Hawthorn Bancshares Inc. (NASDAQ: HWBK), today reported
consolidated financial results for the Company for the quarter
ended September 30, 2019.
Net income for the current quarter was $3.9
million, or $0.62 per diluted common share, compared to $3.5
million, or $0.56 per diluted common share, for the linked quarter
ended June 30, 2019, and net income of $3.1 million, or $0.49 per
diluted common share, for the quarter ended September 30, 2018.
Included in the current quarter net income is an additional pretax
gain on the sale of our Branson branch of $0.1 million ($0.1
million after tax), or $0.01 per diluted common share. Excluding
this gain, non-GAAP net income for the current quarter was $3.8
million, or $0.61 per diluted common share.
The year-to-date annualized return on average
common equity for the current year was 15.03% (12.88% excluding the
Branson branch sale gain) compared to 11.69% for the prior year and
the annualized return on average assets was 1.09% (0.93% excluding
the Branson branch sale gain) compared to 0.75% for the prior
year.
Commenting on earnings
performance, Chairman David T. Turner said,
“Hawthorn continued to report increased earnings for the third
quarter 2019 with increases of $0.05 and $0.12 in non-GAAP earnings
per diluted common share compared to the prior linked quarter and
prior year quarter, respectively. Year-to-date non-GAAP earnings
have improved by $0.36 per diluted share, or 28%, primarily due to
the $56.4 million, or 5.2%, increase in net loans from the prior
year quarter-end coupled with the higher year-to-date net interest
margin of 3.47% for the current year compared to 3.29% for the
prior year. In addition, we have continued to maintain high loan
quality as nonperforming loans to total loans was 0.41% at
September 30, 2019, compared to 0.49% at December 31, 2018, and
0.56% at September 30, 2018.
Non-interest income of $2.4 million for the
current quarter (excluding the Branson branch sale gain) was $0.3
million higher than the prior linked quarter and $0.1 million
higher than the prior year quarter. The improvement over the
prior linked quarter was primarily due to a lower fair market value
adjustment of mortgage servicing rights of $0.1 million and
increases in service charge income and trust income of $0.1 million
each. Non-interest expense of $9.6 million for the current quarter
was $0.1 million below the prior linked quarter and $0.3 million
below the prior year quarter. The decrease from the prior year
quarter was mostly due to lower salaries and benefits of $0.2
million resulting from our reduction of 22, or 7.4%, in full-time
equivalent staff since the quarter ended September 30, 2018 and
reduced FDIC assessment expense of $0.2 million due to assessment
credits received during the current quarter.”
Net Interest
Income
Net interest income for the quarter ended
September 30, 2019 was $12.4 million compared to $12.2 million for
the quarter ended June 30, 2019, and $11.3 million for the quarter
ended September 30, 2018. Loan volume slowed during the current
quarter but average loans were still $51.6 million, or 4.7%, higher
than the prior year quarter that contributed to the improved net
interest income. The year-to-date net interest margin of 3.47%
increased 8 basis points from the prior linked quarter and 18 basis
points from the prior year quarter.
Non-Interest Income and
Expense
Non-interest income for the quarter ended
September 30, 2019 was $2.4 million compared to $2.1 million for
the prior quarter ended June 30, 2019, and $2.4 million for the
quarter ended September 30, 2018. The net increase from the
prior linked quarter of $0.3 million was primarily due to a $0.1
million decrease in in the fair market value adjustment of mortgage
servicing rights and increases in service charge income and trust
income of $0.1 million each.
Non-interest expense of $9.6 million for the
current quarter decreased $0.1 million from the quarter ended June
30, 2019 and decreased $0.3 million for the quarter ended September
30, 2018. The decrease from the prior year quarter resulted from
lower salaries and employee benefits expense of $0.2 million due to
reductions in staff and reduced FDIC assessment expense of $0.2
million due to assessment credits received during the current
quarter.
