Hawthorn Bancshares Inc. (NASDAQ: HWBK), today reported
consolidated financial results for the Company for the quarter
ended September 30, 2018.
Net income for the current quarter was $3.1
million, or $0.51 per diluted common share, compared to net income
of $2.9 million, or $0.48 per diluted common share, for the linked
quarter ended June 30, 2018 and net income of $1.8 million, or
$0.29 per diluted common share for the quarter ended September 30,
2017. Net income for the nine months ended September 30, 2018
was $8.1 million, or $1.34 per diluted common share, compared to
$5.8 million, or $0.95 per diluted common share for the nine months
ended September 30, 2017.
The year-to-date annualized return on average
common equity for the current year was 11.69% and the annualized
return on average assets was 0.75% compared to 8.18% and 0.58%,
respectively, for the prior year.
Commenting on earnings performance, Chairman
David T. Turner said, “Hawthorn reported earnings per diluted
common share for the current quarter of $0.51, which was an
increase of $0.03, or 6.3% over the linked quarter, and an increase
of $0.22, or 75.9% over the prior year quarter. Year-to-date
net income has increased $2.3 million or 39.7% over the prior
year-to-date level. These increases have resulted primarily
from continued loan growth and the positive impact of the lower
corporate income tax rate for 2018 enacted by the Tax Cuts and Jobs
Act (the “Tax Act”). Loans, net of the allowance for loan
losses, increased $21.4 million, or 2.0% from the linked
quarter-end, $70.4 million, or 6.8%, from the prior year
quarter-end, and they have increased $247.9 million, or 28.9%,
since year-end 2015. This growth occurred without a deterioration
in credit quality as nonperforming loans to total loans has
remained relatively unchanged from 0.51% at 12/31/15 to 0.54% at
9/30/18. Our current year-to-date net interest margin of 3.28%
continues to be squeezed by increased interest expense during the
recent rising interest rate environment although the current
quarter increased 1 basis point from the prior linked quarter
compared to the 16 basis points decline since the prior year
quarter. Non-interest income of $2.3 million for the current
quarter was relatively unchanged from the prior linked quarter and
the prior year quarter. Non-interest expense of $9.9 million
was level with the prior linked quarter and $0.1 million higher
than the prior year quarter. Year-to-date non-interest
expense of $30.1 million was $1.3 million, or 4.5%, higher than the
prior year-to-date level. This increase over the prior year
includes an increase in salaries and benefits of $1.1 million, or
7.0%, due to bonuses of $1,000 for full-time staff and $500 for
part-time staff paid in the first quarter 2018 as a result of the
benefits accruing from the enactment of the Tax Act; annual cost of
living increases averaging 3%; and higher medical and pension
benefit costs. As of September 30, 2018, we have been able to
reduce our full-time equivalent head count by 33, or approximately
10%, since December 31, 2017, most of which occurred in the second
and third quarters of this year. As a result, the cost
savings from this reduction will be more fully realized in 2019. We
continue to pursue initiatives to improve our efficiency ratio
including right sizing our branch network. To this end, we
recently announced the closing of our Windsor branch during the
fourth quarter 2018 and the sale of our Branson branch expected to
close in the first quarter of 2019. While these transactions are
not expected to significantly affect loan or deposit volumes, they
will further reduce head count and operating expenses.
Net Interest Income
Net interest income for the quarter ended
September 30, 2018 was $11.3 million compared to $11.0 million for
the prior linked quarter and $10.8 million for the prior year
quarter. Year-to-date 2018 net interest income of $33.1 million was
$1.0 million, or 3.1%, higher than the prior year-to-date amount of
$32.1 million. The increase in net interest income from the prior
year was primarily due to an increase in average loans of $70.6
million, or 6.9%. Although the net interest margin has declined
year over year, the pace of decline has slowed noticeably in the
current quarter where the year-to-date net interest margin of 3.28%
increased 1 basis point from the prior linked quarter but decreased
16 basis points from the prior year. The decrease from the
prior year was 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 average total
deposits, which have grown by $109.8 million, or 10.4%, from the
prior year.
Non-Interest Income and
Expense
Non-interest income for the quarter ended
September 30, 2018 was $2.3 million compared to $2.4 million for
the prior linked quarter ended June 30, 2018 and $2.2 million for
the prior year quarter ended September 30, 2017. The net
increase from the prior year quarter was primarily due to an
increase of $0.1 million in combined real estate loan income.
