<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, 2000
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
BELOIT, WISCONSIN 53511
(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 MAY 1, 2000
----------------------- ------------------
$.01 PAR VALUE 2,322,899 SHARES
1
<PAGE> 2
INDEX
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page
----
<S> <C>
ITEM 1. FINANCIAL STATEMENTS
Independent Accountants Report 3
Consolidated Condensed Balance Sheets as of
March 31, 2000 and December 31, 1999 4
Consolidated Condensed Statements of Income for the
three months ended March 31, 2000 and 1999 5
Consolidated Condensed Statements of Shareholders'
Equity as of March 31, 2000 and 1999 6
Consolidated Condensed Statements of Cash Flows for the
three months ended March 31, 2000 and 1999 7-8
Notes to Consolidated Condensed Financial Statements 9-10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 11-13
PART II - OTHER INFORMATION
ITEM 6. A) EXHIBITS 14
B) REPORTS ON FORM 8-K 14
SIGNATURES 15
INDEX TO EXHIBITS 16
</TABLE>
2
<PAGE> 3
INDEPENDENT ACCOUNTANT'S REPORT
Board of Directors and Shareholders
Blackhawk Bancorp, Inc.
Beloit, Wisconsin
We have reviewed the accompanying unaudited consolidated balance sheet of
Blackhawk Bancorp, Inc. and Subsidiary as of March 31, 2000, and the related
unaudited consolidated statements of income, shareholders' equity, and cash
flows for the three-month period then ended. These financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying consolidated financial statements for them to be in
conformity with generally accepted accounting principles.
/s/ Wipfli Ullrich Bertelson LLP
Wipfli Ullrich Bertelson LLP
May 11, 2000
Green Bay, Wisconsin
3
<PAGE> 4
BLACKHAWK BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS MARCH 31, DECEMBER 31,
2000 1999
----------- ------------
(Dollars in thousands)
<S> <C> <C>
Cash and cash equivalents $ 11,567 $ 11,994
Interest-bearing deposit accounts 2,872 4,616
Federal funds sold and other short-term investments 397 91
Securities available for sale 53,931 49,071
Securities held to maturity 18,826 19,696
Loans held for sale 697 540
Loans, net of allowance for loan losses of
$2,015,000 and $1,996,000 192,556 190,184
Bank premises and equipment, net 6,944 7,065
Other intangible assets 7,321 7,511
Accrued interest receivable 2,152 2,028
Other assets 3,056 2,888
--------- ---------
Total Assets $ 300,319 $ 295,684
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Deposits:
Non-interest bearing $ 28,978 $ 30,552
Interest bearing 205,338 203,573
--------- ---------
Total deposits 234,316 234,125
--------- ---------
Borrowed Funds:
Short-term borrowings 21,702 18,564
Other borrowings 18,167 16,803
Accrued interest payable 1,066 1,030
Other liabilities 1,892 1,837
--------- ---------
Total Liabilities 277,143 272,359
--------- ---------
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,
2,333,223 and 2,324,673 shares issued and outstanding 23 23
Additional paid-in capital 7,338 7,307
Retained Earnings 16,947 16,973
Treasury Stock, 10,324 shares, at cost (120) (120)
FASB 115 Adjustment (1,012) (858)
--------- ---------
Total Shareholders' Equity 23,176 23,325
--------- ---------
Total Liabilities and
Shareholders' Equity $ 300,319 $ 295,684
========= =========
</TABLE>
See Notes to Unaudited Consolidated Condensed Financial Statements
4
<PAGE> 5
BLACKHAWK BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
2000 1999
-----------------------------------
(Dollars in thousands)
<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 4,049 $ 3,848
Interest on deposits with other banks 40 110
Interest on investment securities:
Taxable 868 684
Exempt from federal income taxes 133 101
Int. on fed. funds sold and other short-term invest. 8 164
-------------- --------------
Total Interest Income 5,098 4,907
-------------- --------------
INTEREST EXPENSE:
Interest on deposits 2,220 2,282
Interest on short-term borrowings 291 90
Interest on other borrowings 266 244
-------------- --------------
Total Interest Expense 2,777 2,616
