Blackhawk Bancorp Announces Third Quarter 2012 Results

BELOIT, Wis., Oct. 26, 2012 /PRNewswire/ -- Blackhawk Bancorp, Inc.  (OTCBB: BHWB) today reported earnings of $708,000 for the quarter ended September 30, 2012, a 15% increase compared to $617,000 earned in the third quarter of 2011.    For the nine months ended September 30, 2012 the company's net income was $2,132,000, a 26% increase compared to $1,695,000 earned the first nine 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 nine month period ended September 30, 2012.  

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Earnings per diluted share for the quarter increased $0.04, or 19%, to $0.25 compared to $0.21 per diluted share the third quarter of 2011. For the first nine months of 2012 the company earned $0.75 per diluted share, a 36% increase compared to the $0.55 per diluted share earned the first nine months of 2011.  The company had total assets of $559.4 million at September 30, 2012, a $0.4 million increase compared to $559.0 million at December 31, 2011. 

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

 

Key Performance and Asset Quality Measures

3rd Qtr

2012

2nd Qtr

2012

1st Qtr

2012

4th Qtr

2011

3rd Qtr

2011







Diluted Earnings per share

$0.25

$0.27

$0.24

$0.26

$0.21

Return on average assets

.50%

.53%

.49%

.52%

.45%

Return on common equity

6.00%

6.82%

6.03%

6.74%

5.49%

Net interest margin

3.72%

3.80%

3.75%

3.79%

3.71%

Efficiency ratio

68.16%

67.37%

69.94%

67.19%

70.37%

Nonaccrual loans to total loans

3.77%

3.01%

4.19%

3.67%

2.61%

Nonaccrual loans and OREO to total loans

4.38%

3.76%

4.41%

4.11%

3.38%

Allowance for loan losses to total loans

1.74%

1.98%

2.13%

2.05%

1.78%

Allowance for loan losses to nonaccrual loans

46.1%

65.8%

50.8%

55.9%

68%

Subsidiary bank total risk-based capital

13.62%

13.58%

13.83%

13.90%

13.71%







Net Interest Income

Net interest income for the third quarter increased 2% to $4,741,000 compared to $4,663,000 in the third quarter 2011.  Average total earning assets for the third quarter increased by $12.9 million to $522.4 compared to $509.5 million in the third quarter of 2011.  The growth in earning assets includes a $25.2 million, or 8%, 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 increased 1 basis point to 3.72% for the quarter ended September 30, 2012 compared to 3.71% for the third quarter of 2011. 

Average total deposits for the third quarter increased by $15.1 million, or 3%, to $490.0 million compared to $474.9 million the third quarter of last year.  The increase in average total deposits includes a $33.7 million, or 9%, increase in average non-maturity deposits such as demand deposit, interest checking, savings and money market accounts, which was offset by an $18.6 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 total borrowings declining by $5.7 million.          

Net interest income for the nine months ended September 30, 2012 decreased by $66,000, or 0.5%, to $14,241,000 compared to $14,307,000 for the first nine months of 2011.   Average total earning assets for the first nine months of 2012 increased by $12.1 million to $521.4 million compared to $509.2 million for the first nine months of 2011.  The earning asset growth included a $16.7 million, or 5%, increase in average loans.  The net interest margin for the first nine months of 2012 declined by 9 basis points to 3.75% compared to 3.84% for the first nine months of last year. 

Average total deposits for the first nine months of 2012 increased by $10.7 million, or 2%, to $487.3 million compared to $476.6 million in the first nine months of 2011.  The increase in average total deposits includes an increase of $31.6 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 $20.9 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 third quarter of 2012 increased by $658,000, or 29%, to $2,895,000 compared to $2,237,000 the third quarter of the prior year.  The increase was attributable to a $704,000 increase in mortgage banking revenues.   

For the nine months ended September 30, 2012 noninterest income increased $2,499,000 to $8,368,000 compared to $5,869,000 the first nine months of 2011.  The increase was attributable to a $1,754,000 increase in mortgage banking revenues.  Other increases in non-interest income include a $318,000 increase in the net gain on sale of securities and other trading activity.

Operating expenses for the third quarter increased $374,000, or 8%, to $5,301,000 compared to $4,927,000 in the third quarter of 2011.  For the nine months ended September 30, 2012 operating expenses increased by $1,041,000, or 7% to $15,760,000 compared to $14,719,000 the first nine months of 2011.   The increase in operating expenses for both the three and nine month periods ended September 30, 2012 was primarily due to increased compensation expense, reflecting increased variable mortgage origination compensation, additions to commercial credit staff and an increase in the cost of employee health benefits.

