2014

Blackhawk Bancorp Announces Fourth Quarter and Annual 2009 Results Bank reports 50 percent earnings increase for quarter

BELOIT, Wis., Feb. 18 /PRNewswire-FirstCall/ -- Blackhawk Bancorp, Inc. (OTC Bulletin Board: BHWB) today reported a 50% increase in earnings for the quarter ended December 31, 2009 to $582,000 compared to the $388,000 earned in the fourth quarter of 2008.  The increase reflects net interest margin improvement and higher levels of non-interest income.  Earnings per share for the quarter increased to $0.19 compared to $0.18 per diluted share for the fourth quarter of 2008.  Total assets increased to $523.3 million as of December 31, 2009 compared with $500.4 million at year end 2008.  The increase was due to strong deposit growth, which has reduced the Company’s reliance on wholesale funding sources, substantially improving the company’s liquidity position.

For the year ended December 31, 2009 Blackhawk reported net income of $1.95 million, a 23% decrease compared to $2.55 million earned in 2008.  Earnings per share for the year decreased 43% to $0.67 per diluted share compared to the $1.17 per diluted share in 2008.  The decrease in earnings was primarily the result of an increase in loan loss provision and higher operating expenses, such as FDIC insurance premiums.  These expense increases were substantially offset by improvements in net interest margin and other income.  

The more significant percentage decrease in earnings per share for the year compared to the decrease in net income reflects dividend payments on preferred stock that was issued in the first quarter of 2009.  In March of 2009 the company received a $10 million capital investment under the U.S. Treasury’s voluntary Capital Purchase Plan, a part of the Emergency Economic Stabilization Act of 2008, designed to provide capital to healthy financial institutions to promote confidence and stabilization in the economy.  The cost of that capital is not considered an expense when determining net income, but it is deducted from earnings available to common shareholders when calculating earnings per share.  

“Participation in the U.S. Treasury’s Capital Purchase Plan, which bolstered the company’s capital ratios, was just one component of our strategic priority to fortify the bank’s balance sheet,” said Rick Bastian, president and CEO.  “We were also successful in maintaining relatively strong credit quality and enhancing the bank’s liquidity position.  Capital, asset quality and liquidity are three critical areas where deficiencies have been the primary cause of nearly 200 bank failures since the beginning of 2008,” he added.  

The following table summarizes key performance and asset quality measures for the quarter ended December 31, 2009 compared to the previous four quarters.    

    
    
    Key Performance and        4th        3rd      2nd        1st      4th
     Asset Quality             Qtr        Qtr      Qtr        Qtr      Qtr
     Measures                  2009       2009     2009       2009     2008
                               ----       ----     ----       ----     ----
    
    Diluted Earnings per
     share                    $0.19      $0.01    $0.17      $0.29    $0.18
    Return on average
     assets                     .44%       .14%     .39%       .53%     .31%
    Return on common
     equity                    4.68%       .43%    5.68%      9.62%    6.32%
    Net interest margin        3.86%      3.62%    3.61%      3.46%    3.39%
    Efficiency ratio           73.7%      69.6%    75.5%      70.9%    78.9%
    Nonperforming loans to
     total loans               1.90%      2.11%    2.20%      2.24%    1.50%
    Nonperforming assets
     to total loans            2.09%      2.44%    2.63%      2.41%    1.64%
    Allowance for loan
     losses to total loans     1.67%      1.57%    1.18%      1.08%     .90%
    Allowance for loan
     losses to
     nonperforming loans         88%        75%      54%        48%      60%
    Subsidiary bank total
     risk based capital       12.92%     12.80%   12.46%     12.75%   10.41%
    
    
    

“I am proud that Blackhawk has remained profitable, despite the challenges of the current economic environment,” said Bastian.  “The loan loss provision we recorded in 2009 has was substantially more than our actual losses charged-off, which allows us to go into 2010 with much stronger reserves,” he added.    

