- Q3 Net Income Up 17% BELOIT, Wis., Oct. 15 /PRNewswire-FirstCall/
-- Blackhawk Bancorp, Inc. (OTC:BHWB) (BULLETIN BOARD: BHWB) today
announced improved financial results for the third quarter ended
September 30, 2008. Net income rose to $755,000, or $0.35 per fully
diluted share, compared with $645,000, or $0.29 per diluted share
in third quarter 2007. Net income for the first nine months of the
year rose to $2,164,000, or $1.00 per fully diluted share, compared
with $1,728,000, or $0.77 per diluted share for the same period in
2007. Total assets increased to $486.3 million as of September 30,
2008 compared with $464.7 million at year end 2007. "By following a
disciplined and focused approach to our business we're continuing
to grow and improve performance," said Rick Bastian, president and
CEO. "The strength of our core earnings has produced record
earnings while, at the same time, we increased our reserve for bad
debts," he added. Blackhawk's solid performance reflects an
improved net interest margin and balance sheet growth. "Up to this
point we've avoided major issues, but as the effects of the big
bank problems and a weaker economy trickle down, we expect to feel
some impact," said Bastian. Net Interest Income Rises Net interest
income for the third quarter increased 18% to $3.9 million as
compared with $3.3 million in the third quarter 2007. For the first
nine months of 2008, net interest income was up 18% to $11.2
million, compared to $9.5 million for the same period a year ago.
The increase in net interest income includes higher average earning
assets and an improved margin. The net interest margin for the
third quarter increased 36 basis points to 3.59%, and is up 33
basis points to 3.48% for the year. Strong loan and deposit growth
and increased investment portfolio yields contributed to the gains
in net interest income and improved net interest margin. Average
total loans for the quarter increased 12% to $310.7 million
compared with $278.0 million in third quarter 2007. While the
balance of retail and mortgage loans grew, the majority of loan
growth has been in the commercial and commercial real estate
portfolios, which consist of loans to a diversified base of
customers, with less than 6% of the bank's total loans being in
construction and land development. Average total deposits for the
third quarter of 2008 increased 9% to $355.6 million compared with
$329.9 million in the same period a year ago. This included an
additional $24.8 million in interest checking, driven by the
success of Blackhawk's EasyMoney Checking product, Bastian noted.
For the nine months, average total deposits increased 7% to $351.5
million compared with $327.6 million over the same period in 2007.
"Our strategy of providing high-touch advice and tailored solutions
through experienced bankers continues to build customer loyalty,"
said Bastian. "Our clean and strong balance sheet should generate
confidence from our shareholders and peace of mind for our clients,
especially as we enter this period of unprecedented economic
uncertainty." he added. Non-Interest Income and Operating Expenses
Quarterly non-interest income decreased 2% to $1.33 million, with
year-to- date non-interest income up 9% to $3.9 million. For the
quarter, deposit service charges were relatively flat, down $14,000
or by 2%, compared to the third quarter of 2007. However, revenue
from mortgage-banking, asset management and bank cards increased
$118,000, or by 28% over the same quarter a year ago. The increase
in these fee based revenues was offset by a $180,000 loss due to
the net change in fair value of trading securities and other
financial instruments for which the company has elected fair value
accounting. On a year to date basis, mortgage banking income is up
$505,000, or 83% to $1,115,000 compared to $610,000 for the first
three quarters of 2007. "We believe we have assembled one of the
best mortgage origination and processing teams in our market. We're
proud that they have been able to achieve this level of growth in
the face of a declining market," said Bastian. "We've been able to
capitalize on the decisions of other institutions to outsource
processing and servicing of mortgages, and capture a much larger
share of the market. We believe that local processing, decision
making and loan servicing are a big part of the competitive
advantage we enjoy," he added. Total operating expenses for the
third quarter increased 8% to $3.90 million compared with $3.62
million for 2007. This includes a 10% increase in compensation
expense, and higher occupancy, data processing and professional
fees. The increase in compensation costs is partially due to higher
mortgage loan production and investment management fees, which are
generated by commission-based employees. The other expense
increases reflect investment in new technology, equipment and staff
development and retention. Credit Quality Remains Strong Blackhawk
strengthened its loan loss reserve in the third quarter, increasing
the allowance for loan losses to total loans to .90% compared to
.88% at June 30, 2008 and .82% at December 31, 2007. The ratio of
the allowance to non-performing loans has increased to 119%
compared to 90% at June 30, 2008. The provision for loan losses in
third quarter was $328,000, a 165% increase over the $124,000
provision recorded in third quarter 2007. Net charge-offs in the
third quarter increased by only $21,000 to $98,000 compared to the
same period in 2007. For the year, net charge-offs increased to
$343,000, or .14% of total loans on an annualized basis, compared
with $264,000 for the first nine months in 2007. Blackhawk believes
its prudent underwriting practices and close relationships with
customers have helped ensure the credit quality of the bank's loan
portfolio. Non-performing loans plus other real estate owned
equaled .89% of total assets at the end of the third quarter
compared with 1.16% at June 30, 2008 and .78% at December 31, 2007.
