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On Friday, Keefe, Bruyette & Woods maintained a positive stance on TowneBank (NASDAQ:TOWN) shares, reaffirming an Outperform rating and a $45.00 price target. The firm’s analysts highlighted TowneBank’s recent acquisition of Old Point Financial Corporation (OPOF), which significantly expands the bank’s footprint in the Hampton Roads Metropolitan Statistical Area (MSA). The acquisition adds approximately $1.5 billion in assets, representing an 8% pro forma increase, and brings in a low-cost deposit base with an average cost of 1.69%.
The deal is characterized by substantial branch overlap, which is expected to result in approximately 45% cost savings. TowneBank’s strategy involves using its excess capital for the transaction, with a mix of 50-60% in stock. The bank’s strong financial position is evidenced by its conservative debt-to-equity ratio of 0.17 and its impressive track record of maintaining dividend payments for 23 consecutive years, with 13 years of consecutive increases. InvestingPro subscribers have access to over 30 additional financial metrics and insights about TowneBank’s performance. The analysts at Keefe, Bruyette & Woods consider the acquisition to be an attractive and low-risk move, despite acknowledging that the purchase price is full.
TowneBank’s recent completion of its acquisition of Village Bank on April 1, 2025, is seen as a positive indicator of the bank’s ability to immediately follow up with another strategic in-market deal. The analysts believe that the new acquisition will boost TowneBank’s earnings per share momentum and that the bank is well-positioned to benefit from net interest income, regardless of interest rate fluctuations, due to back-book repricing and the Village Bank acquisition.
Additionally, the analysts noted strong tailwinds for TowneBank’s insurance and property management segments. They pointed out that previous regulatory administrations had discouraged acquisitions involving significant branch overlap, but recent comments from the FDIC suggest a less stringent approach. The recent merger between Renasant Corp (NYSE:RNST) and First Bancshares (FBMS) was cited as an example of regulators taking a more reasonable stance on divestitures.
In summary, despite the full price paid for the acquisition, the analysts at Keefe, Bruyette & Woods view the capital deployment and anticipated high cost savings as factors that will contribute to attractive accretion levels, with a projected increase of around 10%.
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