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Blackhawk Bancorp Announces 2017 First Quarter Earnings

BELOIT, Wis., April 21, 2017 /PRNewswire/ -- Blackhawk Bancorp, Inc. (BHWB) today announced net income of $1.2 million and diluted earnings per share (EPS) of $0.46 for the quarter ended March 31, 2017.  This compares to net income of $1.4 million and diluted EPS of $0.60 for the quarter ended December 31, 2016; and to net income of $2.6 million and diluted EPS of $1.12 for the first quarter of 2016.   The 2016 first quarter results included a $1.8 million (after tax) recovery of a fraud loss incurred in prior years.  Excluding the large recovery in the first quarter of 2016 net income would have been $790 thousand, or $0.35 per diluted share.  

"We're very pleased with our first quarter results," said Rick Bastian, the company's Chairman and Chief Executive Officer.  "Excluding the non-recurring recovery realized last year, diluted EPS for the quarter is up 31% over the first quarter 2016."

Net Interest Income

Net interest income totaled $5.2 million for the quarter ended March 31, 2017.  The amount is essentially unchanged compared to the quarter ended December 31, 2016 and represents a 5.6% increase compared to $4.9 million for the first quarter of 2016.    

"While we didn't achieve net loan growth during the first quarter of 2017, the net interest margin improved, reflecting loan growth achieved in the fourth quarter of last year and our ability to keep funding costs stable," said Bastian.   

The net interest margin for the quarter ended March 31, 2017 was 3.55%, a thirteen basis point increase compared to the net interest margin of 3.42% for the quarter ended December 31, 2016 and a seven basis point increase over the 3.48% net interest margin for the first quarter of last year.  The net interest margin improvement compared to the fourth quarter of 2016 reflects the increase in total average loans for the quarter offset by a decrease in average interest-bearing cash equivalents and short-term investments, with little change to total earning assets.  The improvement in the net interest margin compared to the first quarter of last year reflects a 5% increase in average total loans and the shift of $29 million of average interest-bearing cash equivalents and short-term investments to investment securities.      

Average Earning assets totaled $668.9 million for the quarter ended March 31, 2017, a decrease of $2.1 million compared to the quarter ended December 31, 2016 and a $35.6 million increase compared to the first quarter of the prior year.  Average total loans increased by $11.6 million, or 3%, to $415.5 million for the quarter ended March 31, 2017 compared to $403.9 million for the previous quarter, and increased $18.0 million, or 5%, compared to the first quarter of 2016. 

Average total deposits for the quarter ended March 31, 2017 were $587.8 million, a $4.2 million decrease compared to the quarter ended December 31, 2016 and a $21.6 million increase compared to the first quarter of 2016.  The deposit growth compared to the first quarter of 2016 included an $11.4 million, or 11%, increase in noninterest demand deposits and another $10.1 million increase in interest bearing checking, money market and savings accounts. 

Provision for Loan Losses and Credit Quality

The provision for loan losses for the quarter ended March 31, 2017 totaled $360 thousand, compared to $475 thousand for the quarter ended December 31, 2016 and $495 thousand for the first quarter of 2016.    Net loan charge-offs were $146 thousand for the quarter ended March 31, 2017 compared to $720 thousand for the quarter ended December 31, 2016, and to net recoveries of $23 thousand for the first quarter of 2016. 

Total nonperforming assets, which includes troubled debt restructures that are performing in accordance with their modified terms, equaled $14.6 million as of March 31, 2017.  This compares to $11.9 million and $13.5 million at December 31, 2016 and March 31, 2016, respectively.  The 2017 first quarter increase reflects the transfer of $4.6 million of commercial loans to nonaccrual status.  The majority of the amount transferred to nonaccrual relates to one relationship.  We expect a substantial reduction in this credit in the second quarter of 2017.   

At March 31, 2017, total nonperforming assets equaled 2.17% of total assets compared to 1.79% at December 31, 2016 and 2.00% at March 31, 2016.  The ratio of the allowance for loan losses to total loans was 1.29% at March 31, 2017 compared to 1.25% at December 31, 2016 and 1.34% at March 31, 2016.         

