Investors might want to keep an eye on Southside Bancshares in Tyler, Tex.
According to an analysis by SunTrust Robinson Humphrey in Atlanta, Southside is the most likely to sell among 142 companies examined for their chances of doing so.
The $1.2 billion-asset company topped the rankings, SunTrust said, because it is in a desirable East Texas market, its insider ownership is low (17%), and - most importantly - its chief executive officer is 73.
The study, released Monday, looked at publicly traded banking companies with less than $3 billion of assets and located in the Southeast, the Washington/Baltimore metropolitan area, and Texas.
It focused on several factors - including capital needs, market location, and management succession planning - in calculating each company's chance of being sold within two years.
Jennifer Demba, an analyst with SunTrust, said she and her colleagues are not making predictions - they just wanted to show how companies stacked up.
"Investors that buy these stocks always want to know the takeover possibilities, so we thought we would just lay them out," she said.
The list, which was compiled last month, has already gotten some vindication. Among its top 10 targets was the $825 million-asset Resource Bankshares Corp. of Virginia Beach; on Aug. 25, Fulton Financial Corp. of Lancaster, Pa., announced that it would buy the company for $197 million.
SunTrust put Southside's chances for a sale at 86%. By contrast, the $112 million-asset Southern Banc Co. Inc. of Gadsden, Ala., was given just a 19% chance, because it is in a slow-growing market, its CEO is 33, and insiders own 23% of the stock.
Like Southside, most of the companies in the top 30 are not looking for white knights but rather have decent earnings and performance ratios.
One exception is the $909 million-asset Capital Bank Corp. of Raleigh, N.C. Last month the 6-year-old company accepted the resignation of its chief executive officer and restated second-quarter earnings after charging off $2.5 million in recently acquired bad loans.
SunTrust covers 11 of the companies in the top 30, including the $2.5 billion-asset Coastal Bancorp of Houston, which it ranked ninth. The analysis said that since Coastal is the largest savings bank in Texas and its stock is undervalued, it could be acquired by some company looking to get into the state. No names were mentioned.
Manuel Mehos, Coastal's CEO, repeated what most executives of publicly traded banks say when asked about acquisitions: "We will do what is in the best interest of the shareholders." However, he also said that though banks in Texas may be perceived as hot targets, few acquirers are showing serious interest.
"Even though a bank is on the list or even says it wants to be acquired, that doesn't matter as long as there aren't any interested buyers down here," he said
First Mariner Bancorp of Baltimore, which was ranked eighth, recently topped $1 billion of assets; CEO Edwin F. Hale attributed the market speculation to this milestone
"It's the nature of the business," Mr. Hale said. "Once you hit $1 billion, everyone starts looking at you."
SunTrust's Ms. Demba said that the analysis results were not a huge surprise, since many of the companies are rumored to be on the block. For example, in the last few weeks there has been lots of chatter about Royal Bank of Canada's possible interest in buying the $2.7 billion-asset Republic Bancshares Inc. of St. Petersburg, Fla., which ranked 26th.
On the other hand, Ms. Demba said, three of the 11 top-30 companies that SunTrust covers - Prosperity Bancshares of Houston, Iberiabank Corp. of Lafayette, La., and Main Street Banks Inc. of Kennesaw, Ga., each with $2 billion of assets - are unlikely sellers. All have "outstanding fundamental performance" and are potential acquirers themselves, she said; they are in the top 30 only because their capital levels are low.