-------------- --------------
Net Interest Income 2,321 2,291
Provision for loan losses (Note 3) 90 108
Net Interest Income After
Provision For Loan Losses 2,231 2,183
-------------- --------------
OTHER OPERATING INCOME:
Service charges on deposit accounts 316 293
Gain on sale of loans 15 200
Brokerage & annuity commissions 74 76
Other income 144 187
-------------- --------------
Total Other Operating Income 549 756
-------------- --------------
OTHER OPERATING EXPENSES:
Salaries and employee benefits 1,197 1,241
Occupancy expense of bank premises, net 171 175
Furniture and equipment 206 189
Data processing 189 167
Intangible amortization 140 145
Other operating expenses 499 518
-------------- --------------
Total Other Operating Expenses 2,402 2,435
-------------- --------------
Income Before Income Taxes 378 504
Provision for income taxes 126 193
-------------- --------------
Net Income $ 252 $ 311
============== =============
Earnings Per Share $ 0.11 $ 0.14
============= ==============
Fully diluted earnings per share $ 0.11 $ 0.13
============= ==============
Dividends Per Share $ 0.12 $ 0.12
============= ==============
</TABLE>
See Notes to Unaudited Consolidated Condensed Financial Statements
5
<PAGE> 6
BLACKHAWK BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
2000 1999
------------- ------------
(Dollars in thousands)
<S> <C> <C>
Common Stock:
Balance at beginning of period $ 23 $ 23
Stock options exercised -- --
------------- -----------
Balance at end of period 23 23
------------- -----------
Additional Paid-in Capital:
Balance at beginning of period 7,307 7,229
Stock options exercised 31 23
------------- -----------
Balance at end of period 7,338 7,252
------------- -----------
Retained Earnings:
Balance at beginning of period 16,973 16,975
Net income 252 311
Dividends declared on common stock (278) (277)
-------------- ------------
Balance at end of period 16,947 17,009
------------- -----------
Treasury Stock, at cost:
Balance at beginning of period (120) (120)
Purchase -- --
------------- -----------
Balance at end of period (120) (120)
-------------- -----------
Accumulated other comprehensive income:
Balance at beginning of period (858) 293
Other comprehensive deficit, net of taxes (154) (218)
-------------- ------------
Balance at end of period (1,012) 75
-------------- -----------
Total Shareholders' Equity $ 23,176 $ 24,439
============= ===========
</TABLE>
See Notes to Unaudited Consolidated Condensed Financial Statements
6
<PAGE> 7
BLACKHAWK BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
2000 1999
--------------- -------------
(Dollars in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 252 $ 311
Adjustments to reconcile net income
to net cash provided by operating activities:
Provision for loan losses 90 108
Provision for depreciation and
amortization 405 307
Amortization of premiums (accretion/
discounts) on investment securities, net 22 38
(Gain) on sale of loans (15) (184)
Loans originated for sale (1,018) (20,077)
Proceeds from sale of loans 870 22,732
Change in assets and liabilities:
(Increase) decrease in other assets (75) 165
(Increase) decrease in accrued interest receivable (124) 161
Increase (decrease) in accrued interest payable 36 (297)
Increase (decrease) in other liabilities 42 (8)
--------------- -------------
Net cash provided by operating activities 485 3,256
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturity of available-
for-sale securities 941 4,643
Purchase of available-for-sale securities (6,053) (12,022)
Proceeds from maturity of investment securities 1,959 6,270
Purchase of investment securities (1,104) (2,304)
Decrease in federal funds sold and
other short-term investments, net 1,438 7,010
Loans originated, net of
principal collected (2,462) 6,239
Purchase of bank premises and equipment (76) (152)
---------------- ------------
Net cash (used in) provided by
investing activities (5,357) 9,684
---------------- ------------
</TABLE>
See Notes to Unaudited Consolidated Condensed Financial Statements.
