UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended March 31, 2010
 or
 o
    
    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.
  Missouri
    
    43-1626350(State or other jurisdiction of 
of incorporation or organization)
    
    (I.R.S. Employer
Identification No.)
 300 Southwest Longview Boulevard, Lees Summit, Missouri 64081
  (816) 347-8100
 N/A
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
 o þ




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##### 



Item 1. Financial Statements
 HAWTHORN BANCSHARES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
 March 31,
    
    December 31,2010
    
    2009ASSETSLoans
    
    $
    974,187,039
    
    
    $
    991,614,007Allowances for loan losses
    
    
    (14,657,622
    )
    
    
    (14,796,549
    )Net loans
    
    
    959,529,417
    
    
    
    976,817,458Investment
in available - for - sale securities, at fair value
    
    
    159,048,121
    
    
    
    152,926,685Federal funds sold and securities purchased under agreements to resell
    
    
    225,016
    
    
    
    89,752Cash and due from banks
    
    
    58,649,312
    
    
    
    24,575,943Premises and
equipment - net
    
    
    38,251,680
    
    
    
    38,623,293Other real estate owned and repossessed assets
    
    
    11,368,113
    
    
    
    8,490,914Accrued interest receivable
    
    
    6,015,006
    
    
    
    6,625,557Mortgage servicing rights
    
    
    2,000,456
    
    
    
    2,020,964Intangible
assets  - net
    
    
    1,353,467
    
    
    
    1,503,986Cash
surrender value - life insurance
    
    
    1,948,654
    
    
    
    1,929,910Other assets
    
    
    22,021,603
    
    
    
    22,866,092Total assets
    
    $
    1,260,410,845
    
    
    $
    1,236,470,554LIABILITIES AND STOCKHOLDERS EQUITYDeposits:Non - interest bearing demand
    
    $
    130,856,351
    
    
    $
    135,017,639Savings, interest checking and money market
    
    
    402,042,287
    
    
    
    354,284,004Time deposits $100,000 and over
    
    
    133,904,306
    
    
    
    137,860,435Other time deposits
    
    
    322,992,318
    
    
    
    329,160,719Total deposits
    
    
    989,795,262
    
    
    
    956,322,797Federal funds purchased and securities sold
under agreements to repurchase
    
    
    32,107,860
    
    
    
    36,645,434Subordinated notes
    
    
    49,486,000
    
    
    
    49,486,000Other borrowed money
    
    
    74,128,083
    
    
    
    79,317,302Accrued interest payable
    
    
    2,336,292
    
    
    
    2,438,121Other liabilities
    
    
    5,006,326
    
    
    
    4,489,617Total liabilities
    
    
    1,152,859,823
    
    
    
    1,128,699,271Stockholders equity:Preferred stock, $1,000 par value
Authorized and issued 30,255 shares
    
    
    28,483,887
    
    
    
    28,364,768Common stock, $1 par value
Authorized 15,000,000 shares; issued 4,463,813 shares
    
    
    4,463,813
    
    
    
    4,463,813Surplus
    
    
    26,999,926
    
    
    
    26,970,745Retained earnings
    
    
    50,099,798
    
    
    
    50,576,551Accumulated other comprehensive income, net of tax
    
    
    1,020,416
    
    
    
    912,224Treasury stock; 161,858 shares, at cost
    
    
    (3,516,818
    )
    
    
    (3,516,818
    )Total stockholders equity
    
    
    107,551,022
    
    
    
    107,771,283Total liabilities and stockholders equity
    
    $
    1,260,410,845
    
    
    $
    1,236,470,554
  2




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##### 



HAWTHORN BANCSHARES, INC. AND SUBSIDIARIES
Consolidated Statements of Operations (Unaudited)
 For the Three Months EndedMarch 31,2010
    
    2009INTEREST INCOMEInterest and fees on loans
    
    $
    13,418,476
    
    
    $
    14,444,026Interest on debt securities:Taxable
    
    
    1,063,979
    
    
    
    1,162,507Nontaxable
    
    
    326,202
    
    
    
    393,616Interest on federal funds sold and securities purchased
under agreements to resell
    
    
    36
    
    
    
    150Interest on
interest - bearing deposits
    
    
    13,631
    
    
    
    14,392Dividends on other securities
    
    
    50,697
    
    
    
    19,559Total interest income
    
    
    14,873,021
    
    
    
    16,034,250INTEREST EXPENSEInterest on deposits:Savings, interest checking and money market
    
    
    630,753
    
    
    
    949,950Time deposit accounts $100,000 and over
    
    
    711,382
    
    
    
    1,080,246Other time deposit accounts
    
    
    1,998,651
    
    
    
    2,939,881Interest on federal funds purchased and securities sold
under agreements to repurchase
    
    
    20,540
    
    
    
    22,487Interest on subordinated notes
    
    
    524,300
    
    
    
    662,046Interest on other borrowed money
    
    
    676,361
    
    
    
    849,183Total interest expense
    
    
    4,561,987
    
    
    
    6,503,793Net interest income
    
    
    10,311,034
    
    
    
    9,530,457Provision for loan losses
    
    
    2,505,000
    
    
    
    1,750,000Net interest income after provision for loan losses
    
    
    7,806,034
    
    
    
    7,780,457NON - INTEREST INCOMEService charges on deposit accounts
    
    
    1,296,088
    
    
    
    1,377,799Trust department income
    
    
    178,862
    
    
    
    201,647Gain on sale
of mortgage  loans, net
    
    
    224,573
    
    
    
    1,020,971Other
    
    
    305,933
    
    
    
    164,351Total non
- interest income
    
    
    2,005,456
    
    
    
    2,764,768NON - INTEREST EXPENSESalaries and employee benefits
    
    
    4,657,121
    
    
    
    4,362,282Occupancy expense, net
    
    
    621,672
    
    
    
    608,277Furniture and equipment expense
    
    
    492,039
    
    
    
    563,658FDIC insurance assessment
    
    
    410,178
    
    
    
    680,781Legal, examination, and professional fees
    
    
    247,290
    
    
    
    360,870Advertising and promotion
    
    
    278,189
    
    
    
    281,271Postage, printing, and supplies
    
    
    288,166
    
    
    
    284,470Processing expense
    
    
    850,365
    
    
    
    854,748Other real estate expense
    
    
    506,455
    
    
    
    164,317Other
    
    
    779,271
    
    
    
    834,058Total non
- interest expense
    
    
    9,130,746
    
    
    
    8,994,732Income before income taxes
    
    
    680,744
    
    
    
    1,550,493Less income taxes
    
    
    186,976
    
    
    
    493,862Net income
    
    
    493,768
    
    
    
    1,056,631Preferred stock dividends
    
    
    369,783
    
    
    
    373,985Accretion of discount on preferred stock
    
    
    119,119
    
    
    
    119,119Net income available to common shareholders
    
    $
    4,866
    
    
    $
    563,527Basic earnings per share
    
    $
    0.00
    
    
    $
    0.13Diluted earnings per share
    
    $
    0.00
    
    
    $
    0.13
 3




---



##### 



HAWTHORN BANCSHARES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
 Three months Ended March 31,2010
    
    2009Cash flows from operating activities:Net income
    
    $
    493,768
    
    
    $
    1,056,631Adjustments to reconcile net income to net cash provided by operating activities:Provision for loan losses
    
    
    2,505,000
    
    
    
    1,750,000Depreciation expense
    
    
    506,615
    
    
    
    525,900Net amortization of debt securities, premiums, and discounts
    
    
    160,499
    
    
    
    84,597Amortization of intangible assets
    
    
    150,519
    
    
    
    168,543Stock based compensation expense
    
    
    29,181
    
    
    
    37,803(Gain) loss on sales and dispositions of premises and equipment
    
    
    (104
    )
    
    
    3,513Other real estate owned impairment charges
    
    
    62,690
    
    
    
    815,574Decrease (increase) in deferred tax asset, net
    
    
    7,667
    
    
    
    (55,965
    )Decrease in accrued interest receivable
    
    
    610,551
    
    
    
    480,220Increase in
cash surrender value - life insurance
    
    
    (18,744
    )
    