Net Interest Income

Net interest income for the fourth quarter increased 21% to $4.6 million compared to $3.8 million in the fourth quarter 2008.  Both the average balance of total earning assets and the net interest margin realized on those assets increased in the fourth quarter compared to the same quarter the year before.  Average earning assets for the fourth quarter increased 6.1% compared to the fourth quarter of 2008 and the net interest margin increased 47 basis points to 3.86% compared to 3.39% in the fourth quarter of 2008.  Total average loans decreased by $1.9 million, or .6%, compared to the prior year fourth quarter.  The increase in average earning assets was in investment securities and other short-term investments, providing for an improved liquidity position.  

For the full year net interest income was up 15% to $17.3 million, compared to $15.0 million for 2008.  Average earning assets and the net interest margin both increased for the full year as well.  Total average earning assets increased over 2008 by $41.5 million, or 9.4%.  The increase in average earning assets included a $17.8 million, or 5.8% increase in average total loans, with the remainder of the growth in investment securities and short-term investments.  The net interest margin increased 21 basis points to 3.66% for the year ended December 31, 2009 compared to 3.45% the year before.  

The earning asset growth and improvement in the net interest margin reflect the bank’s success in generating core deposit growth.  Average total deposits for the fourth quarter increased by $34.3 million, or 9.2% compared to the fourth quarter of 2008.  For the year average deposits increased $41.0 million, or 11.5% over 2008.  All of the deposit growth occurred in non-maturity deposit products such as DDA, interest checking and money market.  This growth has resulted in less reliance on borrowings, as the average balance of borrowing for the fourth quarter of 2009 decreased by $15.4 million, or 19.6% compared to the average balance in the fourth quarter of the prior year.      

Non-Interest Income and Operating Expenses

Noninterest income for the fourth quarter increased 50% to $1.4 million compared to $.9 million the fourth quarter of the prior year.  For the year non-interest income increased 46% to $7.6 million compared to $5.2 million in 2008.  The increase in non-interest income was primarily driven by mortgage banking activity.  For the year gain on sale of mortgage loans increased by $2.6 million, or 183%, to $4.0 million compared to $1.4 million in 2008.  “We have assembled a great mortgage origination staff,” said Bastian.  “We were well positioned to benefit from historically low interest rates in 2009, as many of the mortgage brokers we used to compete against had gone out of business,” he added.    

Operating expenses increased by $0.7 million, or 18%, to $4.5 million in the fourth quarter of 2009 compared to $3.8 million the prior year.  For the year operating expenses were up $2.8 million, or 18%, to $18.3 million compared to $15.5 million in 2008.  The increase in operating expenses was driven by escalating FDIC insurance premiums, including a special assessment that was accrued in the second quarter.  The bank also saw an increase in compensation expense, primarily due to higher mortgage loan production, which is generated by commission-based employees.

Provision for Loan Losses and Credit Quality

Nonperforming assets equaled $6.8 million, or 2.09% of total loans, at December 31, 2009 compared to $7.9 million, or 2.44% of total loans, at September 30, 2009 and $5.4 million, or 1.64% of total loans, at December 31, 2008.  “We’re pleased to have made progress reducing the level of nonperforming loans during the fourth quarter; however many of the bank’s customers who are current on their loan obligations continue to be challenged by the on-going economic recession,” said Bastian.  “For that reason we expect nonperforming assets to remain above historical levels throughout 2010.”

The provision for loan losses in the fourth quarter increased by 26% to $0.7 million compared to $0.5 million in fourth quarter 2008.  For the year Blackhawk recorded a provision for loan losses of $4.1 million, a 209% increase over the $1.3 million provision recorded in 2008.  Loan charge-offs also increased in 2009, but to a lesser extent than the provision.  This allowed the company to significantly strengthen the ratio of allowance for loan losses to total loans, which was to 1.67% at December 31, 2009 compared to .90% at December 31, 2008.  It also increased the ratio of the allowance for loan losses to nonperforming loans to 88% at December 31, 2009 compared to 60% at December 31, 2008.  

