For banking stocks, 2016 has been a bad year to put it mildly. The soft positions taken by central banks around the world, including the U.S. Fed, have weighed heavily on the sector. This is a significant turnaround, since it comes after a long period of policies which had pushed up asset prices.At present, financials are among the worst performing stocks even as markets have been enjoying significant gains. But this may be the right time to pick up undervalued bank picks though it is important to examine whether they have strong fundamentals.Lower Interest Rates Hurt MarginsCurrently, the financial sector is the worst performer among the S&P 500’s sectors and has lost 7.6% year to date. Additionally, the KBW Nasdaq Bank of large banks has suffered grievously, losing 15% during the same period. This is primarily because of the low interest rate environment which has hurt earnings on a global basis.The first interest rate hike by the Fed had created much optimism for the financial sector. Higher rates increase the gap between what banks earn from loans and what they have to pay out for deposits, also known as the net interest margin. However, in its last interest policy statement, the Fed projected that the number of rate hikes this year will be two instead of four as stated earlier.Selecting the Best Regional Value Picks Picking banking stocks could seem to be counterintuitive at this point. Some of the big names in the business have already lost more than the broader sector. While Morgan Stanley MS has lost more than 25.3% year to date, Bank of America Corporation BAC is down 23.5%. Citigroup Inc. C has declined 21.8% year to date.However, the KBW Nasdaq Regional Banking Index has lost just 0.9% so far this year. This is surprising given that this category is more sensitive to the prevailing interest rate environment. This is because they derive a higher proportion of their income from deposits and lending activity compared to the likes of JPMorgan Chase & Co. JPM.Additionally, regional banks could gain from significant acquisition activity. Larger operators in the sector are acquiring smaller banks in an effort to increase profitability and control costs. In the fourth quarter of last year, New York Community Bancorp, Inc. NYCB gave the nod to Astoria Financial Corp.’s AF buyout offer. Similarly, Huntington Bancshares Incorporated HBAN has recently said that it will acquire FirstMerit Corporation FMER.Recently, the CEO of Mitsubishi UFJ Financial Group, Inc.’s MTU banking arm Bank of Tokyo-Mitsubishi said that they are open to the idea of inorganic growth. This would primarily come about by acquiring regional U.S. banks. Given Japan’s negative interest rates, this move will help them boost profitability. The bank is looking at several potential acquisition targets though it is yet to enter into negotiations. Our ChoicesWhile several traders are taking a bearish position on these stocks, others are looking to pick up good value picks at attractive prices. Price to book value becomes a key consideration for such stocks. This is because the nature of the assets and liabilities of such a business is extremely fluid. Additionally, banks utilize mark-to-market accounting which means this ratio is a fairly close estimate of the actual value of the stock’s assets.Regional banks are already set to gain from heightened acquisition activity and are trading below their intrinsic value. Using this metric, you could identify those stocks which are worth adding to your portfolio. Our selection is also backed by a good Zacks Value Score and Zacks Rank.We narrowed down our choices with the help of our new style score system.Our research shows that stocks with a Value Style Score of ‘A’ or ‘B’ when combined with a Zacks Rank #1 (Strong Buy) or Zacks Rank #2 (Buy) offer the best investment opportunities in the value investing space.Northrim Bancorp Inc. NRIM, a holding company for Northrim Bank, is a full-service commercial bank that provides a full range of personal and business banking services, focusing on Alaska.Northrim Bancorp holds a Zacks Rank #2 (Buy) and has a Value Style Score of ‘A’. The forward price-to-earnings ratio (P/E) for the current financial year (F1) is 9.94, lower than the industry average of 13.16. It has a price-to-book (P/B) ratio of 0.90, lower than the industry average of 1.24.First Bank FRBA offers personal and business banking services in New Jersey.First Bank holds a Zacks Rank #2 and has a Value Style Score of ‘A’. The stock has a P/E (F1) of 11.53x, lower than the industry average of 14.07. It has a P/B ratio of 0.11, lower than the industry average of 1.10.Sussex Bancorp SBBX is the holding company for the Sussex Bank which offers personal and business banking services and also caters to government customers.Sussex Bancorp holds a Zacks Rank #2 and has a Value Style Score of ‘B’. The stock has a P/E (F1) of 12.55x, lower than the industry average of 14.07. It has a P/B ratio of 1.08, lower than the industry average of 1.10.First Bancorp FBP is the holding company of FirstBank Puerto Rico that offers a wide range of personal and business banking services.First Bancorp holds a Zacks Rank #2 and has a Value Style Score of ‘A’. The stock has a P/E (F1) of 7.29x, compared to the industry average of 13.93. It has a P/B ratio of 0.33, lower than the industry average of 1.09.First NBC Bank Holding Company FNBC is a bank holding company that conducts its business activities through its subsidiary, First NBC Bank.First NBC holds a Zacks Rank #2 and has a Value Style Score of ‘A’. The stock has a P/E (F1) of 4.86x, compared to the industry average of 13.93. It has a P/B ratio of 0.80, lower than the industry average of 1.09.Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report JPMORGAN CHASE (JPM): Free Stock Analysis Report CITIGROUP INC (C): Free Stock Analysis Report BANK OF AMER CP (BAC): Free Stock Analysis Report MITSUBISHI-UFJ (MTU): Free Stock Analysis Report HUNTINGTON BANC (HBAN): Free Stock Analysis Report FIRSTMERIT CORP (FMER): Free Stock Analysis Report FIRST BNCRP P R (FBP): Free Stock Analysis Report NORTHRIM BCP (NRIM): Free Stock Analysis Report MORGAN STANLEY (MS): Free Stock Analysis Report NEW YORK CMNTY (NYCB): Free Stock Analysis Report ASTORIA FINL CP (AF): Free Stock Analysis Report FIRST NBC BANK (FNBC): Free Stock Analysis Report FIRST BK HAM NJ (FRBA): Free Stock Analysis Report SUSSEX BANCORP (SBBX): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research