Allowance for Loan
Losses
The Company’s level of non-performing loans was
0.41% of total loans at September 30, 2019 compared to 0.50% at
June 30, 2019 and 0.56% at September 30, 2018. For the
quarter ended September 30, 2019, the Company recorded net
charge-offs of $155,000, or 0.01% of average loans compared to net
charge-offs of $212,000, or 0.02% of average loans for the quarter
ended June 30, 2019, and net charge-offs of $104,000, or 0.01% of
average loans for the quarter ended September 30, 2018. The
allowance for loan losses at September 30, 2019 was $12.2 million,
or 1.06% of outstanding loans, and 255.79% of non-performing loans.
At June 30, 2019, the allowance for loan losses was $11.9 million,
or 1.03% of outstanding loans, and 203.48% of non-performing loans.
At September 30, 2018, the allowance for loan losses was $11.4
million, or 1.02% of outstanding loans, and 180.86% 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 September 30, 2019.
Financial
Condition
Comparing September 30, 2019 balances with June
30, 2019, total assets decreased $21.6 million primarily due to a
$48.7 million, or 4.1%, decrease in total deposits to $1.1 billion
at September 30, 2019 partially offset by a $21.9 million increase
in FHLB advances. The decrease in deposits led to a
corresponding decrease in investment securities of $31.0 million
partially offset by an increase of $14.9 million in federal funds
sold and other overnight interest-bearing deposits. During the same
period, stockholders’ equity increased 3.1% to $112.8 million, or
7.8% of total assets. The total risk based capital ratio of 14.47%
and the leverage ratio of 10.69% at September 30, 2019,
respectively, far exceed minimum regulatory requirements of 8.00%
and 4.00%, respectively.
[Tables follow]
|
|
FINANCIAL
SUMMARY |
(unaudited) |
$000, except per
share data |
|
|
|
Three Months Ended |
|
|
September 30, |
|
June 30, |
|
September 30, |
Statement of
income information: |
|
2019 |
|
2019 |
|
2018 |
Total interest income |
|
$ |
15,925 |
|
|
$ |
16,184 |
|
$ |
14,751 |
Total interest expense |
|
|
3,564 |
|
|
|
4,027 |
|
|
3,443 |
Net interest income |
|
|
12,361 |
|
|
|
12,157 |
|
|
11,308 |
Provision for loan losses |
|
|
450 |
|
|
|
250 |
|
|
250 |
Noninterest income |
|
|
2,424 |
|
|
|
2,121 |
|
|
2,364 |
Investment securities (loss) gain, net |
|
|
(40 |
) |
|
|
— |
|
|
50 |
Gain on sale of branch, net |
|
|
109 |
|
|
|
— |
|
|
— |
Noninterest expense |
|
|
9,590 |
|
|
|
9,671 |
|
|
9,928 |
Pre-tax income |
|
|
4,814 |
|
|
|
4,357 |
|
|
3,544 |
Income taxes |
|
|
954 |
|
|
|
837 |
|
|
446 |
Net income |
|
$ |
3,860 |
|
|
$ |
3,520 |
|
$ |
3,098 |
Earnings per
share: |
|
|
|
|
|
|
|
|
|
Basic: |
|
$ |
0.62 |
|
|
$ |
0.56 |
|
$ |
0.49 |
Diluted: |
|
$ |
0.62 |
|
|
$ |
0.56 |
|
$ |
0.49 |
|
|
For the Nine Months
Ended |
|
|
September 30, |
Statement of
income information: |
|
2019 |
|
2018 |
Total interest income |
|
$ |
48,023 |
|
|
$ |
42,583 |
Total interest expense |
|
|
11,876 |
|
|
|
9,493 |
Net interest income |
