Hawthorn Bancshares Inc. (NASDAQ:HWBK), today reported consolidated
financial results for the Company for the quarter ended March 31,
2018.
Net income for the current quarter was $2.1
million, or $0.36 per diluted common share, compared to a loss of
$2.4 million, or $0.41 per diluted common share, for the linked
quarter ended December 31, 2017 and net income of $2.1 million, or
$0.36 per diluted common share for the quarter ended March 31,
2017. Included in the prior linked quarter net loss was a
$4.1 million charge, or $0.70 per diluted common share, that
includes $3.1 million resulting from application of the Tax Cuts
and Jobs Act (the “Tax Act”) enacted in the fourth quarter of 2017,
and $1.0 million resulting from tax planning initiatives
implemented at year-end 2017.
The year-to-date annualized return on average
common equity for the current quarter was 9.32% and the annualized
return on average assets was 0.60% compared to 9.23% and 0.65%,
respectively, for the prior year quarter.
Commenting on earnings performance, Chairman
David T. Turner said, “Hawthorn reported solid earnings for the
current quarter with earnings per diluted common share of $0.36
equal to the prior year quarter. We continued to grow our
loan portfolio by increasing gross loans $15.9 million, or 1.5%,
from the prior linked quarter-end, $74.1 million, or 7.3%, from the
prior year quarter-end and they have increased $219 million, or
25.3%, since year-end 2015. This growth was accomplished
without a deterioration in credit quality as nonperforming loans to
total loans improved from 1.19% at 12/31/15 to 0.93% at 3/31/18.
Our current quarter net interest margin of 3.29% has been squeezed
during the recent rising interest rate environment although net
interest income increased $0.3 million over the prior year quarter.
Non-interest income of $2.3 million for the current quarter was
level with the prior linked quarter and slightly below the prior
year quarter. Non-interest expense of $10.3 million was $0.3
million higher than the prior linked quarter and $0.9 million
higher than the prior year quarter. The increase over the
prior year quarter includes an increase in salaries and benefits of
$0.6 million mostly due to bonuses of $1,000 for full-time staff
and $500 for part-time staff paid in the current quarter as a
result of the benefits accruing from the enactment of the Tax Act,
as well as increases in various other non-interest expenses.”
Net Interest Income
Net interest income for the quarter ended March
31, 2018 was $10.8 million compared to $10.9 million for the prior
linked quarter and $10.5 million for the prior year quarter. The
increase in net interest income from the prior year quarter was
primarily due to an increase in average loans of $80.9 million, or
8.2%. The net interest margin declined 12 basis points from the
prior linked quarter and 19 basis points from the prior year
quarter to 3.29% for the current quarter. These decreases are
primarily due to the cost of average interest bearing liabilities
increasing faster than the yield on average earning assets.
The majority of these increased funding costs has occurred in our
most stable funding base of total deposits which have grown on
average by $86.9 million, or 8.3%, from the prior year quarter.
Non-Interest Income and
Expense
Non-interest income for the quarter ended March
31, 2018 was $2.3 million compared to $2.3 million for the prior
linked quarter ended December 31, 2017 and $2.4 million for the
prior year quarter ended March 31, 2017. The net decrease
from the prior year quarter was primarily due to a decrease of $0.2
million in combined real estate loan income, primarily due to lower
fair value of mortgage servicing rights, offset by $0.1 million of
securities gains recognized in the current quarter.
Non-interest expense was $10.3 million for the
quarter ended March 31, 2018, compared to $10.0 million for the
prior linked quarter and $9.4 million for the prior year quarter
ended March 31, 2017. Salaries and benefits increased $0.6 million,
or 11.0% over the prior linked quarter and $0.6 million, or 11.4%
over the prior year quarter, accounting for the majority of the
increases in non-interest expenses. The increases in salaries
and benefits were primarily due to the bonuses paid to all staff in
recognition of the lower corporate income taxes the Company will
pay as a result of the enactment of the Tax Act in the prior linked
quarter.
Allowance for Loan LossesThe
Company’s level of non-performing loans at March 31, 2018 was 0.93%
of total loans compared to 1.00% at December 31, 2017 and 0.93% at
March 31, 2017. During the current quarter ended March 31, 2018,
the Company recorded net charge-offs of $205,000, or 0.02% of
average loans, compared to net recoveries of $26,000 in the prior
year quarter ended March 31, 2017. The allowance for loan
losses at March 31, 2018 was $10.9 million, or 1.01% of outstanding
loans, 108.05% of non-performing loans and 198.32% of nonperforming
loans when excluding accruing TDR’s. At December 31, 2017, the
allowance for loan losses was $10.9 million, or 1.02% of
outstanding loans, 101.57% of non-performing loans and 180.87% of
nonperforming loans when excluding accruing TDR’s. The allowance
for loan losses represents management’s best estimate of probable
losses inherent in the loan portfolio and is commensurate with
risks in the loan portfolio as of March 31, 2018.
Financial Condition
Comparing March 31, 2018 balances with December
31, 2017, total assets increased $23.7 million to $1.5 billion.