Non-Interest Income and Operating Expenses:

Non-interest income for the quarter ended March 31, 2017 totaled $2.2 million.  This represents a $315 thousand decrease compared to $2.5 million for the quarter ended December 31, 2016.  The reduction in non-interest income compared to the quarter ended December 31, 2016 includes a $199 thousand decrease in revenue from the sale and servicing on mortgage loans and a $156 thousand reduction in net gains on the sale of securities.  Compared to the quarter ended March 31, 2106, non-interest income decreased by $2.8 million.  The first quarter of 2016 includes a $2.9 million non-recurring recovery of a fraud loss incurred in prior years.  Excluding that recovery, non-interest income increased by $129,000. 

Operating expenses for the quarter ended March 31, 2017 totaled $5.7 million, increasing $361 thousand compared to the quarter ended December 31, 2106, and increasing by $168 thousand compared to the first quarter of 2016.    

Capital Levels:

On March 14, 2017, the Company completed a $23 million capital raise that substantially improved the consolidated regulatory capital ratios.  As of March 31, 2017, the company's tier 1 leverage ratio was 10.93% compared to 7.47% at December 31, 2016 and 7.40% at March 31, 2016.  The company's total capital to risk-weighted assets ratio increased to 16.96% as of March 31, 2017 compared to 12.39% at December 31, 2016 and 11.82% at March 31, 2016.  The company anticipates redeeming certain subordinated notes, which are included in the determination of total capital, in the second quarter of 2017.  These subordinated notes contributed 123 basis points to the total capital to risk-weighted assets ratio at March 31, 2017. 

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.  This growth combined with ongoing strengthening of the Company's credit quality are expected to lead to improved earnings.  Growth and earnings could however be tempered by uncertain economic conditions, competitive pressures, 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, which operates eight banking centers in south central Wisconsin and north central Illinois, along the I-90 corridor from Belvidere, Illinois to Janesville, Wisconsin.  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 the financial products it provides.   

 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"; 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.

Further information is available on the Company's website at www.blackhawkbank.com.

 

BLACKHAWK BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

MARCH 31, 2017 AND DECEMBER 31, 2016

(UNAUDITED)


March 31,


December 31,

Assets

2017


2016


(Amounts in thousands, except share data)





Cash and due from banks

$    18,863


$            16,402

Securities purchased under agreements to resell

-


-

Interest-bearing deposits in banks and other

13,448


7,640

          Total cash and cash equivalents

32,311


24,042

Securities available-for-sale

191,928


191,815

Loans held for sale

534


1,053

Federal Home Loan Bank stock, at cost

497


1,086

Loans, less allowance for loan losses of $5,307 and $5,093 at March 31, 2017 and December 31, 2016, respectively

406,891


407,331

Premises and equipment, net 

9,794


8,242

Goodwill

5,037


5,037

Mortgage Servicing rights

2,221


2,189

Cash surrender value of bank-owned life insurance

10,291


10,208

Other assets 

13,195


14,725

     Total assets

$  672,699


$         665,728





Liabilities and Stockholders' Equity








Liabilities




   Deposits:




     Noninterest-bearing

$  116,420


$         117,785

     Interest-bearing 

468,696


454,581

          Total deposits

585,116


572,366

Subordinated debentures and notes (including $1,031 at fair value at March 31, 2017 and December 31, 2016)

11,255


11,255

Senior secured term note

-


7,500

Other borrowings

311


21,200

Other liabilities

2,906


3,857

          Total liabilities

599,588


616,178





Stockholders' equity




  Common stock, $0.01 par value, 10,000,000 shares authorized; 3,342,285 and 2,376,750 shares issued as of March 31, 2017 and December 31, 2016, respectively

33


24

  Additional paid-in capital

32,548


10,664

  Retained earnings 

41,049


39,990

  Treasury stock, 91,238 and 90,844 shares at cost as of March 31, 2017 and December 31, 2016, respectively

(1,030)


(1,020)

  Accumulated other comprehensive income (loss)

511


(108)

     Total stockholders' equity

73,111


49,550

     Total liabilities and stockholders' equity

$  672,699


$         665,728

 

BLACKHAWK BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

Quarter Ended


March 31,

December 31,

September 30,

June 30,

March 31


2017

2016

2016

2016

2016


(amounts in thousands, except per share data)

Interest Income:






     Interest and fees on loans

$     4,688

$       4,749

$        4,786

$  4,654

$    4,635

     Interest and dividends on available-for-sale securities:






