Beloit Bank avoids subprime exposures
Blackhawk Bancorp Inc., the Beloit-based parent company of Blackhawk State Bank, announced it has managed to steer clear of the subprime mortgage crisis that has devastated the bottom lines of so many other banks.
The bank said its net income for the full year in 2007 increased to $2.29 million, or $1.03 per share, up from $2.26 million, or $1.00 per share, in 2006.
For the fourth quarter, Blackhawk’s net income was $563,000, or 26 cents per share, which was down from $766,000, or 34 cents per share, in the same period a year ago.
Fourth quarter and annual net interest income rose, reflecting solid loan and deposit growth, the company reported. The growth in deposits was primarily in checking, savings and money market accounts.
"Blackhawk grew in a number of areas throughout 2007. In light of the soft economy we believe that performance is a very encouraging indication of our bank’s and our markets’ essential strength and stability," said R. Richard Bastian III, president and chief executive officer of the company.
"Blackhawk has no participation in the sub-prime mortgage loan market. Mortgage loans we originate are primarily conforming loans that are sold into the secondary market. However, an important part of Blackhawk’s strategy is to retain the servicing to facilitate the cross-sale of additional banking products," Bastian said. "Although the economies in the markets we serve are experiencing the same issues as most areas, our communities never had the speculative real estate issues that caused the widest swings. Building and construction in our communities has been slow but stable. We deal extensively with builders and contractors. One of our bank’s specialties is having a consultative relationship with customers, so we were able to help them anticipate economic changes and make adjustments. We believe this helped them to more effectively manage their business, and enabled us to avoid over- extending our commitments."
FDIC report shows weakness in banking industry
The annual report released recently by Federal Deposit Insurance Corp. (FDIC) confirmed the gloom of the American banking industry, showing that profits at the banks and thrifts it insures fell to a 16-year low in the fourth quarter of 2007.
For the full year 2007, the industry incurred the first year-over-year decline in profits in six years, according to the report.
"Record-high loan-loss provisions, record losses in trading activities and goodwill impairment expenses combined to dramatically reduce earnings at a number of FDIC-insured institutions in the fourth quarter of 2007. Fourth-quarter net income of $5.8 billion was the lowest amount reported by the industry since the fourth quarter of 1991, when earnings totaled $3.2 billion. It was $29.4 billion (83.5 percent) less than insured institutions earned in the fourth quarter of 2006," the report stated. "One out of every four institutions with assets greater than $10 billion reported a net loss for the fourth quarter. Institutions associated with subprime mortgage lending operations and institutions engaged in significant trading activity were among those reporting the largest earnings declines."
"The rising trend in noncurrent loans indicates that write-offs and loss provisions will likely remain high for the near future," FDIC chairman Sheila Bair said in the FDIC’s Quarterly Banking Profile. "We’ll also need to keep a close eye as we’ve been doing for a number of months on loan portfolios other than housing, including commercial real estate, credit cards, and small business. All of these are showing signs of stress, as housing market weakness continues."
The FDIC is an independent agency created by the Congress that maintains the stability and public confidence in the nation’s financial system by insuring deposits, examining and supervising financial institutions, and managing receiverships.
To view the entire report, visit www2.fdic.gov/qbp/2007dec/qbp.pdf.
