US banks with lowest price to adjusted tangible book values in February

While the broader market traded down in February, many U.S. bank stocks held on to their January gains.

The median monthly total return for the 212 banks in the S&P Global Market Intelligence analysis was 0.0%, as of Feb. 28. This was more than the market cap-weighted S&P U.S. BMI Banks index and the S&P 500, which fell 0.9% and 2.4%, respectively.

Just four banks in the analysis experienced double-digit percentage market changes in February. These banks were Fairmont, W.Va.-based MVB Financial Corp. on the positive side and San Francisco-based First Republic Bank; Hicksville, N.Y.-based New York Community Bancorp Inc.; and New York-based Signature Bank on the negative side.

S&P Global Market Intelligence analyzes U.S. banks trading on the Nasdaq, NYSE or NYSEAM with total assets of greater than $3 billion in the most recent quarter available. The analysis excludes banks in the mutual holding company ownership structure, other operating subsidiaries, and mutual bank conversions until financial data is available for the quarter following the conversion date. Adjusted tangible book value is calculated as the sum of tangible common equity and loss reserves less nonperforming assets and loans 90 or more days past due but still accruing interest divided by common shares outstanding.

Lowest-valued banks

Citigroup Inc. was the least-valued bank in the analysis by price to adjusted tangible book value for the 15th consecutive month. At Feb. 28, this stood at 58.4%, down from 71.2% a year ago. Following fourth-quarter 2022 earnings announcements, analysts ratcheted down normalized EPS estimates of almost all the largest banks in the sector, including Citigroup.

Fishers, Ind.-based First Internet Bancorp and West Reading, Pa.-based Customers Bancorp Inc. retained the second and third positions. Both companies significantly altered their funding bases in the fourth quarter, with First Internet adding noninterest-bearing deposits and shedding time deposits, and Customers Bancorp taking the opposite strategy.

Republic First Bancorp Inc. was fourth on the list. The Philadelphia-based bank brought in new management in December 2022 and is also evaluating strategic alternatives.

Entries, exits

The four entries to the bottom-20 valuation list in February were Blue Ridge Bankshares Inc., Metropolitan Bank Holding Corp., Signature Bank and New York Community.

Blue Ridge was a newcomer to the analysis as it crossed the $3 billion in assets threshold in the fourth quarter of 2022. The Charlottesville, Va.-based bank is addressing the financial technology partnership risks that were in its August 2022 formal written agreement with the Office of the Comptroller of the Currency.

Metropolitan Bank was one of only three banks in the analysis, and the only one on the bottom-20 valuation list, to record negative net income available to common shareholders in the most recent quarter. The New York-based bank's 2022 fourth-quarter earnings were substantially impacted by a regulatory settlement reserve that resulted in a $7.7 million loss following 24 consecutive profitable quarters.

"We have reserved $35 million toward a potential resolution of an investigation by the Federal Reserve and the [New York Department of Financial Services] relating to matters involving a fintech client [Metropolitan] banked in 2020," said President and CEO Mark DeFazio in an 8-K filing.

Signature Bank announced a management succession plan Feb. 16. Its shares were down 66.2% on a total return basis in the 12 months ended Feb. 28, outperforming just La Jolla, Calif.-based Silvergate Capital Corp. in the analysis.

New York Community's total assets surged to over $90 billion at the end of 2022, up 43.2% quarter over quarter following the acquisition of Troy, Mich.-based Flagstar Bancorp Inc.

The exits were Martinsville, Va.-based Carter Bankshares Inc.; Fairfield, N.J.-based Kearny Financial Corp.; New Canaan, Conn.-based Bankwell Financial Group Inc.; and Asheville, N.C.-based HomeTrust Bancshares Inc.

* Click here for S&P Global Market Intelligence's calculations for price to adjusted tangible book value as of Feb. 28. * Click here for a primer on the U.S. banking industry.

2021 top financial performers

The top three companies in the 2021 S&P Global Market Intelligence U.S. public bank ranking — Carmel, Ind.-based Merchants Bancorp; Phoenix-based Western Alliance Bancorp.; and Customers Bancorp — took different valuation paths during 2022.

A year ago, Merchants Bancorp and Customers Bancorp traded almost in line with the industry median price to adjusted tangible book value. Since then, both banks have continued to trade at a discount, with Customers Bancorp facing a much harsher market penalty. Merchants Bancorp's discount peaked at 57 percentage points in October 2022, but ended February at 16 percentage points. Customers Bancorp's peak discount was 92 percentage points in November 2022, declining to 79 percentage points at Feb. 28.

On the other hand, Western Alliance traded at a hefty 80-percentage-point premium to the industry median a year ago. It has continued to trade at a premium, albeit a smaller one, for all but one month during the last year. At the end of February, the premium was 24 percentage points.