The following table summarizes the activity in the allowance for loan losses for 2009 and 2008.

    
    
    Activity in Allowance for Loan Losses     2009        2008
                                              ----        ----
    
    Beginning allowance for loan losses    $2,970,000  $2,411,000
    Provision for loan losses               4,090,000   1,322,000
    Charge-offs                            (1,779,000)   (988,000)
    Recoveries                                190,000     225,000
                                              -------     -------
    Ending allowance for loan losses       $5,471,000  $2,970,000
                                           ==========  ==========
    Net charge-offs to average total loans    .49%        .26%
                                              ===         ===
    
    
    

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.

    
    
                      BLACKHAWK BANCORP, INC. AND SUBSIDIARY                 
                         CONDENSED STATEMENTS OF INCOME                      
                                   (Unaudited)                               
                            Three Months Ended                               
                                December 31,                                 
    (Dollars in thousands,
     except per share data)     2009       2008          2009           2008 
    ----------------------      ----       ----          ----           ---- 
                                                                             
    Interest and Dividend                                                    
     Income                   $6,843     $6,957       $27,698        $27,807 
    Interest Expense           2,205      3,137        10,430         12,781 
                               -----      -----        ------         ------ 
         Net Interest and                                                    
          Dividend Income      4,638      3,820        17,268         15,026 
    Provision for loan                                                       
     losses                      675        537         4,090          1,322 
    Non-Interest Income        1,405        934         7,580          5,196 
    Non-Interest Expense       4,521      3,819        18,285         15,484 
                               -----      -----        ------         ------ 
         Income Before Income                                 
          Taxes                  847        398         2,473          3,416 
    Income Taxes                 265         10           520            864 
                                 ---         --           ---            --- 
         Net Income             $582       $388        $1,953         $2,552 
                                ====       ====        ======         ====== 
                                                                             
          Key Ratios                                                         
          ----------                                                         
                                                                             
    Diluted Earnings Per                                                     
     Common Share              $0.19      $0.18         $0.67          $1.17 
    Dividends Per Common                                                     
     Share                         -       0.09          0.27           0.36 
    Average Outstanding                                                      
     Common Shares         2,163,678  2,154,504     2,162,446      2,161,605 
    Ending Outstanding                                                       
     Common Shares         2,163,678  2,154,504     2,163,678      2,154,504 
    Net Interest Margin         3.86%      3.39%         3.66%          3.45%
    Efficiency Ratio           73.69%     78.92%        72.18%         75.45%
    Return on Assets            0.44%      0.31%         0.37%          0.53%
    Return on Common                                                         
     Equity                     4.68%      6.32%         5.55%         10.39%
                                                                             
                            
    
                               CONDENSED BALANCE SHEETS 
                                   (Unaudited)                               
                                                 December 31,  December 31,  
    (Dollars in thousands)                               2009           2008 
    ----------------------                               ----           ---- 
    Assets:                                                                  
    -------                                                                  
    Cash and cash equivalents                         $30,886        $18,558 
    Interest-bearing deposits in banks                  1,197          1,080 
    Trading securities                                  7,428         19,603 
    Securities available-for-sale                     126,643        103,274 
    Federal Home Loan Bank Stock, at cost               4,085          4,085 
    Loans, net of allowances for loan losses          321,353        326,358 
    Office buildings and equipment, net                 8,370          9,042 
    Intangible assets, net                              7,696          6,739 
    Cash surrender value of bank-owned life                                  
     insurance                                          8,136          7,915 
    Other assets                                        7,555          3,787 
                                                        -----          ----- 
         Total Assets                                $523,349       $500,441 
                                                     ========       ======== 
    Liabilities and Stockholders' Equity:                                    
    -------------------------------------                                    
    Deposits                                         $411,343       $376,995 
    Borrowings                                         66,662         88,369 
    Subordinated debentures                             4,958          5,158 
    Other liabilities                                   3,167          3,569 
                                                        -----          ----- 
         Total liabilities                            486,130        474,091 
    Preferred Stock                                    10,083              - 
    Common Stockholders' equity                        27,136         26,350 
                                                       ------         ------ 
    Total Stockholders' equity                         37,219         26,350 
                                                       ------         ------ 
         Total liabilities and stockholders'                                 
          equity                                     $523,349       $500,441 
                                                     ========       ======== 
                                                                             
