Doug Hughes is a specialist in community and regional banks. For his Top Pick for 2015, the editor of Bank Newsletter turns to a Palo Alto-based regional.

Avid Bank Holdings (AVBH) is a $450 million commercial bank located in the red hot Palo Alto section of California.

In my view, this bank could be the next takeover target with 15% + loan growth. The bank also has had zero charge offs the past two years.

Meanwhile, the stock is trading at just $0.50 cents over book value, which makes this a strong buy under $12.50.

In my view, the shares are worth at least 1.75 times book in a deal. Avid Bank Holdings' earning power of $1.20 share in 2015 is possible and $1.50 is possible looking out to 2016.

Overall, this is a very solid bank, with insiders owning a ton at almost 16%. In addition, insiders also bought a huge part of the last private placement at $9.50 a share two years ago. Buy all day long under $12.50 and hold until they sell.

The bank is almost 12 years old and it could be time to sell this year or next.
Downside limited to about 10% while I see upside potential of 70%. This stock offers great risk to reward in this market.

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