Company Quick10K Filing
Quick10K
Hawthorn Bancshares
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$24.01 6 $145
10-Q 2019-06-30 Quarter: 2019-06-30
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-08-07 Other Events, Exhibits
8-K 2019-07-30 Earnings, Exhibits
8-K 2019-07-02 Other Events, Exhibits
8-K 2019-06-04 Shareholder Vote, Exhibits
8-K 2019-05-09 Earnings, Exhibits
8-K 2019-04-30 Earnings, Exhibits
8-K 2019-02-08 Other Events, Exhibits
8-K 2019-01-30 Earnings, Exhibits
8-K 2019-01-30 Other Events, Exhibits
8-K 2018-11-07 Officers, Exhibits
8-K 2018-10-30 Earnings, Exhibits
8-K 2018-10-17 Enter Agreement, Exhibits
8-K 2018-08-08 Other Events
8-K 2018-07-30 Earnings, Exhibits
8-K 2018-06-05 Shareholder Vote, Exhibits
8-K 2018-05-10 Other Events, Exhibits
8-K 2018-04-26 Earnings, Exhibits
8-K 2018-02-01 Earnings, Exhibits
8-K 2018-01-23 Other Events
APU Amerigas Partners 3,270
PPBI Pacific Premier Bancorp 1,920
MIK Michaels Companies 1,890
TCDA Tricida 1,740
QIWI Qiwi 828
CYAD Celyad 242
MPO Midstates Petroleum Company 213
NAK Northern Dynasty Minerals 146
MRBK Meridian 114
REBL Rebel Group 0
HWBK 2019-06-30
Part I – Financial Information
Item 1. Financial Statements
Item 2 - Management’S Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
EX-31.1 hwbk-20190630ex311ecfe46.htm
EX-31.2 hwbk-20190630ex312c90837.htm
EX-32.1 hwbk-20190630ex321b92cb6.htm
EX-32.2 hwbk-20190630ex322f65405.htm

Hawthorn Bancshares Earnings 2019-06-30

HWBK 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 hwbk-20190630x10q.htm 10-Q hwbk_Current_Folio_10Q

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

   Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2019

OR

   Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from ______________ to ______________

Commission file number: 0‑23636

HAWTHORN BANCSHARES, INC.

(Exact name of registrant as specified in its charter)

 

Missouri

43‑1626350

(State or other jurisdiction of

(I.R.S. Employer Identification No.)

incorporation or organization)

 

 

132 East High Street, Box 688, Jefferson City, Missouri 65102

(Address of principal executive offices) (Zip Code)

(573) 761‑6100

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report.)

Securities registered pursuant to Section 12(b) of the Act:

 

 

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $1.00 par value

HWBK

The Nasdaq Stock Market LLC

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ◻ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ◻ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a  smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b‑2 of the Exchange Act.

 

 

 

 

Large accelerated filer ◻

Accelerated filer ☒

Non-accelerated filer ◻

 

 

 

Smaller reporting company ☒

Emerging growth company ◻

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Exchange Act). ◻ Yes ☒ No

As of August 8, 2019, the registrant had 6,276,236 shares of common stock, par value $1.00 per share, outstanding.

 

 

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

HAWTHORN BANCSHARES, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

 

 

 

 

 

 

 

 

(In thousands, except per share data)

 

June 30, 

 

December 31, 

 

    

2019

    

2018

 

    

(Unaudited)

    

 

ASSETS

 

 

 

 

 

 

Cash and due from banks

 

$

22,230

 

$

23,687

Federal funds sold and other interest-bearing deposits

 

 

6,636

 

 

18,396

Cash and cash equivalents

 

 

28,866

 

 

42,083

Certificates of deposit in other banks

 

 

12,745

 

 

12,247

Available-for-sale debt securities, at fair value

 

 

213,181

 

 

218,205

Other investments

 

 

5,333

 

 

5,675

Total investment securities

 

 

218,514

 

 

223,880

Loans

 

 

1,156,943

 

 

1,146,627

Allowances for loan losses

 

 

(11,883)

 

 

(11,652)

Net loans

 

 

1,145,060

 

 

1,134,975

Premises and equipment - net

 

 

35,573

 

 

34,894

Mortgage servicing rights

 

 

2,657

 

 

2,931

Other real estate owned - net

 

 

13,110

 

 

13,691

Accrued interest receivable

 

 

6,146

 

 

6,162

Cash surrender value - life insurance

 

 

2,579

 

 

2,542

Other assets

 

