Hawthorn Bancshares Inc.
(NASDAQ: HWBK), (the
“Company” or “HWBK”) reported net income of $5.8 million for the
third quarter 2021, an increase of $0.9 million compared to the
linked second quarter 2021 (“linked quarter”) and an increase of
$0.8 million from the third quarter 2020 (the “prior year
quarter”). Earnings per diluted share (“EPS”) was $0.88 for the
third quarter 2021 compared to $0.74 for both the linked quarter
and prior year quarter. Net income and EPS for the third quarter
2021 increased from the linked quarter primarily due to higher net
interest income driven by higher Small Business Payroll Protection
Program ("PPP") loan fee income, partially offset by a decrease in
gain on sale of real estate mortgages, described in more detail
below.
Chairman David T. Turner
commented, “Hawthorn Bank continues to be well-positioned
during this economic recovery, and once again delivered strong
financial performance in the third quarter. Contributing to this
strong overall financial performance was the acceleration of PPP
loan fee income as a result of our borrowers electing to pursue
loan forgiveness in accordance with the CARES Act. This
acceleration, while contributing almost $1.6 million in higher
earnings as compared to the linked quarter, did result in the
forgiveness of $24 million in loans during the quarter. Excluding
the impact of PPP loans on our portfolio, we achieved $12.6 million
or 1.0% loan growth in the third quarter as compared to the linked
quarter. At the end of the quarter, we had $1.8 million in PPP loan
fees which will be recognized in future periods as the remaining
$26 million in PPP loans are forgiven. Our overall asset quality is
improving. We continue to closely monitor our portfolio of
non-performing loans and have seen some signs of strengthening
within certain credits, and no further degradation so we remain
very optimistic. Our mortgage lending team continues to perform
well. While we did see a reduction in production of 20% in the
third quarter versus the linked quarter, we feel this result was
driven more by housing market-related factors and the current
mortgage rate environment as opposed to any actions we should have
taken differently.”
“I continue to be very proud of our team and how
we continue to navigate through these unprecedented times; always
thinking of how to better address the needs of our customers.”
Highlights
-
Earnings – Net income of $5.8 million for the
third quarter 2021 increased $0.9 million, or 18%, from the linked
quarter, and increased $0.8 million, or 17%, from the prior year
quarter. EPS was $0.88 for the third quarter 2021 compared to $0.74
for both the linked quarter and prior year quarter.
- Net
interest income and net interest margin – Net interest
income of $15.4 million for the third quarter 2021, increased $1.7
million from the linked quarter and increased $1.5 million from the
prior year quarter. Driving the increase from both the linked
quarter and prior year quarter was an increase in PPP fee income of
$1.6 million. Net interest margin, on an FTE basis, was 3.78% for
the third quarter 2021, an increase from 3.40% for the linked
quarter, and an increase from 3.50% for the prior year
quarter.
-
Loans – Loans held for investment totaled $1.3
billion at September 30, 2021, a decrease of $11.1 million, or
0.9%, as compared to the end of the linked quarter. Year-over-year,
loans grew $3.7 million, or 0.3%, from $1.3 billion as of September
30, 2020.
- Asset
quality – Non-performing loans totaled $32.8 million at
September 30, 2021, a decrease of $1.0 million from $33.8 million
at the end of the linked quarter, and an increase of $27.0 million
from $5.8 million at the end of the prior year quarter. The
allowance for loan losses to total loans was 1.48% at September 30,
2021, compared to 1.45% at June 30, 2021 and 1.39% at September 30,
2020.
-
Deposits – Total deposits increased by $30.1
million, or 2.2%, equal to $1.4 billion as of September 30, 2021 as
compared to the end of the linked quarter. Year-over-year deposits
grew $84.3 million, or 6.4%, from $1.3 billion as of September 30,
2020.
-
Capital – Total shareholder’s equity was $139.1
million and the common equity to assets ratio was 8.00% at
September 30, 2021 as compared to 7.99% and 7.45% from the end of
the linked quarter and prior year quarter, respectively. Regulatory
capital ratios remain “well-capitalized”, with a tier 1 leverage
ratio of 10.82% and a total risk-based capital ratio of
15.01%.
