Blackhawk Bancorp, Inc. (OTCBB: BHWB) reports that net
income for the first quarter of 2014 increased 20% to $700,000
compared to $583,000 earned in the first quarter of 2013. Earnings
per diluted share for the quarter increased $0.05 to $0.24 compared
to $0.19 the first quarter last year. The company’s total assets
increased 4% to $604.2 million as of March 31, 2014 compared to
$583.4 million at the end of 2013.
“The increase in earnings reflects a continued improvement in
credit quality,” said Rick Bastian, the company’s president and
CEO. “The provision for loan losses dropped 53% to $511,000
compared to $1,080,000 last year. We also realized a slight
increase in net interest income, but these gains were largely
offset by a slowdown in secondary market loan production,” he
added.
The following table summarizes key performance and asset quality
measures for the quarter ended March 31, 2014 compared to the
previous four quarters:
Key Performance and Asset Quality
Measures
1st Qtr
2014
4th Qtr
2013
3rd Qtr
2013
2nd Qtr
2013
1st Qtr
2013
Diluted
Earnings per share $0.24 $0.75 $0.36 $0.16 $0.19 Return on average
assets .49% 1.25% .67% .35% .42% Return on common equity 5.70%
17.47% 8.95% 3.66% 4.52% Net interest margin 3.70% 3.79% 3.69%
3.66% 3.76% Efficiency ratio 79.1% 62.4% 74.4% 68.2% 74.9%
Nonaccrual loans to total loans 1.49% 1.63% 1.97% 1.68% 2.46%
Nonaccrual loans and OREO to total loans 1.89% 2.11% 2.75% 2.55%
3.07% Allowance for loan losses to total loans 1.26% 1.26% 1.58%
1.86% 1.77% Allowance for loan losses to nonaccrual loans 84.7%
77.5% 82.3% 110.7% 72.2% Subsidiary bank total risk-based capital
13.80% 13.51% 13.46%
13.64% 13.62%
Net Interest Income
Net interest income for the first quarter increased 1% to
$4,776,000 compared to $4,731,000 for the first quarter of 2013;
however, the net interest margin decreased 6 basis points to 3.70%
compared to 3.76% the first quarter last year. “Loan and investment
re-pricing in this prolonged low rate environment continues to put
downward pressure on the net interest margin,” said Todd James, the
company’s chief financial officer. “Loan growth and lower funding
costs are offsetting most of the margin squeeze, but have not been
robust enough to improve it,” he added.
Average total earning assets for the quarter increased by $15.8
million to $541.5 million compared to $525.7 million in the first
quarter of 2013. The growth in earning assets includes a $16.1
million, or 4.4%, increase in average total loans. Average total
deposits for the first quarter increased by $6.3 million, or 1%, to
$501.1 million compared to $494.8 million the first quarter of last
year. The increase in average total deposits represents growth in
demand deposits accounts.
Provision for Loan Losses and Credit Quality
The provision for loan losses in the first quarter dropped by
$569,000, or 53%, to $511,000 compared to $1,080,000 in first
quarter of 2013 reflecting improving asset quality. Nonaccrual
loans and other real estate owned totaled $7.1 million, or 1.89% of
total loans, at March 31, 2014 compared to $8.1 million, or 2.10%
of total loans, at December 31, 2013 and $11.1 million, or 3.1% of
total loans, at March 31, 2013.
Net loan charge-offs decreased by 43% to $664,000 compared to
$1,175,000 the first quarter of 2013. The following table
summarizes the activity in the allowance for loan losses for the
quarters ended March 31, 2014 and 2013 and the year ended December
31, 2013:
Activity in Allowance For Loan Losses:
Year Ended (in Thousands) Quarter Ended March 31,
December 31, 2014 2013 2013 Beginning allowance for loan
losses 4,894 6,520 6,520 Provision for loan losses 511 1,080 4,140
Charge-offs (761) (1,234) (6,590) Recoveries 97 59 824 Ending
allowance for loan losses 4,741 6,425 4,894
Net charge-offs to average total loans,
annualized
0.69% 1.31%
1.55%
The ratio of the allowance for loan losses to total loans was
1.26% as of March 31, 2014, which was unchanged from the previous
quarter and down by 51 basis points compared to 1.77% at March 31,
2013. However, the ratio of the allowance for loan losses to
nonaccrual loans increased to 85% at March 31, 2014 compared to 78%
at December 31, 2013 and 72% at March 31, 2013.