 

5,664

 

 

8,277

Total assets

 

$

1,470,914

 

$

1,481,682

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

Deposits

 

 

 

 

 

 

Non-interest bearing demand

 

$

261,868

 

$

262,857

Savings, interest checking and money market

 

 

596,237

 

 

614,040

Time deposits $250,000 and over

 

 

113,855

 

 

104,900

Other time deposits

 

 

214,149

 

 

216,671

Total deposits

 

 

1,186,109

 

 

1,198,468

Federal funds purchased and securities sold under agreements to repurchase

 

 

25,334

 

 

24,647

Federal Home Loan Bank advances and other borrowings

 

 

85,038

 

 

95,153

Subordinated notes

 

 

49,486

 

 

49,486

Operating lease liabilities

 

 

2,345

 

 

 —

Accrued interest payable

 

 

1,306

 

 

1,035

Other liabilities

 

 

11,916

 

 

13,479

Total liabilities

 

 

1,361,534

 

 

1,382,268

Stockholders’ equity:

 

 

 

 

 

 

Common stock, $1 par value, authorized 15,000,000 shares; issued 6,278,481 shares, respectively

 

 

6,279

 

 

6,279

Surplus

 

 

55,969

 

 

50,173

Retained earnings

 

 

55,167

 

 

54,105

Accumulated other comprehensive loss, net of tax

 

 

(2,991)

 

 

(6,099)

Treasury stock; 243,638 shares, at cost, respectively

 

 

(5,044)

 

 

(5,044)

Total stockholders’ equity

 

 

109,380

 

 

99,414

Total liabilities and stockholders’ equity

 

$

1,470,914

 

$

1,481,682

 

See accompanying notes to the consolidated financial statements (unaudited).

2

HAWTHORN BANCSHARES, INC. AND SUBSIDIARIES

Consolidated Statements of Income (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

June 30, 

 

June 30, 

 

(In thousands, except per share amounts)

    

2019

    

2018

    

2019

    

2018

 

INTEREST INCOME

 

 

  

 

 

  

 

 

  

 

 

  

 

Interest and fees on loans

 

$

14,750

 

$

12,853

 

$

28,856

 

$

25,077

 

Interest on investment securities:

 

 

  

 

 

  

 

 

  

 

 

  

 

Taxable

 

 

1,025

 

 

1,046

 

 

2,026

 

 

2,052

 

Nontaxable

 

 

148

 

 

147

 

 

289

 

 

305

 

Federal funds sold, other interest-bearing deposits, and certificates of deposit in other banks

 

 

193

 

 

189

 

 

795

 

 

295

 

Dividends on other investments

 

 

68

 

 

53

 

 

133

 

 

103

 

Total interest income

 

 

16,184

 

 

14,288

 

 

32,099

 

 

27,832

 

INTEREST EXPENSE

 

 

  

 

 

  

 

 

  

 

 

  

 

Interest on deposits:

 

 

  

 

 

  

 

 

  

 

 

  

 

Savings, interest checking and money market

 

 

1,454

 

 

1,347

 

 

3,170

 

 

2,431

 

Time deposit accounts $250,000 and over

 

 

621

 

 

296

 

 

1,286

 

 

434

 

Time deposits

 

 

761

 

 

536

 

 

1,468

 

 

1,046

 

Total interest expense on deposits

 

 

2,836

 

 

2,179

 

 

5,924

 

 

3,911

 

Interest on federal funds purchased and securities sold under agreements to repurchase

 

 

44

 

 

189

 

 

76

 

 

360

 

Interest on Federal Home Loan Bank advances

 

 

538

 

 

332

 

 

1,080

 

 

728

 

Interest on subordinated notes

 

 

609

 

 

561

 

 

1,233

 

 

1,051

 

Total interest expense on borrowings

 

 

1,191

 

 

1,082

 

 

2,389

 

 

2,139

 

Total interest expense

 

 

4,027

 

 

3,261

 

 

8,313

 

 

6,050

 

Net interest income

 

 

12,157

 

 

11,027

 

 

23,786

 

 

21,782

 

Provision for loan losses

 

 

250

 

 

450

 

 

400

 

 

750

 

Net interest income after provision for loan losses

 

 

11,907

 

 

10,577

 

 

23,386

 

 

21,032

 

NON-INTEREST INCOME

 

 

  

 

 

  

 

 

  

 

 

  

 

Service charges and other fees

 

 

885

 

 

941

 

 

1,747

 

 

