Blackhawk Bancorp Announces Third Quarter 2016 Earnings

BELOIT, Wis., Oct. 25, 2016 /PRNewswire/ -- Blackhawk Bancorp, Inc. (OTCQX: BHWB) reported third quarter 2016 net income of $1,056,000, a 7% decrease from the $1,129,000 earned in the third quarter of 2015.  Fully diluted earnings per share for the third quarter was $0.46 compared with $0.51 cents a share earned in the third quarter of 2015.

For 2016 3^rd Quarter Financials follow link: OTCQX:BHWB Q3 Financial Statements  

Net income for the nine months ended September 30, 2016 increased 56% to $4,581,000 compared to $2,933,000 earned the first nine months of 2015.  Fully diluted earnings per share for the first nine months was $1.98 compared to $1.31 per share for the same period last year.  The 2016 year to date results were boosted by the recovery of a fraud loss that was incurred in 2014.  Excluding the recovery, net income for the first nine months of 2016 would have been $2,804,000, or $1.21 per diluted share.   

The following table summarizes key performance and asset quality measures for the quarter ended September 30, 2016 compared to the previous four quarters:

"We're pleased to report another quarter of stable earnings and continued revenue growth despite a small decrease in average total loans," said Rick Bastian, the company's chairman and CEO.   "Many commercial borrowers, particularly manufacturers, are reluctant to expand in the face of a sluggish and uncertain economy.  We have elected to maintain credit discipline and have not tried to make up the growth in commercial real estate loans, where we've seen some lenders compromising terms and structure to get deals in this very competitive environment," he added.      

Net Interest Income

Net interest income for the third quarter increased 4% to $5,223,000 compared to $5,019,000 for the third quarter of 2015.  The net interest margin for the quarter improved by 8 basis points to 3.40% compared to the most recent quarter; however, it decreased 28 basis points compared to the 3.68% net interest margin the same quarter last year.  For the first nine months of 2016 net interest income increased 4% to $15,265,000 compared to $14,618,000 the first three quarters of 2015.  The net interest margin for the first nine months of the year decreased to 3.40% compared to 3.68% for the first nine months of last year.

The net interest margin declined compared to the prior year due to a $72.9, or 14%, increase in total average deposits, with about one-half of the growth being deployed in the investment portfolio and the other half held in short term cash equivalent instruments, producing a very modest increase in net interest income compared to the growth in earning assets.  The deposits creating the excess liquidity are expected to decrease considerably during the fourth quarter.  Total average loans for the first nine months of 2016 decreased by $3.3 million, or 1%, compared to 2015.

Provision for Loan Losses and Credit Quality

The provision for loan losses for the third quarter decreased by $120,000, or 22%, to $435,000 compared to $555,000 in the third quarter of last year.  For the first nine months of 2016, the provision for loan losses decreased $384,000, or 22%, to $1,405,000 compared to $1,789,000 the first nine months of 2015.  Net charge-offs were $71,000 for the third quarter and totaled $857,000 for the first nine months.  The following table summarizes the activity in the allowance for loan losses for the nine month periods ended September 30, 2016 and 2015 and the year ended December 31, 2015:

Nonaccrual loans and other real estate owned totaled $6.6 million, or 1.63% of total loans, at September 30, 2016 compared to $8.0 million, or 2.0% of total loans, at December 31, 2015 and $6.7 million, or 1.61% of total loans, at September 30, 2015.  The ratio of the allowance for loan losses to nonaccrual loans was 97.4% at September 30, 2016 compared to 75.5% at December 31, 2015 and 97.9% at September 30, 2015.       

Non-Interest Income and Operating Expenses:

Non-interest for the third quarter of 2016 increased by $136,000, or 6%, to $2,588,000 compared to $2,452,000 the third quarter of the prior year.  Year to date non-interest is up by $2,956,000, or 43%, primarily due to the fraud recovery in the first quarter.  Excluding this recovery, non-interest income for the first nine months of 2016 increased by $33,000, or less than 1%; however, growth in core recurring non-interest income offset a decrease of $321,000 in gains from the sale of securities.   

Operating expenses for the quarter increased by $642,000, or 12%, to $6,023,000 compared to $5,381,000 the third quarter of 2015.  Operating expenses for the nine months ended September 30, 2016 increased $1,340,000, or 8%, to $17,232,000 compared to $15,892,000 the first half of 2015. The increase in operating expenses includes approximately $150,000 to re-issue all debit cards to be chip enabled and $160,000 of professional fees to establish a captive insurance subsidiary.  These were both nonrecurring expenses that will provide future financial benefits.    

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 earnings improvement.  Growth and earnings could however be tempered by uncertain economic conditions, which continue to be less than ideal in the markets served by Blackhawk.  Competitive pressures, regulation and the on-going low interest rate environment are additional factors that will challenge growth and earnings.            

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