Hawthorn Bancshares Inc.
(NASDAQ: HWBK), (the
“Company” or “HWBK”) reported net income of $4.9 million for the
second quarter 2021, a decrease of $0.9 million compared to the
linked first quarter 2021 (“linked quarter”) and an increase of
$1.6 million from the second quarter 2020 (the “prior year
quarter”). Earnings per diluted share (“EPS”) was $0.74 for the
second quarter 2021 compared to $0.88 and $0.49 for the linked
quarter and prior year quarter, respectively. Net income and EPS
for the second quarter 2021 decreased from the linked quarter due
in part to lower net interest income driven by lower PPP loan fee
income, in addition to higher provision expense, described in more
detail below.
Chairman David T. Turner
commented, “In the second quarter we started to see some
indications of a return to normalcy since the beginning of the
pandemic with our customers across the bank. For this we are very
encouraged. Hawthorn Bank continues to be well positioned during
this recovery. Our overall asset quality remains very strong. We
continue to closely monitor our portfolio of non-performing loans
which we saw spike last year as a result of the pandemic. We saw
stronger organic loan growth during the quarter. Excluding the
impact of PPP loans on our portfolio, we achieved $24.4 million or
2.0% loan growth in the second quarter as compared to the linked
quarter. Speaking of the PPP loan programs, we successfully closed
over $47 million in new loans in Round 2 and this is in addition to
over $88 million we accomplished during Round 1. Approximately 93%
of the PPP Round 1 loans were forgiven and the related fees
recognized by the end of the second quarter. At the end of the
second quarter, we had $3.8 million in PPP loan fees, primarily
from Round 2 which will be recognized in future periods as the
loans are forgiven.”
Turner continued, “As we transition from
unprecedented and challenging times to a more familiar and normal
state, we continue to deliver strong financial results. In the
second quarter we earned $4.9 million in net income, which
translates into $0.74 per share, and an ROA and ROE of 1.14% and
14.64%, respectively.“
Highlights
-
Earnings – Net income in the second quarter 2021
was $4.9 million and EPS was $0.74. Pre-tax pre-provision income
(“PTPP”) of $6.5 million for the second quarter decreased $0.7
million, or 10%, from the linked quarter, and increased $1.6
million, or 32%, from the prior year quarter.
- Net
interest income and net interest margin – Net interest
income of $13.7 million for the second quarter 2021, decreased $0.7
million from the linked quarter and increased $0.3 million from the
prior year quarter. Driving the decrease from the linked quarter
was a reduction in PPP fee income of $1.0 million. Net interest
margin, on a FTE basis, was 3.40% for the second quarter 2021, a
decrease from 3.61% for the linked quarter, and a decrease from
3.46% for the prior year quarter.
-
Loans – Loans held for investment totaled $1.3
billion as of June 30, 2021, an increase of $17.7 million, or 1.4%,
as compared to the end of the linked quarter. Year-over-year, loans
grew $13.3 million, or 1.0%, from $1.3 billion as of June 30,
2020.
- Asset
quality – Non-performing loans totaled $33.8 million at
June 30, 2021, a decrease of $0.4 million from $34.2 million at the
end of the linked quarter. The allowance for loan losses to total
loans was 1.45% at June 30, 2021, compared to 1.44% at March 31,
2021 and 1.30% at June 30, 2020.
-
Deposits – Total deposits decreased by $13.0
million, or 0.9%, equal to $1.4 billion as of June 30, 2021 as
compared to the end of the linked quarter. Year-over-year deposits
grew $53.4 million, or 4.0%, from $1.3 billion as of June 30,
2020.
-
Capital – Total shareholder’s equity was $136.5
million and the tangible common equity to tangible assets ratio was
7.99% at June 30, 2021 as compared to 7.55% and 7.13% from the end
of the linked quarter and prior year quarter, respectively.
Regulatory capital ratios remain “well-capitalized”, with tier 1
leverage ratio of 10.49% and a total risk-based capital ratio of
14.66%.
The Company's 2019 Repurchase Plan was amended
during the second quarter 2021 to authorize the purchase of up to
$5.0 million 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 second quarter 2021 there were no share
repurchases pursuant to that authorization. As of June 30, 2021,
$5.0 million remained for share repurchase pursuant to that
authorization.
