Hawthorn Bancshares Inc. (NASDAQ: HWBK), today reported
consolidated financial results for the Company for the quarter
ended March 31, 2019.
Net income for the current quarter was $4.7
million, or $0.77 per diluted common share, compared to $2.6
million, or $0.44 per diluted common share, for the linked quarter
ended December 31, 2018, and net income of $2.1 million, or $0.35
per diluted common share, for the quarter ended March 31,
2018. Included in the current quarter net income is a pretax
gain on the sale of our Branson branch of $2.1 million ($1.6
million after tax), or $0.27 per diluted common share.
Excluding this gain, net income for the current quarter was $3.0
million, or $0.50 per diluted common share.
The year-to-date annualized return on average
common equity for the current quarter was 18.41% (11.95% excluding
the Branson branch sale gain) compared to 9.32% for the prior year
quarter and the year-to-date annualized return on average assets
was 1.23% (0.80% excluding the Branson branch sale gain) compared
to 0.60% for the prior year quarter.
Commenting on earnings
performance, Chairman David T. Turner said,
“Hawthorn continued to report a favorable trend in earnings for the
first quarter 2019 with increases of $0.06 and $0.15 in non-GAAP
earnings per diluted common share compared to the prior linked
quarter and prior year quarter, respectively. Although loan growth
has slowed recently, net loans were $69.4 million, or 6.5%, higher
than the prior year quarter-end which has contributed to these
increased earnings. Even with this loan growth, we have continued
to maintain high loan quality as nonperforming loans to total loans
was 0.48% at March 31, 2019, compared to 0.49% at December 31,
2018, and 0.51% at March 31, 2018.
Although our net interest margin remains
compressed, it has recently stabilized at 3.26% for the current
quarter compared to 3.30% for both the prior linked quarter and the
prior year quarter. Non-interest income of $2.1 million (excluding
the Branson branch sale gain) for the current quarter was only
slightly lower than prior periods having decreased $0.3 million
from the prior linked quarter and $0.1 million from the prior year
quarter. Non-interest expense of $9.9 million for the current
quarter was $0.4 million below both the prior linked quarter and
prior year quarter. The decrease from the prior periods was mostly
due to lower salaries and benefits expenses resulting from our
reduction of 53, or 15.6%, in full-time equivalent staff since the
quarter ended March 31, 2018.”
Net Interest
Income
Net interest income for the quarter ended March
31, 2019 was $11.6 million compared to $11.5 million for the
quarter ended December 31, 2018, and $10.8 million for the quarter
ended March 31, 2018. Loan growth slowed during the current quarter
but average loans were still $73.7 million, or 6.9%, higher than
the prior year quarter which contributed to the improved net
interest income. The net interest margin for the current quarter of
3.26% remained relatively constant compared to the 3.30% for the
prior linked quarter and the prior year quarter. This is an
improvement over previous quarters where the rising rate
environment was continually reducing our net interest margins.
Non-Interest Income and
Expense
Non-interest income for the quarter ended March
31, 2019 was $2.1 million compared to $2.4 million for the prior
quarter ended December 31, 2018, and $2.2 million for the quarter
ended March 31, 2018. The net change from the prior linked
quarter of $0.3 million was primarily due to decreases in real
estate loan income of $0.2 million and service charge income of
$0.1 million.
Non-interest expense was $9.9 million for the
current quarter, a decrease of $0.4 million from the quarters ended
December 31, 2018 and March 31, 2018, respectively. The decrease
from the prior linked quarter was mostly due to lower salaries and
employee benefits expense of $0.3 million and lower advertising and
promotion expenses of $0.1 million. The decrease from the
prior year quarter included lower salaries and employee benefits
expense of $0.6 million partially offset by higher furniture and
equipment expenses of $0.2 million.
Allowance for Loan
Losses
The Company’s level of non-performing loans was
0.48% of total loans at March 31, 2019 compared to 0.49% at
December 31, 2018 and 0.51% at March 31, 2018. For the
quarter ended March 31, 2019, the Company recorded net recoveries
of $43,000, compared to net charge-offs of $181,000, or 0.02% of
average loans for the quarter ended December 31, 2018, and
$205,000, or 0.02% of average loans for the quarter ended March 31,
2018. The allowance for loan losses at March 31, 2019 was
$11.8 million, or 1.03% of outstanding loans, and 212.43% of
non-performing loans. At December 31, 2018, the allowance for loan
losses was $11.7 million, or 1.02% of outstanding loans, and
208.97% of non-performing loans. At March 31, 2018, the
allowance for loan losses was $10.9 million, or 1.01% of
outstanding loans, and 198.32% of nonperforming 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, 2019.
