UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 (Mark One)
 þ
    
    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended June 30, 2009
 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
    
    (I.R.S. Employerof incorporation or organization)
    
    Identification No.)
 300 Southwest Longview Boulevard, Lees Summit, Missouri
    
    64081(Address of principal executive offices)
    
    (Zip Code)
 
 (816) 347-8100
 N/A
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if smaller reporting company)
 o þ




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##### 



Item 1. Financial Statements
 HAWTHORN BANCSHARES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets (Unaudited)
 June 30,
    
    December 31,2009
    
    2008ASSETSLoans
    
    $
    1,010,088,483
    
    
    $
    1,009,103,532Allowances for loan losses
    
    
    (13,704,736
    )
    
    
    (12,666,546
    )Net loans
    
    
    996,383,747
    
    
    
    996,436,986Investment in available-for-sale securities, at fair value
    
    
    152,166,736
    
    
    
    149,400,929Investment in equity securities, at cost
    
    
    8,875,250
    
    
    
    8,875,250Total investment securities
    
    
    161,041,986
    
    
    
    158,276,179Federal funds sold and securities purchased under agreements to resell
    
    
    371,416
    
    
    
    104,393Cash and due from banks
    
    
    31,264,743
    
    
    
    53,723,075Premises and equipment  net
    
    
    37,593,367
    
    
    
    39,260,220Other real estate owned and repossessed assets
    
    
    7,584,212
    
    
    
    7,828,278Accrued interest receivable
    
    
    7,046,466
    
    
    
    7,476,093Mortgage servicing rights
    
    
    1,767,328
    
    
    
    1,171,225Intangible assets  net
    
    
    1,805,024
    
    
    
    2,130,097Cash surrender value  life insurance
    
    
    1,889,339
    
    
    
    1,852,902Other assets
    
    
    10,590,128
    
    
    
    11,439,419Total assets
    
    $
    1,257,337,756
    
    
    $
    1,279,698,867LIABILITIES AND STOCKHOLDERS EQUITYDeposits:Non-interest bearing demand
    
    $
    129,814,898
    
    
    $
    125,245,200Savings, interest checking and money market
    
    
    348,657,468
    
    
    
    342,626,702Time deposits $100,000 and over
    
    
    141,592,944
    
    
    
    142,972,489Other time deposits
    
    
    364,078,345
    
    
    
    344,451,998Total deposits
    
    
    984,143,655
    
    
    
    955,296,389Federal
funds purchased and securities sold under agreements to repurchase
    
    
    33,201,820
    
    
    
    29,138,623Subordinated notes
    
    
    49,486,000
    
    
    
    49,486,000Other borrowed money
    
    
    71,669,678
    
    
    
    129,057,483Accrued interest payable
    
    
    4,303,532
    
    
    
    3,847,415Other liabilities
    
    
    7,948,186
    
    
    
    6,454,574Total liabilities
    
    
    1,150,752,871
    
    
    
    1,173,280,484Stockholders equity:Preferred stock, $1000 par valueAuthorized and issued 30,255 shares
    
    
    28,126,530
    
    
    
    27,888,294Common stock, $1 par valueAuthorized 15,000,000 shares; issued 4,298,353 shares
    
    
    4,298,353
    
    
    
    4,298,353Surplus
    
    
    27,074,283
    
    
    
    25,144,323Retained earnings
    
    
    49,822,755
    
    
    
    51,598,678Accumulated other comprehensive income, net of tax
    
    
    779,782
    
    
    
    1,005,553Treasury stock; 161,858 shares, at cost
    
    
    (3,516,818
    )
    
    
    (3,516,818
    )Total stockholders equity
    
    
    106,584,885
    
    
    
    106,418,383Total liabilities and stockholders equity
    
    $
    1,257,337,756
    
    
    $
    1,279,698,867
  2




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##### 



HAWTHORN BANCSHARES, INC. AND SUBSIDIARIES
Consolidated Statements of Operations (Unaudited)
 For the Three Months Ended
    
    For the Six Months EndedJune 30,
    
    June 30,2009
    
    2008
    
    2009
    
    2008INTEREST INCOMEInterest and fees on loans
    
    $
    14,547,559
    
    
    $
    15,312,073
    
    
    $
    28,991,585
    
    
    $
    31,773,963Interest on debt securities:Taxable
    
    
    1,114,711
    
    
    
    1,324,771
    
    
    
    2,277,218
    
    
    
    2,724,289Nontaxable
    
    
    344,106
    
    
    
    404,297
    
    
    
    737,722
    
    
    
    881,797Interest on
federal funds sold and securities purchased under agreements to resell
    
    
    43
    
    
    
    10,266
    
    
    
    193
    
    
    
    44,226Interest on interest-bearing deposits
    
    
    17,617
    
    
    
    102
    
    
    
    32,009
    
    
    
    289Dividends on equity securities
    
    
    36,709
    
    
    
    69,797
    
    
    
    56,268
    
    
    
    122,408Total interest income
    
    
    16,060,745
    
    
    
    17,121,306
    
    
    
    32,094,995
    
    
    
    35,546,972INTEREST EXPENSEInterest on deposits:Savings, interest checking and money market
    
    
    746,897
    
    
    
    1,023,322
    
    
    
    1,696,847
    
    
    
    2,572,703Time deposit accounts $100,000 and over
    
    
    1,027,274
    
    
    
    1,464,699
    
    
    
    2,107,520
    
    
    
    3,086,017Other time deposit accounts
    
    
    2,839,268
    
    
    
    3,194,119
    
    
    
    5,779,149
    
    
    
    6,745,656Interest on
federal funds purchased and securities sold under agreements to repurchase
    
    
    18,083
    
    
    
    277,658
    
    
    
    40,570
    
    
    
    653,039Interest on subordinated notes
    
    
    628,057
    
    
    
    731,932
    
    
    
    1,290,103
    
    
    
    1,582,922Interest on other borrowed money
    
    
    783,763
    
    
    
    913,422
    
    
    
    1,632,946
    
    
    
    1,846,081Total interest expense
    
    
    6,043,342
    
    
    
    7,605,152
    
    
    
    12,547,135
    
    
    
    16,486,418Net interest income
    
    
    10,017,403
    
    
    
    9,516,154
    
    
    
    19,547,860
    
    
    
    19,060,554Provision for loan losses
    
    
    1,404,000
    
    
    
    1,300,000
    
    
    
    3,154,000
    
    
    
    2,950,000Net interest income after provision for loan losses
    
    
    8,613,403
    
    
    
    8,216,154
    
    
    
    16,393,860
    
    
    
    16,110,554NON-INTEREST INCOMEService charges on deposit accounts
    
    
    1,455,411
    
    
    
    1,584,673
    
    
    
    2,833,210
    
    
    
    2,999,900Trust department income
    
    
    183,672
    
    
    
    194,118
    
    
    
    385,319
    
    
    
    405,874Gain on sale of mortgage loans, net
    
    
    927,129
    
    
    
    301,175
    
    
    
    1,948,100
    
    
    
    552,794Other
    
    
    241,278
    
    
    
    241,805
    
    
    
    405,629
    
    
    
    728,611Total non-interest income
    
    
    2,807,490
    
    
    
    2,321,771
    
    
    
    5,572,258
    
    
    
    4,687,179INVESTMENT SECURITIES GAINS (LOSSES), NET
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,773NON-INTEREST EXPENSESalaries and employee benefits
    
    
    4,587,388
    
    
    
    4,484,595
    
    
    
    8,949,670
    
    
    
    9,178,314Occupancy expense, net
    
    
    555,158
    
    
    
    584,676
    
    
    
    1,163,435
    
    
    
    1,200,780Furniture and equipment expense
    
    
    724,273
    
    
    
    704,990
    
    
    
    1,287,931
    
    
    
    1,268,518FDIC insurance assessment
    
    
    983,001
    
    
    
    104,159
    
    
    
    1,663,782
    
    
    
    126,020Legal, examination, and professional fees
    
    
    312,624
    
    
    
    212,566
    
    
    
    673,494
    
    
    
    525,997Advertising and promotion
    
    
    318,447
    
    
    
    275,525
    
    
    
    599,718
    
    
    
    511,135Postage, printing, and supplies
    
    
    277,942
    
    
    
    347,359
    
    
    
    562,412
    
    
    
    634,650Processing expense
    
    
    838,031
    
    
    
    737,419
    
    
    
    1,692,779
    
    
    
    1,552,910Other
    
    
    1,064,613
    
    
    
    1,174,593
    
    
    
    2,062,988
    
    
    
    2,272,206Total non-interest expense
    
    
    9,661,477
    
    
    
    8,625,882
    
    
    
    18,656,209
    
    
    
