Hawthorn Bancshares(HWBK)2025-03-17 17:07Financial Performance and Position - The Company reported a fourth-quarter repositioning of its balance sheet by selling 9.1 million[67]. - The profitability of the Company is significantly affected by local economic conditions in central and west-central Missouri and eastern Kansas, with potential declines in profitability due to increased unemployment and decreased real estate values[64]. - The primary source of earnings for the Bank is net interest income, which may decrease if prevailing interest rates decline, impacting the overall profitability of the Company[66]. - The Company faces credit risk as a lender, with potential loan defaults and increased charge-offs if borrowers are unable to repay their loans[70]. - The Bank's loan portfolio is susceptible to local economic conditions, and high levels of non-performing assets could adversely affect the Company's financial condition[71]. - The provision for credit losses may need to be increased if the financial condition of borrowers deteriorates or if real estate values decline, impacting future profitability[72]. - Adverse market conditions, including increased unemployment and reduced availability of commercial credit, could negatively impact the Company's business and credit performance[73]. - The FDIC's changes in deposit insurance premium calculations could increase non-interest expenses and adversely affect the Company's profitability[82]. - Liquidity risk is a concern for the Company, as insufficient liquidity could impair its ability to fund operations and meet obligations[78]. - The Company relies on customer deposits and may face challenges in replacing withdrawals or maturing deposits if market conditions change[79]. - The company may need to seek additional capital in the future, which could be affected by illiquid credit markets and economic conditions[83]. - The stock price of the company is subject to significant fluctuations due to various factors, including market conditions and operational performance, which could affect shareholder liquidity[122]. - The trading volume of the company's common stock is low, making it difficult for shareholders to sell shares quickly and potentially leading to price volatility[125]. - The company is not insured by any governmental entity, which poses additional risks for investors[126]. - The Company has not issued any new securities recently[154]. Competition and Market Conditions - The bank faces substantial competition from various financial institutions, which may adversely affect its ability to attract loans and deposits[85]. - Increased competition could lead to a decline in the bank's market share of deposits and loans, impacting its financial condition[86]. Operational and Compliance Risks - The company may experience difficulties in managing growth and integrating newly acquired companies, which could pose risks to profitability[87]. - The bank's success depends on its ability to generate loans and deposits at acceptable risk levels without significant increases in non-interest expenses[90]. - The bank's reputation is critical to its success, and any misconduct or errors could materially harm its performance[91]. - The company is exposed to operational risks, including fraudulent activities and cybersecurity incidents, which could disrupt business and increase costs[92]. - Regulatory changes may impact the profitability of the company's business activities and require significant management resources to comply[101]. - The Federal Reserve may require the company to commit capital resources to support its subsidiary bank, which could adversely affect its financial condition[102]. - Changes to regulatory capital requirements could result in lower returns on invested capital and require raising additional capital[104]. - The company is subject to increased FDIC deposit insurance premiums due to a decline in the reserve ratio of the Deposit Insurance Fund (DIF) relative to total insured deposits, which could adversely affect its financial condition[105]. - Non-compliance with laws such as the USA PATRIOT Act and Bank Secrecy Act could lead to fines, sanctions, and restrictions on expansion opportunities, impacting the company's growth potential[106]. - The company faces potential increased costs and operational impacts due to evolving privacy, cybersecurity, and data protection regulations, which could affect its business opportunities[107]. - Compliance with current and future laws may result in higher costs and restrict the company's ability to provide certain products and services, adversely affecting its financial condition[109]. Cybersecurity and IT Risks - The company relies heavily on technology and third-party vendors, and any operational disruptions or failures in these areas could materially impact its business operations and financial results[121]. - The Company has implemented a comprehensive cybersecurity and IT risk management program based on NIST and FFIEC frameworks, led by a Director with over 15 years of experience in cybersecurity[130]. - The Audit Committee meets quarterly to assess cybersecurity risks and receives reports on the status of the Company's information security program and emerging threats[131]. - The Company engages outside experts for cybersecurity assessments and audits, ensuring robust vendor management and annual due diligence on critical vendors[134]. - The Incident Response Program categorizes incidents into five severity levels, assessing impacts on financial loss, reputation, and service interruption[136]. - The Company has not experienced material adverse impacts from cyber threats to date, but acknowledges ongoing risks from malicious cyber activity[137]. - The company may face reputational damage and financial losses due to potential cybersecurity incidents, which could lead to increased costs for remediation and protection[118]. - Changes in accounting policies and adverse publicity could also impact the company's future financial performance and operational results[127]. Financial Reporting and Governance - The Company maintained effective internal control over financial reporting as of December 31, 2024, based on the criteria established in the Internal Control – Integrated Framework (2013)[170]. - There were no changes in the Company's internal control over financial reporting during the quarter ended December 31, 2024, that materially affected its internal control[168]. - The independent registered public accounting firm expressed an unqualified opinion on the Company's consolidated financial statements for the year ended December 31, 2024[171]. - The Company has no disagreements with accountants on accounting and financial disclosure[164]. - The consolidated financial statements for the years ended December 31, 2024, 2023, and 2022 are included in the Company's 2024 Annual Report to Shareholders[189]. - The auditor for the Company is Forvis Mazars, LLP, located in Kansas City, MO[190]. - The consolidated balance sheets as of December 31, 2024, and 2023 are reported, indicating the Company's financial position[190]. - The consolidated statements of income for the years ended December 31, 2024, 2023, and 2022 are provided, detailing revenue and expenses[191]. - The consolidated statements of comprehensive income for the years ended December 31, 2024, 2023, and 2022 are included, reflecting overall financial performance[192]. - The consolidated statements of stockholders' equity for the years ended December 31, 2024, 2023, and 2022 are presented, showing changes in equity[193]. - The consolidated statements of cash flows for the years ended December 31, 2024, 2023, and 2022 are available, detailing cash inflows and outflows[193]. - The Company has omitted certain financial statement schedules as they are not required or applicable[194]. - The Company has filed various exhibits related to executive compensation and corporate governance in its definitive Proxy Statement for the 2025 Annual Meeting of Shareholders[188]. - The Company has a policy for the recovery of erroneously awarded compensation, indicating a commitment to ethical governance practices[195].