11-K 1 t1701830_11k.htm FORM 11-K

 

 

 

UNITED STATES

 

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 11-K

 

(Mark One):

 

x ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE

ACT OF 1934.

 

For the fiscal year ended December 31, 2016.

 

OR

 

¨ TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934.

 

For the transition period from ________ to __________

 

Commission file number 0-23636

 

A. Full title of the plan and the address of the plan, if different from that of the issuer named below:

 

Hawthorn Bancshares, Inc. Profit Sharing 401(k) Plan

 

B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office:

 

Hawthorn Bancshares, Inc.

132 East High Street, Box 688

Jefferson City, MO 65102

(573) 761-6100

 

 

 

 

 

Hawthorn Bancshares, Inc.

Profit Sharing 401(k) Plan

Years Ended December 31, 2016 and 2015

 

Contents  
   
  Page
   
Report of Independent Registered Public Accounting Firm 1
   
Financial Statements  
   
Statements of Net Assets Available for Benefits 2
   
Statements of Changes in Net Assets Available for Benefits 3
   
Notes to Financial Statements 4
   
Supplemental Schedule  
   
Schedule H, Line 4i – Schedule of Assets (Held at End of Year) 9
   
Consent of Independent Registered Public Accounting Firm  
   
Exhibit 23.1  

 

 

  

Report of Independent Registered Public Accounting Firm

 

Retirement and Investment Committee

and Audit Committee

Hawthorn Bancshares, Inc.

Profit Sharing 401(k) Plan

Jefferson City, Missouri

 

We have audited the accompanying statements of net assets available for benefits of Hawthorn Bancshares, Inc. Profit Sharing 401(k) Plan as of December 31, 2016 and 2015, and the related statements of changes in net assets available for benefits for the years then ended. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Plan is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing auditing procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Plan’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits also included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of Hawthorn Bancshares, Inc. Profit Sharing 401(k) Plan as of December 31, 2016 and 2015, and the changes in its net assets available for benefits for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

 

The supplemental information in the accompanying Schedule of Assets (Held at End of Year) has been subjected to audit procedures performed in conjunction with the audit of the Plan’s financial statements. The supplemental information is presented for the purpose of additional analysis and is not a required part of the financial statements but includes supplemental information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. The supplemental information is the responsibility of the Plan’s management. Our audit procedures included determining whether the supplemental information reconciles to the financial statements or the underlying accounting and other records, as applicable, and performing procedures to test the completeness and accuracy of the information presented in the supplemental information. In forming our opinion on the supplemental information in the accompanying schedule, we evaluated whether the supplemental information, including its form and content, is presented in conformity with the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. In our opinion, the supplemental information in the accompanying schedule is fairly stated, in all material respects, in relation to the financial statements as a whole.

 

/s/ BKD, LLP

 

St. Louis, Missouri

June 13, 2017

 

 

 

Hawthorn Bancshares, Inc.

Profit Sharing 401(k) Plan

Statements of Net Assets Available for Benefits

December 31, 2016 and 2015

 

   2016   2015 
         
Investments, At Fair Value  $25,652,666   $23,505,016 
           
Receivable          
Employer's contribution   479,000    563,000 
           
Net Assets Available for Benefits  $26,131,666   $24,068,016 

 

See accompanying notes to the financial statements.

 

 2

 

Hawthorn Bancshares, Inc.

Profit Sharing 401(k) Plan

Statements of Changes in Net Assets Available for Benefits

Years Ended December 31, 2016 and 2015

 

   2016   2015 
Additions to Net Assets Attributable to:          
Investment Income          
Net appreciation (depreciation) in fair value of investments  $1,217,688   $(110,996)
Interest and dividends   820,899    1,063,982 
Total investment income   2,038,587    952,986 
           
Contributions          
Employer   825,493    887,617 
Participants   735,087    699,934 
Rollovers   12,640    33,454 
           
Total contributions   1,573,220    1,621,005 
           
Total additions   3,611,807    2,573,991 
           
Deductions from Net Assets Attributable to:          
Benefits paid to participants   1,548,157    1,224,828 
           
Net increase   2,063,650    1,349,163 
           
Net Assets Available for Benefits:          
Beginning of Year   24,068,016    22,718,853 
End of Year  $26,131,666   $24,068,016 

 

See accompanying notes to the financial statements.

