Blackhawk Bancorp : Earns $3.48 Million in Second Quarter 2022; Highlighted by Strong Loan Growth and Net Interest Margin Expansion

Blackhawk Bancorp Earns $3.48 Million in Second Quarter 2022; Highlighted by Strong Loan Growth and Net Interest Margin ExpansionPress Release | 07/18/2022

BELOIT, WI / ACCESSWIRE / July 18, 2022 / Blackhawk Bancorp, Inc. (OTCQX:BHWB), (the "Company") the parent company of Blackhawk Bank (the "Bank"), today reported net income of $3.48 million for the quarter ended June 30, 2022, a 33% increase from the $2.62 million earned the in the preceding quarter, and a 14% decrease compared to the $4.06 million earned during the second quarter of 2021. Diluted Earnings per Share (EPS) for the current quarter was $1.21, an increase of $0.29, or 32%, compared to the preceding quarter, and a $0.09 decrease, or 7%, compared to the quarter ended June 30, 2021. The second quarter of 2022 results yielded a Return on Average Equity (ROAE) of 16.75% and a Return on Average Assets (ROAA) of 1.02%.

The increase in earnings during the current quarter, compared to the linked quarter, included a $1.50 million credit to the provision for loan losses. This was partially offset by a one-time charge totaling $1.27 million related to the previously announced branch closures.

The decrease in net income for the second quarter of 2022, compared to the second quarter of the prior year, included a $981,000 decrease in income from the sale and servicing of mortgage loans and a $1.8 million increase in operating expenses (including the $1.27 million one-time charge related to branch closures), which was partially offset by the $1.50 million credit to the provision for loan losses.

"The second quarter results reflected continued robust loan growth," said Todd James, Chairman and CEO. "We outpaced the first quarter's growth and continued to fund it with our low-cost deposit base. The strong loan growth combined with the repricing of our variable rate loans due to the recent Fed moves contributed to net interest margin expansion during the quarter. We remain cautiously optimistic for loan growth for the rest of the year, as rising interest rates and inflation concerns has the potential to slow things down."

"We continue to optimize our banking footprint and look for ways to improve operating efficiencies," said James. "In this regard, we announced the closure of two branches and recorded a $1.27 million charge during the current quarter in connection with the pending closures. Excluding this one-time charge, operating expenses were down 2% compared to the prior quarter. We anticipate efficiency improvements in future quarters as a result of this consolidation."

Second Quarter 2022 Financial Highlights (at or for the three months ended June 30, 2022)

• Net income was $3.48 million, or $1.21 per diluted share, compared to $4.06 million, or $1.30 per diluted share, in the second quarter of 2021.
• Net interest margin was 3.31%, compared to 3.13% in the preceding quarter and 3.37% in the second quarter a year ago.
• Annualized return on average assets was 1.02%, compared to 1.26% in the second quarter of 2021.
• Annualized return on average equity was 16.75%, compared to 15.74% in the second quarter a year ago.
• Excluding Paycheck Protection Program (PPP) loans, loans held for investment increased $157.0 million, or 26% to $770.5 million at June 30, 2022, compared to $613.5 million a year ago.
• Total deposits grew by $31.7 million to $1.22 billion at June 30, 2022 compared to $1.19 billion a year earlier. Allowance for loan losses to total loans was 1.22% at quarter end.
• Nonperforming assets to total assets was 0.45% at June 30, 2022 compared to 0.76% a year ago.
• On June 17, 2022, the Company paid a quarterly cash dividend of $0.12 per share, marking the 32^nd consecutive quarterly cash dividend paid.

Net Interest Income

Net interest income totaled $10.54 million for the quarter ended June 30, 2022, an increase of $884,000, or 9%, compared to the first quarter of 2022, and an increase of $377,000, or 4%, compared to the second quarter of the prior year. The benefit to net interest income from the recognition of PPP loan fees decreased to $280,000 for the second quarter of 2022 compared to $539,000 the preceding quarter and $1.10 million the second quarter of 2021. As of June 30, 2022, only $85,000 of net deferred PPP fee income remains to be recognized in future periods. Interest income also benefitted from the repricing of variable rate loans due to the Fed interest rate increases in March and June.

