2022
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Missouri | 43-1626350 | ||||
(State or other jurisdiction of |
| ||||
incorporation or organization) |
(573)
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Common Stock, $1.00 par value | HWBK | The Nasdaq Stock Market LLC |
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Large accelerated filer ☐ | Accelerated filer | ☐ | Non-accelerated filer | ☒ | |||||||||||||
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Smaller reporting company | ☒ | Emerging growth company | ☐ |
|
(In thousands, except per share data) | March 31, 2022 | December 31, 2021 | |||||||||
(Unaudited) | |||||||||||
ASSETS | |||||||||||
Cash and due from banks | $ | 22,544 | $ | 17,287 | |||||||
Federal funds sold | 419 | 7,122 | |||||||||
Other interest-bearing deposits | 27,552 | 135,500 | |||||||||
Cash and cash equivalents | 50,515 | 159,909 | |||||||||
Certificates of deposit in other banks | 4,701 | 5,193 | |||||||||
Available-for-sale debt securities, at fair value | 286,754 | 310,870 | |||||||||
Other investments | 5,490 | 5,408 | |||||||||
Total investment securities | 292,244 | 316,278 | |||||||||
Loans held for investment | 1,333,923 | 1,302,133 | |||||||||
Allowance for loan losses | (14,279) | (16,903) | |||||||||
Net loans | 1,319,644 | 1,285,230 | |||||||||
Loans held for sale, at lower of cost or fair value | 909 | 2,249 | |||||||||
Premises and equipment - net | 33,555 | 32,719 | |||||||||
Mortgage servicing rights, at fair value | 2,639 | 2,659 | |||||||||
Other real estate owned - net | 9,758 | 10,525 | |||||||||
Accrued interest receivable | 6,241 | 6,621 | |||||||||
Cash surrender value - life insurance | 2,524 | 2,509 | |||||||||
Other assets | 12,953 | 7,658 | |||||||||
Total assets | $ | 1,735,683 | $ | 1,831,550 | |||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||
Deposits | |||||||||||
Non-interest bearing demand | $ | 450,225 | $ | 453,066 | |||||||
Savings, interest checking and money market | 752,164 | 818,358 | |||||||||
Time deposits $250,000 and over | 84,692 | 69,075 | |||||||||
Other time deposits | 169,062 | 176,321 | |||||||||
Total deposits | 1,456,143 | 1,516,820 | |||||||||
Federal funds purchased and securities sold under agreements to repurchase | 5,514 | 23,829 | |||||||||
Federal Home Loan Bank advances and other borrowings | 77,357 | 77,418 | |||||||||
Subordinated notes | 49,486 | 49,486 | |||||||||
Operating lease liabilities | 1,763 | 1,837 | |||||||||
Accrued interest payable | 298 | 282 | |||||||||
Other liabilities | 10,735 | 12,922 | |||||||||
Total liabilities | 1,601,296 | 1,682,594 | |||||||||
Stockholders’ equity: | |||||||||||
Common stock, $1.00 par value, authorized 15,000,000 shares; issued 7,023,821 shares, respectively | 7,024 | 7,024 | |||||||||
Surplus | 64,437 | 64,437 | |||||||||
Retained earnings | 87,919 | 82,300 | |||||||||
Accumulated other comprehensive (loss) income, net of tax | (16,289) | 3,293 | |||||||||
Treasury stock; 430,382, and 406,846 shares, at cost, respectively | (8,704) | (8,098) | |||||||||
Total stockholders’ equity | 134,387 | 148,956 | |||||||||
Total liabilities and stockholders’ equity | $ | 1,735,683 | $ | 1,831,550 |
| | | | | | |
| | March 31, | | December 31, | ||
(In thousands, except per share data) |
| 2021 |
| 2020 | ||
|
| (Unaudited) |
| | ||
ASSETS | | | | | | |
Cash and due from banks | | $ | 18,496 | | $ | 19,235 |
Federal funds sold and other interest-bearing deposits | |
| 128,207 | |
| 161,128 |
Cash and cash equivalents | |
| 146,703 | |
| 180,363 |
Certificates of deposit in other banks | |
| 8,897 | |
| 9,376 |
Available-for-sale debt securities, at fair value | |
| 238,142 | |
| 198,030 |
Other investments | |
| 6,188 | |
| 6,353 |
Total investment securities | |
| 244,330 | |
| 204,383 |
Loans held for investment | |
| 1,276,185 | |
| 1,286,967 |
Allowance for loan losses | |
| (18,361) | |
| (18,113) |
Net loans | |
| 1,257,824 | |
| 1,268,854 |
Loans held for sale, at lower of cost or fair value | | | 6,308 | | | 5,099 |
Premises and equipment - net | |
| 34,027 | |
| 34,561 |
Mortgage servicing rights, at fair value | |
| 2,494 | |
| 2,445 |
Other real estate owned - net | |
| 12,140 | |
| 12,291 |
Accrued interest receivable | |
| 6,488 | |
| 6,640 |
Cash surrender value - life insurance | |
| 2,465 | |
| 2,451 |
Other assets | |
| 10,248 | |
| 7,268 |
Total assets | | $ | 1,731,924 | | $ | 1,733,731 |
LIABILITIES AND STOCKHOLDERS' EQUITY | | | | | | |
Deposits | | | | | | |
Non-interest bearing demand | | $ | 431,035 | | $ | 382,492 |
Savings, interest checking and money market | |
| 708,615 | |
| 723,808 |
Time deposits $250,000 and over | |
| 74,406 | |
| 91,263 |
Other time deposits | |
| 179,926 | |
| 186,043 |
Total deposits | |
| 1,393,982 | |
| 1,383,606 |
Federal funds purchased and securities sold under agreements to repurchase | |
| 42,018 | |
| 45,154 |
Federal Home Loan Bank advances and other borrowings | |
| 97,614 | |
| 106,674 |
Subordinated notes | |
| 49,486 | |
| 49,486 |
Operating lease liabilities | | | 2,058 | | | 2,137 |
Accrued interest payable | |
| 439 | |
| 837 |
Other liabilities | |
| 15,619 | |
| 15,248 |
Total liabilities | |
| 1,601,216 | |
| 1,603,142 |
Stockholders’ equity: | | | | | | |
Common stock, $1 par value, authorized 15,000,000 shares; issued 6,769,322 | |
| 6,769 | |
| 6,769 |
Surplus | |
| 59,307 | |
| 59,307 |
Retained earnings | |
| 73,947 | |
| 68,935 |
Accumulated other comprehensive income (loss), net of tax | |
| (1,217) | |
| 1,528 |
Treasury stock; 406,846, and 289,214 shares, at cost, respectively | |
| (8,098) | |
| (5,950) |
Total stockholders’ equity | |
| 130,708 | |
| 130,589 |
Total liabilities and stockholders’ equity | | $ | 1,731,924 | | $ | 1,733,731 |
See accompanying notes to the consolidated financial statements (unaudited).
| | | | | | | |
| | Three Months Ended | | ||||
|
| March 31, | | ||||
(In thousands, except per share amounts) |
| 2021 |
| 2020 | | ||
INTEREST INCOME | | |
| | |
| |
Interest and fees on loans | | $ | 14,979 | | $ | 14,422 | |
Interest and fees on loans held for sale | | | 25 | | | 5 | |
Interest on investment securities: | |
|
| |
|
| |
Taxable | |
| 667 | |
| 813 | |
Nontaxable | |
| 246 | |
| 142 | |
Federal funds sold, other interest-bearing deposits, and certificates of deposit in other banks | |
| 102 | |
| 326 | |
Dividends on other investments | |
| 83 | |
| 100 | |
Total interest income | |
| 16,102 | |
| 15,808 | |
INTEREST EXPENSE | |
|
| |
|
| |
Interest on deposits: | |
|
| |
|
| |
Savings, interest checking and money market | |
| 309 | |
| 947 | |
Time deposit accounts $250,000 and over | |
| 210 | |
| 413 | |
Time deposits | | | 461 | | | 752 | |
Total interest expense on deposits | | | 980 | | | 2,112 | |
Interest on federal funds purchased and securities sold under agreements to repurchase | |
| 26 | |
| 37 | |
Interest on Federal Home Loan Bank advances | |
| 396 | |
| 632 | |
Interest on subordinated notes | |
| 310 | |
| 501 | |
Total interest expense on borrowings | | | 732 | | | 1,170 | |
Total interest expense | |
| 1,712 | |
| 3,282 | |
Net interest income | |
| 14,390 | |
| 12,526 | |
Provision for loan losses | |
| — | |
| 3,300 | |
Net interest income after provision for loan losses | |
| 14,390 | |
| 9,226 | |
NON-INTEREST INCOME | |
|
| |
|
| |
Service charges and other fees | |
| 739 | |
| 799 | |
Bank card income and fees | |
| 860 | |
| 693 | |
Trust department income | |
| 294 | |
| 379 | |
Real estate servicing fees, net | |
| 73 | |
| (87) | |
Gain on sale of mortgage loans, net | |
| 2,469 | |
| 419 | |
Other | |
| 8 | |
| 88 | |
Total non-interest income | |
| 4,443 | |
| 2,291 | |
Investment securities gains (losses), net | |
| 14 | |
| (1) | |
NON-INTEREST EXPENSE | |
|
| |
|
| |
Salaries and employee benefits | |
| 7,146 | |
| 6,121 | |
Occupancy expense, net | |
| 771 | |
| 766 | |
Furniture and equipment expense | |
| 744 | |
| 750 | |
Processing, network, and bank card expense | |
| 1,007 | |
| 976 | |
Legal, examination, and professional fees | |
| 404 | |
| 367 | |
Advertising and promotion | |
| 243 | |
| 249 | |
Postage, printing, and supplies | |
| 204 | |
| 241 | |
Loan expense | |
| 174 | |
| 123 | |
Other | |
| 958 | |
| 898 | |
Total non-interest expense | |
| 11,651 | |
| 10,491 | |
Income before income taxes | |
| 7,196 | |
| 1,025 | |
Income tax expense | |
| 1,357 | |
| 157 | |
Net income | | $ | 5,839 | | $ | 868 | |
Basic earnings per share | | $ | 0.92 | | $ | 0.13 | |
Diluted earnings per share | | $ | 0.92 | | $ | 0.13 | |
Three Months Ended March 31, | |||||||||||||||||||||||
(In thousands, except per share data) | 2022 | 2021 | |||||||||||||||||||||
INTEREST INCOME | |||||||||||||||||||||||
Interest and fees on loans | $ | 13,915 | $ | 14,979 | |||||||||||||||||||
Interest and fees on loans held for sale | 20 | 25 | |||||||||||||||||||||
Interest on investment securities: | |||||||||||||||||||||||
Taxable | 788 | 667 | |||||||||||||||||||||
Nontaxable | 577 | 246 | |||||||||||||||||||||
Federal funds sold | 1 | 4 | |||||||||||||||||||||
Other interest-bearing deposits and certificates of deposit in other banks | 60 | 98 | |||||||||||||||||||||
Dividends on other investments | 75 | 83 | |||||||||||||||||||||
Total interest income | 15,436 | 16,102 | |||||||||||||||||||||
INTEREST EXPENSE | |||||||||||||||||||||||
Interest on deposits: | |||||||||||||||||||||||
Savings, interest checking and money market | 316 | 309 | |||||||||||||||||||||
Time deposit accounts $250,000 and over | 113 | 210 | |||||||||||||||||||||
Time deposits | 276 | 461 | |||||||||||||||||||||
Total interest expense on deposits | 705 | 980 | |||||||||||||||||||||
Interest on federal funds purchased and securities sold under agreements to repurchase | 10 | 26 | |||||||||||||||||||||
Interest on Federal Home Loan Bank advances | 252 | 396 | |||||||||||||||||||||
Interest on subordinated notes | 324 | 310 | |||||||||||||||||||||
Total interest expense on borrowings | 586 | 732 | |||||||||||||||||||||
Total interest expense | 1,291 | 1,712 | |||||||||||||||||||||
Net interest income | 14,145 | 14,390 | |||||||||||||||||||||
(Release of) provision for loan losses | (2,500) | — | |||||||||||||||||||||
Net interest income after (release of) provision for loan losses | 16,645 | 14,390 | |||||||||||||||||||||
NON-INTEREST INCOME | |||||||||||||||||||||||
Service charges and other fees | 793 | 739 | |||||||||||||||||||||
Bank card income and fees | 961 | 860 | |||||||||||||||||||||
Trust department income | 340 | 294 | |||||||||||||||||||||
Real estate servicing fees, net | 231 | 73 | |||||||||||||||||||||
Gain on sale of mortgage loans, net | 888 | 2,469 | |||||||||||||||||||||
Other | 513 | 137 | |||||||||||||||||||||
Total non-interest income | 3,726 | 4,572 | |||||||||||||||||||||
Investment securities (losses) gains, net | (4) | 14 | |||||||||||||||||||||
NON-INTEREST EXPENSE | |||||||||||||||||||||||
Salaries and employee benefits | 6,886 | 7,146 | |||||||||||||||||||||
Occupancy expense, net | 786 | 771 | |||||||||||||||||||||
Furniture and equipment expense | 755 | 744 | |||||||||||||||||||||
Processing, network, and bank card expense | 1,142 | 1,007 | |||||||||||||||||||||
Legal, examination, and professional fees | 440 | 404 | |||||||||||||||||||||
Advertising and promotion | 293 | 243 | |||||||||||||||||||||
Postage, printing, and supplies | 190 | 204 | |||||||||||||||||||||
Loan expense | 145 | 174 | |||||||||||||||||||||
Other | 1,590 | 1,087 | |||||||||||||||||||||
Total non-interest expense | 12,227 | 11,780 | |||||||||||||||||||||
Income before income taxes | 8,140 | 7,196 | |||||||||||||||||||||
Income tax expense | 1,531 | 1,357 | |||||||||||||||||||||
Net income | $ | 6,609 | $ | 5,839 | |||||||||||||||||||
Basic earnings per share | $ | 1.00 | $ | 0.88 | |||||||||||||||||||
Diluted earnings per share | $ | 1.00 | $ | 0.88 |
See accompanying notes to the consolidated financial statements (unaudited).
| | | | | | | |
| | Three Months Ended | | ||||
|
| March 31, | | ||||
(In thousands) |
| 2021 |
| 2020 | | ||
Net income | | $ | 5,839 | | $ | 868 | |
Other comprehensive income, net of tax | |
|
| |
|
| |
Investment securities available-for-sale: | | | | | | | |
Unrealized (losses) gains on investment securities available-for-sale, net of tax | |
| (2,778) | |
| 2,180 | |
Adjustment for (gains) losses on sale of investment securities, net of tax | |
| (2) | |
| — | |
Defined benefit pension plans: | |
|
| |
|
| |
Amortization of prior service cost included in net periodic pension cost, net of tax | |
| 35 | |
| 53 | |
Total other comprehensive income (loss) | |
| (2,745) | |
| 2,233 | |
Total comprehensive income | | $ | 3,094 | | $ | 3,101 | |
Three Months Ended March 31, | |||||||||||||||||||||||
(In thousands) | 2022 | 2021 | |||||||||||||||||||||
Net income | $ | 6,609 | $ | 5,839 | |||||||||||||||||||
Other comprehensive (loss) income, net of tax | |||||||||||||||||||||||
Investment securities available-for-sale: | |||||||||||||||||||||||
Change in unrealized losses on investment securities available-for-sale, net of tax | (19,582) | (2,778) | |||||||||||||||||||||
Adjustment for gains on sale of investment securities, net of tax | — | (2) | |||||||||||||||||||||
Defined benefit pension plans: | |||||||||||||||||||||||
Amortization of prior service cost included in net periodic pension cost, net of tax | 0 | 35 | |||||||||||||||||||||
Total other comprehensive loss | (19,582) | (2,745) | |||||||||||||||||||||
Total comprehensive (loss) income | $ | (12,973) | $ | 3,094 |
Three Months Ended March 31, 2022 and 2021 | |||||||||||||||||||||||||||||||||||
(In thousands, except per share data) | Common Stock | Surplus | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Treasury Stock | Total Stockholders' Equity | |||||||||||||||||||||||||||||
Balance, December 31, 2021 | $ | 7,024 | $ | 64,437 | $ | 82,300 | $ | 3,293 | $ | (8,098) | $ | 148,956 | |||||||||||||||||||||||
Net income | — | — | 6,609 | — | — | 6,609 | |||||||||||||||||||||||||||||
Other comprehensive loss | — | — | — | (19,582) | — | (19,582) | |||||||||||||||||||||||||||||
Purchase of treasury stock | — | — | — | — | (606) | (606) | |||||||||||||||||||||||||||||
Cash dividends declared, common stock ($0.15 per share) | — | — | (990) | — | — | (990) | |||||||||||||||||||||||||||||
Balance, March 31, 2022 | $ | 7,024 | $ | 64,437 | $ | 87,919 | $ | (16,289) | $ | (8,704) | $ | 134,387 | |||||||||||||||||||||||
Balance, December 31, 2020 | $ | 6,769 | $ | 59,307 | $ | 68,935 | $ | 1,528 | $ | (5,950) | $ | 130,589 | |||||||||||||||||||||||
Net income | — | — | 5,839 | — | — | 5,839 | |||||||||||||||||||||||||||||
Other comprehensive loss | — | — | — | (2,745) | — | (2,745) | |||||||||||||||||||||||||||||
Purchase of treasury stock | — | — | — | — | (2,148) | (2,148) | |||||||||||||||||||||||||||||
Cash dividends declared, common stock ($0.13 per share) | — | — | (827) | — | — | (827) | |||||||||||||||||||||||||||||
Balance, March 31, 2021 | $ | 6,769 | $ | 59,307 | $ | 73,947 | $ | (1,217) | $ | (8,098) | $ | 130,708 | |||||||||||||||||||||||
4
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | For the Three Months Ended March 31, 2021 and 2020 | ||||||||||||||||
|
| | |
| | |
| | |
| Accumulated |
| | |
| Total | ||
| | | | | | | | | |
| Other | | | |
| Stock - | ||
|
| Common | | | |
| Retained |
| Comprehensive |
| Treasury |
| holders' | |||||
(In thousands) |
| Stock |
| Surplus |
| Earnings |
| Income (Loss) |
| Stock |
| Equity | ||||||
Balance, December 31, 2020 | | $ | 6,769 | | $ | 59,307 | | $ | 68,935 | | $ | 1,528 | | $ | (5,950) | | $ | 130,589 |
Net income | |
| 0 | |
| 0 | |
| 5,839 | |
| 0 | |
| 0 | |
| 5,839 |
Other comprehensive loss | |
| 0 | |
| 0 | |
| 0 | |
| (2,745) | |
| 0 | |
| (2,745) |
Purchase of treasury stock | |
| 0 | |
| 0 | |
| 0 | |
| 0 | |
| (2,148) | |
| (2,148) |
Cash dividends declared, common stock ($0.13 per share) | |
| 0 | |
| 0 | |
| (827) | |
| 0 | |
| 0 | |
| (827) |
Balance, March 31, 2021 | | $ | 6,769 | | $ | 59,307 | | $ | 73,947 | | $ | (1,217) | | $ | (8,098) | | $ | 130,708 |
| | | | | | | | | | | | | | | | | | |
Balance, December 31, 2019 | | $ | 6,520 | | $ | 55,727 | | $ | 61,590 | | $ | (3,755) | | $ | (5,044) | | $ | 115,038 |
Net income | |
| 0 | |
| 0 | |
| 868 | |
| 0 | |
| 0 | |
| 868 |
Other comprehensive income | |
| 0 | |
| 0 | |
| 0 | |
| 2,233 | |
| 0 | |
| 2,233 |
Purchase of treasury stock | |
| 0 | |
| 0 | |
| 0 | |
| 0 | |
| (719) | |
| (719) |
Cash dividends declared, common stock ($0.12 per share) | |
| 0 | |
| 0 | |
| (750) | |
| 0 | |
| 0 | |
| (750) |
Balance, March 31, 2020 | | $ | 6,520 | | $ | 55,727 | | $ | 61,708 | | $ | (1,522) | | $ | (5,763) | | $ | 116,670 |
| | | | | | | | | | | | | | | | | | |
Three Months Ended March 31, | |||||||||||
(In thousands) | 2022 | 2021 | |||||||||
Cash flows from operating activities: | |||||||||||
Net income | $ | 6,609 | $ | 5,839 | |||||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
(Release of) provision for loan losses | (2,500) | — | |||||||||
Depreciation expense | 545 | 578 | |||||||||
Net amortization of investment securities, premiums, and discounts | 378 | 418 | |||||||||
Change in fair value of mortgage servicing rights | 48 | 121 | |||||||||
Investment securities losses (gains), net | 4 | (14) | |||||||||
Gain on sales and dispositions of premises and equipment | — | 4 | |||||||||
Gain on sales and dispositions of other real estate | (8) | (15) | |||||||||
Provision for other real estate owned | — | 88 | |||||||||
Decrease in accrued interest receivable | 380 | 152 | |||||||||
Increase in cash surrender value - life insurance | (15) | (14) | |||||||||
Decrease (increase) in other assets | 329 | (1,926) | |||||||||
Decrease in operating lease liabilities | (74) | (79) | |||||||||
Increase (decrease) in accrued interest payable | 16 | (398) | |||||||||
(Decrease) increase in other liabilities | (2,567) | 12 | |||||||||
Origination of mortgage loans held for sale | (26,935) | (65,012) | |||||||||
Proceeds from the sale of mortgage loans held for sale | 29,085 | 66,272 | |||||||||
Gain on sale of mortgage loans, net | (888) | (2,469) | |||||||||
Net cash provided by operating activities | 4,407 | 3,557 | |||||||||
Cash flows from investing activities: | |||||||||||
Purchase of certificates of deposit in other banks | — | (245) | |||||||||
Proceeds from maturities of certificates of deposit in other banks | 490 | 736 | |||||||||
Net (increase) decrease in loans | (31,812) | 11,000 | |||||||||
Purchase of available-for-sale debt securities | (14,581) | (62,297) | |||||||||
Proceeds from maturities of available-for-sale debt securities | 11,284 | 10,491 | |||||||||
Proceeds from calls of available-for-sale debt securities | 2,250 | 7,745 | |||||||||
Purchases of FHLB stock | (178) | (327) | |||||||||
Proceeds from sales of FHLB stock | 92 | 505 | |||||||||
Purchases of premises and equipment | (1,417) | (135) | |||||||||
Proceeds from sales of premises and equipment | — | 12 | |||||||||
Proceeds from sales of other real estate and repossessed assets | 723 | 108 | |||||||||
Net cash used in investing activities | (33,149) | (32,407) | |||||||||
Cash flows from financing activities: | |||||||||||
Net (decrease) increase in demand deposits | (2,841) | 48,543 | |||||||||
Net decrease in interest-bearing transaction accounts | (66,194) | (15,193) | |||||||||
Net increase (decrease) in time deposits | 8,358 | (22,974) | |||||||||
Net decrease in federal funds purchased and securities sold under agreements to repurchase | (18,315) | (3,136) | |||||||||
Repayment of FHLB advances and other borrowings | (61) | (9,060) | |||||||||
Purchase of treasury stock | (606) | (2148) | |||||||||
Cash dividends paid - common stock | (993) | (842) | |||||||||
Net cash used in financing activities | (80,652) | (4,810) | |||||||||
Net decrease in cash and cash equivalents | (109,394) | (33,660) | |||||||||
Cash and cash equivalents, beginning of period | 159,909 | 180,363 | |||||||||
Cash and cash equivalents, end of period | $ | 50,515 | $ | 146,703 | |||||||
5
HAWTHORN BANCSHARES, INC. AND SUBSIDIARIES
| | | | | | |
| | Three Months Ended March 31, | ||||
(In thousands) |
| 2021 |
| 2020 | ||
Cash flows from operating activities: | | | | | | |
Net income | | $ | 5,839 | | $ | 868 |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | |
Provision for loan losses | |
| 0 | |
| 3,300 |
Depreciation expense | |
| 578 | |
| 562 |
Net amortization of investment securities, premiums, and discounts | |
| 418 | |
| 312 |
Change in fair value of mortgage servicing rights | |
| 121 | |
| 275 |
Investment securities (gains) losses, net | |
| (14) | |
| 1 |
Losses (gains) on sales and dispositions of premises and equipment | |
| 4 | | | (55) |
Gain on sales and dispositions of other real estate | |
| (15) | |
| 0 |
Provision for other real estate owned | |
| 88 | |
| 12 |
Decrease in accrued interest receivable | |
| 152 | |
| 218 |
Increase in cash surrender value - life insurance | |
| (14) | |
| (13) |
Increase in other assets | |
| (1,756) | | | (312) |
Operating lease liabilities | | | (79) | | | (62) |
Decrease in accrued interest payable | |
| (398) | |
| (356) |
Increase (decrease) in other liabilities | |
| 12 | |
| (1,367) |
Origination of mortgage loans held for sale | |
| (65,012) | |
| (16,609) |
Proceeds from the sale of mortgage loans held for sale | |
| 66,272 | |
| 13,170 |
Gain on sale of mortgage loans, net | |
| (2,469) | | | (419) |
Other, net | |
| (170) | |
| (67) |
Net cash provided by (used in) operating activities | |
| 3,557 | |
| (542) |
Cash flows from investing activities: | | | | | | |
Purchase of certificates of deposit in other banks | |
| (245) | |
| (735) |
Proceeds from maturities of certificates of deposit in other banks | |
| 736 | |
| 491 |
Net decrease (increase) in loans | |
| 11,000 | |
| (11,809) |
Purchase of available-for-sale debt securities | |
| (62,297) | |
| (43,984) |
Proceeds from maturities of available-for-sale debt securities | |
| 10,491 | |
| 13,860 |
Proceeds from calls of available-for-sale debt securities | |
| 7,745 | |
| 8,935 |
Proceeds from sales of available-for-sale debt securities | |
| 0 | |
| 681 |
Purchases of FHLB stock | |
| (327) | |
| (1,491) |
Proceeds from sales of FHLB stock | |
| 505 | |
| 2 |
Purchases of premises and equipment | |
| (135) | |
| (369) |
Proceeds from sales of premises and equipment | |
| 12 | |
| 123 |
Proceeds from sales of other real estate and repossessed assets | |
| 108 | |
| 0 |
Net cash used in investing activities | |
| (32,407) | |
| (34,296) |
Cash flows from financing activities: | | | | | | |
Net increase in demand deposits | |
| 48,543 | |
| 11,412 |
Net decrease in interest-bearing transaction accounts | |
| (15,193) | |
| (18,037) |
Net decrease in time deposits | |
| (22,974) | | | (325) |
Net (decrease) increase in federal funds purchased and securities sold under agreements to repurchase | |
| (3,136) | |
| 3,492 |
Repayment of FHLB advances and other borrowings | |
| (9,060) | |
| (58) |
FHLB advances | |
| 0 | |
| 37,000 |
Purchase of treasury stock | |
| (2,148) | |
| (719) |
Cash dividends paid - common stock | |
| (842) | |
| (753) |
Net cash (used in) provided by financing activities | |
| (4,810) | |
| 32,012 |
Net decrease in cash and cash equivalents | |
| (33,660) | |
| (2,826) |
Cash and cash equivalents, beginning of period | |
| 180,363 | |
| 78,121 |
Cash and cash equivalents, end of period | | $ | 146,703 | | $ | 75,295 |
Supplemental disclosures of cash flow information: | | | | | | |
Cash paid during the period for: | | | | | | |
Interest | | $ | 2,109 | | $ | 3,639 |
Income taxes | | $ | 0 | | $ | 0 |
Noncash investing and financing activities: | | | | | | |
Other real estate and repossessed assets acquired in settlement of loans | | $ | 30 | | $ | 0 |
continued
Three Months Ended March 31, | |||||||||||
(In thousands) | 2022 | 2021 | |||||||||
Supplemental disclosures of cash flow information: | |||||||||||
Cash paid during the period for: | |||||||||||
Interest | $ | 1,275 | $ | 2,109 | |||||||
Income taxes | $ | — | $ | — | |||||||
Noncash investing and financing activities: | |||||||||||
Other real estate and repossessed assets acquired in settlement of loans net of (charge-offs) | $ | (52) | $ | 30 | |||||||
6
HAWTHORN BANCSHARES, INC.
