Hawthorn Bancshares, Inc.
(NASDAQ: HWBK), (the
“Company” or “HWBK”) reported net income of $22.5 million, or $3.40
per diluted share, for the year ended December 31, 2021, compared
to $14.3 million, or $2.12 per diluted share, for the prior year.
The Company reported net income of $6.0 million
for the fourth quarter 2021, an increase of $0.2 million compared
to the linked third quarter 2021 (“linked quarter”) and an increase
of $0.8 million from the fourth quarter 2020 (the "prior year
quarter"). Earnings per diluted share (“EPS”) was $0.90 for the
fourth quarter 2021 compared to $0.88 and $0.77 for the linked
quarter and prior year quarter, respectively. Net income and EPS
for the fourth quarter 2021 increased from the linked quarter due
to negative provision expense resulting from the release of
specific reserves, partially offset by higher non-interest expense,
described in more detail below.
Cash dividends paid in 2021 of $0.56 per share
increased $0.08 per share, or 17%, compared to $0.48 per share in
2020. The Company’s Board of Directors approved the Company’s
quarterly dividend of $0.15 per common share for the first quarter
of 2022, payable April 1, 2022 to shareholders as of record March
15, 2022.
Chairman David T. Turner
commented, "Today, we celebrate 2021 as the year in which
we delivered record-setting financial performance for the
shareholders of Hawthorn Bancshares. For the full year 2021, we
reported $22.5 million in net income, up $8.2 million, or 58%
compared to 2020. While our reported results include some
significant one-time gains from negative provision expense, and PPP
fees, our underlying core earnings, which may be a better barometer
of real growth were also strong. Our asset quality for some
specific troubled credits also continues to improve, consistent
with our expectations as our borrowers navigate through the
protracted economic recovery. Non-performing loans totaled $25.5
million at the end of 2021, down $9.1 million from $34.6 million at
the end of 2020."
Turner continued, "While much has been learned
over the past almost two years since the pandemic became a reality,
this next year will also present some new headwinds, challenges and
opportunities for our bank and the overall financial services
industry.
Our team of bankers has demonstrated the ability
to excel in the delivery of financial services to our customers in
unprecedented times. I'm very proud of each and every banker and
all that we have accomplished together.
We remain very optimistic for the future.
Here's to a safe, healthy, and prosperous
2022!"
Highlights
-
Earnings – Net income for the full year 2021 was
$22.5 million and EPS was $3.40, compared to net income of $14.3
million and EPS of $2.12 for the prior year. Net income in the
fourth quarter 2021 was $6.0 million and EPS was $0.90, compared to
net income of $5.2 million and EPS of $0.77 for the prior year
quarter.
- Net
interest income and net interest margin – Net interest
income for the full year 2021 was $58.5 million and net interest
margin, on an FTE basis, was 3.62% compared to net interest income
of $53.3 million and net interest margin, on an FTE basis, of 3.48%
for the prior year. Net interest income includes PPP fee income
which amounted to $5.4 million for the full year 2021, compared to
$1.8 million for 2020, an increase of $3.6 million. Net interest
income of $15.1 million for the fourth quarter 2021, decreased $0.3
million from the linked quarter, and increased $1.5 million from
the prior year quarter. Net interest margin, on an FTE basis, was
3.67% for the fourth quarter, a decrease from 3.78% for the linked
quarter, and an increase from 3.40% for the prior year
quarter.
-
Loans – Loans held for investment increased by
$19.3 million, or 1.5%, equal to $1.3 billion as of December 31,
2021 as compared to the linked quarter. Year-over-year, loans grew
$15.2 million, or 1.2%, from $1.3 billion as of December 31,
2020.
- Asset
quality – Non-performing loans totaled $25.5 million at
December 31, 2021, a decrease of $7.3 million from $32.8 million at
the end of the linked quarter primarily due to returning a few
large non-accrual loans to accrual status described in more detail
below. The allowance for loan losses to total loans was 1.30% at
December 31, 2021, compared to 1.48% at September 30, 2021 and
1.41% at December 31, 2020.
-
Deposits – Total deposits increased by $105.8
million, or 7.5%, equal to $1.5 billion as of December 31, 2021 as
compared to the linked quarter. Year-over-year deposits grew $133.2
million, or 9.6%, from $1.4 billion as of December 31, 2020.