Non-Interest Income and Operating Expenses
Non-interest income for the first quarter of 2014 decreased by
15% to $1,843,000 compared to $2,158,000 the first quarter of the
prior year. Net revenue from the sale and servicing of mortgage
loans decreased in the first quarter by 50% to $372,000 compared to
$740,000 the prior year.
Operating expenses for the first quarter increased $104,000, or
2%, to $5,371,000 compared to $5,267,000 in the first quarter of
2013.
Outlook
Blackhawk has created a strong credit culture and the processes
to support it; however, the economic recession and depressed real
estate values have resulted in an elevated level of losses and
nonperforming loans. While the level of nonperforming loans has
been decreasing and should result in improved earnings, the
potential for continuing economic weakness presents a heightened
level of risk. For that reason, the company expects to continue
fortifying its balance sheet by conserving capital, strengthening
the allowance for loan losses and maintaining ample liquidity to
meet the demands of its customer base. The company will however
continue to seek profitable growth opportunities in its Wisconsin
and Illinois markets, without sacrificing profitability or credit
quality. Blackhawk emphasizes the value of its personal attention
and the service it provides that remain unmatched by larger
competitors.
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
Beloit, 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 its banking
products such as health savings accounts and investment
management.
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.
Further information is available on the Company’s website at
www.blackhawkbank.com.
BLACKHAWK BANCORP, INC. AND
SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED) Three months ended March 31, 2014
2013 (Amounts in thousands, except share and
per share data) Interest Income: Interest and fees on loans $ 4,620
$ 4,692 Interest on trading securities 4 14 Interest and dividends
on available-for-sale securities: Taxable 465 537 Tax-exempt 335
291 Interest on federal funds sold and securities purchased under
agreements to resell 64 94 Interest on interest-bearing deposits in
banks 1 3
Total interest and
dividend income 5,489 5,631
Interest Expense: Interest on deposits 534 747 Interest on
borrowings 27 98 Interest on subordinated debentures and notes
152 55
Total interest expense
713 900
Net interest and dividend
income before provision for loan losses 4,776 4,731 Provision
for loan losses 511 1,080
Net
interest and dividend income after provision for loan losses
4,265 3,651 Noninterest Income:
Service charges on deposits accounts 654 656 Net gain on sale of
loans 298 771 Net loan servicing income (loss) 74 (31 ) Debit card
interchange fees 542 544 Net gains (losses) on trading activities
17 4 Net gains (losses) on available-for-sale securities 198 - Net
other gains (losses) (276 ) (76 ) Increase in cash surrender value
of bank-owned life insurance 80 81 Other 256
209
Total noninterest income 1,843
2,158 Noninterest Expenses: Salaries and
employee benefits 2,884 2,753 Occupancy and equipment 668 660 Data
processing 606 581 FDIC assessment 185 185 Advertising and
marketing 63 88 Amortization of intangibles 25 35 Professional fees
230 273 Office Supplies 89 86 Telephone 92 87 Other 529
519
Total noninterest expenses
5,371 5,267
Income before income taxes
737 542 Provision for income taxes 37 (41 )
Net income $ 700 $ 583
Key
Ratios Basic
Earnings Per Common Share $ 0.25 $ 0.19 Diluted Earnings Per Common
Share 0.24 0.19 Net Interest Margin (FTE) 3.70 % 3.76 %
Efficiency Ratio (FTE) 79.12 % 74.91 % Return on Assets 0.49 % 0.42
% Return on Common Equity 5.70 % 4.52 %
BLACKHAWK BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS MARCH 31, 2014 AND DECEMBER
31, 2013 (UNAUDITED) March 31, December
31, Assets 2014