(Unaudited)
(Unaudited)
2021.
Operating, Accounting and Reporting Considerations related to COVID-19
The COVID-19 pandemic has negatively impacted the global economy, including the United States. In response to this crisis, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was passed by Congress and signed into law on March 27, 2020. The CARES Act, along with subsequent relief programs, provided substantial funding to fight the COVID-19 pandemic and stimulate the economy by supporting individuals and businesses through loans, grants, tax changes, and other types of relief. Some of the provisions applicable to the Company include, but are not limited to:
7
HAWTHORN BANCSHARES, INC.
AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
(Unaudited)
Also in response to the COVID-19 pandemic, the Board of Governors of the Federal Reserve System (“FRB”), the Federal Deposit Insurance Corporation (“FDIC”), the National Credit Union Administration (“NCUA”), the Office of the Comptroller of the Currency (“OCC”), and the Consumer Financial Protection Bureau (“CFPB”), in consultation with the state financial regulators (collectively, the “agencies”) issued a joint interagency statement (issued March 22, 2020; revised statement issued April 7, 2020). Some of the provisions applicable to the Company include, but are not limited to:
The Company began offering short-term loan modifications to assist borrowers during the COVID-19 pandemic. These modifications generally involve principal and/or interest payment deferrals for up to six months. These modifications generally meet the criteria of both Section 4013 of the CARES Act and the joint interagency statement, and therefore, the Company does not account for such loan modifications as TDRs. As the COVID-19 pandemic persists in negatively impacting the economy, the Company continues to offer additional loan modifications to borrowers struggling as a result of the pandemic. Similar to the initial modifications granted, the additional round of loan modifications are granted specifically under Section 4013 of the CARES Act and generally involve principal and/or interest payment deferrals for up to an additional six months for commercial and consumer loans, and principal-only deferrals for up to an additional 12 months for selected commercial loans. On August 3, 2020, the Federal Financial Institutions Examination Council on behalf of its members (collectively “the FFIEC members”) issued a joint statement on additional loan accommodations related to the COVID-19 pandemic. The joint statement clarifies that for loan modifications in which Section 4013 is being applied, subsequent modifications could also be eligible under Section 4013. To be eligible, each loan modification must be (1) related to the COVID-19 event; (2) executed on a loan that was not more than 30 days past due as of December 31, 2019; and (3) executed between March 1, 2020, and the earlier of (A) 60 days after the date of termination of the National Emergency or (B) December 31, 2020. The December 31, 2020 deadline was subsequently extended to January 1, 2022, by the CAA. Substantially all of the Company’s additional round of loan modifications granted under Section 4013 of the CARES Act are in compliance with the aforementioned FFIEC requirements. Accordingly, the Company does not account for such loan modifications as TDRs.
8
HAWTHORN BANCSHARES, INC.
AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
(Unaudited)
(in thousands) | March 31, 2022 | December 31, 2021 | |||||||||
Commercial, financial, and agricultural(a) | $ | 221,015 | $ | 217,214 | |||||||
Real estate construction − residential | 21,515 | 27,920 | |||||||||
Real estate construction − commercial | 103,478 | 91,369 | |||||||||
Real estate mortgage − residential | 287,879 | 279,346 | |||||||||
Real estate mortgage − commercial | 677,539 | 663,256 | |||||||||
Installment and other consumer | 22,497 | 23,028 | |||||||||
Total loans held for investment | $ | 1,333,923 | $ | 1,302,133 |
| | | | | | |
| | March 31, | | December 31, | ||
(in thousands) |
| 2021 |
| 2020 | ||
Commercial, financial, and agricultural (a) | | $ | 251,943 | | $ | 272,918 |
Real estate construction − residential | |
| 33,962 | |
| 29,692 |
Real estate construction − commercial | |
| 78,576 | |
| 78,144 |
Real estate mortgage − residential | |
| 258,259 | |
| 262,339 |
Real estate mortgage − commercial | |
| 628,178 | |
| 617,133 |
Installment and other consumer | |
| 25,267 | |
| 26,741 |
Total loans held for investment | | $ | 1,276,185 | | $ | 1,286,967 |
The Bank grants real estate, commercial, installment, and other consumer loans to customers located within the Missouri communities surrounding Jefferson City, Columbia, Clinton, Warsaw, Springfield, St. Louis, and the greater Kansas City metropolitan area. As such, the Bank is susceptible to changes in the economic environment in these communities. The
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, 2021 | ||||||||||||||||||||||
| | Commercial, | | Real Estate | | Real Estate | | Real Estate | | Real Estate | | Installment | | | | |
| | ||||||
| | Financial, & | | Construction - | | Construction - | | Mortgage - | | Mortgage - | | and Other | | Un- | |
| | |||||||
(in thousands) |
| Agricultural |
| Residential |
| Commercial |
| Residential |
| Commercial |
| Consumer |
| allocated |
| Total | ||||||||
Balance at beginning of period | | $ | 5,121 | | $ | 213 | | $ | 475 | | $ | 2,679 | | $ | 9,354 | | $ | 264 | | $ | 7 | | $ | 18,113 |
Additions: | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Provision for loan losses | |
| (567) | |
| 83 | |
| 57 | |
| (253) | |
| 573 | |
| 13 | |
| 94 | |
| — |
Deductions: | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Loans charged off | |
| 27 | |
| — | |
| — | |
| — | |
| 23 | |
| 57 | |
| — | |
| 107 |
Less recoveries on loans | |
| (149) | |
| (13) | |
| — | |
| (168) | |
| — | |
| (25) | |
| — | |
| (355) |
Net loan charge-offs (recoveries) | |
| (122) | |
| (13) | |
| — | |
| (168) | |
| 23 | |
| 32 | |
| — | |
| (248) |
Balance at end of period | | $ | 4,676 | | $ | 309 | | $ | 532 | | $ | 2,594 | | $ | 9,904 | | $ | 245 | | $ | 101 | | $ | 18,361 |
9
Three Months Ended March 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||
(in thousands) | Commercial, Financial, & Agricultural | Real Estate Construction - Residential | Real Estate Construction - Commercial | Real Estate Mortgage - Residential | Real Estate Mortgage - Commercial | Installment and Other Consumer | Un- allocated | Total | |||||||||||||||||||||||||||||||||||||||
Balance at beginning of period | $ | 2,717 | $ | 137 | $ | 588 | $ | 2,482 | $ | 10,662 | $ | 256 | $ | 61 | $ | 16,903 | |||||||||||||||||||||||||||||||
Additions: | |||||||||||||||||||||||||||||||||||||||||||||||
(Release of ) provision for loan losses | 128 | (77) | 76 | 93 | (2,897) | 56 | 121 | (2,500) | |||||||||||||||||||||||||||||||||||||||
Deductions: | |||||||||||||||||||||||||||||||||||||||||||||||
Loans charged off | 35 | — | — | — | 75 | 56 | — | 166 | |||||||||||||||||||||||||||||||||||||||
Less recoveries on loans | (20) | — | — | (3) | (2) | (17) | — | (42) | |||||||||||||||||||||||||||||||||||||||
Net loan charge-offs (recoveries) | 15 | — | — | (3) | 73 | 39 | — | 124 | |||||||||||||||||||||||||||||||||||||||
Balance at end of period | $ | 2,830 | $ | 60 | $ | 664 | $ | 2,578 | $ | 7,692 | $ | 273 | $ | 182 | $ | 14,279 |
Three Months Ended March 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||
(in thousands) | Commercial, Financial, & Agricultural | Real Estate Construction - Residential | Real Estate Construction - Commercial | Real Estate Mortgage - Residential | Real Estate Mortgage - Commercial | Installment and Other Consumer | Un- allocated | Total | |||||||||||||||||||||||||||||||||||||||
Balance at beginning of period | $ | 5,121 | $ | 213 | $ | 475 | $ | 2,679 | $ | 9,354 | $ | 264 | $ | 7 | $ | 18,113 | |||||||||||||||||||||||||||||||
Additions: | |||||||||||||||||||||||||||||||||||||||||||||||
Provision for loan losses | (567) | 83 | 57 | (253) | 573 | 13 | 94 | — | |||||||||||||||||||||||||||||||||||||||
Deductions: | |||||||||||||||||||||||||||||||||||||||||||||||
Loans charged off | 27 | — | — | — | 23 | 57 | — | 107 | |||||||||||||||||||||||||||||||||||||||
Less recoveries on loans | (149) | (13) | — | (168) | — | (25) | — | (355) | |||||||||||||||||||||||||||||||||||||||
Net loan charge-offs (recoveries) | (122) | (13) | — | (168) | 23 | 32 | — | (248) | |||||||||||||||||||||||||||||||||||||||
Balance at end of period | $ | 4,676 | $ | 309 | $ | 532 | $ | 2,594 | $ | 9,904 | $ | 245 | $ | 101 | $ | 18,361 |
HAWTHORN BANCSHARES, INC.
AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, 2020 | ||||||||||||||||||||||
| | Commercial, | | Real Estate | | Real Estate | | Real Estate | | Real Estate | | Installment | | | | |
| | ||||||
| | Financial, & | | Construction - | | Construction - | | Mortgage - | | Mortgage - | | and Other | | Un- | |
| | |||||||
(in thousands) |
| Agricultural |
| Residential |
| Commercial |
| Residential |
| Commercial |
| Consumer |
| allocated |
| Total | ||||||||
Balance at beginning of period | | $ | 2,918 | | $ | 64 | | $ | 369 | | $ | 2,118 | | $ | 6,547 | | $ | 381 | | $ | 80 | | $ | 12,477 |
Additions: | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Provision for loan losses | |
| 721 | |
| 53 | |
| 253 | |
| 255 | |
| 2,087 | |
| 8 | |
| (77) | |
| 3,300 |
Deductions: | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Loans charged off | |
| 41 | |
| — | |
| — | |
| 19 | |
| 22 | |
| 52 | |
| — | |
| 134 |
Less recoveries on loans | |
| (25) | |
| — | |
| — | |
| (9) | |
| (2) | |
| (14) | |
| — | |
| (50) |
Net loan charge-offs | |
| 16 | |
| — | |
| — | |
| 10 | |
| 20 | |
| 38 | |
| — | |
| 84 |
Balance at end of period | | $ | 3,623 | | $ | 117 | | $ | 622 | | $ | 2,363 | | $ | 8,614 | | $ | 351 | | $ | 3 | | $ | 15,693 |
Loans, or portions of loans, are charged off to the extent deemed uncollectible or a loss is confirmed. Loan charge-offs reduce the allowance for loan losses, and recoveries of loans previously charged off are added back to the allowance. If management determines that it is probable that all amounts due on a loan will not be collected under the original terms of the loan agreement, the loan is considered to be impaired. These loans are evaluated individually for impairment, and in conjunction with current economic conditions and loss experience, specific reserves are estimated as further discussed below. Loans not individually evaluated are aggregated by risk characteristics and reserves are recorded using a consistent methodology that considers historical loan loss experience by loan type, delinquencies, current economic conditions, loan risk ratings and industry concentration.
When the COVID-19 pandemic surfaced in the first quarter of 2020, management reassessed the calculation of the allowance for loan loss by increasing the economic qualitative factor in order to capture the impact on the credit risk present in the loan portfolio given the economic environment that existed at that time. As of the fourth quarter of 2020, management reassessed the qualitative factor and economic indicators. Enough time had passed so that data after the outbreak would be available and a better interpretation of the impact of the virus on the economy. Management determined that the local market and economy had been able to transition to a functional level while adapting to the new requirements aimed at stopping the spread of the virus and returned to calculating the qualitative adjustment according to the Company's methodology detailed above.
10
HAWTHORN BANCSHARES, INC.
AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
(Unaudited)
Additionally, theThe funding of $88.4 million and $40.2$47.5 million in SBA PPP loans during 2020 and 2021, respectively, required management to assess the methodology that would be adopted in regard to the allowance for loan losses applicable to these loans. As the SBA PPP loans are expected to be mostly paid off in the next six to twelve monthswithin a year and carry a 100% credit guarantee from the SBA, management determined that 0 allowance for loan losses was deemed necessary for these loans. At March 31, 20212022, the net balance of the PPP loans totaled $56.3$2.3 million.
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Commercial, | | Real Estate | | Real Estate | | Real Estate | | Real Estate | | Installment | | | | |
| | ||||||
| | Financial, and | | Construction - | | Construction - | | Mortgage - | | Mortgage - | | and Other | | Un- | |
| | |||||||
(in thousands) |
| Agricultural |
| Residential |
| Commercial |
| Residential |
| Commercial |
| Consumer |
| allocated |
| Total | ||||||||
March 31, 2021 |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Allowance for loan losses: |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Individually evaluated for impairment | | $ | 2,134 | | $ | 26 | | $ | 28 | | $ | 256 | | $ | 2,691 | | $ | 9 | | $ | 0 | | $ | 5,144 |
Collectively evaluated for impairment | |
| 2,542 | |
| 283 | |
| 504 | |
| 2,338 | |
| 7,213 | |
| 236 | |
| 101 | |
| 13,217 |
Total | | $ | 4,676 | | $ | 309 | | $ | 532 | | $ | 2,594 | | $ | 9,904 | | $ | 245 | | $ | 101 | | $ | 18,361 |
Loans outstanding: | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Individually evaluated for impairment | | $ | 7,408 | | $ | 189 | | $ | 198 | | $ | 3,134 | | $ | 25,647 | | $ | 71 | | $ | 0 | | $ | 36,647 |
Collectively evaluated for impairment | |
| 244,535 | |
| 33,773 | |
| 78,378 | |
| 255,125 | |
| 602,531 | |
| 25,196 | |
| 0 | |
| 1,239,538 |
Total | | $ | 251,943 | | $ | 33,962 | | $ | 78,576 | | $ | 258,259 | | $ | 628,178 | | $ | 25,267 | | $ | 0 | | $ | 1,276,185 |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
December 31, 2020 | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Allowance for loan losses: | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Individually evaluated for impairment | | $ | 2,187 | | $ | 27 | | $ | 28 | | $ | 263 | | $ | 2,594 | | $ | 14 | | $ | 0 | | $ | 5,113 |
Collectively evaluated for impairment | |
| 2,934 | |
| 186 | |
| 447 | |
| 2,416 | |
| 6,760 | |
| 250 | |
| 7 | |
| 13,000 |
Total | | $ | 5,121 | | $ | 213 | | $ | 475 | | $ | 2,679 | | $ | 9,354 | | $ | 264 | | $ | 7 | | $ | 18,113 |
Loans outstanding: | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Individually evaluated for impairment | | $ | 7,552 | | $ | 192 | | $ | 200 | | $ | 3,626 | | $ | 25,657 | | $ | 108 | | $ | 0 | | $ | 37,335 |
Collectively evaluated for impairment | |
| 265,366 | |
| 29,500 | |
| 77,944 | |
| 258,713 | |
| 591,476 | |
| 26,633 | |
| 0 | |
| 1,249,632 |
Total | | $ | 272,918 | | $ | 29,692 | | $ | 78,144 | | $ | 262,339 | | $ | 617,133 | | $ | 26,741 | | $ | 0 | | $ | 1,286,967 |
11
(in thousands) | Commercial, Financial, and Agricultural | Real Estate Construction - Residential | Real Estate Construction - Commercial | Real Estate Mortgage - Residential | Real Estate Mortgage - Commercial | Installment and Other Consumer | Un- allocated | Total | |||||||||||||||||||||||||||||||||||||||
March 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||
Allowance for loan losses: | |||||||||||||||||||||||||||||||||||||||||||||||
Individually evaluated for impairment | $ | 39 | $ | — | $ | 13 | $ | 206 | $ | 41 | $ | 18 | $ | — | $ | 317 | |||||||||||||||||||||||||||||||
Collectively evaluated for impairment | 2,791 | 60 | 651 | 2,372 | 7,651 | 255 | 182 | 13,962 | |||||||||||||||||||||||||||||||||||||||
Total | $ | 2,830 | $ | 60 | $ | 664 | $ | 2,578 | $ | 7,692 | $ | 273 | $ | 182 | $ | 14,279 | |||||||||||||||||||||||||||||||
Loans outstanding: | |||||||||||||||||||||||||||||||||||||||||||||||
Individually evaluated for impairment | $ | 319 | $ | — | $ | 100 | $ | 2,428 | $ | 15,800 | $ | 140 | $ | — | $ | 18,787 | |||||||||||||||||||||||||||||||
Collectively evaluated for impairment | 220,696 | 21,515 | 103,378 | 285,451 | 661,739 | 22,357 | — | 1,315,136 | |||||||||||||||||||||||||||||||||||||||
Total | $ | 221,015 | $ | 21,515 | $ | 103,478 | $ | 287,879 | $ | 677,539 | $ | 22,497 | $ | — | $ | 1,333,923 | |||||||||||||||||||||||||||||||
December 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||
Allowance for loan losses: | |||||||||||||||||||||||||||||||||||||||||||||||
Individually evaluated for impairment | $ | 42 | $ | — | $ | 13 | $ | 166 | $ | 2,815 | $ | 8 | $ | — | $ | 3,044 | |||||||||||||||||||||||||||||||
Collectively evaluated for impairment | 2,675 | 137 | 575 | 2,316 | 7,847 | 248 | 61 | 13,859 | |||||||||||||||||||||||||||||||||||||||
Total | $ | 2,717 | $ | 137 | $ | 588 | $ | 2,482 | $ | 10,662 | $ | 256 | $ | 61 | $ | 16,903 | |||||||||||||||||||||||||||||||
Loans outstanding: | |||||||||||||||||||||||||||||||||||||||||||||||
Individually evaluated for impairment | $ | 341 | $ | — | $ | 105 | $ | 2,391 | $ | 24,357 | $ | 60 | $ | — | $ | 27,254 | |||||||||||||||||||||||||||||||
Collectively evaluated for impairment | 216,873 | 27,920 | 91,264 | 276,955 | 638,899 | 22,968 | — | 1,274,879 | |||||||||||||||||||||||||||||||||||||||
Total | $ | 217,214 | $ | 27,920 | $ | 91,369 | $ | 279,346 | $ | 663,256 | $ | 23,028 | $ | — | $ | 1,302,133 |
(Unaudited)
| | | | | | |
| | March 31, | | December 31, | ||
(in thousands) |
| 2021 |
| 2020 | ||
Non-accrual loans | | $ | 34,233 | | $ | 34,559 |
Performing TDRs | |
| 2,414 | |
| 2,776 |
Total impaired loans | | $ | 36,647 | | $ | 37,335 |
12
(in thousands) | March 31, 2022 | December 31, 2021 | |||||||||
Non-accrual loans | $ | 17,096 | $ | 25,459 | |||||||
Performing TDRs | 1,691 | 1,795 | |||||||||
Total impaired loans | $ | 18,787 | $ | 27,254 |
HAWTHORN BANCSHARES, INC.
AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
(Unaudited)
The following tables provide additional information about impaired loans at March 31, 20212022 and December 31, 2020,2021, respectively, segregated between loans for which an allowance has been provided and loans for which no allowance has been provided.
| | | | | | | | | |
|
| | |
| Unpaid |
| | | |
| | Recorded | | Principal | | Specific | |||
(in thousands) | | Investment | | Balance | | Reserves | |||
March 31, 2021 | | | | | | | | | |
With no related allowance recorded: |
| |
|
| |
|
| |
|
Commercial, financial and agricultural | | $ | 1,837 | | $ | 1,882 | | $ | — |
Real estate mortgage − residential | |
| 1,275 | |
| 1,377 | |
| — |
Real estate mortgage − commercial | | | 9,457 | | | 9,467 | | | — |
Total | | $ | 12,569 | | $ | 12,726 | | $ | — |
With an allowance recorded: | |
|
| |
|
| |
|
|
Commercial, financial and agricultural | | $ | 5,571 | | $ | 5,645 | | $ | 2,134 |
Real estate construction − residential | | | 189 | | | 189 | | | 26 |
Real estate construction − commercial | |
| 198 | |
| 251 | |
| 28 |
Real estate mortgage − residential | |
| 1,859 | |
| 2,304 | |
| 256 |
Real estate mortgage − commercial | |
| 16,190 | |
| 16,257 | |
| 2,691 |
Installment and other consumer | |
| 71 | |
| 75 | |
| 9 |
Total | | $ | 24,078 | | $ | 24,721 | | $ | 5,144 |
Total impaired loans | | $ | 36,647 | | $ | 37,447 | | $ | 5,144 |
| | | | | | | | | |
|
| | |
| Unpaid |
| | | |
| | Recorded | | Principal | | Specific | |||
(in thousands) | | Investment | | Balance | | Reserves | |||
December 31, 2020 |
| |
|
| |
|
| |
|
With no related allowance recorded: |
| |
|
| |
|
| |
|
Commercial, financial and agricultural | | $ | 1,703 | | $ | 1,731 | | $ | — |
Real estate mortgage − residential | |
| 1,300 | |
| 1,395 | |
| — |
Real estate mortgage − commercial | | | 8,943 | | | 8,943 | | | — |
Total | | $ | 11,946 | | $ | 12,069 | | $ | — |
With an allowance recorded: | |
|
| |
|
| |
|
|
Commercial, financial and agricultural | | $ | 5,849 | | $ | 6,180 | | $ | 2,187 |
Real estate construction − residential | | | 192 | | | 192 | | | 27 |
Real estate construction − commercial | |
| 200 | |
| 251 | |
| 28 |
Real estate mortgage − residential | |
| 2,326 | |
| 2,786 | |
| 263 |
Real estate mortgage − commercial | |
| 16,714 | |
| 16,787 | |
| 2,594 |
Installment and other consumer | |
| 108 | |
| 112 | |
| 14 |
Total | | $ | 25,389 | | $ | 26,308 | | $ | 5,113 |
Total impaired loans | | $ | 37,335 | | $ | 38,377 | | $ | 5,113 |
13
(in thousands) | Recorded Investment | Unpaid Principal Balance | Specific Reserves | ||||||||||||||
March 31, 2022 | |||||||||||||||||
With no related allowance recorded: | |||||||||||||||||
Real estate mortgage − residential | $ | 754 | $ | 754 | $ | — | |||||||||||
Real estate mortgage − commercial | 15,364 | 16,045 | — | ||||||||||||||
Installment and other consumer | — | 4 | — | ||||||||||||||
Total | $ | 16,118 | $ | 16,803 | $ | — | |||||||||||
With an allowance recorded: | |||||||||||||||||
Commercial, financial and agricultural | $ | 319 | $ | 357 | $ | 39 | |||||||||||
Real estate construction − commercial | 100 | 135 | 13 | ||||||||||||||
Real estate mortgage − residential | 1,674 | 2,152 | 206 | ||||||||||||||
Real estate mortgage − commercial | 436 | 516 | 41 | ||||||||||||||
Installment and other consumer | 140 | 140 | 18 | ||||||||||||||
Total | $ | 2,669 | $ | 3,300 | $ | 317 | |||||||||||
Total impaired loans | $ | 18,787 | $ | 20,103 | $ | 317 |
(Unaudited)
(in thousands) | Recorded Investment | Unpaid Principal Balance | Specific Reserves | ||||||||||||||
December 31, 2021 | |||||||||||||||||
With no related allowance recorded: | |||||||||||||||||
Real estate mortgage − residential | $ | 1,034 | $ | 1,152 | $ | — | |||||||||||
Real estate mortgage − commercial | 15,593 | 16,057 | — | ||||||||||||||
Total | $ | 16,627 | $ | 17,209 | $ | — | |||||||||||
With an allowance recorded: | |||||||||||||||||
Commercial, financial and agricultural | $ | 341 | $ | 374 | $ | 42 | |||||||||||
Real estate construction − commercial | 105 | 138 | 13 | ||||||||||||||
Real estate mortgage − residential | 1,357 | 1,730 | 166 | ||||||||||||||
Real estate mortgage − commercial | 8,764 | 9,142 | 2,815 | ||||||||||||||
Installment and other consumer | 60 | 61 | 8 | ||||||||||||||
Total | $ | 10,627 | $ | 11,445 | $ | 3,044 | |||||||||||
Total impaired loans | $ | 27,254 | $ | 28,654 | $ | 3,044 |
| | | | | | | | | | | | | |
| | Three Months Ended March 31, | | ||||||||||
| | 2021 | | 2020 | | ||||||||
| | | | | Interest | | | | | Interest | | ||
| | Average | | Recognized | | Average | | Recognized | | ||||
| | Recorded | �� | For the | | Recorded | | For the | | ||||
(in thousands) |
| Investment |
| Period Ended |
| Investment |
| Period Ended | | ||||
With no related allowance recorded: | | |
|
| |
|
| |
|
| |
| |
Commercial, financial and agricultural | | $ | 1,742 | | $ | 8 | | $ | 1,014 | | $ | 0 | |
Real estate construction − commercial | | | 0 | | | 0 | | | 227 | | | 0 | |
Real estate mortgage − residential | |
| 1,424 | |
| 9 | |
| 1,581 | |
| 0 | |
Real estate mortgage − commercial | |
| 9,457 | |
| 0 | |
| 1,163 | |
| 6 | |
Installment and other consumer | | | 0 | | | 0 | | | 12 | | | 0 | |
Total | | $ | 12,623 | | $ | 17 | | $ | 3,997 | | $ | 6 | |
With an allowance recorded: | |
|
| |
|
| |
|
| |
|
| |
Commercial, financial and agricultural | | $ | 5,696 | | $ | 7 | | $ | 1,195 | | $ | 8 | |
Real estate construction − residential | | | 190 | | | 0 | | | 0 | | | 0 | |
Real estate construction − commercial | |
| 199 | |
| 0 | |
| 0 | |
| 0 | |
Real estate mortgage − residential | |
| 1,958 | |
| 6 | |
| 2,550 | |
| 20 | |
Real estate mortgage − commercial | |
| 16,195 | |
| 7 | |
| 370 | |
| 2 | |
Installment and other consumer | |
| 85 | |
| 3 | |
| 117 | |
| 6 | |
Total | | $ | 24,323 | | $ | 23 | | $ | 4,232 | | $ | 36 | |
Total impaired loans | | $ | 36,946 | | $ | 40 | | $ | 8,229 | | $ | 42 | |
Three Months Ended March 31, | |||||||||||||||||||||||||||||||||||||||||||||||
2022 | 2021 | ||||||||||||||||||||||||||||||||||||||||||||||
(in thousands) | Average Recorded Investment | Interest Recognized For the Period Ended | Average Recorded Investment | Interest Recognized For the Period Ended | |||||||||||||||||||||||||||||||||||||||||||
With no related allowance recorded: | |||||||||||||||||||||||||||||||||||||||||||||||
Commercial, financial and agricultural | $ | — | $ | — | $ | 1,742 | $ | 8 | |||||||||||||||||||||||||||||||||||||||
Real estate mortgage − residential | 759 | 9 | 1,424 | 9 | |||||||||||||||||||||||||||||||||||||||||||
Real estate mortgage − commercial | 21,256 | — | 9,457 | — | |||||||||||||||||||||||||||||||||||||||||||
Installment and other consumer | 2 | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
Total | $ | 22,017 | $ | 9 | $ | 12,623 | $ | 17 | |||||||||||||||||||||||||||||||||||||||
With an allowance recorded: | |||||||||||||||||||||||||||||||||||||||||||||||
Commercial, financial and agricultural | $ | 323 | $ | 3 | $ | 5,696 | $ | 7 | |||||||||||||||||||||||||||||||||||||||
Real estate construction − residential | — | — | 190 | — | |||||||||||||||||||||||||||||||||||||||||||
Real estate construction − commercial | 101 | — | 199 | — | |||||||||||||||||||||||||||||||||||||||||||
Real estate mortgage − residential | 1,659 | 7 | 1,958 | 6 | |||||||||||||||||||||||||||||||||||||||||||
Real estate mortgage − commercial | 440 | 7 | 16,195 | 7 | |||||||||||||||||||||||||||||||||||||||||||
Installment and other consumer | 96 | — | 85 | 3 | |||||||||||||||||||||||||||||||||||||||||||
Total | $ | 2,619 | $ | 17 | $ | 24,323 | $ | 23 | |||||||||||||||||||||||||||||||||||||||
Total impaired loans | $ | 24,636 | $ | 26 | $ | 36,946 | $ | 40 |
14
HAWTHORN BANCSHARES,��INC.
AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
(Unaudited)
ability to pay under the terms of the note through a sustained period of repayment performance, which is generally six months.
| | | | | | | | | | | | | | | |
|
| Current or |
| | |
| 90 Days |
| | |
| | | ||
| | Less Than | | | | | Past Due | | | | | | | ||
| | 30 Days | | 30 - 89 Days | | And Still | | | | | | | |||
(in thousands) | | Past Due | | Past Due | | Accruing | | Non-Accrual | | Total | |||||
March 31, 2021 |
| |
|
| |
|
| |
|
| |
|
| |
|
Commercial, Financial, and Agricultural | | $ | 245,019 | | $ | 333 | | $ | 0 | | $ | 6,591 | | $ | 251,943 |
Real estate construction − residential | |
| 33,773 | |
| 0 | |
| 0 | |
| 189 | |
| 33,962 |
Real estate construction − commercial | |
| 78,378 | |
| 0 | |
| 0 | |
| 198 | |
| 78,576 |
Real estate mortgage − residential | |
| 255,172 | |
| 1,170 | |
| 0 | |
| 1,917 | |
| 258,259 |
Real estate mortgage − commercial | |
| 602,502 | |
| 367 | |
| 0 | |
| 25,309 | |
| 628,178 |
Installment and Other Consumer | |
| 25,181 | |
| 57 | |
| 0 | |
| 29 | |
| 25,267 |
Total | | $ | 1,240,025 | | $ | 1,927 | | $ | 0 | | $ | 34,233 | | $ | 1,276,185 |
December 31, 2020 | |
|
| |
|
| |
|
| |
|
| |
|
|
Commercial, Financial, and Agricultural | | $ | 265,821 | | $ | 380 | | $ | 0 | | $ | 6,717 | | $ | 272,918 |
Real estate construction − residential | |
| 29,500 | |
| 0 | |
| 0 | |
| 192 | |
| 29,692 |
Real estate construction − commercial | |
| 77,944 | |
| 0 | |
| 0 | |
| 200 | |
| 78,144 |
Real estate mortgage − residential | |
| 259,688 | |
| 546 | |
| 0 | |
| 2,105 | |
| 262,339 |
Real estate mortgage − commercial | |
| 591,815 | |
| 4 | |
| 0 | |
| 25,314 | |
| 617,133 |
Installment and Other Consumer | |
| 26,576 | |
| 117 | |
| 17 | |
| 31 | |
| 26,741 |
Total | | $ | 1,251,344 | | $ | 1,047 | | $ | 17 | | $ | 34,559 | | $ | 1,286,967 |
The Company's past due and non-accrual loans at March 31, 2021 and December 31, 2020 do not include $43.5 million and $57.1 million of loans accepting forbearance under the CARES Act, respectively. Their delinquency status will not change through the forbearance period as they are fulfilling the agreement they have made with the Company. Of the total remaining $72.8 million loan modifications under the CARES Act, $29.3 million, are on nonaccrual status at March 31, 2021.
(in thousands) | Current or Less Than 30 Days Past Due | 30 - 89 Days Past Due | 90 Days Past Due And Still Accruing | Non-Accrual | Total | ||||||||||||||||||||||||
March 31, 2022 | |||||||||||||||||||||||||||||
Commercial, Financial, and Agricultural | $ | 220,703 | $ | 176 | $ | — | $ | 136 | $ | 221,015 | |||||||||||||||||||
Real estate construction − residential | 21,513 | 2 | — | — | 21,515 | ||||||||||||||||||||||||
Real estate construction − commercial | 103,339 | 39 | — | 100 | 103,478 | ||||||||||||||||||||||||
Real estate mortgage − residential | 286,007 | 614 | — | 1,258 | 287,879 | ||||||||||||||||||||||||
Real estate mortgage − commercial | 662,062 | — | — | 15,477 | 677,539 | ||||||||||||||||||||||||
Installment and Other Consumer | 22,273 | 96 | 3 | 125 | 22,497 | ||||||||||||||||||||||||
Total | $ | 1,315,897 | $ | 927 | $ | 3 | $ | 17,096 | $ | 1,333,923 | |||||||||||||||||||
December 31, 2021 | |||||||||||||||||||||||||||||
Commercial, Financial, and Agricultural | $ | 217,058 | $ | 3 | $ | — | $ | 153 | $ | 217,214 | |||||||||||||||||||
Real estate construction − residential | 27,920 | — | — | — | 27,920 | ||||||||||||||||||||||||
Real estate construction − commercial | 91,264 | — | — | 105 | 91,369 | ||||||||||||||||||||||||
Real estate mortgage − residential | 277,532 | 671 | 14 | 1,129 | 279,346 | ||||||||||||||||||||||||
Real estate mortgage − commercial | 638,982 | 245 | — | 24,029 | 663,256 | ||||||||||||||||||||||||
Installment and Other Consumer | 22,848 | 137 | — | 43 | 23,028 | ||||||||||||||||||||||||
Total | $ | 1,275,604 | $ | 1,056 | $ | 14 | $ | 25,459 | $ | 1,302,133 |
15
HAWTHORN BANCSHARES, INC.
AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
(Unaudited)
non-performing TDRs and are included with all other nonaccrualnon-accrual loans for presentation purposes. It is the Company’s policy to discontinue the accrual of interest income on loans when management believes that the collection of interest or principal is doubtful.
| | | | | | | | | | | | | | | | | | | | | |
|
| Commercial, |
| Real Estate |
| Real Estate |
| Real Estate |
| Real Estate |
| Installment |
| | | ||||||
| | Financial, & | | Construction - | | Construction - | | Mortgage - | | Mortgage - | | and other | | | | ||||||
(in thousands) | | Agricultural | | Residential | | Commercial | | Residential | | Commercial | | Consumer | | Total | |||||||
At March 31, 2021 |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Watch | | $ | 8,675 | | $ | 540 | | $ | 7,013 | | $ | 15,694 | | $ | 71,375 | | $ | 0 | | $ | 103,297 |
Substandard | |
| 581 | |
| 0 | |
| 2,670 | |
| 954 | |
| 1,645 | |
| 0 | |
| 5,850 |
Performing TDRs | |
| 817 | |
| 0 | |
| 0 | |
| 1,217 | |
| 338 | |
| 42 | |
| 2,414 |
Non-accrual loans | |
| 6,591 | |
| 189 | |
| 198 | |
| 1,917 | |
| 25,309 | |
| 29 | |
| 34,233 |
Total | | $ | 16,664 | | $ | 729 | | $ | 9,881 | | $ | 19,782 | | $ | 98,667 | | $ | 71 | | $ | 145,794 |
At December 31, 2020 | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Watch | | $ | 9,649 | | $ | 545 | | $ | 10,806 | | $ | 15,835 | | $ | 66,936 | | $ | 0 | | $ | 103,771 |
Substandard | |
| 598 | |
| 0 | |
| 0 | |
| 1,002 | |
| 1,662 | |
| 0 | |
| 3,262 |
Performing TDRs | |
| 835 | |
| 0 | |
| 0 | |
| 1,521 | |
| 343 | |
| 77 | |
| 2,776 |
Non-accrual loans | |
| 6,717 | |
| 192 | |
| 200 | |
| 2,105 | |
| 25,314 | |
| 31 | |
| 34,559 |
Total | | $ | 17,799 | | $ | 737 | | $ | 11,006 | | $ | 20,463 | | $ | 94,255 | | $ | 108 | | $ | 144,368 |
2021.
(in thousands) | Commercial, Financial, & Agricultural | Real Estate Construction - Residential | Real Estate Construction - Commercial | Real Estate Mortgage - Residential | Real Estate Mortgage - Commercial | Installment and other Consumer | Total | ||||||||||||||||||||||||||||||||||
At March 31, 2022 | |||||||||||||||||||||||||||||||||||||||||
Watch | $ | 8,618 | $ | — | $ | 2,897 | $ | 12,061 | $ | 41,464 | $ | — | $ | 65,040 | |||||||||||||||||||||||||||
Substandard | 6,143 | — | 2,673 | 537 | 10,893 | — | 20,246 | ||||||||||||||||||||||||||||||||||
Performing TDRs | 183 | — | — | 1,170 | 323 | 15 | 1,691 | ||||||||||||||||||||||||||||||||||
Non-accrual loans | 136 | — | 100 | 1,258 | 15,477 | 125 | 17,096 | ||||||||||||||||||||||||||||||||||
Total | $ | 15,080 | $ | — | $ | 5,670 | $ | 15,026 | $ | 68,157 | $ | 140 | $ | 104,073 | |||||||||||||||||||||||||||
At December 31, 2021 | |||||||||||||||||||||||||||||||||||||||||
Watch | $ | 9,219 | $ | — | $ | 4,304 | $ | 12,185 | $ | 43,348 | $ | — | $ | 69,056 | |||||||||||||||||||||||||||
Substandard | 6,284 | — | 2,673 | 750 | 2,305 | — | 12,012 | ||||||||||||||||||||||||||||||||||
Performing TDRs | 188 | — | — | 1,262 | 328 | 17 | 1,795 | ||||||||||||||||||||||||||||||||||
Non-accrual loans | 153 | — | 105 | 1,129 | 24,029 | 43 | 25,459 | ||||||||||||||||||||||||||||||||||
Total | $ | 15,844 | $ | — | $ | 7,082 | $ | 15,326 | $ | 70,010 | $ | 60 | $ | 108,322 |
As provided for by the CARES Act, the Company offered payment modifications to borrowers. At March 31, 2021, $72.8 million, or 5.7% of total loans, remained in some form of a modification. These loan modifications include $28.1 million, or 38.5%, on interest only, $39.6 million, or 54.5%, on full deferral and $5.1 million, or 7.0%, with extended amortization. (See table below titled – Loan Modifications under the CARES Act by NAICS Code.)
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16
HAWTHORN BANCSHARES, INC.
AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
(Unaudited)
| | Total Remaining Loan Modifications under the CARES Act by NAICS Code as of March 31, 2021 | | |||||||||||||||||||
|
| | | | % of | | | | % of | | | | % of | | | | ||||||
| | | | | Total Remaining | Full | Total Remaining | | | | Total Remaining | | | | ||||||||
| | Interest | Loan | Deferral | Loan | Extended | Loan | | | | ||||||||||||
Industry Category |
| Only | Modifications | (1) | Modifications | Amortizations | Modifications | Totals | ||||||||||||||
(in thousands) | | | | | | | | | | | | | | | | | | | | | | |
Real Estate and Rental and Leasing | | $ | 4,521 |
| | 6.2 | % | $ | 5,790 | | | 8.0 | % | $ | 499 | | | 0.7 | % | $ | 10,810 | |
Accommodations and Food Services | | | 10,590 | | | 14.5 | | | 29,007 | | | 39.8 | | | 4,592 | | | 6.3 | | | 44,189 | |
Construction | | | 144 | | | 0.2 | | | — | | | — | | | — | | | — | | | 144 | |
Lands and lots | | | 1,553 | | | 2.1 | | | — | | | — | | | — | | | — | | | 1,553 | |
Cinemas | | | 1,086 | | | 1.5 | | | 4,691 | | | 6.4 | | | — | | | — | | | 5,777 | |
Arts, Entertainment, Recreation | | | 10,164 | | | 14.0 | | | — | | | — | | | — | | | — | | | 10,164 | |
Non-NAICS (Consumer) | | | — | | | 0.0 | | | 161 | | | 0.3 | | | — | | | — | | | 161 | |
Total modifications | | $ | 28,058 | | | 38.5 | % | $ | 39,649 | | | 54.5 | % | $ | 5,091 | | | 7.0 | % | $ | 72,798 | |
| | | | | | | | | | | | | | | | | | | | | | |
Remaining loan modifications under the CARES Act as a percent of the total loan portfolio5.7%
The following table summarizes loans that were modified as TDRs during the periods indicated.
| | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, | ||||||||||||||
| | 2021 | | 2020 | ||||||||||||
| | Recorded Investment (1) | | Recorded Investment (1) | ||||||||||||
| | Number of | | Pre- | | Post- | | Number of | | Pre- | | Post- | ||||
(in thousands) |
| Contracts |
| Modification |
| Modification |
| Contracts |
| Modification |
| Modification | ||||
Troubled Debt Restructurings |
|
|
| |
|
| |
|
|
|
| |
|
| | |
Installment and other consumer | | — | | $ | — | | $ | — |
| 1 | | $ | 6 | $ |
| 5 |
Total |
| — | | $ | — | | $ | — |
| 1 | | $ | 6 | | $ | 5 |
The Company’s portfolio of loans classified as TDRs include concessions for the borrower given their financial condition such as applying interest rates below the current market rate, deferring principal payments, and extending maturity dates. There were 0no loans meeting the TDR criteria that were modified during the three months ended March 31, 2022, and 2021, and 1 loan during the three months ended March 31, 2020.respectively. The Company considers a TDR to be in default when it is 90 days or more past due under the modified terms, a charge-off occurs, or it is in the process of foreclosure. There were 0no loans modified as a TDR that defaulted during any of the three months ended March 31, 20212022 and 2020,2021, respectively, and within twelve months of their modification date. See Lending and Credit Management section for further information.
17
HAWTHORN BANCSHARES, INC.
(Unaudited)
| | | | | | |
| | March 31, | | December 31, | ||
(in thousands) | | 2021 |
| 2020 | ||
Commercial | | $ | 920 | | $ | 920 |
Real estate construction - residential | |
| — | |
| — |
Real estate construction - commercial | |
| 10,987 | |
| 10,986 |
Real estate mortgage - residential | |
| 137 | |
| 201 |
Real estate mortgage - commercial | |
| 2,798 | |
| 2,798 |
Total | | $ | 14,842 | | $ | 14,905 |
Less valuation allowance for other real estate owned | |
| (2,702) | |
| (2,614) |
Total other real estate owned | | $ | 12,140 | | $ | 12,291 |
March 31, | December 31, | ||||||||||
(in thousands) | 2022 | 2021 | |||||||||
Commercial | $ | — | $ | 643 | |||||||
Real estate construction - commercial | 10,094 | 10,166 | |||||||||
Real estate mortgage - residential | 117 | 117 | |||||||||
Real estate mortgage - commercial | 2,458 | 2,510 | |||||||||
Total | $ | 12,669 | $ | 13,436 | |||||||
Less valuation allowance for other real estate owned | (2,911) | (2,911) | |||||||||
Total other real estate owned | $ | 9,758 | $ | 10,525 |
| | | | | | | |
| | Three Months Ended March 31, | | ||||
|
| 2021 |
| 2020 |
| ||
Balance at beginning of period | | $ | 14,905 | | $ | 15,737 | |
Additions | | | 30 | | | — | |
Proceeds from sales | | | (108) | | | — | |
Charge-offs against the valuation allowance for other real estate owned, net | | | 0 | | | 0 | |
Net gain on sales | | | 15 | | | 0 | |
Total other real estate owned | | $ | 14,842 | | $ | 15,737 | |
Less valuation allowance for other real estate owned | | | (2,702) | | | (2,968) | |
Balance at end of period | | $ | 12,140 | | $ | 12,769 | |
| | | | | | | |
Three Months Ended March 31, | |||||||||||||||||||||||
(in thousands) | 2022 | 2021 | |||||||||||||||||||||
Balance at beginning of period | $ | 13,436 | $ | 14,905 | |||||||||||||||||||
Additions net of (charge-offs) | (52) | 30 | |||||||||||||||||||||
Proceeds from sales | (723) | (108) | |||||||||||||||||||||
Net gain on sales | 8 | 15 | |||||||||||||||||||||
Total other real estate owned | $ | 12,669 | $ | 14,842 | |||||||||||||||||||
Less valuation allowance for other real estate owned | (2,911) | (2,702) | |||||||||||||||||||||
Balance at end of period | $ | 9,758 | $ | 12,140 |
2021.
| | | | | | |
| | Three Months Ended March 31, | ||||
(in thousands) |
| 2021 |
| 2020 | ||
Balance, beginning of period | | $ | 2,614 | | $ | 2,956 |
Provision for other real estate owned | |
| 88 | |
| 12 |
Charge-offs | |
| 0 | |
| 0 |
Balance, end of period | | $ | 2,702 | | $ | 2,968 |
| | | | | | |
18
Three Months Ended March 31, | |||||||||||||||||||||||
(in thousands) | 2022 | 2021 | |||||||||||||||||||||
Balance, beginning of period | $ | 2,911 | $ | 2,614 | |||||||||||||||||||
Provision for other real estate owned | — | 88 | |||||||||||||||||||||
Balance, end of period | $ | 2,911 | $ | 2,702 |
HAWTHORN BANCSHARES, INC.
(Unaudited)
Available for sale securities
| | | | | | | | | | | | |
| | Total | | | | | | | | | | |
| | Amortized | | Gross Unrealized | | Fair | ||||||
(in thousands) |
| Cost |
| Gains |
| Losses |
| Value | ||||
March 31, 2021 |
| |
|
| |
|
| |
|
| |
|
U.S. Treasury | | $ | 3,018 | | $ | 23 | | $ | 0 | | $ | 3,041 |
U.S. government and federal agency obligations | |
| 20,161 | |
| 76 | |
| (408) | |
| 19,829 |
U.S. government-sponsored enterprises | |
| 22,497 | |
| 238 | |
| (184) | |
| 22,551 |
Obligations of states and political subdivisions | |
| 70,324 | |
| 961 | |
| (467) | |
| 70,818 |
Mortgage-backed securities | | | 108,106 | | | 1,586 | | | (1,048) | | | 108,644 |
Other debt securities (a) | |
| 11,825 | |
| 209 | |
| (11) | |
| 12,023 |
Bank issued trust preferred securities (a) | |
| 1,486 | |
| 0 | |
| (250) | |
| 1,236 |
Total available-for-sale securities | | $ | 237,417 | | $ | 3,093 | | $ | (2,368) | | $ | 238,142 |
| | | | | | | | | | | | |
December 31, 2020 | |
|
| |
|
| |
|
| |
|
|
U.S. Treasury | | $ | 2,772 | | $ | 26 | | $ | 0 | | $ | 2,798 |
U.S. government and federal agency obligations | |
| 11,732 | |
| 197 | |
| 0 | |
| 11,929 |
U.S. government-sponsored enterprises | |
| 22,495 | |
| 379 | |
| 0 | |
| 22,874 |
Obligations of states and political subdivisions | |
| 56,943 | |
| 1,801 | |
| 0 | |
| 58,744 |
Mortgage-backed securities | | | 88,357 | | | 1,809 | | | (54) | |
| 90,112 |
Other debt securities (a) | |
| 10,000 | |
| 358 | |
| (14) | |
| 10,344 |
Bank issued trust preferred securities (a) | |
| 1,486 | |
| 0 | |
| (257) | |
| 1,229 |
Total available-for-sale securities | | $ | 193,785 | | $ | 4,570 | | $ | (325) | | $ | 198,030 |
Gross Unrealized | |||||||||||||||||||||||
(in thousands) | Total Amortized Cost | Gains | Losses | Fair Value | |||||||||||||||||||
March 31, 2022 | |||||||||||||||||||||||
U.S. Treasury | $ | 3,154 | $ | 3 | $ | (12) | $ | 3,145 | |||||||||||||||
U.S. government and federal agency obligations | 1,015 | — | (40) | 975 | |||||||||||||||||||
U.S. government-sponsored enterprises | 26,498 | — | (1,233) | 25,265 | |||||||||||||||||||
Obligations of states and political subdivisions | 134,882 | 10 | (14,458) | 120,434 | |||||||||||||||||||
Mortgage-backed securities | 132,222 | 81 | (8,455) | 123,848 | |||||||||||||||||||
Other debt securities (a) | 11,825 | 222 | (226) | 11,821 | |||||||||||||||||||
Bank issued trust preferred securities (a) | 1,486 | — | (220) | 1,266 | |||||||||||||||||||
Total available-for-sale securities | $ | 311,082 | $ | 316 | $ | (24,644) | $ | 286,754 | |||||||||||||||
December 31, 2021 | |||||||||||||||||||||||
U.S. Treasury | $ | 3,909 | $ | 11 | $ | (3) | $ | 3,917 | |||||||||||||||
U.S. government and federal agency obligations | 1,314 | 5 | — | 1,319 | |||||||||||||||||||
U.S. government-sponsored enterprises | 26,498 | 70 | (196) | 26,372 | |||||||||||||||||||
Obligations of states and political subdivisions | 128,093 | 1,605 | (474) | 129,224 | |||||||||||||||||||
Mortgage-backed securities | 137,286 | 791 | (1,611) | 136,466 | |||||||||||||||||||
Other debt securities (a) | 11,825 | 482 | (23) | 12,284 | |||||||||||||||||||
Bank issued trust preferred securities (a) | 1,486 | — | (198) | 1,288 | |||||||||||||||||||
Total available-for-sale securities | $ | 310,411 | $ | 2,964 | $ | (2,505) | $ | 310,870 |
The Company’s investment securities are classified as available for sale. Agency bonds and notes, Small Business AdministrationSBA guaranteed loan certificates, (SBA), residential and commercial agency mortgage-backed securities, and agency collateralized mortgage obligations (CMO) include securities issued by the Government National Mortgage Association (GNMA), a U.S. government agency, and the Federal National Mortgage Association (FNMA), the Federal Home Loan Mortgage Corporation (FHLMC), and the Federal Home Loan Bank (FHLB), which are U.S. government-sponsored enterprises.