-
Capital – Total shareholder’s equity was $149.0
million and the common equity to assets ratio was 8.13% at December
31, 2021 as compared to 8.00% and 7.53% from the linked quarter and
the prior year quarter, respectively. Regulatory capital ratios
remain “well-capitalized”, with tier 1 leverage ratio of 11.01% and
a total risk-based capital ratio of 14.79% at December 31,
2021.
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 fourth quarter 2021, there were no share
repurchases pursuant to that authorization. As of December 31,
2021, $5.0 million remained available for share repurchase pursuant
to that authorization.
Net Interest Income and Net Interest
Margin
Net interest income for the full year 2021 was
$58.5 million and net interest margin was 3.62%, on an FTE basis,
compared to net interest income of $53.3 million and net interest
margin, on an FTE basis, of 3.48% for the prior year. Net interest
income of $15.1 million for the fourth quarter 2021, decreased $0.3
million from the linked quarter, and increased $1.5 million from
the prior year quarter. Net interest margin, on a FTE basis, was
3.67% for the fourth quarter, compared to 3.78% for the linked
quarter, and 3.40% for the prior year quarter.
Loans
Loans held for investment increased by $19.3
million, or 1.5%, to $1.3 billion as of December 31, 2021 as
compared to the linked quarter and increased by $15.2 million, or
1.2%, from the prior year quarter. Included within loans held for
investment are PPP loans. At December 31, 2021, PPP loans totaled
$8.4 million, as compared to $25.9 million and $63.3 million at the
end of the linked quarter and prior year quarter, respectively.
Excluding PPP loans, loans held for investment at December 31, 2021
increased 2.9% as compared to the linked quarter, and 5.7% as
compared to the prior year quarter.
The yield earned on average loans held for
investment was 4.64%, on an FTE basis, for the fourth quarter 2021,
compared to 4.81% for the linked quarter and 4.53% for the prior
year quarter.
Asset Quality
Non-performing loans totaled $25.5 million at
December 31, 2021, a decrease of $7.3 million from $32.8 million at
the end of the linked quarter, primarily due to returning a few
loans to accrual from non-accrual status. Non-performing loans to
total loans was 1.96% at December 31, 2021, and 2.56% and 2.69% at
the end of the linked quarter and prior year quarter,
respectively.
At December 31, 2021, $3.0 million of the
Company’s allowance for loan losses was allocated to impaired loans
totaling $27.3 million, compared to $4.9 million of the Company's
allowance for loan losses allocated to impaired loans totaling
$34.7 million at the end of the linked quarter. At December 31,
2021, management determined that $16.6 million, or 61%, of total
impaired loans required no reserve allocation compared to $11.9
million, or 34%, of total impaired loans at the end of the linked
quarter primarily due to adequate collateral values.
In the fourth quarter 2021, the Company had net
loan recoveries of $375,000 compared to net loan charge-offs of
$106,000 in the linked quarter, and $51,000 of net loan charge-offs
in the prior year quarter. The Company recognized a negative
provision expense for credit losses of $(2.4) million for the
fourth quarter 2021 compared to a provision expense of $0.3 million
for the linked quarter and $0.4 million for the prior year quarter.
The negative provision expense in the fourth quarter 2021 resulted
primarily from the release of specific reserves totaling $2.7
million due to returning significant loan balances to accrual from
non-accrual status or other collateral valuation adjustments.
The allowance for loan losses at December 31,
2021 was $16.9 million, or 1.30% of outstanding loans, and 66.4% of
non-performing loans. At September 30, 2021, the allowance for loan
losses was $18.9 million, or 1.48% of outstanding loans, and 57.7%
of non-performing loans. At December 31, 2020, the allowance for
loan losses was $18.1 million, or 1.41% of outstanding loans, and
52.4% 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, 2021.
Deposits
Total deposits at December 31, 2021 were $1.5
billion, an increase of $105.8 million, or 7.5%, from September 30,
2021, and an increase of $133.2 million, or 9.6%, from December 31,
2020. Growth in deposits over the linked quarter was positively
impacted by the funding cycle of public funds depositors. Growth in
year-over-year deposits is indicative of the higher savings rate
and/or reserves customers have chosen in response to pandemic
conditions.
Non-interest Income
Total non-interest income for 2021 was $16.4
million, an increase of $1.4 million, or 9.4%, from 2020. The
primary reasons for the improvement were increases in bankcard
income and fees of $0.8 million, plus real estate servicing fees of
$0.6 million.
