Blackhawk Bancorp Announces 2021 Third Quarter Earnings

BELOIT, WI / ACCESSWIRE / October 19, 2021 / Blackhawk Bancorp, Inc. (OTCQX:BHWB) reported net income of $3.22 million for the quarter ended September 30, 2021, a 21% decrease compared to the $4.06 million earned the previous quarter, and a 13% increase compared to the $2.86 million earned the third quarter of 2020. Fully diluted earnings per share (EPS) for the quarter was $1.13, a decrease of $0.17 as compared to $1.30 for the quarter ended June 30, 2021 and an increase of $0.27, or 31%, as compared to $0.86 reported for the quarter ended September 30, 2020. The third quarter 2021 results produced a Return on Average Equity (ROAE) of 12.57% and a Return on Average Assets (ROAA) of 0.96%.

The decrease in earnings compared to the most recent quarter included a $0.39 million decrease in net interest income and a $0.85 million increase in operating expenses. These earnings declines were partially offset by a $0.07 million increase in noninterest income.

The increase in net income for the third quarter of 2021 compared to the third quarter of the prior year reflects a $2.62 million decrease in provision for loan losses. This improvement was partially offset by a $1.20 million decrease in revenue from the sale and servicing of mortgage loans and a $1.03 million increase in operating expenses. The increase in earnings per share compared to the third quarter of 2020 was boosted by the tender offer and stock repurchase, which was completed in the second quarter of 2021, where the Company repurchased 525,546 shares, or 15.6%, of its outstanding common stock.

For the nine months ended September 30, 2021, the company reported net income of $10.71 million, a 43% increase over the $7.50 million reported for the first nine months of 2020. Diluted earnings per share for the first nine months of 2021 increased by 53% to $3.45 compared to $2.26 for the first nine months of 2020. The Company's results for the first nine months of 2021 produced a return on average assets of 1.13% and a return on average equity of 13.49%.

"The solid third quarter results include continued recognition of Paycheck Protection Program (PPP) loan fees, low credit costs and robust mortgage banking activity," said Todd James, the Company's Chairman and CEO. "While pleased with overall financial results, loan growth continues to be a challenge, especially from our commercial and industrial borrowers, many of whom benefited from the PPP and are cautious about making capital investments due to challenges attracting labor and break-downs in the supply chain. These issues, combined with potential changes in the tax code, have some business owners deciding this is a good time to sell," added James. "Despite these challenges to growth, Blackhawk's continued to add experienced bankers and make investments to improve our operating systems and processes. We expect to be well positioned when economic activity begins to pick up," he said.

Total assets of the company increased by $176.4 million, or 15%, to $1.32 billion as of September 30, 2021 compared to $1.14 billion as of December 31, 2020. Total gross loans decreased by $9.5 million, or 1%, and total investment securities increased $120.4 million, or 34%, during the first nine months of 2021. Total deposits increased by $181.8 million, or 18%, to $1.17 billion compared to $987.3 million at the end of 2020.

Net Interest Income
Net interest income for the third quarter of 2021 totaled $9.77 million, a decrease of $0.39 million, or 4%, compared to the second quarter of 2021, and down $0.1 million, or 1%, compared to the third quarter of last year. The net interest margin was 3.11% for the third quarter of 2021 as compared to 3.37% for the quarter ended June 30, 2021, and 3.83% for the third quarter of the prior year.

The decrease in net interest income and the net interest margin compared to the third quarter of last year is primarily the result of declining yields on earning assets driven by the pro-longed low interest rate environment. The tax equivalent yield on earning assets has dropped seventy-nine basis points to 3.34%, compared to 4.13% for the third quarter of 2020, while at the same time the cost of deposits decreased only ten basis points to .14% from .24% the same quarter a year ago. Like most banks, Blackhawk has seen a significant influx of deposits and slow loan growth due to the unprecedented level of Federal stimulus in response to the pandemic. Average total deposits for the third quarter of 2021 increased by $238.7 million to $1.18 billion compared to $943.8 million in the third quarter of 2020. This deposit growth has led to increases of $161.9 million and $77.3 million in average investment securities and funds held in interest-bearing deposits, respectively, compared to the third quarter of the prior year.