1,817

 

Bank card income and fees

 

 

793

 

 

709

 

 

1,488

 

 

1,365

 

Trust department income

 

 

296

 

 

311

 

 

589

 

 

592

 

Real estate servicing fees, net

 

 

(82)

 

 

161

 

 

 2

 

 

381

 

Gain on sale of mortgage loans, net

 

 

179

 

 

242

 

 

284

 

 

387

 

Other

 

 

50

 

 

26

 

 

102

 

 

62

 

Total non-interest income

 

 

2,121

 

 

2,390

 

 

4,212

 

 

4,604

 

Investment securities gain, net

 

 

 —

 

 

108

 

 

 1

 

 

206

 

Gain on branch sale, net

 

 

 —

 

 

 —

 

 

2,074

 

 

 —

 

NON-INTEREST EXPENSE

 

 

  

 

 

  

 

 

  

 

 

  

 

Salaries and employee benefits

 

 

5,416

 

 

5,813

 

 

10,854

 

 

11,870

 

Occupancy expense, net

 

 

741

 

 

725

 

 

1,440

 

 

1,413

 

Furniture and equipment expense

 

 

686

 

 

685

 

 

1,495

 

 

1,320

 

Processing, network, and bank card expense

 

 

973

 

 

889

 

 

1,973

 

 

1,747

 

Legal, examination, and professional fees

 

 

304

 

 

201

 

 

632

 

 

624

 

Advertising and promotion

 

 

282

 

 

291

 

 

541

 

 

544

 

Postage, printing, and supplies

 

 

259

 

 

224

 

 

469

 

 

492

 

Other

 

 

1,010

 

 

1,115

 

 

2,155

 

 

2,199

 

Total non-interest expense

 

 

9,671

 

 

9,943

 

 

19,559

 

 

20,209

 

Income before income taxes

 

 

4,357

 

 

3,132

 

 

10,114

 

 

5,633

 

Income tax expense

 

 

837

 

 

225

 

 

1,928

 

 

636

 

Net income

 

 

3,520

 

 

2,907

 

$

8,186

 

$

4,997

 

Basic earnings per share

 

$

0.56

 

$

0.46

 

$

1.30

 

$

0.80

 

Diluted earnings per share

 

$

0.56

 

$

0.46

 

$

1.30

 

$

0.80

 

 

See accompanying notes to the consolidated financial statements (unaudited).

3

HAWTHORN BANCSHARES, INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

June 30, 

 

June 30, 

 

(In thousands)

    

2019

    

2018

    

2019

    

2018

 

Net income

 

$

3,520

 

$

2,907

 

$

8,186

 

$

4,997

 

Other comprehensive income, net of tax

 

 

  

 

 

  

 

 

  

 

 

  

 

Investment securities available-for-sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain (loss) on investment securities available-for-sale, net of tax

 

 

1,699

 

 

(442)

 

 

3,077

 

 

(2,157)

 

Adjustment for gain on sale of investment securities, net of tax

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

Defined benefit pension plans:

 

 

  

 

 

  

 

 

  

 

 

  

 

Amortization of prior service cost included in net periodic pension cost, net of tax

 

 

16

 

 

43

 

 

31

 

 

85

 

Total other comprehensive income (loss)

 

 

1,715

 

 

(399)

 

 

3,108

 

 

(2,072)

 

Total comprehensive income

 

$

5,235

 

$

2,508

 

$

11,294

 

$

2,925

 

 

See accompanying notes to the consolidated financial statements (unaudited).

4

HAWTHORN BANCSHARES, INC. AND SUBSIDIARIES

Consolidated Statements of Stockholders’ Equity (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

    

 

 

    

 

 

    

Accumulated

    

 

 

    

Total

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

Stock -

 

 

Common

 

 

 

 

Retained

 

Comprehensive

 

Treasury

 

holders'

(In thousands)

 

Stock

 

Surplus

 

Earnings

 

Loss

 

Stock

 

Equity

Balance, March 31, 2018

 

$

6,047

 

$

45,442

 

$

52,280

 

$

(7,335)

 

$

(5,163)

 

$

91,271

Net income

 

 

 —

 

 

 —

 

 

2,907

 

 

 —

 

 

 —

 

 

2,907

Other comprehensive loss

 

 

 —

 

 

 —

 

 

 —

 

 

(399)

 

 

 —

 

 

(399)

Purchase of treasury stock

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(67)

 

 

(67)

Stock dividend

 

 

 —

 

