Upgrades

* National Bankshares Inc. was raised to "buy" from "hold" at Sandler O'Neill & Partners, following its fourth-quarter 2017 earnings report and analyst Brendan Nosal's discussions with management.

Margin erosion seems "a thing of the past" at the Blacksburg, Va.-based company, wrote Nosal, with net interest margin likely to hit 3.51% by the end of 2018 and 3.57% a year after. Meanwhile, its stock price is down year-to-date, "trading basically in-line with high-performing peers on a [price-to-earnings] basis, but at a deep discount on [tangible book value per share]."

Management appears interested in M&A, which could fix National's capital issue. Nosal said potential targets are likely to be "within a three hour drive."

The price target is $46.

Industry reports

* Baird's David George wrote, "It has been puzzling that more retail customers have not pursued higher-yielding direct bank or money-market mutual fund offerings," when the likes of CIT Group Inc., Goldman Sachs Group Inc., Ally Financial Inc., American Express Co., Discover Financial Services and Synchrony Financial are now paying savings deposit rates of 1.35% to 1.55%. For comparison, traditional banks pay about 0.01%.

And banks' current deposit mixes may be unsustainable in this rising rate environment. George calculates that if 5% of noninterest-bearing deposits moved to time deposits, the hit to EPS for his covered banks would be approximately 3%.

* D.A. Davidson's Gary Tenner also touched on deposit betas in a report on management commentary from banks in the central states.

"Updating treasury management systems, changing lender/relationship management incentives, and acquiring deposit rich franchises are all on the table," the analyst wrote. In the meantime, "whispers of regulators increasing focus on liquidity and over reliance on wholesale borrowings are getting louder, particularly for smaller institutions and those with high loan to deposit ratios."