HWBK Hawthorn Bancshares Inc

Hawthorn Bancshares Inc. (NASDAQ: HWBK), today reported consolidated financial results for the Company for the third quarter ended September 30, 2015.

Net income for the third quarter 2015 was $2.5 million, or $0.47 per diluted common share, compared to $1.9 million, or $0.35 per diluted common share, for second quarter 2015, and $1.6 million, or $0.29 per diluted common share, for the third quarter 2014. For the nine months ended September 30, 2015, net income was $6.6 million, or $1.21 per diluted common share, compared to $5.7 million, or $1.04 per diluted common share, for the prior year-to-date.

The return on average common equity was 11.82% and the return on average assets was 0.84% for the third quarter ended September 30, 2015 compared to 7.71% and 0.54% for the third quarter ended September 30, 2014, respectively. For the current year, return on average common equity was 10.55% and the return on average assets was 0.74% compared to 9.69% and 0.65% for the prior year-to date, respectively.

Commenting on earnings performance, Chairman David T. Turner said, “Hawthorn reported improved earnings for the current quarter of $0.47 per diluted common share, up $0.12 per diluted common share compared to the prior quarter and up $0.17 per diluted common share compared to the prior year to date results. These increases were partially due to recoveries of nonaccrual interest from several problem loan relationships resolved during the current quarter although average loans increased $10.1 million during the current quarter and average loan balances for the current year were $13.8 million, or 1.6%, ahead of last year. The net interest margin improved to 3.78% for the current quarter versus 3.52% for the prior quarter and 3.71% for the prior year quarter while it was equal to the prior year-to-date level at 3.71%. Net interest income for the current quarter was $0.6 million ahead of the linked quarter and the prior year quarter while the current year was $1.1 million, or 3.6%, higher than the prior year. We have continued to maintain our net interest margins during the extended low interest rate environment and with improved loan volumes, our net interest income has continued to grow. No loan loss provision was recorded in the current quarter, while a $0.3 million provision was made for the prior linked quarter. The decrease in the provision for loan losses from the prior quarter resulted primarily from a reduction in nonperforming loans. Non-interest income of $2.3 million for the current quarter was $0.2 million below the prior quarter and equal to the prior year quarter. Non-interest expense of $9.0 million was $0.3 million, or 3.1%, below the linked prior quarter and $0.9 million, or 9.3%, below the prior year quarter mostly due to lower real estate foreclosure expenses.”

Net Interest Income

Net interest income was $10.6 million for the third quarter and $10.0 million for the linked quarter 2015 and $10.0 million for the third quarter 2014. Average loans increased $13.8 million, or 1.6%, from the prior year, which contributed to the continued strong net interest margin for the current year of 3.71% consistent with the prior year.

Non-Interest Income and Expense

Non-interest income for the third quarter ended September 30, 2015 was $2.3 million compared to $2.5 million for the second quarter ended June 30, 2015 and $2.3 million for the third quarter ended September 30, 2014.

Non-interest expense was $9.0 million for the third quarter ended September 30, 2015 compared to $9.9 million for the third quarter 2014. The $0.9 million decrease, or 9.3%, resulted primarily from a $0.3 million decrease, or 4.7%, in salaries and employee benefits coupled with a $0.7 million decrease in real estate foreclosure expenses.

Allowance for Loan Losses

The Company’s level of non-performing loans improved significantly during the current year to 1.66% of total loans at September 30, 2015, compared to 2.09% at June 30, 2015 and 4.18% at December 31, 2014. During the third quarter ended September 30, 2015, the Company recognized net charge-offs of $740,000 compared to net charge-offs of $117,000 for the third quarter ended September 30, 2014. The increase over the prior quarter was primarily due to the charge-off of specific reserves on three impaired loan relationships during the current quarter. For the nine months ended September 30, 2015, net charge-offs of $103,000 were recorded compared to net charge-offs of $1.7 million for the prior year. No provision for loan losses was recorded during the third quarter ended September 30, 2015 or in the prior year quarter. The allowance for loan losses at September 30, 2015 was $9.3 million, or 1.05% of outstanding loans, 63.51% of non-performing loans and 99.36% of nonperforming loans when excluding accruing TDR’s. At December 31, 2014, the allowance for loan losses was $9.1 million, or 1.06% of outstanding loans, 25.26% of non-performing loans and 49.72% of nonperforming loans when excluding accruing TDR’s. The allowance for loan losses represents management’s best estimate of probable losses contained in the loan portfolio and is commensurate with risks in the loan portfolio as of September 30, 2015.