 

5,014

 

 

(5,014)

 

 

 —

 

 

 —

 

 

 —

Cash dividends declared, common stock

 

 

 —

 

 

 —

 

 

(579)

 

 

 —

 

 

 —

 

 

(579)

Balance, June 30, 2018

 

$

6,047

 

$

50,456

 

$

49,594

 

$

(7,734)

 

$

(5,230)

 

$

93,133

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2017

 

$

6,047

 

$

45,442

 

$

50,595

 

$

(5,662)

 

$

(5,051)

 

$

91,371

Net income

 

 

 —

 

 

 —

 

 

4,997

 

 

 —

 

 

 —

 

 

4,997

Other comprehensive income

 

 

 —

 

 

 —

 

 

 —

 

 

(2,072)

 

 

 —

 

 

(2,072)

Purchase of treasury stock

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(179)

 

 

(179)

Stock dividend

 

 

 —

 

 

5,014

 

 

(5,014)

 

 

 —

 

 

 —

 

 

 —

Cash dividends declared, common stock

 

 

 —

 

 

 —

 

 

(984)

 

 

 —

 

 

 —

 

 

(984)

Balance, June 30, 2018

 

$

6,047

 

$

50,456

 

$

49,594

 

$

(7,734)

 

$

(5,230)

 

$

93,133

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

    

 

 

    

 

 

    

Accumulated

    

 

 

    

Total

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

Stock -

 

 

Common

 

 

 

 

Retained

 

Comprehensive

 

Treasury

 

holders'

(In thousands)

 

Stock

 

Surplus

 

Earnings

 

Loss

 

Stock

 

Equity

Balance, March 31, 2019

 

$

6,279

 

$

50,173

 

$

58,168

 

$

(4,706)

 

$

(5,044)

 

$

104,870

Net income

 

 

 —

 

 

 —

 

 

3,520

 

 

 —

 

 

 —

 

 

3,520

Other comprehensive income

 

 

 —

 

 

 —

 

 

 —

 

 

1,715

 

 

 —

 

 

1,715

Stock dividend

 

 

 —

 

 

5,796

 

 

(5,796)

 

 

 —

 

 

 —

 

 

 —

Cash dividends declared, common stock

 

 

 —

 

 

 —

 

 

(725)

 

 

 —

 

 

 —

 

 

(725)

Balance, June 30, 2019

 

$

6,279

 

$

55,969

 

$

55,167

 

$

(2,991)

 

$

(5,044)

 

$

109,380

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2018

 

$

6,279

 

$

50,173

 

$

54,105

 

$

(6,099)

 

$

(5,044)

 

$

99,414

Net income

 

 

 —

 

 

 —

 

 

8,186

 

 

 —

 

 

 —

 

 

8,186

Other comprehensive income

 

 

 —

 

 

 —

 

 

 —

 

 

3,108

 

 

 —

 

 

3,108

Stock dividend

 

 

 —

 

 

5,796

 

 

(5,796)

 

 

 —

 

 

 —

 

 

 —

Cash dividends declared, common stock

 

 

 —

 

 

 —

 

 

(1,328)

 

 

 —

 

 

 —

 

 

(1,328)

Balance, June 30, 2019

 

$

6,279

 

$

55,969

 

$

55,167

 

$

(2,991)

 

$

(5,044)

 

$

109,380

 

See accompanying notes to the consolidated financial statements (unaudited).

5

HAWTHORN BANCSHARES, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows (unaudited)

 

 

 

 

 

 

 

 

 

Six Months Ended June 30, 

(In thousands)

    

2019

    

2018

Cash flows from operating activities:

 

 

 

 

 

 

Net income

 

$

8,186

 

$

4,997

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

Provision for loan losses

 

 

400

 

 

750

Depreciation expense

 

 

884

 

 

877

Net amortization of investment securities, premiums, and discounts

 

 

644

 

 

752

Change in fair value of mortgage servicing rights

 

 

373

 

 

31

Investment securities gain, net

 

 

(1)

 

 

(206)

Loss (gain) on sales and dispositions of premises and equipment

 

 

43

 

 

(13)

Gain on sales and dispositions of other real estate

 

 

(19)

 

 

(2)

Gain on branch sale, net

 

 

(2,074)

 

 

 —

Provision for other real estate owned

 

 

18

 

 

26

Operating lease payment

 

 

 5

 

 

 —

Decrease in accrued interest receivable

 

 

16

 

 

333

Increase in cash surrender value - life insurance

 

