Blackhawk Bancorp Announces First Quarter Earnings
/EINPresswire.com/ -- BELOIT, WI--(Marketwired - April 27, 2016) - Blackhawk Bancorp, Inc. (OTCQX: BHWB) reported that its first quarter 2016 earnings were boosted by the recovery of a fraud loss that was incurred in 2014. Blackhawk reported net income of $2,573,000, a 197% increase over the $865,000 earned in the first quarter of 2015. Fully diluted earnings per share for the first quarter was $1.12, a 196% increase over the first quarter of last year. Excluding the large recovery net income for the first quarter of 2016 would have been $795,000, or $0.35 per diluted share.
"We are extremely pleased to have recovered the fraud loss we incurred in 2014," said Rick Bastian, the company's chairman and chief executive officer. "It makes a great contribution to our on-going efforts to fortify and strengthen our balance sheet, but we're not letting it mask the challenges we face and our focus on growing core earnings," he added.
The following table summarizes key performance and asset quality measures for the quarter ended March 31, 2016 compared to the previous four quarters:
Key Performance and Asset Quality 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr 1st Qtr
Measures 2016 2015 2015 2015 2015
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Diluted EPS $1.12 $0.43 $0.51 $0.42 $0.38
Diluted EPS, excluding fraud
recovery $0.35 $0.43 $0.51 $0.42 $0.38
ROAA 1.63% .64% .75% .63% .61%
ROAA, excluding fraud recovery .51% .64% .75% .63% .61%
ROACE 22.27% 8.59% 10.15% 8.65% 8.16%
ROACE, excluding fraud recovery 6.89% 8.59% 10.15% 8.65% 8.16%
Efficiency Ratio* 77.17% 73.65% 71.8% 72.5% 75.9%
Net Interest Margin (tax-equivalent
basis) 3.48% 3.58% 3.68% 3.66% 3.70%
Nonaccrual Loans to Total Loans 1.51% 1.59% 1.31% 1.30% 1.28%
Nonaccrual Loans and OREO to Total
Loans 1.98% 2.00% 1.61% 1.61% 1.53%
Allowance for Loan Losses to Total
Loans 1.34% 1.20% 1.29% 1.17% 1.21%
Allowance for Loan Losses to
Nonaccrual Loans 88.7% 75.5% 97.9% 89.7% 94.3%
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* - The efficiency ratio calculation excludes net gains and losses on securities and net gains and losses on other assets.
Net Interest Income
Net interest income for the first quarter increased 4% to $4,923,000 compared to $4,715,000 for the first quarter of 2015; however, the net interest margin fell to 3.48% compared to 3.58% the most recent quarter and 3.70% the same quarter last year. The decrease in the net interest margin compared to the first quarter of 2015 was due to a $60.0 million, or 12%, increase in average total deposits, which was accompanied by an increase of only $1.2 million, or less than 1%, in average total loans. The excess liquidity was held in short-term investments and on deposit at the Federal Reserve Bank. The elevated deposit balances are temporary and are expected to decline significantly in the second quarter. The increase in balance sheet leverage had minimal impact on net interest income, but negatively affected the net interest margin ratio.
While average total loans for the first quarter was up slightly over the same quarter a year ago, it decreased by $13.5 million, or 3%, compared to the most recent quarter. The decrease was the result of some planned and unplanned pay-offs. The pay-offs were due to one customer selling their business, one selling commercial real estate and the SBA funding their subordinated interest in another credit. "While disappointed in the level of loan growth for the first quarter, we're not willing to compromise on credit quality or structure to gain volume when demand is a little soft," said Bastian. "We have a good pipeline of high quality credit opportunities and expect to see moderate growth for the remainder of the year," he added.
Provision for Loan Losses and Credit Quality
The provision for loan losses in the first quarter decreased by $122,000, or 20%, to $495,000 compared to $617,000 in first quarter of 2015. With a provision for loan losses of $495,000 and net loan recoveries of $23,000 for the quarter, the ratio of the allowance for loan losses to total loans increased to 1.34% compared to 1.20% at December 31, 2015 and 1.21% March 31, 2015.
