I’m recommending the shares of FNB Bancorp, the holding company of First National Bank of Northern
California (“FNBG”). With approximately 1.1 billion in assets FNBG has a solid footprint in South San
Francisco and services the counties of San Mateo, San Francisco and Santa Clara.
Let’s take a quick snap shot of the valuation metrics. 1.1 billion in assets trading at a valuation of 135%
price to tangible book value. With an efficiency ratio in the low 70s, this bank trades at approximately
16 times earnings per share. FNBG maintains a 4% NIM. Bank pays a small dividend which generates a
1.7% dividend yield.
At this point you might be thinking.. “So….ok…uh…what exactly is the attraction?” The answer is, I think
it is a takeover candidate. I have been buying shares of FNBG, and other banks with similar
characteristics, because I think that it is probable that the bank will be sold in the next 5 years, and
possibly sooner. I’d like to emphasize that this is a small holding for me, and part of a basket of banks
with similar takeover characteristics. I think a very important consideration is the age of the CEO, and
average age of the board. The next consideration I look at is how much the CEO and board collectively
own. If you have a bank board in their late 60s that collectively own at least 20% of the outstanding
shares – I think it gives the investor a tail wind on the odds that they sell. I think that putting together a
basket of banks with such characteristics and pricing metrics should perform satisfactorily over the next
Let’s take a look at the proxy.
Thomas G Atwood D.D.S owns or controls 627,780 shares, or 14.72%. Dr. Atwood is 69 and was on the
board from 1977 to 1996. He rejoined the board in 2010. Of note, he seems to have increased his
ownership from 10% to 15% between proxy filings in 2009 and 1010 at very attractive prices. A savvy
stock picking 69 year old dentist that owns 15%, sounds good to me.
The Ricco Lagomarsino Trust owns 9.76%. Ricco Lagomarsino was at one time the Chairman of FNBG.
Now a trustee of the Trust, Lisa Angelot serves as Chairwoman of FNBG. Lisa is the granddaughter of
Ricco Latomarsino and is 57.
Wellington owns 8.75%.
Banc Funds owns 5.46%.
Thomas McGraw is the CEO and a Director and owns 237,785 shares. Mr. McGraw is 63 and is also
covered by a generous Salary Continuation Agreement that kicks in at age 65.
So clearly we have some concentrated ownership with a vested interest in FNBG. Noticeably absent are
any significant Form 4s reporting stock sales by any director over the last few years.
I think the age of the CEO and Board are very important factors for deciding when or if a bank
might sell. The euphemism to describe this in banking circles is “social issues.”
Recently the American Banker wrote an article (December 9, 2015) titled “Is the Banking Industry on the