Blackhawk Bancorp Earns Record $13.64 Million in 2022 and $4.05 Million in Fourth Quarter 2022

BELOIT, WI / ACCESSWIRE / January 24, 2023 / Blackhawk Bancorp, Inc. (OTCQX:BHWB), (the “Company”) the parent company of Blackhawk Bank (the “Bank”), reported record earnings for the year ended December 31, 2022, with net income of $13.64 million slightly exceeding the previous year’s net income of $13.62 million. Diluted Earnings per Share (EPS) for 2022 increased 6.26% to $4.75 compared to the previous record of $4.47 reported for 2021. The Company’s results for the year ended 2022 produced a Return on Average Equity (ROAE) of 16.23% and a Return on Average Assets (ROAA) of 1.01%.

The increase in earnings for 2022 as compared to 2021 includes an increase in net interest income of $4.64 million and a decrease in the provision for loan losses of $1.45 million. The growth in net interest income was achieved despite a $2.37 million decrease in Paycheck Protection Program (PPP) fees recognized. These earnings improvements were partially offset by a $4.11 million decrease in noninterest income and a $2.32 million increase in operating expenses, which include a $1.34 one-time charge related to the branch closures.

The Company reported net income of $4.05 million for the fourth quarter of 2022, a 16% increase compared to $3.49 million earned in the preceding quarter, and a 39% increase compared to the $2.91 million earned during the fourth quarter of 2021. Diluted EPS for the current quarter was $1.41, an increase of $0.20, or 17%, over the preceding quarter, and a $0.39, or 38%, increase compared to the fourth quarter a year ago. Fourth quarter 2022 results yielded a ROAE of 22.31% and a ROAA of 1.19%.

The fourth quarter earnings increase over the prior quarter included a $428,000 increase in net interest income and a $487,000 decrease in operating expenses. These earnings improvements were partially offset by an increase of $350,000 in the provision for loan losses and a $327,000 decrease in noninterest income, primarily due to reduced mortgage banking activity.

The increase in net income for the fourth quarter of 2022, compared to the fourth quarter of 2021, included a $2.45 million, or 25%, increase in net interest income. Additionally, operating expenses decreased by $301,000, or 3%. This earnings growth was partially offset by a $1.31 million decrease in income from the sale and servicing of mortgage loans.

“Our continued strong net interest income generation during the fourth quarter reflects rising rates and controlled funding costs, which more than offset the slowdown in mortgage lending,” said Todd James, Chairman and CEO. “Our hedge between net interest margin growth and mortgage banking revenue allows us the opportunity to generate revenue growth throughout the economic cycles. During an economic downturn when rates decline our mortgage banking revenue increases helping to offset declining net interest margin and potential credit losses, and when interest rates increase and mortgage lending slows, we benefit from net interest margin expansion.”

“Due to the current rate environment and increased deposit competition, we experienced an uptick in in deposit costs during the quarter. With more potential rate sensitivity going forward, we are starting to see some funds move to higher yielding accounts, and we anticipate deposit pricing pressure could be a challenge to future NIM expansion,” said James.

Fourth Quarter 2022 Financial Highlights (at or for the three months ended December 31, 2022)

• Net income was $4.05 million, or $1.41 per diluted share, compared to $2.91 million, or $1.02 per diluted share, in the fourth quarter of 2021.
• Net interest margin was 3.82%, compared to 3.63% in the preceding quarter and 3.12% in the fourth quarter a year ago.
• Annualized return on average assets was 1.19%, compared to 0.89% in the fourth quarter of 2021.
• Annualized return on average equity was 22.31%, compared to 11.41% in the fourth quarter a year ago.
• Excluding PPP loans, average total loans increased $139.5 million, or 22% to $785.4 million for the quarter ended December 31, 2022, compared to $645.9 million for the fourth quarter of 2021.
• Total deposits decreased by $5.93 million to $1.19 billion at December 31, 2022 compared to $1.20 billion a year earlier.
• Allowance for loan losses to total loans was 1.11% at quarter end.
• Nonperforming assets to total assets was 0.36% at December 31, 2022 compared to 0.54% a year ago.
• On December 23, 2022, the Company paid a quarterly cash dividend of $0.12 per share, marking the 34th consecutive quarterly cash dividend paid.