While average total loans for the third quarter of 2021 decreased by $18.3 million, or 3%, compared to the third quarter of the prior year, the decrease was due to forgiveness of PPP loans. The table below reflects the average balance, related interest income and the respective yields for all loans, PPP loans, and loans excluding PPP for the third quarter of 2021 compared to the same quarter the year before.

Net interest income for the nine months ended September 30, 2021, increased by $1.25 million, or 4%, to $29.65 million as compared to $28.41 million for the first nine months of 2020. The net interest margin for the first nine months of 2021 decreased by 57 basis points to 3.32% compared to 3.89% for the first nine months of 2020. The increase in net interest income was primarily due to a $1.48 million increase in PPP loan fees recognized as unamortized fees are recognized when forgiveness is granted. At September 30, 2021 $1.44 million of unamortized PPP fees remain on the Company's balance sheet. The decrease in the net interest margin is driven by the pro-longed low interest rate environment and influx of deposits due to Federal pandemic stimulus programs. For the nine months ended September 30, 2021 average total deposits increased by $224.3 million, or 25%, to $1.13 billion compared to $901.5 million the first nine months of 2020. While the Company was able to achieve a twenty basis point decrease in the cost of deposits to 0.15% compared to 0.35% for the nine months ended September 30, 2020; the decrease was more than offset by a seventy-five basis point decrease in the yield on average total earning assets to 3.54% as compared to 4.29% for the first nine months of the prior year. The excess liquidity from deposit growth has been deployed in the investment portfolio or held in cash equivalent investments.

The table below reflects the average balance, related interest income and the respective yields for all loans, PPP loans, and loans excluding PPP for the nine months ended September 30, 2021 compared to the first three quarters of 2020.

Provision for Loan Losses and Asset Quality
There was no provision for loan losses recorded for the quarter ended September 30, 2021 or June 30, 2021, as compared to $2.62 million for the quarter ended September 30, 2020. The decreased provision reflects an improved credit outlook, especially as it relates to pandemic related losses. The Company has not released any reserves as management still believes there is continued uncertainty related to the future course of the pandemic, labor challenges and the impact of inflation and supply chain issues on the Company's customer base. Net charge offs for the third quarter were near zero.

Total nonperforming assets, which include troubled debt restructures performing in accordance with their modified terms, equaled $9.8 million as of September 30, 2021, as compared to $10.2 million as of June 30, 2021, and $11.0 million at September 30, 2020. At September 30, 2021, the ratio of nonperforming loans to total loans equaled 1.46%, as compared to 1.50% at June 30, 2021, and 1.59% at September 30, 2020. The allowance for loan losses to total loans was 1.68% as of September 30, 2021, as compared to 1.66% at June 30, 2021, and 1.44% as of September 30, 2020. The ratio of the allowance for loan losses to nonperforming loans increased to 114.5% as of September 30, 2021, as compared to 110.2% at June 30, 2021, and 90.8% at September 30, 2020. All but $2.4 million of credits that were granted modifications for COVID relief have been returned to normal payments, or are included in the nonperforming asset numbers above.

Non-Interest Income and Operating Expenses
Non-interest income for the quarter ended September 30, 2021 totaled $4.76 million, a $0.07 million increase compared to $4.69 million the prior quarter, and a $0.91 million decrease from the $5.67 million recorded in the third quarter of 2020. The decrease in non-interest income compared to the third quarter of 2020 was due to a $1.20 million decrease in revenue from the sale and servicing of mortgage loans, which was partially offset by a $0.14 million increase in debit card revenue.

Non-interest income for the first nine months of 2021 increased $0.98 million, or 7%, to $14.76 million as compared to $13.78 million for the first nine months of 2020, including a $0.63 million increase in debit card interchange fees.

Operating expenses for the quarter ended September 30, 2021 totaled $10.32 million, an increase of $0.85 million, or 9%, compared to the quarter ended June 31, 2021, and increased by $1.03 million, or 11%, compared to the third quarter of 2020. The increase compared to the third quarter of 2020 includes $0.15 million in other expense, reflecting non-recurring donations.