Nonaccrual loans and other real estate owned totaled $7.8 million, or 1.98% of total loans, at March 31, 2016 compared to $8.0 million, or 2.0% of total loans, at December 31, 2015 and $6.2 million, or 1.53% of total loans, at March 31, 2015. The following table summarizes the activity in the allowance for loan losses for the quarters ended March 31, 2016 and 2015 and the year ended December 31, 2015:
Activity in Allowance For Loan Losses:
(in Thousands) Year Ended
Quarter Ended March 31, December 31,
2016 2015 2015
----------- ----------- ------------
Beginning allowance for loan losses 4,886 4,396 4,396
Provision for loan losses 495 617 2,139
Charge-offs (170) (185) (2,506)
Recoveries 193 58 761
----------- ----------- ------------
Ending allowance for loan losses 5,309 4,886 4,790
----------- ----------- ------------
Net charge-offs to average loans,
annualized (.02%) .13% .43%
=========== =========== ============
The ratio of the allowance for loan losses to nonaccrual loans was 88.7% at March 31, 2016 compared to 75.5% at December 31, 2015 and 94.3% at March 31, 2015.
Non-Interest Income and Operating Expenses:
Excluding the fraud recovery, non-interest income for the first quarter of 2016 declined by $114,000, or 5%, to $2,065,000 compared to $2,179,000 for the first quarter of 2015. The decrease reflects a reduction in net securities gains to $0 compared to $200,000 the first quarter of last year. Modest increases in deposit service charges and debit card revenue offset a small decrease in income from the sale and servicing of secondary market mortgage loans.
Operating expenses for the quarter increased by $288,000, or 6%, to $5,508,000 compared to $5,220,000 the first quarter of 2015.
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. This growth combined with ongoing strengthening of the Company's credit quality are expected to lead to earnings improvement. Growth and earnings could however be tempered by uncertain economic conditions, which continue to be less than ideal in the markets served by Blackhawk. Competitive pressures, regulation and the on-going low interest rate environment are additional factors that will challenge growth and earnings.
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 the financial products its provides.
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
MARCH, 2016 AND DECEMBER 31, 2015
(UNAUDITED)
March 31, December 31,
Assets 2016 2015
----------------------------------------------------------------------------
(Amounts in thousands,
except
share and per share data)
Cash and due from banks $ 12,561 $ 11,653
Securities purchased under agreements to resell 12,202 14,955
Interest-bearing deposits in banks and other 47,258 1,144
----------- -------------
Total cash and cash equivalents 72,021 27,752
----------- -------------
Securities available-for-sale 172,143 139,533
Loans held for sale 3,101 3,014
Federal Home Loan Bank stock, at cost 2,266 2,266
Loans, less allowance for loan losses of $5,309
and $4,790 at March 31, 2016 and December 31,
2015, respectively 390,805 395,187
Premises and equipment, net 7,724 7,715
Goodwill 5,037 5,037
Mortgage Servicing rights 2,286 2,395
Cash surrender value of bank-owned life insurance 9,986 9,902
Other assets 12,053 9,711
----------- -------------
Total assets $ 677,422 $ 602,512
=========== =============
Liabilities and Stockholders' Equity
Liabilities
Deposits:
Noninterest-bearing $ 109,125 $ 102,943
Interest-bearing 496,136 420,114
----------- -------------
Total deposits 605,261 523,057
Subordinated debentures and notes (including
$1,031 at fair value at March 31, 2016 and
December 31, 2015) 11,255 11,255
Senior secured term note 8,250 8,500
Other borrowings - 11,250
Other liabilities 4,127 3,301
----------- -------------
Total liabilities 628,893 557,363
----------- -------------
Stockholders' equity
Common stock, $0.01 par value, 10,000,000 shares
authorized; 2,370,371 and 2,327,197 shares
issued as of March 31, 2016 and December 31,
2015, respectively 24 23
Additional paid-in capital 10,411 10,362
Retained earnings 36,858 34,376
Treasury stock, 90,284 and 88,783 shares at cost
as of March 31, 2016 and December 31, 2015,
respectively (1,010) (982)
Accumulated other comprehensive income (loss) 2,246 1,370
----------- -------------
Total stockholders' equity 48,529 45,149
----------- -------------
Total liabilities and stockholders' equity $ 677,422 $ 602,512
=========== =============
BLACKHAWK BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three months ended March 31,
2016 2015
