- 2007 net income $1.03 vs. $1.00 BELOIT, Wis., Feb. 28
/PRNewswire-FirstCall/ -- Blackhawk Bancorp, Inc. (OTC:BHWB)
(BULLETIN BOARD: BHWB) today announced financial results for the
fourth quarter and year ended December 31, 2007. Net income rose to
$2.29 million or $1.03 per fully diluted share compared with $2.26
million or $1.00 per diluted share a year ago. Net income in fourth
quarter was $563,000 or 26 cents per diluted share compared with
$766,000 or 34 cents per diluted share in fourth quarter 2006.
Total assets amounted to $464.7 million at year-end, up 6 percent
compared with $439.5 million at year-end 2006. Fourth quarter and
annual net interest income rose, reflecting solid loan and deposit
growth, the company reported. The growth in deposits was primarily
in checking, savings and money market accounts. Time deposits were
stable year-over-year. For the year, net interest income rose to
$12.9 million in 2007 compared with $12.2 million in 2006. Fourth
quarter 2007 net interest income was approximately $3.4 million
compared with $3.0 million in fourth quarter 2006. The net interest
margin for the year was up slightly, to 3.18 percent compared with
3.14 in 2006. The net interest margin in the fourth quarter was up
14 basis points to 3.24 percent compared with 3.10 percent in the
fourth quarter of 2006. "Blackhawk grew in a number of areas
throughout 2007. In light of the soft economy we believe that
performance is a very encouraging indication of our bank's and our
markets' essential strength and stability," said R. Richard
Bastian, III, President and CEO. "We believe our commitment to
maintaining high levels of personal attention and service strongly
contributed to customer retention. We kept existing customers,
balances in consumer accounts were essentially stable, and we
successfully collected fee income and service charges." "In its
first full year, balances in Blackhawk's Easy Money checking
program grew to nearly $20 million, with $7.3 million from
customers that had no prior relationship with the bank. This
innovative account rewards customers with high interest rates in
return for using electronic payment methods and receiving
electronic account statements. There is no account minimum, and it
includes free worldwide ATM service. The additional revenue from
transaction fees offsets the higher interest costs," explained
Bastian. "This has been an exciting product, especially for
customers who don't typically carry large enough balances to take
advantage of most high-interest earning checking accounts," he
said. "It has generated new business and attracted new customers,
which gives us cross-selling opportunities." Discussing the
company's loans and the lending environment of its served markets,
Bastian explained: "To remain prudent in today's soft economic
environment, we increased our provision for loan losses to $566,000
for the year ended December 31, 2007 compared with $407,000 the
year before. We had lower net charge-offs of $466,000 in 2007
compared to $480,000 in 2006. Blackhawk has no participation in the
sub-prime mortgage loan market. Mortgage loans we originate are
primarily conforming loans that are sold into the secondary market.
However, an important part of Blackhawk's strategy is to retain the
servicing to facilitate the cross-sale of additional banking
products. "Although the economies in the markets we serve are
experiencing the same issues as most areas, our communities never
had the speculative real estate issues that caused the widest
swings," continued Bastian. "Building and construction in our
communities has been slow but stable. We deal extensively with
builders and contractors. One of our bank's specialties is having a
consultative relationship with customers, so we were able to help
them anticipate economic changes and make adjustments. We believe
this helped them to more effectively manage their business, and
enabled us to avoid over- extending our commitments." Non-interest
income was $5.0 million in 2007 compared with $4.9 million in 2006.
Core non-interest income, which includes wealth management fees,
debit card interchange, gain on sale of mortgages and deposit
service charges increased by more than $625,000 for 2007 compared
to 2006. These increases were partially offset by a recognized loss
of $374,000 on the bank's trading security portfolio and certain
financial liabilities that are accounted for at fair value. This
fair value adjustment reflects the pricing volatility on
mortgage-backed securities and collateralized mortgage obligations
during the last several months of 2007. Management has closely
analyzed Blackhawk's securities portfolios and believes these fair
value adjustments will be recovered as the market stabilizes or the
underlying cash flows are received. In addition, the company
recorded gains on the sale of real estate of approximately $79,000
in 2007 compared to $278,000 in 2006, the decline further
offsetting the gains in core non-interest income. Bastian noted
that the company, in most operating cost categories, held the line
compared with 2006. Salaries and employee benefits were up 7.7
percent year-over-year, in part because the company added lenders
with proven experience in generating sales and new business, and
who are expected to generate increasing business. "We had held the
line on personnel costs for several years, but we have an excellent
opportunity to grow and capitalize on any upturn in the economy,"
explained the chief executive. "We've also grown revenue in
mortgage banking and wealth management, both of which have a
commission-based sales team," said Bastian. He also said the
company's intensive service culture, which includes basic financial
planning for individuals and consultative support for small
business clients, strongly differentiates Blackhawk from
competitors. Even in a strong economy, the company's efficiency
ratio will generally be higher than banking organizations that
offer less service, he explained. "Because of our service levels
and personal attention to customers, we have exceptionally high
account retention rates," he continued. "We also have many
opportunities to present new products and services to customers on
a personal level. The service and sales skills of our employees is
a cost- effective investment to generate new business." The company
increased spending on technology to offer the latest electronic
banking capabilities to customers and to improve long-term
efficiency of operations. Bastian noted that the economy affected
Blackhawk's performance, with return on equity declining to 9.35
percent in 2007 compared with 10.01 percent in 2006. Return on
assets was .51 percent in 2007, virtually even with 2006, while the
bank's efficiency ratio moved up to 78.62 percent compared with
77.64 percent in 2006. 2008 Outlook "The Wisconsin and Illinois
communities Blackhawk serves should continue stable, although they
will probably have few growth opportunities for at least the next
six months," said Bastian. "The company's best opportunities for
growth will come from building market share and getting a greater
share of banking and financial business from each customer. One of
the company's goals is to increase the average number of financial
products per customer by establishing expectations for the front
line on the number of products delivered at each point of sale."