This asset growth was primarily due to an increase in gross loans
of $15.9 million, or 1.5%, and an increase in cash and cash
equivalents of $18.5 million, partially offset by a decrease in
investment securities of $12.1 million. Total deposits increased
$54.6 million, or 4.9%, to $1.2 billion while FHLB advances and
other borrowings decreased $37.1 million to $84.3 million at March
31, 2018. Stockholders’ equity at March 31, 2018 was $91.3 million,
or 6.3% of total assets. The total risk based capital ratio of
12.87% and the leverage ratio of 9.17% at March 31, 2018,
respectively, far exceed minimum regulatory requirements of 8.00%
and 4.00%, respectively.
[Tables follow]
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FINANCIAL SUMMARY |
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(unaudited) |
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$000 |
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Three Months Ended |
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Statement of income information: |
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March 31, |
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December 31, |
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March 31, |
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2018 |
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2017 |
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|
2017 |
|
Total interest income |
$ |
13,544 |
|
$ |
13,219 |
|
|
$ |
12,099 |
|
Total interest expense |
|
2,790 |
|
|
2,351 |
|
|
|
1,612 |
|
Net interest income |
|
10,754 |
|
|
10,868 |
|
|
|
10,487 |
|
Provision for loan losses |
|
300 |
|
|
530 |
|
|
|
350 |
|
Noninterest income |
|
2,301 |
|
|
2,268 |
|
|
|
2,407 |
|
Noninterest expense |
|
10,254 |
|
|
9,999 |
|
|
|
9,351 |
|
Pre-tax income |
|
2,501 |
|
|
2,607 |
|
|
|
3,193 |
|
Income taxes |
|
411 |
|
|
4,979 |
|
|
|
1,093 |
|
Net income |
$ |
2,090 |
|
$ |
(2,372 |
) |
|
$ |
2,100 |
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Earnings per share: |
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Basic: |
$ |
0.36 |
|
$ |
(0.41 |
) |
|
$ |
0.36 |
|
Diluted: |
$ |
0.36 |
|
$ |
(0.41 |
) |
|
$ |
0.36 |
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Key
financial ratios: |
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March 31, |
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December 31, |
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March 31, |
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|
2018 |
|
|
2017 |
|
|
2017 |
|
Return on average assets (YTD) |
|
0.60 |
% |
|
0.25 |
% |
|
|
0.65 |
% |
Return on average common equity (YTD) |
|
9.32 |
% |
|
3.59 |
% |
|
|
9.23 |
% |
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|
March 31, |
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|
December 31, |
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|
March 31, |
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|
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2018 |
|
|
2017 |
|
|
2017 |
|
Allowance for loan losses to total loans |
|
1.01 |
% |
|
1.02 |
% |
|
|
1.02 |
% |
Nonperforming loans to total loans |
|
0.93 |
% |
|
1.00 |
% |
|
|
0.93 |
% |
Nonperforming assets to loans |
|
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|
|
|
|
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|
and foreclosed assets |
|
2.13 |
% |
|
2.21 |
% |
|
|
2.24 |
% |
Allowance for loan losses to |
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|
nonperforming loans |
|
108.05 |
% |
|
101.57 |
% |
|
|
109.70 |
% |
Allowance for loan losses to nonperforming |
|
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loans - excluding performing TDRs |
|
198.32 |
% |
|
180.87 |
% |
|
|
288.50 |
% |
|
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|
Balance sheet information: |
|
March 31, |
|
|
December 31, |
|
|
March 31, |
|
|
|
2018 |
|
|
2017 |
|
|
2017 |
|
Loans, net of allowance for loan losses |
$ |
1,073,379 |
|
$ |
1,057,580 |
|
|
$ |
999,920 |
|
Investment securities |
|
225,445 |
|
|
237,579 |
|
|
|
226,029 |
|
Total assets |
|
1,452,908 |
|
|
1,429,216 |
|
|
|
1,319,663 |
|
Deposits |
|
1,180,380 |
|
|
1,125,812 |
|
|
|
1,043,004 |
|
Total stockholders’ equity |
|
91,271 |
|
|
91,371 |
|
|
|
93,077 |
|
|
|
|
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Book value per share |
$ |
15.74 |
|
$ |
15.68 |
|
|
$ |
15.94 |
|
Market price per share |
$ |
20.64 |
|
$ |
20.75 |
|
|
$ |
20.29 |
|
Net interest Spread (YTD) |
$ |
3.08 |
|
$ |
3.24 |
|
|
$ |
3.35 |
|
Net interest Margin (YTD) |
|
3.29 |
% |
|
3.41 |
% |
|
|
3.48 |
% |
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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, 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. Such
forward-looking statements include, but are not limited to,
statements regarding the estimated effects of the Tax Act. It is
important to note that actual results could differ materially from
those projected in such forward-looking statements. Factors that
could cause the Company's estimated effects of the Tax Act to
differ materially include, but are not limited to, changes in
interpretations and assumptions the Company has made with respect
to the anticipated effects of the Tax Act, federal tax regulations
and guidance that may be issued by the U.S. Department of Treasury
and future actions by the Company resulting from the Tax Act.
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.
Contact: Bruce Phelps
Chief Financial Officer
TEL: 573.761.6100 FAX: 573.761.6272
www.HawthornBancshares.com
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