Net Interest Income

Net interest income for the year ended December 31, 2022 increased $4.6 million, or 12%, to $43.91 million compared to $39.28 million for 2021. For 2022, the company’s net interest margin expanded 20 basis points to 3.47%, compared to 3.27% for the prior year. The tax-equivalent yield on earning assets increased by 33 basis points to 3.81% for 2022, compared to 3.48% for 2021. The cost of deposits increased by 11 basis points to 0.25% compared to 0.14% for 2021. The growth in net interest income and net interest margin reflects the $75.0 million increase in average total loans to $758.9 million compared to $683.9 million for 2021.

The benefit to net interest income from recognition of PPP fees was $904,000 for 2022, compared to $3.28 million for 2021. Net interest income for 2022 benefited from the repricing of variable rate loans and investments due to the increase in short term rates by the Federal Reserve Bank.

Net interest income totaled $12.07 million for the fourth quarter of 2022, an increase of $428,000, or 4%, compared to the third quarter of 2022, and an increase of $2.45 million, or 25%, compared to the fourth quarter of the prior year. The benefit to net interest income from the recognition of PPP loan fees decreased to $33,000 for the fourth quarter of 2022, compared to $53,000 the preceding quarter and $535,000 in the fourth quarter of 2021. As of December 31, 2022, no deferred PPP fee income remains to be recognized in future periods.

The Company’s net interest margin was 3.82% for the fourth quarter of 2022, compared to 3.63% for the third quarter of 2022, and 3.12% for the fourth quarter of 2021. The tax-equivalent yield on earning assets increased by 46 basis points to 4.44% and the cost of deposits increased by 24 basis points to 0.50% for the fourth quarter of 2022, as compared to 3.98% and 0.26%, respectively, for the third quarter of 2022. The tax-equivalent yield on earning assets and cost of total deposits increased by 112 basis points and 39 basis points, respectively, compared to the fourth quarter of 2021.

Average total loans for the fourth quarter of 2022 were $786.1 million, a $5.2 million, or 1%, increase over the third quarter of 2022 and a $111.3 million, or 17%, increase compared to the fourth quarter of 2021.

Average deposits totaled $1.23 billion for the fourth quarter of 2022, a decrease of $6.1 million, or less than 1%, compared to the third quarter of 2022, and an increase of $69.7 million, or 6%, compared to the fourth quarter of 2021.

Provision for Loan Losses and Asset Quality

The provision for loan losses decreased by $1.45 million to a negative provision of $950,000 for 2022 compared to a provision of $500,000 for 2021. The decrease in provision reflects a reduction in qualitative factor adjustments in the allowance calculation for potential losses related to the pandemic. The Company recorded a provision for loan losses of $450,000 for the quarter ended December 31, 2022. This compares to a $100,000 provision in the third quarter of 2022, and no provision for loan losses in the fourth quarter of 2021.

Total nonperforming assets, which include troubled debt restructures performing in accordance with their modified terms, improved to $4.7 million as of December 31, 2022, as compared to $5.0 million as of September 30, 2022, and $7.3 million at December 31, 2021. At December 31, 2022, the ratio of nonperforming loans to total loans equaled 0.60%, as compared to 0.64% at September 30, 2022, and 1.02% at December 31, 2021.

The allowance for loan losses to total loans was 1.11% at December 31, 2022, compared to 1.14% at September 30, 2022, and 1.57% at December 31, 2021. The allowance for loan losses to nonperforming loans increased to 185.1% at December 31, 2022, compared to 179.0% at September 30, 2022, and 153.0% at December 31, 2021.

Noninterest Income and Operating Expenses

Noninterest income for the year ended December 31, 2022 totaled $14.89 million, a $4.11 million decrease compared to the $19.00 million for the prior year. The net revenue from the sale and servicing of mortgages decreased by $4.64 million. This was partially offset by a $892,000 increase in deposit service fees during 2022.

Noninterest income totaled $3.41 million for the fourth quarter of 2022, a $327,000 decrease compared to $3.74 million in the third quarter of 2022 and a $1.11 million decrease compared to $4.52 million in the fourth quarter of 2021. The net revenue from the sale and servicing of mortgage loans decreased $325,000 during the fourth quarter of 2022, compared to the preceding quarter and by $1.31 million compared to the fourth quarter of 2021.

Operating expenses for the year ended December 31, 2022 totaled $42.32 million, a $2.32 million, or 6%, increase compared to 2021. The increase includes a $665,000 increase in salaries and employee benefits as well as a $1.34 million non-recurring charge related to the branch closures. Excluding the one-time charge, total operating expenses for the year ended December 31, 2022 increased $984,000, or 2%, compared to 2021.

