Community Bankshares of Indiana, New Albany, IN (CBIN)

A Case of the Road Less Gravelled

I love this bank! Since coming public over 15 years ago, Community Bankshares of Indiana has grown nicely from a little $130M thrift to an $800M commercial bank with a diversified loan portfolio.

CBIN stock is cheap no matter how you look at it: price to book value, price to tangible book, or price to earnings. I would guess that a year from now, tangible book could reach $20 a share and we’re likely to see the stock trading for 120% of book or better, paving the way for a nice return if you buy it today.

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

Prospective Buyers	Although CBIN is surely an attractive acquisition target, I believe it should stay independent as long as Management continues to deliver such stellar returns  MainSource Financial Group, Greensburg, IN (MSFG) Old National Bancorp, Evansville, IL (ONB) Republic Bancorp, Louisville, KY (RBCAA)
Financial Snapshot (as of 03/31/2013)	Total assets: $810M Tangible book value per share: $17.23 NPAs to assets: 2.6% Price to book: 61% Market cap: $53.6M Dividend yield: 2.8% Trailing 12-month return on assets: 0.95% Trailing 12-month return on equity: 9.11% TARP: $0M
Luminaries	Gary L. Libs, Chairman James D. Rickard, CEO and President Paul A. Chrisco, Executive VP and CFO
Gold Stars	I like these people! Although I don’t know them personally, I have a lot of confidence in CBIN's management team. Libs and Rickard have been driving this money-making machine together for more than a decade. Libs has been a Director since 1989, and Rickard has been CEO and President since 2000 CBIN insiders own a whopping 19% of stock, and have made eight separate insider purchases already this year. Which — if you’ve followed my work, you already know — I consider a super strong indicator of future success I like their numbers! Besides being solidly profitable for the past 15 quarters, CBIN: Ranks in the top quartile of U.S. banks in ROE and ROA Has reduced NPAs by more than 60% since they peaked in 2011 Has shown it can effectively acquire other banks — three so far! (most recently, First Federal Bank of Lexington, KY)
Sources	Community Bankshares of Indiana website 2012 Annual Report April 2013 Proxy Statement December 2012 10-K SNL Financial

UPDATE: Blackhawk Bancorp, Beloit, WI (BHWB)

Thankfully, the fears I expressed in last October's review of Blackhawk Bancorp have not come true! I'm happy to report that the bank has proven remarkably shareholder-friendly, has largely resolved its capital issues without diluting shareholders, and is currently trading at just eight times earnings, making BHWB now a very cheap, appealing stock.

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

Prospective Buyers	Blackhawk has the same compelling selling opportunities observed in last October's review: Associated Banc-Corp, Green Bay, WI (ASBC) BMO Financial, Toronto, Canada (BMO) Heartland Financial USA, Dubuque, IA (HTLF)
Financial Snapshot (as of 12/31/2012)	JUN 2012 DEC 2012 Total assets: $558M $560M Tangible book value per share: $13.77 $14.69 NPAs to assets: 4.7% 4.4% Price to book: 43% 48.4% Market cap: $15.3M $18.1M Dividend yield: 0.0% 0.0% Trailing 12-month return on assets: 0.5% 0.52% Trailing 12-month return on equity:  6.2% 6.26%   TARP: $10M $10M* *The U.S. Government recently auctioned off its TARP holdings in BHWB in two series for 91¢ and 95¢ on the dollar, respectively
The Crew	Merrit J. Mott, Chairman Rick Bastian III, President and CEO Todd James, Executive VP, Treasurer, Secretary, and CFO
The Skinny	Three reasons I'm really excited about Blackhawk Bancorp today: Shareholder Dilution? No longer a concern! Blackhawk earned $2.4M in 2012 On April 1, 2013, it sold $6.1M in subordinated debt, rather than pursue a dilutive capital raise At current rate of earnings, the bank is now within spitting distance of funding an entire repurchase of TARP Operating Performance? Much improved! NPAs have shifted from trending up to down Loans increase by $33M in 2012 Margin is holding up well at 3.75% Stock Price? Great value! BHWB stock has underperformed the market by 20% Fears of dilution drove BHWB share price down 4% over the past 12 months, while the Keefe Bruyette and Woods Bank Index rose 17% BHWB stock is currently trading at just 48% of its stated book value of $17.06 per share
Sources	Blackhawk Bank website September 2012 10-Q Keefe Bruyette Bank Index SNL Financial Standard and Poors Industry Report Card Confidential interviews with shareholders

Logansport Financial Corp, Logansport, IN (LOGN)

A Case of a Safe Port for Bank Stock Investors

A company with this great a record ought to be trading at a premium to book value. Although there are literally hundreds of banks like this trading far below what they are worth, Logansport Financial is one of my favorites. All signs point to LOGN's book value being over $30 next year. If it trades down the road at 120% of book like I anticipate, investors will own a $36 stock, 80% higher than where LOGN trades now. In the meantime, shareholders can sleep at night, earning a decent 2.7% dividend.

