Heartland BancCorp (OTC: OTC:HLAN) on Wednesday received a rating downgrade from DA Davidson from Buy to Neutral, although its price target was increased to $145.00 from $103.00.
The adjustment comes after Heartland BancCorp's shares experienced a significant surge following the announcement of its $330 million sale to German American Bancorp (NASDAQ:GABC) in an all-stock transaction.
The deal priced Heartland BancCorp at a 72% premium at the time of the announcement, approximately 2.1 times its tangible book value (TBV).
Despite a 9% decline in Heartland BancCorp's stock since the announcement, the analyst believes that the upside potential is now limited to roughly 5%, based on the implied fixed exchange ratio tied to German American Bancorp's shares. DA Davidson does not provide coverage for GABC shares.
Heartland BancCorp reported strong second-quarter earnings for 2024, surpassing consensus expectations with better-than-anticipated operating expenses, robust loan growth of 6%, and deposit growth of 4%.
The company also maintained excellent credit quality. The analyst acknowledged Heartland BancCorp's growth and returns but suggested that the recent share gains post-deal have led to a more cautious stance.
The sale to German American Bancorp has been a notable event for Heartland BancCorp, reflecting a substantial premium over its previous market valuation. The new price target of $145.00 represents an increase from the prior target but acknowledges the limited growth prospects following the recent stock price movement.
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