Hawthorn Bancshares, Inc. (Form: 8-K)

Jefferson City, Mo. — August 14, 2013 — Hawthorn Bancshares Inc. (NASDAQ: HWBK), today reported consolidated financial results for the Company for the second quarter ended June 30, 2013.

Net income for the quarter was $1.8 million, compared to $0.7 million for the second quarter of 2012. The Company earned $0.30 per diluted common share for the three months ended June 30, 2013, versus $0.01 for the second quarter of 2012 after deducting accrued dividends and normal and accelerated discount accretion totaling $0.3 million for the three months ended June 30, 2013, and $0.7 million for the three months ended June 30, 2012, respectively, on preferred stock issued to the U.S. Treasury under the Capital Purchase Program.

For the quarter, the annualized return on average common equity was 8.13% and the annualized return on average assets was 0.62% compared with 0.26% and 0.25%, respectively, for the same period in 2012.

On a year to date basis, the Company generated net income of $1.7 million, compared to $2.2 million for 2012. After deducting accrued dividends and accretion on preferred stock issued to the U.S. Treasury, income available to common shareholders was $1.1 million for 2013 compared to $1.0 million for 2012. On a diluted earnings per common share basis, the Company generated $0.21 for the six months ended June 30, 2013 compared to $0.20 per common share for the same period in 2012.

Net Interest Income
Net interest income for the quarter ended June 30, 2013 decreased 3.5% to $9.8 million from $10.2 million for the same period in 2012. The decrease is largely attributed to a 3.66% net interest margin compared to 3.77% for the same three month period in 2012. With lower average loan balances and lower average rates, loan interest income decreased which resulted in a lower net interest margin for the quarter ending June 30, 2013.

Non-Interest Income and Expense
Non-interest income for the three months ended June 30, 2013 was $3.1 million compared to $2.4 million for the same period in 2012. The increase is primarily due to favorable fair value adjustments of mortgage servicing rights, higher gain on sale of mortgage loans driven by increased residential real estate refinancing activity and gains realized on the sale of investment securities. Investment security gains were the result of selling numerous older small holdings and purchasing a few large current issues without significantly changing the size or duration of the bond portfolio. Non-interest expense for the three months ended June 30, 2013 was $9.3 million compared to $10.1 million for second quarter 2012. The positive variance is largely attributed to selling other real estate owned at a gain representing a partial recovery and a decrease in processing expenses compared to the prior year quarter.

Allowance for Loan Losses
The Company’s level of non-performing loans was 4.63% of total loans at June 30, 2013, down from 4.65% at year-end 2012. During the quarter ended June 30, 2013, the Company recognized net charge-offs of $0.2 million compared to $0.8 million for the second quarter of 2012. The Company provided $1.0 million to the allowance for loan losses for the second quarter of 2013, compared to $1.5 million for the second quarter of 2012. The allowance for loan losses at June 30, 2013 was $15.4 million, or 1.83% of outstanding loans and 39.5% of non-performing loans as of June 30, 2013. At December 31, 2012, the allowance for loan losses was $14.8 million, or 1.75% of outstanding loans and 37.7% of non-performing loans. The allowance for loan losses represents management’s best estimate of probable losses contained in the loan portfolio as of June 30, 2013.

Financial Condition
Comparing June 30, 2013 balances with December 31, 2012, total assets remained relatively unchanged at $1.2 billion. Continued soft loan demand resulted in loans, net of allowance for loan losses, declining 1.0% to $823.6 million. With low loan demand, the Company’s next highest yielding asset category, investment securities, increased 10.2% to $220.7 million. Cash and due from banks decreased 39.4% to $35.7 million. Total deposits decreased 0.5% to $986.0 million. During the same period, stockholders’ equity decreased 23.5% to $70.6 million or 6.1% of total assets. The decrease in stockholders’ equity for the period is due to the Company’s election to repay the remaining balance of its TARP obligation which was $18.3 million. The total risk based capital ratio of 14.89% and the leverage ratio of 8.18% at June 30, 2013, respectively, far exceed minimum regulatory requirements of 8.00% and 3.00%, respectively.


