I posted two articles last week arguing that perhaps the banking system is not as dire as seems, which you can read here and here.

I started tracking the banks last year. I have not made an investment yet, and still think it is too early, but valuations are at the point where dipping you toe into the water might make sense.

I do not know if I will execute this strategy, but I am thinking about buying a basket of well-capitalized, profitable banks that have been thrown out with the whole industry.

I keep a list of 538 banks.  When I last checked, 27 were trading below tangible book value.  Today, 100 are trading below tangible book value, or 19% of the universe.  In total, 412 are trading below book, or 77% of the universe.  Banks, as you could imagine, have become much cheaper since last summer.

These are the banks that are trading below tangible book value, were profitable last year and are expected to be profitable this year.

Capital Bank (ticker CBKN)
Cardinal Financial (CFNL)
Cascade Financial (CASB)
Center Financial (CLFC)
Central Valley Community Bancorp (CVCY)
Community Capital (CPBK)
Crescent Financial (CRFN)
First M&F (FMFC)
First Security Group (FSGI)
Firstbank Corp (FBMI)
Heritage Oaks Bancorp (HEOP)
Horizon Bancorp (HBNC)
Intervest Bancshares (IBCA)
LNB Bancorp (LNBB)
MacKinac Financial (MFNC)
MetroCorp Bancshares (MCBI)
Northrim Bancorp (NRIM)
Parke Bancorp (PKBK)
Porter Bancorp (PBIB)
Savannah Bancorp (SAVB)
Southern Community Financial (SCMF)
Southwest Bancorp (OKSB)
Summit Financial (SMMF)
Sun Bancorp (SNBC)
VIST Financial (VIST)

Now, I am not saying these are all buys.  This is a starting list. 

Some of these trade by appointment.  The average market cap is $53 million, ranging from $10 million to $135 million.  Average assets are $1.5 billion.  The average return on equity is 4.2%, ranging from 0.2% to 12.0%.  Net interest margin averages 3.5%, with ranges between 1.8% and 5.2%.  The efficiency ratio averages 66%.  Core capital averages 10.7%, with a low of 9.2% and a high of 13.5%.  Equity to assets averages 8.7%, ranging between 5.4% and 11.3%.  Loans to deposits averages 105% while earning assets to liabilities averages 117%.

There is more stress to come in the banking sector but I believe those who buy right will make fortunes buying banks during this time.