Hawthorn Bancshares, Inc.
(NASDAQ: HWBK), (the
“Company” or “HWBK”) reported net income of $4.9 million for the
third quarter 2022, an increase of $0.4 million compared to the
linked quarter 2022 and a decrease of $0.9 million from the third
quarter 2021 (the "prior year quarter"). Earnings per diluted share
(“EPS”) was $0.73 for the third quarter 2022 compared to $0.66 and
$0.84 for the linked quarter and prior year quarter, respectively.
Net income and EPS for the third quarter 2022 increased from the
linked quarter primarily due to lower provision expense and higher
net interest income in the third quarter, partially offset by
higher non-interest expense.
Chairman David T. Turner
commented, "Hawthorn Bank continued to perform very well
in the third quarter of 2022. Hawthorn Bancshares reported $4.9
million of net income and $0.73 in earnings per diluted share for
the third quarter. We continue to see strong loan demand, as
evidenced by our $64 million, or 4.5% growth in loans as compared
to the linked quarter. Deposits grew $62 million in the third
quarter, or 4.0% compared to the linked quarter. We are continuing
to adapt to the ever-increasing interest rate environment. We saw
strong growth in our loan yield as compared to the linked quarter,
however, we are also seeing our cost of funds increase consistent
with a rising rate environment. Asset quality remains strong as
evidenced in the steady decline in non-performing loans as a
percentage of total loans. As previously mentioned, rising interest
rates have had and will continue to have negative impacts on our
mortgage loan production and the overall profit contribution from
that team."
Turner continued, "We 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
financial needs."
Highlights
-
Earnings – Net income of $4.9 million for the
third quarter 2022 increased $0.4 million, or 9.8%, from the linked
quarter, and decreased $0.9 million, or 15.0%, from the prior year
quarter. EPS was $0.73 for the third quarter 2022 compared to $0.66
for the linked quarter, and $0.84 for the prior year quarter.
- Net
interest income and net interest margin – Net interest
income of $15.1 million for the third quarter 2022, increased $0.5
million from the linked quarter, and decreased $0.3 million from
the prior year quarter. Net interest margin, on an FTE basis, was
3.56% for the third quarter, a decrease from 3.64% for the linked
quarter, and a decrease from 3.78% for the prior year quarter.
-
Loans – Loans held for investment increased by
$64.2 million, or 4.5%, equal to $1.5 billion as of
September 30, 2022 as compared to the end of the linked
quarter. Year-over-year, loans held for investment grew $209.2
million, or 16.3%, from $1.3 billion as of September 30,
2021.
- Asset
quality – Non-performing loans totaled $17.3 million at
September 30, 2022, a decrease of $0.5 million from $17.8
million at the end of the linked quarter, and a decrease of $15.5
million from $32.8 million at the end of the prior year quarter.
The reduction in non-performing loans in the current quarter
compared to the prior year quarter is primarily due to three large
non-accrual loan relationships returning to accrual status
described in more detail below. The allowance for loan losses to
total loans was 1.04% at September 30, 2022, compared to 1.30%
at December 31, 2021 and 1.48% at September 30,
2021.
-
Deposits – Total deposits increased by $62.0
million, or 4.0%, equal to $1.6 billion as of September 30,
2022 as compared to the end of the linked quarter. Year-over-year
deposits grew $181.7 million, or 12.9%, from $1.4 billion as of
September 30, 2021.
-
Capital – Total shareholder’s equity was $115.4
million and the common equity to assets ratio was 6.25% at
September 30, 2022 as compared to 6.93% and 8.00% at the end
of the linked quarter and the prior year quarter, respectively.
Regulatory capital ratios remain “well-capitalized”, with a tier 1
leverage ratio of 10.60% and a total risk-based capital ratio of
13.84% at September 30, 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. The Company repurchased 108,724 common shares under the
plan during 2022 at an average cost of $26.60 per share totaling
$2.9 million. As of September 30, 2022, $2.1 million remained
available for share repurchases pursuant to the plan.
During the fourth quarter of 2022, the Company's
Board of Directors approved a quarterly cash dividend of $0.17 per
common share payable January 1, 2023 to shareholders of record at
the close of business on December 15, 2022.
