WTBFA - Uplisting Uplifting For W.T.B.

Summary

• W.T.B. Financial Corporation is one of my favorite banks.
• Reasonable as is.
• A double if they sell or merely uplist to the Nasdaq.

Introduction

W.T.B. Financial Corporation ( WTBFB ) is the best bank in the Pacific Northwest. CEO and Chairman Pete Stanton's family owns control. He is in his mid-sixties and physically active, firmly in control, but his son is a chef and daughter is a photographer; neither has shown any interest in banking. The current Mr. Stanton will be the last of his line running this bank. While he's there, they make money and grow book value.

Catalysts

Then what? Then he needs to plan an exit next year or next decade. The CFO isn't a CEO type and the COO is near retirement age too. One good thing is that there are only five board members (incidentally the ideal board size) so there isn't as much bickering as with huge boards where everyone angles for extending their well-compensated sinecures. Based on comps, it is worth at least $700 per share to a buyer. It would even trade there on an uplisting. When uplisted, JMSB in Virginia doubled their stock price, FDBC in Pennsylvania saw a 259% increase, BHRB rocketed as well. In an uplisting, about 10% of the float would get gobbled up by price-insensitive index funds. WTBFB could also make the S&P 600 which would attract additional passive money.

I don't think they're in a hurry. So why do I mention it now? Because they just passed $10 billion in assets, which is forcing a change to their systems at that scale. They may have to report additional information, which means that they can no longer stay as private as they'd like to. That might lead them to accept more disclosure and sell or uplist. Their CFO has SEC reporting experience uncommon to OTC banks, so they are ready for an uplisting.

Value

This is one of the best banks in the country. It is very high quality. It trades at 1x tangible book value, with comparable banks trading at 2x. It currently costs between 7-8x earnings. Washington, Idaho, and Oregon are highly desirable banking markets. They have a trust company with over $8 billion in assets that earns over $25 million annually. Despite a nearly perfect credit quality, they have a huge 2% loan loss reserve. Their worst year ever was 2009 when they broke even. They are good lenders (always look back to the 2008-2009 financial crisis to make sure). They own a decent number of their branches. In all, they should be able to compound book value at 10-15% per year while we await a catalyst. Almost half (46%) of their deposits are non-interest bearing. They have an overall 30 bps cost of deposits. They buy back shares (should buy back more).

Caveat

Why haven't they uplisted already? The family is private and can get away with less disclosure. They're already rich and don't really have a problem to solve. The liquidity is poor (which drives the opportunity). The catalyst could take years. This is not an exciting idea.

Conclusion

Don't buy a single share unless you can hold it for 5-10 years; it might pop much sooner, but it isn't liquid enough to own it for anything other than the stated uplist or sell thesis. This should be a one decision investment. But it is worth at least what you pay today, and one random day could get a big pop. I own it. You might want to, too.

TL; DR

Buy WTBFB , but with strict limit orders as there is limited volume available.

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