    
    (8,156
    )Decrease in other assets
    
    
    629,603
    
    
    
    460,862(Decrease) increase in accrued interest payable
    
    
    (101,829
    )
    
    
    137,492Increase in other liabilities
    
    
    516,709
    
    
    
    94,405Origination of mortgage loans held for sale
    
    
    (10,355,738
    )
    
    
    (51,495,000
    )Proceeds from the sale of mortgage loans held for sale
    
    
    10,580,311
    
    
    
    52,515,971Gain on sale of mortgage loans, net
    
    
    (224,573
    )
    
    
    (1,020,971
    )Other, net
    
    
    11,991
    
    
    
    158,846Net cash provided by operating activities
    
    
    5,564,116
    
    
    
    5,710,265Cash flows from investing activities:Net decrease in loans
    
    
    10,683,563
    
    
    
    2,631,238Purchase of
available - for - sale debt securities
    
    
    (108,812,450
    )
    
    
    (36,673,418
    )Proceeds
from maturities of available - for - sale debt securities
    
    
    81,462,422
    
    
    
    31,174,201Proceeds
from calls of available - for - sale debt securities
    
    
    21,225,800
    
    
    
    8,190,000Proceeds from sales of FHLB stock
    
    
    230,900
    
    
    
    Purchases of premises and equipment
    
    
    (135,298
    )
    
    
    (166,876
    )Proceeds from sales of premises and equipment
    
    
    400
    
    
    
    36,990Proceeds from sales of other real estate owned and repossessions
    
    
    1,094,910
    
    
    
    224,411Net cash provided by investing activities
    
    
    5,750,247
    
    
    
    5,416,546Cash flows from financing activities:Net decrease
in non - interest - bearing demand deposits
    
    
    (4,161,288
    )
    
    
    (1,565,998
    )Net increase in savings, interest checking, and money market accounts
    
    
    47,758,283
    
    
    
    18,131,440Net (decrease) increase in time deposits
    
    
    (10,124,530
    )
    
    
    19,159,374Net decrease in federal funds purchased and securities sold
under agreements to repurchase
    
    
    (4,537,574
    )
    
    
    (2,816,502
    )Repayment of other borrowed money
    
    
    (5,189,219
    )
    
    
    (45,199,639
    )Cash
dividends paid - preferred stock
    
    
    (378,187
    )
    
    
    (235,317
    )Cash
dividends paid - common stock
    
    
    (473,215
    )
    
    
    (868,663
    )Net cash provided (used) by financing activities
    
    
    22,894,270
    
    
    
    (13,395,305
    )Net increase (decrease) in cash and cash equivalents
    
    
    34,208,633
    
    
    
    (2,268,494
    )Cash and cash equivalents, beginning of year
    
    
    24,665,695
    
    
    
    53,827,468Cash and cash equivalents, end of period
    
    $
    58,874,328
    
    
    $
    51,558,974Supplemental disclosures of cash flow information:Cash paid during the year for:Interest
    
    $
    4,663,816
    
    
    $
    6,366,301Income taxes
    
    $
    200,000
    
    
    $
    Supplemental schedule of noncash investing and financing activities:Other real estate and repossessions acquired in settlement of loans
    
    $
    4,099,478
    
    
    $
    685,000
  4




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##### 



(Unaudited)
 Basis of Presentation
  Consolidated Financial Statements
   Loans and Allowance for Loan Losses
  March 31,
    
    December 31,2010
    
    2009Commercial, financial, and agricultural
    
    $
    145,576,990
    
    
    $
    151,399,300Real estate construction  residential
    
    
    39,142,763
    
    
    
    38,840,664Real estate construction  commercial
    
    
    77,449,610
    
    
    
    77,936,569Real estate mortgage  residential
    
    
    226,233,066
    
    
    
    232,332,124Real estate mortgage  commercial
    
    
    450,070,277
    
    
    
    453,975,271Installment loans to individuals
    
    
    35,547,090
    
    
    
    36,966,018Unamortized loan origination fees and costs, net
    
    
    167,243
    
    
    
    164,061Total loans
    
    $
    974,187,039
    
    
    $
    991,614,007
  5




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##### 



March 31, 2010
    
    December 31, 2009Loans classified as impaired:Non-accrual loans
    
    $
    54,420,542
    
    
    $
    34,153,731Impaired loans continuing to accrue interest
    
    
    15,810,178
    
    
    
    39,713,014Total impaired loans
    
    $
    70,230,720
    
    
    $
    73,866,745Balance of impaired loans with reserves
    
    $
    27,537,263
    
    
    $
    26,294,560Balance of impaired loans without reserves
    
    
    42,693,457
    
    
    
    47,572,185Total impaired loans
    
    $
    70,230,720
    
    
    $
    73,866,745Reserves for impaired loans
    
    $
    6,207,043
    
    
    $
    6,414,729Average balance of impaired loans during the period
    
    
    66,413,767
    
    
    
    39,048,298Balance of trouble debt restructured loans included
in impaired loans
    
    
    13,605,033
    
    
    
    11,233,326
   Three Months Ended March 31,2010
    
    2009Balance at beginning of period
    
    $
    14,796,549
    
    
    $
    12,666,546Additions:Provision for loan losses
    
    
    2,505,000
    
    
    
    1,750,000Total additions
    
    
    2,505,000
    
    
    
    1,750,000Deductions:Loans charged off
    
    
    2,806,275
    
    
    
    1,381,358Less recoveries on loans
    
    
    (162,348
    )
    
    
    (124,237
    )Net loans charged off
    
    
    2,643,927
    
    
    
    1,257,121Balance at end of period
    
    $
    14,657,622
    
    
    $
    13,159,425
 6




---



##### 



Investment Securities
  March 31,
    
    December 31,2010
    
    2009U.S. treasury
    
    $
    1,000,156
    
    
    $
    Government sponsored enterprises
    
    
    40,254,563
    
    
    
    44,380,798Asset-backed securities
    
    
    85,335,896
    
    
    
    69,434,650Obligations of states and political subdivisions
    
    
    32,457,506
    
    
    
    39,111,237Total available for sale securities
    
    $
    159,048,121
    
    
    $
    152,926,685
   Gross
    
    GrossAmortized
    
    unrealized
    
    unrealizedcost
    
    gains
    
    losses
    
    Fair valueMarch 31, 2010U.S. treasury
    
    $
    999,768
    
    
    $
    388
    
    
    $
    
    
    
    $
    1,000,156Government sponsored enterprises
    
    
    40,085,881
    
    
    
    243,519
    
    
    
    74,837
    
    
    
    40,254,563Asset-backed securities
    
    
    83,635,365
    
    
    
    1,938,086
    
    
    
    237,555
    
    
    
    85,335,896Obligations of states and political subdivisions
    
    
    31,851,353
    
    
    
    633,226
    
    
    
    27,073
    
    
    
    32,457,506Total available for sale securities
    
    $
    156,572,367
    
    
    $
    2,815,219
    
    
    $
    339,465
    
    
    $
    159,048,121December 31, 2009Government sponsored enterprises
    
    $
    44,059,540
    
    
    $
    371,258
    
    
    $
    50,000
    
    
    $
    44,380,798Asset-backed securities
    
    
    68,092,852
    
    
    
    1,585,774
    
    
    
    243,976
    
    
    
    69,434,650Obligations of states and political subdivisions
    
    
    38,456,246
    
    
    
    708,196
    
    
    
    53,205
    
    
    
    39,111,237Total available for sale securities
    
    $
    150,608,638
    
    
    $
    2,665,228
    
    
    $
    347,181
    
    
    $
    152,926,685
  7




---



##### 



Amortized
    
    Faircost
    
    valueDue in one year or less
    
    $
    9,564,388
    
    
    $
    9,657,095Due after one year through five years
    
    
    48,132,196
    
    
    
    48,579,197Due after five years through ten years
    
    
    12,111,354
    
    
    
    12,320,776Due after ten years
    
    
    3,129,064
    
    
    
    3,155,15772,937,002
    
    
    
    73,712,225Asset-backed securities
    
    
    83,635,365
    
    
    
    85,335,896Total available for sale investment securities
    
    $
    156,572,367
    
    
    $
    159,048,121
   Less than 12 months
    
    12 months or more
    
    
    