The Company's net interest margin was 3.31% for the second quarter of 2022, compared to 3.13% for the quarter ended March 31, 2022, and 3.37% for the second quarter of 2021. "Strong loan growth and recent short-term rate interest increases by the Federal Reserve have led to improved loan yields and net interest margin," said James. "We are well positioned to capitalize on additional loan growth opportunities and to benefit from expected future interest rate increases by the Federal Reserve."

The tax-equivalent yield on earning assets increased by 19 basis points to 3.51% for the second quarter of 2022, from the first quarter of 2022, and the cost of deposits increased by one basis point for the second quarter of 2022, from the first quarter of 2022. Tax-equivalent yield on earning assets dropped seven basis points compared to 3.58% for the second quarter of 2021, and the cost of deposits decreased three basis points compared to 0.15% for the second quarter of 2021.

Average total deposits for the second quarter of 2022 increased by $85.5 million to $1.23 billion compared to $1.19 billion in the second quarter of 2021. Average total loans for the second quarter of 2022 increased by $52.7 million, or 8%, compared to the prior year's second quarter. Excluding PPP loans, average total loans increased by $49.7 million, or 7%, to $747.4 million compared to $697.8 million for the quarter ended March 31, 2022 and increased $126.2 million, or 20%, compared to $621.3 million for the second quarter of 2021.

Net interest income for the six months ended June 30, 2022 increased $315,000 to $20.20 million compared to $19.88 million for the first half of 2021. The benefit to net interest income from recognition of PPP loan fees decreased to $819,000 for the first half of 2022 compared to $1.89 million the first half of the prior year. For the first six months of 2022, the company's net interest margin was 3.22%, compared to 3.44% for the same period in the prior year. The tax-equivalent yield on earning assets decreased by 24 basis points to 3.41% for the first six months of 2022, compared to 3.65% the first six months of 2021. The cost of deposits decreased by three basis points to 0.12% compared to the first six months of 2021.

Provision for Loan Losses and Asset Quality

Primarily due to the reduction in risk of potential losses associated with the pandemic, along with the overall quality of the loan portfolio, the Company recorded a negative provision for loan losses of $1.50 million for the quarter ended June 30, 2022. This compared to no provision for loan losses for the quarters ended March 31, 2022, and June 30, 2021.

Total nonperforming assets, which include troubled debt restructures performing in accordance with their modified terms, equaled $6.0 million as of June 30, 2022, as compared to $6.9 million as of March 31, 2022, and $10.2 million at June 30, 2021. At June 30, 2022, the ratio of nonperforming loans to total loans equaled 0.78%, as compared to 0.93% at March 31, 2022, and 1.50% at June 30, 2021.

The allowance for loan losses to total loans was 1.22% at June 30, 2022, compared to 1.51% at March 31, 2022, and 1.66% at June 30, 2021. The allowance for loan losses to nonperforming loans decreased to 157.3% at June 30, 2022, compared to 162.0% at March 31, 2022, and 110.2% at June 30, 2021.

Noninterest Income and Operating Expenses

Noninterest income for the quarter ended June 30, 2022, totaled $3.82 million, a $98,000 decrease compared to $3.92 million from the prior quarter and a $872,000 decrease from the $4.69 million recorded in the second quarter of 2021. The net revenue from the sale and servicing of mortgage loans decreased $276,000 and debit card interchange fees increased $86,000 compared to the first quarter of 2022. The decline in noninterest income compared to the second quarter of 2021 was primarily due to a $981,000 decrease in revenue from the sale and servicing of mortgage loans, which was partially offset by a $305,000 increase in deposit service fees.

Noninterest income for the six months ended June 30, 2022 totaled $7.74 million, a $1.99 million decrease compared to the $9.73 million for the same period in the prior year. The net revenue from the sale and servicing of mortgages decreased by $2.16 million. This was partially offset by a $528,000 increase in deposit service fees during the same period.

Operating expenses for the quarter ended June 30, 2022, totaled $11.25 million, an increase of $1.08 million, or 11%, compared to the first quarter of 2022, and an increase of $1.79 million, or 19%, compared to the second quarter of 2021. The increase compared to both the prior quarter and the year ago quarter was primarily due to one-time charges of $1.27 million that were incurred during the second quarter of 2022 relating to the branch closures. Excluding these one-time charges, operating expenses would have been $9.98 million, or 2% less than the prior quarter and 5% greater than the quarter ended June 30, 2021.

