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Top Picks 2019: First US Bancshares (FUSB)

01/17/2019 5:00 am EST


Benj Gallander

President, Contra the Heard

First US Bancshares (FUSB), our favorite conservative idea for 2019, is expanding with the takeover of The Peoples Bank, moving it beyond Alabama into Tennessee and Virginia, suggests Benj Gallander, editor of Contra the Heard.

CEO/President James F. House stated, “We have now added a talented banking team and an excellent customer base in the Knoxville, Tennessee and southwest Virginia areas."

He added, "We believe that this expansion will provide significant opportunity for future growth, particularly with respect to commercial lending in the vibrant Knoxville market.  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.”

House has been the CEO since 2011. He has been in the industry for over 35 years and one can garner that he has seen it all. For investors, that adds a level of confidence, as too often, bankers tend to lose their way.

In 2014, the bank recommenced a dividend of a penny a quarter, after a three-year hiatus. Now it is up to two cents. Prior to the financial crisis, it was $0.27 a quarter. Given that the share count has remained flat, further increases are likely in the cards.

The stock seems cheap. Book value is $12.31, about one-third more than the trading price. The capitalization ratios are excellent with Tier 1 capital and Tier 1 risk-based capital ratios each 12.28 percent.  Its total capital ratio is 13.20 percent, and its Tier 1 leverage ratio is 8.78 percent. Insiders own about 5.6 percent.

Interest rates likely have some upside push left. That should help the banking sector and benefit the bank. First U.S. Bancshares used to trade at much higher levels. It would not surprise to see this one move back to the $25 level. And it could provide a good tuck-in takeover for a larger player that wants to expand.

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