Breaking Down Hawthorn Bancshares, Inc. (HWBK) Financial Health: Key Insights for Investors

You are looking for a clear signal in the regional bank sector, and honestly, Hawthorn Bancshares, Inc. (HWBK) just delivered a strong one for the third quarter of 2025, which you defintely need to pay attention to.

The headline is that net income jumped to $6.1 million, a solid 34.1% increase year-over-year, translating to a diluted earnings per share (EPS) of $0.88, which tells you they are executing well in a tough rate environment. Their core profitability-the Net Interest Margin (NIM)-expanded nicely to 3.97%, meaning they are successfully managing the cost of deposits while loan yields rise. Plus, the loan portfolio grew by $51.1 million quarter-over-quarter to a total of $1.514 billion, showing tangible core growth, and credit quality remains stable, with non-performing assets at a manageable 0.48% of total loans, so the bank is growing without taking on excessive risk.

Revenue Analysis

You're looking at Hawthorn Bancshares, Inc. (HWBK) and want to know where the money is actually coming from, which is the right first step. The direct takeaway is that Hawthorn Bancshares's revenue growth is solid, driven by its core lending activities, with Net Interest Income (NII) remaining the dominant engine, while non-interest revenue is holding steady.

For the nine months ended September 30, 2025, the company generated a total revenue of approximately $59.0 million. This is a healthy increase of about 9.26% compared to the $54.0 million reported for the same period in 2024. That kind of single-digit, quality growth in a regional banking environment is defintely a good sign of core business strength.

Primary Revenue Sources and Segment Contribution

As a bank holding company, Hawthorn Bancshares's revenue streams are cleanly split into two main components: Net Interest Income (NII) and Non-interest Income. NII is the profit from lending-the difference between the interest earned on loans and investments and the interest paid out on deposits and borrowings. Non-interest income covers everything else, like service charges and wealth management fees.

The vast majority of the company's top-line revenue comes from its core banking function, which is exactly what you want to see in a regional bank. Here's the quick math on the breakdown for the first nine months of the 2025 fiscal year:

• Net Interest Income (NII): Contributed $48.3 million.
• Non-interest Income: Contributed $10.7 million.

This means NII accounts for roughly 81.86% of total revenue, with non-interest income making up the remaining 18.14%. This high reliance on NII shows the company's profitability is tied directly to its loan portfolio and its ability to manage its net interest margin (NIM), which expanded to 3.97% in Q3 2025.

Year-over-Year Revenue Dynamics

The growth story is mostly about the core lending business. Net Interest Income for the nine months ended September 30, 2025, rose by $5.1 million, up from $43.2 million to $48.3 million year-over-year. That's a strong indicator that the bank is effectively deploying capital and benefiting from the current interest rate environment, which allows them to earn more on their loans.

Non-interest income, however, tells a slightly different story. For the nine-month period, it was flat, coming in at $10.7 million, a slight decrease of $0.1 million from the prior year. This segment is important for diversification, and while the CEO has pointed to growth in the wealth management group, the overall category is still facing some headwinds, which is a common trend across the industry right now.

To get a clearer picture of the primary revenue streams and their contribution to the total, look at the nine-month period data:

What this estimate hides is the quarter-to-quarter volatility in non-interest income, which can be affected by things like gains on the sale of mortgage loans or other real estate owned. Still, the NII trend is the key driver here, showing consistent strength. If you want to dive deeper into who is buying into this growth story, you should be Exploring Hawthorn Bancshares, Inc. (HWBK) Investor Profile: Who's Buying and Why?

Your next concrete step should be to compare the loan growth-which was $51.1 million quarter-over-quarter in Q3 2025-against the increase in the provision for credit losses to ensure the growth isn't coming at the expense of asset quality.

