Blackhawk Bancorp Achieves Record Earnings for 2019

BELOIT, WI / ACCESSWIRE / January 30, 2020 / Blackhawk Bancorp, Inc. (OTCQX:BHWB) reported net income of $2.35 million for the fourth quarter of 2019, a 31% decrease as compared to the $3.42 million earned in the most recent quarter ended September 30, 2019, but a 12% increase over the $2.10 million earned the fourth quarter of 2018. Diluted earnings per share (EPS) for the quarter ended December 31, 2019 was $0.71, a decrease of $0.32 as compared to $1.03 for the quarter ended September 30, 2019 but an increase of $0.07 as compared to $0.64 for the same quarter a year ago. The fourth quarter 2019 results produced an annualized Return on Average Equity (ROAE) of 9.60% and Return on Average Assets (ROAA) of 0.97%.

The decrease in earnings as compared to the most recent quarter was driven by a $273,000 decrease in net interest income, a $400,000 increase in the provision for loan losses and a $1.03 million decrease in net gain on sale of securities and other assets.

The increase in earnings as compared to the fourth quarter of 2018 was attributable to increases of $1.51 and $1.0 million in net interest income and non-interest income, respectively. These revenue increases were partially offset by an $830,000 increase in the provision for loan losses and a $1.19 million increase in operating expenses.

For the year ended December 31, 2019, the company reported record net income of $9.60 million, an 18% increase over the $8.14 million reported for 2018. Diluted earnings per share for 2019 increased by $0.43, or 17%, to a record $2.91 compared to $2.47 in 2018. The annual results produced an ROAE of 10.49% and an ROAA of 1.02%. The 2019 results include non-recurring acquisition related expenses totaling $1.45 million (net of tax), which negatively affected EPS by $0.44, and ROAE and ROAA by 1.58 and .15 percentage points, respectively. The negative effect of the acquisition related expenses was partially offset by gains on the sale of securities of $843,000 (net of tax), which contributed $0.25 to EPS, and .92 and .09 percentage points to ROAE and ROAA, respectively.

Excluding the non-recurring acquisition related expenses and securities gains, 2019 core earnings increased 25% compared to 2018. The growth in core earnings was driven by increases of $6.21 and $2.46 million in net interest income and non-interest income, respectively. These improvements were offset by an $830,000 increase in the provision for loan losses and $4.9 million increase in operating expenses, excluding the acquisition related expenses.

“The past year has been an exciting and productive one for Blackhawk,” said Todd James, the Company’s Chief Executive Officer. “In addition to achieving record earnings, we successfully integrated the First McHenry acquisition and continued to make investments in the talent and technology required to drive future growth,” he added. “However, we are a little disappointed in how we finished the year. Our fourth quarter was negatively affected by an increase in the provision for loan losses, and about a $15 million decrease in total loans outstanding. Excluding intentional reductions in exposure to certain credit relationships, gross loans outstanding were essentially unchanged from the previous quarter end,” stated James.

Total assets increased by $146.6 million, or 18%, to $963.9 million at December 31, 2019, compared to $817.3 million as of December 31, 2018. Total gross loans increased by $79.6 million, or 14%, during 2019 to $633.8 million compared to $554.3 million at December 31, 2018. This includes $37 million in net organic growth as the acquisition of First McHenry included $42.5 million of total loans at closing. Total deposits increased by $144.0 million, or 21%, to $829.6 million as compared to $685.6 million at the end of 2018, and included $150.5 million of total deposits at closing from the First McHenry acquisition. With the acquisition of First McHenry and the core deposit base that came with it, the company was able to reduce institutional deposits by $29.8 million and Federal Home Loan Bank advances by $26.5 million during 2019. The reduction in Federal Home Loan Bank borrowings was partially offset by a $14 million increase in senior debt added at the Holding Company level used to partially fund the First McHenry acquisition.