Operating expenses for the fourth quarter of 2022, totaled $10.20 million, a decrease of $487,000, or 5%, compared to the third quarter of 2022, and a decrease of $301,000, or 3%, compared to the fourth quarter of 2021. The decrease compared to the preceding quarter was primarily due to a $459,000 decrease in salaries and employee benefits.

Excluding the one-time charge related to the branch closures, the efficiency ratio was 65.54% for the fourth quarter of 2022. This compared to 69.04% for the preceding quarter and 73.75% for the fourth quarter a year ago.

Capital

Tangible book value per share was $22.60 at December 31, 2022, compared to $21.01 at September 30, 2022 and $31.41 at December 31, 2021. The increase in tangible book value per share compared to the preceding quarter includes a $557,000 increase in accumulated other comprehensive income (“AOCI”) related to a decrease in the unrealized losses on available for sale securities. Excluding AOCI, tangible book value per share was $35.03 at December 31, 2022, an increase of $1.41 and $4.39 compared to September 30, 2022 and December 31, 2021, 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]

Matthew McDonnell, SVP & CFO
[email protected]

Phone: (608) 364-8911

BLACKHAWK BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2022 AND DECEMBER 31, 2021
(UNAUDITED)

		December 31,				December 31,
Assets		2022				2021
		(Dollars in thousands, except
		share and per share data)
Cash and due from banks		$	16,686			$	10,846
Interest-bearing deposits in banks and other institutions			6,071				55,720
Total cash and cash equivalents			22,757				66,566
Certificates of deposit in banks and other institutions			1,463				2,161
Equity securities at fair value			3,455				2,553
Securities available-for-sale			443,772				504,341
Loans held for sale			2,190				2,585
Federal Home Loan Bank stock, at cost			1,705				2,150
Loans, less allowance for loan losses of $8,714 and $11,125
at December 31, 2022 and December 31, 2021, respectively			771,468				696,292
Premises and equipment, net			17,192				20,778
Goodwill and core deposit intangible			11,286				11,628
Mortgage servicing rights			3,985				3,833
Cash surrender value of bank-owned life insurance			11,761				11,440
Other assets			30,764				16,911
Total assets		$	1,321,798			$	1,341,238
Liabilities and Stockholders’ Equity
Liabilities
Deposits:
Noninterest-bearing		$	352,647			$	380,601
Interest-bearing			838,469				816,440
Total deposits			1,191,116				1,197,041
Subordinated debentures and notes, net of issuance costs (including $1,031
at fair value at December 31, 2022 and December 31, 2021)			19,856				19,775
Senior secured term note			9,722				11,278
Other borrowings			18,000				5,000
Other liabilities			7,043				6,985
Total liabilities			1,245,737				1,240,079
Stockholders’ equity
Common stock, $0.01 par value, 10,000,000 shares authorized;
3,507,220 and 3,479,069 shares issued as of December 31, 2022 and
December 31, 2021, respectively			35				35
Additional paid-in capital			36,694				35,890
Retained earnings			94,243				81,987
Treasury stock, 640,594 and 630,991 shares at cost as of December 31, 2022
and December 31, 2021, respectively			(19,276	)			(18,952	)
Accumulated other comprehensive income (loss)			(35,635	)			2,199
Total stockholders’ equity			76,061				101,159
Total liabilities and stockholders’ equity		$	1,321,798			$	1,341,238

