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4 Mid-Cap Bank Stock Value Plays From UBS

FMER Chart FMER data by YCharts

4. FirstMerit

Shares of FirstMerit (FMER - Get Report) of Akron, Ohio, closed at $16.50 Tuesday, returning 18% this year, following a 2% decline during 2012. The shares trade for 1.6 times tangible book value, according to Thomson Reuters Bank Insight, and for 11.7 times the consensus 2014 EPS estimate of $1.41. The consensus 2013 EPS estimate is $1.25.

Based on a quarterly payout of 16 cents, the shares have a dividend yield of 3.88%.

The company in September agreed to acquire Citizens Republic Bancorp (CRBC) of Flint, Mich., in an all-stock deal valued at $912 million. Citizens Republic has $9.6 billion in total assets and owes $300 million in federal bailout funds received through the Troubled Assets Relief Program, or TARP. FirstMerit plans to purchase Citizens Republic's TARP preferred shares from the U.S. Treasury without itself becoming subject to TARP's restrictions, while also paying the government deferred dividends totaling $48.5 million. The merger is expected to be completed in the second quarter.

The consensus among analysts is for FirstMerit to report first-quarter earnings of 31 cents a share, declining from 35 cents in the fourth quarter, but increasing from 28 cents in the first quarter of 2012.

Scinicariello on Tuesday raised his price target for FirstMerit's shares to $18.00 from $17.50, saying in his note to investors that "We believe the acquisition of CRBC provides longer-term growth opportunities." Scinicariello maintained his first-quarter EPS estimate of 32 cents and his 2013 EPS estimate of $1.28, but lowered his 2014 EPS estimate to $1.69 from $1.63, because of expected net interest margin compression.

"Given the size and importance of the CRBC deal, we expect FMER to remain focused on integration throughout 2013 before ramping up inorganic capital deployment but gauging management's future appetite will be important."

Interested in more on FirstMerit? See TheStreet Ratings' report card for this stock.
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BAC $14.13 0.00%
CMA $42.28 0.00%
FITB $17.54 0.00%
FMER $21.72 0.00%
KEY $11.89 0.00%


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