<PAGE> 1
FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ----TO----
COMMISSION FILE NUMBER 0-18599
BLACKHAWK BANCORP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
WISCONSIN 39-1659424
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
400 BROAD STREET 53511
BELOIT, WISCONSIN (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(608) 364-8911
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
NOT APPLICABLE
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST REPORT)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
OUTSTANDING AT
CLASS OF COMMON STOCK MARCH 31, 1997
----------------------- ---------------------
$.01 PAR VALUE 2,291,264 SHARES
<PAGE> 2
INDEX
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page
----
<S> <C>
ITEM 1. FINANCIAL STATEMENTS
Consolidated Condensed Balance Sheets as of
March 31, 1997 and December 31, 1996 3
Consolidated Condensed Statements of Income for the
three months ended March 31, 1997 and 1996 4
Consolidated Condensed Statements of Shareholders'
Equity as of March 31, 1997 and December 31, 1996 5
Consolidated Condensed Statements of Cash Flows for the
three months ended March 31, 1997 and 1996 6-7
Notes to Consolidated Condensed Financial Statements 8-10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 11-14
PART II - OTHER INFORMATION
ITEM 5. OTHER ITEMS 15
ITEM 6. A) EXHIBITS 15
B) REPORTS ON FORM 8-K 15
SIGNATURES 16
</TABLE>
<PAGE> 3
BLACKHAWK BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
ASSETS 1997 1996
------ ------------ ------------
<S> <C> <C>
Cash and cash equivalents $ 6,028,994 $ 7,966,929
Federal funds sold and other short-term
investments 3,270,057 4,677,596
Securities available for sale 10,588,932 10,701,911
Securities held to maturity 27,234,939 24,864,640
Total loans 101,175,060 99,426,691
Allowance for loan losses (Note 3) 1,208,782 1,185,672
------------ ------------
Net loans 99,966,278 98,241,019
Bank premises and equipment, net 3,404,950 3,463,491
Accrued interest receivable 1,178,430 1,041,756
Other assets 469,392 526,663
------------ ------------
Total Assets $152,141,972 $151,484,005
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
LIABILITIES:
Deposits:
Non-interest bearing $ 14,355,840 $ 23,193,906
Interest bearing 97,874,017 95,116,941
------------ ------------
Total deposits 112,229,857 118,310,847
Borrowed Funds:
Short-term borrowings (Note 4) 14,295,367 7,405,451
Other borrowings (Note 5) 2,262,063 2,275,456
Accrued interest payable 588,766 680,226
Other liabilities 469,628 782,827
------------ ------------
Total Liabilities 129,845,681 129,454,807
------------ ------------
SHAREHOLDERS' EQUITY:
Preferred stock
1,000,000 shares, $.01 par value per share
authorized, none issued or outstanding -- --
Common stock
10,000,000 shares, $.01 par value
per share authorized, 2,291,264 and
2,285,864 shares issued and outstanding 22,913 22,859
Additional paid-in capital 6,983,267 6,960,550
Employee stock options earned 102,765 94,764
Retained Earnings 15,295,886 15,072,129
Treasury Stock (84,305) (84,305)
FASB 115 Adjustment (12,172) (11,343)
------------ ------------
22,308,354 22,054,654
Less: Deferred compensation related
to employee stock ownership
plan debt guarantee (12,063) (25,456)
------------ ------------
Total Shareholders' Equity 22,296,291 22,029,198
------------ ------------
Total Liabilities and
Shareholders' Equity $152,141,972 $151,484,005
============ ============
</TABLE>
See Notes to Unaudited Consolidated Condensed Financial Statements
3
<PAGE> 4
BLACKHAWK BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
1997 1996
------------ ------------
<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 2,284,735 $ 2,124,459
Interest on deposits with other banks 276 417
Interest on investment securities:
Taxable 521,217 502,883
Exempt from federal income taxes 38,426 51,051
Interest on federal funds sold
and other short-term investments 66,276 88,958
--------------- ---------------
Total Interest Income 2,910,930 2,767,768
--------------- ---------------
INTEREST EXPENSE:
Interest on deposits 1,138,640 1,138,966
Interest on short-term borrowings 189,055 168,001
Interest on other borrowings 35,715 55,983
--------------- ---------------
Total Interest Expense 1,363,410 1,362,950
--------------- ---------------
Net Interest Income 1,547,520 1,404,818
Provision for loan losses (Note 3) 30,000 45,000
--------------- ---------------
Net Interest Income After
Provision For Loan Losses 1,517,520 1,359,818
--------------- ---------------
OTHER OPERATING INCOME:
Investment securities gains (losses) -- 99
Gain on sale of loans 8,465 17,611
Trust department income 31,500 23,779
