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.

ReleaseID: 574764