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.
Due largely to a $4.7 million loan loss provision and a $1.1 million other real estate impairment expense, Hawthorn realized a net loss for the third quarter of $1.6 million. This compares to the Company’s $1.5 million net income for the third quarter of 2011. On a per share basis, Hawthorn reported a $0.39 per diluted common share loss for the three months ended September 30, 2012, versus positive earnings per common share of $0.21 for the third quarter of 2011. Financial results were reduced by accrued dividends and accretion of $0.3 million on preferred stock issued to the U.S. Treasury under the Capital Purchase Program for the third quarter of 2012 compared to $0.5 million for the same period in 2011.
The preferred dividend reduction for the quarter results from repaying $12 million of the company’s TARP obligation on May 9, 2012.
On a year to date basis, Hawthorn Bancshares generated net income of $0.6 million, down from $3.9 million for 2011. After deducting accrued preferred dividends and accretion of $1.5 million, Hawthorn reported a $0.9 million loss to common shareholders for the nine months ending September 30, 2012. This compares to net income of $2.4 million available to common shareholders for the same period in 2011 after preferred dividends and accretion of $1.5 million. On a diluted per common share basis, Hawthorn reported an $0.18 loss for the nine months ended September 30, 2012 compared to income of $0.49 per common share for the same period in 2011.
Commenting on earnings performance, Chairman David T. Turner said, “2012 is proving to be a difficult economic environment for Hawthorn with significant increases in loan loss provisions and carrying costs associated with foreclosed assets. The main driver of the Company’s 3
quarter loan loss provision expense resulted from exposure in a commercial real estate property in Branson, Missouri which has experienced lower tourism revenues.”
Net Interest Income
Due to a reduction in the Company’s net interest margin from 3.98% for the third quarter of 2011 to 3.80% for the same period in 2012, net interest income for the quarter declined moderately to $10.1 million from $10.8 million. The lower net interest margin was primarily the result of reduced earning asset yields, while the volume of earning assets remained relatively steady. With reference to interest income, Chairman Turner stated, “Hawthorn’s core operations remain strong as our net interest margin continues to fair well in comparison to our peers. With the historically low rate environment and growing loan competition, the entire banking industry is experiencing margin pressure and while Hawthorn is experiencing some compression, the margin for the quarter remains healthy.”