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3, 2, 1 Blastoff!!

Well the new 6.75% fixed rate preferred from tiny Louisiana banker First Guaranty Bancshares (FGBI) started to trade today.

I wanted a taste of this issue–say 500 shares–not as a hold, but more of a couple week flip for steak dinners (maybe 50 cents/share). Obviously there are many folks that wanted it worst than me. I put bids in at $25.25, $25.55 and $25.75 and while it looked like this should have executed it didn’t.

While it has been fairly clear to everyone that there continues to be a huge chase for yield and these small banks are ‘hot’–for now I simply had to walk away. Not that I couldn’t have made a huge jump in my bid a likely gotten the shares I simply am not chasing a $2.5 billion in asset bank to the moon. Oh well, no doubt another tiny bank will sell some a new preferred issue soon and I can maybe chase that down for ‘steak dinners’.

At this moment I show shares trading at $26.26 on the OTC grey market under ticker FGBIL.

15 thoughts on “3, 2, 1 Blastoff!!”

  1. Good morning everyone; Can you Bankers out there explain something to me about this company. As Tim clearly stated they have $2.5 BILLION in ASSETS which they clearly state right on their Homepage. Here’s my question: Why is their market cap a Tiny $166.7 Million Dollars??? Yes, I do know the “difference” between assets and market cap but I just find it somewhat strange. My only other comment would be if they are truly Rock Solid why are they offering such a rich coupon in this environment???

    1. It doesn’t take a banker to know that banks have almost as much in liabilities as assets. For example, Wells Fargo has almost $2 trillion in assets, but a market cap of “only” $184 billion. That’s because stocks are priced on equity value, not asset value.

    2. I and my wife both work for banks. I work for a very large one, and she works for a small one. We thought about this good question of market cap, and then pondered about the bank’s resources, obligations, and how that affects the equity value of a bank. In the end, my wife is right, as she said size does matter.

    3. I smell a Rat in this offering.
      Too many of us were ignored when we offered to buy at the ask.
      On another note, ever since my wisdom tooth Ex-traction on Thursday at Tooth Hurty.
      I’m not as sharp witted.

    4. LOL I too had to drill down on that. The NW to total asset ratio has always one of the most basic #’s used to evaluate a bank’s soundness. 6 to 8% as been a standard. And there are at least 15 different ways to evaluate their books of business.

      It’s been said it doesn’t matter how much cap a bad bank has…..nor does it matter how little cap a good bank has. The bad bank fails the good bank lives. There’s a wealth of bank creditworthiness in It’s a Wonderful Life.

      There’s another old saying. When is a bank insolvent? When a regulator says it is!…..So yeah buying this one is questionable for me. Coupons great. 68 year history is encouraging. Market reception good. Just too small for me. And what was it 35 mill in offering size??

    5. I noticed FGBI increased their allowance for loan losses from $4.9M to $14.9M in December 2020. The use of proceeds section of the new preferred prospectus only specifies general business purposes, and the company hasn’t made an investor presentation available for about a year. They could be financing a growth strategy, but its more likely they’re holding some bad loans on their books and are scrambling to cover the expected losses.

      1. Perhaps this bank is doing what I’ve heard a number of banks did in 2020, used the fee income from making PPP loans to shore up their loan loss allowance in preparation for CRE defaults.

  2. I’m selling shares with long-term gains, I like to be fully invested but this environment tells me to back off. Major corps are announcing major price increases. Inflation is coming, and coming hard. Just my opinion.

  3. I decided to see what FGBIL settled at after close this evening when I took a break from practicing a devilish guitar exercise. According to otcmarkets.com the bid was 26.26 and ask was 26.32. When I placed my Vanguard limit order at 25.35 it was just below the 25.40 ask. Guess I should have bit and bought it right then instead of playing the prudent investor. Oh well, there will be another one along in a little while. Will keep an eye on Tim’s most excellent site for the next one. Any company who wants to raise money can in this environment if their finances are anywhere near in order at low interest rates. Lord knows where this thing is headed, do I hear 27? Reminds me of the sub 5% JPM one I bought last year and wound up with almost two bucks per share on when I flipped it.

  4. The deal was too thin…I tried 25.25, .30 and .55 —Got nothing done.

    Slim pickings out there

  5. Well,. I will leave my limit order at Vanguard for 550 shares @ $25.35 alone JIC (just in case). It is amazing how the world is these days with the ZIRP policies driving yield chasing. Maybe better luck on the next one. As I said earlier the casino was open and I never got up to the table!

  6. It is amazing, I’m sure there are more than a few of us that had bids in that we thought were fair. I walked away at $25.50.
    The biggest advantage the individual investor has versus the institution is PATIENCE, they have to be fully invested, we can wait. Keep telling myself this!

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