Financial
Condition
Comparing March 31, 2019 balances with December
31, 2018, total deposits increased $52.1 million, or 4.4%, to $1.3
billion at March 31, 2019 while federal funds sold and other
overnight deposits increased $56.6 million, or 307.9%, and loans
increased $8.0 million, or 0.7%. During the same period,
stockholders’ equity increased 5.5% to $104.9 million, or 6.8% of
total assets. The total risk based capital ratio of 13.39% and the
leverage ratio of 9.38% at March 31, 2019, respectively, far exceed
minimum regulatory requirements of 8.00% and 4.00%,
respectively.
[Tables follow]
FINANCIAL
SUMMARY(unaudited)$000
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
March 31, |
|
December 31, |
|
March 31, |
Statement of income
information: |
|
2019 |
|
2018 |
|
2018 |
Total
interest income |
|
$ |
15,915 |
|
$ |
15,196 |
|
|
$ |
13,544 |
Total
interest expense |
|
|
4,286 |
|
|
3,692 |
|
|
|
2,790 |
Net
interest income |
|
|
11,629 |
|
|
11,504 |
|
|
|
10,754 |
Provision
for loan losses |
|
|
150 |
|
|
475 |
|
|
|
300 |
Noninterest income |
|
|
2,091 |
|
|
2,436 |
|
|
|
2,203 |
Investment securities (loss) gain, net |
|
|
1 |
|
|
(1 |
) |
|
|
98 |
Gain on
sale of branch, net |
|
|
2,074 |
|
|
— |
|
|
|
— |
Noninterest expense |
|
|
9,888 |
|
|
10,259 |
|
|
|
10,254 |
Pre-tax
income |
|
|
5,757 |
|
|
3,205 |
|
|
|
2,501 |
Income
taxes |
|
|
1,091 |
|
|
586 |
|
|
|
411 |
Net
income |
|
$ |
4,666 |
|
$ |
2,619 |
|
|
$ |
2,090 |
Earnings per share: |
|
|
|
|
|
|
|
|
|
Basic: |
|
$ |
0.77 |
|
$ |
0.44 |
|
|
$ |
0.35 |
Diluted: |
|
$ |
0.77 |
|
$ |
0.44 |
|
|
$ |
0.35 |
|
|
|
|
|
|
|
|
|
|
March 31, |
|
December 31, |
|
March 31, |
|
Key
financial ratios: |
|
2019 |
|
2018 |
|
2018 |
|
Return on
average assets (YTD) |
|
1.23 |
% |
0.74 |
% |
0.60 |
% |
Return on
average common equity (YTD) |
|
18.41 |
% |
11.45 |
% |
9.32 |
% |
|
|
|
|
|
|
|
|
|
|
March 31, |
|
December 31, |
|
March 31, |
|
|
|
2018 |
|
2018 |
|
2018 |
|
Allowance
for loan losses to total loans |
|
1.03 |
% |
1.02 |
% |
1.01 |
% |
Non-performing loans to total loans (a) |
|
0.48 |
% |
0.49 |
% |
0.51 |
% |
Non-performing assets to loans (a) |
|
1.66 |
% |
1.68 |
% |
1.50 |
% |
Non-performing assets to assets (a) |
|
1.24 |
% |
1.30 |
% |
1.12 |
% |
Performing TDRs to loans (a) |
|
0.27 |
% |
0.27 |
% |
0.43 |
% |
Allowance
for loan losses to non-performing loans (a) |
|
212.43 |
% |
208.97 |
% |
198.32 |
% |
(a) Non-performing loans include loans 90 days past due and
accruing and nonaccrual loans.