    17,270,530Income before income taxes
    
    
    1,759,416
    
    
    
    1,912,043
    
    
    
    3,309,909
    
    
    
    3,529,976Less income taxes
    
    
    555,128
    
    
    
    594,583
    
    
    
    1,048,990
    
    
    
    1,125,641Net income
    
    
    1,204,288
    
    
    
    1,317,460
    
    
    
    2,260,919
    
    
    
    2,404,335Preferred stock dividends
    
    
    501,508
    
    
    
    
    
    
    
    994,612
    
    
    
    Net income available to common shareholders
    
    $
    702,780
    
    
    $
    1,317,460
    
    
    $
    1,266,307
    
    
    $
    2,404,335Basic earnings per share
    
    $
    0.17
    
    
    $
    0.32
    
    
    $
    0.31
    
    
    $
    0.58Diluted earnings per share
    
    $
    0.17
    
    
    $
    0.31
    
    
    $
    0.31
    
    
    $
    0.57
  3




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##### 



HAWTHORN BANCSHARES, INC. AND SUBSIDIARIES  Consolidated Statements of Cash Flows (Unaudited)
 Six months ended June 30,2009
    
    2008Cash flows from operating activities:Net income
    
    $
    2,260,919
    
    
    $
    2,404,335Adjustments to reconcile net income to net cash provided by operating activities:Provision for loan losses
    
    
    3,154,000
    
    
    
    2,950,000Depreciation expense
    
    
    1,052,040
    
    
    
    1,080,479Net
amortization (accretion) of debt securities, premiums, and discounts
    
    
    233,688
    
    
    
    (92,109
    )Amortization of intangible assets
    
    
    325,073
    
    
    
    364,357Stock based compensation expense
    
    
    68,537
    
    
    
    104,041Decrease in accrued interest receivable
    
    
    429,627
    
    
    
    1,394,252Increase in cash surrender value -life insurance
    
    
    (36,437
    )
    
    
    (25,335
    )Decrease (increase) in other assets
    
    
    446,833
    
    
    
    (417,834
    )Increase (decrease) in accrued interest payable
    
    
    456,117
    
    
    
    (163,618
    )Increase (decrease) in other liabilities
    
    
    1,907,262
    
    
    
    (626,810
    )Gain on sales of debt securities
    
    
    
    
    
    
    (2,773
    )Origination of mortgage loans for sale
    
    
    (102,485,000
    )
    
    
    (31,878,936
    )Proceeds from the sale of mortgage loans
    
    
    104,433,100
    
    
    
    32,431,727Gain on sale of mortgage loans, net
    
    
    (1,948,100
    )
    
    
    (552,791
    )Loss on sales and dispositions of premises and equipment
    
    
    153,859
    
    
    
    108,941Other real estate owned impairment charges
    
    
    62,535
    
    
    
    153,500Increase in deferred tax asset
    
    
    (144,340
    )
    
    
    (420,887
    )Other, net
    
    
    276,060
    
    
    
    7,852Net cash provided by operating activities
    
    
    10,645,773
    
    
    
    6,818,391Cash flows from investing activities:Net increase in loans
    
    
    (4,323,339
    )
    
    
    (62,011,250
    )Purchase of available-for-sale debt securities
    
    
    (71,446,366
    )
    
    
    (192,141,107
    )Proceeds from maturities of available-for-sale debt securities
    
    
    54,907,262
    
    
    
    132,855,429Proceeds from calls of available-for-sale debt securities
    
    
    13,130,000
    
    
    
    35,032,640Proceeds from sales of available-for-sale debt securities
    
    
    
    
    
    
    30,920,778Purchase of equity securities
    
    
    
    
    
    
    (3,934,100
    )Proceeds from sales of equity securities
    
    
    
    
    
    
    494,800Purchases of premises and equipment
    
    
    (365,831
    )
    
    
    (727,907
    )Proceeds from sales of premises and equipment
    
    
    574,815
    
    
    
    27,900Proceeds from sales of other real estate owned and repossessions
    
    
    1,514,552
    
    
    
    666,321Net cash used in investing activities
    
    
    (6,008,907
    )
    
    
    (58,816,496
    )Cash flows from financing activities:Net increase (decrease) in demand deposits
    
    
    4,569,698
    
    
    
    (13,787,134
    )Net increase (decrease) in interest-bearing transaction accounts
    
    
    6,030,766
    
    
    
    (9,219,913
    )Net increase (decrease) in time deposits
    
    
    18,246,802
    
    
    
    (1,590,563
    )Net increase
in federal funds purchased and securities sold under agreements to repurchase
    
    
    4,063,197
    
    
    
    20,887,646Proceeds from Federal Home Loan Bank advances
    
    
    
    
    
    
    192,300,000Repayment of Federal Home Loan Bank advances
    
    
    (57,387,805
    )
    
    
    (135,757,468
    )Cash dividends paid  preferred stock
    
    
    (613,504
    )
    
    
    Cash dividends paid  common stock
    
    
    (1,737,329
    )
    
    
    (1,749,087
    )Purchase of treasury stock
    
    
    
    
    
    
    (269,705
    )Net cash (used) in provided by financing activities
    
    
    (26,828,175
    )
    
    
    50,813,776Net decrease in cash and cash equivalents
    
    
    (22,191,309
    )
    
    
    (1,184,329
    )Cash and cash equivalents, beginning of year
    
    
    53,827,468
    
    
    
    35,873,385Cash and cash equivalents, end of period
    
    $
    31,636,159
    
    
    $
    34,689,056Supplemental disclosures of cash flow information:Cash paid during the year for:Interest
    
    $
    12,091,018
    
    
    $
    16,650,036Income taxes
    
    $
    
    
    
    $
    1,800,000Supplemental schedule of noncash investing and financing activities:Other real estate and repossessions acquired in settlement of loans
    
    $
    1,222,578
    
    
    $
    1,527,721Dividends declared
    
    $
    455,014
    
    
    $
    868,664Stock dividend declared
    
    $
    1,861,423
    
    
    $
    
  4




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##### 



(Unaudited)
 Basis of Presentation
    Loans and Allowance for Loan Losses
  June 30,
    
    December 31,2009
    
    2008Amount
    
    AmountCommercial, financial, and agricultural
    
    $
    153,749,734
    
    
    $
    153,386,062Real estate Construction
    
    
    119,865,619
    
    
    
    129,638,759Real estate Mortgage
    
    
    702,707,513
    
    
    
    692,530,252Installment loans to individuals
    
    
    33,765,617
    
    
    
    33,548,459Total loans
    
    $
    1,010,088,483
    
    
    $
    1,009,103,532
  5




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##### 



June 30,
    
    December 31,2009
    
    2008Nonperforming loans
    
    $
    29,436,078
    
    
    $
    24,866,085Loans classified as impaired:Impaired loans with reserves
    
    $
    24,318,061
    
    
    $
    18,482,148Impaired loans without reserves
    
    
    8,776,130
    
    
    
    11,451,625Total impaired loans
    
    $
    33,094,191
    
    
    $
    29,933,773Reserves for impaired loans
    
    $
    4,651,703
    
    
    $
    3,837,419Average balance of impaired loans during the period
    
    $
    32,877,111
    
    
    $
    20,645,519
  Three Months
    
    Six MonthsEnded June 30,
    
    Ended June 30,2009
    
    2008
    
    2009
    
    2008Amount
    
    Amount
    
    Amount
    
    AmountBalance at beginning of period
    
    $
    13,159,425
    
    
    $
    10,007,977
    
    
    $
    12,666,546
    
    
    $
    9,281,848Additions:Provision for loan losses
    
    
    1,404,000
    
    
    
    1,300,000
    
    
    
    3,154,000
    
    
    
    2,950,000Total additions
    
    
    1,404,000
    
    
    
    1,300,000
    
    
    
    3,154,000
    
    
    
    2,950,000Deductions:Loans charged off
    
    
    970,049
    
    
    
    325,736
    
    
    
    2,351,407
    
    
    
    1,394,111Less recoveries on loans
    
    
    (111,360
    )
    
    
    (148,791
    )
    
    
    (235,597
    )
    
    
    (293,295
    )Net loans charged off
    
    
    858,689
    
    
    
    176,945
    
    
    
    2,115,810
    
    
    
    1,100,816Balance at end of period
    
    $
    13,704,736
    
    
    $
    11,131,032
    
    
    $
    13,704,736
    
    
    $
    11,131,032
 6




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##### 



Investment in Debt and Equity Securities
  Gross
    
    GrossAmortized
    
    unrealized
    
    unrealizedcost
    
    gains
    
    losses
    
    Fair valueJune 30, 2009Government sponsored enterprises
    
    $
    46,317,458
    
    
    $
    893,542
    
    
    $
    27,229
    
    
    $
    47,183,771Asset-backed securities
    
    
    64,711,259
    
    
    
