Median price to adjusted tangible book value falls to 106% for US banks in May

US bank stocks experienced another challenging month in May, dragging down industry valuations.

After bank stocks tumbled 18.6% in March and 6.9% in April, the beatdown continued in May. The 209 banks in the S&P Global Market Intelligence analysis had a median total return of negative 6.3% during the month, underperforming the S&P 500's 0.4%. At the end of May, the industry median for price to tangible book value (TBV), adjusted for marks on credit and held-to-maturity (HTM) securities, fell to 106.2%, about 11 percentage points lower compared to the valuation as of April 28.

Just five banks in the analysis bucked the industry trend and posted a positive double-digit percentage return in May, led by First Citizens BancShares Inc.'s 23.9%. The Raleigh, NC-based bank extended its bull run following first-quarter earnings, more than doubling its basic tangible book value. At the end of May, First Citizens traded on par with the industry median in terms of price to TBV, adjusted for marks on credit and held-to-maturity securities.

S&P Global Market Intelligence analyzes US 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 seized by regulators, banks undergoing a liquidation, banks with a negative held-to-maturity and credit adjusted tangible book value, 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.

HTM and credit adjusted tangible book value is calculated as the sum of tangible common equity; unrealized gain or loss from HTM securities, tax-adjusted at the 21% corporate rate; and loss reserves; less nonperforming assets and loans 90 or more days past due but still accruing interest; divided by common shares outstanding.

Least expensive banks

For the second consecutive month, HomeStreet Inc. was the weakest market performer and the cheapest bank in the analysis. The Seattle-based bank's negative 45.4% return in May dropped its price to HTM and credit adjusted TBV to 18.3%, more than 7 percentage points lower than any other peer.

Four other banks ended May trading below 50% of HTM and credit adjusted TBV: Dallas-based First Foundation Inc. at 25.5%; Fishers, Ind.-based First Internet Bancorp at 30.2%; Beverly Hills, Calif.-based PacWest Bancorp at 34.2%; and Los Angeles-based RBB Bancorp at 45.7%. In early May, First Internet disclosed an additional charge-off on a commercial and industrial participation loan. PacWest reported substantial deposit flight following the First Republic Bank failure and is undertaking actions to shrink its balance sheet, including a construction loan sale. At RBB Bancorp, a director resigned due to differences on governance issues.

– Click here for S&P Global Market Intelligence's calculations for price to adjusted tangible book value as of May 31. – Read some of the day's top news and insights from S&P Global Market Intelligence. – Set email alerts for future Data Dispatch articles.

Most expensive banks

Community Bank System Inc. was the most expensive bank in the analysis with a price to HTM and credit adjusted TBV of 351.1%. Hedge fund Jacobs Asset Management LLC more than tripled its position in the Dewitt, NY-based bank in the first quarter.

Bank First Corp. was a top market performer in May, with a total return of 11.3%. Its price-to-adjusted TBV valuation rose to 203.7% from 181.9% at the end of April, making it No. 13 on the list. The Manitowoc, Wis.-based bank has one of the most illiquid stocks in the analysis, with average daily volume under 14,000 shares for the year ended May 31.

Largest valuation changes

Bank of Hawaii Corp. had the highest adjustment to its price-to-TBV ratio, at 86.4 percentage points. The Honolulu-based bank was the second-most shorted US bank stock at the end of April, behind only PacWest.

Fifth Third Bancorp's price to adjusted TBV was 16 percentage points lower than its price to basic TBV. In contrast to superregional peers like Truist Financial Corp., Fifth Third holds a minimal amount of HTM securities. Fifth Third has been busy on the nonbank M&A front. On May 22, it acquired Rize Money Inc., and on May 15, it completed the acquisition of Big Data Healthcare LLC.