Blackhawk Bancorp Announces Third Quarter 2015 Results
/EINPresswire.com/ -- BELOIT, WI--(Marketwired - October 23, 2015) - Blackhawk Bancorp, Inc. (OTCQX: BHWB) reported net income of $1,129,000 for the third quarter of 2015, a $1,504,000 increase from the $375,000 loss reported for the third quarter of 2014. Earnings per diluted share for the quarter was $0.51, up $0.68 from the $0.17 per diluted share loss realized in the third quarter of 2014. The dramatic increase compared to the third quarter of last year reflects the securities fraud loss realized last year, which reduced net income by $1,593,000 in the third quarter of 2014.
Net income for the nine months ended September 2015 increased 124% to $2,933,000 compared to $1,308,000 earned the first three quarters of 2014. Earnings per diluted share for the nine month period was $1.31, a 162% increase compared to the $0.50 earned the first nine months of 2014. Excluding the fraud related loss recognized in the third quarter of 2014, net income for the first nine months of 2015 increased $32,000, or 2%, and diluted earnings per share increased $0.10, or 8%, compared to the first nine months of 2014.
"We're pleased to be reporting another quarter of solid performance," said Rick Bastian, the Company's chief executive officer. "We continue to grow our core business by providing the personal attention and financial solutions business owners and consumers want from their Bank," he added.
"Our credit quality and the strength of our reserves continue to improve. While the provision for loan losses is about the same as last year, net charge-offs are down by 63%. With the reduction in charge-offs, the allowance for loan losses has increased by 21% since the end of 2014. The added strength of our reserves gives us more flexibility to aggressively resolve remaining nonperforming loans," said Bastian. "We don't expect to be releasing any reserves, although the stabilization in credit quality could lead to reduced provision levels in the future," he added.
The following table summarizes key performance and asset quality measures for the quarter ended September 30, 2015 compared to the previous four quarters:
Key Performance and Asset 3rd Qtr 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr
Quality Measures 2015 2015 2015 2014 2014
--------------------------------------------------
Diluted EPS $0.51 $0.42 $0.38 $0.42 ($0.17)
Diluted EPS, excluding
net securities fraud
loss $0.51 $0.42 $0.38 $0.42 $0.54
ROAA .75% .63% .61% .65% (.25%)
ROAA, excluding net
securities fraud loss .75% .63% .61% .65% .81%
ROACE 10.15% 8.65% 8.16% 8.93% (3.55%)
ROACE, excluding net
securities fraud loss 10.15% 8.65% 8.16% 8.93% 11.53%
Efficiency Ratio* 71.8% 72.5% 75.9% 74.2% 71.2%
Net interest margin (tax-
equivalent basis) 3.68% 3.66% 3.70% 3.73% 3.66%
Nonaccrual loans to total
loans 1.31% 1.30% 1.28% 1.43% 1.53%
Nonaccrual loans and OREO
to total loans 1.61% 1.61% 1.53% 1.66% 1.79%
Allowance for loan losses
to total loans 1.29% 1.17% 1.21% 1.11% 1.12%
Allowance for loan losses
to nonaccrual loans 97.9% 89.7% 94.3% 77.4% 73.1%
----------------------------------------------------------------------------
* - The efficiency ratio calculation excludes net gains and losses on securities, net gains and losses on other assets and the securities related fraud loss.
Net Interest Income
Net interest income for the third quarter increased 2% to $5,019,000 compared to $4,932,000 for the third quarter of 2014, and the net interest margin increased to 3.68% compared to 3.66% the most recent quarter and the third quarter of 2014.
For the first nine months of 2015 net interest income increased $156,000, or 1%, to $14,618,000 compared to $14,462,000 the nine months of 2014. The 2015 year to date net interest margin was 3.68%, up 3 basis points compared to the first three quarters of 2014.
