Here we highlight 2 regional microcap banks with Outperform ratings with different growth catalysts.
A primary growth lever for regional banks is acquisition so the 4/9/26 acquisition announcement of Lakeside Bancshares (LKSB) by Catalyst Bancorp (CLST) is noteworthy.
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Catalyst Bancorp (CLST) serves the south-central portion of Louisiana with six full-service branches. The merger with Lakeside is arguably transformative as the bank expects the transaction to be over 180% accretive to EPS within 3 years as cost savings are realized. But yet, post announcement, the stock still trades at about a 20% discount to tangible book value.
The deal will add 4 of Lakeside’s locations and is expected to close in the third quarter.
Independent of the acquisition, the bank was able to materially lower its cost of funds YOY from 2.54% to 2.30% in Q1 due to less reliance on costlier wholesale funds.
EPS was essentially flat YOY at $.15 per share as non-interest expenses in the form of elevated professional fees related to the acquisition trimmed about $.02 from EPS. NIM declined marginally by 6 bps to 3.83%.
So the bet here is that the acquisition successfully closes and Catalyst is able to execute upon integration cost synergies. Please note that the bank’s loan portfolio has approximately 11% exposure to oilfield services pre-acquisition.
The other regional bank, Landmark Bancorp (LARK), serves Kansas and the metropolitan Kansas City area with 29 branches and expanded into Missouri with a loan production office in Kansas City in 2024.
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Landmark Bancorp (LARK) posted a solid Q1 with NIM expanding 48 bps YOY to 4.24% supported by improvement in both asset yields and funding costs. Q1 EPS grew 7.8% YOY to $.83.
For income investors, it is noteworthy that the bank has paid a dividend for 99 consecutive quarters, with a 5-year CAGR rate of approximately 5.9% which comfortably outpaces inflation.
The stock trades at about 1.1x BV and about 1.4x Tangible Book Value.
Lastly, it was noting that Kansas and the greater Kansas City area typically score well on cost-of-living indexes. This is relevant as there is some evidence that lower cost geographies may help temper operational costs for banks.
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This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
