- Q2 2008 Net Income Up 32% BELOIT, Wis., July 16
/PRNewswire-FirstCall/ -- Blackhawk Bancorp, Inc. (OTC:BHWB)
(BULLETIN BOARD: BHWB) today announced improved financial results
for the second quarter ended June 30, 2008. Net income rose to a
second quarter record of $812,000, or $0.37 per fully diluted
share, compared with $613,000, or $0.27 per diluted share in second
quarter 2007. Net income for the first six months of the year rose
to $1,409,000, or $0.65 per fully diluted share, compared with
$1,084,000, or $0.48 per diluted share for the same period in 2007.
Total assets increased to $472.6 million as of June 30, 2008
compared with $464.7 million at year end 2007. "It's extremely
satisfying to deliver a positive financial report to our
shareholders with negative economic news coming at us from all
directions in the first half of 2008," said Rick Bastian, president
and CEO. "Our strategy of providing high-touch tailored financial
solutions through experienced bankers continues to build customer
loyalty. A reputation of service spread by word of mouth is better
than any advertising," he added. Net Interest Income Rises Net
interest income for the second quarter increased 17% to $3.7
million as compared with $3.1 million in the second quarter 2007.
For the first six months of 2008, net interest income was up 18% to
$7.3 million, compared to $6.2 million for the same period a year
ago. The increase in net interest income includes both an increase
in average earning assets and an improved net interest margin being
earned on those assets. The net interest margin for the second
quarter increased 27 basis points to 3.41%, and is up 31 basis
points to 3.42% for the first half of the year. Strong deposit
growth and improved investment portfolio yields contributed to the
increases in net interest income and improved net interest margin.
Average total loans for the quarter increased 6% to $297.1 million
compared with $278.5 million in second quarter 2007. While the
balance of retail and mortgage loans grew, the majority of loan
growth has been in the commercial and commercial real estate
portfolios, which consist of loans to a diversified base of
customers, with less than 8% of the bank's total loans being
construction and land development loans. Average total deposits for
the second quarter of 2008 increased 7% to $356.4 million compared
with $334.5 million in the same period a year ago. This included an
additional $16.6 million in interest checking, driven by the
success of Blackhawk's EasyMoney Checking product, Bastian noted.
For the six months, average total deposits increased 7% to $349.5
million compared with $326.3 million over the same period in 2007.
"EasyMoney Checking is a good example of an innovative product that
serves customers' needs and also benefits the company," said
Bastian. "Many of our customers aren't able to maintain large
balances, so they appreciate receiving a very attractive return
with no minimum balance. The bank receives fee income from a
required minimum number of debit card transactions each month --
transactions the customers would make anyway." Non-Interest Income
and Operating Expenses Quarterly non-interest income increased 18%
to $1.59 million, with year-to-date non-interest income up 15% to
$2.9 million. The growth in non-interest income in the second
quarter compared to the same period in 2007 includes increases of
$173,000 in mortgage banking revenue, $97,000 in deposit service
charges, and $48,000 generated from debit card interchange. Lower
interest rates in the secondary markets helped drive mortgage
refinancing activity during the first six months even as the
housing market cooled. The growth of EasyMoney Checking contributed
to the increases in service charges and debit card interchange.
"While we don't expect mortgage loan volume to continue at its
current pace, the increases so far with their affect on both our
non-interest income and our net interest income set us up to have a
good year," said Bastian. "We believe we have built one of the best
mortgage origination and processing teams in our area, which
benefits our customers who were contacted to take advantage of
refinance opportunities," he added. Total operating expenses for
the second quarter increased 11% to $3.89 million compared with
$3.50 million for 2007. This included an 11% increase in
compensation expense, and higher occupancy, data processing and
professional fees. The increase in compensation costs is partially
due to the higher mortgage loan production, and brokerage and
investment management fees, which are generated by commission-based
employees. The other expense increases reflect investment in new
technology, equipment and staff development and retention. Bastian
added, "We continue to invest in our people, and technology to
drive growth." Credit Quality Remains Strong Blackhawk's provision
for loan losses in second quarter was $228,000, an 83% increase
over the $124,000 provision recorded in second quarter 2007, but
still amounted to only .31% of total loans on an annualized basis.