Operating expenses for the nine-month period ended September 30, 2021, totaled $29.77 million, a $2.98 million, or 11%, increase over the first nine months of 2020.

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 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 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

Matthew McDonnell, SVP & CFO
mmcdonnell@blackhawkbank.com

Phone: (608) 364-8911

BLACKHAWK BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2021 AND DECEMBER 31, 2020
(UNAUDITED)

		September 30,				December 31,
Assets		2021				2020
		(Dollars in thousands, except
		share and per share data)
Cash and due from banks		$	16,536			$	12,012
Interest-bearing deposits in banks and other institutions			101,310				42,119
Total cash and cash equivalents			117,846				54,131
Certificates of deposit in banks and other institutions			3,412				4,159
Equity securities at fair value			2,555				2,517
Securities available-for-sale			469,917				349,565
Loans held for sale			6,029				6,096
Federal Home Loan Bank stock, at cost			2,150				2,150
Loans, less allowance for loan losses of $11,224 and $10,764
at September 30, 2021 and December 31, 2020, respectively			652,294				662,225
Premises and equipment, net			20,906				20,254
Goodwill and core deposit intangible			11,723				12,018
Mortgage servicing rights			3,756				3,409
Cash surrender value of bank-owned life insurance			11,363				11,126
Other assets			16,043				13,949
Total assets		$	1,317,994			$	1,141,599
Liabilities and Stockholders' Equity
Liabilities
Deposits:
Noninterest-bearing		$	349,827			$	268,866
Interest-bearing			819,258				718,388
Total deposits			1,169,085				987,254
Subordinated debentures and notes (including $1,031 at fair value at
September 30, 2021 and December 31, 2020)			20,155				5,155
Senior secured term note			11,667				12,833
Other borrowings			5,000				14,000
Other liabilities			11,585				10,602
Total liabilities			1,217,492				1,029,844
Stockholders' equity
Common stock, $0.01 par value, 10,000,000 shares authorized;
3,479,069 and 3,435,348 shares issued as of September 30, 2021 and
December 31, 2020, respectively			35				35
Additional paid-in capital			35,665				35,062
Retained earnings			79,388				69,676
Treasury stock, 630,991 and 62,999 shares at cost as of September 30, 2021
and December 31, 2020, respectively			(18,951	)			(941	)
Accumulated other comprehensive income (loss)			4,365				7,923
Total stockholders' equity			100,502				111,755
Total liabilities and stockholders' equity		$	1,317,994			$	1,141,599

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

		Nine months ended September 30,
		2021				2020
		(Amounts in thousands, except per share data)
Interest Income:
Interest and fees on loans		$	24,956			$	25,362
Interest and dividends on available-for-sale securities:
Taxable			5,309				4,729
Tax-exempt			1,182				1,067
Interest on deposits in other financial institutions			150				244
Total interest income			31,597				31,402
Interest Expense:
Interest on deposits			1,258				2,381
Interest on subordinated debentures			353				141
Interest on senior secured term note			313				385
Interest on other borrowings			21				88
Total interest expense			1,945				2,995
Net interest income before provision for loan losses			29,652				28,407
Provision for loan losses			500				5,885
Net interest income after provision for loan losses			29,152				22,522
Noninterest Income:
Service charges on deposits accounts			2,140				2,254
Net gain on sale of loans			6,726				7,509
Net loan servicing income			495				(254	)
Debit card interchange fees			3,392				2,759
Net gains on sales of securities available-for-sale			-				107
Net other gains (losses)			101				64
Increase in cash surrender value of bank-owned life insurance			237				235
Change in value of equity securities			(12	)			77
Other			1,685				1,030
Total noninterest income			14,764				13,781
Noninterest Expenses:
Salaries and employee benefits			17,605				16,097
Occupancy and equipment			3,547				3,293
Data processing			1,921				1,700
Debit card processing and issuance			1,417				1,200
Advertising and marketing			310				222
Amortization of core deposit intangible			294				330
Professional fees			1,224				1,157
Office Supplies			244				273
Telephone			425				437
Other			2,785				2,083
Total noninterest expenses			29,772				26,792
Income before income taxes			14,144				9,511
Provision for income taxes			3,437				2,011
Net income		$	10,707			$	7,500
Key Ratios
Basic Earnings Per Common Share		$	3.45			$	2.26
Diluted Earnings Per Common Share			3.45				2.26
Dividends Per Common Share			0.33				0.33
Net Interest Margin (1)			3.32	%			3.89	%
Efficiency Ratio (1)(2)			67.01	%			63.44	%
Return on Assets			1.13	%			0.95	%
Return on Common Equity			13.49	%			9.69	%