    
    
    TotalNumber ofFair
    
    Unrealized
    
    Fair
    
    Unrealized
    
    Investment
    
    Fair
    
    UnrealizedValue
    
    Losses
    
    Value
    
    Losses
    
    Positions
    
    Value
    
    LossesAt March 31, 2010Government sponsored
enterprises
    
    $
    17,465,754
    
    
    $
    (74,837
    )
    
    $
    
    
    
    $
    
    
    
    
    18
    
    
    $
    17,465,754
    
    
    $
    (74,837
    )Asset-backed securities
    
    
    28,016,205
    
    
    
    (237,555
    )
    
    
    
    
    
    
    
    
    
    
    28
    
    
    
    28,016,205
    
    
    
    (237,555
    )Obligations of states and
political subdivisions
    
    
    2,204,733
    
    
    
    (18,932
    )
    
    
    231,859
    
    
    
    (8,141
    )
    
    
    10
    
    
    
    2,436,592
    
    
    
    (27,073
    )$
    47,686,692
    
    
    $
    (331,324
    )
    
    $
    231,859
    
    
    $
    (8,141
    )
    
    
    56
    
    
    $
    47,918,551
    
    
    $
    (339,465
    )Less than 12 months
    
    12 months or more
    
    
    
    
    
    TotalNumber ofFair
    
    Unrealized
    
    Fair
    
    Unrealized
    
    Investment
    
    Fair
    
    UnrealizedValue
    
    Losses
    
    Value
    
    Losses
    
    Positions
    
    Value
    
    LossesAt December 31, 2009Government sponsored
enterprises
    
    $
    5,943,819
    
    
    $
    (50,000
    )
    
    $
    
    
    
    $
    
    
    
    
    6
    
    
    $
    5,943,819
    
    
    
    (50,000
    )Asset-backed securities
    
    
    14,600,160
    
    
    
    (243,904
    )
    
    
    20,551
    
    
    
    (72
    )
    
    
    15
    
    
    
    14,620,711
    
    
    $
    (243,976
    )Obligations of states and
political subdivisions
    
    
    3,576,780
    
    
    
    (53,205
    )
    
    
    
    
    
    
    
    
    
    
    14
    
    
    
    3,576,780
    
    
    
    (53,205
    )$
    24,120,759
    
    
    $
    (347,109
    )
    
    $
    20,551
    
    
    $
    (72
    )
    
    
    35
    
    
    $
    24,141,310
    
    
    $
    (347,181
    )
   8




---



##### 



Intangible Assets
  March 31, 2010
    
    December 31, 2009Gross
    
    
    
    
    
    
    
    
    
    GrossCarrying
    
    Accumulated
    
    Net
    
    Carrying
    
    Accumulated
    
    NetAmount
    
    Amortization
    
    Amount
    
    Amount
    
    Amortization
    
    AmountAmortizable intangible assets:Core deposit intangible
    
    $
    7,060,224
    
    
    $
    (5,706,757
    )
    
    $
    1,353,467
    
    
    $
    7,060,224
    
    
    $
    (5,556,238
    )
    
    $
    1,503,986Mortgage servicing rights
    
    
    2,887,111
    
    
    
    (886,655
    )
    
    
    2,000,456
    
    
    
    2,945,019
    
    
    
    (924,055
    )
    
    
    2,020,964Total amortizable intangible assets
    
    $
    9,947,335
    
    
    $
    (6,593,412
    )
    
    $
    3,353,923
    
    
    $
    10,005,243
    
    
    $
    (6,480,293
    )
    
    $
    3,524,950
  Core Deposit
    
    Mortgage ServicingIntangible Asset
    
    RightsBalance at December 31, 2009
    
    $
    1,503,986
    
    
    $
    2,020,964Additions
    
    
    
    
    
    
    114,366Amortization
    
    
    (150,519
    )
    
    
    (134,874
    )Balance at March 31, 2010
    
    $
    1,353,467
    
    
    $
    2,000,456
 Fair Value of Financial Instruments.
  Core Deposit
    
    MortgageIntangible Asset
    
    Servicing Rights2010
    
    $
    375,958
    
    
    $
    443,1262011
    
    
    434,763
    
    
    
    439,0002012
    
    
    408,062
    
    
    
    335,0002013
    
    
    134,684
    
    
    
    256,0002014
    
    
    
    
    
    
    196,0002015
    
    
    
    
    
    
    151,000
 9




---



##### 



Three Months EndedMarch 31,Aggregate amortization expense
    
    2010
    
    2009Core deposit intangible asset
    
    $
    150,519
    
    
    $
    168,543Mortgage servicing rights
    
    
    134,874
    
    
    
    318,626
 Income Taxes
   Employee Benefit Plans
  For the Three Months EndedMarch 31,2010
    
    2009Payroll taxes
    
    $
    321,967
    
    
    $
    329,300Medical plans
    
    
    404,852
    
    
    
    370,545401k match
    
    
    80,012
    
    
    
    77,730Pension plan
    
    
    216,299
    
    
    
    228,999Profit-sharing
    
    
    72,470
    
    
    
    67,175Other
    
    
    41,328
    
    
    
    21,140Total employee benefits
    
    $
    1,136,928
    
    
    $
    1,094,889
  Estimated
    
    Actual2010
    
    2009Service cost  benefits earned during the year
    
    $
    844,178
    
    
    $
    850,940Interest cost on projected benefit obligations
    
    
    556,047
    
    
    
    509,482Expected return on plan assets
    
    
    (613,659
    )
    
    
    (539,283
    )Amortization of prior service cost
    
    
    78,628
    
    
    
    78,628Amortization of net gains
    
    
    
    
    
    
    (9,075
    )Net periodic pension expense  Annual
    
    $
    865,194
    
    
    $
    890,692Pension expense  three months
ended March 31, (actual)
    
    $
    216,299
    
    
    $
    228,999
  10




---



##### 



Stock-Based Compensation
   WeightedWeighted
    
    Aggregate
    
    AverageAverage
    
    Intrinsic
    
    ContractualExercise
    
    Value
    
    TermOptions
    
    Price
    
    (000)
    
    (in years)Outstanding at January 1, 2010
    
    
    275,966
    
    
    $
    25.07Granted
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    Canceled
    
    
    
    
    
    
    Outstanding at March 31, 2010
    
    
    275,966
    
    
    $
    25.07
    
    
    $
    
    
    
    
    4.7Exercisable at March 31, 2010
    
    
    221,109
    
    
    $
    24.80
    
    
    $
    
    
    
    
    4.0
  Comprehensive Income
  Three Months Ended March 31,2010
    
    2009Net income
    
    $
    493,768
    
    
    $
    1,056,631Other comprehensive income:Unrealized gain (loss) on securities:Unrealized gain (loss) on debt and equity
securities available-for-sale, net of tax
    
    
    96,201
    
    
    
    (99,585
    )Defined benefit pension plan:Amortization of prior service cost included in
net periodic pension cost, net of tax
    
    
    11,991
    
    
    
    12,045Total other comprehensive income (loss)
    
    
    108,192
    
    
    
    (87,540
    )Comprehensive income
    
    $
    601,960
    
    
    $
    969,091
 Preferred Stock
   11




---



##### 



Earnings per Share
   For the Three Months EndedMarch 31,2010
    
    2009Net income, basic and diluted
    
    $
    493,768
    
    
    $
    1,056,631Less:Preferred stock dividends
    
    
    369,783
    
    
    
    373,985Accretion of discount on preferred stock
    
    
    119,119
    
    
    
    119,119Net income available to
common shareholders
    
    
    4,866
    
    
    
    563,527Average shares outstanding
    
    
    4,301,955
    
    
    
    4,301,955Average shares outstanding including
dilutive stock options
    
    $
    4,301,955
    
    
    $
    4,301,955Net income per share, basic
    
    $
    0.00
    
    
    $
    0.13Net income per share, diluted
    
    
    0.00
    
    
    
    0.13
  12




---



##### 



Three months ended March 31,2010
    
    2009Anti-dilutive shares  option shares
    
    
    275,966
    
    
    