Operating expenses for the six months ended June 30, 2022 totaled $21.43 million, a $2.25 million, or 12%, increase compared to the same period in 2021. Excluding the aforementioned one-time charges, operating expenses for the six months ended June 30, 2022 would have been $20.15 million, a $975,000, or 5% increase over the same period in 2021. The increase includes a $801,000 increase in salaries and employee benefits.

The efficiency ratio, excluding the one-time charges, was 68.96% for the second quarter of 2022. This compared to 74.35% for the preceding quarter and 63.28% for the second quarter a year ago.

Capital

Tangible book value per share was $23.91 at June 30, 2022, compared to $26.58 at March 31, 2022 and $30.81 at June 30, 2021. The decrease in tangible book value per share during the current quarter was primarily due to a $10.41 million decrease in accumulated other comprehensive income ("AOCI") related primarily to an increase in the unrealized loss on available for sale securities reflecting the increase in interest rates during the current quarter. Excluding AOCI, tangible book value per share was $32.42 at June 30, 2022, an increase of $1.15 and $3.86 compared to March 31, 2022 and June 30, 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 twelve full-service banking centers located in Rock County, Wisconsin, and the Illinois counties of Winnebago, Boone, McHenry, Lake, 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
[e-mail]
Phone: [phone]

Matthew McDonnell, SVP & CFO
[e-mail]

BLACKHAWK BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2022 AND DECEMBER 31, 2021
(UNAUDITED)

		June 30,				December 31,
Assets		2022				2021
		(Dollars in thousands, except share and per share data)
Cash and due from banks		$	15,682			$	10,846
Interest-bearing deposits in banks and other institutions			11,078				55,720
Total cash and cash equivalents			26,760				66,566
Certificates of deposit in banks and other institutions			1,912				2,161
Equity securities at fair value			3,481				2,553
Securities available-for-sale			469,496				504,341
Loans held for sale			3,382				2,585
Federal Home Loan Bank stock, at cost			2,150				2,150
Loans, less allowance for loan losses of $9,495 and $11,125
at June 30, 2022 and December 31, 2021, respectively			762,597				696,292
Premises and equipment, net			19,060				20,778
Goodwill and core deposit intangible			11,453				11,628
Mortgage servicing rights			4,078				3,833
Cash surrender value of bank-owned life insurance			11,604				11,440
Other assets			26,217				16,911
Total assets		$	1,342,190			$	1,341,238
Liabilities and Stockholders' Equity
Liabilities
Deposits:
Noninterest-bearing		$	393,709			$	380,601
Interest-bearing			826,958				816,440
Total deposits			1,220,667				1,197,041
Subordinated debentures and notes, net of issuance costs (including $1,031
at fair value at March 31, 2022 and December 31, 2021)			19,827				19,775
Senior secured term note			10,500				11,278
Other borrowings			5,000				5,000
Other liabilities			5,998				6,985
Total liabilities			1,261,992				1,240,079
Stockholders' equity
Common stock, $0.01 par value, 10,000,000 shares authorized;
3,510,970 and 3,479,069 shares issued as of June 30, 2022 and
December 31, 2021, respectively			35				35
Additional paid-in capital			36,340				35,890
Retained earnings			87,393				81,987
Treasury stock, 635,540 and 630,991 shares at cost as of June 30, 2022
and December 31, 2021, respectively			(19,108	)			(18,952	)
Accumulated other comprehensive income (loss)			(24,462	)			2,199
Total stockholders' equity			80,198				101,159
Total liabilities and stockholders' equity		$	1,342,190			$	1,341,238

