Hawthorn Bancshares Reports Results for Third Quarter 2020
Hawthorn Bancshares Inc. (NASDAQ: HWBK) reported a net income of $5.0 million for Q3 2020, marking an increase of $1.7 million from the previous quarter. Earnings per diluted share stood at $0.77, up from $0.51 and $0.59 in Q2 2020 and Q3 2019, respectively. Net interest income grew to $13.8 million, a 12% increase year-over-year. Loans held for investment increased by $130 million, or 11.3%, compared to the same period last year. Despite challenges from COVID-19, asset quality improved with non-performing loans decreasing to $5.8 million.
- Net income increased to $5.0 million, up from $3.3 million in Q2 2020.
- Earnings per diluted share rose to $0.77, reflecting a solid performance.
- Net interest income reached $13.8 million, a 12% year-over-year increase.
- Loans held for investment grew by $130 million, or 11.3%, compared to Q3 2019.
- Non-interest income surged to $5.1 million, significantly higher than previous quarters.
- Asset quality improved, with non-performing loans decreasing to $5.8 million.
- Total deposits slightly reduced by $1.0 million, or 0.1%, from the linked quarter.
- The loan loss provision increased to $1.2 million compared to $0.9 million in Q2 2020.
Third Quarter 2020 Results
- Net income of
$5.0 million , or$0.77 per diluted share
- Net interest margin, fully taxable equivalent ("FTE") of
3.50%
- Return on average assets and equity of
1.18% and15.99% , respectively
- Loan and deposit volumes were relatively “flat” for the quarter
JEFFERSON CITY, Mo., Oct. 30, 2020 (GLOBE NEWSWIRE) -- Hawthorn Bancshares Inc. (NASDAQ: HWBK), (the “Company” or “HWBK”) reported net income of
Chairman David T. Turner commented, “The COVID-19 pandemic has continued to challenge our customers and small business owners in the communities we serve. Our bankers have responded very well through these troubling times, and we appreciate the trust and confidence our customers place in us as we journey together.
Now as before, and after six-months of responding to the pandemic we continue to work with our customers and small business owners in developing tailored solutions to meet their specific needs. In total, we enabled over
Turner continued, “Despite these challenges, we continued to deliver strong operating results in the third quarter. Non-GAAP net income, which excludes an additional
Particularly noteworthy are the results achieved by our real estate mortgage lending and loan processing teams. Sales of mortgages originated and sold to secondary market investors have delivered gains on sales totaling
Highlights
- Earnings – Net income in the third quarter 2020 was
$5.0 million and EPS was$0.77 . Pre-tax pre-provision income (“PTPP”) of$7.3 million in the third quarter increased$2.4 million , or48% , and$2.0 million , or39% , from the linked quarter and third quarter 2019, respectively.
- Net interest income and net interest margin – Net interest income of
$13.8 million for the third quarter 2020, increased$0.5 million and$1.5 million from the linked quarter and third quarter 2019, respectively. Net interest margin, on a tax equivalent basis, was3.50% for the third quarter, an increase from3.46% in the linked quarter, and a reduction from3.64% in the third quarter of 2019.
- Loans – Loans held for investment reduced by
$1.5 million , or0.1% , equal to$1.3 billion as of September 30, 2020 as compared to the linked quarter. Year-over-year, loans grew$130 million , or11.3% , from$1.1 billion as of September 30, 2019. Year-over-year growth in loans was primarily due to an increase in commercial loans for customers who participated in the PPP.
- Asset quality – Non-performing loans totaled
$5.8 million at September 30, 2020, a decrease of$3.1 million from$8.9 million at the end of the linked quarter, primarily due to one loan relationship that was paid off during the quarter. The allowance for loan losses to total loans was1.39% at September 30, 2020, an increase from1.30% at June 30, 2020 and an increase from1.06% at September 30, 2019.