(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
		September 30,				June 30,				March 31,				December 31,				September 30,
		2021				2021				2021				2020				2020
		(Dollars in thousands, except per share data)				(Dollars in thousands, except per share data)
Interest Income:
Interest and fees on loans		$	8,180			$	8,621			$	8,155			$	8,079			$	8,671
Interest on available-for-sale securities:
Taxable			1,830				1,759				1,721				1,598				1,607
Tax-exempt			419				378				384				384				372
Interest on deposits in other financial institutions			61				48				41				33				41
Total interest income			10,490				10,806				10,301				10,094				10,691
Interest Expense:
Interest on deposits			421				421				415				458				565
Interest on subordinated debentures			195				117				41				41				42
Interest on senior secured term note			103				104				107				113				119
Interest on other borrowings			-				-				20				40				47
Total interest expense			719				642				583				652				773
Net interest income before provision for loan losses			9,771				10,164				9,718				9,442				9,918
Provision for loan losses			-				-				500				1,715				2,615
Net interest income after provision for loan losses			9,771				10,164				9,218				7,727				7,303
Noninterest Income:
Service charges on deposits accounts			787				663				690				781				747
Net gain on sale of loans			2,147				2,217				2,362				3,572				3,412
Net loan servicing income			90				36				369				(177	)			26
Debit card interchange fees			1,146				1,218				1,027				979				1,002
Net gains on sales of securities available-for-sale			-				-				-				428				-
Net other gains (losses)			52				7				42				-				58
Increase in cash surrender value of bank-owned life insurance			78				72				87				75				76
Other			457				479				458				310				344
Total noninterest income			4,757				4,692				5,035				5,968				5,665
Noninterest Expenses:
Salaries and employee benefits			6,118				5,753				5,734				5,851				5,585
Occupancy and equipment			1,273				1,092				1,182				986				1,137
Data processing			689				641				591				683				629
Debit card processing and issuance			489				503				425				384				409
Advertising and marketing			141				70				99				75				87
Amortization of intangibles			96				96				104				107				107
Professional fees			434				399				390				373				386
Office Supplies			74				93				77				90				94
Telephone			139				144				141				140				138
Other			865				673				968				637				714
Total noninterest expenses			10,318				9,464				9,711				9,326				9,286
Income before income taxes			4,210				5,392				4,542				4,369				3,682
Provision for income taxes			988				1,337				1,112				1,021				819
Net income		$	3,222			$	4,055			$	3,430			$	3,348			$	2,863
Key Ratios
Basic Earnings Per Common Share		$	1.13			$	1.30			$	1.02			$	1.00			$	0.86
Diluted Earnings Per Common Share			1.13				1.30				1.02				1.00				0.86
Dividends Per Common Share			0.11				0.11				0.11				0.11				0.11
Book Value Per Common Share			35.29				34.97				32.95				33.14				32.37
Tangible Book Value Per Share			31.17				30.81				29.40				29.57				28.74
Number of Shares Outstanding			2,848,078				2,842,828				3,359,613				3,372,349				3,302,316
