Blackhawk Bancorp Reports Second Quarter Results

Read Time:25 Minute, 13 Second

BELOIT, WI / ACCESSWIRE / July 21, 2023 / Blackhawk Bancorp, Inc. (OTCQX:BHWB), (the “Company”) the parent company of Blackhawk Bank (the “Bank”), today reported net income of $3.19 million for the quarter ended June 30, 2023, a 10% increase from the $2.89 million earned the in the preceding quarter, and an 8% decrease compared to the $3.48 million earned during the second quarter of 2022. Diluted Earnings per Share (EPS) for the current quarter was $1.10, an increase of $0.10, or 10%, compared to the preceding quarter, and a $0.11 decrease, or 9%, compared to the quarter ended June 30, 2022. The second quarter of 2023 results yielded a Return on Average Equity (ROAE) of 15.64% and a Return on Average Assets (ROAA) of 0.96%.

Results for the second quarter of 2023 included $202,000 (after-tax) of expenses related to the pending merger with First Mid Bancshares, Inc. (NASDAQ: FMBH) (“First Mid”). Excluding these expenses, the 2023 second-quarter net income would have been $3.40 million, a $503,000, or 17%, increase compared to the linked quarter ending March 31, 2023, and a $82,000, or 2%, decrease over the second quarter of last year.

The decrease in net income for the second quarter of 2023, compared to the second quarter of the prior year was driven by a $1.97 million increase in the provision for loan losses and a $476,000 decrease in revenue from the sale and servicing of mortgage loans. The increase in the provision for loan losses was due to a $1.50 million negative provision in the second quarter of last year. These variances were partially offset by an $812,000 increase in net interest income and a $1.42 million reduction in other operating expenses. The reduction in other operating expenses reflects the $1.27 million charge related to branch closures in the second quarter of 2022.

Second Quarter 2023 Financial Highlights (at or for the three months ended June 30, 2023) :

Net income was $3.19 million, or $1.10 per diluted share, compared to $3.48 million, or $1.21 per diluted share, in the second quarter of 2022.
Net interest margin was 3.63%, compared to 3.77% in the preceding quarter and 3.31% in the second quarter a year ago.
Annualized return on average assets was 0.96%, compared to 1.02% in the second quarter of 2022.
Annualized return on average equity was 15.64%, compared to 16.75% in the second quarter a year ago.
Total deposits decreased by $31.29 million to $1.19 billion at June 30, 2023 compared to $1.22 billion a year earlier.
Allowance for loan losses to total loans was 1.47% at quarter end.
Nonperforming assets to total assets was 0.32% at June 30, 2023 compared to 0.45% a year ago.
On June 16, 2023, the Company paid a quarterly cash dividend of $0.12 per share, marking the 36^nd consecutive quarterly cash dividend paid.

For the six months ended June 30, 2023 the Company reported net income of $6.09 million slightly less than the $6.10 million reported in the first half of 2022. Diluted Earnings per Share (EPS) for the six months ended June 30, 2023 decreased $0.02 to $2.11 compared to $2.13 the first six months of the prior year. The Company’s results for the six months ended June 30, 2023 produced a Return on Average Equity (ROAE) of 15.38% and a Return on Average Assets (ROAA) of 0.92%.

Net Interest Income

Net interest income totaled $11.35 million for the quarter ended June 30, 2023, a decrease of $314,000, or 3%, compared to the first quarter of 2023, and an increase of $812,000, or 8%, compared to the second quarter of the prior year.

The Company’s net interest margin was 3.63% for the second quarter of 2023, compared to 3.77% for the quarter ended March 31, 2023, and 3.31% for the second quarter of 2022. The tax-equivalent yield on earning assets increased by 17 basis points to 4.87% for the second quarter of 2023, compared to the first quarter of 2023, and the cost of deposits increased by 45 basis point to 1.13% for the second quarter of 2023, compared to 0.77% for the linked quarter. Tax-equivalent yield on earning assets increased 136 basis points compared to 3.51% for the second quarter of 2022, and the cost of deposits increased by 101 basis points compared to 0.12% for the second quarter of 2022.