Average total earning assets for the quarter increased by $5.5 million to $558.0 million compared to $552.5 million in the third quarter of 2014. The increase in average total earning assets includes a $26.9 million, or 7%, increase in average total loans that was offset with a $24.6 million decrease in average short-term investments and investment securities. Average total deposits for the third quarter were $7.4 million, or 2%, higher than they were in the third quarter of 2014. This includes a $7.3 million increase in average non-interesting bearing demand deposits.
Average total earning assets for the nine months ended September 30, 2015 increased by $1.2 million to $548.6 million compared to $547.4 million the first nine months of 2014; however, total average loans were up by $24.2 million to $405.7 million compared to $381.3 million the year before. The increase in average total loans for both the quarter and year to date periods was driven by growth in the commercial and commercial real estate portfolios. The shift in earning assets from investments to loans has been helpful in maintaining the net interest margin, despite downward pressure from the prolonged low rate environment and intense competition for quality commercial credits. Average total deposits for the first three quarters of 2015 increased by $1.5 million, or less than 1%, compared to the same period the year before.
Provision for Loan Losses and Credit Quality
The provision for loan losses in the third quarter decreased by $23,000, or 4%, to $555,000 compared to $578,000 in third quarter of 2014. For the first nine months of 2015 the provision for loan losses increased $20,000 to $1,789,000 compared to $1,769,000 for the first three quarters of 2014.
Nonaccrual loans and other real estate owned totaled $6.7 million, or 1.61% of total loans, at September 30, 2015 compared to $6.6 million, or 1.61% of total loans, at June 30, 2015 and $7.0 million, or 1.79% of total loans, at September 30, 2014.
Net loan charge-offs for the first nine months of 2015 decreased 64% to $837,000 compared to $2,276,000 in the first nine months of 2014. The following table summarizes the activity in the allowance for loan losses for the nine months ended September 30, 2015 and 2014 and the year ended December 31, 2014:
Activity in Allowance For Loan Losses: Year Ended
(in Thousands) Nine Months Ended December 31,
September 30,
2015 2014 2014
---------- ---------- ---------------
Beginning allowance for loan losses 4,396 4,894 4,894
Provision for loan losses 1,789 1,769 4,140
Charge-offs (1,028) (2,556) (3,170)
Recoveries 191 280 387
---------- ---------- ---------------
Ending allowance for loan losses 5,348 4,387 4,396
========== ========== ===============
Net charge-offs to average total loans
- annualized
0.28% 0.80% 0.72%
========== ========== ===============
The ratio of the allowance for loan losses to total loans was 1.29% as of September 30, 2015, compared 1.17% at June 30, 2015, and 1.12% at September 30, 2014. The ratio of the allowance for loan losses to nonaccrual loans was 97.9% at September 30, 2015 compared to 89.7% at June 30, 2015 and 73.1% at September 30, 2015.
Non-Interest Income and Operating Expenses
Excluding the securities fraud loss from the prior year, non-interest income for the third quarter of 2015 increased $5,000 to $2,452,000 compared to $2,447,000 for the third quarter of 2014. For the first nine months of 2015 it's up by $581,000, or 9%, compared to $6,366,000 for the first nine months of last year. The year to date improvement in non-interest income includes a $350,000, or 24%, increase in revenue from the sale and servicing of mortgage loans originated for sale into the secondary market.
Operating expenses for the quarter increased by $235,000, or 5%, to $5,381,000 compared to $5,146,000 the third quarter of 2014. For the first nine months of the year operating expenses are up $503,000, or 3%, to $15,892,000 compared to $15,389,000 the first nine months of 2014.
Outlook
Blackhawk has created a strong credit culture and the processes to support it; however, economic uncertainties 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 is expected to 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 Janesville, Wisconsin. Blackhawk's locations serve individuals and small businesses, primarily with fewer than 200 employees. The Company offers a variety of value-added consultative services to small businesses and their employees related to 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"; inability to recover previously recorded losses as anticipated, and the inability of third party vendors to perform critical services for the Company or its customers.
Further information is available on the Company's website at www.blackhawkbank.com.
