Hawthorn Bancshares reported consolidated financial results for the first quarter ended March 31, 2015. Net income was $2.1 million, or $0.41 per diluted share.
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This compares to $2 million, or $0.38 per diluted share, for the linked quarter ended December 31, 2014 and $2 million, or $0.38 per diluted share, for the first quarter ended March 31, 2014.
The year-to-date annualized return on average common equity was 10.60% and the annualized return on average assets was 0.73% for the current quarter compared with 9.71% and 0.69%, respectively, for the prior linked quarter and 10.67% and 0.70%, respectively, for the prior year quarter.
Net interest income for the quarter ended March 31, 2015 of $10 million was unchanged from the linked quarter ended December 31, 2014 and $0.3 million ahead of the same quarter in 2014.
Average loans were relatively unchanged from the linked December 2014 quarter and $15.1 million, or 1.8%, ahead of the prior year quarter which contributed to the continued strong net interest margin for the current quarter of 3.71% versus 3.72% for the March 2014 quarter.
Non-interest income for the three months ended March 31, 2015 was $2.0 million compared to $2.2 million for the December 2014 quarter and $2.1 million for the same period in 2014. The variances from the linked quarter and prior year quarter were mostly due to moderate decreases in combined real estate servicing income and mortgage loan sales.
Non-interest expense was $8.7 million for the quarter ended March 31, 2015 compared to $9.1 million for the linked December 2014 quarter and $8.7 million for the prior year quarter. The decrease from the linked quarter was primarily due to a $0.4 million decrease in real estate foreclosure gains and expense.
Compared to the prior year quarter, salaries and benefits were $0.3 million higher while real estate foreclosure gains and expense decreased $0.3 million due to lower losses recognized on foreclosed assets during the current year.
The company's level of non-performing loans was 3.38% of total loans at March 31, 2015, compared to 4.18% at December 31, 2014 and 4.29% at March 31, 2014. During the quarter ended March 31, 2015, the company recognized net recoveries of $0.7 million compared to $2.9 million of net charge offs for the fourth quarter of 2014 and $0.9 million of net charge-offs for the first quarter of 2014.
Included in the net recoveries for the current quarter was a $0.5 million recovery of one loan previously charged off. The increase in charge offs during the fourth quarter 2014 included $2.7 million of charge offs related to six impaired loan relationships with specific reserves that management determined to be uncollectable.
The company did not record a loan loss provision during the current quarter, the prior linked quarter or the prior year quarter. The allowance for loan losses at March 31, 2015 was $9.8 million, or 1.13% of outstanding loans and 33.48% of non-performing loans. At December 31, 2014, the allowance for loan losses was $9.1 million, or 1.06% of outstanding loans and 25.26% of non-performing loans.
The increase in the allowance for loan losses coverage of non-performing loans was primarily due to a $6.4 million troubled debt restructure loan relationship that was moved to performing loans during the current quarter due to subsequent restructuring at market rates and terms followed by satisfactory payment performance.
The allowance for loan losses represents management's best estimate of probable losses contained in the loan portfolio and is commensurate with risks in the loan portfolio as of March 31, 2015.
Comparing March 31, 2015 balances with December 31, 2014, total assets increased $27.8 million to $1.2 billion. The largest driver in asset growth was investment securities increasing $35.9 million followed by loans increasing $2.0 million to $863.2 million. Total deposits increased $23.6 million to $993.1 million primarily due to seasonal increases in public fund deposits.
During the same period, stockholders' equity increased to $83.0 million or 6.93% of total assets. The total risk based capital ratio of 15.49% and the leverage ratio of 9.24% at March 31, 2015, respectively, far exceed minimum regulatory requirements of 8.00% and 4.00%, respectively. ■