Average total deposits for the second quarter of 2023 decreased by $18.5 million to $1.21 billion compared to $1.23 billion in the second quarter of 2022. Average total loans for the second quarter of 2023 increased by $29.1 million, or 4%, compared to the prior year’s second quarter.

Net interest income for the six months ended June 30, 2023 increased $2.82 million to $23.02 million compared to $20.20 million for the first half of 2022. For the first six months of 2023, the company’s net interest margin was 3.70%, compared to 3.22% for the same period in the prior year. The tax-equivalent yield on earning assets increased by 137 basis points to 4.78% for the first six months of 2023, compared to 3.41% the first six months of 2022. The cost of deposits increased by 42 basis points to 0.06% compared to the first six months of 2022.

Provision for Loan Losses and Asset Quality

The provision for loan losses for the quarter ended June 30, 2023, totaled $466,000, as compared to $415,000 for the quarter ended March 31, 2023, and negative $1.5 million for the second quarter of 2022. The provision for loan losses for the first-half 2023 increased by $2.38 million to $881,000 compared to negative $1.50 million first-half of 2022. Net charge-offs for the six months ended June 30, 2023, equaled $392,000.

Total nonperforming assets, which include troubled debt restructures that are performing in accordance with their modified terms, equaled $4.19 million as of June 30, 2023, as compared to $4.36 million as of March 31, 2023, and $6.04 million at June 30, 2022. At June 30, 2023, the ratio of nonperforming assets to total assets equaled 0.32%, as compared to 0.34% at March 31, 2023, and 0.45% at June 30, 2022.

The allowance for loan losses to total loans was 1.47% as of June 30, 2023, as compared to 1.46% at March 31, 2023, and 1.22% as of June 30, 2022. The ratio of the allowance for loan losses to nonperforming loans increased to 276.9% as of June 30, 2023, as compared to 262.9% at March 31, 2023, and 157.3% at June 30, 2022.

Noninterest Income and Operating Expenses

Noninterest income for the quarter ended June 30, 2023, totaled $3.54 million, a $353,000 increase compared to $3.19 million the prior quarter and a $282,000 decrease from the $3.82 million recorded in the second quarter of 2022. The decline in noninterest income compared to the second quarter of 2022 includes a $476,000 decrease in revenue from the sale and servicing of mortgage loans.

Noninterest income for the six months ended June 30, 2023 totaled $6.72 million, a $1.02 million decrease compared to the $7.74 million for the same period in the prior year. The decrease was mainly driven by a $1.38 million decrease in revenue the sale and servicing of mortgage loans.

Operating expenses for the quarter ended June 30, 2023, totaled $10.14 million, a decrease of $509,000, or 5%, compared to the first quarter of 2023, and decrease of $1.12 million, or 10%, compared to the second quarter of 2022. The first and second quarters of 2023 include $314,000 and $279,000 of merger related expenses. The decrease compared to the second quarter of 2022 includes a $1.27 million charge related to branch closures.

Operating expenses for the six months ended June 30, 2023 totaled $20.78 million, a $642,000, or 3%, decrease compared to the same period in 2022. Excluding the merger related one-time charges of $593,000, operating expenses for the six months ended June 30, 2023 would have been $20.19 million, a $1.24 million decrease over the same period in 2022.

Capital

Tangible book value per share was $23.99 at June 30, 2023, compared to $24.02 at March 31, 2023 and $23.91 at June 30, 2022. The decrease in tangible book value per share during the current quarter was primarily due to a $3.26 million decrease in accumulated other comprehensive income (“AOCI”) related primarily to an increase in the unrealized loss on available for sale securities. Excluding AOCI, tangible book value per share was $36.11 at June 30, 2023, an increase of $1.11 and $3.70 compared to March 31, 2023 and June 30, 2022, respectively.