BLACKHAWK BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2015 AND DECEMBER 31, 2014
(UNAUDITED)
September 30, December 31,
Assets 2015 2014
----------------------------------------------------------------------------
(Amounts in thousands, except
share and per share data)
Cash and due from banks $ 10,175 $ 9,847
Interest-bearing deposits in banks and
other 19,819 11,744
---------------- ---------------
Total cash and cash equivalents 29,994 21,591
---------------- ---------------
Securities available-for-sale 134,519 129,184
Loans held for sale 1,300 1,537
Federal Home Loan Bank stock, at cost 2,266 2,266
Loans, less allowance for loan losses of
$5,348 and $4,396 at September 30, 2015
and December 31, 2014, respectively 411,321 391,448
Premises and equipment, net 7,919 8,320
Goodwill 5,037 5,037
Mortgage Servicing rights 2,475 2,640
Cash surrender value of bank-owned life
insurance 9,828 9,602
Other assets 9,473 9,848
---------------- ---------------
Total assets $ 614,132 $ 581,473
================ ===============
Liabilities and Stockholders' Equity
Liabilities
Deposits:
Noninterest-bearing $ 101,064 $ 99,068
Interest-bearing 444,934 416,716
---------------- ---------------
Total deposits 545,998 515,784
Subordinated debentures and notes
(including $1,031 at fair value at
September 30, 2015 and December 31, 2014) 11,255 11,255
Senior secured term note 8,750 9,000
Other borrowings - -
Other liabilities 3,192 3,398
---------------- ---------------
Total liabilities 569,195 539,437
---------------- ---------------
Stockholders' equity
Common stock, $0.01 par value, 10,000,000
shares authorized;
2,320,454 and 2,318,496 shares issued as
of September 30, 2015 and
December 31, 2014, respectively 23 23
Additional paid-in capital 10,280 9,960
Retained earnings 33,480 31,091
Treasury stock, 88,783 and 87,865 shares
at cost as of September 30, 2015 and
December 31, 2014, respectively (983) (969)
Accumulated other comprehensive income
(loss) 2,137 1,931
---------------- ---------------
Total stockholders' equity 44,937 42,036
---------------- ---------------
Total liabilities and stockholders'
equity $ 614,132 $ 581,473
================ ===============
BLACKHAWK BANCORP, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three months ended September 30,
2015 2014
-------------------------------------
(Amounts in thousands, except
share and per share data)
Interest Income:
Interest and fees on loans $ 4,827 $ 4,732
Interest and dividends on available-
for-sale securities:
Taxable 504 595
Tax-exempt 296 325
Interest on securities purchased
under agreements to resell 3 45
Interest on other 2 1
------------------ -----------------
Total interest and dividend income 5,632 5,698
------------------ -----------------
Interest Expenses:
Interest on deposits 364 518
Interest on subordinated debentures 153 152
Interest on senior secured term note 89 92
Interest on other borrowings 7 4
------------------ -----------------
Total interest expense 613 766
------------------ -----------------
Net interest and dividend income
before provision for loan losses 5,019 4,932
Provision for loan losses 555 578
------------------ -----------------
Net interest and dividend income
after provision for loan losses 4,464 4,354
------------------ -----------------
Noninterest Income:
Service charges on deposits accounts 724 741
Net gain on sale of loans 565 516
Net loan servicing income 93 72
Debit card interchange fees 555 561
Net gains on sales of securities
available-for-sale 121 214
Net other gains (losses) 14 (2,515)
Increase in cash value of bank-owned
life insurance 73 71
Other 307 176
------------------ -----------------
Total noninterest income 2,452 (164)
------------------ -----------------
Noninterest Expenses:
Salaries and employee benefits 2,878 2,845
Premises and equipment 650 632
Data processing 611 579
Advertising and marketing 69 55
Professional fees 261 235
Office Supplies 85 108
