American National Bankshares Inc. 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 is comprised of:
1-4 family loans 20%
Multi-Family Loans 44%
Construction Loans 6%
Home Equity Loans 12%
Consumer loans 12%
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.
Redwood does not have a position in this Company and has no plans to add it in the immediate future.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.