Net income for the nine months ended September 30, 2024 was $13.7 million, or $1.95 per diluted share, an increase of $5.3 million compared to $8.4 million, or $1.19 per diluted share, for the nine months ended September 30, 2023.
Net Interest Income and Net Interest Margin
Net interest income for the third quarter 2024 was $14.3 million, an increase of $0.2 million from the prior quarter, and a decrease of $0.82 million from the prior year quarter. Net interest income for the nine months ended September 30, 2024 was $43.2 million, a decrease of $0.1 million compared to $43.3 million for the nine months ended September 30, 2023.
Interest income decreased $0.1 million in the current quarter compared to the prior year quarter, driven primarily by lower average interest earning assets, while interest expense increased $0.8 million compared to the prior year quarter. Net interest margin, on an FTE basis, was 3.36% for the current quarter, compared to 3.33% for the prior quarter, and 3.35% for the prior year quarter.
The yield earned on average loans held for investment was consistent at 5.83%, on an FTE basis, for both the third quarter 2024 and the prior quarter, compared to 5.67% for the prior year quarter.
The average cost of deposits was 2.74% for the third quarter 2024, compared to 2.69% for the prior quarter and 2.32% for the prior year quarter. Non-interest bearing demand deposits as a percent of total deposits was 26.0% as of September 30, 2024, compared to 25.9% and 26.9% at June 30, 2024 and September 30, 2023, respectively.
Non-interest Income
Total non-interest income for the third quarter 2024 was $3.8 million, a decrease of $0.2 million, or 5.3%, from the prior quarter, and an increase of $3.2 million, or 524.3%, from the prior year quarter. For the nine months ended September 30, 2024, non-interest income was $10.8 million, an increase of $5.4 million as compared to $5.4 million for the nine months ended September 30, 2023.
The decrease in the current quarter compared to the prior quarter was primarily due to the Company completing the sale of its mortgage servicing rights and recognizing a gain on sale on foreclosed property in the prior quarter.
The increase in the current quarter compared to the prior year quarter was primarily due to an increase in earnings on bank owned life insurance and a decrease in other real estate owned valuation write-downs, partially offset by a decrease in the gains on sale of mortgage loans in the current quarter.
Non-interest Expense
Total non-interest expense for the third quarter 2024 was $12.0 million, a decrease of $0.04 million, or 0.3%, from the prior quarter, and a decrease of $0.6 million, or 4.6%, from the prior year quarter. For the nine months ended September 30, 2024, non-interest expense was $36.6 million, a decrease of $1.2 million as compared to $37.8 million for the nine months ended September 30, 2023.
The third quarter 2024 efficiency ratio was 66.23% compared to 66.24% and 79.79% for the prior quarter and prior year quarter, respectively. The slight decrease in the current quarter compared to the prior quarter was primarily due to higher net interest margin and lower non-interest expenses in the current quarter.
Loans
Loans held for investment decreased $31.8 million, or 2.1%, to $1.5 billion as of September 30, 2024 as compared to June 30, 2024 and decreased $90.2 million, or 5.8%, from September 30, 2023.
Investments
Investments increased $17.9 million, or 9.3%, to $209.0 million as of September 30, 2024 compared to June 30, 2024 and decreased $31.5 million, or 13.1%, from September 30, 2023.
Asset Quality
Non-performing assets to total loans was 0.58% at September 30, 2024, compared to 0.54% and 0.48% at June 30, 2024 and September 30, 2023, respectively. Non-performing assets totaled $8.5 million at September 30, 2024, compared to $8.1 million and $7.4 million at June 30, 2024 and September 30, 2023, respectively. The increase in non-performing assets in the current quarter compared to the prior quarter is primarily due to a $2.0 million commercial loan relationship moving to non-accrual status and a $1.1 million commercial real estate loan that went to foreclosure during the current quarter.