 

 3

 

Hawthorn Bancshares, Inc.

Profit Sharing 401(k) Plan

Notes to Financial Statements

Years Ended December 31, 2016 and 2015

 

(1)Description of the Plan

 

The following description of the Hawthorn Bancshares, Inc. Profit Sharing 401(k) Plan (“Plan”) provides only general information. Participants should refer to the Plan Document and Summary Plan Description for a more complete description of the Plan’s provisions, which are available from the Plan Administrator.

 

General

 

The Plan is a defined contribution plan sponsored by Hawthorn Bancshares, Inc. and its subsidiaries (collectively the “Company”) for the benefit of the employees of the Company who have at least 90 days of service and are age 21 or older. An eligible employee becomes a participant in the Plan on the first day of each quarter of the Plan year. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). Capital Bank and Trust Company is the trustee of the Plan.

 

Contributions

 

The Company profit-sharing contributions are discretionary as determined by the Company’s Board of Directors. All employer contributions are allocated to a participant’s account based on that participant’s compensation compared to the total compensation of all eligible participants. In addition, the Company matches the participant’s salary deferral into the plan dollar for dollar up to 3 percent of the participant’s annual salary. All contributions are made conditioned upon their deductibility for federal income tax purposes.

 

Participants have the option to make voluntary contributions to the Plan up to the annual limit set by the Internal Revenue Service (IRS).

 

Effective July 1, 2016, an automatic deferral feature was added to the Plan. Accordingly, the Company will automatically withhold a portion of the participant’s compensation from each payroll period and contribute that amount to the Plan as a pre-tax 401(k) deferral unless a contrary election is made.

 

Participant Investment Account Options

 

Investment account options available include various mutual funds and common stock of the Company. Each participant has the option of directing his/her contributions into any of the separate investment accounts and may change the allocation daily.

 

Participant Accounts

 

Each participant’s account is credited with the participant’s contribution, the Company’s contribution, plan earnings and forfeitures of terminated participants’ nonvested accounts. Allocations are based on participant earnings. The benefits to which a participant is entitled is the benefit that can be provided from the participant’s vested account.

 

Vesting

 

Participant contributions and earnings thereon are 100 percent vested at all times. Employer contributions and earnings thereon vest according to the following schedule:

 

 4

 

Hawthorn Bancshares, Inc.

Profit Sharing 401(k) Plan

Notes to Financial Statements

Years Ended December 31, 2016 and 2015

 

Length of Service  Percent Vested 
      
After 1 Year   0%
After 2 Years   20%
After 3 Years   40%
After 4 Years   60%
After 5 Years   100%

 

Forfeited accounts

 

At the time a participant terminates his/her employment, the nonvested portion of the employer contribution account is forfeited and allocated to eligible participants on a pro rata allocation method. At December 31, 2016 and 2015, plan assets include $42,017 and $19,302, respectively, of forfeitures to be allocated to eligible participants on a pro rata allocation method.

 

Payment of Benefits

 

Under the terms of the Plan, participants are entitled to receive the amount credited to their accounts upon normal retirement at the age of 65 or disability retirement. Participants terminating employment prior to retirement are entitled to receive that portion of their account that is vested. In the event of death, the participant’s account becomes fully vested and the balance is paid to the designated beneficiary. Distributions under the Plan are payable in a lump sum or through installments.

 

(2)Summary of Significant Accounting Policies

 

Basis of Accounting

 

The accompanying financial statements are prepared on the accrual basis of accounting except for benefits, which are recorded upon distribution, and present the net assets available for plan benefits and changes in those net assets.