7
<PAGE> 8
BLACKHAWK BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
2000 1999
---------------- --------------
(Dollars in thousands)
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Stock options exercised $ 31 $ 23
Net increase (decrease) in deposits 191 (11,982)
Net increase in borrowed funds 4,502 3,806
Cash dividends paid (279) (277)
---------------- -------------
Net cash provided by (used in) financing activities 4,445 (8,430)
---------------- -------------
Net (decrease) increase in cash and
cash equivalents (427) 4,510
CASH AND CASH EQUIVALENTS:
Beginning 11,994 15,973
---------------- -------------
Ending $ 11,567 $ 20,483
================ =============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash payments for:
Interest $ 2,741 $ 2,913
Income taxes $ - $ 274
SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING
ACTIVITIES:
Other assets acquired in settlement of loans $ - $ 185
</TABLE>
See Notes to Unaudited Consolidated Condensed Financial Statements.
8
<PAGE> 9
BLACKHAWK BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
March 31, 2000
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.
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, 2000 and December 31, 1999, the
results of operations for the three months ended March 31,
2000 and 1999, and cash flows for the three months ended March
31, 2000 and 1999.
The results of operations for the three months ended March 31,
2000 and 1999 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,
---------------------------
(Dollars in thousands) 2000 1999
----------- ----------
<S> <C> <C>
Impaired loans $ 1,980 $ 1,984
Non-accruing loans 1,071 565
Past due 90 days or more
and still accruing 411 529
----------- ----------
Total non-performing loans $ 3,462 $ 3,078
=========== ==========
</TABLE>
9
<PAGE> 10
BLACKHAWK BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
March 31, 1999
(CONTINUED)
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
--------
(dollars in thousands)
2000 1999
----------- -----------
<S> <C> <C>
Balance at beginning of period $ 1,996 $ 1,915
Provision charged to expense 90 108
Loans charged off 74 86
Recoveries 3 15
----------- -----------
Balance at end of period $ 2,015 $ 1,952
=========== =========
</TABLE>
Note 4. Earnings Per Share Basic earnings per share are arrived at by
dividing net income available to common shareholders by the
weighted-average number of common shares outstanding and do not
include the impact of any potentially dilutive common stock
equivalents. The diluted earnings per share calculation is arrived at
by dividing net income by the weighted-average number of shares
outstanding, adjusted for the dilutive effect of outstanding stock
options, and any other common stock equivalents. The following table
shows the computation of the basic and diluted earnings per share:
<TABLE>
<CAPTION>
Income Share Per Share
(Numerator) (Denominator) Amount
-------------- ------------- ----------
<S> <C> <C> <C>
For the Three Months Ended March 31, 2000
Basic Earnings Per Share $ 252,000 2,317,344 $ 0.11
=============== =========
Effect of Dilutive Stock Options 62,412
-------------
Diluted Earnings Per Share $ 252,000 2,379,756 $ 0.11
=============== ============= =========
For the Three Months Ended March 31, 1999
Basic Earnings Per Share $ 311,000 2,304,316 $ 0.14
=============== =========
Effect of Dilutive Stock Options 114,055
-------------
Diluted Earnings Per Share $ 311,000 2,418,371 $ 0.13
=============== ============= =========
</TABLE>
Note 5. Future Accounting Change
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133,
"Accounting for Derivative Instruments and Hedging Activities." This
statement establishes accounting and reporting standards for
derivative instruments and for hedging activities. This statement
requires an entity to recognize all derivatives as either assets or
liabilities in the balance sheet and measure those instruments at fair
value. The accounting for changes in the fair value of a derivative
depends on the intended use of the derivative and the resulting
designation. This statement is effective for fiscal years beginning
after June 15, 2000. Management, at this time, cannot determine the
effect adoption of this statement may have on the consolidated
financial statements of the Company as the accounting for derivatives
is dependent on the amount and nature of derivatives in place at the
time of adoption.