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. During the third quarter 2021, there were no share
repurchases pursuant to that authorization. As of September 30,
2021, $5.0 million remained available for share repurchases
pursuant to that authorization.
During the third quarter 2021, the Company’s
Board of Directors approved a quarterly cash dividend of $0.15 per
common share, payable October 1, 2021 to shareholders of record at
the close of business on September 15, 2021.
Net Interest Income and Net Interest
Margin
Net interest income of $15.4 million for the
third quarter 2021 increased $1.7 million from the linked quarter
and increased $1.5 million from the prior year quarter 2020.
Driving the increase from both the linked quarter and prior year
quarter was an increase in PPP fee income of $1.6 million. Net
interest margin, on an FTE basis, was 3.78% for the third quarter
2021, compared to 3.40% for the linked quarter, and 3.50% for the
prior year quarter of 2020.
Loans
Loans held for investment decreased by $11.1
million, or 0.9%, to $1.3 billion as of September 30, 2021 as
compared to the end of the linked quarter. Contributing to the
decrease in loans compared to the linked quarter was a decrease in
PPP loans of $23.7 million, or 1.8% of loans held for investment.
Loans grew $3.7 million, or 0.3%, as compared to the prior year
quarter. Contributing to the low loan growth as compared to the
prior year quarter was a reduction in PPP loans of $59.5 million,
or 4.7%, of loans held for investment. Excluding the impact of PPP
loans on our portfolio, we achieved $12.6 million, or 1.0%, loan
growth in the third quarter as compared to the linked quarter, and
$63.2 million, or 5.9%, as compared to the prior year quarter.
The yield earned on average loans held for
investment was 4.81%, on an FTE basis, for the third quarter 2021,
compared to 4.42% for the linked quarter and 4.66% for the prior
year quarter.
As provided for by the CARES Act, the Company
has offered payment modifications to borrowers. At September 30,
2021, $11.3 million, or 0.9%, 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 September
30, 2021 were all interest only.
Asset Quality
Non-performing loans totaled $32.8 million at
September 30, 2021, a decrease of $1.0 million from $33.8 million
at the end of the linked quarter, and an increase of $27.0 million
from $5.8 million at the end of the prior year quarter.
Non-performing loans to total loans was 2.56% at September 30,
2021, and 2.61% and 0.45% 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 September 30, 2021, $4.9 million of the
Company’s allowance for loan losses was allocated to impaired loans
totaling $34.7 million, compared to $5.4 million of the Company's
allowance for loan losses allocated to impaired loans totaling
$36.1 million at the end of the linked quarter. At September 30,
2021, management determined that $11.9 million, or 34%, of total
impaired loans required no reserve allocation compared to $12.4
million, or 34%, of total impaired loans at the end of the linked
quarter, primarily due to adequate collateral values.
In the third quarter 2021, the Company had net
loan charge-offs of $106,000 compared to net loan charge-offs of
$26,000 in the linked quarter, and $58,000 of net loan charge-offs
in the prior year quarter. The Company recorded provision expense
of $0.3 million for loan losses for the third quarter 2021 driven
principally by growth in the portfolio, compared to $0.4 million
for the linked quarter and $1.2 million for the prior year
quarter.
The allowance for loan losses at September 30,
2021 was $18.9 million, or 1.48% of outstanding loans, and 57.7% of
non-performing loans. At June 30, 2021, the allowance for loan
losses was $18.7 million, or 1.45% of outstanding loans, and 55.5%
of non-performing loans. At September 30, 2020, the allowance for
loan losses was $17.8 million, or 1.39% of outstanding loans, and
305.5% of non-performing loans. The allowance for loan losses at
September 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 September 30, 2021 were $1.4
billion, an increase of $30.1 million, or 2.2%, from June 30, 2021,
and an increase of $84.3 million, or 6.4%, from the end of the
prior year quarter. The increase in total deposits in the current
quarter as compared to the linked quarter is primarily due to
increases in demand deposits, including public funds deposits.
