Merchants & Marine Bancorp, Inc, Pascagoula, MS (MNMB)

A Case of an Undervalued Vessel


Merchants & Marine Bank has been sailing way under the radar and is way undervalued.

MNMB wasn't even listed until January 2015. It doesn’t look like the bank has any institutional shareholders. Its largest reported shareholder — Director Paul Moore — owns a mere 2.8%.

If M&M Bank would use its earnings and excess capital to buy back shares, the stock could easily reach book value of $80, earnings of $7, and trading value of $100 by 2022.

Alternatively, given neighboring Charter Bank’s recent sale for 140% of book value, Merchants & Marine Bancorp could and probably should sell the ship now for $80 per share.


Disclosure: As of this posting, I own shares of MNMB and may subsequently either dispose of them or purchase more.


Prospective Buyers

M&M Bank’s 33% marketshare in Pascagoula presents an attractive acquisition opportunity for these better performing peers.

First Bancshares, Hattisburg, MS (FBMS)
Home BancShares, Conway, AR (HOMB)
Bancorp South Bank, Tupelo, MS (BSX)

Financial Snapshot
as of 03/31/2019

Total assets:
$593M
Tangible book value per share:   
$51.27
NPAs to assets:
1.3%
Price to book:
74%
Market cap:
$52.5M
Dividend yield:
3.0%
Trailing 12-month ROA:
0.7%
Trailing 12-month ROE:
5.5%

The Crew

L. Royce Cumbest, Chairman and CEO
Clayton Legear, President and COO
Paul Moore, Director, largest inside shareholder

The Skinny

As far as marine vessels go, M&M’s ship has proven to be sturdy. 

The bank has stayed afloat, held its deposit cargo intact, weathered some storms, and carried a fair share of passenger-customers since it was founded almost 90 years ago.

As far as mercantilism goes, however, M&M Bank hasn’t produced profit levels consistent with its name or industry for at least the past ten years.

Back in 2011, Merchants & Marine Bancorp tried to grow by expanding its fleet. They spent $3M to acquire $55M in assets held by Heritage First Bank.  Sounded great! Except eight years later, the combined entity is only $8M in assets larger.

That’s some hole in the deck to let $47M leak out, don’t you think? I’ll never understand why companies like M&M Bank go pay full price for a ship that’s in no way needed to deliver their goods, when spending the same amount to increase ownership of their own ship would produce far greater returns and plug holes like this.

Stranger still, Merchants & Marine insiders seem to be missing the opportunity right before their eyes. Of the top seven of the bank’s officers, five own zero shares. Eight directors out of eleven own less than 1%. Two own zero shares. One owns just 50 shares ($1950 worth).

Attention on deck: MNMB is undervalued. You're sailing under the radar. Look at the horizon! We need you to adjust course now.

Sources

Ohana Pacific Bank, Honolulu, HI (OHPB)

A Case of Asian-American Assets


Immigrants have been getting a particularly bad rap lately, so I feel compelled to highlight cases like Ohana Pacific Bank, where immigrant ingenuity, effort, capital and investment lend value to our communities— in this case, quite literally, in the form of a lending institution.

Ohana's stock is also valuable. Happily, it's undervalued by the market. Investors paid $10 per share when the bank was founded thirteen years ago. Today, you can buy it for $7.65.

Give Ohana Pacific three years and we could see book value approaching $12, earnings over $1 per share, and OHPB trading at $15.


Disclosure: As of this posting, I own shares of OHPB and may subsequently either dispose of them or purchase more.


Prospective Buyers

Although Ohana Pacific is not for sale and earns enough to remain independent, acquiring it would help one of these banks compete better against First Hawaii (FHB) and Bank of Hawaii (BOH), which combined, control 67% of the Honolulu market.

First Foundation, Inc, Irvine, CA (FFWM)
Orient Bancorporation, San Francisco, CA (private)
Territorial Bancorp, Honolulu, HI (TBNK)

Financial Snapshot
as of 03/31/2019

Total assets:
$162M
Tangible book value per share:   
$8.78
NPAs to assets:
0.1%
Price to book:
86.8%
Market cap:
$15.8M
Dividend yield:
0%
Trailing 12-month ROA:
0.95%
Trailing 12-month ROE:
8.22%

The Crew

Donald Kang, Chairman
James Chungwoo Hong, President and CEO
Nicole Byun, Executive VP, Chief Credit Officer

The Skinny

Honolulu's Asian Americans, especially Korean Americans, have been putting serious money and talent to work in this bank.

Ohana Pacific was founded by Korean Americans who invested $15M to capitalize the bank in 2006.

Korean-American immigrant business owner Donald Kim remained the bank's largest shareholder until his death in 2018.

In 2006, Kim invested $500,000 of his own capital to help launch the bank.

When Ohana Pacific needed additional capital in 2010, Kim and his company (Amkor A&E, Inc) invested an additional $1.6M.

The majority of Honolulu's 400,000 some residents are Asian Americans (54%), and given Ohana Pacific's focus on serving the Korean American market, it's safe to say a majority of the bank's assets are from our Asian American compatriots.

Ohana Pacific has $136M in loans outstanding today—money Asian Americans have put to work in the Honolulu economy.

As you can imagine, I've seen a lot of bank boards. Every director on the board of Ohana Pacific Bank has impressive business credentials, and the high standards to which they apparently hold each other are really remarkable.*

*As evidenced by their recent removal of Ronald Moon. He may have been a State Supreme Court Judge, but that didn't prevent the board from holding him to account as a bank director.

Sources