19
(Unaudited)
| | | | | | |
|
| Amortized |
| Fair | ||
(in thousands) | | Cost | | Value | ||
Due in one year or less | | $ | 4,975 | | $ | 5,011 |
Due after one year through five years | |
| 18,245 | |
| 18,456 |
Due after five years through ten years | |
| 35,184 | |
| 35,589 |
Due after ten years | |
| 70,907 | |
| 70,442 |
Total | �� |
| 129,311 | |
| 129,498 |
Mortgage-backed securities | |
| 108,106 | |
| 108,644 |
Total available-for-sale securities | | $ | 237,417 | | $ | 238,142 |
(in thousands) | Amortized Cost | Fair Value | |||||||||
Due in one year or less | $ | 5,521 | $ | 5,517 | |||||||
Due after one year through five years | 23,271 | 22,653 | |||||||||
Due after five years through ten years | 29,254 | 28,264 | |||||||||
Due after ten years | 120,814 | 106,472 | |||||||||
Total | 178,860 | 162,906 | |||||||||
Mortgage-backed securities | 132,222 | 123,848 | |||||||||
Total available-for-sale securities | $ | 311,082 | $ | 286,754 |
Investment Securities
| | | | | | | |
|
| March 31, |
| December 31, | | ||
(in thousands) |
| 2021 |
| 2020 | | ||
Other securities: |
| |
|
| |
| |
FHLB stock | | $ | 5,992 | | $ | 6,170 | |
MIB stock | |
| 151 | |
| 151 | |
Equity securities with readily determinable fair values | |
| 45 | |
| 32 | |
Total other investment securities | | $ | 6,188 | | $ | 6,353 | |
20
(in thousands) | March 31, 2022 | December 31, 2021 | |||||||||
Other securities: | |||||||||||
FHLB stock | $ | 5,283 | $ | 5,197 | |||||||
MIB stock | 151 | 151 | |||||||||
Equity securities with readily determinable fair values | 56 | 60 | |||||||||
Total other investment securities | $ | 5,490 | $ | 5,408 |
(Unaudited)
| | | | | | | | | | | | | | | | | | |
| | Less than 12 months | | 12 months or more | | Total | | Total | ||||||||||
|
| Fair |
| Unrealized |
| Fair |
| Unrealized |
| Fair |
| Unrealized | ||||||
(in thousands) | | Value | | Losses | | Value | | Losses | | Value | | Losses | ||||||
At March 31, 2021 |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
U.S. Treasury | | $ | 1,022 | | $ | 0 | | $ | 250 | | $ | 0 | | $ | 1,272 | | $ | 0 |
U.S. government and federal agency obligations | | | 14,447 | | | (408) | | | 0 | | | 0 | | | 14,447 | | | (408) |
U.S. government-sponsored enterprises | |
| 5,816 | |
| (184) | |
| 0 | |
| 0 | |
| 5,816 | |
| (184) |
Obligations of states and political subdivisions | |
| 22,580 | |
| (467) | |
| 0 | |
| 0 | |
| 22,580 | |
| (467) |
Mortgage-backed securities | | | 46,969 | | | (1,048) | | | 0 | | | 0 | | | 46,969 | | | (1,048) |
Other debt securities | | | 2,989 | | | (11) | | | 0 | | | 0 | | | 2,989 | | | (11) |
Bank issued trust preferred securities | |
| 0 | |
| 0 | |
| 1,236 | |
| (250) | |
| 1,236 | |
| (250) |
Total | | $ | 93,823 | | $ | (2,118) | | $ | 1,486 | | $ | (250) | | $ | 95,309 | | $ | (2,368) |
| | | | | | | | | | | | | | | | | | |
(in thousands) | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
At December 31, 2020 | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
U.S. Treasury | | $ | 1,015 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 1,015 | | $ | 0 |
Mortgage-backed securities | | | 7,494 | | | (54) | | | 0 | | | 0 | | | 7,494 | | | (54) |
Other debt securities | | | 2,987 | | | (14) | | | 0 | | | 0 | | | 2,987 | | | (14) |
Bank issued trust preferred securities | |
| 0 | |
| 0 | |
| 1,229 | |
| (257) | |
| 1,229 | | | (257) |
Total | | $ | 11,496 | | $ | (68) | | $ | 1,229 | | $ | (257) | | $ | 12,725 | | $ | (325) |
Less than 12 months | 12 months or more | ||||||||||||||||||||||||||||||||||
(in thousands) | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Total Fair Value | Total Unrealized Losses | |||||||||||||||||||||||||||||
At March 31, 2022 | |||||||||||||||||||||||||||||||||||
U.S. Treasury | $ | 2,145 | $ | (9) | $ | 248 | $ | (3) | $ | 2,393 | $ | (12) | |||||||||||||||||||||||
U.S. government and federal agency obligations | 975 | (40) | — | — | 975 | (40) | |||||||||||||||||||||||||||||
U.S. government-sponsored enterprises | 20,736 | (763) | 4,530 | (470) | 25,266 | (1,233) | |||||||||||||||||||||||||||||
Obligations of states and political subdivisions | 110,254 | (13,072) | 5,612 | (1,386) | 115,866 | (14,458) | |||||||||||||||||||||||||||||
Mortgage-backed securities | 87,136 | (5,018) | 30,475 | (3,437) | 117,611 | (8,455) | |||||||||||||||||||||||||||||
Other debt securities | 4,598 | (226) | — | — | 4,598 | (226) | |||||||||||||||||||||||||||||
Bank issued trust preferred securities | — | — | 1,266 | (220) | 1,266 | (220) | |||||||||||||||||||||||||||||
Total | $ | 225,844 | $ | (19,128) | $ | 42,131 | $ | (5,516) | $ | 267,975 | $ | (24,644) | |||||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||||||||||||||
At December 31, 2021 | |||||||||||||||||||||||||||||||||||
U.S. Treasury | $ | 1,758 | $ | (3) | $ | — | $ | — | $ | 1,758 | $ | (3) | |||||||||||||||||||||||
U.S. government-sponsored enterprises | 18,304 | (196) | — | — | 18,304 | (196) | |||||||||||||||||||||||||||||
Obligations of states and political subdivisions | 39,221 | (474) | — | — | 39,221 | (474) | |||||||||||||||||||||||||||||
Mortgage-backed securities | 89,520 | (1,579) | 1,864 | (32) | 91,384 | (1,611) | |||||||||||||||||||||||||||||
Other debt securities | 3,802 | (23) | — | — | 3,802 | (23) | |||||||||||||||||||||||||||||
Bank issued trust preferred securities | — | — | 1,288 | (198) | 1,288 | (198) | |||||||||||||||||||||||||||||
Total | $ | 152,605 | $ | (2,275) | $ | 3,152 | $ | (230) | $ | 155,757 | $ | (2,505) |
The total available for sale portfolio consisted of approximately 308 securities at December 31, 2020. The portfolio included 10 securities having an aggregate fair value of $12.7 million that were in a loss position at December 31, 2020. Securities identified as temporarily impaired which had been in a loss position for 12 months or longer totaled $1.2$3.2 million at fair value at December 31, 2020.2021. The $325,000$2.5 million aggregate unrealized loss included in accumulated other comprehensive loss at December 31, 20202021 was caused by interest rate fluctuations.
21
(Unaudited)
| | | | | | | |
| | Three Months Ended March 31, | | ||||
(in thousands) |
| 2021 |
| 2020 |
| ||
Investment securities gains (losses), net |
| |
|
| |
| |
Available for sale securities: |
| |
|
| |
| |
Gross realized gains | | $ | 2 | | $ | 0 | |
Gross realized losses | |
| 0 | |
| 0 | |
Other-than-temporary impairment recognized | |
| 0 | |
| 0 | |
Other investment securities: | |
|
| |
|
| |
Fair value adjustments, net | |
| 12 | |
| (1) | |
Investment securities gains (losses), net | | $ | 14 | | $ | (1) | |
Three Months Ended March 31, | |||||||||||||||||||||||
(in thousands) | 2022 | 2021 | |||||||||||||||||||||
Investment securities (losses) gains, net | |||||||||||||||||||||||
Available-for-sale securities: | |||||||||||||||||||||||
Gross realized gains | $ | — | $ | 2 | |||||||||||||||||||
Gross realized losses | — | — | |||||||||||||||||||||
Other-than-temporary impairment recognized | — | — | |||||||||||||||||||||
Other investment securities: | |||||||||||||||||||||||
Fair value adjustments, net | (4) | 12 | |||||||||||||||||||||
Investment securities (losses) gains, net | $ | (4) | $ | 14 |
2021.
| | | | | | | |
| | Three Months Ended March 31, | | ||||
(in thousands) |
| 2021 |
| 2020 | | ||
Balance at beginning of period | | $ | 2,445 | | $ | 2,482 | |
Originated mortgage servicing rights | |
| 170 | |
| 67 | |
Changes in fair value: | |
|
| |
|
| |
Due to changes in model inputs and assumptions (1) | |
| 22 | |
| (198) | |
Other changes in fair value (2) | |
| (143) | |
| (77) | |
Total changes in fair value | | | (121) | | | (275) | |
Balance at end of period | | $ | 2,494 | | $ | 2,274 | |
Three Months Ended March 31, | |||||||||||||||||||||||
(in thousands) | 2022 | 2021 | |||||||||||||||||||||
Balance at beginning of period | $ | 2,659 | $ | 2,445 | |||||||||||||||||||
Originated mortgage servicing rights | 28 | 170 | |||||||||||||||||||||
Changes in fair value: | |||||||||||||||||||||||
Due to changes in model inputs and assumptions (1) | 30 | 22 | |||||||||||||||||||||
Other changes in fair value (2) | (78) | (143) | |||||||||||||||||||||
Total changes in fair value | (48) | (121) | |||||||||||||||||||||
Balance at end of period | $ | 2,639 | $ | 2,494 |
|
|
|
|
22
HAWTHORN BANCSHARES, INC.
AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
(Unaudited)
The following key data and assumptions were used in estimating the fair value of the Company’s MSRs as of March 31, 2022 and 2021, respectively:
Three Months Ended March 31, | |||||||||||
2022 | 2021 | ||||||||||
Weighted average constant prepayment rate | 9.40 | % | 15.04 | % | |||||||
Weighted average note rate | 3.36 | % | 3.47 | % | |||||||
Weighted average discount rate | 8.00 | % | 7.75 | % | |||||||
Weighted average expected life (in years) | 6.2 | 5.0 |
brokered deposits for the periods indicated.
(aggregate amounts in thousands) | March 31, 2022 | December 31, 2021 | |||||||||||||||||||||
Time deposits with balances > $250,000 | $ | 84,692 | $ | 69,075 | |||||||||||||||||||
Brokered deposits | $ | 20,209 | $ | 20,202 |
| | | | | |
| Three Months Ended March 31, | ||||
|
| 2021 |
| 2020 |
|
Weighted average constant prepayment rate | | 15.04 | % | 15.18 | % |
Weighted average note rate | | 3.47 | % | 3.91 | % |
Weighted average discount rate | | 7.75 | % | 8.25 | % |
Weighted average expected life (in years) | | 5.0 |
| 4.4 | |
(6)
Repurchase
(in thousands) | March 31, 2022 | December 31, 2021 | |||||||||
Federal funds purchased | $ | — | $ | — | |||||||
Repurchase agreements | 5,514 | 23,829 | |||||||||
Total | $ | 5,514 | $ | 23,829 |
| | | | | | | |
| | March 31, | | December 31, | | ||
(in thousands) | | 2021 |
| 2020 |
| ||
Federal funds purchased | | $ | 0 | | $ | 0 | |
Repurchase agreements | |
| 42,018 | |
| 45,154 | |
Total | | $ | 42,018 | | $ | 45,154 | |
The Company offers a sweep account program whereby amounts in excess of an established limit are “swept” from the customer’s demand deposit account on a daily basis into retail repurchase agreements pursuant to individual repurchase agreements between the Company and its customers. Repurchase agreements are agreements to sell securities subject to an obligation to repurchase the same or similar securities. They are accounted for as collateralized financing transactions, not as sales and purchases of the securities portfolio. The securities collateral pledged for the repurchase agreements with customers is maintained by a designated third partythird-party custodian. The collateral amounts pledged to repurchase agreements by remaining maturity in the table below are limited to the outstanding balances of the related asset or liability; thus amounts of excess collateral are not shown.
| | | | | | | | | | | | |
Repurchase Agreements | | Remaining Contractual Maturity of the Agreements | ||||||||||
|
| Overnight |
| Less |
| Greater |
|
| | |||
| | and | | than | | than | |
| | |||
(in thousands) | | continuous | | 90 days | | 90 days | | Total | ||||
At March 31, 2021 |
| |
|
| |
|
| |
|
| |
|
U.S. government-sponsored enterprises | | $ | 8,757 | | $ | 0 | | $ | 0 | | $ | 8,757 |
Mortgage-backed securities | |
| 33,261 | |
| 0 | |
| 0 | |
| 33,261 |
Total | | $ | 42,018 | | $ | 0 | | $ | 0 | | $ | 42,018 |
| | | | | | | | | | | | |
At December 31, 2020 | |
|
| |
|
| |
|
| |
|
|
U.S. government and federal agency obligations | | $ | 2,728 | | $ | 0 | | $ | 0 | | $ | 2,728 |
U.S. government-sponsored enterprises | | | 15,533 | |
| 0 | |
| 0 | |
| 15,533 |
Mortgage-backed securities | |
| 26,893 | |
| 0 | |
| 0 | |
| 26,893 |
Total | | $ | 45,154 | | $ | 0 | | $ | 0 | | $ | 45,154 |
(7)
Repurchase Agreements | Remaining Contractual Maturity of the Agreements | ||||||||||||||||||||||
(in thousands) | Overnight and continuous | Less than 90 days | Greater than 90 days | Total | |||||||||||||||||||
At March 31, 2022 | |||||||||||||||||||||||
U.S. government-sponsored enterprises | $ | 5,514 | $ | — | $ | — | $ | 5,514 | |||||||||||||||
Total | $ | 5,514 | $ | — | $ | — | $ | 5,514 | |||||||||||||||
At December 31, 2021 | |||||||||||||||||||||||
U.S. government-sponsored enterprises | $ | 9,113 | $ | — | $ | — | $ | 9,113 | |||||||||||||||
Mortgage-backed securities | 14,716 | — | — | 14,716 | |||||||||||||||||||
Total | $ | 23,829 | $ | — | $ | — | $ | 23,829 |
23
HAWTHORN BANCSHARES, INC.
AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
(Unaudited)
respectively. As of March 31, 2021,2022, the weighted-average remaining lease term on these operating leases is approximately 7.36.3 years and the weighted-average discount rate used to measure the lease liabilities is approximately 4.0%4%.
2021.
2021.
| | | |
|
| Operating | |
Lease payments due in: | | Lease | |
(in thousands) | | | |
2021 (excluding 3 months ending March 31, 2021) |
| $ | 276 |
2022 |
| | 367 |
2023 |
| | 366 |
2024 |
| | 258 |
2025 |
| | 257 |
Thereafter | | | 830 |
Total lease payments | | | 2,354 |
Less imputed interest | | | (296) |
Total lease liabilities, as reported | | $ | 2,058 |
| | | |
(8)
Lease payments due in: | Operating Lease | ||||
(in thousands) | |||||
2022 (excluding 3 months ended March 31, 2022) | $ | 276 | |||
2023 | 367 | ||||
2024 | 258 | ||||
2025 | 257 | ||||
2026 | 259 | ||||
Thereafter | 571 | ||||
Total lease payments | 1,988 | ||||
Less imputed interest | (225) | ||||
Total lease liabilities, as reported | $ | 1,763 |
24
HAWTHORN BANCSHARES, INC.
AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
(Unaudited)
months ended March 31, 20212022 and 2020,2021, respectively, is lower than the U.S. federal statutory rate of 21% primarily due to tax-free revenues.
(9)
| | | | | | | | | |
| | Three Months Ended March 31, 2021 | |||||||
| | | | | | | | Accumulated | |
| | | | | Unrecognized Net | | Other | ||
| | Unrealized | | Pension and | | Comprehensive | |||
| | Gains (Losses) | | Postretirement | | Income | |||
(in thousands) |
| on Securities (1) |
| Costs (2) |
| (Loss) | |||
Balance at beginning of period | | $ | 3,353 | | $ | (1,825) | | $ | 1,528 |
Other comprehensive income, before reclassifications | |
| (3,518) | |
| 45 | |
| (3,473) |
Amounts reclassified from accumulated other comprehensive (loss) income | |
| (2) | |
| — | |
| (2) |
Current period other comprehensive income (loss), before tax | |
| (3,520) | |
| 45 | |
| (3,475) |
Income tax benefit (expense) | |
| 740 | |
| (10) | |
| 730 |
Current period other comprehensive income (loss), net of tax | |
| (2,780) | |
| 35 | |
| (2,745) |
Balance at end of period | | $ | 573 | | $ | (1,790) | | $ | (1,217) |
25
Three Months Ended March 31, 2022 | |||||||||||||||||
(in thousands) | Unrealized Gains (Losses) on Securities (1) | Unrecognized Net Pension and Postretirement Costs (2) | Accumulated Other Comprehensive Income (Loss) | ||||||||||||||
Balance at beginning of period | $ | 362 | $ | 2,931 | $ | 3,293 | |||||||||||
Other comprehensive loss, before reclassifications | (24,787) | — | (24,787) | ||||||||||||||
Amounts reclassified from accumulated other comprehensive income (loss) | — | — | — | ||||||||||||||
Current period other comprehensive loss, before tax | (24,787) | — | (24,787) | ||||||||||||||
Income tax benefit | 5,205 | — | 5,205 | ||||||||||||||
Current period other comprehensive loss, net of tax | (19,582) | — | (19,582) | ||||||||||||||
Balance at end of period | $ | (19,220) | $ | 2,931 | $ | (16,289) |
Three Months Ended March 31, 2021 | |||||||||||||||||
(in thousands) | Unrealized Gains (Losses) on Securities (1) | Unrecognized Net Pension and Postretirement Costs (2) | Accumulated Other Comprehensive Income (Loss) | ||||||||||||||
Balance at beginning of period | $ | 3,353 | $ | (1,825) | $ | 1,528 | |||||||||||
Other comprehensive (loss) income, before reclassifications | (3,518) | 45 | (3,473) | ||||||||||||||
Amounts reclassified from accumulated other comprehensive (loss) income | (2) | — | (2) | ||||||||||||||
Current period other comprehensive (loss) income, before tax | (3,520) | 45 | (3,475) | ||||||||||||||
Income tax benefit (expense) | 740 | (10) | 730 | ||||||||||||||
Current period other comprehensive (loss) income, net of tax | (2,780) | 35 | (2,745) | ||||||||||||||
Balance at end of period | $ | 573 | $ | (1,790) | $ | (1,217) |
HAWTHORN BANCSHARES, INC.
AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
(Unaudited)
| | | | | | | | | |
| | Three Months Ended March 31, 2020 | |||||||
| | | | | | | | | |
| | | | | | | | Accumulated | |
| | | | | Unrecognized Net | | Other | ||
| | Unrealized | | Pension and | | Comprehensive | |||
| | Gains (Losses) | | Postretirement | | Income | |||
(in thousands) |
| on Securities (1) |
| Costs (2) |
| (Loss) | |||
Balance at beginning of period | | $ | (23) | | $ | (3,732) | | $ | (3,755) |
Other comprehensive income, before reclassifications | |
| 2,760 | |
| 67 | |
| 2,827 |
Amounts reclassified from accumulated other comprehensive income (loss) | |
| 0 | |
| 0 | |
| 0 |
Current period other comprehensive income, before tax | |
| 2,760 | |
| 67 | |
| 2,827 |
Income tax expense | |
| (580) | |
| (14) | |
| (594) |
Current period other comprehensive income, net of tax | |
| 2,180 | |
| 53 | |
| 2,233 |
Balance at end of period | | $ | 2,157 | | $ | (3,679) | | $ | (1,522) |
(10)(11) Employee Benefit Plans
| | | | | | |
| | Three Months Ended March 31, | ||||
(in thousands) |
| 2021 |
| 2020 | ||
Payroll taxes | | $ | 435 | | $ | 389 |
Medical plans | |
| 450 | |
| 427 |
401(k) match and profit sharing | | | 499 | | | 306 |
Periodic pension cost | |
| 416 | |
| 464 |
Other | |
| 4 | |
| 23 |
Total employee benefits | | $ | 1,804 | | $ | 1,609 |
Three Months Ended March 31, | |||||||||||||||||||||||
(in thousands) | 2022 | 2021 | |||||||||||||||||||||
Payroll taxes | $ | 441 | $ | 435 | |||||||||||||||||||
Medical plans | 475 | 450 | |||||||||||||||||||||
401(k) match and profit sharing | 369 | 499 | |||||||||||||||||||||
Periodic pension cost | 437 | 416 | |||||||||||||||||||||
Other | 8 | 4 | |||||||||||||||||||||
Total employee benefits | $ | 1,730 | $ | 1,804 |
In addition, employees were able to make additional tax-deferred contributions.
26
HAWTHORN BANCSHARES, INC.
AND SUBSIDIARIES
NotesThe accrued liability relating to the Consolidated Financial Statements
(Unaudited)
AsSERP was $1.8 million as of March 31, 2021, the accrued liability was $1.1 million2022, and the expense for the three months ended March 31, 2021 and 20202022 was $93,000 compared to $97,000 and $80,000, respectively,for the three months ended March 31, 2021 and is recognized over the required service period.
April 1, 2022.
(Loss)
| | | | | | | |
| | Pension Benefits | | ||||
(in thousands) |
| 2021 |
| 2020 | | ||
Service cost - benefits earned during the year | | $ | 1,663 | | $ | 1,857 | |
Interest costs on projected benefit obligations (a) | |
| 1,023 | |
| 1,159 | |
Expected return on plan assets (a) | |
| (1,825) | |
| (1,572) | |
Expected administrative expenses (a) | |
| 104 | |
| 110 | |
Amortization of prior service cost (a) | |
| — | |
| 50 | |
Amortization of unrecognized net loss (a) | |
| 181 | |
| 218 | |
Net periodic pension cost | | $ | 1,146 | | $ | 1,822 | |
| | | | | | | |
Three Months Ended March 31, | |||||||||||
(in thousands) | 2022 | 2021 | |||||||||
Service cost - benefits earned during the year | $ | 1,630 | $ | 1,663 | |||||||
Interest costs on projected benefit obligations (a) | 1,183 | 1,023 | |||||||||
Expected return on plan assets (a) | (2,231) | (1,825) | |||||||||
Expected administrative expenses | 118 | 104 | |||||||||
Amortization of prior service cost (a) | — | — | |||||||||
Amortization of unrecognized net loss (a) | — | 181 | |||||||||
Net periodic pension cost | $ | 700 | $ | 1,146 |
27
HAWTHORN BANCSHARES, INC.
AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
(Unaudited)
participants in the Plans.pension plan. The prior service credit is amortized over the average remaining service period to full eligibility for participating employees expected to receive benefits.
(11) Currently, there is no prior service cost or net transition (asset)/obligation to be amortized.
period.
Three Months Ended March 31, | |||||||||||||||||||||||
(dollars in thousands, except per share data) | 2022 | 2021 | |||||||||||||||||||||
Basic earnings per share: | |||||||||||||||||||||||
Net income available to shareholders | $ | 6,609 | $ | 5,839 | |||||||||||||||||||
Average shares outstanding | 6,604,493 | 6,617,368 | |||||||||||||||||||||
Basic earnings per share | $ | 1.00 | $ | 0.88 | |||||||||||||||||||
Diluted earnings per share: | |||||||||||||||||||||||
Net income available to shareholders | $ | 6,609 | $ | 5,839 | |||||||||||||||||||
Average shares outstanding | 6,604,493 | 6,617,368 | |||||||||||||||||||||
Diluted earnings per share | $ | 1.00 | $ | 0.88 |
| | | | | | | |
| | Three Months Ended March 31, | | ||||
(dollars in thousands, except per share data) |
| 2021 |
| 2020 |
| ||
Basic earnings per share: | | | | | | | |
Net income available to shareholders | | $ | 5,839 | | $ | 868 | |
Average shares outstanding | | | 6,362,869 | | | 6,510,189 | |
Basic earnings per share | | $ | 0.92 | | $ | 0.13 | |
Diluted earnings per share: | | | | | | | |
Net income available to shareholders | | $ | 5,839 | | $ | 868 | |
Average shares outstanding | |
| 6,362,869 | |
| 6,510,189 | |
Effect of dilutive stock options | |
| 0 | |
| 0 | |
Average shares outstanding including dilutive stock options | |
| 6,362,869 | |
| 6,510,189 | |
Diluted earnings per share | | $ | 0.92 | | | 0.13 | |
Under the treasury stock method, outstanding stock options are dilutive when the average market price of the Company’s common stock, when combined with the effect of any unamortized compensation expense, exceeds the option price
Repurchase Program
In 2019, the Company's Board of Directors authorizedauthorize the purchase of up to an additional $5.0 million in market value of the Company's common stock. Management was given discretion to determine the number and pricing of the shares to be purchased, as well as the timing of any such purchases.
28
HAWTHORN BANCSHARES, INC.
AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
(Unaudited)
(12)(13) Fair Value Measurements
Available-for-Sale
29
HAWTHORN BANCSHARES, INC.
