BELOIT, Wis., Oct. 9 /PRNewswire-FirstCall/ -- Blackhawk Bancorp,
Inc. (OTC:BHWB) (BULLETIN BOARD: BHWB) today reported net income
for the third quarter ended September 30, 2009 of $189,000, a 75%
decrease compared to $755,000 for the third quarter of 2008.
Earnings per diluted common share for the third quarter decreased
by 97% to $0.01 compared to $0.35 per common share earned the same
quarter last year. For the nine months ended September 30, 2009 net
income decreased by 37% to $1,371,000 compared to $2,164,000 earned
in the first nine months of 2008. Earnings per diluted common share
for the nine months ended September 30, 2009 decreased by 53% to
$0.47 compared to $1.00 per common share earned the first nine
months of 2008. The lower earnings for both the third quarter and
first nine months of 2009 was primarily due to increased loan loss
provisions and higher FDIC insurance expense. Improvements in net
interest income and a high level of mortgage banking revenue
partially offset these expense increases. The following table
summarizes some of the key performance ratios over the last five
quarters: 3rd Qtr 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr Key Performance
Ratios 2009 2009 2009 2008 2008 ---- ---- ---- ---- ---- Diluted
Earnings per share $0.01 $0.17 $0.29 $0.18 $0.35 Return on average
assets .14% .39% .53% .31% .63% Return on common equity .43% 5.68%
9.62% 6.32% 12.45% Net interest margin 3.62% 3.61% 3.46% 3.39%
3.59% Efficiency ratio 69.6% 75.5% 70.9% 78.9% 73.3% Asset quality
The provision for loan losses for the three and nine month periods
ended September 30, 2009 increased 446% and 335% to $1,790,000 and
$3,415,000 compared to $328,000 and $785,000, for the same three
and nine month periods of 2008, respectively. "The company's asset
quality is a reflection of the economies of the communities we
serve," said Rick Bastian, President and CEO. "While there are
reports the economy has bottomed out and the recession has likely
ended, the recovery is expected to be slow, especially in areas
with high unemployment, which has soared to well above fifteen
percent in the markets in which we operate," he added. "The
increase in nonperforming loans experienced during the first half
of year has leveled off, however performing loans to customers with
weakened balance sheets, or secured by collateral with depressed
value pose increased risk, especially if the economy continues to
deteriorate," said Bastian. Sound underwriting and credit
administration practices, including substantial diversification in
the loan portfolio have helped Blackhawk maintain its level of
nonperforming loans below that of its peer group, however asset
quality has been negatively affected by the current economic
downturn. Total nonperforming loans equaled $6.8 million at
September 30, 2009 compared to $7.1 million at June 30, 2009 and
$4.9 million at December 31, 2008. The following table summarizes
asset quality and reserve coverage ratios as of the end of the last
five quarters. 3rd Qtr 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr Asset
Quality Ratios 2009 2009 2009 2008 2008 ---- ---- ---- ---- ----
Nonperforming loans to total loans 2.11% 2.20% 2.24% 1.50% .75%
Nonperforming assets to total loans 2.60% 2.63% 2.41% 1.64% .89%
Allowance for loan losses to total loans 1.57% 1.18% 1.08% .90%
.90% Allowance for loan losses to nonperforming loans 75% 54% 48%
60% 119% Subsidiary bank total risk based capital 12.8% 12.46%
12.75% 10.41% 10.81% The increased loan loss provision, which has
significantly outpaced loan charge-offs, has substantially
strengthened the allowance for loan losses. The ratio of the
allowance for loan losses to total loans increased to 1.57% at
September 30, 2009 compared to the 1.18% reported at June 30, 2009
and 0.90% at December 31, 2008. The ratio of the allowance for loan
losses to non-performing loans increased to 75% as of September 30,
2009 compared to 54% at June 30, 2009 and 60% at December 31, 2008.
