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Valyooo (99.65)

Is anybody here good at analyzing regional banks?



January 12, 2011 – Comments (4)

Hello Fools.  As many of you know I am very thirsty for knowledge.  As such, i try to learn too many thing at once- I will read like 10 different books about different things in a few weeks, and sometimes I will leave a book only half finished before picking up another one (such a stupid thing to do).  I have tried to analyze like 10 different sectors in the last few months.  However, I still dont fully understand any of them (not to say I havent learned a great deal, because I have).

I decided that rather than do that, I am going to spend a few months on all of the sectors I want to learn about.  These sectors are megabanks, regional banks, insurance, mining, oil and gas, utilities, homebuilders, paper, and reit's....pretty much in that order.  I have no interest in railroads, medicine, technology, aerospace, or retail.  I am kind of torn on this, as I believe medicine, technology, and aerospace will be much higher growth than what I have listed...I am analyzing old world type sectors.  However, I don't see banks or insurance going away anytime soon, mining plays a part in everything else, as does utilities, oil and gas, and paper.  people will always need homes as well.  I don't like retail or tech because they are much more zero sum than other industries (can you be more zero sum?  you know what I mean).  Railroads costs too much to expand, and are generally boring. I guess I could learn about  aerospace, but I would rather invest in companies that an idiot could run.  Not that an idiot can run a lot of what I said, but an idiot could analyze them mostly statistically.


Anyway, my first sector is going to be banking.  Since I own STD and BAC, and they are running a lot, I feel that even though they have a ways to run, there is probably more upside in regional banks.  So I am going to start analyzing them.

Any books/articles would be appreciated as a suggestion for this sector, but what would be most appreciated is just straight up telling me what matters with regionals that does not matter with mega banks, and what doesnt matter with regionals that does matter with mega banks.

Also, for banking, I have made the following list of what to analyze:

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1. How well-capitalized they are: look at all the capital ratios and such.  Check for  dilution

2.  Are deposits growing?

3. How's the net interest margin looking?

4. Which direction are NPLs (non-performing loans) going?

5. What is the loan portfolio of the bank and what are the risks associated with each type of loan? 

6. How safe is its bond portfolio? 

7. Whats the net tangible book value?  Under 1 is a bargain, sell when people get greedy and it gets close to 2.

8. Hows the dividend?  Is it bigger than its peers?  Hows the payout ratio?

9. How did it do during the last economic downturn?

10. What is the NIM?

11. Small and shrinking reserves for loan loss

 12. Relation of the asset-liabilities gap to where I think interest rates are headed


13. Decreasing operating expenses (unless revenue is growing)

14. ROA

Thanks in advance.

4 Comments – Post Your Own

#1) On January 12, 2011 at 7:32 PM, Momentum21 (96.85) wrote:

Jakilathehun is pretty darn good

It is one thing to analyze and another for another bank to get under the hood in the due diligence that matters.

Take the Wilmington Trust story for example. M&T Bank had their own version of reality that cut the share price in half upon acquisition.  

This is a pretty good piece that got me thinking more about the risks of owning the small banks.  


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#2) On January 12, 2011 at 10:36 PM, rebello15 (< 20) wrote:

valyoo, do you have an email address I can email you at?

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#3) On January 13, 2011 at 1:02 PM, lemoneater (79.31) wrote:

Valyooo, I know very little about regional banks except that they are frequently bought and sold. For instance, my bank Carolina First is now part of TD Ameritrade. I think I see an improvement in the professionalism. I'm just thankful that the name didn't change so I had to buy new checks!

I think Credit Unions change hands less frequently, but I could be wrong. I hope that Russ, rd80, fondly known as TARPEDBanks reads this blog.


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#4) On January 13, 2011 at 4:55 PM, Valyooo (99.65) wrote: the subject line let me know its you, so i know it isnt spam

What exactly is the difference betwen a bank, credit union, and a savings and loan?

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