AND SUBSIDIARIES
NotesDerivative assets and liabilities include interest rate lock commitments (IRLCs) and forward sale commitments. The fair values of IRLCs and forward sale commitments are determined using readily observable market data such as interest rates, prices, volatility factors, and customer credit-related adjustments. For IRLCs, the fair value is subject to the Consolidated Financial Statements
(Unaudited)
| | | | | | | | | | | | |
| | | | | Fair Value Measurements | |||||||
| | | | | Quoted Prices | | | | | |
| |
| | | | | in Active | | | | | |
| |
| | | | | Markets for | | Other | | Significant | |||
| | | | | Identical | | Observable | | Unobservable | |||
| | | | | Assets | | Inputs | | Inputs | |||
(in thousands) |
| Fair Value |
| (Level 1) |
| (Level 2) |
| (Level 3) | ||||
March 31, 2021 | | | | | | | | | | | | |
Assets: | | | | | | | | | | | | |
U.S. Treasury | | $ | 3,041 | | $ | 3,041 |
| | 0 |
| $ | 0 |
U.S. government and federal agency obligations | |
| 19,829 | |
| 0 |
| | 19,829 |
|
| 0 |
U.S. government-sponsored enterprises | |
| 22,551 | |
| 0 |
| | 22,551 |
|
| 0 |
Obligations of states and political subdivisions | |
| 70,818 | |
| 0 |
| | 70,818 |
|
| 0 |
Mortgage-backed securities | |
| 108,644 | |
| 0 |
| | 108,644 |
|
| 0 |
Other debt securities | | | 12,023 | | | 0 | | | 12,023 | | | 0 |
Bank-issued trust preferred securities | | | 1,236 | | | 0 | | | 1,236 | | | 0 |
Equity securities | | | 45 | | | 45 | | | 0 | | | 0 |
Mortgage servicing rights | |
| 2,494 | |
| 0 |
| | 0 |
|
| 2,494 |
Total | | $ | 240,681 | | $ | 3,086 | | $ | 235,101 |
| $ | 2,494 |
| | | | | | | | | | | | |
December 31, 2020 | | | | | | | | | | | | |
Assets: | | | | | | | | | | | | |
U.S. Treasury | | $ | 2,798 | | $ | 2,798 |
| | 0 |
| $ | 0 |
U.S. government and federal agency obligations | |
| 11,929 | |
| 0 |
| | 11,929 |
|
| 0 |
U.S. government-sponsored enterprises | |
| 22,874 | |
| 0 |
| | 22,874 |
|
| 0 |
Obligations of states and political subdivisions | |
| 58,744 | |
| 0 |
| | 58,744 |
|
| 0 |
Mortgage-backed securities | |
| 90,112 | |
| 0 |
| | 90,112 |
|
| 0 |
Other debt securities | | | 10,344 | | | 0 | | | 10,344 | | | 0 |
Bank-issued trust preferred securities | | | 1,229 | | | 0 | | | 1,229 | | | 0 |
Equity securities | | | 32 | | | 32 | | | 0 | | | 0 |
Mortgage servicing rights | |
| 2,445 | |
| 0 |
| | 0 |
|
| 2,445 |
Total | | $ | 200,507 | | $ | 2,830 | | $ | 195,232 |
| $ | 2,445 |
30
Fair Value Measurements | |||||||||||||||||||||||
(in thousands) | Fair Value | Quoted Prices in Active Markets for Identical Assets (Level 1) | Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||||||||||
March 31, 2022 | |||||||||||||||||||||||
Assets: | |||||||||||||||||||||||
U.S. Treasury | $ | 3,145 | $ | 3,145 | $ | — | $ | — | |||||||||||||||
U.S. government and federal agency obligations | 975 | — | 975 | — | |||||||||||||||||||
U.S. government-sponsored enterprises | 25,265 | — | 25,265 | — | |||||||||||||||||||
Obligations of states and political subdivisions | 120,434 | — | 120,434 | — | |||||||||||||||||||
Mortgage-backed securities | 123,848 | — | 123,848 | — | |||||||||||||||||||
Other debt securities | 11,821 | — | 11,821 | — | |||||||||||||||||||
Bank-issued trust preferred securities | 1,266 | — | 1,266 | — | |||||||||||||||||||
Equity securities | 56 | 56 | — | — | |||||||||||||||||||
Interest rate lock commitments | 64 | — | — | 64 | |||||||||||||||||||
Forward sale commitments | 21 | — | 21 | — | |||||||||||||||||||
Loans held for sale | 909 | — | 909 | — | |||||||||||||||||||
Mortgage servicing rights | 2,639 | — | — | 2,639 | |||||||||||||||||||
Total | $ | 290,443 | $ | 3,201 | $ | 284,539 | $ | 2,703 | |||||||||||||||
Liabilities: | |||||||||||||||||||||||
Interest rate lock commitments | $ | 47 | $ | — | $ | — | $ | 47 | |||||||||||||||
Total | $ | 47 | $ | — | $ | — | $ | 47 | |||||||||||||||
December 31, 2021 | |||||||||||||||||||||||
Assets: | |||||||||||||||||||||||
U.S. Treasury | $ | 3,917 | $ | 3,917 | $ | — | $ | — | |||||||||||||||
U.S. government and federal agency obligations | 1,319 | — | 1,319 | — | |||||||||||||||||||
U.S. government-sponsored enterprises | 26,372 | — | 26,372 | — | |||||||||||||||||||
Obligations of states and political subdivisions | 129,224 | — | 129,224 | — | |||||||||||||||||||
Mortgage-backed securities | 136,466 | — | 136,466 | — | |||||||||||||||||||
Other debt securities | 12,284 | — | 12,284 | — | |||||||||||||||||||
Bank-issued trust preferred securities | 1,288 | — | 1,288 | — | |||||||||||||||||||
Equity securities | 60 | 60 | — | — | |||||||||||||||||||
Interest rate lock commitments | 312 | — | — | 312 | |||||||||||||||||||
Forward sale commitments | 12 | — | 12 | — | |||||||||||||||||||
Loans held for sale | 2,249 | — | 2,249 | — | |||||||||||||||||||
Mortgage servicing rights | 2,659 | — | — | 2,659 | |||||||||||||||||||
Total | $ | 316,162 | $ | 3,977 | $ | 309,214 | $ | 2,971 | |||||||||||||||
Liabilities: | |||||||||||||||||||||||
Interest rate lock commitments | $ | 26 | $ | — | $ | — | $ | 26 | |||||||||||||||
Total | $ | 26 | $ | — | $ | — | $ | 26 |
(Unaudited)
| | | | | | | |
|
| Fair Value Measurements Using | | ||||
| | (Level 3) | | ||||
| | Mortgage Servicing Rights | | ||||
| | Three Months Ended March 31, | | ||||
(in thousands) |
| 2021 |
| 2020 |
| ||
Balance at beginning of period | | $ | 2,445 | | $ | 2,482 | |
Total (losses) or gains (realized/unrealized): | | | | | | | |
Included in earnings | |
| (121) | |
| (275) | |
Included in other comprehensive income | |
| 0 | |
| 0 | |
Purchases | |
| 0 | |
| 0 | |
Sales | |
| 0 | |
| 0 | |
Issues | |
| 170 | |
| 67 | |
Settlements | |
| 0 | |
| 0 | |
Balance at end of period | | $ | 2,494 | | $ | 2,274 | |
Fair Value Measurements Using Significant Unobservable Inputs (Level 3) | |||||||||||||||||||||||
Mortgage Servicing Rights | Interest Rate Lock Commitments | ||||||||||||||||||||||
Three Months Ended March 31, | |||||||||||||||||||||||
(in thousands) | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||
Balance at beginning of period | $ | 2,659 | $ | 2,445 | $ | 286 | $ | — | |||||||||||||||
Total gains or (losses) (realized/unrealized): | |||||||||||||||||||||||
Included in earnings | (48) | (121) | (8) | — | |||||||||||||||||||
Included in other comprehensive income | — | — | — | — | |||||||||||||||||||
Purchases | — | — | — | — | |||||||||||||||||||
Sales | — | — | (286) | — | |||||||||||||||||||
Issues | 28 | 170 | 25 | — | |||||||||||||||||||
Settlements | — | — | — | — | |||||||||||||||||||
Balance at end of period | $ | 2,639 | $ | 2,494 | $ | 17 | $ | — |
Non-recurring Basis
Dependent Impaired Loans
31
HAWTHORN BANCSHARES, INC.
AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
(Unaudited)
upon appraisals by approved, independent state certifiedstate-certified appraisers. Like impaired loans, appraisals on OREO may be discounted based on the Company’s historical knowledge, changes in market conditions from the time of appraisal or other information available. During the holding period, valuations are updated periodically, and the assets may be written down to reflect a new cost basis. Because many of these inputs are not observable, the measurements are classified as Level 3.
| | | | | | | | | | | | | | | |
| | | | | Fair Value Measurements Using | ||||||||||
| | | | | Quoted Prices | | | | | | | | |
| |
| | | | | in Active | | | | | | | | |
| |
| | | | | Markets for | | Other | | Significant | | |
| |||
| | | | | Identical | | Observable | | Unobservable | | |
| |||
| | Total | | Assets | | Inputs | | Inputs | | Total Gains | |||||
(in thousands) |
| Fair Value |
| (Level 1) |
| (Level 2) |
| (Level 3) |
| (Losses)* | |||||
March 31, 2021 | | | | | | | | | | | | | | | |
Assets: | | | | | | | | | | | | | | | |
Collateral dependent impaired loans: | | | | | | | | | | | | | | | |
Commercial, financial, & agricultural | | $ | 4,188 | | $ | 0 | | $ | 0 | | $ | 4,188 |
| $ | — |
Real estate mortgage - residential | |
| 403 | |
| 0 | |
| 0 | |
| 403 |
|
| — |
Real estate mortgage - commercial | |
| 22,484 | |
| 0 | |
| 0 | |
| 22,484 |
|
| (23) |
Total | | $ | 27,075 | | $ | 0 | | $ | 0 | | $ | 27,075 |
| $ | (23) |
Other real estate and repossessed assets | | $ | 12,140 | | $ | 0 | | $ | 0 | | $ | 12,140 |
| $ | (73) |
| | | | | | | | | | | | | | | |
March 31, 2020 | | | | | | | | | | | | | | | |
Assets: | | | | | | | | | | | | | | | |
Collateral dependent impaired loans: | | | | | | | | | | | | | | | |
Commercial, financial, & agricultural | | $ | 2,422 | | $ | 0 | | $ | 0 | | $ | 2,422 |
| $ | — |
Real estate construction - commercial | |
| 408 | |
| 0 | |
| 0 | |
| 408 |
|
| 0 |
Real estate mortgage - residential | |
| 1,921 | |
| 0 | |
| 0 | |
| 1,921 |
|
| (19) |
Real estate mortgage - commercial | |
| 827 | |
| 0 | |
| 0 | |
| 827 |
|
| (22) |
Installment and other consumer | |
| 12 | |
| 0 | |
| 0 | |
| 12 |
|
| (14) |
Total | | $ | 5,590 | | $ | 0 | | $ | 0 | | $ | 5,590 |
| $ | (55) |
Other real estate and repossessed assets | | $ | 12,769 | | $ | 0 | | $ | 0 | | $ | 12,769 |
| $ | (12) |
Fair Value Measurements Using | |||||||||||||||||||||||||||||||||||
(in thousands) | Total Fair Value | Quoted Prices in Active Markets for Identical Assets (Level 1) | Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Three Months Ended March 31, Total Gains (Losses)* | ||||||||||||||||||||||||||||||
March 31, 2022 | |||||||||||||||||||||||||||||||||||
Assets: | |||||||||||||||||||||||||||||||||||
Collateral dependent impaired loans: | |||||||||||||||||||||||||||||||||||
Real estate mortgage - commercial | $ | 15,365 | $ | — | $ | — | $ | 15,365 | $ | (23) | |||||||||||||||||||||||||
Total | $ | 15,365 | $ | — | $ | — | $ | 15,365 | $ | (23) | |||||||||||||||||||||||||
Other real estate and repossessed assets | $ | 9,758 | $ | — | $ | — | $ | 9,758 | $ | (45) | |||||||||||||||||||||||||
March 31, 2021 | |||||||||||||||||||||||||||||||||||
Assets: | |||||||||||||||||||||||||||||||||||
Collateral dependent impaired loans: | |||||||||||||||||||||||||||||||||||
Commercial, financial, & agricultural | $ | 4,188 | $ | — | $ | — | $ | 4,188 | $ | — | |||||||||||||||||||||||||
Real estate mortgage - residential | 403 | — | — | 403 | — | ||||||||||||||||||||||||||||||
Real estate mortgage - commercial | 22,484 | — | — | 22,484 | (23) | ||||||||||||||||||||||||||||||
Total | $ | 27,075 | $ | — | $ | — | $ | 27,075 | $ | (23) | |||||||||||||||||||||||||
Other real estate and repossessed assets | $ | 12,140 | $ | — | $ | — | $ | 12,140 | $ | (73) |
|
| |
(13)
32
HAWTHORN BANCSHARES, INC.
AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
(Unaudited)
used are estimated using comparable market rates for similar types of loan products adjusted to be commensurate with the credit risk, overhead costs, and optionality of such instruments.
Loans originated and intended to be sold in the secondary market, generally 1-4 family residential mortgage loans, are carried, in aggregate, at the lower of cost or estimated fair value. The estimated fair value measurements of loans held for sale are management's best estimate of market value, which is primarily based on quoted market prices for similar loans in the secondary market.
Investment Securities
A detailed description of the fair value measurement of the debt instruments in the available-for-sale sections of the investment security portfolio is provided in the Fair Value Measurement section above. A schedule of investment securities by category and maturity is provided in the notes on Investment Securities.
Other investment securities
Other investment securities include equity securities with readily determinable fair values and other investment securities that do not have readily determinable fair values. Investments in Federal Home Loan Bank (FHLB) stock, and Midwest Independent Bank (MIB) bankers bank stock, that do not have readily determinable fair values, are required for membership in those organizations. Equity securities that are not actively traded are classified in level 2.
Equity securities with readily determinable fair values are recorded at fair value, with changes in fair value reflected in earnings. Equity securities that do not have readily determinable fair values are carried at cost and are periodically assessed for impairment. The Company uses level 1 inputs to value equity securities that are traded in active markets.
Federal Funds Sold, Cash, and Due from Banks
Other Banks
33
(Unaudited)
(Unaudited)
Operating Lease Liabilities
The fair value of operating lease liabilities are recognized at lease commencement based on the present value of the remaining lease payments using a discount rate that represents the Company's incremental borrowing rate at the lease commencement date.
34
(Unaudited)
| | | | | | | | | | | | | | | |
| | | | | | | | March 31, 2021 | |||||||
| | | | | | | | Fair Value Measurements | |||||||
| | | | | | | | | Quoted Prices | | | | | |
|
| | | | | | |
| in Active | | | |
| Net | ||
| | | | | | |
| Markets for |
| Other |
| Significant | |||
|
| March 31, 2021 |
| Identical |
| Observable |
| Unobservable | |||||||
|
| Carrying |
| Fair |
| Assets |
| Inputs |
| Inputs | |||||
(in thousands) |
| amount |
| value |
| (Level 1) |
| (Level 2) |
| (Level 3) | |||||
Assets: | | | | | | | | | | | | | | | |
Cash and due from banks | | $ | 18,496 | | $ | 18,496 | | $ | 18,496 | | $ | 0 |
| $ | 0 |
Federal funds sold and overnight interest-bearing deposits | |
| 128,207 | |
| 128,207 | |
| 128,207 | |
| 0 |
| | 0 |
Certificates of deposit in other banks | |
| 8,897 | |
| 8,897 | |
| 8,897 | |
| 0 |
| | 0 |
Available for sale securities | |
| 238,142 | |
| 238,142 | |
| 3,041 | |
| 235,101 |
| | 0 |
Other investment securities | |
| 6,188 | |
| 6,188 | |
| 45 | |
| 6,143 |
| | 0 |
Loans, net | |
| 1,257,824 | |
| 1,283,560 | |
| 0 | |
| 0 |
| | 1,283,560 |
Loans held for sale | | | 6,308 | | | 6,308 | | | 0 | | | 0 | | | 6,308 |
Cash surrender value - life insurance | |
| 2,465 | |
| 2,465 | |
| 0 | |
| 2,465 |
| | 0 |
Accrued interest receivable | |
| 6,488 | |
| 6,488 | |
| 6,488 | |
| 0 |
| | 0 |
Total | | $ | 1,673,015 | | $ | 1,698,751 | | $ | 165,174 | | $ | 243,709 |
| $ | 1,289,868 |
Liabilities: | | | | | | | | | | | | | | | |
Deposits: | | | | | | | | | | | | | | | |
Non-interest bearing demand | | $ | 431,035 | | $ | 431,035 | | $ | 431,035 | | $ | 0 |
| $ | 0 |
Savings, interest checking and money market | |
| 708,615 | |
| 708,615 | |
| 708,615 | |
| 0 |
| | 0 |
Time deposits | |
| 254,332 | |
| 256,047 | |
| 0 | |
| 0 |
| | 256,047 |
Federal funds purchased and securities sold under agreements to repurchase | |
| 42,018 | |
| 42,018 | |
| 42,018 | |
| 0 |
| | 0 |
Federal Home Loan Bank advances and other borrowings | |
| 97,614 | |
| 99,750 | |
| 0 | |
| 99,750 |
| | 0 |
Subordinated notes | |
| 49,486 | |
| 41,176 | |
| 0 | |
| 41,176 |
| | 0 |
Operating lease liabilities | | | 2,058 | | | 2,058 | | | 0 | | | 2,058 | | | 0 |
Accrued interest payable | |
| 439 | |
| 439 | |
| 439 | |
| 0 |
| | 0 |
Total | | $ | 1,585,597 | | $ | 1,581,138 | | $ | 1,182,107 | | $ | 142,984 |
| $ | 256,047 |
35
March 31, 2022 | |||||||||||||||||||||||||||||
Fair Value Measurements | |||||||||||||||||||||||||||||
March 31, 2022 | Quoted Prices in Active Markets for Identical Assets | Other Observable Inputs | Net Significant Unobservable Inputs | ||||||||||||||||||||||||||
(in thousands) | Carrying amount | Fair value | (Level 1) | (Level 2) | (Level 3) | ||||||||||||||||||||||||
Assets: | |||||||||||||||||||||||||||||
Cash and due from banks | $ | 22,544 | $ | 22,544 | $ | 22,544 | $ | — | $ | — | |||||||||||||||||||
Federal funds sold and overnight interest-bearing deposits | 27,971 | 27,971 | 27,971 | — | — | ||||||||||||||||||||||||
Certificates of deposit in other banks | 4,701 | 4,701 | 4,701 | — | — | ||||||||||||||||||||||||
Available-for-sale securities | 286,754 | 286,754 | 3,145 | 283,609 | — | ||||||||||||||||||||||||
Other investment securities | 5,490 | 5,490 | 56 | 5,434 | — | ||||||||||||||||||||||||
Loans, net | 1,319,644 | 1,326,968 | — | — | 1,326,968 | ||||||||||||||||||||||||
Loans held for sale | 909 | 909 | — | 909 | — | ||||||||||||||||||||||||
Cash surrender value - life insurance | 2,524 | 2,524 | — | 2,524 | — | ||||||||||||||||||||||||
Interest rate lock commitments | 64 | 64 | — | — | 64 | ||||||||||||||||||||||||
Forward sale commitments | 21 | 21 | — | 21 | — | ||||||||||||||||||||||||
Accrued interest receivable | 6,241 | 6,241 | 6,241 | — | — | ||||||||||||||||||||||||
Total | $ | 1,676,863 | $ | 1,684,187 | $ | 64,658 | $ | 292,497 | $ | 1,327,032 | |||||||||||||||||||
Liabilities: | |||||||||||||||||||||||||||||
Deposits: | |||||||||||||||||||||||||||||
Non-interest bearing demand | $ | 450,225 | $ | 450,225 | $ | 450,225 | $ | — | $ | — | |||||||||||||||||||
Savings, interest checking and money market | 752,164 | 752,164 | 752,164 | — | — | ||||||||||||||||||||||||
Time deposits | 253,754 | 252,878 | — | — | 252,878 | ||||||||||||||||||||||||
Federal funds purchased and securities sold under agreements to repurchase | 5,514 | 5,514 | 5,514 | — | — | ||||||||||||||||||||||||
Federal Home Loan Bank advances and other borrowings | 77,357 | 77,364 | — | 77,364 | — | ||||||||||||||||||||||||
Subordinated notes | 49,486 | 42,166 | — | 42,166 | — | ||||||||||||||||||||||||
Interest rate lock commitments | 47 | 47 | — | — | 47 | ||||||||||||||||||||||||
Accrued interest payable | 298 | 298 | 298 | — | — | ||||||||||||||||||||||||
Total | $ | 1,588,845 | $ | 1,580,656 | $ | 1,208,201 | $ | 119,530 | $ | 252,925 |
(Unaudited)
| | | | | | | | | | | | | | | |
| | | | | | | | December 31, 2020 | |||||||
| | | | | | | | Fair Value Measurements | |||||||
| | | | | | | | Quoted Prices | | | | | |
| |
| | | | | | |
| in Active | | | |
| Net | ||
| | | | | | |
| Markets for |
| Other |
| Significant | |||
| | December 31, 2020 |
| Identical |
| Observable |
| Unobservable | |||||||
|
| Carrying |
| Fair |
| Assets |
| Inputs |
| Inputs | |||||
(in thousands) |
| amount |
| value |
| (Level 1) |
| (Level 2) |
| (Level 3) | |||||
Assets: | | | | | | | | | | | | | | | |
Cash and due from banks | | $ | 19,235 | | $ | 19,235 | | $ | 19,235 | | $ | 0 |
| $ | 0 |
Federal funds sold and overnight interest-bearing deposits | |
| 161,128 | |
| 161,128 | |
| 161,128 | |
| 0 |
| | 0 |
Certificates of deposit in other banks | |
| 9,376 | |
| 9,376 | |
| 9,376 | |
| 0 |
| | 0 |
Available-for-sale securities | |
| 198,030 | |
| 198,030 | |
| 2,798 | |
| 195,232 |
| | 0 |
Other investment securities | |
| 6,353 | |
| 6,353 | |
| 32 | |
| 6,321 |
| | 0 |
Loans, net | |
| 1,268,854 | |
| 1,288,677 | |
| 0 | |
| 0 |
| | 1,288,677 |
Loans held for sale | | | 5,099 | | | 5,279 | | | 0 | | | 0 | | | 5,279 |
Cash surrender value - life insurance | |
| 2,451 | |
| 2,451 | |
| 0 | |
| 2,451 |
| | 0 |
Accrued interest receivable | |
| 6,640 | |
| 6,640 | |
| 6,640 | |
| 0 |
| | 0 |
| | $ | 1,677,166 | | $ | 1,697,169 | | $ | 199,209 | | $ | 204,004 |
| $ | 1,293,956 |
Liabilities: | | | | | | | | | | | | | | | |
Deposits: | | | | | | | | | | | | | | | |
Non-interest bearing demand | | $ | 382,492 | | $ | 382,492 | | $ | 382,492 | | $ | 0 |
| $ | 0 |
Savings, interest checking and money market | |
| 723,808 | |
| 723,808 | |
| 723,808 | |
| 0 |
| | 0 |
Time deposits | |
| 277,306 | |
| 279,569 | |
| 0 | |
| 0 |
| | 279,569 |
Federal funds purchased and securities sold under agreements to repurchase | |
| 45,154 | |
| 45,154 | |
| 45,154 | |
| 0 |
| | 0 |
Federal Home Loan Bank advances and other borrowings | |
| 106,674 | |
| 110,121 | |
| 0 | |
| 110,121 |
| | 0 |
Subordinated notes | |
| 49,486 | |
| 40,929 | |
| 0 | |
| 40,929 |
| | 0 |
Operating lease liabilities | | | 2,137 | | | 2,137 | | | 0 | | | 2,137 | | | 0 |
Accrued interest payable | |
| 837 | |
| 837 | |
| 837 | |
| 0 |
| | 0 |
| | $ | 1,587,894 | | $ | 1,585,047 | | $ | 1,152,291 | | $ | 153,187 |
| $ | 279,569 |
(Unaudited)
December 31, 2021 | |||||||||||||||||||||||||||||
Fair Value Measurements | |||||||||||||||||||||||||||||
December 31, 2021 | Quoted Prices in Active Markets for Identical Assets | Other Observable Inputs | Net Significant Unobservable Inputs | ||||||||||||||||||||||||||
(in thousands) | Carrying amount | Fair value | (Level 1) | (Level 2) | (Level 3) | ||||||||||||||||||||||||
Assets: | |||||||||||||||||||||||||||||
Cash and due from banks | $ | 17,287 | $ | 17,287 | $ | 17,287 | $ | — | $ | — | |||||||||||||||||||
Federal funds sold and overnight interest-bearing deposits | 142,622 | 142,622 | 142,622 | — | — | ||||||||||||||||||||||||
Certificates of deposit in other banks | 5,193 | 5,193 | 5,193 | — | — | ||||||||||||||||||||||||
Available-for-sale securities | 310,870 | 310,870 | 3,917 | 306,953 | — | ||||||||||||||||||||||||
Other investment securities | 5,408 | 5,408 | 60 | 5,348 | — | ||||||||||||||||||||||||
Loans, net | 1,285,230 | 1,308,539 | — | — | 1,308,539 | ||||||||||||||||||||||||
Loans held for sale | 2,249 | 2,249 | — | 2,249 | — | ||||||||||||||||||||||||
Cash surrender value - life insurance | 2,509 | 2,509 | — | 2,509 | — | ||||||||||||||||||||||||
Interest rate lock commitments | 312 | 312 | — | — | 312 | ||||||||||||||||||||||||
Forward sale commitments | 12 | 12 | — | 12 | — | ||||||||||||||||||||||||
Accrued interest receivable | 6,621 | 6,621 | 6,621 | — | — | ||||||||||||||||||||||||
Total | $ | 1,778,313 | $ | 1,801,622 | $ | 175,700 | $ | 317,071 | $ | 1,308,851 | |||||||||||||||||||
Liabilities: | |||||||||||||||||||||||||||||
Deposits: | |||||||||||||||||||||||||||||
Non-interest bearing demand | $ | 453,066 | $ | 453,066 | $ | 453,066 | $ | — | $ | — | |||||||||||||||||||
Savings, interest checking and money market | 818,358 | 818,358 | 818,358 | — | — | ||||||||||||||||||||||||
Time deposits | 245,396 | 246,025 | — | — | 246,025 | ||||||||||||||||||||||||
Federal funds purchased and securities sold under agreements to repurchase | 23,829 | 23,829 | 23,829 | — | — | ||||||||||||||||||||||||
Federal Home Loan Bank advances and other borrowings | 77,418 | 78,152 | — | 78,152 | — | ||||||||||||||||||||||||
Subordinated notes | 49,486 | 42,908 | — | 42,908 | — | ||||||||||||||||||||||||
Interest rate lock commitments | 26 | 26 | — | — | 26 | ||||||||||||||||||||||||
Accrued interest payable | 282 | 282 | 282 | — | — | ||||||||||||||||||||||||
Total | $ | 1,667,861 | $ | 1,662,646 | $ | 1,295,535 | $ | 121,060 | $ | 246,051 |
36
HAWTHORN BANCSHARES, INC.
AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
(Unaudited)
involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the fair value estimates.
