These 2 High Yielding Regional Banks Offer Value

Seeking AlphaDividend Quick Picks | Financials These 2 High Yielding Regional Banks Offer ValueSep. 24, 2020 12:06 PM ET|| Includes: AROW, RBCAA, WAFD, WASHby: Dividend PowerDividend Power Long-term horizon, Dividend Growth Investing, Growth, Long OnlyDividend Power.cls-1{fill:#024999;}SummaryRegional banks' stock prices are still down in some cases over -30% year-to-date. They have not participated in the market recovery.
Many regional banks have high yields over 4% or even over 5%. The dividends are covered by earnings.
Net interest margins are compressing due to low interest rates pressuring profitability. But some banks are seeing volume growth in mortgage banking.
Asset quality is still good with low non-performing assets and loans. Capital ratios are high and above the minimum levels to be considered well capitalized.
Two regional banks that are trading below their fair value estimate are buys.
The stock prices of regional or community banks have been beaten down during the COVID-19 pandemic. However, unlike many tech stocks, their stock prices have not recovered. Many are still down over -30% year-to-date and their yields are over 4% or even over 5%. High yielding regional banks offer value and opportunity to the small investor. A few of these regional banks perform better than others and I view them as long-term buys. In this article, I analyze regional banks based on several criteria and also look at profitability and asset quality. Two regional banks stand out in my opinion. I view Washington Trust Bancorp (WASH) and Arrow Financial Corporation (AROW) as buys.
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What Ails Regional Banks?
Regional banks are often the lynchpins of community businesses. The business model of regional banks is fairly simple. They gather deposits at low rates and lend or invest at higher rates. The banks pocket the difference minus expenses. But when the economy is slow and interest rates fall, then interest income declines and pressures... Read more