Service fees 147,018 123,715
Other income 57,249 69,356
--------------- ---------------
Total Other Operating Income 244,232 234,560
--------------- ---------------
OTHER OPERATING EXPENSES:
Salaries and employee benefits 574,656 526,617
Occupancy expense of bank premises, net 88,034 80,116
Furniture and equipment 82,081 90,016
Data processing 77,620 80,730
Other operating expenses 244,753 265,998
--------------- ---------------
Total Other Operating Expenses 1,067,144 1,043,477
--------------- ---------------
Income Before Income Taxes 694,608 550,901
Provision for income taxes 242,482 179,254
--------------- ---------------
Net Income $ 452,126 $ 371,647
=============== ===============
Earnings Per Share $ .20 $ .16
=============== ===============
Fully Diluted Earnings Per Share $ .19 $ .16
=============== ===============
Dividends Per Share $ .10 $ .08
=============== ===============
</TABLE>
See Notes to Unaudited Consolidated Condensed Financial Statements
4
<PAGE> 5
BLACKHAWK BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS TWELVE MONTHS
ENDED ENDED
MARCH 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
Common Stock:
Balance at beginning of period $ 22,859 $ 22,826
Stock split -- --
Stock options exercised 54 33
--------------- ----------------
Balance at end of period 22,913 22,859
--------------- ----------------
Additional Paid-in Capital:
Balance at beginning of period 6,960,550 6,946,370
Stock options exercised 22,717 14,180
--------------- ---------------
Balance at end of period 6,983,267 6,960,550
--------------- ----------------
Employee Stock Options Earned:
Balance at beginning of period 94,764 52,165
Stock options exercised (22,771) (55)
Unearned employee compensation 30,772 42,654
--------------- ---------------
Balance at end of period 102,765 94,764
--------------- ---------------
Retained Earnings:
Balance at beginning of period 15,072,129 14,210,036
Net income 452,126 1,728,275
Dividends declared on common stock (228,369) (866,182)
--------------- ---------------
Balance at end of period 15,295,886 15,072,129
--------------- ---------------
Treasury Stock, at cost:
Balance at beginning of period (84,305) --
Purchase -- (84,305)
--------------- ---------------
Balance at end of period (84,305) (84,305)
--------------- ---------------
FASB 115 Adjustment:
Balance at beginning of period (11,343) 37,114
Net adjustment during period (829) (48,457)
--------------- ---------------
Balance at end of period (12,172) (11,343)
--------------- ---------------
Other:
Balance at beginning of period (25,456) (79,027)
Principal payments on ESOP loan 13,393 53,571
--------------- ---------------
Balance at end of period (12,063) (25,456)
--------------- ---------------
Total Shareholders' Equity $ 22,296,291 $ 22,029,198
=============== ===============
</TABLE>
See Notes to Unaudited Consolidated Condensed Financial Statements
5
<PAGE> 6
BLACKHAWK BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1997 1996
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 452,126 $ 371,647
Adjustments to reconcile net income
to net cash provided by operating
activities:
Compensatory options recognized 8,001 --
Provision for loan losses 30,000 45,000
Provision for depreciation and
amortization 74,895 84,480
Amortization of premiums accrediting
discounts on investment securities, net (29,741) 1,814
(Gains) losses on investment securities -- 99
(Gain) on sale of loans (8,465) (17,611)
Loans originated for sale (351,000) (1,323,508)
Proceeds from sale of loans 599,865 1,424,319
Change in assets and liabilities:
(Increase) decrease in accrued
interest receivable (136,674) (66,498)
(Increase) decrease in other assets 57,271 18,592
Increase (decrease) in accrued
interest payable (91,460) (114,738)
Increase (decrease) in other
liabilities (314,025) (211,248)
----------- ------------
Net cash provided by operating
activities 290,793 205,952
----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturity of available-
for-sale securities 1,361,419 3,218,902
Purchase of available-for-sale securities (1,249,496) (6,329,991)
Proceeds from maturity of investment
securities 4,192,223 1,294,166
Purchase of investment securities (6,531,728) (1,660,000)
Decrease in federal funds sold and
other short-term investments, net 1,407,539 7,928,731
Loans originated, net of
principal collected (1,995,659) 163,195
Purchase of bank premises and equipment (16,354) (7,327)
----------- ------------
Net cash provided by (used in)
investing activities (2,832,056) 4,607,676
----------- ------------
</TABLE>
See Notes to Unaudited Consolidated Condensed Financial Statements.
