Using MBRG to make large Investments with the Float
I can't understand what you are saying because I thought banking laws significantly inhibit the use of deposits to make non-bank investments other than Agency paper,etc. They also discourage hedge fund and aggressive equity investing. What exactly do you see as the float? Buffet's example of bank investing is primarily limited to M&T and Wells Fargo which both had scale and top managements. Certainly not the case with Middleberg which is certainly too small to compete with the larger banks in its area. To maximize his return he would be well advised to sell while the returns available to his competitors are higher than they can make on residential mortgages. If he waits for the NIMs to increase it may be too late to have the appeal to the BB&T's that it has now. Still can't see the logic of your views.
Yes, banking laws like Frank Dodd are extremely complex, so complex that I think most bankers don't even fully understand them, but the idea of using float, as I see it, is that banks invest their deposits, typically into mortgages, "agency paper", tax liens, municipal bonds, and I think SunTrust bank was even holding a large chunk of Coca Cola stock on their balance sheet, so banks can hold some equities. I imagine Sokol's acumen is sharp enough to make money even in the limited scope of investments allowable to banks.
I also disagree that Middleburg Bank is too small to compete with the larger banks in its area. Middleburg Bank has been voted "best bank in Loudoun County" for 16 consecutive years. They have over $1.2 billion in assets. Southern Trust closed $1 billion in mortgage loans last year. Middleburg Investment Group has $1.5 billion of assets under management. I suppose if you see MBRG as a small country bank with no real value, it does make sense to sell out to the highest bidder. But it's a solid, well run business, and book value, deposits, and income are growing every quarter.
Am still trying to ascertain why you have such a positive and passive view relative to creating value for the stockholders of Middleburg. Sincerely thought you must be an insider with a job to protect , until reviewing some of your older posts where you expressed concern about free stock for Directors and your doubts about DS taking such a passive stance in management. So on second thought can't understand why you are so complacent now. Perhaps because the stock price has moved up? Still think this is less than an ideal vehicle for leveraging float ,etc, but time will tell. I wish both of us success with our holding but expect unless there is a deal it will be a very slow slog kind of like watching grass grow. Thank you for your commentary in any case. Best wishes.