Blackhawk Bancorp Announces First Quarter 2010 Results

BELOIT, Wis., April 22 /PRNewswire-FirstCall/ -- Blackhawk Bancorp, Inc. (OTC Bulletin Board: BHWB) today reported earnings of $653,000 for the quarter ended March 31, 2010, a 1% decrease compared to $662,000 earned in the first quarter of 2009.  Despite continued improvement in net interest margin, earnings were essentially flat compared to the first quarter of the prior year due to an increase in the provision for loan losses and a decrease in mortgage banking activity. Earnings per share for the quarter decreased to $0.23 compared to $0.29 per diluted share for the first quarter of 2009.  

Total assets increased during the quarter to $529.0 million from $523.4 million at December 31, 2009.  Strong deposit growth lead to an increase in investment securities and reduction in borrowings and other wholesale funding, substantially strengthening the company's liquidity position.

The following table summarizes key performance and asset quality measures for the quarter ended March 31, 2010 compared to the previous four quarters.



Key Performance and Asset Quality Measures

1st Qtr

2010

4th Qtr

2009

3rd Qtr

2009

2nd Qtr

2009

1st Qtr

2009







Diluted Earnings per share

$0.23

$0.19

$0.01

$0.17

$0.29

Return on average assets

.51%

.44%

.14%

.39%

.53%

Return on common equity

7.22%

4.68%

.43%

5.68%

9.62%

Net interest margin

3.96%

3.86%

3.62%

3.61%

3.46%

Efficiency ratio

68.4%

73.7%

69.6%

75.5%

70.9%

Nonperforming loans to total loans

2.55%

1.90%

2.11%

2.20%

2.24%

Nonperforming assets to total loans

2.80%

2.09%

2.44%

2.63%

2.41%

Allowance for loan losses to total loans

1.87%

1.67%

1.57%

1.18%

1.08%

Allowance for loan losses to nonperforming loans

74%

88%

75%

54%

48%

Subsidiary bank total risk based capital

13.48%

12.92%

12.80%

12.46%

12.75%




Net Interest Income

Net interest income for the first quarter increased 17% to $4.6 million compared to $3.9 million in the first quarter 2009.  Both the average balance of total earning assets and the net interest margin realized on earning assets increased in the first quarter of 2010 compared to the same quarter last year.  The average balance of total earning assets for the quarter increased 3.0% compared to the first quarter of 2009.  The earning asset growth included a $22.9 million, or 16% increase in average short-term investments and investment securities offset by a $10.2 million, or 3%, decrease in average total loans.  The net interest margin increased 50 basis points to 3.96% compared to 3.46% in the first quarter of 2009.  

The earning asset growth and improvement in the net interest margin reflect the bank's success in generating core deposits.  Average total deposits for the first quarter increased $46.1 million, or 12%, compared to the first quarter of 2009.  All of the deposit growth occurred in non-maturity deposit products such as regular checking, interest checking and money market.  The growth in deposits was used to pay down borrowings, decreasing the average balance of borrowings for the first quarter of 2010 by $40.2 million, or 43%, compared to the average balance in the first quarter of 2009.

Non-Interest Income and Operating Expenses

Noninterest income for the first quarter decreased 20% to $1.7 million compared to $2.1 million the first quarter of the prior year.  The decrease reflects lower volume of origination and sale of residential mortgage loans in the secondary market.  "Mortgage banking activity continues to be a primary source of non-interest income," said Rick Bastian, president and CEO. "The decrease from the first quarter of last year reflects the unprecedented volume in the first quarter of 2009.  The activity in the first quarter of 2010 still exceeded our expectations, as near historic low interest rates, low home values, and government programs have fueled refinance and purchase activity," he added.

Operating expenses were essentially flat at $4.4 million in the first quarter of 2010 compared to the prior year.  Reductions in compensation expense were offset by increases in FDIC insurance and loan collection expenses.