Profitability Metrics

Hawthorn Bancshares, Inc. (HWBK) delivered a strong profitability rebound in the third quarter of 2025, primarily driven by margin expansion and improved operational efficiency. The key takeaway is that HWBK's core profitability, measured by its Net Interest Margin (NIM), is significantly outperforming the broader major US bank average, giving it a competitive edge in a tough rate environment.

A Deep Dive into Hawthorn Bancshares, Inc. (HWBK)'s Margins

For a bank, the closest measure to Gross Profit Margin is the Net Interest Margin (NIM), which tracks the spread between interest earned on loans and interest paid on deposits. For Q3 2025, HWBK's fully taxable equivalent (FTE) Net Interest Margin expanded to 3.97%. This is a substantial gain, up from 3.36% in the prior year quarter.

Moving down the income statement, we can look at the operating and net profitability. A good proxy for Operating Profit Margin is the Pre-Provision Net Revenue (PPNR) margin, which compares PPNR (Net Interest Income + Non-Interest Income - Non-Interest Expense) to total operating revenue (Net Interest Income + Non-Interest Income). For Q3 2025:

• Net Interest Income: $16.9 million.
• Total Non-Interest Income: $3.7 million.
• Total Operating Revenue: $20.6 million (Here's the quick math: $16.9M + $3.7M).
• Net Income (Net Profit): $6.1 million.

This translates to a Net Profit Margin of about 29.61% ($6.1M / $20.6M), which is a defintely solid figure for the regional banking space. The bank's Return on Average Equity (ROE) was also robust at 15.21% for the quarter.

Profitability Trends and Operational Efficiency

The trend in profitability is clearly upward, which is a major positive. Net income for Q3 2025 rose by 34.1% year-over-year. This growth is not just from a one-time event; it's a structural improvement driven by margin management.

The key to this improvement is operational efficiency (cost management). We measure this using the Efficiency Ratio (Non-Interest Expense / Total Revenue, where a lower number is better). HWBK's Efficiency Ratio improved to 62.30% in Q3 2025, down from 66.23% a year earlier. This is a clear signal that the company is managing its non-interest expenses effectively while growing its revenue base.

Here's a snapshot of the recent trend:

Industry Comparison and Actionable Insights

When we compare Hawthorn Bancshares, Inc. (HWBK) to its peers, its profitability metrics stand out. While major US banks are projected to have an average Net Interest Margin of around 2.39% in Q3 2025, HWBK's NIM of 3.97% is materially higher. This wider spread indicates superior asset yield generation and/or better control over deposit costs, which is crucial for a regional bank.

What this estimate hides is the difference in business models; regional banks often target a higher NIM than the largest diversified banks. Still, HWBK's 15.21% Return on Average Equity (ROE) for Q3 2025 is well above the 11% ROE seen for the banking industry in Q3 2024, confirming its strong relative performance.

The company is positioned for continued earnings growth, as the industry is expected to see a median earnings-per-share growth of 17% over the next five years. HWBK's recent performance suggests it's a leader in this trend. For more on the shareholder base, you should be Exploring Hawthorn Bancshares, Inc. (HWBK) Investor Profile: Who's Buying and Why?

Debt vs. Equity Structure

You want to know how Hawthorn Bancshares, Inc. (HWBK) is funding its growth, and the simple answer is that the company leans more heavily on debt (liabilities) relative to its equity than its regional bank peers, but still maintains a strong capital position by regulatory standards. The key takeaway is that the debt-to-equity (D/E) ratio is 1.21, which is higher than the industry average for regional banks.

For a bank, debt isn't just borrowed money; it's mostly customer deposits, which are liabilities on the balance sheet. Still, we look at the D/E ratio (Total Liabilities divided by Shareholders' Equity) to gauge financial leverage. Hawthorn Bancshares, Inc.'s D/E ratio of 1.21 as of late 2025 is a crucial number. Here's the quick math: for every dollar of shareholder equity, the company has $1.21 in liabilities.