6
<PAGE> 7
BLACKHAWK BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
1997 1996
----------- ------------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Stock options exercised 22,771 8,454
Net (decrease) in deposits (6,080,990) (9,758,535)
Net increase (decrease) in other
borrowings 6,889,916 3,237,052
Cash dividends paid (228,369) (182,749)
--------------- ----------------
Net cash (used in)
financing activities 603,328 (6,695,778)
--------------- ----------------
Net increase (decrease) in cash and
cash equivalents (1,937,935) (1,882,150)
CASH AND CASH EQUIVALENTS:
Beginning 7,966,929 7,589,600
--------------- ----------------
Ending $ 6,028,994 $ 5,707,450
=============== ================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash payments for:
Interest $ 1,454,870 $ 1,477,688
Income taxes $ 235,723 $ 32,129
SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING
ACTIVITIES:
Other assets acquired in settlement of
loans $ 26,230 $ 103,845
Principal payments on ESOP loan (Note 5) $ 13,393 $ 13,394
</TABLE>
See Notes to Unaudited Consolidated Condensed Financial Statements.
7
<PAGE> 8
BLACKHAWK BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
March 31, 1997
Note 1. General:
The accompanying consolidated condensed financial statements conform
to generally accepted accounting principles and to general practices
within the banking industry. The more significant policies used by
the Company in preparing and presenting its financial statements are
stated in the Corporation's Form 10-KSB, with the exception of FAS
128, Earnings Per Share, which the Company adopted as of January 1,
1997
The effect of timing differences in the recognition of revenue and
expense for tax liability is not determined until the end of each
fiscal year.
In the opinion of Management, the accompanying unaudited consolidated
condensed financial statements contain all adjustments (consisting of
normal recurring accruals) necessary to present fairly the financial
position of the Corporation as of March 31, 1997 and December 31,
1996, the results of operations for the three months ended March 31,
1997 and 1996, and cash flows for the three months ended March 31,
1997 and 1996.
The results of operations for the three months ended March 31, 1997
and 1996 are not necessarily indicative of the results to be expected
for the full year.
Note 2. Non-Performing Loans
Non-performing loans includes loans which have been categorized by
management as non-accruing because collection of interest is not
assured, and loans which are past-due ninety days or more as to
interest and/or principal payments. The following summarizes
information concerning non-performing loans:
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
------------- -----------
1997 1996 1995
--------- -------- --------
<S> <C> <C> <C>
Impaired loans $494,149 $ -- $ 444,594
Non-accruing loans 217,476 308,000 442,897
Past due 90 days or more
and still accruing 32,705 142,000 252,163
-------- -------- ---------
Total non-performing loan $744,330 $450,000 $1,139,654
======== ======== ==========
</TABLE>
Note 3: Allowance For Loan Losses
A summary of transactions in the allowance for loan losses is as
follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
----------
1997 1996
--------- ---------
<S> <C> <C>
Balance at beginning of
period $1,185,672 $ 928,817
Provision charged to expense 30,000 45,000
Loans charged off (12,759) (38,861)
Recoveries 5,869 4,005
--------- ---------
Balance at end of period $1,208,782 $ 938,961
========== =========
</TABLE>
8
<PAGE> 9
BLACKHAWK BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
March 31, 1997
(CONTINUED)
Note 4. Short-Term Borrowings:
A summary of short-term borrowings is as follows:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
----------- ----------
<S> <C> <C>
Securities sold under agreement to
repurchase $14,295,367 $ 7,405,451
=========== ===========
</TABLE>
Note 5. Other Borrowings:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
---------- ------------
<S> <C> <C>
ESOP Debt Guarantee $ 12,063 $ 25,456
FHLB Borrowings 2,250,000 2,250,000
---------- -----------
$2,262,063 $ 2,275,456
========== ===========
</TABLE>
The Company has an Employee Stock Ownership Plan for the benefit of
the employees of the Company and its subsidiary. The ESOP borrowed
funds from a third party lender and purchased 37,367 shares of the
Company's stock. Accordingly, the debt has been recorded in the
accompanying consolidated condensed balance sheets together with the
related deferred compensation. The debt and related deferred
compensation are reduced as the ESOP makes principal payments.