Blackhawk has acquired land for future expansion in a manufacturing
and business section of Rockford, Ill., where it anticipates
beginning to serve the area's small businesses and their employees.
"Although Rockford is not a fast growing market, it is a regional
business center with more than 150,000 population (2000 census) and
has many vibrant businesses that we believe can benefit from the
high level of service and personal attention we provide, especially
to small business owners," explained Bastian. "We are excited about
the opportunity we have to establish a strong foothold in Rockford
in an area with significant potential for economic development."
About Blackhawk Bancorp Blackhawk Bancorp, Inc. is the parent
company of Blackhawk State Bank, which operates seven office
locations in south central Wisconsin and north Central Illinois,
along the US 90 corridor from Rockford, Ill. to Beloit, Wis.
Blackhawk's locations Blackhawk serves 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 trust, estate and succession
planning. The bank has received numerous accolades for its work
with the fast-growing Hispanic population in its served markets.
Further information is available on the Company's website at
http://www.blackhawkbank.com/. 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"; and the inability of
third party vendors to perform critical services for the company or
its customers. Financial Summary Follows BLACKHAWK BANCORP, INC.
AND SUBSIDIARY CONDENSED STATEMENTS OF INCOME (Unaudited) Three
Months Ended Twelve Months Ended (Dollars in thousands, except
December 31, December 31, per share data) 2007 2006 2007 2006
Interest Income $7,165 $6,566 $27,664 $25,038 Interest Expense
3,754 3,514 14,778 12,859 Net Interest and Dividend Income 3,411
3,052 12,886 12,179 Provision for loan losses 189 115 566 407
Non-Interest Income 1,089 1,477 4,988 4,892 Non-Interest Expense
3,620 3,275 14,195 13,402 Income Before Income Taxes 691 1,139
3,113 3,262 Income Taxes 128 373 822 1,006 Net Income $563 $766
$2,291 $2,256 Key Ratios Diluted Earnings Per Share $0.26 $0.34
$1.03 $1.00 Dividends Per Share 0.09 0.09 0.36 0.36 Average
Outstanding Shares 2,180,361 2,227,861 2,205,067 2,224,408 Ending
Outstanding Shares 2,174,227 2,235,706 2,174,227 2,235,706 Net
Interest Margin 3.24% 3.10% 3.18% 3.14% Efficiency Ratio 79.36%
71.69% 78.62% 77.64% Return on Assets 0.48% 0.70% 0.51% 0.52%
Return on Equity 8.82% 12.81% 9.35% 10.01% CONDENSED BALANCE SHEETS
(Unaudited) December 31, December 31, (Amounts in thousands) 2007
2006 Assets: Cash and cash equivalents $22,793 $26,641
Interest-bearing deposits in banks 1,066 1,249 Available-for sale
securities 92,266 113,763 Trading securities 26,520 - Federal Home
Loan Bank Stock, at cost 4,085 4,085 Loans, net of allowances for
loan losses 292,529 268,616 Office buildings and equipment, net
7,424 8,057 Intangible assets, net 6,636 6,675 Cash surrender value
of bank-owned life insurance 7,286 7,014 Other assets 4,068 3,418
Total Assets $464,673 $439,518 Liabilities and Stockholders'
Equity: Deposits $331,239 $312,001 Borrowings 100,931 88,284
Subordinated debentures 5,158 11,341 Other liabilities 2,852 3,684
Total liabilities 440,180 415,310 Stockholders' equity 24,493
24,208 Total liabilities and stockholders' equity $464,673 $439,518
DATASOURCE: Blackhawk Bancorp, Inc. CONTACT: Todd James, CFO, or R.
Richard Bastian III, President & CEO, both of Blackhawk
Bancorp, Inc., +1-608-364-8911; or Tad Gage or Jacob Eisen, both of
The Investor Relations Company, +1-312-245-2700, for Blackhawk
Bancorp, Inc. Web site: http://www.blackhawkbank.com/
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