U.S. Treasury bond yields rose swiftly yesterday, hitting a multi-year high. An increase in Treasury yields helps banks earn more interest income. The benchmark 10-year Treasury note yield climbed 6.2 basis points to 2.379% yesterday after Fed Chairman Jerome Powell hinted at raising interest rates quickly and aggressively.

The economy has been facing strong inflationary pressure of late, with the Consumer Price Index rising 7.9% in February, its highest increase since January 1982. Last week, the Fed approved its first interest rate hike in more than three years and plans to increase rates several more times this year. However, hotter than expected inflation data may compel the Fed to raise interest rates more aggressively than forecasted to keep inflation in check. Kathy Jones, the chief fixed-income strategist at Charles Schwab, said, “The tone and the message he’s delivering is, “we are going to tighten policy.”” Higher interest rates help banks increase their margins. Investors’ growing interest in the regional bank stocks is evident in the SPDR S&P Regional Banking ETF’s (KRE) 15.1% gains over the past six months.

Given this backdrop, we think it could be wise to add fundamentally strong regional bank stocks Popular, Inc. (BPOP), Origin Bancorp, Inc. (OBNK), Byline Bancorp, Inc. (BY), QCR Holdings, Inc. (QCRH), and Horizon Bancorp, Inc. (HBNC) to one’s portfolio.

Popular, Inc. (BPOP)

Headquartered in Hato Rey, Puerto Rico, BPOP provides retail, mortgage, and commercial banking products and services in Puerto Rico, the United States, and the British Virgin Islands. The company provides savings, NOW, money market, and other interest-bearing demand accounts; non-interest-bearing demand deposits; and certificates of deposits. It also offers commercial real estate loans, residential mortgages, and consumer loans.

On Feb. 24, 2022, BPOP announced that its wholly owned subsidiary, Banco Popular de Puerto Rico (BPPR), had agreed with Evertec, Inc. and its wholly-owned subsidiary Evertec Group, LLC, to acquire the assets used by Evertec to service certain BPPR channels. The acquisition is expected to accelerate BPOP’s ongoing digital transformation and improve the experience of its clients. BPOP’s President and CEO Ignacio Alvarez said, “This transaction will enhance our client experience and allow us greater flexibility to meet our customer demands.”

BPOP’s net interest income increased 6.2% year-over-year to $501.28 million for the fourth quarter, ended Dec. 31, 2021. The company’s total non-interest income increased 13.6% year-over-year to $144.84 million. Also, its net income applicable to common stock increased 16.9% year-over-year to $205.71 million. In addition, its EPS came in at $2.58, representing a 22.8% increase  year-over-year.

Analysts expect BPOP’s EPS for its fiscal year 2023 to increase 8.3% year-over-year to $10.44. Its revenue for the quarter ending June 30, 2022, is expected to increase 9.4% year-over-year to $533.85 million. It surpassed the Street’s EPS estimates in each of the trailing four quarters. And over the past year, the stock has gained 22.6% in price to close the last trading session at $85.25.

BPOP’s strong fundamentals are reflected in its POWR Ratings. It has an overall B rating, which equates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

It has a B grade for Value, Momentum, and Sentiment. It is ranked #4 of 26 stocks in the Southeast Regional Banks industry. Click here to see the other ratings of BPOP for Growth, Stability, and Quality.

Origin Bancorp, Inc. (OBNK)

OBNK in Ruston, La., provides banking and financial services to small- and medium-sized businesses, municipalities, high-net-worth individuals, and retail clients. It offers non-interest and interest-bearing checking accounts, savings deposits, money market accounts, and time deposits. It also provides mortgage warehouses, residential mortgages, and paycheck protection program loans.

On Feb. 24, 2022, OBNK announced its agreement to  acquire BT Holdings, Inc. (BTH) in an all-stock transaction. OBNK’s Chairman, President and CEO Drake Mills, said, “I firmly believe that our cultural alignment and shared values provide an ideal combination to drive growth and long-term value for our employees, customers, communities and shareholders.”

For its fiscal fourth quarter, ended Dec. 31, 2021, OBNK’s net income increased 60.7% year-over-year to $28.32 million. The company’s total deposits increased 6.6% sequentially to $6.57 billion. Also, its net interest income increased 3.1% sequentially to $54.18 million.

For its fiscal year 2023, OBNK’s EPS and revenues are expected to increase 24.7% and 27.2%, respectively, year-over-year to $4.24 and $381.29 million. It surpassed the Street’s EPS estimates in each of the trailing four quarters. Over the past six months, the stock has gained 9.3% in price to close the last trading session at $44.18.

OBNK’s POWR Ratings reflect solid prospects. The company has an overall B rating, which translates to a Buy in our proprietary rating system.

It has a B grade for Momentum, Stability, and Sentiment. It is ranked #4 of 27 stocks in the Southwest Regional Banks industry. To see the other ratings of OBNK for Growth, Value, and Quality, click here.