For the quarter ended December 31, 2021, total
non-interest income was $3.7 million, equal to the linked quarter,
and a decrease of $1.0 million, or 21.9%, from the prior year
quarter. The change in the current quarter compared to the prior
year quarter is primarily due to the decrease in the gain on sale
of real estate mortgages of $1.5 million, or 53.1%.
Non-interest Expense
Non-interest expense for 2021 was $48.6 million,
an increase of $3.5 million, or 7.9%, from 2020. Salaries and
employee benefits expense contributed $1.5 million to the current
increase. In addition, in the month of January 2022, mediation of
an ongoing legal matter for which the bank was a defendant resulted
in agreement on a full-and-final financial settlement requiring the
bank to pay the plaintiff $1.5 million.
The fourth quarter 2021 non-interest expense was
$13.5 million, an increase of $1.8 million, or 15.5% from the
linked quarter, and an increase of $1.9 million, or 16.2%, from the
prior year quarter. The fourth quarter efficiency ratio was 71.8%
compared to 61.2%, and 63.5% for the linked quarter and prior year
quarter, respectively.
Capital
The Company maintains its “well capitalized”
regulatory capital position. At the end of the fourth quarter 2021,
capital ratios were as follows: total risk-based capital to
risk-weighted assets 14.79%, tier 1 capital to risk-weighted assets
13.59%, tier 1 leverage 11.01% and common equity to assets
8.13%.
[Tables follow]
FINANCIAL SUMMARY
(unaudited)
$000, except per share data
|
Three Months Ended |
|
December 31, |
|
September 30, |
|
December 31, |
Statement of income information: |
|
2021 |
|
|
2021 |
|
2020 |
Total interest income |
$ |
16,378 |
|
|
$ |
16,804 |
|
$ |
15,498 |
Total interest expense |
|
1,275 |
|
|
|
1,424 |
|
|
1,942 |
Net interest income |
|
15,103 |
|
|
|
15,380 |
|
|
13,556 |
Provision for loan losses |
|
(2,400 |
) |
|
|
300 |
|
|
400 |
Non-interest income |
|
3,675 |
|
|
|
3,675 |
|
|
4,707 |
Investment securities gains, net |
|
9 |
|
|
|
126 |
|
|
43 |
Non-interest expense |
|
13,474 |
|
|
|
11,668 |
|
|
11,600 |
Pre-tax income |
|
7,713 |
|
|
|
7,213 |
|
|
6,306 |
Income taxes |
|
1,723 |
|
|
|
1,417 |
|
|
1,123 |
Net income |
$ |
5,990 |
|
|
$ |
5,796 |
|
$ |
5,183 |
Earnings per share: |
|
|
|
|
|
Basic: |
$ |
0.90 |
|
|
$ |
0.88 |
|
$ |
0.77 |
Diluted: |
$ |
0.90 |
|
|
$ |
0.88 |
|
$ |
0.77 |
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended |
|
December 31, |
Statement of income information: |
|
2021 |
|
|
2020 |
Total interest income |
$ |
64,454 |
|
|
$ |
62,985 |
Total interest expense |
|
5,909 |
|
|
|
9,722 |
Net interest income |
|
58,545 |
|
|
|
53,263 |
Provision for loan losses |
|
(1,700 |
) |
|
|
5,800 |
Non-interest income |
|
16,382 |
|
|
|
14,973 |
Investment securities gains, net |
|
149 |
|
|
|
61 |
Non-interest expense |
|
48,562 |
|
|
|
45,021 |
Pre-tax income |
|
28,214 |
|
|
|
17,476 |
Income taxes |
|
5,697 |
|
|
|
3,183 |
Net income |
$ |
22,517 |
|
|
$ |
14,293 |
Earnings per share: |
|
|
|
Basic: |
$ |
3.40 |
|
|
$ |
2.12 |
Diluted: |
$ |
3.40 |
|
|
$ |
2.12 |
