Hawthorn Bancshares, Inc. (HWBK) - Q3 2025 10-Q Summary
Business Context and Reporting Period
This report covers the quarterly period ended September 30, 2025. Hawthorn Bancshares, Inc. operates as a community bank holding company with its subsidiary, Hawthorn Bank, serving Missouri communities including Jefferson City, Columbia, and Kansas City. The company reported two operating segments for the first time in 2025: the Bank and a newly separated Wealth Management business.
Key Financial Metrics
| Metric | Q3 2025 (3 Months) | Q3 2024 (3 Months) | YTD 2025 (9 Months) | YTD 2024 (9 Months) |
|---|---|---|---|---|
| Net Income | $6.13 million | $4.57 million | $17.62 million | $13.66 million |
| Diluted EPS | $0.88 | $0.66 | $2.53 | $1.95 |
| Net Interest Income | $16.87 million | $14.33 million | $48.30 million | $43.25 million |
| Net Interest Margin (FTE) | 3.97% | 3.36% | 3.85% | 3.36% |
| Non-Interest Income | $3.72 million | $3.78 million | $10.72 million | $10.80 million |
| Non-Interest Expense | $12.82 million | $11.99 million | $37.59 million | $36.60 million |
| Efficiency Ratio | 62.30% | 66.23% | 63.68% | 67.73% |
| Total Assets | $1.93 billion | $1.81 billion | $1.93 billion | $1.81 billion |
| Total Loans | $1.51 billion | $1.47 billion | $1.51 billion | $1.47 billion |
| Total Deposits | $1.53 billion | $1.50 billion | $1.53 billion | $1.50 billion |
| Stockholders' Equity | $164.94 million | $146.47 million | $164.94 million | $146.47 million |
| Return on Assets (ROA) | 1.33% | 1.00% | 1.30% | 1.00% |
| Return on Equity (ROE) | 15.21% | 12.87% | 15.13% | 13.24% |
Material Changes vs. Prior Period
- Profitability Surge: Net income increased 34% year-over-year for the quarter and 29% year-over-year for the nine-month period, driven primarily by a significant expansion in Net Interest Margin (NIM) from 3.36% to 3.97% (quarterly).
- Asset Growth: Total assets grew by approximately $107 million compared to the prior year quarter, with loans held for investment increasing by $47.8 million since year-end 2024.
- Cost Management: Despite a 6.9% increase in non-interest expenses (driven by salaries and occupancy for new branches), the efficiency ratio improved to 62.30% due to higher revenue generation.
- Asset Quality Deterioration: Non-performing assets (NPA) increased to $7.34 million (0.38% of total assets) from $4.19 million at year-end 2024. Non-accrual loans rose 60% to $4.06 million, primarily due to one commercial relationship moving to non-accrual status.
- Capital Position: The company maintains a "well-capitalized" status with a Total Risk-Based Capital ratio of 14.90% and a Tier 1 Leverage ratio of 11.97%.
Guidance, Outlook, and Risks
- Segment Reporting: Beginning in Q1 2025, Wealth Management is reported as a separate segment, contributing $0.65 million in revenue for Q3 2025.
- Capital Actions: The Board approved a new $10.0 million stock repurchase program in June 2025. As of September 30, $8.7 million remains available. The company also filed a shelf registration statement to raise up to $150 million in capital.
- Interest Rate Risk: Management models indicate that a 200 basis point increase in rates would decrease projected net interest income by 1.15%, while a 200 basis point decrease would decrease it by 1.51%.
- Legislative Impact: The "One Big Beautiful Bill Act" signed in July 2025 is under evaluation, but management does not currently expect a material impact on operations.
- Risk Factors: No material changes to risk factors were disclosed compared to the 2024 10-K. Primary risks remain interest rate volatility, credit quality in the commercial real estate sector, and regulatory compliance.
Investor Verification Checklist
- Non-Performing Loan Concentration: Verify the specific details of the commercial relationship that moved to non-accrual status, which drove the 60% increase in non-accrual loans.
- Commercial Real Estate Exposure: Review the composition of the $629.6 million non-owner occupied CRE portfolio, specifically the 29.9% allocation to Multi-Family and 27.1% to Retail.
- Deposit Stability: Confirm the stability of the $1.44 billion in core deposits (94.1% of total) versus the $339.6 million in uninsured deposits.
- Expense Run-Rate: Assess the sustainability of the increased occupancy and salary expenses associated with the opening of two new branches and one operations facility.
- Investment Portfolio: Note the $25.8 million in unrealized losses on available-for-sale securities, which are attributed to interest rate fluctuations rather than credit quality.