Net Interest Income

Net interest income for the fourth quarter of 2019 totaled $8.57 million, decreasing $273,000, or 3%, compared to $8.84 million for the previous quarter and up $1.35 million, or 19%, from the fourth quarter of last year. The net interest margin was 3.83% for the fourth quarter of 2019 as compared to 3.93% for the quarter ended September 30, 2019, and 3.91% for the fourth quarter of last year.

The decrease in net interest income compared to the most recent quarter ended September 30, 2019 included a $73,000 decrease in net accretion of loan and deposit fair value marks, which was $56,000 in the fourth quarter compared to $129,000 in the third quarter. The third quarter amount was elevated due to pre-payments. In addition, the three rate cuts by the Federal Reserve Bank in the second half of 2019 increased pressure on the company’s net interest margin, as much of the C&I portfolio is indexed to prime. The increase in net interest income for the fourth quarter compared to the same quarter a year ago was due to growth in earning assets and core deposits, including organic growth and the effect of the First McHenry acquisition. Average total loans for the quarter ended December 31, 2019 equaled $642.4 million, a $9.2 million, or 2% increase over the previous quarter and a $106.7 million, or 20% increase, over the same quarter a year ago. Average total deposits for the quarter ended December 31, 2019 equaled $830 million a $2 million, or 0.23% decrease, from the previous quarter and a $142.4 million, or 21% increase, over the same quarter a year ago.

Net interest income for 2019, increased by $6.21 million, or 23%, to $33.68 million as compared to $27.47 million in 2018.The net interest margin for 2019 decreased by three basis points to 3.88% compared to 3.91% in 2018. Average total loans for 2019 were $610.5 million, an increase of $97.9 million, or 19%, as compared to $512.5 million for 2018, with the First McHenry acquisition contributing approximately $35.0 million to the 2019 year to date average balance. Average total deposits for 2019 were $813.7 million, an increase of $140.2 million, or 21%, as compared to $673.5 for 2018 with the First McHenry acquisition contributing approximately $125.0 million to total average deposits for the year.

Provision for Loan Losses and Credit Quality

The provision for loan losses for the quarter ended December 31, 2019 totaled $980,000, as compared to $580,000 for the quarter ended September 30, 2019, and $150,000 for the fourth quarter of 2018. The provision for loan losses was $2.01 million for the full year 2019, increasing by $830,000 compared to 2018. The increase in the fourth quarter and full year provision was related to a credit tied to the Northern White frac sand industry. The provision taken reflects what management believes to be a worst case scenario for that credit, which is the company’s only exposure to the industry. Net charge-offs for 2019, equaled $1.41 million, with $1.22 million related to the frac sand industry credit mentioned above.

Total nonperforming assets, which include troubled debt restructures, that are performing in accordance with their modified terms equaled $13.6 million as of December 31, 2019 compared to $9.10 million as of September 30, 2019 and $6.2 million at December 31, 2018. The increase in the fourth quarter of 2019 was attributable to one commercial relationship that is experiencing financial difficulty and was moved to nonaccrual status, although no principal loss is expected. At December 31, 2019, the ratio of nonperforming assets to total assets equaled 1.41%, as compared to 0.93% at September 30, 2019, and 0.76% at December 31, 2018. The allowance for loan losses to total loans was 1.25% as of December 31, 2019, as compared to 1.28% at September 30, 2019, and 1.32% as of December 31, 2018. The ratio of the allowance for loan losses to nonperforming loans was 59% as of December 31, 2019, compared to 95% at September 30, 2019, and 120% at December 31, 2018.

Non-Interest Income and Operating Expenses

Non-interest income for the quarter ended December 31, 2019 totaled $3.87 million, a $773,000 decrease compared to $4.65 million the prior quarter, and a $1.01 million increase over the $2.87 million recorded in the fourth quarter of 2018. The decrease compared to the most recent quarter included an $866,000 decrease in gain on sale of securities. The increase in non-interest income compared to the same quarter a year ago includes an increase of $320,000 from the sale and servicing of mortgage loans, and increases of $153,000 and $193,000 in deposit service charges and debit card interchange, respectively.

