BELOIT, WI / ACCESSWIRE / October 26, 2020 / Blackhawk Bancorp, Inc. (OTCQX:BHWB) reported net income of $2.9 million for the third quarter of 2020, a 12% increase over the $2.6 million earned the previous quarter, and a 16% decrease compared to the $3.4 million earned the third quarter of 2019. Fully diluted earnings per share (EPS) for the quarter ended September 30, 2020, was $0.86, an increase of $0.09 as compared to $0.77 for the quarter ended June 30, 2020 and a decrease of $0.17 as compared to $1.03 earned for the quarter ended September 30, 2019. The third quarter 2020 results produced a Return on Average Equity (ROAE) of 10.64% and a Return on Average Assets (ROAA) of 1.03%.

The earnings increase compared to the most recent quarter was primarily driven by an increase in net revenue from the sale and servicing of residential mortgage loans, which was partially offset by an increase in operating expenses. Net interest income for the quarter increased only slightly compared to the most recent quarter.

The decrease in net income for the third quarter of 2020 compared to the third quarter of last year reflects an increase in the provision for loan losses, a decrease in net gain on sale of securities and an increase in operating expenses, which were partially offset by growth in net interest income and net revenue from the sale and servicing of residential mortgage loans.

For the nine months ended September 30, 2020, the company reported net income of $7.5 million, a 3% increase over the $7.3 million reported for the first nine months of 2019. Diluted earnings per share for the third quarter of 2020 increased by 3% to $2.26 compared to $2.20 for the first nine months of 2019. The Company's results for the first nine months of 2020 produced a return on average assets of 0.95% and a return on average equity of 9.69%.

Total assets of the company increased by $162 million, or 17%, to $1.1 billion at September 30, 2020, compared to $963.9 million as of December 31, 2019. Total gross loans increased by $57.2 million, or 9%, and total investment securities increased $80.3 million, or 34%, during the first nine months of 2020. Total Deposits increased by $131.2 million, or 16%, to $960.8 million compared to $829.6 million at the end of 2019.

Net Interest Income

Net interest income for the third quarter of 2020 totaled $9.9 million, unchanged compared to the second quarter of 2020, and up $1.1 million, or 12%, compared to the third quarter of last year. The net interest margin was 3.83% for the third quarter of 2020 as compared to 3.99% for the quarter ended June 30, 2020, and 3.93% for the third quarter of last year.

The increase in net interest income compared to the third quarter of last year was driven by the overall increase in earning assets and recognition $0.7 million of PPP fees. Balance sheet growth reflects the origination of approximately $84 million of PPP loans, liquidity from other pandemic stimulus programs and an overall influx of deposits. While the increase in overall earning assets added to net interest income, the net interest margin on the assets added was lean, with PPP loans earning 1% and the remaining liquidity being deployed in the investment portfolio, where yields were at historical lows, or held at the Federal Reserve. Despite the deployment of funds into lower interest rate assets the net interest margin held up well at 3.83% for the third quarter of 2020 as recognition of PPP fees offset the effect of the low interest being earned rate on the PPP loans.

Average total loans for the quarter ended September 30, 2020, equaled $693.4 million, a $7.7 million, or 1%, decrease as compared to the previous quarter, and a $60.2 million, or 10%, increase over the same quarter a year ago. The average total loans for the third quarter and second quarters of 2020 included $84 million and $63 million of average PPP loans, respectively.

Average total deposits for the quarter ended September 30, 2020, equaled $943.8 million, a $25.0 million, or 3% increase over the previous quarter, and a $111.9 million, or 13%, increase over the same quarter a year ago. The increase in average total deposits included PPP funds deposited by borrowers, other stimulus money received by customers and other deposit growth.

Net interest income for the nine months ended September 30, 2020, increased by $3.3 million, or 13%, to $28.4 million as compared to $25.1 million for the first nine months of 2019. The net interest margin for the first nine months of 2020 decreased by two basis points to 3.89% compared to 3.91% for the first nine months of 2019. Average total loans for the first nine months of 2020 were $674.5 million, an increase of $74.8 million, or 12%, as compared to $599.7 million for the first nine months of 2019. Average total deposits for the first nine months of 2020 were $901.5 million, an increase of $93.3 million, or 12%, as compared to $808.2 million for the first nine months of 2019. The Federal Reserve's aggressive rate cuts to address the economic fallout from the pandemic resulted in a forty-four basis point decrease in the year to date yield on average earning assets as compared to the first three quarters of 2019. The Company acted swiftly to lower funding costs achieving a forty-four basis point decrease in the cost of deposits and a fifty basis point drop in cost of funds limiting the decrease in the net interest margin to two basis points compared to the first three quarters of 2019.