BLACKHAWK BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)		For the Quarter Ended
		June 30,				March 31,				December 31,				September 30,				June 30,
		2022				2022				2021				2021				2021
		(Dollars in thousands, except per share data)
Interest Income:
Interest and fees on loans		$	8,366			$	7,808			$	7,876			$	8,180			$	8,621
Interest on available-for-sale securities:
Taxable			2,364				2,068				1,960				1,830				1,759
Tax-exempt			369				365				369				419				378
Interest on deposits in other financial institutions			72				24				33				61				48
Total interest income			11,171				10,265				10,238				10,490				10,806
Interest Expense:
Interest on deposits			375				322				319				421				421
Interest on subordinated debentures			186				195				196				195				117
Interest on senior secured term note			45				91				98				103				104
Interest on other borrowings			24				-				-				-				-
Total interest expense			630				608				613				719				642
Net interest income before provision for loan losses			10,541				9,657				9,625				9,771				10,164
Provision for loan losses			(1,500	)			-				-				-				-
Net interest income after provision for loan losses			12,041				9,657				9,625				9,771				10,164
Noninterest Income:
Service charges on deposits accounts			968				913				901				787				663
Net gain on sale of loans			1,063				1,146				1,865				2,147				2,217
Net loan servicing income			209				402				186				90				36
Debit card interchange fees			1,165				1,079				1,168				1,146				1,218
Net gains on sales of securities available-for-sale			(20	)			-				-				-				-
Net other gains (losses)			11				(4	)			5				52				7
Increase in cash surrender value of bank-owned life insurance			77				86				77				78				72
Other			347				296				317				457				479
Total noninterest income			3,820				3,918				4,519				4,757				4,692
Noninterest Expenses:
Salaries and employee benefits			6,066				6,222				6,403				6,118				5,753
Occupancy and equipment			1,132				1,212				1,109				1,273				1,092
Data processing			681				708				694				689				641
Debit card processing and issuance			528				513				533				489				503
Advertising and marketing			140				108				115				141				70
Amortization of intangibles			88				96				95				96				96
Professional fees			392				389				436				434				399
Office Supplies			97				86				127				74				93
Telephone			146				140				143				139				144
Other			1,984				697				850				865				673
Total noninterest expenses			11,254				10,171				10,505				10,318				9,464
Income before income taxes			4,607				3,404				3,639				4,210				5,392
Provision for income taxes			1,129				785				728				988				1,337
Net income		$	3,478			$	2,619			$	2,911			$	3,222			$	4,055
Key Ratios
Basic Earnings Per Common Share		$	1.21			$	0.92			$	1.02			$	1.13			$	1.30
Diluted Earnings Per Common Share			1.21				0.92				1.02				1.13				1.30
Dividends Per Common Share			0.12				0.12				0.11				0.11				0.11
Book Value Per Common Share			27.89				30.59				35.50				35.29				34.97
Tangible Book Value Per Share			23.91				26.58				31.41				31.17				30.81
Tangible Book Value Excluding AOCI Per Share			32.42				31.27				30.64				29.64				28.56
Number of Shares Outstanding			2,875,430				2,873,528				2,848,078				2,848,078				2,842,828