Non-interest income for the year 2019 increased $3.59 million to $15.13 million as compared to $11.54 million for 2018. Excluding the $1.13 million increase in the gain on sale of securities, non-interest income increased by $2.46 million, including increases of $527,000, $503,000 and $686,000 in deposit service fees, revenue from sale and servicing of mortgage loans, and debit card interchange, respectively.

Operating expenses for the quarter ended December 31, 2019, totaled $8.49 million, essentially unchanged compared to the quarter ended September 30, 2019, and increasing by $1.2 million, or 16%, compared to the fourth quarter of 2018. The increase over the fourth quarter of 2018 included the increased staffing and occupancy and equipment expenses related to the acquired locations.

Operating expenses for the year 2019, totaled $34.6 million, a $6.9 million, or 25% increase over 2018. That increase includes the $1.98 million in non-recurring acquisition related expenses. Excluding the acquisition related expenses, operating expenses increased $4.9 million, or 18%. The increase is partially driven by ten months of operations of the First McHenry locations in 2019, and includes $398,000 of amortization of the deposit intangible related to the acquisition.

Outlook

Blackhawk expects to grow by pursuing creditworthy and profitable business and consumer relationships in its Wisconsin and Illinois markets, emphasizing the value of its personal attention and service that remains unmatched by larger competitors. In addition to the organic growth opportunities, Blackhawk may also pursue growth through selective acquisition opportunities. Growth, combined with the Company’s strong credit quality, is expected to lead to continued earnings improvement. Growth and earnings could, however, be tempered by such occurrences as uncertain economic conditions, competitive pressures, changes in regulatory burden and the interest rate environment.

About Blackhawk Bancorp

Blackhawk Bancorp, Inc. is headquartered in Beloit, Wisconsin and is the parent company of Blackhawk Bank. The combined entity operates eleven full-service banking centers and a dedicated commercial office, which are located in Rock County, Wisconsin and the Illinois counties of Winnebago, Boone, McHenry, Lake, and Kane. The Company’s footprint stretches along the I-90 corridor from Janesville, Wisconsin to Elgin, Illinois and into the Northwest collar counties of the Chicagoland area. The company offers a variety of value-added consultative services to its business customers and their employees related to the financial products it provides.

Disclosures Regarding non-GAAP Measures

This report refers to financial measures that are identified as non-GAAP that the Company believes help to evaluate and measure the Company’s performance, including the presentation of the net interest margin ratio and efficiency ratio calculations on a taxable-equivalent basis. Non-GAAP measures are also used to assist investor comparison by identifying nonrecurring events such as the 2019 acquisition-related expenses, nonrecurring securities gains and the impact such items have on the performance measures of return on average assets, return on average equity, diluted earnings per share, and the efficiency ratio. This supplemental information should not be considered in isolation or as a substitute for the related GAAP measures.

Forward-Looking Statements

When used in this communication, the words “believes,” “expects,” “likely”, “would”, 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 particularly in the Company’s markets; potential deterioration in real estate values, 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”; inability to recover previously recorded losses as anticipated, and the inability of third party vendors to perform critical services for the company or its customers. The inclusion of forward-looking information should not be construed as a representation by the Company or any person that future events or plans contemplated by the Company will be achieved. The Company undertakes no obligation to publicly update or revise any forward-looking statements whether as a result of new information or otherwise.

Further information is available on the company’s website at www.blackhawkbank.com.

Blackhawk Bancorp, Inc.

Todd J. James, Chairman & CEO
tjames@blackhawkbank.com
Phone: (608) 364-8911

BLACKHAWK BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2019 AND DECEMBER 31, 2018
(UNAUDITED)