FINANCIAL SUMMARY
(continued)(unaudited)$000
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
December 31, |
|
March 31, |
|
Balance
sheet information: |
|
2019 |
|
2018 |
|
2018 |
|
Total
assets |
|
$ |
1,538,311 |
|
$ |
1,481,682 |
|
$ |
1,452,908 |
|
Loans,
net of allowance for loan losses |
|
|
1,142,807 |
|
|
1,134,975 |
|
|
1,073,379 |
|
Investment securities |
|
|
224,274 |
|
|
223,880 |
|
|
225,445 |
|
Deposits |
|
|
1,250,572 |
|
|
1,198,468 |
|
|
1,180,380 |
|
Total
stockholders’ equity |
|
|
104,870 |
|
|
99,414 |
|
|
91,271 |
|
|
|
|
|
|
|
|
|
|
|
|
Book
value per share |
|
$ |
17.38 |
|
$ |
16.49 |
|
$ |
15.14 |
|
Market
price per share |
|
$ |
23.24 |
|
$ |
21.03 |
|
$ |
19.84 |
|
Net
interest spread (YTD) |
|
|
2.95 |
% |
|
3.05 |
% |
|
3.09 |
% |
Net
interest margin (YTD) |
|
|
3.26 |
% |
|
3.30 |
% |
|
3.30 |
% |
Use of Non-GAAP
Measures
Several financial measures in this press release
are non-GAAP, meaning they are not presented in accordance with
generally accepted accounting principles (GAAP) in the U.S. The
non-GAAP items presented in this press release are non-GAAP net
income, non-GAAP basic earnings per share, non-GAAP diluted
earnings per share, non-GAAP return on average assets and non-GAAP
return on average common equity. These measures include the
adjustment to exclude the impact of the gain on the sale of our
Branson branch that closed during the current quarter, which is
non-recurring and not considered indicative of underlying earnings
performance. The Company believes that the exclusion of this item
provides a useful basis for evaluating the Company's underlying
performance, but should not be considered in isolation and is not
in accordance with, or a substitute for, evaluating performance
utilizing GAAP financial information. The Company uses non-GAAP
measures to analyze its financial performance and to make financial
comparisons to prior periods presented on a similar basis. The
Company believes that providing such adjusted results allows
investors to better understand the Company's comparative operating
performance for the periods presented. Non-GAAP measures are not
formally defined by GAAP or codified in the federal banking
regulations, and other entities may use calculation methods that
differ from those used by the Company. The Company has reconciled
each of these measures to a comparable GAAP measure below:
NON-GAAP FINANCIAL
MEASURES(unaudited)$000
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
March 31, |
|
December 31, |
|
March 31, |
Statement of income
information: |
|
2019 |
|
|
2018 |
|
2018 |
Net
income – GAAP |
|
$ |
4,666 |
|
|
$ |
2,619 |
|
$ |
2,090 |
Effect of
net gain on branch sale (a) |
|
|
(1,638 |
) |
|
|
— |
|
|
— |
Net
income - Non-GAAP |
|
$ |
3,028 |
|
|
$ |
2,619 |
|
$ |
2,090 |
Earnings per share: |
|
|
|
|
|
|
|
|
|
Basic –
GAAP |
|
$ |
0.77 |
|
|
$ |
0.44 |
|
$ |
0.35 |
Effect of
net gain on branch sale (a) |
|
|
(0.27 |
) |
|
|
— |
|
|
— |
Basic -
Non-GAAP |
|
$ |
0.50 |
|
|
$ |
0.44 |
|
$ |
0.35 |
Diluted –
GAAP |
|
$ |
0.77 |
|
|
$ |
0.44 |
|
$ |
0.35 |
Effect of
net gain on branch sale (a) |
|
|
(0.27 |
) |
|
|
— |
|
|
— |
Diluted -
Non-GAAP |
|
$ |
0.50 |
|
|
$ |
0.44 |
|
$ |
0.35 |
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
December 31, |
|
|
March 31, |
|
Key
financial ratios: |
|
2019 |
|
2018 |
|
|
2018 |
|
Return on
average assets (YTD) – GAAP |
|
1.23 |
% |
|
0.74 |
% |
|
0.60 |
% |
Effect of
net gain on branch sale (a) |
|
(0.43 |
)% |
|
— |
|
|
— |
|
Return on
average assets (YTD) - Non-GAAP |
|
0.80 |
% |
|
0.74 |
% |
|
0.60 |
% |
Return on
average common equity (YTD) – GAAP |
|
18.41 |
% |
|
11.45 |
% |
|
9.32 |
% |
Effect of
net gain on branch sale (a) |
|
(6.46 |
)% |
|
— |
% |
|
— |
% |
Return on
average common equity (YTD) - Non-GAAP |
|
11.95 |
% |
|
11.45 |
% |
|
9.32 |
% |
(a) The pre-tax gain on the sale of the Branson Branch was $2.1
million and $1.6 million after tax.
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,
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: Bruce Phelps
Chief Financial Officer
TEL: 573.761.6100 FAX: 573.761.6272
www.HawthornBancshares.com
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