S&P Global Market Intelligence identified 10 tangiblebook value winners in the banking sector as of Sept. 27. These banks aresuccessfully managing their tangible common equity yet are priced at a discountto the industry.

Banks are financial intermediaries with credit and interestrate risk, so sometimes they trade to a certain extent based on variouscalculations of liquidation value, including TBV and cash dividends. Mostcompanies in the sector that are growing gross TBV (basic TBV, gross of cashdividends paid) faster than the industry median and that are earning well abovetheir cost of capital, trade at premium valuations. A handful of those highperformers may be underappreciated, unless investors are forecasting a sustaineddownward trend in profitability.

The analysis byS&P Global Market Intelligence covered only fully public U.S. banks andthrifts that were not merger targets, traded on a major exchange, had totalassets of greater than $1 billion as of June 30 and had nonrecurringrevenue-to-total revenue of less than 10% for the 12 months ended June 30.

The most importantcriterion, the lynchpin for TBV winners, was growth in gross TBV in excess ofthe industry median over multiple periods. The growth hurdles were greater than12.5% for the 12 months ended June 30 and greater than 3.5% for the quarterended June 30. Additionally, inclusion on the winners’ list required a returnon average tangible common equity (ROATCE) in excess of 11% for the 12 monthsended June 30 and a price/TBV below 150% as of Sept. 27.

Among the TBV winners, Sandusky, Ohio-based experienced thehighest growth rate in gross TBV for the last 12 months at 25.7%. It also wasthe only one of the 10 companies to clear the 20% ROATCE bar. Its results wereaided by a loanpayoff in the second quarter.

Irvine, Calif.-based was the top gross TBV grower in the second quarter at 10.2%. Total assetscrossed over the $10 billionthreshold in the second quarter, and are up 58% in the last year.PL Capital Group, anactivist financial hedge fund that owned 4.8% of the stock as of Sept. 9, isconcerned about the bank’s corporate governance and executive compensation. TimothyCoffey of FIG Partners LLC downgraded Banc of California in August to"underperform" and cut his 2017 EPS estimate by 18 cents to $1.65,citing a projected increase in the bank’s share count from .

Two superregional banks — Cincinnati-based and Atlanta-based SunTrust BanksInc. — made the TBV winners' list.Following Fifth Third's announcement of its new strategic initiative,"Project North Star," Dick Bove of Rafferty Capital Markets LLC and of Compass PointResearch & Trading LLC upgraded the stock to "buy." As forSunTrust, part of its TBV increase was from net unrealized gains on securities,totaling $550.0 million at June 30, which was the highest level during the last15 quarters.

Another TBV winner, West Point, Va.-based , alsoshows up in S&P Global Market Intelligence’s analysis of banks with thelowest price-to-adjustedTBV. C&F Financial's loan loss reserves are more than 3.5x thesum of its nonperforming assets and loans 90 days past due but still accruing,resulting in a large gap between basic TBV and adjusted TBV.