Hawthorn Bancshares, Inc.
(NASDAQ: HWBK), (the
“Company” or “HWBK”) reported net income of $6.6 million for the
first quarter 2022, an increase of $0.6 million compared to the
linked quarter 2021 and an increase of $0.8 million from the first
quarter 2021 (the "prior year quarter"). Earnings per diluted share
(“EPS”) was $1.00 for the first quarter 2022 compared to $0.90 and
$0.88 for the linked quarter and prior year quarter, respectively.
Net income and EPS for the first quarter 2022 increased from the
linked quarter primarily due to lower non-interest expense,
partially offset by lower net interest income, described in more
detail below.
Chairman David T. Turner
commented, "Hawthorn Bank continued to perform very well
in the first quarter of 2022. As we expected, and consistent with
what we delivered through our financial results for the current
quarter, most all of our largest borrowers who were negatively
impacted through the pandemic are now returning to a state of
improved financial stability. We are excited for their success, and
proud to be partners on their journey. Our financial results for
the quarter include significant, one-time adjustments to loan loss
reserves, consistent with the improved financial health of our
borrowers. In addition, over the last several quarters we have
tried to be transparent regarding the financial "lift" we
experienced from loan fees as PPP loans were forgiven. In the first
quarter 2022, we had very little PPP loan fee income as loans
eligible for forgiveness were significantly reduced, and near zero
at quarter-end. Also, rising interest rates have most recently
negatively impacted our mortgage loan production in the current
quarter as compared to the linked quarter and prior year quarter.
Hawthorn Bancshares reported $6.6 million of net income and $1.00
in earnings per share for the first quarter. We saw strong loan
growth in the first quarter, and continue to be excited about
further growth opportunities in the markets we serve, and stand
ready as the community bank of choice to support their lending
needs."
Turner continued, "As I've said before, I'm very
proud of our team of bankers who have demonstrated the ability to
excel in the delivery of financial services to our customers during
these difficult times, and we continue to be very optimistic for
the future."
Highlights
-
Earnings – Net income of $6.6 million for the
first quarter 2022 increased $0.6 million, or 10.3%, from the
linked quarter, and increased $0.8 million, or 13.2%, from the
prior year quarter. EPS was $1.00 for the first quarter 2022
compared to $0.90 for the linked quarter, and $0.88 for the prior
year quarter.
- Net
interest income and net interest margin – Net interest
income of $14.1 million for the first quarter 2022, decreased $1.0
million from the linked quarter, and decreased $0.2 million from
the prior year quarter. Net interest margin, on an FTE basis, was
3.50% for the first quarter, a decrease from 3.67% for the linked
quarter, and a decrease from 3.61% for the prior year quarter.
-
Loans – Loans held for investment increased by
$31.8 million, or 2.4%, equal to $1.3 billion as of March 31,
2022 as compared to the end of the linked quarter. Year-over-year,
loans held for investment grew $57.7 million, or 4.5%, from $1.3
billion as of March 31, 2021.
- Asset
quality – Non-performing loans totaled $17.1 million at
March 31, 2022, a decrease of $8.4 million from $25.5
million at the end of the linked quarter, and a decrease of $17.1
million from $34.2 million at the end of the prior year quarter.
The reduction in non-performing loans in the current quarter, as
compared to the linked quarter and prior year quarter is primarily
due to several large non-accrual loans returning to accrual status
described in more detail below. The allowance for loan losses to
total loans was 1.07% at March 31, 2022, compared to 1.30% at
December 31, 2021 and 1.44% at March 31, 2021.
-
Deposits – Total deposits decreased by $60.7
million, or 4.0%, equal to $1.5 billion as of March 31, 2022
as compared to the end of the linked quarter. Year-over-year
deposits grew $62.2 million, or 4.5%, from $1.4 billion as of
March 31, 2021.
-
Capital – Total shareholder’s equity was $134.4
million and the common equity to assets ratio was 7.74% at
March 31, 2022 as compared to 8.13% and 7.55% at the end of
the linked quarter and the prior year quarter, respectively.