About Blackhawk Bancorp

Blackhawk Bancorp, Inc. is headquartered in Beloit, Wisconsin, and is the parent company of Blackhawk Bank. The combined entity operates ten full-service banking centers located in Rock County, Wisconsin, and the Illinois counties of Winnebago, Boone, McHenry, and Kane. 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 acquisition-related expenses, securities gains and losses and other non-recurring gains or losses 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
[email protected]
Phone: (608) 364-8911

Matthew McDonnell, SVP & CFO
[email protected]

BLACKHAWK BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2023 AND DECEMBER 31, 2022
(UNAUDITED)

	June 30,			December 31,
Assets	2023			2022
	(Dollars in thousands, except
	share and per share data)
Cash and due from banks	$	16,967		$	16,686
Interest-bearing deposits in banks and other institutions		22,931			6,071
Total cash and cash equivalents		39,898			22,757

Certificates of deposit in banks and other institutions		935			1,463
Equity securities at fair value		3,501			3,455
Securities available-for-sale		409,020			443,772
Loans held for sale		4,144			2,190
Federal Home Loan Bank stock, at cost		1,737			1,705
Loans, less allowance for loan losses of $11,611 and $8,714
at June 30, 2023 and December 31, 2022, respectively		773,021			771,468
Premises and equipment, net		16,547			17,192
Goodwill and core deposit intangible		11,135			11,286
Mortgage servicing rights		3,756			3,985
Cash surrender value of bank-owned life insurance		11,931			11,761
Other assets		29,922			30,764
Total assets	$	1,305,547		$	1,321,798

Liabilities and Stockholders’ Equity

Liabilities
Deposits:
Noninterest-bearing	$	285,736		$	352,647
Interest-bearing		903,644			838,469
Total deposits		1,189,380			1,191,116
Subordinated debentures and notes, net of issuance costs		19,885			19,856
Senior secured term note		8,945			9,722
Other borrowings		–			18,000
Other liabilities		6,817			7,043
Total liabilities		1,225,027			1,245,737

Stockholders’ equity
Common stock, $0.01 par value, 10,000,000 shares authorized;
3,535,287 and 3,507,220 shares issued as of June 30, 2023 and
December 31, 2022, respectively		35			35
Additional paid-in capital		37,158			36,694
Retained earnings		97,733			94,243
Treasury stock, 643,303 and 640,594 shares at cost as of June 30, 2023
and December 31, 2022, respectively		(19,355	)		(19,276	)
Accumulated other comprehensive income (loss)		(35,051	)		(35,635	)
Total stockholders’ equity		80,520			76,061
Total liabilities and stockholders’ equity	$	1,305,547		$	1,321,798

BLACKHAWK BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)	For the Quarter Ended
	June 30,			March 31,			December 31,			September 30,			June 30,
	2023			2023			2022			2022			2022
	(Dollars in thousands, except per share data)
Interest Income:
Interest and fees on loans	$	10,682		$	10,237		$	10,115		$	9,306		$	8,366
Interest on available-for-sale securities:
Taxable		3,631			3,619			3,284			2,913			2,364
Tax-exempt		265			299			379			372			369
Interest on deposits in other financial institutions		690			405			246			184			72
Total interest income		15,268			14,560			14,024			12,775			11,171
Interest Expense:
Interest on deposits		3,458			2,323			1,555			815			375
Interest on subordinated debentures		236			231			219			196			186
Interest on senior secured term note		141			135			120			89			45
Interest on other borrowings		80			204			59			32			24
Total interest expense		3,915			2,893			1,953			1,132			630
Net interest income before provision for loan losses		11,353			11,667			12,071			11,643			10,541
Provision for loan losses		466			415			450			100			(1,500
Net interest income after provision for loan losses		10,887			11,252			11,621			11,543			12,041

Noninterest Income:
Service charges on deposits accounts		1,002			982			1,029			1,023			968
Net gain on sale of loans		565			465			551			868			1,063
Net loan servicing income		231			177			195			203			209
Debit card interchange fees		1,150			1,029			1,141			1,177			1,165
Net gains on sales of securities available-for-sale		1			(50	)		20			–			(20
Net other gains (losses)		60			3			–			–			11
Increase in cash surrender value of bank-owned life insurance		80			90			79			78			77
Other		449			489			399			392			347
Total noninterest income		3,538			3,185			3,414			3,741			3,820