                                                                             
    
    
    
    
    
    BLACKHAWK BANCORP, INC. AND SUBSIDIARY                               
    CONSOLIDATED BALANCE SHEETS                                          
    DECEMBER 31, 2009 AND DECEMBER 31, 2008                              
    (UNAUDITED)                                                          
                                                  December 31,  December 31,
    Assets                                            2009          2008 
    ------                                            ----          ---- 
                                                (Amounts in thousands, except
                                                   share and per share data) 
    
    Cash and due from banks                         $9,714        $9,960 
    Federal funds sold and securities                                    
     purchased under agreements to resell           21,172         8,598 
                                                    ------         ----- 
              Total cash and cash equivalents       30,886        18,558 
                                                    ------        ------ 
    Interest-bearing deposits in banks               1,197         1,080 
    Trading securities                               7,428        19,603 
    Securities available-for-sale                  126,643       103,274 
    Federal Home Loan Bank (FHLB) Stock, at                              
     cost                                            4,085         4,085 
    Loans, less allowance for loan losses
     of $5,471 and $2,970 at December 31, 2009
     and December 31, 2008, respectively           321,353       326,358 
    Office buildings and equipment, net              8,370         9,042 
    Intangible assets, net                           7,696         6,739 
    Cash surrender value of bank-owned life                              
     insurance                                       8,136         7,915 
    Other assets                                     7,555         3,787 
                                                     -----         ----- 
         Total assets                             $523,349      $500,441 
                                                  ========      ======== 
                                                                         
    Liabilities and Stockholders' Equity                                 
                                                                         
    Liabilities                                                          
       Deposits:                                                         
         Noninterest-bearing                       $52,087       $46,774 
         Interest-bearing (including $0 and
         $5,610 at fair value at December 31,
          2009 and December 31, 2008, 
          respectively)                            359,256       330,221 
                                                   -------       ------- 
           Total deposits                          411,343       376,995 
    Short-term borrowings                            8,400         9,222 
    Long-term borrowings (including $19,274
      and $15,535 at fair value at
      December 31, 2009 and December 31, 2008,                            
      respectively)                                 58,262        79,147 
    Subordinated debentures (including $834 and
      $1,034 at fair value at December 31, 2009
       and December 31, 2008, respectively)          4,958         5,158 
    Other liabilities                                3,167         3,569 
                                                     -----         ----- 
              Total liabilities                    486,130       474,091 
                                                   -------       ------- 
                                                                         
    Stockholders’ equity                                                 
      Preferred stock, $0.01 par value,
       1,000,000 shares authorized;     
       10,500 and 0 shares issued as of
       December 31, 2009 and December 31,
       2008, respectively                           10,083             - 
      Common stock, $0.01 par value, 10,000,000
       shares authorized; 2,248,930 and 2,239,756
       shares issued as of December 31, 2009 and 
       December 31, 2008, respectively                  22            22 
      Surplus                                        9,279         9,279 
      Retained earnings                             19,495        18,357 
      Treasury stock, 85,252 shares at cost as
       of December 31, 2009 and  
       December 31, 2008, respectively                (931)         (931)
      Accumulated other comprehensive income                             
       (loss)                                         (729)         (377)
                                                      ----          ---- 
         Total stockholders' equity                 37,219        26,350 
                                                    ------        ------ 
         Total liabilities and stockholders'                             
          equity                                  $523,349      $500,441 
                                                  ========      ======== 
    
    
    
    
    
    BLACKHAWK BANCORP, INC. AND SUBSIDIARY                             
    CONSOLIDATED STATEMENTS OF INCOME                                  
    (UNAUDITED)                                                        
                                                                       
