MBRG - Middleburg Financial Co.

[texual]

Hey all,

 

I've owned this stock for a number of years since learning that Sokol was a big owner and wanted to get involved in building a great bank. While the dividend was nice, the stock now appears to finally be in play. Yesterday David wrote this letter to the board. Stock price is rising on the news.

 

Ladies and Gentlemen:

 

This letter follows my meeting yesterday with Joe Boling, John Lee and Gary Shook to discuss the future of Middleburg Financial Corporation (“MBRG”). As you know, I have been a shareholder of MBRG since 2009. I am MBRG’s largest shareholder, currently owning 2,103,008 shares (or approximately 30%) of MBRG’s outstanding common stock.

 

Based on our recent discussions regarding the financial performance of MBRG and prevailing market conditions impacting community banks (including increased competition for customers, costly regulatory compliance and general economic uncertainties), I would urge the Board of Directors to establish a special committee of independent directors to initiate a process to explore strategic alternatives to enable MBRG’s shareholders to realize the full value of their investment in MBRG. In the current competitive and regulatory environment, it is essential that banks of our size continue to grow in order to leverage operational and compliance costs across a larger platform. This is especially true for small local banks such as MBRG. I do not believe MBRG has demonstrated the ability to earn a return on average equity (ROAE) that is adequate to cover its cost of capital. By way of example, MBRG’s 2015 ROAE was 6.25%, while our cost of capital is likely in the 12% to 15% range. This means shareholders of MBRG are not being adequately compensated for the risk they are taking in owning the stock.

 

I believe the time has come for the Board to take advantage of current M&A market conditions to enable its shareholders to realize the intrinsic value of MBRG. Maintaining the status quo is unacceptable.

 

What are these strategic options? What are the possibilities here and how can I reasonably know what to value this small bank after hearing him say that they're taking on risk by being smaller?

 

Would like to know more about the bank and maybe if other owners of this stock could chime in. I'm perhaps in very small company here with MBRG, I have found very little discussion out there on this thinly traded stock.

 

 

 

Texual 

[merkhet]

I suspect it ends in a sale of MBRG to someone bigger.

 

P/TBV is around of 1.5 for median sales of smaller banks, but most of that gap seems closed over the last two days. Possible that they get a P/TBV of 2.0, but that's a bit tougher.

[OracleofCarolina]

You guys called it...the bank is merging with another bank