Noninterest Expenses:
Salaries and employee benefits		6,142			6,205			5,963			6,422			6,066
Occupancy and equipment		1,154			1,174			1,083			1,176			1,132
Data processing		726			785			724			705			681
Debit card processing and issuance		569			565			596			661			528
Advertising and marketing		123			107			81			138			140
Amortization of intangibles		72			80			84			88			88
Professional fees		567			587			439			417			392
Office Supplies		100			103			125			96			97
Telephone		116			129			133			136			146
Other		568			911			976			852			1,984
Total noninterest expenses		10,137			10,646			10,204			10,691			11,254
Income before income taxes		4,288			3,791			4,831			4,593			4,607
Provision for income taxes		1,094			898			779			1,107			1,129
Net income	$	3,194		$	2,893		$	4,052		$	3,486		$	3,478

Key Ratios

Basic Earnings Per Common Share	$	1.10		$	1.00		$	1.41		$	1.21		$	1.21
Diluted Earnings Per Common Share		1.10			1.00			1.41			1.21			1.21
Dividends Per Common Share		0.12			0.12			0.12			0.12			0.12

Book Value Per Common Share		27.84			27.89			26.53			24.97			27.89
Tangible Book Value Per Share		23.99			24.02			22.60			21.01			23.91
Tangible Book Value Excluding AOCI Per Share		36.11			35.00			35.03			33.62			32.42
Number of Shares Outstanding		2,891,984			2,895,805			2,866,626			2,870,754			2,875,430
Average Number of Shares Outstanding		2,893,790			2,880,666			2,867,915			2,872,232			2,874,254

Net Interest Margin (1)		3.63	%		3.77	%		3.82	%		3.63	%		3.31
Efficiency Ratio (1)(2)(3)		67.69	%		71.09	%		65.54	%		69.04	%		68.96
Return on Assets		0.96	%		0.87	%		1.19	%		1.02	%		1.02
Return on Common Equity		15.64	%		15.09	%		22.31	%		16.73	%		16.75

(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.

(3) The efficiency ratio excludes one time charges related to branch closures in 2022.

(UNAUDITED)	As of
	June 30,		March 31,		December 31,		September 30,		June 30,
	2023		2023		2022		2022		2022
	(Amounts in thousands, except per share data)
Cash and due from banks	$	16,967	$	14,383	$	16,686	$	18,618	$	15,682
Interest-bearing deposits in banks and other		23,866		6,190		7,534		60,116		12,990
Securities		412,521		432,022		447,227		452,198		472,977
Net loans/leases		777,165		772,417		773,658		770,279		765,979
Goodwill and core deposit intangible		11,135		11,206		11,286		11,369		11,453
Other assets		63,893		65,762		65,407		67,801		63,109
Total assets	$	1,305,547	$	1,301,980	$	1,321,798	$	1,380,381	$	1,342,190

Deposits	$	1,189,380	$	1,148,275	$	1,191,116	$	1,263,183	$	1,220,667
Subordinated debentures		19,885		19,871		19,856		19,841		19,827
Senior secured term note		8,945		9,333		9,722		10,111		10,500
Borrowings		–		34,500		18,000		5,000		5,000
Other liabilities		6,817		9,239		7,043		10,568		5,998
Stockholders’ equity		80,520		80,762		76,061		71,678		80,198
Total liabilities and stockholders’ equity	$	1,305,547	$	1,301,980	$	1,321,798	$	1,380,381	$	1,342,190

ASSET QUALITY DATA
(Amounts in thousands)	June 30,			March 31,			December 31,			September 30,			June 30,
	2023			2023			2022			2022			2022

Non-accrual loans	$	2,674		$	2,721		$	3,036		$	3,254		$	4,125
Accruing loans past due 90 days or more		–			36			–			–			–
Troubled debt restructures – accruing		1,519			1,606			1,671			1,720			1,910
Total nonperforming loans	$	4,193		$	4,363		$	4,707		$	4,974		$	6,035
Other real estate owned		–			–			17			–			–
Total nonperforming assets	$	4,193		$	4,363		$	4,724		$	4,974		$	6,035

Total loans	$	788,776		$	783,886		$	782,372		$	779,181		$	775,474
Allowance for loan losses		11,611			11,469			8,714			8,902			9,495
Loans, less allowance for loan losses	$	777,165		$	772,417		$	773,658		$	770,279		$	765,979
Nonperforming Assets to total Assets		0.32	%		0.34	%		0.36	%		0.36	%		0.45
Nonperforming loans to total loans		0.53	%		0.56	%		0.60	%		0.64	%		0.78
Allowance for loan losses to total loans		1.47	%		1.46	%		1.11	%		1.14	%		1.22
Allowance for loan losses to nonperforming loans		276.9	%		262.9	%		185.1	%		179.0	%		157.3

