On Wednesday, Piper Sandler adjusted its price target on shares of Isabella Bank Corp (OTC: ISBA), increasing it to $22.00 from the previous $20.00. The firm maintained a Neutral rating on the stock.
The adjustment follows Isabella Bank's second-quarter results, which showcased a notable rise in net interest income (NII) due to a higher-than-expected net interest margin (NIM) expansion, robust loan growth, and stable credit metrics.
Piper Sandler's report highlighted the bank's solid long-term holding potential, underscored by an attractive dividend yield of 5.6%, which stands out compared to the peer average of 3.2%.
The firm noted Isabella Bank's ongoing efforts to secure full commercial and industrial (C&I) relationships and build scalable infrastructure, which may hasten profitability improvements and possibly exceed Piper Sandler's expectations. The firm anticipates a return on assets (ROA) between 0.6% and 0.8% in the second half of 2024 and into 2025.
In response to the promising quarterly performance, Piper Sandler has raised its earnings per share (EPS) estimates for Isabella Bank for the years 2024 and 2025. The new estimates are set at $1.80 and $2.10, up from the previous $1.70 and $2.05, respectively. These revisions are based on the assumption of increased net interest income.
The new price target of $22.00 reflects a valuation of 1.05 times the one-year forward tangible book value (TBV) estimate, an increase from the prior multiple of 0.95, aligning with higher peer multiples. Despite the positive outlook, the target still implies a moderate discount compared to the peer average valuation of 1.2 times, which takes into account Isabella Bank's below-average profitability forecast.
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