 
  December 31,     December 31,  
Assets
  2019     2018  
 
  (Dollars in thousands, except  
 
  share and per share data)  
Cash and due from banks
  $ 12,320     $ 16,677  
Interest-bearing deposits in banks and other
    27,086       2,760  
Total cash and cash equivalents
    39,406       19,437  
Equity securities at fair value
    2,365       2,250  
Securities available-for-sale
    235,083       198,670  
Loans held for sale
    6,540       5,164  
Federal Home Loan Bank stock, at cost
    742       1,643  
Loans, less allowance for loan losses of $7,941 and $7,339
               
at December 31, 2019 and December 31, 2018, respectively
    619,359       541,760  
Premises and equipment, net
    21,025       14,874  
Goodwill
    10,228       5,037  
Core deposit intangible
    2,227        
Mortgage servicing rights
    3,106       2,969  
Cash surrender value of bank-owned life insurance
    11,118       10,812  
Other assets
    12,662       14,671  
Total assets
  $ 963,861     $ 817,287  
 
               
Liabilities and Stockholders’ Equity
               
 
               
Liabilities
               
Deposits:
               
Noninterest-bearing
  $ 155,978     $ 121,024  
Interest-bearing
    673,631       564,615  
Total deposits
    829,609       685,639  
Subordinated debentures and notes (including $1,031 at fair value at
               
December 31, 2019 and December 31, 2018)
    5,155       5,155  
Senior secured term note
    14,000        
Other borrowings
    10,035       36,500  
Other liabilities
    7,738       5,701  
Total liabilities
    866,537       732,995  
 
               
Stockholders’ equity
               
Common stock, $0.01 par value, 10,000,000 shares authorized;
               
3,399,803 and 3,369,192 shares issued as of December 31, 2019 and
               
December 31, 2018, respectively
    34       34  
Additional paid-in capital
    33,989       33,478  
Retained earnings
    60,295       52,011  
Treasury stock, 105,185 and 97,570 shares at cost as of December 31, 2019
               
and December 31, 2018, respectively
    (1,408 )     (1,204 )
Accumulated other comprehensive income (loss)
    4,414       (27 )
Total stockholders’ equity
    97,324       84,292  
Total liabilities and stockholders’ equity
  $ 963,861     $ 817,287  
 
               

BLACKHAWK BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)

 
  Twelve months ended December 31,  
 
  2019     2018  
 
  (Amounts in thousands, except per share data)  
 
           
Interest Income:
           
Interest and fees on loans
  $ 32,449     $ 26,543  
Interest on available-for-sale securities:
               
Taxable
    6,089       3,653  
Tax-exempt
    1,587       1,554  
Interest on interest-bearing deposits and other
    528       381  
Total interest income
    40,653       32,131  
Interest Expense:
               
Interest on deposits
    5,806       4,292  
Interest on subordinated debentures and notes
    248       233  
Interest on senior secured term note
    591        
Interest on other borrowings
    324       135  
Total interest expense
    6,969       4,660  
Net interest income before provision for loan losses
    33,684       27,471  
Provision for loan losses
    2,010       1,180  
Net interest income after provision for loan losses
    31,674       26,291  
 
               
Noninterest Income:
               
Service charges on deposits accounts
    3,715       3,188  
Net gain on sale of loans
    4,211       3,386  
Net loan servicing income
    369       691  
Debit card interchange fees
    3,402       2,716  
Net gains on sales of securities available-for-sale
    1,171       46  
Net other gains (losses)
    89       (63 )
Increase in cash surrender value of bank-owned life insurance
    306       299  
Other
    1,864       1,278  
Total noninterest income
    15,127       11,541  
 
               
Noninterest Expenses:
               
Salaries and employee benefits
    19,382       16,277  
Occupancy and equipment
    4,115       3,373  
Data processing
    3,574       1,665  
Debit card processing and issuance
    1,574       1,302  
Advertising and marketing
    450       598  
Amortization of intangibles
    398        
Professional fees
    1,659       1,365  
Office Supplies
    405       357  
Telephone
    536       504  
Other
    2,520       2,290  
Total noninterest expenses
    34,613       27,731  
Income before income taxes
    12,188       10,101  
Provision for income taxes
    2,585       1,960  
Net income
  $ 9,603     $ 8,141  
 
               
Key Ratios
               
 
               
