Capital Pacific Bank, Portland, OR (CPBO)

A Case of Earning One's Keep in Portland


This bank stock has me wanting to wage a "Bank on (not just in) Portland" campaign, just to see how much wealth we could help Portlandians create for themselvesImagine:

Within one mile, Portland's Bank of America, U.S. Bancorp, and Wells Fargo have branches holding $10.6 billion in deposits. If even a small fraction of Portlandians were to move their deposits from these corporate banks — (don't worry, they won't even notice) — next door to Capital Pacific Bank, this fine community bank would grow exponentially.

Meanwhile, if Portlandians were to trade in any U.S. Bancorp stock they may own — (expensively trading as high as 293% of tangible book value) — for CPBO stock (cheap at 101.3% of book value) — they could grow their own wealth exponentially right along with Capital Pacific. Wouldn't that be cool?

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

Prospective Buyers
In my opinion, Capital Pacific Bank has earned the right to remain independent and to control its own destiny. That being said, I am sure CPBO is pretty darn attractive to these local competitors:
Pacific Continental, Eugene, OR (PCBK). Deposits in PCBK's two branches combined fall short of those held in CPBO's one branch by 50%. 
Umpqua Holdings, Portland, OR (UMPQ). CPBO's one branch bank has more deposits than 21 of UMPQ's 22 Portland area branches!
Washington Federal, Seattle, WA (WAFD). CPBO has twice as many deposits in its one-branch bank as WAFD has in two.
Financial Snapshot
(as of 12/31/2013)

Total assets:
$239M
Tangible book value per share:
$8.36
NPAs to assets:
1.6%
Price to book:
101.3%
Market cap:
$21.7M
Dividend yield:
0%
Trailing 12-month return on assets:
0.86%
Trailing 12-month return on equity:
8.8%
TARP:
$4M*
*Redeemed 11/09/2012
Luminaries
Karen Whitman, Chairman
Mark C. Stevenson, President and CEO
Felice I. Belifiore, Executive VP and CFO
Gold Stars
Capital Pacific Bank has PURPOSE
  • With a strong niche in lending to sustainable businesses and non-profit organizations underserved by America's corporate banks, CPBO is filling a real need and making a real difference specifically for Portland.
  • For doing this work, CPBO's Mark Stevenson receives less than 2% of the annual compensation a typical corporate bank CEO draws every year. Would you rather have your deposits support Mark, or contribute to the $14M in compensation Bank of America's CEO Brian Moynihan gets (for doing things like damage control for the company's illegal activities).
Bottom line? Portlandians can feel great about moving their deposits and investments over to CPBO.

Capital Pacific Bank has PERFORMED
  • Since peaking at nearly 6% at the end of 2010 (when CPBO had a small yearly loss), NPAs have been in steady decline to the current 1.6%. 
  • CPBO can boast three years straight of quarterly profits, profits are growing, and in Q4 2013, ROE surpassed 11%. 
Bottom line? Portlandians can reasonably expect CPBO stock will eventually trade at substantial premiums to book value.
    Sources
    • Interviews with management
    • Confidential interviews with shareholders

    Northern California National Bank, Chico, CA (NCNB)

    A Case of a Skillfully Cultivated One Branch Bank


    "A society grows great when old men plant trees whose shade they know they shall never sit in." 
    - Greek Proverb

    "Someone's sitting in the shade today, because someone planted a tree a long time ago." 
    - Warren Buffet

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

    Prospective Buyers
    SKBHC Holdings, Seattle, WA (private)
    TriCo Bancshares, Chico, CA (TCBK)
    Umpqua Holdings, Portland, OR (UMPQ)
    Financial Snapshot
    (as of 09/30/2013)

    Total assets:
    $137M
    Tangible book value per share:
    $10.88
    NPAs to assets:
    0.4%
    Price to book:
    81.8%
    Market cap:
    $12.1M
    Dividend yield:
    0%
    Trailing 12-month return on assets:
    0.61%
    Trailing 12-month return on equity:
    5.3%
    Luminaries
    John Lucchesi, Chairman, President, and CEO
    Todd Lewis, Executive VP and CFO
    Gold Stars
    Once upon a time, there was a unique sort of arborist, named John Lucchesi, who cultivated community bank branches with great care in the land of Chico, California.
      Lucchesi is the man who picked up two little sappling branches once known as North State Bank, and spent 11 years nurturing them until they grew strong and proud. In 2003, Lucchesi helped to graft each of his branches onto the great big TriCo tree. Over ten years later, one of those branches is the 3rd strongest of the 65 on that tree.
        On any given day today, you can still find Lucchesi, carefully cultivating an even sturdier branch at the corner of 7th and Mangrove in Chico, which he named Northern California National Bank when he founded it in March of 2006. This one-branch bank of Lucchesi's has sprouted 50% more deposits than the two neighboring branches of the giant Umpqua tree combined, and more deposits than all but one of the seven TriCo tree branches in the area.  
          Thanks to Lucchesi's artful care, NCNB has never been plagued by the diseases that have struck so many of our nation's bank branches. NPAs there never even reached 1%, and the bank had no need for injections of TARP that others needed just to stay alive.
              By my calculations, Lucchesi's branch today is worth even more than the 190% of book value that TriCo recently paid for North Valley Bank (NOVB). I hope it gives Lucchesi satisfaction to know that when he chooses to step aside from his art, the one-branch NCNB will have its choices of trees to join.
                Sources
                • Confidential interviews with shareholders