Blackhawk Bancorp Announces First Quarter 2012 Results

BELOIT, Wis., April 27, 2012 /PRNewswire/ -- Blackhawk Bancorp, Inc.  (OTCBB: BHWB) today reported earnings of $678,000 for the quarter ended March 31, 2012, a 6% increase compared to $639,000 earned in the first quarter of 2011.  Earnings per diluted share for the quarter increased $0.02 to $0.24 compared to $0.22 the first quarter of 2011.  Growth in non-interest income in the first quarter of 2012 more than offset a decrease in net interest income and increase in the provision for loan losses compared to the first quarter of last year.  Total assets of the company increased $6.0 million during the quarter to $565.0 million at March 31, 2012 from $559.0 million at December 31, 2011. 

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The following table summarizes key performance and asset quality measures for the quarter ended March 31, 2012 compared to the previous four quarters.    

 

Key Performance and Asset Quality Measures

1st Qtr

2012

4th Qtr

2011

3rd Qtr

2011

2nd Qtr

2011

1st Qtr

2011







Diluted Earnings per share

$0.24

$0.26

$0.21

$0.13

$0.22

Return on average assets

.49%

.52%

.45%

.32%

.47%

Return on common equity

6.03%

6.74%

5.49%

3.50%

6.29%

Net interest margin

3.75%

3.79%

3.71%

3.83%

3.97%

Efficiency ratio

69.94%

67.19%

70.17%

73.19%

72.03%

Nonaccrual loans to total loans

4.19%

3.67%

2.61%

2.31%

1.99%

Nonaccrual loans and OREO to total loans

4.41%

4.11%

3.38%

3.12%

2.73%

Allowance for loan losses to total loans

2.13%

2.05%

1.78%

1.83%

1.86%

Allowance for loan losses to nonaccrual loans

50.8%

55.9%

68%

79%

94%

Subsidiary bank total risk-based capital

13.83%

13.90%

13.71%

13.78%

13.57%







"The on-going low interest rate environment, soft loan demand and intense competition for qualified borrowers are all factors that continued to compress net interest income in the first quarter," said Rick Bastian, president & CEO.  "However, we are starting to see an increase in lending opportunities, especially in the manufacturing sector, and expect loan growth to pick up the remainder of the year," he added.     

Net Interest Income

Net interest income for the first quarter decreased 4% to $4.7 million compared to $4.9 million in the first quarter 2011. The average balance of total earning assets for the first quarter increased by $11.2 million to $517.4 million while the net interest margin realized on earning assets decreased 22 basis points to 3.75% compared to 3.97% for the first quarter of 2011.  The growth in earning assets included a $6.9 million, or 2%, increase in average total loans.      

Average total deposits for the first quarter were essentially flat at $477.3 million compared to $478.1 million the first quarter of 2011.  While total average deposits were little changed, a $20.3 million increase in average non-maturity deposits such as checking, money market and savings accounts was offset by a $21.2 million decrease in average time deposits.  The strong growth in non-maturity deposits has dramatically reduced the company's need for brokered deposits or other sources of wholesale funding.          

Non-Interest Income and Operating Expenses

Noninterest income for the first quarter of 2012 increased by $768,000, or 43%, to $2.6 million compared to $1.8 million the first quarter of the prior year.  The increase was primarily attributable to a $406,000 increase in mortgage banking revenues, which consists of gain on sale of mortgage loans and net loan servicing income.   Other increases in non-interest income included a $145,000 increase in net securities gains, a $148,000 improvement in net gain (loss) on sale of other real estate and other assets, and an increase of $110,000 in deposit service fees and debit card revenue.            

Operating expenses for the first quarter increased $305,000, or 6%, to $5.2 million compared to $4.9 million in the first quarter of 2011.  This includes an increase of $276,000, or 11%, in compensation and benefit costs, which was driven primarily by variable compensation related to mortgage production and an increase in the cost of employee health benefits.   

Provision for Loan Losses and Credit Quality

The provision for loan losses in the first quarter increased by $360,000, or 40%, to $1.3 million compared to $0.9 million in first quarter 2011.   During the first quarter the company had net loan charge-offs of $901,000 compared to $819,000 for the first quarter of the previous year.  Nonaccrual loans and other real estate owned totaled $15.1 million, or 4.41% of total loans, at March 31, 2012 compared to $13.9 million, or 4.11% of total loans, at December 31, 2011 and $9.1 million, or 2.73% of total loans, at March 31, 2011.   "While we are beginning to see bright spots in the local economy, our market still suffers from high unemployment and depressed real estate values," said Bastian.  "Although we expect non-performing assets to remain at elevated levels throughout 2012, we anticipate improvement throughout the year as we reach final resolution on certain credits." 

