Blackhawk Bancorp Announces Second Quarter 2012 Results

BELOIT, Wis., July 16, 2012 /PRNewswire/ -- Blackhawk Bancorp, Inc. (OTCBB: BHWB) today reported earnings of $745,000 for the quarter ended June 30, 2012, a 70% increase compared to $439,000 earned in the second quarter of 2011.  For the six months ended June 30, 2012 the company's net income was $1,423,000, a 32% increase compared to $1,078,000 earned the first six months of 2011.  Growth in mortgage banking revenue and other non-interest income more than offset increases in the provision for loan losses for both the quarter and six month period ended June 30, 2012.  

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Earnings per diluted share for the quarter increased $0.13, or 108%, to $0.27 compared to $0.13 per diluted share the second quarter of 2011. For the first half of 2012 the company earned $0.50 per diluted share, a 47% increase compared to the $0.34 per diluted share earned the first half of 2011.  The company had total assets of $557.9 million at June 30, 2012, a $1.1 million decrease compared to $559.0 million at December 31, 2011. 

"We are extremely pleased to be reporting another quarter of positive earnings," said Rick Bastian, president & CEO.  "Growth in mortgage banking revenue and other non-interest income has allowed us to increase profitability despite heavy additions to the provision for loan losses as we vigorously address asset quality issues," he added.    

The following table summarizes key performance and asset quality measures for the quarter ended June 30, 2012 compared to the previous four quarters.    

 

Key Performance and Asset Quality Measures

2nd Qtr

2012

1st Qtr

2012

4th Qtr

2011

3rd Qtr

2011

2nd Qtr

2011







Diluted Earnings per share

$0.27

$0.24

$0.26

$0.21

$0.13

Return on average assets

.53%

.49%

.52%

.45%

.32%

Return on common equity

6.82%

6.03%

6.74%

5.49%

3.50%

Net interest margin

3.80%

3.75%

3.79%

3.71%

3.83%

Efficiency ratio

67.37%

69.94%

67.19%

70.17%

73.61%

Nonaccrual loans to total loans

3.01%

4.19%

3.67%

2.61%

2.31%

Nonaccrual loans and OREO to total loans

3.76%

4.41%

4.11%

3.38%

3.12%

Allowance for loan losses to total loans

1.98%

2.13%

2.05%

1.78%

1.83%

Allowance for loan losses to nonaccrual loans

65.8%

50.8%

55.9%

68%

79%

Subsidiary bank total risk-based capital

13.58%

13.83%

13.90%

13.71%

13.78%







Net Interest Income

Net interest income for the second quarter increased 1% to $4,809,000 compared to $4,783,000 in the second quarter 2011.  Average total earning assets for the second quarter increased by $13.0 million to $524.2 compared to $511.2 million in the second quarter of 2011.  The growth in earning assets includes an $18.0 million, or 5%, increase in average total loans, which was partially offset with a net decrease in available for sale securities and other short term investments.  The net interest margin realized on earning assets decreased 3 basis points to 3.80% for the quarter ended June 30, 2012 compared to 3.83% for the second quarter of 2011. 

Average total deposits for the second quarter increased by $14.1 million, or 3%, to $487.7 million compared to $473.6 million the second quarter of last year.  The increase in average total deposits includes a $37.1 million, or 11%, increase in average non-maturity deposits such as demand deposit, interest checking, savings and money market accounts, which was offset by a $23.0 million decrease in the average balance of certificates of deposits.  The majority of the reduction in average certificates of deposits is due to the maturity or call of brokered deposits.   In addition, strong deposit growth continues to reduce reliance on borrowings, with the average balance of borrowings declining by $5.6 million.          

Net interest income for the six months ended June 30, 2012 decreased by $145,000, or 2%, to $9,500,000 compared to $9,645,000 for the first half of 2011.   Average total earning assets for the first half of the 2012 increased by $12.1 million to $520.8 million compared to $508.7 million for the first half of 2011.  The earning asset growth included a $12.5 million, or 4%, increase in average loans.  The net interest margin for the first six months of 2012 declined by 13 basis points to 3.77% compared to 3.90% for the first half of last year.

Average total deposits for the first half of 2012 increased by $8.2 million, or 2%, to $484.8 million compared to $476.6 million in the first six months of 2011.  The increase in average total deposits includes an increase of $30.3 million, or 9%, in average non-maturity deposits such as demand deposit, interest checking, savings and money market accounts.  The increase in average non-maturity deposits was partially offset with a $22.1 million reduction in average certificates of deposit.  The majority of the reduction in average certificates of deposit is due to the maturity or call of brokered deposits. 