                                                         2009         2008
                                                         ----         ---- 
                                                (Amounts in thousands, except
                                                   share and per share data)
    Interest Income:                                                   
         Interest and fees on loans                   $20,147      $20,712 
         Interest on trading securities                   755        1,223
         Interest and dividends on securities:                         
              Taxable                                   5,493        4,858 
              Tax-exempt                                  757          586 
         Interest on federal funds sold and securities                  
          purchased under agreements to resell            537          393 
         Interest on interest-bearing deposits in                      
          banks                                             9           35 
                                                            -           -- 
              Total interest and dividend income       27,698       27,807 
                                                       ------       ------ 
    Interest Expenses:                                                 
         Interest on deposits                           6,800        8,656
         Interest on short-term borrowings                 25           33 
         Interest on long-term borrowings               3,293        3,477 
         Interest on subordinated debentures              312          345 
                                                          ---          --- 
              Total interest expense                   10,430       12,781 
                                                       ------       ------ 
              Net interest and dividend income         17,268       15,026 
               Provision for loan losses                4,090        1,322 
                                                        -----        ----- 
              Net interest and dividend
               income after provision      
               for loan losses                         13,178       13,704 
                                                       ------       ------ 
                                                                       
    Noninterest Income:                                                
         Service charges on deposits accounts           2,577        2,749 
         Net gain on sale of loans                      4,019        1,420 
         Debit card interchange fees                    1,161          879 
         Net gains (losses) on trading activities        (403)        (401)
         Net gains (losses) on available-for-sale                      
          securities                                       39         (601)
         Net other gains (losses)                        (524)          (5)
         Increase in cash value of bank-owned life                      
          insurance                                       318          279 
         Other                                            393          876 
                                                          ---          --- 
              Total noninterest income                  7,580        5,196 
                                                        -----        ----- 
                                                                       
    Noninterest Expenses:                                              
         Salaries and employee benefits                 9,119        8,263
         Occupancy and equipment                        2,509        2,278 
         Data processing                                1,863        1,612 
         Advertising and marketing                        413          455 
         Amortization of intangibles                      222          263 
         Professional fees                                839          575 
         Office Supplies                                  332          289 
         Telephone                                        253          232 
         Other                                          2,735        1,517 
                                                        -----        ----- 
              Total noninterest expenses               18,285       15,484 
                                                       ------       ------ 
              Income before income taxes                2,473        3,416 
    Income Taxes                                          520          864 
                                                          ---          --- 
              Net income                               $1,953       $2,552 
                                                       ======       ======
                                                                       
                        Key Ratios                                     
                        ----------                                     
                                                                       
    Basic Earnings Per Common Share                     $0.67        $1.18
    Diluted Earnings Per Common Share                    0.67         1.17
    Dividends Per Common Share                           0.27         0.36
    
    
    
    
    
    BLACKHAWK BANCORP, INC. AND SUBSIDIARY                           
    CONSOLIDATED STATEMENTS OF INCOME                                
    (UNAUDITED)                                                      
                                                        Three Months Ended  
                                                            December 31, 
                                                        2009          2008 
                                                        ----          ---- 
                                               (Amounts in thousands, except
                                                   share and per share data)
    Interest Income:                                                 
         Interest and fees on loans                   $5,026        $5,197 
         Interest on trading securities                  115           264 
         Interest and dividends on securities:                       
              Taxable                                  1,396         1,272 
              Tax-exempt                                 178           165 
         Interest on federal funds sold and                          
          securities                                                 
                purchased under agreements to resell     126            56 
         Interest on interest-bearing deposits in                    
          banks                                            2             3 
                                                          --            -- 
              Total interest and dividend income       6,843         6,957
                                                       -----         ----- 
    Interest Expenses:                                               
         Interest on deposits                          1,401         2,146 
         Interest on short-term borrowings                 8             8 
         Interest on long-term borrowings                723           896 
         Interest on subordinated debentures              73            87 
                                                          --            -- 
              Total interest expense                   2,205         3,137 
                                                       -----         ----- 
              Net interest and dividend income         4,638         3,820
     Provision for loan losses                           675           537 
                                                         ---           --- 
              Net interest and dividend income                       
               after provision for loan losses         3,963         3,283 
                                                       -----         ----- 
                                                                     
