CAC - Katahdin Bankshares: Long-Term Incremental Returns

2024-05-24 13:30:35 ET

Summary

• Katahdin Bankshares Corp. continues to perform well in a challenging environment.
• The company has met expectations by providing compound annual returns of ~9.5% per annum the last several years.
• We expect forward performance to reflect past results and provide long-term shareholders with compelling long-term returns.

Katahdin Bankshares Corp. ( KTHN ) is a small community bank primarily serving the far northern region of Maine. The company holds the largest deposit market share in its core market of northern Aroostook County, with about 37.5% of all insured market deposits. In addition, Katahdin has a significant presence in the northern section of adjacent Penobscot County, although the company's market share is much smaller in Penobscot as a whole due to the population center of Bangor, Maine, located at the far southern end of the county.

Katahdin has generated a compound average annual return (including dividends) of just under 10% over the nearly seven years since our initial article on the company. The results are in line with our baseline expectation at the time, slightly increased by a modest closing of the valuation gap between the market quotation and the company's tangible book value per share. The total return is only marginally behind the return on the far more expensive S&P 500 (SP500) over the same period of time....

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