- Deposits – Total deposits reduced by
$1.0 million , or0.1% , equal to$1.3 billion as of September 30, 2020 as compared to the linked quarter. Year-over-year deposits grew$189 million , or16.6% , from$1.1 billion as of September 30, 2019. Growth in deposits over prior year quarter was positively impacted in part by customers who deposited PPP loan proceeds into demand deposit accounts, in addition to an increase in interest bearing deposits.
- Capital – Total shareholder’s equity was
$124 million and the tangible common equity to tangible assets ratio was7.45% at September 30, 2020 as compared to7.13% and7.78% from the linked quarter and third quarter of 2019, respectively. Regulatory capital ratios remain “well-capitalized”, with tier 1 leverage ratio of9.99% and a total risk-based capital ratio of15.05% .
In the third quarter of 2020, the Company’s Board of Directors authorized the purchase of up to
The Company’s Board of Directors approved a quarterly cash dividend of
Net Interest Income and Net Interest Margin
Net interest income for the third quarter increased
Loans
Loans held for investment totaled
The yield earned on average loans held for investment was
In April 2020, the Company began offering loans through the PPP which was part of the CARES Act passed by Congress. At September 30, 2020, it had provided over 1,275 loans to small business customers totaling
As provided for by the CARES Act, the Company has also offered payment modifications to borrowers. Disaster relief payment modifications granted to-date include approximately 578 loans totaling
Asset Quality
Non-performing loans totaled
The Company recorded a provision for credit losses of
The allowance for loan losses at September 30, 2020, was
Deposits
Deposits totaled
Noninterest Income
Total noninterest income for the third quarter 2020 was
Noninterest Expense
Total noninterest expense for the third quarter 2020 was
The Company’s efficiency ratio was
Capital
The Company maintains its “well capitalized” regulatory capital position. At the end of the third quarter 2020, the capital ratios were as follows: total risk-based capital to risk-weighted assets
[Tables follow]
FINANCIAL SUMMARY
(unaudited)
Three Months Ended | ||||||||||
September 30, | June 30, | September 30, | ||||||||
Statement of income information: | 2020 | 2020 | 2019 | |||||||
Total interest income | $ | 15,958 | $ | 15,721 | $ | 15,925 | ||||
Total interest expense | 2,116 | 2,382 | 3,564 | |||||||
Net interest income | 13,842 | 13,339 | 12,361 | |||||||
Provision for loan losses | 1,200 | 900 | 450 | |||||||
Noninterest income | 5,075 | 2,633 | 2,424 | |||||||
Investment securities gains (losses), net | 12 | 7 | (40 | ) | ||||||
Noninterest expense | 11,616 | 11,047 | 9,590 | |||||||
Pre-tax income | 6,113 | 4,032 | 4,814 | |||||||
Income taxes | 1,153 | 750 | 954 | |||||||
Net income | $ | 4,960 | $ | 3,282 | $ | 3,860 | ||||
Earnings per share: | ||||||||||
Basic: | $ | 0.77 | $ | 0.51 | $ | 0.59 | ||||
Diluted: | $ | 0.77 | $ | 0.51 | $ | 0.59 |
For the Nine Months Ended | |||||||
September 30, | |||||||
Statement of income information: | 2020 | 2019 | |||||