Net Interest Income and Net Interest
Margin
Net interest income of $15.1 million for the
third quarter 2022, increased $0.5 million from the linked quarter,
and decreased $0.3 million from the prior year quarter. Driving the
increase from the linked quarter was higher interest income,
primarily resulting from significant loan growth of 4.5%, more than
offsetting the increase in interest expense for interest bearing
accounts which reprice in a rising rate environment. While interest
income increased $1.1 million in the current quarter compared to
the prior year quarter, which was driven by higher interest income
from significant loan growth more than offsetting the reduction in
PPP fees of $2.0 million, interest expense increased $1.4 million
resulting in a $0.3 million decrease in net interest income. Net
interest margin, on an FTE basis, was 3.56% for the third quarter,
compared to 3.64% for the linked quarter, and 3.78% for the prior
year quarter.
Loans
Loans held for investment increased by $64.2
million, or 4.5%, to $1.5 billion as of September 30, 2022 as
compared to the end of the linked quarter and increased by $209.2
million, or 16.3%, from the end of the prior year quarter. Included
within loans held for investment are PPP loans. At
September 30, 2022, PPP loans totaled $0.6 million, as
compared to $1.1 million and $25.9 million at the end of the linked
quarter and prior year quarter, respectively. Excluding PPP loans,
loans held for investment at September 30, 2022 increased 4.5%
as compared to the end of the linked quarter, and 18.7% as compared
to the end of the prior year quarter.
The yield earned on average loans held for
investment was 4.51%, on an FTE basis, for the third quarter 2022,
compared to 4.33% for the linked quarter and 4.81% for the prior
year quarter. The increase in yield as of September 30, 2022
compared to the end of the linked quarter is reflective of recent
market conditions where most loan types have seen an increase in
yield, consistent with the two most recent increases in the prime
rate which moved the rate from 4.75% in June to 6.25% in September.
The decline in yield in the current quarter as compared to the end
of the prior year quarter is largely attributed to the
aforementioned decrease in PPP fee income.
Asset Quality
Non-performing loans totaled $17.3 million at
September 30, 2022, a decrease of $0.5 million from $17.8
million at the end of the linked quarter, and a decrease of $15.5
million from $32.8 million at the end of the prior year quarter.
The reduction in non-performing loans in the current quarter as
compared to the prior year quarter was primarily due to three large
non-accrual loan relationships returning to accrual status.
Non-performing loans to total loans was 1.16% at September 30,
2022, compared to 1.25% and 2.56% at the end of the linked quarter
and prior year quarter, respectively.
At September 30, 2022, $0.3 million of
the Company’s allowance for loan losses was allocated to impaired
loans totaling $18.9 million, compared to $0.3 million of
the Company's allowance for loan losses allocated to impaired loans
totaling $19.3 million at the end of the linked quarter. At
September 30, 2022, management determined that
$15.9 million, or 84.0%, of total impaired loans required no
reserve allocation compared to $16.0 million, or 82.8%, of
total impaired loans at the end of the linked quarter primarily due
to adequate collateral values.
In the third quarter 2022, the Company had net
loan charge-offs of $148,000 compared to net loan charge-offs of
$126,000 in the linked quarter, and net loan charge-offs of
$106,000 in the prior year quarter. The Company recognized a
provision expense for credit losses of $0.3 million for the
third quarter 2022 compared to $1.2 million for the linked quarter
and $0.3 million for the prior year quarter.
The allowance for loan losses at
September 30, 2022 was $15.5 million, or 1.04% of outstanding
loans, and 89.4% 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
September 30, 2021, the allowance for loan losses was $18.9
million, or 1.48% of outstanding loans, and 57.6% 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
September 30, 2022.
Deposits
Total deposits at September 30, 2022 were
$1.6 billion, an increase of $62.0 million, or 4.0%, from June 30,
2022, and an increase of $181.7 million, or 12.9%, from
September 30, 2021. Growth in deposits in the third quarter as
compared to the linked quarter and prior year quarter has occurred
in both non-interest bearing and interest bearing and in nearly all
types of deposit products.
Non-interest Income
Total non-interest income for the third quarter
ended September 30, 2022 was $3.5 million, a decrease of $0.2
million, or 4.5%, from the linked quarter, and a decrease of $0.3
million, or 7.7%, 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
$0.7 million, or 54.1%.
Non-interest Expense
Non-interest expense for the third quarter 2022
was $12.2 million, an increase of $0.7 million, or 5.7%, from the
linked quarter, and an increase of $0.4 million, or 3.6%, from the
prior year quarter.
The third quarter efficiency ratio was 65.7%
compared to 63.4% and 61.4% for the linked quarter and prior year
quarter, respectively.