          Taxable

764

758

742

724

561

          Tax-exempt

371

315

300

299

301

     Interest on other

14

35

64

103

73

          Total interest and dividend income

5,837

5,857

5,892

5,780

5,570

Interest Expense:






     Interest on deposits

401

416

423

415

398

     Interest on subordinated debentures and notes

162

161

159

157

157

     Interest on senior secured term note

67

83

84

86

91

     Interest on other borrowings

9

6

3

3

1

          Total interest expense

639

666

669

661

647

          Net interest and dividend income before provision for loan losses

5,198

5,191

5,223

5,119

4,923

 Provision for loan losses

360

475

435

475

495

          Net interest and dividend income after provision for loan losses  

$     4,838

$       4,716

$        4,788

$  4,644

$    4,428







Noninterest Income:






     Service charges on deposits accounts

$         668

$          715

$            738

$      703

$        689

     Net gain on sale of loans

378

702

649

698

353

     Net loan servicing income 

192

67

71

71

81

     Debit card interchange fees

576

557

566

594

568

     Net gains on sales of securities available-for-sale

-

156

-

-

-

     Net other gains (losses)

(14)

(51)

(50)

(51)

2,933

     Increase in cash surrender value of bank-owned life insurance

83

75

74

73

85

     Other

311

288

540

239

279

          Total noninterest income

$     2,194

$       2,509

$        2,588

$  2,327

$    4,988







Noninterest Expenses:






     Salaries and employee benefits

$     3,182

$       3,040

$        3,107

$  3,076

$    3,136

     Occupancy and equipment

606

592

663

661

645

     Data processing 

398

384

329

331

344

     Debit card processing and issuance

272

258

435

279

255

     Advertising and marketing

101

114

76

121

94

     Professional fees

259

252

435

244

230

     Office Supplies

81

79

72

86

86

     Telephone

112

115

107

106

103

     Other

665

481

799

798

615

          Total noninterest expenses

$     5,676

$       5,315

$        6,023

$  5,702

$    5,508

          Income before income taxes

$     1,356

$       1,910

$        1,353

$  1,269

$    3,908

Provision for income taxes

205

512

297

318

1,335

          Net income 

$     1,151

$       1,398

$        1,056

$      951

$    2,573







Key Ratios












Basic Earnings Per Common Share

$        0.46

$         0.61

$           0.46

$    0.41

$      1.13

Diluted Earnings Per Common Share

$        0.46

$         0.60

$           0.46

$    0.41

$      1.12

Dividends Per Common Share

$        0.04

$         0.04

$           0.04

$    0.04

$      0.04







Net Interest Margin (FTE)

3.55%

3.42%

3.40%

3.32%

3.48%

Efficiency Ratio (FTE)

74.66%

68.48%

75.10%

74.48%

77.17%

Return on Assets

0.70%

0.89%

6.70%

0.56%

1.63%

Return on Common Equity

8.49%

10.87%

8.25%

7.77%

22.27%

 

BLACKHAWK BANCORP, INC. AND SUBSIDIARIES

AVERAGE BALANCE SHEET WITH RESULTANT INTEREST AND RATES


      Average Balance Sheet with Resultant Interest and Rates

(Amounts in thousands)

(Yields on a tax-equivalent basis)

For the Quarter Ended


March 31, 2017


December 31, 2016


March 31, 2016


Average


Average


Average


Average


Average


Average


Balance

Interest

Rate


Balance

Interest

Rate


Balance

Interest

Rate

Interest Earning Assets:












  Interest-bearing deposits in banks

$      7,850

$        13

0.74%


$    26,451

$        34

0.53%


$    23,741

$        29

0.50%

  Federal funds sold & securities purchased under agreements to resell

359

1

0.61%


489

1

0.19%


13,521

44

1.31%

  Investment securities:












       Taxable investment securities

141,702

764

2.18%


149,309

758

2.02%


112,907

561

2.00%

       Tax-exempt investment securities

50,876

371

4.53%


43,299

315

4.42%


39,952

301

4.64%

            Total Investment securities

192,578

1,135

2.80%


192,608

1,073

2.56%


152,859

862

2.69%

  Loans

415,517

4,688

4.58%


403,937

4,749

4.68%


397,481

4,635

4.69%













Total Earning Assets

$  616,304

$  5,837

3.97%


$  623,485

$  5,857

3.84%


$  587,602

$  5,570

3.92%

  Allowance for loan losses

(5,162)




