Hawthorn Bancshares (HWBK) FY2025 10-K Risk Factors: 37 New, 5 Dropped

What the changes say

Hawthorn Bancshares faces heightened risks from regional economic downturns in central and west-central Missouri and the Kansas City MSA.
Fluctuating interest rates threaten net interest income, loan origination, and portfolio values.
Credit quality, small-business borrowing vulnerabilities, and broader financial market liquidity are key concerns.

What changed since the prior 10-K

New

NewRisks Relating to Our Business and Market
Because we primarily serve Central and West Central Missouri, as well as the Kansas City MSA, a decline in the local economic conditions could lower the Company's profitability
A local economic downturn in central and west-central Missouri or the Kansas City MSA could reduce loan demand, increase delinquencies, and lower profitability.
NewRisks Relating to Our Business and Market
Interest rate changes may reduce the profitability of the Company and the Bank
Decreasing prevailing interest rates could reduce the interest earned on loans faster than the interest paid on deposits, lowering net interest income.
NewRisks Relating to Our Business and Market
Our business depends on our ability to successfully manage credit risk
Inadequate loan underwriting or borrower default could cause credit losses that exceed collateral value.
NewRisks Relating to Our Business and Market
The Company's profitability depends on the Bank's asset quality and lending risks
Failure to timely monitor loan quality for borrowers concentrated in Missouri could harm financial condition.
NewRisks Relating to Our Business and Market
The provision for probable credit losses may need to be increased
Declining real estate values or borrower deterioration may require increasing the provision for probable credit losses.
NewRisks Relating to Our Business and Market
Adverse market conditions in the U.S. economy and the markets in which we operate could adversely impact the Company's business
Unfavorable U.S. economic conditions, rising inflation, and increasing unemployment could increase commercial and consumer credit write-downs.
NewRisks Relating to Our Business and Market
Emerging financial technologies such as digital assets, stablecoins, and distributed ledger systems may reduce the demand for traditional banking services and create new competitive pressures that adversely affect our business
Emerging financial technologies like digital assets and distributed ledger systems could reduce traditional banking demand and fee income.
NewRisks Relating to Our Business and Market
financial services sector. These technologies enable near-instantaneous value transfer, programmable money and peer-to-peer settlement mechanisms, many of which may operate outside the traditional banking system
Our limited size and regulatory constraints restrict our ability to compete with larger tech-driven financial services providers.
NewRisks Relating to Our Business and Market
Smaller commercial borrowers may have fewer financial resources, which may impair their ability to repay loans
Small- and medium-sized business borrowers have fewer financial resources and are more vulnerable to economic downturns, impairing loan repayment.
NewRisks Relating to Our Business and Market
The soundness of other financial institutions could adversely affect us
Counterparty defaults or market-wide liquidity problems among financial institutions could expose us to losses.
NewRisks Relating to Our Business and Market
Liquidity risk could impair our ability to fund operations and meet our obligations as they become due, and failure to maintain sufficient liquidity could materially adversely affect our growth, business, profitability and financial condition
An inability to obtain adequate funding at a reasonable cost could impair our ability to meet debt obligations and fund operations.
NewRisks Relating to Our Business and Market
Deterioration in the housing market could cause further increases in delinquencies and non-performing assets, including loan charge-offs, and depress the Company's income and growth
A decline in real estate values and housing prices could increase residential mortgage delinquencies and non-performing assets.
NewRisks Relating to Our Business and Market
The FDIC's changes in the calculation of deposit insurance premiums and ability to levy special assessments could increase the Company's non-interest expense and may reduce its profitability
NewRisks Relating to Our Business and Market
We may elect or be compelled to seek additional capital in the future, but that capital may not be available when it is needed
NewRisks Relating to Our Business and Market
If we are unable to successfully compete for customers in the Company's market area, the Company's financial condition and results of operations could be adversely affected
NewRisks Relating to Our Business and Market
We face strong competition from financial service companies and other companies that offer banking and wealth management services, which could adversely affect our business
NewRisks Relating to Our Business and Market
Our wealth management fees may decrease as a result of poor investment performance, in either relative or absolute terms, which could decrease our revenues and net earnings
NewRisks Relating to Our Business and Market
We may experience difficulties in managing growth and in effectively integrating newly acquired companies
NewRisks Relating to Our Business and Market
The Bank is a community bank and our ability to maintain the Bank's reputation is critical to the success of our business and the failure to do so could materially adversely affect our performance
NewRisks Relating to Our Business and Market
Fraudulent activity could damage our reputation, disrupt our business, increase our costs and cause losses
NewRisks Relating to Our Business and Market
The Company's success largely depends on the efforts of its executive officers
NewRisks Relating to Our Business and Market
Severe weather, natural disasters, pandemics, and other external events could significantly impact our business
NewRisks Relating to Our Business and Market
Climate change and responses to climate change may adversely impact our business, financial condition and results of operations
NewRisks Relating to Our Regulatory Environment
We may be adversely affected by changes in laws and regulations affecting the financial services industry
NewRisks Relating to Our Regulatory Environment
The Federal Reserve may require the Company to commit capital resources to support the Bank
NewRisks Relating to Our Regulatory Environment
The short-term and long-term impact of the changing regulatory capital requirements and new capital rules is uncertain
NewRisks Relating to Our Regulatory Environment
Non-compliance with the USA PATRIOT Act, Bank Secrecy Act, Real Estate Settlement Procedures Act, Truth-in-Lending Act, Community Reinvestment Act, Fair Lending Laws or other laws and regulations could result in fines or sanctions and curtail expansion opportunities
NewRisks Relating to Our Regulatory Environment
Regulations relating to privacy, information security and data protection could increase our costs, affect or limit how we collect and use personal information and adversely affect our business opportunities
NewRisks Relating to Our Regulatory Environment
We are subject to numerous laws designed to protect consumers, including the Community Reinvestment Act and fair lending laws, and failure to comply with these laws could lead to a wide variety of sanctions
NewRisks Relating to Our Regulatory Environment
We are subject to a number of other laws and regulations, which may adversely affect the operation of our business and increase our costs
NewTechnology and Vendor Risks
We are subject to security and operational risks relating to our use of technology that could damage our reputation and our business
NewTechnology and Vendor Risks
The operation of our business, including customer interaction, is increasingly done via electronic means, and this has increased our risks related to cybersecurity
NewTechnology and Vendor Risks
We continually encounter technological change, and we cannot predict how changes in technology will affect our business
NewTechnology and Vendor Risks
The development and use of artificial intelligence presents risks and challenges that may adversely impact our business
NewTechnology and Vendor Risks
We rely on others to provide key components of our business infrastructure
NewRisks Related to Our Common Stock
The price of our common stock could fluctuate significantly, and this could make it difficult for you to resell shares of our common stock at times or at prices you find attractive
NewRisks Related to Our Common Stock
The trading volume in our common stock has been low, and the sale of a substantial number of shares of our common stock in the public market could depress the price of our common stock and make it difficult for you to sell your shares