Capital
The Company maintains its “well capitalized”
regulatory capital position. At the end of the third quarter 2022,
capital ratios were as follows: total risk-based capital to
risk-weighted assets 13.84%, tier 1 capital to risk-weighted assets
12.25%, tier 1 leverage 10.60% and common equity to assets
6.25%.
[Tables follow]
FINANCIAL SUMMARY(unaudited)$000,
except per share data
|
Three Months Ended |
|
September 30, |
|
June 30, |
|
September 30, |
Statement of income information: |
2022 |
|
2022 |
|
2021 |
Total interest income |
$ |
17,893 |
|
$ |
16,142 |
|
|
$ |
16,804 |
Total interest expense |
|
2,826 |
|
|
1,581 |
|
|
|
1,424 |
Net interest income |
|
15,067 |
|
|
14,561 |
|
|
|
15,380 |
Provision for loan losses |
|
300 |
|
|
1,200 |
|
|
|
300 |
Non-interest income |
|
3,485 |
|
|
3,648 |
|
|
|
3,776 |
Investment securities (gains) losses, net |
|
1 |
|
|
(9 |
) |
|
|
126 |
Non-interest expense |
|
12,195 |
|
|
11,540 |
|
|
|
11,769 |
Pre-tax income |
|
6,058 |
|
|
5,460 |
|
|
|
7,213 |
Income taxes |
|
1,131 |
|
|
971 |
|
|
|
1,417 |
Net income |
$ |
4,927 |
|
$ |
4,489 |
|
|
$ |
5,796 |
Earnings per share: |
|
|
|
|
|
Basic: |
$ |
0.73 |
|
$ |
0.66 |
|
|
$ |
0.84 |
Diluted: |
$ |
0.73 |
|
$ |
0.66 |
|
|
$ |
0.84 |
|
Nine Months Ended |
|
September 30, |
Statement of income information: |
2022 |
|
2021 |
Total interest income |
$ |
49,471 |
|
|
$ |
48,076 |
Total interest expense |
|
5,698 |
|
|
|
4,634 |
Net interest income |
|
43,773 |
|
|
|
43,442 |
(Release of) provision for loan losses |
|
(1,000 |
) |
|
|
700 |
Non-interest income |
|
10,859 |
|
|
|
13,010 |
Investment securities (losses) gains, net |
|
(12 |
) |
|
|
140 |
Non-interest expense |
|
35,962 |
|
|
|
35,391 |
Pre-tax income |
|
19,658 |
|
|
|
20,501 |
Income taxes |
|
3,633 |
|
|
|
3,974 |
Net income |
$ |
16,025 |
|
|
$ |
16,527 |
Earnings per share: |
|
|
|
Basic: |
$ |
2.36 |
|
|
$ |
2.40 |
Diluted: |
$ |
2.36 |
|
|
$ |
2.40 |
FINANCIAL SUMMARY
(continued)
(unaudited)
$000, except per share data
|
September 30, |
|
June 30, |
|
December 31, |
|
September 30, |
|
2022 |
|
2022 |
|
2021 |
|
2021 |
Key financial ratios: |
|
|
|
|
|
|
|
Return on average assets (YTD) |
1.21 |
% |
|
1.28 |
% |
|
1.30 |
% |
|
1.28 |
% |
Return on average common equity (YTD) |
16.00 |
% |
|
16.33 |
% |
|
16.46 |
% |
|
16.37 |
% |
Return on average assets (QTR) |
1.08 |
% |
|
1.04 |
% |
|
1.35 |
% |
|
1.33 |
% |
Return on average common equity (QTR) |
15.30 |
% |
|
14.00 |
% |
|
16.70 |
% |
|
16.49 |
% |
|
|
|
|
|
|
|
|
Asset Quality Ratios |
|
|
|
|
|
|
|
Allowance for loan losses to total loans |
1.04 |
% |
|
1.08 |
% |
|
1.30 |
% |
|
1.48 |
% |
Non-performing loans to total loans (a) |
1.16 |
% |
|
1.25 |
% |
|
1.96 |
% |
|
2.56 |
% |
Non-performing assets to loans (a) |
1.78 |
% |
|
1.89 |
% |
|
2.76 |
% |
|
3.46 |
% |
Non-performing assets to assets (a) |
1.44 |
% |
|
1.51 |
% |
|
1.97 |
% |
|
2.56 |
% |
Performing TDRs to loans |
0.11 |
% |
|
0.12 |
% |
|
0.14 |
% |
|
0.15 |
% |
Allowance for loan losses to |