Net loan charge-offs for the nine months ended September 30, 2009
equaled $1,281,000 compared to $344,000 for the first nine months
of 2008. The activity in the allowance for loan losses for the nine
month periods ended September 30, 2009 and 2008 and the year ended
December 31, 2008 is summarized in the following table. Nine Months
Ended Year Activity in Allowance for September September Ended Loan
Losses 30, 2009 30, 2008 December 31, 2008 --------- ---------
-------- Beginning allowance for loan losses $2,970,000 $2,411,000
$2,411,000 Provision for loan losses 3,415,000 785,000 1,322,000
Charge-offs (1,416,000) (498,000) (988,000) Recoveries 135,000
154,000 225,000 ------- ------- ------- Ending allowance for loan
losses $5,104,000 $2,852,000 $2,970,000 ========== ==========
========== Net charge-offs to average total loans (annualized) .52%
.15% .26% === === === Net Interest Income Net interest income for
the third quarter increased by $453,000, or 12%, to $4,361,000
compared to $3,908,000 in the third quarter of 2008. The net
interest margin for the third quarter increased by 3 basis points
to 3.62% compared to 3.59% the third quarter of last year. Net
interest income for the nine months ended September 30, 2009
increased by $1,423,000, or 13% to $12,629,000 compared to
$11,206,000 for the first nine months of 2008. The net interest
margin for the first nine months of 2009 increased by 11 basis
points to 3.59% compared to 3.48% for the same nine month period in
2008. The improvement in net interest income reflects strong core
deposit growth and the implementation of pricing strategies that
account for the increased credit risk of lending in the current
economic environment. Total average deposits for the three months
ended September 30, 2009 equaled $404 million, a $48 million, or
13.6% increase over total average deposits for the third quarter of
2008. The majority of this deposit growth has been driven by
success of the bank's EasyMoney checking product that rewards
customers with a high interest rate and ATM fee refunds for using
electronic delivery channels for accessing their account.
Non-Interest Income and Operating Expenses Non-interest income
continues to be strong and increased by $528,000, or 40% to
$1,859,000 for the third quarter compared to $1,331,000 for the
third quarter of last year. For the first nine months of 2009
non-interest income is up by $1,913,000, or 45%, to $6,175,000
compared to $4,262,000 for the nine months ended September 30,
2008. The increase in non-interest income for both the quarter and
nine months ended September 30, 2009 is primarily due to strong
mortgage banking revenue. The bank also realized increases in debit
card interchange income as a result of growth in the EasyMoney
checking product and broader acceptance and use of debit cards by
the bank's customer base. Operating expenses increased by $504,000,
or 12.9% for the quarter to $4,402,000 compared to $3,898,000 for
the third quarter of last year. For the nine month period ended
September 30, 2009 expenses were up $2,098,000, or 18.0%, to
$13,763,000 compared to $11,665,000 for the first nine months of
2008. Expense increases for both the quarter and nine months ended
September 30, 2009 reflect variable compensation expense related to
mortgage loan production, increased FDIC insurance premiums,
increased occupancy expense related to the new branch opened in
November of 2008, and increased data processing costs, reflecting
an increase in the number of accounts and transactions processed.
Balance Sheet Strength In 2009 Blackhawk has been focused on
fortifying the balance sheet to ensure that the company continues
to be strong in the face of economic uncertainty. This strategy
includes increasing the provision for loan losses, which builds
reserves to cover potential future loan charge-offs; improving the
bank's liquidity position by growing the core deposit base and
reducing reliance on volatile wholesale funds; and strengthening
capital. While Blackhawk meets regulatory capital requirements and
the subsidiary bank is well capitalized, management believes that
regulatory agencies are unofficially increasing capital
expectations, which could constrain Blackhawk's ability to grow and
take advantage of market opportunities. In March 2009 the company
received $10 million in capital under the U.S. Treasury's voluntary
Capital Purchase Program, a part of the Emergency Economic
Stabilization Act of 2008, designed to provide capital to healthy
financial institutions to promote confidence and stabilization in
the economy. Blackhawk accepted this capital as other sources of
capital had become cost prohibitive, if available at all. While
many banking companies have recently raised additional capital, it
has been very expensive and dilutive to existing shareholders. Our
board is evaluating its options to enhance the company's capital
and to position the company to be able to repay the capital
received under the U.S. Treasury's Capital Purchase Program. At
this point, earnings retention appears to be the least expensive
source capital available, and reduction or suspension of the
quarterly dividend is being evaluated by the board of directors.
