Unlocking Value: 3 Undervalued Regional Banks with High Dividend Yields

Bank stocks have been cheap for 17 years since the financial crisis, with regional banks like OZK, BUSE, and WSBC having price-to-book ratios under 1.3. These banks offer attractive dividend yields between 3% and 5%. The large banks have already rallied, but the smaller regional banks are still cheap and offer strong earnings growth. WesBanco, Bank OZK, and Busey are three cheap bank stocks for value investors to consider.

In recent years, regional banks have been overlooked by investors, with their stock prices remaining relatively stagnant despite strong earnings growth. As of July 2025, regional banks like WesBanco (WSBC), Bank OZK (OZK), and Busey (BUSE) offer attractive dividend yields between 3% and 5%, making them appealing to value investors. This article explores the investment case for these undervalued regional banks, highlighting their potential for growth and the benefits of dividend investing.

Attractive Dividend Yields

Regional banks such as WesBanco, Bank OZK, and Busey offer dividend yields that are among the highest in the financial sector. According to NerdWallet [1], WesBanco has a dividend yield of 4.5%, Bank OZK has a yield of 3.8%, and Busey offers a yield of 5.2%. These high yields provide investors with a steady stream of passive income, which can be particularly attractive in times of market uncertainty.

Undervalued Stocks with Strong Earnings Growth

Despite their attractive dividend yields, these regional banks have been undervalued by the market. As of July 2025, WesBanco, Bank OZK, and Busey have price-to-book (P/B) ratios of 1.2x, 1.3x, and 1.1x, respectively, well below the regional banking sector average of 1.6x [2]. This undervaluation presents an opportunity for investors to buy these stocks at a discount and potentially benefit from a revaluation as the market recognizes their fundamentals.

Potential for Valuation Re-rating

Bank OZK, in particular, is poised for a valuation re-rating based on its upcoming Q2 2025 earnings report. With a short interest of 17.8%, a Raymond James Outperform rating, and a $58 price target, a strong earnings beat could spark a short-covering rally and lift the stock to a 15% upside [2]. Similarly, WesBanco and Busey have shown consistent earnings growth and could also benefit from a revaluation as the market recognizes their fundamentals.

Diversification and Risk Management

Investing in individual dividend stocks requires careful consideration of diversification and risk management. While regional banks offer attractive dividend yields, they are also subject to market risks and regulatory changes. Therefore, it is essential to maintain a diversified portfolio and monitor the companies' fundamentals regularly.

Conclusion

Regional banks such as WesBanco, Bank OZK, and Busey offer attractive dividend yields and are currently undervalued by the market. With strong earnings growth and potential for valuation re-rating, these banks present an opportunity for value investors. However, it is crucial to conduct thorough research and maintain a diversified portfolio when investing in individual dividend stocks.

References

[1] NerdWallet. "How to Invest in Dividend Stocks." https://www.nerdwallet.com/article/investing/how-to-invest-dividend-stocks

[2] AInvest. "Bank OZK Q2 Earnings: Contrarian Play, Undervaluation, Short Squeeze Catalysts." https://www.ainvest.com/news/bank-ozk-q2-earnings-contrarian-play-undervaluation-short-squeeze-catalysts-2507/