    275,966Anti-dilutive shares  warrant shares
    
    
    255,260
    
    
    
    255,260
 Fair Value Measurements
 Fair Value Measurements and Disclosures,
        Valuation methods for instruments measured at fair value on a recurring basis
  Available-for-sale securities
  13




---



##### 



Fair Value MeasurementsAt March 31, 2010 UsingQuoted Pricesin ActiveMarkets for
    
    Other
    
    SignificantIdentical
    
    Observable
    
    UnobservableFair Value
    
    Assets
    
    Inputs
    
    InputsDescription
    
    March 31, 2010
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)U.S. treasury
    
    $
    1,000,156
    
    
    $
    
    
    
    $
    1,000,156
    
    
    $
    Government sponsored enterprises
    
    
    40,254,563
    
    
    
    
    
    
    
    40,254,563
    
    
    
    Asset-backed securities
    
    
    85,335,896
    
    
    
    
    
    
    
    85,335,896
    
    
    
    Obligations
of states and political subdivisions
    
    
    32,457,506
    
    
    
    
    
    
    
    32,457,506
    
    
    
    Total
    
    $
    159,048,121
    
    
    $
    
    
    
    $
    159,048,121
    
    
    $
    
 Valuation methods for instruments measured at fair value on a nonrecurring basis
  Impaired Loans
 Accounting by Creditors for Impairment of a
Loan
 Other Real Estate Owned and Repossessed Assets
  14




---



##### 



Fair Value MeasurementsAt March 31, 2010 UsingQuoted Pricesin Active
    
    
    
    
    
    
    
    
    
    Three MonthsMarkets for
    
    Other
    
    Significant
    
    EndedIdentical
    
    Observable
    
    Unobservable
    
    March 31, 2010Fair Value
    
    Assets
    
    Inputs
    
    Inputs
    
    Total GainsDescription
    March 31, 2010
    
    (Level 1)

    
    (Level 2)
    
    (Level 3)
    
    (Losses)Impaired loans:Commercial
    
    $
    1,147,532
    
    
    $
    
    
    
    $
    
    
    
    $
    1,147,532
    
    
    $
    (487,937
    )Construction  residential
    
    
    1,013,480
    
    
    
    
    
    
    
    
    
    
    
    1,013,480
    
    
    
    (321,170
    )Construction  commercial
    
    
    3,888,327
    
    
    
    
    
    
    
    
    
    
    
    3,888,327
    
    
    
    (64,000
    )Real estate  residential
    
    
    5,628,926
    
    
    
    
    
    
    
    
    
    
    
    5,628,926
    
    
    
    (1,740,827
    )Real estate  commercial
    
    
    9,651,955
    
    
    
    
    
    
    
    
    
    
    
    9,651,955
    
    
    
    (17,083
    )Total
    
    $
    21,330,220
    
    
    $
    
    
    
    $
    
    
    
    
    21,330,220
    
    
    $
    (2,631,017
    )Other real estate owned
and repossessed assets
    
    $
    11,368,113
    
    
    $
    
    
    
    $
    
    
    
    $
    11,368,113
    
    
    $
    (468,942
    )
  Fair Value of Financial Instruments
  Loans
  Investment Securities
 Fair Value Measurement Investment Securities.
 Federal Funds Sold, Cash, and Due from Banks
  Mortgage Servicing Rights
  Accrued Interest Receivable and Payable
  Deposits
  15




---



##### 



Securities Sold under Agreements to Repurchase and Interest-bearing Demand Notes to U.S. Treasury
  Other Borrowings
   March 31,
    
    December 31,2010
    
    2009Carrying
    
    Fair
    
    Carrying
    
    Fairamount
    
    value
    
    amount
    
    valueAssets:Loans
    
    $
    959,529,417
    
    
    $
    967,188,000
    
    
    $
    976,817,458
    
    
    $
    984,305,000Investment in debt securities
    
    
    159,048,121
    
    
    
    159,048,121
    
    
    
    152,926,685
    
    
    
    152,926,685Federal fund sold and securities
purchased under agreements to resell
    
    
    225,016
    
    
    
    225,016
    
    
    
    89,752
    
    
    
    89,752Cash and due from banks
    
    
    58,649,312
    
    
    
    58,649,312
    
    
    
    24,575,943
    
    
    
    24,575,943Mortgage servicing rights
    
    
    2,000,456
    
    
    
    2,883,000
    
    
    
    2,020,964
    
    
    
    2,904,000Accrued interest receivable
    
    
    6,015,006
    
    
    
    6,015,006
    
    
    
    6,625,557
    
    
    
    6,625,557$
    1,185,467,328
    
    
    $
    1,194,008,455
    
    
    $
    1,163,056,359
    
    
    $
    1,171,426,937Liabilities:Deposits:Demand
    
    $
    130,856,351
    
    
    $
    130,856,351
    
    
    $
    135,017,639
    
    
    $
    135,017,639NOW
    
    
    180,512,089
    
    
    
    180,512,089
    
    
    
    139,623,577
    
    
    
    139,623,577Savings
    
    
    51,904,576
    
    
    
    51,904,576
    
    
    
    47,637,148
    
    
    
    47,637,148Money market
    
    
    169,625,622
    
    
    
    169,625,622
    
    
    
    167,023,279
    
    
    
    167,023,279Time
    
    
    456,896,624
    
    
    
    466,603,000
    
    
    
    467,021,154
    
    
    
    478,011,000Federal funds purchased and securities
sold under agreements to repurchase
    
    
    32,107,860
    
    
    
    32,107,860
    
    
    
    36,645,434
    
    
    
    36,645,434Subordinated notes
    
    
    49,486,000
    
    
    
    20,930,000
    
    
    
    49,486,000
    
    
    
    18,329,000Other borrowings
    
    
    74,128,083
    
    
    
    74,974,000
    
    
    
    79,317,302
    
    
    
    80,557,000Accrued interest payable
    
    
    2,336,292
    
    
    
    2,336,292
    
    
    
    2,438,121
    
    
    
    2,438,121$
    1,147,853,497
    
    
    $
    1,129,849,790
    
    
    $
    1,124,209,654
    
    
    $
    1,105,282,198
 16




---



##### 



Item 2 - Managements Discussion and Analysis of Financial Condition
And Results of Operations
 Forward-Looking Statements
  
    
    statements that are not historical in nature, and
 
    
    statements preceded by, followed by or that include the words believes, expects, may, will,
should, could, anticipates, estimates, intends or similar expressions.
  
    
    competitive pressures among financial services companies may increase significantly,
 
    
    changes in the interest rate environment may reduce interest margins,
 
    
    general economic conditions, either nationally or in Missouri, may be less favorable than
expected and may adversely affect the quality of our loans and other assets,
 
    
    increases in non-performing assets in our loan portfolios and adverse economic conditions
may necessitate increases to our provisions for loan losses,
 
    
    costs or difficulties related to the integration of the business of our Company and its
acquisition targets may be greater than expected,
 
    
    legislative or regulatory changes may adversely affect the business in which our Company
and its subsidiaries are engaged, and
 
    
    changes may occur in the securities markets.
  Overview
   17




---



##### 



Critical Accounting Policies
  Allowance for Loan Losses
  Income Taxes
  18




---



##### 



SELECTED CONSOLIDATED FINANCIAL DATA
  Selected Financial Data
 Three MonthsEndedMarch 31,(In thousands, except per share data)
    
    2010
    
    2009Per Share DataBasic earnings per common share
    
    $
    
    
    
    $
    0.13Diluted earnings per common share
    
    
    
    
    
    
    0.13Dividends paid on preferred stock
    
    
    378
    
    
    
    235Amortization of discount on preferred stock
    
    
    119
    
    
    
    119Dividends paid on common stock
    
    
    473
    
    
    
    869Book value per common share
    
    
    18.38
    
    
    
    18.93Market price common stock
    
    
    11.69
    
    
    
    11.75Selected Ratios(Based on average balance sheets)Return on average total assets
    
    
    0.16
    %
    
    
    0.34
    %Return on average common stockholders equity
    
    
    0.02
    %
    
    
    2.88
    %Average common stockholders equity to average total assets
    
    
    6.37
    %
    
    
    6.28
    %(Based on end-of-period data)Efficiency ratio (1)
    