2013 (Amounts in thousands, except share and per share data)
Cash and due from banks $ 29,312 $ 11,350 Federal funds sold and
securities purchased under agreements to resell 13,048 21,064
Interest-bearing deposits in banks 418 2,078
Total cash and cash equivalents 42,778
34,492 Trading securities 226 315 Securities
available-for-sale 153,033 127,985 Loans held for sale 249 1,161
Federal Home Loan Bank stock, at cost 2,266 2,266 Loans, less
allowance for loan losses of $4,741 and $4,894 at March 31, 2014
and December 31, 2013, respectively 371,911 382,295 Office
buildings and equipment, net 8,846 8,922 Goodwill 5,037 5,037 Other
intangible assets, net 2,945 3,091 Cash surrender value of
bank-owned life insurance 9,391 9,311 Other assets 7,540
8,565 Total assets $ 604,222 $ 583,440
Liabilities and Stockholders' Equity
Liabilities Deposits: Noninterest-bearing $ 106,012 $ 91,450
Interest-bearing 418,270 419,308 Total
deposits 524,282 510,758 Borrowings (including $2,140 and $2,157 at
fair value at March 31, 2014 and December 31, 2013, respectively)
15,920 10,157 Subordinated debentures and notes (including $1,031
at fair value at March 31, 2014 and December 31, 2013) 11,255
11,255 Other liabilities 3,026 2,968
Total liabilities 554,483 535,138
Stockholders’ equity Preferred stock, $0.01
par value, 1,000,000 shares authorized; 10,500 shares issued as of
March 31, 2014 and December 31, 2013, respectively 10,500 10,483
Common stock, $0.01 par value, 10,000,000 shares authorized;
2,312,199 and 2,299,496 shares issued as of March 31, 2014 and
December 31, 2013, respectively 23 23 Surplus 9,807 9,768 Retained
earnings 29,714 29,166
Treasury stock, 87,167 and 83,252 shares
at cost as of March 31, 2014
and December 31, 2013, respectively (960 ) (909 ) Accumulated other
comprehensive income (loss) 655 (229 ) Total
stockholders' equity 49,739 48,302
Total liabilities and stockholders' equity $ 604,222
$ 583,440
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) Three months ended
March 31, 2014 Three months ended March 31, 2013 Average Average
Average Average Balance Interest Rate Balance Interest
Rate
Interest Earning Assets: Interest-bearing
deposits in banks $ 2,836 $ 1 0.19 % $ 3,818 $ 3 0.28 % Federal
funds sold & securities purchased under agreements to resell
19,745 64 1.31 % 30,744 94 1.24 % Investment securities: Taxable
investment securities 100,037 469 1.90 % 93,801 551 2.38 %
Tax-exempt investment securities 39,189 335
5.22 % 33,849 291 5.19 % Total
Investment securities 139,226 804 2.84 % 127,650 842 3.13 % Loans
379,691 4,620 4.93 % 363,520
4,692 5.23 %
Total Earning
Assets $ 541,498 $ 5,489
4.24 % $ 525,732 $ 5,631
4.45 % Allowance for loan losses (4,920 )
(6,260 ) Cash and due from banks 12,726 13,030 Other assets
34,250 35,834
Total Assets $
583,554 $ 568,336
Interest Bearing
Liabilities: Interest bearing checking accounts $ 159,944 $ 116
0.29 % $ 158,038 $ 234 0.60 % Savings and money market deposits
145,533 53 0.15 % 146,721 71 0.20 % Time deposits 104,929
365 1.41 % 106,701 442
1.68 % Total interest bearing deposits 410,406 534 0.53 %
411,460 747 0.74 % Subordinated debentures and notes 15,662 152
5.56 % 6,103 55 3.67 % Borrowings 11,083 27
0.69 % 15,116 98 2.63 %
Total Interest-Bearing Liabilities $ 437,151
$ 713 0.66 % $
432,679 $ 900 0.84 %
Interest Rate Spread 3.58 % 3.61
% Noninterest checking accounts 90,674 83,358 Other
liabilities 6,258 3,282 Total
liabilities 534,083 519,319 Preferred Stock 10,490 10,392 Common
Stockholders' equity 38,981 38,625
Total Stockholders' equity 49,471 49,017
Total
Liabilities and Stockholders' Equity $ 583,554 $
568,336
Net Interest Income/Margin $
4,776 3.70 % $ 4,731
3.76 %
Blackhawk Bancorp, Inc.R. Richard Bastian, III, President
& CEOrbastian@blackhawkbank.comorTodd J. James, EVP &
CFOtjames@blackhawkbank.comPhone: (608) 364-8911
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