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KBW upgrades Heritage Oaks; FBR downgrades First NBC Bank

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KBW upgrades Heritage Oaks; FBR downgrades First NBC Bank

Upgrade

* After Pacific Premier Bancorp Inc. announced its plans to acquire Heritage Oaks Bancorp in an all-stock deal valued at approximately $405.6 million, Keefe Bruyette & Woods analyst Jacquelynne Chimera upgraded Heritage Oaks to "outperform" from "market perform" and increased the price target to $13 from $10. The analyst noted that the change in recommendation reflected her expectations from the pending deal and for Pacific Premier. The analyst expects the deal to be 6.9% accretive to 2018 EPS, which is slightly more than the management's projections. The analyst also incorporated her expectations for revenue synergies in her estimates, which she noted that the company has not reflected in its calculations.

The analyst maintained her "outperform" rating for Pacific Premier and increased the price target to $37 from $35. She is optimistic about the company's strong organic and acquisitive growth prospects and noted that Pacific Premier is trading at a discount despite better profitability metrics.

Downgrade

* FBR & Co. analyst Christopher Nolan downgraded First NBC Bank Holding Co. to "underperform" from "market perform," citing valuation. He listed the stock as his new Alpha Generator pick. Nolan noted that the company shares have appreciated 40% since the U.S. presidential election, compared to a 19% increase in the Nasdaq bank index.

Though the company is trading at a significant discount compared to its peers based on tangible book value per share, Nolan thinks the discount might be reflective of a possible sale in the near future or the possibility that the company will be successful in recapitalizing itself. The analyst thinks the company is worth $5 per share fundamentally and in the event of a sale. The stock is materially below current valuations. First NBC Bank closed at $9.60 on Tuesday, Dec. 13.

His price target is $5, based on the analyst's estimated value of First NBC Bank in a distressed sale.

Initiations

* D. A. Davidson & Co.'s Kevin Reevey initiated TCF Financial Corp. at "neutral" with a 12-month target price of $21. The analyst set his price target at an 8.6% discount to the company's peer group. Reevey noted that although the company is already generating higher profits than its peers, it is also well-positioned to derive gain from an interest rate hike. However, the company's asset quality is lower than its peer group and given the company's "headline risk from exposure to auto finance," Reevey believes the company should be trading at a discount to its peers.

* Hovde Group analyst Kevin Fitzsimmons initiated his coverage of First Community Corp. at "market perform" with a price target of $20. The analyst noted that the company is one of the leading community bank deposit franchises in the Midlands region of South Carolina. Fitzsimmons thinks the company will be able to increase its net interest margin and core profitability as its management team tries to improve the proportion of loans to average earning assets. The analyst thinks these efforts along with increasing short-term rates hike will be a positive for the company.

Since regulators have released the company from an enforcement action, Fitzsimmons expects First Community to be more active on the M&A front.