|
|
36,147 |
|
|
|
33,090 |
Provision for loan losses |
|
|
850 |
|
|
|
1,000 |
Noninterest income |
|
|
6,637 |
|
|
|
6,970 |
Investment securities (loss) gain, net |
|
|
(40 |
) |
|
|
256 |
Gain on sale of branch, net |
|
|
2,183 |
|
|
|
— |
Noninterest expense |
|
|
29,149 |
|
|
|
30,138 |
Pre-tax income |
|
|
14,928 |
|
|
|
9,178 |
Income taxes |
|
|
2,882 |
|
|
|
1,083 |
Net income |
|
$ |
12,046 |
|
|
$ |
8,095 |
Earnings per
share: |
|
|
|
|
|
|
Basic: |
|
$ |
1.92 |
|
|
$ |
1.29 |
Diluted: |
|
$ |
1.92 |
|
|
$ |
1.29 |
|
|
|
|
|
|
|
|
FINANCIAL
SUMMARY (continued) |
(unaudited) |
$000, except per
share data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
June 30, |
|
|
September 30, |
|
|
December 31, |
|
Key financial
ratios: |
2019 |
|
|
2019 |
|
|
2018 |
|
|
2018 |
|
Return on average assets (YTD) |
|
1.09 |
% |
|
|
1.09 |
% |
|
|
0.75 |
% |
|
|
0.74 |
% |
Return on average common equity (YTD) |
|
15.03 |
% |
|
|
15.74 |
% |
|
|
11.69 |
% |
|
|
11.45 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
June 30, |
|
|
September 30, |
|
|
December 31, |
|
|
2019 |
|
|
2019 |
|
|
2018 |
|
|
2018 |
|
Allowance for loan losses to total loans |
|
1.06 |
% |
|
|
1.03 |
% |
|
|
1.02 |
% |
|
|
1.02 |
% |
Non-performing loans to total loans (a) |
|
0.41 |
% |
|
|
0.50 |
% |
|
|
0.56 |
% |
|
|
0.49 |
% |
Non-performing assets to loans (a) |
|
1.53 |
% |
|
|
1.64 |
% |
|
|
1.76 |
% |
|
|
1.68 |
% |
Non-performing assets to assets (a) |
|
1.22 |
% |
|
|
1.29 |
% |
|
|
1.35 |
% |
|
|
1.30 |
% |
Performing TDRs to loans (a) |
|
0.23 |
% |
|
|
0.25 |
% |
|
|
0.29 |
% |
|
|
0.27 |
% |
Allowance for loan losses to non-performing loans (a) |
|
255.79 |
% |
|
|
203.48 |
% |
|
|
180.86 |
% |
|
|
208.97 |
% |
|
(a)
Non-performing loans include loans 90 days past due and accruing
and nonaccrual loans. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
June 30, |
|
|
September 30, |
|
|
December 31, |
|
Balance sheet
information: |
2019 |
|
|
2019 |
|
|
2018 |
|
|
2018 |
|
Total assets |
$ |
1,449,338 |
|
|
$ |
1,470,914 |
|
|
$ |
1,448,650 |
|
|
$ |
1,481,682 |
|
Loans, net of allowance for loan losses |
|
1,139,340 |
|
|
|
1,145,060 |
|
|
|
1,082,983 |
|
|
|
1,134,975 |
|
Investment securities |
|
187,480 |
|
|
|
218,514 |
|
|
|
236,924 |
|
|
|
223,880 |
|
Deposits |
|
1,137,407 |
|
|
|
1,186,109 |
|
|
|
1,183,386 |
|
|
|
1,198,468 |
|
Total stockholders’ equity |
|
112,814 |
|
|
|
109,380 |
|
|
|
93,133 |
|
|
|
99,414 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Book value per share |
$ |
17.97 |
|
|
$ |
17.43 |
|
|
$ |
15.14 |
|
|
$ |
15.86 |
|
Market price per share |
$ |
23.83 |
|
|
$ |
26.80 |
|
|
$ |
21.88 |
|
|
$ |
20.22 |
|
Net interest spread (YTD) |
|
3.15 |
% |
|
|
3.07 |
% |
|
|
3.06 |
% |
|
|
3.05 |
% |
Net interest margin (YTD) |
|
3.47 |
% |
|
|
3.39 |
% |
|
|
3.29 |
% |
|
|
3.30 |
% |
Net interest margin (QTR) |
|
3.64 |
% |
|
|
3.50 |
% |
|
|
3.31 |
% |
|
|
3.34 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 quarter ended March 31, 2019,