Total interest income | $ | 47,487 | $ | 48,023 | |||
Total interest expense | 7,780 | 11,876 | |||||
Net interest income | 39,707 | 36,147 | |||||
Provision for loan losses | 5,400 | 850 | |||||
Noninterest income | 9,956 | 6,637 | |||||
Investment securities gains (losses), net | 18 | (40 | ) | ||||
Gain on sale of branch, net | — | 2,183 | |||||
Noninterest expense | 33,111 | 29,149 | |||||
Pre-tax income | 11,170 | 14,928 | |||||
Income taxes | 2,060 | 2,882 | |||||
Net income | $ | 9,110 | $ | 12,046 | |||
Earnings per share: | |||||||
Basic: | $ | 1.40 | $ | 1.85 | |||
Diluted: | $ | 1.40 | $ | 1.85 |
FINANCIAL SUMMARY (continued)
(unaudited)
September 30, | June 30, | September 30, | December 31, | |||||||||
Key financial ratios: | 2020 | 2020 | 2019 | 2019 | ||||||||
Return on average assets (YTD) | 0.76 | % | 0.53 | % | 1.09 | % | 1.09 | % | ||||
Return on average common equity (YTD) | 10.15 | % | 7.06 | % | 15.03 | % | 14.77 | % | ||||
September 30, | June 30, | September 30, | December 31, | |||||||||
2020 | 2020 | 2019 | 2019 | |||||||||
Asset Quality Ratios | ||||||||||||
Allowance for loan losses to total loans | 1.39 | % | 1.30 | % | 1.06 | % | 1.07 | % | ||||
Non-performing loans to total loans (a) | 0.45 | % | 0.70 | % | 0.41 | % | 0.43 | % | ||||
Non-performing assets to loans (a) | 1.44 | % | 1.67 | % | 1.53 | % | 1.53 | % | ||||
Non-performing assets to assets (a) | 1.10 | % | 1.27 | % | 1.22 | % | 1.20 | % | ||||
Performing TDRs to loans (a) | 0.19 | % | 0.19 | % | 0.23 | % | 0.22 | % | ||||
Allowance for loan losses to | ||||||||||||
non-performing loans (a) | 305.49 | % | 186.62 | % | 255.79 | % | 246.09 | % | ||||
Capital Ratios | ||||||||||||
Average stockholders' equity to average total assets (YTD) | 7.47 | % | 7.51 | % | 7.22 | % | 7.38 | % | ||||
Period-end stockholders' equity to period-end assets (YTD) | 7.45 | % | 7.13 | % | 7.78 | % | 7.71 | % | ||||
Total risk-based capital ratio | 15.05 | % | 14.64 | % | 14.47 | % | 14.89 | % | ||||
Tier 1 risk-based capital ratio | 13.28 | % | 12.76 | % | 12.60 | % | 13.04 | % | ||||
Common equity Tier 1 capital | 9.97 | % | 9.58 | % | 9.50 | % | 9.86 | % | ||||
Tier 1 leverage ratio | 9.99 | % | 9.82 | % | 10.69 | % | 10.73 | % |
(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: | 2020 | 2020 | 2019 | 2019 | ||||||||||||
Total assets | $ | 1,669,770 | $ | 1,683,736 | $ | 1,449,338 | $ | 1,492,962 | ||||||||
Loans held for investment | 1,279,165 | 1,280,615 | 1,149,268 | 1,168,797 | ||||||||||||
Allowance for loan losses | (17,764 | ) | (16,622 | ) | (12,178 | ) | (12,477 | ) | ||||||||
Loans held for sale | 7,886 | 9,041 | 2,250 | 428 | ||||||||||||
Investment securities | 193,175 | 199,012 | 187,480 | 180,901 | ||||||||||||
Deposits | 1,326,752 | 1,327,633 | 1,137,407 | 1,186,521 | ||||||||||||
Total stockholders’ equity | 124,367 | 120,031 | 112,814 | 115,038 | ||||||||||||
Book value per share | $ | 19.15 | $ | 18.47 | $ | 17.29 | $ | 17.63 | ||||||||
Market price per share | $ | 18.94 | $ | 19.69 | $ | 22.91 | $ | 24.52 | ||||||||