 

(37)

 

 

(32)

Decrease in other assets

 

 

1,875

 

 

873

Increase in accrued interest payable

 

 

271

 

 

236

Decrease in other liabilities

 

 

(1,684)

 

 

(1,742)

Origination of mortgage loans for sale

 

 

(13,872)

 

 

(19,597)

Proceeds from the sale of mortgage loans

 

 

14,618

 

 

19,722

Gain on sale of mortgage loans, net

 

 

(284)

 

 

(387)

Other, net

 

 

(99)

 

 

(131)

Net cash provided by operating activities

 

 

9,263

 

 

6,487

Cash flows from investing activities:

 

 

 

 

 

 

Purchase of certificates of deposit in other banks

 

 

(498)

 

 

(7,286)

Net increase in loans

 

 

(11,290)

 

 

(26,272)

Purchase of available-for-sale debt securities

 

 

(18,790)

 

 

(74,275)

Proceeds from maturities of available-for-sale debt securities

 

 

19,695

 

 

16,445

Proceeds from calls of available-for-sale debt securities

 

 

7,370

 

 

1,685

Proceeds from sales of available-for-sale debt securities

 

 

 —

 

 

51,810

Purchases of FHLB stock

 

 

(1,322)

 

 

(1,370)

Proceeds from sales of FHLB stock

 

 

1,665

 

 

3,084

Purchases of premises and equipment

 

 

(1,176)

 

 

(734)

Proceeds from sales of premises and equipment

 

 

 6

 

 

13

Payment for branch sale, net

 

 

(6,700)

 

 

 —

Proceeds from sales of other real estate and repossessed assets

 

 

925

 

 

304

Net cash used in investing activities

 

 

(10,115)

 

 

(36,596)

Cash flows from financing activities:

 

 

 

 

 

 

Net increase in demand deposits

 

 

4,701

 

 

4,851

Net (decrease) increase in interest-bearing transaction accounts

 

 

(14,546)

 

 

30,509

Net increase in time deposits

 

 

8,115

 

 

22,214

Net increase in federal funds purchased and securities sold under agreements to repurchase

 

 

687

 

 

8,543

Repayment of FHLB advances and other borrowings

 

 

(57,921)

 

 

(141,112)

FHLB advances

 

 

47,806

 

 

94,000

Purchase of treasury stock

 

 

 —

 

 

(179)

Cash dividends paid - common stock

 

 

(1,207)

 

 

(811)

Net cash (used) provided by financing activities

 

 

(12,365)

 

 

18,015

Net decrease in cash and cash equivalents

 

 

(13,217)

 

 

(12,094)

Cash and cash equivalents, beginning of year

 

 

42,083

 

 

62,878

Cash and cash equivalents, end of year

 

$

28,866

 

$

50,784

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

Cash paid during the year for:

 

 

 

 

 

 

Interest

 

$

19,726

 

$

5,814

Income taxes

 

$

1,190

 

$

50

Noncash investing and financing activities:

 

 

 

 

 

 

Other real estate and repossessed assets acquired in settlement of loans

 

$

343

 

$

382

Net deposits and fixed assets transferred to other assets held for sale

 

$

(8,885)

 

$

 —

Right of use assets obtained in exchange for new operating lease liabilities

 

$

2,424

 

$

 —

 

See accompanying notes to the consolidated financial statements (unaudited).

 

6

HAWTHORN BANCSHARES, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

(Unaudited)

(1)   Summary of Significant Accounting Policies

Hawthorn Bancshares, Inc. (the Company) through its subsidiary, Hawthorn Bank (the Bank), provides a broad range of banking services to individual and corporate customers located within the Missouri communities in and surrounding Jefferson City, Columbia, Clinton, Warsaw, Springfield, and the greater Kansas City metropolitan area. The Company is subject to competition from other financial and nonfinancial institutions providing financial products. Additionally, the Company and its subsidiaries are subject to the regulations of certain regulatory agencies and undergo periodic examinations by those regulatory agencies.

The accompanying unaudited consolidated financial statements of the Company have been prepared in conformity with U.S. generally accepted accounting principles (U.S. GAAP) for interim financial information and with the instructions to Form 10‑Q, and Rule 10‑01 of Regulation S-X. Accordingly, the unaudited consolidated financial statements do not include all of the information and disclosures required by U.S. GAAP for complete financial statements and should be read in conjunction with the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10‑K for the year ended December 31, 2018.

