Hawthorn Bancshares, Inc. — 2021 Form 10-K
Business context and reporting period. The filing covers the fiscal year ended December 31, 2021. Hawthorn is a Missouri bank holding company whose principal subsidiary, Hawthorn Bank, operates 23 banking offices and provides commercial, consumer, mortgage, trust and deposit services, primarily in central and west-central Missouri.
Financial position and performance
The supplied filing text incorporates the consolidated financial statements and management’s discussion from the 2021 Annual Report but does not include their detailed figures. Accordingly, it does not provide clear values here for revenue, net income, cash flow, net interest margin, loan or deposit balances, nonperforming assets, allowance for credit losses, debt, or liquidity.
- Regulatory capital at December 31, 2021: Hawthorn Bancshares reported a 11.01% Tier 1 leverage ratio, 10.22% common equity Tier 1 risk-based ratio, 13.59% Tier 1 risk-based ratio, and 14.79% total risk-based capital ratio. The Bank reported 11.04%, 13.58%, 13.58%, and 14.78%, respectively, and was classified as well-capitalized.
- Interest-rate sensitivity: Management’s models estimated annual net interest income could change by +4.47% if rates rose 200 basis points or −4.02% if rates fell 200 basis points over one year. Management described this exposure as within board limits; actual results may differ.
- LIBOR exposure: $12.6 million of loans were tied to LIBOR at year-end.
- Share repurchases: No company or affiliate purchases occurred in the fourth quarter. The board had reauthorized up to $5.0 million of repurchases, with the full $5.0 million remaining available at year-end.
Changes, outlook and risks
The filing text does not provide clear year-over-year income, margin, cash-flow, or balance-sheet comparisons. It notes that growth during the pandemic was supported in part by government programs, including the SBA Paycheck Protection Program, which may not continue. No specific earnings or financial guidance is provided.
- Management identified interest-rate changes, local economic conditions, credit quality, real-estate values, competition, and the effects of COVID-19 as factors that could affect performance. Possible outcomes include weaker loan demand, delayed or missed payments, lower collateral values, and higher credit-loss provisions.
- The Bank was informed that certain loans and participation interests held by HB Realty would no longer qualify as Federal Home Loan Bank collateral. A five-year run-off applies to affected collateral pledged as of September 30, 2020; the Bank was evaluating alternatives to preserve related borrowing capacity.
- The Company was preparing for CECL adoption in January 2023. Management said the effect on its financial statements was not yet known and that the allowance could increase at adoption.
- The filing discusses the LIBOR transition, including potential implementation costs, valuation effects, and customer disputes if substitute indices are not successfully implemented.
- Management and the auditor concluded internal control over financial reporting was effective as of December 31, 2021. KPMG issued an unqualified opinion on the consolidated financial statements and an unqualified opinion on internal control.
Important facts for investors to verify
- Review the incorporated 2021 Annual Report for actual revenue, earnings, margins, cash flows, asset quality, liquidity, and year-over-year comparisons; the supplied text does not state those values.
- Assess the status and potential effect of the FHLB collateral run-off and any alternative borrowing capacity.
- Review the estimated CECL transition impact and the Bank’s credit quality and allowance trends.
- Track the LIBOR-linked loan transition and the sensitivity of net interest income to rate changes.
- Check Note 19, incorporated by reference, for the details of commitments and contingencies; those details are not included in the supplied text.