The benchmark 10-year U.S. Treasury yield increased by 12 basis points yesterday on inflation fears and a potential slowing of economic growth. In its efforts to tackle 40-year-high inflation rates, the Federal Reserve raised interest rates by 25 basis points in March and 50 basis points in May. The increase in interest rates bodes well for regional banks because it will help them increase their interest income. So, with further rate hikes planned by the Fed, regional banks are expected to benefit.
Higher interest rates help banks increase their spreads, thereby boosting their profit margins. Investors’ growing interest in the regional bank stocks is evident in the SPDR S&P Regional Banking ETF’s (KRE) 2.1% gains over the past month, compared to the benchmark S&P 500 index’s marginal decline over this period.
Given this backdrop, we think it could be wise to invest in fundamentally strong yet cheap regional bank stocks Flushing Financial Corporation (FFIC), First Financial Corporation (THFF), Amalgamated Financial Corp. (AMAL), RBB Bancorp (RBB), and CNB Financial Corporation (CCNE).
Flushing Financial Corporation (FFIC)
FFIC in Lake Success, N.Y., is the bank holding company for Flushing Bank. The bank operates as a full-service New York commercial bank. It also operates an internet brand under iGObanking.com and BankPurely, which offers checking, savings, money market, and certificates of deposit accounts. The bank’s principal business attracts retail deposits from the public. It invests those deposits with funds generated from operations and borrowings, primarily in originations and purchases of multi-family residential loans, commercial business loans, and construction loans.
On May 13, 2022, FFIC announced that it plans to open a new location at 85-15 Queens Boulevard, Elmhurst, N.Y., in June. FFIC’s President and CEO John R. Buran said, “This new Elmhurst location will expand our presence in Queens and deepen our relationship with the residents and businesses that reflect the diversity of this market.”
In terms of forward non-GAAP P/E, FFIC’s 9.23x is 11.9% lower than the 10.48x industry average. And its 2.68x forward P/S is 10.3% lower than the 2.98x industry average. And the stock’s 0.98x forward P/B is 14.5% lower than the 1.15x industry average.
FFIC’s net interest margin (FTE) for its fiscal first quarter, ended March 31, 2022, came in at 3.36%, compared to 3.18% in the year-ago period. The company’s net interest income increased 4.2% year-over-year to $63.47 million. Also, its net income increased 0.7% sequentially to $18.21 million.
Analysts expect FFIC’s EPS for the quarter ending June 30, 2022, to increase 8.2% year-over-year to $0.66. Its revenue for fiscal 2022 is expected to increase 4.1% year-over-year to $262.09 million. Over the past month, the stock has gained 7.4% in price to close the last trading session at $23.10.
FFIC’s strong fundamentals are reflected in its POWR Ratings. It has an overall B rating, which equates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
It is ranked #11 out of 64 stocks in the Northeast Regional Banks industry. It has an A grade for Stability and a B grade for Value and Momentum. Click here to see the other ratings of FFIC for Growth, Sentiment, and Quality.
First Financial Corporation (THFF)
THFF in Terre Haute, Ind., is a financial holding company that offers various financial services, including commercial, mortgage, consumer lending, lease financing, trust account services, depositor services, and insurance services through its subsidiaries. Its loan portfolio includes commercial loans, residential loans, and consumer loans. Its deposits include non-interest-bearing demand deposits, interest-bearing demand deposits, savings, and time deposits.
On April 21, 2022, THFF announced that its board of directors had authorized a stock repurchase program to purchase up to 10% of its outstanding common stock.
In terms of forward non-GAAP P/E, THFF’s 9.24x is 11.9% lower than the 10.48x industry average. And its 2.82x forward P/S is 5.5% lower than the 2.98x industry average. And the stock’s 1.01x forward P/B is 12.3% lower than the 1.15x industry average.
For its fiscal first quarter, ended March 31, 2022, THFF’s net interest income increased 8.3% year-over-year to $37.81 million. The company’s net income increased 62.4% year-over-year to $20.92 million. Also, its EPS came in at $1.67, representing an increase of 75.7% year-over-year.
For its fiscal 2022, THFF’s EPS and revenue are expected to increase 26.9% and 8.9%, respectively, year-over-year to $5.10 and $198.33 million. It surpassed the Street’s EPS estimates in three of the trailing four quarters. Over the past nine months, the stock had gained 11.5% in price year-over-year to $44.98.
THFF’s POWR Ratings reflect solid prospects. The company has an overall B rating, which translates to a Buy in our proprietary rating system.
It has a B grade for Value, Momentum, and Stability. Within the Midwest Regional Banks industry, it is ranked #4 out of 41 stocks. To see the other ratings of Growth, Sentiment, and Quality, click here.
Amalgamated Financial Corp. (AMAL)
AMAL in New York City is the bank holding company for Amalgamated Bank that provides commercial and retail banking, investment management, and trust and custody services for commercial and retail customers. The company accepts various deposit products, including non-interest-bearing accounts, interest-bearing demand products, savings accounts, and NOW accounts. It also provides multiple commercial loans that consist of commercial and industrial, multi-family mortgages, and commercial real estate and retail loans.
