Blackhawk Bancorp Announces Record Earnings for 2016

BELOIT, Wis., Jan. 27, 2017 /PRNewswire/ -- Blackhawk Bancorp, Inc. (OTCQX: BHWB) reported that the Company achieved a second consecutive year of record earnings in 2016.  Net income for the year ended December 31, 2016 increased 53% to $5,978,000 compared to the previous record of $3,919,000 earned in 2015.  Fully diluted earnings per share for the year reached a record $2.59 compared to $1.73 per share for 2015.  The 2016 results were boosted by the recovery of a fraud loss that was incurred in 2014.  Excluding the recovery, net income for 2016 would have been $4,170,000 or $1.81 per diluted share, still a 4% increase in both net income and fully diluted earnings per share over the previous record set in 2015.  

For 2016 4th Quarter Financials follow link: OTCQX:BHWB Q4 2016 Financial Statements

Net income for the fourth quarter was $1,398,000, a 42% increase compared to the $985,000 earned in the fourth quarter of 2015.  Fully diluted earnings per share for the fourth quarter increased 40% to $0.60 compared to $0.43 cents per share earned the same quarter last year.

"We're pleased to report record earnings, especially with the challenge we had generating loan growth last year," said Rick Bastian, the company's chief executive officer.  "While loan demand was soft in 2016, especially within our manufacturing base, activity and optimism has really picked up since the presidential election," he added.    

The following table summarizes key performance measures for the quarter ended December 31, 2016 compared to the previous four quarters:    

Net Interest Income

Net interest income for the fourth quarter increased 4% to $5,191,000 compared to $5,015,000 for the fourth quarter of 2015.  The net interest margin for the quarter improved by 2 basis points to 3.42% compared to the most recent quarter; however, it decreased 16 basis points compared to the 3.58% net interest margin the same quarter last year.  For the full year net interest income increased 4% to $20,456,000 compared to $19,633000 in 2015.  The net interest margin for 2016 decreased to 3.40% compared to 3.65% for the year ended December 31, 2015.

"The decline in net interest margin in 2016 was driven by a shift in the Company's asset mix," said Todd James, the company's chief financial officer.  "Deposit growth significantly outpaced loan growth generating funds that were deployed in the investment portfolio and interest-bearing cash equivalents.  The higher level of investments contributed to the increase in net interest income, but the lower rates on investments compared to loans negatively affected the net interest margin on total earning assets," he explained. 

Average total deposits increased by $67.2 million, or 13%, to $589.1 million compared to $521.8 million in 2015.  The increase was primarily in transaction accounts, including a $10.2 million, or 10%, increase in average non-interest bearing demand accounts.  Average total loans were relatively flat year over year decreasing 1% to $402.8 million compared to $407.0 million for 2015.  Total average investment securities increased by $41. 4 million to $177.2 million compared to $135.8 million the prior year, and interest-bearing cash equivalents increased by $28.3 million.   

Provision for Loan Losses and Credit Quality

The provision for loan losses for the fourth quarter increased by $125,000 to $475,000 compared to $350,000 in the fourth quarter of last year.  For the year the provision for loan losses decreased $259,000 to $1,880,000 compared to $2,139,000 for 2015.  The ratio of non-performing assets to total assets decreased to 1.79% at December 31, 2016 compared to the year before.  The following table summarizes nonperforming assets as of December 31, 2016 and 2015:

Net loan charge-offs were $720,000 and $1,577,000 for quarter and year ending December 31, 2016, respectively, compared to $908,000 and $1,745,000 for the quarter and year ending December 31, 2015.  The following table summarizes the activity in the allowance for loan losses for the years ended December 31, 2016 and 2015:

At December 31, 2016 the ratio of the allowance for loan losses to total loans was 1.25% compared to 1.20% at the end of 2015.       

Non-Interest Income and Operating Expenses:

Non-interest income for the fourth quarter of 2016 increased by $441,000, or 21%, to $2,509,000 compared to $2,068,000 the fourth quarter of the prior year.  The increase over the prior year included an improvement of $264,000 in net gains (losses) on securities and other assets.  In addition, net revenue from the sale and servicing of mortgage loans was up by $288,000 compared to the fourth quarter of last year.  For the year non-interest income is up by $3,396,000, largely due to a fraud recovery in the first quarter.  Excluding the recovery, non-interest income for 2016 increased by $423,000, or 5%.  This included an increases of $179,000, or 5%, in deposit service charges and an increase of $377,000, or 16%, in net revenue from the sale and servicing of mortgage loans.  The increases were partially offset by a reduction of $217,000 in net gain (loss) on securities and other assets.  

Operating expenses for the fourth quarter decreased by $135,000, or 3%, to $5,315,000 compared to $5,450,000 the fourth quarter of 2015.  For the year operating expenses increased $1,206,000, or 6%, to $22,547,000 compared to $21,341,000 for 2015.  

Outlook

Blackhawk expects to grow by pursuing creditworthy and profitable business and consumer relationships in its Wisconsin and Illinois markets, emphasizing the value of its personal attention and service that remains unmatched by larger competitors.  This growth combined with ongoing strengthening of the Company's credit quality are expected to lead to improved earnings.  Growth and earnings could however be tempered by uncertain economic conditions, competitive pressures, regulatory burden and the interest rate environment.            

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 Janesville, 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 the financial products its provides.   

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"; inability to recover previously recorded losses as anticipated, 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.

Related Links

http://www.blackhawkbank.com