Hawthorn Bancshares' Net Income Jumps 29% on Strong Loan Growth

TL;DR

**HWBK is looking strong with big profit jumps and loan growth, but watch those FHLB borrowings – they're up over 100% and could be a red flag if rates keep climbing.**

AI Summary

Hawthorn Bancshares, Inc. (HWBK) reported a significant increase in net income for the nine months ended September 30, 2025, reaching $17.616 million, up 29% from $13.659 million in the prior year. Net interest income also saw a healthy rise to $48.301 million, an 11.7% increase from $43.246 million in the same period of 2024. Total assets grew by 5.8% to $1.932 billion from $1.825 billion at December 31, 2024, driven by a $47.842 million increase in net loans to $1.492 billion. Deposits decreased slightly by 0.5% to $1.525 billion, while Federal Home Loan Bank advances and other borrowings surged by 117% to $177.086 million. The company's allowance for credit losses decreased marginally to $21.904 million from $22.044 million, reflecting a net release of $16 thousand for credit losses on loans and unfunded commitments. Strategic moves include filing a universal shelf registration for up to $150 million and evaluating new tax reform legislation, though no material impact is currently expected.

Why It Matters

Hawthorn Bancshares' robust 29% net income growth and 11.7% rise in net interest income signal strong operational performance in a competitive regional banking landscape. For investors, this indicates effective asset utilization and potential for continued profitability, especially with the strategic $150 million shelf registration providing capital flexibility for future growth or acquisitions. Employees benefit from a stable and growing company, while customers in Missouri communities like Jefferson City and Columbia can expect continued banking services. The significant increase in FHLB advances, however, suggests a reliance on wholesale funding, which could impact interest expense if rates rise further, potentially affecting HWBK's competitive position against larger, more diversified financial institutions.

Risk Assessment

Risk Level: medium — The risk level is medium due to the significant increase in Federal Home Loan Bank advances and other borrowings, which surged by 117% from $81.525 million at December 31, 2024, to $177.086 million at September 30, 2025. This increased reliance on wholesale funding could expose the company to higher interest rate risk and liquidity pressures, despite a slight decrease in total deposits.

Analyst Insight

Investors should consider HWBK's strong net income growth and strategic capital flexibility as positive indicators. However, they should closely monitor the company's reliance on FHLB advances and its impact on future interest expenses, especially in a rising rate environment. A deeper dive into the composition and duration of these borrowings is warranted.

Financial Highlights

debt To Equity

1.07

revenue

$72,372,000

operating Margin

N/A

total Assets

$1,932,105,000

total Debt

$226,573,000

net Income

$17,616,000

eps

$2.54

gross Margin

N/A

cash Position

$99,875,000

revenue Growth

+1.3%

Revenue Breakdown

Key Numbers

• $17.616M — Net Income (Increased 29% for the nine months ended September 30, 2025, from $13.659 million in 2024.)
• $48.301M — Net Interest Income (Increased 11.7% for the nine months ended September 30, 2025, from $43.246 million in 2024.)
• $1.932B — Total Assets (Increased 5.8% from $1.825 billion at December 31, 2024, to September 30, 2025.)
• $1.492B — Net Loans (Increased by $47.842 million from $1.444 billion at December 31, 2024, to September 30, 2025.)
• $177.086M — FHLB Advances and Other Borrowings (Increased 117% from $81.525 million at December 31, 2024, to September 30, 2025.)
• $150M — Shelf Registration (Maximum capital to be raised through a universal shelf registration statement filed on June 24, 2025.)
• $0.89 — Basic Earnings Per Share (Q3 2025) (Increased from $0.66 in Q3 2024.)
• $2.54 — Basic Earnings Per Share (YTD 2025) (Increased from $1.95 for the nine months ended September 30, 2024.)
• $21.904M — Allowance for Credit Losses (Slight decrease from $22.044 million at December 31, 2024.)
• 6,897,646 — Common Stock Shares Outstanding (As of November 6, 2025.)

Key Players & Entities

• HAWTHORN BANCSHARES, INC. (company) — Registrant
• Hawthorn Bank (company) — Subsidiary providing banking services
• Federal Home Loan Bank (company) — Source of significant borrowings
• Securities and Exchange Commission (regulator) — Regulator for filing and shelf registration
• Financial Accounting Standards Board (regulator) — Issuer of accounting standards
• The Nasdaq Stock Market LLC (company) — Exchange where HWBK common stock is registered
• One Big Beautiful Bill Act (other) — New tax reform legislation
• Jefferson City (other) — Community served by Hawthorn Bank
• Columbia (other) — Community served by Hawthorn Bank
• Kansas City metropolitan area (other) — Region served by Hawthorn Bank

