Hawthorn Bancshares, Inc. — 2011 Form 10-K
Reporting period: Fiscal year ended December 31, 2011. The filing was signed March 30, 2012. Hawthorn is a Missouri bank holding company whose principal subsidiary, Hawthorn Bank, operates 24 banking offices and provides commercial, consumer, real estate, deposit, trust and related services.
Financial position and performance
- Capital: At year-end, Hawthorn reported a 11.52% leverage ratio, 15.16% Tier 1 risk-based capital ratio and 18.03% total risk-based capital ratio; it stated that it complied with holding-company capital guidelines.
- Bank capital: Hawthorn Bank was classified as well-capitalized, with a 10.45% leverage ratio, 13.74% Tier 1 risk-based capital ratio and 15.00% total risk-based capital ratio.
- Earnings, revenue, margins, cash flow, debt and liquidity: The supplied filing text incorporates the financial statements and management’s discussion from the 2011 Annual Report but does not include their figures. Clear values and comparable-period changes for these measures are therefore not available here.
- Interest-rate sensitivity: Year-end shock models estimated that annual net interest income could change by approximately negative 25.4% to positive 36.0% under interest-rate movements of up to 400 basis points over one year. The company cautioned that actual results could differ.
Changes and notable matters
- The filing identifies continued weak economic and real estate conditions through the first quarter of 2012 as a concern, but the supplied text does not provide year-over-year financial results to quantify their effects.
- Hawthorn continued to participate in the U.S. Treasury’s Capital Purchase Program, entered in December 2008. Restrictions include limits on common-stock dividends and repurchases, particularly when preferred dividends are in arrears.
- No shares were repurchased in the fourth quarter of 2011; $333,038 remained under the previously authorized repurchase program, subject to applicable restrictions.
- Chief Financial Officer Richard Rose retired from that role in January 2012; W. Bruce Phelps became CFO. The filing reports effective disclosure controls and internal control over financial reporting, and KPMG issued an unqualified opinion on the financial statements and an unqualified opinion on internal control.
Outlook, risks and contingencies
The filing gives no specific earnings or financial guidance. Management said the difficult market and economic conditions were not expected to improve in the near future. Key risks include deterioration in Missouri economic and property conditions; borrower defaults, foreclosures and declining collateral values; higher loan-loss provisions; interest-rate changes; competition for loans and deposits; and regulatory changes, including implementation of the Dodd-Frank Act. Hawthorn also cited potential additional deposit-insurance costs, dependence on access to capital, and risks involving counterparties and financial-market liquidity. Legal proceedings are referenced in the incorporated financial-statement note; the supplied text does not describe their nature or amounts.
Important facts for investors to verify
- Review the incorporated 2011 Annual Report for revenue, net income, net interest margin, cash flows, balance-sheet trends and 2010/2009 comparisons.
- Verify loan quality and allowance measures, including nonperforming assets, delinquencies, charge-offs, foreclosed property and concentrations by loan type or geography.
- Review liquidity, deposits, borrowings, securities exposure and the assumptions underlying the interest-rate sensitivity estimates.
- Confirm Treasury preferred-stock terms, dividend status, repayment plans and resulting limits on common dividends and repurchases.
- Review the incorporated commitments-and-contingencies note for the details and potential effects of legal matters and other obligations.