Core deposits were $1.3 billion at September 30,
2021, an increase of $129.9 million, or 11.0%, from September 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 third quarter 2021, total noninterest
income was $3.7 million, a decrease of $0.9 million, or 19.9%, from
the linked quarter, and a decrease of $1.4 million, or 28.2%, from
the prior year quarter. The decrease in total noninterest income in
the current quarter as compared to the linked quarter and prior
year quarter is primarily due to the decrease in gain on sale of
real estate mortgages of $0.7 million and $1.7 million,
respectively. These decreases are primarily due to lower volumes of
real estate mortgage loans sold of $22.7 million (37%) and $34.4
million (47%) for the linked quarter and prior year quarter,
respectively, as compared to the current quarter volume sold of
$39.1 million.
Noninterest Expense
For the third quarter 2021, total noninterest
expense was $11.7 million, a decrease of $0.1 million, or 0.9%,
from the linked quarter, and essentially equal to the prior year
quarter. The third quarter 2021 efficiency ratio was 61.23%
compared to 64.45% and 61.49% 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 2021,
capital ratios were as follows: total risk-based capital to
risk-weighted assets 15.01%; tier 1 capital to risk-weighted assets
13.64%; tier 1 leverage 10.82% and common equity to assets
8.00%.
[Tables follow]
FINANCIAL SUMMARY(unaudited)$000, except per
share data
|
Three Months Ended |
|
September 30, |
|
June 30, |
|
September 30, |
Statement of income
information: |
2021 |
|
2021 |
|
2020 |
Total interest income |
$ |
16,804 |
|
$ |
15,169 |
|
$ |
15,958 |
Total interest expense |
|
1,424 |
|
|
1,498 |
|
|
2,116 |
Net interest income |
|
15,380 |
|
|
13,671 |
|
|
13,842 |
Provision for loan losses |
|
300 |
|
|
400 |
|
|
1,200 |
Noninterest income |
|
3,675 |
|
|
4,589 |
|
|
5,119 |
Investment securities gains, net |
|
126 |
|
|
— |
|
|
12 |
Noninterest expense |
|
11,668 |
|
|
11,769 |
|
|
11,660 |
Pre-tax income |
|
7,213 |
|
|
6,091 |
|
|
6,113 |
Income taxes |
|
1,417 |
|
|
1,199 |
|
|
1,153 |
Net income |
$ |
5,796 |
|
$ |
4,892 |
|
$ |
4,960 |
Earnings per
share: |
|
|
|
|
|
|
|
|
Basic: |
$ |
0.88 |
|
$ |
0.74 |
|
$ |
0.74 |
Diluted: |
$ |
0.88 |
|
$ |
0.74 |
|
$ |
0.74 |
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended |
|
September 30, |
Statement of income
information: |
2021 |
|
2020 |
Total interest income |
$ |
48,076 |
|
$ |
47,487 |
Total interest expense |
|
4,634 |
|
|
7,780 |
Net interest income |
|
43,442 |
|
|
39,707 |
Provision for loan losses |
|
700 |
|
|
5,400 |
Noninterest income |
|
12,707 |
|
|
10,266 |
Investment securities gains, net |
|
140 |
|
|
18 |
Noninterest expense |
|
35,088 |
|
|
33,421 |
Pre-tax income |
|
20,501 |
|
|
11,170 |
Income taxes |
|
3,974 |
|
|
2,060 |
Net income |
$ |
16,527 |
|
$ |
9,110 |
Earnings per
share: |
|
|
|
|
|
Basic: |
$ |
2.50 |
|
$ |
1.35 |
Diluted: |
$ |
2.50 |
|
$ |
1.35 |
|
|
|
|
|
|
FINANCIAL SUMMARY
(continued)(unaudited)$000, except per share
data
|
September 30, |
|
June 30, |
|
September 30, |
|
December 31, |
|
|
2021 |
