Downgrades
Janney Montgomery Scott LLC analyst John Rodis downgraded Limestone Bancorp Inc.'s investment rating to "neutral" from "buy" based on valuation.
On a year-to-date basis, Limestone's stock is up about 9% compared to its Midwestern peers, which are up about 7%.
Its stock is trading at 111% of tangible book value, compared to its peers' average of 135%. Rodis wrote that the discount seems appropriate given Limestone's profitability outlook compared to its peers.
Rodis expects Limestone's recently announced branch acquisition to boost the bank's profits. Limestone agreed to acquire four branches from Louisville, Ky.-based Republic Bank & Trust Co., which is expected to close in the fourth quarter.
The analyst's EPS estimates for the company are $1.51 for 2019 and $1.60 for 2020, up from previous estimates of $1.31 and $1.52, respectively.
Rodis' fair value estimate on Limestone's stock remains unchanged at $16.25, with a potential upside of 8%.
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B. Riley FBR analyst Stephen Moss downgraded First Busey Corp. to "neutral" from "buy" based on EPS challenges from net interest margin pressure as a result of lower interest rates. Moss also lowered the price target to $28 from $30.
Moss wrote that First Busey is asset sensitive so the Federal Reserve's interest rate cuts and lower long-term rates will put pressure on its NIM. He modeled 8 basis points of NIM compression by the fourth quarter, to 3.35%, assuming another rate cut in September.
Moss also wrote that while First Busey has been active in acquisition discussions, he does not expect the company to announce a new transaction until 2020 because of its ongoing integration of Bank of Ed and its new CFO.
His EPS estimates for the company are $2.07 for 2019 and $2.15 for 2020, down from previous estimates of $2.12 and $2.30, respectively, due to NIM pressure.
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B. Riley's Moss also downgraded Preferred Bank to "neutral" from "buy" driven primarily by the interest rate environment that could put pressure on its NIM and lead to potential loan prepayments. Moss lowered the price target to $55 from $59.
He wrote that Preferred Bank is asset sensitive and that the lowering interest rate environment could put pressure on its NIM.
He also wrote that the bank has seen solid loan growth in recent quarters but that lower long-term interest rates could lead to higher pay-downs and slow loan growth after the third quarter of 2020. Moss wrote that a 300-basis-point change to annual loan growth estimates could reduce his EPS estimates by up to 21 cents.
His EPS estimates for the company are $5.15 for 2019, up from his previous estimate of $5.06, and $5.35 for 2020, down from his previous estimate of $5.38.
