Blackhawk Bancorp, Inc. :BHWB-US: Earnings Analysis: 2016 By the Numbers : February 2, 2017

Blackhawk Bancorp, Inc. reports financial results for the year ended December 31, 2016.

We analyze the earnings along side the following peers of Blackhawk Bancorp, Inc. – First Busey Corporation (BUSE-US) that have also reported for this period.

Highlights

  • Net interest income margins narrowed from 67.52% to 62.24% compared to the same period last year.
  • Net loan assets changed 1.78% compared to same period last year and 1.78% from previous period, total deposits changed 9.43% compared to same period last year and 9.43% from previous period.
  • Earnings growth from operating margin improvements as well as from one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income (See complete table at the end of this report):

2016 2015 2014 2013 2012
Relevant Numbers (Annual)
Revenues 32.87 29.08 27.79 30.8 30.57
Revenue Growth (YOY) N/A N/A N/A N/A N/A
Earnings 5.98 3.92 2.25 3.92 2.91
Earnings Growth (YOY) 52.54 74.02 -42.48 34.44 20.03
Net Margin 18.19 13.48 8.1 12.71 9.53
EPS 2.59 1.73 0.92 1.47 1.03
Return on Equity 12.63 8.99 4.56 6.8 6.34
Return on Assets 0.94 0.66 0.39 0.68 0.52

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Earnings Growth Analysis

BHWB-US‘s earnings rose year-on-year. But this growth has not come as a result of improvement in net interest income margins or any loan loss improvement activities in its operations. Net interest income margins were 62.24% compared to 67.52% in the immediate last period. Net interest income after provisions margins were 56.52% this period compared to 60.16% in the previous period. In addition, loan loss provisions as a percentage of net interest income were 9.19% this period and 10.89% a year ago.

Net Interest Income Margin Versus Loan Loss Provisions Margin

Quadrant label definitions. Hover to know more

High Risk; High Reward Loans, Risky Loan Portfolio, Conservative Loan Portfolio, Safer Loan Portfolio
Net Interest Income Margin History
Loan Loss Provisions Margin History

Net Loans and Total Deposits

A financial institution’s core operations represented by Net Interest Income and Net Interest Income after Provisions are dependent on both the growth and quality of its deposits as well as the growth and quality of its loans. A firm could boost its interest income in the short-term by just increasing its loan assets with less concern about their quality – but this would eventually lead to greater loan loss provisions. Similarly a drive to increase deposits could result in higher interest expenses and eventually effect the firm’s equity. It is thus important to understand net interest income performance in context to loan loss provisions, loan assets and deposits.

Loan Assets Growth Rate History (HY YOY)
Total Deposits Growth Rate History (HY YOY)

The firm’s decline in net interest income margins was influenced by both the relative drops in the levels of net loan assets and the level of total deposits as a percentage of equity. On an absolute basis, net loan assets changed 1.78% compared to the same period last year and 1.78% from the previous period. Total deposits changed 9.43% compared to the same period last year and 9.43% from the previous period.

Margins

The company’s earnings growth has also been influenced by the following factors: (1) Improvements in operating margins from 19.25% to 25.68% and (2) one-time items. The company’s pretax margins are now 25.68%, compared to 17.77% for the same period last year.

EBIT Margin History
PreTax Margin History
EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables

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Company Profile

Blackhawk Bancorp, Inc. engages in the provision of banking and related financial services. It operates through five divisions: Personal, Business, Financial Planning, Loans and Online services. It offers business banking services, online banking security for business banking clients, health savings accounts, savings and money market accounts, certificate of deposits, immigrant banking services, budgeting & calculators, repossessed vehicles and homes for sale, loans and mortgage services. The company was founded in November 1989 and is headquartered in Beloit, WI.

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