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Hawthorn Bancshares Announces Earnings

Hawthorn Bancshares Inc. (NASDAQ: HWBK), today reported consolidated financial results for the Company, including its main operating subsidiary, Hawthorn Bank, for the third quarter ended September 30.

Net income for the quarter was $1.5 million, compared to $1.4 million for the third quarter of 2010. Hawthorn earned $0.22 per diluted common share for the three months ended September 30, 2011, versus $0.20 for the third quarter of 2010 after deducting accrued dividends and accretion of $0.5 million on preferred stock issued to the U.S. Treasury under the Capital Purchase Program.

On a year to date basis, Hawthorn Bancshares generated net income of $3.9 million, up from $2.7 million for 2010. After deducting accrued dividends and accretion on preferred stock issued to the U.S. Treasury, income available to common shareholders was $2.4 million compared to $1.2 million for 2010. From a diluted earnings per common share basis, Hawthorn generated $0.51 for the nine months ended September 30, 2011 compared to $0.26 per common share for the same period in 2010.

Operating Results

Net Interest Income

Due to increasing the Company’s net interest margin from 3.81% for the third quarter of 2010 to 3.98% for the same period in 2011, net interest income for the quarter ended September 30, 2011 remained stable at $10.8 million despite a lower volume of earning assets. The higher net interest margin is primarily the result of the decrease in rates paid on interest bearing liabilities outpacing the decrease in rates earned on interest bearing assets.

Non-Interest Income and Expense

Non-interest income for the three months ended September 30, 2011 was $2.4 million compared to $2.9 million for the same period in 2010. The decrease is primarily the result of a $0.6 million decrease in the gains on sales of mortgage loans due to higher real estate refinancing activity experienced during the third quarter of 2010 as compared to 2011. Non-interest expense for the three months ended September 30, 2011 was $8.9 million compared to $9.4 million for third quarter 2010. The decrease is largely attributed to a $0.4 million decrease in expenses and impairment charges related to foreclosed assets.

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