The ratio of allowance for loan losses to total loans was 2.13% at March 31, 2012 compared to 2.05% at December 31, 2011, and 1.86% at March 31, 2011.  The ratio of the allowance for loan losses to nonaccrual loans was 51% at March 31, 2012 down from 56% at December 31, 2011, and 94% at March 31, 2011.

The following table summarizes the activity in the allowance for loan losses for the quarters ended March 31, 2012 and 2011, and the year ended December 31, 2011.

Activity in Allowance for Loan Losses

 

Quarter Ended March 31,


Year Ended

December 31,


2012


2011


2011

Beginning allowance for loan losses

$     6,943,000


$   6,142,000


$     6,142,000

Provision for loan losses

1,260,000


900,000


4,803,000

Charge-offs

(987,000)


(858,000)


(4,407,000)

Recoveries

86,000


39,000


405,000

Ending allowance for loan losses

$     7,302,000


$  6,223,000


$     6,943,000

 

Net charge-offs to average total loans, annualized

1.06%


1.00%


1.20%

Outlook

Blackhawk has created a strong credit culture and the processes to support it; however, the economic recession and depressed real estate values have resulted in an elevated level of nonperforming loans. The level of nonperforming loans and 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.

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.

BLACKHAWK BANCORP, INC. AND SUBSIDIARIES




CONSOLIDATED BALANCE SHEETS




MARCH 31, 2012 AND DECEMBER 31, 2011




(UNAUDITED)





March 31,


December 31,

Assets

2012


2011


(Amounts in thousands, except


share and per share data)

Cash and due from banks

$                12,653


$              13,056

Federal funds sold and securities purchased under agreements to resell

29,512


31,964

          Total cash and cash equivalents

42,165


45,020

Interest-bearing deposits in banks

10,128


1,097

Trading securities

2,187


2,449

Securities available-for-sale

135,374


142,788

Loans held for sale

4,328


4,140

Federal Home Loan Bank (FHLB) Stock, at cost

3,055


4,085

Loans, less allowance for loan losses of $7,302 and $6,943




    at March 31, 2012 and December 31, 2011, respectively

335,400


326,935

Office buildings and equipment, net 

8,525


8,772

Intangible assets, net

8,053


8,102

Cash surrender value of bank-owned life insurance

8,801


8,720

Other assets 

7,011


6,879

     Total assets

$             565,027


$            558,987





Liabilities and Stockholders' Equity








Liabilities




   Deposits:




     Noninterest-bearing

$                79,034


$              70,578

     Interest-bearing

418,091


405,049

          Total deposits

497,125


475,627

Short-term borrowings

-


16,000

Other borrowings (including $2,246 and $2,255 at fair value at




  March 31, 2012 and December 31, 2011, respectively)

15,994


16,326

Subordinated debentures (including $834 and $834 at fair value at




  March 31, 2012 and December 31, 2011, respectively)

4,958


4,958

Other liabilities

2,660


2,040

          Total liabilities

520,737


514,951





Stockholders' equity




  Preferred stock, $0.01 par value, 1,000,000 shares authorized;




   10,500 shares issued as of March 31, 2012 and 




    December 31, 2011, respectively

10,308


10,283

  Common stock, $0.01 par value, 10,000,000 shares authorized;




   2,279,004 and 2,279,004 shares issued as of March 31, 2012 and




    December 31, 2011, respectively

23


23

  Surplus

9,516


9,477

  Retained earnings 

24,146


23,629

  Treasury stock, 83,252 and 83,252 shares at cost as of March 31, 2012 and




    December 31, 2011, respectively

(909)


(909)

  Accumulated other comprehensive income (loss)

1,206


1,533

     Total stockholders' equity

44,290


44,036

     Total liabilities and stockholders' equity

$             565,027


$            558,987









BLACKHAWK BANCORP, INC. AND SUBSIDIARIES




CONSOLIDATED STATEMENTS OF INCOME




(UNAUDITED)





Three months ended March 31,


2012


2011


(Amounts in thousands, except


share and per share data)

Interest Income:




     Interest and fees on loans

$                  4,730


$                4,854

     Interest on trading securities

12


33

     Interest and dividends on securities:




          Taxable

789


1,103

          Tax-exempt

287


250

     Interest on federal funds sold and securities purchased under agreements to resell