Provision for Loan Losses and Asset Quality

The provision for loan losses for the quarter ended September 30, 2020, totaled $2.6 million, as compared to $2.5 million for the quarter ended June 30, 2020, and $0.6 million for the third quarter of 2019. The provision for the first nine months of 2020 increased to $5.9 million compared to $1 million for the first nine months of 2019. The increased provision reflects elevated charge-offs in the third quarter of 2020, and uncertainty related to the impact COVID-19 may have on future loan losses. Net charge-offs during the third quarter equaled $2.8 million, bringing the total up to $3.9 million for the first nine months of 2020. The charge-offs in the third quarter included $2.7 million related to one relationship.

Total nonperforming assets, which include troubled debt restructures that were performing in accordance with their modified terms, equaled $11.0 million as of September 30, 2020, as compared to $11.6 million as of June 30, 2020, and $9.1 million at September 30, 2019. At September 30, 2020, the ratio of nonperforming assets to total assets equaled 0.97%, as compared to 1.05% at June 30, 2020, and 0.93% at September 30, 2019. The allowance for loan losses to total loans was 1.44% as of September 30, 2020, as compared to 1.43% at June 30, 2020, and 1.28% as of September 30, 2019. The allowance for loan losses to total loans, excluding PPP loans, at September 30, 2020 is 1.64% compared to 1.60% at June 30, 2020. The ratio of the allowance for loan losses to nonperforming loans decreased to 90.8% as of September 30, 2020, as compared to 93.6% at June 30, 2020, and 94.7% at September 30, 2019.

While overall delinquency rates and non-performing asset levels have not increased, management believes that current economic conditions could result in elevated losses in future quarters. Many borrowers have taken advantage of PPP, other stimulus programs, and the loan modifications provided by Blackhawk. Management expects to continue recording elevated provision for loan losses for the rest of the year, and will continue being proactive with borrowers to ensure credit issues are identified and addressed as early as possible, improving the overall probability of repayment.

Blackhawk has provided payment relief to borrowers negatively affected by the COVID-19 pandemic, including payment deferrals, interest only payments and forbearance agreements offering other relief. During the third quarter many of these customers had returned to normal payments, however, some were still under the original or extended modification agreements. The total balance of loans under COVID-related modifications decreased by $45.5 million to $23.2 million as of September 30, 2020 compared to $68.7 million in June 30, 2020. Blackhawk's exposure to borrowers in high risk industries that received a modification and not returned to normal payments as of September 30, 2020 decreased by $39.5 million or 76%, compared to June 30, 2020. The table below summarizes the company's total outstanding balance and modified loan balance by industry code. The balances in the tables exclude loans originated under PPP, which are 100% guaranteed by the SBA:

As of 9/30/20 (balance in thousands)
						Balance of Loans by Modification Type
Industry		Portfolio Balance*				Payment Deferrals				Interest Only				Other				Total Modified				Percent of Portfolio Modified
High Risk Industries
Arts, Entertainment and Recreation			4,208				-				-				-				-				0	%
Health Care and Social Assistance			49,250				2,441				2,720				-				5,161				10	%
Hospitality and Food Services			29,505				4,149				7				-				4,156				14	%
Other Services (except Public Admin)			14,401				1,098				-				-				1,098				8	%
Real Estate Rental and Leasing			108,882				-				814				-				814				1	%
Retail Trade			40,798				1,078				-				-				1,078				3	%
High Risk Industries Total			247,044				8,766				3,541				-				12,307				5	%
Other Industries and Consumer Total
Construction			32,247				-				387				-				387				1	%
Manufacturing			102,404				309				-				-				309				0	%
Other Industries			100,440				2,587				3,519				-				6,106				6	%
Consumer, Mortgage and Other			113,071				467				-				3,600				4,067				4	%
Other Industries and Consumer Total			348,162				3,363				3,906				3,600				10,869				3	%
Grand Total			595,206				12,129				7,447				3,600				23,176				4	%
*Excluding loans held for sale and PPP loans

