Hawthorn Bancshares Inc. (NASDAQ:HWBK), today reported consolidated
financial results for the Company for the year ended December 31,
2017.
Net income for the current year was $3.4
million, or $0.59 per diluted common share, compared to $7.3
million, or $1.24 per diluted common share, for 2016.
Included in the 2017 net income is a $4.1 million charge, or $0.70
per diluted common share, that includes $3.1 million resulting from
application of the Tax Cut and Jobs Act (the “Tax Act”) enacted in
the fourth quarter of 2017, and $1.0 million resulting from tax
planning strategies implemented at year-end 2017.
The return on average common equity was 3.59%
(7.90% excluding the charge from the Tax Act) and the return on
average assets was 0.25% (0.56% excluding the charge from the Tax
Act) for the current year compared to 7.97% and 0.58% for the prior
year, respectively.
Commenting on earnings performance, Chairman
David T. Turner said, “Hawthorn reported a 4% increase in non-GAAP
earnings per share to $1.29 excluding the impact of the Tax Act for
the current year. Loans increased $94.4 million, or 9.7%,
from the prior year end and they have increased $203 million, or
23.5%, since year-end 2015. This growth was accomplished
without a deterioration in credit quality as nonperforming loans to
total loans improved from 1.19% at 12/31/15 to 1.00% at 12/31/17.
Our current year net interest margin remained strong at 3.41% while
net interest income was $42.9 million, a $2.6 million increase from
the prior year driven primarily by loan growth. Non-interest income
of $9.0 million for the current year was level with the prior year,
mostly due to securities gains of $0.6 million recognized in 2016
that offset increases in most other non-interest income
categories. Non-interest expense of $38.8 million was $2.0
million higher than the prior year mostly due to a $0.9 million, or
4.5%, increase in salaries and benefits expense and a net increase
in other operating expenses of $1.1 million primarily due to costs
associated with technology related expenses to improve operating
efficiencies and our ability to react to new technology
developments.”
Net Interest Income
Net interest income for the year ended December
31, 2017 was $42.9 million compared to $40.3 million for the prior
year. The increase in average loans from 2016 of $111 million, or
12.1%, was the primary contributor to the growth in net interest
income. The net interest margin declined 7 basis points from 2016
to 3.41% for 2017 primarily due to the yield on average earning
assets increasing 7 basis points while the cost of interest bearing
liabilities increased 19 basis points.
Non-Interest Income and
Expense
Non-interest income for the year ended December
31, 2017 was $9.0 million compared to $8.9 million for the prior
year ended December 31, 2016. The net change from the prior
year was primarily due to increases in trust income of $0.2 million
and combined real estate servicing and mortgage loan sales income
of $0.3 million offset by securities gains of $0.6 million
recognized in the prior year.
Non-interest expense was $38.8 million for the
year ended December 31, 2017, an increase of $2.0 million, or 5.4%,
over the prior year level of $36.8 million. Salaries and benefits
increased $0.9 million, or 4.5% over 2016 due to cost of living
adjustments, merit increases and increased health insurance and
pension costs. Other operating expenses increased $1.1
million primarily due to technology related costs.
Allowance for Loan Losses
The Company’s level of non-performing loans at
December 31, 2017 was 1.00% of total loans compared to 0.95% at
December 31, 2016. During the year ended December 31, 2017, the
Company recorded net charge-offs of $799,000, or 0.08% of average
loans, compared to net charge-offs of $143,000, or 0.02% of average
loans for the year ended December 31, 2016. The increase in
net charge-offs over the prior year was primarily due to a recovery
of approximately $500,000 on a construction loan during the second
quarter of 2016. The allowance for loan losses at December 31, 2017
was $10.9 million, or 1.02% of outstanding loans, 101.57% of
non-performing loans and 180.87% of nonperforming loans when
excluding accruing TDR’s. At December 31, 2016, the allowance for
loan losses was $9.9 million, or 1.01% of outstanding loans,
107.35% of non-performing loans and 282.94% of nonperforming loans
when excluding accruing TDR’s. 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, 2017.
Financial Condition
Comparing December 31, 2017 balances with
December 31, 2016, total assets increased $142.2 million to $1.4
billion. The largest driver in asset growth was the increase in
loans of $94.4 million, or 9.7%, while federal funds sold and other
overnight interest-bearing deposits increased $41.6 million. Total
deposits increased $115.1 million, or 11.4%, to $1.1 billion and
FHLB advances and other borrowings increased $28.0 million to
$121.4 million at December 31, 2017. During the same period,
stockholders’ equity increased 0.4% to $91.4 million, or 6.4% of
total assets. The total risk based capital ratio of 12.93% and the
leverage ratio of 9.33% at December 31, 2017, respectively, far
exceed minimum regulatory requirements of 8.00% and 4.00%,
respectively.