|
|
|
|
|
|
|
non-performing loans (a) |
89.38 |
% |
|
86.17 |
% |
|
66.36 |
% |
|
57.65 |
% |
|
|
|
|
|
|
|
|
Capital Ratios |
|
|
|
|
|
|
|
Average stockholders' equity to average total assets (YTD) |
7.55 |
% |
|
7.81 |
% |
|
7.89 |
% |
|
7.82 |
% |
Period-end stockholders' equity to period-end assets (YTD) |
6.25 |
% |
|
6.93 |
% |
|
8.13 |
% |
|
8.00 |
% |
Total risk-based capital ratio |
13.84 |
% |
|
13.97 |
% |
|
14.79 |
% |
|
15.01 |
% |
Tier 1 risk-based capital ratio |
12.25 |
% |
|
12.53 |
% |
|
13.59 |
% |
|
13.64 |
% |
Common equity Tier 1 capital |
9.82 |
% |
|
9.85 |
% |
|
10.22 |
% |
|
10.26 |
% |
Tier 1 leverage ratio |
10.60 |
% |
|
10.98 |
% |
|
11.01 |
% |
|
10.82 |
% |
(a) Non-performing loans include
loans 90 days past due and accruing and non-accrual loans.
FINANCIAL SUMMARY
(continued)
(unaudited)
$000, except per share data
|
September 30, |
|
June 30, |
|
December 31 |
|
September 30, |
Balance sheet information: |
2022 |
|
2022 |
|
2021 |
|
2021 |
Total assets |
$ |
1,847,598 |
|
|
$ |
1,789,976 |
|
|
$ |
1,831,550 |
|
|
$ |
1,738,652 |
|
Loans held for investment |
|
1,491,997 |
|
|
|
1,427,828 |
|
|
|
1,302,133 |
|
|
|
1,282,820 |
|
Allowance for loan losses |
|
(15,505 |
) |
|
|
(15,353 |
) |
|
|
(16,903 |
) |
|
|
(18,929 |
) |
Loans held for sale |
|
913 |
|
|
|
1,716 |
|
|
|
2,249 |
|
|
|
4,576 |
|
Investment securities |
|
250,516 |
|
|
|
272,383 |
|
|
|
316,278 |
|
|
|
284,543 |
|
Deposits |
|
1,592,798 |
|
|
|
1,530,808 |
|
|
|
1,516,820 |
|
|
|
1,411,059 |
|
Total stockholders’ equity |
$ |
115,405 |
|
|
$ |
124,058 |
|
|
$ |
148,956 |
|
|
$ |
139,094 |
|
|
|
|
|
|
|
|
|
Book value per share |
$ |
16.97 |
|
|
$ |
18.20 |
|
|
$ |
21.66 |
|
|
$ |
20.22 |
|
Market price per share |
$ |
21.86 |
|
|
$ |
25.49 |
|
|
$ |
24.94 |
|
|
$ |
22.27 |
|
Net interest spread (FTE) (YTD) |
|
3.36 |
% |
|
|
3.41 |
% |
|
|
3.45 |
% |
|
|
3.43 |
% |
Net interest margin (FTE) (YTD) |
|
3.57 |
% |
|
|
3.57 |
% |
|
|
3.62 |
% |
|
|
3.60 |
% |
Net interest spread (FTE) (QTR) |
|
3.28 |
% |
|
|
3.47 |
% |
|
|
3.52 |
% |
|
|
3.62 |
% |
Net interest margin (FTE) (QTR) |
|
3.56 |
% |
|
|
3.64 |
% |
|
|
3.67 |
% |
|
|
3.78 |
% |
Efficiency ratio (YTD) |
|
65.83 |
% |
|
|
65.87 |
% |
|
|
64.81 |
% |
|
|
62.69 |
% |
Efficiency ratio (QTR) |
|
65.73 |
% |
|
|
63.38 |
% |
|
|
71.75 |
% |
|
|
61.44 |
% |
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.
The financial results in this press release
reflect preliminary, unaudited results, which are not final until
the Company's Quarterly Report on Form 10-Q is filed. 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. These
forward-looking statements are made as of the date of this
communication, and the Company disclaims any obligation to update
any forward-looking statement or to publicly announce the results
of any revisions to any of the forward-looking statements included
herein, except as required by law.
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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