8-K: Hawthorn Bancshares Reports Strong Q3 2025 Earnings

Hawthorn Bancshares, Inc. announced robust third-quarter 2025 financial results, with net income increasing 34.1% year-over-year and an expanded net interest margin.

Summary

• Net income for the third quarter 2025 was $6.1 million, an increase of 34.1% from the prior year quarter and 0.5% from the prior quarter.
• Diluted earnings per share (EPS) for Q3 2025 was $0.88, a 33% improvement from the prior year quarter and unchanged from the prior quarter.
• Net interest margin (FTE) improved to 3.97% in Q3 2025, up from 3.89% in Q2 2025 and 3.36% in Q3 2024.
• Loans held for investment increased by $51.1 million, or 3.5%, to $1.51 billion compared to the prior quarter.
• Deposits increased by $7.9 million, or 0.5%, to $1.53 billion compared to the prior quarter.
• The efficiency ratio improved to 62.30% in Q3 2025, compared to 66.23% in the prior year quarter.
• Non-performing assets to total loans was 0.48% at September 30, 2025, an improvement from 0.58% in the prior year quarter but an increase from 0.35% in the prior quarter.
• The Board of Directors approved a quarterly cash dividend of $0.20 per common share, payable January 1, 2026, to shareholders of record on December 15, 2025.
• The company repurchased 90,466 common shares for $2.5 million during the first nine months of 2025, with $8.7 million remaining available under the repurchase plan.

Sentiment

Score: 8

Explanation: The company reported strong financial results across key metrics, including significant increases in net income, EPS, and net interest margin, alongside healthy loan and deposit growth and an improved efficiency ratio. The dividend declaration and ongoing share repurchase program further enhance shareholder value, despite a slight increase in non-performing assets quarter-over-quarter due to a specific commercial relationship.

Positives

• Net income increased by $1.6 million, or 34.1%, to $6.1 million in Q3 2025 compared to Q3 2024.
• Diluted EPS improved by $0.22 per share, or 33%, to $0.88 in Q3 2025 compared to Q3 2024.
• Net interest margin (FTE) expanded to 3.97% in Q3 2025, up from 3.36% in Q3 2024 and 3.89% in Q2 2025.
• Loans held for investment grew by $51.1 million, or 3.5%, quarter-over-quarter to $1.51 billion.
• Deposits increased by $7.9 million, or 0.5%, quarter-over-quarter to $1.53 billion.
• The efficiency ratio improved to 62.30% in Q3 2025 from 66.23% in Q3 2024, primarily due to higher net interest margin.
• Credit quality remained strong with non-performing assets to total loans improving to 0.48% from 0.58% in Q3 2024.
• The company remained well capitalized with a total risk-based capital ratio of 14.90% at September 30, 2025.
• Book value per share increased by $1.23, or 5.5%, to $23.76 compared to the prior quarter and $2.85, or 13.6%, compared to the prior year quarter.
• The Board approved a quarterly cash dividend of $0.20 per common share, demonstrating commitment to shareholder returns.
• The company repurchased $2.5 million in common shares during the first nine months of 2025, with $8.7 million remaining for future repurchases.

Negatives

• Non-interest income decreased by $0.1 million, or 1.8%, in Q3 2025 compared to Q3 2024.
• Total non-interest expense increased by $0.8 million, or 6.9%, in Q3 2025 compared to Q3 2024, primarily due to higher salaries and employee benefits.
• Non-performing assets increased by $2.1 million to $7.3 million at September 30, 2025, from $5.2 million at June 30, 2025, due to one commercial relationship moving to non-accrual status.
• The allowance for credit losses to total loans slightly decreased to 1.45% at September 30, 2025, from 1.47% at June 30, 2025.
• The allowance for credit losses on loans to non-performing loans significantly decreased to 446.02% at September 30, 2025, from 781.24% at June 30, 2025, reflecting the increase in non-performing loans.

Risks

• An increase in non-performing assets to $7.3 million at September 30, 2025, from $5.2 million at June 30, 2025, was attributed to one commercial relationship moving to non-accrual status, indicating a potential concentration risk or specific credit quality issue.

Future Outlook

Management expressed satisfaction with continued core growth, margin expansion, and growth in the wealth management group, attributing these results to a focus on strategic objectives aimed at creating shareholder value. No specific forward-looking financial guidance or estimates were provided beyond these general statements.

Management Comments

• Brent Giles, Chief Executive Officer, stated: "I am pleased with our third quarter results as they reflect continued core growth. Our margin continued to expand, and we experienced growth in our wealth management group. Additionally, we were able to grow our loan portfolio by expanding our customer relationships and attracting new customers. The third quarter results reflect our focus on our strategic objectives which continues to create shareholder value."

Industry Context

The company's performance, particularly the expansion of its net interest margin and growth in its loan portfolio, suggests effective navigation of the current interest rate environment and competitive landscape within the regional banking sector. The growth in wealth management also indicates diversification of revenue streams, a common strategic focus for community banks.

Corporate Governance

Stakeholder Impact

• Shareholders are positively impacted by strong earnings growth, an increased book value per share, a declared cash dividend, and an active share repurchase program.
• Customers benefit from the company's ability to grow its loan portfolio, suggesting continued lending capacity and relationship expansion.
• Employees may benefit from the company's growth and focus on strategic objectives, although increased non-interest expenses related to salaries and benefits were noted.

Next Steps

• Payment of the quarterly cash dividend of $0.20 per common share on January 1, 2026.
• Continued execution of strategic objectives to drive core growth and create shareholder value, as indicated by management.
• Potential further share repurchases under the remaining $8.7 million authorization.

Key Dates

Recommendation

The company demonstrated robust financial performance in Q3 2025, with significant year-over-year growth in net income and EPS, coupled with an expanding net interest margin and improved efficiency ratio. Healthy loan and deposit growth indicate strong operational momentum. The commitment to shareholder returns through a declared dividend and an active share repurchase program further enhances its attractiveness. While there was a quarter-over-quarter increase in non-performing assets due to a single commercial relationship, the overall credit quality remains strong compared to the prior year, and the company is well-capitalized. These factors collectively suggest a compelling investment opportunity.

Keywords

Banking, Financial Services, Regional Bank, Community Bank, Hawthorn Bancshares, HWBK, Earnings, Dividend, Loan Growth, Deposit Growth, Net Interest Margin, Share Repurchase, Asset Quality