FBR Capital on Financial Institutions/Small-Cap Banks: Daylight in the Sunshine State - Credit Quality and Economic Improvements Slow but Steady

FBR Capital on Financial Institutions/Small-Cap Banks: Daylight in the Sunshine State - Credit Quality and Economic Improvements Slow but Steady - M&A Drives Outperformance

FBR analyst says, "With 4Q10 earnings behind us, we are updating our estimates for companies under our coverage headquartered in the state of Florida: 1st United Bancorp (Nasdaq: FUBC)(Outperform), CenterState Banks, Inc. (Nasdaq: CSFL)(Outperform), Capital City Bank Group (Nasdaq: CCBG)(Market Perform), and Seacoast Banking Corporation of Florida (Nasdaq: SBCF)(Market Perform). While we continue to see opportunity in the state and believe there is still a significant amount of consolidation yet to occur in Florida, elevated nonperforming asset balances and prolonged charge-offs as a result of the local economy will weigh on the near-term results for a majority of banking institutions in the state."

Despite the relative struggles of the state and the markets in which these companies operate, Florida remains a bastion of opportunity for growing companies with organic loan growth opportunities slowly returning and our expectation for a continuation of meaningful deal activity. While first-quarter FDIC-assisted deal activity has been slow, we expect more transactions to materialize with the problem bank list continuing to grow. With these factors in mind, we reiterate our Outperform rating for 1st United (Nasdaq: FUBC) and CenterState Banks (Nasdaq: CSFL) and our Market Perform rating for Capital City Bank Group (Nasdaq: CCBG) and Seacoast Banking Corporation of Florida (Nasdaq: SBCF), primarily based on their relative health, growth prospects, and relative valuations."

Updating FUBC Estimates. We are changing our 2011 EPS estimate of $0.14 to ($0.01), initiating with a 2012 EPS estimate of $0.19, and reiterating our Outperform rating.

Updating CSFL estimates. We are changing our 2011 EPS estimate of $0.15 to ($0.08), initiating with a 2012 EPS estimate of $0.08, and reiterating our Outperform rating.

CCBG. We are changing our 2011 EPS estimate of $0.32 to $0.41 and initiating with a 2012 EPS estimate of $0.45. Credit quality continues to improve at CCBG, with a reduction in aggregate NPAs and net chargeoffs in 4Q10...As credit quality and associated credit expenses continue to decline, profitability at the company will improve. Based on the company's current price/TBV multiple of 1.2x, outsized problem loans at CCBG relative to the company's non-Florida peers and limited excess capital (TCE/TA of 6.98%), growth prospects remain limited and therefore we expect a near-term drag on valuation. With these factors in mind, we reiterate our Market Perform rating.

SBCF. We are changing our 2011 EPS estimate of ($0.23) to ($0.20) and initiating with a 2012 EPS estimate of ($0.08). Seacoast remains an interesting story in the somewhat more troubled markets of central Florida. Credit metrics and the risk profile of the company's loan portfolio are improving, however, and total revenues
have increased 6.3% year over year.

---

Serious News for Serious Traders! Try StreetInsider.com Premium Free!

---

You May Also Be Interested In

• Walmart (WMT) PT Lowered to $130 at UBS on Investment Narrative's Competing Dynamics
• Vireo Growth completes acquisition of C21 Investments
• Advance Auto Parts (AAP) PT Lowered to $48 at DA Davidson Following 25% Selloff Post Q2 Results