The bank has established a line of credit with the Federal Home Loan
Bank ("FHLB"). Periodic draws are taken against this line to fund
specific loans. The total line of credit is $5,834,000, with an
available balance of $3,584,000.
Note 6. Stock Option Plan:
The Company's 1990 Directors' Stock Option Plan and the 1990 Executive
Stock Option Plan expired on January 24, 1995. At the time of
expiration, options outstanding under the 1990 Plans were 125,134 plus
another 240,000 options under the 1994 Directors' and Executives Stock
Option Plans. Options are granted at prices equal to the fair market
value for directors and at prices from 90% to 100% of fair market
value for key employees. The options vest over three years and are
exercisable to 10 years from the date of grant. Other pertinent
information related to the plans is as follows:
9
<PAGE> 10
BLACKHAWK BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
March 31, 1997
(CONTINUED)
Note 6. Stock Option Plan (continued)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
----------- -----------
<S> <C> <C>
Shares under option, beginning of year 275,776 262,235
Granted during the year 7,350 17,300
Terminated and canceled during the year 1,000 (510)
Exercised during the year (5,400) (3,249)
------- -------
Shares under option, end of period 276,726 275,776
======= =======
Options exercisable, end of period 179,092 113,543
======= =======
Available to grant, end of period
107,000 131,650
======= =======
Average prices: Granted during the period $ 11.50 $ 11.20
Exercised during the period $ 6.33 $ 5.25
Under option
$ 7.15 $ 7.02
======= =======
</TABLE>
Note 7. Commitments and Contingent Liabilities:
A summary of the amount of exposure to credit loss for loan
commitments (unfunded loans and unused lines of credit) and standby
letters of credit outstanding is as follows:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
------------ -----------
<S> <C> <C>
Loan commitments $10,404,291 $9,327,753
Standby letters of credit 509,593 355,991
----------- ----------
$10,913,884 $9,683,744
=========== ==========
</TABLE>
10
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
The purpose of Management's discussion and analysis is to provide relevant
information regarding the Registrant's financial condition and its results of
operations. The information included herein should be read in conjunction with
the consolidated condensed balance sheets as of March 31, 1997 and December 31,
1996 and the consolidated condensed statements of income for the three months
ended March 31, 1997 and 1996. This information is not meant to be a
substitute for the balance sheets and income statements.
RESULTS OF OPERATIONS
Net income for the three months ended March 31, 1997 was approximately $452,000
compared to $372,000 for the similar period in 1996. The discussion that
follows will provide information about the various areas of income and expense
that resulted in the aforementioned results.
THREE MONTHS ENDED MARCH 31
For the three months ended March 31, 1997, interest income was $2,911,000
compared to $2,768,000 for the same period in 1996. This increase of
approximately 5.2%, $143,000, was primarily the result of increased volume in
commercial loans and fed funds sold, as discussed below.
Interest and fees on loans increased to $2,285,000 in the three months ended
March 31, 1997 compared to $2,124,000 in same period of 1995. Interest from
real estate loans was approximately $27,000 higher in 1997 and fees were
approximately $24,000 higher, thus resulting in total real estate loan interest
and fees being more than $50,000 higher in the first three months of 1997 than
in 1996. Commercial loan interest income increased approximately $44,000 in
1997 compared to 1996. The increase was due almost entirely to additional
volume. Income from consumer loans, including home equity, credit cards, and
installment loans, increased due to higher volumes.
Investment income on taxable securities increased nearly $18,000 in the first
three months of 1997 compared to 1996, $521,000 and $503,000 respectively.
Most of this increase was the result of increased volumes although the average
yield increased slightly. The volume increase was in the area of corporate
bonds. The yield increase was in all categories of taxable bonds. Income from
tax exempt securities decreased by 25%, $38,000 in 1997 compared to $51,000 in
the same period in 1996. This was the result of both lower volumes and lower
yields.