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,
2000 and December 31, 1999 and the consolidated condensed statements of
income for the three months ended March 31, 2000 and 1999. 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, 2000 was approximately
$252,000 compared to $311,000 for the similar period in 1999. 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, 2000, interest income was $5,098,000
compared to $4,907,000 for the same period in 1999. This increase of
approximately $191,000 was due to the increases of interest and fees on
loans of $201,000. The interest on investment securities increased
$216,000 but was offset by a decrease of interest on short-term
investments and bank deposits of $226,000.
Interest and fees on loans increased to $4,049,000 in the three months
ended March 31, 2000 compared to $3,848,000 in same period of 1999. This
increase was the result of an increase in average loans of approximately
$19,000,000, offsetting an average decline of approximately 0.50% in
yield. All of the general loan categories participated in the increased
volume and reduced rate except credit cards. Credit card volume and
average rate declined in the current period compared to that of 1999.
Investment income on taxable securities increased $184,000 in the first
three months of 2000 compared to 1999, $868,000 and $684,000 respectively.
This increase was the result of increased volumes partially offset by
lower yields. Income from tax exempt securities increased to $135,000 in
2000 compared to $101,000 in the same period in 1999. This was the result
of an increase in volume and a slight increase in rate.
Interest from fed funds sold and other short-term investments decreased
substantially to $8,000 in 2000 from $164,000 in 1999. The excess
liquidity that was evident in 1999 was the result of real estate loan
payoffs and security maturities. Late in the first quarter and early
second quarter of 1999, this excess liquidity had been invested in either
longer-term securities or the loan portfolio.
Interest paid on deposits decreased to $2,220,000 in the three months
ended March 31, 2000 compared to $2,282,000 for the same period in 1999.
Average interest-bearing deposits declined from year earlier amounts. The
average rate paid on deposits decreased when comparing 2000 to 1999. The
actions of the Federal Reserve will continue to affect the level and
direction of interest rates in the future.
Interest on short-term borrowings increased to $291,000 from $90,000 in
1999, an increase of $201,000, or nearly 225.0%. Interest on other
borrowings increased to $267,000 in the first quarter of 2000 from
$244,000 in the same period in 1999. The volume as well as the average
rate of both of these categories increased in 2000 compared to 1999. The
increased volume was used to partially fund the increase of the investment
and loan portfolios. Short-term borrowing consist of securities sold under
agreements to repurchase. Other borrowings are represented by Federal Home
Loan Bank ("FHLB") advances and borrowings with a third-party bank in part
to finance the First Financial acquisition.
11
<PAGE> 12
The provision for loan loss was $90,000 for the three months in 2000 compared to
$108,000 in 1999. It is management's opinion that this amount represents an
adequate provision.
Total other operating income decreased to $549,000 from $756,000 for the three
months ended March 31, 2000 and 1999 respectively. Gain on sale of loans in the
first quarter of 2000 was $15,000 compared to $200,000 in 1999. As fixed
mortgage rates increased in the second half of 1999, the activity in this area
decreased significantly. Substantially, all fixed rate loans originated are sold
in the secondary market. Partially offsetting the reduction of income from
mortgage sales was the increase in service charges on deposit accounts. The
increase was due to an increased number of accounts and an increased fee
schedule. Other income in the three months ended March 31, 2000 was $144,000
compared to $187,000 in the comparable period of 1999.
Total other operating expenses decreased approximately $33,000 to $2,402,000
from $2,435,000. The area of largest decrease was salaries and employee
benefits, $1,197,000 compared to $1,241,000 in 2000 and 1999 respectively. The
main reason for the lower salaries is reduced staff, some as a result of
conscious effort and other as certain positions have remained unfilled during
the first quarter of 2000 while the Company sought to fill them. The increases
and decreases in the other categories nearly offset each other.
Income taxes decreased to $126,000 from $193,000. This decrease was due to a
lower amount of income before taxes. The effective tax rate, 33.3% and 38.3%,
2000 and 1999 respectively, decreased because the tax-exempt income more nearly
offset the non-deductible intangible amortization. The non-deductible
amortization expenses are the result of the purchase method of accounting the
Company has used for its acquisitions.