In the third quarter 2024, the Company had net loan charge-offs of $0.6 million, or 0.04% of average loans, compared to net loan charge-offs of $2.0 million, or 0.13% of average loans, and $0.1 million, or 0.00% of average loans, in the prior quarter and prior year quarter, respectively. The charge-offs in the current quarter primarily related to one commercial real estate loan and one commercial loan relationship that were adequately reserved for in the prior quarter.
The Company's provision for credit losses and unfunded commitments was consistent at $0.5 million for both the third quarter 2024 and the prior quarter, and was $0.1 million for the prior year quarter.
The allowance for credit losses at September 30, 2024 was $21.9 million, or 1.50% of outstanding loans, and 539.52% of non-performing loans. At June 30, 2024, the allowance for credit losses was $22.0 million, or 1.47% of outstanding loans, and 495.38% of non-performing loans. At September 30, 2023, the allowance for credit losses was $22.5 million, or 1.44% of outstanding loans, and 583.88% of non-performing loans. The allowance for credit losses represents management’s best estimate of expected losses inherent in the loan portfolio and is commensurate with risks in the loan portfolio as of September 30, 2024 as determined by management.
Deposits
Total deposits at September 30, 2024 were $1.5 billion, a decrease of $46.7 million, or 3.0%, from June 30, 2024, and a decrease of $76.9 million, or 4.9%, from September 30, 2023. The decrease in deposits at September 30, 2024 as compared to September 30, 2023 was primarily a result of a decrease in demand deposits and brokered deposits.
Capital
The Company maintains its “well capitalized” regulatory capital position. At September 30, 2024, capital ratios were as follows: total risk-based capital to risk-weighted assets 14.91%; tier 1 capital to risk-weighted assets 13.66%; tier 1 leverage 11.33%; and common equity to assets 8.09%.
Pursuant to the Company's 2019 Repurchase Plan, management is given discretion to determine the number and pricing of the shares to be purchased under the plan, as well as the timing of any such purchases. The Company repurchased 56,692 common shares under the repurchase plan during the first nine months of 2024 at an average cost of $19.51 per share totaling $1.1 million. As of September 30, 2024, $3.9 million remains available for share repurchases pursuant to the plan.
During the fourth quarter of 2024, the Company's Board of Directors approved a quarterly cash dividend of $0.19 per common share payable January 1, 2025 to shareholders of record at the close of business on December 15, 2024.
[Tables follow]
FINANCIAL SUMMARY
(unaudited)
$000, except per share data
| | Three Months Ended |
| | September 30, | | June 30, | | September 30, |
| Statement of income information: | 2024 | | 2024
| | 2023 |
| Total interest income | $ | 23,819 | | $ | 23,556 | | | $ | 23,888 |
| Total interest expense | | 9,492 | | | 9,384 | | | | 8,741 |
| Net interest income | | 14,327 | | | 14,172 | | | | 15,147 |
| Provision for credit losses on loans and unfunded commitments | | 500 | | | 457 | | | | 110 |
| Non-interest income | | 3,783 | | | 3,995 | | | | 606 |
| Investment securities gains (losses), net | | 8 | | | (15) | | | | 3 |
| Non-interest expense | | 11,994 | | | 12,034 | | | | 12,569 |
| Pre-tax income | | 5,624 | | | 5,661 | | | | 3,077 |
| Income taxes | | 1,050 | | | 1,033 | | | | 498 |
| Net income | $ | 4,574 | | $ | 4,628 | | | $ | 2,579 |
| Earnings per share: | | | | | |
| Basic: | $ | 0.66 | | $ | 0.66 | | | $ | 0.36 |
| Diluted: | $ | 0.66 | | $ | 0.66 | | | $ | 0.36 |
| | | | | | |
| | | | Nine Months Ended |
| | | | September 30, |
| Statement of income information: | | | 2024 | | | 2023 |
