Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 6 stocks made the list for top value stocks in the Banks industry. Those looking for value stocks to add to their portfolio may want to use this list as a starting point for further investment research.

Why Focus on Undervalued Banks Stocks?

Value investors seek to buy stocks at a discount to their intrinsic value. Long-term returns show that such strategies are advantageous. Value stocks, as a group, tend to outperform growth stocks over extended periods of time. Typically, value investors perform financial analysis of numerous metrics, don’t follow the herd and are long-term investors.

AAII’s A+ Investor Value Grade is derived from a stock’s Value Score. The Value Score is the percentile rank of the average of the percentile ranks of the price-to-sales ratio, price-earnings ratio, enterprise-value-to-EBITDA (EV/EBITDA) ratio, shareholder yield, price-to-book-value ratio and price-to-free-cash-flow ratio. The score is variable, meaning it can consider all six ratios or, should any of the six ratios not be valid, the remaining ratios that are valid. To be assigned a Value Score, stocks must have a valid (non-null) ratio and corresponding ranking for at least two of the six valuation ratios.

What Goes Into AAII’s Value Grade?

Stock evaluation requires access to huge amounts of data as well as the knowledge and time to sift through it all, make sense of financial ratios, read income statements and analyze recent stock movement. AAII created A+ Investor, a robust data suite that condenses data research in an actionable and customizable way suitable for investors of all knowledge levels, to help investors with that task.

AAII’s proprietary stock grades come with A+ Investor. These offer intuitive A–F grades for more than just value. It is possible for a stock to appear cheap based on one valuation metric but appear expensive on another. It is also possible for one valuation ratio to be associated with outperforming stocks during certain periods of time but not others. Some stocks may even have null values for certain metrics like the price-earnings ratio or the price-to-book ratio but not others. An example of this would be a company with losses instead of profits or a negative book value because of heavy borrowing. Negative earnings or book value result in non-meaningful ratios that are left blank or null.

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6 Undervalued Banks Stocks

Of course, there are countless value stocks that are worth mentioning, but this is a concise list of the top 6 undervalued stocks in the Banks industry for Friday, May 03, 2024. Let’s take a closer look at their individual scores to see how they measure up against each other and the Banks industry median.

The Value Grade is assigned based on how each stock’s composite valuation compares to all other stocks.

The process for assigning grades starts with each variable for a given stock. The percentile rankings for all valid ratios that a stock has are calculated. So, for instance, a stock could have a price-to-book ranking in the 43rd percentile, a price-earnings ranking in the 67th percentile, a price-to-sales ranking in the 23rd percentile, etc. Then, those rankings are averaged for each stock. (A minimum of two valid variables are required, though all six will be used if available.)

Once the average of the individual variables is calculated, that average is ranked against all stocks. Put another way, each stock’s composite valuation is compared to all other stocks. These ranks are then sorted into quintiles from the cheapest 20% (a grade of A) to the most expensive 20% (a grade of F).

As always, we recommend that you conduct proper due diligence and research before investing in any security. We also suggest that investors utilize numerous grades, not just value, when it comes to deciding whether a company is a good fit for their allocation needs.

Bank of San Francisco’s Value Grade

Value Grade:

Bank of San Francisco (Bank) is a state-chartered commercial bank. Bank of San Francisco is a state-chartered commercial bank. The Bank provides a full range of banking services to businesses, nonprofits and individuals located in its community. It provides a variety of deposit products, including checking, savings, and money market accounts and certificates of deposit. The Bank is also engaged in mortgage banking activities and, as such, originates and both brokers and retains one-to-four-unit mortgage loans in its portfolio. The principal market for the Bank’s financial services is San Francisco. The Bank offers real estate mortgages, real estate construction, and commercial and consumer loans to clients primarily in its principal market. The Bank also provides commercial real estate, residential real estate, construction and land, commercial and industrial, consumer loans, and other loans.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Bank of San Francisco has a Value Score of 76, which is considered to be undervalued.

When you look at Bank of San Francisco’s price-to-sales ratio at 1.85 compared to the industry median at 1.84, this company has a higher price relative to revenue compared to its peers. This could make Bank of San Francisco’s stock less attractive for value investors.

Bank of San Francisco’s price-earnings ratio is 7.85 compared to the industry median at 10.03. This means it has a lower share price relative to earnings compared to its peers. This could make Bank of San Francisco more attractive for value investors.

Now, let’s assess Bank of San Francisco’s EV/EBITDA ratio, also known as enterprise multiple. At 4.9, when compared to the industry median of 7.5, the company may be considered undervalued in relation to its peers. Value investors could use the enterprise multiple to identify stocks that are considered overvalued or undervalued relative to their industry.