Basic Earnings Per Common Share
  $ 2.91     $ 2.47  
Diluted Earnings Per Common Share
    2.91       2.47  
Dividends Per Common Share
    0.40       0.38  
 
               
Net Interest Margin (1)
    3.88 %     3.91 %
Efficiency Ratio (1)(2)
    72.10 %     70.32 %
Return on Assets
    1.02 %     1.06 %
Return on Common Equity
    10.49 %     10.19 %

(1) Non-GAAP Presentations: Management discloses certain non-GAAP financial measures to evaluate and measure the Company’s performance, including the presentation of the net interest margin and efficiency ratio calculations on a taxable equivalent basis (“TE”). The net interest margin ratio is calculated by dividing net interest income on a tax equivalent basis by average earning assets for the period. Management believes this measure provides investors with information regarding comparative balance sheet profitability.

(2) The efficiency ratio is calculated as noninterest expense divided by the sum of net interest income on a TE basis, noninterest income less any securities gains (losses) or other gains (losses), and also includes a TE adjustment on the increases in cash surrender value of bank-owned life insurance.

BLACKHAWK BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)

 
  For the Quarter Ended  
 
  December 31,     September 30,     June 30,     March 31,     December 31,  
 
  2019     2019     2019     2019     2018  
 
  (Dollars in thousands, except per share data)  
Interest Income:
                             
Interest and fees on loans
  $ 8,284     $ 8,580     $ 8,043     $ 7,542     $ 7,174  
Interest on available-for-sale securities:
                                       
Taxable
    1,496       1,591       1,659       1,345       1,062  
Tax-exempt
    331       356       451       448       431  
Interest on interest-bearing deposits and other
    107       133       130       158       41  
Total interest income
    10,218       10,660       10,283       9,493       8,708  
Interest Expense:
                                       
Interest on deposits
    1,400       1,485       1,458       1,463       1,336  
Interest on subordinated debentures and notes
    58       61       65       65       62  
Interest on senior secured term note
    165       173       186       67        
Interest on other borrowings
    24       97       98       105       89  
Total interest expense
    1,647       1,816       1,807       1,700       1,487  
Net interest income before provision for loan losses
    8,571       8,844       8,476       7,793       7,221  
Provision for loan losses
    980       580       180       270       150  
Net interest income after provision for loan losses
    7,591       8,264       8,296       7,523       7,071  
 
                                       
Noninterest Income:
                                       
Service charges on deposits accounts
    1,002       1,019       885       808       849  
Net gain on sale of loans
    1,257       1,333       1,040       581       886  
Net loan servicing income
    119       (91 )     171       172       170  
Debit card interchange fees
    876       910       827       789       683  
Net gains on sales of securities available-for-sale
          866       146       159       (19 )
Net other gains (losses)
    (87 )     81       94              
Increase in cash surrender value of bank-owned life insurance
    75       74       74       83       73  
Other
    632       455       390       388       227  
Total noninterest income
    3,874       4,647       3,627       2,980       2,869  
 
                                       
Noninterest Expenses:
                                       
Salaries and employee benefits
    4,964       4,992       4,841       4,585       4,279  
Occupancy and equipment
    1,038       1,085       1,000       992       824  
Data processing
    520       657       571       1,827       425  
Debit card processing and issuance
    449       402       389       334       334  
Advertising and marketing
    101       100       142       108       176  
Amortization of intangibles
    119       119       119       40        
Professional fees
    300       387       393       579       443  
Office Supplies
    118       112       89       86       91  
Telephone
    153       137       130       116       129  
Other
    730       505       701       584       605  
Total noninterest expenses
    8,492       8,496       8,375       9,251       7,306  
Income before income taxes
    2,973       4,415       3,548       1,252       2,634  
Provision for income taxes
    621       996       794       173       538  
Net income
  $ 2,352     $ 3,419     $ 2,754     $ 1,079     $ 2,096  
 
                                       
Key Ratios
                                       
 
                                       
Basic Earnings Per Common Share
  $ 0.71     $ 1.03     $ 0.83     $ 0.33     $ 0.64  
Diluted Earnings Per Common Share
    0.71       1.03       0.83       0.33       0.64  
Dividends Per Common Share
    0.10       0.10       0.10       0.10       0.10  
 