Regulatory capital ratios remain “well-capitalized”, with tier 1
leverage ratio of 10.99% and a total risk-based capital ratio of
14.66% at March 31, 2022.
The Company's 2019 Repurchase Plan was amended
during the second quarter 2021 to authorize the purchase of up to
$5.0 million in market value of the Company's common stock.
Management was given discretion to determine the number and pricing
of the shares to be purchased, as well as the timing of any such
purchases. During the first quarter 2022, there were 23,536 common
shares purchased at an average cost of $25.75 per share totaling
$0.6 million. As of March 31, 2022, $4.4 million remained
available for share repurchases pursuant to that authorization.
During the second quarter of 2022, the Company's
Board of Directors approved a quarterly cash dividend of $0.17 per
common share in addition to a special stock dividend of 4.0%, each
payable July 1, 2022 to shareholders of record at the close of
business on June 15, 2022.
Net Interest Income and Net Interest
Margin
Net interest income of $14.1 million for the
first quarter 2022, decreased $1.0 million from the linked quarter,
and decreased $0.2 million from the prior year quarter. Driving the
decrease from the linked quarter and prior year quarter was a
decrease in PPP fee income of $1.1 million and $1.2 million,
respectively. Net interest margin, on an FTE basis, was 3.50% for
the first quarter, compared to 3.67% for the linked quarter, and
3.61% for the prior year quarter.
Loans
Loans held for investment increased by $31.8
million, or 2.4%, to $1.3 billion as of March 31, 2022 as
compared to the end of the linked quarter and increased by $57.7
million, or 4.5%, from the end of the prior year quarter. Included
within loans held for investment are PPP loans. At March 31,
2022, PPP loans totaled $2.3 million, as compared to $8.4 million
and $56.3 million at the end of the linked quarter and prior year
quarter, respectively. Excluding PPP loans, loans held for
investment at March 31, 2022 increased 2.9% as compared to the
end of the linked quarter, and 9.2% as compared to the end of the
prior year quarter.
The yield earned on average loans held for
investment was 4.34%, on an FTE basis, for the first quarter 2022,
compared to 4.64% for the linked quarter and 4.81% for the prior
year quarter. This decline in yield is largely attributed to the
aforementioned decrease in PPP fee income for the respective
periods.
Asset Quality
Non-performing loans totaled $17.1 million at
March 31, 2022, a decrease of $8.4 million from $25.5
million at the end of the linked quarter, and a decrease of $17.1
million from $34.2 million at the end of the prior year quarter.
These decreases in non-performing loans were primarily driven by a
few large non-accrual loan relationships returning to accrual
status in both the current quarter and linked quarter.
Non-performing loans to total loans was 1.28% at March 31,
2022, and 1.96% and 2.68% at the end of the linked quarter and
prior year quarter, respectively.
At March 31, 2022, $0.3 million of the
Company’s allowance for loan losses was allocated to impaired loans
totaling $18.8 million, compared to $3.0 million of the
Company's allowance for loan losses allocated to impaired loans
totaling $27.3 million at the end of the linked quarter. At
March 31, 2022, management determined that $16.1 million,
or 85.8%, of total impaired loans required no reserve allocation
compared to $16.6 million, or 61.0%, of total impaired loans
at the end of the linked quarter primarily due to adequate
collateral values.
In the first quarter 2022, the Company had net
loan charge-offs of $124,000 compared to net loan recoveries of
$375,000 in the linked quarter, and net loan recoveries of $248,000
in the prior year quarter. The Company recognized a negative
provision expense for credit losses of $2.5 million for the first
quarter 2022 compared to a negative provision expense of $2.4
million for the linked quarter and no provision for the prior year
quarter. The negative provision expense in the first quarter 2022
and linked quarter resulted primarily from the release of specific
reserves totaling $2.8 million and $2.7 million,
respectively, due to returning significant loan balances to accrual
from non-accrual status or other collateral valuation
adjustments.
The allowance for loan losses at March 31,
2022 was $14.3 million, or 1.07% of outstanding loans, and 83.5% of
non-performing loans. At December 31, 2021, the allowance for
loan losses was $16.9 million, or 1.30% of outstanding loans, and
66.4% of non-performing loans. At March 31, 2021, the
allowance for loan losses was $18.4 million, or 1.44% of
outstanding loans, and 53.6% 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 March 31, 2022.