Shareholder yield is the sum of a stock’s dividend yield (paid over previous 12 months minus special dividends) and the percentage of net share buybacks over the previous 12 months. Bank of San Francisco’s shareholder yield is lower than its industry median ratio of 3.55%. Value investors may look for an attractive shareholder yield because it can be a powerful tool for identifying if the company has a good management team.

As one of the most common value metrics, the price-to-book ratio evaluates a company’s current market price relative to its book value. Bank of San Francisco’s price-to-book ratio is lower than its industry median ratio of 0.89. This could make Bank of San Francisco more attractive to investors looking for a new addition to their portfolio.

First Ottawa Bancshares Inc’s Value Grade

Value Grade:

First Ottawa Bancshares, Inc. is a bank holding company. The Company’s principal activity is the ownership and management of its subsidiary, American Commercial Bank & Trust, National Association (the Bank). The Bank is primarily engaged in providing a full range of banking and financial services to individual and corporate customers in LaSalle, Grundy, Cook, and surrounding counties in Illinois. Its portfolio segments include commercial real estate, commercial non-real estate, construction, and land development, agricultural, residential, and consumer. The Bank's business banking includes business accounts, cash management, commercial lending, and farm management and agricultural lending. Its personal banking includes checking and savings, certificate of deposits and individual retirement accounts (IRAs), consumer lending, online and mobile banking, safe deposit boxes, and wealth management services. Its residential lending services include Residential Loans and Home Equity Loans.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

First Ottawa Bancshares Inc has a Value Score of 84, which is considered to be undervalued.

First Ottawa Bancshares Inc’s price-earnings ratio is 6.5 compared to the industry median at 10.0. This means that it has a lower price relative to its earnings compared to its peers. This makes First Ottawa Bancshares Inc more attractive for value investors.

First Ottawa Bancshares Inc’s price-to-book ratio is lower than its peers. This could make First Ottawa Bancshares Inc more attractive for value investors when compared to the industry median at 0.89.

You can read more about First Ottawa Bancshares Inc’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Highlands Bankshares Inc (West Virginia)’s Value Grade

Value Grade:

Highlands Bankshares, Inc. is a bank holding company, which operates through its two wholly owned subsidiary banks, The Grant County Bank and Capon Valley Bank. The Company also offers insurance services through its wholly owned subsidiary, HBI Life Insurance Company. The Grant County Bank operates six branch offices located in the towns of Moorefield, Keyser, Riverton, Harman, Davis and Canaan Valley, West Virginia. Capon Valley Bank operates four offices in Baker and Moorefield, West Virginia, and in Gore and Stephens City, Virginia. The Company owns and operates a total of 12 banking locations throughout seven counties in two states. Both banks offer a range of banking products and services, including online banking and merchant processing services.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Highlands Bankshares Inc (West Virginia) has a Value Score of 78, which is considered to be undervalued.

Highlands Bankshares Inc (West Virginia)’s price-earnings ratio is 12.9 compared to the industry median at 10.0. This means that it has a higher price relative to its earnings compared to its peers. This makes Highlands Bankshares Inc (West Virginia) less attractive for value investors.

Highlands Bankshares Inc (West Virginia)’s price-to-book ratio is higher than its peers. This could make Highlands Bankshares Inc (West Virginia) less attractive for value investors when compared to the industry median at 0.89.

You can read more about Highlands Bankshares Inc (West Virginia)’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Northeast Indiana Bancorp Inc’s Value Grade

Value Grade:

Northeast Indiana Bancorp, Inc. is the holding company for First Federal Savings Bank (First Federal). First Federal offers a full array of banking and financial advisory services to its customers through three full-service locations in Huntington, Indiana, one full-service location in Warsaw, Indiana and two full-service locations in Fort Wayne, Indiana. The Bank’s personal banking includes checking, savings/certificate of deposits (CDs), health savings accounts, retirement accounts, direct deposit, credit cards, debit cards, checking, loans, safety deposit boxes and online banking. Its business banking includes business checking accounts, business debit cards, merchant services and cash management. Its financial services include investments, insurance, wealth management and corporate retirement accounts. Its subsidiaries include FFSB Portfolio Holdings, Inc. and FFSB Real Estate Holdings, Inc.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Northeast Indiana Bancorp Inc has a Value Score of 87, which is considered to be undervalued.

Northeast Indiana Bancorp Inc’s price-earnings ratio is 9.5 compared to the industry median at 10.0. This means that it has a lower price relative to its earnings compared to its peers. This makes Northeast Indiana Bancorp Inc more attractive for value investors.

Northeast Indiana Bancorp Inc’s price-to-book ratio is higher than its peers. This could make Northeast Indiana Bancorp Inc less attractive for value investors when compared to the industry median at 0.89.