Telephone 105 98
Other 722 594
------------------ -----------------
Total noninterest expenses 5,381 5,146
------------------ -----------------
Income before income taxes 1,535 (956)
Provision for income taxes 406 (581)
------------------ -----------------
Net income $ 1,129 $ (375)
================== =================
Key Ratios
----------------------------------------------------------------------------
Basic Earnings Per Common Share $ 0.51 $ (0.17)
Diluted Earnings Per Common Share 0.51 (0.17)
Dividends Per Common Share 0.04 0.02
Net Interest Margin (FTE) 3.68% 3.66%
Efficiency Ratio (FTE) 71.80% 71.15%
Return on Assets 0.75% -0.25%
Return on Common Equity 10.15% -3.56%
BLACKHAWK BANCORP, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Nine months ended September 30,
2015 2014
-------------------------------------
(Amounts in thousands, except
share and per share data)
Interest Income:
Interest and fees on loans $ 14,181 $ 13,946
Interest and dividends on available-
for-sale securities:
Taxable 1,480 1,590
Tax-exempt 906 994
Interest on securities purchased
under agreements to resell 3 154
Interest on other 14 3
------------------ -----------------
Total interest and dividend income 16,584 16,687
------------------ -----------------
Interest Expense:
Interest on deposits 1,227 1,578
Interest on subordinated debentures
and notes 458 456
Interest on senior secured term note 271 157
Interest on other borrowings 10 34
------------------ -----------------
Total interest expense 1,966 2,225
------------------ -----------------
Net interest and dividend income
before provision for loan losses 14,618 14,462
Provision for loan losses 1,789 1,769
------------------ -----------------
Net interest and dividend income
after provision for loan losses 12,829 12,693
------------------ -----------------
Noninterest Income:
Service charges on deposits accounts 1,972 2,100
Net gain on sale of loans 1,606 1,291
Net loan servicing income 227 192
Debit card interchange fees 1,691 1,680
Net gains on sales of securities
available-for-sale 321 469
Net other gains (losses) 19 (2,879)
Increase in cash surrender value of
bank-owned life insurance 227 221
Other 884 681
------------------ -----------------
Total noninterest income 6,947 3,755
------------------ -----------------
Noninterest Expenses:
Salaries and employee benefits 8,727 8,436
Premises and equipment 1,928 1,903
Data processing 1,786 1,757
Advertising and marketing 185 167
Professional fees 743 688
Office Supplies 259 285
Telephone 312 280
Other 1,952 1,873
------------------ -----------------
Total noninterest expenses 15,892 15,389
------------------ -----------------
Income before income taxes 3,884 1,059
Provision for income taxes 951 (249)
------------------ -----------------
Net income $ 2,933 $ 1,308
================== =================
Key Ratios
----------------------------------------------------------------------------
Basic Earnings Per Common Share $ 1.31 $ 0.50
Diluted Earnings Per Common Share 1.31 0.50
Dividends Per Common Share 0.08 0.04
Net Interest Margin (FTE) 3.68% 3.65%
Efficiency Ratio (FTE) 73.22% 72.84%
Return on Assets 0.66% 0.30%
Return on Common Equity 9.01% 3.69%
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- Three months ended Three months ended
equivalent basis) September 30, 2015 September 30, 2014
-------------------------- --------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
-------------------------- --------------------------
Interest Earning
Assets:
Interest-bearing
deposits in banks $5,322 $2 0.17% $1,973 $1 0.14%
Federal funds sold &
securities
purchased under
agreements to
resell 2,581 3 0.49% 12,693 45 1.39%
Investment
securities:
Taxable investment
securities 99,801 504 2.00% 113,325 595 2.08%
Tax-exempt
investment
securities 37,573 296 4.79% 38,623 325 5.02%
-------------------------- --------------------------
Total Investment
securities 137,374 800 2.77% 151,948 920 2.83%
