BELOIT, Wis., April 29, 2011 /PRNewswire/ -- Blackhawk Bancorp, Inc. (OTCBB: BHWB) today reported earnings of $639,000 for the quarter ended March 31, 2011, a 2% decrease compared to $653,000 earned in the first quarter of 2010. The slight decrease in earnings was due to increased operating expenses, primarily employee compensation and benefits. Earnings per diluted share for the quarter decreased to $0.22 compared to $0.23 the first quarter of 2010. Total assets increased during the quarter to $558.3 million at March 31, 2011 from $539.9 million at December 31, 2010. "Core deposit growth and low funding costs have helped us maintain a strong net interest margin, offsetting the slowdown in mortgage refinance activity and increased operating costs," said Rick Bastian, president & CEO. "We continue to seek profitable lending opportunities; however, loan demand has been soft in the face of a slow and fragile economic recovery. Most creditworthy businesses are being very cautious about taking on additional debt," he added.
The following table summarizes key performance and asset quality measures for the quarter ended March 31, 2011 compared to the previous four quarters.
Key Performance and Asset Quality Measures
Diluted Earnings per share
Return on average assets
Return on common equity
Net interest margin
Nonaccrual loans to total loans
Nonaccrual loans and OREO to total loans
Allowance for loan losses to total loans
Allowance for loan losses to nonaccrual loans
Subsidiary bank total risk based capital
Net Interest Income
Net interest income for the first quarter increased 5% to $4.9 million compared to $4.6 million in the first quarter 2010. Both the average balance of total earning assets and the net interest margin realized on earning assets increased for the first quarter of 2011 compared to the same quarter last year. The average balance of total earning assets for the quarter increased 5.0% compared to the first quarter of 2010. The earning asset growth included a $15.9 million, or 5% increase in average total loans. The net interest margin increased 1 basis points to 3.97% compared to 3.96% in the first quarter of 2010.
The earning asset growth and improvement in the net interest margin reflect the bank's success in generating and maintaining core deposits. Average total deposits for the first quarter increased $49.7 million, or 10%, compared to the first quarter of 2010. The increase included a $15.5 million, or 5% increase in non-maturity deposits such as checking, savings, and money market accounts. The remainder of the increase in total average deposits was in time deposits. Strong deposit growth allowed for a $30.8 million, or 57%, decrease in the average total borrowings to $23.5 million for the quarter compared to $54.3 million the first quarter of 2010.
Non-Interest Income and Operating Expenses
Noninterest income for the first quarter increased 3% to $1.8 million compared to $1.7 million the first quarter of the prior year. The decrease was attributable to a $151,000 reduction in mortgage banking revenues, which consists of gain on sale of mortgage loans and net loan servicing income.
Operating expenses for the first quarter increased 10%, to $4.8 million compared to $4.4 million in the first quarter of 2010. Increasing compensation and benefit costs accounted for two-thirds of the increase. Data processing and credit and collection expense were also up compared to the first quarter of 2010.
Provision for Loan Losses and Credit Quality
The provision for loan losses in the first quarter decreased by 6% to $900,000 compared to $961,000 in first quarter 2010. During the first quarter the company had net loan charge-offs of $819,000 compared to $436,000 for the first quarter of the previous year. Nonaccrual loans and other real estate owned totaled $9.1 million, or 2.73% of total loans, at March 31, 2011 compared to $8.8 million, or 2.61% of total loans, at December 31, 2010 and $8.9 million, or 2.80% of total loans, at March 31, 2010. "While many of our business customers have begun to recover from the economic recession, high unemployment and depressed real estate values continue to challenge our market," said Bastian. "For this reason we expect non-performing assets and credit losses to remain at elevated levels throughout 2011."
The ratio of allowance for loan losses to total loans was 1.86% at March 31, 2011 compared to 1.82% at December 31, 2010, and 1.87% at March 31, 2010. The ratio of the allowance for loan losses to nonaccrual loans was 94% at March 31, 2011 down from 105% at December 31, 2010, but up from 74% at March 31, 2010.
The following table summarizes the activity in the allowance for loan losses for the quarters ended March 31, 2011 and 2010, and the year ended December 31, 2010.
Activity in Allowance for Loan Losses
Quarter Ended March 31,
Beginning allowance for loan losses
Provision for loan losses
Ending allowance for loan losses
Net charge-offs to average total loans, annualized
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 State 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.
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.
SOURCE Blackhawk Bancorp, Inc.