Comerica Reaping The Benefits Of Its Unusual Business Mix

Investors continue to appreciate Comerica’s (CMA) strong leverage to this phase of the banking cycle, as the shares have continued to outperform peers even through this recent correction. Although loan growth remains lackluster, Comerica’s strong asset sensitivity remains a key driver, as does the company’s improving cost efficiency. There are certainly some cheaper names out there, but Comerica’s pre-provision income growth is likely to remain quite strong relative to its peers, and I can understand why growth-oriented would continue to want to own this name.

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Comerica Reaping The Benefits Of Its Unusual Business Mix

Healthy Spreads And Efficiency Driving M&T Bank

While M&T Bank (MTB) closed its Hudson City deal about two and a half years ago, the bank has continued to reshape its loan book and drive higher returns on equity. At the same time, while M&T isn’t particularly asset-sensitive, the bank’s mix of higher-yielding loans and lower-cost funding are driving attractive net interest spreads while cost discipline is pushing the efficiency ratio lower and helping boost pre-provision income.

There are a lot of positives for M&T, including those attractive spreads and ongoing expense leverage. What I don’t find so positive at this point is the value proposition – even with mid-to-high single-digit long-term earnings growth and returns on tangible equity likely to approach 20% in the near future, the shares trade at a pretty healthy valuation already.

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Healthy Spreads And Efficiency Driving M&T Bank

First Horizon's Footprint And Business Mix Should Drive Long-Term Growth

With good strategic positioning across the Southeast U.S., deal synergies, a respectable specialized lending business, and an asset-sensitive balance sheet, First Horizon (FHN) looks well-placed to deliver good growth so long as the economic cycle stays positive. That makes a softer than expected first quarter a little easier to digest, though investors should keep an eye on the competitive factors pushing up deposit betas and the still-sluggish overall environment for loan demand.

First Horizon looks priced for high single-digit to low double-digit annualized returns, which isn't bad, but I like to pay $0.90 (or less) for a dollar of value and bank stocks are no exception. To that end, there are cheaper bank stocks that I'd favor today, but First Horizon deserves a spot on a watch list and certainly doesn't seem like a bad hold now.

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First Horizon's Footprint And Business Mix Should Drive Long-Term Growth

Bank Of The Ozarks Pushing Hard For Growth

It's been a while since I've written about Bank of the Ozarks (OZRK) for Seeking Alpha, in part because there's a limit to how many different ways you can say "it's a well-run, high-growth bank, but the multiple is rich". In any case, the shares are a little under 20% from my last update (when I thought it was too pricey for me), and I've frankly done better with my positions in JPMorgan (JPM) and BB&T (BBT) over that same time.

I continue to find it difficult to get completely comfortable with the valuation on this bank, and I'm a little concerned about the aggressive pace of C&D lending at this point in the real estate cycle. Management's skill in navigating past cycles has certainly earned them the benefit of the doubt with me, and I like the long-term potential of not only replicating the specialty lending model across the country but also diversifying the loan book and building up core deposits.

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Bank Of The Ozarks Pushing Hard For Growth

Southside Seems Priced Like A Better Bank Than It Appears To Be

Considering the size of the economy and the above-average population growth, it makes sense that both investors and other banks are interested in Texas-based banks. Although worries that weak oil/gas prices would undermine the entire state's economy pressured the shares of many Texas banks earlier this year, many have rebounded strongly and now sit at or near 52-week highs.

Southside Bancshares (NASDAQ:SBSI) is one such bank, and while I'm certainly interested in finding some good investment ideas in the Texas bank sector, I'm not convinced this one qualifies. In its favor, Southside could be an acquisition target for a bank looking to acquire a bigger presence in East Texas, and banks ranging from larger super-regionals like BB&T (NYSE:BBT) and U.S. Bancorp (NYSE:USB) to other Texas-based banks like Hilltop (NYSE:HTH) and Prosperity (NYSE:PB) are looking to build their deposit share in the state. Against that, though, is more leverage than I'd like, a heavily CRE-dependent loan book, and a valuation that already factors in some pretty solid growth expectations.

