- Quarterly net interest margin up by 20 basis points compared to
2nd Quarter 2008 - 2nd Quarter mortgage banking revenue up 231%
over 2008 - $240,000 special assessment drives $380,000 increase in
FDIC insurance BELOIT, Wis., July 17 /PRNewswire-FirstCall/ --
Blackhawk Bancorp, Inc. (OTC:BHWB) (BULLETIN BOARD: BHWB) today
reported net income for the quarter ended June 30, 2009 of
$519,000, a 36% decrease compared to $812,000 earned the same
quarter last year. Earnings per share for the quarter decreased 54%
to $0.17 per diluted common share compared to $0.37 per diluted
common share earned in the second quarter of 2008. Net income for
the six months ended June 30, 2009 was $1,182,000, a 16% decrease
compared to $1,409,000 earned in the first six months of 2008.
Earnings per share for first six months were 29% lower at $0.46 per
diluted common share compared to the $0.65 per share earned for the
same period a year ago. Improvement in the net interest margin and
strong mortgage refinance activity partially offset increases in
FDIC insurance expense and loan loss provision. "Despite the
elevated level of nonperforming assets in the first half of 2009,
our net interest margin is holding up well," said Rick Bastian,
President and CEO. "It's actually improved in each of the last two
quarters," he added. "In addition, our mortgage banking team
continued producing at a record level, cementing our position as
one of the top mortgage producers in our local markets," he said.
2nd Qtr 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr Key Performance Ratios 2009
2009 2008 2008 2008 ---- ---- ---- ---- ---- Net interest margin
3.61% 3.46% 3.39% 3.59% 3.41% Efficiency ratio 75.5% 70.9% 78.9%
73.3% 72.5% Return on average assets .39% .53% .31% .63% .68%
Return on common equity 5.68% 9.62% 6.32% 12.45% 13.14%
Nonperforming loans to total loans 2.20% 2.24% 1.50% .75% .98%
Allowance to total loans 1.18% 1.08% .90% .90% .88% Subsidiary bank
total risk based capital 12.46% 12.75% 10.41% 10.81% 11.35% The
increase in bank failures throughout the country has driven up the
cost of FDIC insurance. In addition to the special assessment of
$240,000 that was accrued during the second quarter of 2009 the
regular quarterly assessment has gone up. Blackhawk projects total
FDIC insurance cost of approximately $900,000 for 2009 compared to
$50,000 in 2008. The increase in FDIC insurance and other
regulatory compliance burdens combined with further deterioration
in the economy during the first two quarters of 2009 has Blackhawk
continuing its efforts to fortify the balance sheet, focusing on
three key areas: capital, reserve for loan losses, and liquidity.
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
investment to ensure that it had an adequate capital cushion to
continue meeting the credit needs of customers, even in the face of
a prolonged economic downturn. At June 30, 2009 the subsidiary
bank's total risk-based capital was 12.46% compared to 10.41% at
December 31, 2008. A higher provision for loan losses, was well in
excess of net charge-offs, increased the ratio of allowance for
loan losses to total loans to 1.18% at June 30, 2009 compared to
1.08% at March 31, 2009, and .90% at December 31, 2008. Management
continually assesses the adequacy of the allowance for loan losses
and anticipates continuing to increase it as a percentage of total
loans if the economy does not start to improve. Strong deposit
growth has resulted in a substantial increase in liquidity, which
is being held on the balance sheet in short-term investments
classified as cash equivalents. Cash and cash equivalents to total
assets equaled 9.5% at June 30, 2009 compared to 3.7% at December
31, 2008. The increased liquidity allows the bank to reduce
reliance on more volatile wholesale funding sources and to be more
responsive to customer borrowing and deposit activity, even in
periods of volatile activity. Net Interest Income Rises Net
interest income for the second quarter increased 17% to $4.3
million compared with $3.7 million in the second quarter of 2008.