Non-Interest Income and Operating Expenses

Non-interest income for the quarter ended September 30, 2020, totaled $5.7 million, a $0.8 million increase compared to $4.9 million the prior quarter, and a $1.0 million increase over the $4.6 million recorded in the third quarter of 2019. The increase compared to the second quarter of 2020 includes increases of $0.2 million in net gain on sale of loans, $0.4 million in net loan servicing income and $0.1 million in deposit service charges. The increase compared to the third quarter of 2019 includes a $2.1 million increase in net gain on sale of loans, which was offset by a $0.3 million decrease in deposit service fees and an $0.9 million decrease in net gains on the sale of securities.

Non-interest income for the first nine months of 2020 increased $2.5 million, or 22%, to $13.8 million as compared to $11.3 million for the first nine months of 2019, including a $4.6 million increase in gain on sale of loans. This increase was offset by $0.5 million decrease in deposit service charges, a $0.5 million decrease in loan servicing income and a $1.1 million decrease in gain on sale of securities.

Operating expenses for the quarter ended September 30, 2020, totaled $9.3 million, increasing by $0.3 million, or 4%, compared to the quarter ended June 30, 2020, and increasing by $0.8 million, or 9%, compared to the third quarter of 2019. The increases compared to the third quarter of 2019 were driven primarily by the variable compensation related to increased mortgage loan originations.

Operating expenses for the nine-month period ended September 30, 2020, totaled $26.8 million, a $0.7 million, or 3%, increase over the first nine month of 2019. The 2019 results included $2 million of nonrecurring acquisition related expenses. Excluding these expenses, operating expenses would have increased by $2.7 million, or 11%, over the first nine months of last year. The increase reflects operating the three acquired locations for the full nine months, versus only seven months in the first nine months of 2019, and the increased variable compensation related to the mortgage banking activity.

Share Repurchase Program

At its meeting on October 21, 2020, the Company's Board of Directors authorized a share repurchase program, under which the Company may repurchase up to 200,000 shares of its outstanding common stock.

According to Todd James, Blackhawk Bancorp, Inc.'s President and CEO, "the stock repurchase program announced today is part of an overall plan to balance the use of Company resources to support all of its stakeholders. As we manage through these unprecedented times, Blackhawk has been and will continue supporting its customers, communities and employees that are negatively affected by COVID-19. This repurchase plan was adopted to extend similar support to our shareholders. While the number of shares authorized to be repurchased is relatively low, it demonstrates our confidence in the strength of our Company and will provide some level of liquidity for shareholders at a time when other alternatives may not be readily available," added James.

Under the share repurchase program, the Company may purchase, from time to time, on the open market or otherwise, shares of common stock of the Company in such quantities, at such prices, in such manner and on such terms and conditions as the Company's management team may deem appropriate, so long as the aggregate number of shares of common stock repurchased shall not exceed 200,000. Unless extended by the Board, the repurchase program will terminate on the twelve-month anniversary of its adoption.

The extent to which the Company repurchases its shares, and the timing of such repurchases, will depend upon a variety of factors, including market conditions, capital requirements and other corporate considerations, as determined by the Company's management team. The repurchase program may be suspended or discontinued at any time. The Company expects to finance the purchases with existing cash balances.

Outlook

The outlook for Blackhawk as well as the entire banking industry is clouded by uncertainty related to the COVID-19 pandemic crisis. Blackhawk believes there is risk of elevated credit losses in future quarters as the economic impact of the crisis plays out, and will continue taking steps to increase revenue, implement government stimulus programs and work with credit customers to offset and mitigate losses to the extent possible. Management believes the Company's financial position is strong and it has ample resources to withstand a potentially severe and protracted recession. In addition to responding to this crisis, Blackhawk will continue to pursue creditworthy and profitable business and consumer relationships in its Wisconsin and Illinois markets, emphasizing the value of its personal attention and service that remains unmatched by larger competitors. In addition to organic growth opportunities, Blackhawk may also pursue growth through selective acquisitions. Ability to grow or maintain profitability may be affected by uncertain economic conditions, competitive pressures, changes in regulatory burden and the interest rate environment.