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Southside Seems Priced Like A Better Bank Than It Appears To Be

Park Sterling Poised For Strong Growth

Parents of younger kids will probably relate to the idea of buying clothes with the expectation that they'll "grow into them" relatively soon. You could say that Park Sterling (NASDAQ:PSTB) has followed a similar strategy with its staffing and spending in recent years - absorbing higher costs and generating lower returns than its peers, but laying the foundation to leverage strong lending growth in the coming years.

Park Sterling has shown that it means to grow through both organic and inorganic channels. The company has added capabilities in residential construction lending, trust management, capital markets and other segments, while also hiring banking teams to drive lending growth. At the same time, the company has executed three sizable whole-bank acquisitions to grow its footprint from Georgia to Virginia. Although the shares do not look like significantly undervalued today, current holders and/or more aggressive buyers can at least look to potential for greater than expected loan growth and better cost leverage to drive higher estimates and valuations down the line.

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Park Sterling Poised For Strong Growth

Seeking Alpha: Eagle Bancorp Flying High

Eagle Bancorp (NASDAQ:EGBN) has done well since I spotlighted the bank as a Top Idea back in mid-2013, with the shares up more than 90% in that time and basically matching super-performer Bank of the Ozarks (NASDAQ:OZRK). Like Bank of the Ozarks, Eagle is now in that tough grey zone where I love the growth and love management's strategy, but I don't love the valuation. I am generally loathe to tell investors to get out of a good growth story just because of valuation, and that's the case here, but I don't see enough valuation upside to recommend it as a new investment.

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Eagle Bancorp Flying High

Seeking Alpha: Bank Of The Ozarks Offers Rare Growth, But It'll Cost You

Watching Bank of the Ozarks (NASDAQ:OZRK) continue to climb higher is a little like standing outside of a restaurant and watching people eat your favorite food. I have tremendous respect for this bank's management and its business plan, but I've never been able to construct a model that makes me comfortable with the valuation. That's particularly true given that the bank hasn't exceeded my financial performance expectations by all that much, suggesting to me that Wall Street is simply willing to pay more for the company's growth than I am.

Not much has really changed in any of those respects. I like the company's 2015 acquisitions and I believe OZRK can generate more than 25% earnings growth per year (CAGR) for the next five years. But even with the 20% pullback in the shares from its 52-week high, I just can't make the numbers work from a value perspective. Painful experience has taught me not to stick my neck out in situations where I can't make sense of the valuation, but more aggressive and/or valuation-insensitive investors could see more on offer here.

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Bank Of The Ozarks Offers Rare Growth, But It'll Cost You

Seeking Alpha: Energy's Fall Creates An Opportunity At Prosperity Bancshares

Wall Street may not be a zero-sum game at all times, but I think it happens often enough to say that bad news in one spot is usually good news somewhere else. I'm not remotely happy that oil's freefall has created a crater in the energy portion of my portfolio, but that drop has taken down the shares of many Texas banks, including Prosperity Bancshares (NYSE:PB).

While an ongoing energy rout would eventually damage Prosperity's loan growth and credit quality, direct energy lending is less than 10% of the loan book and Prosperity has exceptionally clean credit metrics. I would expect Prosperity to return to its M&A ways at some point this year and although not a screaming bargain by conventional metrics, the value in these shares is getting interesting.

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Energy's Fall Creates An Opportunity At Prosperity Bancshares

Seeking Alpha: PrivateBancorp Already Priced For Big Things

If you want a good growth story in banking, you're going to have to pay for it. Like Bank of the Ozarks (NASDAQ:OZRK), PrivateBancorp (NASDAQ:PVTB) is showing uncommonly good loan growth and has a large addressable opportunity supporting many years of growth. But like Bank of the Ozarks, that growth potential doesn't come with a bargain price.

I like PrivateBancorp's leverage to higher rates and its leverage to economically sensitive loan growth. I also think that the company has made excellent progress in working off legacy assets and fundamentally altering its business mix. If you want a bargain in banking, you're going to have to shop amongst banks well off the beaten path or with significant ongoing concerns/risks regarding asset growth, expense leverage, and regulatory/legal issues (names like Citigroup (NYSE:C) and Bank of America (NYSE:BAC) come to mind). PrivateBancorp doesn't look like a bargain, but if you want to ride along with a rate-sensitive growth story, there may be something here for you.