Outlook "We expect to continue strengthening loan loss reserves
especially if economic conditions continue to deteriorate," said
Bastian. "We believe we've created a strong credit culture and
processes to support it, but the potential for a prolonged economic
downturn has us focused on fortifying our balance sheet," he added.
Blackhawk continues to seek profitable growth opportunities in its
Wisconsin and Illinois markets, without sacrificing profitability
or credit quality. It emphasizes the value of its personal
attention and the service it provides that remain unmatched by
larger competitors. During the fourth quarter, Blackhawk will
complete construction of a new full service facility in a
manufacturing and business section of Rockford, Illinois,
convenient to its niche markets of small to medium sized
manufacturing companies and the area's Hispanic immigrant
population. In spite of the soft economy, the Company believes by
continuing its commitment to service and personalized attention it
can continue to grow and prosper. About Blackhawk Bancorp Blackhawk
Bancorp, Inc. is headquartered in Beloit, Wisconsin and is the
parent company of Blackhawk Bank, which operates seven banking
centers in south central Wisconsin and north Central Illinois,
along the I-90 corridor from Belvidere, Ill. to Beloit, Wis.
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, investment management, and 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/. BLACKHAWK BANCORP, INC. AND
SUBSIDIARY CONDENSED STATEMENTS OF INCOME (Unaudited) Three Months
Ended Nine Months Ended September 30, September 30, (Dollars in
thousands, except per share data) 2008 2007 2008 2007 Interest and
Dividend Income $7,019 $7,028 $20,850 $20,498 Interest Expense
3,111 3,723 9,644 11,023 Net Interest and Dividend Income 3,908
3,305 11,206 9,475 Provision for loan losses 328 124 785 377
Non-Interest Income 1,331 1,363 4,262 3,899 Non-Interest Expense
3,898 3,620 11,665 10,575 Income Before Income Taxes 1,013 924
3,018 2,422 Income Taxes 258 279 854 694 Net Income $755 $645
$2,164 $1,728 Key Ratios Diluted Earnings Per Share $0.35 $0.29
$1.00 $0.77 Dividends Per Share 0.09 0.09 0.27 0.27 Average
Outstanding Shares 2,154,504 2,195,324 2,163,990 2,213,393 Ending
Out standing Shares 2,154,504 2,182,885 2,154,504 2,182,885 Net
Interest Margin 3.59% 3.23% 3.48% 3.15% Efficiency Ratio 73.27%
76.72% 74.38% 78.37% Return on Assets 0.63% 0.58% 0.61% 0.52%
Return on Equity 12.45% 10.55% 11.75% 9.53% CONDENSED BALANCE
SHEETS (Unaudited) September 30, December 31, (Dollars in
thousands) 2008 2007 Assets: Cash and cash equivalents $19,244
$22,793 Interest-bearing deposits in banks 939 1,066 Trading
securities 20,499 26,520 Securities available-for sale 98,831
92,266 Federal Home Loan Bank Stock, at cost 4,085 4,085 Loans, net
of allowances for loan losses 315,585 292,529 Office buildings and
equipment, net 7,879 7,424 Intangible assets, net 6,761 6,636 Cash
surrender value of bank-owned life insurance 7,496 7,286 Other
assets 4,982 4,068 Total Assets $486,301 $464,673 Liabilities and
Stockholders' Equity: Deposits $358,070 $331,239 Borrowings 96,182
100,931 Subordinated debentures 5,158 5,158 Other liabilities 2,435
2,852 Total liabilities 461,845 440,180 Stockholders' equity 24,456
24,493 Total liabilities and stockholders' equity $486,301 $464,673
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. DATASOURCE: Blackhawk Bancorp,
Inc. CONTACT: Todd James, CFO, or R. Richard Bastian III, President
& CEO, both of Blackhawk Bancorp, Inc., +1-608-364-8911, fax,
+1-608-363-6186; or Woody Wallace, , or Diane Hettwer, , both of
The Investor Relations Company, +1-312-245-2700, for Blackhawk
Bancorp, Inc. Web site: http://www.blackhawkbank.com/
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