Non-interest income for the nine months ended September 30, 2018
was $6.9 million, a $0.2 million increase, or 3.0%, over the prior
year-to-date level of $6.7 million. Contributing to this
increase was additional service charge income of $0.2 million and
increased bankcard income of $0.1 million.
Non-interest expense was $9.9 million for the
quarter ended September 30, 2018, compared to $9.9 million for the
prior linked quarter and $9.8 million for the prior year quarter
ended September 30, 2017. Non-interest expense for the nine
months ended September 30, 2018 was $30.1 million, an increase of
$1.3 million, or 4.5%, from the nine months ended September 30,
2017. The majority of this increase was caused by salaries
and benefits increasing $1.1 million, or 7.0%, from the prior
year-to-date to the current year-to-date. These compensation
costs increased due to the aforementioned bonuses paid to all staff
resulting from the Tax Act lowering corporate income tax rates;
annual cost of living increases; and higher medical and pension
benefit costs.
Allowance for Loan Losses
The Company’s level of non-performing loans at
September 30, 2018 was 0.54% of total loans compared to 0.53% at
December 31, 2017 and 0.59% at September 30, 2017. For the nine
months ended September 30, 2018, the Company recorded net
charge-offs of $494,000, or 0.05% of average loans, compared to net
charge-offs of $121,000, or 0.01% of average loans, for the nine
months ended September 30, 2017. The allowance for loan
losses at September 30, 2018 was $11.4 million, or 1.02% of
outstanding loans and 187.89% of non-performing loans. At December
31, 2017, the allowance for loan losses was $10.9 million, or 1.02%
of outstanding loans, and 191.33% of non-performing loans. 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 September 30, 2018.
Financial Condition
Comparing September 30, 2018 balances with
December 31, 2017, total assets increased $22.4 million to $1.5
billion. This asset growth was primarily due to an increase in net
loans of $46.8 million, or 4.4%, partially offset by a decrease in
cash and cash equivalents of $26.1 million. Total deposits
increased $56.9 million, or 5.1%, to $1.2 billion while FHLB
advances and other borrowings decreased $42.7 million to $78.7
million at September 30, 2018. Stockholders’ equity at September
30, 2018 was $94.9 million, or 6.5% of total assets. The total risk
based capital ratio of 13.54% and the leverage ratio of 9.35% at
September 30, 2018, respectively, far exceed minimum regulatory
requirements of 8.00% and 4.00%, respectively.
[Tables follow]
FINANCIAL
SUMMARY |
|
|
|
|
|
|
|
|
(unaudited) |
|
|
|
|
|
|
|
|
$000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
Statement of
income information: |
|
September 30, |
|
|
June 30, |
|
|
September 30, |
|
|
2018 |
|
|
2018 |
|
|
2017 |
Total
interest income |
$ |
14,751 |
|
$ |
14,288 |
|
$ |
12,936 |
Total
interest expense |
|
3,443 |
|
|
3,261 |
|
|
2,183 |
Net
interest income |
|
11,308 |
|
|
11,027 |
|
|
10,753 |
Provision
for loan losses |
|
250 |
|
|
450 |
|
|
555 |
Noninterest income |
|
2,324 |
|
|
2,378 |
|
|
2,181 |
Investment securities gain, net |
|
50 |
|
|
108 |
|
|
- |
Noninterest expense |
|
9,888 |
|
|
9,931 |
|
|
9,766 |
Pre-tax
income |
|
3,544 |
|
|
3,132 |
|
|
2,613 |
Income
taxes |
|
446 |
|
|
225 |
|
|
847 |
Net
income |
$ |
3,098 |
|
$ |
2,907 |
|
$ |
1,766 |
Earnings per
share: |
|