To be fair, a bank's D/E ratio is naturally high because of deposits, but Hawthorn Bancshares, Inc.'s ratio of 1.21 is significantly above the regional bank industry average, which typically sits around 0.5 to 0.5753 as of 2025. This higher figure suggests a more aggressive use of leverage to drive returns, which can magnify gains but also increases risk if the economy turns sour. It's a classic risk/reward trade-off.

Debt and Funding Overview

The company's total debt-which generally refers to borrowed funds like Federal Home Loan Bank (FHLB) advances, subordinated debt, and other borrowings, not customer deposits-was approximately $190 million as of the second quarter of 2025. The majority of this is long-term, with reported long-term debt around $177 million in the first quarter of 2025. This structure is typical: banks use long-term funding to match the duration of their loan portfolio, minimizing interest rate risk.

Hawthorn Bancshares, Inc. has been managing its capital structure actively, favoring equity management over new debt issuance. The company maintains a well capitalized regulatory position, with its common equity to assets ratio at a healthy 8.54% as of September 30, 2025. This is a strong buffer against unexpected loan losses. The board has also been executing on a share repurchase plan, which is a form of returning capital to shareholders and reducing the equity base, thereby increasing the D/E ratio slightly. They still had an $8.7 million buyback capacity remaining in Q3 2025, a clear sign of confidence in their current valuation.

The balance of debt and equity funding is a constant management decision. Hawthorn Bancshares, Inc. is using its balance sheet effectively by maintaining high regulatory capital while using a moderate amount of non-deposit debt to fuel loan growth-loans held for investment increased to $1.51 billion as of September 30, 2025. For a deeper dive into the risks associated with this growth, you can check out the full post on Breaking Down Hawthorn Bancshares, Inc. (HWBK) Financial Health: Key Insights for Investors.

Liquidity and Solvency

You are looking at Hawthorn Bancshares, Inc. (HWBK), a bank holding company, and the first thing to understand is that traditional liquidity ratios look odd for a bank. Your typical Current Ratio (Current Assets / Current Liabilities) will always appear low because customer deposits are classified as current liabilities, even though they are the core funding source. This is defintely a key nuance.

For the quarter ended March 31, 2025, Hawthorn Bancshares, Inc.'s Current Ratio stood at just 0.152. This means for every dollar of short-term obligation (mostly deposits), the bank had only about 15 cents in highly liquid current assets. Given the nature of a bank's balance sheet, where all deposits are technically current liabilities, this low ratio is normal-it's a structural feature, not a crisis signal. The Quick Ratio (which excludes inventory) is essentially the same for a bank, as they carry no inventory to speak of.

Here's the quick math on the components: Current Assets were approximately $234 million against Current Liabilities of roughly $1.544 billion as of March 31, 2025. What truly matters for a bank's liquidity is its cash flow generation and access to alternative funding.

The working capital trend, while not a primary metric for a bank, is better viewed through the lens of deposit and loan growth. The company's liquidity position is supported by its ability to attract and retain deposits, which increased by $7.9 million (or 0.5%) in the third quarter of 2025 compared to the prior quarter.

The cash flow statement for the nine months ended September 30, 2025, tells a more complete story about how the bank is managing its funds:

The strong cash flow from financing activities, which provided $81.7 million, more than offset the cash used in investing activities, which totaled $44.6 million. This is a healthy sign for a growing bank, as it indicates the bank is successfully funding its loan and investment growth with new capital, mostly deposits and borrowings.

Hawthorn Bancshares, Inc. shows clear liquidity strengths, not concerns. Management explicitly states they have more than adequate liquidity, both on the balance sheet and through additional funding capacity. This capacity includes:

• Pledging $742.0 million in loans to the Federal Home Loan Bank (FHLB) for collateral.
• Pledging $8.1 million in investments to secure borrowing capacity at the Federal Reserve Bank.

Valuation Analysis

You're looking at Hawthorn Bancshares, Inc. (HWBK) right now and asking the core question: Is it a bargain or is the market pricing in too much growth? Based on the latest fiscal year 2025 data, the stock looks fairly valued, leaning toward the slightly undervalued side when you consider its core banking metrics against the broader regional bank sector.

