KBW Starts NCOM At Outperform, $25 Price Target

In a report published Monday, Keefe, Bruyette & Woods analyst Jefferson Harralson initiated coverage of

with an Outperform rating and a price target of $25. The rating reflects the company's excellent track record, expected premium growth rate, excess capital and "clear opportunity" for earnings growth, the analyst said. Headquartered in Birmingham, Alabama, the company is a $1.1 billion-in-asset bank. The new company is similar to its predecessor in name, in personnel, in location and in business lines, Harralson said. In the report Keefe, Bruyette & Woods noted, "Our thesis is that the shares should perform well as the bank drives exceptional growth (we expect 15% loan growth for the rest of 2015 and 2016), pursues improved profitability via operating leverage (we estimate its 0.79% 4Q14 operating return on assets [ROA] should move to more than 1% in 2016), and mixes in an accretive acquisition from time to time." Since National Commerce's IPO on March 19, the shares have risen 12.8 percent. The EPS estimates for 2015 and 2016 have been set at $1.13 and $1.37, respectively, reflecting ROAs of 0.85 percent and 0.96 percent. Even with the IPO dilution, Harralson estimates 15 percent EPS growth in 2015 and 21 percent in 2016.