Dropped

DroppedRisks Relating to Our Business and Market
financial condition, the financial condition of the FHLB or market conditions were to change. FHLB borrowings and other current sources of liquidity may not be available or, if available, sufficient to provide adequate funding for operations
FHLB borrowings and other current sources of liquidity may not be available.
DroppedRisks Relating to Our Business and Market
Any of these scenarios could cause an increase in delinquencies and non-performing assets, require us to charge-off a higher percentage of loans, increase substantially the provision for losses on loans, or make fewer loans, which would reduce income
FDIC changes in deposit insurance premiums and special assessments could increase non-interest expense.
DroppedRisks Relating to Our Business and Market
Any of these results could have a material adverse impact on the Bank's market share of deposits and loans in the Bank's service areas. If the Bank is unable to successfully compete, its financial condition and results of operations will be adversely affected
Difficulties in managing growth and integrating newly acquired companies.
DroppedRisks Related to Our Common Stock
A significant decline in our stock price could result in substantial losses for individual stockholders and could lead to costly and disruptive securities litigation
Low trading volume in common stock could make it difficult to sell shares.
DroppedRisks Related to Our Common Stock
Our Common Stock is Not Insured by Any Governmental Entity. Our common stock is not a deposit account or other obligation of any bank and is not insured by the FDIC or any other governmental entity
Common stock is not insured by the FDIC or any governmental entity.

All 37 risk factors

Headings as the filing states them, in filing order.