    Noninterest Income:                                              
         Service charges on deposits accounts            693           655 
         Net gain on sale of loans                       694           305 
         Debit card interchange fees                     305           245 
         Net gains (losses) on trading activities         13            78 
         Net gains (losses) on available-for-sale                     
          securities                                    (178)         (601)
         Net other gains (losses)                       (272)           18 
         Increase in cash value of bank-owned life                   
          insurance                                       45            69 
         Other                                           105           165 
                                                         ---           --- 
              Total noninterest income                 1,405           934 
                                                       -----           --- 
                                                                     
    Noninterest Expenses:                                            
         Salaries and employee benefits                2,120         2,035 
         Occupancy and equipment                         663           560 
         Data processing                                 489           437
         Advertising and marketing                        81           119 
         Amortization of intangibles                      62            66 
         Professional fees                               231           100 
         Office Supplies                                  79            94 
         Telephone                                        69            61 
         Other                                           727           347 
                                                         ---           --- 
              Total noninterest expenses               4,521         3,819 
                                                       -----         ----- 
              Income before income taxes                 847           398 
    Income Taxes                                         265            10 
                                                         ---            -- 
              Net income                                $582          $388 
                                                        ====          ==== 
                                                                     
                        Key Ratios                                   
                        ----------                                   
                                                                     
    Basic Earnings Per Common Share                    $0.19         $0.18
    Diluted Earnings Per Common Share                   0.19          0.18 
    Dividends Per Common Share                             -          0.09 
    
    
    
    
    
                   BLACKHAWK BANCORP, INC. AND SUBSIDIARY              
             AVERAGE BALANCE SHEET WITH RESULTANT INTEREST AND RATES   
                                                                       
          Average Balance Sheet with Resultant Interest and Rates      
                                                 
    (Amounts in thousands)                      Twelve months ended    
    (Yields on a tax-equivalent basis)           December 31, 2009     
                                                -------------------    
                                                                       
                                             Average           Average 
                                             Balance  Interest   Rate  
                                             -------  -------- ------- 
    Interest Earning Assets:                                           
      Interest-bearing deposits in banks      $1,546        $9    0.62%
      Federal funds sold & securities                                  
        purchased under agreements to                                  
        resell                                30,504       537    1.76%
      Investment securities:                                           
           Taxable investment securities     108,634     6,248    5.75%
           Tax-exempt investment securities   20,142       757    6.17%
                                              ------       ---    ---- 
                Total Investment securities  128,776     7,005    5.82%
      Loans                                  324,333    20,147    6.21%
                                             -------    ------    ---- 
                                                                       
    Total Earning Assets                    $485,159   $27,698    5.81%
                                                       -------    ---- 
      Allowance for loan losses               (4,307)                  
      Cash and due from banks                 10,776                   
      Other Assets                            29,220                   
                                              ------                   
                                                                       
    Total Assets                            $520,848                   
                                            ========                   
                                                                       
    Interest Bearing Liabilities:                                      
      Interest bearing checking accounts    $108,445    $2,106    1.94%
      Savings and money market deposits      121,347     1,218    1.00%
      Time deposits                          114,578     3,476    3.03%
                                             -------     -----    ---- 
           Total interest bearing deposits   344,370     6,800    1.97%
      Short-term borrowings                    6,911        25    0.35%
      Subordinated debentures                  5,006       312    6.24%
      Long-term borrowings                    73,568     3,293    4.48%
                                              ------     -----    ---- 
                                                                       
    Total Interest-Bearing Liabilities      $429,855   $10,430    2.43%
                                                       -------    ---- 
                                                                       
    Interest Rate Spread                                          3.38%
                                                                  ==== 
                                                                       