Interest from fed funds sold and other short-term investments decreased
substantially to $66,000 in 1997 from $89,000 in 1996. The decreased volume in
fed funds sold, an average balance of $4.4 million in 1997 compared to $6.7
million in 1996, was the primary reason for the decreased income in this
category. The decreased income due to decreased volume was offset to some
extent by slightly higher yields.
Interest paid on deposits increased to $1,139,000 in the three months ended
March 31, 1997. This was approximately the same amount of interest paid on
deposits in the same period in 1996. Average deposits decreased slightly in
1997 but the average cost of funds increased slightly. Therefore the interest
paid on deposits was approximately the same for both periods. If, as some are
predicting, interest rates
11
<PAGE> 12
increase through the rest of 1997, the cost of funds will likely increase also.
The cost of funds increase is expected to occur in the second quarter of 1997
based on current rates being offered compared to the rates on maturing
deposits. The actions of the Federal Reserve will continue to affect the level
and direction of interest rates in the future. Management, at this time, is
not able to predict their actions.
Interest on short-term borrowings increased to $189,000 from $168,000 in 1996,
or an increase of $21,000 or 12.5%. Repurchase agreements, the major item in
this category, had a higher average balance in 1997 compared to 1996, $14.9
million and $13.5 million respectively. The interest rates paid also increased
in 1997 compared to 1996. A very small amount of Fed funds were purchased in
the first quarter of 1997 compared to none purchased in 1996.
Other borrowings are represented by Federal Home Loan Bank ("FHLB") advances.
Average borrowings from the FHLB decreased to $2.3 million from $3.6 million in
1996. The average rate on the borrowings increased because the maturing
borrowings were at rates lower than those remaining. As a result of these
items the interest cost of the other borrowings category was approximately
$20,000 less in 1997 than in 1996.
The provision for loan loss was $30,000 for the three months in 1997 compared
to $45,000 in 1996. It is management's opinion that this amount is an adequate
provision.
Total other operating income increased to $244,000 from $235,000 for the three
months ended March 31, 1997 and 1996 respectively. Gain on sale of loans in
the first quarter of 1997 was $8,000 compared to $18,000 in 1996. As fixed
mortgage rates increased, the activity in this area declined. All fixed rate
loans originated are sold. Service fees increased to nearly $147,000 in 1997
from $124,000 in 1996. Most of this amount results from checking account fees.
The increase was due to an increased number of accounts and an increased fee
schedule. Other income in the three months ended March 31, 1997 was $57,000
compared to $69,000 in the comparable period of 1996.
Total other operating expenses increased approximately $24,000 to $1,067,000
from $1,043,000. The increased personnel costs were primarily the result of
normal annual increases and the accrual for the 1997 bonus. The increase in
occupancy expenses are due to increased depreciation and increased real estate
taxes. The decrease in equipment expenses was a lower depreciation expense.
Data processing expenses declined slightly when comparing the first three
months of 1997 with the same period in 1996. Other operating expenses
decreased to $245,000 in 1997 from $266,000 in 1996. This reduction was the
result of small reductions in several different areas which came about because
of a conscious effort to monitor expenses in all operational areas.
Income taxes increased to $242,000 from $179,000. This increase was due to a
larger amount of income before taxes and a higher effective tax rate, 34.9% and
32.5%, 1997 and 1996 respectively.
BALANCE SHEET ANALYSIS
This analysis of the Company's financial position is comparing March 31, 1997
to December 31, 1996. Total assets were $152.1 million compared to $151.5
million, March 31, 1997 and December 31, 1996, respectively. This represents
an increase of approximately 4.3%.
Total loans were $101.2 million on March 31, 1997 and $99.4 million on
12
<PAGE> 13
December 31, 1996, an increase of $1.8 million or 1.8%. All three of the major
loan categories increased in balances outstanding. Real estate loans were
$57.1 million compared to $56.3 million, March 31, 1997 and December 31, 1996
respectively. Consumer loans increased to $18.6 million at March 31, 1997
compared to $18.2 million at December 31, 1996. Commercial loans increased to
$23.6 million at March 31, 1997 compared to $23.0 million at December 31, 1996.
Loan demand was steady during the first quarter of 1997. At this time,
indications are that a steady loan demand will be prevalent during the second
and possibly the third quarters of 1997.