Provision for Loan Losses and Credit Quality

The provision for loan losses in the third quarter increased by $410,000, or 36%, to $1,560,000 compared to $1,150,000 in the third quarter 2011.   For the nine months ended September 30, 2012 the provision for loan losses increased by $1,156,000, or 36%, to $4,360,000 compared to $3,204,000 for the first nine months of 2011.  Net loan charge-offs were $5,033,000 in the first nine of 2012, compared to $3,318,000 for the first nine months of 2011.  Nonaccrual loans and other real estate owned totaled $15.8 million, or 4.38% of total loans, at September 30, 2012 compared to $13.4 million, or 3.76% of total loans, at June 30, 2012, 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 nine months ended September 30, 2012 and 2011, and the year ended December 31, 2011.

Activity in Allowance for Loan Losses

 

Year Ended September 30,


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

4,360,000


3,204,000


4,803,000

Charge-offs

(5,295,000)


(3,673,000)


(4,407,000)

Recoveries

261,000


355,000


405,000

Ending allowance for loan losses

$     6,269,000


$  6,028,000


$     6,943,000

 

Net charge-offs to average total loans, annualized

1.89%


1.34%


1.20%

The ratio of allowance for loan losses to total loans was 1.74% as of September 30, 2012 compared to 1.98% at June 30, 2012, and 2.05% at December 31, 2011.  The ratio of the allowance for loan losses to nonaccrual loans was 46% at September 30, 2012, compared to 66% at June 30, 2012 and 56% at December 31, 2011.  

Capital Position

The company and its subsidiary bank meet all regulatory capital requirements and continue to be well capitalized.  The company' total risk based capital ratio was 12.29% at September 30, 2012 compared to 12.22% at December 31, 2011 and 11.97% at September 30, 2011.  The capital improvement has come from an increase in retained earnings.  On May 2, 2012 the company announced the retention of a financial advisor for capital raising advice and execution.  The company continues to work with these advisors, however the recent successful auction by the U.S. Treasury of the company's preferred securities partially diminishes the immediate need for additional or replacement capital.  With these securities being transferred to private investors the company exits the TARP program, eliminating certain reporting requirements and potential restrictions on future dividends.   The company continues to evaluate the need and alternatives for raising additional capital to support growth, take advantage of market opportunities, and to meet increasing regulatory capital expectations.          

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

SEPTEMBER 30, 2012 AND DECEMBER 31, 2011

(UNAUDITED)


September 30,


December 31,

Assets

2012


2011


(Amounts in thousands, except


share and per share data)

Cash and due from banks

$             11,293


$            13,056

Federal funds sold and securities purchased under agreements to resell

16,774


31,964

          Total cash and cash equivalents

28,067


45,020

Interest-bearing deposits in banks

681


1,097

Trading securities

1,798


2,449

Securities available-for-sale

138,286


142,788

Loans held for sale

5,298


4,140

Federal Home Loan Bank (FHLB) Stock, at cost

2,550


4,085

Loans, less allowance for loan losses of $6,269 and $6,943




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

348,429


326,935

Office buildings and equipment, net 

8,301


8,772

Intangible assets, net

8,217


8,102

Cash surrender value of bank-owned life insurance

8,945


8,720

Other assets 

8,805


6,879

     Total assets

$           559,377


$         558,987





Liabilities and Stockholders' Equity








Liabilities




   Deposits:




     Noninterest-bearing

$             75,709


$            70,578

     Interest-bearing 

407,770


405,049

          Total deposits

483,479


475,627

Short-term borrowings

9,750


16,000

Other borrowings (including $2,249 and $2,255 at fair value at




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

10,351


16,326

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




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

4,958


4,958

Other liabilities

3,570


2,040

          Total liabilities

512,108


514,951





Stockholders' equity




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




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




    December 31, 2011, respectively

10,358


10,283

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




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




    December 31, 2011, respectively

23


23

  Surplus

9,562


9,477

  Retained earnings 

25,277


23,629

  Treasury stock, 83,252 and 85,252 shares at cost as of September 30, 2012 and



    December 31, 2011, respectively

(909)


(909)

  Accumulated other comprehensive income (loss)

2,958


1,533

     Total stockholders' equity

47,269


44,036

     Total liabilities and stockholders' equity

$           559,377


$         558,987

 

 

 

BLACKHAWK BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)


Three months ended September 30,


2012


2011


(Amounts in thousands, except


share and per share data)