BLACKHAWK BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)		For the Quarter Ended
		December 31,				September 30,				June 30,				March 31,				December 31,
		2022				2022				2022				2022				2021
		(Dollars in thousands, except per share data)
Interest Income:
Interest and fees on loans		$	10,115			$	9,306			$	8,366			$	7,808			$	7,876
Interest on available-for-sale securities:
Taxable			3,284				2,913				2,364				2,068				1,960
Tax-exempt			379				372				369				365				369
Interest on deposits in other financial institutions			246				184				72				24				33
Total interest income			14,024				12,775				11,171				10,265				10,238
Interest Expense:
Interest on deposits			1,555				815				375				322				319
Interest on subordinated debentures			219				196				186				195				196
Interest on senior secured term note			120				89				45				91				98
Interest on other borrowings			59				32				24				–				–
Total interest expense			1,953				1,132				630				608				613
Net interest income before provision for loan losses			12,071				11,643				10,541				9,657				9,625
Provision for loan losses			450				100				(1,500	)			–				–
Net interest income after provision for loan losses			11,621				11,543				12,041				9,657				9,625
Noninterest Income:
Service charges on deposits accounts			1,029				1,023				968				913				901
Net gain on sale of loans			551				868				1,063				1,146				1,865
Net loan servicing income			195				203				209				402				186
Debit card interchange fees			1,141				1,177				1,165				1,079				1,168
Net gains on sales of securities available-for-sale			20				–				(20	)			–				–
Net other gains (losses)			–				–				11				(4	)			5
Increase in cash surrender value of bank-owned life insurance			79				78				77				86				77
Other			399				392				347				296				317
Total noninterest income			3,414				3,741				3,820				3,918				4,519
Noninterest Expenses:
Salaries and employee benefits			5,963				6,422				6,066				6,222				6,403
Occupancy and equipment			1,083				1,176				1,132				1,212				1,109
Data processing			724				705				681				708				694
Debit card processing and issuance			596				661				528				513				533
Advertising and marketing			81				138				140				108				115
Amortization of intangibles			84				88				88				96				95
Professional fees			439				417				392				389				436
Office Supplies			125				96				97				86				127
Telephone			133				136				146				140				143
Other			976				852				1,984				697				850
Total noninterest expenses			10,204				10,691				11,254				10,171				10,505
Income before income taxes			4,831				4,593				4,607				3,404				3,639
Provision for income taxes			779				1,107				1,129				785				728
Net income		$	4,052			$	3,486			$	3,478			$	2,619			$	2,911
Key Ratios
Basic Earnings Per Common Share		$	1.41			$	1.21			$	1.21			$	0.92			$	1.02
Diluted Earnings Per Common Share			1.41				1.21				1.21				0.92				1.02
Dividends Per Common Share			0.12				0.12				0.12				0.12				0.11
Book Value Per Common Share			26.53				24.97				27.89				30.59				35.50
Tangible Book Value Per Share			22.60				21.01				23.91				26.58				31.41
Tangible Book Value Excluding AOCI Per Share			35.03				33.62				32.42				31.27				30.64
Number of Shares Outstanding			2,866,626				2,870,754				2,875,430				2,873,528				2,848,078
Average Number of Shares Outstanding			2,867,915				2,872,232				2,874,254				2,864,082				2,848,109
Net Interest Margin (1)			3.82	%			3.63	%			3.31	%			3.13	%			3.12	%
Efficiency Ratio (1)(2)(3)			65.54	%			69.04	%			68.96	%			74.35	%			73.75	%
Return on Assets			1.19	%			1.02	%			1.02	%			0.80	%			0.89	%
Return on Common Equity			22.31	%			16.73	%			16.75	%			10.82	%			11.41	%
(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 the one-time charge totaling $1.34 million related to the previously announced branch closures.
(UNAUDITED)		As of
	December 31,						September 30,				June 30,				March 31,		December 31,
			2022				2022				2022				2022			2021
						(Amounts in thousands, except per share data)
Cash and due from banks		$	16,686			$	18,618			$	15,682			$	13,413			$	10,846
Interest-bearing deposits in banks and other			7,534				60,116				12,990				42,103				57,882
Securities			447,227				452,198				472,977				484,420				506,894
Net loans/leases			773,658				770,279				765,979				716,456				698,877
Goodwill and core deposit intangible			11,286				11,369				11,453				11,536				11,628
Other assets			65,407				67,801				63,109				62,715				55,428
Total assets		$	1,321,798			$	1,380,381			$	1,342,190			$	1,330,643			$	1,341,555
Deposits		$	1,191,116			$	1,263,183			$	1,220,667			$	1,199,627			$	1,197,041
Subordinated debentures			19,856				19,841				19,827				19,812				20,155
Senior secured term note			9,722				10,111				10,500				10,889				11,278
Borrowings			18,000				5,000				5,000				5,000				5,000
Other liabilities			7,043				10,568				5,998				7,414				6,985
Stockholders’ equity			76,061				71,678				80,198				87,901				101,096
Total liabilities and stockholders’ equity		$	1,321,798			$	1,380,381			$	1,342,190			$	1,330,643			$	1,341,555
ASSET QUALITY DATA
(Amounts in thousands)		December 31,				September 30,				June 30,				March 31,				December 31,
			2022				2022				2022				2022				2021
Non-accrual loans		$	3,036			$	3,254			$	4,125			$	4,983			$	5,430
Accruing loans past due 90 days or more			–				–				–				–				–
Troubled debt restructures – accruing			1,671				1,720				1,910				1,802				1,843
Total nonperforming loans		$	4,707			$	4,974			$	6,035			$	6,785			$	7,273
Other real estate owned			17				–				–				75				24
Total nonperforming assets		$	4,724			$	4,974			$	6,035			$	6,860			$	7,297
Total loans		$	782,372			$	779,181			$	775,474			$	727,451			$	710,002
Allowance for loan losses			8,714				8,902				9,495				10,995				11,125
Loans, less allowance for loan losses		$	773,658			$	770,279			$	765,979			$	716,456			$	698,877
Nonperforming Assets to total Assets			0.36	%			0.36	%			0.45	%			0.52	%			0.54	%
Nonperforming loans to total loans			0.60	%			0.64	%			0.78	%			0.93	%			1.02	%
Allowance for loan losses to total loans			1.11	%			1.14	%			1.22	%			1.51	%			1.57	%
Allowance for loan losses to nonperforming loans			185.1	%			179.0	%			157.3	%			162.0	%			153.0	%
	For the Quarter Ended
	December 31,				September 30,				June 30,				March 31,				December 31,
ROLLFORWARD OF ALLOWANCE			2022				2022			2022					2022				2021
Beginning Balance		$	8,902			$	9,495			$	10,995			$	11,125			$	11,224
Provision			450				100				(1,500	)			–				–
Loans charged off			679				758				95				214				181
Loan recoveries			41				65				95				84				82
Net charge-offs			638				693				–				130				99
Ending Balance		$	8,714			$	8,902			$	9,495			$	10,995			$	11,125

