BELOIT, Wis., April 24, 2013 /PRNewswire/ -- Blackhawk Bancorp, Inc. (OTCBB: BHWB) today reported earnings of $583,000 for the quarter ended March 31, 2013, a 14% decrease compared to $678,000 earned in the first quarter of 2012. Earnings per diluted share for the quarter decreased $0.05 to $0.19 compared to $0.24 the first quarter of 2012. The company saw improvements in net interest income and the provision for loan losses, which were more than offset by a decline in non-interest income. The decline in non-interest income was primarily due to a slow-down in mortgage refinance activity, and a reduction in the net gain on sale of securities and other assets. "Our net interest income and other recurring revenues have held up well despite pressure from intense competition for high quality loans and the pro-longed low interest rate environment," said Rick Bastian, the company's president and CEO. "The historically high provision for loan losses continues to be the primary drag on our earnings, however we're making progress in our efforts to reduce problem assets," he added.
The following table summarizes key performance and asset quality measures for the quarter ended March 31, 2013 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 1% to $4,731,000 compared to $4,692,000 in the first quarter 2012. Average total earning assets for the first quarter increased by $8.3 million to $525.7 million and the net interest margin realized on earning assets increased 1 basis point to 3.76% compared to 3.75% for the first quarter of 2012. The growth in average earning assets included a $23.7 million, or 7%, increase in average total loans. Average total deposits for the first quarter increased $17.5 million, or 4%, to $494.8 million compared to $477.3 million the first quarter of 2012. The increase in average total deposits included an increase in average non-maturity deposits, such as checking, savings and money market accounts, of $24.9 to $388.1 million compared to $363.2 million for the first quarter of 2012. The increase in average non-maturity deposits was offset by a $7.5 million decrease in average time deposits.
Non-Interest Income and Operating Expenses
Noninterest income for the first quarter of 2013 decreased by $399,000, or 16%, to $2,158,000 compared to $2,557,000 in the first quarter of the prior year. The decrease included an $80,000, or 10%, drop in mortgage banking revenue, a $226,000 reduction in securities gains, and a $102,000 reduction in net gain (loss) on sale of OREO and other assets. Operating expenses for the first quarter increased $103,000, or 2%, to $5,267,000 compared to $5,164,000 in the first quarter of 2012.
Provision for Loan Losses and Credit Quality
The provision for loan losses in the first quarter decreased by $180,000, or 14%, to $1,080,000 compared to $1,260,000 in first quarter 2012. During the first quarter the company had net loan charge-offs of $1,175,000 compared to $900,000 for the first quarter of the previous year. Nonaccrual loans and other real estate owned totaled $11.1 million, or 3.07% of total loans, at March 31, 2013 compared to $13.2 million, or 3.60% of total loans, at December 31, 2012 and $15.1 million, or 4.35% of total loans, at March 31, 2012.
The ratio of allowance for loan losses to total loans was 1.77% at March 31, 2013 compared to 1.78% at December 31, 2012, and 2.10% at March 31, 2012. The ratio of the allowance for loan losses to nonaccrual loans was 72% at March 31, 2013 up from 57% at December 31, 2012, and 51% at March 31, 2012. The following table summarizes the activity in the allowance for loan losses for the quarters ended March 31, 2013 and 2012, and the year ended December 31, 2012.
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.