Average Number of Shares Outstanding			2,848,109				3,118,265				3,372,684				3,360,579				3,332,071
Net Interest Margin (1)			3.11	%			3.37	%			3.52	%			3.63	%			3.83	%
Efficiency Ratio (1)(2)			70.70	%			63.28	%			65.53	%			61.80	%			59.39	%
Return on Assets			0.96	%			1.26	%			1.16	%			1.20	%			1.03	%
Return on Common Equity			12.57	%			15.74	%			12.44	%			12.08	%			10.64	%
(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
	September 30,								June 30,				March 31,				December 31,
			2021				2021				2021				2020				2020
Cash and due from banks		$	16,536			$	16,418			$	15,108			$	12,012			$	17,403
Interest-bearing deposits in banks and other			104,722				140,073				50,199				46,278				47,848
Securities			472,472				448,072				379,187				352,082				317,761
Net loans/leases			658,323				666,738				700,399				668,321				681,060
Goodwill and core deposit intangible			11,723				11,819				11,914				12,018				12,125
Other assets			54,218				53,629				50,826				50,888				50,105
Total assets		$	1,317,994			$	1,336,749			$	1,207,633			$	1,141,599			$	1,126,302
Deposits		$	1,169,085			$	1,188,997			$	1,068,197			$	987,254			$	960,773
Subordinated debentures			20,155				20,155				5,155				5,155				5,155
Senior secured term note			11,667				12,056				12,445				12,833				13,222
Borrowings			5,000				5,000				4,000				14,000				29,000
Other liabilities			11,585				11,131				7,138				10,602				10,161
Stockholders' equity			100,502				99,410				110,698				111,755				107,991
Total liabilities and stockholders' equity		$	1,317,994			$	1,336,749			$	1,207,633			$	1,141,599			$	1,126,302
ASSET QUALITY DATA
(Amounts in thousands)		September 30,				June 30,				March 31,				December 31,				September 30,
			2021				2021				2021				2020				2020
Non-accrual loans		$	7,827			$	8,228			$	6,361			$	7,013			$	8,584
Accruing loans past due 90 days or more			-				-				-				-				196
Troubled debt restructures - accruing			1,975				1,958				1,996				2,057				2,176
Total nonperforming loans		$	9,802			$	10,186			$	8,357			$	9,070			$	10,956
Other real estate owned			-				-				-				1				1
Total nonperforming assets		$	9,802			$	10,186			$	8,357			$	9,071			$	10,957
Total loans		$	669,547			$	677,967			$	711,515			$	679,085			$	691,003
Allowance for loan losses			11,224				11,229				11,116				10,764				9,943
Loans, less allowance for loan losses		$	658,323			$	666,738			$	700,399			$	668,321			$	681,060
Nonperforming Assets to total Assets			0.74	%			0.76	%			0.69	%			0.79	%			0.97	%
Nonperforming loans to total loans			1.46	%			1.50	%			1.17	%			1.34	%			1.59	%
Allowance for loan losses to total loans			1.68	%			1.66	%			1.56	%			1.59	%			1.44	%
Allowance for loan losses to nonperforming loans			114.5	%			110.2	%			133.0	%			118.7	%			90.8	%
	For the Quarter Ended
	September 30,								June 30,				March 31,				December 31,
ROLL FORWARD OF ALLOWANCE			2021				2021				2021				2020				2020
Beginning Balance		$	11,229			$	11,116			$	10,764			$	9,943			$	10,102
Provision			-				-				500				1,715				2,615
Loans charged off			103				61				582				1,334				2,892
Loan recoveries			98				174				434				440				118
Net charge-offs			5				(113	)			148				894				2,774
Ending Balance		$	11,224			$	11,229			$	11,116			$	10,764			$	9,943

