First US Bancshares (FUSB) was our Top Pick last year and it has moved up more than 38% since then — but far more is expected; indeed, it remains our Top Pick for 2020 for more risk-oriented investors, explains value expert Benj Gallander, editor of Contra the Heard Investment Letter.
Given that it is a small regional bank, it is somewhat riskier than the major players in this sector. But the company makes money virtually every year, revenues have been trending upwards, and it sells at a large discount to book value.
Capital ratios are solid, and the dividend was delivered once again at the two-cent level. Prior to the recession it paid a regular quarterly dividend of $0.27 a quarter, which is one reason that we stand by our belief that this will be hiked, and likely before the end of next year.
The share count has remained flat at six million shares meaning that an increase should not ding the bottom line very much. Insiders own about six percent.
FUSB is based in Birmingham, Alabama. Founded in 1952, there are 20 bank branches in Alabama and Virginia. The latter state joined the bank through a takeover of the Peoples Bank in 2018 and the digestion process appears to have gone well.
James House, the President/CEO since 2011 stated, “As we complete the integration of our organizations and move beyond the nonrecurring acquisition expenses, the acquisition should quickly begin to bring improved efficiency and earnings growth.” That seems to be occurring. In addition, there is stellar loan expansion.
One aspect in particular that we like about this organization is that it is the same old management so to speak. Besides long-serving House, many of the other key personnel have been with the bank for years. That is also true of their Board of Directors. While an investor might fear that management could become stale, at our end that is not a concern.
First U.S. used to trade north of $33. It would not surprise to see this one move back to the $25 level, so better than a double from here. And it could be a good tuck-in takeover for a larger player that wants to expand, while buying assets at a very reasonable price.
