Is Now The Time To Buy These 4 Under-The-Radar Bank Stocks?

Bank stocks, admittedly, are not the sexiest investment vehicle. After all, with Coinbase Global Inc COIN and Dogecoin DOGE/USD monopolizing investor chatter, bank stocks seem so very yesteryear.

And even among those who put their faith and funds into bank stocks, it often seems like the usual suspects get the surplus amount of attention with the money center monoliths and the XL-sized regionals inevitably hogging whatever spotlight shines on this sector.

Here’s a novel concept: Let’s shine that spotlight on four bank stocks that rarely rate a blip of investor chatter, but could easily turn out to be the happy surprises of the year. In alphabetical order, for your consideration, are a quartet of under-the-radar bank stocks that would benefit from some much-needed attention.

Allegiance Bancshares Inc ABTX: This is the Houston-based holding company for Allegiance Bank, whose customer base covers small and medium-sized businesses and consumers.

The bank was founded in 2007 just as the economy was starting to collapse, but it survived the Great Recession and COVID-19 pandemic downturn, too.

Texas has become one of the growth states during the pandemic in terms of attracting new business and incoming residents from high-tax/fraying-quality-of-life states, including the self-crowned technoking Elon Musk.

Related Link: JPMorgan's Jamie Dimon Says Economic Boom Could Continue Into 2023, Hints At M&A Targeting Fintechs

The bank has benefited from the changing demographics, growing stronger as the Texas economy maintains a vibrant mojo.

Allegiance closed 2020 with an asset base of $6.05 billion, up 21.2% from 2019’s $4.99 billion — the growth was primarily credited to the origination of Paycheck Protection Program (PPP) loans and growth of its’ securities portfolio.

But the bank also rang out 2020 with $45.5 million in net income and diluted earnings per share of $2.22, somewhat lower than the $53 million, or $2.47 per diluted share, from one year earlier. The bank attributed those declines to the increased provision for credit losses in response to the pandemic.

On the brighter side, pandemic-era customers were putting their money into this bank: Deposits at the end of 2020 totaled $4.99 billion, up 22.6% from $4.07 billion at the end of 2019.

“As Houston’s largest locally-headquartered community bank, we expect to build on our strong core fundamentals,” said CEO Steve Retzloff announcing the 2020 earnings data in January. “We are excited about the future and look forward to the year ahead where we will embrace the opportunity to remain focused on our customers and the communities we serve.”

Allegiance opened for trading Thursday afternoon at $40.02, a bit lower than its 52-week high of $43.34 and distant from its 52-week low of $20.88.

Broadway Financial Corp BYFC: Unless you're tracking the nation’s Minority Depository Institutions (MDIs), this Los Angeles-based holding company for Broadway Federal Bank might be miles removed from your radar. Founded in 1946, this Black-owned bank has three branches: two in Los Angeles and one in neighboring Inglewood.

The pandemic era was not a pleasant period for Broadway, and, truth be told, the pre-pandemic era wasn’t too gentle, either. The company closed 2020 with a net loss of $642,000, or -$0.02 per share, compared to a net loss of $206,000, or -$0.01 per share, for 2019.

Broadway did not participate in the PPP because it has not historically offered Small Business Administration loans, but instead focused on selective originations of multifamily residential and commercial real estate loans. In 2020, the bank sold $104.3 million of loans at a cumulative profit of $276,000.

Yes, this is a very small community bank and why would an investor want to focus here instead of giving attention to the money center institutions?

There are two reasons: First, there has been a renewed interest within the financial services world of strengthening the nation’s less than two-dozen Black-owned banks. Broadway has recently received equity investments from Wells Fargo & Co. WFC and JPMorgan Chase & Co. JPM in their respective efforts to advance racial equity.

Second, earlier this month Broadway and CFBanc Corporation closed on the merger they announced last summer, which has resulted in the largest Black-led MDI with more than $1 billion in combined assets under management and over $900 million in total depository institution assets.