About Blackhawk Bancorp

Blackhawk Bancorp, Inc. is headquartered in Beloit, Wisconsin and is the parent company of Blackhawk Bank. The combined entity operates eleven full-service banking centers and a dedicated commercial office, which are located in Rock County, Wisconsin and the Illinois counties of Winnebago, Boone, McHenry, Lake, and Kane. The Company's footprint stretches along the I-90 corridor from Janesville, Wisconsin to Elgin, Illinois and into the Northwest collar counties of the Chicagoland area. 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 the 2019 acquisition-related expenses, nonrecurring securities gains 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
tjames@blackhawkbank.com
Phone: (608) 364-8911

Matthew McDonnell, SVP & CFO
mmcdonnell@blackhawkbank.com
Phone: (608) 364-8911

BLACKHAWK BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2020 AND DECEMBER 31, 2019
(UNAUDITED)
		September 30,				December 31,
Assets		2020				2019
		(Dollars in thousands, except
		share and per share data)
Cash and due from banks		$	17,403			$	12,320
Interest-bearing deposits in banks and other institutions			43,441				20,761
Total cash and cash equivalents			60,844				33,081
Certificates of deposit in banks and other institutions			4,407				6,325
Equity securities at fair value			2,529				2,365
Securities available-for-sale			315,232				235,083
Loans held for sale			11,826				6,540
Federal Home Loan Bank stock, at cost			2,150				742
Loans, less allowance for loan losses of $9,943 and $7,941
at September 30, 2020 and December 31, 2019, respectively			669,234				619,359
Premises and equipment, net			20,095				21,025
Goodwill and core deposit intangible			12,125				12,455
Mortgage servicing rights			3,416				3,106
Cash surrender value of bank-owned life insurance			11,051				11,118
Other assets			13,393				12,662
Total assets		$	1,126,302			$	963,861
Liabilities and Stockholders' Equity
Liabilities
Deposits:
Noninterest-bearing		$	257,123			$	155,978
Interest-bearing			703,650				673,631
Total deposits			960,773				829,609
Short-term borrowings			-				-
Subordinated debentures and notes (including $1,031 at fair value at
September 30, 2020 and December 31, 2019)			5,155				5,155
Senior secured term note			13,222				14,000
Other borrowings			29,000				10,000
Other liabilities			10,161				7,773
Total liabilities			1,018,311				866,537
Stockholders' equity
Common stock, $0.01 par value, 10,000,000 shares authorized;
3,435,348 and 3,399,803 shares issued as of September 30, 2020 and
December 31, 2019, respectively			34				34
Additional paid-in capital			34,487				33,989
Retained earnings			66,700				60,295
Treasury stock, 106,364 and 105,185 shares at cost as of September 30, 2020
and December 31, 2019, respectively			(1,440	)			(1,408	)
Accumulated other comprehensive income (loss)			8,210				4,414
Total stockholders' equity			107,991				97,324
Total liabilities and stockholders' equity		$	1,126,302			$	963,861

BLACKHAWK BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)