Net charge-offs in the second quarter increased to $196,000
compared with $34,000 for the same period in 2007. For the year,
net charge-offs increased to $245,000, or .16% of total loans on an
annualized basis, compared with $187,000 for the six months in
2007. Blackhawk's prudent underwriting practices and close
relationships with customers have helped ensure the credit quality
of the bank's loan portfolio, however it has experienced an
increase in delinquencies and nonperforming loans. Non-performing
loans increased to .98% of total loans at June 30, 2008 compared
with .78% at December 31, 2007 and .61% at June 30, 2007. "We've
done a good job of insulating ourselves from many of the problems
facing the financial sector. However, we can't immunize ourselves
from the realities around us," said Bastian. "We expect an
increased level of loan loss provision to continue throughout 2008
to strengthen our allowance for loan losses." While Blackhawk has
not directly participated in the sub-prime mortgage business, the
recent slowdown in housing and overall economic downturn could
result in further increases in nonperforming loans and charge-offs.
"A key benefit of being a relationship bank is our frequent contact
with customers, which allows us to more effectively monitor their
financial situations and gives us more opportunities to work with
them to avert late payments and defaults," said Bastian. "This is
one of the best ways we know to protect the quality of our loan
portfolio." Outlook Bastian remarked, "We are evaluating the best
methods to take market share, which is our primary growth strategy
in the relatively stable markets we serve. We continue investing in
sales training and tools, which allow our bankers to deliver
personalized solutions to our customers, deepening the
relationships and increasing our share of the financial services
products they purchase. We remain committed to innovative and niche
products such as EasyMoney Checking and health savings accounts for
small business owners." 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
remains unmatched by larger competitors. Blackhawk has started
construction of a new full service facility in a manufacturing and
business section of Rockford, Illinois which will be convenient to
its niche markets of small to medium sized manufacturing companies
and the Hispanic immigrant population. In spite of the soft
economy, the Company believes its commitment to service and
personalized attention will appeal to a great number of people.
About Blackhawk Bancorp Blackhawk Bancorp, Inc. is headquartered in
Beloit, Wisconsin and is the parent company of Blackhawk Bank,
which operates seven 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 and trust, 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/. 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"; and the inability of
third party vendors to perform critical services for the company or
its customers. Financial Summary Follows BLACKHAWK BANCORP, INC.
AND SUBSIDIARY CONDENSED STATEMENTS OF INCOME (Unaudited) Three
Months Ended Six Months Ended (Dollars in thousands, June 30, June
30, except per share data) 2008 2007 2008 2007 Interest and
Dividend Income $6,796 $6,843 $13,834 $13,470 Interest Expense
3,106 3,696 6,536 7,300 Net Interest and Dividend Income 3,690
3,147 7,298 6,170 Provision for loan losses 228 124 456 253
Non-Interest Income 1,591 1,344 2,931 2,536 Non-Interest Expense
3,883 3,497 7,768 6,955 Income Before Income Taxes 1,170 870 2,005
1,498 Income Taxes 358 257 596 414 Net Income $812 $613 $1,409
$1,084 Key Ratios Diluted Earnings Per Share $0.37 $0.27 $0.65
$0.48 Dividends Per Share 0.09 0.09 0.18 0.18 Average Outstanding
Shares 2,165,608 2,215,541 2,168,785 2,222,576 Ending Outstanding
Shares 2,154,504 2,203,885 2,154,504 2,203,885 Net Interest Margin
3.41% 3.14% 3.42% 3.11% Efficiency Ratio 72.50% 77.22% 74.94%
79.25% Return on Assets 0.68% 0.55% 0.60% 0.49% Return on Equity
13.14% 10.11% 11.40% 9.03% CONDENSED BALANCE SHEETS (Unaudited)
June 30, December 31, (Dollars in thousands) 2008 2007 Assets: Cash
and cash equivalents $25,543 $22,793 Interest-bearing deposits in
banks 1,038 1,066 Trading securities 22,302 26,520 Securities
available.for sale 97,271 92,266 Federal Home Loan Bank Stock, at
cost 4,085 4,085 Loans, net of allowances for loan losses 295,795
292,529 Office buildings and equipment, net 7,674 7,424 Intangible
assets, net 6,788 6,636 Cash surrender value of bank-owned life
insurance 7,425 7,286 Other assets 4,751 4,068 Total Assets
$472,672 $464,673 Liabilities and Stockholders' Equity: Deposits
$351,002 $331,239 Borrowings 89,444 100,931 Subordinated debentures
5,158 5,158 Other liabilities 2,840 2,852 Total liabilities 448,444
440,180 Stockholders' equity 24,228 24,493 Total liabilities and
stockholders' equity $472,672 $464,673 DATASOURCE: Blackhawk
Bancorp, Inc. CONTACT: Todd James, CFO or R. Richard Bastian III,
President & CEO, both of Blackhawk Bancorp, Inc.,
+1-608-364-8911; or Diane Hettwer or Woody Wallace, both of The
Investor Relations Company, +1-312-245-2700, for Blackhawk Bancorp,
Inc. Web site: http://www.blackhawkbank.com/
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