    1,750,507
    
    
    
    56,937
    
    
    
    66,404,829Obligations of states and political
subdivisions
    
    
    38,168,285
    
    
    
    515,620
    
    
    
    105,769
    
    
    
    38,578,136Total available for sale securities
    
    $
    149,197,002
    
    
    $
    3,159,669
    
    
    $
    189,935
    
    
    $
    152,166,736December 31, 2008Government sponsored enterprises
    
    $
    54,018,436
    
    
    $
    1,526,240
    
    
    $
    
    
    
    $
    55,544,676Asset-backed securities
    
    
    48,801,151
    
    
    
    1,292,982
    
    
    
    3,148
    
    
    
    50,090,985Obligations of states and political
subdivisions
    
    
    43,201,999
    
    
    
    755,091
    
    
    
    191,822
    
    
    
    43,765,268Total available for sale securities
    
    $
    146,021,586
    
    
    $
    3,574,313
    
    
    $
    194,970
    
    
    $
    149,400,929
  The Meaning of
Other-Than-Temporary Impairment and its Application to Certain Investments. Recognition and Presentation of Other-Than-Temporary
Impairments,
  For the three months
    
    For the six monthsended June 30,
    
    ended June 30,2009
    
    2008
    
    2009
    
    2008Proceeds from sales of available for sale securities
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    30,920,778Available for sale:Gains realized on sales
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,773Losses realized on sales
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other-than-temporary impairment recognized
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Investment securities gains (losses), net
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    2,773
 7




---



##### 



Fair Value Measurements
 Fair Value Measurement.
      Determining Fair Value
When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and
Identifying Transactions That Are Not Orderly
 Valuation methods for instruments measured at fair value on a recurring basis
  Available-for-sale securities
  8




---



##### 



Fair Value MeasurementsAt June 30, 2009 UsingQuoted Pricesin ActiveMarkets for
    
    Other
    
    SignificantIdentical
    
    Observable
    
    UnobservableFair Value
    
    Assets
    
    Inputs
    
    InputsDescription
    
    June 30, 2009
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)Available-for-Sale Securities
    
    $
    152,166,736
    
    
    $
    
    
    
    $
    152,166,736
    
    
    $
    
 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
  Fair Value MeasurementsAt June 30, 2009 UsingQuoted Pricesin ActiveMarkets for
    
    Other
    
    SignificantIdentical
    
    Observable
    
    UnobservableFair Value
    
    Assets
    
    Inputs
    
    Inputs
    
    Total GainsDescription
    
    June 30, 2009
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)
    
    (Losses)Loans
    
    $
    19,666,358
    
    
    $
    
    
    
    $
    19,666,358
    
    
    $
    
    
    
    $
    (880,400
    )Other real estate owned
and repossessed assets
    
    $
    7,584,212
    
    
    $
    
    
    
    $
    
    
    
    $
    7,584,212
    
    
    $
    (894,859
    )
 9




---



##### 



Earnings per Share
  For the Three Months Ended
    
    For the Six Months EndedJune 30,
    
    June 30,2009
    
    2008
    
    2009
    
    2008Net income, basic and diluted
    
    $
    1,204,288
    
    
    $
    1,317,460
    
    
    $
    2,260,919
    
    
    $
    2,404,335Less: preferred stock dividends
    
    
    501,508
    
    
    
    
    
    
    
    994,612
    
    
    
    Net income available to
common shareholders
    
    
    702,780
    
    
    
    1,317,460
    
    
    
    1,266,307
    
    
    
    2,404,335Average shares outstanding
    
    
    4,136,495
    
    
    
    4,166,638
    
    
    
    4,136,495
    
    
    
    4,168,066Effect of dilutive stock options
    
    
    
    
    
    
    21,269
    
    
    
    
    
    
    
    21,960Average shares outstanding including
dilutive stock options
    
    $
    4,136,495
    
    
    $
    4,187,907
    
    
    $
    4,136,495
    
    
    $
    4,190,026Net income per share, basic
    
    $
    0.17
    
    
    $
    0.32
    
    
    $
    0.31
    
    
    $
    0.58Net income per share, diluted
    
    
    0.17
    
    
    
    0.31
    
    
    
    0.31
    
    
    
    0.57
   Anti-dilutive shares
    
    2009
    
    2008Three months ended June 30,
    
    
    510,847
    
    
    
    32,157Six months ended June 30,
    
    
    510,847
    
    
    
    28,774
 10




---



##### 



Stock-Based Compensation
   WeightedWeighted
    
    Aggregate
    
    AverageAverage
    
    Intrinsic
    
    ContractualExercise
    
    Value
    
    TermOptions
    
    Price
    
    (000)
    
    (in years)Outstanding at January 1, 2009
    
    
    266,835
    
    
    $
    26.10Granted
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Forfeited
    
    
    (1,431
    )
    
    
    31.43Canceled
    
    
    
    
    
    
    Outstanding at June 30, 2009
    
    
    265,404
    
    
    $
    26.07
    
    
    $
    
    
    
    
    5.4Exercisable at June 30, 2009
    
    
    202,050
    
    
    $
    25.81
    
    
    $
    
    
    
    
    4.6
  Comprehensive Income
  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2009
    
    2008
    
    2009
    
    2008Net income
    
    $
    1,204,288
    
    
    $
    1,317,460
    
    
    $
    2,260,919
    
    
    $
    2,404,335Other comprehensive income:Unrealized loss on securities:Unrealized loss on debt and equity securities available-for-sale, net of tax
    
    
    (150,276
    )
    
    
    (1,424,109
    )
    
    
    (249,861
    )
    
    
    (708,750
    )Adjustment gain loss on sales and calls of
debt and equity securities, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,692
    )Defined benefit pension plans:Amortization of prior service cost included in
net periodic pension cost, net of tax
    
    
    12,045
    
    
    
    3,926
    
    
    
    24,090
    
    
    
    7,852Total other comprehensive income (loss)
    
    
    (138,231
    )
    
    
    (1,420,183
    )
    
    
    (225,771
    )
    
    
    (702,590
    )Comprehensive income (loss)
    
    $
    1,066,057
    
    
    $
    (102,723
    )
    
    $
    2,035,148
    
    
    $
    1,701,745
 11




---



##### 



Goodwill and Intangible Assets
   June 30, 2009
    
    December 31, 2008Gross
    
    
    
    
    
    
    
    
    
    GrossCarrying
    
    Accumulated
    
    Net
    
    Carrying
    
    Accumulated
    
    NetAmount
    
    Amortization
    
    Amount
    
    Amount
    
    Amortization
    
    AmountAmortizable intangible assets:Core deposit intangible
    
    $
    7,060,224
    
    
    $
    (5,255,200
    )
    
    $
    1,805,024
    
    
    $
    7,060,224
    
    
    $
    (4,930,127
    )
    
    $
    2,130,097Mortgage servicing rights
    
    
    3,266,618
    
    
    
    (1,499,290
    )
    
    
    1,767,328
    
    
    
    2,767,180
    
    
    
    (1,595,955
    )
    
    
    1,171,225Total amortizable intangible assets
    
    $
    10,326,842
    
    
    $
    (6,754,490
    )
    
    $
    3,572,352
    
    
    $
    9,827,404
    
    
    $
    (6,526,082
    )
    
    $
    3,301,322
  Core Deposit
    
    MortgageIntangible
    
    ServicingAsset
    
    RightsBalance at December 31, 2008
    
    $
    2,130,097
    
    
    $
    1,171,225Additions
    
    
    
    
    
    
    1,186,420Amortization
    
    
    (325,073
    )
    
    
    (590,317
    )Impairment charge
    
    
    
    
    
    
    Balance at June 30, 2009
    
    $
    1,805,024
    
    
    $
    1,767,328
   Core Deposit
    
    MortgageIntangible
    
    ServicingAsset
    
    Rights2009
    
    $
    301,038
    
    
    $
    269,0002010
    
    
    526,477
    
    
    
    383,0002011
    
    
    434,763
    
    
    
    292,0002012
    
    
    408,062
    
    
    
    222,0002013
    
    
    134,684
    
    
    
    170,0002014
    
    
    
    
    
    
    130,000
 12




---



##### 



Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,Aggregate amortization expense
    
    2009
    
    2008
    
    2009
    
    2008Core deposit intangible asset
    
    $
    156,530
    
    
    $
    175,363
    
    
    $
    325,073
    
    
    $
    364,357Mortgage servicing rights
    
    
    271,690
    
    
    
    182,277
    
    
    
    590,317
    
    
    