(14)
| | | | | | |
|
| March 31, | | December 31, | ||
(in thousands) |
| 2021 |
| 2020 | ||
Commitments to extend credit | | $ | 350,465 | | $ | 264,528 |
Commitments to originate residential first and second mortgage loans | |
| 50,340 | |
| 51,270 |
Standby letters of credit | |
| 20,810 | |
| 125,800 |
Total | | | 421,615 | | | 441,598 |
(in thousands) | March 31, 2022 | December 31, 2021 | |||||||||
Commitments to extend credit | $ | 398,543 | $ | 396,958 | |||||||
Interest rate lock commitments | 14,684 | 16,161 | |||||||||
Forward sale commitments | 909 | 2,199 | |||||||||
Standby letters of credit | 4,329 | 35,514 | |||||||||
Total | $ | 418,465 | $ | 450,832 |
2022.
37
•competitive pressures among financial services companies may increase significantly, •changes in the interest rate environment may reduce interest margins, •general economic conditions, either nationally or in Missouri, may be less favorable than expected and may adversely affect the quality of our loans and other assets, •increases in non-performing assets in the Company’s loan portfolios and adverse economic conditions may necessitate increases to our provisions for loan losses, •costs or difficulties related to any integration of any business of the Company and its acquisition targets may be greater than expected, •legislative, regulatory or tax law changes may adversely affect the business in which the Company and its subsidiaries are engaged, •changes may occur in the securities markets, and •the COVID-19 pandemic, or other external events may adversely affect the Company. |
We have described under the caption Risk Factors in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020,2021, and in other reports filed with the SEC from time to time, additional factors that could cause actual results to be materially different from those described in the forward-looking statements. Other factors that have not been identified in this report could also have this effect. You are cautioned not to put undue reliance on any forward-looking statement, which speak only as of the date they were made.
Except as required by law, the Company undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events, or changes in its business, results of operations or financial condition over time.
38
lending. The Company’s income from mortgage brokerage activities is directly dependent on mortgage rates and the level of home purchases and refinancing activity.
Each
Effects on Our Market Areas. Our commercial and consumer banking products and services are delivered primarily in Missouri, where individual and governmental responses to the COVID-19 pandemic have led to a broad curtailment of economic activity While positive headwinds exist, we recognize that our business and consumer customers are experiencing varying degrees of financial distress, which is expected to continue into the second quarter of 2021, especially if new COVID-19 variant infections increase and new economic restrictions are mandated. Commercial activity has improved, but has not returned to the levels existing prior to the outbreakduration of the pandemic which may result inand the timing and strength of the global and national economic recovery. In conjunction with our customers’ inabilityefforts to meet their loan obligations to us. In addition, the economic pressures and uncertainties related to the COVID-19 pandemic have resulted in changes in consumer spending behaviors, which may negatively impact the demand for loans and other services we offer. Our borrowing base includes customers in industries hotel/lodging, restaurants, entertainment, retail and commercial real estate, all of which have been significantly impactedsupport clients affected by the COVID-19 pandemic. We recognize that these industries may take longerpandemic, the Company has cumulatively originated $136.0 million in loans under the Paycheck Protection Program (PPP) with amounts outstanding of $2.3 million and $8.4 million at March 31, 2022 and December 31, 2021, respectively. For more information on PPP loans, see Note 2 – Loans and Allowance for Loan Losses in the Notes to recover as consumers may be hesitant to return to full social interaction or may change their spending habits on a more permanent basis as a resultConsolidated Financial Statements (unaudited). The future direct and indirect impact of the pandemic. We continue to monitor these customers closely.
39
Effects on Our Business. The COVID-19 pandemic and the specific developments referred to above will continue to have a significant impact on our business. In particular, we anticipate that a significant portionbusinesses, results of operations and financial condition remains uncertain. Should current economic conditions deteriorate or if the Bank’s borrowers inpandemic worsens due to various factors, including through the hotel, restaurant, gaming, long-term healthcarespread of more easily communicable variants of COVID-19, such conditions could have an adverse effect on our businesses and retail industries will continue to endure significant economic distress, which has caused,results of operations and will continue to cause, them to draw on their existing lines of credit andcould adversely affect their ability to repay existing indebtedness. These developments, together with economic conditions generally, are also expected to impact our commercial real estate portfolio, particularly with respect to real estate with exposure to these industries, our consumer loan business and loan portfolio, and the value of certain collateral securing our loans.
The Company continues to lend to qualified consumer and commercial customers. We continue to participate in the SBA’s Small Business Paycheck Protection Program. As of March 31, 2021 the net balance of the PPP loans totaled $56.3 million.
As provided for by the CARES Act, the Company offered payment modifications to borrowers. At March 31, 2021, $72.8 million, or 5.7% of total loans, remained in some form of a modification. These loan modifications include $28.1 million, or 38.5%, on interest only, $39.6 million, or 54.5%, on full deferral and $5.1 million, or 7.0%, with extended amortization.
financial condition.
40
SELECTED CONSOLIDATED FINANCIAL DATA
The following table presents selected consolidated financial information for the Company as of and for each of the three months ended March 31, 2021 and 2020, respectively. The selected consolidated financial data should be read in conjunction with the unaudited consolidated financial statements of the Company, including the related notes, presented elsewhere herein.
| | | | | | | |
Selected Financial Data | | | | | | | |
|
| Three Months Ended | | ||||
|
| March 31, | | ||||
(In thousands, except per share data) |
|
| 2021 | |
| 2020 | |
Per Share Data | | | | | | | |
Basic earnings per share |
| $ | 0.92 | | $ | 0.13 | |
Diluted earnings per share | | | 0.92 | | | 0.13 | |
Cash dividends paid on common stock | | | 842 | | | 753 | |
Book value per share | | | 20.54 | | | 17.92 | |
Market price per share | | | 21.29 | | | 17.64 | |
Selected Ratios | | | | | | | |
(Based on average balance sheets) | | | | | | | |
Return on total assets | | | 1.38 | % | | 0.23 | % |
Return on stockholders' equity | | | 18.03 | % | | 2.97 | % |
Stockholders' equity to total assets | | | 7.64 | % | | 7.80 | % |
Efficiency ratio (1) | | | 61.86 | % | | 70.80 | % |
Net interest spread | | | 3.44 | % | | 3.28 | % |
Net interest margin | | | 3.62 | % | | 3.55 | % |
| | | | | | | |
(Based on end-of-period data) | | | | | | | |
Stockholders' equity to assets | | | 7.55 | % | | 7.64 | % |
Total risk-based capital ratio | | | 14.80 | % | | 14.80 | % |
Tier 1 risk-based capital ratio | | | 13.21 | % | | 12.81 | % |
Common equity Tier 1 capital | | | 9.93 | % | | 9.64 | % |
Tier 1 leverage ratio (2) | | | 10.22 | % | | 10.43 | % |
|
|
|
|
RESULTS OF OPERATIONS ANALYSIS
The Company has prepared all of the consolidated financial information in this report in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP).U.S. GAAP. In preparing the consolidated financial statements in accordance with U.S. GAAP, the Company makes estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported
41
amounts of revenue and expenses during the reporting period. There can be no assurances that actual results will not differ from those estimates.
| | | | | | | | | | | | | |
| | Three Months Ended March 31, | |||||||||||
(In thousands) |
| 2021 |
| 2020 |
| $ Change |
| % Change |
| ||||
Net interest income | | $ | 14,390 | | $ | 12,526 | | $ | 1,864 | | | 14.9 | % |
Provision for loan losses | |
| — | |
| 3,300 | |
| (3,300) | |
| (100.0) | |
Non-interest income | |
| 4,443 | |
| 2,291 | |
| 2,152 | |
| 93.9 | |
Investment securities gains (losses), net | | | 14 | | | (1) | | | 15 | | | 100.0 | |
Non-interest expense | |
| 11,651 | |
| 10,491 | |
| 1,160 | |
| 11.1 | |
Income before income taxes | |
| 7,196 | |
| 1,025 | |
| 6,171 | |
| 602.0 | |
Income tax expense | |
| 1,357 | |
| 157 | |
| 1,200 | |
| 764.3 | |
Net income | | $ | 5,839 | | $ | 868 | | $ | 4,971 | | | 572.7 | % |
NM = not meaningful
As of and for the three months ended | ||||||||||||||||||||||||||||||||||||||
(Dollars in thousands, except per share data) | March 31, 2022 | December 31, 2021 | March 31, 2021 | |||||||||||||||||||||||||||||||||||
Net interest income | $ | 14,145 | $ | 15,103 | $ | 14,390 | ||||||||||||||||||||||||||||||||
(Release of) provision for loan losses | (2,500) | (2,400) | — | |||||||||||||||||||||||||||||||||||
Non-interest income | 3,726 | 3,675 | 4,572 | |||||||||||||||||||||||||||||||||||
Investment securities (losses) gains, net | (4) | 9 | 14 | |||||||||||||||||||||||||||||||||||
Non-interest expense | 12,227 | 13,474 | 11,780 | |||||||||||||||||||||||||||||||||||
Income before income taxes | 8,140 | 7,713 | 7,196 | |||||||||||||||||||||||||||||||||||
Income tax expense | 1,531 | 1,723 | 1,357 | |||||||||||||||||||||||||||||||||||
Net income | $ | 6,609 | $ | 5,990 | $ | 5,839 | ||||||||||||||||||||||||||||||||
Basic earnings per share | $ | 1.00 | $ | 0.90 | $ | 0.88 | ||||||||||||||||||||||||||||||||
Diluted earnings per share | $ | 1.00 | $ | 0.90 | $ | 0.88 | ||||||||||||||||||||||||||||||||
Cash dividends paid on common stock | $ | 993 | $ | 992 | $ | 842 | ||||||||||||||||||||||||||||||||
Book value per share | $ | 20.35 | $ | 22.51 | $ | 19.75 | ||||||||||||||||||||||||||||||||
Market price per share | $ | 25.28 | $ | 25.94 | $ | 20.47 | ||||||||||||||||||||||||||||||||
Return on average total assets | 1.51% | 1.35% | 1.38% | |||||||||||||||||||||||||||||||||||
Return on average stockholders' equity | 18.41% | 16.70% | 18.03% | |||||||||||||||||||||||||||||||||||
Average stockholders' equity to total assets | 8.22% | 8.10% | 7.64% | |||||||||||||||||||||||||||||||||||
Efficiency ratio (1) | 68.42% | 71.75% | 62.12% | |||||||||||||||||||||||||||||||||||
Net interest spread | 3.36% | 3.52% | 3.44% | |||||||||||||||||||||||||||||||||||
Net interest margin | 3.50% | 3.67% | 3.61% | |||||||||||||||||||||||||||||||||||
Stockholders' equity to assets | 7.74% | 8.13% | 7.55% | |||||||||||||||||||||||||||||||||||
Total risk-based capital ratio | 14.66% | 14.79% | 14.80% | |||||||||||||||||||||||||||||||||||
Tier 1 risk-based capital ratio | 13.44% | 13.59% | 13.21% | |||||||||||||||||||||||||||||||||||
Common equity Tier 1 capital | 10.36% | 10.22% | 9.93% | |||||||||||||||||||||||||||||||||||
Tier 1 leverage ratio (2) | 10.99% | 11.01% | 10.22% | |||||||||||||||||||||||||||||||||||
Asset Quality | ||||||||||||||||||||||||||||||||||||||
Net-charge-offs (recoveries) | $ | 124 | $ | (375) | $ | (248) | ||||||||||||||||||||||||||||||||
Non-performing loans | $ | 17,099 | $ | 25,473 | $ | 34,233 | ||||||||||||||||||||||||||||||||
Classified assets | $ | 104,073 | $ | 108,322 | $ | 145,794 | ||||||||||||||||||||||||||||||||
Non-performing loans to total loans | 1.28% | 1.96% | 2.68% | |||||||||||||||||||||||||||||||||||
Non-performing assets to total assets | 1.55% | 1.97% | 2.68% | |||||||||||||||||||||||||||||||||||
Allowance for loan losses to total loans | 1.07% | 1.30% | 1.44% | |||||||||||||||||||||||||||||||||||
No
The Company’s net loan recoveries were $248,000 fordecrease in the three months ended March 31, 2021 compared to net loan charge-offsgain on sale of $84,000 for the three months ended March 31, 2020.
Non-performing loans totaled $34.2real estate mortgages of $1.6 million, or 2.68% of total loans, at March 31, 2021 compared to $34.6 million, or 2.69% of total loans, at December 31, 2020, and $8.1 million, or 0.68% of total loans, at March 31, 2020.64.0%. These changes are discussed in greater detail under the LendingNon-interest Income and Credit ManagementExpense section below.
Non-interest expense increased $1.2 million, or 11.1%, for the three months ended March 31, 20212022 as compared to the three months endedend of the linked quarter. Year-over-year, loans held for investment grew $57.7 million, or 4.5%, from $1.3 billion as of March 31, 2020.2021.
42
Average Balance Sheets
Sheet Data
Three Months Ended March 31, | ||||||||||||||||||||||||||||||||
2022 | 2021 | |||||||||||||||||||||||||||||||
(Dollars in thousands) | Average Balance | Interest Income/ Expense (1) | Rate Earned/ Paid (1) | Average Balance | Interest Income/ Expense (1) | Rate Earned/ Paid (1) | ||||||||||||||||||||||||||
ASSETS | ||||||||||||||||||||||||||||||||
Loans: (2) (3) | ||||||||||||||||||||||||||||||||
Commercial | $ | 220,888 | $ | 2,832 | 5.20% | $ | 257,623 | $ | 4,159 | 6.55% | ||||||||||||||||||||||
Real estate construction - residential | 23,455 | 256 | 4.43 | 33,492 | 394 | 4.77 | ||||||||||||||||||||||||||
Real estate construction - commercial | 95,935 | 996 | 4.21 | 78,578 | 878 | 4.53 | ||||||||||||||||||||||||||
Real estate mortgage - residential | 281,824 | 2,832 | 4.08 | 260,040 | 2,841 | 4.43 | ||||||||||||||||||||||||||
Real estate mortgage - commercial | 670,713 | 6,938 | 4.20 | 621,877 | 6,600 | 4.30 | ||||||||||||||||||||||||||
Installment and other consumer | 22,342 | 206 | 3.74 | 25,992 | 265 | 4.13 | ||||||||||||||||||||||||||
Total loans | $ | 1,315,157 | $ | 14,060 | 4.34% | $ | 1,277,602 | $ | 15,137 | 4.81% | ||||||||||||||||||||||
Loans held for sale | 2,288 | 20 | 3.55 | 5,500 | 25 | 1.84 | ||||||||||||||||||||||||||
Investment securities: | ||||||||||||||||||||||||||||||||
U.S. Treasury | 4,010 | 5 | 0.51 | 3,006 | 8 | 1.08 | ||||||||||||||||||||||||||
U.S. government and federal agency obligations | 27,371 | 89 | 1.32 | 38,605 | 146 | 1.53 | ||||||||||||||||||||||||||
Obligations of states and political subdivisions | 126,577 | 1,020 | 3.27 | 61,456 | 452 | 2.98 | ||||||||||||||||||||||||||
Mortgage-backed securities | 132,922 | 510 | 1.56 | 101,101 | 338 | 1.36 | ||||||||||||||||||||||||||
Other debt securities | 13,456 | 156 | 4.70 | 11,539 | 143 | 5.03 | ||||||||||||||||||||||||||
Total investment securities | 304,336 | 1,780 | 2.37 | 215,707 | 1,087 | 2.04 | ||||||||||||||||||||||||||
Other investment securities | 5,412 | 75 | 5.62 | 5,982 | 83 | 5.63 | ||||||||||||||||||||||||||
Federal funds sold | 6,232 | 1 | 0.07 | 20,276 | 4 | 0.08 | ||||||||||||||||||||||||||
Interest bearing deposits in other financial institutions | 70,824 | 60 | 0.34 | 129,048 | 98 | 0.31 | ||||||||||||||||||||||||||
Total interest earning assets | $ | 1,704,249 | $ | 15,996 | 3.81% | $ | 1,654,115 | $ | 16,434 | 4.03% | ||||||||||||||||||||||
All other assets | 83,294 | 84,407 | ||||||||||||||||||||||||||||||
Allowance for loan losses | (16,926) | (18,466) | ||||||||||||||||||||||||||||||
Total assets | $ | 1,770,617 | $ | 1,720,056 | ||||||||||||||||||||||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||||||||||||||||||||||||
NOW accounts | $ | 176,648 | $ | 15 | 0.03% | $ | 142,735 | $ | 12 | 0.03% | ||||||||||||||||||||||
Savings | 265,542 | 187 | 0.29 | 231,311 | 138 | 0.24 | ||||||||||||||||||||||||||
Interest checking | 29,398 | 28 | 0.39 | 61,522 | 76 | 0.50 | ||||||||||||||||||||||||||
Money market | 289,140 | 86 | 0.12 | 279,234 | 83 | 0.12 | ||||||||||||||||||||||||||
Time deposits | 260,628 | 389 | 0.61 | 267,047 | 671 | 1.02 | ||||||||||||||||||||||||||
Total interest bearing deposits | $ | 1,021,356 | $ | 705 | 0.28% | $ | 981,849 | $ | 980 | 0.40% | ||||||||||||||||||||||
Federal funds purchased and securities sold under agreements to repurchase | 13,792 | 10 | 0.29 | 41,507 | 26 | 0.25 | ||||||||||||||||||||||||||
Federal Home Loan Bank advances and other borrowings | 77,397 | 252 | 1.32 | 98,152 | 396 | 1.64 | ||||||||||||||||||||||||||
Subordinated notes | 49,486 | 324 | 2.66 | 49,486 | 310 | 2.54 | ||||||||||||||||||||||||||
Total borrowings | 140,675 | 586 | 1.69 | 189,145 | 732 | 1.57 | ||||||||||||||||||||||||||
Total interest bearing liabilities | $ | 1,162,031 | $ | 1,291 | 0.45% | $ | 1,170,994 | $ | 1,712 | 0.59% | ||||||||||||||||||||||
Demand deposits | 449,175 | 399,429 | ||||||||||||||||||||||||||||||
Other liabilities | 13,849 | 18,275 | ||||||||||||||||||||||||||||||
Total liabilities | $ | 1,625,055 | $ | 1,588,698 | ||||||||||||||||||||||||||||
Stockholders' equity | 145,562 | 131,358 | ||||||||||||||||||||||||||||||
Total liabilities and stockholders' equity | $ | 1,770,617 | $ | 1,720,056 | ||||||||||||||||||||||||||||
Net interest income (FTE) | $ | 14,705 | $ | 14,722 | ||||||||||||||||||||||||||||
Net interest spread | 3.36% | 3.44% | ||||||||||||||||||||||||||||||
Net interest margin | 3.50% | 3.61% |
| | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, | | | ||||||||||||||
| | 2021 | | 2020 | | | ||||||||||||
| | | | | Interest | | Rate | | | | | Interest | | Rate | | | ||
| | Average | | Income/ | | Earned/ | | Average | | Income/ | | Earned/ | | | ||||
(In thousands) |
| Balance |
| Expense(1) |
| Paid(1) |
| Balance |
| Expense(1) |
| Paid(1) | | | ||||
ASSETS | | | | | | | | | | | | | | | | | | |
Loans: (2) (3) | |
| | |
| | |
| |
| | |
| | |
| | |
Commercial | | $ | 257,623 | | $ | 4,159 | | 6.55 | % | $ | 199,082 | | $ | 2,570 | | 5.19 | % | |
Real estate construction - residential | | | 33,492 | | | 394 | | 4.77 | | | 23,467 | | | 323 | | 5.54 | | |
Real estate construction - commercial | | | 78,578 | | | 878 | | 4.53 | | | 85,573 | | | 1,108 | | 5.21 | | |
Real estate mortgage - residential | | | 260,040 | | | 2,841 | | 4.43 | | | 250,757 | | | 3,132 | | 5.02 | | |
Real estate mortgage - commercial |
| | 621,877 |
| | 6,600 |
| 4.30 |
| | 573,133 |
| | 7,005 |
| 4.92 |
| |
Installment and other consumer |
| | 25,992 |
| | 265 |
| 4.13 |
| | 31,441 |
| | 357 |
| 4.57 |
| |
Total loans | | $ | 1,277,602 | | $ | 15,137 |
| 4.81 | % | $ | 1,163,453 | | $ | 14,495 |
| 5.01 | % | |
Loans held for sale | | $ | 5,500 | | $ | 25 | | 1.84 | % | $ | 1,892 | | $ | 5 | | 1.06 | % | |
Investment securities: | |
|
| |
|
|
|
| |
|
| |
|
|
|
| | |
U.S. Treasury | | $ | 3,006 | | $ | 8 |
| 1.08 | % | $ | 758 | | $ | 4 |
| 2.12 | % | |
U.S. government and federal agency obligations | |
| 38,605 | |
| 146 |
| 1.53 | |
| 37,167 | |
| 195 |
| 2.11 | | |
Obligations of states and political subdivisions | |
| 61,456 | |
| 452 |
| 2.98 | |
| 36,785 | |
| 270 |
| 2.95 | | |
Mortgage-backed securities | |
| 101,101 | |
| 338 |
| 1.36 | |
| 104,029 | |
| 525 |
| 2.03 | | |
Other debt securities | | | 11,539 | |
| 143 |
| 5.03 | |
| 4,402 | |
| 60 |
| 5.48 | | |
Total investment securities | | $ | 215,707 | | $ | 1,087 |
| 2.04 | % | $ | 183,141 | | $ | 1,054 |
| 2.31 | % | |
Other investment securities | |
| 5,982 | |
| 83 |
| 5.63 | |
| 6,253 | |
| 100 |
| 6.43 | | |
Federal funds sold and interest bearing deposits in other financial institutions | |
| 149,325 | |
| 102 |
| 0.28 | |
| 82,215 | |
| 325 |
| 1.59 | | |
Total interest earning assets | | $ | 1,654,116 | | $ | 16,434 |
| 4.03 | % | $ | 1,436,954 | | $ | 15,979 |
| 4.47 | % | |
All other assets | |
| 84,733 | | | | | | |
| 83,136 | |
|
|
|
| | |
Allowance for loan losses | |
| (18,466) | | | | | | |
| (12,584) | |
|
|
|
| | |
Total assets | | $ | 1,720,383 | | | | | | | $ | 1,507,506 | |
|
|
|
| | |
LIABILITIES AND STOCKHOLDERS' EQUITY | |
|
| |
|
|
|
| |
|
| |
|
|
|
| | |
NOW accounts | | $ | 231,312 | | $ | 138 |
| 0.24 | % | $ | 185,642 | | $ | 290 |
| 0.63 | % | |
Savings | |
| 142,735 | |
| 12 |
| 0.03 | |
| 100,862 | |
| 22 |
| 0.09 | | |
Interest checking | | | 61,521 | | | 76 | | 0.50 | | | 47,295 | | | 173 | | 1.47 | | |
Money market | |
| 279,234 | |
| 83 |
| 0.12 | |
| 270,520 | |
| 462 |
| 0.69 | | |
Time deposits | |
| 267,047 | |
| 671 |
| 1.02 | |
| 323,103 | |
| 1,165 |
| 1.45 | | |
Total interest bearing deposits | | $ | 981,849 | | $ | 980 |
| 0.40 | % | $ | 927,422 | | $ | 2,112 |
| 0.92 | % | |
Federal funds purchased and securities sold under agreements to repurchase | |
| 41,507 | |
| 26 |
| 0.25 | |
| 26,290 | |
| 37 |
| 0.57 | | |
Federal Home Loan Bank advances and other borrowings | |
| 98,152 | |
| 396 |
| 1.64 | |
| 108,031 | |
| 632 |
| 2.35 | | |
Subordinated notes | |
| 49,486 | |
| 310 |
| 2.54 | |
| 49,486 | |
| 501 |
| 4.07 | | |
Total borrowings | | $ | 189,145 | | $ | 732 |
| 1.57 | % | $ | 183,807 | | $ | 1,170 |
| 2.56 | % | |
Total interest bearing liabilities | | $ | 1,170,994 | | $ | 1,712 |
| 0.59 | % | $ | 1,111,229 | | $ | 3,282 |
| 1.19 | % | |
Demand deposits | |
| 399,429 | | | | | | |
| 261,244 | |
|
|
|
| | |
Other liabilities | |
| 18,601 | | | | | | |
| 17,433 | |
|
|
|
| | |
Total liabilities | |
| 1,589,024 | | | | | | |
| 1,389,906 | |
|
|
|
| | |
Stockholders' equity | |
| 131,359 | | | | | | |
| 117,600 | |
|
|
|
| | |
Total liabilities and stockholders' equity | | $ | 1,720,383 | | | | | | | $ | 1,507,506 | |
|
|
|
| | |
Net interest income (FTE) | | | | | $ | 14,722 | | | | | | | $ | 12,697 |
|
| | |
Net interest spread | | | | | | |
| 3.44 | % | | | |
|
|
| 3.28 | % | |
Net interest margin | | | | | | |
| 3.62 | % | | | |
|
|
| 3.55 | % | |
|
|
|
|
43
|
|
Rate and Volume Analysis
| | | | | | | | | | |
| | Three Months Ended March 31, | | |||||||
|
| 2021 vs. 2020 |
| |||||||
| | | |
| Change due to | | ||||
|
| Total |
| Average |
| Average |
| |||
(In thousands) |
| Change |
| Volume |
| Rate |
| |||
Interest income on a fully taxable equivalent basis: (1) |
| |
|
| |
|
| |
|
|
Loans: (2) (3) |
| |
|
| |
|
| |
|
|
Commercial | | $ | 1,589 | | $ | 858 | | $ | 731 | |
Real estate construction - residential | |
| 71 | |
| 123 | |
| (52) | |
Real estate construction - commercial | |
| (230) | |
| (86) | |
| (144) | |
Real estate mortgage - residential | |
| (291) | |
| 113 | |
| (404) | |
Real estate mortgage - commercial | |
| (405) | |
| 565 | |
| (970) | |
Installment and other consumer | |
| (92) | |
| (58) | |
| (34) | |
Loans held for sale | | | 20 | | | 15 | | | 5 | |
Investment securities: | |
| | |
| | |
| | |
U.S. Treasury | |
| 4 | |
| 7 | |
| (3) | |
U.S. government and federal agency obligations | |
| (49) | |
| 8 | |
| (57) | |
Obligations of states and political subdivisions | |
| 182 | |
| 181 | |
| 1 | |
Mortgage-backed securities | |
| (187) | |
| (15) | |
| (172) | |
Other debt securities | |
| 83 | |
| 89 | |
| (6) | |
Other investment securities | | | (17) | |
| (4) | |
| (13) | |
Federal funds sold and interest bearing deposits in other financial institutions | |
| (223) | |
| 156 | |
| (379) | |
Total interest income | |
| 455 | |
| 1,952 | |
| (1,497) | |
Interest expense: | |
|
| |
|
| |
|
| |
NOW accounts | |
| (152) | |
| 58 | |
| (210) | |
Savings | |
| (10) | |
| 7 | |
| (17) | |
Interest checking | |
| (97) | |
| 41 | |
| (138) | |
Money market | |
| (379) | |
| 15 | |
| (394) | |
Time deposits | |
| (494) | |
| (180) | |
| (314) | |
Federal funds purchased and securities sold under agreements to repurchase | |
| (11) | |
| 15 | |
| (26) | |
Federal Home Loan Bank advances and other borrowings | |
| (236) | |
| (54) | |
| (182) | |
Subordinated notes | |
| (191) | |
| — | |
| (191) | |
Total interest expense | |
| (1,570) | |
| (98) | |
| (1,472) | |
Net interest income on a fully taxable equivalent basis | | $ | 2,025 | | $ | 2,050 | | $ | (25) | |
Three Months Ended March 31, | |||||||||||||||||||||||||||||||||||
2022 vs. 2021 | |||||||||||||||||||||||||||||||||||
Change due to | |||||||||||||||||||||||||||||||||||
(In thousands) | Total Change | Average Volume | Average Rate | ||||||||||||||||||||||||||||||||
Interest income on a fully taxable equivalent basis: (1) | |||||||||||||||||||||||||||||||||||
Loans: (2) (3) | |||||||||||||||||||||||||||||||||||
Commercial | $ | (1,327) | $ | (543) | $ | (784) | |||||||||||||||||||||||||||||
Real estate construction - residential | (138) | (111) | (27) | ||||||||||||||||||||||||||||||||
Real estate construction - commercial | 118 | 183 | (65) | ||||||||||||||||||||||||||||||||
Real estate mortgage - residential | (9) | 228 | (237) | ||||||||||||||||||||||||||||||||
Real estate mortgage - commercial | 338 | 509 | (171) | ||||||||||||||||||||||||||||||||
Installment and other consumer | (59) | (35) | (24) | ||||||||||||||||||||||||||||||||
Loans held for sale | (5) | (20) | 15 | ||||||||||||||||||||||||||||||||
Investment securities: | |||||||||||||||||||||||||||||||||||
U.S. Treasury | (3) | 2 | (5) | ||||||||||||||||||||||||||||||||
U.S. government and federal agency obligations | (57) | (38) | (19) | ||||||||||||||||||||||||||||||||
Obligations of states and political subdivisions | 568 | 521 | 47 | ||||||||||||||||||||||||||||||||
Mortgage-backed securities | 172 | 117 | 55 | ||||||||||||||||||||||||||||||||
Other debt securities | 13 | 23 | (10) | ||||||||||||||||||||||||||||||||
Other investment securities | (8) | (8) | — | ||||||||||||||||||||||||||||||||
Federal funds sold | (3) | (2) | (1) | ||||||||||||||||||||||||||||||||
Interest bearing deposits in other financial institutions | (38) | (48) | 10 | ||||||||||||||||||||||||||||||||
Total interest income | $ | (438) | $ | 778 | $ | (1,216) | |||||||||||||||||||||||||||||
Interest expense: | |||||||||||||||||||||||||||||||||||
Savings | 3 | 3 | — | ||||||||||||||||||||||||||||||||
NOW accounts | 49 | 22 | 27 | ||||||||||||||||||||||||||||||||
Interest checking | (48) | (33) | (15) | ||||||||||||||||||||||||||||||||
Money market | 3 | 3 | — | ||||||||||||||||||||||||||||||||
Time deposits | (282) | (16) | (266) | ||||||||||||||||||||||||||||||||
Federal funds purchased and securities sold under agreements to repurchase | (16) | (19) | 3 | ||||||||||||||||||||||||||||||||
Federal Home Loan Bank advances and other borrowings | (144) | (75) | (69) | ||||||||||||||||||||||||||||||||
Subordinated notes | 14 | — | 14 | ||||||||||||||||||||||||||||||||
Total interest expense | $ | (421) | $ | (115) | $ | (306) | |||||||||||||||||||||||||||||
Net interest income on a fully taxable equivalent basis | $ | (17) | $ | 893 | $ | (910) |
|
|
|
|
|
|
Financial results for the three months ended March 31, 2021 compared to2022 and 2021. Such adjustments totaled $0.6 million and $0.3 million for the three months ended March 31, 2020,2022 and 2021, respectively.
