Hawthorn Bancshares, Inc.
(NASDAQ: HWBK), (the
“Company” or “HWBK”) reported net income of $20.8 million, or $3.06
per diluted share, for the year ended December 31, 2022,
compared to $22.5 million, or $3.27 per diluted share, for the
prior year.
The Company reported net income of $4.7 million
for the fourth quarter 2022, a decrease of $0.2 million compared to
the linked quarter 2022 and a decrease of $1.3 million from the
fourth quarter 2021 (the "prior year quarter"). Earnings per
diluted share (“EPS”) was $0.70 for the fourth quarter 2022
compared to $0.73 and $0.87 for the linked quarter and prior year
quarter, respectively. Net income and EPS for the fourth quarter
2022 decreased from the linked quarter primarily due to higher
non-interest expense and lower non-interest income, partially
offset by lower provision expense.
Chairman David T. Turner
commented, “Despite a very challenging economic
environment in 2022, which included record-setting inflation,
rapidly rising interest rates and a dramatic slowdown in mortgage
applications for both new homes sales and refinancing, we were able
to achieve and deliver strong financial returns to our
shareholders. For the full year 2022, we reported $20.8 million in
net income, down $1.8 million, or 7.8%, compared to 2021. But while
earnings were down, we had several very positive accomplishments
which we believe will drive strong financial performance going
forward. Specifically, we achieved loan growth of $219 million, or
16.8%, in 2022 as compared to the previous year; our non-performing
loans at the end of 2022 were $18.7 million, or 1.23% of total
loans, down $6.8 million compared to $25.5 million, or 1.96% of
total loans at the end of 2021. And while growth in our loans
outpaced deposits, we were also able to achieve impressive deposit
growth of $115.3 million, or 7.6%. The financial results in 2022
are even more impressive when you consider we did not have the same
level of financial contribution from PPP fee income as compared to
2021, or the same strength in the secondary mortgage sales market
which also existed last year."
Turner continued, "This next year will present
some new headwinds, challenges and opportunities for our bank and
the overall financial services industry. In 2023, we will continue
to be very focused on securing the most cost-effective sources for
funding our continued growth in loans, in addition to further
building out our mortgage lending team in key markets.
Our team of bankers continues to be focused on
delivering value to our customers through our diverse products and
services offering. I'm very proud of every banker and all that we
have accomplished together.
We remain very optimistic for the future."
Highlights
-
Earnings – Net income for 2022 was $20.8 million
and EPS was $3.06, compared to net income of $22.5 million and EPS
of $3.27 for the prior year.Net income of $4.7 million for the
fourth quarter 2022 decreased $0.2 million, or 4.1%, from the
linked quarter, and decreased $1.3 million, or 21.1%, from the
prior year quarter. EPS was $0.70 for the fourth quarter 2022
compared to $0.73 for the linked quarter, and $0.87 for the prior
year quarter.
- Net
interest income and net interest margin – Net interest
income for 2022 was $58.8 million and net interest margin was
3.53%, on an FTE basis, compared to net interest income of $58.5
million and net interest margin of 3.62%, on an FTE basis, for the
prior year.Net interest income of $15.0 million for the fourth
quarter 2022, decreased $0.1 million from the linked quarter, and
decreased $0.1 million from the prior year quarter. Net interest
margin, on an FTE basis, was 3.43% for the fourth quarter, a
decrease from 3.56% for the linked quarter, and a decrease from
3.67% for the prior year quarter.
-
Loans – Loans held for investment increased by
$29.3 million, or 2.0%, equal to $1.5 billion as of
December 31, 2022 as compared to the end of the linked
quarter. Year-over-year, loans held for investment grew $219.1
million, or 16.8%, from $1.3 billion as of December 31,
2021.
- Asset
quality – Non-performing loans totaled $18.7 million at
December 31, 2022, an increase of $1.4 million from $17.3
million at the end of the linked quarter, and a decrease of $6.8
million from $25.5 million at the end of the prior year quarter.
Contributing to the increase in the current quarter as compared to
the linked quarter was the movement of a single borrower
relationship from accrual to non-accrual status totaling $1.8
million. The reduction in non-performing loans in the current
quarter compared to the prior year quarter is primarily due to
three large non-accrual loan relationships returning to accrual
status. The allowance for loan losses to total loans was 1.02% at
December 31, 2022, compared to 1.04% at September 30, 2022 and
1.30% at December 31, 2021.
-
Deposits – Total deposits increased by $39.3
million, or 2.5%, equal to $1.6 billion as of December 31,
2022 as compared to the end of the linked quarter. Year-over-year
deposits grew $115.3 million, or 7.6%, from $1.5 billion as of
December 31, 2021.