    347,524
 Income Taxes
   Employee Benefit Plans
  For the Three Months Ended
    
    For the Six Months EndedJune 30,
    
    June 30,2009
    
    2008
    
    2009
    
    2008Payroll taxes
    
    $
    279,697
    
    
    $
    295,259
    
    
    $
    608,997
    
    
    $
    676,100Medical plans
    
    
    386,819
    
    
    
    374,572
    
    
    
    757,364
    
    
    
    738,993401k match
    
    
    69,127
    
    
    
    72,684
    
    
    
    146,857
    
    
    
    150,768Pension plan
    
    
    229,000
    
    
    
    218,337
    
    
    
    458,000
    
    
    
    436,673Profit-sharing
    
    
    67,175
    
    
    
    24,337
    
    
    
    134,350
    
    
    
    103,815Other
    
    
    31,494
    
    
    
    70,980
    
    
    
    52,633
    
    
    
    101,582Total employee benefits
    
    $
    1,063,312
    
    
    $
    1,056,169
    
    
    $
    2,158,201
    
    
    $
    2,207,931
 13




---



##### 



Estimated
    
    Actual2009
    
    2008Service cost  benefits earned during the year
    
    $
    851,000
    
    
    $
    820,401Interest cost on projected benefit obligations
    
    
    509,000
    
    
    
    452,524Expected return on plan assets
    
    
    (523,000
    )
    
    
    (454,344
    )Amortization of prior service cost
    
    
    79,000
    
    
    
    78,628Amortization of net gains
    
    
    
    
    
    
    (42,802
    )Net priodic pension expense  Annual
    
    $
    916,000
    
    
    $
    854,407Pension expense  three months
ended June 30 (actual)
    
    $
    229,000
    
    
    $
    218,336Pension expense  six months
ended June 30 (actual)
    
    $
    458,000
    
    
    $
    436,673
  Preferred Stock
     14




---



##### 



Subsequent Event
  Disclosures about Fair Value of Financial Instruments
  Loans
    Investment in Debt and Equity 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
   June 30,
    
    December 31,2009
    
    2008Carrying
    
    Fair
    
    Carrying
    
    Fairamount
    
    value
    
    amount
    
    valueAssets:Loans
    
    $
    996,383,747
    
    
    $
    1,005,318,000
    
    
    $
    996,436,986
    
    
    $
    1,000,594,000Investment in debt and equity securities
    
    
    161,041,986
    
    
    
    161,041,986
    
    
    
    158,276,179
    
    
    
    158,276,179Federal fund sold and
securities purchased under
agreements to resell
    
    
    371,416
    
    
    
    371,416
    
    
    
    104,393
    
    
    
    104,393Cash and due from banks
    
    
    31,264,743
    
    
    
    31,264,743
    
    
    
    53,723,075
    
    
    
    53,723,075Mortgage servicing rights
    
    
    1,767,328
    
    
    
    2,890,000
    
    
    
    1,171,225
    
    
    
    2,455,000Accrued interest receivable
    
    
    7,046,466
    
    
    
    7,046,466
    
    
    
    7,476,093
    
    
    
    7,476,093$
    1,197,875,686
    
    
    $
    1,207,932,611
    
    
    $
    1,217,187,951
    
    
    $
    1,222,628,740Liabilities:Deposits:Demand
    
    $
    129,814,898
    
    
    $
    129,814,898
    
    
    $
    125,245,200
    
    
    $
    125,245,200NOW
    
    
    128,035,278
    
    
    
    128,035,278
    
    
    
    123,288,896
    
    
    
    123,288,896Savings
    
    
    46,436,256
    
    
    
    46,436,256
    
    
    
    43,370,172
    
    
    
    43,370,172Money market
    
    
    174,185,934
    
    
    
    174,185,934
    
    
    
    175,967,634
    
    
    
    175,967,634Time
    
    
    505,671,289
    
    
    
    517,613,000
    
    
    
    487,424,487
    
    
    
    494,427,000Federal funds purchased and
securities sold under
agreements to repurchase
    
    
    33,201,820
    
    
    
    33,201,820
    
    
    
    29,138,623
    
    
    
    29,138,623Subordinated notes
    
    
    49,486,000
    
    
    
    49,981,000
    
    
    
    49,486,000
    
    
    
    35,180,000Other borrowings
    
    
    71,669,678
    
    
    
    72,994,000
    
    
    
    129,057,483
    
    
    
    130,454,000Accrued interest payable
    
    
    4,303,532
    
    
    
    4,303,532
    
    
    
    3,847,415
    
    
    
    3,847,415$
    1,142,804,685
    
    
    $
    1,156,565,718
    
    
    $
    1,166,825,910
    
    
    $
    1,160,918,940
 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 Hawthorn and its
acquisition targets may be greater than expected,
    
    legislative or regulatory changes may adversely affect the business in which Hawthorn and
its subsidiaries are engaged, and
    
    changes may occur in the securities markets.
  Overview
   17




---



##### 



Critical Accounting Policies
  Allowance for Loan Losses
  Income Taxes
  Goodwill and Other Intangible Assets
 Accounting for Impairment or Disposal of Long-Lived Assets
 Goodwill and Other Intangible Assets,
 18




---



##### 



SELECTED CONSOLIDATED FINANCIAL DATA
  Selected Financial Data
 Three Months
    
    Six MonthsEnded
    
    EndedJune 30,
    
    June 30,(In thousands, except per share data)
    
    2009
    
    2008
    
    2009
    
    2008Per Share DataBasic earnings per common share
    
    $
    0.17
    
    
    $
    0.32
    
    
    $
    0.31
    
    
    $
    0.58Diluted earnings per common share
    
    
    0.17
    
    
    
    0.31
    
    
    
    0.31
    
    
    
    0.57Dividends paid on preferred stock
    
    
    378
    
    
    
    
    
    
    
    613
    
    
    
    Amortization of discount on preferred stock
    
    
    119
    
    
    
    
    
    
    
    238
    
    
    
    Dividends paid on common stock
    
    
    869
    
    
    
    873
    
    
    
    1,737
    
    
    
    1,749Book value per common share
    
    
    
    
    
    
    
    
    
    
    18.96
    
    
    
    26.68Market price common stock
    
    
    
    
    
    
    
    
    
    
    9.90
    
    
    
    25.27Selected Ratios(Based on average balance sheets)Return on average total assets
    
    
    0.38
    %
    
    
    0.43
    %
    
    
    0.36
    %
    
    
    0.39
    %Return on average common stockholders equity
    
    
    3.56
    %
    
    
    4.67
    %
    
    
    3.22
    %
    
    
    4.29
    %Average common stockholders equity to average total assets
    
    
    6.23
    %
    
    
    9.18
    %
    
    
    6.25
    %
    
    
    9.19
    %(Based on end-of-period data)Efficiency ratio (1)
    
    
    75.34
    %
    
    
    72.87
    %
    
    
    74.27
    %
    
    
    72.72
    %Period-end stockholders equity to period-end assets
    
    
    
    
    
    
    
    
    
    
    8.48
    %
    
    
    8.90
    %Period-end common stockholders equity to period-end assets
    
    
    
    
    
    
    
    
    
    
    6.24
    %
    
    
    8.90
    %Total risk-based capital ratio
    
    
    
    
    
    
    
    
    
    
    16.18
    
    
    
    13.17Tier 1 risk-based capital ratio
    
    
    
    
    
    
    
    
    
    
    13.68
    
    
    
    11.00Leverage ratio
    
    
    
    
    
    
    
    
    
    
    10.98
    
    
    
    8.87
 (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 Months
    
    Six MonthsEnded June 30,
    
    Ended June 30,(Dollars in thousands)
    
    2009
    
    2008
    
    $ Change
    
    % Change
    
    2009
    
    2008
    
    $ Change
    
    % ChangeNet interest income
    
    $
    10,017
    
    
    $
    9,516
    
    
    $
    501
    
    
    
    5.3
    %
    
    $
    19,548
    
    
    $
    19,060
    
    
    $
    488
    
    
    
    2.6
    %Provision for loan losses
    
    
    1,404
    
    
    
    1,300
    
    
    
    104
    
    
    
    8.0
    
    
    
    3,154
    
    
    
    2,950
    
    
    
    204
    
    
    
    6.9Noninterest income
    
    
    2,807
    
    
    
    2,322
    
    
    
    485
    
    
    
    20.9
    
    
    
    5,572
    
    
    
    4,687
    
    
    
    885
    
    
    
    18.9Investment securities gains, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    (3
    )
    
    
    (100.0
    )Noninterest expense
    
    
    9,661
    
    
    
    8,626
    
    
    
    1,035
    
    
    
    12.0
    
    
    
    18,656
    
    
    
    17,270
    
    
    
