Blackhawk Bancorp : Annual Report - Audited Financial Statements 2021

BLACKHAWK BANCORP, INC.

AND SUBSIDIARIES

Consolidated Financial Statements

Years Ended December 31, 2021 and 2020

Blackhawk Bancorp, Inc. and Subsidiaries

Contents
Independent Auditor's Report on the Consolidated Financial Statements	1-2
Financial Statements
Consolidated Balance Sheets	3
Consolidated Statements of Income	4
Consolidated Statements of Comprehensive Income	5
Consolidated Statements of Changes in Stockholders' Equity	6
Consolidated Statements of Cash Flows	7-8
Notes to Consolidated Financial Statements	9-48

Independent Auditor's Report

To the Board of Directors

Blackhawk Bancorp, Inc. and Subsidiaries

Opinion

We have audited the accompanying consolidated financial statements of Blackhawk Bancorp, Inc. and Subsidiaries (the "Company"), which comprise the consolidated balance sheets as of December 31, 2021 and 2020 and the related consolidated statements of income, comprehensive income, changes in stockholders' equity, and cash flows for the years then ended, and the related notes to the consolidated financial statements.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020 and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

Basis for Opinion

We conducted our audits in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audits of the Consolidated Financial Statements section of our report. We are required to be independent of the Company and to meet our ethical responsibilities in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Responsibilities of Management for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern within one year after the date that the consolidated financial statements are issued or available to be issued.

Auditor's Responsibilities for the Audits of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether these consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and, therefore, is not a guarantee that audits conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the consolidated financial statements.

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To the Board of Directors

Blackhawk Bancorp, Inc. and Subsidiaries

In performing audits in accordance with GAAS, we:

• Exercise professional judgment and maintain professional skepticism throughout the audits.
• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.
• Obtain an understanding of internal control relevant to the audits in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. Accordingly, no such opinion is expressed.
• Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the consolidated financial statements.
• Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern for a reasonable period of time.

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audits, significant audit findings, and certain internal control-related matters that we identified during the audits.

March 2, 2022

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Blackhawk Bancorp, Inc. and Subsidiaries
Consolidated Balance Sheets
December 31, 2021 and 2020
		2021		2020
Assets	(Amounts in thousands, except
		share and per share data)
Cash and due from banks	$	10,846	$	12,012
Interest-bearing deposits in banks and other institutions		55,720		42,119
Total cash and cash equivalents		66,566		54,131
Certificates of deposit in banks and other institutions		2,161		4,159
Equity securities at fair value		2,553		2,517
Securities available-for-sale		504,341		349,565
Loans held for sale		2,585		6,096
Federal Home Loan Bank stock, at cost		2,150		2,150
Loans, less allowance for loan losses of $11,125 and $10,764
at December 31, 2021 and 2020, respectively		696,292		662,225
Premises and equipment, net		20,778		20,254
Goodwill and core deposit intangible		11,628		12,018
Mortgage servicing rights		3,833		3,409
Cash surrender value of bank-owned life insurance		11,440		11,126
Other assets		16,911		13,949
Total assets	$	1,341,238	$	1,141,599
Liabilities and Stockholders' Equity
Liabilities
Deposits:
Noninterest-bearing	$	380,601	$	268,866
Interest-bearing		816,440		718,388
Total deposits		1,197,041		987,254
Subordinated debentures, net of issuance costs (including $1,031 at fair value at
December 31, 2021 and 2020)		19,775		5,155
Senior secured term note		11,278		12,833
Other borrowings		5,000		14,000
Other liabilities		6,985		10,602
Total liabilities		1,240,079		1,029,844
Stockholders' Equity
Common stock, $0.01 par value, 10,000,000 shares authorized; 3,479,069 and
3,435,348 shares issued as of December 31, 2021 and 2020, respectively		35		35
Additional paid-in capital		35,890		35,100
Retained earnings		81,987		69,676
Treasury stock, 630,991 and 62,999 shares, at cost as of December 31, 2021
and 2020, respectively		(18,952)		(979)
Accumulated other comprehensive income		2,199		7,923
Total stockholders' equity		101,159		111,755
Total liabilities and stockholders' equity	$	1,341,238	$	1,141,599

See Notes to Consolidated Financial Statements.

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