-
Capital – Total stockholders' equity was $127.4
million and the common equity to assets ratio was 6.62% at
December 31, 2022 as compared to 6.25% and 8.13% at the end of
the linked quarter and the prior year quarter, respectively.
Regulatory capital ratios remain “well-capitalized”, with a tier 1
leverage ratio of 10.76% and a total risk-based capital ratio of
13.85% at December 31, 2022.
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. The Company repurchased 108,724 common shares under the
plan during 2022 at an average cost of $26.60 per share totaling
$2.9 million. As of December 31, 2022, $2.1 million remained
available for share repurchases pursuant to the plan.
During the fourth quarter of 2022, the Company's
Board of Directors approved a quarterly cash dividend of $0.17 per
common share payable January 1, 2023 to shareholders of record at
the close of business on December 15, 2022.
Net Interest Income and Net Interest
Margin
Net interest income for 2022 was $58.8 million
and net interest margin was 3.53%, on an FTE basis, compared to net
interest income of $58.5 million and net interest margin of 3.62%,
on an FTE basis, for the prior year. Net interest income of $15.0
million for the fourth quarter 2022, decreased $0.1 million from
the linked quarter, and decreased $0.1 million from the prior year
quarter. Driving the decrease from the linked quarter was
significantly higher interest expense for interest bearing deposit
accounts and other borrowings which reprice in a rising rate
environment, more than offsetting the increase in interest income
and fees from loans and other earning assets. While interest income
increased $3.4 million in the current quarter compared to the prior
year quarter, which was driven by higher interest income from
significant loan growth more than offsetting the reduction in PPP
fees of $1.4 million, interest expense increased $3.5 million
resulting in a $0.1 million decrease in net interest income. Net
interest margin, on an FTE basis, was 3.43% for the fourth quarter,
compared to 3.56% for the linked quarter, and 3.67% for the prior
year quarter.
Loans
Loans held for investment increased by $29.3
million, or 2.0%, to $1.5 billion as of December 31, 2022 as
compared to the end of the linked quarter and increased by $219.1
million, or 16.8%, from the end of the prior year quarter. Included
within loans held for investment are PPP loans. At
December 31, 2022, PPP loans totaled $0.01 million, as
compared to $0.6 million and $8.4 million at the end of the linked
quarter and prior year quarter, respectively. Excluding PPP loans,
loans held for investment at December 31, 2022 increased 2.0%
as compared to the end of the linked quarter, and 17.6% as compared
to the end of the prior year quarter.
The yield earned on average loans held for
investment was 4.81%, on an FTE basis, for the fourth quarter 2022,
compared to 4.51% for the linked quarter and 4.64% for the prior
year quarter. The increase in yield as of December 31, 2022
compared to the end of the linked quarter is reflective of recent
market conditions where most loan types have seen an increase in
yield, consistent with the two most recent increases in the prime
rate which moved the rate from 6.25% in September to 7.50% in
December.
Asset Quality
Non-performing loans totaled $18.7 million at
December 31, 2022, an increase of $1.4 million from $17.3
million at the end of the linked quarter, and a decrease of $6.8
million from $25.5 million at the end of the prior year quarter.
Non-performing loans to total loans was 1.23% at December 31,
2022, compared to 1.16% and 1.96% at the end of the linked quarter
and prior year quarter, respectively.
At December 31, 2022, $0.3 million of
the Company’s allowance for loan losses was allocated to impaired
loans totaling $20.4 million, compared to $0.3 million of
the Company's allowance for loan losses allocated to impaired loans
totaling $18.9 million at the end of the linked quarter, and
$3.0 million of the Company's allowance for loan losses
allocated to impaired loans totaling $27.3 million at the end
of the prior year. At December 31, 2022, management determined
that $17.7 million, or 86.8%, of total impaired loans required
no reserve allocation compared to $15.9 million, or 84.0%, and
$16.6 million, or 61.0%, of total impaired loans at the end of
the linked quarter and prior year, respectively, primarily due to
adequate collateral values.
In the fourth quarter 2022, the Company had net
loan charge-offs of $17,000 compared to net loan charge-offs of
$148,000 in the linked quarter, and net loan recoveries of
$0.4 million in the prior year quarter. The Company recognized
a provision expense for credit losses of $0.1 million for the
fourth quarter 2022 compared to $0.3 million for the linked quarter
and a release of provision of $2.4 million for the prior year
quarter.
The allowance for loan losses at
December 31, 2022 was $15.6 million, or 1.02% of outstanding
loans, and 83.35% of non-performing loans. At September 30, 2022,
the allowance for loan losses was $15.5 million, or 1.04% of
outstanding loans, and 89.38% of non-performing loans. At
December 31, 2021, the allowance for loan losses was $16.9
million, or 1.30% of outstanding loans, and 66.36% 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, 2022.
