- 1Q 2008 Net Income Up 27%; EPS Rises 29% - Net Interest Income
Increases 19% - Non-interest income up 12% on strong mortgage
revenue - Deposits grow 6% in first quarter BELOIT, Wis., April 24
/PRNewswire-FirstCall/ -- Blackhawk Bancorp, Inc. (OTC:BHWB)
(BULLETIN BOARD: BHWB) today announced financial results for the
first quarter ended March 31, 2008. Net income rose to $597,000, or
$0.27 per fully diluted share compared to $471,000, or $0.21 per
diluted share in first quarter 2007. This was a record first
quarter net income for the company. Total assets increased to
$482.5 million compared with $464.7 million at year end 2007.
Average total deposits at quarter-end increased to $342.4 million
compared with $318.0 million the first quarter of 2007. Net
interest income increased to $3.6 million compared with $3.0
million in first quarter last year. Quarterly non-interest income
increased 12% to $1.34 million. "It was gratifying in these
challenging economic times to post record results, which we believe
reflect our vigilant efforts to maintain high credit quality,
provide superior customer service and to offer innovative products
and services," said Rick Bastian, president and CEO. "Our focus is
maximizing customer loyalty and retention by listening to and
working closely with customers. Winning business because of a
reputation for service is one of the greatest rewards for a
community bank. It inspires us to work even harder." Interest
Income Rises; Loans and Deposits Up The net interest margin for the
first quarter increased to 3.39% compared to 3.08% for the same
quarter last year, which contributed significantly to the 19% rise
in net interest income. The improvement in net interest margin
reflects solid loan and deposit growth and improved yields on the
investment portfolio, explained Bastian. Average total loans for
the quarter increased 7% to $294.7 million compared with $274.3
million in first quarter 2007. This growth included $14.6 million
increase in average commercial loans and a $5.8 million increase in
average consumer and residential mortgage loans. Bastian said
refinancing activity drove the growth in residential mortgages
while auto and home equity loans accounted for the growth in the
consumer segment. "Over the past year, we have structured our
business to encourage dialogue between customers and employees, and
our success in consumer and residential lending reflects this,"
said Bastian. "Our staff, which is trained to uncover needs and
cross-sell additional products, drove these increases." Commercial
lending numbers benefited from ongoing business and increases in
loan participations from other banks. Blackhawk maintains
relationships with these banks to participate in quality loans in
return for allowing them to participate in Blackhawk's lending
relationships that exceed the bank's legal lending limit. Bastian
said the company's efforts to develop lending opportunities with
Rockford-based manufacturers and service businesses also
contributed to commercial loan growth. Average total deposits in
first quarter 2008 increased 8% to $342.4 million compared with
$318.0 million in first quarter 2007. This includes an additional
$14.1 million in interest checking, fueled by the popularity of
Blackhawk's EasyMoney Checking product. "EasyMoney Checking is a
good example of an innovative product that serves customers' needs
and also benefits the company," said Bastian. "Many of our
customers aren't able to maintain large balances, so they
appreciate receiving a very attractive return with no minimum
balance. The bank receives fee income from a required minimum
number of debit card transactions each month -- transactions the
customers would make in any case." In addition to strong growth in
loans and deposits, the net interest margin was boosted by improved
investment portfolio yield, which rose 71 basis points to 5.62% for
the first quarter compared with 4.91% in first quarter 2007.
Non-Interest Income and Operating Expenses The net increase in
non-interest income includes $284,000, $88,000, and $42,000 in gain
on sale of mortgage loans, deposit service charges and debit card
interchange, respectively. These were partially offset by a
$274,000 loss on financial instruments accounted for at fair value.
Attractive interest rates helped drive mortgage refinancing
activity, but many of these transactions started with employee
outreach. The popularity and growth of EasyMoney Checking drove the
increases in service charges and debit card interchange. In
addition, brokerage and investment advisory fees increased by
$90,000, or 118% over first quarter 2007. "We're extremely pleased
with the increases in core fee income, although we don't expect the
mortgage loan volume to continue at the pace we enjoyed the first
quarter," said Bastian. The chief executive said Blackhawk
continued to invest in its people, technology and marketing to
drive growth. Total operating expense for the first quarter of 2008
increased 12% to $3.89 million, compared with $3.46 million the
year before. This increase includes a 12% increase in compensation
expense, and increases in occupancy, data processing and
professional fees. The increase in compensation is partially due to
the increases in mortgage loan production, and brokerage 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's provision for loan losses in
first quarter was $228,000, a 77% increase over the $129,000
provision recorded in first quarter 2007. However, net charge-offs
in first quarter decreased by 68% to $49,000 compared with $154,000
for the same period in 2007. While Blackhawk's prudent underwriting
practices and close relationships with customers have helped ensure
the credit quality of the bank's loan portfolio, the bank has
experienced an increase in delinquencies and non-performing loans.
