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American National Bankshares Inc. (AMNB) is a 1.3 Billion dollar (assets) bank headquartered in Danville, Va.

The bank has a solid equity/asset ratio of 9.35 and boasts an impressive 10.74 return on average equity.

The 4.35% dividend makes it an attractive holding and justifies its 140% price to tangible book value pricing.

Insiders own 8.43% of the outstanding shares and the officers all own stock equal to at least one year of their salaries.

The loan portfolio breaks down as follows 1-4 family loans 20%, Multi-Family Loans 44%, Construction Loans 6%, Home Equity Loans 12%, Consumer loans 12%, and Commercial Loans 15%.

Loan growth is relatively flat and they hold 75% loans to deposits and 25% securities to assets.

The securities portfolio which comprises about 25% of the invested assets is a combination of 60% State and Municipal bonds with duration of about 10-15 years and yielding about 3.5%, 28% Mortgage backed securities and CMO's with a 3.75 % yield (duration was estimated at 4-5 years, but in a rising rate environment it would likely be much longer) and 10% Federal agency bonds and GSE bonds with 3-5 year duration.

The overall bond portfolio is yielding about 3.5% and goes out a little longer than I am comfortable with, but new additions are going to be in shorter term corporate bonds.

Non-Performing loans in relation to loans are at 1.24% and their reserves are 119% of non-performing loans, so they are adequately reserved.

The strategy going forward for the bank is to grow through acquisition and there are a number of opportunities in their footprint that could be acquired at a price that would be immediately accretive if purchased properly.

Although they could do a deal with the current capital they have, it is likely, that they will raise additional capital to put them into a stronger negotiating position as a buyer.

The execution of that strategy could push the value of the bank higher and position them to have a bigger footprint when the environment for making loans is improved.

Overall this is a very well run institution with a definite strategy to grow and the personal to do it with. The dividend will give some income but the capital raise will dilute value until the acquisition is made.

Source: Attractive Dividend In A Well Run Bank