Hawthorn Bancshares Inc. (NASDAQ: HWBK), today reported
consolidated financial results for the Company for the year ended
December 31, 2019.
Net income for the current year was $16.1
million, or $2.57 per diluted common share, compared to $10.7
million, or $1.71 per diluted common share, for 2018. Included in
the current year net income is a pretax gain on the sale of our
Branson branch of $2.2 million ($1.7 million after tax), or $0.27
per diluted common share. Excluding this gain, non-GAAP net income
for the current year was $14.4 million, or $2.30 per diluted common
share. Income taxes as a percentage of earnings before income
taxes for the current year were 19.2% compared to 13.5% for the
prior year. The change in the effective tax rate for the year ended
December 31, 2019 over the year ended December 31, 2018, was
primarily due to the final impacts of the Tax Cuts and Jobs Act
that decreased the 2018 tax rate, as well as an increase to pre-tax
income that increased the 2019 tax rate.
The year-to-date return on average common equity
for the current year was 14.77% (13.19% excluding the Branson
branch sale gain) compared to 11.45% for the prior year and the
return on average assets was 1.09% (0.97% excluding the Branson
branch sale gain) compared to 0.74% for the prior year.
Commenting on earnings
performance, Chairman David T. Turner said,
“Hawthorn reported a 34.5% increase in non-GAAP earnings per
diluted common share to $2.30 for the current year excluding the
Branson branch sale gain. This followed a 37.9% increase in
non-GAAP earnings per diluted common share for 2018 excluding the
impact of the Tax Act and tax planning initiatives in 2017.
Although loan growth slowed during 2019, we still increased net
loans by $21.8 million from year-end 2018 and year-to-date average
loans increased $57.1 million, or 5.2% over 2018. In
addition, we improved our year-to-date net interest margin by 20
basis points to 3.51% in 2019. In spite of this growth, we have
continued to maintain high loan quality as nonperforming loans to
total loans was 0.43% at December 31, 2019, compared to 0.49% at
December 31, 2018.
Non-interest income of $8.9 million for the
current year (excluding the Branson branch sale gain) was $0.4
million lower than the prior year. This decrease was
primarily due to market value write downs of our mortgage servicing
rights during 2019 of $0.4 million compared to write ups of $0.3
million during 2018. This net reduction of $0.7 million was
partially offset by additional bank card income of $0.3 million.
Non-interest expense of $38.7 million for the current year
was $1.6 million, or 4.0% below the prior year. The decrease from
the prior year was mostly due to lower salaries and benefits of
$1.5 million resulting from our reduction of 55, or 16.5%, in
full-time equivalent staff since December 31, 2017.”
Net Interest
Income
Net interest income for the year ended December
31, 2019 was $48.7 million compared to $44.6 million for the year
ended December 31, 2018, an increase of $4.1 million, or 9.2%.
Contributing to this increase was an increase in average
loans for 2019 of $57.1 million, or 5.2% from 2018 while the net
interest margin improved by 20 basis points to 3.51% in 2019.
Non-Interest Income and
Expense
Non-interest income (excluding the Branson
branch sale gain) for the year ended December 31, 2019 was $8.9
million compared to $9.3 million for the prior year ended December
31, 2018. The $0.4 million decrease from the prior year was
primarily due to a $0.7 million year over year decrease in the fair
market value adjustment of mortgage servicing rights, partially
offset by a $0.3 million increase in bank card income.
Non-interest expense of $38.7 million for the
current year decreased $1.6 million, or 4.0% from the year ended
December 31, 2018. This decrease primarily resulted from lower
salaries and employee benefits expense of $1.5 million, or 16.5%
due to reductions in staff of 55 full-time equivalent positions
since December 31, 2017.
Allowance for Loan
Losses
The Company’s level of non-performing loans was
0.43% of total loans at December 31, 2019 compared to 0.49% at
December 31, 2018. For the year ended December 31, 2019, the
Company recorded net charge-offs of $325,000, or 0.03% of average
loans compared to net charge-offs of $675,000, or 0.06% of average
loans for the year ended December 31, 2018. The allowance for
loan losses at December 31, 2019 was $12.5 million, or 1.07% of
outstanding loans, and 246.09% 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. 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 December 31, 2019.