| Total interest income | | | $ | 71,427 | | | $ | 66,748 |
| Total interest expense | | | | 28,181 | | | | 23,451 |
| Net interest income | | | | 43,246 | | | | 43,297 |
| Provision for credit losses on loans and unfunded commitments | | | | 726 | | | | 790 |
| Non-interest income | | | | 10,798 | | | | 5,384 |
| Investment securities (losses) gains, net | | | | (7) | | | | 18 |
| Non-interest expense | | | | 36,603 | | | | 37,772 |
| Pre-tax income | | | | 16,708 | | | | 10,137 |
| Income taxes | | | | 3,049 | | | | 1,738 |
| Net income | | | $ | 13,659 | | | $ | 8,399 |
| Earnings per share: | | | | | |
| Basic: | | | $ | 1.95 | | | $ | 1.19 |
| Diluted: | | | $ | 1.95 | | | $ | 1.19 |
FINANCIAL SUMMARY (continued)
(unaudited)
$000
| | September 30, | | June 30, | | September 30, |
| | 2024 | | 2024 | | 2023 |
| Key financial ratios: | | | | | |
| Return on average assets (QTR) | | 1.00% | | | | 1.02% | | | | 0.54% | |
| Return on average common equity (QTR) | | 12.87% | | | | 13.75% | | | | 8.05% | |
| Net interest margin (FTE) (QTR) | | 3.36% | | | | 3.33% | | | | 3.35% | |
| Efficiency ratio (QTR) | | 66.23% | | | | 66.24% | | | | 79.79% | |
| | | | | | |
| Asset Quality Ratios: | | | | | |
| Allowance for credit losses to total loans | | 1.50% | | | | 1.47% | | | | 1.44% | |
| Non-performing loans to total loans (a) | | 0.28% | | | | 0.30% | | | | 0.25% | |
| Non-performing assets to loans | | 0.58% | | | | 0.54% | | | | 0.48% | |
| Non-performing assets to assets | | 0.47% | | | | 0.44% | | | | 0.39% | |
| Performing TDRs to loans | $ | 636 | | | $ | 1,977 | | | $ | 74 | |
| Net Charge-offs to Average Loans (QTR) | | 0.04% | | | | 0.13% | | | | 0.00% | |
| Allowance for credit losses on loans to | | | | | |
| non-performing loans (a) | | 539.52% | | | | 495.38% | | | | 583.88% | |
| | | | | | |
| Capital Ratios: | | | | | |
| Average stockholders' equity to average total assets (QTR) | | 7.80% | | | | 7.40% | | | | 6.73% | |
| Period-end stockholders' equity to period-end assets | | 8.09% | | | | 7.48% | | | | 6.30% | |
| Total risk-based capital ratio | | 14.91% | | | | 14.30% | | | | 14.20% | |
| Tier 1 risk-based capital ratio | | 13.66% | | | | 12.94% | | | | 12.54% | |
| Common equity Tier 1 capital | | 10.53% | | | | 10.02% | | | | 10.09% | |
| Tier 1 leverage ratio | | 11.33% | | | | 10.94% | | | | 10.43% | |
(a) Non-performing loans include loans 90-days past due and accruing and non-accrual loans.
About Hawthorn Bancshares
Hawthorn Bancshares, Inc., a financial-bank holding company headquartered in Jefferson City, Missouri, is the parent company of Hawthorn Bank, which has served families and businesses for more than 150 years. Hawthorn Bank has multiple locations, including in the greater Kansas City metropolitan area, Jefferson City, Columbia, Springfield, and Clinton.
Contact:
Hawthorn Bancshares, Inc.
Brent M. Giles
Chief Executive Officer
TEL: 573.761.6100
www.HawthornBancshares.com
The financial results in this press release reflect preliminary, unaudited results, which are not final until the Company's Quarterly Report on Form 10-Q is filed. Statements made in this press release that suggest the Company's 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 Exchange Act of 1934, as amended. It is important to note that actual results could differ materially from those projected in such forward-looking statements. 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. These forward-looking statements are made as of the date of this communication, and the Company disclaims any obligation to update any forward-looking statement or to publicly announce the results of any revisions to any of the forward-looking statements included herein, except as required by law.
