Value Hounds
Banks you can Identify With?

Related Links
Discussion Boards

By TMFRichDad
November 19, 2009

Posts selected for this feature rarely stand alone. They are usually a part of an ongoing thread, and are out of context when presented here. The material should be read in that light. How are these posts selected? Click here to find out and nominate a post yourself!

Hi all,

This is NOT a recommendation to buy. It's just something to chat about and maybe reveal a little about how my mind, if left unchecked, thinks. :)

This story appeared in our daily rag last night.

It's a story about one of the local (very tiny) banks around these parts. When the story broke MCBC stock price jumped 25% on the news. Currently, its trading at about 0.6x book. I actually owned this one for a short spell when it was in the teens. Sold at a small loss because the company gave me bad vibes: Too fancy of an annual report; a tendency to pay stock divi's (essentially a stock split on the order of 103:100, stupid) and a few other reasons. No regrets about selling, obviously.

It did get me wondering about a couple of the other local banks that also have fallen on hard times cause of the recession etc.

IBCP trades at 0.2x book

MBWM trades at 0.17x book

Trust me, you don't want to look at the latest 10Qs. Pretty grim.

The idea would be to lay an equal weight bet on these last two on the hopes that at least one survives. If one survives it isn't unreasonable to figure the stock price would get back to at least 1.0x book in a few years. You do the math.

Another option would be to buy the IBCP 8.25% Cumulative Trust Preferred Securities (ticker: IBCPO) currently trading at $8.15. The divi's suspended but it's cumulative and after 20 quarters it all gets paid in full (theoretically). Par is $25.

It would be a little safer. But upside is limited. Don't really think that would be the best way to play this one. I know what you are thinking. I'm nuts. Maybe I am. If I was reading this post written by one of you and these tickers were just that, tickers, I'd think the same way.

But, these are real banks with branches by the side of the road that I drive by every day. I've done business with both IBCP and MCBC. IBCP held my mortgage once upon time. MBWM is my employer's bank. One of my former employers was a founding shareholder in MCBC.

Several of the stocks I own are Michigan companies. It's my way of supporting my community and make a little money too. I like investing in businesses that are a part of the community where I live. Anyway, these are real businesses that I can identify with, not just stock symbols. If I had to bet on just one. It'd be MBWM cause it's weighted more toward business banking than conventional residential mortgages. All three could go under. It's not like there is a shortage of banks around here.

They are cheap,  can't argue with that. Trouble is determining whether any are a "value" is a whole nother matter. Beyond me.