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PrivateBancorp Already Priced For Big Things

Seeking Alpha: Bank Of The Ozarks Continues To Execute

Even allowing for the fact that growth becomes more difficult as a company get bigger, if Bank of the Ozarks (NASDAQ:OZRK) continues to execute like this it is not going to be a small bank for long. This Arkansas-bank remains heavily weighted to real estate-based commercial lending, but continues to use disciplined underwriting to control risk while leveraging a very low-cost deposit base. The shares don't look cheap by most of the bank valuation metrics I like, but quality growth doesn't come cheap and I still see opportunities for outperformance and value-building acquisitions.

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Bank Of The Ozarks Continues To Execute

Seeking Alpha: Frustrating To Value, Bank Of The Ozarks Keeps Growing

Valuing normal banks on the basis of their returns on tangible equity, tangible book value, and long-term returns on equity usually works pretty well. For better and for worse, Bank of the Ozarks (OZRK) is not at all a "normal bank" and investors have to make their peace with a demanding valuation to take part in a very strong, very well-run bank growth story.

The growth side of Bank of the Ozarks looks fine. While the company is seeing more competition for lending, the bank's capabilities in specialty and complex real estate lending sets it apart. Bank of the Ozarks also has the option to expand its leasing operations and use its equity to expand its asset base. It's tough to put together a valuation model that goes much past the low $60s for these shares, but I don't have any particular expectation of getting them cheap while the growth story remains intact.

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Frustrating To Value, Bank Of The Ozarks Keeps Growing

Seeking Alpha: Facing Up To A Bad Call On Synovus

Admitting mistakes is never fun, but if you're going to write about stocks in public fora it is a part of the job description. Four months ago, I thought Synovus (SNV) shares had gone far enough, as I saw the probable lack of revenue and operating profit growth, coupled with a potentially slower credit recovery and the need to pay back TARP as limiting factors. Since then, the shares are up 19%. Now, in fairness to myself, the stocks I liked better at the time - including BB&T (BBT) and Bank of America (BAC) - haven't exactly been embarrassments (up 14% and 21%, respectively), but Synovus' 19% gain is definitely more than I thought was likely to come.

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Facing Up To A Bad Call On Synovus

Seeking Alpha: Bank Of The Ozarks Growing Gangbusters, But Not At All Cheap

For as long as I've followed Arkansas's Bank of the Ozarks (OZRK) (which is quite a few years now), I've been very impressed with this company's aggressive but extremely focused strategy. While it's true that having a loan book tilted heavily towards commercial real estate (CRE) and construction lending is risky, it's sort of like walking a high-wire - it's risky, but the risk doesn't matter if you don't fall off, and Bank of the Ozarks has a system in place that has kept the falls to a minimum.

As much as I like this bank, it rarely gets very cheap and this is not one of those times. I had hoped that investors might misread this second quarter earnings report and sell the shares, but it appears that that's not happening. In any case, while I wouldn't sell these shares if I owned them, I need at least a 10% pullback before I could be enticed to think about buying.

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Bank Of The Ozarks Growing Gangbusters, But Not At All Cheap

Investopedia: Bank Of The Ozarks Continues To Build Value

I've long praised Little Rock-based Bank of the Ozarks (Nasdaq:OZRK) as one of the best-run banks that most investors probably don't know about. This bank has long used a mix of opportunistic M&A and focused lending expertise to grow what has become an increasing valuable Southern/Southeastern banking franchise. While today's price is not exactly a bargain, there are worse fates in investing than to hold somewhat expensive positions in very promising companies.

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http://www.investopedia.com/stock-analysis/041213/bank-ozarks-continues-build-value-ozrk-bxs-rf-pb.aspx

Investopedia: Bank Of The Ozarks Hitting The Accelerator In A Low-Growth Environment

I am big fan of Bank of the Ozarks (Nasdaq:OZRK), so it bothers me that I can't find much value in these shares. Moreover, while I believe this company's aggressive growth strategy could underpin its evolution into a significant regional bank, I do worry that the bank is doing too much too soon. While it certainly makes sense to grow aggressively while many larger competitors have a hand tied behind their back, aggressive growth stories in banking have a disturbing habit of going sour at some point.