    1,386
    
    
    
    8.0Income before
income taxes
    
    
    1,759
    
    
    
    1,912
    
    
    
    (153
    )
    
    
    (8.0
    )
    
    
    3,310
    
    
    
    3,530
    
    
    
    (220
    )
    
    
    (6.2
    )Income taxes
    
    
    555
    
    
    
    595
    
    
    
    (40
    )
    
    
    (6.7
    )
    
    
    1,049
    
    
    
    1,126
    
    
    
    (77
    )
    
    
    (6.8
    )Net income
    
    $
    1,204
    
    
    $
    1,317
    
    
    $
    (113
    )
    
    
    (8.6
    )%
    
    $
    2,261
    
    
    $
    2,404
    
    
    $
    (143
    )
    
    
    (5.9
    )%Less: preferred dividends
    
    
    501
    
    
    
    
    
    
    
    501
    
    
    
    
    
    
    
    995
    
    
    
    
    
    
    
    995
    
    
    
    Net income available
to common shareholders
    
    $
    703
    
    
    $
    1,317
    
    
    $
    (614
    )
    
    
    (46.6
    )%
    
    $
    1,266
    
    
    $
    2,404
    
    
    $
    (1,138
    )
    
    
    (47.3
    )%
   20




---



##### 



Net Interest Income
  Average Balance Sheets
  Three Months Ended June 30,2009
    
    2008Interest
    
    Rate
    
    
    
    
    
    Interest
    
    RateAverage
    
    Income/
    
    Earned/
    
    Average
    
    Income/
    
    Earned/(dollars in thousands)
    
    Balance
    
    Expense(1)
    
    Paid(1)
    
    Balance
    
    Expense(1)
    
    Paid(1)ASSETSLoans: (2) (4)
    
    $
    1,008,344
    
    
    $
    14,571
    
    
    
    5.80
    %
    
    $
    947,031
    
    
    $
    15,351
    
    
    
    6.50
    %Investment in securities: (3)Government sponsored enterprises
    
    
    109,997
    
    
    
    1,092
    
    
    
    3.98
    
    
    
    115,832
    
    
    
    1,307
    
    
    
    4.53State and municipal
    
    
    37,844
    
    
    
    523
    
    
    
    5.54
    
    
    
    45,637
    
    
    
    601
    
    
    
    5.28Other
    
    
    8,875
    
    
    
    37
    
    
    
    1.67
    
    
    
    7,868
    
    
    
    70
    
    
    
    3.57Federal funds sold
    
    
    213
    
    
    
    
    
    
    
    
    
    
    
    2,082
    
    
    
    10
    
    
    
    1.93Interest bearing deposits
in other financial institutions
    
    
    29,797
    
    
    
    37
    
    
    
    0.50
    
    
    
    236
    
    
    
    
    
    
    
    Total interest earning assets
    
    
    1,195,070
    
    
    
    16,260
    
    
    
    5.46
    
    
    
    1,118,686
    
    
    
    17,339
    
    
    
    6.22All other assets
    
    
    88,850
    
    
    
    
    
    
    
    
    
    
    
    126,088Allowance for loan losses
    
    
    (13,311
    )
    
    
    
    
    
    
    
    
    
    
    (10,161
    )Total assets
    
    $
    1,270,609
    
    
    
    
    
    
    
    
    
    
    $
    1,234,613LIABILITIES AND STOCKHOLDERS EQUITYNOW accounts
    
    $
    137,531
    
    
    $
    298
    
    
    
    0.87
    %
    
    $
    116,570
    
    
    $
    252
    
    
    
    0.87
    %Savings
    
    
    46,116
    
    
    
    35
    
    
    
    0.30
    
    
    
    44,818
    
    
    
    57
    
    
    
    0.51Money market
    
    
    173,652
    
    
    
    434
    
    
    
    1.00
    
    
    
    165,779
    
    
    
    714
    
    
    
    1.73Time deposits of
$100,000 and over
    
    
    141,610
    
    
    
    1,027
    
    
    
    2.91
    
    
    
    141,899
    
    
    
    1,465
    
    
    
    4.14Other time deposits
    
    
    367,712
    
    
    
    2,839
    
    
    
    3.10
    
    
    
    311,178
    
    
    
    3,194
    
    
    
    4.12Total time deposits
    
    
    866,621
    
    
    
    4,633
    
    
    
    2.14
    
    
    
    780,244
    
    
    
    5,682
    
    
    
    2.92Federal funds purchased and
securities sold under agreements
to repurchase
    
    
    31,612
    
    
    
    18
    
    
    
    0.23
    
    
    
    49,434
    
    
    
    278
    
    
    
    2.26Subordinated notes
    
    
    49,486
    
    
    
    628
    
    
    
    5.09
    
    
    
    49,486
    
    
    
    732
    
    
    
    5.93Other borrowed money
    
    
    79,174
    
    
    
    784
    
    
    
    3.97
    
    
    
    110,563
    
    
    
    913
    
    
    
    3.31Total interest bearing liabilities
    
    
    1,026,893
    
    
    
    6,063
    
    
    
    2.37
    
    
    
    989,727
    
    
    
    7,605
    
    
    
    3.08Demand deposits
    
    
    125,834
    
    
    
    
    
    
    
    
    
    
    
    122,930Other liabilities
    
    
    10,727
    
    
    
    
    
    
    
    
    
    
    
    8,591Total liabilities
    
    
    1,163,454
    
    
    
    
    
    
    
    
    
    
    
    1,121,248Stockholders equity
    
    
    107,155
    
    
    
    
    
    
    
    
    
    
    
    113,365Total liabilities and
stockholders equity
    
    $
    1,270,609
    
    
    
    
    
    
    
    
    
    
    $
    1,234,613Net interest income (FTE)
    
    
    
    
    
    $
    10,197
    
    
    
    
    
    
    
    
    
    
    $
    9,734Net interest spread
    
    
    
    
    
    
    
    
    
    
    3.09
    %
    
    
    
    
    
    
    
    
    
    
    3.14
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    3.42
    %
    
    
    
    
    
    
    
    
    
    
    3.49
    %
 (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 $179,000 and $218,000 for the three months
ended June 30, 2009 and 2008, 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




---



##### 



Six Months Ended June 30,2009
    
    2008Interest
    
    Rate
    
    
    
    
    
    Interest
    
    RateAverage
    
    Income/
    
    Earned/
    
    Average
    
    Income/
    
    Earned/(dollars in thousands)
    
    Balance
    
    Expense(1)
    
    Paid(1)
    
    Balance
    
    Expense(1)
    
    Paid(1)ASSETSLoans: (2) (4)
    
    $
    1,009,251
    
    
    $
    29,038
    
    
    
    5.80
    %
    
    $
    932,415
    
    
    $
    31,838
    
    
    
    6.85
    %Investment in securities: (3)Government sponsored enterprises
    
    
    109,399
    
    
    
    2,235
    
    
    
    4.12
    
    
    
    119,838
    
    
    
    2,688
    
    
    
    4.50State and municipal
    
    
    39,825
    
    
    
    1,110
    
    
    
    5.62
    
    
    
    48,368
    
    
    
    1,300
    
    
    
    5.39Other
    
    
    8,875
    
    
    
    56
    
    
    
    1.27
    
    
    
    7,060
    
    
    
    123
    
    
    
    3.49Federal funds sold
    
    
    331
    
    
    
    
    
    
    
    
    
    
    
    3,327
    
    
    
    44
    
    
    
    2.65Interest bearing deposits
in other financial institutions
    
    
    23,734
    
    
    
    32
    
    
    
    0.27
    
    
    
    178
    
    
    
    
    
    
    
    Total interest earning assets
    
    
    1,191,415
    
    
    
    32,471
    
    
    
    5.50
    
    
    
    1,111,186
    
    
    
    35,993
    
    
    
    6.50All other assets
    
    
    88,800
    
    
    
    
    
    
    
    
    
    
    
    126,490Allowance for loan losses
    
    
    (13,021
    )
    
    
    
    
    
    
    
    
    
    
    (9,798
    )Total assets
    
    $
    1,267,194
    
    
    
    
    
    
    
    
    
    
    $
    1,227,878LIABILITIES AND STOCKHOLDERS EQUITYNOW accounts
    
    $
    140,585
    
    
    $
    634
    
    
    
    0.91
    %
    
    $
    115,854
    
    
    $
    626
    
    
    
    1.08
    %Savings
    
    
    45,258
    
    
    
    71
    
    
    
    0.32
    
    
    
    44,042
    
    
    
    115
    
    
    
    0.52Money market
    
    
    175,466
    
    
    
    992
    
    
    
    1.14
    
    
    
    169,959
    
    
    
    1,832
    
    
    
