Hawthorn Bancshares Reports First Quarter Earnings

Hawthorn Bancshares Inc. (NASDAQ: HWBK), today reported consolidated financial results for the Company for the quarter ended March 31.

Net income for the quarter was $1.5 million, compared to $1.0 million for the first quarter of 2011. After deducting dividends and discount accretion of $0.5 million on the preferred stock issued to the U.S. Treasury under the Capital Purchase Program, Hawthorn earned $0.21 per diluted common share for the three months ending March 31, 2012, versus $0.10 for the first quarter of 2011. For the quarter, the annualized return on average common equity was 5.21% and the annualized return on average assets was 0.49% compared with 2.56% and 0.32%, respectively, for the same period in 2011.

Operating Results

Net Interest Income

Net interest income for the quarter ended March 31, 2012 increased 3.2% to $10.8 million from $10.5 million for the same period in 2011. The increase is attributed to continued strengthening of the Company’s net interest margin which increased from 3.84% at March 31, 2011 to 3.98% for the first quarter of 2012. The net interest margin for the full year 2011 was 3.92%. In commenting on growth in the margin, Chairman David T. Turner said, “With non-performing assets of $69.9 million, there is significant downward pressure on asset yields. However, lower funding costs for the company more than outpaced declining asset yields; thereby, resulting in a net improvement in the company’s margin.”

Non-Interest Income and Expense

Non-interest income for the three months ended March 31, 2012 was $2.0 million compared to $2.1 million for the same period in 2011. Non-interest expense for the three months ended March 31, 2012 was $9.5 million compared to $9.4 million for first quarter 2011.

Loan Loss Reserve

Hawthorn’s level of non-performing loans increased to 5.92% of total loans at March 31, 2012, from 5.77% at March 31, 2011. However, the level of non-performing loans in relation to total loans decreased when compared to the year-end 2011 level of 6.37%.

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