|
|
|
|
|
|
|
Basic: |
$ |
0.51 |
|
$ |
0.48 |
|
$ |
0.29 |
Diluted: |
$ |
0.51 |
|
$ |
0.48 |
|
$ |
0.29 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of
income information: |
|
|
|
For the Nine Months Ended |
|
|
|
|
|
September 30, 2018 |
|
|
September 30, 2017 |
Total
interest income |
|
|
|
$ |
42,583 |
|
$ |
37,717 |
Total
interest expense |
|
|
|
|
9,493 |
|
|
5,657 |
Net
interest income |
|
|
|
|
33,090 |
|
|
32,060 |
Provision
for loan losses |
|
|
|
|
1,000 |
|
|
1,235 |
Noninterest income |
|
|
|
|
6,905 |
|
|
6,687 |
Investment securities gain, net |
|
|
|
|
256 |
|
|
- |
Noninterest expense |
|
|
|
|
30,073 |
|
|
28,803 |
Pre-tax
income |
|
|
|
|
9,178 |
|
|
8,709 |
Income
taxes |
|
|
|
|
1,083 |
|
|
2,923 |
Net
income |
|
|
|
$ |
8,095 |
|
$ |
5,786 |
Earnings per
share: |
|
|
|
|
|
|
|
|
Basic: |
|
|
|
$ |
1.34 |
|
$ |
0.95 |
Diluted: |
|
|
|
$ |
1.34 |
|
$ |
0.95 |
|
|
|
|
|
|
|
|
|
FINANCIAL
SUMMARY (continued) |
|
|
|
|
|
|
|
|
|
|
|
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
$000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Key financial
ratios: |
|
September 30, |
|
|
June 30, |
|
|
September 30, |
|
December 31, |
|
|
|
2018 |
|
|
2018 |
|
|
2017 |
|
2017 |
|
Return on
average assets (YTD) |
|
0.75 |
% |
|
0.70 |
% |
|
0.58 |
% |
0.25 |
% |
Return on
average common equity (YTD) |
|
11.69 |
% |
|
11.00 |
% |
|
8.18 |
% |
3.59 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
June 30, |
|
|
September 30, |
|
December 31, |
|
|
|
2018 |
|
|
2018 |
|
|
2017 |
|
2017 |
|
Allowance
for loan losses to total loans |
|
1.02 |
% |
|
1.02 |
% |
|
1.05 |
% |
1.02 |
% |
Nonperforming loans to total loans |
|
0.54 |
% |
|
0.58 |
% |
|
0.59 |
% |
0.53 |
% |
Loans
past-due 90 days or more |
|
|
|
|
|
|
|
|
|
|
|
and still
accruing to loans |
|
0.02 |
% |
|
0.00 |
% |
|
0.02 |
% |
0.03 |
% |
Performing TDRs to loans |
|
0.29 |
% |
|
0.36 |
% |
|
0.45 |
% |
0.44 |
% |
Nonperforming assets to loans |
|
|
|
|
|
|
|
|
|
|
|
and
foreclosed assets |
|
1.72 |
% |
|
1.77 |
% |
|
1.83 |
% |
1.74 |
% |
Allowance
for loan losses to |
|
|
|
|
|
|
|
|
|
|
|
nonperforming loans |
|
187.89 |
% |
|
177.66 |
% |
|
177.13 |
% |
191.33 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Balance sheet
information: |
|
September 30, |
|
|
June 30, |
|
|
September 30, |
|
December 31, |
|
|
|
2018 |
|
|
2018 |
|
|
2017 |
|
2017 |
|
Loans,
net of allowance for loan losses |
$ |
1,104,407 |
|
$ |
1,082,983 |
|
$ |
1,034,047 |
|
1,057,580 |
|
Investment securities |
|
229,580 |
|
|
236,924 |
|
|
222,410 |
|
237,579 |
|
Total
assets |
|
1,451,664 |
|
|
1,448,650 |
|
|
1,386,532 |
|
1,429,216 |
|
Deposits |
|
1,182,734 |
|
|
1,183,386 |
|
|
1,107,960 |
|
1,125,812 |
|
Total
stockholders’ equity |
|
94,872 |
|
|
93,133 |
|
|
96,072 |
|
91,371 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Book
value per share |
$ |
15.75 |
|
$ |
15.46 |
|
$ |
15.84 |
|
15.08 |
|
Market
price per share |
$ |
22.75 |
|
$ |
21.90 |
|
$ |
19.90 |
|
19.95 |
|
Net
interest Spread (YTD) |
$ |
3.05 |
|
$ |
3.05 |
|
$ |
3.28 |
|
3.24 |
|
Net
interest Margin (YTD) |
|
3.28 |
% |
|
3.27 |
% |
|
3.44 |
% |
3.41 |
% |
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, 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
Hawthorn Bancshares (NASDAQ:HWBK)
Historical Stock Chart
From Jun 2024 to Jul 2024
Hawthorn Bancshares (NASDAQ:HWBK)
Historical Stock Chart
From Jul 2023 to Jul 2024