                                       
Net Interest Margin (1)
    3.83 %     3.93 %     3.88 %     3.92 %     3.91 %
Efficiency Ratio (1)(2)
    67.25 %     67.19 %     69.77 %     86.07 %     71.37 %
Return on Assets
    0.97 %     1.40 %     1.15 %     0.50 %     1.05 %
Return on Common Equity
    9.60 %     14.25 %     12.54 %     5.12 %     10.13 %
 
                                       

(1) Non-GAAP Presentations: Management discloses certain non-GAAP financial measures to evaluate and measure the Company’s performance, including the presentation of net interest income, net interest margin and efficiency ratio calculations on a taxable equivalent basis (“TE”). The net interest margin is calculated by dividing net interest income on a TE basis by average earning assets for the period. Management believes this measure provides investors with information regarding comparative balance sheet profitability.

(2) The efficiency ratio is calculated as noninterest expense divided by the sum of net interest income on an TE basis, noninterest income less any securities gains (losses) or other gains (losses), and also includes a TE adjustment on interest on tax-exempt securities, loans, and the increases in cash surrender value of bank-owned life insurance.

(UNAUDITED)
  As of  
 
  December 31,     September 30,     June 30,     March 31,     December 31,  
 
  2019     2019     2019     2019     2018  
 
  (Amounts in thousands, except per share data)  
Cash and due from banks
  $ 12,320     $ 18,778     $ 17,364     $ 14,581     $ 16,677  
Interest-bearing deposits in banks and other
    27,086       22,478       16,442       35,862       2,760  
Securities
    237,448       232,165       256,262       270,665       200,920  
Net loans/leases
    625,899       640,576       616,925       583,350       546,924  
Goodwill
    10,228       10,228       10,183       10,183       5,037  
Other assets
    50,880       52,133       52,295       51,795       44,969  
Total assets
  $ 963,861     $ 976,358     $ 969,471     $ 966,436     $ 817,287  
 
                                       
Deposits
  $ 829,609     $ 843,703     $ 837,319     $ 854,505     $ 685,639  
Subordinated debentures
    5,155       5,155       5,155       5,155       5,155  
Senior secured term note
    14,000       14,000       14,000       14,000        
Borrowings
    10,035       10,042       13,992             36,500  
Other liabilities
    7,738       7,516       6,614       5,360       5,701  
Stockholders’ equity
    97,324       95,942       92,391       87,416       84,292  
Total liabilities and stockholders’ equity
  $ 963,861     $ 976,358     $ 969,471     $ 966,436     $ 817,287  
 
                                       
 
                                       
ASSET QUALITY DATA
                                       
(Amounts in thousands)
  December 31,     September 30,     June 30,     March 31,     December 31,  
 
    2019       2019       2019       2018       2018  
 
                                       
Non-accrual loans
  $ 10,642     $ 5,524     $ 3,712     $ 3,815     $ 2,312  
Accruing loans past due 90 days or more
          104       272             17  
Troubled debt restructures – accruing
    2,866       3,163       3,321       3,546       3,797  
Total nonperforming loans
  $ 13,508     $ 8,791     $ 7,305     $ 7,361     $ 6,126  
Other real estate owned
    54       319       307       339       104  
Total nonperforming assets
  $ 13,562     $ 9,110     $ 7,612     $ 7,700     $ 6,230  
 
                                       
Total loans
  $ 633,840     $ 648,900     $ 624,674     $ 590,895     $ 554,263  
Allowance for loan losses
  $ 7,941     $ 8,324     $ 7,749     $ 7,545     $ 7,339  
 
  $ 625,899     $ 640,576     $ 616,925     $ 583,350     $ 546,924  
Nonperforming Assets to total Assets
    1.41 %     0.93 %     0.79 %     0.80 %     0.76 %
Nonperforming loans to total loans
    2.13 %     1.35 %     1.17 %     1.25 %     1.11 %
Allowance for loan losses to total loans
    1.25 %     1.28 %     1.24 %     1.28 %     1.32 %
Allowance for loan losses to nonperforming loans
    58.8 %     94.7 %     106.1 %     102.5 %     119.8 %
 