Non-Interest Income and Operating Expenses

Noninterest income for the second quarter of 2012 increased by $1,004,000, or 53%, to $2,916,000 compared to $1,912,000 the second quarter of the prior year.  The increase was attributable to a $646,000 increase in mortgage banking revenues.  Other increases in non-interest income include a $283,000 increase in the net gain on sale of securities and other trading activity.

For the six months ended June 30, 2012 noninterest income increased $1,695,000 to $5,472,000 compared to $3,777,000 the first half of 2011.  The increase includes a $1,051,000 increase in mortgage banking revenue and a $393,000 increase in the gain on sale of securities and other trading activity.              

Operating expenses for the second quarter increased $295,000, or 6%, to $5,297,000 compared to $5,002,000 in the second quarter of 2011.  For the six months ended June 30, 2012 operating expenses increased by $522,000, or 5% to $10,459,000 compared to $9,937,000 the first half of 2011.  The increase in operating expenses for both the three and six month periods ended June 30, 2012 was due to increased compensation expense, reflecting increased variable compensation related to mortgage production, an increase in the cost of employee health benefits and staff additions in the business banking area.   

Provision for Loan Losses and Credit Quality

The provision for loan losses in the second quarter increased by $386,000, or 33%, to $1,540,000 compared to $1,154,000 in second quarter 2011.   For the six months ended June 30, 2012 the provision for loan losses increased by $746,000, or 36%, to $2,800,000 compared to $2,054,000 for the first half of 2011.  The company had net loan charge-offs of $2,665,000 in the first six months of 2012, compared to $2,128,000 for the first half of 2011.  Nonaccrual loans and other real estate owned totaled $13.4 million, or 3.76% of total loans, at June 30, 2012 compared to $15.1 million, or 4.41% of total loans, at March 31, 2011, and $13.9 million, or 4.11% of total loans, at December 31, 2011. 

The following table summarizes the activity in the allowance for loan losses for the six months ended June 30, 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

2,800,000


2,054,000


4,803,000

Charge-offs

(2,852,000)


(2,404,000)


(4,407,000)

Recoveries

187,000


276,000


405,000

Ending allowance for loan losses

$     7,078,000


$  6,068,000


$     6,943,000

 

Net charge-offs to average total loans, annualized

1.51%


1.29%


1.20%

The ratio of allowance for loan losses to total loans was 1.98% as of June 30, 2012 compared to 2.13% at March 31, 2012, and 2.05% at December 31, 2011.  The ratio of the allowance for loan losses to nonaccrual loans was 66% at June 30, 2012, compared to 51% at March 31, 2012 and 56% at December 31, 2011.  

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

JUNE 30, 2012 AND DECEMBER 31, 2011

(UNAUDITED)


June 30,


December 31,

Assets

2012


2011


(Amounts in thousands, except


share and per share data)

Cash and due from banks

$         12,268


$                       13,056

Federal funds sold and securities purchased under agreements to resell

18,647


31,964

          Total cash and cash equivalents

30,915


45,020

Interest-bearing deposits in banks

5,471


1,097

Trading securities

1,983


2,449

Securities available-for-sale

132,390


142,788

Loans held for sale

5,010


4,140

Federal Home Loan Bank (FHLB) Stock, at cost

2,550


4,085

Loans, less allowance for loan losses of $7,086 and $6,943




    at June 30, 2012 and December 31, 2011, respectively

345,671


326,935

Office buildings and equipment, net 

8,420


8,772

Intangible assets, net

8,138


8,102

Cash surrender value of bank-owned life insurance

8,873


8,720

Other assets 

8,453


6,879

     Total assets

$       557,874


$                    558,987





Liabilities and Stockholders' Equity








Liabilities




   Deposits:




     Noninterest-bearing

$         74,949


$                       70,578

     Interest-bearing 

418,833


405,049

          Total deposits

493,782


475,627

Short-term borrowings

-


16,000

Other borrowings (including $2,264 and $2,255 at fair value at




  June 30, 2012 and December 31, 2011, respectively)

10,689


16,326

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




  June 30, 2012 and December 31, 2011, respectively)

4,958


4,958

Other liabilities

2,602


2,040

          Total liabilities

512,031


514,951





Stockholders' equity




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




   10,500 shares issued as of June 30, 2012 and 




    December 31, 2011, respectively

10,333


10,283

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




   2,279,004 and 2,279,004 shares issued as of June 30, 2012 and




    December 31, 2011, respectively

23


23

  Surplus

9,533


9,477

  Retained earnings 

24,730


23,629

  Treasury stock, 83,252 and 85,252 shares at cost as of June 30,

    2012 and December 31, 2011, respectively




(909)