Deposits
Total deposits at March 31, 2022 were $1.5
billion, a decrease of $60.7 million, or 4.0%, from
December 31, 2021, and an increase of $62.2 million, or 4.5%,
from March 31, 2021. The decrease in deposits over the linked
quarter was negatively impacted by the funding cycle of public
funds depositors. Growth in year-over-year deposits is indicative
of the higher savings rate and/or reserves customers have chosen in
response to pandemic conditions.
Non-interest Income
Total non-interest income for the quarter ended
March 31, 2022 was $3.7 million, an increase of $0.1 million,
or 1.4%, from the linked quarter, and a decrease of $0.8 million,
or 18.5%, from the prior year quarter. The change in the current
quarter compared to the prior year quarter is primarily due to the
decrease in the gain on sale of real estate mortgages of $1.6
million, or 64.0%.
Non-interest Expense
Non-interest expense for the first quarter 2022
was $12.2 million, a decrease of $1.2 million, or 9.3%, from the
linked quarter, and an increase of $0.4 million, or 3.8%, from the
prior year quarter. The change in the current quarter compared to
the linked quarter is primarily due to the decrease in legal fees
expenses resulting from the recognition of final settlement of a
legal matter in the fourth quarter of 2021.
The first quarter efficiency ratio was 68.4%
compared to 71.8% and 62.1% for the linked quarter and prior year
quarter, respectively.
Capital
The Company maintains its “well capitalized”
regulatory capital position. At the end of the first quarter 2022,
capital ratios were as follows: total risk-based capital to
risk-weighted assets 14.66%, tier 1 capital to risk-weighted assets
13.44%, tier 1 leverage 10.99% and common equity to assets
7.74%.
[Tables follow]
FINANCIAL SUMMARY
(unaudited)
$000, except per share data
|
Three Months Ended |
|
March 31, |
|
December 31 |
|
March 31, |
Statement of income information: |
|
2022 |
|
|
|
2021 |
|
|
|
2021 |
|
Total interest income |
$ |
15,436 |
|
|
$ |
16,378 |
|
|
$ |
16,102 |
|
Total interest expense |
|
1,291 |
|
|
|
1,275 |
|
|
|
1,712 |
|
Net interest income |
|
14,145 |
|
|
|
15,103 |
|
|
|
14,390 |
|
Provision for loan losses |
|
(2,500 |
) |
|
|
(2,400 |
) |
|
|
— |
|
Non-interest income |
|
3,726 |
|
|
|
3,675 |
|
|
|
4,572 |
|
Investment securities (losses) gains, net |
|
(4 |
) |
|
|
9 |
|
|
|
14 |
|
Non-interest expense |
|
12,227 |
|
|
|
13,474 |
|
|
|
11,780 |
|
Pre-tax income |
|
8,140 |
|
|
|
7,713 |
|
|
|
7,196 |
|
Income taxes |
|
1,531 |
|
|
|
1,723 |
|
|
|
1,357 |
|
Net income |
$ |
6,609 |
|
|
$ |
5,990 |
|
|
$ |
5,839 |
|
Earnings per share: |
|
|
|
|
|
Basic: |
$ |
1.00 |
|
|
$ |
0.90 |
|
|
$ |
0.88 |
|
Diluted: |
$ |
1.00 |
|
|
$ |
0.90 |
|
|
$ |
0.88 |
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL SUMMARY
(continued)
(unaudited)
$000, except per share data
|
March 31, |
|
December 31, |
|
March 31, |
|
2022 |
|
2021 |
|
2021 |
Key financial ratios: |
|
|
|
|
|
Return on average assets (YTD) |
1.51 |
% |
|
1.30 |
% |
