Blackhawk Bancorp Announces Fourth Quarter and Annual 2010 Results - Fourth Quarter EPS increases 74%

- 2010 net interest margin increases 39 basis points to 4.05%

- 2010 average total deposits increase 14% over 2009

BELOIT, Wis., Feb. 17, 2011 /PRNewswire/ -- Blackhawk Bancorp, Inc.  (OTC Bulletin Board: BHWB) today reported a 52% increase in earnings for the quarter ended December 31, 2010, to $886,000 compared to the $582,000 earned in the fourth quarter of 2009.  Earnings per share for the quarter increased 74% to $0.33 compared to $0.19 per share for the fourth quarter of 2009.  The increase in earnings for the quarter included continued improvement in the net interest margin and a high level of mortgage banking revenue, which was partially offset by an increase in the provision for loan losses. "Our determination to emerge from the Great Recession as a stronger and more profitable organization paid off," said R. Richard Bastian, President & CEO.

For the year ended December 31, 2010, Blackhawk reported net income of $3.03 million, a 55% increase compared to $1.95 million earned in 2009.  Earnings per share for the year increased 64% to $1.10 compared to the $0.67 per share earned in 2009. The year over year earnings growth was driven by an increase in the bank's net interest margin. Total assets increased to $540.0 million as of December 31, 2010, compared with $523.3 million at year end 2009.  Strong deposit growth for the year funded the increase in assets and was also used to substantially reduce borrowings and other noncore funding, strengthening the company's liquidity position.  

"By virtually every metric, including: profitability, return on equity, net interest margin, non-performing loans, capital and core deposit growth, we ended the year in a much better position than we started," stated Bastian.  The following table summarizes key performance and asset quality measures for the quarter ended December 31, 2010, compared to the previous four quarters.    



Key Performance and Asset Quality Measures

4th  Qtr

2010

3rd  Qtr

2010

2nd Qtr

2010

1st Qtr

2010

4th Qtr

2009







Diluted Earnings per share

$0.33

$0.30

$0.23

$0.23

$0.19

Return on average assets

.62%

.60%

.50%

.50%

.44%

Return on common equity

9.62%

8.91%

7.19%

7.12%

6.53%

Net interest margin

4.12%

4.07%

3.92%

3.96%

3.86%

Efficiency ratio

67.93%

63.34%

68.24%

68.4%

73.7%

Nonperforming loans to total loans

1.73%

2.30%

2.45%

2.55%

1.90%

Nonperforming assets to total loans

2.61%

2.68%

2.70%

2.80%

2.09%

Allowance for loan losses to total loans

1.82%

1.88%

1.79%

1.87%

1.67%

Allowance for loan losses to nonperforming loans

105%

82%

73%

74%

88%

Subsidiary bank total risk based capital

13.57%

13.05%

13.16%

13.48%

12.92%




Net Interest Income

Net interest income for the fourth quarter increased 13% to $5.2 million compared to $4.6 million in the fourth quarter 2009.  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 5.9% compared to the fourth quarter of 2009 and the net interest margin increased 27 basis points to 4.13% compared to 3.86% in the fourth quarter of 2009.  Total average loans increased by $21.8 million, or 6.8%, compared to the prior year fourth quarter.  

For the full year net interest income was up 15% to $19.8 million, compared to $17.2 million for 2009.  Average earning assets and the net interest margin both increased for the full year as well.  Total average earning assets increased over 2009 by $13.9 million, or 2.9%.  The increase in average earning assets included a $4.7 million, or 1.5% increase in average total loans, with the remainder of the growth in investment securities and short-term investments.  The net interest margin increased 39 basis points to 4.05% for the year ended December 31, 2010, compared to 3.66% the year before.  

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 fourth quarter increased by $82.9 million, or 20% compared to the fourth quarter of 2009.  For the year average deposits increased $57.6 million, or 14% over 2009.  Substantially all of the increase in average deposits for the year 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 borrowings for the fourth quarter of 2010 decreased by $45.8 million, or 60%, 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 101% to $2.8 million compared to $1.4 million the fourth quarter of the prior year.  The increase for the quarter was primarily due to a high level of mortgage refinance activity in the fourth quarter.  For the year, non-interest income increased 11% to $8.4 million compared to $7.6 million in 2009.  The increase in non-interest income for the year reflects an increase in debit card interchange revenue and a reduction in net losses on securities and other assets.    

Operating expenses increased by $1.0 million, or 23%, to $5.6 million in the fourth quarter of 2010 compared to $4.5 million the prior year.  For the year operating expenses were up $.9 million, or 5%, to $19.2 million compared to $18.3 million in 2009.  The increase in operating expenses for the year was primarily the result of increased compensation and credit and collection related expenses.

Provision for Loan Losses and Credit Quality

The provision for loan losses in the fourth quarter increased by 65% to $1.1 million compared to $.7 million in fourth quarter 2009.  For the year, Blackhawk recorded a provision for loan losses of $4.5 million, an 11% increase over the $4.1 million provision recorded in 2009.  Loans charged off in 2010, net of recoveries, equaled $3.9 million compared to $1.6 million in 2009.   The ratio of allowance for loan losses to total loans was 1.82% at December 31, 2010 compared to 1.67% at December 31, 2009.  

The following table summarizes the activity in the allowance for loan losses for 2010 and 2009.


Activity in Allowance for Loan Losses

2010


2009





Beginning allowance for loan losses

$     5,471,000


$   2,970,000

Provision for loan losses

4,544,000


4,090,000

Charge-offs

(4,115,000)


(1,779,000)

Recoveries

243,000


190,000

Ending allowance for loan losses

$     6,142,000


$   5,471,000


Net charge-offs to average total loans

1.18%


.49%




Nonperforming assets equaled $8.8 million, or 2.61% of total loans, at December 31, 2010, compared to $9.0 million, or 2.68% of total loans, at September 30, 2010, and $6.8 million, or 2.09% of total loans, at December 31, 2009.  Nonperforming loans to total loans was reduced to 1.73% as of December 31, 2010, compared to 2.30% at September 30, 2010, and 1.90% at December 31, 2009.  The decrease in nonperforming loans compared to the previous quarter reflects resolution of various credits, which has resulted in a $1.7 million increase in other real estate owned.  As of December 31, 2010, the ratio of the allowance for loan losses to nonperforming loans equals 105%, compared to 81% as of September 30, 2010, and 88% at December 31, 2009.  

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

rbastian@blackhawkbank.com

Todd J. James, EVP & CFO

tjames@blackhawkbank.com

Phone: (608) 364-8911



SOURCE Blackhawk Bancorp, Inc.



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http://www.blackhawkbank.com

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