Hawthorn Bancshares Inc. Reports Operating Results (10-Q)

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May 08, 2009
Hawthorn Bancshares Inc. (HWBK, Financial) filed Quarterly Report for the period ended 2009-03-31.

Exchange National Bancshares Inc. is a bank holding company whose activities currently are limited to ownership directly or indirectly through subsidiaries of the outstanding capital stock of Exchange National Bank Citizens Union State Bank and Osage Valley Bank. Hawthorn Bancshares Inc. has a market cap of $45.5 million; its shares were traded at around $11 with a P/E ratio of 18.9 and P/S ratio of 0.6. The dividend yield of Hawthorn Bancshares Inc. stocks is 7.6%. Hawthorn Bancshares Inc. had an annual average earning growth of 16.8% over the past 5 years.

Highlight of Business Operations:

Our Companys consolidated net income of $1,057,000 for the first quarter of 2009 was essentially unchanged when compared to $1,087,000 for the first quarter of 2008. $493,000 of the first quarter income was restricted for preferred shareholders, resulting in $564,000 of net income available to common shareholders, or $.14 per diluted common share, compared to $1,087,000, or $.26 per diluted common share for the first quarter ended March 31, 2008. For the first three months of 2009, the annualized return on average assets was 34 basis points, the annualized return on average common shareholders equity was 2.88%, and the efficiency ratio was 73.2%. Our Company did experience substantial real estate refinancing activity in the first quarter of 2009, which contributed an additional $800,000 to income. However, this was offset by an industry wide increase in FDIC insurance assessments as well as an increase in our provision for loan losses. Net interest margin decreased 23 basis points from 3.55% to 3.32%. Net interest income, on a tax equivalent basis, decreased $46,000 or 47 basis points from 2008 to 2009. Total assets at March 31, 2009 were $1,267,542,000, compared to $1,279,698,000 at March 31, 2008, a decrease of $12,156,000, or 1.0%.

Financial results for the first three months of 2009 compared to 2008 included a decrease in net interest income, on a tax equivalent basis of $46,000, or 47 basis points. Average interest-earning assets increased $84,028,000, or 7.6% to $1,187,720,000 at March 31, 2009 compared to $1,103,692,000 at March 31, 2008, but was offset by a decrease in net interest margin and a higher provision for loan loss.

Average loans outstanding increased $92,367,000 or 10.1% to $1,010,167,000 for first three months of 2009 compared to $917,800,000 for 2008. Average commercial loans outstanding decreased approximately $1,127,000 or 74 basis points for 2009 compared to 2008. Average real estate loans outstanding increased approximately $95,157,000 or 13.0% for 2009 compared to 2008. Average consumer loans outstanding decreased approximately $1,663,000 or 4.8% for 2009 compared to 2008. See the Lending and Credit Management section of this discussion for further discussion of changes in the composition of our lending portfolio.

Average investment securities and federal funds sold decreased $25,819,000 or 13.9% to $189,949,000 at March 31, 2009 compared to $185,768,000 for 2008. The decrease in average investment securities during 2009 and 2008 reflects the use of investment liquidity to fund our Companys growth in the loan portfolio.

Average interest bearing liabilities increased $47,736,000, or 4.8%, to $1,028,583,000 at March 31, 2009 compared to $980,847,000 at March 31, 2008. Average time deposits increased $71,617,000 or 9.0% to $860,716,000 for 2009 compared to $789,414,000 for 2008. The increase was primarily a result of increased public fund deposits and customers increasing savings in light of the current economy. Product specials promoting interest bearing checking accounts and certificate of deposits contributed to the increase in new deposits.

Average federal funds purchased and securities sold under agreements to repurchase decreased $22,550,000 or 43.4% to $29,344,000 for 2009 compared to $51,894,000 for 2008. This primarily is a result of a $24,000,000 decrease in a public fund term repurchase agreement and a $4,000,000 decrease in federal funds purchased during the first three months of 2008 compared to 2009. Average other borrowed money decreased $1,016,000 or 1.1% to $89,037,000 for 2009 compared to $90,053,000 for 2008. The decrease in 2009 reflects a net decrease in Federal Home Loan Bank advances.

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