Hawthorn Bancshares (HWBK) reported higher earnings in the second quarter after exiting the Troubled Asset Relief Program.

The Jefferson City, Mo., company had a profit of $1.5 million, or 30 cents a share. It reported earnings of $48,000, or one cent per share, during the same period last year.

The $1.2 billion-asset company's higher profits were largely driven by a 29% increase in noninterest income. It rose to $3.1 million, thanks to increases in the fair value of mortgage servicing rights, growing refinancing activity, and gains from the sale of investment securities.

Noninterest expenses fell 8% to $9.3 million, reflecting a decrease in processing expenses and real estate sold at a gain.

Hawthorn's second quarter included expenses from completing its Tarp exit. In May, Hawthorn redeemed $18.3 million worth of preferred shares and accrued dividends that it had issued to the Treasury Department in December 2008. It finished repaying Tarp funds in June with a $540,000 payment to repurchase the warrant it issued to the Treasury Department. Hawthorn borrowed a total of $30.2 million in December 2008.

Lower loan balances and sinking interest rates caused net interest income to fall 3.5% to $9.8 million. The net interest margin fell by 11 basis points to 3.66%.

Loan-loss provisions fell by a third to $1 million, while charge-offs declined 75% to $0.2 million.

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