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Raymond James lists First NBC as a possible target for Hancock Holding

Industry note

* Baird Equity Research analyst Bryce Rowe noted that investors' optimism surrounding lower tax rates, less regulatory burden and higher interest rates drove the recent appreciation in bank stocks. He thinks most of the banks in his coverage are now "fairly valued-to-modestly overvalued," assuming that lower tax rates, less regulatory burden and higher interest rates will lead to higher net interest margins. He believes "downside risk outweighs potential upside."

The analyst thinks investors should focus their buying efforts on Houston-based Allegiance Bancshares Inc. and Manitowoc, Wis.-based County Bancorp Inc.

Rowe upgraded Allegiance Bancshares to "outperform" from "neutral" and increased his 12-month target price to $39 from $29. The company is trading at 179% while its Texas-based peers are trading at an average of 257% on the basis of price-to-tangible book value. The analyst thinks the company's profile has improved with better oil prices.

In addition, the analyst noted that County Bancorp is trading at 130% of tangible book value, while its peers are trading at 180% of tangible book value. He expects the company to generate healthier profits than its peers.

On the other hand, Rowe downgraded First Bank to "neutral" from "outperform." The analyst increased his price target for the company to $12 from $10, which implies just 2% upside from the current stock price. The analyst thinks the company does not merit a higher recommendation.

Notable reiterations

* Raymond James analyst Michael Rose reiterated his "outperform" rating for Gulfport, Miss.-based Hancock Holding Co. after the company announced its common stock offering. The analyst thinks the company decided to raise capital to take advantage of the recent increase in its share price. In addition, Rose thinks the company might use the proceeds to fund a possible acquisition as the company said in its prospectus. He thinks First NBC Bank Holding Co. might be a possible target.

Rose noted that First NBC, which is also pursuing strategic alternatives, operates 24 branches within a one-mile radius of a Hancock Holding branch, and 31 branches within a five-mile radius of a Hancock Holding branch. He thinks this geographic footprint could result in significant cost savings and synergies in a potential deal.

* Merion Capital Group analyst Joe Gladue thinks San Juan, Puerto Rico-based First BanCorp.'s resumed preferred stock dividend signals "a vote of confidence from the regulators." He noted that the company is under a written agreement with the Federal Reserve Bank of New York, which requires the company to receive the Fed's approval before it pays any dividends. "The next logical step in this progression would be a resumption of a common stock dividend," Gladue added. He noted that the company will have to maintain preferred stock dividends for 12 months before it can pay a common stock dividend.