FAQ

Risk Factors

• Interest Rate Sensitivity [high — financial]: The company's profitability is sensitive to changes in interest rates. Fluctuations in market interest rates can impact net interest income by affecting the yield on earning assets and the cost of funding. For the nine months ended September 30, 2025, net interest income was $48.301 million, an 11.7% increase from the prior year, indicating some positive impact from current rate environments, but future changes pose a risk.
• Credit Risk and Loan Portfolio Quality [high — financial]: The primary credit risk arises from the loan portfolio, which totals $1.492 billion in net loans as of September 30, 2025. While the allowance for credit losses decreased marginally to $21.904 million, any deterioration in borrower creditworthiness or economic downturn could lead to increased loan losses and negatively impact financial results.
• Liquidity and Funding Sources [medium — financial]: The company relies on deposits and borrowings for funding. A significant increase in Federal Home Loan Bank advances and other borrowings by 117% to $177.086 million suggests a growing reliance on wholesale funding. Any disruption in deposit flows or access to borrowed funds could impact liquidity.
• Regulatory Compliance and Changes [medium — regulatory]: As a financial institution, HWBK is subject to extensive regulation. Changes in banking laws, regulations, or monetary policy, including the evaluation of new tax reform legislation, could affect operations and profitability. The company currently expects no material impact from tax reform, but this could change.
• Economic Conditions [medium — market]: The company's performance is tied to the overall economic health of its operating regions. A recession or significant economic slowdown could lead to increased loan delinquencies, reduced loan demand, and lower overall profitability.
• Cybersecurity and Data Breaches [medium — operational]: Like all financial institutions, HWBK faces risks related to cybersecurity threats and potential data breaches. A successful cyberattack could result in financial losses, reputational damage, and regulatory penalties.
• Dependence on Net Interest Margin [high — financial]: The company's core revenue generation relies heavily on the net interest margin. A compression of this margin due to rising funding costs or falling asset yields would directly impact net income. The increase in net interest income to $48.301 million is positive, but the sustainability depends on market dynamics.
• Capital Raising and Dilution [low — financial]: The filing of a universal shelf registration for up to $150 million indicates a potential need for future capital. While this provides flexibility, the issuance of new equity could dilute existing shareholders' ownership and earnings per share.

Industry Context

Hawthorn Bancshares operates within the highly competitive U.S. banking industry, characterized by a mix of large national banks, regional institutions, and community banks. The industry is currently navigating a landscape shaped by evolving interest rate environments, increasing digital adoption by customers, and ongoing regulatory scrutiny. Community banks like HWBK often differentiate themselves through personalized service and deep local market knowledge, while facing pressure to invest in technology to remain competitive.

Regulatory Implications

As a financial institution, HWBK is subject to stringent federal and state banking regulations. Compliance with capital adequacy, liquidity, and consumer protection rules is paramount. The company is also monitoring potential impacts from new tax reform legislation, though currently no material effects are anticipated, highlighting the need for continuous assessment of the regulatory environment.

What Investors Should Do

1. Monitor Net Interest Margin Trends
2. Assess Loan Portfolio Growth and Quality
3. Evaluate Funding Mix and Cost
4. Observe Capital Raising Activities

Key Dates

• 2025-09-30: Nine Months Ended Financial Results — Reported a 29% increase in net income to $17.616 million and an 11.7% rise in net interest income to $48.301 million, indicating strong operational performance.
• 2025-06-24: Universal Shelf Registration Filed — Filed for potential capital raise of up to $150 million, providing financial flexibility for future growth or strategic initiatives.
• 2025-11-06: Common Stock Shares Outstanding Reported — 6,897,646 shares outstanding as of this date, relevant for per-share calculations and ownership analysis.

Glossary

Net Interest Income

The difference between the interest income generated by a bank and the interest it pays out to depositors and lenders. (A core measure of a bank's profitability from its lending and borrowing activities. HWBK saw an 11.7% increase for the nine months ended September 30, 2025.)

Allowance for Credit Losses

An estimate of the amount of loans that may not be collected. It is a contra-asset account that reduces the carrying value of loans on the balance sheet. (Indicates the bank's assessment of potential loan defaults. HWBK's allowance decreased slightly to $21.904 million.)

Federal Home Loan Bank (FHLB) Advances

Short-term to long-term borrowings from the Federal Home Loan Bank system, used by member institutions to fund mortgages and other loans. (A source of wholesale funding for banks. HWBK's FHLB advances and other borrowings surged 117% to $177.086 million.)

Universal Shelf Registration

A filing with the SEC that allows a company to register securities it plans to issue over a period of time, providing flexibility to raise capital quickly when needed. (HWBK filed for up to $150 million, signaling potential future capital needs or opportunities.)

Net Loans

The total amount of loans a bank has made, minus the allowance for credit losses. (Represents the bank's primary earning asset. HWBK's net loans grew to $1.492 billion.)

Deposits

Funds held by a bank that belong to its customers. These are a primary source of funding for banks. (HWBK's total deposits saw a slight decrease of 0.5% to $1.525 billion.)

Basic Earnings Per Share (EPS)

The portion of a company's profit allocated to each outstanding share of common stock. (A key profitability metric for investors. HWBK's YTD EPS increased to $2.54.)

