First Guaranty Bancshares, Hammond, LA (FGBI)

A Case of a Great Guy Selling Himself Short


I guess it's no surprise that I like to make money, but I like to see other people make money, too! Especially people I admire as much as the Chairman of First Guaranty. So Marshall Reynolds' recent request to sell a significant portion of his FGBI stock has me grieving on both of our behalves. Why sell such a high percentage of shares at a substantial discount to mutual disadvantage of oneself and one's shareholders, when you can sell the bank and obtain more than a fair share for all?

Disclosure: As of this posting, I own shares of FGBI and may subsequently either dispose of them or purchase more.

Prospective Buyers
First Guaranty's 21 branches would be a perfect acquisition for Iberiabank, in particular, which has a big hole in the market where First Guaranty has a stronghold.
First NBC Bank Holding Co, New Orleans, LA (FNBC)
Hancock Holding Co, Gulfport, MS (HBHC)
Iberiabank, Lafayette, LA (IBKC)
Financial Snapshot
as of 9/30/2014

Total assets:
$1.476B
Tangible book value per share:
$14.83
NPAs to assets:
1.28%
Price to book:
118%
Market cap:
$114.8M
Dividend yield:
3.5%
Trailing 12-month return on assets:
0.77%
Trailing 12-month return on equity:
8.45%
TARP:
$0*
*Redeemed $20.7M 9/22/2011
The Crew
Marshall T. Reynolds, Chairman
Alton B. Lewis Jr., Vice Chairman, President and CEO
Eric John Dosch, Treasurer, Secretary and CFO
The Skinny
What I like
  • I like Marshall Reynolds. He's a good old fashioned, hardworking, straight out of storybooks, all American, serial entrepreneur. Who else goes from getting turned down for a business loan as a young man to owning the bank that denied it to him, and signs up to coach a high school basketball team for the first time at 74 years old?
  • I like First Guaranty Bank. It's been around for over 80 years, has never experienced any major asset quality problems, has been growing steadily since Reynolds took over in 1993, and now dominates the market in 11 Louisiana cities.
  • I like FGBI stock. It's performing in the 20th percentile of community banks as far as dividends are concerned, is priced well below what it is worth, and could easily obtain a premium in a sale.

What I don't like
  • The bank could be performing better. Loan growth at First Guaranty has badly lagged deposit growth, and the bank's loan to deposit ratio is down to 56%.
  • Reynolds is standing in his own way. If he proceeds with the secondary, he will net about $11M and hold remaining shares worth $20M. If he sells the bank instead, his shares would net nearly twice that, a pretty $60M.
  • Reynolds is standing in my way. If he proceeds with this secondary, his remaining shares and mine are apt to get stuck in the current $18-$20 price range. Were he to sell the bank instead, they would fetch something in the $30s.

What I want
  • I sure hope Reynolds cancels the secondary, which would be dilutive to shareholders, and takes steps to sell the bank, instead, like he did so well with Key Centurion Bank in 1992!
Sources

1 comment :