Skyline Bankshares Inc

Skyline Bankshares continues to demonstrate strong growth in loans and deposits, which is a positive indicator for future performance. The stock trades at just seven times our estimate of cash earnings for 2026, suggesting it remains undervalued despite its recent price increase from under $13 to $26.20 per share. This valuation, combined with the bank's growth trajectory, positions Skyline Bankshares as an attractive investment opportunity within our community bank holdings.

Skyline Bankshares continues to show strong growth in loans and deposits, which is a positive indicator for future performance. The stock trades at just seven times our estimate of cash earnings for 2026, suggesting it remains undervalued. We built a position a year ago at under $13 per share, and it closed Q2 at $26.20 per share, reflecting our confidence in its growth trajectory. We expect the company to continue executing well, which is crucial for equity investments.

We profiled Skyline Bankshares (otc: SLBK) in our Q1 2025 letter. We built a position a year ago at under $13 per share and it closed Q1 at $21.75 per share. It still trades at just six times our estimate of cash earnings for 2026. This valuation suggests significant upside potential as the market recognizes its earnings capacity.

Skyline Bankshares (SLBK) is part of a basket of attractively priced community banks that we believe should trade at higher valuations. The fund has been building this basket, which includes banks trading at less than six times earnings. We see potential for these banks to become attractive acquisition candidates. The current market conditions, including the ability to repurchase outstanding preferred stock at a discount, position Skyline Bankshares favorably for future growth and valuation improvement.

Skyline Bankshares is a small community bank where earnings are growing and valuation is extremely low. As of the last update, Skyline was trading at just over five times earnings, with a dividend yield near 4%. The manager believes it should trade closer to $25, which would be just ten times earnings. Fast forward six months, earnings are likely to be $0.70 per share in Q3, resulting in an annualized run rate of $2.96 per share. Despite the stock climbing to $17.25 per share, the price-to-earnings ratio is still under six, indicating significant upside potential.

We built up a new position in Skyline Bankshares, a community bank in rural Virginia and Tennessee, with a market cap of $70 million. Despite a decrease in earnings from $1.74 per share in 2023 to $1.34 in 2024, this was largely due to merger-related expenses and amortization of core deposit intangibles. Adjusted pre-tax earnings for the fourth quarter of 2024 would annualize to $2.45 per share. We believe that Skyline should trade closer to ten times earnings, or $25 per share, and the current dividend yield is a solid 4%.

During the quarter we built up a new position in the fund, Skyline Bankshares (otc: SLBK), a community bank in rural Virginia and Tennessee. The bank has 5,557,000 shares outstanding at roughly $12.50 per share for a market cap of $70 million. The bank earned...