Mercer Bancorp, Inc. (MSBB) stock intrinsic value fair value estimate & owner earnings analysis

Mercer Bancorp is the holding company for Mercer Savings Bank, a small Ohio-chartered savings bank founded in 1888 and based in Celina, Ohio. It has about $176 million of assets, $144 million of deposits and 38 employees. It lends mainly through residential mortgages and agricultural real estate loans in Mercer and Darke Counties in western Ohio, and since 2025 also through a new branch in Berne, Adams County, Indiana. Since January 2023 it has also made indirect auto loans through car dealers. The company converted from mutual to stock form in July 2023 and trades on the OTCQB market. HOW WE MEASURED EARNINGS. For a bank, interest paid to depositors and lenders is an ordinary cost of doing business, so we value the owners' cash earnings after interest and do not subtract deposits or borrowings again as debt. We started from cash generated by operations and removed swings in working capital. We treated the roughly $8.1 million of auto loans the bank originated intending to sell, and has not yet sold, as working capital rather than earnings: that money is tied up in loans, not earned. We also deducted the cost of stock-based pay (ESOP and share awards) and maintenance capital spending. About $2.2 million of the $2.8 million spent on property in fiscal 2025 built the new Berne, Indiana branch. We treated that as a one-time expansion, not as a cost of staying in business. On this basis earnings per share were $0.61 (2022), $0.72 (2023), $0.80 (2024) and $0.81 (2025). The last year grew about 1%. We use $0.80 per share as the normal level, based on the two full years since the offering. The 2022 and 2023 figures pre-date the new capital or include only two months of it. We did not use the latest six months. Net income for October 2025 to March 2026 was $443,000 against $312,000 a year earlier, but the first quarter of fiscal 2026 was below the prior year's, so one strong quarter does not yet change the level. BASE CASE, about $13.30 per share. Earnings hold at about $0.80 per share, discounted at 6%. Year 1 growth is 0%, which is at or below the 1% actually achieved last year. We gave no credit for growth because none is secured. Deposits grew 7% in fiscal 2025 and loans shrank about $5 million. The Berne branch is a new market with no earnings record. Wider margins are a hope, not a contract. The bank is 137 years old with a stable local deposit base, so we assume the earning power persists at that level and do not fade it. Business value is about $13.30 per share. There is no debt to subtract for a bank, so the equity value is the same figure. BEAR CASE, about $8.30 per share. Named risks in the filings: nonperforming loans rose from $386,000 to $1.3 million (0.94% of loans) in fiscal 2025; the loan book is concentrated in farmland and residential loans in a rural market; the indirect auto program is only three years old and $8.1 million of auto loans held for sale had not been sold at September 30, 2025; and the new branch adds fixed costs. We assume credit costs of roughly $400,000 a year, up from $66,000, which cuts earnings to about $0.50 per share, held flat. Business value is about $8.30 per share. The company has about $6 million of Federal Home Loan Bank advances and relies partly on brokered deposits, so funding costs are also a risk. Being small, it has little room to absorb a second bad year. BULL CASE, about $20.00 per share. The bank's own levers work. The Berne branch, already built and paid for, gathers deposits, and asset yields keep repricing, as they have: net interest income rose about 10% in the March 2026 quarter. Earnings per share rise from $0.80 to $1.10 over three years, then grow 2% a year for seven years, in line with the roughly 2% annual deposit growth since 2022, and are then held flat. Business value is about $20.00 per share. WHAT COULD MAKE THIS WRONG. On the upside, book value is about $24 per share, well above all three values, because the bank earns only about 4% on its equity. If management uses the excess capital, through buybacks below book value or a lending expansion, the values would be higher; we have not credited this because it has not yet been done at scale. On the downside, credit losses on the auto and agricultural books could be heavier than we assumed. We could not reconcile the pre-2023 earnings per share because the company had no shares outstanding before its conversion; we used the first reported diluted share count. MARGIN-OF-SAFETY PRICE. The margin-of-safety price sits below the bear case, at about $6.50 per share. That is roughly half the base value, which reflects the very small size and thin trading of the stock, its low return on equity and the credit and funding risks above. At that price, normal earnings equal about 12% of the price, before any re-rating toward the base case.