44
net interest margin increased primarily due to an increase in average earning assets and a decrease in rates paid on average interest bearing liabilities in the three month comparative periods.
Average interest-earning assets increased $217.2$50.1 million, or 15.1%3.0%, to $1.70 billion for the quarter ended March 31, 2022 compared to $1.65 billion for the quarter ended March 31, 2021, and average interest-bearing liabilities decreased $9.0 million, or 0.8%, to $1.16 billion for the quarter ended March 31, 2022 compared to $1.17 billion for the quarter ended March 31, 2021.
Total interest income (expressed on a fully taxable equivalent basis) was $16.4 million for the three months ended March 31, 2021 compared to $16.0 million for the three months ended March 31, 2020.2021. The Company’s rates earned on interest earning assets were 3.81% for the three months ended March 31, 2022 compared to 4.03% for the three months ended March 31, 2021 compared to 4.47% for the three March 31, 2020.
2021.
2021.
2021.
Total interest expense decreased to $1.7 million for the three months ended March 31, 2021 compared to $3.3 million for the three months ended March 31, 2020.2021. The Company’s rates paid on interest bearing liabilities were 0.45% for the three months ended March 31, 2022 compared to 0.59% for the three months ended March 31, 2021 compared2021. See the
Interest expense on deposits decreased2022 compared to $1.0 million for the three months ended March 31, 20212021.
Average interest bearing deposits increased $54.4 million, or 5.9%, to $981.8 million for the three months ended March 31, 20212022 compared to $927.4 million for the three months ended March 31, 2020. The average cost of deposits decreased to 0.40% for the three months ended March 31, 2021 compared to 0.92% for the three months ended March 31, 2020. Although offering rates remain low in response to lower market interest rates, growth in deposits was positively impacted in part by customers who deposited both economic stimulus payments and PPP loan proceeds.
Interest expense on borrowings was $0.7 million for the three months ended March 31, 2021 compared2021.
Average borrowings increased2022 compared to $189.1 million for the three monthsquarter ended March 31, 2021 compared to $183.8 million for the three months ended March 31, 2020.2021. The average cost of borrowings decreasedincreased to 1.69% for the quarter ended March 31, 2022 compared to 1.57% for the three monthsquarter ended March 31, 2021 compared to 2.56% for the three months ended March 31, 2020.2021. The decreaseincrease in cost of funds primarily resulted from lowerhigher market interest rates.
The increase in average borrowings during 2020 was primarily due to an increase in FHLB advances to fund liquidity needs as refinancing activity increased when rates dropped during the first quarter of 2020. This in turn was offset beginning in April of 2020 when the Company had an increase in liquidity due to participation in the CARES Act economic stimulus programs. The Company experienced significant deposit growth primarily due to stimulus checks, proceeds from
45
PPP loan funding, deferral of income tax payments,Non-interest Income and customers holding on to savings due to uncertain times and has been repaying these advances as they come due since May of 2020. See the Liquidity Management section for further discussion.
Non-interest income and expense
Expense
| | | | | | | | | | | | | |
| | Three Months Ended March 31, | | ||||||||||
(In thousands) |
| 2021 |
| 2020 |
| $ Change |
| % Change |
| ||||
Non-interest income |
| |
|
| |
|
|
|
|
| |
| |
Service charges and other fees | | $ | 739 | | $ | 799 | | $ | (60) | | | (7.5) | % |
Bank card income and fees | |
| 860 | |
| 693 | |
| 167 | |
| 24.1 | |
Trust department income | |
| 294 | |
| 379 | |
| (85) | |
| (22.4) | |
Real estate servicing fees, net | |
| 73 | |
| (87) | |
| 160 | |
| (183.9) | |
Gain on sales of mortgage loans, net | |
| 2,469 | |
| 419 | |
| 2,050 | |
| 489.3 | |
Other | |
| 8 | |
| 88 | |
| (80) | |
| (90.9) | |
Total non-interest income | | $ | 4,443 | | $ | 2,291 | | $ | 2,152 | | | 93.9 | % |
Non-interest income as a % of total revenue * | |
| 23.6 | % |
| 15.5 | % |
|
| |
|
| |
Three Months Ended March 31, | ||||||||||||||||||||||||||||||||
(Dollars in thousands) | 2022 | 2021 | $ Change | % Change | ||||||||||||||||||||||||||||
Non-interest income | ||||||||||||||||||||||||||||||||
Service charges and other fees | $ | 793 | $ | 739 | $ | 54 | 7.3 | % | ||||||||||||||||||||||||
Bank card income and fees | 961 | 860 | 101 | 11.7 | % | |||||||||||||||||||||||||||
Trust department income | 340 | 294 | 46 | 15.6 | % | |||||||||||||||||||||||||||
Real estate servicing fees, net | 231 | 73 | 158 | 216.4 | % | |||||||||||||||||||||||||||
Gain on sales of mortgage loans, net | 888 | 2,469 | (1,581) | (64.0) | % | |||||||||||||||||||||||||||
Other | 513 | 137 | 376 | 274.5 | % | |||||||||||||||||||||||||||
Total non-interest income | $ | 3,726 | $ | 4,572 | $ | (846) | (18.5) | % | ||||||||||||||||||||||||
Non-interest income as a % of total revenue * | 20.8 | % | 24.1 | % |
|
|
Service charges and fees decreased $60,000, or 7.5%, to $739,000 for the three months ended March 31, 2021 compared to $799,000 for the three months ended March 31, 2020.2021. The decrease in fees was primarily due to a refundthe decrease in gain on sale of service fees issued during the first quarterreal estate mortgages due to lower volumes of 2021.
real estate mortgage loans sold as further discussed below.
2021.
The Company was servicing $288.9 million of mortgage loans at March 31, 2021 compared to $292.7 million and $270.6 million at December 31, 2020 and March 31, 2020, respectively.
Gain on sales of mortgage loans increased $2.1 million to $2.5$0.3 million for the three months ended March 31, 20212022 compared to $0.4$0.2 million for the three months ended March 31, 2020. During2021. The current quarter's MSR valuation increased $31,000 from the fourthlinked quarter primarily due to an increase in market rates. The Company was servicing $261.5 million of 2019,mortgage loans at March 31, 2022 compared to $270.0 million and $288.9 million at December 31, 2021 and March 31, 2021, respectively.
2021. Loans sold to the secondary market slowed after strong sales during the first six months of 2021.
the related changes due to volume and rates through non-interest income and non-interest expense.
46
The following table presents the gross realized gains and losses from sales and calls of available-for-sale securities, as well as gains and losses on equity securities from fair value adjustments which have been recognized in earnings:
| | | | | | | |
|
| Three Months Ended March 31, | | ||||
(in thousands) |
| 2021 |
| 2020 |
| ||
Investment securities gains (losses), net |
| |
|
| |
| |
Available for sale securities: |
| |
|
| |
| |
Gross realized gains | | $ | 2 | | $ | — | |
Gross realized losses | |
| — | |
| — | |
Other-than-temporary impairment recognized | |
| — | |
| — | |
Other investment securities: | |
|
| |
|
| |
Fair value adjustments, net | |
| 12 | |
| (1) | |
Investment securities gains (losses), net | | $ | 14 | | $ | (1) | |
Three Months Ended March 31, | |||||||||||||||||||||||
(in thousands) | 2022 | 2021 | |||||||||||||||||||||
Investment securities (losses) gains, net | |||||||||||||||||||||||
Available-for-sale securities: | |||||||||||||||||||||||
Gross realized gains | $ | — | $ | 2 | |||||||||||||||||||
Gross realized losses | — | — | |||||||||||||||||||||
Other-than-temporary impairment recognized | — | — | |||||||||||||||||||||
Other investment securities: | |||||||||||||||||||||||
Fair value adjustments, net | (4) | 12 | |||||||||||||||||||||
Investment securities (losses) gains, net | $ | (4) | $ | 14 |
| | | | | | | | | | | | |
| | Three Months Ended March 31, | | |||||||||
(In thousands) |
| 2021 |
| 2020 |
| $ Change |
| % Change |
| |||
Non-interest expense |
| |
|
| |
| | |
| | | |
Salaries | | $ | 5,342 | | $ | 4,512 | | $ | 830 | | 18.4 | % |
Employee benefits | |
| 1,804 | |
| 1,609 | |
| 195 | | 12.1 | |
Occupancy expense, net | |
| 771 | |
| 766 | |
| 5 | | 0.7 | |
Furniture and equipment expense | |
| 744 | |
| 750 | |
| (6) | | (0.8) | |
Processing, network and bank card expense | |
| 1,007 | |
| 976 | |
| 31 | | 3.2 | |
Legal, examination, and professional fees | |
| 404 | |
| 367 | |
| 37 | | 10.1 | |
Advertising and promotion | |
| 243 | |
| 249 | |
| (6) | | (2.4) | |
Postage, printing, and supplies | |
| 204 | |
| 241 | |
| (37) | | (15.4) | |
Loan expense | | | 174 | | | 123 | | | 51 | | 41.5 | |
Other | |
| 958 | |
| 898 | |
| 60 | | 6.7 | |
Total non-interest expense | | $ | 11,651 | | $ | 10,491 | | $ | 1,160 | | 11.1 | % |
Efficiency ratio* | |
| 61.9 | % |
| 70.8 | % | | | | | |
Number of full-time equivalent employees | |
| 304 | |
| 303 | | | | | | |
Three Months Ended March 31, | |||||||||||||||||||||||||||||||||||
(Dollars in thousands) | 2022 | 2021 | $ Change | % Change | |||||||||||||||||||||||||||||||
Non-interest expense | |||||||||||||||||||||||||||||||||||
Salaries | $ | 5,156 | $ | 5,342 | $ | (187) | (3.5) | % | |||||||||||||||||||||||||||
Employee benefits | 1,730 | 1,804 | (73) | (4.1) | |||||||||||||||||||||||||||||||
Occupancy expense, net | 786 | 771 | 15 | 1.9 | |||||||||||||||||||||||||||||||
Furniture and equipment expense | 755 | 744 | 11 | 1.5 | |||||||||||||||||||||||||||||||
Processing, network and bank card expense | 1,142 | 1,007 | 135 | 13.4 | |||||||||||||||||||||||||||||||
Legal, examination, and professional fees | 440 | 404 | 36 | 8.9 | |||||||||||||||||||||||||||||||
Advertising and promotion | 293 | 243 | 50 | 20.6 | |||||||||||||||||||||||||||||||
Postage, printing, and supplies | 190 | 204 | (14) | (6.9) | |||||||||||||||||||||||||||||||
Loan expense | 145 | 174 | (29) | (16.7) | |||||||||||||||||||||||||||||||
Other | 1,590 | 1,087 | 503 | 46.3 | |||||||||||||||||||||||||||||||
Total non-interest expense | $ | 12,227 | $ | 11,780 | $ | 447 | 3.8 | % | |||||||||||||||||||||||||||
Efficiency ratio* | 68.4 | % | 62.1 | % | |||||||||||||||||||||||||||||||
Number of full-time equivalent employees | 306 | 304 |
|
|
2021.
Employee benefits increased $0.2 million, or 12.1%,2022 compared to $1.8 million for the three monthsquarter ended March 31, 2021 compared to $1.6 million for the three months ended March 31, 2020.2021. The increasesdecreases were primarily due to an increasea decrease in 401(k) plan contributions and payroll taxes, partially offset by a decreasean increase in medical premiums and pension cost due to higherlower annual discount rate assumptions compared to the prior year's annual assumptions.
47
Postage, printing, and supplies decreased $37,000, or 15.4%, to $204,000 for the three months ended March 31, 2021 compared to $241,000 for the three months ended March 31, 2020. These decreases are primarily related to savings in stationary and supplies purchases and check printing expenses related to switching vendors.
Loan expense increased $51,000, or 41.5%, to $174,000 for the three months ended March 31, 2021 compared to $123,000 for the three months ended March 31, 2020. The increases were primarily related to increases in real estate loandebit card processing and ATM interchange expenses, due to the growthpartially offset by decreases in loan volume sold to the secondary market.
network and processing expenses.
volume and rates through non-interest income and non-interest expense.
2021.
| | | | | | | | | | | | |
|
| March 31, 2021 | | December 31, 2020 |
| |||||||
(In thousands) |
| Amount | | % of Loans |
| | 2020 | % of Loans |
|
| ||
Commercial, financial, and agricultural (a) | | $ | 251,943 | | 19.7 | % | | $ | 272,918 | 21.2 | % | |
Real estate construction − residential | |
| 33,962 | | 2.7 | | |
| 29,692 | 2.3 | | |
Real estate construction − commercial | |
| 78,576 | | 6.2 | | |
| 78,144 | 6.1 | | |
Real estate mortgage − residential | |
| 258,259 | | 20.2 | | |
| 262,339 | 20.4 | | |
Real estate mortgage − commercial | |
| 628,178 | | 49.2 | | |
| 617,133 | 48.0 | | |
Installment and other consumer | |
| 25,267 | | 2.0 | | |
| 26,741 | 2.1 | | |
Total loans held for investment | | $ | 1,276,185 | | 100.0 | % | | $ | 1,286,967 | 100.0 | % | |
March 31, 2022 | December 31, 2021 | ||||||||||||||||
(Dollars in thousands) | Amount | % of Loans | Amount | % of Loans | |||||||||||||
Commercial, financial, and agricultural (a) | $ | 221,015 | 16.6 | % | $ | 217,214 | 16.7 | % | |||||||||
Real estate construction − residential | 21,515 | 1.6 | 27,920 | 2.1 | |||||||||||||
Real estate construction − commercial | 103,478 | 7.8 | 91,369 | 7.0 | |||||||||||||
Real estate mortgage − residential | 287,879 | 21.6 | 279,346 | 21.5 | |||||||||||||
Real estate mortgage − commercial | 677,539 | 50.8 | 663,256 | 50.9 | |||||||||||||
Installment and other consumer | 22,497 | 1.7 | 23,028 | 1.8 | |||||||||||||
Total loans held for investment | $ | 1,333,923 | 100.0 | % | $ | 1,302,133 | 100.0 | % |
48
The Company generally does not retain long-term fixed rate residential mortgage loans in its portfolio. Fixed rate loans conforming to standards required by the secondary market are offered to qualified borrowers but are not funded until the Company has a non-recourse purchase commitment from the secondary market at a predetermined price. During the three months ended March 31, 2021,2022, the Company sold approximately $66.3$29.1 million of loans to investors compared to $13.2$66.3 million for the three months ended March 31, 2020.2021. At March 31, 2021,2022, the Company was servicing approximately $288.9$261.5 million of loans sold to the secondary market compared to $292.7$270.0 million at December 31, 2020,2021, and $270.6$288.9 million at March 31, 2020.
2021.
49
Non-performing Assets
| | | | | | | | | | |
| | March 31, | | December 31, | | March 31, | | |||
(In thousands) |
| 2021 |
| 2020 |
| 2020 |
| |||
Nonaccrual loans: | | |
|
| |
|
| |
|
|
Commercial, financial, and agricultural | | $ | 6,591 | | $ | 6,717 | | $ | 3,111 | |
Real estate construction − residential | |
| 189 | |
| 192 | |
| — | |
Real estate construction − commercial | |
| 198 | |
| 200 | |
| 408 | |
Real estate mortgage − residential | |
| 1,917 | |
| 2,105 | |
| 3,211 | |
Real estate mortgage − commercial | |
| 25,309 | |
| 25,314 | |
| 1,068 | |
Installment and other consumer | |
| 29 | |
| 31 | |
| 46 | |
Total | | $ | 34,233 | | $ | 34,559 | | $ | 7,844 | |
Loans contractually past - due 90 days or more and still accruing: | |
|
| |
|
| |
|
| |
Real estate mortgage - residential | | $ | — | | $ | — | | $ | 190 | |
Installment and other consumer | |
| — | |
| 17 | |
| 27 | |
Total | | $ | — | | $ | 17 | | $ | 217 | |
Total non-performing loans (a) | | | 34,233 | | | 34,576 | | | 8,061 | |
Other real estate owned and repossessed assets | | | 12,140 | | | 12,291 | | | 12,769 | |
Total non-performing assets | | $ | 46,373 | | $ | 46,867 | | $ | 20,830 | |
| | | | | | | | | | |
Loans held for investment | | $ | 1,276,185 | | $ | 1,286,967 | | $ | 1,180,522 | |
Allowance for loan losses to loans | |
| 1.44 | % |
| 1.41 | % |
| 1.33 | % |
Non-performing loans to loans (a) | |
| 2.68 | % |
| 2.69 | % |
| 0.68 | % |
Non-performing assets to loans (b) | |
| 3.63 | % |
| 3.64 | % |
| 1.76 | % |
Non-performing assets to assets (b) | |
| 2.68 | % |
| 2.70 | % |
| 1.36 | % |
Allowance for loan losses to non-performing loans | |
| 53.64 | % |
| 52.39 | % |
| 194.68 | % |
March 31, | December 31, | ||||||||||
(Dollars in thousands) | 2022 | 2021 | |||||||||
Non-accrual loans: | |||||||||||
Commercial, financial, and agricultural | $ | 136 | $ | 153 | |||||||
Real estate construction − commercial | 100 | 105 | |||||||||
Real estate mortgage − residential | 1,258 | 1,129 | |||||||||
Real estate mortgage − commercial | 15,477 | 24,029 | |||||||||
Installment and other consumer | 125 | 43 | |||||||||
Total | $ | 17,096 | $ | 25,459 | |||||||
Loans contractually past - due 90 days or more and still accruing: | |||||||||||
Real estate mortgage − residential | $ | — | $ | 14 | |||||||
Installment and other consumer | 3 | — | |||||||||
Total | $ | 3 | $ | 14 | |||||||
Total non-performing loans (a) | 17,099 | 25,473 | |||||||||
Other real estate owned and repossessed assets | 9,758 | 10,525 | |||||||||
Total non-performing assets | $ | 26,857 | $ | 35,998 | |||||||
Loans held for investment | $ | 1,333,923 | $ | 1,302,133 | |||||||
Allowance for loan losses to loans | 1.07 | % | 1.30 | % | |||||||
Non-accrual loans to total loans | 1.28 | % | 1.96 | % | |||||||
Non-performing loans to loans (a) | 1.28 | % | 1.96 | % | |||||||
Non-performing assets to loans (b) | 2.01 | % | 2.76 | % | |||||||
Non-performing assets to assets (b) | 1.55 | % | 1.97 | % | |||||||
Allowance for loan losses to non-accrual loans | 83.52 | % | 66.39 | % | |||||||
Allowance for loan losses to non-performing loans | 83.51 | % | 66.36 | % |
Non-performing loans include loans 90 days past due and accruing, non-accrual loans, and non-performing TDRs included in non-accrual loans and 90 days past due.
2021.
2021. During the first quarter ended March 31, 2022, an additional $52,000 charge-off was recorded related to a property that moved into other real estate owned at the end of the fourth quarter of 2021.