    2.16Time deposits of
$100,000 and over
    
    
    140,083
    
    
    
    2,108
    
    
    
    3.03
    
    
    
    142,389
    
    
    
    3,086
    
    
    
    4.35Other time deposits
    
    
    362,293
    
    
    
    5,779
    
    
    
    3.22
    
    
    
    312,583
    
    
    
    6,745
    
    
    
    4.33Total time deposits
    
    
    863,685
    
    
    
    9,584
    
    
    
    2.24
    
    
    
    784,827
    
    
    
    12,404
    
    
    
    3.17Federal funds purchased and
securities sold under agreements
to repurchase
    
    
    30,485
    
    
    
    40
    
    
    
    0.26
    
    
    
    50,664
    
    
    
    653
    
    
    
    2.58Subordinated notes
    
    
    49,486
    
    
    
    1,290
    
    
    
    5.26
    
    
    
    49,486
    
    
    
    1,583
    
    
    
    6.42Other borrowed money
    
    
    84,078
    
    
    
    1,633
    
    
    
    3.92
    
    
    
    100,308
    
    
    
    1,846
    
    
    
    3.69Total interest bearing liabilities
    
    
    1,027,734
    
    
    
    12,547
    
    
    
    2.46
    
    
    
    985,285
    
    
    
    16,486
    
    
    
    3.36Demand deposits
    
    
    122,247
    
    
    
    
    
    
    
    
    
    
    
    120,937Other liabilities
    
    
    10,001
    
    
    
    
    
    
    
    
    
    
    
    8,867Total liabilities
    
    
    1,159,982
    
    
    
    
    
    
    
    
    
    
    
    1,115,089Stockholders equity
    
    
    107,212
    
    
    
    
    
    
    
    
    
    
    
    112,789Total liabilities and
stockholders equity
    
    $
    1,267,194
    
    
    
    
    
    
    
    
    
    
    $
    1,227,878Net interest income (FTE)
    
    
    
    
    
    $
    19,924
    
    
    
    
    
    
    
    
    
    
    $
    19,507Net interest spread
    
    
    
    
    
    
    
    
    
    
    3.04
    %
    
    
    
    
    
    
    
    
    
    
    3.14
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    3.37
    %
    
    
    
    
    
    
    
    
    
    
    3.52
    %
 (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 $376,000 and $446,000 for the six
months ended June 30, 2009 and 2008, 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.
 Comparison of the three and six-month periods ended June 30, 2009 and 2008
 Three months ended June 30, 2009 and 2008
  22




---



##### 



Six months ended June 30, 2009 and 2008
      23




---



##### 



Rate and volume analysis
  Three Months Ended June 30,
    
    Six Months Ended June 30,2009 vs. 2008
    
    2009 vs. 2008Change due to
    
    
    
    
    
    Change due toTotal
    
    Average
    
    Average
    
    Total
    
    Average
    
    Average(Dollars In thousands)
    
    Change
    
    Volume
    
    Rate
    
    Change
    
    Volume
    
    RateInterest income on a fully
taxable equivalent basis:Loans: (1) (3)
    
    $
    (780
    )
    
    $
    954
    
    
    $
    (1,734
    )
    
    $
    (2,800
    )
    
    $
    2,482
    
    
    $
    (5,282
    )Investment securities:Government sponsored entities
    
    
    (215
    )
    
    
    (64
    )
    
    
    (151
    )
    
    
    (453
    )
    
    
    (224
    )
    
    
    (229
    )State and municipal(2)
    
    
    (78
    )
    
    
    (107
    )
    
    
    29
    
    
    
    (190
    )
    
    
    (237
    )
    
    
    47Other
    
    
    (33
    )
    
    
    8
    
    
    
    (41
    )
    
    
    (67
    )
    
    
    26
    
    
    
    (93
    )Federal funds sold
    
    
    (10
    )
    
    
    (5
    )
    
    
    (5
    )
    
    
    (44
    )
    
    
    (21
    )
    
    
    (23
    )Interest bearing deposits
in other financial institutions
    
    
    37
    
    
    
    
    
    
    
    37
    
    
    
    32
    
    
    
    
    
    
    
    32Total interest income
    
    
    (1,079
    )
    
    
    786
    
    
    
    (1,865
    )
    
    
    (3,522
    )
    
    
    2,026
    
    
    
    (5,548
    )Interest expense:NOW accounts
    
    
    46
    
    
    
    45
    
    
    
    1
    
    
    
    8
    
    
    
    122
    
    
    
    (114
    )Savings
    
    
    (22
    )
    
    
    2
    
    
    
    (24
    )
    
    
    (44
    )
    
    
    3
    
    
    
    (47
    )Money market
    
    
    (280
    )
    
    
    33
    
    
    
    (313
    )
    
    
    (840
    )
    
    
    57
    
    
    
    (897
    )Time deposits of 100,000 and over
    
    
    (438
    )
    
    
    (3
    )
    
    
    (435
    )
    
    
    (978
    )
    
    
    (49
    )
    
    
    (929
    )Other time deposits
    
    
    (355
    )
    
    
    519
    
    
    
    (874
    )
    
    
    (966
    )
    
    
    967
    
    
    
    (1,933
    )Federal funds purchased and
securities sold under agreements
to repurchase
    
    
    (260
    )
    
    
    (74
    )
    
    
    (186
    )
    
    
    (613
    )
    
    
    (188
    )
    
    
    (425
    )Subordinated notes
    
    
    (104
    )
    
    
    
    
    
    
    (104
    )
    
    
    (293
    )
    
    
    
    
    
    
    (293
    )Other borrowed money
    
    
    (129
    )
    
    
    (290
    )
    
    
    161
    
    
    
    (213
    )
    
    
    (312
    )
    
    
    99Total interest expense
    
    
    (1,542
    )
    
    
    232
    
    
    
    (1,774
    )
    
    
    (3,939
    )
    
    
    600
    
    
    
    (4,539
    )Net interest income on a fully
taxable equivalent basis
    
    $
    463
    
    
    $
    554
    
    
    $
    (91
    )
    
    $
    417
    
    
    $
    1,426
    
    
    $
    (1,009
    )
 (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 $179,000 and $218,000 for the second
quarter and $376,000 and $446,000 for the six months ended June 30, 2009 and 2008,
respectively.(2)
    
    Non-accruing loans are included in the average amounts outstanding.(3)
    
    Fees and costs on loans are included in interest income.
  24




---



##### 



Provision for loan losses
    Non-interest Income and Expense
 Non-interest income
 Three Months
    
    Six MonthsEnded June 30,
    
    Ended June 30,(Dollars in thousands)
    
    2009
    
    2008
    
    $ Change
    
    % Change
    
    2009
    
    2008
    
    $ Change
    
    % ChangeNon-interest IncomeService charges on deposit
accounts
    
    $
    1,455
    
    
    $
    1,585
    
    
    $
    (130
    )
    
    
    (8.2)
    %
    
    $
    2,833
    
    
    $
    3,000
    
    
    $
    (167
    )
    
    
    (5.6)
    %Trust department income
    
    
    184
    
    
    
    194
    
    
    
    (10
    )
    
    
    (5.2
    )
    
    
    385
    
    
    
    406
    
    
    
    (21
    )
    
    
    (5.2
    )Gains on sales of mortgage
loans
    
    
    927
    
    
    
    301
    
    
    
    626
    
    
    
    208.0
    
    
    
    1,948
    
    
    
    553
    
    
    
    1,395
    
    
    
    252.3Other
    
    
    241
    
    
    
    242
    
    
    
    (1
    )
    
    
    (0.4
    )
    
    
    406
    
    
    
    728
    
    
    
    (322
    )
    
    
    (44.2
    )Total non-interest income
    
    $
    2,807
    
    
    $
    2,322
    
    
    $
    485
    
    
    
    20.9
    %
    
    $
    5,572
    
    
    $
    4,687
    
    
    $
    885
    
    
    
    18.9
    %Investment securities
gains (losses), net
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    
    
    %
    
    $
    
    
    
    $
    3
    
    
    $
    (3
    )
    
    
    (100.0)
    %Non-interest income as a
% of total revenue *
    
    
    21.9
    %
    
    
    19.6
    %
    
    
    
    
    
    
    
    
    
    
    22.2
    %
    
    
    19.7
    %Total revenue per full time
equivalent employee
    
    $
    43.9
    
    
    $
    40.3
    
    
    $
    
    
    
    
    
    
    
    $
    86.2
    
    
    $
    81.0
    
    
    $
 *
    
    Total revenue is calculated as net interest income plus non-interest income
 25




---



##### 



Three Months Ended June 30, 2009 and 2008
  Six Months Ended June 30, 2009 and 2008
  Non-interest expense
 Three Months
    