Risks Relating to Our Business and Market

01Because we primarily serve Central and West Central Missouri, as well as the Kansas City MSA, a decline in the local economic conditions could lower the Company's profitabilityNew
02Interest rate changes may reduce the profitability of the Company and the BankNew
03Our business depends on our ability to successfully manage credit riskNew
04The Company's profitability depends on the Bank's asset quality and lending risksNew
05The provision for probable credit losses may need to be increasedNew
06Adverse market conditions in the U.S. economy and the markets in which we operate could adversely impact the Company's businessNew
07Emerging financial technologies such as digital assets, stablecoins, and distributed ledger systems may reduce the demand for traditional banking services and create new competitive pressures that adversely affect our businessNew
08financial services sector. These technologies enable near-instantaneous value transfer, programmable money and peer-to-peer settlement mechanisms, many of which may operate outside the traditional banking systemNew
09Smaller commercial borrowers may have fewer financial resources, which may impair their ability to repay loansNew
10The soundness of other financial institutions could adversely affect usNew
11Liquidity risk could impair our ability to fund operations and meet our obligations as they become due, and failure to maintain sufficient liquidity could materially adversely affect our growth, business, profitability and financial conditionNew
12Deterioration in the housing market could cause further increases in delinquencies and non-performing assets, including loan charge-offs, and depress the Company's income and growthNew
13The FDIC's changes in the calculation of deposit insurance premiums and ability to levy special assessments could increase the Company's non-interest expense and may reduce its profitabilityNew
14We may elect or be compelled to seek additional capital in the future, but that capital may not be available when it is neededNew
15If we are unable to successfully compete for customers in the Company's market area, the Company's financial condition and results of operations could be adversely affectedNew
16We face strong competition from financial service companies and other companies that offer banking and wealth management services, which could adversely affect our businessNew
17Our wealth management fees may decrease as a result of poor investment performance, in either relative or absolute terms, which could decrease our revenues and net earningsNew
18We may experience difficulties in managing growth and in effectively integrating newly acquired companiesNew
19The Bank is a community bank and our ability to maintain the Bank's reputation is critical to the success of our business and the failure to do so could materially adversely affect our performanceNew
20Fraudulent activity could damage our reputation, disrupt our business, increase our costs and cause lossesNew
21The Company's success largely depends on the efforts of its executive officersNew
22Severe weather, natural disasters, pandemics, and other external events could significantly impact our businessNew
23Climate change and responses to climate change may adversely impact our business, financial condition and results of operationsNew

Risks Relating to Our Regulatory Environment

24We may be adversely affected by changes in laws and regulations affecting the financial services industryNew
25The Federal Reserve may require the Company to commit capital resources to support the BankNew
26The short-term and long-term impact of the changing regulatory capital requirements and new capital rules is uncertainNew
27Non-compliance with the USA PATRIOT Act, Bank Secrecy Act, Real Estate Settlement Procedures Act, Truth-in-Lending Act, Community Reinvestment Act, Fair Lending Laws or other laws and regulations could result in fines or sanctions and curtail expansion opportunitiesNew
28Regulations relating to privacy, information security and data protection could increase our costs, affect or limit how we collect and use personal information and adversely affect our business opportunitiesNew
29We are subject to numerous laws designed to protect consumers, including the Community Reinvestment Act and fair lending laws, and failure to comply with these laws could lead to a wide variety of sanctionsNew
30We are subject to a number of other laws and regulations, which may adversely affect the operation of our business and increase our costsNew

Technology and Vendor Risks

31We are subject to security and operational risks relating to our use of technology that could damage our reputation and our businessNew
32The operation of our business, including customer interaction, is increasingly done via electronic means, and this has increased our risks related to cybersecurityNew
33We continually encounter technological change, and we cannot predict how changes in technology will affect our businessNew
34The development and use of artificial intelligence presents risks and challenges that may adversely impact our businessNew
35We rely on others to provide key components of our business infrastructureNew

Risks Related to Our Common Stock

36The price of our common stock could fluctuate significantly, and this could make it difficult for you to resell shares of our common stock at times or at prices you find attractiveNew
37The trading volume in our common stock has been low, and the sale of a substantial number of shares of our common stock in the public market could depress the price of our common stock and make it difficult for you to sell your sharesNew

Other Hawthorn Bancshares 10-Ks

FY2024 10-K risk factors
34 risks
Credit losses, asset quality, liquidity, and interest-rate changes are central risks for this Missouri and eastern Kansas community bank.
Filed Mar 17, 2025

About this page

The headings are the filing's own. The one-line readings and the overview are automated and can be wrong: read Item 1A of the 10-K for the exact wording.