Hawthorn Bancshares(HWBK) - 2024 Q3 - Quarterly Report

Financial Performance - Consolidated net income for Q3 2024 was $4.6 million, or $0.66 per diluted share, representing a 77.4% increase from $2.6 million, or $0.36 per diluted share, in Q3 2023[146]. - For the nine months ended September 30, 2024, consolidated net income increased by $5.3 million, or 62.6%, to $13.7 million, or $1.95 per diluted share, compared to $8.4 million, or $1.19 per diluted share, for the same period in 2023[147]. - The return on average assets for Q3 2024 was 1.00%, and the return on average stockholders' equity was 12.87%[146]. - The efficiency ratio for Q3 2024 improved to 66.2% from 79.79% in Q3 2023[146]. Income and Expenses - Net interest income for Q3 2024 was $14.3 million, a decrease of $0.8 million from $15.1 million in Q3 2023, while the net interest margin (FTE) increased to 3.36% from 3.35%[149]. - Non-interest income for Q3 2024 was $3.8 million, up from $0.6 million in Q3 2023, primarily due to earnings on bank-owned life insurance and gains on the sale of other real estate[151]. - Non-interest expense for Q3 2024 was $12.0 million, a decrease from $12.6 million in Q3 2023, attributed to improved operational efficiencies[152]. - Total non-interest income increased by $3.2 million, or 524.3%, to $3.8 million for Q3 2024 compared to $0.6 million for Q3 2023[182]. - Total non-interest expense decreased by $0.6 million, or 4.6%, to $12.0 million for Q3 2024 compared to $12.6 million for Q3 2023[188]. Assets and Liabilities - Cash and cash equivalents decreased by $39.2 million to $54.2 million as of September 30, 2024, compared to $93.4 million as of December 31, 2023[153]. - Total assets were $1.81 billion as of September 30, 2024, down from $1.89 billion at the end of the previous year[162]. - Total deposits decreased by $67.3 million to $1.50 billion as of September 30, 2024, compared to $1.57 billion as of December 31, 2023[158]. - Total interest-bearing deposits were $1.13 billion, with an average cost of 2.74%[162]. - Total loans held for investment decreased to $1.47 billion as of September 30, 2024, from $1.54 billion as of December 31, 2023[196]. Credit Quality - Non-performing assets increased to $8.5 million as of September 30, 2024, from $7.4 million in 2023[144]. - Non-performing assets to total loans increased to 0.58% at September 30, 2024, from 0.53% at December 31, 2023, with non-performing assets totaling $8.5 million[155]. - The allowance for credit losses was $21.9 million, or 1.50% of loans outstanding, as of September 30, 2024, down from $23.7 million, or 1.54%, at December 31, 2023[157]. - The company's net charge-offs increased to $0.6 million for Q3 2024 from $0.1 million in Q3 2023, primarily due to one commercial loan relationship[212]. - The provision for credit losses recognized was $0.5 million for the three months ended September 30, 2024, compared to $0.1 million for the same period in 2023[208]. Capital Adequacy - The total risk-based capital ratio was 14.91% as of September 30, 2024, compared to 14.20% in 2023[144]. - The Company’s total capital to risk-weighted assets ratio was 14.91%, exceeding the minimum required ratio of 10.50%[241]. - The Company's Tier 1 capital to risk-weighted assets ratio was 13.66%, above the minimum required ratio of 8.50%[241]. - The Common Equity Tier 1 capital to risk-weighted assets ratio was 10.53%, surpassing the minimum required ratio of 7.00%[241]. - The Company met all capital adequacy requirements as of September 30, 2024, with regulatory capital ratios exceeding the levels established for well-capitalized institutions[244]. Liquidity - The company believes it has more than adequate liquidity to meet future anticipated needs, supported by additional funding capacity with the FHLB and the Federal Reserve Bank[229]. - As of September 30, 2024, the Company had $335.0 million in unused loan commitments and standby letters of credit, indicating adequate liquidity resources[233]. - The company had $96.4 million in outstanding borrowings with the Federal Home Loan Bank as of September 30, 2024, down from $107.0 million at December 31, 2023[225]. Shareholder Returns - The Company paid cash dividends totaling approximately $3.7 million and $3.5 million during the nine months ended September 30, 2024 and 2023, respectively[234]. - The Bank declared dividends of $15.0 million and $9.0 million to the Company during the nine months ended September 30, 2024 and 2023, respectively[234]. - The Company repurchased 56,692 common shares at an average cost of $19.51 per share, totaling $1.1 million, with $3.9 million remaining available for share repurchases[236]. Interest Rate Risk - The projected change in net interest income from interest rate shifts of up to 200 basis points is considered an acceptable level of interest rate risk[251]. - Average interest-earning assets decreased by $104.6 million, or 5.7%, to $1.72 billion for the quarter ended September 30, 2024[167]. - The average yield on loans increased to 5.83% for the quarter ended September 30, 2024, compared to 5.67% for the same period in 2023[171]. Inflation Impact - Inflation did not have a significant effect on the Company's operations for the three months ended September 30, 2024[255].