    Six MonthsEnded June 30,
    
    Ended June 30,(Dollars in thousands)
    
    2009
    
    2008
    
    $ Change
    
    % Change
    
    2009
    
    2008
    
    $ Change
    
    % ChangeNon-interest ExpenseSalary expense
    
    $
    3,524
    
    
    $
    3,429
    
    
    $
    95
    
    
    
    2.8
    %
    
    $
    6,792
    
    
    $
    6,970
    
    
    $
    (178
    )
    
    
    (2.6)
    %Employee benefits
    
    
    1,063
    
    
    
    1,056
    
    
    
    7
    
    
    
    0.7
    
    
    
    2,158
    
    
    
    2,208
    
    
    
    (50
    )
    
    
    (2.3
    )Occupancy expense, net
    
    
    555
    
    
    
    585
    
    
    
    (30
    )
    
    
    (5.1
    )
    
    
    1,163
    
    
    
    1,201
    
    
    
    (38
    )
    
    
    (3.2
    )Furniture and equipment expense
    
    
    724
    
    
    
    705
    
    
    
    19
    
    
    
    2.7
    
    
    
    1,288
    
    
    
    1,269
    
    
    
    19
    
    
    
    1.5FDIC insurance assessment
    
    
    983
    
    
    
    104
    
    
    
    879
    
    
    NM
    
    
    1,664
    
    
    
    126
    
    
    
    1,538
    
    
    NMLegal, examination, and
professional fees
    
    
    313
    
    
    
    213
    
    
    
    100
    
    
    
    46.9
    
    
    
    673
    
    
    
    526
    
    
    
    147
    
    
    
    27.9Advertising and promotion
    
    
    318
    
    
    
    275
    
    
    
    43
    
    
    
    15.6
    
    
    
    600
    
    
    
    511
    
    
    
    89
    
    
    
    17.4Postage, printing, and supplies
    
    
    278
    
    
    
    347
    
    
    
    (69
    )
    
    
    (19.9
    )
    
    
    562
    
    
    
    635
    
    
    
    (73
    )
    
    
    (11.5
    )Processing expense
    
    
    838
    
    
    
    737
    
    
    
    101
    
    
    
    13.7
    
    
    
    1,693
    
    
    
    1,553
    
    
    
    140
    
    
    
    9.0Other
    
    
    1,065
    
    
    
    1,175
    
    
    
    (110
    )
    
    
    (9.4
    )
    
    
    2,063
    
    
    
    2,272
    
    
    
    (209
    )
    
    
    (9.2
    )Total non-interest expense
    
    $
    9,661
    
    
    $
    8,626
    
    
    $
    1,035
    
    
    
    12.0
    %
    
    $
    18,656
    
    
    $
    17,271
    
    
    $
    1,385
    
    
    
    8.0
    %Efficiency ratio
    
    
    75.3
    %
    
    
    72.6
    %
    
    
    
    
    
    
    
    
    
    
    74.2
    %
    
    
    72.7
    %Salaries and benefits as a %
of total non-interest expense
    
    
    47.5
    %
    
    
    52.0
    %
    
    
    
    
    
    
    
    
    
    
    48.0
    %
    
    
    53.1
    %Number of full-time
equivalent employees
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    356
    
    
    
    351
 Three Months Ended June 30, 2009 and 2008
  26




---



##### 



Six Months Ended June 30, 2009 and 2008
  Income taxes
  Lending and Credit Management
    June 30,
    
    December 31,(In thousands)
    
    2009
    
    2008Amount
    
    %
    
    Amount
    
    %Commercial, financial, and agricultural
    
    $
    153,750
    
    
    
    15.2
    %
    
    $
    153,386
    
    
    
    15.2
    %Real estate Construction
    
    
    119,866
    
    
    
    12.9
    
    
    
    129,639
    
    
    
    12.8Real estate Mortgage
    
    
    702,707
    
    
    
    69.6
    
    
    
    692,530
    
    
    
    68.6Installment loans to individuals
    
    
    33,765
    
    
    
    3.3
    
    
    
    33,548
    
    
    
    3.3Total loans
    
    $
    1,010,088
    
    
    
    100.0
    %
    
    $
    1,009,103
    
    
    
    100.0
    %
  27




---



##### 



Accounting by Creditors for Impairment of a Loan,
 Allowance for Loan Losses
  28




---



##### 



Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,(Dollars in thousands)
    
    2009
    
    2008
    
    2009
    
    2008Provision for loan losses
    
    
    1,404
    
    
    
    1,300
    
    
    
    3,154
    
    
    
    2,950Net loan charge-offs:Commercial, financial, and agricultural
    
    
    143
    
    
    
    (26
    )
    
    
    260
    
    
    
    790Real estate  construction
    
    
    374
    
    
    
    109
    
    
    
    850
    
    
    
    92Real estate  mortgage
    
    
    252
    
    
    
    
    
    
    
    898
    
    
    
    63Installment loans to individuals
    
    
    90
    
    
    
    94
    
    
    
    108
    
    
    
    156Total net loan charge-offs
    
    
    859
    
    
    
    177
    
    
    
    2,116
    
    
    
    1,101
   June 30,
    
    December 31,(Dollars in thousands)
    
    2009
    
    2008Nonaccrual loans:Commercial, financial, and agricultural
    
    $
    1,902
    
    
    $
    2,071Real estate  construction
    
    
    11,297
    
    
    
    10,347Real estate  mortgage
    
    
    10,755
    
    
    
    7,850Installment loans to individuals
    
    
    133
    
    
    
    119Total nonaccrual loans
    
    
    24,087
    
    
    
    20,387Loans contractually past  due 90 days
or more and still accruing:Commercial, financial, and agricultural
    
    
    108
    
    
    
    140Real estate  construction
    
    
    
    
    
    
    52Real estate  mortgage
    
    
    891
    
    
    
    547Installment loans to individuals
    
    
    7
    
    
    
    4Total loans contractually past -due
90 days or more and still accruing
    
    
    1,006
    
    
    
    743Restructured troubled loans
    
    
    4,343
    
    
    
    3,736Total nonperforming loans
    
    
    29,436
    
    
    
    24,866Other real estate and repossessions
    
    
    7,584
    
    
    
    7,828Total nonperforming assets
    
    $
    37,020
    
    
    $
    32,694Loans
    
    $
    1,010,088
    
    
    
    1,009,103Allowance for loan losses to loans
    
    
    1.36
    %
    
    
    1.26
    %Nonperforming loans to loans
    
    
    2.91
    %
    
    
    2.46
    %Allowance for loan losses to nonperforming loans
    
    
    46.56
    %
    
    
    50.94
    %Nonperforming assets to loans and foreclosed assets
    
    
    3.64
    %
    
    
    3.21
    %
  29




---



##### 



June 30,
    
    December 31,2009
    
    2008Nonperforming loans
    
    $
    29,436,078
    
    
    $
    24,866,085Loans classified as impaired:Impaired loans with reserves
    
    $
    24,318,061
    
    
    $
    18,482,148Impaired loans without reserves
    
    
    8,776,130
    
    
    
    11,451,625Total impaired loans
    
    $
    33,094,191
    
    
    $
    29,933,773Reserves for impaired loans
    
    $
    4,651,703
    
    
    $
    3,837,419Average balance of impaired loans during the period
    
    $
    32,877,111
    
    
    $
    20,645,519
 Accounting by Creditors for Impairment of a Loan,
  30




---



##### 



Financial Condition
   31




---



##### 



Liquidity and Capital Resources
 Liquidity Management
   32




---



##### 



June 30,
    
    December 31,(dollars in thousands)
    
    2009
    
    2008Liquid assets:Federal funds sold
    
    $
    371
    
    
    $
    104Federal Reserve  excess reserves
    
    
    7,639
    
    
    
    31,099Available for sale investments securities
    
    
    152,167
    
    
    
    149,401Total
    
    
    160,177
    
    
    
    180,604
  June 30,(dollars in thousands)
    
    2009Investment securities pledged for the purpose of securing:Federal Reserve Bank borrowings
    
    $
    3,524Repurchase agreements
    
    
    41,460Other Deposits
    
    
    84,784Total pledged, at fair value
    
    
    129,768
   June 30,
    
    December 31,(dollars in thousands)
    
    2009
    
    2008Core deposit base:Non-interest bearing demand
    
    $
    129,815
    
    
    $
    125,245Interest checking
    
    
    128,035
    
    
    
    123,289Savings and money market
    
    
    220,622
    
    
    
    219,338Total
    
    
    478,472
    
    
    
    467,872
 33




---



##### 



June 30,
    
    December 31,(dollars in thousands)
    