 

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of net assets and changes in net assets and disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates.

 

Investment Valuation and Income Recognition

 

Investments are reported at fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Quoted market prices, if available, are used to value investments. Mutual funds are valued at net asset value (NAV) of shares held by the Plan at year end. See Note 3 for discussion of fair value measurements.

 

Investment transactions are accounted for on the trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date. Net (depreciation) appreciation includes the Plan’s gains and losses on investments bought and sold as well as held during the year.

 

Payment of Benefits

 

Benefits payments are recorded to participants upon distribution.

 

 5

 

 

Hawthorn Bancshares, Inc.

Profit Sharing 401(k) Plan

Notes to Financial Statements

Years Ended December 31, 2016 and 2015

 

Administrative Expenses

 

The administrative expenses of the Plan are paid by the Company.

 

(3)Fair Value of Plan Assets

 

FASB Accounting Standards Codification (ASC) 820, Fair Value Measurements, provides the framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).

 

The three levels of the fair value hierarchy under FASB ASC 820 are described as follows:

 

Level 1Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Plan can access at the measurement date.

 

Level 2Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, such as:

 

·Quoted prices for similar assets or liabilities in active markets;

 

·Quoted prices for identical or similar assets or liabilities in inactive markets;

 

·Inputs other than quoted prices that are observable for the asset or liability;

 

·Inputs that are derived principally from or corroborated by observable market data by correlation or other means.
   
  If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability.

  

Level 3Unobservable inputs supported by little or no market activity and are significant to the fair value of the assets.

 

Following is a description of the valuation methodologies used for assets measured at fair value. There have been no changes in methodologies used at December 31, 2016 and 2015.

 

Mutual funds: Shares held in mutual funds are valued at the net asset value (NAV) of shares held by the Plan at year end. Mutual funds held by the Plan are open-end mutual funds that are registered with the U.S. Securities and Exchange Commission. These funds are required to publish their daily NAV and transact at that price. The mutual funds held by the plan are deemed to be actively traded.

 

Common Stock: The Company’s common stock is valued at the closing price reported in the active market in which the individual securities are traded.

 

The following table presents the fair value measurements of assets recognized in the accompanying statements of net assets available for benefits measured at fair value and the level within the fair value hierarchy in which the fair value measurements fall at December 31:

 

 6

  

Hawthorn Bancshares, Inc.

Profit Sharing 401(k) Plan

Notes to Financial Statements

Years Ended December 31, 2016 and 2015

 

 

       Fair Value Measurements Using 
   Fair Value   Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)		   Significant
Other
Observable
Inputs
(Level 2)		   Significant
Unobservable
Inputs
(Level 3)		 
December 31, 2016                    
Mutual funds  $19,587,398   $19,587,398   $-   $- 
Common stock   6,065,268    6,065,268    -    - 
Total  $25,652,666   $25,652,666   $-   $- 
December 31, 2015                    
Mutual funds  $18,424,988   $18,424,988   $-   $- 
Common stock   5,080,028    5,080,028    -    - 
Total  $23,505,016   $23,505,016   $-   $- 

 

Transfers between levels: For years ended December 31, 2016 and 2015, there were no transfers in or out of Levels 1, 2, or 3.

 

(4)Party-in-interest Transactions

 

The Plan held an investment of 343,641 and 323,363 shares of common stock of the Company with a fair value of $6,065,268 and $5,080,028 at December 31, 2016 and 2015, respectively, and received dividends of $65,915 and $61,360 on such shares during 2016 and 2015, respectively. These investments are considered allowable party-in-interest transactions under ERISA guidelines.

 

Certain Plan investments are shares of mutual funds selected by the Company’s retirement committee and managed by the participants. Capital Bank and Trust Company is the trustee as defined by the Plan and, therefore, these transactions qualify as party-in-interest transactions. Fees incurred by the Plan for the investment management services are included in net appreciation in fair value of the investment, as they are paid through revenue sharing, rather than a direct payment. The Plan Sponsor pays directly any other fees related to the Plan’s operations.

