On Friday, February 22nd one of the nation's higher yielding regional banks announced the distribution of its regular quarterly dividend. In this article I wanted to take a closer at not only the bank, but the three catalysts driving my consideration to establish a position in the stock at present levels.
Fauquier Bankshares Inc. (FBSS), based in Warrenton, Virginia, operates "as a holding company for The Fauquier Bank, a state-chartered bank that provides consumer and commercial banking services to individual, business, and industrial customers principally in Fauquier County, western Prince William County, and neighboring communities in Virginia". Over the course of the last 3 months, shares of FBSS have traded an average of just 2,602 shares per day and currently yield 4.00% ($0.48). One the things potential investors should note is that shares of FBSS have traded 0.84% higher since January 1st of this year.
When it comes to Fauquier, there are three things potential investors should consider before establishing a position in the bank and they are the bank's recent increase in regulatory capital ratios, its increase in revenues generated from the bank's wealth management services unit, and the bank's efforts to cut certain costs.
Regulatory Capital Ratios: According to the company's recent annual earnings, which were reported on February 4th, "Fauquier's regulatory capital ratios continue to be deemed "Well Capitalized" by the Federal Reserve Bank of Richmond. As of December 31, 2012, the company had a leverage ratio of 9.23%, compared with 8.70% one year earlier. The tier 1 and total risk-based ratios were 12.60% and 13.85%, respectively, at December 31, 2012, compared with 12.05% and 13.31% at December 31, 2011. The minimum capital ratios to be considered "well capitalized" by the Federal Reserve are 5.00% for the leverage ratio, 6.00% for the tier 1 risk-based ratio, and 10.00% for the total risk-based ratio".
By examining the ratios a bit closer we'll notice that the bank's ratios are well above the Federal Reserve's standards. For example, Fauquier's leverage ratio, tier-1 ratio and total-risk have surpassed the Fed's standards by 84.60%, 100.83%, and 33.10%, respectively. If the company can continue to demonstrate increases in the above mentioned three ratios, I see no reason why Fauquier can't sustain its "Well Capitalized" classification for years to come.
Wealth Management Services: The second of the three catalysts behind my decision to establish a position FBSS, deals with the company's Wealth Management Services unit. According to the company's most recent earnings announcement, F
For the year ended December 31, 2012, Fauquier Bankshares' Wealth Management Services division revenues were $1.73 million compared to $1.64 million a year earlier, an increase of 5.9%. Assets under management for WMS at December 31, 2012 increased 12.2% to $328.6 million compared with $292.9 million a year earlier.
It's almost as though Fauquier hit two birds with one stone here, not only did the units contributory revenues increase 5.9%, but the assets under the unit's management increased a very impressive 12.2%. If the bank can continue to demonstrate positive performance when it comes to its wealth management services unit, these numbers could be even higher over the next 12-24 months.
Cost Cutting Efforts: The last of the three notable catalysts behind my decision to establish a position FBSS, deals with the company's cost cutting efforts. According to the bank's President and CEO, Randy Ferrell, "The bank's efficiency ratio was 67.64% for 2012 compared with 72.05% in 2011, a positive reflection of our efforts to reduce expenses". One of the contributing factors behind the bank's improved efforts to reduce its spending was a $2.2 million dollar decrease in non-interest expenses. If the bank can continue to cut significant costs and improve efficiency over the next 12-24 months, FBSS could begin to perform much better than the 0.84% shares of the bank have risen since January 1st.
Conclusion: When it comes to those who may be looking to follow my lead in establishing a position in this higher-yielding regional bank, I'd continue to keep a watchful eye on the company's quarterly and annual results. Its regulatory capital ratios and wealth management services have contributed quite nicely to the company's annual performance and if the bank can continue cut costs with an aggressive efficiency as has been the case over the last year, I see no reason why a position at current levels should not be established.