NEW YORK (TheStreet) -- Yadkin Financial (YDKN - Get Report) jumped 6.8% to $18.48 on Monday after the company announced it plans to merge with VantageSouth Bancshares (VSB). VantageSouth surged 12% to $5.75.
The merger will result in the largest community bank headquartered in North Carolina with approximately $4 billion in assets. The transaction would be worth approximately $299 million on the effective date based on Yadkin's closing price of $17.31 on Jan. 24. VantageSouth shareholders will receive 0.3125 shares of Yadkin Financial common stock for each share of VantageSouth common stock they own.
"It is with great enthusiasm that we announce the merger of these two strong community banks," said Yadkin president and CEO Joe Towell in a statement. "This transaction creates significant value for the shareholders of both companies, provides greater convenience and services for our customers, and transforms the banking landscape in the Carolinas. We will have meaningful presence in major markets across the state including Charlotte, Raleigh-Durham, Greenville, and Wilmington while continuing our focus on our community markets."
"This merger-of-equals creates a strong community banking franchise with greater competitive advantage, profitability, and future growth potential," said VantageSouth president and CEO Scott Custer in the statement. "The breadth of the joined franchise, combined with the talent of the two teams will create exceptional service for our customers. Our companies have spent considerable time evaluating the philosophies of our two banks and the merits of this transaction and we believe we are creating a franchise with substantial upside."
TheStreet Ratings team rates YADKIN FINANCIAL CORP as a "hold" with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:
"We rate YADKIN FINANCIAL CORP (YDKN) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its solid stock price performance, increase in net income and good cash flow from operations. However, as a counter to these strengths, we find that the company's return on equity has been disappointing."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- This stock has managed to rise its share value by 88.85% over the past twelve months. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
- YADKIN FINANCIAL CORP has shown improvement in its earnings for its most recently reported quarter when compared with the same quarter a year earlier. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, YADKIN FINANCIAL CORP continued to lose money by earning -$1.65 versus -$3.00 in the prior year. This year, the market expects an improvement in earnings ($1.18 versus -$1.65).
- The gross profit margin for YADKIN FINANCIAL CORP is currently very high, coming in at 89.92%. It has increased significantly from the same period last year. Despite the strong results of the gross profit margin, YDKN's net profit margin of 20.01% significantly trails the industry average.
- YDKN, with its decline in revenue, slightly underperformed the industry average of 0.8%. Since the same quarter one year prior, revenues slightly dropped by 2.4%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Commercial Banks industry and the overall market, YADKIN FINANCIAL CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: YDKN Ratings Report