Early returns: 2018's top-performing bank stocks

January 17, 2018 4:00 PM

Financial and business graphs, Finance concept

naypong - stock.adobe.com

Which large and midcap bank stocks had the most momentum as 2017 came to a close and 2018 began?

These are the banks that started the year off with the biggest bang, as measured by gains in stock price over 20 days of trading ending Jan. 12.

The NASDAQ Bank Index was up 7.1% in that period, while these 12 banks bested that market performance by double or nearly double, according to an analysis by FIG Partners.

Six states have banks on the list, nearly all in the warmer parts of the country. California and Texas boast three banks apiece, and Georgia and Arkansas are each home to two of the banks. Florida is represented by one bank and so is Virginia.

BOFI: up 16.4%

BofI Holding
San Diego, Calif.
President and CEO: Gregory Garrabrants
Market Cap: $2.06 billion*

Besides posting the largest gain in its stock price, BofI, the parent company of Bank of Internet USA, had one of the lowest price-to-earnings ratios among the midcap banks, FIG Partners said in its report. The stock price was 12.6x earnings, based on analysts' consensus for 2018.

Garrabrants was one of our Community Bankers to Watch for 2016.

*Market capitalization given for each company in this slideshow is from Jan. 16, as posted by Yahoo Finance.

ABCB: up 15.1%

Ameris Bancorp
Moultrie, Ga.
Chairman, President and CEO: Edwin W. Hortman Jr.
Market Cap: $1.979 billion

Ameris, which had the second-highest gain in its stock price, also saw a spike in trading volume during the period that FIG Partners analyzed. The percentage of shares that traded exceeded the three-month average by 4.16%.

The recent news for Ameris includes two major announcements. Ameris said in November that it agreed to buy Atlantic Coast Financial in Jacksonville, Fla. Not long after that, the company also said that it had been released from a Bank Secrecy Act-related consent order.

Hortman turned over the CEO role at the company’s bank unit, Ameris Bank, to Dennis Zember around the same time.

EWBC: up 14.6%

East West Bancorp
Pasadena, Calif.
Chairman and CEO: Dominic Ng
Market Cap: $9.648 billion

East West will report its fourth-quarter results on Jan. 25. But its earnings have been increasing – by double-digit percentages – quarter after quarter.

American Banker recognized Ng for being a “consistent performer” as part of our 2017 Banker of the Year awards. (See all the 2017 honorees here.)

LTXB: up 14.3%

LegacyTexas Financial Group
Plano, Texas
President and CEO: Kevin Hanigan
Market Cap: $1.985 billion

LegacyTexas Financial has been focused on its efficiency lately. In the third quarter it posted an efficiency ratio of 44.19%, an improvement from 44.96% in the previous quarter.

It is scheduled to report its fourth-quarter results on Jan. 23.

Last year LegacyTexas Financial placed at No. 117 in our ranking of midtier banks based on return on average equity across three years.

FCB: up 14.1%

FCB Financial Holdings
Weston, Fla.
President and CEO: Kent Ellert
Market Cap: $2.422 billion

In November, FCB Financial announced a deal to buy Floridian Community Bank in Davie, Fla.

Last year the company placed at No. 173 in our ranking of midtier banks based on return on average equity across three years.

UCBI: up 13.4%

United Community Banks
Blairsville, Ga.
Chairman and CEO: Jimmy Tallent
Market Cap: $2.251 billion

Like Ameris, United Community Banks saw a spike in trading volume during the period that FIG Partners analyzed. The percentage of shares that traded exceeded the three-month average by 3.79%.

United Community announced a deal to buy an equipment finance company in recent weeks. It also bought a bank – HCSB Financial in Loris, S.C. – last year, after having cozied up to it earlier.

Tallent, who is a well-known and well-respected Georgia banker, led the company he founded back from the brink following the financial crisis.

He ceded the CEO role at its bank unit to Lynn Harton in August.