Net interest spread (FTE) (YTD) | 3.27 | % | 3.26 | % | 3.15 | % | 3.20 | % | ||||||||
Net interest margin (FTE) (YTD) | 3.50 | % | 3.51 | % | 3.47 | % | 3.51 | % | ||||||||
Net interest spread (FTE) (QTR) | 3.30 | % | 3.25 | % | 3.32 | % | 3.33 | % | ||||||||
Net interest margin (FTE) (QTR) | 3.50 | % | 3.46 | % | 3.64 | % | 3.63 | % | ||||||||
Efficiency ratio (YTD) | 66.67 | % | 69.91 | % | 68.13 | % | 67.15 | % | ||||||||
Efficiency ratio (QTR) | 61.41 | % | 69.16 | % | 64.86 | % | 64.35 | % |
NON-GAAP FINANCIAL MEASURES
(unaudited)
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 adjustments to exclude the additional loan loss provision recorded in the three and nine months ended September 30, 2020 caused by the impact on current economic conditions due to the COVID-19 pandemic and the impact of the gain on the sale of our Branson branch that closed during the quarter ended March 31, 2019. These are non-recurring and not considered indicative of underlying earnings performance. The Company believes that the exclusion of these items 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:
Three Months Ended | ||||||||||
September 30, | June 30, | September 30, | ||||||||
Statement of income information: | 2020 | 2020 | 2019 | |||||||
Net income – GAAP | $ | 4,960 | $ | 3,282 | $ | 3,860 | ||||
Effect of ALL provision COVID-19 (a) | 632 | 474 | — | |||||||
Effect of net gain on branch sale (b) | — | — | (86 | ) | ||||||
Net income - non-GAAP | $ | 5,592 | $ | 3,756 | $ | 3,774 | ||||
Earnings per share: | ||||||||||
Basic – GAAP | $ | 0.77 | $ | 0.51 | $ | 0.59 | ||||
Effect of ALL provision COVID-19 (a) | 0.10 | 0.07 | — | |||||||
Effect of net gain on branch sale (b) | — | — | (0.01 | ) | ||||||
Basic - non-GAAP | $ | 0.87 | $ | 0.58 | $ | 0.58 | ||||
Diluted – GAAP | $ | 0.77 | $ | 0.51 | $ | 0.59 | ||||
Effect of ALL provision COVID-19 (a) | 0.10 | 0.07 | — | |||||||
Effect of net gain on branch sale (b) | — | — | (0.01 | ) | ||||||
Diluted - non-GAAP | $ | 0.87 | $ | 0.58 | $ | 0.58 |
NON-GAAP FINANCIAL MEASURES (continued)
(unaudited)
For the Nine Months Ended | |||||||
September 30, | |||||||
Statement of income information: | 2020 | 2019 | |||||
Net income - GAAP | $ | 9,110 | $ | 12,046 | |||
Effect of ALL provision COVID-19 (a) | 3,476 | — | |||||
Effect of net gain on branch sale (b) | — | (1,725 | ) | ||||
Net income - non-GAAP | $ | 12,586 | $ | 10,321 | |||
Earnings per share: | |||||||
Basic – GAAP | $ | 1.40 | $ | 1.85 | |||
Effect of ALL provision COVID-19 (a) | 0.54 | — | |||||
Effect of net gain on branch sale (b) | — | (0.26 | ) | ||||
Basic - non-GAAP | $ | 1.94 | $ | 1.59 | |||
Diluted – GAAP | $ | 1.40 | $ | 1.85 | |||
Effect of ALL provision COVID-19 (a) | 0.54 | — | |||||
Effect of net gain on branch sale (b) | — | (0.26 | ) | ||||
Diluted - non-GAAP | $ | 1.94 | $ | 1.59 | |||
(a) An additional
(b) The gain on the sale of the Branson Branch was
September 30, | June 30, | September 30, | December 31, | ||||||||
Key financial ratios: | 2020 | 2020 | 2019 | 2019 | |||||||
Return on average assets (YTD) – GAAP | 0.76 | % | 0.53 | % | 1.09 | % | 1.09 | % | |||