Average Number of Shares Outstanding			2,874,254				2,864,082				2,848,109				2,848,109				3,118,265
Net Interest Margin (1)			3.31	%			3.13	%			3.12	%			3.11	%			3.37	%
Efficiency Ratio (1)(2)			77.77	%			74.35	%			73.75	%			70.70	%			63.28	%
Return on Assets			1.02	%			0.80	%			0.89	%			0.96	%			1.26	%
Return on Common Equity			16.75	%			10.82	%			11.41	%			12.57	%			15.74	%
(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.
(UNAUDITED)		As of
	June 30,						March 31,				December 31,				September 30,		June 30,
			2022				2022				2021				2021				2021
						(Amounts in thousands, except per share data)
Cash and due from banks		$	15,682			$	13,413			$	10,846			$	16,536			$	16,418
Interest-bearing deposits in banks and other			12,990				42,103				57,882				104,722				140,073
Securities			472,977				484,420				506,894				472,472				448,072
Net loans/leases			765,979				716,456				698,877				658,323				666,738
Goodwill and core deposit intangible			11,453				11,536				11,628				11,723				11,819
Other assets			63,109				62,715				55,428				54,218				53,629
Total assets		$	1,342,190			$	1,330,643			$	1,341,555			$	1,317,994			$	1,336,749
Deposits		$	1,220,667			$	1,199,627			$	1,197,041			$	1,169,085			$	1,188,997
Subordinated debentures			19,827				19,812				20,155				20,155				20,155
Senior secured term note			10,500				10,889				11,278				11,667				12,056
Borrowings			5,000				5,000				5,000				5,000				5,000
Other liabilities			5,998				7,414				6,985				11,585				11,131
Stockholders' equity			80,198				87,901				101,096				100,502				99,410
Total liabilities and stockholders' equity		$	1,342,190			$	1,330,643			$	1,341,555			$	1,317,994			$	1,336,749
ASSET QUALITY DATA
(Amounts in thousands)		June 30,				March 31,				December 31,				September 30,				June 30,
			2022				2022				2021				2021				2021
Non-accrual loans		$	4,125			$	4,983			$	5,430			$	7,827			$	8,228
Accruing loans past due 90 days or more			-				-				-				-				-
Troubled debt restructures - accruing			1,910				1,802				1,843				1,975				1,958
Total nonperforming loans		$	6,035			$	6,785			$	7,273			$	9,802			$	10,186
Other real estate owned			-				75				24				-				-
Total nonperforming assets		$	6,035			$	6,860			$	7,297			$	9,802			$	10,186
Total loans		$	775,474			$	727,451			$	710,002			$	669,547			$	677,967
Allowance for loan losses			9,495				10,995				11,125				11,224				11,229
Loans, less allowance for loan losses		$	765,979			$	716,456			$	698,877			$	658,323			$	666,738
Nonperforming Assets to total Assets			0.45	%			0.52	%			0.54	%			0.74	%			0.76	%
Nonperforming loans to total loans			0.78	%			0.93	%			1.02	%			1.46	%			1.50	%
Allowance for loan losses to total loans			1.22	%			1.51	%			1.57	%			1.68	%			1.66	%
Allowance for loan losses to nonperforming loans			157.3	%			162.0	%			153.0	%			114.5	%			110.2	%
	For the Quarter Ended
	June 30,						March 31,				December 31,				September 30,				June 30,
ROLL FORWARD OF ALLOWANCE			2022				2022				2021				2021				2021
Beginning Balance		$	10,995			$	11,125			$	11,224			$	11,229			$	11,116
Provision			(1,500	)			-				-				-				-
Loans charged off			95				214				181				103				61
Loan recoveries			95				84				82				98				174
Net charge-offs			-				130				99				5				(113	)
Ending Balance		$	9,495			$	10,995			$	11,125			$	11,224			$	11,229