The preparation of the consolidated financial statements includes all adjustments that, in the opinion of management, are necessary in order to make those statements not misleading. Management is required to make estimates and assumptions, including the determination of the allowance for loan losses, real estate acquired in connection with foreclosure or in satisfaction of loans, and fair values of investment securities available-for-sale that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company’s management has evaluated and did not identify any subsequent events or transactions requiring recognition or disclosure in the consolidated financial statements other than mentioned below.

Stock Dividend On July 1, 2019, the Company paid a special stock dividend of four percent to shareholders of record at the close of business on June 15, 2019. For all periods presented, share information, including basic and diluted earnings per share, has been adjusted retroactively to reflect this change.

Summary of Recent Transactions and Events On February 8, 2019, Hawthorn Bank, a wholly-owned subsidiary of the Company, completed the sale of its branch located in Branson, Missouri with total deposits of approximately $10.6 million to Branson Bank in Branson, Missouri. The transaction excludes loans assigned to the branch. The sale resulted in a pre-tax gain of approximately $2.1 million, or $1.6 million after tax.

The following represents significant new accounting principles adopted in 2019:

Leases On January 1, 2019, the Company adopted ASU No. 2016-02,  Leases (Topic 842) which requires that lessees and lessors recognize lease assets and lease liabilities on the balance sheet and disclose key information about leasing arrangements. The ASU primarily affects lessee accounting, which requires the lessee to recognize a right-of-use asset (ROU) and a liability to make lease payments for those leases classified as operating leases. For leases with a term of 12 months or less, an election by class of underlying asset not to recognize lease assets and lease liabilities is permitted. The ASU also provides additional guidance as to the definition of a lease, identification of lease components, and sale and leaseback transactions. The Company's operating leases primarily relate to office space and bank branches.

 

7

HAWTHORN BANCSHARES, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

(Unaudited)

In January 2018, the FASB issued ASU 2018-01, which allows entities the option to apply the provisions of the new lease guidance at the effective date without adjusting the comparative periods presented. In July 2018, the FASB issued ASU 2018-10, which provides narrow-scope improvements to the lease standard and ASU 2018-11, which allows entities to choose an additional transition method, under which an entity initially applies the new lease standard at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Under this transitional method, the entity shall recognize and measure the leases that exist at the adoption date and the prior comparative periods are not adjusted. The Company adopted this ASU as of January 1, 2019 using the transitional method. In addition, the Company utilized the practical expedients that allowed it to retain the classifications of existing leases, not re-assess if existing leases have initial direct costs, and hindsight when determining the lease term and assessment of impairment. The adoption of ASU 2016-02 and related transition guidance resulted in the recording of right-of-use assets and lease liabilities on the consolidated balance sheets of $2.3 million and $2.3 million, respectively; however, it did not have a material impact on the Company's other consolidated financial statements.  See Note 7 - Leases for additional information.

Derivatives and Hedging The FASB issued guidance within ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities (Topic 815) in August 2017. The amendments in ASU 2017-12 to Topic 815, Derivatives and Hedging, are intended to more closely align hedge accounting with companies' risk management strategies, simplify the application of hedge accounting, and increase transparency as to the scope and results of hedging programs. The guidance also amends the presentation and disclosure requirements and changes how companies assess effectiveness. Under the new guidance, public companies will have until the end of the first quarter in which a hedge is designated to perform an initial assessment of a hedge's effectiveness. After initial qualification, the new guidance permits a qualitative effectiveness assessment for certain hedges instead of a quantitative test if the company can reasonably support an expectation of high effectiveness throughout the term of the hedge. Additional disclosures include cumulative basis adjustments for fair value hedges and the effect of hedging on individual income statement line items. The amendments in this Update are effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. The ASU did not have a significant effect on the Company's Consolidated Financial Statements.

(2)   Loans and Allowance for Loan Losses

Loans

A summary of loans, by major class within the Company’s loan portfolio, at June 30, 2019 and December 31, 2018 is as follows:

 

 

 

 

 

 

 

 

 

June 30, 

 

December 31, 

(in thousands)

    

2019

    

2018

Commercial, financial, and agricultural

 

$

201,232

 

$

207,720

Real estate construction - residential

 

 

24,527

 

 

28,610

Real estate construction - commercial

 

 

120,931

 

 

106,784

Real estate mortgage - residential

 

 

248,980

 

 

241,517

Real estate mortgage - commercial

 

 

529,217

 

 

529,536

Installment and other consumer

 

 

32,056