	For the Quarter Ended
	June 30,		March 31,		December 31,		September 30,		June 30,
ROLLFORWARD OF ALLOWANCE	2023		2023		2022		2022		2022

Beginning Balance	$	11,469	$	8,714	$	8,902	$	9,495	$	10,995
CECL adoption		–		2,408		–		–		–
Provision		466		415		450		100		(1,500
Loans charged off		384		135		679		758		95
Loan recoveries		60		67		41		65		95
Net charge-offs		324		68		638		693		–
Ending Balance	$	11,611	$	11,469	$	8,714	$	8,902	$	9,495

BLACKHAWK BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)	Six months ended June 30,
	2023			2022
	(Amounts in thousands, except per share data)

Interest Income:
Interest and fees on loans	$	20,919		$	16,174
Interest and dividends on available-for-sale securities:
Taxable		7,250			4,433
Tax-exempt		564			733
Interest on deposits in other financial institutions		1,095			96
Total interest income		29,828			21,436
Interest Expense:
Interest on deposits		5,781			698
Interest on subordinated debentures		284			381
Interest on senior secured term note		276			136
Interest on other borrowings		467			24
Total interest expense		6,808			1,239
Net interest income before provision for loan losses		23,020			20,197
Provision for loan losses		881			(1,500	)
Net interest income after provision for loan losses		22,139			21,697

Noninterest Income:
Service charges on deposits accounts		1,985			1,882
Net gain on sale of loans		1,030			2,209
Net loan servicing income		407			612
Debit card interchange fees		2,179			2,244
Net gains on sales of securities available-for-sale		(50	)		(20	)
Net other gains (losses)		64			7
Increase in cash surrender value of bank-owned life insurance		170			163
Change in value of equity securities		(15	)		(109	)
Other		953			751
Total noninterest income		6,723			7,739

Noninterest Expenses:
Salaries and employee benefits		12,347			12,288
Occupancy and equipment		2,328			2,344
Data processing		1,512			1,389
Debit card processing and issuance		1,133			1,041
Advertising and marketing		230			248
Amortization of core deposit intangible		151			185
Professional fees		1,154			781
Office Supplies		203			183
Telephone		245			285
Other		1,480			2,681
Total noninterest expenses		20,783			21,425
Income before income taxes		8,079			8,011
Provision for income taxes		1,992			1,914
Net income	$	6,087		$	6,097

Key Ratios

Basic Earnings Per Common Share	$	2.11		$	2.13
Diluted Earnings Per Common Share		2.11			2.13
Dividends Per Common Share		0.24			0.24

Net Interest Margin (1)		3.70	%		3.22	%
Efficiency Ratio (1)(2)		69.57	%		76.11	%
Return on Assets		0.92	%		0.91	%
Return on Common Equity		15.38	%		13.54	%

(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
ANALYSIS of AVERAGE BALANCES & TAX EQUIVALENT INTEREST RATES

Average Balance Sheet with Resultant Interest and Rates
(Dollars in thousands – unaudited)
(Yields on a tax-equivalent basis) (1)

									For the Quarter Ended
	June 30, 2023								March 31, 2023								June 30, 2022
	Average					Average			Average					Average			Average					Average
	Balance			Interest		Rate			Balance			Interest		Rate			Balance			Interest		Rate
Interest Earning Assets:
Interest-bearing deposits and other	$	54,875		$	690		5.04	%	$	37,127		$	405		4.42	%	$	50,333		$	72		0.58	%
Investment securities:
Taxable investment securities		387,211			3,631		3.76	%		394,967			3,619		3.72	%		432,659			2,364		2.19	%
Tax-exempt investment securities		39,786			265		3.38	%		44,379			299		3.42	%		54,184			369		3.48	%
Total Investment securities		426,997			3,896		3.73	%		439,346			3,918		3.69	%		486,843			2,733		2.33	%
Loans		781,947			10,682		5.48	%		786,195			10,237		5.28	%		752,785			8,366		4.46	%