    Noninterest checking accounts             53,455                   
      Other liabilities                        3,596                   
                                               -----                   
      Total liabilities                      486,906                   
      Stockholders' equity                    33,942                   
                                              ------                   
                                                                       
    Total Liabilities and                                              
      Stockholders' Equity                  $520,848                   
                                            ========                   
                                                                       
    Net Interest Income/Margin                         $17,268    3.66%
                                                       =======    ==== 
                                                                       
                                                                       
    
                                                Twelve months ended    
                                                 December 31, 2008     
                                                -------------------    
                                                                       
                                             Average           Average 
                                             Balance  Interest   Rate  
                                             -------  -------- ------- 
    Interest Earning Assets:                                           
      Interest-bearing deposits in banks      $1,297       $35    2.68%
      Federal funds sold & securities                                  
        purchased under agreements to                                  
        resell                                13,239       393    2.97%
      Investment securities:                                           
           Taxable investment securities     107,173     6,081    5.67%
           Tax-exempt investment securities   15,513       586    5.72%
                                              ------       ---    ---- 
                Total Investment securities  122,686     6,667    5.68%
      Loans                                  306,448    20,712    6.76%
                                             -------    ------    ---- 
                                                                       
    Total Earning Assets                    $443,670   $27,807    6.34%
                                                       -------    ---- 
      Allowance for loan losses               (2,693)                  
      Cash and due from banks                 11,962                   
      Other Assets                            26,610                   
                                              ------                   
                                                                       
    Total Assets                            $479,549                   
                                            ========                   
                                                                       
    Interest Bearing Liabilities:                                      
      Interest bearing checking accounts     $62,157    $1,511    2.43%
      Savings and money market deposits      122,856     2,335    1.90%
      Time deposits                          122,604     4,810    3.92%
                                             -------     -----    ---- 
           Total interest bearing deposits   307,617     8,656    2.81%
      Short-term borrowings                   13,666       303    2.22%
      Subordinated debentures                  5,158       345    6.69%
      Long-term borrowings                    76,629     3,477    4.54%
                                              ------     -----    ---- 
                                                                       
    Total Interest-Bearing Liabilities      $403,070   $12,781    3.17%
                                                       -------    ---- 
                                                                       
    Interest Rate Spread                                          3.17%
                                                                  ==== 
                                                                       
    Noninterest checking accounts             49,189                   
      Other liabilities                        2,807                   
                                               -----                   
      Total liabilities                      455,066                   
      Stockholders' equity                    24,483                   
                                              ------                   
                                                                       
    Total Liabilities and                                              
      Stockholders' Equity                  $479,549                   
                                            ========                   
                                                                       
    Net Interest Income/Margin                         $15,026    3.45%
                                                       =======    ==== 
    
    
    
    
    
                   BLACKHAWK BANCORP, INC. AND SUBSIDIARY              
             AVERAGE BALANCE SHEET WITH RESULTANT INTEREST AND RATES   
                                                                       
          Average Balance Sheet with Resultant Interest and Rates      
                                                 
    (Amounts in thousands)                       Three months ended     
    (yields on a tax-equivalent basis)           December 31, 2009    
                                                -------------------    
                                             Average           Average 
                                             Balance  Interest   Rate  
                                             -------  --------   ----  
    Interest Earning Assets:                                           
      Interest-bearing deposits in banks      $1,372        $2    0.55%
      Federal funds sold & securities                                  
        purchased under agreements to                                  
        resell                                28,838       126    1.73%
      Investment securities:                                           
           Taxable investment securities     116,337     1,511    5.15%
           Tax-exempt investment securities   18,381       178    5.84%
                                              ------       ---    ---- 
                Total Investment securities  134,718     1,689    5.24%
      Loans                                  321,304     5,026    6.21%
                                             -------     -----    ---- 
                                                                       
    Total Earning Assets                    $486,232    $6,843    5.66%
                                                        ------    ---- 
      Allowance for loan losses               (5,287)                  
      Cash and due from banks                 10,152                   
      Other Assets                            30,289                   
                                              ------                   
                                                                       