Allowance for loan losses was $1.21 million at March 31, 1997 compared to $1.19
million at December 31, 1996. As of March 31, 1997 non-performing loans
totaled $744,000 compared to $1.14 million at December 31, 1996. Of the
$744,000, there was a loan that is subject to a $100,000 regulatory write-down.
This write-down occurred in April, and has been provided for in management's
determination of the adequacy of the allowance for loan loss reserve.
Management believes that the allowance is adequate at this time.
Bank premises and equipment was $3.4 million at March 31, 1997 compared to $3.5
million at December 31, 1996. This decrease was primarily the depreciation of
buildings and equipment with no major purchases.
The reduction of deposits discussed below were funded in part by a reduction in
fed funds sold and other short term investments. As of March 31, 1997 fed
funds sold and other short-term investments were $3.3 million compared to $4.7
million at December 31, 1996. Securities available for sale were $10.6 million
at March 31, 1997 compared to $10.7 million at December 31, 1996. Securities
held to maturity were $27.2 million compared to $24.9 million, March 31, 1997
and December 31, 1996, respectively.
Total deposits were $112.2 million at March 31, 1997 compared to $118.3 million
at December 31, 1996. Non-interest bearing deposits were approximately $8.8
million lower on March 31, 1997 than December 31, 1996, $14.4 million and $23.2
million, respectively. Several commercial customers have historically
increased their demand deposit balances at year end. As a result, subsequent
reporting dates typically have balances lower than year-end. Interest bearing
deposits were up slightly, $97.9 million at March 31, 1997 and $95.4 million at
December 31, 1996. Competition for deposit dollars continues to be intense.
As a result, dramatic growth of interest-bearing deposits is not anticipated
during the balance of 1997.
Other borrowings, the main component of which are advances from the FHLB, was
$2.3 million at March 31, 1997 compared to $2.3 million at December 31, 1996.
The advances were used to fund some loans in the past and to also provide
liquidity. The use of FHLB advances in the future will depend on the Bank's
need for funds and the rates at which they may be obtained.
The company continues to maintain an excellent capital position regardless of
the measurement used. The following table shows four different measurements as
of March 31, 1997 and December 31, 1996, and the regulatory requirement, if
any. Management does not anticipate the need for additional capital resources
in the near future.
13
<PAGE> 14
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31, REGULATORY
1997 1996
---- ----
<S> <C> <C> <C>
REQUIREMENTS
------------
Leverage capital ratio 14.67% 15.08% N/A
Core capital as a percent
of assets 14.53% 14.37% 5.50%
Core capital as a percent
of risk-based assets 22.76% 22.88% N/A
Total capital as a percent
of risk-based assets 24.00% 23.47% 8.00%
</TABLE>
Liquidity as it relates to the subsidiary bank is a measure of its ability to
fund loans and withdrawals of deposits in a cost-effective manner. The Bank's
principal sources of funds are deposits, scheduled amortization and prepayment
of loan principal, maturities of investment securities, income from operations,
and short term borrowings. Additional sources include purchasing fed funds,
sale of loans, borrowing from both the Federal Reserve Bank and Federal Home
Loan Bank capital loans, and dividends paid by Nevahawk to the Bank. Under
present law, accumulated earnings could be paid as dividends without incurring
a tax liability.
The liquidity needs of the Company primarily consist of payment of dividends to
its shareholders and a limited amount of expenses. The sources of funds to
provide this liquidity are income from investments, maturities of investments,
cash balances and dividends from the Bank. The purchase of Rochelle Bancorp,
Inc. ("Rochelle") will also be funded from the current reserves of the Company,
plus a dividend of approsimately $500,000 from the Bank. Certain restrictions
are imposed upon the Bank which could limit its ability to pay dividends if it
did not have net earnings in the future. The Company maintains adequate
liquidity to pay its expenses.
Off-Balance sheet items consist of credit card lines of credit, mortgage
commitments, letters of credit and other commitments totaling approximately
$10.9 million as of March 31, 1997. This compares to $9.7 million at December
31, 1996. The bank historically funds off-balance sheet commitments with its
primary sources of funds, and management anticipates that this will continue.
On April 30, 1997, the Company completed the purchase of all the outstanding
shares of Rochelle for approximately $4,173,000 in cash. Rochelle's wholly
owned subsidiary, Rochelle Savings Bank S.B., is an Illinois state chartered
savings bank with offices in Rochelle and Oregon, Illinois, and assets totaling
approximately $48,000,000. This acquisition will be accounted for as a
purchase and the cash consideration paid for the outstanding shares
approximates the fair market value of tangible and intangible assets acquired
less the liabilities assumed.