BLACKHAWK BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)		Six months ended June 30,
		2022				2021
		(Amounts in thousands, except per share data)
Interest Income:
Interest and fees on loans		$	16,174			$	16,776
Interest and dividends on available-for-sale securities:
Taxable			4,433				3,479
Tax-exempt			733				762
Interest on deposits in other financial institutions			96				89
Total interest income			21,436				21,106
Interest Expense:
Interest on deposits			698				836
Interest on subordinated debentures			381				158
Interest on senior secured term note			136				210
Interest on other borrowings			24				20
Total interest expense			1,239				1,224
Net interest income before provision for loan losses			20,197				19,882
Provision for loan losses			(1,500	)			500
Net interest income after provision for loan losses			21,697				19,382
Noninterest Income:
Service charges on deposits accounts			1,882				1,354
Net gain on sale of loans			2,209				4,579
Net loan servicing income			612				404
Debit card interchange fees			2,244				2,245
Net gains on sales of securities available-for-sale			(20	)			-
Net other gains (losses)			7				49
Increase in cash surrender value of bank-owned life insurance			163				159
Change in value of equity securities			(109	)			(30	)
Other			751				967
Total noninterest income			7,739				9,727
Noninterest Expenses:
Salaries and employee benefits			12,288				11,487
Occupancy and equipment			2,344				2,274
Data processing			1,389				1,232
Debit card processing and issuance			1,041				928
Advertising and marketing			248				169
Amortization of core deposit intangible			185				199
Professional fees			781				789
Office Supplies			183				170
Telephone			285				286
Other			2,681				1,641
Total noninterest expenses			21,425				19,175
Income before income taxes			8,011				9,934
Provision for income taxes			1,914				2,449
Net income		$	6,097			$	7,485
Key Ratios
Basic Earnings Per Common Share		$	2.13			$	2.31
Diluted Earnings Per Common Share			2.13				2.31
Dividends Per Common Share			0.24				0.22
Net Interest Margin (1)			3.22	%			3.44	%
Efficiency Ratio (1)(2)			76.11	%			64.64	%
Return on Assets			0.91	%			1.21	%
Return on Common Equity			13.54	%			13.93	%
(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, 2022												March 31, 2022												June 30, 2021
		Average								Average				Average								Average				Average								Average
		Balance				Interest				Rate				Balance				Interest				Rate				Balance				Interest				Rate
Interest Earning Assets:
Interest-bearing deposits and other		$	50,333			$	72				0.58	%		$	48,261			$	24				0.20	%		$	105,385			$	48				0.18	%
Investment securities:
Taxable investment securities			432,659				2,364				2.19	%			448,643				2,068				1.87	%			365,329				1,759				1.93	%
Tax-exempt investment securities			54,184				369				3.48	%			53,820				365				3.50	%			52,197				378				3.73	%
Total Investment securities			486,843				2,733				2.33	%			502,463				2,433				2.04	%			417,526				2,137				2.16	%
Loans			752,785				8,366				4.46	%			714,666				7,808				4.43	%			700,109				8,621				4.94	%
Total Earning Assets		$	1,289,961			$	11,171				3.51	%		$	1,265,390			$	10,265				3.32	%		$	1,223,020			$	10,806				3.58	%
Allowance for loan losses			(10,618	)											(11,136	)											(11,221	)
Cash and due from banks			14,900												14,956												17,124
Other assets			70,202												65,912												58,008
Total Assets		$	1,364,445											$	1,335,122											$	1,286,931
Interest Bearing Liabilities:
Interest bearing checking accounts		$	316,829			$	175				0.22	%		$	313,986			$	139				0.18	%		$	302,946			$	180				0.24	%
Savings and money market deposits			426,585				75				0.07	%			423,755				68				0.06	%			396,476				96				0.10	%
Time deposits			77,287				125				0.65	%			77,755				115				0.60	%			77,155				145				0.75	%
Total interest bearing deposits			820,701				375				0.18	%			815,496				322				0.16	%			776,577				421				0.22	%
Subordinated debentures and notes			19,820				186				3.77	%			20,037				195				3.94	%			13,067				117				3.59	%
Borrowings			22,143				69				1.25	%			16,071				91				2.29	%			16,501				104				2.51	%
Total Interest-Bearing Liabilities		$	862,664			$	630				0.29	%		$	851,604			$	608				0.29	%		$	806,145			$	642				0.32	%
Interest Rate Spread											3.22	%											3.03	%											3.26	%
Noninterest checking accounts			412,508												378,414												371,146
Other liabilities			5,965												6,899												6,283
Total liabilities			1,281,137												1,236,917												1,183,574
Total Stockholders' equity			83,308												98,205												103,357
Total Liabilities and
Stockholders' Equity		$	1,364,445											$	1,335,122											$	1,286,931
Net Interest Income/Margin						$	10,541				3.31	%						$	9,657				3.13	%						$	10,164				3.37	%
(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 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, 2022												June 30, 2021
		Average								Average				Average								Average
		Balance				Interest				Rate				Balance				Interest				Rate
Interest Earning Assets:
Interest-bearing deposits and other		$	49,303			$	96				0.39	%		$	89,833			$	89				0.20	%
Investment securities:
Taxable investment securities			440,607				4,433				2.03	%			343,158				3,479				2.04	%
Tax-exempt investment securities			54,003				733				3.49	%			52,160				762				3.78	%
Total Investment securities			494,610				5,166				2.19	%			395,318				4,241				2.27	%
Loans			733,830				16,174				4.44	%			692,921				16,776				4.88	%
Total Earning Assets		$	1,277,743			$	21,436				3.41	%		$	1,178,072			$	21,106				3.65	%
Allowance for loan losses			(10,875	)											(11,148	)
Cash and due from banks			14,928												16,591
Other assets			68,128												59,141
Total Assets		$	1,349,924											$	1,242,656
Interest Bearing Liabilities:
Interest bearing checking accounts		$	315,415			$	315				0.20	%		$	293,787			$	341				0.23	%
Savings and money market deposits			425,178				143				0.07	%			376,656				180				0.10	%
Time deposits			77,520				240				0.62	%			79,468				315				0.80	%
Total interest bearing deposits			818,113				698				0.17	%			749,911				836				0.22	%
Subordinated debentures			19,928				381				3.86	%			9,133				158				3.49	%
Borrowings			19,124				160				1.68	%			21,408				230				2.17	%
Total Interest-Bearing Liabilities		$	857,165			$	1,239				0.29	%		$	780,452			$	1,224				0.32	%
Interest Rate Spread											3.12	%											3.33	%
Noninterest checking accounts			395,555												347,041
Other liabilities			6,430												6,825
Total liabilities			1,259,150												1,134,318
Total Stockholders' equity			90,774												108,338
Total Liabilities and
Stockholders' Equity		$	1,349,924											$	1,242,656
Net Interest Income/Margin						$	20,197				3.22	%						$	19,882				3.44	%
(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.

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