Year-Over-Year Comparison

Compared to the prior year's reporting period, Hawthorn Bancshares has demonstrated robust growth in profitability, with net income up 29% and net interest income rising 11.7% for the nine months ended September 30, 2025. Total assets have expanded by 5.8%, primarily driven by an increase in net loans. However, the company has also seen a slight decrease in total deposits and a substantial 117% surge in Federal Home Loan Bank advances and other borrowings, indicating a shift in funding strategy. The allowance for credit losses has remained relatively stable, suggesting confidence in loan portfolio quality despite economic uncertainties.

Key Financial Figures

• $1.00 — ange on which registered Common Stock, $1.00 par value HWBK The Nasdaq Stock Market

Filing Documents

• hwbk-20250930.htm (10-Q) — 3182KB
• a2025q3ex311925.htm (EX-31.1) — 10KB
• a2025q3ex312925.htm (EX-31.2) — 10KB
• a2025q3ex321925.htm (EX-32.1) — 5KB
• a2025q3ex322925.htm (EX-32.2) — 5KB
• 0000893847-25-000042.txt ( ) — 15040KB
• hwbk-20250930.xsd (EX-101.SCH) — 51KB
• hwbk-20250930_cal.xml (EX-101.CAL) — 124KB
• hwbk-20250930_def.xml (EX-101.DEF) — 324KB
• hwbk-20250930_lab.xml (EX-101.LAB) — 770KB
• hwbk-20250930_pre.xml (EX-101.PRE) — 574KB
• hwbk-20250930_htm.xml (XML) — 3707KB

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION

Financial Statements

Item 1. Financial Statements: 1 Consolidated Balance Sheets 2 Consolidated Statements of Income 3 Consolidated Statements of Comprehensive Income 4 Consolidated Statements of Stockholders' Equity 5 Consolidated Statements of Cash Flows 6 Notes to the Consolidated Financial Statements 8

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 35

Quantitative and Qualitative Disclosures about Market Risk

Item 3. Quantitative and Qualitative Disclosures about Market Risk 56

Controls and Procedures

Item 4. Controls and Procedures 57

OTHER INFORMATION

PART II. OTHER INFORMATION

Legal Proceedings

Item 1. Legal Proceedings 58

Risk Factors

Item 1A. Risk Factors 58

Unregistered Sales of Equity Securities and Use of Proceeds

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 58

Defaults Upon Senior Securities

Item 3. Defaults Upon Senior Securities 58

Mine Safety Disclosures

Item 4. Mine Safety Disclosures 58

Other Information

Item 5. Other Information 59

Exhibits

Item 6. Exhibits 59

– FINANCIAL INFORMATION

PART I – FINANCIAL INFORMATION

Financial Statements

Item 1. Financial Statements HAWTHORN BANCSHARES, INC. AND SUBSIDIARIES Consolidated Balance Sheets (dollars in thousands, except per share data) September 30, 2025 December 31, 2024 (Unaudited) ASSETS Cash and due from banks $ 17,613 $ 23,668 Other interest bearing deposits 82,262 27,326 Cash and cash equivalents 99,875 50,994 Certificates of deposit in other banks 1,000 1,000 Available-for-sale debt securities, at fair value 216,705 218,652 Other investments 9,312 5,149 Loans held for investment 1,514,002 1,466,160 Allowance for credit losses ( 21,904 ) ( 22,044 ) Net loans 1,492,098 1,444,116 Loans held for sale 1,432 — Premises and equipment - net 30,031 31,166 Other real estate owned - net 2,425 1,446 Cash surrender value of bank-owned life insurance 40,058 38,912 Accrued interest receivable and other assets 39,169 33,750 Total assets $ 1,932,105 $ 1,825,185 LIABILITIES AND STOCKHOLDERS' EQUITY Deposits Non-interest bearing demand $ 424,437 $ 385,022 Savings, interest checking and money market 788,059 846,339 Time deposits 313,421 301,821 Total deposits 1,525,917 1,533,182 Federal Home Loan Bank advances and other borrowings 177,086 81,525 Subordinated notes 49,486 49,486 Operating lease liabilities 2,787 1,678 Accrued interest payable and other liabilities 11,891 9,767 Total liabilities 1,767,167 1,675,638 Stockholders' equity: Common stock, $ 1.00 par value, authorized 15,000,000 shares; issued 7,554,893 shares 7,555 7,555 Surplus 76,916 76,857 Retained earnings 103,057 89,542 Accumulated other comprehensive loss, net of tax ( 8,318 ) ( 12,443 ) Treasury stock; 648,925 and 566,268 shares, at cost, respectively ( 14,272 ) ( 11,964 ) Total stockholders' equity 164,938 149,547 Total liabilities and stockholders' equity $ 1,932,105 $ 1,825,185 See accompanying notes to the consolidated financial statements (unaudited) . 2 HAWTHORN BANCSHARES, INC. AND SUBSIDIARIES Consolidated Statements of Income (unaudited

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View this 10-Q filing on SEC EDGAR