		Nine months ended September 30,
		2020				2019
		(Amounts in thousands, except per share data)
Interest Income:
Interest and fees on loans		$	25,362			$	24,165
Interest and dividends on available-for-sale securities:
Taxable			4,729				4,594
Tax-exempt			1,067				1,256
Interest on other financial institutions			244				421
Total interest income			31,402				30,436
Interest Expense:
Interest on deposits			2,381				4,406
Interest on short-term borrowings			27				130
Interest on subordinated debentures			141				61
Interest on senior secured term note			385				426
Interest on other			61				300
Total interest expense			2,995				5,323
Net interest income before provision for loan losses			28,407				25,113
Provision for loan losses			5,885				1,030
Net interest income after provision for loan losses			22,522				24,083
Noninterest Income:
Service charges on deposits accounts			2,254				2,713
Net gain on sale of loans			7,509				2,954
Net loan servicing income			(254	)			250
Debit card interchange fees			2,759				2,526
Net gains on sales of securities available-for-sale			107				1,171
Net other gains (losses)			64				176
Increase in cash surrender value of bank-owned life insurance			235				231
Change in value of equity securities			77				109
Other			1,030				1,124
Total noninterest income			13,781				11,254
Noninterest Expenses:
Salaries and employee benefits			16,097				14,418
Occupancy and equipment			3,293				3,077
Data processing			1,700				3,054
Debit card processing and issuance			1,200				1,125
Advertising and marketing			222				349
Amortization of core deposit intangible			330				278
Professional fees			1,157				1,359
Office Supplies			273				288
Telephone			437				383
Other			2,083				1,790
Total noninterest expenses			26,792				26,121
Income before income taxes			9,511				9,216
Provision for income taxes			2,011				1,964
Net income		$	7,500			$	7,252
Key Ratios
Basic Earnings Per Common Share		$	2.26			$	2.20
Diluted Earnings Per Common Share			2.26				2.20
Dividends Per Common Share			0.33				0.30
Net Interest Margin (1)			3.89	%			3.91	%
Efficiency Ratio (1)(2)			63.44	%			73.82	%
Return on Assets			0.95	%			1.04	%
Return on Common Equity			9.69	%			10.82	%

(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
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)

		For the Quarter Ended
		September 30,				June 30,				March 31,				December 31,				September 30,
		2020				2020				2020				2019				2019
		(Dollars in thousands, except per share data)
Interest Income:
Interest and fees on loans		$	8,671			$	8,658			$	8,033			$	8,284			$	8,580
Interest on available-for-sale securities:
Taxable			1,607				1,618				1,505				1,496				1,591
Tax-exempt			372				371				323				331				356
Interest on other financial institutions			41				40				162				107				133
Total interest income			10,691				10,687				10,023				10,218				10,660
Interest Expense:
Interest on deposits			565				639				1,177				1,400				1,485
Interest on subordinated debentures			42				45				53				58				61
Interest on senior secured term note			119				111				156				165				173
Interest on other borrowings			47				19				22				24				97
Total interest expense			773				814				1,408				1,647				1,816
Net interest income before provision for loan losses			9,918				9,873				8,615				8,571				8,844
Provision for loan losses			2,615				2,505				765				980				580
Net interest income after provision for loan losses			7,303				7,368				7,850				7,591				8,264
Noninterest Income:
Service charges on deposits accounts			747				610				897				1,002				1,019
Net gain on sale of loans			3,412				3,192				905				1,257				1,333
Net loan servicing income			26				(389	)			110				119				(91	)
Debit card interchange fees			1,002				924				832				876				910
Net gains on sales of securities available-for-sale			-				8				99				-				866
Net other gains (losses)			58				6				-				(87	)			81
Increase in cash surrender value of bank-owned life insurance			76				74				85				75				74
Other			344				425				273				632				455
Total noninterest income			5,665				4,850				3,201				3,874				4,647
Noninterest Expenses:
Salaries and employee benefits			5,585				5,477				5,035				4,964				4,992
Occupancy and equipment			1,137				1,074				1,083				1,038				1,085
Data processing			629				561				510				520				657
Debit card processing and issuance			409				394				397				449				402
Advertising and marketing			87				38				97				101				100
Amortization of intangibles			107				107				115				119				119
Professional fees			386				405				367				300				387
Office Supplies			94				88				90				118				112
Telephone			138				149				150				153				137
Other			714				659				646				730				505
Total noninterest expenses			9,286				8,952				8,490				8,492				8,496
Income before income taxes			3,682				3,266				2,561				2,973				4,415
Provision for income taxes			819				704				487				621				996
Net income		$	2,863			$	2,562			$	2,074			$	2,352			$	3,419
Key Ratios
Basic Earnings Per Common Share		$	0.86			$	0.77			$	0.63			$	0.71			$	1.03
Diluted Earnings Per Common Share			0.86				0.77				0.63				0.71				1.03
Dividends Per Common Share			0.11				0.11				0.11				0.10				0.10
Net Interest Margin (1)			3.83	%			3.99	%			3.83	%			3.83	%			3.93	%
Efficiency Ratio (1)(2)			59.39	%			60.43	%			71.89	%			67.25	%			67.19	%
Return on Assets			1.03	%			0.96	%			0.85	%			0.97	%			1.40	%
Return on Common Equity			10.64	%			10.16	%			8.31	%			9.60	%			14.25	%