The consensus from the street is a clear Hold right now. Wall Street Zen, for example, downgraded the stock to 'Hold' on November 23, 2025, aligning with the overall cautious sentiment. Honestly, for a regional bank with a market capitalization of roughly $225.91 million, a Hold rating often means the stock is priced about right for its near-term risk profile and growth trajectory.

Key Valuation Multiples (TTM 2025)

For a financial institution like Hawthorn Bancshares, Inc., we focus on the Price-to-Earnings (P/E) and Price-to-Book (P/B) ratios. These are the most telling metrics for a bank's valuation. Here's the quick math on the trailing twelve months (TTM) through late 2025:

• The P/E ratio is sitting at about 9.87. That's defintely low compared to the S&P 500, but it's competitive for a regional bank, suggesting the market isn't overpaying for its earnings.
• The Price-to-Book (P/B) ratio is approximately 1.4. A P/B over 1.0 means the market values the company higher than its net tangible assets (book value), which is a good sign, but 1.4 is not excessive, indicating a reasonable premium for its solid 14.49% Return on Equity (ROE).

What this estimate hides is the Enterprise Value-to-EBITDA (EV/EBITDA). Since HWBK is a bank, this ratio is less relevant, but for context, its Enterprise Value (EV) is around $199.46 million.

Stock Price and Dividend Health

You need to see where the stock has been to judge where it might go. Over the last 12 months leading up to November 2025, Hawthorn Bancshares, Inc.'s stock has traded in a range from a low of $25.21 to a high of $35.95. The all-time high closing price was actually reached relatively recently, at $34.65 on February 13, 2025. Trading near the $32.75 mark as of November 21, 2025, puts the stock well within its recent trading range, but closer to the high end.

The dividend story here is strong. The annualized dividend is $0.80 per share, which translates to a healthy dividend yield of about 2.70%. More importantly, the payout ratio is a very sustainable 26.33%. This low payout ratio means the company is only using a small portion of its earnings to cover the dividend, leaving plenty of capital for growth, share buybacks, or weathering an economic downturn. That's a sign of financial discipline, which is crucial for a bank.

To understand the strategic foundation behind these numbers, you should review the Mission Statement, Vision, & Core Values of Hawthorn Bancshares, Inc. (HWBK).

Risk Factors

You're looking for the clear risks, not just the rosy picture, and honestly, every regional bank right now faces a tightrope walk between higher interest rates and credit quality. For Hawthorn Bancshares, Inc. (HWBK), the near-term risk profile is a mix of manageable internal credit issues and the broader external pressures hitting all banks in the US Midwest.

The good news is HWBK remains defintely well capitalized, with a Total Risk-Based Capital ratio of 14.90% as of September 30, 2025, well above the regulatory minimums. But even strong capital can't eliminate the risks.

Internal and Operational Risks: Asset Quality and Expenses

The most immediate operational risk HWBK highlighted in its Q3 2025 report is a slight deterioration in asset quality, specifically the rise in Non-Performing Assets (NPAs). This is a watch item.

• Credit Concentration Risk: NPAs increased to $7.3 million at the end of Q3 2025, up from $5.2 million in the prior quarter. Here's the quick math: this jump was largely due to just one commercial relationship moving to non-accrual status. That single-client exposure shows that even a small number of defaults can move the needle on a bank of this size.
• Rising Expenses: Non-interest expense rose by $0.6 million quarter-over-quarter in Q3 2025, primarily driven by increases in salaries and employee benefits. While the efficiency ratio improved year-over-year to 62.30%, controlling compensation costs is a continuous challenge in competitive labor markets.

The bank's mitigation strategy is clear: they are focused on maintaining a strong Allowance for Credit Losses (ACL), which covered non-performing loans at a robust 446.02% as of September 30, 2025. That's a solid buffer, but still, you need to monitor that NPA trend. One commercial client moving to non-accrual status is a clear, actionable data point.