----------------------------
(Amounts in thousands,
except per share data)
share and per share data)
Interest Income:
Interest and fees on loans $ 4,635 $ 4,614
Interest and dividends on available-for-sale
securities:
Taxable 561 466
Tax-exempt 301 316
Interest on securities purchased under
agreements to resell 44 -
Interest on other 29 5
------------- --------------
Total interest and dividend income 5,570 5,401
------------- --------------
Interest Expense:
Interest on deposits 398 444
Interest on subordinated debentures and notes 157 152
Interest on senior secured term note 91 90
Interest on other borrowings 1 -
------------- --------------
Total interest expense 647 686
------------- --------------
Net interest and dividend income before
provision for loan losses 4,923 4,715
Provision for loan losses 495 617
------------- --------------
Net interest and dividend income after
provision for loan losses 4,428 4,098
------------- --------------
Noninterest Income:
Service charges on deposits accounts 689 621
Net gain on sale of loans 353 457
Net loan servicing income 81 58
Debit card interchange fees 568 554
Net gains on sales of securities available-
for-sale - 200
Net other gains (losses) 2,933 (32)
Increase in cash surrender value of bank-owned
life insurance 85 82
Other 279 239
------------- --------------
Total noninterest income 4,988 2,179
------------- --------------
Noninterest Expenses:
Salaries and employee benefits 3,136 2,873
Premises and equipment 645 657
Data processing 599 596
Advertising and marketing 94 58
Professional fees 230 255
Office Supplies 86 90
Telephone 103 108
Other 615 583
------------- --------------
Total noninterest expenses 5,508 5,220
------------- --------------
Income before income taxes 3,908 1,057
Provision for income taxes 1,335 192
------------- --------------
Net income $ 2,573 $ 865
============= ==============
Key Ratios
----------------------------------------------------------------------------
Basic Earnings Per Common Share $ 1.13 $ 0.39
Diluted Earnings Per Common Share 1.12 0.38
Dividends Per Common Share 0.04 0.02
BLACKHAWK BANCORP, INC. AND SUBSIDIARIES
AVERAGE BALANCE SHEET WITH RESULTANT INTEREST AND RATES
Average Balance Sheet with Resultant
Interest and Rates
(Amounts in
thousands)127027
(Yields on a tax- Three months ended March Three months ended March
equivalent basis) 31, 2016 31, 2015
-------------------------- --------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
-------------------------- --------------------------
Interest Earning
Assets:
Interest-bearing
deposits in banks $ 23,741 $ 29 0.50% $ 9,111 $ 4 0.19%
Federal funds sold
and securities
purchased under
agreements to
resell 13,521 44 1.31% 17 1 0.15%
Investment
securities:
Taxable investment
securities 112,907 561 2.00% 91,111 466 2.07%
Tax-exempt
investment
securities 39,952 301 4.64% 37,592 316 5.15%
-------------------------- --------------------------
Total Investment
securities 152,859 862 2.69% 128,703 782 2.97%
Loans 397,481 4,635 4.69% 396,302 4,614 4.72%
-------------------------- --------------------------
Total Earning Assets $587,602 $ 5,570 3.92% $534,133 $ 5,401 4.22%
---------------- ----------------
Allowance for loan
losses (4,968) (4,566)
Cash and due from
banks 15,445 12,974
Other assets 35,192 35,945
---------- ----------
Total Assets $633,271 $578,486
========== ==========
Interest Bearing
Liabilities:
Interest bearing
checking accounts $202,125 $ 161 0.32% $161,225 $ 113 0.28%
Savings and money
market deposits 172,779 68 0.16% 152,676 60 0.16%
Time deposits 80,401 169 0.84% 89,732 271 1.22%
-------------------------- --------------------------
Total interest
bearing deposits 455,305 398 0.35% 403,633 444 0.45%
Subordinated
debentures and
notes 11,255 157 5.59% 11,255 152 5.47%
Borrowings 10,710 92 3.48% 10,014 90 3.67%
-------------------------- --------------------------
Total Interest-Bearing
Liabilities $477,270 $ 647 0.55% $424,902 $ 686 0.65%
---------------- ----------------
Interest Rate Spread 3.37% 3.57%
======= =======
Noninterest checking
accounts 105,530 97,133
Other liabilities 4,011 13,299
---------- ----------
Total liabilities 586,811 535,334
Common Stockholders'
equity 46,460 43,152
---------- ----------
Total Stockholders'
equity 46,460 43,152
Total Liabilities and
Stockholders' Equity $633,271 $578,486
========== ==========
Net Interest
Income/Margin $ 4,923 3.48% $ 4,715 3.70%
================ ================
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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