Deposits
Total deposits at December 31, 2022 were
$1.6 billion, an increase of $39.3 million, or 2.5%, from September
30, 2022, and an increase of $115.3 million, or 7.6%, from
December 31, 2021. Growth in deposits at the end of the fourth
quarter of 2022 as compared to the ends of the linked quarter and
prior year quarter was primarily due to increases in the combined
savings, interest checking and money market account balances.
Contributing to the increase at the end of current quarter as
compared to the end of the linked quarter is the seasonal increase
in certain public funds depositor balances.
Non-interest Income
Total non-interest income for 2022 was $14.0
million, a decrease of $2.8 million, or 16.7%, from 2021. The
primary reason for the decline was due to the decrease in the gain
on sale of real estate mortgages of $4.5 million.
Total non-interest income for the fourth quarter
ended December 31, 2022 was $3.1 million, a decrease of $0.4
million, or 10.5%, from the linked quarter, and a decrease of $0.7
million, or 17.4%, from the prior year quarter. The decline 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
$0.9 million, or 73.6%.
Non-interest Expense
Non-interest expense for 2022 was $48.5 million, a
decrease of $0.4 million, or 0.9%, from 2021. Non-interest expense
for the fourth quarter 2022 was $12.6 million, an increase of $0.4
million, or 3.1%, from the linked quarter, and a decrease of $1.0
million, or 7.4%, from the prior year quarter. Contributing to the
decrease from the prior year quarter was lower legal fees resulting
from a full-and-final financial settlement in 2021 in the amount of
$1.5 million.
The fourth quarter efficiency ratio was 69.5%
compared to 65.7% and 71.9% 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 2022,
capital ratios were as follows: total risk-based capital to
risk-weighted assets 13.85%, tier 1 capital to risk-weighted assets
12.52%, tier 1 leverage 10.76% and common equity to assets
6.62%.
[Tables follow]
FINANCIAL SUMMARY(unaudited)$000,
except per share data
|
Three Months Ended |
|
December 31, |
|
September 30, |
|
December 31, |
Statement of income information: |
|
2022 |
|
|
2022 |
|
|
2021 |
Total interest income |
$ |
19,785 |
|
$ |
17,893 |
|
$ |
16,378 |
Total interest expense |
|
4,795 |
|
|
2,826 |
|
|
1,275 |
Net interest income |
|
14,990 |
|
|
15,067 |
|
|
15,103 |
Provision for loan losses |
|
100 |
|
|
300 |
|
|
(2,400) |
Non-interest income |
|
3,119 |
|
|
3,485 |
|
|
3,777 |
Investment securities (losses) gains, net |
|
(2) |
|
|
1 |
|
|
9 |
Non-interest expense |
|
12,576 |
|
|
12,195 |
|
|
13,576 |
Pre-tax income |
|
5,431 |
|
|
6,058 |
|
|
7,713 |
Income taxes |
|
705 |
|
|
1,131 |
|
|
1,723 |
Net income |
$ |
4,726 |
|
$ |
4,927 |
|
$ |
5,990 |
Earnings per share: |
|
|
|
|
|
Basic: |
$ |
0.70 |
|
$ |
0.73 |
|
$ |
0.87 |
Diluted: |
$ |
0.70 |
|
$ |
0.73 |
|
$ |
0.87 |
|
|
|
|
|
|
|
|
|
|
For the Years Ended |
|
December 31, |
Statement of income information: |
|
2022 |
|
|
2021 |
Total interest income |
$ |
69,256 |
|
$ |
64,454 |
Total interest expense |
|
10,493 |
|
|
5,909 |
Net interest income |
|
58,763 |
|
|
58,545 |
(Release of) provision for loan losses |
|
(900) |
|
|
(1,700) |
Non-interest income |
|
13,978 |
|
|
16,786 |
Investment securities (losses) gains, net |
|
(14) |
|
|
149 |
Non-interest expense |
|
48,538 |
|
|
48,966 |
Pre-tax income |
|
25,089 |
|
|
28,214 |
Income taxes |
|
4,338 |
|
|
5,697 |
Net income |
$ |
20,751 |
|
$ |
22,517 |
Earnings per share: |
|
|
|
Basic: |
$ |
3.06 |
|
$ |
3.27 |
Diluted: |
$ |
3.06 |
|
$ |
3.27 |
|
|
|
|
|
|
