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	Willamette Community Bank website April 2018 Shareholder Letter 2017 Financial Statement SNL Financial Confidential interviews with shareholders, management, and analysts

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 themselves. Imagine:

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	Capital Pacific Bank website 2013 Annual Report SNL Financial Interviews with management Confidential interviews with shareholders