5 Buy-Rated Bank Stock Takeout Targets From KBW

2. Sierra Bancorp

Shares of Sierra Bancorp (BSRR) of Porterville, Calif., closed at $10.51, returning 22% year-to-date, following a 16% decline during 2011.

The shares trade for 0.9 times their reported Sept. 30 tangible book value of $11.98, and for 14 times the consensus 2013 EPS estimate of 74 cents. The consensus 2014 EPS estimate is 92 cents. Based on a quarterly payout of six cents, the shares have a dividend yield of 2.28%.

Sierra Bancorp had $1.4 billion in total assets as of Sept. 30. The company reported third-quarter earnings of $1.6 million, or 12 cents a share, declining from $2.6 million, or 18 cents a share, in the second quarter, and $2.5 million, or 18 cents a share, in the third quarter of 2011. During the third quarter, the company's provision for loan loss reserves increased to $4.7 million, from $3.2 million the previous quarter, and $3.0 million a year earlier.

CEO James Holly said in the company's Oct. 22 earnings announcement that the elevated provision for loan loss reserves reflected "continued efforts to push problem assets toward resolution, as announced in our first quarter earnings release and as evidenced, in part, by a significant level of charge-offs against specific reserves established for losses on nonperforming loans." The company reported that its nonperforming assets declined to $48.7 million as of Sept. 30, declining from $51.1 million the previous quarter, and $71.5 million a year earlier. Nonperforming loans made up 3.41% of total loans as of Sept. 30, improving from 4.49% in June, and 7.41% in September 2011.

Sierra Bancorp's average loans increased 7% sequentially to $814.0 million in the third quarter, but the company cautioned that "loan growth this year has been concentrated in a component of commercial loans known as mortgage warehouse lines, and growth in those balances is highly dependent on refinancing activity."

The company also warned that it "could continue to experience a relatively high provision for loan losses and elevated charge-off levels as it continues to work on reducing impaired assets."

KBW analyst Jacquelynne Chimera said on Oct. 22 sais that Sierra Bancorp had "attractive branch network and deposit franchise," with "the no. 1 market share position in the Visalia-Porterville MSA," and said "we continue to believe the company would garner an attractive multiple of book in a sale if it were to choose to find a strategic partner." Chimera's price target for Sierra Bancorp is $13.00.

The analyst estimates that Sierra Bancorp will earn 75 cents a share in 2013, increasing to EPS of 85 cents in 2014.

BSRR data by YCharts

Interested in more on Sierra Bancorp? See TheStreet Ratings' report card for this stock.

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