Ticker: FGBI, Buy below $18.

Why I Would Buy

1. Very Cheap – First Guaranty trades at about 8 times trailing earnings. Other than being an obscure microcap stock, there isn’t anything else that I could find to explain this cheapness.
2. Significant Insider Holding – About a third of the shares are held by management and directors.
3. Recent Insider Buying – During the past 12 months 600,000 shares were purchased by company insiders, no significant sales were reported.
4. Strong Returns on Equity – RoE is one of my favorite metrics for evaluating company performance, First Guaranty has posted some impressive numbers: 

   2011	2012	2013	2014	2015
   7.37%	10.90%	9.31%	11.40%	12.98%

5. Low Payout – Despite a healthy dividend of approximately 4%, the payout ratio is just 30%.

What Could Go Wrong

1. Tiny –First Guaranty had a 2015 net income of $just 14.5 million and a market capitalization of about $120 million. Domiciled in Louisiana, it is the only the 7^th largest bank in the state.
2. Revenue Plateau –Revenues have been flat for some years:

   2011	2012	2013	2014	2015
   $51 mill	$53 mill	$47 mill	$50 mill	$56 mill

3. Mediocre Safety/Stability Rating –First Guaranty is rated only 3 stars (out of a possible 5) by BankRate.com’s “Safe & Sound” bank ratings system.

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