Regulatory Financial Reports Of the $1,790,000 provision for loan
losses recorded in the quarter ended September 30, 2009, $1,040,000
will be reflected in amended regulatory financial filings as being
recorded in the quarter ended June 30, 2009. This adjustment, which
decreases after tax net income by $634,000, was not reflected in
the second quarter 2009 results previously reported, nor have the
results been restated, instead the reduction in net income is
reflected in the results of the quarter ended September 30, 2009.
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,
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. 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. BLACKHAWK BANCORP, INC. AND SUBSIDIARY CONDENSED
STATEMENTS OF INCOME (Unaudited) Three Months Nine Months Ended
Ended (Dollars in thousands, except September 30, September 30, per
share data) 2009 2008 2009 2008 ----------------------------- ----
---- ---- ---- Interest and Dividend Income $6,892 $7,019 $20,859
$20,850 Interest Expense 2,531 3,111 8,230 9,644 ----- ----- -----
----- Net Interest and Dividend Income 4,361 3,908 12,629 11,206
Provision for loan losses 1,790 328 3,415 785 Non-Interest Income
1,859 1,331 6,175 4,262 Non-Interest Expense 4,402 3,898 13,763
11,665 ----- ----- ------ ------ Income Before Income Taxes 28
1,013 1,626 3,018 Income Taxes (161) 258 255 854 ---- --- --- ---
Net Income $189 $755 $1,371 $2,164 ==== ==== ====== ====== Key
Ratios ---------- Diluted Earnings Per Common Share $0.01 $0.35
$0.47 $1.00 Dividends Per Common Share 0.09 0.09 0.27 0.27 Average
Outstanding Common Shares 2,163,678 2,154,504 2,162,031 2,163,990
Ending Outstanding Common Shares 2,163,678 2,154,504 2,163,678
2,154,504 Net Interest Margin 3.62% 3.59% 3.59% 3.48% Efficiency
Ratio 69.63% 73.27% 71.76% 74.38% Return on Assets 0.14% 0.63%
0.35% 0.61% Return on Common Equity 0.43% 12.45% 5.23% 11.75%
CONDENSED BALANCE SHEETS (Unaudited) September 30, December 31,
(Dollars in thousands) 2009 2008 ---------------------- ---- ----
Assets: ------- Cash and cash equivalents $42,759 $18,558
Interest-bearing deposits in banks 2,310 1,080 Securities
held-to-maturity 11,372 - Trading securities 10,274 19,603
Securities available-for-sale 103,849 103,274 Federal Home Loan
Bank Stock, at cost 4,085 4,085 Loans, net of allowances for loan
losses 319,652 326,358 Office buildings and equipment, net 8,565
9,042 Intangible assets, net 7,666 6,739 Cash surrender value of
bank-owned life insurance 8,092 7,915 Other assets 6,263 3,787
----- ----- Total Assets $524,887 $500,441 ======== ========
Liabilities and Stockholders' Equity:
------------------------------------- Deposits $402,133 $376,995
Borrowings 78,565 88,369 Subordinated debentures 4,958 5,158 Other
liabilities 3,512 3,569 ----- ----- Total liabilities 489,168
474,091 Preferred Stock 10,058 - Common Stockholders' equity 25,661
26,350 ------ ------ Total Stockholders' equity 35,719 26,350
------ ------ Total liabilities and stockholders' equity $524,887
$500,441 ======== ======== DATASOURCE: Blackhawk Bancorp, Inc.
CONTACT: R. Richard Bastian, III, President & CEO, , or Todd J.
James, EVP & CFO, , both of Blackhawk Bancorp, Inc.,
+1-608-364-8911; or Woody Wallace of The Investor Relations
Company, +1-312-245-2700, for Blackhawk Bancorp, Inc.
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