    
    74.13
    %
    
    
    73.16
    %Period-end stockholders equity to period-end assets
    
    
    6.27
    %
    
    
    6.18
    %Period-end common stockholders equity to period-end assets
    
    
    8.53
    %
    
    
    8.39
    %Total risk-based capital ratio
    
    
    16.68
    
    
    
    16.22Tier 1 risk-based capital ratio
    
    
    14.19
    
    
    
    13.70Leverage ratio
    
    
    11.20
    
    
    
    11.02
 
 (1)
    
    Efficiency ratio is calculated as non-interest expense as a percent of revenue. Total
revenue includes net interest and non-interest income. 19




---



##### 



Results of Operations
 Summary
 Three MonthsEnded March, 31(Dollars in thousands)
    
    2010
    
    2009
    
    $ Change
    
    % ChangeNet interest income
    
    $
    10,311
    
    
    $
    9,530
    
    
    $
    781
    
    
    
    8.2
    %Provision for loan losses
    
    
    2,505
    
    
    
    1,750
    
    
    
    755
    
    
    
    43.1Noninterest income
    
    
    2,006
    
    
    
    2,765
    
    
    
    (759
    )
    
    
    (27.5
    )Noninterest expense
    
    
    9,131
    
    
    
    8,995
    
    
    
    136
    
    
    
    1.5Income before
income taxes
    
    
    681
    
    
    
    1,550
    
    
    
    (869
    )
    
    
    (56.1
    )Income taxes
    
    
    187
    
    
    
    493
    
    
    
    (306
    )
    
    
    (62.1
    )Net income
    
    $
    494
    
    
    $
    1,057
    
    
    $
    (563
    )
    
    
    (53.3)
    %Less:Preferred dividends
    
    
    370
    
    
    
    374
    
    
    
    (4
    )
    
    
    Accretion of discount onPreferred stock
    
    
    119
    
    
    
    119
    
    
    
    
    
    
    
    Net income available
to common shareholders
    
    $
    5
    
    
    $
    564
    
    
    $
    (559
    )
    
    
    (99.1)
    %
  Net Interest Income
  20




---



##### 



Average Balance Sheets
  Three Months Ended March 31,2010

    

    2009Interest
    
    Rate
    
    
    
    
    
    Interest
    
    RateAverage
    
    Income/
    
    Earned/
    
    Average
    
    Income/
    
    Earned/(dollars in thousands)
    
    Balance
    
    Expense(1)
    
    Paid(1)
    
    Balance
    
    Expense(1)
    
    Paid(1)ASSETSLoans (2)(4)Commercial
    
    $
    148,251
    
    
    $
    1,994
    
    
    
    5.45
    %
    
    $
    150,519
    
    
    $
    2,002
    
    
    
    5.39
    %Real estate construction  residential
    
    
    38,744
    
    
    
    508
    
    
    
    5.32
    
    
    
    45,806
    
    
    
    603
    
    
    
    5.34Real estate construction  commercial
    
    
    77,268
    
    
    
    657
    
    
    
    3.45
    
    
    
    66,015
    
    
    
    1,006
    
    
    
    6.18Real estate mortgage  residential
    
    
    231,757
    
    
    
    3,250
    
    
    
    5.69
    
    
    
    205,989
    
    
    
    3,654
    
    
    
    7.19Real estate mortgage  commercial
    
    
    448,632
    
    
    
    6,344
    
    
    
    5.73
    
    
    
    508,694
    
    
    
    6,581
    
    
    
    5.25Consumer
    
    
    36,397
    
    
    
    696
    
    
    
    7.76
    
    
    
    33,144
    
    
    
    621
    
    
    
    7.60Investment in securities: (3)U.S. Treasury
    
    
    77
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Government sponsored enterprises
    
    
    46,137
    
    
    
    333
    
    
    
    2.93
    
    
    
    68,592
    
    
    
    515
    
    
    
    3.05Asset backed securities
    
    
    77,423
    
    
    
    718
    
    
    
    3.76
    
    
    
    40,203
    
    
    
    628
    
    
    
    6.34State and municipal
    
    
    36,733
    
    
    
    493
    
    
    
    5.44
    
    
    
    41,828
    
    
    
    586
    
    
    
    5.68Restricted investments
    
    
    6,728
    
    
    
    51
    
    
    
    3.07
    
    
    
    8,875
    
    
    
    20
    
    
    
    0.91Federal funds sold
    
    
    194
    
    
    
    
    
    
    
    
    
    
    
    451
    
    
    
    
    
    
    
    Interest bearing deposits
in other financial institutions
    
    
    30,941
    
    
    
    14
    
    
    
    0.18
    
    
    
    17,604
    
    
    
    14
    
    
    
    0.32Total interest earning assets
    
    
    1,179,282
    
    
    
    15,058
    
    
    
    5.18
    
    
    
    1,187,720
    
    
    
    16,230
    
    
    
    5.54All other assets
    
    
    93,855
    
    
    
    
    
    
    
    
    
    
    
    88,750Allowance for loan losses
    
    
    (14,925
    )
    
    
    
    
    
    
    
    
    
    
    (12,729
    )Total assets
    
    $
    1,258,212
    
    
    
    
    
    
    
    
    
    
    $
    1,263,741LIABILITIES AND STOCKHOLDERS EQUITYNOW accounts
    
    $
    176,736
    
    
    $
    276
    
    
    
    0.63
    %
    
    $
    143,674
    
    
    $
    336
    
    
    
    0.95
    %Savings
    
    
    49,286
    
    
    
    32
    
    
    
    0.26
    
    
    
    44,391
    
    
    
    36
    
    
    
    0.33Money market
    
    
    169,496
    
    
    
    323
    
    
    
    0.77
    
    
    
    177,300
    
    
    
    578
    
    
    
    1.32Time
deposits of $100,000 and over
    
    
    136,170
    
    
    
    711
    
    
    
    2.12
    
    
    
    138,539
    
    
    
    1,080
    
    
    
    3.16Other time deposits
    
    
    326,958
    
    
    
    1,999
    
    
    
    2.48
    
    
    
    356,812
    
    
    
    2,940
    
    
    
    3.34Total time deposits
    
    
    858,646
    
    
    
    3,341
    
    
    
    1.58
    
    
    
    860,716
    
    
    
    4,970
    
    
    
    2.34Federal funds purchased and
securities sold under agreements
to repurchase
    
    
    33,734
    
    
    
    21
    
    
    
    0.25
    
    
    
    29,344
    
    
    
    23
    
    
    
    0.32Subordinated notes
    
    
    49,486
    
    
    
    524
    
    
    
    4.29
    
    
    
    49,486
    
    
    
    662
    
    
    
    5.43Other borrowed money
    
    
    77,638
    
    
    
    676
    
    
    
    3.53
    
    
    
    89,037
    
    
    
    849
    
    
    
    3.87Total interest bearing liabilities
    
    
    1,019,504
    
    
    
    4,562
    
    
    
    1.81
    
    
    
    1,028,583
    
    
    
    6,504
    
    
    
    2.56Demand deposits
    
    
    123,096
    
    
    
    
    
    
    
    
    
    
    
    118,620Other liabilities
    
    
    7,071
    
    
    
    
    
    
    
    
    
    
    
    9,267Total liabilities
    
    
    1,149,671
    
    
    
    
    
    
    
    
    
    
    
    1,156,470Stockholders equity
    
    
    108,541
    
    
    
    
    
    
    
    
    
    
    
    107,271Total liabilities and
stockholders equity
    
    $
    1,258,212
    
    
    
    
    
    
    
    
    
    
    $
    1,263,741Net interest income (FTE)
    
    
    
    
    
    $
    10,496
    
    
    
    
    
    
    
    
    
    
    $
    9,726Net interest spread
    
    
    
    
    
    
    
    
    
    
    3.37
    %
    
    
    
    
    
    
    
    
    
    
    2.98
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    3.61
    %
    
    
    
    
    
    
    
    
    
    
    3.32
    %
 
 (1)
    