This includes an increase in both the earning asset base and the
net interest margin. The net interest margin for the quarter
increased 20 basis points to 3.61% compared to 3.41% in the second
quarter of 2008. Average earning assets for the quarter ended June
30, 2009 increased by $50 million, or 11%, over the second quarter
of 2008. Strong loan growth in the second half of 2008, continued
strong deposit growth, and higher investment portfolio yields
accounted for the gains in net interest income and the improved net
interest margin. For the six months ended June 30, 2009, net
interest income increased 13% to $8.3 million compared to $7.3
million earned in the same six months in 2008. Average earning
assets increased by $44.9 million, or 10%, to $482.6 million
compared to $437.7 million for the first six months of 2008. This
increase includes a $31.3 million, or 11%, increase in average
total loans for the first half of 2009 compared to the first two
quarters of 2008. The net interest margin for the first six months
of 2009 increased 12 basis points to 3.54% compared to 3.42% for
the same six month period in 2008. Average total deposits for the
second quarter of 2009 increased by $42.9 million, or 12% to $399.3
million compared with $356.4 million in second quarter of 2008.
This includes a $44.2 million increase in the average balance of
interest checking, driven by the success of Blackhawk's EasyMoney
Checking product. For the first six months of 2009 average total
deposits have increased by $41.4 million, or 12% to $390.9 million
compared to $349.5 million for the same six months a year ago. In
addition to the growth driven by the popular EasyMoney Checking
product, some larger municipal deposits have been shifted to low
interest checking accounts in order to receive unlimited FDIC
insurance. "The number of new checking accounts opened, net of the
accounts closed, was up by 83% for the first half of 2009 compared
the first half 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 deposits, which
are up by $30.0 million, or 8%, since December 31, 2008," he added.
Noninterest Income and Operating Expenses Noninterest income for
the quarter increased 37% to $2,182,000 compared to $1,591,000 the
second quarter of 2008. Gain on sale of mortgage loans increased
$904,000, or 231%, to $1,295,000 compared to $391,000 the second
quarter of 2008. The increase in gain on sale of mortgage loans was
partially offset by a $92,000 decrease in net loan servicing income
due to accelerated amortization of servicing rights on loans
refinanced out of the bank's servicing portfolio, a $136,000
decrease in deposit service fees due to a reduced level of
overdraft fees, and an increase of $108,000 in net losses on sale
of investments and charges related to financial instruments
accounted for at fair value. For the six months ended June 30, 2009
noninterest income is up 47% to $4,316,000 compared to $2,931,000
in the same six month period in 2008. Total operating expenses for
the second quarter increased 29% to $5.0 million compared with $3.9
million for the second quarter of 2008. This includes a $380,000
increase in FDIC insurance assessments, reflecting a substantial
increase in the on-going quarterly assessment and the one-time
special assessment levied on all banks for the second quarter. The
increase in expenses also includes an increase of $393,000 in
compensation and benefits. For the six months ended June 30, 2009
operating expenses increased $1.6 million, or 21%, to $9.4 million,
compared to $7.8 million for the first six months of 2008. The
increase in compensation and benefits, for both the quarter and six
months, 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 operation of the new
Rockford banking center, which was opened in the fourth quarter of
2008. FDIC insurance expense for the first six months is up
$544,000 compared to the first six months of 2008. Credit Quality
Management believes that the credit quality of the loan portfolio
is good, despite the increased level of nonperforming loans. At
June 30, 2009 nonperforming loans totaled $7.1 million compared to
$7.3 million at March 31, 2009, and $4.9 million at December 31,
2008. The provision for loan losses was $850,000, up by $622,000,
or 273% compared to the $228,000 provided in the second quarter of
last year. For the first six months of the year the provision for
loan losses was $1,625,000, a $1,169,000, or 256% increase over the
$456,000 provision recorded in the first half of 2008. The higher
provision levels have increased the allowance for loan losses to
total loans to 1.18% compared to .90% at December 31, 2008. Net
loan charge-offs for the first six months of 2009 equaled $745,000,
a $500,000 increase over the $245,000 of net charge-offs during the
first six months of the prior year. Annualized net loan charge-offs
to total average loans for the first six months of 2009 was .46%
compared to .26% for the year ended December 31, 2008. The ratio of
the allowance for loan losses to non-performing loans was 54% at
June 30, 2009 compared to 48% at March 31, 2009, and 60% at
December 31, 2008. Non-performing loans plus other real estate
owned equaled 2.63% of total assets at June 30, 2009 compared to
2.41% at March 31, 2009, 1.64% at December 31, 2008. We expect to
continue strengthening loan loss reserves if economic conditions
don't improve or continue to deteriorate," said Bastian. "We
believe we've created a strong credit culture and processes to
support it, but in this economic environment losses are going to
occur," he added. The mortgage business, which was very strong in
the first half of the year, is expected to slow in the third and
fourth quarters. While this would reduce noninterest income, the
reduction would be offset by a reduction in variable expenses such
as compensation and amortization of mortgage servicing rights.
