Hawthorn Bancshares, Inc. (HWBK) - 2025 Annual Report (10-K) Summary
Business Context and Reporting Period
This filing is the Annual Report on Form 10-K for Hawthorn Bancshares, Inc. for the fiscal year ended December 31, 2025. The Company is a bank holding company incorporated in Missouri, owning 100% of Hawthorn Bank. As of December 31, 2025, the Company operates two reportable segments: the Bank segment and the Wealth Management segment (established as a separate segment in Q1 2025). The Bank operates 18 offices primarily in Central and West Central Missouri and the Kansas City metropolitan area. The Company employs approximately 266 individuals (255 full-time, 11 part-time).
Key Financial Metrics
Note: Specific revenue, profit, cash flow, and margin figures are incorporated by reference to the 2025 Annual Report to Shareholders (Exhibit 13) and are not explicitly detailed in the text of this 10-K filing.
- Capitalization: As of December 31, 2025, the Company and the Bank were classified as "well-capitalized" under federal regulatory guidelines.
- Community Bank Leverage Ratio (CBLR): Both the Company and the Bank qualified to elect the CBLR framework with a ratio greater than 9%, though no election was made as of year-end.
- Stock Repurchases: In Q4 2025, the Company repurchased 9,892 shares at an average price of $30.58. As of December 31, 2025, $8.43 million remained available under the $10.0 million repurchase program approved in June 2025.
- Market Data: As of March 2, 2026, there were 6,901,810 shares of common stock outstanding. The aggregate market value of non-affiliate shares was approximately $125.7 million as of June 30, 2025.
- Interest Rate Risk: Modeling indicated that a 200 basis point rise in rates could decrease annual net interest income by 0.43%, while a 200 basis point fall could decrease it by 1.58%.
Material Changes and Strategic Developments
- Segment Restructuring: Beginning in Q1 2025, Wealth Management was separated from the Bank segment to become a distinct reportable segment, reflecting a strategic focus on this business line.
- Leadership Changes: Brent M. Giles (CEO) and Gregg A. Bexten (President) joined the Company in May 2023. Chris E. Hafner joined as CFO in October 2023. Kathleen L. Bruegenhemke was appointed Executive Vice President in May 2024.
- Subsidiary Activity: HB Realty, LLC (a REIT subsidiary) held mortgage loans with an approximate aggregate book value of $578.4 million as of December 31, 2025. Hawthorn Risk Management, Inc. (a captive insurance subsidiary) was dissolved on December 1, 2023.
- Regulatory Environment: The Company noted the passage of the "GENIUS Act" (July 2025) regarding stablecoins and the "One Big Beautiful Bill Act" (July 2025) regarding tax provisions, though the latter is not expected to have a material immediate impact.
Outlook, Risks, and Management Commentary
Management emphasizes that profitability is heavily dependent on the local economic conditions of Missouri and the Kansas City MSA. Key risks identified include:
- Interest Rate Sensitivity: Net interest income is the primary earnings source; significant rate fluctuations could negatively impact profitability.
- Credit Risk: Concentration of loans in Missouri makes the portfolio susceptible to local economic downturns, unemployment, and real estate value declines.
- Competition: Intense competition from larger banks, credit unions, and emerging fintech/digital asset providers (including stablecoins) poses a threat to deposit and loan market share.
- Cybersecurity: The Company faces ongoing risks from cyber-attacks, fraud, and third-party vendor failures. No material cyber incidents were reported in 2025.
- Regulatory Compliance: Changes in capital rules, deposit insurance assessments, and consumer protection laws (e.g., CFPB enforcement) could increase costs.
Management maintains that internal controls over financial reporting were effective as of December 31, 2025, as audited by Forvis Mazars, LLP.
Investor Verification Checklist
- Financial Statements: Review the Consolidated Financial Statements in Exhibit 13 (2025 Annual Report to Shareholders) for specific revenue, net income, and cash flow figures not detailed in this 10-K text.
- Asset Quality: Verify the Allowance for Credit Losses and Non-Performing Asset ratios in the financial notes to assess credit risk exposure in the Missouri market.
- Capital Ratios: Confirm the specific Common Equity Tier 1, Tier 1, and Total Risk-Based Capital ratios in Note 16 to ensure continued "well-capitalized" status.
- Stock Repurchase Program: Monitor the remaining $8.43 million authorization and future execution of buybacks.
- Regulatory Filings: Check for any updates regarding the potential election of the Community Bank Leverage Ratio (CBLR) framework in future filings.