Investors favor big banks in February

Following fourth-quarter earnings season, market sentiment became more favorable toward the biggest US banks.

The S&P US index with banks over a $5 billion market capitalization had a total return of 3.8% in February, while the indexes with smaller-cap banks experienced negative returns. Most notably, the index with banks between a market cap of $250 million and $1 billion declined 5.4% last month.

The top monthly market performer among the 209 banks in the S&P Global Market Intelligence analysis was Wells Fargo & Co., with an 11.6% total return. Other top performers in the large-cap group included JPMorgan Chase & Co. at 6.7%, First Citizens BancShares Inc. at 4.3%, Huntington Bancshares Inc. at 2.4% and Bank of America Corp. at 2.2%.

The median total return in the analysis was negative 3.3%. More than 80% of the banks had negative returns in February, helping pull the industry median for price-to-adjusted tangible book value (TBV) down 10 percentage points during the month to 120.8%.

S&P Global Market Intelligence analyzed US banks trading on the Nasdaq, NYSE or NYSE American with total assets of greater than $3 billion as of the most recent quarter. The analysis excludes banks in the mutual holding company ownership structure and other operating subsidiaries. New York Community Bancorp Inc. also was excluded because its restated financial data for 2023 was unavailable.

HTM and credit-adjusted TBV is calculated as the sum of tangible common equity; unrealized gain or loss from held-to-maturity 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

Charlottesville, Va.-based Blue Ridge Bankshares Inc. was the cheapest bank in the analysis at the end of February, with a price-to-adjusted TBV of 31.2%. It had been the cheapest bank as of year-end 2023 but was ineligible for the January analysis because of unavailable data.

In December 2023, Blue Ridge rebuffed a potential acquisition offer from Mount Olive, NC-based Southern BancShares Inc. and opted for a $150 million recapitalization. The private placement is priced at $2.50 per share. The proposed acquisition was for between $4.50 and $5.50 per share, but a potential M&A transaction could face significant hurdles in securing regulatory approval. Shares in Blue Ridge closed at $2.45 as of the end of February.

Seattle-based HomeStreet Inc. was the No. 2 bank by lowest valuation, ending February at less than half of adjusted TBV. It announced a sale to Denver-based FirstSun Capital Bancorp on Jan. 16.

Flushing Financial Corp. was the weakest market performer in February, trading down 19.9% and falling to the No. 4 lowest-valued bank. Office exposure is causing significant stress at some banks, but Flushing Financial's relatively small portfolio appears to be holding up well. The Uniondale, NY-based bank had just $257 million of office loans at Dec. 31, 2023, representing 3.7% of gross loans. None of the office portfolio, 37% of which was comprised of medical/healthcare loans, was on nonaccrual status.

The Federal Reserve's Bank Term Funding Program (BTFP) is scheduled to expire March 11, impacting several banks in the analysis, including No. 8 Bethesda, Md.-based Eagle Bancorp Inc., No. 10 Woodbridge, NJ-based Northfield Bancorp Inc. and No. 17 Los Angeles-based Hope Bancorp Inc. Both Eagle Bancorp and Hope Bancorp had at least 10% of their total liabilities in BTFP borrowings as of the end of 2023.

Another company that will need to replace funding is Metropolitan Bank Holding Corp. The New York-based bank disclosed on Feb. 28 that it is exiting all banking as a service relationships, which accounted for 13.6% of total deposits at the end of 2023. Metropolitan Bank, ranked No. 13, was the second-worst market performer in February with a 19.1% loss.

The No. 12 bank, RBB Bancorp, announced a 1 million-share buyback program on Feb. 29. The Los Angeles-based bank repurchased 396,374 shares in 2023.

Most expensive banks

First Financial Bankshares Inc. was the most expensive bank in the analysis. As of Feb. 29, the Abilene, Texas-based bank traded at 356.7% of adjusted TBV.

Honolulu-based Bank of Hawaii Corp., the No. 4 bank by highest valuation, was the most shorted US bank trading on a major exchange at the end of January. Sioux Falls, SD-based Pathward Financial Inc., ranked No. 3, was the third-most shorted bank.

– Access S&P Global Market Intelligence's calculations for price-to-adjusted tangible book value as of Feb. 29, 2024. – Read some of the day's top news and insights from S&P Global Market Intelligence. – Set email alerts for future Data Dispatch articles.

Community Bank System Inc.'s fourth-quarter earnings were restated to account for a $5.8 million settlement. The DeWitt, NY-based bank had the fifth-highest valuation in the analysis at Feb. 29.

Ontario, Calif.-based CVB Financial Corp., the 15th-most expensive bank, specializes in commercial real estate lending, with an emphasis on the industrial segment. As of Dec. 31, 2023, industrial loans represented more than one-quarter of the bank's gross loans.

The 18th-most expensive bank, Glacier Bancorp Inc., is expanding in Montana through an acquisition. The Kalispell, Mont.-based bank is acquiring six branches from Denver-based Heartland Financial USA Inc.