VantageSouth Shares Hit 52-Week High - Analyst Blog

Riding on a steady growth momentum, shares of VantageSouth Bancshares Inc. (VSB) reached a 52-week high of $6.68 on Mar 13. This regional bank has witnessed a jump of about 26.8% since the beginning of 2014.

Moreover, the encouraging momentum of this Zacks Rank #1 (Strong Buy) stock is fuelled by strategic inorganic growth initiatives in the form of mergers and acquisitions along with a robust investment pipeline, thereby enhancing operating leverage.

Yesterday's closing price represents a robust one-year return of about 57.9% against a return of 11.9% clocked by the Dow Jones index. Average volume of shares traded over the last three months stands at approximately 35.4K.

Earnings Review

On Jan 29, VantageSouth reported fourth-quarter 2013 operating earnings per share of 7 cents, in line with the Zacks Consensus Estimate but higher than the year-ago number of 5 cents.

Results reflected robust growth in interest and non-interest income coupled with lower loan loss provisions. However, the positives were more than offset by higher interest and operating expenses. Conversely, asset quality remained strong, while capital ratios remained above regulatory benchmarks, at the end of 2013.

Rationale

Now that the acquisition of East Carolina Bank (ECB) is nearing an anniversary, the merger is showing results. VantageSouth witnessed higher interest and non-interest income as well as lower loan loss provisions following the ECB merger, thereby improving its operating efficiency.

Concurrently, VantageSouth has showcased prudent capital management, which in turn, leaves ample scope for pursuing capital deployment strategies. Going ahead, the proposed merger with Yadkin Financial Corp. is further expected to enhance VantageSouth's operating and competitive efficiencies. We believe the upcoming quarters should benefit from the company's operating and capital actions, as reflected in the market's positive reaction.

Some equally well-placed insurers that warrant a look are Bridge Bancorp Inc. BDGE, Eagle Bancorp Inc. EGBN and West BanCorp. Inc. WTBA. All three stocks carry same Zacks Rank as VantageSouth.