RATING: STRONG BUY....SUITABILITY: AGGRESSIVE
by: BocaJim (29/M) 467 of 469
STERNE,AGEE & LEACH,INC
February 26, 1999
RATING: STRONG BUY
SUITABILITY: AGGRESSIVE
UPGRADING TO “STRONG BUY” FROM “BUY” BASED ON CHEAP
RELATIVE VALUATION AND IMPROVING FUNDAMENTALS
Yesterday we upgraded our rating on RSFC to a STRONG BUY from a BUY rating. We raised our rating based on the recent pullback of the stock to the current price of $8 3/8 from $10½ on January 12, 1999. Meanwhile, we believe fundamentals and future prospects have improved. We are very positive about the recent management additions of R.Michael Strickland, the company's new Chief Banking Officer, and Louis J. Dunham, the new Chief Credit Officer. The seven managers that currently report to RSFC's Chairman and CEO, Rudy Schupp, will now report to Strickland,Dunham, and Richard J. Haskins, RSFC's CFO, who all will report directly to Rudy Schupp. Adding the additional layer of management this early in the year increases our confidence that the upcoming conversion (April 1999) and integration of First Palm Beach Bancorp will be successful.
In particular, we believe that the hiring of Mr. Strickland is significant because he has not changed jobs frequently. In fact,
Barnett Bank (and then NationsBank after the merger) had been his only employer for the past 25 years. Out of his career with Barnett/NationsBank, the last 12 years were spent as CEO and President of Barnett Bank of Palm Beach County Bank, which had more than 50 offices and $2.3 billion in deposits as of June 30, 1998. After the merger with NationsBank, he was given the additional responsibility of NationsBanks' presence in Palm Beach County and four
neighboring counties. Barnett held the second largest market share in Palm Beach County with 11.3% of the county's deposits as of June 30, 1998. With the acquisition of First Palm Beach Bancorp, RSFC moved into fourth place with a 7.6% deposit market share of Florida's third-largest county.
With the shares trading at 1.91x book value and 12.9x our current EPS estimate of $0.65 for 1999, we believe the shares
are cheap relative to the average regional, which trades at 2.8x book value and approximately 17.0x 1999E EPS. Taking into consideration this week's announcement by Union Planters Corp. (UPC - $44¼) that it has agreed to acquire Republic Banking Corp. of Florida (RBCF - $18 7/16) for $19.25 per share in cash, RSFC's scarcity value should be
increasing not shrinking. UPC's cash offer for the $1.6 billion asset bank headquartered in Miami, Florida, represents
2.39x and 2.59x stated and tangible book values, respectively, and 25.7x 1998 EPS of $0.75.
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