“With our combined equity capital base exceeding $100 million, prior to Broadway’s previously announced pending private placements of common stock, we will be able to exert a significantly greater impact on underserved urban communities and advance the process of closing the severe economic gaps in opportunity for our communities, business owners, and families,” said Vice Chairman and President/CEO Brian E. Argrett.

On Thursday afternoon, Broadway was trading at $2.05, not quite in the vicinity of its 52-week high of $7.23 and a little too close to comfort to its 52-week low of $1.09. Still, the future looks bright for this stock, so keep an eye on it.

Related Link: Wells Fargo Makes Equity Investments In Five Black-Owned Banks

Eagle Bancorp Montana Inc EBMT: This is the holding company of Opportunity Bank of Montana, and at the risk of being corny, there is plenty of opportunities to be found in Big Sky Country. U.S. Census Bureau statistics indicate that the state’s population has grown so much over the past decade that it could pick up a new congressional seat in 2022, while several major airlines are starting new routes to Montana’s destinations later this year.

Eagle Bancorp Montana appears to be in the right place at the right time. At the end of 2020, its total assets hit $1.26 billion, up from $1.05 billion one year earlier with the $15 million acquisition of Western Holding Company of Wolf Point and its wholly-owned subsidiary, Western Bank of Wolf Point, credited for that gain.

Also at the end of 2020, the company’s net income hit a record $21.2 million, or $3.11 per diluted share. One year earlier, its net income was $10.9 million, or $1.69 per diluted share.

Total deposits increased to $1.03 billion by the end of 2020, versus $809 million one year earlier. Eagle’s board of directors declared a quarterly cash dividend of $0.0975 per share on Jan. 21.

Eagle shares were trading at $23.25 Thursday afternoon, slightly under its 52-week high of $26.13 and not close to its 52-week low of $15.

First Internet Bancorp INBK: Back in February 1999 when the word “fintech” was nowhere to be found in any dictionary, First Internet Bancorp pioneered the concept of offering online banking without providing a traditional brick-and-mortar branch. INBK’s subsidiary, First Internet Bank of Indiana, made history at the time as the first state-chartered, FDIC-insured Internet bank.

Today, of course, fintechs have taken on a kudzu-worthy expansion, and First Internet’s notability has a history book-level worthiness. The bank would also pioneer the migration from online-exclusive to brick-and-mortar when it acquired Indianapolis-based Landmark Financial Corp. in 2007, which injected a retail mortgage lending operation into its product mix; commercial real estate and commercial and industrial lending services were later added.

If First Internet no longer enjoys the lavish attention given to other fintechs, it certainly deserves respect for maintaining a respectable performance. The bank closed 2020 with $4.24 billion in assets, up from $4.1 billion in 2019.

Net income was a record $29.5 million and diluted earnings per share were a record $2.99, compared to $25.2 million in net income and diluted earnings per share of $2.51 one year earlier.

Also in 2020, there was a $2.1 million pre-tax write-down of commercial other real estate owned, and excluding this charge, adjusted net income for the year was $31.1 million, or $3.16 adjusted diluted earnings per share.

First Internet closed its “Twenty-first year of operation with substantial momentum despite the challenges created by the pandemic," said David Becker, the company’s chairman, president and CEO.

"Over the course of the year, we produced robust revenue growth, with our direct-to-consumer mortgage business delivering its best year in our history. Our bankers met the surge in demand brought on by low-interest rates, winning business with a demonstrated commitment to consistent, excellent service.”

On Thursday afternoon, First Internet shares were at $34.40, nearer to its 52-week high of $41.55 than to its 52-week low of $11.43.

Photos courtesy Wikimedia Commons.

Posted In: Long IdeasNewsPenny StocksSmall CapTrading Ideasbank stocksbankingBrian E. Argrettcommunity banksDavid Becker