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
        • Confidential interviews with shareholders
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