Bank of America Corp (BAC), Citigroup Inc. (C), JPMorgan Chase & Co. (JPM): Forget the Mega Banks … Go Smaller to Win in Financials

S.Y. Bancorp, Inc. (NASDAQ:SYBT) is the parent of Stock Yards Bank & Trust and is based in Louisville, KY, with auxiliary operations in Indianapolis, IN, and Cincinnati, OH.  This bank is coming off a record year for net income where the company generated $25.8 million, a 9.32% increase from 2011. SY Bancorp boasts an ROE of 13.26%, with a healthy operating margin of 37.99%. The 109 year old firm has a 3.50% dividend and matches Penns Woods Bancorp with a beta of 0.76.

Conway, Arkansas, is the headquarters for Home Bancshares Inc (NASDAQ:HOMB), holding company for Centennial Bank. This operation has 47 branches in Arkansas, 46 in Florida, and 8 in Alabama.  It shows an ROE of 12.74%, but the mind-blowing 51.33 % operating margin is the statistic that raises eyebrows. The bank announced a 30% increase in its quarterly dividend in January, raising its yield to 1.50%.  Home Bancshares holds the lowest beta of the three featured stocks, with a 0.73 correlation to the overall market.

The takeaway

With dramatically less internal problems and much greater efficiency in their business models, regional banks offer more stability and growth potential than the Big Four. Penn Woods Bancorp, SY Bancorp, and Home Bancshares are the “white knight” alternatives to saddle up and ride through the rocky financial sector.

The article Forget the Mega Banks … Go Smaller to Win in Financials originally appeared on Fool.com and is written by Mike Richardson.

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