(909)

  Accumulated other comprehensive income (loss)

2,133


1,533

     Total stockholders' equity

45,843


44,036

     Total liabilities and stockholders' equity

$       557,874


$                    558,987

    

BLACKHAWK BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)


Three months ended June 30,


2012


2011


(Amounts in thousands, except


share and per share data)

Interest Income:




     Interest and fees on loans

$  4,908


$  4,877

     Interest on trading securities

22


15

     Interest and dividends on securities:




          Taxable

710


1,031

          Tax-exempt

289


246

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

70


59

     Interest on interest-bearing deposits in banks

4


1

          Total interest and dividend income

6,003


6,229

Interest Expenses:




     Interest on deposits

922


1,175

     Interest on short-term borrowings

2


4

     Interest on long-term borrowings

234


233

     Interest on subordinated debentures

36


34

          Total interest expense

1,194


1,446

          Net interest and dividend income

4,809


4,783

 Provision for loan losses

1,540


1,154

          Net interest and dividend income after provision for loan losses  

3,269


3,629





Noninterest Income:




     Service charges on deposits accounts

682


685

     Net gain on sale of loans

1,168


451

     Net mortgage servicing income

(42)


29

     Debit card interchange fees

587


552

     Net gains (losses) on trading activities

(27)


(223)

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

296


209

     Net other gains (losses) 

(43)


(82)

     Increase in cash value of bank-owned life insurance

71


70

     Other

224


221

          Total noninterest income

2,916


1,912





Noninterest Expenses:




     Salaries and employee benefits

2,711


2,428

     Occupancy and equipment

598


568

     Data processing 

634


669

     FDIC assessment

185


225

     Advertising and marketing

89


122

     Amortization of intangibles

35


35

     Professional fees

301


221

     Office Supplies

100


91

     Telephone

77


70

     Other

567


573

          Total noninterest expenses

5,297


5,002

          Income before income taxes

888


539

Income Taxes

143


100

          Net income 

$     745


$     439





Key Ratios








Basic Earnings Per Common Share

$    0.27


$    0.13

Diluted Earnings Per Common Share

0.27


0.13





Net Interest Margin (FTE)

3.80%


3.83%

Efficiency Ratio (FTE)

67.37%


73.61%

Return on Assets

0.53%


0.32%

Return on Common Equity

6.82%


3.50%

    

BLACKHAWK BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)


Six months ended June 30,


2012


2011


(Amounts in thousands, except


share and per share data)

Interest Income:




     Interest and fees on loans

$  9,639


$  9,731

     Interest on trading securities

33


49

     Interest and dividends on securities:




          Taxable

1,499


2,134

          Tax-exempt

577


496

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

149


136

     Interest on interest-bearing deposits in banks

6


2

          Total interest and dividend income

11,903


12,548

Interest Expenses:




     Interest on deposits

1,875


2,364

     Interest on short-term borrowings

3


5

     Interest on long-term borrowings

452


467

     Interest on subordinated debentures

73


67

          Total interest expense

2,403


2,903

          Net interest and dividend income

9,500


9,645

 Provision for loan losses

2,800


2,054

          Net interest and dividend income after provision for loan losses  

6,700


7,591





Noninterest Income:




     Service charges on deposits accounts

1,297


1,331

     Net gain on sale of loans

2,067


834

     Net mortgage servicing income

(122)


60

     Debit card interchange fees

1,148


1,048

     Net gains (losses) on trading activities

(43)


(204)

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

522


290

     Net other gains (losses) 

(17)


(204)

     Increase in cash value of bank-owned life insurance

153


139

     Other

467


483

          Total noninterest income

5,472


3,777





Noninterest Expenses:




     Salaries and employee benefits

5,427


4,867

     Occupancy and equipment

1,204


1,162

     Data processing 

1,254


1,313

     FDIC assessment

370


464

     Advertising and marketing

179


226

     Amortization of intangibles

70


97

     Professional fees

555


428

     Office Supplies

196


185

     Telephone

152


140

     Other

1,052


1,055

          Total noninterest expenses

10,459


9,937

          Income before income taxes

1,713


1,431

Income Taxes

290


353

          Net income 

$  1,423


$  1,078





Key Ratios








Basic Earnings Per Common Share

$    0.50


$    0.34

Diluted Earnings Per Common Share

0.50


0.34





Net Interest Margin (FTE)

3.77%


3.90%

Efficiency Ratio (FTE)

68.61%


72.96%

Return on Assets

0.51%


0.40%

Return on Common Equity

6.42%


4.87%

    

















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 June 30, 2012


Three months ended June 30, 2011


Average


Average


Average


Average


Balance

Interest

Rate


Balance

Interest

Rate

Interest Earning Assets:








  Interest-bearing deposits in banks

$      6,020

$          4

0.28%


$          948

$          1

0.51%

  Federal funds sold & securities








    purchased under agreements to 








    resell

22,466

70

1.25%


19,057

59

1.23%

  Investment securities:








       Taxable investment securities

111,520

732

2.64%


134,102

1,046

3.13%

       Tax-exempt investment securities

33,021

289

5.20%


23,947

246

5.79%

            Total Investment securities

144,541

1,021

3.22%


158,049

1,292

3.53%

  Loans

351,171

4,908

5.62%


333,162

4,877

5.87%









Total Earning Assets

$  524,198

$  6,003

4.71%


$  511,216

$  6,229

4.97%

  Allowance for loan losses

(6,999)




(6,386)



  Cash and due from banks

11,981




10,301



  Other assets

33,611




35,346











Total Assets

$  562,791




$  550,477











Interest Bearing Liabilities:








  Interest bearing checking accounts

$  156,180

$     360

0.93%


$  132,658

$     434

1.31%

  Savings and money market deposits

143,583

97

0.27%


139,567

122

0.35%

  Time deposits

108,123

465

1.73%


131,139

619

1.89%

       Total interest bearing deposits

407,886

922

0.91%


403,364

1,175

1.17%

  Short-term borrowings

1,123

2

0.66%


4,230

4

0.39%

  Subordinated debentures

4,958

36

2.92%


4,958

34

2.75%

  Long-term borrowings

18,325

234

5.14%


20,866

233

4.47%









Total Interest-Bearing Liabilities

$  432,292

$  1,194

1.11%


$  433,418

$  1,446

1.34%









Interest Rate Spread



3.60%




3.63%









Noninterest checking accounts

79,812




70,211



  Other liabilities

5,150




4,301



  Total liabilities

517,254




507,930



  Preferred Stock

10,311




10,221



  Common Stockholders' equity

35,226




32,326



Total Stockholders' equity

45,537




42,547



Total Liabilities and








  Stockholders' Equity

$  562,791




$  550,477











Net Interest Income/Margin


$  4,809

3.80%



$  4,783

3.83%









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)

Six months ended June 30, 2012


Six months ended June 30, 2011


Average


Average


Average


Average


Balance

Interest

Rate


Balance

Interest

Rate

Interest Earning Assets:








  Interest-bearing deposits in banks

$      4,905

$            6

0.27%


$          842

$            2

0.57%

  Federal funds sold & securities








    purchased under agreements to 








    resell

24,857

149

1.21%


23,218

136

1.18%

  Investment securities:








       Taxable investment securities

112,791

1,532

2.73%


128,223

2,183

3.43%

       Tax-exempt investment securities

32,807

577

5.20%


23,493

496

5.95%

            Total Investment securities

145,598

2,109

3.29%


151,716

2,679

3.82%

  Loans

345,472

9,639

5.61%


333,000

9,731

5.89%









Total Earning Assets

$  520,832

$  11,903

4.70%


$  508,776

$  12,548

5.05%

  Allowance for loan losses

(7,044)




(6,385)



  Cash and due from banks

12,371




10,999



  Other assets

33,572




35,480











Total Assets

$  559,731




$  548,870











Interest Bearing Liabilities:








  Interest bearing checking accounts

$  153,247

$        715

0.94%


$  131,100

$        846

1.30%

  Savings and money market deposits

143,304

217

0.31%


144,084

261

0.37%

  Time deposits

111,138

943

1.70%


133,217

1,257

1.90%

       Total interest bearing deposits

407,689

1,875

0.92%


408,401

2,364

1.17%

  Short-term borrowings

1,313

3

0.51%


2,633

5

0.42%

  Subordinated debentures

4,958

73

2.96%


4,958

67

2.74%

  Long-term borrowings

19,945

452

4.55%


19,205

467

4.90%









Total Interest-Bearing Liabilities

$  433,905

$    2,403

1.11%


$  435,197

$    2,903

1.34%









Interest Rate Spread



3.59%




3.71%









Noninterest checking accounts

77,142




68,223



  Other liabilities

3,393




3,397



  Total liabilities

514,440




506,817



  Preferred Stock

10,307




10,209



  Common Stockholders' equity

34,984




31,844



Total Stockholders' equity

45,291




42,053



Total Liabilities and








  Stockholders' Equity

$  559,731




$  548,870











Net Interest Income/Margin


$    9,500

3.77%



$    9,645

3.90%

SOURCE Blackhawk Bancorp, Inc.



RELATED LINKS
http://www.blackhawkbank.com

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