Financial Condition

Comparing September 30, 2015 balances with December 31, 2014, total assets increased $57.9 million to $1.2 billion. The largest driver in asset growth was investment securities increasing $49.8 million, or 24.4%. Total deposits increased $2.7 million to $972.2 million; federal funds purchased and securities sold under agreements to repurchase increased $9.8 million to $27.8 million at September 30, 2015; and FHLB advances increased $37 million to $80 million at September 30, 2015. During the same period, stockholders’ equity increased 8.1% to $87.0 million, or 7.1% of total assets. The total risk based capital ratio of 14.91% and the leverage ratio of 9.70% at September 30, 2015, respectively, far exceed minimum regulatory requirements of 8.00% and 4.00%, respectively.

       

FINANCIAL SUMMARY

(unaudited)

$000

    Three Months Ended Statement of income information:

September 30,2015

June 30,2015

September 30,2014

Total interest income $ 11,829 $ 11,214 $ 11,196 Total interest expense 1,271 1,230 1,240 Net interest income 10,558 9,984 9,956 Provision for loan losses 0 250 0 Noninterest income 2,336 2,461 2,313 Noninterest expense 8,977 9,267 9,899 Pre-tax income 3,917 2,928 2,370 Income taxes 1,378 1,001 802 Net income $ 2,539 $ 1,927 $ 1,568 Earnings per share: Basic: $ 0.47 $ 0.35 $ 0.29 Diluted: $ 0.47 $ 0.35 $ 0.29                 For the Year Ended Statement of income information:

September 30,2015

September 30,2014

Total interest income $ 34,241 $ 33,284 Total interest expense 3,721 3,827 Net interest income 30,520 29,457 Provision for loan losses 250 0 Noninterest income 6,785 6,582 Noninterest expense 26,953 27,417 Pre-tax income 10,102 8,622 Income taxes 3,497 2,969 Net income $ 6,605 $ 5,653 Earnings per share: Basic: $ 1.21 $ 1.04 Diluted: $ 1.21 $ 1.04     Key financial ratios:

September 30,2015

 

June 30,2015

 

September 30,2014

 

December 31,2014

  Return on average assets (YTD) 0.74 % 0.69 % 0.65 % 0.66 % Return on average common equity (YTD) 10.55 % 9.89 % 9.69 % 9.69 %  

September 30,2015

 

June 30,2015

 

September 30,2014

 

December 31,2014

  Allowance for loan losses to total loans 1.05 % 1.16 % 1.40 % 1.06 % Nonperforming loans to total loans 1.66 % 2.09 % 4.15 % 4.18 % Nonperforming assets to loans and foreclosed assets 3.32 % 3.49 % 5.51 % 5.49 % Allowance for loan losses to

nonperforming loans

63.51 % 55.30 % 33.68 % 25.26 % Allowance for loan losses to nonperforming loans - excluding performing TDRs 99.36 % 83.48 % 49.14 % 49.72 %   Balance sheet information:

September 30,2015

 

June 30,2015

 

September 30,2014

 

December 31,2014

  Loans, net of allowance for loan losses $ 870,228 $ 853,668 $ 848,952 $ 852,114 Investment securities 253,487 247,403 210,218 203,720 Total assets 1,227,624 1,204,363 1,156,526 1,169,731 Deposits 972,168 988,866 964,705 969,514 Total stockholders’ equity 87,073 83,789 80,521 80,568   Book value per share $ 16.00 $ 15.39 $ 14.79 $ 14.80 Market price per share $ 13.97 $ 14.32 $ 13.22 $ 13.70  

About Hawthorn Bancshares

Hawthorn Bancshares, Inc., a financial-bank holding company headquartered in Jefferson City, Missouri, is the parent company of Hawthorn Bank of Jefferson City with locations in the Missouri communities of Lee's Summit, Liberty, Springfield, Branson, Independence, Columbia, Clinton, Windsor, Collins, Osceola, Warsaw, Belton, Drexel, Harrisonville, California and St. Robert.

Statements made in this press release that suggest Hawthorn Bancshares' or management's intentions, hopes, beliefs, expectations, or predictions of the future include "forward-looking statements" within the meaning of Section 21E of the Securities and Exchange Act of 1934, as amended. It is important to note that actual results could differ materially from those projected in such forward-looking statements. Additional information concerning factors that could cause actual results to differ materially from those projected in such forward-looking statements is contained from time to time in the company's quarterly and annual reports filed with the Securities and Exchange Commission.

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Hawthorn BancsharesBruce Phelps, 573-761-6100Chief Financial OfficerFax: 573-761-6272www.HawthornBancshares.com