|
|
|
|
|
|
|
FINANCIAL SUMMARY
(continued)
(unaudited)
$000, except per share data
|
|
December 31, |
|
September 30, |
|
December 31, |
|
|
2021 |
|
2021 |
|
2020 |
Key financial ratios: |
|
|
|
|
|
|
Return on average assets (YTD) |
|
1.30 |
% |
|
1.28 |
% |
|
0.88 |
% |
Return on average common equity (YTD) |
|
16.46 |
% |
|
16.37 |
% |
|
11.74 |
% |
Return on average assets (QTR) |
|
1.35 |
% |
|
1.33 |
% |
|
1.21 |
% |
Return on average common equity (QTR) |
|
16.70 |
% |
|
16.49 |
% |
|
16.19 |
% |
|
|
|
|
|
|
|
Asset Quality Ratios |
|
|
|
|
|
|
Allowance for loan losses to total loans |
|
1.30 |
% |
|
1.48 |
% |
|
1.41 |
% |
Non-performing loans to total loans (a) |
|
1.96 |
% |
|
2.56 |
% |
|
2.69 |
% |
Non-performing assets to loans (a) |
|
2.76 |
% |
|
3.46 |
% |
|
3.64 |
% |
Non-performing assets to assets (a) |
|
1.97 |
% |
|
2.56 |
% |
|
2.70 |
% |
Performing TDRs to loans |
|
0.14 |
% |
|
0.15 |
% |
|
0.22 |
% |
Allowance for loan losses to |
|
|
|
|
|
|
non-performing loans (a) |
|
66.36 |
% |
|
57.65 |
% |
|
52.39 |
% |
|
|
|
|
|
|
|
Capital Ratios |
|
|
|
|
|
|
Average stockholders' equity to average total assets (YTD) |
|
7.89 |
% |
|
7.82 |
% |
|
7.48 |
% |
Period-end stockholders' equity to period-end assets (YTD) |
|
8.13 |
% |
|
8.00 |
% |
|
7.53 |
% |
Total risk-based capital ratio |
|
14.79 |
% |
|
15.01 |
% |
|
14.97 |
% |
Tier 1 risk-based capital ratio |
|
13.59 |
% |
|
13.64 |
% |
|
13.37 |
% |
Common equity Tier 1 capital |
|
10.22 |
% |
|
10.26 |
% |
|
10.00 |
% |
Tier 1 leverage ratio |
|
11.01 |
% |
|
10.82 |
% |
|
10.19 |
% |
|
(a) Non-performing loans include loans 90 days
past due and accruing and non-accrual loans. |
|
|
|
December 31, |
|
September 30, |
|
December 31, |
Balance sheet information: |
|
|
2021 |
|
|
|
2021 |
|
|
|
2020 |
|
Total assets |
|
$ |
1,831,550 |
|
|
$ |
1,738,652 |
|
|
$ |
1,733,731 |
|
Loans held for investment |
|
|
1,302,133 |
|
|
|
1,282,820 |
|
|
|
1,286,967 |
|
Allowance for loan losses |
|
|
(16,903 |
) |
|
|
(18,929 |
) |
|
|
(18,113 |
) |
Loans held for sale |
|
|
2,249 |
|
|
|
4,576 |
|
|
|
5,099 |
|
Investment securities |
|
|
316,278 |
|
|
|
284,543 |
|
|
|
204,383 |
|
Deposits |
|
|
1,516,820 |
|
|
|
1,411,059 |
|
|
|
1,383,606 |
|
Total stockholders’ equity |
|
$ |
148,956 |
|
|
$ |
139,094 |
|
|
$ |
130,589 |
|
|
|
|
|
|
|
|
Book value per share |
|
$ |
22.51 |
|
|
$ |
21.02 |
|
|
$ |
19.36 |
|
Market price per share |
|
$ |
25.94 |
|
|
$ |
23.16 |
|
|
$ |
21.06 |
|
Net interest spread (FTE) (YTD) |
|
|
3.45 |
% |
|
|
3.43 |
% |
|
|
3.25 |
% |
Net interest margin (FTE) (YTD) |
|
|
3.62 |
% |
|
|
3.60 |
% |
|
|
3.48 |
% |
Net interest spread (FTE) (QTR) |
|
|
3.52 |
% |
|
|
3.62 |
% |
|
|
3.21 |
% |
Net interest margin (FTE) (QTR) |
|
|
3.67 |
% |
|
|
3.78 |
% |
|
|
3.40 |
% |
Efficiency ratio (YTD) |
|
|
64.81 |
% |
|
|
63.49 |
% |
|
|
65.98 |
% |
Efficiency ratio (QTR) |
|
|
71.75 |
% |
|
|
61.23 |
% |
|
|
63.52 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
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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