External and Strategic Headwinds

Like all regional banks operating in Missouri and eastern Kansas, Hawthorn Bancshares, Inc. faces three major external risks that are largely out of its direct control.

The strategic challenge is managing the net interest margin (NIM) in a highly competitive and uncertain rate environment. To be fair, HWBK has done well here, with NIM expanding to 3.97% in Q3 2025, a significant improvement from 3.36% a year earlier. This expansion shows their ability to price loans effectively and keep a lid on their cost of deposits, which was 2.36% in the third quarter.

Ultimately, the core action for you is to keep an eye on credit quality metrics. If the Non-Performing Assets to total loans ratio of 0.48% starts trending higher, that would signal a systemic credit issue beyond a single commercial client. For more detailed analysis on the bank's performance, check out Breaking Down Hawthorn Bancshares, Inc. (HWBK) Financial Health: Key Insights for Investors.

Growth Opportunities

You're looking for a clear path forward for Hawthorn Bancshares, Inc. (HWBK), and the Q3 2025 results give us a solid map. The direct takeaway is that HWBK's growth is not driven by a single, massive acquisition, but by a precise, high-margin focus on core banking and wealth management, plus a clear capital return strategy.

The company's future growth prospects are fundamentally tied to its ability to expand its Net Interest Margin (NIM) and its specialized services. In Q3 2025, the fully taxable equivalent (FTE) NIM expanded to a strong 3.97%, up from 3.36% in the prior year quarter. This margin expansion-getting more revenue from every dollar of assets-is the primary engine for earnings growth right now. This is defintely a key competitive advantage in a regional banking environment where many peers are still struggling with deposit costs.

Here's the quick math on earnings: with diluted Earnings Per Share (EPS) at $2.53 for the nine months ended September 30, 2025, and Q3 EPS at $0.88, a conservative projection for the full 2025 fiscal year EPS lands around $3.41. That figure is built on the momentum of strong quarterly performance, which saw net income rise to $6.1 million in Q3 2025, a 34.1% increase from the prior year quarter. That's a powerful trend.

The strategic initiatives that will drive the next phase of growth are clear actions, not just aspirations:

• Wealth Management Expansion: The CEO specifically highlighted growth in the wealth management group. This is a higher-margin, non-interest income stream, which provides a crucial buffer against interest rate volatility.
• Targeted Market Expansion: The opening of the Overland Park, KS banking center in February 2025 is a concrete step to expand the bank's footprint in the greater Kansas City metropolitan area, a key growth market.
• Loan Portfolio Momentum: The loan portfolio continues its steady, core growth, increasing by $51.1 million, or 3.5% quarter-over-quarter, to a total of $1.51 billion as of September 30, 2025.

The company is also actively managing shareholder value through capital allocation. In June 2025, Hawthorn Bancshares, Inc. approved a new common stock repurchase program authorizing up to $10.0 million in repurchases, with $8.7 million remaining as of the end of Q3 2025. This signals management's confidence and provides a floor for the stock price. Plus, the capital position remains robust, with a total risk-based capital ratio of 14.90% as of September 30, 2025.

To be fair, the company is not immune to credit risks-Non-Performing Assets (NPAs) did tick up slightly quarter-over-quarter due to one commercial relationship, but the NPA-to-loan ratio of 0.48% is still an improvement year-over-year. The bank has a strong allowance for credit losses, covering 446% of non-performing loans, so they are well-provisioned for the current environment.

For a deeper dive into who is driving this growth and the investor sentiment, you should read Exploring Hawthorn Bancshares, Inc. (HWBK) Investor Profile: Who's Buying and Why?

Here is a quick snapshot of the core financial drivers:

Next step: Analyze the Q4 2025 guidance when it's released in January 2026, specifically looking for any change in the loan growth rate or new strategic acquisitions.