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Three years ago, the Seattle bank was struggling mightily with bad loans and diminishing capital. A recently completed IPO put $96 million back into the bank, putting it on the path to recovery.
March 8
A Michigan bank that recently endured three straight years of losing money and a Seattle thrift that was once on the verge of failure are among 22 banks and thrifts that the investment bank Sandler O'Neill & Partners LP predicts will be added to the Russell 3000 stock index this year.
In a positive sign for bank stocks in general, Sandler O'Neill also predicted in a research note to investors Wednesday that just two banking companies would fall off the index when it is rebalanced in June, compared to 11 banks and thrifts that were jettisoned last year.
Russell Investment Group rebalances the index each year based on market capitalization as of May 31. Sandler O'Neill projects that companies will need to have a market cap of at least $108 million to be eligible for the Russell 3000, or 16% lower than the $130 million cut-off last year.
The annual rebalancing is significant because it often instantly raises or lowers the profile of the companies that are added or subtracted.
"The stocks of companies that are added to, or deleted from, the Russell indices tend to react meaningfully," Sandler O'Neill said in its report.
In all, Sandler O'Neill expects 42 financial services firms to be added to the index in 2012.
Several banking companies that had been part of the Russell 3000 index in past years but were removed when they hit upon hard times during the financial crisis are expected to rejoin the index this year.
They include
First BanCorp is still in the red, but its future appears brighter thanks to a $560 million capital infusion it received from private-equity investors late last year. Its market cap at March 19 was $813 million.
Other bank and thrift companies that Sandler O'Neill expects to join the index are FNB United Corp. in Asheboro, N.C., a private-equity backed company that was created last year through the merger of two troubled banks; and
The companies Sandler O'Neill predicts will be removed from the index this year are Orrstown Financial Services Inc. of Shippensburg, Pa., and Hampton Roads Bancshares Inc. in Norfolk, Va.
Orrstown lost nearly $30 million in the fourth quarter due to a spike in problem loans and its stock price has fallen by more than 66% over the past year. Hampton Roads lost close to $99 million last year and its stock price is down more than 90% in the past year, to $2.43 midday Wednesday.