80


78

     Interest on interest-bearing deposits in banks

2


1

          Total interest and dividend income

5,900


6,319

Interest Expenses:




     Interest on deposits

952


1,188

     Interest on short-term borrowings

2


2

     Interest on long-term borrowings

217


234

     Interest on subordinated debentures

37


33

          Total interest expense

1,208


1,457

          Net interest and dividend income

4,692


4,862

 Provision for loan losses

1,260


900

          Net interest and dividend income after provision for loan losses  

3,432


3,962





Noninterest Income:




     Service charges on deposits accounts

615


570

     Net gain on sale of loans

899


383

     Net mortgage servicing income

(79)


31

     Debit card interchange fees

561


496

     Net gains (losses) on trading activities

(16)


19

     Net gains (losses) on available-for-sale securities

226


81

     Net other gains (losses) 

26


(122)

     Increase in cash value of bank-owned life insurance

82


69

     Other

243


262

          Total noninterest income

2,557


1,789





Noninterest Expenses:




     Salaries and employee benefits

2,715


2,439

     Occupancy and equipment

606


594

     Data processing 

620


573

     FDIC assessment

185


240

     Advertising and marketing

91


104

     Amortization of intangibles

35


62

     Professional fees

255


207

     Office Supplies

96


94

     Telephone

76


69

     Other

485


477

          Total noninterest expenses

5,164


4,859

          Income before income taxes

825


892

Income Taxes

147


253

          Net income 

$                      678


$                    639





Key Ratios








Basic Earnings Per Common Share

$                    0.24


$                   0.22

Diluted Earnings Per Common Share

0.24


0.22





Net Interest Margin (FTE)

3.75%


3.97%

Efficiency Ratio (FTE)

69.94%


72.03%

Return on Assets

0.49%


0.47%

Return on Common Equity

6.03%


6.29%



BLACKHAWK BANCORP, INC. AND SUBSIDIARIES

      AVERAGE BALANCE SHEET WITH RESULTANT INTEREST AND RATES









      Average Balance Sheet with Resultant Interest and Rates






(Amounts in thousands)








(yields on a tax-equivalent basis)

Three months ended March 31, 2012


Three months ended March 31, 2011


Average


Average


Average


Average


Balance

Interest

Rate


Balance

Interest

Rate

Interest Earning Assets:








  Interest-bearing deposits in banks

$               3,789

$                  2

0.24%


$                    735

$                  1

0.65%

  Federal funds sold & securities








    purchased under agreements to 








    resell

27,248

80

1.17%


27,426

78

1.15%

  Investment securities:








       Taxable investment securities

114,062

801

2.82%


122,278

1,136

3.81%

       Tax-exempt investment securities

32,593

287

5.20%


23,035

250

6.11%

            Total Investment securities

146,655

1,088

3.35%


145,313

1,386

4.27%

  Loans

339,772

4,730

5.60%


332,837

4,854

5.91%









Total Earning Assets

$           517,464

$          5,900

4.69%


$           506,311

$          6,319

5.15%

  Allowance for loan losses

(7,088)




(6,385)



  Cash and due from banks

12,760




11,705



  Other Assets

33,547




35,660











Total Assets

$           556,683




$           547,291











Interest Bearing Liabilities:








  Interest bearing checking accounts

$           150,314

$             355

0.95%


$           129,525

$             412

1.29%

  Savings and money market deposits

138,384

120

0.35%


147,110

139

0.38%

  Time deposits

114,152

477

1.68%


135,319

637

1.91%

       Total interest bearing deposits

402,850

952

0.95%


411,954

1,188

1.17%

  Short-term borrowings

1,504

2

0.40%


1,018

2

0.56%

  Subordinated debentures

4,958

37

2.99%


4,958

33

2.73%

  Long-term borrowings

21,566

217

4.05%


17,526

234

5.42%









Total Interest-Bearing Liabilities

$           430,878

$          1,208

1.13%


$           435,456

$          1,457

1.36%









Interest Rate Spread



3.56%




3.79%









Noninterest checking accounts

74,471




66,212



  Other liabilities

6,289




4,069



  Total liabilities

511,638




505,737



  Preferred Stock

10,296




10,196



  Common Stockholders' equity

34,749




31,358



Total Stockholders' equity

45,045




41,554



Total Liabilities and








  Stockholders' Equity

$           556,683




$           547,291











Net Interest Income/Margin


$          4,692

3.75%



$          4,862

3.97%

SOURCE Blackhawk Bancorp, Inc.



RELATED LINKS
http://www.blackhawkbank.com

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