides various banking products and services for businesses and individuals in the United States.

"We rate INVESTORS BANCORP INC (ISBC) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its robust revenue growth, expanding profit margins, compelling growth in net income, good cash flow from operations and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 1.6%. Since the same quarter one year prior, revenues rose by 17.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The gross profit margin for INVESTORS BANCORP INC is currently very high, coming in at 76.56%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 23.80% significantly outperformed against the industry average.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Commercial Banks industry. The net income increased by 56.6% when compared to the same quarter one year prior, rising from $27.51 million to $43.08 million.
  • Net operating cash flow has significantly increased by 304.81% to $37.11 million when compared to the same quarter last year. Despite an increase in cash flow, INVESTORS BANCORP INC's cash flow growth rate is still lower than the industry average growth rate of 318.99%.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.

 

PACW Chart PACW data by YCharts
3. PacWest Bancorp ( PACW)
Rating: Buy, A+
Market Cap: $4.8 billion
Year-to-date return: 2.9%

PacWest Bancorp operates as the holding company for Pacific Western Bank that provides commercial banking products and services to individuals, professionals, and small to mid-sized businesses in the United States. It accepts demand, money market, and time deposits.

"We rate PACWEST BANCORP (PACW) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth, compelling growth in net income, good cash flow from operations and expanding profit margins. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • PACW's very impressive revenue growth greatly exceeded the industry average of 1.6%. Since the same quarter one year prior, revenues leaped by 178.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • PACWEST BANCORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, PACWEST BANCORP increased its bottom line by earning $1.97 versus $1.08 in the prior year. This year, the market expects an improvement in earnings ($2.78 versus $1.97).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Commercial Banks industry. The net income increased by 2183.7% when compared to the same quarter one year prior, rising from $3.11 million to $71.00 million.
  • Net operating cash flow has significantly increased by 1242.72% to $184.85 million when compared to the same quarter last year. In addition, PACWEST BANCORP has also vastly surpassed the industry average cash flow growth rate of 318.99%.
  • The gross profit margin for PACWEST BANCORP is currently very high, coming in at 92.46%. Regardless of PACW's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, PACW's net profit margin of 31.92% significantly outperformed against the industry.

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