FINANCIAL SUMMARY
(continued)
(unaudited)
$000, except per share data
|
December 31, |
|
September 30, |
|
December 31, |
|
2022 |
|
2022 |
|
2021 |
Key financial ratios: |
|
|
|
|
|
Return on average assets (YTD) |
1.16 |
% |
|
1.21 |
% |
|
1.30 |
% |
Return on average common equity (YTD) |
15.94 |
% |
|
16.00 |
% |
|
16.46 |
% |
Return on average assets (QTR) |
1.01 |
% |
|
1.08 |
% |
|
1.35 |
% |
Return on average common equity (QTR) |
15.72 |
% |
|
15.30 |
% |
|
16.70 |
% |
|
|
|
|
|
|
Asset Quality Ratios |
|
|
|
|
|
Allowance for loan losses to total loans |
1.02 |
% |
|
1.04 |
% |
|
1.30 |
% |
Non-performing loans to total loans (a) |
1.23 |
% |
|
1.16 |
% |
|
1.96 |
% |
Non-performing assets to loans (a) |
1.81 |
% |
|
1.78 |
% |
|
2.76 |
% |
Non-performing assets to assets (a) |
1.43 |
% |
|
1.44 |
% |
|
1.97 |
% |
Performing TDRs to loans |
0.11 |
% |
|
0.11 |
% |
|
0.14 |
% |
Allowance for loan losses to |
|
|
|
|
|
non-performing loans (a) |
83.35 |
% |
|
89.38 |
% |
|
66.36 |
% |
|
|
|
|
|
|
Capital Ratios |
|
|
|
|
|
Average stockholders' equity to average total assets (YTD) |
7.27 |
% |
|
7.55 |
% |
|
7.89 |
% |
Period-end stockholders' equity to period-end assets (YTD) |
6.62 |
% |
|
6.25 |
% |
|
8.13 |
% |
Total risk-based capital ratio |
13.85 |
% |
|
13.84 |
% |
|
14.79 |
% |
Tier 1 risk-based capital ratio |
12.52 |
% |
|
12.25 |
% |
|
13.59 |
% |
Common equity Tier 1 capital |
9.89 |
% |
|
9.82 |
% |
|
10.22 |
% |
Tier 1 leverage ratio |
10.76 |
% |
|
10.60 |
% |
|
11.01 |
% |
(a) Non-performing loans include
loans 90 days past due and accruing and non-accrual loans.
FINANCIAL SUMMARY
(continued)
(unaudited)
$000, except per share data
|
December 31, |
|
September 30, |
|
December 31 |
Balance sheet information: |
2022 |
|
2022 |
|
2021 |
Total assets |
$ |
1,923,540 |
|
|
$ |
1,847,598 |
|
|
$ |
1,831,550 |
|
Loans held for investment |
|
1,521,252 |
|
|
|
1,491,997 |
|
|
|
1,302,133 |
|
Allowance for loan losses |
|
(15,588) |
|
|
|
(15,505) |
|
|
|
(16,903) |
|
Loans held for sale |
|
591 |
|
|
|
913 |
|
|
|
2,249 |
|
Investment securities |
|
257,100 |
|
|
|
250,516 |
|
|
|
316,278 |
|
Deposits |
|
1,632,079 |
|
|
|
1,592,798 |
|
|
|
1,516,820 |
|
Total stockholders’ equity |
$ |
127,411 |
|
|
$ |
115,405 |
|
|
$ |
148,956 |
|
|
|
|
|
|
|
Book value per share |
$ |
18.76 |
|
|
$ |
16.97 |
|
|
$ |
21.66 |
|
Market price per share |
$ |
21.77 |
|
|
$ |
21.86 |
|
|
$ |
24.94 |
|
Net interest spread (FTE) (YTD) |
|
3.26 |
% |
|
|
3.36 |
% |
|
|
3.45 |
% |
Net interest margin (FTE) (YTD) |
|
3.53 |
% |
|
|
3.57 |
% |
|
|
3.62 |
% |
Net interest spread (FTE) (QTR) |
|
3.00 |
% |
|
|
3.28 |
% |
|
|
3.52 |
% |
Net interest margin (FTE) (QTR) |
|
3.43 |
% |
|
|
3.56 |
% |
|
|
3.67 |
% |
Efficiency ratio (YTD) |
|
66.73 |
% |
|
|
65.83 |
% |
|
|
65.00 |
% |
Efficiency ratio (QTR) |
|
69.46 |
% |
|
|
65.73 |
% |
|
|
71.91 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
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.
The financial results in this press release
reflect preliminary, unaudited results, which are not final until
the Company's Annual Report on Form 10-K is filed. 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. These
forward-looking statements are made as of the date of this
communication, and the Company disclaims any obligation to update
any forward-looking statement or to publicly announce the results
of any revisions to any of the forward-looking statements included
herein, except as required by law.
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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