Interest Income:




     Interest and fees on loans

$  4,862


$  4,902

     Interest on trading securities

18


21

     Interest and dividends on securities:




          Taxable

610


904

          Tax-exempt

292


234

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

57


76

     Interest on interest-bearing deposits in banks

4


1

          Total interest and dividend income

5,843


6,138

Interest Expenses:




     Interest on deposits

883


1,210

     Interest on short-term borrowings

1


2

     Interest on long-term borrowings

182


229

     Interest on subordinated debentures

36


34

          Total interest expense

1,102


1,475

          Net interest and dividend income

4,741


4,663

 Provision for loan losses

1,560


1,150

          Net interest and dividend income after provision for loan losses  

3,181


3,513





Noninterest Income:




     Service charges on deposits accounts

742


709

     Net gain on sale of loans

1,506


743

     Net mortgage servicing income

(121)


(62)

     Debit card interchange fees

559


546

     Net gains (losses) on trading activities

(6)


(28)

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

(1)


97

     Net other gains (losses) 

(100)


(66)

     Increase in cash value of bank-owned life insurance

73


71

     Other

243


227

          Total noninterest income

2,895


2,237





Noninterest Expenses:




     Salaries and employee benefits

2,760


2,435

     Occupancy and equipment

588


556

     Data processing 

652


627

     FDIC assessment

185


180

     Advertising and marketing

75


117

     Amortization of intangibles

35


35

     Professional fees

242


224

     Office Supplies

89


96

     Telephone

95


70

     Other

580


587

          Total noninterest expenses

5,301


4,927

          Income before income taxes

775


823

Income Taxes

67


206

          Net income 

$     708


$     617





Key Ratios








Basic Earnings Per Common Share

$    0.25


$    0.21

Diluted Earnings Per Common Share

0.25


0.21





Net Interest Margin (FTE)

3.72%


3.71%

Efficiency Ratio (FTE)

68.16%


70.37%

Return on Assets

0.50%


0.45%

Return on Common Equity

6.00%


5.49%

 

 

BLACKHAWK BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)


Nine months ended September 30,


2012


2011


(Amounts in thousands, except


share and per share data)

Interest Income:




     Interest and fees on loans

$  14,500


$  14,633

     Interest on trading securities

51


70

     Interest and dividends on securities:




          Taxable

2,109


3,037

          Tax-exempt

868


730

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

207


211

     Interest on interest-bearing deposits in banks

11


4

          Total interest and dividend income

17,746


18,685

Interest Expenses:




     Interest on deposits

2,758


3,574

     Interest on short-term borrowings

4


7

     Interest on long-term borrowings

634


696

     Interest on subordinated debentures

109


101

          Total interest expense

3,505


4,378

          Net interest and dividend income

14,241


14,307

 Provision for loan losses

4,360


3,204

          Net interest and dividend income after provision for loan losses  

9,881


11,103





Noninterest Income:




     Service charges on deposits accounts

2,039


1,895

     Net gain on sale of loans

3,572


1,578

     Net mortgage servicing income

(242)


(2)

     Debit card interchange fees

1,707


1,594

     Net gains (losses) on trading activities

(49)


(232)

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

522


387

     Net other gains (losses) 

(116)


(270)

     Increase in cash value of bank-owned life insurance

225


209

     Other

710


710

          Total noninterest income

8,368


5,869





Noninterest Expenses:




     Salaries and employee benefits

8,187


7,302

     Occupancy and equipment

1,792


1,718

     Data processing 

1,906


1,795

     FDIC assessment

555


645

     Advertising and marketing

254


343

     Amortization of intangibles

105


132

     Professional fees

797


652

     Office Supplies

285


281

     Telephone

247


210

     Other

1,632


1,641

          Total noninterest expenses

15,760


14,719

          Income before income taxes

2,489


2,253

Income Taxes

357


558

          Net income 

$    2,132


$    1,695





Key Ratios








Basic Earnings Per Common Share

$      0.75


$      0.55

Diluted Earnings Per Common Share

0.75


0.55





Net Interest Margin (FTE)

3.75%


3.84%

Efficiency Ratio (FTE)

68.45%


71.89%

Return on Assets

0.51%


0.41%

Return on Common Equity

6.27%


5.08%

 

 

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 September 30, 2012


Three months ended September 30, 2011


Average


Average


Average


Average


Balance

Interest

Rate


Balance

Interest

Rate

Interest Earning Assets:








