8 Community Bank Stocks Face Mass Downgrade At Raymond James On 'Challenging' Operating Environment

In a report published Thursday, Raymond James analyst David Long made nine rating changes on community banking stocks, which include one upgrade and eight downgrades.

"The operating environment remains challenging in light of continued NIM pressure and upward pressure on noninterest expenses (franchise reinvestment, regulatory/tech costs)," Long wrote. "On conference calls, we expect continued heighted focus on interest rates and loan growth. In addition, other major topics likely include near-term NIM trends, revenue growth opportunities, expense control, credit trends, and DFAST results for banks with $10-50 billion in assets."

Downgrading Regions Financial To Outperform

Shares of Regions Financial Corp RF were downgraded to Outperform from Buy with an unchanged $11.50 price target following the stock's outperformance in the second quarter relative to the broader index and S&P 500.

Long noted that he still views the stock's discounted valuation relative to peers (on P/TBV basis) coupled with its "relatively solid" profitable positively. The company is also well positioned for a rising interest rate environment with a "demographically attractive" footprint.

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Downgrading Zion To Market Perform

Shares of Zions Bancorporation ZION were downgraded to Market Perform from Strong Buy as shares are trading near the analyst's $34 price target.

According to Long, the shares' strong performance in the second quarter indicates that the upside potential from its recently announced cost rationalization is priced into its share price. As such, there is a lack of near-term positive catalysts for the stock.

Downgrading Bank Of The Ozarks To Outperform

Shares of Bank Of The Ozarks Inc OZRK were downgraded to Outperform from Strong Buy with a price target raised to $51 from a previous $46.

The analyst's boosted price target assumes shares trade at around 20x his 2016E earnings per share, a 31 percent premium to its peers which is "warranted" given it's "outsized" profitability, superior growth profile, pristine asset quality and stout capital base.

Long noted that his revised target provides less than the required 15 percent upside to maintain a Strong Buy rating.

Downgrading United Bankshares To Market Perform

Shares of United Bankshares, Inc. UBSI were downgraded to Market Perform from Outperform due to valuation reasons as shares are trading above the analyst's $39 price target.

According to Long, his prior investment thesis was based on the notion that shares would outperform peers as the bank continued to deliver strong earnings and dividend streams. The analyst noted that he still remains confident that the company will continue posting strong earnings and maintain a growing dividend but the stock's current price already reflects the value of the franchise.

Downgrading EverBank To Outperform

Shares of EverBank Financial Corp EVER were downgraded to Outperform from Strong Buy with an unchanged $22 price target.

Long noted that EverBank's "outsized' mortgage exposure will weigh on nearer-term P/E multiple expansion in the face of waning refinance volumes in the bottom half of 2015 despite the fact that the company is in the process of diversifying its business.

Despite the near-term issues, the analyst noted that the company can double in size organically over the next four to five years and achieve its growth targets. The company could also present itself as an acquisition candidate given its strong organic asset generation capabilities.

Downgrading Pinnacle Financial Partners To Market Perform

Shares of Pinnacle Financial Partners PNFP were downgraded to Market Perform from Outperform as shares are trading above the analyst's $53 price target.

According to Long, shares are trading at a "well-deserved" premium valuation following acquisition announcements in April. The company is likely to continue performing "positively" with "solid" earnings per share growth in the coming years.

Nevertheless, shares have shown recent strength and gained more than 22 percent in the second quarter, justifying a lower rating at the current time.

Downgrading Columbia Banking System To Market Perform

Shares of Columbia Banking System Inc COLB were downgraded to Market Perform from Outperform as shares are trading above the analyst's $32 price target.

Downgrading Wilshire Bancorp To Market Perform

Shares of Wilshire Bancorp Inc WIBC were downgraded to Market Perform from Outperform as shares are trading above the analyst's $11.50 price target.

Upgrading United Community Banks To Outperform

Shares of United Community Banks, Inc. UCBI were upgraded to Outperform from Market Perform with a newly established $23 price target.

According to Long, the stock's discount to peers relative to projected returns on tangible assets and tangible equity is "too steep." The company also announced two earnings per share accretive acquisitions, which instills confidence in the analyst's above-consensus earnings per share estimates.