    Interest income and yields are presented on a fully taxable equivalent basis using the
Federal statutory income tax rate of 35%, net of nondeductible interest expense. Such adjustments totaled $185,000 and $196,000 for the three
months ended March 31, 2010 and 2009, respectively.(2)
    
    Non-accruing loans are included in the average amounts outstanding.(3)
    
    Average balances based on amortized cost.(4)
    
    Fees and costs on loans are included in interest income. 21




---



##### 



Comparison of the three periods ended March 31, 2010 and 2009
   Three Months Ended March 31,(Dollars in thousands)
    
    2010
    
    2009
    
    $ Change
    
    % ChangeAverage loans:Commercial
    
    $
    148,251
    
    
    $
    150,519
    
    
    $
    (2,268
    )
    
    
    (1.5)
    %Real estate
construction -
residential
    
    
    38,744
    
    
    
    45,806
    
    
    
    (7,062
    )
    
    
    (15.4
    )Real estate
construction -
residential
    
    
    77,268
    
    
    
    66,015
    
    
    
    11,253
    
    
    
    17.0Real estate mortgage -
residential
    
    
    231,757
    
    
    
    205,989
    
    
    
    25,768
    
    
    
    12.5Real estate mortgage -
commercial
    
    
    448,632
    
    
    
    508,694
    
    
    
    (60,062
    )
    
    
    (11.8
    )Consumer
    
    
    36,397
    
    
    
    33,144
    
    
    
    3,253
    
    
    
    9.8Total
    
    $
    981,049
    
    
    $
    1,010,167
    
    
    $
    (29,118
    )
    
    
    (2.9)
    %
 Lending and Credit Management
 Liquidity Management
   22




---



##### 



Rate and volume analysis
  Three Months Ended March 31,2010 vs. 2009Change due toTotal
    
    Average
    
    Average(Dollars In thousands)
    
    Change
    
    Volume
    
    RateInterest income on a fully
taxable equivalent basis:Loans: (1) (3)Commercial
    
    $
    (8
    )
    
    $
    (30
    )
    
    $
    22Real estate construction  residential
    
    
    (95
    )
    
    
    (93
    )
    
    
    (2
    )Real estate construction  commercial
    
    
    (349
    )
    
    
    150
    
    
    
    (499
    )Real estate mortgage  residential
    
    
    (404
    )
    
    
    421
    
    
    
    (825
    )Real estate mortgage  commercial
    
    
    (237
    )
    
    
    (817
    )
    
    
    580Consumer
    
    
    75
    
    
    
    62
    
    
    
    13Investment securities:U.S. Treasury
    
    
    
    
    
    
    
    
    
    
    Government sponsored entities
    
    
    (182
    )
    
    
    (163
    )
    
    
    (19
    )Asset backed securities
    
    
    90
    
    
    
    417
    
    
    
    (327
    )State and municipal(2)
    
    
    (93
    )
    
    
    (69
    )
    
    
    (24
    )Restricted investments
    
    
    31
    
    
    
    (6
    )
    
    
    37Federal funds sold
    
    
    
    
    
    
    
    
    
    
    Interest bearing deposits
in other financial institutions
    
    
    
    
    
    
    8
    
    
    
    (8
    )Total interest income
    
    
    (1,172
    )
    
    
    (120
    )
    
    
    (1,052
    )Interest expense:NOW accounts
    
    
    (60
    )
    
    
    66
    
    
    
    (126
    )Savings
    
    
    (4
    )
    
    
    4
    
    
    
    (8
    )Money market
    
    
    (255
    )
    
    
    (24
    )
    
    
    (231
    )Time deposits of 100,000 and over
    
    
    (369
    )
    
    
    (18
    )
    
    
    (351
    )Other time deposits
    
    
    (941
    )
    
    
    (230
    )
    
    
    (711
    )Federal funds purchased and
securities sold under agreements to repurchase
    
    
    (2
    )
    
    
    3
    
    
    
    (5
    )Subordinated notes
    
    
    (138
    )
    
    
    
    
    
    
    (138
    )Other borrowed money
    
    
    (173
    )
    
    
    (103
    )
    
    
    (70
    )Total interest expense
    
    
    (1,942
    )
    
    
    (302
    )
    
    
    (1,640
    )Net interest income on a fully
taxable equivalent basis
    
    $
    770
    
    
    $
    182
    
    
    $
    588
 
 (1)
    
    Interest income and yields are presented on a fully taxable equivalent basis using the
Federal statutory income tax rate of 35%, net of nondeductible interest expense. Such adjustments totaled $185,000 and $196,000 for the first
three months ended March 31, 2010 and 2009, respectively.(2)
    
    Non-accruing loans are included in the average amounts outstanding.(3)
    
    Fees and costs on loans are included in interest income.  23




---



##### 



Provision for loan losses
   Non-interest Income and Expense
 Non-interest income
 Three MonthsEnded March 31,(Dollars in thousands)
    
    2010
    
    2009
    
    $ Change
    
    % ChangeNon-interest IncomeService charges on deposit accounts
    
    $
    1,296
    
    
    $
    1,378
    
    
    $
    (82
    )
    
    
    (6.0)
    %Trust department income
    
    
    179
    
    
    
    202
    
    
    
    (23
    )
    
    
    (11.4
    )Gains on sales of mortgage loans, net
    
    
    225
    
    
    
    1,021
    
    
    
    (796
    )
    
    
    (78.0
    )Other
    
    
    306
    
    
    
    164
    
    
    
    142
    
    
    
    86.6Total non-interest income
    
    $
    2,006
    
    
    $
    2,765
    
    
    $
    (759
    )
    
    
    (27.5)
    %Non-interest income as a
% of total revenue *
    
    
    16.3
    %
    
    
    22.5
    %Total revenue per full time
equivalent employee
    
    
    35.8
    
    
    
    35.7
 
 *
    
    Total revenue is calculated as net interest income plus non-interest income Three Months Ended March 31, 2010 and 2009
  24




---



##### 



Non-interest expense
 Three Months Ended March 31, 2010 and 2009
 Three MonthsEnded March, 31(Dollars in thousands)
    
    2010
    
    2009
    
    $ Change
    
    % ChangeNon - interest ExpenseSalary expense
    
    $
    3,520
    
    
    $
    3,267
    
    
    $
    253
    
    
    
    7.7
    %Employee benefits
    
    
    1,137
    
    
    
    1,095
    
    
    
    42
    
    
    
    3.8Occupancy expense, net
    
    
    622
    
    
    
    608
    
    
    
    14
    
    
    
    2.3Furniture and equipment expense
    
    
    492
    
    
    
    564
    
    
    
    (72
    )
    
    
    (12.8
    )FDIC insurance assessment
    
    
    410
    
    
    
    681
    
    
    
    (271
    )
    
    
    (39.8
    )Legal,
examination, and professional fees
    
    
    247
    
    
    
    361
    
    
    
    (114
    )
    
    
    (31.6
    )Advertising and promotion
    
    
    278
    
    
    
    281
    
    
    
    (3
    )
    
    
    (1.1
    )Postage, printing, and supplies
    
    
    288
    
    
    
    285
    
    
    
    3
    
    
    
    1.1Processing expense
    
    
    850
    
    
    
    855
    
    
    
    (5
    )
    
    
    (0.6
    )Other real estate expense
    
    
    507
    
    
    
    164
    
    
    
    343
    
    
    
    209.1Other
    
    
    780
    
    
    
    834
    
    
    
    (54
    )
    
    
    (6.5
    )Total non
- interest expense
    
    $
    9,131
    
    
    $
    8,995
    
    
    $
    136
    
    
    
    1.5
    %Efficiency ratio
    
    
    74.1
    %
    
    
    73.2
    %Salaries and benefits as a %
of total non interest expense
    
    
    51.0
    %
    
    
    48.5
    %Number of
full - time equivalent
employees
    
    
    344
    
    
    
    344
  Income Taxes
  Lending and Credit Management
   25




---



##### 



March 31,
    
    December 31,(In thousands)
    
    2010
    
    2009Amount
    
    %
    
    Amount
    
    %Commercial, financial, and agricultural
    
    $
    145,577
    
    
    
    14.9
    %
    
    $
    151,399
    
    
    
    15.3
    %Real estate
construction - residential
    
    
    39,143
    
    
    
