United Bancorporation of Alabama, Atmore, AL (UBAB)

A Case of United Banking in Opportunity Zones


Remarkably, even in this political climate, politicians have crossed party lines to arm financial institutions with new tools for developing America's most distressed communities.  

United Bank of Atmore, Alabama is putting some of these tools to good work!

What's the opportunity here for investors? They could nearly double their money in three years. I see UBAB earning over $3 per share, having book value over $23 per share, and trading in the $30's.


Disclosure: As of this posting, I own shares of UBAB and may subsequently either dispose of them or purchase more.


Prospective Buyers

Non-interest bearing deposits spell opportunity for any enterprising bank. 43% of United Bank's deposits fall in this category and are free to lend in the community.

First Bancshares, Hattiesburg, MS (FBMS)
Home BancShares, Conway, AR (HOMB)
Trustmark, Jackson, MS (TRMK)

Financial Snapshot
as of 03/31/2018

Total assets:
$608M
Tangible book value per share:   
$15.65
NPAs to assets:
1.0%
Price to book:
113%
Market cap:
$43.3M
Dividend yield:
0.8%
Trailing 12-month ROA:
0.7%
Trailing 12-month ROE:
10.9%
TARP:
$0*

*Redeemed $10.3M 11/2016

The Crew

David D Swift, Sr, Chairman
Robert R Jones III, President and CEO
Gwendolyn Bailey Braden, Executive VP and COO

The Skinny

United Bank is lending in communities desperately in need of capital:
  • Five of United Bank's 18 branches (28%) are located in Opportunity Zones (see map).

United Bank uses a variety of contemporary tools for getting capital in the hands of area developers, entrepreneurs, and job creators:

United Bank may be in some economically distressed areas, but it is performing great!
  • The bank has #1 market share of deposits in 6 of the 15 towns where it has branches.
  • UBAB has paid uninterrupted dividends since 1983.
  • UBAB’s ROA and ROE are on a par with those of other banks in the country.

Sources

UPDATE: California BanCorp, Oakland, CA (CALB)

Terry Peterson resigns, a winner! Since my July 2014 Timyan Bank Alert review of California Bank of Commerce, a holding company was formed for the bank, the stock has performed as I'd anticipated, and the CEO in which I had so much confidence has resigned.

Updating my predictions for this bank, I'd say that within three years book value could approach $16 and earnings could be $2.00 or better making it likely the stock will trade at $30, presuming everything goes right without Peterson at the helm.

Since California BanCorp could garner $32/share in a sale today, that's what I'd consider the big win to shoot for now.


Disclosure: As of this posting, I own shares of CALB and may subsequently either dispose of them or purchase more.


Prospective Buyers

An acquisition of California BanCorp would be accretive to book value and earnings for any of these three area banks, whose currencies are so strong they can afford to pay a significant premium.

Bank of Marin, Novato, CA (BMRC)
Heritage Commerce Corp, San Jose, CA (HTBK)
Westamerica, San Rafael, CA (WABC)

Financial Snapshot
as of 03/31/2018

Total assets:
$909M
Tangible book value per share:     
$12.21
NPAs to assets:
0.4%
Price to book:
164%
Market cap:
$136M
Dividend yield:
0%
Trailing 12-month ROA:
0.7%
Trailing 12-month ROE:
7.0%

The Crew

Steven A. Cortese, Chairman
Steven E. Shelton, President and CEO
Randall D. Greenfield, Executive VP and CFO

The Skinny

Terry Peterson is an all-star banker.

Few, if any, bankers in the US have had more success in building banks as Peterson has had in his career so far.
  • He has consistently attracted top banking talent to come to work with him.
  • He grew deposits at California Bank of Commerce from $281 million to $798M, including a whopping $321M in non-interest bearing deposits.
  • He increased the takeover value of the bank to 250% of today's book value (based on recent overtures from prospective buyers).
Peterson announced his resignation on May 7th, a winner.

California BancCorp's best prospect for a post-Peterson win is to sell.

On their own, surviving management can get CALB to a $30 share price in three years, assuming they can maintain Peterson's achievement levels.

Now that its star player is out of the lineup, I can't imagine California Bank of Commerce doing better without him than it was with him.

Sources

Willamette Community Bank, Albany, OR (WMCB)

A Case of a Bank on Fertile Ground


The pickings for bank stocks investors are definitely getting slim, but that makes the few that have been overlooked more fun to find!

Surveying the field in Oregon, I can easily see Willamette Community Bank delivering earnings of 80 cents per share, book value approaching $12, and a stock trading at $14-$15 over the next three years.

In the event WMCB doesn’t produce the returns I'm anticipating on today's $9.25 share price, I’d expect new shareholders will push for a sale that would garner the same results or better.


Disclosure: As of this posting, I own shares of WMCB and may subsequently either dispose of them or purchase more.


Prospective Buyers

Willamette Community Bank's 27% non-interest bearing deposits and total cost of deposits of 0.28% make it an attractive property.

Citizens Bancorp, Corvallis, OR (CZBC)
Oregon Bancorp, Salem, OR (ORBN)
Washington Federal, Inc, Seattle, WA (WAFD)

Financial Snapshot
as of 03/31/2018

Total assets:
$130M
Tangible book value per share:      
$9.90
NPAs to assets:
0.5%
Price to book:
94%
Market cap:
$17.1M
Dividend yield:
0%
Trailing 12-month ROA:
0.4%
Trailing 12-month ROE:
3.8%

The Crew

Kerry Johnson, Chairman
Joan Reukauf, President and CEO
Robert Moore, Senior VP and CFO

The Skinny

WMCB is one of the most fertile bank stocks in the country for investors looking to plant some cash.  

The original seeds were purchased in 2003 at $10/share when the bank was founded.

In last two years, Willamette Community Bank has grown faster than all but one other bank in Oregon.

Today, you can buy WMCB for $9.25/share — 94% of book value.

WMCB should naturally produce a more bountiful crop than other Oregon bank stocks, which are trading at 130% on average.


Willamette Community Bank is in an expanding, business-friendly market, where climate conditions are conducive to growth.  

In Willamette Valley there are no local business, sales, or inventory taxes. Real estate is cheap, and the local labor pool is both low-cost and high quality.

All three Willamette Community Bank branches are within 90 miles of Portland, which offers area businesses easy access to a major airport.

Mergers in the Valley — namely Bank of the Cascades (CACB) and Pacific Continental (PCBK), which both sold in the past two years — have made it easier for Willamette to gain customers and talent.


All three local markets where Willamette has its branches are strong, too!

The newest Willamette Community Bank branch is in Oregon's capital city of Salem, where Amazon just built a new facility anticipated to employ 1000 people.

Willamette's biggest branch is in Albany, where median income was up 12% in 2016.

And the bank's thriving Lebanon branch benefits from a population that has grown at an average of 25% in each of the past four decades.

Sources

  • Confidential interviews with shareholders, management, and analysts