Financial
Condition
Comparing December 31, 2019 balances with
December 31, 2018 total assets increased $11.3 million primarily
due to a $21.8 million, or 1.9%, increase in net loans and a $37.1
million increase in federal funds sold and other overnight
interest-bearing deposits, partially offset by a $43.0 million, or
19.8% decrease in investment securities. During the same period,
stockholders’ equity increased 15.7% to $115.0 million, or 7.7% of
total assets. The total risk based capital ratio of 14.70% and the
leverage ratio of 10.73% at December 31, 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 |
|
|
December 31, |
|
September 30, |
|
December 31, |
Statement of
income information: |
|
2019 |
|
2019 |
|
|
2018 |
|
Total interest income |
|
$ |
15,946 |
|
$ |
15,925 |
|
|
$ |
15,196 |
|
Total interest expense |
|
|
3,355 |
|
|
3,564 |
|
|
|
3,692 |
|
Net interest income |
|
|
12,591 |
|
|
12,361 |
|
|
|
11,504 |
|
Provision for loan losses |
|
|
300 |
|
|
450 |
|
|
|
475 |
|
Noninterest income |
|
|
2,300 |
|
|
2,424 |
|
|
|
2,384 |
|
Investment securities (loss) gain, net |
|
|
— |
|
|
(40 |
) |
|
|
(1 |
) |
Gain on sale of branch, net |
|
|
— |
|
|
109 |
|
|
|
— |
|
Noninterest expense |
|
|
9,582 |
|
|
9,590 |
|
|
|
10,207 |
|
Pre-tax income |
|
|
5,009 |
|
|
4,814 |
|
|
|
3,205 |
|
Income taxes |
|
|
941 |
|
|
954 |
|
|
|
586 |
|
Net income |
|
$ |
4,068 |
|
$ |
3,860 |
|
|
$ |
2,619 |
|
Earnings per
share: |
|
|
|
|
|
|
|
|
|
Basic: |
|
$ |
0.65 |
|
$ |
0.62 |
|
|
$ |
0.42 |
|
Diluted: |
|
$ |
0.65 |
|
$ |
0.62 |
|
|
$ |
0.42 |
|
|
|
For the Year Ended |
|
|
December 31, |
Statement of
income information: |
|
2019 |
|
|
2018 |
Total interest income |
|
$ |
63,970 |
|
|
$ |
57,779 |
Total interest expense |
|
|
15,232 |
|
|
|
13,186 |
Net interest income |
|
|
48,738 |
|
|
|
44,593 |
Provision for loan losses |
|
|
1,150 |
|
|
|
1,475 |
Noninterest income |
|
|
8,937 |
|
|
|
9,341 |
Investment securities (loss) gain, net |
|
|
(40 |
) |
|
|
255 |
Gain on sale of branch, net |
|
|
2,183 |
|
|
|
— |
Noninterest expense |
|
|
38,731 |
|
|
|
40,332 |
Pre-tax income |
|
|
19,937 |
|
|
|
12,382 |
Income taxes |
|
|
3,823 |
|
|
|
1,668 |
Net income |
|
$ |
16,114 |
|
|
$ |
10,714 |
Earnings per
share: |
|
|
|
|
|
|
Basic: |
|
$ |
2.57 |
|
|
$ |
1.71 |
Diluted: |
|
$ |
2.57 |
|
|
$ |
1.71 |
FINANCIAL SUMMARY
(continued)(unaudited)$000,
except per share data
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
September 30, |
|
December 31, |
|
Key financial
ratios: |
2019 |
|
2019 |
|
2018 |
|
Return on average assets (YTD) |
|
1.09 |
% |
|
1.09 |
% |
|
0.74 |
% |
Return on average common equity (YTD) |
|
14.77 |
% |
|
15.03 |
% |
|
11.45 |
% |
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
September 30, |
|
December 31, |
|
|
2019 |
|
2019 |
|
2018 |
|
Allowance for loan losses to total loans |
|
1.07 |
% |
|
1.06 |
% |
|
1.02 |
% |
Non-performing loans to total loans (a) |
|
0.43 |
% |
|
0.41 |
% |
|
0.49 |
% |
Non-performing assets to loans (a) |
|
1.53 |
% |
|
1.53 |
% |
|
1.68 |
% |
Non-performing assets to assets (a) |
|
1.20 |
% |
|
1.22 |
% |
|
1.30 |
% |
Performing TDRs to loans (a) |
|
0.22 |
% |
|
0.23 |
% |
|
0.27 |
% |
Allowance for loan losses to non-performing loans (a) |
|
246.09 |
% |
|
255.79 |
% |
|
208.97 |
% |
(a) Non-performing loans include loans 90 days past due and
accruing and nonaccrual loans.