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

Prospective Buyers	PNC Financial Services, Pittsburgh, PA (PNC) - unlikely to be interested in acquiring a property as small as LOGN. Salin Bancshares, Indianapolis, IN (privately held) - has been rapidly expanding throughout Indiana and might find LOGN an attractive candidate for acquisition. Security Federal Savings Bank, Logansport, IN (privately held) - a Mutual Savings Bank that does not have stock with which to acquire another institution. Should Security decide to go public, buying LOGN could make sense.
Financial Snapshot (as of 12/31/2012)	Total assets: $173M Tangible book value per share: $28.66 NPAs to assets: 1.35% Price to book: 75% Market cap: $14.5M Dividend yield: 2.76% Trailing 12-month return on assets: 0.91% Trailing 12-month return on equity: 7.8% TARP: None
Luminaries	David Wihebrink, Chairman and former CEO Arden Cramer, President and CEO Chad Higgins, Treasurer, Secretary, and CFO
Gold Stars	Logansport Financial's Management team has been doing everything right for decades. The have a stellar REPUTATION in the industry for being top-notch bankers. They have produced remarkable RESULTS compared to their peers: Increased book value from $12/share in 1996 to $28/share today Amassed 3x average deposits for community banks, exceeding the industry gold standard by 50% (See bancography.com) Didn't lose any money during the Great Recession Never had to take TARP Their record of REINVESTING bodes well for investors. Insiders own 11% The company recently repurchased over 15% of shares outstanding, paying $22.65/share for the last 9000 shares Stock buy-backs are providing a nice floor for the shares and helping to increase book value by far more than earnings accretion alone At today's stock price of $21.66/share, investors can buy LOGN stock for less than the company itself paid to repurchase shares
Sources	Logansport Financial website Logansport Financial Statements SNL Financial Bancography.com Interviews with management Confidential interviews with shareholders

CenterBank, Milford, OH (privately held)

A Case of Greenlee, OH vs Lindenbaum, NY

Management at CenterBank is just plain stinky and deserves to be called out for their crummy behavior — pretending to be good "small town America" guys getting screwed by bad "NY City Wall Street guys," when they're really just sore losers playing the victim. The way they are shirking their obligations to the taxpayer-funded Troubled Asset Relief Program (aka TARP) undermines the moral fabric of our financial system and dishonors every hard-working American taxpayer. Shame on them!

Disclosure: As of this posting, I do not own shares of CenterBank and wouldn't touch them with a ten-foot pole.

Financial Snapshot (as of 12/31/2012)	Total assets: $113M Tangible book value per share: N/A NPAs to assets: 2.9% Price to book: N/A Market cap: N/A Dividend yield: N/A Trailing 12-month return on assets: 0.9% Trailing 12-month return on equity: 9.4% TARP: $2.3M* *Resold in auction October, 2012 to Basswood Capital Management LLC
Scoundrels	Daniel Rolfes, Chairman Stewart M. Greenlee, President and CEO Stephen R. Church, Controller
Red Flags	- - - - The Skinny - - - -  After CenterBank lost $700K in 2008, the U.S. Government came to its rescue with $2.3M of TARP funding on April 1, 2009 Although its retained earnings were negative, CenterBank paid its TARP dividends to Washington without fuss for 13 consecutive quarters In a January 2012 Cincinatti.com interview, CEO Stewart Greenlee insisted CenterBank would repay TARP before the scheduled 2014 interest rate increase In October 2012, after giving CenterBank ample opportunity to repay it, the U.S. Government auctioned off the bank's TARP, as it is doing across the country to wind down the emergency program CenterBank insiders submitted a bid at the auction, but private investors submitted a higher bid, “winning” the TARP “fair and square” for $.82 on the dollar Given their December 2012 report of positive retained earnings, CenterBank is now in a better position to pay its TARP obligations than ever Instead, CenterBank has reneged on its January 2012 promise, stopped paying TARP dividends, launched a Pity Me Campaign, and started demanding that the new TARP holders hand it over to them at a 10% discount for the crime of being from “New York”  - - - - CenterBank's Pity Me Campaign - - - - But we wanted to buy ourselves out of it! (sniff sniff) We can't help it we were outbid! We shouldn't have to send our dividends to NY (stomp stomp) Technically, since it’s non-cumulative preferred stock, no one can make us! Let’s make them sorry and pay for outbidding us (ruff ruff) - - - - The Facts of the Matter  - - - - CenterBank is … Violating an implicit understanding that any reasonable person engaging in business with them would have believed they had every reason to trust Holding hostage honest people doing the government and taxpayers a service — for personal gain Hurting taxpayers everywhere — who paid the money to save their butts and foot their $2.3M TARP rescue package in the first place Hurting the government in remaining TARP auctions because investors will be afraid to buy TARP preferred (we have proof of this already, because the last auctions have brought lower bids) Creating a new problem for taxpayers — who will have to put more money into the government coffers to make up for the $ the government loses Behaving far more like Stalin-era Communists than anything honest American
Sources	CenterBank website 2012 "Statement of Condition" SNL Corporate Profile (Members Only) SNL Financial Business Courier Articles, by Steve Watkins: CenterBank Gets Option to Pay Back TARP In an unusual move, CenterBank halts dividend payments