  Interest-bearing deposits in banks

$      4,987

$          4

0.35%


$      2,107

$          1

0.23%

  Federal funds sold & securities








    purchased under agreements to 








    resell

19,912

57

1.15%


25,163

76

1.19%

  Investment securities:








       Taxable investment securities

104,898

628

2.38%


123,880

925

2.96%

       Tax-exempt investment securities

33,474

292

5.14%


24,409

234

5.46%

            Total Investment securities

138,372

920

3.05%


148,289

1,159

3.37%

  Loans

359,139

4,862

5.39%


333,978

4,902

5.82%









Total Earning Assets

$  522,410

$  5,843

4.56%


$  509,537

$  6,138

4.86%

  Allowance for loan losses

(6,737)




(5,823)



  Cash and due from banks

12,246




10,511



  Other assets

34,611




35,035











Total Assets

$  562,530




$  549,260











Interest Bearing Liabilities:








  Interest bearing checking accounts

$  156,981

$     334

0.85%


$  136,139

$     423

1.23%

  Savings and money market deposits

144,403

85

0.23%


143,466

126

0.35%

  Time deposits

108,273

464

1.71%


126,827

661

2.07%

       Total interest bearing deposits

409,657

883

0.86%


406,432

1,210

1.18%

  Short-term borrowings

545

1

0.62%


1,272

2

0.60%

  Subordinated debentures

4,958

36

2.89%


4,958

34

2.69%

  Long-term borrowings

14,460

182

5.01%


19,471

229

4.67%









Total Interest-Bearing Liabilities

$  429,620

$  1,102

1.02%


$  432,133

$  1,475

1.35%









Interest Rate Spread



3.54%




3.51%









Noninterest checking accounts

80,340




68,451



  Other liabilities

5,501




5,016



  Total liabilities

515,461




505,600



  Preferred Stock

10,217




10,246



  Common Stockholders' equity

36,852




33,414



Total Stockholders' equity

47,069




43,660



Total Liabilities and








  Stockholders' Equity

$  562,530




$  549,260











Net Interest Income/Margin


$  4,741

3.72%



$  4,663

3.71%

 

 

 

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)

Nine months ended September 30, 2012


Nine months ended September 30, 2011


Average


Average


Average


Average


Balance

Interest

Rate


Balance

Interest

Rate

Interest Earning Assets:








  Interest-bearing deposits in banks

$      4,932

$          11

0.30%


$      1,467

$            4

0.33%

  Federal funds sold & securities








    purchased under agreements to 








    resell

23,196

207

1.19%


23,874

211

1.18%

  Investment securities:








       Taxable investment securities

110,141

2,160

2.62%


126,759

3,107

3.28%

       Tax-exempt investment securities

33,031

868

5.18%


23,802

730

5.78%

            Total Investment securities

143,172

3,028

3.21%


150,561

3,837

3.67%

  Loans

350,061

14,500

5.53%


333,330

14,633

5.87%









Total Earning Assets

$  521,361

$  17,746

4.65%


$  509,232

$  18,685

4.98%

  Allowance for loan losses

(6,941)




(6,196)



  Cash and due from banks

12,329




10,636



  Other assets

33,876




35,317











Total Assets

$  560,625




$  548,989











Interest Bearing Liabilities:








  Interest bearing checking accounts

$  154,501

$        715

0.91%


$  132,798

$    1,268

1.28%

  Savings and money market deposits

144,385

217

0.28%


144,406

388

0.36%

  Time deposits

110,176

1,826

1.70%


131,064

1,918

1.95%

       Total interest bearing deposits

409,062

2,758

0.90%


408,268

3,574

1.17%

  Short-term borrowings

1,055

4

0.53%


2,174

7

0.45%

  Subordinated debentures

4,958

109

2.93%


4,958

101

2.72%

  Long-term borrowings

18,104

634

4.68%


19,295

696

4.82%









Total Interest-Bearing Liabilities

$  433,179

$    3,505

1.08%


$  434,695

$    4,378

1.35%









Interest Rate Spread



3.57%




3.63%









Noninterest checking accounts

78,215




68,300



  Other liabilities

3,343




3,399



  Total liabilities

514,737




506,394



  Preferred Stock

10,320




10,222



  Common Stockholders' equity

35,568




32,373



Total Stockholders' equity

45,888




42,595



Total Liabilities and








  Stockholders' Equity

$  560,625




$  548,989











Net Interest Income/Margin


$  14,241

3.75%



$  14,307

3.84%

 

SOURCE Blackhawk Bancorp, Inc.



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