40 NOVEMBER / DECEMBER 2023 Michael A. Renninger Principal Renninger & Associates LLC MRenninger @RenningerLLC.com Renninger & Associates LLC is a Diamond Associate Member of the Indiana Bankers Association. Securities offered through Ausdal Financial Partners Inc. Member FINRA/SIPC. 5187 Utica Ridge Road, Davenport IA 52807 563-326-2064. Renninger & Associates and Ausdal Financial Partners Inc. are separately owned and operated. Indiana Statistics Click on the hand icon in HB Digital to access statistics through Sept. 30, Aug. 31 and July 31, or visit: indiana.bank/bank-thriftstock-update. Stock Analysis Review as of Sept. 30, 2023 INDIANA BANK & THRIFT STOCK UPDATE The Size, Pricing and Profitability Reports for Indiana Banks and Thrifts as of Sept. 30, Aug. 31 and July 31, 2023, are available by clicking on the icon on this page in HB Digital or by visiting the designated website location. These reports present the stock price changes for the 29 Indiana banks and thrifts that are traded on the NASDAQ and Over-The-Counter markets over the prior two years, one year and year-to-date, in addition to pricing and performance metrics. Selected banks headquartered outside Indiana, four broad market indices, and four bank and thrift indices are also tracked. The bank and thrift stock indices continued to underperform broad stock indices to this point in 2023. The bank indices decreased an average of 20.9% YTD as of Sept. 30, 2023, while the broad indices increased an average 12.5%. In comparison, Indiana’s NASDAQ-traded banks are down a median of 26.6% YTD, while Indiana’s OTC/Pink Sheet-listed banks are down 13.7%. The relative underperformance of bank indices to broad indices is not just a 2023 phenomenon. Bank stock indices are down a median of 16.1% and 35.8% over the one- and two-year time horizons respectively, compared to broad indices which are up 19.9% and down only 3.8% over the same periods At this writing, most banks have not yet released their third quarter results. It is widely anticipated that earnings performance will be considerably choppier than prior quarters, as net interest margins narrow and credit quality concerns rise. While the Federal Reserve has significantly slowed the size and pace of interest rate increases, another quarter-point rate hike is still being considered by year end since their inflation reduction goals have not been met. The combined impact of rising interest rates, and the erosion of depositor confidence in the wake of several large bank failures earlier this year, have pushed banks to raise deposit interest rates to protect their funding base. While liquidity concerns have abated, largely due to purposeful mitigation tactics, the full effect of “higher for longer rates” on net interest margins and credit quality have yet to be seen. The anticipation of lower earnings has had an obvious impact on bank stock prices. Higher interest rates have also devalued AvailableFor-Sale securities portfolios, straining certain capital ratios. After several years of significant asset growth, due in part to deposit inflows from pandemic stimulus programs, some banks may consider shrinking their balance sheets, focusing on the most profitable business segments and implementing additional cost savings measures. Mergers and acquisition activity is expected to be muted as bank acquirers are less likely to offer their low-valued shares as currency, and bank sellers are less likely to find attractive pricing. The most recent M&A activity involving Indianabased banks includes a purchase and a sale. On Sept. 7, 2023, Merchants Bank of Indiana announced it is selling its four Illinois branches with $219 million in deposits to two banks, one based in Illinois and the other in Iowa, at undisclosed prices. On Oct. 26, 2023, Old National Bancorp announced its acquisition of Nashville, Tennessee-based CapStar Financial Holdings, Inc. ($3.3 billion in assets) in an all-stock deal valued at $344.4 million. The price represents a modest tangible book value multiple and approximately 11.0 times earnings for the seller. HB
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