(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
		September 30,				June 30,				March 31,				December 31,				September 30,
		2020				2020				2020				2019				2019
		(Amounts in thousands, except per share data)
Cash and due from banks		$	17,403			$	14,527			$	15,240			$	12,320			$	18,778
Interest-bearing deposits in banks and other			47,848				25,246				6,775				27,086				22,478
Securities			317,761				301,726				265,165				237,448				232,165
Net loans/leases			681,060				697,881				626,797				625,899				640,576
Goodwill and core deposit intangible			12,125				12,232				12,340				12,455				12,575
Other assets			50,105				49,485				50,688				48,653				49,786
Total assets		$	1,126,302			$	1,101,097			$	977,005			$	963,861			$	976,358
Deposits		$	960,773			$	939,066			$	843,061			$	829,609			$	843,703
Subordinated debentures			5,155				5,155				5,155				5,155				5,155
Senior secured term note			13,222				13,611				14,000				14,000				14,000
Borrowings			29,000				29,000				10,000				10,035				10,042
Other liabilities			10,161				9,758				6,083				7,738				7,516
Stockholders' equity			107,991				104,507				98,706				97,324				95,942
Total liabilities and stockholders' equity		$	1,126,302			$	1,101,097			$	977,005			$	963,861			$	976,358
ASSET QUALITY DATA
(Amounts in thousands)		September 30, 2020				June 30, 2020				March 31, 2020				December 31, 2019				September 30, 2019
Non-accrual loans		$	8,584			$	8,427			$	9,680			$	10,642			$	5,524
Accruing loans past due 90 days or more			196				-				845				-				104
Troubled debt restructures - accruing			2,176				2,361				2,770				2,866				3,163
Total nonperforming loans		$	10,956			$	10,788			$	13,295			$	13,508			$	8,791
Other real estate owned			1				762				123				54				319
Total nonperforming assets		$	10,957			$	11,550			$	13,418			$	13,562			$	9,110
Total loans		$	691,003			$	707,983			$	634,957			$	633,840			$	648,900
Allowance for loan losses		$	9,943			$	10,102			$	8,160			$	7,941			$	8,324
		$	681,060			$	697,881			$	626,797			$	625,899			$	640,576
Nonperforming Assets to total Assets			0.97	%			1.05	%			1.37	%			1.41	%			0.93	%
Nonperforming loans to total loans			1.59	%			1.52	%			2.09	%			2.13	%			1.35	%
Allowance for loan losses to total loans			1.44	%			1.43	%			1.29	%			1.25	%			1.28	%
Allowance for loan losses to nonperforming loans			90.8	%			93.6	%			61.4	%			58.8	%			94.7	%

		For the Quarter Ended
		September 30,				June 30,				March 31,				December 31,				September 30,
ROLLFORWARD OF ALLOWANCE		2020				2020				2020				2019				2019
Beginning Balance		$	10,102			$	8,160			$	7,941			$	8,324			$	7,749
Provision			2,615				2,505				765				980				580
Loans charged off			2,892				639				633				1,463				52
Loan recoveries			118				76				87				100				47
Net charge-offs			2,774				563				546				1,363				5
Ending Balance		$	9,943			$	10,102			$	8,160			$	7,941			$	8,324