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
September 30, |
|
December 31, |
|
Balance sheet
information: |
|
2019 |
|
2019 |
|
2018 |
|
Total assets |
|
$ |
1,492,962 |
|
$ |
1,449,338 |
|
$ |
1,481,682 |
|
Loans, net of allowance for loan losses |
|
|
1,156,748 |
|
|
1,139,340 |
|
|
1,134,975 |
|
Investment securities |
|
|
180,901 |
|
|
187,480 |
|
|
223,880 |
|
Deposits |
|
|
1,186,521 |
|
|
1,137,407 |
|
|
1,198,468 |
|
Total stockholders’ equity |
|
|
115,038 |
|
|
112,814 |
|
|
99,414 |
|
|
|
|
|
|
|
|
|
|
|
|
Book value per share |
|
$ |
18.33 |
|
$ |
17.97 |
|
$ |
15.86 |
|
Market price per share |
|
$ |
25.50 |
|
$ |
23.83 |
|
$ |
20.22 |
|
Net interest spread (YTD) |
|
|
3.20 |
% |
|
3.15 |
% |
|
3.06 |
% |
Net interest margin (YTD) |
|
|
3.51 |
% |
|
3.47 |
% |
|
3.31 |
% |
Net interest margin (QTR) |
|
|
3.63 |
% |
|
3.64 |
% |
|
3.35 |
% |
|
|
|
|
|
|
|
|
|
|
|
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 |
|
|
December 31, |
|
September 30, |
|
December 31, |
Statement of
income information: |
|
2019 |
|
2019 |
|
|
2018 |
Net income – GAAP |
|
$ |
4,036 |
|
$ |
3,860 |
|
|
$ |
2,619 |
Effect of net gain on branch sale |
|
|
— |
|
|
(86 |
) |
|
|
— |
Net income - Non-GAAP |
|
$ |
4,036 |
|
$ |
3,774 |
|
|
$ |
2,619 |
Earnings per
share: |
|
|
|
|
|
|
|
|
|
Basic – GAAP |
|
$ |
0.65 |
|
$ |
0.62 |
|
|
$ |
0.42 |
Effect of net gain on branch sale |
|
|
— |
|
|
(0.01 |
) |
|
|
— |
Basic - Non-GAAP |
|
$ |
0.65 |
|
$ |
0.61 |
|
|
$ |
0.42 |
Diluted – GAAP |
|
$ |
0.65 |
|
$ |
0.62 |
|
|
$ |
0.42 |
Effect of net gain on branch sale |
|
|
— |
|
|
(0.01 |
) |
|
|
— |
Diluted - Non-GAAP |
|
$ |
0.65 |
|
$ |
0.61 |
|
|
$ |
0.42 |
|
|
|
|
|
|
|
|
|
For the Year Ended |
|
|
December 31, |
Statement of
income information: |
|
2019 |
|
|
2018 |
Net income - GAAP |
|
$ |
16,114 |
|
|
$ |
10,714 |
Effect of net gain on branch sale (a) |
|
|
(1,725 |
) |
|
|
— |
Net income - Non-GAAP |
|
$ |
14,389 |
|
|
$ |
10,714 |
Earnings per
share: |
|
|
|
|
|
|
Basic – GAAP |
|
$ |
2.57 |
|
|
$ |
1.71 |
Effect of net gain on branch sale (a) |
|
|
(0.27 |
) |
|
|
— |
Basic - Non-GAAP |
|
$ |
2.30 |
|
|
$ |
1.71 |
Diluted – GAAP |
|
$ |
2.57 |
|
|
$ |
1.71 |
Effect of net gain on branch sale (a) |
|
|
(0.27 |
) |
|
|
— |
Diluted - Non-GAAP |
|
$ |
2.30 |
|
|
$ |
1.71 |
|
(a) The pre-tax gain on the sale of the Branson Branch was $2.2
million and $1.7 million after tax for the year ended December 31,
2019.
NON-GAAP FINANCIAL MEASURES
(continued)(unaudited)$000,
except per share data
|
|
|
|
|
|
|
|
|
|
December 31, |
|
September 30, |
|
December 31, |
|
Key financial ratios: |
|
2019 |
|
|
2019 |
|
|
2018 |
|
Return on average assets (YTD)
– GAAP |
|
1.09 |
|
% |
1.09 |
|
% |
0.74 |
% |
Effect of net gain on branch
sale (a) |
|
(0.12 |
) |
% |
(0.16 |
) |
% |
— |
% |
Return on average assets (YTD)
- Non-GAAP |
|
0.97 |
|
% |
0.93 |
|
% |
0.74 |
% |
Return on average common
equity (YTD) – GAAP |
|
14.77 |
|
% |
15.03 |
|
% |
11.45 |
% |
Effect of net gain on branch
sale (a) |
|
(1.58 |
) |
% |
(2.15 |
) |
% |
— |
% |
Return on average common
equity (YTD) - Non-GAAP |
|
13.19 |
|
% |
12.88 |
|
% |
11.45 |
% |
(a) The pre-tax gain on the sale of the Branson Branch was $2.2
million and $1.7 million after tax for the year ended December 31,
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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