|
2021 |
|
2020 |
|
2020 |
|
Key financial
ratios: |
|
|
|
|
|
|
|
|
Return on average assets (YTD) |
1.28 |
% |
1.26 |
% |
0.76 |
% |
0.88 |
% |
Return on average common equity (YTD) |
16.37 |
% |
16.31 |
% |
10.15 |
% |
11.74 |
% |
Return on average assets (QTR) |
1.33 |
% |
1.14 |
% |
1.18 |
% |
1.21 |
% |
Return on average common equity (QTR) |
16.49 |
% |
14.64 |
% |
15.99 |
% |
16.19 |
% |
|
|
|
|
|
|
|
|
|
Asset Quality
Ratios |
|
|
|
|
|
|
|
|
Allowance for loan losses to total loans |
1.48 |
% |
1.45 |
% |
1.39 |
% |
1.41 |
% |
Non-performing loans to total loans (a) |
2.56 |
% |
2.61 |
% |
0.45 |
% |
2.69 |
% |
Non-performing assets to loans (a) |
3.46 |
% |
3.53 |
% |
1.44 |
% |
3.64 |
% |
Non-performing assets to assets (a) |
2.56 |
% |
2.68 |
% |
1.10 |
% |
2.70 |
% |
Performing TDRs to loans |
0.15 |
% |
0.18 |
% |
0.19 |
% |
0.22 |
% |
Allowance for loan losses to non-performing loans (a) |
57.65 |
% |
55.45 |
% |
305.49 |
% |
52.39 |
% |
|
|
|
|
|
|
|
|
|
Capital
Ratios |
|
|
|
|
|
|
|
|
Average stockholders' equity to average total assets (YTD) |
7.82 |
% |
7.70 |
% |
7.47 |
% |
7.48 |
% |
Period-end stockholders' equity to period-end assets (YTD) |
8.00 |
% |
7.99 |
% |
7.45 |
% |
7.53 |
% |
Total risk-based capital ratio |
15.01 |
% |
14.66 |
% |
15.05 |
% |
14.97 |
% |
Tier 1 risk-based capital ratio |
13.64 |
% |
13.20 |
% |
13.28 |
% |
13.37 |
% |
Common equity Tier 1 capital |
10.26 |
% |
9.91 |
% |
9.97 |
% |
10.00 |
% |
Tier 1 leverage ratio |
10.82 |
% |
10.49 |
% |
9.99 |
% |
10.19 |
% |
|
|
|
|
|
|
|
|
|
(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: |
|
2021 |
|
2021 |
|
2020 |
|
2020 |
Total assets |
|
$ |
1,738,652 |
|
|
$ |
1,708,966 |
|
|
$ |
1,669,770 |
|
|
$ |
1,733,731 |
|
Loans held for investment |
|
|
1,282,820 |
|
|
|
1,293,894 |
|
|
|
1,279,165 |
|
|
|
1,286,967 |
|
Allowance for loan losses |
|
|
(18,929 |
) |
|
|
(18,735 |
) |
|
|
(17,764 |
) |
|
|
(18,113 |
) |
Loans held for sale |
|
|
4,576 |
|
|
|
2,487 |
|
|
|
7,886 |
|
|
|
5,099 |
|
Investment securities |
|
|
284,543 |
|
|
|
282,022 |
|
|
|
193,175 |
|
|
|
204,383 |
|
Deposits |
|
|
1,411,059 |
|
|
|
1,381,001 |
|
|
|
1,326,752 |
|
|
|
1,383,606 |
|
Total stockholders’ equity |
|
|
139,094 |
|
|
|
136,503 |
|
|
|
124,367 |
|
|
|
130,589 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Book value per share |
|
$ |
21.02 |
|
|
$ |
20.63 |
|
|
$ |
18.43 |
|
|
$ |
19.36 |
|
Market price per share |
|
$ |
23.16 |
|
|
$ |
22.93 |
|
|
$ |
18.21 |
|
|
$ |
21.06 |
|
Net interest spread (FTE) (YTD) |
|
|
3.43 |
% |
|
|
3.34 |
% |
|
|
3.27 |
% |
|
|
3.25 |
|
Net interest margin (FTE) (YTD) |
|
|
3.60 |
% |
|
|
3.51 |
% |
|
|
3.50 |
% |
|
|
3.48 |
|
Net interest spread (FTE) (QTR) |
|
|
3.62 |
% |
|
|
3.24 |
% |
|
|
3.30 |
% |
|
|
3.21 |
|
Net interest margin (FTE) (QTR) |
|
|
3.78 |
% |
|
|
3.40 |
% |
|
|
3.50 |
% |
|
|
3.40 |
|
Efficiency ratio (YTD) |
|
|
62.49 |
% |
|
|
63.14 |
% |
|
|
66.88 |
% |
|
|
65.82 |
|
Efficiency ratio (QTR) |
|
|
61.23 |
% |
|
|
64.45 |
% |
|
|
61.49 |
% |
|
|
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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