BLACKHAWK BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)		Twelve months ended December 31,
		2022				2021
		(Amounts in thousands, except per share data)
Interest Income:
Interest and fees on loans		$	35,596			$	32,832
Interest and dividends on available-for-sale securities:
Taxable			10,629				7,268
Tax-exempt			1,484				1,550
Interest on deposits in other financial institutions			527				184
Total interest income			48,236				41,834
Interest Expense:
Interest on deposits			3,068				1,576
Interest on subordinated debentures			796				549
Interest on senior secured term note			344				412
Interest on other borrowings			115				20
Total interest expense			4,323				2,557
Net interest income before provision for loan losses			43,913				39,277
Provision for loan losses			(950	)			500
Net interest income after provision for loan losses			44,863				38,777
Noninterest Income:
Service charges on deposits accounts			3,933				3,041
Net gain on sale of loans			3,629				8,592
Net loan servicing income			1,009				681
Debit card interchange fees			4,561				4,559
Net gains on sales of securities available-for-sale			–				–
Net other gains (losses)			7				106
Increase in cash surrender value of bank-owned life insurance			320				314
Change in value of equity securities			(201	)			(28	)
Other			1,635				1,739
Total noninterest income			14,893				19,004
Noninterest Expenses:
Salaries and employee benefits			24,673				24,008
Occupancy and equipment			4,604				4,656
Data processing			2,818				2,614
Debit card processing and issuance			2,297				1,950
Advertising and marketing			467				390
Amortization of core deposit intangible			342				425
Professional fees			1,637				1,660
Office Supplies			404				371
Telephone			555				568
Other			4,524				3,355
Total noninterest expenses			42,321				39,997
Income before income taxes			17,435				17,784
Provision for income taxes			3,800				4,165
Net income		$	13,635			$	13,619
Key Ratios
Basic Earnings Per Common Share		$	4.75			$	4.47
Diluted Earnings Per Common Share			4.75				4.47
Dividends Per Common Share			0.48				0.44
Net Interest Margin (1)			3.47	%			3.27	%
Efficiency Ratio (1)(2)(3)			69.22	%			68.63	%
Return on Assets			1.01	%			1.06	%
Return on Common Equity			16.23	%			12.99	%
(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. (3)The efficiency ratio excludes the one-time charge totaling $1.34 million related to the previously announced branch closures.