Total Earning Assets	$	1,263,819		$	15,268		4.87	%	$	1,262,668		$	14,560		4.70	%	$	1,289,961		$	11,171		3.51	%
Allowance for loan losses		(11,579	)							(11,295	)							(10,618	)
Cash and due from banks		15,265								15,389								14,900
Other assets		71,816								74,551								70,202

Total Assets	$	1,339,321							$	1,341,313							$	1,364,445

Interest Bearing Liabilities:
Interest bearing checking accounts	$	459,788		$	2,084		1.82	%	$	451,741		$	1,388		1.25	%	$	316,829		$	175		0.22	%
Savings and money market deposits		341,744			623		0.73	%		371,722			461		0.50	%		426,585			75		0.07	%
Time deposits		111,691			751		2.70	%		96,298			474		2.00	%		77,287			125		0.65	%
Total interest bearing deposits		913,223			3,458		1.52	%		919,761			2,323		1.02	%		820,701			375		0.18	%
Subordinated debentures and notes		19,879			236		4.77	%		19,863			231		4.71	%		19,820			186		3.77	%
Borrowings		15,196			221		5.82	%		31,465			339		4.37	%		22,143			69		1.25	%

Total Interest-Bearing Liabilities	$	948,298		$	3,915		1.66	%	$	971,089		$	2,893		1.21	%	$	862,664		$	630		0.29	%

Interest Rate Spread							3.21	%							3.49	%							3.22	%

Noninterest checking accounts		301,442								284,430								412,508
Other liabilities		7,684								8,046								5,965
Total liabilities		1,257,424								1,263,565								1,281,137
Total Stockholders’ equity		81,897								77,748								83,308
Total Liabilities and
Stockholders’ Equity	$	1,339,321							$	1,341,313							$	1,364,445

Net Interest Income/Margin				$	11,353		3.63	%				$	11,667		3.77	%				$	10,541		3.31	%

(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
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)(1)

	For the Six Months Ended
	June 30, 2023								June 30, 2022
	Average					Average			Average					Average
	Balance			Interest		Rate			Balance			Interest		Rate
Interest Earning Assets:
Interest-bearing deposits and other	$	46,051		$	1,095		4.80	%	$	49,303		$	96		0.39	%
Investment securities:
Taxable investment securities		391,067			7,250		3.74	%		440,607			4,433		2.03	%
Tax-exempt investment securities		42,070			564		3.40	%		54,003			733		3.49	%
Total Investment securities		433,137			7,814		3.71	%		494,610			5,166		2.19	%
Loans		784,059			20,919		5.38	%		733,830			16,174		4.44	%

Total Earning Assets	$	1,263,247		$	29,828		4.78	%	$	1,277,743		$	21,436		3.41	%
Allowance for loan losses		(11,438	)							(10,875	)
Cash and due from banks		15,326								14,928
Other assets		73,311								68,128

Total Assets	$	1,340,446							$	1,349,924

Interest Bearing Liabilities:
Interest bearing checking accounts	$	455,787		$	3,472		1.54	%	$	315,415		$	315		0.20	%
Savings and money market deposits		356,650			1,084		0.61	%		425,178			143		0.07	%
Time deposits		104,037			1,225		2.38	%		77,520			240		0.62	%
Total interest bearing deposits		916,474			5,781		1.27	%		818,113			698		0.17	%
Subordinated debentures		19,871			467		4.74	%		19,928			381		3.86	%
Borrowings		23,286			560		4.85	%		19,124			160		1.68	%

Total Interest-Bearing Liabilities	$	959,631		$	6,808		1.43	%	$	857,165		$	1,239		0.29	%

Interest Rate Spread							3.35	%							3.12	%

Noninterest checking accounts		292,983								395,555
Other liabilities		7,998								6,430
Total liabilities		1,260,612								1,259,150
Total Stockholders’ equity		79,834								90,774
Total Liabilities and
Stockholders’ Equity	$	1,340,446							$	1,349,924

Net Interest Income/Margin				$	23,020		3.70	%				$	20,197		3.22	%