Balance sheet information:			June 30, 2013		December 31, 2012

	Loans, net of allowance for loan losses		$	823,632	$	832,142
	Investment securities			220,655		200,246
	Total assets			1,165,536		1,181,606
	Deposits			985,992		991,275
	Total stockholders’ equity			70,596		92,220
			Three Months		Three Months
Statement of income information:			Ended June 30, 2013		Ended June 30, 2012

	Total interest income		$	11,592	$	12,297
	Total interest expense			1,777		2,125

	Net interest income			9,815		10,172
	Provision for loan losses			1,000		1,500
	Noninterest income			3,088		2,443
	Noninterest expense			9,281		10,098

	Pre-tax income			2,622		1,017
	Income taxes			810		277

	Net income			1,812		740
	Dividends & accretion on preferred stock issued to U.S. Treasury			320		692

	Net income available to common shareholders		$	1,492	$	48

	Earnings Per Common Share:
		Basic:	$	0.30	$	0.01
		Diluted:	$	0.30	$	0.01
			Six Months		Six Months
Statement of income information:			Ended June 30, 2013		Ended June 30, 2012

	Total interest income		$	23,137	$	24,943
	Total interest expense			3,593		3,956

	Net interest income			19,544		20,987
	Provision for loan losses			2,000		3,200
	Noninterest income			6,096		4,413
	Noninterest expense			21,216		19,578

	Pre-tax income			2,424		2,622
	Income taxes			748		431

	Net income			1,676		2,191
	Dividends & accretion on preferred stock issued to U.S. Treasury			615		1,181

	Net income available to common shareholders		$	1,061	$	1,010

	Earnings Per Common Share:
		Basic:	$	0.21	$	0.20
		Diluted:	$	0.21	$	0.20


Key financial ratios:		June 30, 2013			June 30, 2012

	Return on average assets (YTD)		0.29	%		0.37	%
	Return on average common equity (YTD)		2.88	%		2.73	%
		June 30, 2013			December 31, 2012

	Allowance for loan losses to total loans		1.83	%		1.75	%
	Nonperforming loans to total loans		4.63	%		4.65	%
	Nonperforming assets to loans and foreclosed assets		6.63	%		7.23	%
	Allowance for loan losses to nonperforming loans		39.53	%		37.70	%

Hawthorn Bancshares, Inc., a financial-bank holding company headquartered in Jefferson City, Missouri, is the parent company of Hawthorn Bank of Jefferson City with locations in the Missouri communities of Lee’s Summit, Liberty, Springfield, Branson, Independence, Raymore, Columbia, Clinton, Windsor, Collins, Osceola, Warsaw, Belton, Drexel, Harrisonville, California and St. Robert.

Statements made in this press release that suggest Hawthorn Bancshares’ or management’s intentions, hopes, beliefs, expectations, or predictions of the future include “forward-looking statements” within the meaning of Section 21E of the Securities and Exchange Act of 1934, as amended. It is important to note that actual results could differ materially from those projected in such forward-looking statements. Additional information concerning factors that could cause actual results to differ materially from those projected in such forward-looking statements is contained from time to time in the company’s quarterly and annual reports filed with the Securities and Exchange Commission.


Missouri	0-23636	431626350
_____________________ (State or other jurisdiction	_____________ (Commission	______________ (I.R.S. Employer
of incorporation)	File Number)	Identification No.)

132 East High Street, Box 688, Jefferson City , Missouri		65102
_________________________________ (Address of principal executive offices)		___________ (Zip Code)


	Hawthorn Bancshares, Inc.

August 14, 2013	By:	David T. Turner

		Name: David T. Turner
		Title: Chairman, CEO & President


Exhibit No.		Description

99.1		Hawthorn Bancshares Announces Second Quarter Earnings


Date of Report (Date of Earliest Event Reported):		August 14, 2013


Registrant’s telephone number, including area code:		573.761.6179


Contact:		Kathleen Bruegenhemke Senior Vice President, Investor Relations TEL: 573.761.6100 FAX: 573.761.6272 www.HawthornBancshares.com