OZRK: up 13.1%

Bank of the Ozarks
Little Rock, Ark.
Chairman, President and CEO: George Gleason
Market Cap: $6.786 billion

In addition to a spike in trading volume – in its case 5.50% – Bank of the Ozarks stood out in the FIG Partners analysis for being relatively cheap compared with other midcap bank stocks. Its price was at 13.8x earnings based on 2018 analyst consensus.

Commercial real estate exposure has been one of the issues dampening enthusiasm for the stock, though investors have started to return.

Bank of the Ozarks reported Tuesday that its fourth-quarter earnings rose by 67% from a year earlier, after the company revalued its deferred tax liability. Excluding the $49.8 million tax benefit, its profit rose by 9.7%.

Last year Bank of the Ozarks raised some capital, ahead of its first stress test coming up in June. It also announced plans to dissolve its holding company for cost-cutting purposes.

CADE: up 13.0%

Cadence Bancorp
Houston, Texas
Chairman and CEO: Paul B. Murphy Jr.
Market Cap: $2.331 billion

Cadence will announce its fourth-quarter results on Jan. 25.

Its third-quarter net income was up 393% from a year earlier, mostly because of improved credit quality. It had a provision expense of $1.7 million for the quarter, compared with $29.6 million for the same period in 2016.

The third-quarter net income also was up 12.5% from the previous quarter, with the company citing organic growth.

Cadence completed an initial public offering as well as a secondary offering last year.

Prior to that, it placed at No. 216 in our ranking of midtier banks based on return on average equity across three years.

PACW: up 12.7%

PacWest Bancorp
Beverly Hills, Calif.
President and CEO: Matthew Wagner
Market Cap: $6.712 billion

The acquisitive PacWest announced plans to buy a credit union last spring, which drew some protest. It closed on the deal in October.

It also announced in December that it would stop doing cash flow loans and that its Pacific Western Bank would increase the minimum wage for employees to $15 an hour.

COF: up 12.0%

Capital One Financial Corp.
McLean, Va.
Chairman, president and CEO: Richard Fairbank
Market Cap: $50.544 billion

In the FIG Partners analysis, Capital One stood out among the large cap banks for its cheap core deposit premium (9.7%) and its low price-to-tangible book ratio (164).

It also landed atop the cheap list for price to earnings. It had the lowest stock price of all the large and midcap banks relative to the 2018 earnings that analysts project (11.4x).

Early this month, Capital One suffered technical glitches that aggravated customers. They saw transactions recorded multiple times, experienced drained accounts and had to deal with long hold times.

It was one of the most notable reasons that the company has been in the news lately.

But among its more positive developments on the technology front last year, Capital One used machine learning to better customize its website content for each customer in real time; began pitching digital identity products to businesses as a way to guard against fraud; and introduced a Pixar-inspired chatbot that it calls Eno.

Its overall reputation among customers and noncustomers is average, according to our 2017 Survey of Bank of Reputations.

TCBI: up 11.7%

Texas Capital Bancshares
Dallas, Texas
President and CEO: C. Keith Cargill
Market Cap: $4.911 billion

Texas Capital’s trading volume – 5.46% greater than its three-month average – was up nearly as much as Bank of the Ozarks’, the FIG Partners analysis showed.

The company will report its fourth-quarter earnings on Jan. 24. Its third-quarter net income rose about 40% from a year earlier, largely on an increase in loans and the average yield on those loans.

Texas Capital has an interesting strategy to keep lenders from pursuing volume over quality.

HOMB: up 11.7%

Home BancShares
Conway, Ark.
President and CEO: C. Randall Sims
Market Cap: $4.296 billion

Trading volume was up 5.28% for Home BancShares during the period that FIG Partners analyzed.

Much of the news about the company over the past year centered on its prolific dealmaking.

In particular it has been bulking up in a big way in Florida. Heading into 2017, the Arkansas company had acquired 12 banks in the Sunshine State since 2010. Then in March, it agreed to buy Stonegate Bank in Pompano Beach, prompting some to ask whether it was pushing its luck with No. 13.

Last year the company placed at No. 18 in our ranking of midtier banks based on return on average equity across three years.

Home Bancshares’ founder and chairman Johnny Allison was named as one of our Community Bankers of the Year in 2013.