Non-performing loans increased to an amount equal to .95% of total
loans at March 31, 2008 compared with .78% at December 31, 2007 and
.38% at March 31, 2007. While Blackhawk has not directly
participated in the sub-prime mortgage business, management notes
the recent slowdown in the housing market and overall economic
downturn could result in further increases in non-performing loan
levels and charge-offs. The company expects an increased level of
loan loss provision to continue throughout 2008 to strengthen the
allowance for loan losses. "A key benefit of being a relationship
bank is our frequent contact with customers, which allows us to
more effectively monitor their financial situations and gives us
more opportunities to work with them to avert late payments and
defaults," said Bastian. "This is one of the best ways we know to
protect the quality of our loan portfolio." Outlook "Blackhawk will
continue to seek profitable growth opportunities in the Wisconsin
and Illinois markets served by the bank, but will not sacrifice
profitability and/or credit quality to achieve that growth,"
explained Bastian. "We will emphasize the value of the personal
attention and service we provide that can't be matched by our
larger competitors. We are looking at ways to capitalize on taking
market share, which is our primary growth strategy in the
relatively stable markets we serve. "We continue investing in sales
training and tools, which allow our bankers to deliver personalized
solutions to our customers, deepening the relationships and
increasing our share of the financial services they purchase. We
are continuing our commitment to innovative and niche products such
as EasyMoney Checking and health savings accounts for small
business owners. "Blackhawk has acquired land for a new full
service facility in a manufacturing and business section of
Rockford, Illinois. This branch will be convenient to our niche
markets of small to medium sized manufacturing companies and the
Hispanic immigrant population. Although the economy is soft, we
believe our commitment to service and personalized attention will
appeal to a great number of people." About Blackhawk Bancorp
Blackhawk Bancorp, Inc. is headquartered in Beloit, Wisconsin and
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 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 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) (Dollars
in thousands, except per Three Months Ended March 31, share data)
2008 2007 Interest and Dividend Income $7,031 $6,627 Interest
Expense 3,423 3,605 Net Interest and Dividend Income 3,608 3,022
Provision for loan losses 228 129 Non-Interest Income 1,340 1,193
Non-Interest Expense 3,885 3,458 Income Before Income Taxes 835 628
Income Taxes 238 157 Net Income $597 $471 Key Ratios Diluted
Earnings Per Share $0.27 $0.21 Dividends Per Share 0.09 0.09
Average Outstanding Shares 2,171,962 2,229,690 Ending Outstanding
Shares 2,171,527 2,174,497 Net Interest Margin 3.39% 3.08%
Efficiency Ratio 77.55% 77.64% Return on Assets 0.51% 0.43% Return
on Equity 9.53% 7.93% CONDENSED BALANCE SHEETS (Unaudited) March
31, December 31, (Amounts in thousands) 2008 2007 Assets: Cash and
cash equivalents $42,558 $22,793 Interest-bearing deposits in banks
1,888 1,066 Trading securities 24,616 26,520 Securities
available-for sale 89,496 92,266 Federal Home Loan Bank Stock, at
cost 4,085 4,085 Loans, net of allowances for loan losses 293,979
292,529 Office buildings and equipment, net 7,573 7,424 Intangible
assets, net 6,735 6,636 Cash surrender value of bank-owned life
insurance 7,358 7,286 Other assets 4,173 4,068 Total Assets
$482,461 $464,673 Liabilities and Stockholders' Equity: Deposits
$352,006 $331,239 Borrowings 97,635 100,931 Subordinated debentures
5,158 5,158 Other liabilities 3,078 2,852 Total liabilities 457,877
440,180 Stockholders' equity 24,584 24,493 Total liabilities and
stockholders' equity $482,461 $464,673 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 Web site:
http://www.blackhawkbank.com/
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