- Mortgage refinance activity drives 11% increase in first quarter
net income BELOIT, Wis., April 22 /PRNewswire-FirstCall/ --
Blackhawk Bancorp, Inc. (OTC:BHWB) (BULLETIN BOARD: BHWB) today
reported net income for the quarter ended March 31, 2009 of
$662,000, an 11% increase compared to $597,000 earned the same
quarter last year. Earnings per share increased 7% to $0.29 per
diluted common share, a record for the first quarter, compared to
$0.27 per diluted common share earned in the first quarter of 2008.
"We were able to achieve record first quarter earnings performance
as improved margin and non-interest income growth more than
compensated for a 240% increase in the quarter's provision for loan
losses," said Rick Bastian, president and CEO. The increase in
non-interest income reflects a 186% increase in gain on sale of
mortgage loans, which was driven by a high volume of refinance
activity. "We ranked number two in the Rock River Valley in
residential mortgage loan production, originating over $73 million
in mortgage loans in the first quarter," said Bastian. "We've
assembled a great team of mortgage originators and processors,
which has positioned Blackhawk to benefit from the combination of
low rates, less competition and what we consider to be missteps by
some of the larger institutions in the market," he added. 1(st)
4(th) 3(rd) 2(nd) 1(st) Qtr Qtr Qtr Qtr Qtr Key Performance Ratios:
2009 2008 2008 2008 2008 ---- ---- ---- ---- ---- Net interest
margin 3.46% 3.39% 3.59% 3.41% 3.39% Efficiency ratio 70.9% 78.9%
73.3% 72.5% 77.6% Return on average assets .53% .31% .63% .68% .51%
Return on common equity 9.62% 6.32% 12.45% 13.14% 9.53%
Nonperforming loans to total loans 2.24% 1.50% .75% .98% .91%
Allowance to total loans 1.08% .90% .90% .88% .87% Subsidiary bank
total risk based capital 12.75% 10.41% 10.81% 11.35% 11.26% Despite
the recessionary economy and steps being taken to fortify the
bank's balance sheet, Blackhawk shows improvement in the first
quarter in net interest margin, return on average assets, return on
common equity and the efficiency ratio compared to the quarters
ended December 31, 2008 and March 31, 2008. To fortify the balance
sheet the company is focusing on three key areas: strengthening
capital ratios, ensuring sufficient loan loss reserves, and
increasing on balance sheet liquidity. In March of 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. "We are well capitalized and profitable," said
Bastian. "This investment gives us additional resources to meet the
borrowing needs of businesses and individuals in our markets at a
time when other sources of capital have become cost prohibitive, if
available at all," he added. The provision for loan losses was up
by 240% compared to the first quarter of last year, increasing the
allowance for loan losses to total loans by 18 basis points to
1.08% compared to .90% at December 31, 2008. Strong deposit growth
has also allowed the company to build substantial on balance sheet
liquidity. Total cash and cash equivalent investments are up by
$26.1 million, or 140%, compared to December 31, 2008. A strong
liquidity position allows the bank to be more responsive to
customer borrowing needs and reduces the company's dependence on
wholesale funding for supporting loan growth. Net Interest Income
Rises Net interest income for the first quarter increased 9% to
$3.9 million as compared with $3.6 million in the first quarter
2008. The increase includes both an increase in the earning asset
base and an increase in the net interest margin. The net interest
margin for the quarter increased 7 basis points to 3.46% compared
to 3.39% in the first quarter of 2008. Average earning assets for
the quarter ended March 31, 2009 increased $39.8 million, or 9%
over the first quarter of 2008. Strong loan and deposit growth and
higher investment portfolio yields accounted for the gains in net
interest income and the improved net interest margin. Average total
loans for the first quarter increased $33.4 million, or 11% to
$328.1 million compared with $297.7 million in first quarter 2008.
The majority of the loan growth was generated through the company's
business banking activities, increasing the average balance of the
commercial and commercial real estate loans for the first quarter
by $27.7 million over the average balance for the first quarter of
2008. Average total deposits for the first quarter of 2009
increased 12% to $382.4 million compared with $342.3 million in the
same period a year ago. This includes a $31.6 million increase in
the average balance of interest checking, driven by the success of
Blackhawk's EasyMoney Checking product. "The number of new checking
accounts opened, net of the accounts closed, was up by 60% for the
first quarter of 2009 compared the first quarter of last year,"
explained Bastian. "Our attractive product line and
solutions-oriented customer service has helped us earn the
confidence of new and existing customers, especially in this
uncertain economic environment," said Bastian. "This confidence has
translated into phenomenal growth in core deposits, which are up
more than 5% since December 31, 2008," he added. Noninterest Income
and Operating Expenses Noninterest income for the quarter increased
59% to $2,134,000 compared to $1,340,000 the first quarter of 2008.