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
		September 30, 2020												June 30, 2020												September 30, 2019
		Average								Average				Average								Average				Average								Average
		Balance				Interest				Rate				Balance				Interest				Rate				Balance				Interest				Rate
Interest Earning Assets:
Interest-bearing deposits and other		$	42,716			$	41				0.38	%		$	17,056			$	40				0.95	%		$	23,356			$	133				2.26	%
Investment securities:
Taxable investment securities			257,506				1,607				2.48	%			241,831				1,618				2.69	%			202,607				1,591				3.11	%
Tax-exempt investment securities			47,090				372				4.09	%			46,443				371				4.13	%			43,558				356				4.10	%
Total Investment securities			304,596				1,979				2.73	%			288,274				1,989				2.92	%			246,165				1,947				3.29	%
Loans			693,418				8,670				4.97	%			701,080				8,658				4.97	%			633,215				8,580				5.38	%
Total Earning Assets		$	1,040,730			$	10,690				4.13	%		$	1,006,410			$	10,687				4.31	%		$	902,736			$	10,660				4.73	%
Allowance for loan losses			(11,018	)											(8,769	)											(7,860	)
Cash and due from banks			18,901												15,232												16,131
Other assets			58,022												58,475												59,817
Total Assets		$	1,106,635											$	1,071,348											$	970,824
Interest Bearing Liabilities:
Interest bearing checking accounts		$	292,875			$	166				0.23	%		$	298,831			$	157				0.21	%		$	258,808			$	399				0.61	%
Savings and money market deposits			335,043				111				0.13	%			305,966				105				0.14	%			295,746				547				0.73	%
Time deposits			91,366				288				1.25	%			101,808				377				1.49	%			118,910				539				1.80	%
Total interest bearing deposits			719,284				565				0.31	%			706,605				639				0.36	%			673,464				1,485				0.88	%
Subordinated debentures and notes			5,155				42				3.25	%			5,155				45				3.53	%			5,155				61				4.70	%
Borrowings			42,637				165				1.54	%			39,436				130				1.32	%			32,870				270				3.25	%
Total Interest-Bearing Liabilities		$	767,076			$	772				0.40	%		$	751,196			$	814				0.44	%		$	711,489			$	1,816				1.01	%
Interest Rate Spread											3.73	%											3.87	%											3.72	%
Noninterest checking accounts			224,552												212,196												158,512
Other liabilities			7,950												6,570												5,603
Total liabilities			999,578												969,962												875,604
Total Stockholders' equity			107,057												101,386												95,220
Total Liabilities and
Stockholders' Equity		$	1,106,635											$	1,071,348											$	970,824
Net Interest Income/Margin						$	9,918				3.83	%						$	9,873				3.99	%						$	8,844				3.93	%

(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.

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 Nine Months Ended
		September 30, 2020												September 30, 2019
		Average								Average				Average								Average
		Balance				Interest				Rate				Balance				Interest				Rate
Interest Earning Assets:
Interest-bearing deposits and other		$	32,518			$	244				1.00	%		$	23,901			$	421				2.37	%
Investment securities:
Taxable investment securities			234,704				4,729				2.69	%			194,127				4,594				3.16	%
Tax-exempt investment securities			44,811				1,067				4.10	%			53,331				1,256				4.04	%
Total Investment securities			279,515				5,796				2.92	%			247,458				5,850				3.35	%
Loans			674,503				25,362				5.02	%			599,712				24,165				5.39	%
Total Earning Assets		$	986,536			$	31,402				4.29	%		$	871,071			$	30,436				4.73	%
Allowance for loan losses			(9,274	)											(7,652	)
Cash and due from banks			16,594												15,953
Other assets			58,483												57,443
Total Assets		$	1,052,339											$	936,815
Interest Bearing Liabilities:
Interest bearing checking accounts		$	287,538			$	657				0.31	%		$	253,795			$	1,122				0.59	%
Savings and money market deposits			307,807				578				0.25	%			284,070				1,725				0.81	%
Time deposits			102,306				1,146				1.50	%			116,247				1,559				1.79	%
Total interest bearing deposits			697,651				2,381				0.46	%			654,112				4,406				0.90	%
Subordinated debentures			5,155				141				3.64	%			5,155				191				4.94	%
Borrowings			35,584				473				1.78	%			28,123				726				3.45	%
Total Interest-Bearing Liabilities		$	738,390			$	2,995				0.54	%		$	687,390			$	5,323				1.04	%
Interest Rate Spread											3.75	%											3.69	%
Noninterest checking accounts			203,854												154,084
Other liabilities			7,131												5,723
Total liabilities			949,375												847,197
Total Stockholders' equity			102,964												89,618
Total Liabilities and
Stockholders' Equity		$	1,052,339											$	936,815
Net Interest Income/Margin						$	28,407				3.89	%						$	25,113				3.91	%

(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.