BALANCE SHEET ANALYSIS
This analysis of the Company's financial position is comparing March 31, 2000 to
December 31, 1999. Total assets were $300.3 million compared to $295.7 million
at December 31, 1999. This represents an increase of approximately 1.6%.
Net loans were $192.6 million on March 31, 2000 and $190.2 million on December
31, 1999, an increase of $2.4 million. Real estate loans and commercial loans
have increased since the beginning of the year by $1.4 million and $1.6 million
respectively. Consumer loans and credit card loans have decreased a total of
$0.6 million since December 31, 1999. The Company expects loan demand will be
adversely affected by anticipated future increases in interest rates, as
customers have become more price sensitive.
Allowance for loan losses remained unchanged at $2.0 million at March 31, 2000
from December 31, 1999. As of March 31, 2000, non-performing loans totaled $3.5
million compared to $3.1 million at December 31, 1999. Management believes that
the allowance is adequate at this time.
Net bank premises and equipment was $6.9 million at March 31, 2000 compared to
$7.1 million at December 31, 1999. This decrease was primarily the depreciation
of buildings and equipment with no major purchases.
Fed funds sold and other short term investments increased approximately $300,000
comparing March 31, 2000 with December 31, 1999. Securities available for sale
were $53.9 million at March 31, 2000 compared to $49.0 million at December 31,
1999. Securities held to maturity were $18.8 million compared to $19.7 million,
March 31, 2000 and December 31, 1999, respectively. Most of the securities
purchased will be added to the available for sale category.
Total deposits were $234.3 million at March 31, 2000 compared to $234.1 million
at December 31, 1999. Non-interest bearing deposits were approximately $1.6
million lower on March 31, 2000 than December 31, 1999, $29.0 million and $30.6
million, respectively. Several commercial customers have historically increased
their
12
<PAGE> 13
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, $205.3 million at March 31, 2000 and $203.6 million at December 31,
1999. Competition for deposit dollars continues to be aggressive. As a result,
dramatic growth of interest-bearing deposits is not anticipated during the
balance of 2000.
Short-term borrowings, fed funds purchased and repurchase agreements, increased
to $21.7 million from $18.6 million as of year-end. Other borrowings, consisting
of long-term borrowings incurred in part to complete the First Financial
acquisition and advances from the Federal Home Loan Bank for terms greater than
one year, were $18.2 million at March 31, 2000 compared to $16.8 million at
December 31, 1999. The advances from the FHLB 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 three different measurements as
of March 31, 2000 and December 31, 1999, and the regulatory requirement, if any.
The decline in the risk weighted capital ratios has been driven by the shift in
the lending portfolio to commercial loans and commercial real estate which carry
a higher risk weighting than 1-4 family mortgages. This change is expected to
improve earnings. Management does not anticipate the need for additional capital
resources in the near future.
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31, REGULATORY
2000 1999 REQUIREMENTS
------------- ------------------- -----------------
<S> <C> <C> <C>
Tier I Capital
(To Average Assets) 6.19% 6.10% 3.00%
Tier I Capital (To Risk
Weighted Assets) 9.31% 9.52% 4.00%
Total Capital (To Risk
Weighted Assets) 10.37% 10.61% 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 cash balances, dividends from the Bank, and a line of
credit with a third-party 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
$28.5 million as of March 31, 2000. This compares to $30.6 million at December
31, 1999. The bank historically funds off-balance sheet commitments with its
primary sources of funds, and management anticipates that this will continue.
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
When used in this report, the words "believes," "expects," 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, changes in interest rates, levels of consumer bankruptcies,
customer loan and deposit preferences, and other general economic conditions
13
<PAGE> 14
PART II
OTHER INFORMATION
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 no reports on Form 8-K filed during the first
quarter of 2000.
14
<PAGE> 15
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 15, 2000 /s/ Dennis M. Conerton
----------------------------------
Dennis M. Conerton
President and
Chief Executive Officer
Date: May 15, 2000 /s/ Jesse L. Calkins
----------------------------------
Jesse L. Calkins
Senior Vice President
(Chief Financial and
Accounting Officer)
15
<PAGE> 16
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>
16
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