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, except per
share data |
|
|
|
Three Months Ended |
|
|
September 30, |
|
June 30, |
|
September 30, |
Statement of
income information: |
|
2019 |
|
2019 |
|
2018 |
Net income – GAAP |
|
$ |
3,860 |
|
|
$ |
3,520 |
|
$ |
3,098 |
Effect of net gain on branch sale (a) |
|
|
(86 |
) |
|
|
— |
|
|
— |
Net income - Non-GAAP |
|
$ |
3,774 |
|
|
$ |
3,520 |
|
$ |
3,098 |
Earnings per
share: |
|
|
|
|
|
|
|
|
|
Basic – GAAP |
|
$ |
0.62 |
|
|
$ |
0.56 |
|
$ |
0.49 |
Effect of net gain on branch sale (a) |
|
|
(0.01 |
) |
|
|
— |
|
|
— |
Basic - Non-GAAP |
|
$ |
0.61 |
|
|
$ |
0.56 |
|
$ |
0.49 |
Diluted – GAAP |
|
$ |
0.62 |
|
|
$ |
0.56 |
|
$ |
0.49 |
Effect of net gain on branch sale (a) |
|
|
(0.01 |
) |
|
|
— |
|
|
— |
Diluted - Non-GAAP |
|
$ |
0.61 |
|
|
$ |
0.56 |
|
$ |
0.49 |
|
For the Nine Months
Ended |
|
September 30, |
Statement of
income information: |
2019 |
|
2018 |
Net income - GAAP |
$ |
12,046 |
|
|
$ |
8,095 |
Effect of net gain on branch sale (a) |
|
(1,725 |
) |
|
|
— |
Net income - Non-GAAP |
$ |
10,321 |
|
|
$ |
8,095 |
Earnings per
share: |
|
|
|
|
|
Basic – GAAP |
$ |
1.92 |
|
|
$ |
1.29 |
Effect of net gain on branch sale (a) |
|
(0.27 |
) |
|
|
— |
Basic - Non-GAAP |
$ |
1.65 |
|
|
$ |
1.29 |
Diluted – GAAP |
$ |
1.92 |
|
|
$ |
1.29 |
Effect of net gain on branch sale (a) |
|
(0.27 |
) |
|
|
— |
Diluted - Non-GAAP |
$ |
1.65 |
|
|
$ |
1.29 |
|
(a) The pre-tax
gain on the sale of the Branson Branch was $0.1 million and $0.1
million after tax for the three months ended September 30, 2019 and
$2.2 million and $1.7 million after tax for the nine months ended
September 30, 2019. |
|
NON-GAAP
FINANCIAL MEASURES (continued) |
(unaudited) |
$000, except per
share data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
June 30, |
|
September 30, |
|
|
December 31, |
|
Key financial
ratios: |
|
2019 |
|
2019 |
|
2018 |
|
|
2018 |
|
Return on average assets (YTD) – GAAP |
|
1.09 |
% |
|
1.09 |
% |
|
0.75 |
% |
|
0.74 |
% |
Effect of net gain on branch
sale (a) |
|
(0.16 |
)% |
|
(0.22 |
)% |
|
— |
% |
|
— |
% |
Return on average assets (YTD)
- Non-GAAP |
|
0.93 |
% |
|
0.87 |
% |
|
0.75 |
% |
|
0.74 |
% |
Return on average common
equity (YTD) – GAAP |
|
15.03 |
% |
|
15.74 |
% |
|
11.69 |
% |
|
11.45 |
% |
Effect of net gain on branch
sale (a) |
|
(2.15 |
)% |
|
(3.15 |
)% |
|
— |
% |
|
— |
% |
Return on average common
equity (YTD) - Non-GAAP |
|
12.88 |
% |
|
12.59 |
% |
|
11.69 |
% |
|
11.45 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) The pre-tax
gain on the sale of the Branson Branch was $0.1 million and $0.1
million after tax for the three months ended September 30, 2019 and
$2.2 million and $1.7 million after tax for the nine months ended
September 30, 2019. |
|
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:
Hawthorn Bancshares Inc.
Bruce Phelps,
Chief Financial Officer
TEL: 573.761.6100
Fax: 573.761.6272
www.HawthornBancshares.com
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