Friday, FBR Capital Markets initiated coverage of 10 small-cap banks focused in the Mid-Atlantic and Southeast. The initial coverage includes community banks in the Washington, D.C., metro market, as well as larger community banks having presence predominantly in Virginia, North Carolina, South Carolina, and Georgia.
The brokerage initiated coverage of First Citizens Bancshares Inc. (FCNCA) stock with an Outperform rating and a price target of $205. Analyst Brett Scheiner finds First Citizens' to be a noteworthy opportunity given the company's size, health, and deft acquisition history. The analyst finds FCNCA attractive with limited downside at current valuation levels, with the opportunity for transformational growth as he moves through the later stages of this credit cycle.
The analyst anticipates that FCNCA' capital base will remain healthy through the cycle with year-end 2010 tangible common equity/tangible assets of 7.72%. While the company's current standalone earnings power is limited, with FCNCA trading at 1.10x estimated 2010 TBV, the analyst feels the risk-reward mix is well in investors' favor. The analyst estimates that First Citizens' management could acquire a $5 billion bank in an FDIC-assisted transaction without requiring additional funding.
The brokerage launched coverage of Eagle Bancorp, Inc. (EGBN) stock with an Outperform rating and a price target of $12.50. Given EGBN's recent capital raise, the brokerage anticipates Eagle Bancorp evaluating strategic growth alternatives going forward through organic and branch acquisition opportunities.
Although the brokerage projects credit costs increasing in the coming quarters, albeit off a small base, Eagle Bancorp's current loan loss reserve of $19.9 million more than adequately covers its estimate of $13.9 million in charge-offs through 2010.
Brett Scheiner begin coverage of Cardinal Financial Corp. (CFNL) stock with an Outperform rating and a price target of $10.50 per share. Given the outstanding credit quality at Cardinal Financial and its recent capital raise, the analyst is confident in the company's ability to prosper in the challenging economic environment.
The analyst said that the company's strong markets, capital base, growth potential, and low credit losses position Cardinal Financial among the best-performing community banks in the U.S. Given the strong economy in the Washington, D.C., metro area, FDIC-assisted acquisition opportunities will be limited in Cardinal Financial's markets of operation.
The analyst established coverage of Virginia Commerce Bancorp Inc. (VCBI) stock with an Underperform rating and a price target of $3. The analyst views Virginia Commerce Bancorp as a survivor of the cycle but believes its fundamental performance will be depressed in the coming quarters.
The analyst said that Virginia Commerce Bancorp is facing serious challenges in credit and capital with tangible common equity/assets and net charge-offs/average loans of 5.57% and 3.15% compared with its unprofitable peer medians of 5.57% and 2.89%, respectively, that will weigh on valuation going forward.
Although VCBI' management believes its third quarter provision will more than adequately cover future losses, the analyst believes the company's earnings power will be limited as projected charge-offs through 2010 exceed current reserves by $11.1 million. Therefore, the analyst believes VCBI will underperform small-cap bank universe and its D.C. peers in the coming year as the company experiences mounting losses and faces a potentially dilutive equity raise.
The brokerage initiated Sandy Spring Bancorp Inc. (SASR) stock at Underperform rating with a price target of $7.50. Given Sandy Spring Bancorp' current tangible common equity/assets ratio of 6.06% and NCOs/average loans of 5.02% compared with the analyst's unprofitable peer group medians of 5.57% and 2.89%, respectively, he anticipates the company underperforming in the near term as it continues to work through credit challenges and the threat of a capital raise weighs on valuation.
The analyst believes the current capital base is sufficient to sustain Sandy Spring Bancorp through the end of 2010, but year-end 2010 levels imply the potential need for additional capital if credit worsens materially. Given the company's limited earnings power with projected provisions exceeding pretax, pre-provision earnings through 2010, the analyst believes that SASR will underperform smallcap bank universe and its D.C. peers in the coming year as it further erodes an already stressed capital base.
The analyst launched coverage of United Community Banks Inc. (UCBI) stock with a Market Perform rating and a price target of $4.00. Although United Community's recent capital raise gives the analyst's confidence that the company will be able to manage through significantly elevated credit losses in coming quarters, he believes that these losses, coupled with the further de-levering of the balance sheet, will weigh on valuation going forward.
While the analyst applauds United Community's recent acquisition of Southern Community in a FDIC loss sharing transaction, he anticipates that the company will not participate in a significant deal in the near term.
The brokerage initiated Union Bankshares Corp. (UBSH) stock at Market Perform rating with a price target of $11.00. The analyst applauds Union Bankshares' recent capital raise and its acquisition of First Market Bank.
Given Union Bankshares' low net charge-offs of 0.26% compared with the profitable peers' median of 0.66% and a more fully levered balance sheet due to the recent acquisition, however, the analyst expects that it will be internally focused in the near term limiting upside potential on growth and valuation despite a healthy tangible common equity/assets ratio of 8.70% versus the profitable peer median of 7.97% at the end of third quarter.
Brett Scheiner begin coverage of First Bancorp (FBNC) stock with a Market Perform rating and a $16.00 price target. The analyst applauds First Bancorp's acquisition of Cooperative Bank in an FDIC loss-sharing transaction, and he anticipates that the company will evaluate smaller opportunities going forward.
The analyst believes FBNC will perform in line with small-cap bank universe in the near term as the lack of long-term growth and moderate out-year returns weigh on valuation. Going forward, the analyst believes First Bancorp would achieve reasonable cost takeouts from the Cooperative deal and would continue to upgrade its branch footprint on a one-off basis as opportunities permit, though he sees First Bancorp focused internally for the foreseeable future.
The brokerage initiated coverage of Towne Bank (TOWN) stock with a Market Perform rating and a $13.50 price target. The brokerage is attracted to TowneBank by its coastal Virginia footprint, solid credit quality, and impressive organic balance sheet growth at a time when many of its competitors are struggling. The brokerage believes TOWN will perform in line with its small-cap bank universe given its comparatively lower capital base and limited acquisition opportunities and fuller valuation.
The brokerage believes that TowneBank's comparatively lower tangible common equity base of 6.49% compared with its profitable peer median of 7.97% and relatively high valuation, coupled with the limited number of potential government-assisted transactions in its markets, will limit upside in the shares relative to small-cap bank universe in the coming quarters.
The analyst established coverage of StellarOne Corp. (STEL) stock with an Market Perform rating and a price target of $10.50. The analyst believes that StellarOne is well positioned as a survivor, though earnings and growth will remain depressed as the company works through the weak credit environment weighing on valuation. The analyst believes that losses and limited growth potential through 2010 will continue to weigh on valuation in the coming quarters.
The analyst believes that current capital levels are more than sufficient to sustain StellarOne in a challenging environment. Given the company's limited earnings power, however, with projected provisions exceeding pretax, pre-provision earnings for the next four quarters, the analyst believes that STEL will perform in line with his small-cap bank universe.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.