On Feb. 18, 2022, Almika Renewable Finance launched of a suite of financial services focusing on the residential solar and energy storage market with the financial backing of AMAL. AMAL’s President and CEO Priscilla Sims Brown said, “By making a strategic investment in clean solar energy, Amalgamated will tap into a growing market and accelerate our efforts to mitigate climate change.”
In terms of forward non-GAAP P/E, AMAL’s 9.46x is 9.8% lower than the 10.48x industry average. And its 2.75x forward P/S is 7.9% lower than the 2.98x industry average.
AMAL’s net interest income increased 15.5% year-over-year to $48.36 million for the first quarter, ended March 31, 2022. The company’s non-GAAP core operating revenue increased 21.3% year-over-year to $55.62 million. Also, its non-GAAP core net income increased 10.5% year-over-year to $14.35 million.
Analysts expect AMAL’s EPS and revenue for the quarter ending June 30, 2022, to increase 71.9% and 27.1%, respectively, year-over-year to $0.55 and $59.75 million. It surpassed consensus EPS estimates in three of the trailing four quarters. And over the past nine months, the stock has gained 39.7% in price to close the last trading session at $21.73.
AMAL’s strong fundamentals are reflected in its POWR ratings. The company has an overall B rating, which translates to a Buy in our proprietary rating system.
It has an A grade for Stability and Sentiment and a B grade for Growth, Value, and Momentum. It is ranked #2 of 64 stocks in the Northeast Regional Banks industry. Click here to see the other rating of AMAL for Quality.
RBB Bancorp (RBB)
Los Angeles-based RBB is the bank holding company for Royal Business Bank that provides various banking products and services to the Chinese-American, Korean-American, and other Asian-American communities. Its deposit products include checking, savings, and money market accounts. It also offers commercial and industrial lines of credit, term loans, mortgage warehouse lines, international trade discounts, commercial real estate loans, and others.
On May 2, 2022, RBB announced that its board of directors had adopted a stock repurchase program under which it may repurchase up to 500,000 shares of its common stock, or about 2.59% of its outstanding shares.
In terms of forward non-GAAP P/E, RBB’s 6.88x is 34.3% lower than the 10.48x industry average. Likewise, its 2.66x forward P/S is 11% lower than the 2.98x industry average. And the stock’s 0.83x forward P/B is 28% lower than the 1.15x industry average.
For its fiscal first quarter, ended March 31, 2022, RBB’s total interest income increased 11.3% year-over-year to $39.56 million. The company’s net interest income after provisions for loan losses increased 21.9% year-over-year to $34.12 million. Also, its net income increased 17.4% year-over-year to $14.60 million.
For the quarter ending Sept. 30, 2022, RBB’s EPS is expected to increase 12.7% year-over-year to $0.80. Its revenue for fiscal 2022 is expected to increase 13.2% year-over-year to $155.11 million. Also, it surpassed consensus EPS estimates in each of the trailing four quarters. And over the past month, the stock has gained 0.3% in price to close the last trading session at $21.46.
RBB’s POWR Ratings reflect solid prospects. The stock has an overall B rating, which equates to a Buy in our proprietary rating system.
It has a B grade for Value, Momentum, and Stability. Within the Pacific Regional Banks industry, it is ranked #3 out of 41 stocks. To see the other ratings for RBB for Growth, Sentiment, and Quality, click here.
CNB Financial Corporation (CCNE)
CCNE operates as the bank holding company for CNB Bank that provides banking products and services for individuals, businesses, governmental, and institutional customers. The Clearfield, Pa., company accepts checking, savings, and time deposit accounts; and offers real estate, commercial, industrial, residential, and consumer loans. It also provides wealth and asset management services.
In terms of forward non-GAAP P/E, CCNE’s 7.43x is 29.1% lower than the 10.48x industry average. Its 2.29x forward P/S is 23.3% lower than the 2.98x industry average. And the stock’s 1.05x forward P/B is 8.6% lower than the 1.15x industry average.
CCNE’s net income available to common shareholders has increased 8.1% year-over-year to $14.17 million. Its EPS came in at $0.84, representing an increase of 7.7% year-over-year. The company’s net interest income after the provision of credit losses increased 10.7% year-over-year to $40.97 million.
Analysts expect CCNE’s EPS for its fiscal 2023 to increase 10.3% year-over-year to $3.74. Its revenue for fiscal 2022 is expected to increase 12.7% year-over-year to $180.01 million. Also, it surpassed the Street’s EPS estimates in three of the trailing four quarters. And over the past year, the stock has gained 3.3% in price to close the last trading session at $25.13.
CCNE’s strong fundamentals are reflected in its POWR ratings. The company has an overall B rating, which translates to a Buy in our proprietary rating system.
It has an A grade for Stability and a B grade for Value, Momentum, and Sentiment. It is ranked #3 out of 34 stocks in the Mid-Atlantic Regional Banks industry. Click here to see the other ratings of CCNE for Growth and Quality.
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FFIC shares were unchanged in premarket trading Wednesday. Year-to-date, FFIC has declined -4.02%, versus a -12.79% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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