    4.0
    
    
    
    38,841
    
    
    
    3.9Real estate
construction - commercial
    
    
    77,450
    
    
    
    8.0
    
    
    
    77,937
    
    
    
    7.9Real estate
mortgage - residential
    
    
    226,233
    
    
    
    23.2
    
    
    
    232,332
    
    
    
    23.4Real estate
mortgage - commercial
    
    
    450,070
    
    
    
    46.2
    
    
    
    453,975
    
    
    
    45.8Installment loans to individuals
    
    
    35,547
    
    
    
    3.7
    
    
    
    36,966
    
    
    
    3.7Deferred fees
    
    
    167
    
    
    
    0.0
    
    
    
    164
    
    
    
    0.0Total loans
    
    $
    974,187
    
    
    
    100.0
    %
    
    $
    991,614
    
    
    
    100.0
    %
      Accounting by Creditors for Impairment of a
Loan,
 26




---



##### 



Allowance for Loan Losses
   Three Months EndedMarch 31,(Dollars in thousands)
    
    2010
    
    2009Provision for loan losses
    
    $
    2,505
    
    
    $
    1,750Net loan
charge - offs:Commercial, financial, and agricultural
    
    
    491
    
    
    
    95Real estate
construction - residential
    
    
    281
    
    
    
    187Real estate
construction - commercial
    
    
    80
    
    
    
    289Real estate
mortgage - residential
    
    
    1,728
    
    
    
    606Real estate
mortgage - commercial
    
    
    18
    
    
    
    40Installment loans to individuals
    
    
    46
    
    
    
    40Total net
loan charge - offs
    
    $
    2,644
    
    
    $
    1,257
  27




---



##### 



March 31,
    
    December 31,(Dollars in thousands)
    
    2010
    
    2009Nonaccrual loans:Commercial, financial, and agricultural
    
    $
    2,135
    
    
    $
    2,067Real estate
construction - residential
    
    
    1,898
    
    
    
    2,678Real estate
construction - commercial
    
    
    20,616
    
    
    
    9,277Real estate
mortgage - residential
    
    
    7,979
    
    
    
    6,692Real estate
mortgage - commercial
    
    
    21,634
    
    
    
    13,161Installment loans to individuals
    
    
    159
    
    
    
    279Total nonaccrual loans
    
    
    54,421
    
    
    
    34,154Loans
contractually past - due 90 days
or more and still accruing:Commercial, financial, and agricultural
    
    

    
    
    
    
    2Total
loans contractually past - due
90 days or more and still accruing
    
    

    
    
    
    
    2Troubled debt restructured loans
    
    
    8,339
    
    
    
    8,191Total nonperforming loans
    
    
    62,760
    
    
    
    42,347Other real estate and repossessions
    
    
    11,368
    
    
    
    8,491Total nonperforming assets
    
    $
    74,128
    
    
    $
    50,838Loans
    
    $
    974,187
    
    
    $
    991,614Allowance for loan losses to loans
    
    
    1.50
    %
    
    
    1.49
    %Nonperforming loans to loans
    
    
    6.44
    %
    
    
    4.27
    %Allowance for loan losses to nonperforming loans
    
    
    23.36
    %
    
    
    34.94
    %Nonperforming assets to loans and foreclosed assets
    
    
    7.52
    %
    
    
    5.08
    %
    28




---



##### 



29




---



##### 



March 31,
    
    December 31,(Dollars in thousands)
    
    2010
    
    2009Allocation of allowance for
loan losses at end of period:Commercial, financial, and agricultural
    
    $
    2,146
    
    
    $
    2,644Real estate construction
    
    
    3,892
    
    
    
    3,802Real estate mortgage
    
    
    7,024
    
    
    
    6,596Installment loans to individuals
    
    
    365
    
    
    
    380Unallocated
    
    
    1,231
    
    
    
    1,375Total
    
    $
    14,658
    
    
    $
    14,797
   Financial Condition
        30




---



##### 



Liquidity and Capital Resources
 Liquidity Management
    March 31,
    
    December 31,(dollars in thousands)
    
    2010
    
    2009Liquid assets:Federal funds sold
    
    $
    225
    
    
    $
    90Federal Reserve  excess reserves
    
    
    40,613
    
    
    
    2,216Available for sale investments securities
    
    
    159,048
    
    
    
    152,927Total
    
    $
    199,886
    
    
    $
    155,233
   March 31,(dollars in thousands)
    
    2010Investment securities pledged for the purpose of securing:Federal Reserve Bank borrowings
    
    $
    3,551Repurchase agreements
    
    
    36,871Other Deposits
    
    
    109,042Total pledged, at fair value
    
    $
    149,464
   31




---



##### 



March 31,
    
    December 31,(dollars in thousands)
    
    2010
    
    2009Core deposit base:Non-interest bearing demand
    
    $
    130,856
    
    
    $
    135,018Interest checking
    
    
    180,512
    
    
    
    139,624Savings and money market
    
    
    221,531
    
    
    
    214,660Total
    
    $
    532,899
    
    
    $
    489,302
  March 31,
    
    December 31,(dollars in thousands)
    
    2010
    
    2009Borrowings:Federal funds purchased
    
    $
    
    
    
    $
    4,980Securities sold under agreements to repurchase
    
    
    32,108
    
    
    
    31,665FHLB advances
    
    
    74,128
    
    
    
    79,317Subordinated notes
    
    
    49,486
    
    
    
    49,486Total
    
    $
    155,722
    
    
    $
    165,448
   March 31, 2010(dollars in thousands)
    
    FHLB
    
    Federal Reserve
    
    OtherCollateral value pledged
    
    $
    292,411
    
    
    $
    3,551
    
    
    $
    8,355Advances outstanding
    
    
    (74,128
    )
    
    
    
    
    
    
    Total
    
    $
    218,283
    
    
    $
    3,551
    
    
    $
    8,355
 32




---



##### 



Sources and Uses of Funds
     Regulatory Capital
   33




---



##### 



Minimum
    
    Well-CapitalizedActual
    
    Capital requirements
    
    Capital RequirementsAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    RatioMarch 31, 2010Total capital (to risk-weighted assets):Company
    
    $
    165,386
    
    
    
    16.68
    %
    
    $
    79,343
    
    
    
    8.00
    %
    
    
    
    
    
    
    Hawthorn Bank
    
    
    135,968
    
    
    
    13.95
    
    
    
    77,979
    
    
    
    8.00
    
    
    $
    97,474
    
    
    
    10.00
    %Tier I capital (to risk-weighted assets):Company
    
    $
    140,687
    
    
    
    14.19
    
    
    $
    39,672
    
    
    
    4.00
    %
    
    
    
    
    
    
    Hawthorn Bank
    
    
    123,759
    
    
    
    12.70
    
    
    
    38,990
    
    
    
    4.00
    
    
    $
    58,484
    
    
    
    6.00
    %Tier I capital (to adjusted average assets):Company
    
    $
    140,687
    
    
    
    11.20
    
    
    $
    37,695
    
    
    
    3.00
    %
    
    
    
    
    
    
    Hawthorn Bank
    
    
    123,759
    
    
    
    10.01
    
    
    
    37,076
    
    
    
    3.00
    
    
    $
    61,793
    
    
    
    5.00
    %
 Minimum
    
    Well-CapitalizedActual
    
    Capital requirements
    
    Capital RequirementsAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    RatioDecember 31, 2009Total capital (to risk-weighted assets):Company
    
    $
    165,969
    
    
    
    16.49
    %
    
    $
    80,502
    
    
    
    8.00
    %
    
    
    
    
    
    
    Hawthorn Bank
    
    
    134,673
    
    
    
    13.62
    
    
    
    79,129
    
    
    
    8.00
    
    
    $
    98,911
    
    
    
    10.00
    %Tier I capital (to risk-weighted assets):Company
    
    $
    140,974
    
    
    
    14.01
    
    
    $
    40,251
    
    
    
    4.00
    %
    
    
    
    
    
    
    Hawthorn Bank
    
    
    122,285
    
    
    
    12.36
    
    
    
    39,564
    
    
    
    4.00
    
    
    $
    59,347
    
    
    