|
1.38 |
% |
Return on average common equity (YTD) |
18.41 |
% |
|
16.46 |
% |
|
18.03 |
% |
Return on average assets (QTR) |
1.51 |
% |
|
1.35 |
% |
|
1.38 |
% |
Return on average common equity (QTR) |
18.41 |
% |
|
16.70 |
% |
|
18.03 |
% |
|
|
|
|
|
|
Asset Quality Ratios |
|
|
|
|
|
Allowance for loan losses to total loans |
1.07 |
% |
|
1.30 |
% |
|
1.44 |
% |
Non-performing loans to total loans (a) |
1.28 |
% |
|
1.96 |
% |
|
2.68 |
% |
Non-performing assets to loans (a) |
2.01 |
% |
|
2.76 |
% |
|
3.63 |
% |
Non-performing assets to assets (a) |
1.55 |
% |
|
1.97 |
% |
|
2.68 |
% |
Performing TDRs to loans |
0.13 |
% |
|
0.14 |
% |
|
0.19 |
% |
Allowance for loan losses to non-performing loans (a) |
83.51 |
% |
|
66.36 |
% |
|
53.64 |
% |
|
|
|
|
|
|
Capital Ratios |
|
|
|
|
|
Average stockholders' equity to average total assets (YTD) |
8.22 |
% |
|
7.89 |
% |
|
7.64 |
% |
Period-end stockholders' equity to period-end assets (YTD) |
7.74 |
% |
|
8.13 |
% |
|
7.55 |
% |
Total risk-based capital ratio |
14.66 |
% |
|
14.79 |
% |
|
14.80 |
% |
Tier 1 risk-based capital ratio |
13.44 |
% |
|
13.59 |
% |
|
13.21 |
% |
Common equity Tier 1 capital |
10.36 |
% |
|
10.22 |
% |
|
9.93 |
% |
Tier 1 leverage ratio |
10.99 |
% |
|
11.01 |
% |
|
10.22 |
% |
|
|
|
|
|
|
|
|
|
(a) Non-performing loans include loans 90 days past
due and accruing and non-accrual loans.
|
March 31, |
|
December 31 |
|
March 31, |
Balance sheet information: |
|
2022 |
|
|
|
2021 |
|
|
|
2021 |
|
Total assets |
$ |
1,735,683 |
|
|
$ |
1,831,550 |
|
|
$ |
1,731,924 |
|
Loans held for investment |
|
1,333,923 |
|
|
|
1,302,133 |
|
|
|
1,276,185 |
|
Allowance for loan losses |
|
(14,279 |
) |
|
|
(16,903 |
) |
|
|
(18,361 |
) |
Loans held for sale |
|
909 |
|
|
|
2,249 |
|
|
|
6,308 |
|
Investment securities |
|
292,244 |
|
|
|
316,278 |
|
|
|
244,330 |
|
Deposits |
|
1,456,143 |
|
|
|
1,516,820 |
|
|
|
1,393,982 |
|
Total stockholders’ equity |
$ |
134,387 |
|
|
$ |
148,956 |
|
|
$ |
130,708 |
|
|
|
|
|
|
|
Book value per share |
$ |
20.35 |
|
|
$ |
22.51 |
|
|
$ |
19.75 |
|
Market price per share |
$ |
25.28 |
|
|
$ |
25.94 |
|
|
$ |
20.47 |
|
Net interest spread (FTE) (YTD) |
|
3.36 |
% |
|
|
3.45 |
% |
|
|
3.44 |
% |
Net interest margin (FTE) (YTD) |
|
3.50 |
% |
|
|
3.62 |
% |
|
|
3.61 |
% |
Net interest spread (FTE) (QTR) |
|
3.36 |
% |
|
|
3.52 |
% |
|
|
3.44 |
% |
Net interest margin (FTE) (QTR) |
|
3.50 |
% |
|
|
3.67 |
% |
|
|
3.61 |
% |
Efficiency ratio (YTD) |
|
68.42 |
% |
|
|
64.81 |
% |
|
|
62.12 |
% |
Efficiency ratio (QTR) |
|
68.42 |
% |
|
|
71.75 |
% |
|
|
62.12 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
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, St. Louis,
Springfield, 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. 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.
Contact:
Hawthorn Bancshares, Inc.
Stephen E. Guthrie
Chief Financial Officer
TEL: 573.761.6100
Fax: 573.761.6272
www.HawthornBancshares.com
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