Byline Bancorp, Inc. (BY)

BY is a bank holding company that operates through its subsidiary, Byline Bank, a full-time commercial bank. The Chicago-based bank offers a range of banking products and services to small- and medium-sized businesses, commercial real estate and financial sponsors, and consumers. It also offers various deposit products, including savings accounts, non-interest-bearing accounts, and money market deposit accounts.

On Dec.10, 2021, BY announced its plans to continue to optimize its branch network, dispose of a portfolio of owned real estate properties, and reduce the amount of office square footage it occupies as part of its efforts to adapt to changes in customer behavior and improve operating efficiencies. BY’s president, Alberto J. Paracchini, said, “The strategic actions we are taking are the result of our continued focus to position ourselves to meet our customers’ current and evolving banking needs. We expect to reinvest approximately 70% of the anticipated annualized cost savings into talent and technology that will further enhance our digital banking capabilities.”

BY’s net interest income increased 10.1% year-over-year to $61.72 million for the fourth quarter, ended Dec. 31, 2021. The company’s total non-interest income increased 7.4% year-over-year to $19.01 million. Also, its adjusted net income increased 72.8% year-over-year to $26.26 million. In addition, its adjusted EPS came in at $0.69, representing an increase of 81.5% year-over-year.

Analysts expect BY’s EPS and revenue for its fiscal year 2023 to increase 7.1% and 4.7%, respectively, year-over-year to $2.10 and $318.50 million. It surpassed the Street’s EPS estimates in three of the trailing four quarters. Over the past year, the stock has gained 30.3% in price to close its last trading session at $27.12.

BY’s strong fundamentals are reflected in its POWR ratings. The company has an overall B rating, which translates to a Buy in our proprietary rating system.

It has an A grade for Stability and a B grade for Momentum and Sentiment. It is ranked #7 of 42 stocks in the Midwest Regional Banks industry. Click here to see the other ratings of BY for Growth, Value, and Quality.

QCR Holdings, Inc. (QCRH)

QCRH is a Moline, Ill.-based multi-bank holding company that provides commercial and consumer banking and trust and asset management services. Its deposit products include noninterest-bearing demand, interest-bearing demand, time, and brokered deposits. The company also provides various commercial and retail lending/leasing and investment services. It serves the Quad Cities, Cedar Rapids, Waterloo/Cedar Falls, Des Moines/Ankeny, and Springfield markets.

On Nov. 9, 2021, QCRH announced that it had signed a definitive agreement to acquire Guaranty Federal Bancshares, Inc (GFED) and merge Guaranty Bank into its Springfield First Community Bank. QCRH’s CEO Larry Helling said, “Enhancing our market share in this region supports our strategic goals and enables us to extend our high-performing and profitable niche business lines benefiting clients and shareholders alike.”

For the fiscal fourth quarter, ended Dec. 31, 2021, QCRH’s adjusted net income increased 43.4% year-over-year to $27.42 million. The company’s adjusted EPS came in at $1.73, representing an increase of 44.1% year-over-year. Also, its adjusted net interest income increased 8.7% year-over-year to $49.22 million.

For the quarter ending March 31, 2022, QCRH’s EPS is expected to increase 33.9% year-over-year to $1.50. Its revenue for the quarter ending June 30, 2022, is expected to increase 36.1% year-over-year to $60.57 million. Over the past year, the stock has gained 20.4% in price to close the last trading session at $56.76.

QCRH’s POWR Ratings reflect solid prospects. The stock has an overall B rating, equating to a Buy in our proprietary rating system.

It has a B grade for Value, Momentum, and Stability. Within the Southwest Regional Banks industry, it is ranked #2. To see the other ratings of QCRH for Growth, Sentiment, and Quality, click here.

Horizon Bancorp, Inc. (HBNC)

Michigan, Ind.-based HBNC provides a range of banking services through its bank subsidiary, Horizon Bank. Horizon is a full-service commercial bank that offers commercial and retail banking services, corporate and individual trust and agency services, and other services incident to banking.

HBNC’s adjusted net income increased 3.8% year-over-year to $23.71 million for the fourth quarter, ended Dec. 31, 2021. The company’s adjusted EPS came in at $0.54, representing a 3.8% increase year-over-year. Also, its net interest income increased 14.6% year-over-year to $49.97 million.

Analysts expect HBNC’s EPS and revenue for its fiscal year 2023 to increase 10% and 7.2%, respectively, year-over-year to $2.31 and $273.47 million. It surpassed consensus EPS estimates in three of the trailing four quarters. Over the past six months, the stock has gained 18.9% in price to close the last trading session at $20.13.

HBNC’s strong fundamentals are reflected in its POWR ratings. The company has an overall B rating, which translates to a Buy in our proprietary rating system.

It has a B grade for Momentum, Stability, and Sentiment. It is ranked #8 out of 35 stocks in the Mid-Atlantic Regional Banks industry. Click here to see the other ratings of HBNC for Growth, Value, and Quality.