    6.00
    %Tier I capital (to adjusted average assets):Company
    
    $
    140,974
    
    
    
    11.35
    
    
    $
    37,254
    
    
    
    3.00
    %
    
    
    
    
    
    
    Hawthorn Bank
    
    
    122,285
    
    
    
    10.04
    
    
    
    36,556
    
    
    
    3.00
    
    
    $
    60,926
    
    
    
    5.00
    %
 34




---



##### 



Item 3. Quantitative and Qualitative Disclosures about Market Risk
   Over5 years orno stated(Dollars in thousands)
    
    Year 1
    
    Year 2
    
    Year 3
    
    Year 4
    
    Year 5
    
    Maturity
    
    TotalASSETSInvestment securities
    
    $
    8,233
    
    
    $
    4,338
    
    
    $
    4,357
    
    
    $
    17,296
    
    
    $
    23,602
    
    
    $
    101,222
    
    
    $
    159,048Interest-bearing deposits
    
    
    40,973
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    40,973Other restricted investments
    
    
    6,523
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,523Federal funds sold and securities
purchased under agreements to resell
    
    
    225
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    225Loans
    
    
    526,948
    
    
    
    155,806
    
    
    
    132,588
    
    
    
    100,659
    
    
    
    41,707
    
    
    
    33,906
    
    
    
    991,614Total
    
    $
    582,902
    
    
    $
    160,144
    
    
    $
    136,945
    
    
    $
    117,955
    
    
    $
    65,309
    
    
    $
    135,128
    
    
    $
    1,198,383LIABILITIESSavings, Now deposits
    
    $
    
    
    
    $
    
    
    
    $
    173,990
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    173,990Rewards checking, Super Now,
money market deposits
    
    
    228,265
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    228,265Time deposits
    
    
    335,025
    
    
    
    69,767
    
    
    
    22,178
    
    
    
    25,995
    
    
    
    3,719
    
    
    
    
    
    
    
    456,684Federal funds purchased and securities
sold under agreements to repurchase
    
    
    32,108
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32,108Subordinated notes
    
    
    49,486
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    49,486Other borrowed money
    
    
    42,317
    
    
    
    23,488
    
    
    
    8,279
    
    
    
    44
    
    
    
    
    
    
    
    
    
    
    
    74,128Total
    
    $
    687,201
    
    
    $
    93,255
    
    
    $
    204,447
    
    
    $
    26,039
    
    
    $
    3,719
    
    
    $
    
    
    
    $
    1,014,661Interest-sensitivity GAPPeriodic GAP
    
    $
    (104,299
    )
    
    $
    66,889
    
    
    $
    (67,502
    )
    
    $
    91,916
    
    
    $
    61,590
    
    
    $
    135,128
    
    
    $
    183,722Cumulative GAP
    
    $
    (104,299
    )
    
    $
    (37,410
    )
    
    $
    (104,912
    )
    
    $
    (12,996
    )
    
    $
    48,594
    
    
    $
    183,722
    
    
    $
    183,722Ratio of interest-earnings
assets to interest-bearing liabilitiesPeriodic GAP
    
    
    0.85
    
    
    
    1.72
    
    
    
    0.67
    
    
    
    4.53
    
    
    
    17.56
    
    
    NM
    
    
    1.18Cumulative GAP
    
    
    0.85
    
    
    
    0.95
    
    
    
    0.89
    
    
    
    0.99
    
    
    
    1.05
    
    
    
    1.18
    
    
    
    1.18
 35




---



##### 



Item 4. Controls and Procedures
   Impact of New Accounting Standards
 Fair Value Measurements and Disclosures.
 Subsequent Events Subsequent Events Subsequent Events Subsequent Events Amendments to Certain Recognition and Disclosure Requirements
 Consolidation.
 Transfers and Servicing
 36




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##### 



PART II  OTHER INFORMATION
 Item 1. Legal Proceedings
    
    NoneItem 1A. Risk Factors
    
    NoneItem 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    NoneItem 3. Defaults Upon Senior Securities
    
    NoneItem 4. (Removed and Reserved)
    
    NoneItem 5. Other Information
    
    NoneItem 6. Exhibits
 Exhibit No.
    
    Description3.1
    
    Restated Articles of Incorporation of our Company (filed as
Exhibit 3.1 to our Companys current report on Form 8-K on
August 9, 2007 and incorporated herein by reference).3.1.1
    
    Certificate of Designations of Fixed Rate Cumulative Perpetual
Preferred Stock, Series 2008, dated December 17, 2008 (filed
as Exhibit 3.1.1 to our Companys current report on Form 8-K
on December 23, 2008 and incorporated herein by reference).3.2
    
    Amended and Restated Bylaws of our Company (filed as Exhibit
3.1 to our Companys current report on Form 8-K on June 8,
2009 and incorporated herein by reference).4.1
    
    Specimen certificate representing shares of our
Companys $1.00 par value common stock (filed as Exhibit 4.1
to our Companys Annual Report on Form 10-K for the fiscal
year ended December 31, 1999 (Commission file number 0-23636)
and incorporated herein by reference).4.2
    
    Specimen certificate representing shares of our Fixed Rate
Cumulative Perpetual Preferred Stock, Series 2008 (filed as
Exhibit 4.2 to our Companys current report on Form 8-K on
December 23, 2008 and incorporated herein by reference).4.3
    
    Warrant to purchase shares of our Companys $1.00 par value
Common Stock, dated December 19, 2008 (filed as Exhibit 4.3 to
our Companys current report on Form 8-K on December 23, 2008
and incorporated herein by reference).31.1
    
    Certificate of the Chief Executive Officer of our Company
pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    Certificate of the Chief Financial Officer of our Company
pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    Certificate of the Chief Executive Officer of our Company
pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    Certificate of the Chief Financial Officer of our Company
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 37




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##### 



SIGNATURES
  HAWTHORN BANCSHARES, INC.DateMay 17, 2010
    /s/ James E. SmithJames E. Smith,Chairman of the Board and Chief Executive Officer (Principal Executive Officer)May 17, 2010
    /s/ Richard G. RoseRichard G. Rose,Chief Financial Officer (Principal Financial
Officer and Principal Accounting Officer) 38




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##### 



HAWTHORN BANCSHARES, INC.
   Exhibit No.
    
    Description
    
    
    Page No.3.1
    
    Restated Articles of Incorporation of our
Company (filed as Exhibit 3.1 to our Companys
current report on Form 8-K on August 9, 2007 and
incorporated herein by reference).
    
    
    **3.1.1
    
    Certificate of Designations of Fixed Rate
Cumulative Perpetual Preferred Stock, Series
2008, dated December 17, 2008 (filed as Exhibit
3.1.1 to our Companys current report on Form
8-K on December 23, 2008 and incorporated herein
by reference).
    
    
    **3.2
    
    Amended and Restated Bylaws of our Company
(filed as Exhibit 3.1 to our Companys current
report on Form 8-K on June 8, 2009 and
incorporated herein by reference).
    
    
    **4.1
    
    Specimen certificate representing shares of our
Companys $1.00 par value common stock (filed as
Exhibit 4.1 to our Companys Annual Report on
Form 10-K for the fiscal year ended December 31,
1999 (Commission file number 0-23636) and
incorporated herein by reference).
    
    
    **4.2
    
    Specimen certificate representing shares of our
Fixed Rate Cumulative Perpetual Preferred Stock,
Series 2008 (filed as Exhibit 4.2 to our
Companys current report on Form 8-K on December
23, 2008 and incorporated herein by reference).
    
    
    **4.3
    
    Warrant to purchase shares of our Companys
$1.00 par value Common Stock, dated December 19,
2008 (filed as Exhibit 4.3 to our Companys
current report on Form 8-K on December 23, 2008
and incorporated herein by reference).
    
    
    **31.1
    
    Certificate of the Chief Executive Officer of
our Company pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
    
    
    4031.2
    
    Certificate of the Chief Financial Officer of
our Company pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
    
    
    4132.1
    
    Certificate of the Chief Executive Officer of
our Company pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
    
    
    4232.2
    
    Certificate of the Chief Financial Officer of
our Company pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
    
    
    43
 
 **
    
    Incorporated by reference. 39