(5,309)




(4,968)



  Cash and due from banks

17,807




15,080




15,445



  Other assets

39,947




37,820




35,192















Total Assets

$  668,896




$  671,076




$  633,271















Interest Bearing Liabilities:












  Interest bearing checking accounts

$  209,202

$     147

0.28%


$  209,515

$     160

0.30%


$  202,125

$     161

0.32%

  Savings and money market deposits

175,849

70

0.16%


174,517

66

0.15%


172,779

68

0.16%

  Time deposits

85,794

184

0.87%


88,267

190

0.86%


80,401

169

0.84%

       Total interest bearing deposits

470,845

401

0.35%


472,299

416

0.35%


455,305

398

0.35%

  Subordinated debentures and notes

11,255

162

5.84%


11,255

161

5.69%


11,255

157

5.59%

  Borrowings

11,076

76

2.80%


12,268

89

2.87%


10,710

92

3.48%













Total Interest-Bearing Liabilities

$  493,176

$     639

0.53%


$  495,822

$     666

0.53%


$  477,270

$     647

0.55%













Interest Rate Spread



3.44%




3.31%




3.37%













Noninterest checking accounts

116,990




119,749




105,530



Other liabilities

3,778




4,353




4,011



   Total liabilities

613,944




619,924




586,811



Total Stockholders' equity

54,952




51,152




46,460



Total Liabilities and Stockholders' Equity

$  668,896




$  671,076




$  633,271















Net Interest Income/Margin


$  5,198

3.55%



$  5,191

3.42%



$  4,923

3.48%

 

BLACKHAWK BANCORP, INC. AND SUBSIDIARIES

ASSET QUALITY DATA 

(Amounts in thousands)


Quarter Ended


March 31,

December 31,

September 30,

June 30,

March 31


2017

2016

2016

2016

2016

ACTIVITY IN ALLOWANCE FOR LOAN LOSSES






Beginning Balance

$     5,093

$              5,338

$                4,975

$    5,308

$    4,790

Provision

360

475

435

475

495

Loans charged off

(199)

(1,170)

(306)

(890)

(170)

Loan recoveries

53

450

234

82

193

Ending Balance

$     5,307

$              5,093

$                5,338

$    4,975

$    5,308














As of


March 31,

December 31,

September 30,

June 30,

March 31


2017

2016

2016

2016

2016

NONPERFORMING ASSETS






Non-accrual loans

$     8,867

$              4,775

$                5,464

$    5,321

$    5,985

Accruing loans past due 90 days or more

15

1,198

19

-

-

Troubled debt restructures - accruing

5,125

5,072

5,327

6,349

5,719

Total nonperforming loans

$   14,007

$            11,045

$             10,810

$  11,670

$  11,704

Other real estate owned

597

871

1,115

1,006

1,842

Total nonperforming assets

$   14,604

$            11,916

$             11,925

$  12,676

$  13,546













ASSET QUALITY RATIOS






Nonperforming assets to total Assets

2.17%

1.79%

1.81%

1.91%

2.00%

Allowance for loan losses to total loans

1.29%

1.25%

1.32%

1.24%

1.34%

Allowance for loan losses to nonperforming loans

37.9%

46.1%

49.4%

42.6%

45.4%













REGULATORY CAPITAL RATIOS






Consolidated:






Tier 1 leverage ratio

10.93%

7.47%

7.28%

7.00%

7.40%

Common equity tier 1 to risk-weighted assets

13.64%

9.09%

9.10%

8.74%

8.45%

Tier 1 capital to risk-weighted assets

14.65%

10.11%

10.15%

9.77%

9.48%

Total capital to risk-weighted assets

16.96%

12.39%

12.56%

12.07%

11.82%







Subsidiary bank:






Tier 1 leverage ratio

10.01%

8.85%

8.72%

8.44%

9.27%

Common equity tier 1 to risk-weighted assets

13.35%

11.96%

12.14%

11.79%

11.87%

Tier 1 capital to risk-weighted assets

13.35%

11.96%

12.14%

11.79%

11.87%

Total capital to risk-weighted assets

14.42%

13.00%

13.27%

12.82%

12.96%

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/blackhawk-bancorp-announces-2017-first-quarter-earnings-300443655.html