Challenges Seem to Be Intensifying
While there are certainly regional differences in business conditions in the U.S., the fact remains that Bank of the Ozarks operates in the same low-rate/narrow spread environment as First Horizon (NYSE:FHN), Cullen/Frost (NYSE:CFR), and Regions Financial (NYSE:RF). To wit, it's a lot harder to make a buck in regular old banking.

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Seeking Alpha: Bank of the Ozarks Thriving; Consider Buying On Dips

There is no shortage of critics who will bitterly complain about how the Bush and Obama administrations have handled the near-meltdown of the U.S. banking system. One company that is not likely to complain at all is Arkansas's Bank of the Ozarks
(OZRK) as this company has feasted on FDIC-assisted acquisitions and continues to thrive by zigging where others zag. The question, though, is whether the potential returns are still worth the risk.

A Strong Close To The Year
Relative to larger banks like M&T Bank (MTB) or Wells Fargo (WFC), Bank of the Ozarks' earnings are relatively clean and simple. Although net earnings did slide about 7% from the third quarter, the bank nevertheless beat the average analyst guess by about two cents.

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Bank Of The Ozarks Thriving; Consider Buying On Dips

Investopedia: 2011 In Review - Regional Banks Are Suffering

The best that can be said about regional bank performance in 2011 is that the smaller regional banks did less poorly than their larger brethren this year. In fact, as measured by the Keefe, Bruyette & Woods Regional Banking Index, regional bank stocks are down more than 7% on a year-to-date basis and down about 2% on a rolling one-year basis. That's better than the larger cap KBW Bank Index (which is down almost 24% on a year-to-date basis), but still well short of matching the S&P 500 this year.

Is there really much surprise in the performance of these banks? Consumers are trying to repair their personal balance sheets, property values and unemployment remain stubbornly disappointing, and loan demand is a mess, as generally only poor credit risks seem to be actively seeking loans. Were it not for the concerted efforts of the Fed to keep rates low, many banks would be in tough shape. (For related reading on the Fed, see How The Federal Reserve Manages Money Supply.)

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http://stocks.investopedia.com/stock-analysis/2011/2011-In-Review-Regional-Banks-Are-Suffering-TCBI-OZRK-STI-CMA-RF-ZION-SBNY1218.aspx

Investopedia: Bank Of The Ozarks Making The Best Of Things

No bank has gone through the housing crash and credit crisis totally unscathed, but it clearly has not harmed all banks to the same degree. Although government-mandated changes to key aspects of the banking industry like capital requirements, lending standards and fee income will alter the profitability of banks going forward, some banks have been able to use the crisis to expand and gather assets. (To read more about how banking has changed, see The Evolution Of Banking.)

Bank of the Ozarks (Nasdaq:OZRK) was a very interesting small-cap bank before the crisis, but a combination of savvy management and FDIC-assisted acquisitions have left the company in good shape for the coming years.

Solid-Looking Numbers for Q1
Bank of the Ozarks has profited from the oxymoronic policy of aggressive conservatism. That in turn has led to unusually low credit losses and non-performing assets, as well as surprisingly high net interest margin. At the same time, it is hard to ignore that the bank's performance has been boosted by the contributions of acquired businesses.

For the first quarter, OZRK saw fully-taxed net interest income rise about 33% on an annual basis (to $36.1 million). On that basis, net interest margin rose to 5.61% from 4.99% - a level that is well above the norm and even high-end performers like Westamerica Bancorp (Nasdaq:WABC), BankUnited (NYSE:BKU) and First Republic Bank (NYSE:FRU).


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Investopedia: Heavily Shorted Stocks Near Their Highs

Virtually every stock of any real size is going to have a certain amount of short interest. When a stock's short interest reaches double-digits, though, investors should pay a little attention. By and large, retail investors do not short stocks and neither do most mutual funds. Moreover, the rules and hassles of short selling combined with the theoretically unlimited loss potential often mean that short positions are not entered into lightly.

While some short positions are simply a byproduct of a fund manager's belief that a stock is simply overvalued, often it is a bet on the notion that there is something more fundamentally wrong with the basic business. Accordingly, it is interesting to see that there are a number of stocks with high short interests trading near their 52-week highs. Is this simply a product of a bull market that has gone on too long, or is there something worse lurking beneath the surface? (For more, see Stocks With Increasing Short Interest.)

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