    Total Assets                            $521,386                   
                                            ========                   
                                                                       
    Interest Bearing Liabilities:                                      
      Interest bearing checking accounts    $123,973      $496    1.59%
      Savings and money market deposits      125,274       237    0.75%
      Time deposits                          103,186       668    2.57%
                                             -------       ---    ---- 
           Total interest bearing deposits   352,433     1,401    1.58%
      Short-term borrowings                    6,981         8    0.43%
      Subordinated debentures                  4,958        73    5.83%
      Long-term borrowings                    63,401       723    4.52%
                                              ------       ---    ---- 
                                                                       
    Total Interest-Bearing Liabilities      $427,773    $2,205    2.04%
                                                        ------    ---- 
                                                                       
    Interest Rate Spread                                          3.62%
                                                                  ==== 
                                                                       
    Noninterest checking accounts             54,591                   
      Other liabilities                        3,561                   
                                               -----                   
      Total liabilities                      485,925                   
      Stockholders' equity                    35,461                   
                                              ------                   
                                                                       
    Total Liabilities and                                              
      Stockholders' Equity                  $521,386                   
                                            ========                   
                                                                       
    Net Interest Income/Margin                          $4,638    3.86%
                                                        ======    ==== 
                                                                       
                                                  
                                                Three months ended     
                                                 December 31, 2008     
                                                ------------------     
                                             Average           Average 
                                             Balance  Interest   Rate  
                                             -------  --------   ----  
    Interest Earning Assets:                                           
      Interest-bearing deposits in banks        $966        $3    1.28%
      Federal funds sold & securities                                  
        purchased under agreements to                                  
        resell                                10,073        56    2.21%
      Investment securities:                                           
           Taxable investment securities     106,322     1,536    5.75%
           Tax-exempt investment securities   17,565       165    5.65%
                                              ------       ---    ---- 
                Total Investment securities  123,887     1,701    5.73%
      Loans                                  323,120     5,197    6.40%
                                             -------     -----    ---- 
                                                                       
    Total Earning Assets                    $458,046    $6,957    6.12%
                                                        ------    ---- 
      Allowance for loan losses               (2,911)                  
      Cash and due from banks                 11,057                   
      Other Assets                            28,133                   
                                              ------                   
                                                                       
    Total Assets                            $494,325                   
                                            ========                   
                                                                       
    Interest Bearing Liabilities:                                      
      Interest bearing checking accounts     $68,989      $459    2.65%
      Savings and money market deposits      123,478       535    1.73%
      Time deposits                          130,402     1,152    3.51%
                                             -------     -----    ---- 
           Total interest bearing deposits   322,869     2,146    3.64%
      Short-term borrowings                   10,523         8    0.31%
      Subordinated debentures                  5,158        87    6.69%
      Long-term borrowings                    78,846       896    4.52%
                                              ------       ---    ---- 
                                                                       
    Total Interest-Bearing Liabilities      $417,396    $3,137    2.99%
                                                        ------    ---- 
                                                                       
    Interest Rate Spread                                          3.13%
                                                                  ==== 
                                                                       
    Noninterest checking accounts             49,815                   
      Other liabilities                        2,779                   
                                               -----                   
      Total liabilities                      469,990                   
      Stockholders' equity                    24,335                   
                                              ------                   
                                                                       
    Total Liabilities and                                              
      Stockholders' Equity                  $494,325                   
                                            ========                   
                                                                       
    Net Interest Income/Margin                          $3,820    3.39%
                                                        ======    ==== 
    
    
    

For further information:

Blackhawk Bancorp, Inc.


R. Richard Bastian, III, President & CEO

rbastian@blackhawkbank.com


Todd J. James, EVP & CFO

tjames@blackhawkbank.com


Phone: (608) 364-8911


SOURCE Blackhawk Bancorp, Inc.



RELATED LINKS
http://www.blackhawkbank.com

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