FMB Equibanc, Statesboro, GA (FMBE)

A Case of Being in a Better State

Economically speaking, FMBE is in the best state it's been in since the Great Recession. Geographically speaking, Georgia is a great state to be a bank in these days. So I find it linguistically satisfying that Georgia's Farmers & Merchants Bank is in a vibrant Georgian town named Statesboro.

Of course, now I have to state my case: I see FMBE's earnings reaching 70¢ a share and book value surpassing $7 in three years, making it likely the stock will trade at $10 and deliver a healthy return for today's investor. Were FMBE to sell today, it could get $9-10.

When holding out a few years doesn't get the stock to a much better state than it can obtain today, I say management should sell.

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

Prospective Buyers	Farmers & Merchants Bank has more great options for a mutually lucrative M&A transaction than any community bank I have seen in quite some time. All five of these banks have holes in their branch networks FMBE would fill nicely: Bank of the Ozarks, Little Rock, AR (OZRK) Fidelity Southern, Atlanta, GA (LION) South State Corp, Columbia, SC (SSB) State Bank Financial, Atlanta, GA (STBZ) United Community Banks, Blairsville, GA (UCBI)
Financial Snapshot †as of 12/31/2017	Total assets: $190M† Tangible book value per share: $5.67† NPAs to assets: 1.0%† Price to book: 115% Market cap: $21M Dividend yield: 0% Trailing 12-month ROA: 0.6%†* Trailing 12-month ROE: 5.2%†* *Adjusted to exclude one-time Deferred Tax Asset (DTA) charge Q4 2017
The Crew	Gary Davis, Chairman Charles Ricky Nessmith, President and CEO William Brett Morgan, Bank President and CEO
The Skinny	Why I'm pleased with FMBE's current state: It presents a "heads we win, tails we win" situation. Shareholders get a much higher share price whether management sells or keeps improving operations. It's just a matter of sooner or later. The state of leadership is great. CEO Brett Morgan has presided over one of the greatest bank turnarounds of this economic cycle. He brought FMBE's NPAs down from 17% in 2011 to 1% today! The bank's marketshare is in a strong state. Farmers & Merchants Bank is the only bank in Brooklet and controls 15% of the deposits in Bulloch County—an economically vibrant area anchored by Georgia Southern University and its 30,000 students and staff. The state of the bank's deposit mix is getting better and better. 36% of FMBE's $171M are in checking accounts, 15% more than in 2012 and well above the 25% most investors are happy to see.
Sources	Farmers & Merchants Bank website December 2017 Call Report SNL Financial Confidential interviews with shareholders and analysts