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MERCHANTS & MARINE BANCORP MNMB
October 03, 2023 - 3:22pm EST by
david101
2023 2024
Price: 48.30 EPS 0 0
Shares Out. (in M): 1 P/E 0 0
Market Cap (in $M): 60 P/FCF 0 0
Net Debt (in $M): 0 EBIT 0 0
TEV (in $M): 0 TEV/EBIT 0 0

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  • Community Bank
 

Description

 
 

  
Loans: The bank largely focuses on commercial real estate but does do a variety of other loans.
 
 
Deposits: The bank relies a lot on money market accounts which I view as a negative..
 
 

 
 
Metrics: Here is a brief summary of various metrics for the bank.
 
 
 
 
Mississippi River Bank (MRB) Acquisition: The deal was announced on 9/20. I spoke briefly with the CFO Casey Hill. Details about the deal are being kept quiet until the MRB shareholders vote and approve the deal. He did indicate that the deal is at a premium to TBV but “left of the bell curve” in terms of M&A TBV multiples. The deal is all cash which is good since it trades below TBV and the bank has excess capital. MRB has $127.7 million in assets and $17.3 million in TBV. I am going to assume the deal is at 130% of TBV of $22.5 million. There are some questions about MRB but it does have a phenomenal deposit base. It had $109.6 million in deposits, and interest expense doubled in the 2nd Qtr to $6,000. That works out to an annual interest rate of 0.022%. Net income for the 1st Half of 2023 was $2.44 million. Divide that by MNMB’s shares and multiply by 2 and you get $3.67/sh annualized added to MNMB earnings. Even though MRB is a much smaller bank, it should more than double current earnings. Normally, I am skeptical of banks buying other banks because often the combined results don’t reach the expected levels. Here is some info on MRB:
 
  
 
 
 
 
Annual Meetings: The 2022 MNMB shareholder’s meeting was interesting although long at almost 2 hours. The first hour was a presentation by an economics professor that in hindsight was spot on with regard to inflation in 2022. He also mentioned the ECIP money and how incredibly cheap this capital would be. Legear spent a lot of time justifying the increased expenses as necessary to position the bank for the future. MNMB's efficiency ratio use to be in the mid 70's but the past 5-6 years, it has been in the mid to high 80's.
 
https://info.mandmbank.com/shareholder2021
 
2022 Annual Report:
 
https://mandmbank.com/wp-content/uploads/2023/04/ANNUAL-REPORT-FINAL-2023.pdf
 
The 2023 annual meeting is even longer where there are large pockets of nothing happening. There is a shorter recap video available as well.
 
https://info.mandmbank.com/2023-shareholders-meeting
 
 
Management: The former CEO of 33 years, Royce Cumbest, is the chairman of the board. Clayton Legear is young and about 42 years old. He joined the bank in 2011 and was named CEO in 2019. He currently serves on a state banking committee and also is on a committee with the Federal Reserve Bank of Atlanta. Legear has been the force behind the recent initiatives to expand beyond its traditional banking model.
 
Legear also made a video that is posted on the bank's Facebook page. He was raised by a single mother and lived in Section 8 housing.
 
https://www.facebook.com/watch/?v=1404708016590292
 
 
Insider Ownership: The FR Y-6 filed as of 12/31/2021 shows that the MNMB CEO Clayton Legear, owns about 628 shares. Not exactly a lot but some. There are no 5%+ shareholders but insiders own 12.4% of the shares.
  
  
Risks:
  • MRB deal falls through.
  • Credit quality deteriorates.
  • NIM contracts further.
  • New ventures do not produce as expected.
  • Interest rates go higher for longer.
  • Dark and thinly traded.
 

 

I do not hold a position with the issuer such as employment, directorship, or consultancy.
I and/or others I advise hold a material investment in the issuer's securities.

Catalyst

  • Earnings increase from MRB deal.
  • Other ventures start producing.
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