Consolidation Paying Dividends for Small-Cap Banks

Posted On August 13, 2014 | by AllenCaron

As a small cap focused blog, we like to watch for other blogs or columns with a similar small cap focus. A case in point is the regular “Sizing up Small-Caps” feature in Barron’s. The August 11 edition has a very optimistic review of Sterling Bancorp (STL), published under the headline “Sterling Sees Golden Opportunities to Grow.”

Sizing up Small-Caps typically covers one particular small-cap company and does a much deeper dive into the financials

Photo courtesy of

Photo courtesy of

and strategic challenges and positioning than we do. In this case, the story notes that Sterling last October merged with Provident New York Bancorp to combine operations and reduce overall expenses. The result? Sterling “is well-positioned to boost its customer base and cut costs. Its shares could rally more than 20 percent.”

That said, we have randomly chosen two other small-cap banks that are similar to Sterling in size and market cap, but may or may not have issues that only a close look could unveil. So please do your homework before making any investment decisions! We did notice that these banks, like Sterling, seem to be consolidating with other small regional banks. In the case of Sterling, consolidation gives a small regional bank “broader lending capabilities, a larger pool of potential customers and plenty of cross-selling opportunities,” according to the Barron’s article.

Republic Bancorp (Nasdaq: RBCAA), a Louisville, KY-based holding company, is the parent company of Republic Bank & Trust Company and Republic Bank. It operates in three segments: traditional banking, mortgage banking and tax refund solutions. RBCAA recently acquired assets of Tennessee Commerce Bank. RBCAA closed August 13 at $22.75, down 3 cents on the day, with a market cap of $473 million. Its 52-week trading range is $18.74-$28.23.

Community Trust Bancorp (Nasdaq: CTBI), a Pikeville, KY-based bank holding company, owns Community Trust Bank and Community Trust and Investment Company, and serves small and mid-sized communities in parts of Kentucky, West Virginia and Tennessee. In January 2011 LaFollette Bank merged into Community Trust Bancorp. On July 29, CTBI announced it was increasing its quarterly cash dividend to $0.30 a share (an increase of 3.4 percent) to shareholders of record as of Sept. 15. CTBI closed August 13 at $35.34, up 41 cents on the day, with a market cap of $612 million. Its 52-week trading range is $32.33-$42.07.

Renasant Corp. (Nasdaq: RNST), based in Tupelo, MS, is a bank holding company that owns and operates Renasant Bank, a banking association with operations Mississippi, Alabama, Tennessee and Georgia, as well as Renasant Insurance Inc., a wholly owned subsidiary of the bank. It operates in three segments: community banks, insurance and wealth management. In September 2013 RNST completed a merger with First M&F Corporation. RNST closed August 13 at $28.36, up 3 cents for the day, with a market cap of $894 million. Its 52-week trading range is $24.90-$32.04.

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