 

(5)Tax Status

 

The IRS issued its latest determination letter on March 3, 2006, which stated that the Plan and its underlying trust qualify under the applicable provisions of the Internal Revenue Code and, therefore, are exempt from federal income taxes. The Plan has been amended since receiving the determination letter. However, the Plan Administrator believes that the Plan is currently designed and being operated in compliance with the applicable requirements of the Internal Revenue Code. Therefore, we believe the Plan was qualified and the related trust was tax-exempt as of the financial statement date. With a few exceptions, the Plan is no longer subject to U.S. federal tax examinations for years before 2013.

 

(6)Plan Termination

 

Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to provision of ERISA. In such an event, the participants’ accounts become fully vested and are not subject to forfeiture.

 

(7)Risks and Uncertainties

 

The Plan invests in various investment securities. Investment securities are exposed to various risks such as interest rate, market and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect the participants’ account balances and the amounts reported in the statements of net assets available for benefits.

 

 7

 

Supplemental Schedule

 

 8

 

Hawthorn Bancshares, Inc.

Profit Sharing 401(k) Plan

Schedule H, Line 4i – Schedule of Assets (Held at End of Year)

December 31, 2016

 

   Description        
   of      Current 
Investment Type and Issuer  Investment       Value 
            
Mutual funds             
* American Funds U.S. Government Money Market   1,223,858    Shares  $1,223,858 
* American Funds Euro-Pacific Growth Fund   25,094    Shares   1,110,417 
* American Funds Growth Fund   54,377    Shares   2,266,983 
* American Funds New Perspective Fund   57,002    Shares   1,988,236 
* American Funds New World Fund   1,774    Shares   90,775 
* American Funds Small-Cap World Fund   34,110    Shares   1,556,451 
AB Large-Cap Growth Fund   1,723    Shares   66,377 
Columbia Small-Cap Index Fund   5,116    Shares   120,588 
Federated Kaufmann A   235,236    Shares   1,155,012 
MFS Global Real Estate Fund   658    Shares   5,433 
* American Funds Fundamental Investors   20,305    Shares   1,103,168 
* American Funds Washington Mutual Investors Fund   69,494    Shares   2,832,576 
Putnam Equity Income A   7,743    Shares   165,319 
* American Funds Bond Fund of America Fund   157,565    Shares   2,004,225 
AMG Managers Loomis Sayles Bond Fund   59,452    Shares   1,560,015 
* American Funds 2010 Target Date Fund   2,242    Shares   22,753 
* American Funds 2015 Target Date Fund   3,561    Shares   38,210 
* American Funds 2020 Target Date Fund   50,847    Shares   581,177 
* American Funds 2025 Target Date Fund   72,149    Shares   862,183 
* American Funds 2030 Target Date Fund   15,051    Shares   187,992 
* American Funds 2035 Target Date Fund   10,349    Shares   129,982 
* American Funds 2040 Target Date Fund   13,023    Shares   166,300 
* American Funds 2045 Target Date Fund   4,014    Shares   51,826 
* American Funds 2050 Target Date Fund   13,382    Shares   168,882 
* American Funds 2055 Target Date Fund   8,089    Shares   126,914 
* American Funds 2060 Target Date Fund   170    Shares   1,747 
Total Mutual funds           19,587,398 
              
Common stock             
* Hawthorn Bancshares, Inc. Common Stock   343,641    Shares   6,065,268 
Total Investments          $25,652,666 

 

* Represents party-in-interest to the Plan.

 

 9

 

SIGNATURES

  

The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the employee benefit plan) have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.

 

  Hawthorn Bancshares, Inc. Profit Sharing 401(k) Plan
  (Name of Plan)

 

Dated:  June 13, 2017    
  /s/ W. Bruce Phelps  
  W. Bruce Phelps  
  Chief Financial Officer  

 

 10