BLACKHAWK BANCORP, INC. AND SUBSIDIARIES
MODIFIED LOAN BALANCES BY INDUSTRY CODE (UNAUDITED)

As of 9/30/20 (balance in thousands)
						Balance of Loans by Modification Type
Industry		Portfolio Balance*				Payment Deferrals				Interest Only				Other				Total Modified				Percent of Portfolio Modified
High Risk Industries
Arts, Entertainment and Recreation			4,208				-				-				-				-				0	%
Health Care and Social Assistance			49,250				2,441				2,720				-				5,161				10	%
Hospitality and Food Services			29,505				4,149				7				-				4,156				14	%
Other Services (except Public Admin)			14,401				1,098				-				-				1,098				8	%
Real Estate Rental and Leasing			108,882				-				814				-				814				1	%
Retail Trade			40,798				1,078				-				-				1,078				3	%
High Risk Industries Total			247,044				8,766				3,541				-				12,307				5	%
Other Industries and Consumer Total
Construction			32,247				-				387				-				387				1	%
Manufacturing			102,404				309				-				-				309				0	%
Other Industries			100,440				2,587				3,519				-				6,106				6	%
Consumer, Mortgage and Other			113,071				467				-				3,600				4,067				4	%
Other Industries and Consumer Total			348,162				3,363				3,906				3,600				10,869				3	%
Grand Total			595,206				12,129				7,447				3,600				23,176				4	%
*Excluding loans held for sale and PPP loans

As of 6/30/20 (balance in thousands)
						Balance of Loans by Modification Type
Industry		Portfolio Balance*				Payment Deferrals				Interest Only				Other				Total Modified				Percent of Portfolio Modified
High Risk Industries
Arts, Entertainment and Recreation			4,363				219				1,101				-				1,320				30	%
Health Care and Social Assistance			50,855				3,176				6,342				-				9,518				19	%
Hospitality and Food Services			27,540				8,766				9,578				-				18,344				67	%
Other Services (except Public Admin)			16,164				7,809				1,702				-				9,511				59	%
Real Estate Rental and Leasing			121,187				5,761				3,687				-				9,448				8	%
Retail Trade			43,898				261				3,444				-				3,705				8	%
High Risk Industries Total			264,007				25,992				25,854				-				51,846				20	%
Other Industries and Consumer Total
Construction			33,956				255				387				-				642				2	%
Manufacturing			109,364				1,744				1,829				-				3,573				3	%
Other Industries			93,981				2,361				5,106				200				7,667				8	%
Consumer, Mortgage and Other			110,229				529				-				4,464				4,993				5	%
Other Industries and Consumer Total			347,530				4,889				7,322				4,664				16,875				5	%
Grand Total			611,537				30,881				33,176				4,664				68,721				11	%
*Excluding loans held for sale and PPP loans

Net Change (balance in thousands)
						Balance of Loans by Modification Type
Industry		Portfolio Balance				Payment Deferrals				Interest Only				Other				Total Modified
High Risk Industries
Arts, Entertainment and Recreation			(155	)			(219	)			(1,101	)			-				(1,320	)
Health Care and Social Assistance			(1,605	)			(735	)			(3,622	)			-				(4,357	)
Hospitality and Food Services			1,965				(4,617	)			(9,571	)			-				(14,188	)
Other Services (except Public Admin)			(1,763	)			(6,711	)			(1,702	)			-				(8,413	)
Real Estate Rental and Leasing			(12,305	)			(5,761	)			(2,873	)			-				(8,634	)
Retail Trade			(3,100	)			817				(3,444	)			-				(2,627	)
High Risk Industries Total			(16,963	)			(17,226	)			(22,313	)			-				(39,539	)
Other Industries and Consumer Total
Construction			(1,709	)			(255	)			-				-				(255	)
Manufacturing			(6,960	)			(1,435	)			(1,829	)			-				(3,264	)
Other Industries			6,459				226				(1,587	)			(200	)			(1,561	)
Consumer, Mortgage and Other			2,842				(62	)			-				(864	)			(926	)
Other Industries and Consumer Total			632				(1,526	)			(3,416	)			(1,064	)			(6,006	)
Grand Total			(16,331	)			(18,752	)			(25,729	)			(1,064	)			(45,545	)

SOURCE: Blackhawk Bancorp, Inc.

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