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

Average Balance Sheet with Resultant Interest and Rates
(Dollars in thousands - unaudited)
(Yields on a tax-equivalent basis) (1)		For the Quarter Ended
		September 30, 2021												June 30, 2021												September 30, 2020
		Average								Average				Average								Average				Average								Average
		Balance				Interest				Rate				Balance				Interest				Rate				Balance				Interest				Rate
Interest Earning Assets:
Interest-bearing deposits and other		$	119,991			$	61				0.20	%		$	105,385			$	48				0.18	%		$	42,716			$	41				0.38	%
Investment securities:
Taxable investment securities			413,853				1,830				1.75	%			365,329				1,759				1.93	%			257,506				1,607				2.48	%
Tax-exempt investment securities			52,663				420				4.05	%			52,197				378				3.73	%			47,090				372				4.09	%
Total Investment securities			466,516				2,250				2.01	%			417,526				2,137				2.16	%			304,596				1,979				2.73	%
Loans			675,070				8,180				4.81	%			700,109				8,621				4.94	%			693,418				8,670				4.97	%
Total Earning Assets		$	1,261,577			$	10,491				3.34	%		$	1,223,020			$	10,806				3.58	%		$	1,040,730			$	10,690				4.13	%
Allowance for loan losses			(11,229	)											(11,221	)											(11,018	)
Cash and due from banks			16,821												17,124												18,901
Other assets			61,274												58,008												58,022
Total Assets		$	1,328,443											$	1,286,931											$	1,106,635
Interest Bearing Liabilities:
Interest bearing checking accounts		$	300,935			$	180				0.24	%		$	302,946			$	180				0.24	%		$	292,875			$	166				0.23	%
Savings and money market deposits			423,894				109				0.10	%			396,476				96				0.10	%			335,043				111				0.13	%
Time deposits			76,682				133				0.69	%			77,155				145				0.75	%			91,366				288				1.25	%
Total interest bearing deposits			801,511				422				0.21	%			776,577				421				0.22	%			719,284				565				0.31	%
Subordinated debentures and notes			20,155				195				3.83	%			13,067				117				3.59	%			5,155				42				3.25	%
Borrowings			16,670				103				2.45	%			16,501				104				2.51	%			42,637				165				1.54	%
Total Interest-Bearing Liabilities		$	838,336			$	720				0.34	%		$	806,145			$	642				0.32	%		$	767,076			$	772				0.40	%
Interest Rate Spread											3.00	%											3.26	%											3.73	%
Noninterest checking accounts			381,046												371,146												224,552
Other liabilities			7,381												6,283												7,950
Total liabilities			1,226,763												1,183,574												999,578
Total Stockholders' equity			101,680												103,357												107,057
Total Liabilities and
Stockholders' Equity		$	1,328,443											$	1,286,931											$	1,106,635
Net Interest Income/Margin						$	9,771				3.11	%						$	10,164				3.37	%						$	9,918				3.83	%

(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
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)(1)		For the Nine Months Ended
		September 30, 2021												September 30, 2020
		Average								Average				Average								Average
		Balance				Interest				Rate				Balance				Interest				Rate
Interest Earning Assets:
Interest-bearing deposits and other		$	99,997			$	150				0.20	%		$	32,518			$	244				1.00	%
Investment securities:
Taxable investment securities			366,982				5,309				1.93	%			234,704				4,729				2.69	%
Tax-exempt investment securities			52,329				1,182				3.87	%			44,811				1,067				4.10	%
Total Investment securities			419,311				6,491				2.18	%			279,515				5,796				2.92	%
Loans			686,905				24,956				4.86	%			674,503				25,362				5.02	%
Total Earning Assets		$	1,206,213			$	31,597				3.54	%		$	986,536			$	31,402				4.29	%
Allowance for loan losses			(11,176	)											(9,274	)
Cash and due from banks			16,668												16,594
Other assets			59,861												58,483
Total Assets		$	1,271,566											$	1,052,339
Interest Bearing Liabilities:
Interest bearing checking accounts		$	296,196			$	521				0.23	%		$	287,538			$	657				0.31	%
Savings and money market deposits			392,575				290				0.10	%			307,807				578				0.25	%
Time deposits			78,529				447				0.76	%			102,306				1,146				1.50	%
Total interest bearing deposits			767,300				1,258				0.22	%			697,651				2,381				0.46	%
Subordinated debentures			12,847				353				3.67	%			5,155				141				3.64	%
Borrowings			19,811				334				2.25	%			35,584				473				1.78	%
Total Interest-Bearing Liabilities		$	799,958			$	1,945				0.32	%		$	738,390			$	2,995				0.54	%
Interest Rate Spread											3.22	%											3.75	%
Noninterest checking accounts			358,500												203,854
Other liabilities			7,012												7,131
Total liabilities			1,165,470												949,375
Total Stockholders' equity			106,096												102,964
Total Liabilities and
Stockholders' Equity		$	1,271,566											$	1,052,339
Net Interest Income/Margin						$	29,652				3.32	%						$	28,407				3.89	%

SOURCE: Blackhawk Bancorp, Inc.

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