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
		December 31, 2022												September 30, 2022												December 31, 2021
		Average								Average				Average								Average				Average								Average
		Balance				Interest				Rate				Balance				Interest				Rate				Balance				Interest				Rate
Interest Earning Assets:
Interest-bearing deposits and other		$	29,253			$	246				3.34	%		$	30,655			$	184				2.39	%		$	61,530			$	33				0.21	%
Investment securities:
Taxable investment securities			393,291				3,284				3.31	%			417,110				2,913				2.77	%			447,836				1,960				1.74	%
Tax-exempt investment securities			54,914				379				3.49	%			54,353				372				3.46	%			52,749				369				3.57	%
Total Investment securities			448,205				3,663				3.33	%			471,463				3,285				2.85	%			500,585				2,329				1.93	%
Loans			786,108				10,115				5.11	%			780,878				9,306				4.73	%			674,818				7,876				4.63	%
Total Earning Assets		$	1,263,566			$	14,024				4.44	%		$	1,282,996			$	12,775				3.98	%		$	1,236,933			$	10,238				3.32	%
Allowance for loan losses			(8,819	)											(9,120	)											(11,192	)
Cash and due from banks			15,834												15,331												16,557
Other assets			76,693												71,882												62,310
Total Assets		$	1,347,274											$	1,361,089											$	1,304,608
Interest Bearing Liabilities:
Interest bearing checking accounts		$	367,443			$	982				1.06	%		$	359,146			$	451				0.50	%		$	308,166			$	116				0.15	%
Savings and money market deposits			401,432				320				0.32	%			419,116				177				0.17	%			423,311				77				0.07	%
Time deposits			84,817				253				1.18	%			82,736				187				0.90	%			78,625				126				0.64	%
Total interest bearing deposits			853,692				1,555				0.72	%			860,998				815				0.38	%			810,102				319				0.16	%
Subordinated debentures and notes			19,849				219				4.37	%			19,834				196				3.93	%			20,155				196				3.85	%
Borrowings			17,962				179				3.95	%			16,492				121				2.90	%			16,306				98				2.40	%
Total Interest-Bearing Liabilities		$	891,503			$	1,953				0.87	%		$	897,324			$	1,132				0.50	%		$	846,563			$	613				0.29	%
Interest Rate Spread											3.57	%											3.48	%											3.03	%
Noninterest checking accounts			375,569												374,336												349,482
Other liabilities			8,151												6,742												7,342
Total liabilities			1,275,223												1,278,402												1,203,387
Total Stockholders’ equity			72,051												82,687												101,221
Total Liabilities and
Stockholders’ Equity		$	1,347,274											$	1,361,089											$	1,304,608
Net Interest Income/Margin						$	12,071				3.82	%						$	11,643				3.63	%						$	9,625				3.12	%
(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 Twelve Months Ended
		December 31, 2022												December 31, 2021
		Average								Average				Average								Average
		Balance				Interest				Rate				Balance				Interest				Rate
Interest Earning Assets:
Interest-bearing deposits and other		$	39,549			$	527				1.33	%		$	90,300			$	183				0.20	%
Investment securities:
Taxable investment securities			422,758				10,629				2.51	%			387,361				7,269				1.88	%
Tax-exempt investment securities			54,321				1,484				3.48	%			52,435				1,550				3.76	%
Total Investment securities			477,079				12,113				2.62	%			439,796				8,819				2.10	%
Loans			758,866				35,596				4.69	%			683,859				32,832				4.80	%
Total Earning Assets		$	1,275,494			$	48,236				3.81	%		$	1,213,955			$	41,834				3.48	%
Allowance for loan losses			(9,915	)											(11,180	)
Cash and due from banks			15,258												16,640
Other assets			71,274												60,379
Total Assets		$	1,352,111											$	1,279,794
Interest Bearing Liabilities:
Interest bearing checking accounts		$	339,552			$	1,748				0.51	%		$	299,213			$	636				0.21	%
Savings and money market deposits			417,665				640				0.15	%			400,323				366				0.09	%
Time deposits			80,674				680				0.84	%			78,553				574				0.73	%
Total interest bearing deposits			837,891				3,068				0.37	%			778,089				1,576				0.20	%
Subordinated debentures			19,884				796				4.00	%			14,689				548				3.73	%
Borrowings			18,167				459				2.53	%			18,928				433				2.29	%
Total Interest-Bearing Liabilities		$	875,942			$	4,323				0.49	%		$	811,706			$	2,557				0.32	%
Interest Rate Spread											3.32	%											3.16	%
Noninterest checking accounts			385,169												356,227
Other liabilities			6,984												6,995
Total liabilities			1,268,095												1,174,928
Total Stockholders’ equity			84,016												104,866
Total Liabilities and
Stockholders’ Equity		$	1,352,111											$	1,279,794
Net Interest Income/Margin						$	43,913				3.47	%						$	39,277				3.27	%
(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.