Loans 412,801 4,827 4.64% 385,923 4,732 4.86%
-------------------------- --------------------------
Total Earning Assets $558,078 $5,632 4.12% $552,537 $5,698 4.21%
----------------- -----------------
Allowance for loan
losses (5,045) (4,310)
Cash and due from
banks 13,459 13,129
Other assets 35,639 32,914
--------- ---------
Total Assets $602,131 $594,270
========= =========
Interest Bearing
Liabilities:
Interest bearing
checking accounts $165,566 $112 0.27% $167,651 $118 0.28%
Savings and money
market deposits 170,955 75 0.17% 143,616 54 0.15%
Time deposits 77,221 177 0.91% 102,407 346 1.34%
-------------------------- --------------------------
Total interest
bearing deposits 413,742 364 0.35% 413,674 518 0.50%
Subordinated
debentures 11,255 153 5.40% 11,255 152 5.37%
Borrowings 27,351 96 1.39% 20,084 96 1.90%
-------------------------- --------------------------
Total Interest-
Bearing Liabilities $452,348 $613 0.54% $445,013 $766 0.68%
----------------- -----------------
Interest Rate Spread 3.58% 3.53%
======== ========
Noninterest checking
accounts 101,517 94,177
Other liabilities 4,149 13,180
--------- ---------
Total liabilities 558,014 552,370
Common Stockholders'
equity 44,117 41,900
--------- ---------
Total Stockholders'
equity 44,117 41,900
Total Liabilities and
Stockholders' Equity $602,131 $594,270
========= =========
Net Interest
Income/Margin $5,019 3.68% $4,932 3.66%
================= =================
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- Nine months ended Nine months ended
equivalent basis) September 30, 2015 September 30, 2014
-------------------------- --------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
-------------------------- --------------------------
Interest Earning
Assets:
Interest-bearing
deposits in banks $ 7,763 $ 14 0.24% $ 2,667 $ 3 0.16%
Federal funds sold
& securities
purchased under
agreements to
resell 896 3 0.48% 15,179 154 1.36%
Investment
securities:
Taxable
investment
securities 96,391 1,480 2.05% 109,125 1,590 1.95%
Tax-exempt
investment
securities 37,917 906 4.88% 39,116 994 5.11%
-------------------------- --------------------------
Total Investment
securities 134,308 2,386 2.85% 148,241 2,584 2.78%
Loans 405,677 14,181 4.67% 381,395 13,946 4.89%
-------------------------- --------------------------
Total Earning
Assets $548,644 $ 16,584 4.16% $547,482 $ 16,687 4.20%
---------------- ----------------
Allowance for loan
losses (4,811) (4,652)
Cash and due from
banks 13,127 12,932
Other assets 35,518 33,531
-------- --------
Total Assets $592,478 $589,293
======== ========
Interest Bearing
Liabilities:
Interest bearing
checking accounts $165,617 $ 343 0.28% $164,331 $ 354 0.29%
Savings and money
market deposits 165,618 197 0.16% 152,495 164 0.14%
Time deposits 83,487 687 1.10% 103,216 1,060 1.37%
-------------------------- --------------------------
Total interest
bearing deposits 414,722 1,227 0.40% 420,042 1,578 0.50%
Subordinated
debentures and
notes 11,255 458 5.44% 11,180 456 5.46%
Borrowings 18,266 281 2.06% 16,144 191 1.58%
-------------------------- --------------------------
Total Interest-
Bearing
Liabilities $444,243 $ 1,966 0.59% $447,366 $ 2,225 0.66%
---------------- ----------------
Interest Rate
Spread 3.57% 3.54%
======= =======
Noninterest
checking accounts 100,516 93,684
Other liabilities 4,179 3,378
-------- --------
Total liabilities 548,938 544,428
Common
Stockholders'
equity 43,540 44,865
-------- --------
Total Stockholders'
equity 43,540 44,865
Total Liabilities
and Stockholders'
Equity $592,478 $589,293
======== ========
Net Interest
Income/Margin $ 14,618 3.68% $ 14,462 3.65%
================ ================
For further information:
Blackhawk Bancorp, Inc.
R. Richard Bastian, III
Chairman & CEO
rbastian@blackhawkbank.com
Todd J. James
EVP & CFO
tjames@blackhawkbank.com
Phone: (608) 364-8911
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