FBC, SNBC, SBCF: Regional Banks Looking Strong Ahead of Earnings

Regional banks Flagstar Bancorp Inc (NYSE: FBC), Sun Bancorp Inc (NASDAQ: SNBC), and Seacoast Banking Corporation of Florida (NASDAQ: SBCF) are trading strongly ahead of their earnings announcements.

Flagstar Bancorp Inc (NYSE: FBC) had 162 banking centres located in Michigan, Indiana and Georgia as on September 2011. However, the count is expected to reduce by around 50 when the company provides its latest earnings update on January 25. If performance in recent quarters is any indicator, we may see another quarter of reduced losses. Although the company has displayed a declining trend in interest income during all the three quarters so far in the year, more than proportionate decline in expenses has more than made up for revenue reductions. As a result, FBC’s net loss for the nine months in 2011 reduced to $120,761 from $201,492 during the same period in the previous year. The company completed the sale of its 27 banking centers in Georgia to PNC Bank and 22 banking centers in Indiana to First Financial Bancorp in December and while exact financial details for both transactions are not known, the deals are expected to boost FBC’s annual results to a huge margin.

The deal has effectively made FBC a regional bank with sole focus on Michigan. This may have its downsides but the company will surely gain a lot in efficiency savings. Its stock, currently available at $0.74, appears to have significant upside in light of these developments, even after gaining 62.6 per cent in the last month.

Sun Bancorp Inc (NASDAQ: SNBC) made an advance of nearly 27 per cent in the last 30 days as analysts upgraded this regional banking play and Wilbur Ross made a $1.8 million bet on the company.

Seacoast Banking Corporation of Florida (NASDAQ: SBCF) has lined up its annual earnings on 26 January. The first three quarters in 2011 were simple remarkable compared to 2010 when the performance was adversely affected by provisioning for loan losses. The bank is likely to beat analysts’ expectations for the full year by posting net profits.  

It was no brainer six months ago that regional banks are here to stay and thrive at the expense of bigger banks because of their unique ability to customise their service according to clients, something very difficult for bigger banks. Although it somewhat restricts the scale growth of regional banks, narrow focus is the name of the game and no harm in pursuing it if it leads to profits.