    2009
    
    2008Borrowings:Securities sold under agreements to repurchase
    
    $
    33,202
    
    
    $
    29,139FHLB advances
    
    
    71,669
    
    
    
    129,057Subordinated notes
    
    
    49,486
    
    
    
    49,486Total
    
    
    154,357
    
    
    
    207,682
   June 30, 2009Federal(dollars in thousands)
    
    FHLB
    
    Reserve
    
    OtherCollateral value pledged
    
    $
    313,486
    
    
    $
    3,386
    
    
    $
    5,417Advances outstanding
    
    
    (71,669
    )
    
    
    
    
    
    
    Letters of credit issued
    
    
    (100
    )
    
    
    
    
    
    
    Total
    
    
    241,717
    
    
    
    3,386
    
    
    
    5,417
 Sources and Uses of Funds
  34




---



##### 



Regulatory Capital
    Minimum
    
    Well-CapitalizedActual
    
    Capital requirements
    
    Capital RequirementsAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    RatioJune 30, 2009Total capital (to risk-weighted assets):Company
    
    $
    164,748
    
    
    
    16.18
    %
    
    $
    81,448
    
    
    
    8.00
    %
    
    
    
    
    
    
    Hawthorn Bank
    
    
    130,206
    
    
    
    13.01
    
    
    
    80,044
    
    
    
    8.00
    
    
    $
    100,054
    
    
    
    10.00
    %Tier I capital (to risk-weighted assets):Company
    
    $
    139,268
    
    
    
    13.68
    
    
    $
    40,724
    
    
    
    4.00
    %
    
    
    
    
    
    
    Hawthorn Bank
    
    
    117,690
    
    
    
    11.76
    
    
    
    40,022
    
    
    
    4.00
    
    
    $
    60,033
    
    
    
    6.00
    %Tier I capital (to adjusted average assets):Company
    
    $
    139,268
    
    
    
    10.98
    
    
    $
    38,043
    
    
    
    3.00
    %
    
    
    
    
    
    
    Hawthorn Bank
    
    
    117,690
    
    
    
    9.43
    
    
    
    37,425
    
    
    
    3.00
    
    
    $
    62,375
    
    
    
    5.00
    %
 Minimum
    
    Well-CapitalizedActual
    
    Capital requirements
    
    Capital RequirementsAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    RatioDecember 31, 2008Total capital (to risk-weighted assets):Company
    
    $
    163,949
    
    
    
    16.01
    %
    
    $
    81,912
    
    
    
    8.00
    %
    
    
    
    
    
    
    Hawthorn Bank
    
    
    125,510
    
    
    
    12.35
    
    
    
    81,310
    
    
    
    8.00
    
    
    $
    101,638
    
    
    
    10.00
    %Tier I capital (to risk-weighted assets):Company
    
    $
    138,756
    
    
    
    13.55
    
    
    $
    40,956
    
    
    
    4.00
    %
    
    
    
    
    
    
    Hawthorn Bank
    
    
    113,158
    
    
    
    11.13
    
    
    
    40,655
    
    
    
    4.00
    
    
    $
    60,983
    
    
    
    6.00
    %Tier I capital (to adjusted average assets):Company
    
    $
    138,756
    
    
    
    10.80
    
    
    $
    38,543
    
    
    
    3.00
    %
    
    
    
    
    
    
    Hawthorn Bank
    
    
    113,158
    
    
    
    8.82
    
    
    
    38,497
    
    
    
    3.00
    
    
    $
    64,162
    
    
    
    5.00
    %
 35




---



##### 



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
    
    $
    38,558
    
    
    $
    10,711
    
    
    $
    7,694
    
    
    $
    15,960
    
    
    $
    10,133
    
    
    $
    77,986
    
    
    $
    161,042Interest-bearing deposits
    
    
    7,663
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,663Federal funds sold and securities
purchased under agreements to resell
    
    
    371
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    371Loans
    
    
    558,561
    
    
    
    135,041
    
    
    
    127,894
    
    
    
    98,290
    
    
    
    53,004
    
    
    
    37,298
    
    
    
    1,010,088Total
    
    $
    605,153
    
    
    $
    145,752
    
    
    $
    135,588
    
    
    $
    114,250
    
    
    $
    63,137
    
    
    $
    115,284
    
    
    $
    1,179,164LIABILITIESSavings, Now deposits
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    118,387
    
    
    $
    
    
    
    $
    
    
    
    $
    118,387Rewards checking, Super Now,
money market deposits
    
    
    230,600
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    230,600Time deposits
    
    
    374,328
    
    
    
    70,146
    
    
    
    31,711
    
    
    
    4,819
    
    
    
    24,338
    
    
    
    
    
    
    
    505,342Federal funds purchased and securities
sold under agreements to repurchase
    
    
    33,202
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    33,202Subordinated notes
    
    
    49,486
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    49,486Other borrowed money
    
    
    17,359
    
    
    
    38,727
    
    
    
    15,385
    
    
    
    193
    
    
    
    6
    
    
    
    
    
    
    
    71,670Total
    
    $
    704,975
    
    
    $
    108,873
    
    
    $
    47,096
    
    
    $
    123,399
    
    
    $
    24,344
    
    
    $
    
    
    
    $
    1,008,687Interest-sensitivity GAPPeriodic GAP
    
    $
    (99,822
    )
    
    $
    36,879
    
    
    $
    88,492
    
    
    $
    (9,149
    )
    
    $
    38,793
    
    
    $
    115,284
    
    
    $
    170,477Cumulative GAP
    
    $
    (99,822
    )
    
    $
    (62,943
    )
    
    $
    25,549
    
    
    $
    16,400
    
    
    $
    55,193
    
    
    $
    170,477
    
    
    $
    170,477Ratio of interest-earnings
assets to interest-bearing liabilitiesPeriodic GAP
    
    
    0.86
    
    
    
    1.34
    
    
    
    2.88
    
    
    
    0.93
    
    
    
    2.59
    
    
    NM
    
    
    
    1.17Cumulative GAP
    
    
    0.86
    
    
    
    0.92
    
    
    
    1.03
    
    
    
    1.02
    
    
    
    1.05
    
    
    
    1.17
    
    
    
    1.17
 36




---



##### 



Item 4. Controls and Procedures
   Impact of New Accounting Pronouncements
 Employers Disclosures about Postretirement Benefit Plan Assets, Employers Disclosures
about Pensions and Other Postretirement Benefits
 Determining Fair Value When the
Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and
Identifying Transactions That Are Not Orderly
 Recognition and Presentation of
Other-than-Temporary Impairment
 37




---



##### 



Interim Disclosures about Fair
Value of Financial Statements
 Subsequent Event, .
 Accounting for Transfers of Financial Assets, an
Amendment of SFAS No. 140  Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities .
 Amendments to FASB Interpretation No. 46(R) . Consolidation of Variable Interest Entities,
 38




---



##### 



The FASB Accounting Standards
Codification TM and the Hierarchy of Generally Accepted Accounting Principles, a
Replacement of SFAS No. 162  The Hierarchy of Generally Accepted Accounting Principles . TM
 39




---



##### 



PART II  OTHER INFORMATION
 Item 1. Legal Proceedings
    
    
    
    None
 Item 1A. Risk Factors
    
    
    
    None
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    
    None
 Item 3. Defaults Upon Senior Securities
    
    
    
    None
    Withhold 
AuthorityFor
    
    or Against
    
    AbstentionsElection of Directors:Charles G. Dudenhoeffer, Jr.
    
    
    3,126,277
    
    
    
    144,734
    
    
    
    n/aGus S. Wetzel, II
    
    
    2,940,981
    
    
    
    282,238
    
    
    
    n/aAdvisory Approval of Executive
Compensation
    
    
    2,791,797
    
    
    
    374,591
    
    
    
    149,962Ratification of KPMG LLP as independent
registered public accounting firm
    
    
    3,032,114
    
    
    
    218,184
    
    
    
    68,521
   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
 40




---



##### 



Exhibit No.
    
    DescriptionCompany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
 41




---



##### 



SIGNATURES
  HAWTHORN BANCSHARES, INC.Date/s/ James E. SmithAugust 10, 2009
    
    James E. Smith, Chairman of the Board 

and Chief Executive Officer (Principal Executive Officer)/s/ Richard G. RoseAugust 10, 2009
    
    Richard G. Rose, Chief Financial Officer
 (Principal Financial
Officer and Principal Accounting Officer)
 42




---



##### 



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
    
    4431.2
    
    Certificate of the Chief Financial Officer of
our Company pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
    
    4532.1
    
    Certificate of the Chief Executive Officer of
our Company pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
    
    4632.2
    
    Certificate of the Chief Financial Officer of
our Company pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
    
    47
 
 **
    
    Incorporated by reference. 43