BELOIT, Wis., April 27, 2012 /PRNewswire/ -- Blackhawk Bancorp, Inc. (OTCBB: BHWB) today reported earnings of $678,000 for the quarter ended March 31, 2012, a 6% increase compared to $639,000 earned in the first quarter of 2011. Earnings per diluted share for the quarter increased $0.02 to $0.24 compared to $0.22 the first quarter of 2011. Growth in non-interest income in the first quarter of 2012 more than offset a decrease in net interest income and increase in the provision for loan losses compared to the first quarter of last year. Total assets of the company increased $6.0 million during the quarter to $565.0 million at March 31, 2012 from $559.0 million at December 31, 2011.
The following table summarizes key performance and asset quality measures for the quarter ended March 31, 2012 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
"The on-going low interest rate environment, soft loan demand and intense competition for qualified borrowers are all factors that continued to compress net interest income in the first quarter," said Rick Bastian, president & CEO. "However, we are starting to see an increase in lending opportunities, especially in the manufacturing sector, and expect loan growth to pick up the remainder of the year," he added.
Net Interest Income
Net interest income for the first quarter decreased 4% to $4.7 million compared to $4.9 million in the first quarter 2011. The average balance of total earning assets for the first quarter increased by $11.2 million to $517.4 million while the net interest margin realized on earning assets decreased 22 basis points to 3.75% compared to 3.97% for the first quarter of 2011. The growth in earning assets included a $6.9 million, or 2%, increase in average total loans.
Average total deposits for the first quarter were essentially flat at $477.3 million compared to $478.1 million the first quarter of 2011. While total average deposits were little changed, a $20.3 million increase in average non-maturity deposits such as checking, money market and savings accounts was offset by a $21.2 million decrease in average time deposits. The strong growth in non-maturity deposits has dramatically reduced the company's need for brokered deposits or other sources of wholesale funding.
Non-Interest Income and Operating Expenses
Noninterest income for the first quarter of 2012 increased by $768,000, or 43%, to $2.6 million compared to $1.8 million the first quarter of the prior year. The increase was primarily attributable to a $406,000 increase in mortgage banking revenues, which consists of gain on sale of mortgage loans and net loan servicing income. Other increases in non-interest income included a $145,000 increase in net securities gains, a $148,000 improvement in net gain (loss) on sale of other real estate and other assets, and an increase of $110,000 in deposit service fees and debit card revenue.
Operating expenses for the first quarter increased $305,000, or 6%, to $5.2 million compared to $4.9 million in the first quarter of 2011. This includes an increase of $276,000, or 11%, in compensation and benefit costs, which was driven primarily by variable compensation related to mortgage production and an increase in the cost of employee health benefits.
Provision for Loan Losses and Credit Quality
The provision for loan losses in the first quarter increased by $360,000, or 40%, to $1.3 million compared to $0.9 million in first quarter 2011. During the first quarter the company had net loan charge-offs of $901,000 compared to $819,000 for the first quarter of the previous year. Nonaccrual loans and other real estate owned totaled $15.1 million, or 4.41% of total loans, at March 31, 2012 compared to $13.9 million, or 4.11% of total loans, at December 31, 2011 and $9.1 million, or 2.73% of total loans, at March 31, 2011. "While we are beginning to see bright spots in the local economy, our market still suffers from high unemployment and depressed real estate values," said Bastian. "Although we expect non-performing assets to remain at elevated levels throughout 2012, we anticipate improvement throughout the year as we reach final resolution on certain credits."
The ratio of allowance for loan losses to total loans was 2.13% at March 31, 2012 compared to 2.05% at December 31, 2011, and 1.86% at March 31, 2011. The ratio of the allowance for loan losses to nonaccrual loans was 51% at March 31, 2012 down from 56% at December 31, 2011, and 94% at March 31, 2011.
The following table summarizes the activity in the allowance for loan losses for the quarters ended March 31, 2012 and 2011, and the year ended December 31, 2011.
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; 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.
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.