                                       
 
                                       
 
  For the Quarter Ended  
 
  December 31,     September 30,     June 30,     March 31,     December 31,  
ROLLFORWARD OF ALLOWANCE
    2019       2019       2019       2019       2018  
 
                                       
Beginning Balance
  $ 8,324     $ 7,749     $ 7,545     $ 7,339     $ 7,211  
Provision
    980       580       180       270       150  
Loans charged off
    1,463       52       11       102       76  
Loan recoveries
    100       47       35       38       54  
Net charge-offs
    1,363       5       (24 )     64       22  
Ending Balance
  $ 7,941     $ 8,324     $ 7,749     $ 7,545     $ 7,339  
 
                                       

BLACKHAWK BANCORP, INC. AND SUBSIDIARIES
AVERAGE BALANCE SHEET WITH RESULTANT INTEREST AND RATES
(Amounts in thousands)
(yields on a tax-equivalent basis) (1)

 
  For the Twelve Months Ended  
 
  December 31, 2019     December 31, 2018  
 
  Average           Average     Average           Average  
 
  Balance     Interest     Rate     Balance     Interest     Rate  
Interest Earning Assets:
                                   
Interest-bearing deposits and other
  $ 23,058     $ 528       2.29 %   $ 20,832     $ 381       1.83 %
Investment securities:
                                               
Taxable investment securities
    193,954       6,089       3.14 %     132,422       3,653       2.76 %
Tax-exempt investment securities
    50,100       1,587       3.88 %     51,783       1,554       4.10 %
Total Investment securities
    244,054       7,676       3.29 %     184,205       5,207       3.13 %
Loans
    610,472       32,449       5.32 %     512,544       26,543       5.18 %
 
                                               
Total Earning Assets
  $ 877,584     $ 40,653       4.67 %   $ 717,581     $ 32,131       4.56 %
Allowance for loan losses
    (7,778 )                     (6,648 )                
Cash and due from banks
    15,765                       17,373                  
Other assets
    57,920                       40,623                  
 
                                               
Total Assets
  $ 943,491                     $ 768,929                  
 
                                               
Interest Bearing Liabilities:
                                               
Interest bearing checking accounts
  $ 254,228     $ 1,483       0.58 %   $ 228,838     $ 1,141       0.50 %
Savings and money market deposits
    286,719       2,237       0.78 %     225,207       1,702       0.76 %
Time deposits
    116,814       2,086       1.79 %     95,939       1,449       1.51 %
Total interest bearing deposits
    657,761       5,806       0.88 %     549,984       4,292       0.78 %
Subordinated debentures
    5,155       248       4.81 %     5,155       233       4.51 %
Borrowings
    27,145       915       3.37 %     6,178       135       2.18 %
 
                                               
Total Interest-Bearing Liabilities
  $ 690,061     $ 6,969       1.01 %   $ 561,317     $ 4,660       0.83 %
 
                                               
Interest Rate Spread
                    3.66 %                     3.73 %
 
                                               
Noninterest checking accounts
    155,936                       123,516                  
Other liabilities
    5,956                       4,172                  
Total liabilities
    851,953                       689,005                  
Total Stockholders’ equity
    91,538                       79,924                  
Total Liabilities and
                                               
Stockholders’ Equity
  $ 943,491                     $ 768,929                  
 
                                               
Net Interest Income/Margin
          $ 33,684       3.88 %           $ 27,471       3.91 %

(1) Management discloses certain non-GAAP financial measures to evaluate and measure the Company’s performance including a presentation of net interest income with a net interest margin ratio on a tax-equivalent (TE) basis. The net interest margin is calculated by dividing net interest income on a TE basis by average earning assets for the period. Management believes this measure provides investors with information regarding comparative balance sheet profitability. Nonaccrual loans are included in the above-stated average balances.