During the second quarter 2021, the Company’s
Board of Directors approved a quarterly cash dividend of $0.15 per
common share in addition to a special stock dividend of 4.0%, each
payable July 1, 2021 to shareholders of record at the close of
business on June 15, 2021.
Net Interest Income and Net Interest
Margin
Net interest income of $13.7 million for the
second quarter 2021 decreased $0.7 million from the linked quarter
and increased $0.3 million from the prior year quarter 2020. Net
interest margin, on a FTE basis, was 3.40% for the second quarter
2021, compared to 3.61% for the linked quarter, and 3.46% for the
prior year quarter of 2020.
Loans
Loans held for investment increased by $17.7
million, or 1.4%, to $1.3 billion as of June 30, 2021 as compared
to the end of the linked quarter. Year-over-year loans grew $13.3
million, or 1.0%.
The yield earned on average loans held for
investment was 4.42%, on a FTE basis, for the second quarter 2021,
compared to 4.81% for the linked quarter and 4.68% for the prior
year quarter.
As provided for by the CARES Act, the Company
has offered payment modifications to borrowers. At June 30, 2021,
$42.8 million, or 3.3% of total loans remained in some form of a
modification, as compared to $86.7 million, or 6.7% of total loans
at December 31, 2020. These loan modifications at June 30, 2021
include $11.4 million on interest only, $26.4 million on full
deferral, and $5.0 million with extended amortization.
Asset Quality
Non-performing loans totaled $33.8 million at
June 30, 2021, a decrease of $0.4 million from $34.2 million at the
end of the linked quarter. Non-performing loans to total loans was
2.61% at June 30, 2021, and 2.68% and 0.70% at the end of the
linked quarter and prior year quarter, respectively. The increase
in non-performing loans as compared to the prior year quarter was
primarily due to placing on non-accrual in the fourth quarter 2020,
several significant loans previously modified in accordance with
the CARES Act passed by Congress in 2020.
At June 30, 2021, $5.4 million of the Company’s
allowance for loan losses was allocated to impaired loans totaling
$36.1 million, compared to $5.1 million of the Company's allowance
for loan losses allocated to impaired loans totaling $36.6 million
at the end of the linked quarter. At June 30, 2021 management
determined that $12.4 million, or 34%, of total impaired loans
required no reserve allocation compared to $12.6 million, or 34% of
total impaired loans at the end of the linked quarter, primarily
due to adequate collateral values.
In the second quarter 2021, the Company had net
loan charge-offs of $26,000 compared to net loan recovery of
$248,000 in the linked quarter, and $29,000 of net loan recovery in
the prior year quarter. The Company recorded provision expense of
$0.4 million for loan losses for the second quarter 2021 driven
principally by growth in the portfolio, compared to no provision
for the linked quarter and $0.9 million for the prior year
quarter.
The allowance for loan losses at June 30, 2021
was $18.7 million, or 1.45% of outstanding loans, and 55.5% 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. At June 30, 2020, the allowance for loan
losses was $16.6 million, or 1.30% of outstanding loans, and 186.6%
of non-performing loans. The allowance for loan losses at June 30,
2021 represents management’s best estimate of probable losses
inherent in the loan portfolio and is commensurate with risks in
the loan portfolio as of that date.
Deposits
Total deposits at June 30, 2021 were $1.4
billion, a decrease of $13.0 million, or 0.9%, from March 31, 2021,
and an increase of $53.4 million, or 4.0%, from the end of the
prior year quarter. The decrease in total deposits in the current
quarter as compared to the linked quarter is due to the maturity of
$18 million of time deposits in the current quarter related to
government programs.
Core deposits were $1.3 billion at June 30,
2021, an increase of $116.4 million, or 10.0%, from June 30, 2020.
Growth in year-over-year core deposits is indicative of the higher
savings rate customers have chosen in response to pandemic
conditions.
Noninterest Income
For the second quarter 2021, total noninterest
income was $4.6 million, an increase of $0.1 million, or 3.3%, from
the linked quarter, and an increase of $1.7 million, or 60.7%, from
the prior year quarter. The increase in noninterest income in the
current quarter as compared to the prior year quarter is primarily
due to the increase in gain on sale of real estate mortgages of
$1.1 million.
Noninterest Expense
For the second quarter 2021, total noninterest
expense was $11.8 million, an increase of $0.1 million, or 1.0%,
from the linked quarter, and an increase of $0.5 million, or 4.4%
from the prior year quarter. The second quarter 2021 efficiency
ratio was 64.45% compared to 61.86% and 69.59% for the linked
quarter and prior year quarter, respectively.
