Hawthorn Bancshares Announces Financial Results

  Hawthorn Bancshares Announces Financial Results

Business Wire

JEFFERSON CITY, Mo. -- November 14, 2013

Hawthorn Bancshares Inc. (NASDAQ: HWBK), today reported consolidated financial
results for the Company for the third quarter ended September 30, 2013.

Net income for the quarter was $1.6 million, compared to a net loss of $1.6
million for the third quarter of 2012. The Company earned $0.31 per diluted
common share for the three months ended September 30, 2013, versus a per share
net loss of $0.37 for the third quarter of 2012. As a result of the Company’s
May 2013 full repayment of its preferred stock, there was no deduction from
net income for accrued dividends and discount accretion for the current
quarter. Preferred dividends and discount accretion for the three months ended
September 30, 2012 totaled $0.3 million.

For the quarter, the return on average common equity was 8.68% and the return
on average assets was 0.54% compared to a negative 9.95% and a negative 0.54%,
respectively, for the same period in 2012.

On a year to date basis, the Company generated net income of $3.2 million for
2013, compared to $0.6 million for 2012. After deducting accrued dividends and
accretion on preferred stock issued to the U.S. Treasury, income available to
common shareholders was $2.6 million for 2013 compared to a net loss of $0.9
million for 2012. On a diluted earnings per common share basis, the Company
generated $0.52 for the nine months ended September 30, 2013 compared to a net
loss of $0.17 per common share for the same period in 2012.

Operating Results

Net Interest Income

Net interest income for the quarter ended September 30, 2013 decreased 2.5% to
$9.9 million from $10.1 million for the same period in 2012. The decrease is
largely attributed to a 3.74% net interest margin for the current quarter
compared to 3.80% for the same three month period in 2012. With lower average
loan balances and lower average rates, loan interest income was reduced which
resulted in a lower net interest margin for the quarter ending September 30,
2013.

Noninterest Income and Expense

Noninterest income for the three months ended September 30, 2013 was $2.4
million compared to $2.7 million for the same period in 2012. The decrease is
primarily due to lower residential real estate refinancing activity reducing
gain on sale, which was partially offset by an increase in real estate
servicing fees. Noninterest expense for the three months ended September 30,
2013 decreased $0.4 million, or 3.9%, to $10.0 million compared to $10.4
million for third quarter 2012. The decrease was largely attributed to lower
other real estate owned expenses and reduced processing expenses for the
quarter.

Allowance for Loan Losses

The Company’s level of non-performing loans was 4.44% of total loans at
September 30, 2013, down from 4.65% at year-end 2012. During the quarter ended
September 30, 2013, the Company recognized net charge-offs of $1.1 million
compared to $3.1 million for the third quarter of 2012. Due to lower
historical loss rates, decreases in average loans and reduced levels of
nonperforming loans, no loan loss provision was needed for the third quarter
of 2013 compared to the $4.7 million loan loss provision for the third quarter
of 2012. The allowance for loan losses at September 30, 2013 was $14.3
million, or 1.73% of outstanding loans and 39.0% of non-performing loans. At
December 31, 2012, the allowance for loan losses was $14.8 million, or 1.75%
of outstanding loans and 37.7% of non-performing loans. Management believes
that the allowance for loan losses is adequate to cover probable losses as of
September 30, 2013.

Financial Condition

Comparing September 30, 2013 balances with December 31, 2012, total assets
declined 4.3% to $1.1 billion. Loans, net of allowance for loan losses,
declined 2.8% to $808.8 million. With reduced loan demand, investment
securities increased 6.7% to 213.6 million. The decline in asset volume lead
to total deposits declining 4.0% to $951.5 million. During the same period,
stockholders’ equity decreased to $71.8 million or 6.4% of total assets. The
decrease in the capital account for the period was due to the Company’s
election to repay the remaining balance of its TARP obligation of $18.3
million. At 15.36% and 8.56% of total assets as of September 30, 2013, total
risk based and leverage capital ratios, respectively, far exceed
“well-capitalized” regulatory minimums of 10.00% and 5.00%, respectively.

                                                         
FINANCIAL SUMMARY

(unaudited)

($ thousands, except per share amounts)
                                                                 
Balance sheet information:                September 30,          December 31,
                                          2013                   2012
       Loans, net of allowance for        $808,788               $832,142
       loan losses
       Debt securities                    213,629                200,246
       Total assets                       1,131,315              1,181,606
       Deposits                           951,478                991,275
       Total stockholders' equity         71,827                 92,220
                                                                 
                                          Three Months           Three Months
Statement of operations information:      Ended Sept. 30,        Ended Sept.
                                          2013                   30, 2012
       Total interest income              $11,298                $12,151
       Total interest expense             1,433                  2,029
       Net interest income                9,865                  10,122
       Provision for loan losses          0                      4,700
       Noninterest income                 2,447                  2,680
       Noninterest expense                9,972                  10,378
       Pre-tax income (loss)              2,340                  (2,276)
       Income taxes                       771                    (704)
       Net income (loss)                  1,569                  (1,572)
       Dividends & accretion on          0                      300
       preferred stock
       Net income (loss) available to     1,569                  (1,872)
       common shareholders
       Earnings (loss) per common
       share:
                   Basic                  $0.31                  ($0.37)
                   Diluted                $0.31                  ($0.37)
                                                                 
                                          Nine Months            Nine Months
Statement of operations information:      Ended Sept. 30,        Ended Sept.
                                          2013                   30, 2012
       Total interest income              $34,436                $37,094
       Total interest expense             5,027                  5,986
       Net interest income                29,409                 31,108
       Provision for loan losses          2,000                  7,900
       Noninterest income                 8,543                  7,093
       Noninterest expense                31,188                 29,955
       Pre-tax income                     4,764                  346
       Income taxes                       1,519                  (273)
       Net income                         3,245                  619
       Dividends & accretion on           615                    1,481
       preferred stock
       Net income(loss) available to      2,630                  (862)
       common shareholders
       Earnings (loss) per common
       share:
                   Basic                  $0.52                  ($0.17)
                   Diluted                $0.52                  ($0.17)
                                                                 
Key financial ratios:                     September 30,          September 30,
                                          2013                   2012
       Return on average assets           0.37%                  0.07%
       (YTD)
       Return on average common           4.79%                  (1.54%)
       equity (YTD)
                                                                 
                                          September 30,          December 31,
                                          2013                   2012
       Allowance for loan losses to       1.73%                  1.75%
       total loans
       Nonperforming loans to total       4.44%                  4.65%
       loans
       Nonperforming assets to loans      6.25%                  7.23%
       and foreclosed assets
       Allowance for loan losses to       38.96%                 37.70%
       nonperforming loans
                                                                 

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, Missouri with locations in Lee's Summit, Springfield, Branson,
Independence, Liberty, Raymore, Columbia, Clinton, Windsor, Collins, 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
Kathleen Bruegenhemke, 573-761-6100
Senior Vice President, Investor Relations
FAX: 573-761-6272
www.HawthornBancshares.com
 
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