Effect of ALL provision COVID-19 (a) | 0.29 | 0.36 | — | — | |||||||
Effect of net gain on branch sale (b) | — | — | (0.16 | ) | (0.12 | ) | |||||
Return on average assets (YTD) - non-GAAP | 1.05 | % | 0.89 | % | 0.93 | % | 0.97 | % | |||
Return on average common equity (YTD) – GAAP | 10.15 | % | 7.06 | % | 15.03 | % | 14.77 | % | |||
Effect of ALL provision COVID-19 (a) | 3.87 | 4.84 | — | — | |||||||
Effect of net gain on branch sale (b) | — | — | (2.15 | ) | (1.58 | ) | |||||
Return on average common equity (YTD) - non-GAAP | 14.02 | % | 11.90 | % | 12.88 | % | 13.19 | % | |||
(a) An additional
(b) The gain on the sale of the Branson Branch was
LOAN MODIFICATIONS
(unaudited)
Total Loan Modifications to date under the CARES Act by NAICS Code | ||||||||||||||||
Interest | % | Full | % | |||||||||||||
Industry Category | Only | Loans | Deferral | Loans | Totals | |||||||||||
Real Estate and Rental and Leasing | $ | 124,903 | 41.2 | % | $ | 32,520 | 10.7 | % | $ | 157,423 | ||||||
Accommodations and Food Services | 23,360 | 7.7 | 43,827 | 14.4 | 67,187 | |||||||||||
Construction | 9,856 | 3.2 | 4,497 | 1.5 | 14,353 | |||||||||||
Manufacturing | 7,715 | 2.5 | 485 | 0.2 | 8,200 | |||||||||||
Other Services | 5,717 | 1.9 | 1,803 | 0.6 | 7,520 | |||||||||||
Cinemas | 1,061 | 0.4 | 6,191 | 2.0 | 7,252 | |||||||||||
Health Care and Social Assistance | 5,044 | 1.7 | 1,188 | 0.4 | 6,232 | |||||||||||
Retail Trade | 4,236 | 1.4 | 524 | 0.2 | 4,760 | |||||||||||
Arts, Entertainment, Recreation | 11,378 | 3.8 | 3,186 | 1.0 | 14,564 | |||||||||||
Non-NAICS (Consumer) | 190 | 0.1 | 3,832 | 1.3 | 4,022 | |||||||||||
Other | 8,053 | 2.7 | 3,648 | 1.2 | 11,701 | |||||||||||
Total modifications | $ | 201,513 | 66.5 | % | $ | 101,701 | 33.5 | % | $ | 303,214 | ||||||
As of September 30, 2020 | ||||||||||||||||
Loan Modifications under the CARES Act by NAICS Code | ||||||||||||||||
Interest | % | Full | % | |||||||||||||
Industry Category | Only | Loans | Deferral | Loans | Totals | |||||||||||
Real Estate and Rental and Leasing | $ | 13,003 | 14.3 | % | $ | 3,343 | 3.7 | % | $ | 16,346 | ||||||
Accommodations and Food Services | 19,859 | 21.8 | 37,918 | 41.7 | 57,777 | |||||||||||
Construction | 505 | 0.6 | - | - | 505 | |||||||||||
Cinemas | - | - | 4,691 | 5.2 | 4,691 | |||||||||||
Retail Trade | - | - | 119 | 0.1 | 119 | |||||||||||
Arts, Entertainment, Recreation | 10,166 | 11.2 | - | - | 10,166 | |||||||||||
Non-NAICS (Consumer) | 77 | 0.1 | 427 | 0.5 | 504 | |||||||||||
Other | 943 | 1.0 | - | - | 943 | |||||||||||
Total modifications | $ | 44,553 | 48.9 | % | $ | 46,498 | 51.1 | % | $ | 91,051 | ||||||
Remaining loan modifications under the CARES Act as a percent of the total loan portfolio | 7.1 | % | ||||||||||||||
Total loan modifications under the CARES Act to date | $ | 303,214 | ||||||||||||||
Total loan modifications under the CARES Act to date as a percent of the total loan portfolio | 23.7 | % | ||||||||||||||
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.
FAQ
What were the earnings for Hawthorn Bancshares (HWBK) in Q3 2020?
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