Capital
The Company maintains its “well capitalized”
regulatory capital position. At the end of the second quarter 2021,
capital ratios were as follows: total risk-based capital to
risk-weighted assets 14.66%; tier 1 capital to risk-weighted assets
13.20%; tier 1 leverage 10.49% and tangible common equity to
tangible assets 7.99%.
[Tables follow]
FINANCIAL SUMMARY(unaudited)$000, except per
share data
|
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Three Months Ended |
|
|
June 30, |
|
March 31, |
|
June 30, |
Statement of income
information: |
|
2021 |
|
2021 |
|
2020 |
Total interest income |
|
$ |
15,169 |
|
$ |
16,102 |
|
$ |
15,721 |
Total interest expense |
|
|
1,498 |
|
|
1,712 |
|
|
2,382 |
Net interest income |
|
|
13,671 |
|
|
14,390 |
|
|
13,339 |
Provision for loan losses |
|
|
400 |
|
|
— |
|
|
900 |
Noninterest income |
|
|
4,589 |
|
|
4,443 |
|
|
2,856 |
Investment securities gains, net |
|
|
— |
|
|
14 |
|
|
7 |
Noninterest expense |
|
|
11,769 |
|
|
11,651 |
|
|
11,270 |
Pre-tax income |
|
|
6,091 |
|
|
7,196 |
|
|
4,032 |
Income taxes |
|
|
1,199 |
|
|
1,357 |
|
|
750 |
Net income |
|
$ |
4,892 |
|
$ |
5,839 |
|
$ |
3,282 |
Earnings per
share: |
|
|
|
|
|
|
|
|
|
Basic: |
|
$ |
0.74 |
|
$ |
0.88 |
|
$ |
0.49 |
Diluted: |
|
$ |
0.74 |
|
$ |
0.88 |
|
$ |
0.49 |
|
|
|
|
|
|
|
|
|
For the Six Months Ended |
|
|
June 30, |
Statement of income
information: |
|
2021 |
|
2020 |
Total interest income |
|
$ |
31,272 |
|
$ |
31,529 |
Total interest expense |
|
|
3,210 |
|
|
5,664 |
Net interest income |
|
|
28,062 |
|
|
25,865 |
Provision for loan losses |
|
|
400 |
|
|
4,200 |
Noninterest income |
|
|
9,031 |
|
|
5,147 |
Investment securities gains, net |
|
|
15 |
|
|
6 |
Noninterest expense |
|
|
23,420 |
|
|
21,761 |
Pre-tax income |
|
|
13,288 |
|
|
5,057 |
Income taxes |
|
|
2,557 |
|
|
907 |
Net income |
|
$ |
10,731 |
|
$ |
4,150 |
Earnings per
share: |
|
|
|
|
|
|
Basic: |
|
$ |
1.62 |
|
$ |
0.61 |
Diluted: |
|
$ |
1.62 |
|
$ |
0.61 |
FINANCIAL SUMMARY
(continued)(unaudited)$000, except per share
data
|
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|
|
June 30, |
|
March 31, |
|
June 30, |
|
December 31, |
|
|
2021 |
|
2021 |
|
2020 |
|
2020 |
|
Key financial
ratios: |
|
|
|
|
|
|
|
|
|
|
|
|
Return on average assets (YTD) |
|
1.26 |
% |
|
1.38 |
% |
|
0.53 |
% |
|
0.88 |
% |
Return on average common equity (YTD) |
|
16.31 |
% |
|
18.03 |
% |
|
7.06 |
% |
|
11.74 |
% |
Return on average assets (QTR) |
|
1.14 |
% |
|
1.38 |
% |
|
0.81 |
% |
|
1.21 |
% |
Return on average common equity (QTR) |
|
14.64 |
% |
|
18.03 |
% |
|
11.12 |
% |
|
16.19 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Quality
Ratios |
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses to total loans |
|
1.45 |
% |
|
1.44 |
% |
|
1.30 |
% |
|
1.41 |
% |
Non-performing loans to total loans (a) |
|
2.61 |
% |
|
2.68 |
% |
|
