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* Eagle Bancorp Inc.'s stock fell almost 25% on Dec. 1, following a short seller's allegations of improper insider loans at the Bethesda, Md.-based company.
Analysts covering Eagle slammed a lack of substance in Aurelius Value's claims and called the price pullback a good entry point. Keefe Bruyette & Woods' Catherine Mealor raised the stock's rating to "outperform" from "market perform"; Merion Capital's Joe Gladue raised it to "outperform" from "neutral."
Gladue wrote, "The article itself is a jumble of disconnected details, innuendos and unrelated items, flavored with lots of negative-sounding, but meaningless adjectives." It, for example, "uses the term 'undisclosed'" repeatedly and without context, when in fact "banks generally do not disclose their loans in order to comply with privacy regulations as well as for competitive reasons."
KBW's Mealor argued the report's conclusions "are wrong," that the supposedly inappropriate loans received neither preferential terms nor rates and that the recent stock sales by CEO Ronald Paul referenced by the article have actually been in line with Paul's donations "to various charities." That said, Mealor acknowledged that attacks by short sellers "tend to weigh on stocks over a long period of time" and lowered the price target by $3 to $63.
Gladue of Merion Capital kept his price target at $72.
Sandler O'Neill & Partners' Casey Whitman struck a slightly different note, writing, "While we would like to give management the full benefit of the doubt, we aren't sure how this situation will ultimately play out." Aurelius is expected to make more noise, raising allegations against Paul, who "has been such a driving force ... [and] the reason [some investors] have gotten into the stock." Whitman lowered the price target to $65 from $74, but maintained the "buy" rating.
Initiations
* Stephens Inc. now covers Southern Pines, N.C.-based First Bancorp, which analyst Tyler Stafford calls the "last man standing" in its market.
Stafford remarked on the company's deposit base, composed of 80% "core deposits," compared with peers' 69%. He also noted fee income makes up a "robust" 23% of total revenue, compared with peers' 18%.
The analyst gave First Bancorp's stock a rating of "equal-weight," on valuation, and a price target of $40. It had closed at $37.83 on Dec. 1.
* Coverage of New York-based Metropolitan Bank Holding Corp. was launched at Keefe Bruyette & Woods and Piper Jaffray, following a November IPO.
KBW's Collyn Gilbert on Dec. 3 rated the stock "outperform," with a target price of $50. Piper Jaffray's Matthew Breese rated it "neutral," with a price target of $46.
Both commented on Metropolitan's unique positioning as a publicly traded, New York City-headquartered commercial bank within the $1 billion-to-$40 billion asset range. Also of interest is its prepaid debit card business, which Gilbert points out gives it "an effective zero-cost deposit origination channel." Breese remarks that its healthcare lending may get investor scrutiny, "given recent credit hiccups" at LegacyTexas Financial Group Inc., Triumph Bancorp Inc. and Opus Bank, "in contrast to [Metropolitan]'s solid history in the space."
* Beaumont, Texas-based CBTX Inc., having similarly completed its IPO, received a "market perform" rating from KBW's Brady Gailey and an "overweight" rating from Stephens' Matt Olney.
Gailey wrote, "CBTX exhibits many sought-after qualities such as a quality deposit base, nicely asset-sensitive balance sheet, scalable infrastructure, clean credit quality and ample organic and acquisitive growth opportunities in attractive southeast Texas geographies." While the analyst is on the sidelines for now, the company's potential acquisitiveness provides a "notable upside" longer term.
Olney shared the sentiment, projecting an acquisition in 2018 to 2019, with potential targets in the Houston metropolitan statistical area and holding $400 million to $1 billion in assets.
The Stephens analyst also commented on CBTX's successful formation of "deep relationships" with borrowers. Approximately 83% of loan customers also have deposits in the bank.
Gailey gave the stock a $31 price target; Olney gave it a target of $33.
Notable reiteration
* Wedbush Securities Inc.'s David Chiaverini, following discussions with Valley National Bancorp executives, maintained the "neutral" rating on the stock and the price target of $12.
Takeaways from the talks included the planned reinvestment of about 40% of the cost-saves from expense initiative LIFT into technology, derailing the company's noninterest expense target for 2018. An efficiency ratio of less than 55% by mid-2019, however, is still within reach.
The Valley executives also indicated that the deposit beta is likely to stay in the mid-to-high teens, despite plans to lower the loan-to-deposit ratio to less than 100%.