BLACKHAWK BANCORP, INC. AND SUBSIDIARIES
ANALYSIS of AVERAGE BALANCES & TAX EQUIVALENT INTEREST RATES

(Dollars in thousands – unaudited)
(Yields on a tax-equivalent basis) (1)

 
  For the Quarter Ended        
 
  December 31, 2019     September 30, 2019     December 31, 2018  
 
  Average           Average     Average           Average     Average           Average  
 
  Balance     Interest     Rate     Balance     Interest     Rate     Balance     Interest     Rate  
Interest Earning Assets:
                                                     
Interest-bearing deposits and other
  $ 20,557     $ 107       2.09 %   $ 23,356     $ 133       2.26 %   $ 7,554     $ 41       2.18 %
Investment securities:
                                                                       
Taxable investment securities
    193,439       1,496       3.07 %     202,607       1,591       3.11 %     144,565       1,062       2.91 %
Tax-exempt investment securities
    40,513       331       4.16 %     43,558       356       4.10 %     56,653       431       3.86 %
Total Investment securities
    233,952       1,827       3.26 %     246,165       1,947       3.29 %     201,218       1,493       3.18 %
Loans
    642,399       8,284       5.12 %     633,215       8,580       5.38 %     535,659       7,174       5.31 %
 
                                                                       
Total Earning Assets
  $ 896,908     $ 10,218       4.56 %   $ 902,736     $ 10,660       4.73 %   $ 744,431     $ 8,708       4.71 %
Allowance for loan losses
    (8,154 )                     (7,860 )                     (7,277 )                
Cash and due from banks
    15,207                       16,131                       17,442                  
Other assets
    59,337                       59,817                       39,495                  
 
                                                                       
Total Assets
  $ 963,298                     $ 970,824                     $ 794,091                  
 
                                                                       
Interest Bearing Liabilities:
                                                                       
Interest bearing checking accounts
  $ 255,516     $ 361       0.56 %   $ 258,808     $ 399       0.61 %   $ 220,536     $ 267       0.48 %
Savings and money market deposits
    294,580       513       0.69 %     295,746       547       0.73 %     232,669       559       0.95 %
Time deposits
    118,497       526       1.76 %     118,910       539       1.80 %     107,599       510       1.88 %
Total interest bearing deposits
    668,593       1,400       0.83 %     673,464       1,485       0.88 %     560,804       1,336       0.95 %
Subordinated debentures and notes
    5,155       58       4.45 %     5,155       61       4.70 %     5,155       62       4.76 %
Borrowings
    24,243       189       3.09 %     32,870       270       3.25 %     14,257       89       2.43 %
 
                                                                       
Total Interest-Bearing Liabilities
  $ 697,991     $ 1,647       0.94 %   $ 711,489     $ 1,816       1.01 %   $ 580,216     $ 1,487       1.02 %
 
                                                                       
Interest Rate Spread
                    3.62 %                     3.72 %                     3.69 %
 
                                                                       
Noninterest checking accounts
    161,432                       158,512                       126,816                  
Other liabilities
    6,641                       5,603                       4,956                  
Total liabilities
    866,064                       875,604                       711,988                  
Total Stockholders’ equity
    97,234                       95,220                       82,103                  
Total Liabilities and
                                                                       
Stockholders’ Equity
  $ 963,298                     $ 970,824                     $ 794,091                  
 
                                                                       
Net Interest Income/Margin
          $ 8,571       3.83 %           $ 8,844       3.93 %           $ 7,221       3.91 %

(1) Management discloses certain non-GAAP financial measures to evaluate and measure the Company’s performance including a presentation of net interest income with a net interest margin ratio on a tax-equivalent (TE) basis. The net interest margin is calculated by dividing net interest income on a TE basis by average earning assets for the period. Management believes this measure provides investors with information regarding comparative balance sheet profitability. Nonaccrual loans are included in the above-stated average balances.

SOURCE: Blackhawk Bancorp, Inc.

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