50
The following table summarizes the Company’s TDRs at the dates indicated:
| | | | | | | | | | | | | | | | |
|
| March 31, 2021 | | December 31, 2020 | ||||||||||||
|
| Number of |
| Recorded |
| Specific |
| Number of |
| Recorded |
| Specific | ||||
(In thousands) |
| contracts |
| Investment |
| Reserves | | contracts |
| Investment |
| Reserves | ||||
Performing TDRs |
|
|
| |
|
| |
| |
|
| |
|
| |
|
Commercial, financial and agricultural |
| 7 | | $ | 817 | | $ | 37 | | 7 | | $ | 835 | | $ | 90 |
Real estate mortgage − residential |
| 5 | |
| 1,217 | |
| 46 | | 5 | |
| 1,521 | |
| 28 |
Real estate mortgage − commercial |
| 2 | |
| 338 | |
| 7 | | 2 | |
| 343 | |
| 7 |
Installment and other consumer | | 4 | | | 42 | | | 5 | | 5 | | | 77 | | | 10 |
Total performing TDRs |
| 18 | | $ | 2,414 | | $ | 95 | | 19 | | $ | 2,776 | | $ | 135 |
Non-performing TDRs |
|
| |
|
| |
|
| |
| |
|
| |
|
|
Commercial, financial and agricultural |
| 1 | | $ | 3 | | $ | — | | 1 | | $ | 4 | | $ | 1 |
Real estate mortgage − residential |
| 8 | | | 876 | | | 77 | | 8 | | | 895 | | | 78 |
Total non-performing TDRs |
| 9 | | $ | 879 | | $ | 77 | | 9 | | $ | 899 | | $ | 79 |
Total TDRs |
| 27 | | $ | 3,293 | | $ | 172 | | 28 | | $ | 3,675 | | $ | 214 |
March 31, 2022 | December 31, 2021 | ||||||||||||||||||||||||||||||||||
(Dollars in thousands) | Number of contracts | Recorded Investment | Specific Reserves | Number of contracts | Recorded Investment | Specific Reserves | |||||||||||||||||||||||||||||
Performing TDRs | |||||||||||||||||||||||||||||||||||
Commercial, financial and agricultural | 2 | $ | 183 | $ | 23 | 2 | $ | 188 | $ | 24 | |||||||||||||||||||||||||
Real estate mortgage − residential | 5 | 1,170 | 46 | 6 | 1,262 | 56 | |||||||||||||||||||||||||||||
Real estate mortgage − commercial | 2 | 323 | 38 | 2 | 328 | 38 | |||||||||||||||||||||||||||||
Installment and other consumer | 2 | 15 | 2 | 2 | 17 | 2 | |||||||||||||||||||||||||||||
Total performing TDRs | 11 | $ | 1,691 | $ | 109 | 12 | $ | 1,795 | $ | 120 | |||||||||||||||||||||||||
Non-performing TDRs | |||||||||||||||||||||||||||||||||||
Real estate mortgage − residential | 5 | $ | 551 | $ | 70 | 5 | $ | 561 | $ | 39 | |||||||||||||||||||||||||
Total non-performing TDRs | 5 | $ | 551 | $ | 70 | 5 | $ | 561 | $ | 39 | |||||||||||||||||||||||||
Total TDRs | 16 | $ | 2,242 | $ | 179 | 17 | $ | 2,356 | $ | 159 |
| | | | | | | |
| | March 31, | | December 31, | | ||
(In thousands) |
| 2021 |
| 2020 | | ||
Allocation of allowance for loan losses at end of period: |
| |
|
| |
| |
Commercial, financial, and agricultural | | $ | 4,676 | | $ | 5,121 | |
Real estate construction − residential | |
| 309 | |
| 213 | |
Real estate construction − commercial | |
| 532 | |
| 475 | |
Real estate mortgage − residential | |
| 2,594 | |
| 2,679 | |
Real estate mortgage − commercial | |
| 9,904 | |
| 9,354 | |
Installment and other consumer | |
| 245 | |
| 264 | |
Unallocated | |
| 101 | |
| 7 | |
Total | | $ | 18,361 | | $ | 18,113 | |
March 31, 2022 | December 31, 2021 | ||||||||||||||||||||||||||||||||||
(In thousands) | Amount | % of loans in each category to total loans | Amount | % of loans in each category to total loans | |||||||||||||||||||||||||||||||
Allocation of allowance for loan losses at end of period: | |||||||||||||||||||||||||||||||||||
Commercial, financial, and agricultural | $ | 2,830 | 16.6 | % | $ | 2,717 | 16.7 | % | |||||||||||||||||||||||||||
Real estate construction − residential | 60 | 1.6 | 137 | 2.1 | |||||||||||||||||||||||||||||||
Real estate construction − commercial | 664 | 7.8 | 588 | 7.0 | |||||||||||||||||||||||||||||||
Real estate mortgage − residential | 2,578 | 21.6 | 2,482 | 21.5 | |||||||||||||||||||||||||||||||
Real estate mortgage − commercial | 7,692 | 50.8 | 10,662 | 50.9 | |||||||||||||||||||||||||||||||
Installment and other consumer | 273 | 1.7 | 256 | 1.8 | |||||||||||||||||||||||||||||||
Unallocated | 182 | — | 61 | — | |||||||||||||||||||||||||||||||
Total | $ | 14,279 | 100.0 | % | $ | 16,903 | 100.0 | % |
51
The following table is a summary of the general and specific allocations of the allowance for loan losses:
| | | | | | | |
| | March 31, | | December 31, | | ||
(In thousands) |
| 2021 |
| 2020 | | ||
Allocation of allowance for loan losses: |
| |
|
| |
| |
Individually evaluated for impairment − specific reserves | | $ | 5,144 | | $ | 5,113 | |
Collectively evaluated for impairment − general reserves | |
| 13,217 | |
| 13,000 | |
Total | | $ | 18,361 | | $ | 18,113 | |
(In thousands) | March 31, 2022 | December 31, 2021 | |||||||||
Allocation of allowance for loan losses: | |||||||||||
Individually evaluated for impairment − specific reserves | $ | 317 | $ | 3,044 | |||||||
Collectively evaluated for impairment − general reserves | 13,962 | 13,859 | |||||||||
Total | $ | 14,279 | $ | 16,903 |
The specific reserve component applies to loans evaluated individually for impairment. The net carrying value of impaired loans is generally based on the fair values of collateral obtained through independent appraisals and/or internal evaluations, or by discounting the total expected future cash flows. Once the impairment amount is calculated, a specific reserve allocation is recorded. At March 31, 2021, $5.12022, $0.3 million of the Company’s ALL was allocated to impaired loans totaling approximately $36.6$18.8 million compared to $5.1$3.0 million of the Company’s ALL allocated to impaired loans totaling approximately $37.3$27.3 million at December 31, 2020.2021. Management determined that $12.6$16.1 million, or 34%86%, of total impaired loans required no reserve allocation at March 31, 20212022 compared to $11.9$16.6 million, or 32%61%, at December 31, 2020,2021, primarily due to adequate collateral values, acceptable payment history and adequate cash flow ability.
non-performing loans.
No
52
quarter of 2020 resulted2021 primarily fromdue to the impact of net recoveries and improvement in
pandemic experienced throughout 2020.
| | | | | | | |
| | Three Months Ended | | ||||
| | March 31, | | ||||
(In thousands) |
| 2021 |
| 2020 |
| ||
Analysis of allowance for loan losses: |
| |
|
| |
| |
Balance beginning of period | | $ | 18,113 | | $ | 12,477 | |
Charge-offs: | |
| | |
| | |
Commercial, financial, and agricultural | |
| 27 | |
| 41 | |
Real estate construction − residential | |
| — | |
| — | |
Real estate construction − commercial | |
| — | |
| — | |
Real estate mortgage − residential | |
| — | |
| 19 | |
Real estate mortgage − commercial | |
| 23 | |
| 22 | |
Installment and other consumer | |
| 57 | |
| 52 | |
Total charge-offs | | $ | 107 | | $ | 134 | |
Recoveries: | |
|
| |
|
| |
Commercial, financial, and agricultural | | $ | 149 | | $ | 25 | |
Real estate construction − residential | |
| 13 | |
| — | |
Real estate construction − commercial | |
| — | |
| — | |
Real estate mortgage − residential | |
| 168 | |
| 9 | |
Real estate mortgage − commercial | |
| — | |
| 2 | |
Installment and other consumer | |
| 25 | |
| 14 | |
Total recoveries | | $ | 355 | | $ | 50 | |
Net charge-offs (recoveries) | |
| (248) | |
| 84 | |
Provision for loan losses | |
| — | |
| 3,300 | |
Balance end of period | | $ | 18,361 | | $ | 15,693 | |
Three Months Ended March 31, | |||||||||||||||||||||||||||||||||||
2022 | 2021 | ||||||||||||||||||||||||||||||||||
(Dollars in thousands) | Net Charge-offs (Recoveries) | Average Loans | Net (Recoveries) Charge-offs / Average Loans | Net Charge-offs (Recoveries) | Average Loans | Net (Recoveries) Charge-offs / Average Loans | |||||||||||||||||||||||||||||
Commercial, financial, and agricultural | $ | 15 | $ | 220,888 | 0.01 | % | $ | (122) | $ | 257,623 | (0.05) | % | |||||||||||||||||||||||
Real estate construction − residential | — | 23,455 | — | (13) | 33,492 | (0.04) | |||||||||||||||||||||||||||||
Real estate construction − commercial | — | 95,935 | — | — | 78,578 | — | |||||||||||||||||||||||||||||
Real estate mortgage − residential | (3) | 281,824 | — | (168) | 260,040 | (0.06) | |||||||||||||||||||||||||||||
Real estate mortgage − commercial | 73 | 670,713 | 0.01 | 23 | 621,877 | — | |||||||||||||||||||||||||||||
Installment and other consumer | 39 | 22,342 | 0.17 | 32 | 25,992 | 0.12 | |||||||||||||||||||||||||||||
Total | $ | 124 | $ | 1,315,157 | 0.01 | % | $ | (248) | $ | 1,277,602 | (0.02) | % |
2021.
In the fourth quarter of 2019 the Company expanded its current home loan program to better serve our customers. This expansion began with hiring new mortgage lending personnel and expanding the bank’s available loan products and upgrading the Company's operating systems. New home loan programs for its customers include VA loans, designed for military families and veterans; USDA loans for those buying homes in rural communities; and FHA loans, which offer low down payments and flexible underwriting guidelines. In addition, we have added several secondary market investors, allowing us to sell loans on the secondary market versus servicing them at the Company. This provides us with the ability to offer clients more aggressive pricing and at the same time improve the Company's financial return.
53
Liquidity and Capital Resources
| | | | | | | |
| | March 31, | | December 31, | | ||
(In thousands) |
| 2021 |
| 2020 | | ||
Federal funds sold and other interest-bearing deposits | | $ | 128,207 | | $ | 161,128 | |
Certificates of deposit in other banks | |
| 8,897 | |
| 9,376 | |
Available-for-sale investment securities | |
| 238,142 | |
| 198,030 | |
Total | | $ | 375,246 | | $ | 368,534 | |
| | | | | | | |
(In thousands) | March 31, 2022 | December 31, 2021 | |||||||||
Federal funds sold | $ | 419 | $ | 7,122 | |||||||
Other interest-bearing deposits | 27,552 | 135,500 | |||||||||
Certificates of deposit in other banks | 4,701 | 5,193 | |||||||||
Available-for-sale investment securities | 286,754 | 310,870 | |||||||||
Total | $ | 319,426 | $ | 458,685 |
borrowings.
| | | | | | | |
| | March 31, | | December 31, | | ||
(In thousands) |
| 2021 |
| 2020 | | ||
Investment securities pledged for the purpose of securing: |
| |
|
| |
| |
Federal Reserve Bank borrowings | | $ | 10,824 | | $ | 9,115 | |
Federal funds purchased and securities sold under agreements to repurchase | |
| 51,625 | |
| 59,695 | |
Other deposits | |
| 135,122 | |
| 85,130 | |
Total pledged, at fair value | | $ | 197,571 | | $ | 153,940 | |
(In thousands) | March 31, 2022 | December 31, 2021 | |||||||||
Investment securities pledged for the purpose of securing: | |||||||||||
Federal Reserve Bank borrowings | $ | 9,448 | $ | 10,778 | |||||||
Federal funds purchased and securities sold under agreements to repurchase | 6,448 | 28,769 | |||||||||
Other deposits | 173,592 | 235,829 | |||||||||
Total pledged, at fair value | $ | 189,488 | $ | 275,376 |
54
Core deposits at March 31, 20212022 and December 31, 20202021 were as follows:
| | | | | | | |
| | March 31, | | December 31, | | ||
(In thousands) |
| 2021 |
| 2020 | | ||
Core deposit base: | | | | | | | |
Non-interest bearing demand | | $ | 431,035 | | $ | 382,492 | |
Interest checking | |
| 264,210 | |
| 292,375 | |
Savings and money market | |
| 414,215 | |
| 391,248 | |
Other time deposits | |
| 177,943 | |
| 183,072 | |
Total | | $ | 1,287,403 | | $ | 1,249,187 | |
Time
(In thousands) | March 31, 2022 | December 31, 2021 | |||||||||
Core deposit base: | |||||||||||
Non-interest bearing demand | $ | 450,225 | $ | 453,066 | |||||||
Interest checking | 277,988 | 357,825 | |||||||||
Savings and money market | 453,967 | 440,331 | |||||||||
Other time deposits | 168,568 | 175,827 | |||||||||
Total | $ | 1,350,748 | $ | 1,427,049 |
2022.
| | | | | | | |
| | March 31, | | December 31, | | ||
(In thousands) |
| 2021 |
| 2020 |
| ||
Borrowings: | | | | | | | |
Federal funds purchased and securities sold under agreements to repurchase | | $ | 42,018 | | $ | 45,154 | |
Federal Home Loan Bank advances | |
| 97,600 | |
| 106,660 | |
Subordinated notes | |
| 49,486 | |
| 49,486 | |
Other borrowings | |
| 14 | |
| 14 | |
Total | | $ | 189,118 | | $ | 201,314 | |
(In thousands) | March 31, 2022 | December 31, 2021 | |||||||||
Borrowings: | |||||||||||
Federal funds purchased and securities sold under agreements to repurchase | $ | 5,514 | $ | 23,829 | |||||||
Federal Home Loan Bank advances | 77,357 | 77,418 | |||||||||
Subordinated notes | 49,486 | 49,486 | |||||||||
Total | $ | 132,357 | $ | 150,733 |
55
from the discount window.
| | | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, | | December 31, | ||||||||||||||||||||
|
| 2021 | | 2020 | ||||||||||||||||||||
|
| | |
| | |
| Federal |
| | |
| | |
| | |
| Federal |
| | | ||
| | | |
| | |
| Funds | | | | | | |
| | |
| Funds | | | | ||
| | | | | Federal |
| Purchased | | | | | | | | Federal |
| Purchased | | | | ||||
(In thousands) | | FHLB | | Reserve Bank |
| Lines | | Total | | FHLB | | Reserve Bank |
| Lines | | Total | ||||||||
Advance equivalent | | $ | 281,044 | | $ | 10,388 | | $ | 60,000 | | $ | 351,432 | | $ | 300,633 | | $ | 8,898 | | $ | 56,835 | | $ | 366,366 |
Letters of credit | |
| (18,000) | |
| — | |
| — | |
| (18,000) | |
| (123,000) | |
| — | |
| — | |
| (123,000) |
Advances outstanding | |
| (97,599) | |
| — | |
| — | |
| (97,599) | |
| (106,660) | |
| — | |
| — | |
| (106,660) |
Total available | | $ | 165,445 | | $ | 10,388 | | $ | 60,000 | | $ | 235,833 | | $ | 70,973 | | $ | 8,898 | | $ | 56,835 | | $ | 136,706 |
March 31, 2022 | December 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||
(In thousands) | FHLB | Federal Reserve Bank | Federal Funds Purchased Lines | Total | FHLB | Federal Reserve Bank | Federal Funds Purchased Lines | Total | |||||||||||||||||||||||||||||||||||||||
Advance equivalent | $ | 278,761 | $ | 8,947 | $ | 60,000 | $ | 347,708 | $ | 273,479 | $ | 10,384 | $ | 60,000 | $ | 343,863 | |||||||||||||||||||||||||||||||
Letters of credit | — | — | — | — | (31,000) | — | — | (31,000) | |||||||||||||||||||||||||||||||||||||||
Advances outstanding | (77,357) | — | — | (77,357) | (77,418) | — | — | (77,418) | |||||||||||||||||||||||||||||||||||||||
Total available | $ | 201,404 | $ | 8,947 | $ | 60,000 | $ | 270,351 | $ | 165,061 | $ | 10,384 | $ | 60,000 | $ | 235,445 |
The Company also has available additional liquidity having pledged the PPP loans to the FHLB as collateral for available advances.
long-term.
2022.
prior year tax collections.
56
as of March 31, 2021.2022. Although the Company’s current liquidity resources are adequate to fund this commitment level, the nature of these commitments is such that the likelihood of such a funding demand is very low.
Subject to declaration by the Company's Board of Directors, the Company expects to continue paying quarterly cash dividends as a part of its current capital allocation strategy. Future dividends will be subject to the determination, declaration and discretion of the Company's Board of Directors and compliance with applicable regulatory capital requirements.
57
Under the Basel III requirements, at March 31, 20212022 and December 31, 2020,2021, the Company met all capital adequacy requirements and had regulatory capital ratios in excess of the levels established for well-capitalized institutions, as shown in the following table as of periods indicated:
| | | | | | | | | | | | | | | | |
| | | | | | | Minimum Capital | | Required to be | | ||||||
| | | | | | | Required - Basel III | | Considered Well- | | ||||||
|
| Actual | | Fully Phased-In | | Capitalized | | |||||||||
(in thousands) |
| Amount |
| Ratio |
| Amount |
| Ratio |
| Amount |
| Ratio | | |||
March 31, 2021 | | | | | | | | | | | | | | | | |
Total Capital (to risk-weighted assets): | | | | | | | | | | | | | | | | |
Company |
| $ | 196,553 | | 14.80 | % | $ | 139,475 | | 10.50 | % | $ | — | | N.A | % |
Bank | | | 193,745 | | 14.62 | | | 139,119 | | 10.50 | | | 132,495 | | 10.00 | |
Tier 1 Capital (to risk-weighted assets): | | | | | | | | | | | | | | | | |
Company |
| $ | 172,591 | | 13.21 | % | $ | 112,909 | | 8.50 | % | $ | — | | N.A | % |
Bank | | | 177,159 | | 13.37 | | | 112,620 | | 8.50 | | | 105,996 | | 8.00 | |
Common Equity Tier 1 Capital (to risk-weighted assets): | | | | | | | | | | | | | | | | |
Company |
| $ | 131,925 | | 9.93 | % | $ | 92,984 | | 7.00 | % | $ | — | | N.A | % |
Bank | | | 177,159 | | 13.37 | | | 92,746 | | 7.00 | | | 86,121 | | 6.50 | |
Tier 1 leverage ratio (to adjusted average assets): | | | | | | | | | | | | | | | | |
Company |
| $ | 175,494 | | 10.22 | % | $ | 68,654 | | 4.00 | % | $ | — | | N.A | % |
Bank | | | 177,159 | | 10.37 | | | 68,315 | | 4.00 | | | 85,394 | | 5.00 | |
| | | | | | | | | | | | | | | | |
December 31, 2020 | | | | | | | | | | | | | | | | |
Total Capital (to risk-weighted assets): | | | | | | | | | | | | | | | | |
Company |
| $ | 193,220 | | 14.97 | % | $ | 135,518 | | 10.50 | % | $ | — | | N.A | % |
Bank | | | 191,504 | | 14.87 | | | 135,186 | | 10.50 | | | 128,748 | | 10.00 | |
Tier 1 Capital (to risk-weighted assets): | | | | | | | | | | | | | | | | |
Company |
| $ | 172,591 | | 13.37 | % | $ | 109,705 | | 8.50 | % | $ | — | | N.A | % |
Bank | | | 175,384 | | 13.62 | | | 109,436 | | 8.50 | | | 102,999 | | 8.00 | |
Common Equity Tier 1 Capital (to risk-weighted assets) | | | | | | | | | | | | | | | | |
Company |
| $ | 129,061 | | 10.00 | % | $ | 90,345 | | 7.00 | % | $ | — | | N.A | % |
Bank | | | 175,384 | | 13.62 | | | 90,124 | | 7.00 | | | 83,686 | | 6.50 | |
Tier 1 leverage ratio: | | | | | | | | | | | | | | | | |
Company |
| $ | 172,591 | | 10.19 | % | $ | 67,724 | | 4.00 | % | $ | — | | N.A | % |
Bank | | | 175,384 | | 10.41 | | | 67,394 | | 4.00 | | | 84,243 | | 5.00 | |
Actual | Minimum Capital Required - Basel III Fully Phased-In | Required to be Considered Well- Capitalized | |||||||||||||||||||||||||||||||||
(Dollars in thousands) | Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||||||||||||||||||||||||
March 31, 2022 | |||||||||||||||||||||||||||||||||||
Total Capital (to risk-weighted assets): | |||||||||||||||||||||||||||||||||||
Company | $ | 213,114 | 14.66 | % | $ | 152,691 | 10.50 | % | $ | — | N.A% | ||||||||||||||||||||||||
Bank | 211,027 | 14.52 | % | 152,575 | 10.50 | % | 145,309 | 10.00 | % | ||||||||||||||||||||||||||
Tier 1 Capital (to risk-weighted assets): | |||||||||||||||||||||||||||||||||||
Company | $ | 195,471 | 13.44 | % | $ | 123,607 | 8.50 | % | $ | — | N.A% | ||||||||||||||||||||||||
Bank | 196,588 | 13.53 | % | 123,513 | 8.50 | % | 116,248 | 8.00 | % | ||||||||||||||||||||||||||
Common Equity Tier 1 Capital (to risk-weighted assets): | |||||||||||||||||||||||||||||||||||
Company | $ | 150,675 | 10.36 | % | $ | 101,794 | 7.00 | % | $ | — | N.A% | ||||||||||||||||||||||||
Bank | 196,588 | 13.53 | % | 101,717 | 7.00 | % | 94,451 | 6.50 | % | ||||||||||||||||||||||||||
Tier 1 leverage ratio (to adjusted average assets): | |||||||||||||||||||||||||||||||||||
Company | $ | 195,471 | 10.99 | % | $ | 71,122 | 4.00 | % | $ | — | N.A% | ||||||||||||||||||||||||
Bank | 196,588 | 11.12 | % | 70,747 | 4.00 | % | 88,434 | 5.00 | % | ||||||||||||||||||||||||||
December 31, 2021 | |||||||||||||||||||||||||||||||||||
Total Capital (to risk-weighted assets): | |||||||||||||||||||||||||||||||||||
Company | $ | 210,726 | 14.79 | % | $ | 149,640 | 10.50 | % | $ | — | N.A% | ||||||||||||||||||||||||
Bank | 210,148 | 14.78 | % | 149,339 | 10.50 | % | 142,228 | 10.00 | % | ||||||||||||||||||||||||||
Tier 1 Capital (to risk-weighted assets): | |||||||||||||||||||||||||||||||||||
Company | $ | 193,663 | 13.59 | % | $ | 121,137 | 8.50 | % | $ | — | N.A% | ||||||||||||||||||||||||
Bank | 193,085 | 13.58 | % | 120,894 | 8.50 | % | 113,782 | 8.00 | % | ||||||||||||||||||||||||||
Common Equity Tier 1 Capital (to risk-weighted assets): | |||||||||||||||||||||||||||||||||||
Company | $ | 145,663 | 10.22 | % | $ | 99,760 | 7.00 | % | $ | — | N.A% | ||||||||||||||||||||||||
Bank | 193,085 | 13.58 | % | 99,559 | 7.00 | % | 92,448 | 6.50 | % | ||||||||||||||||||||||||||
Tier 1 leverage ratio: | |||||||||||||||||||||||||||||||||||
Company | $ | 193,663 | 11.01 | % | $ | 70,342 | 4.00% | $ | — | N.A% | |||||||||||||||||||||||||
Bank | 193,085 | 11.04 | % | 69,959 | 4.00 | % | 87,449 | 5.00 | % |
58
conditions and rates. The Asset Liability CommitteeALCO also reviews the liquidity, capital, deposit mix, loan mix and investment positions of the Company.
| | | | | | | |
| | % Change in projected net interest income | |||||
Hypothetical shift in interest rates | | March 31, | | December 31, | | ||
(bps) |
| 2021 |
| 2020 | | ||
200 | | | (1.06) | % | | 0.73 | % |
100 | |
| (1.50) | % |
| 0.10 | % |
(100) | | | (2.73) | % | | (1.28) | % |
(200) | |
| (3.34) | % | | (1.81) | % |
2021.
% Change in projected net interest income | ||||||||||||||
Hypothetical shift in interest rates | March 31, | December 31, | ||||||||||||
(bps) | 2022 | 2021 | ||||||||||||
200 | 1.84% | 4.47% | ||||||||||||
100 | 0.96% | 1.80% | ||||||||||||
(100) | (2.16) | % | (3.12) | % | ||||||||||
(200) | (3.28) | % | (4.02) | % |
59
Item 4. Controls and Procedures
60
PART II - OTHER INFORMATION
|
|
Item 1. Legal Proceedings
The information required by this Item is set forth in Note 15 -Commitments and Contingencies, Pending Litigation, in our Company’s Notes to Consolidated Financial Statements (unaudited).
2021.
2022:
Period | (a) Total Number of Shares (or Units) Purchased | (b) Average Price Paid per Share (or Unit) | (c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs | (d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs * | ||||||||||||||||||||||
January 1-31, 2022 | — | $ | — | — | $ | 5,000,000 | ||||||||||||||||||||
February 1-28, 2022 | 14,062 | $ | 25.56 | 14,062 | $ | 4,640,575 | ||||||||||||||||||||
March 1-31, 2022 | 9,474 | $ | 26.04 | 9,474 | $ | 4,393,903 | ||||||||||||||||||||
Total | 23,536 | 23,536 | $ | 25.75 | 23,536 | $ | 4,393,903 |
| | | | | | | | | | |
|
| |
| | |
| |
| (d) Maximum Number (or | |
| | | | | | | (c) Total Number of | | Approximate Dollar | |
| | | | | | | Shares (or Units) | | Value) of Shares (or | |
| | (a) Total Number of | | (b) Average Price | | Purchased as Part of | | Units) that May Yet Be | ||
| | Shares (or Units) | | Paid per Share (or | | Publicly Announced Plans | | Purchased Under the | ||
Period | | Purchased | | Unit) | | or Programs | | Plans or Programs * | ||
| | | | | | | | | | |
January 1-31, 2021 |
| 116,490 | | $ | 18.25 |
| 116,490 | | $ | 1,966,362 |
February 1-28, 2021 |
| 1,142 | | $ | 18.76 |
| 1,142 | | $ | 1,944,942 |
March 1-31, 2021 |
| — | | $ | — |
| — | | $ | 1,944,942 |
Total |
| 117,632 | | $ | 18.26 |
| 117,632 | | $ | 1,944,942 |
* InThe Company's 2019 Repurchase Plan was amended during the Company's Board of Directors authorizedsecond quarter 2021 to authorize the purchase of up to an additional $5.0 million in market value of the Company's common stock. Management was given discretion to determine the number and pricing of the shares to be purchased, as well as the timing of any such purchases. As of March 31, 2021, $1.92022, $4.4 million remained available for the repurchase of sharesshare repurchases pursuant to the share repurchasethat authorization.
|
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| |||
|
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| |||
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61
None.
|
|
| ||||||
Exhibit No. | Description | |||||||
3.1 |
| |||||||
3.2 |
| |||||||
4.1 |
| |||||||
31.1 |
| |||||||
31.2 |
| |||||||
32.1 |
| |||||||
32.2 |
| |||||||
101.INS |
| Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document). | ||||||
101.SCH |
| Inline XBRL Taxonomy Extension Schema Document. | ||||||
101.CAL |
| Inline XBRL Taxonomy Extension Calculation Linkbase Document. | ||||||
101.DEF |
| Inline XBRL Taxonomy Extension Definition Linkbase Document. | ||||||
101.LAB |
| Inline XBRL Taxonomy Extension Label Linkbase Document. | ||||||
101.PRE |
| Inline XBRL Taxonomy Extension Presentation Linkbase Document. | ||||||
104 |
| Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). |
62
SIGNATURES
|
| ||||
HAWTHORN BANCSHARES, INC. | |||||
Date | |||||
/s/ David T. Turner | |||||
May 10, | David T. Turner, Chairman of the Board, President and | ||||
Chief Executive Officer (Principal Executive Officer) | |||||
/s/ Stephen E. Guthrie | |||||
May 10, | Stephen E. Guthrie, Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) | ||||
63