Gain on sale of mortgage loans increased 186% to $1,295,000
compared to $453,000 the first quarter of 2008. The increase in
gain on sale of mortgage loans was partially offset by $130,000 of
accelerated amortization of mortgage servicing rights related to
loans that were refinanced and a $103,000 decrease in trust and
investment revenue due to the market value decline in assets under
management. Total operating expenses for the first quarter
increased 13% to $4.4 million compared with $3.9 million for the
first quarter of 2008. This includes an increase of $305,000 in
compensation and benefits and an increase of $83,000 in data
processing expense. The increase in compensation and benefits is
primarily due to the high level of mortgage loan originations,
which are produced by commission based employees, however it also
reflects merit increases and the operation of the new Rockford
banking center, which was opened in the fourth quarter of 2008.
Higher data processing costs reflect the increases in the number of
accounts and transaction volume being processed, including a
significant increase in debit card transaction activity. Credit
Quality The credit quality of the loan portfolio remains strong
however, nonperforming loans at March 31, 2009 have increased to
$7.3 million compared to $4.9 million at December 31, 2008 and $2.7
million at March 31, 2008. The number of delinquent borrowers is
increasing and management anticipates an elevated level of
nonperforming loans and charge-offs for the remainder of 2009 as
the bank's customers experience the effects of the economic
recession. The provision for loan losses in the first quarter
increased by 240% to $775,000 compared to $228,000 recorded in
first quarter of 2008. The increase in the provision strengthened
the ratio of allowance for loan losses to total loans to 1.08%
compared to .90% at December 31, 2008 and .87% at March 31, 2008.
Net loan charge-offs in the first quarter increased by $176,000 to
$226,000 compared to $50,000 for the same period in 2008.
Annualized net loan charge-offs to total average loans for the
first quarter was .28% compared to .25% for the year ended December
31, 2008. "Although our level of problem loans has increased with
deterioration in the overall economy, our level of charge-offs has
remained remarkably low," commented Bastian. The ratio of the
allowance for loan losses to non-performing loans has decreased to
48% compared to 60% at December 31, 2008 and 96% at March 31, 2008.
Non-performing loans plus other real estate owned equaled 2.41% of
total assets at March 31, 2009 compared with 1.64% at December 31,
2008 and 1.05% at March 31, 2008. 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. Accepting capital under the US
Treasury's Capital Purchase Program is just one of the things we're
doing to ensure we have the ability to continue growing and meeting
the credit needs of our customers," he added. The mortgage business
remains strong and should continue to substantially contribute to
non-interest income at least through the second quarter. 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. In
the fourth quarter of 2008, Blackhawk completed 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 economic downturn, 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 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. 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 March 31, (Dollars in thousands,
except per share data) 2009 2008
--------------------------------------------- ---- ---- Interest
and Dividend Income $6,847 $7,031 Interest Expense 2,910 3,423
----- ----- Net Interest and Dividend Income 3,937 3,608 Provision
for loan losses 775 228 Non-Interest Income 2,134 1,340
Non-Interest Expense 4,371 3,885 ----- ----- Income Before Income
Taxes 925 835 Income Taxes 263 238 --- --- Net Income $662 $597
==== ==== Key Ratios ---------- Diluted Earnings Per Common Share
$0.29 $0.27 Dividends Per Common Share 0.09 0.09 Average
Outstanding Common Shares 2,158,683 2,171,962 Ending Outstanding
Common Shares 2,163,678 2,171,527 Net Interest Margin 3.46% 3.39%
Efficiency Ratio 70.90% 77.55% Return on Assets 0.53% 0.51% Return
on Common Equity 9.62% 9.53% CONDENSED BALANCE SHEETS (Unaudited)
March 31, December 31, (Dollars in thousands) 2009 2008
---------------------- ---- ---- Assets: ------- Cash and cash
equivalents $44,637 $18,558 Interest-bearing deposits in banks
1,854 1,080 Trading securities 17,693 19,603 Securities
available-for sale 103,344 103,274 Federal Home Loan Bank Stock, at
cost 4,085 4,085 Loans, net of allowances for loan losses 323,756
326,358 Office buildings and equipment, net 8,903 9,042 Intangible
assets, net 7,290 6,739 Cash surrender value of bank-owned life
insurance 7,989 7,915 Other assets 5,433 3,787 ----- ----- Total
Assets $524,984 $500,441 ======== ======== Liabilities and
Stockholders' Equity: -------------------------------------
Deposits $396,816 $376,995 Borrowings 84,248 88,369 Subordinated
debentures 4,958 5,158 Other liabilities 3,907 3,569 ----- -----
Total liabilities 489,929 474,091 Preferred Stock 10,000 - Common
Stockholders' equity 25,055 26,350 ------ ------ Total
Stockholders' equity 35,055 26,350 ------ ------ Total liabilities
and stockholders' equity $524,984 $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. Web Site: http://www.blackhawkbank.com/
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