Provision for Loan Losses and Credit Quality

Nonperforming assets equaled $8.9 million, or 2.80% of total loans, at March 31, 2010 compared to $6.8 million, or 2.09% of total loans, at December 31, 2009 and $7.9 million, or 2.41% of total loans, at March 31, 2009.  "We continue to actively address the Bank's exposure to nonperforming assets, working closely with customers to mitigate losses to the extent possible," said Bastian.  "This economy continues to challenge borrowers' ability to meet their obligations.  With the high-level of unemployment in our markets we expect non-performing assets to remain at elevated levels throughout 2010."

The provision for loan losses in the first quarter increased by 24% to $961,000 compared to $775,000 in first quarter 2009.  Loan charge-offs also increased in the first quarter of 2010, but were still less than one half of the provision amount.  This allowed the company to continue increasing the ratio of allowance for loan losses to total loans, which was 1.87% at March 31, 2010 compared to 1.67% at December 31, 2009, and 1.08% at March 31, 2009.  The ratio of the allowance for loan losses to nonperforming loans was 74% at March 31, 2010 down from 88% at December 31, 2009, but up from 48% at March 31, 2009.  

The following table summarizes the activity in the allowance for loan losses for the quarters ended March 31, 2010 and 2009, and the year ended December 31, 2009.


Activity in Allowance for Loan Losses


Quarter Ended March 31,


Year Ended

December 31,


2010


2009


2009

Beginning allowance for loan losses

$     5,471,000


$   2,970,000


$     2,970,000

Provision for loan losses

961,000


775,000


4,090,000

Charge-offs

(475,000)


(275,000)


(1,779,000)

Recoveries

39,000


49,000


190,000

Ending allowance for loan losses

$     5,996,000


$   3,519,000


$     5,471,000

Net charge-offs to average total loans

.55%


.28%


.49%




Outlook

Blackhawk has created a strong credit culture and the processes to support it, but the potential for continuing economic weakness presents a heightened level of risk.  For that reason the company expects to continue fortifying its balance sheet by conserving capital, strengthening the allowance for loan losses and maintaining ample liquidity to meet the demands of its customer base.  The company will however continue to seek profitable growth opportunities in its Wisconsin and Illinois markets, without sacrificing profitability or credit quality. Blackhawk emphasizes the value of its personal attention and the service it provides that remain unmatched by larger competitors.  

About Blackhawk Bancorp

Blackhawk Bancorp, Inc. is headquartered in Beloit, Wisconsin and is the parent company of Blackhawk Bank, which operates eight banking centers in south central Wisconsin and north central Illinois, along the I-90 corridor from Belvidere, Illinois to Beloit, Wisconsin.  Blackhawk's locations serve individuals and small businesses, primarily with fewer than 200 employees.  The company offers a variety of value-added consultative services to small businesses and their employees related to its banking products such as health savings accounts and investment management. The bank has received numerous accolades for its work with the fast-growing Hispanic population in the markets it serves.  

Forward-Looking Statements

When used in this communication, the words "believes," "expects," and similar expressions are intended to identify forward-looking statements. The company's actual results may differ materially from those described in the forward-looking statements. Factors which could cause such a variance to occur include, but are not limited to: heightened competition; adverse state and federal regulation; failure to obtain new or retain existing customers; ability to attract and retain key executives and personnel; changes in interest rates; unanticipated changes in industry trends; unanticipated changes in credit quality and risk factors, including general economic conditions; success in gaining regulatory approvals when required; changes in the Federal Reserve Board monetary policies; unexpected outcomes of new and existing litigation in which Blackhawk or its subsidiaries, officers, directors or employees is named defendants; technological changes; changes in accounting principles generally accepted in the United States; changes in assumptions or conditions affecting the application of "critical accounting policies"; and the inability of third party vendors to perform critical services for the company or its customers.

Further information is available on the Company's website at www.blackhawkbank.com.


For further information:


Blackhawk Bancorp, Inc.




R. Richard Bastian, III, President & CEO

Todd J. James, EVP & CFO

rbastian@blackhawkbank.com

tjames@blackhawkbank.com



Phone: (608) 364-8911





SOURCE Blackhawk Bancorp, Inc.



RELATED LINKS
http://www.blackhawkbank.com

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