A few days ago, Matthew Lindenbaum’s Basswood Capital, filed a 13D with the U.S. Securities and Exchange Commission, in which it disclosed a slight reduction in its exposure to Metro Bancorp Inc (NASDAQ:METR). The fund declared having diminished its stake by 8,267 shares, to around 1.39 million shares shares. This position represents 9.78% of the company’s outstanding shares of common stock.
Along with the filing, Basswood Capital included a letter to the Board of Directors of this $312 million market cap bank holding company that provides full banking services through its subsidiary, Metro Bank. The epistle refers to “the current financial performance of Metro Bancorp Inc (NASDAQ:METR), the future of the company on a stand-alone basis, and strategic alternatives.” The fund states that, although they are happy with the job that the management has done over the last 29 years, and “applaud management for publicly laying out long-term targets for growth in total assets, total loans, and total deposits. However, it is clear that the environment is becoming more challenging and competitive. In the November 2013 slide presentation, management’s expectation for total deposits by the end of 2014 was approximately $2.56 billion; six months later, in the slide deck from the Annual Meeting of Stockholders in May 2014, that target was reduced by approximately 9% to $2.33 billion. Further, the returns continue to remain under intense pressure.”
In this context, Mr. Lindenbaum’s fund concludes that the current strategy is inadequate and that the best course of action would be betting on a process that eventually leads to the sale Metro Bancorp Inc (NASDAQ:METR) to a larger bank. A weak economy, intense competition within the industry and increased regulatory pressures will make it difficult for the bank holding company (as a standalone company) to generate value for its shareholders.
“[...] merging with a larger bank would create a stronger bank for Metro Bancorp Inc (NASDAQ:METR)’s customers, employees, and the communities (…) The combined company would also have the scale and strength to invest more in employees and customers, as well as in the communities,” the letter added.
Mr. Lindenbaum closes the letter exhorting the Board of Directors to consider starting with the process that leads to the sale. To make his point stronger, he cites another large that seems worried about the company’s prospects. Although he doesn’t actually name this investor, we can assume he is talking about PL Capital, LLC, the only one that filed a 13D this year. PL Capital owns 979,384 shares of the company, which represent 6.9% of the outstanding common stock. Other investors betting on this stock that are worth mentioning are Paul Magidson, Jonathan Cohen And Ostrom Enders‘ Castine Capital Management, which owns 439,356 shares, Steve Eisman‘s Emrys Partners, with 222,979 shares, and Jim Simons‘ Renaissance Technologies, which holds 63,514 shares.
Read the full letter below:
Disclosure: Javier Hasse holds no position in any stocks mentioned.