As a part of this purchase, the Company will also acquire all of the
outstanding shares of Midland Acceptance Corporation (MAC), a financing
subsidiary with offices in Rochelle and Rockford, Illinois and assets of
approximately $2,000,000.
Results of operations of Rochelle and MAC will be incorporated in the Company's
statements from the acquisition date forward. The impact on the Company's net
income for the balance of 1997 is not expected to be significant.
14
<PAGE> 15
PART II
OTHER INFORMATION
ITEM 5. OTHER INFORMATION
On April 30, 1997, the Company completed its acqusition of Rochelle
Bancorp, Inc., ("Rochelle"). As part of the merger reorganization, the
Company also acquired Midland Acceptance Corporation, a financing
subsidiary. Each shareholder of Rochelle received $7.52 in cash for
each share owned. Rochelle had 554,875 shares outstanding. The
transaction was accounted for under the purchase method of accounting.
ITEM 6. A)EXHIBITS
See Exhibit Index following the signature page in this report, which
is incorporated herein by this reference.
ITEM 6. B)REPORTS ON FORM 8-K
There were two reports on Form 8-K/A filed during the first quarter of
1997 regarding the acquisition of Rochelle Bancorp Inc., amending the
previous 8-K filed November 22, 1996.
15
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Blackhawk Bancorp, Inc.
----------------------------------
(Registrant)
Date: May 5, 1997 /s/Dennis M. Conerton
----------------------------------
Dennis M. Conerton
President and
Chief Executive Officer
Date: May 5, 1997 /s/ Jesse L. Calkins
----------------------------------
Jesse L. Calkins
Senior Vice President
(Chief Financial and
Accounting Officer)
16
<PAGE> 17
BLACKHAWK BANCORP, INC.
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Incorporated Filed
Exhibit Herein By Here- Page
Number Description Reference To: with No.
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
4.1 Amended and Exhibit 3.1 to
restated Articles Amendment No. 1 to
of Incorporation Registrant's
of the Registrant Registration
Statement on Form
S-1 (Reg. No.
33-32351)
4.2 By-laws of Regis- Exhibit 3.2 to
trant as amended Amendment No. 1 to
Registrant's
Registration
Statement on Form
S-1 (Reg. No.
33-32351)
4.3 Plan of Conversion Exhibit 1.2 to
Beloit Savings Amendment No. 1 to
Bank as amended Registrant's
Registration
Statement on Form
S-1 (Reg. No.
33-32351)
</TABLE>
17
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 6,028,994
<INT-BEARING-DEPOSITS> 16,371
<FED-FUNDS-SOLD> 3,270,057
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 10,588,932
<INVESTMENTS-CARRYING> 27,234,939
<INVESTMENTS-MARKET> 27,248,205
<LOANS> 101,175,060
<ALLOWANCE> 1,208,782
<TOTAL-ASSETS> 152,141,972
<DEPOSITS> 112,229,857
<SHORT-TERM> 14,295,367
<LIABILITIES-OTHER> 1,058,394
<LONG-TERM> 2,262,063
0
0
<COMMON> 22,913
<OTHER-SE> 22,273,378
<TOTAL-LIABILITIES-AND-EQUITY> 152,141,972
<INTEREST-LOAN> 2,284,735
<INTEREST-INVEST> 559,643
<INTEREST-OTHER> 66,552
<INTEREST-TOTAL> 2,910,930
<INTEREST-DEPOSIT> 1,138,640
<INTEREST-EXPENSE> 1,363,410
<INTEREST-INCOME-NET> 1,547,520
<LOAN-LOSSES> 30,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,067,144
<INCOME-PRETAX> 694,608
<INCOME-PRE-EXTRAORDINARY> 452,126
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 452,126
<EPS-PRIMARY> .20
<EPS-DILUTED> .19
<YIELD-ACTUAL> 4.30
<LOANS-NON> 217,476
<LOANS-PAST> 32,705
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 494,149
<ALLOWANCE-OPEN> 1,185,672
<CHARGE-OFFS> 12,759
<RECOVERIES> 5,869
<ALLOWANCE-CLOSE> 1,208,782
<ALLOWANCE-DOMESTIC> 1,208,782
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