0.70 |
% |
|
2.69 |
% |
Non-performing assets to loans (a) |
|
3.53 |
% |
|
3.63 |
% |
|
1.67 |
% |
|
3.64 |
% |
Non-performing assets to assets (a) |
|
2.68 |
% |
|
2.68 |
% |
|
1.27 |
% |
|
2.70 |
% |
Performing TDRs to loans |
|
0.18 |
% |
|
0.19 |
% |
|
0.19 |
% |
|
0.22 |
% |
Allowance for loan losses to |
|
|
|
|
|
|
|
|
|
|
|
|
non-performing loans (a) |
|
55.45 |
% |
|
53.64 |
% |
|
186.62 |
% |
|
52.39 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
Ratios |
|
|
|
|
|
|
|
|
|
|
|
|
Average stockholders' equity to average total assets (YTD) |
|
7.70 |
% |
|
7.64 |
% |
|
7.51 |
% |
|
7.48 |
% |
Period-end stockholders' equity to period-end assets (YTD) |
|
7.99 |
% |
|
7.55 |
% |
|
7.13 |
% |
|
7.53 |
% |
Total risk-based capital ratio |
|
14.66 |
% |
|
14.80 |
% |
|
14.64 |
% |
|
14.97 |
% |
Tier 1 risk-based capital ratio |
|
13.20 |
% |
|
13.21 |
% |
|
12.76 |
% |
|
13.37 |
% |
Common equity Tier 1 capital |
|
9.91 |
% |
|
9.93 |
% |
|
9.58 |
% |
|
10.00 |
% |
Tier 1 leverage ratio |
|
10.49 |
% |
|
10.22 |
% |
|
9.82 |
% |
|
10.19 |
% |
(a) Non-performing loans include loans 90
days past due and accruing and nonaccrual loans.
|
|
June 30, |
|
March 31, |
|
June 30, |
|
December 31, |
|
Balance
sheet information: |
|
2021 |
|
2021 |
|
2020 |
|
2020 |
|
Total assets |
|
$ |
1,708,966 |
|
|
$ |
1,731,924 |
|
|
$ |
1,683,736 |
|
|
$ |
1,733,731 |
|
|
Loans held for investment |
|
|
1,293,894 |
|
|
|
1,276,185 |
|
|
|
1,280,615 |
|
|
|
1,286,967 |
|
|
Allowance for loan losses |
|
|
(18,735 |
) |
|
|
(18,361 |
) |
|
|
(16,622 |
) |
|
|
(18,113 |
) |
|
Loans held for sale |
|
|
2,487 |
|
|
|
6,308 |
|
|
|
9,041 |
|
|
|
5,099 |
|
|
Investment securities |
|
|
282,022 |
|
|
|
244,330 |
|
|
|
199,012 |
|
|
|
204,383 |
|
|
Deposits |
|
|
1,381,001 |
|
|
|
1,393,982 |
|
|
|
1,327,633 |
|
|
|
1,383,606 |
|
|
Total stockholders’ equity |
|
|
136,503 |
|
|
|
130,708 |
|
|
|
120,031 |
|
|
|
130,589 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Book value per share |
|
$ |
20.63 |
|
|
$ |
19.75 |
|
|
$ |
17.78 |
|
|
$ |
19.36 |
|
|
Market price per share |
|
$ |
22.93 |
|
|
$ |
20.47 |
|
|
$ |
18.93 |
|
|
$ |
21.06 |
|
|
Net interest spread (FTE) (YTD) |
|
|
3.34 |
|
% |
|
3.44 |
|
% |
|
3.26 |
|
% |
|
3.25 |
|
% |
Net interest margin (FTE) (YTD) |
|
|
3.51 |
|
% |
|
3.61 |
|
% |
|
3.51 |
|
% |
|
3.48 |
|
% |
Net interest spread (FTE) (QTR) |
|
|
3.24 |
|
% |
|
3.44 |
|
% |
|
3.25 |
|
% |
|
3.21 |
|
% |
Net interest margin (FTE) (QTR) |
|
|
3.40 |
|
% |
|
3.61 |
|
% |
|
3.46 |
|
% |
|
3.40 |
|
% |
Efficiency ratio (YTD) |
|
|
63.14 |
|
% |
|
61.86 |
|
% |
|
70.17 |
|
% |
|
65.82 |
|
% |
Efficiency ratio (QTR) |
|
|
64.45 |
|
% |
|
61.86 |
|
% |
|
69.59 |
|
% |
|
63.49 |
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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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