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US banks trading at lowest price-to-adjusted tangible book value in July

The largest U.S. public bank stocks carried the sector to a market-beating performance in July, but several banks are still trading at a substantial discount to tangible book value.

The market-cap-weighted SNL U.S. Bank and Thrift Index appreciated 3.8% last month, topping the S&P 500's 1.4% total return. The median monthly return for the 327 companies in the S&P Global Market Intelligence analysis was 1.5%. The 16 largest U.S. banks by total assets all had total returns greater than 1.5% in July.

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Houston-based Cadence Bancorp. was one of the weakest market performers in July, with a negative 17.6% total return. The stock plunged following the second-quarter earnings release, as the bank disclosed a spike in net charge-offs and the loan loss provision. At the end of July, Cadence traded at 122% of adjusted tangible book value, down from 160% in June. Last summer, the bank's ratio exceeded 200%.

Two other Houston-based banks, CBTX Inc. and Allegiance Bancshares Inc., also have seen their valuations shrink since August 2018, although they continue to trade at a premium to the industry median. In contrast to Cadence, both CBTX and Allegiance reported higher EPS and lower net charge-offs on a year-over-year basis.

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Four companies entered the bottom 25 valuation list in July: Oswego, N.Y.-based Pathfinder Bancorp Inc.; Louisville, Ky.-based Limestone Bancorp Inc.; Toano, Va.-based C&F Financial Corp.; and Hamilton, N.J.-based First Bank. Pathfinder crossed the $1 billion asset threshold in the second quarter, while Limestone announced a branch acquisition in July.

Exiting the list were a trio of California companies — Santa Ana-based Banc of California Inc.; Irvine-based Opus Bank; and Costa Mesa-based Pacific Mercantile Bancorp — in addition to Terre Haute, Ind.-based First Financial Corp.

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Click here to see S&P Global Market Intelligence's calculations for price-to-adjusted tangible book value as of July 31, 2019.