|
|
|
|
|
|
|
|
|
|
[Tables follow] |
|
|
|
|
|
|
|
|
|
|
FINANCIAL SUMMARY |
|
|
|
|
|
|
|
|
|
(unaudited) |
|
|
|
|
|
|
|
|
|
$000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Statement of income information: |
December 31, |
|
|
September 30, |
|
|
December 31, |
|
|
|
2017 |
|
|
|
2017 |
|
|
2016 |
|
Total interest income |
$ |
13,219 |
|
|
$ |
12,936 |
|
$ |
11,877 |
|
Total interest expense |
|
2,351 |
|
|
|
2,183 |
|
|
1,497 |
|
Net interest income |
|
10,868 |
|
|
|
10,753 |
|
|
10,380 |
|
Provision for loan losses |
|
530 |
|
|
|
555 |
|
|
450 |
|
Noninterest income |
|
2,268 |
|
|
|
2,181 |
|
|
2,395 |
|
Noninterest expense |
|
9,999 |
|
|
|
9,766 |
|
|
9,285 |
|
Pre-tax income |
|
2,607 |
|
|
|
2,613 |
|
|
3,040 |
|
Income taxes |
|
4,979 |
|
|
|
847 |
|
|
1,052 |
|
Net income |
$ |
(2,372 |
) |
|
$ |
1,766 |
|
$ |
1,988 |
|
Earnings per share: |
|
|
|
|
|
|
|
|
|
Basic: |
$ |
(0.41 |
) |
|
$ |
0.30 |
|
$ |
0.34 |
|
Diluted: |
$ |
(0.41 |
) |
|
$ |
0.30 |
|
$ |
0.34 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of income information: |
|
|
For the Year Ended |
|
|
|
|
|
2017 |
|
|
2016 |
|
Total interest income |
|
|
|
$ |
50,935 |
|
$ |
46,010 |
|
Total interest expense |
|
|
|
|
8,007 |
|
|
5,663 |
|
Net interest income |
|
|
|
|
42,928 |
|
|
40,347 |
|
Provision for loan losses |
|
|
|
|
1,765 |
|
|
1,425 |
|
Noninterest income |
|
|
|
|
8,955 |
|
|
8,917 |
|
Noninterest expense |
|
|
|
|
38,802 |
|
|
36,807 |
|
Pre-tax income |
|
|
|
|
11,316 |
|
|
11,032 |
|
Income taxes |
|
|
|
|
7,902 |
|
|
3,750 |
|
Net income |
|
|
|
$ |
3,414 |
|
$ |
7,282 |
|
Earnings per share: |
|
|
|
|
|
|
|
|
|
Basic: |
|
|
|
$ |
0.59 |
|
$ |
1.24 |
|
Diluted: |
|
|
|
$ |
0.59 |
|
$ |
1.24 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Key
financial ratios: |
|
December 31, |
|
|
September 30, |
|
|
December 31, |
|
|
|
2017 |
|
|
|
2017 |
|
|
2016 |
|
Return on average assets (YTD) |
0.25 |
|
% |
|
0.58 |
% |
|
0.58 |
% |
Return on average common equity (YTD) |
3.59 |
|
% |
|
8.18 |
% |
|
7.97 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
September 30, |
|
|
December 31, |
|
|
|
2017 |
|
|
|
2017 |
|
|
2016 |
|
Allowance for loan losses to total loans |
1.02 |
|
% |
|
1.05 |
% |
|
1.01 |
% |
Nonperforming loans to total loans |
1.00 |
|
% |
|
1.06 |
% |
|
0.95 |
% |
Nonperforming assets to loans and foreclosed assets |
|
2.21 |
|
% |
|
2.29 |
% |
|
2.37 |
% |
Allowance for loan losses to nonperforming loans |
|
101.57 |
|
% |
|
99.42 |
% |
|
107.35 |
% |
Allowance for loan losses to nonperforming loans -
excluding performing TDRs |
180.87 |
|
% |
|
172.20 |
% |
|
282.94 |
% |
|
|
|
|
|
|
|
|
|
|
Balance sheet information: |
|
December 31, |
|
|
September 30, |
|
|
December 31, |
|
|
|
2017 |
|
|
|
2017 |
|
|
2016 |
|
Loans, net of allowance for loan losses |
$ |
1,057,580 |
|
|
$ |
1,034,047 |
|
$ |
964,143 |
|
Investment securities |
|
237,579 |
|
|
|
222,410 |
|
|
224,308 |
|
Total assets |
|
1,429,216 |
|
|
|
1,386,532 |
|
|
1,287,048 |
|
Deposits |
|
1,125,812 |
|
|
|
1,107,960 |
|
|
1,010,666 |
|
Total stockholders’ equity |
|
91,371 |
|
|
|
96,072 |
|
|
91,017 |
|
|
|
|
|
|
|
|
|
|
|
Book value per share |
$ |
15.68 |
|
|
$ |
16.47 |
|
$ |
15.52 |
|
Market price per share |
$ |
20.75 |
|
|
$ |
20.70 |
|
$ |
17.02 |
|
|
|
|
|
|
|
|
|
|
|
|
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 adjustments
to exclude the transitional impact of the Tax Act and the Company's
implementation of new tax planning strategies, which are
non-recurring and not considered indicative of underlying earnings
performance. [The adjustments do not include the ongoing impacts of
the lower U.S. statutory rate under the Tax Act on current year
earnings.] 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 that 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:
|
|
|
|
|
|
|
|
NON-GAAP FINANCIAL MEASURES |
|
|
|
|
|
|
|
(unaudited) |
|
|
|
|
|
|
|
|
|
$000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Statement of income
information: |
December 31, |
|
|
September 30, |
|
|
December 31, |
|
|
|
|
2017 |
|
|
|
2017 |
|
|
2016 |
|
|
Net income - GAAP |
$ |
(2,372 |
) |
|
$ |
1,766 |
|
$ |
1,988 |
|
|
Effect of net deferred tax asset adjustments (a) |
4,105 |
|
|
|
0 |
|
|
0 |
|
|
Net
income and Dec 2017 non-GAAP Net income |
$ |
1,733 |
|
|
$ |
1,766 |
|
$ |
1,988 |
|
|
Earnings per share: |
|
|
|
|
|
|
|
|
Basic - GAAP |
$ |
(0.41 |
) |
|
$ |
0.30 |
|
$ |
0.34 |
|
|
Effect of net deferred tax asset adjustments (a) |
0.71 |
|
|
|
0.00 |
|
|
0.00 |
|
|
Basic and Dec 2017 non-GAAP Basic |
$ |
0.30 |
|
|
$ |
0.30 |
|
$ |
0.34 |
|
|
Diluted - GAAP |
$ |
(0.41 |
) |
|
$ |
0.30 |
|
$ |
0.34 |
|
|
Effect of net deferred tax asset adjustments (a) |
0.71 |
|
|
|
0.00 |
|
|
0.00 |
|
|
Diluted and Dec 2017 non-GAAP Diluted |
$ |
0.30 |
|
|
$ |
0.30 |
|
$ |
0.34 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of income information: |
For the Year Ended |
|
|
|
|
|
|
2017 |
|
|
2016 |
|
|
Net income - GAAP |
|
$ |
3,414 |
|
$ |
7,282 |
|
|
Effect of net deferred tax asset adjustments (a) |
4,105 |
|
|
0 |
|
|
Net
income and 2017 non-GAAP Net income |
$ |
7,519 |
|
$ |
7,282 |
|
|
Earnings per share: |
|
|
|
|
|
|
|
|
Basic - GAAP |
|
|
$ |
0.59 |
|
$ |
1.24 |
|
|
Effect of net deferred tax asset adjustments (a) |
0.70 |
|
|
0.00 |
|
|
Basic and 2017 non-GAAP Basic |
$ |
1.29 |
|
$ |
1.24 |
|
|
Diluted - GAAP |
|
|
$ |
0.59 |
|
$ |
1.24 |
|
|
Effect of net deferred tax asset adjustments (a) |
0.70 |
|
|
0.00 |
|
|
Diluted and 2017 non-GAAP Diluted |
$ |
1.29 |
|
$ |
1.24 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Key
financial ratios: |
December 31, |
|
|
September 30, |
|
|
December 31, |
|
|
|
|
2017 |
|
|
|
2017 |
|
|
2016 |
|
|
Return on average assets (YTD) - GAAP |
0.25 |
|
% |
|
0.58 |
% |
|
0.58 |
% |
|
Effect of net deferred tax asset adjustments (a) |
0.31 |
|
% |
|
0.00 |
|
|
0.00 |
|
|
Return on average assets (YTD) and Dec 2017 non-GAAP Return on
average assets (YTD) |
|
0.56 |
|
% |
|
0.58 |
% |
|
0.58 |
% |
|
Return on average common equity (YTD) - GAAP |
3.59 |
|
% |
|
8.18 |
% |
|
7.97 |
% |
|
Effect of net deferred tax asset adjustments (a) |
4.31 |
|
% |
|
0.00 |
% |
|
0.00 |
% |
|
Return on average common equity (YTD) and Dec 2017 non-GAAP
Return on average common equity (YTD) |
|
7.90 |
|
% |
|
8.18 |
% |
|
7.97 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
(a)
Calculated using the difference in combined statutory rates of 38%
for 2017 and 21% for subsequent years. |
|
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, Springfield,
Branson, Independence, Columbia, Clinton, Windsor, 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. Such
forward-looking statements include, but are not limited to,
statements regarding the estimated effects of the Tax Act. It is
important to note that actual results could differ materially from
those projected in such forward-looking statements. Factors that
could cause the Company's estimated effects of the Tax Act to
differ materially include, but are not limited to, changes in
interpretations and assumptions the Company has made with respect
to the anticipated effects of the Tax Act, federal tax regulations
and guidance that may be issued by the U.S. Department of Treasury
and future actions by the Company resulting from the Tax Act.
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: Bruce Phelps
Chief Financial Officer
TEL: 573.761.6100 FAX: 573.761.6272
www.HawthornBancshares.com
Hawthorn Bancshares (NASDAQ:HWBK)
Historical Stock Chart
From Jun 2024 to Jul 2024
Hawthorn Bancshares (NASDAQ:HWBK)
Historical Stock Chart
From Jul 2023 to Jul 2024