You can read more about Northeast Indiana Bancorp Inc’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Pacific Financial Corp’s Value Grade

Value Grade:

Pacific Financial Corporation is the bank holding company for Bank of the Pacific (the Bank), a state chartered commercial bank. The Bank offers banking products and services to small-to-medium sized businesses and professionals in western Washington and Oregon. It offers a range of services, such as personal banking, business banking, online banking, and home loans. Its personal banking provides personal banking, savings solutions, investments, consumer loans and lines of credit, account switch kit, rates, consumer fee schedule and pay loan online. The Bank's business banking provides business checking, business savings options, commercial and industrial loans, commercial real estate, contact a commercial lender, merchant services and treasury management. Its online banking provides personal online, personal bill pay, business online, business bill pays, mobile and browser security. Its home loan banking provides mortgage loan specialists, purchase, refinance, and home equity loan.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Pacific Financial Corp has a Value Score of 91, which is considered to be undervalued.

Pacific Financial Corp’s price-earnings ratio is 7.4 compared to the industry median at 10.0. This means that it has a lower price relative to its earnings compared to its peers. This makes Pacific Financial Corp more attractive for value investors.

Pacific Financial Corp’s price-to-book ratio is lower than its peers. This could make Pacific Financial Corp fairly attractive for value investors when compared to the industry median at 0.89.

You can read more about Pacific Financial Corp’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Seneca Financial Corp’s Value Grade

Value Grade:

Seneca Financial Corp. is a holding company for Seneca Federal Savings and Loan Association (the Bank). The Bank is a community-oriented savings and loan institution whose business primarily consists of accepting deposits from customers within its market area and investing those funds primarily in residential mortgage and commercial loans. The Company’s personal banking services include loans, deposit accounts, investment services, and managing wealth and planning for retirement. Its online banking services include business banking, business deposit accounts, business loans and online business banking.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Seneca Financial Corp has a Value Score of 88, which is considered to be undervalued.

Seneca Financial Corp’s price-earnings ratio is 10.7 compared to the industry median at 10.0. This means that it has a higher price relative to its earnings compared to its peers. This makes Seneca Financial Corp less attractive for value investors.

Seneca Financial Corp’s price-to-book ratio is higher than its peers. This could make Seneca Financial Corp less attractive for value investors when compared to the industry median at 0.89.

You can read more about Seneca Financial Corp’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Other Banks Stock Grades

Value is just one of the five Stock Grades included in our A+ Investor service. AAII members can see the top-graded stocks—those with grades of A or B for value, growth, momentum, earnings estimate revisions and quality—on the A+ Stock Grades Screener.

Also, if you want full access to all of AAII’s premium services, you can subscribe to one convenient bundled plan called AAII Platinum where you can try out A+ Investor, AAII Dividend Investing, the Stock Superstars Report, Growth Investing and VMQ Stocks. With the other premium services, you can dive deep into additional metrics, portfolios, commentary and information about Banks stocks as well as other industrys.

Choosing Which of the 6 Best Banks Stocks Is Right for You

Choosing which value stocks to invest in will ultimately depend on your individual goals and allocation; however, comparing similar value stocks in the same industry can help you analyze which might be better investments for you in the long run. So, let’s take a look at the Value Grade for all of our stocks.

• Bank of San Francisco stock has a Value Grade of B.
• First Ottawa Bancshares Inc stock has a Value Grade of A.
• Highlands Bankshares Inc (West Virginia) stock has a Value Grade of B.
• Northeast Indiana Bancorp Inc stock has a Value Grade of A.
• Pacific Financial Corp stock has a Value Grade of A.
• Seneca Financial Corp stock has a Value Grade of A.

Now that you have a bit more background about each of the 6 undervalued stocks in the Banks industry as well as their overall grades, it’s time for you to conduct additional research to see if these could fit your portfolio needs based on your goals and risk tolerance. AAII can help you figure out both and identify which investments align with what works best for you.

We do so through a program of education that teaches you to invest for yourself and become an effective manager of your own wealth—no more relying on others for your financial independence. You can rely on AAII for timeless articles on financial planning and stock-picking, unbiased research and actionable analysis that makes you a better investor.

A+ Investor adds to that qualitative teaching by giving you a powerful data suite that helps you whittle down investment decisions to find stocks, exchange-traded funds (ETFs) or mutual funds that meet your needs.

Additional Resources About Banks Stocks

Want to learn more about Banks stocks to see if they could be the right investment for you? Check out some additional resources and articles to help you on your financial journey.

• 6 Undervalued Banks Stocks for Friday, May 03
• 3 Undervalued Banks Stocks for Thursday, May 02
• What You Need to Know About Shore Bancshares Inc's Q1 Earnings
• What You Need to Know About Walker & Dunlop, Inc.'s Q1 Earnings

AAII Disclaimer

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