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Hawthorn Bancshares Reports 2013 Financial Results

Stocks in this article: HWBK

Hawthorn Bancshares, Inc. (NASDAQ: HWBK), today reported financial results for the Company for the year ended December 31, 2013.

The Company reported net income available to common shareholders of $5.0 million for 2013 compared to $2.8 million for 2012. Income available to shareholders improved for 2013 to $4.4 million from $1.0 million for 2012 due to lower preferred dividends related to repayment of Hawthorn Bancshares’ outstanding U.S. Treasury’s Capital Purchase debt (commonly called TARP). Preferred dividends and discount accretion totaled $0.6 million for 2013 compared to $1.8 million for 2012. On a per share basis, Hawthorn earned a net profit of $0.87 per common share for 2013 compared to $0.21 for 2012.

Commenting on the Company’s earnings performance, Chairman and CEO David T. Turner said “I am pleased to report that net income for 2013 increased 76% over 2012 and is at its highest level since 2007. Our improved performance in 2013 was primarily the result of continued improvement in asset quality which allowed us to reduce our loan loss provision.”

Operating Results

Net Interest Income

Net interest income for 2013 was $39.3 million compared to $41.2 million for 2012. While the decrease continues to be the result of the historically low rate environment and growing competition for quality loans, our margin for 2013 remained healthy. On a tax equivalent basis, Hawthorn’s net interest margin for 2013 was 3.72% compared to 3.84% for 2012. The lower net interest margin for 2013 was primarily the result of reduced average earning assets and continued net interest margin contraction.

Non-Interest Income and Expense

Non-interest income for 2013 was $10.9 million compared to $9.7 million for 2012. The increase is primarily the result of a $1.3 million positive variance in real estate servicing income related to changes in the fair value of mortgage servicing rights and $0.8 million of gains realized on the sale of investment securities. Investment security gains were the result of selling numerous older small holdings and purchasing a few large current issues without significantly changing the size or duration of the bond portfolio. These positive changes were partially offset by lower refinancing activity in our home mortgage area which impacted both the volume of loans sold and the related gains recognized. Non-interest expense for 2013 was $40.8 million compared to $38.7 million for 2012. The largest contributor to the increase resulted from higher expense valuation write-downs on foreclosed assets.

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