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 Six Months Ended June 30, June 30, (Dollars in thousands,
except per share data) 2009 2008 2009 2008 -----------------------
---- ---- ---- ---- Interest and Dividend Income $7,114 $6,796
$13,962 $13,834 Interest Expense 2,783 3,106 5,693 6,536 -----
----- ----- ----- Net Interest and Dividend Income 4,331 3,690
8,269 7,298 Provision for loan losses 850 228 1,625 456
Non-Interest Income 2,182 1,591 4,316 2,931 Non-Interest Expense
4,991 3,883 9,362 7,768 ----- ----- ----- ----- Income Before
Income Taxes 672 1,170 1,598 2,005 Income Taxes 153 358 416 596 ---
--- --- --- Net Income $519 $812 $1,182 $1,409 ==== ==== ======
====== Key Ratios ---------- Diluted Earnings Per Common Share
$0.17 $0.37 $0.46 $0.65 Dividends Per Common Share 0.09 0.09 0.18
0.18 Average Outstanding Common Shares 2,163,678 2,165,607
2,161,194 2,168,785 Ending Outstanding Common Shares 2,163,678
2,154,504 2,163,678 2,154,504 Net Interest Margin 3.61% 3.41% 3.54%
3.42% Efficiency Ratio 75.45% 72.50% 73.25% 74.94% Return on Assets
0.39% 0.68% 0.46% 0.60% Return on Common Equity 5.68% 13.14% 7.59%
11.40% CONDENSED BALANCE SHEETS (Unaudited) June 30, December 31,
(Dollars in thousands) 2009 2008 ---------------------- ---- ----
Assets: ------- Cash and cash equivalents $51,045 $18,558
Interest-bearing deposits in banks 5,266 1,080 Securities
held-to-maturity 9,989 - Trading securities 11,323 19,603
Securities available-for-sale 101,666 103,274 Federal Home Loan
Bank Stock, at cost 4,085 4,085 Loans, net of allowances for loan
losses 321,103 326,358 Office buildings and equipment, net 8,766
9,042 Intangible assets, net 7,593 6,739 Cash surrender value of
bank-owned life insurance 8,063 7,915 Other assets 5,541 3,787
----- ----- Total Assets $534,440 $500,441 ======== ========
Liabilities and Stockholders' Equity:
------------------------------------- Deposits $407,035 $376,995
Borrowings 81,909 88,369 Subordinated debentures 4,958 5,158 Other
liabilities 4,054 3,569 ----- ----- Total liabilities 497,956
474,091 Preferred Stock 10,033 - Common Stockholders' equity 26,451
26,350 ------ ------ Total Stockholders' equity 36,484 26,350
------ ------ Total liabilities and stockholders' equity $534,440
$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 Web Site: http://www.blackhawkbank.com/
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