Hawthorn Bancshares, Inc. (HWBK): Análisis PESTLE [Actualizado en enero de 2025]

Sumérgete en el intrincado mundo de Hawthorn Bancshares, Inc. (HWBK), donde la banca cumple con la complejidad en un panorama dinámico de desafíos regulatorios, innovaciones tecnológicas y demandas en evolución del mercado. Este análisis integral de la mano presenta las fuerzas multifacéticas que dan a las decisiones estratégicas del banco, desde las regulaciones políticas matizadas de Missouri hasta las transformaciones tecnológicas de vanguardia que redefinen los servicios financieros. Descubra cómo HWBK navega por las intrincadas intersecciones de factores políticos, económicos, sociológicos, tecnológicos, legales y ambientales que no solo desafían sino que también impulsan su posicionamiento competitivo en el ecosistema bancario regional.

Hawthorn Bancshares, Inc. (HWBK) - Análisis de mortero: factores políticos

Las regulaciones bancarias estatales de Missouri impactan en las estrategias operativas

Las regulaciones financieras de Missouri influyen directamente en el marco operativo de HWBK. A partir de 2024, las leyes bancarias estatales de Missouri requieren:

Requisito regulatorio	Métrica de cumplimiento específica
Requisito de reserva de capital	10.5% de relación de capital mínimo de nivel 1
Información financiera anual	Presentación obligatoria dentro de los 60 días posteriores al año fiscal
Normas de protección del consumidor	Adherencia estricta a las reglas de divulgación de préstamos a nivel estatal

La influencia de las políticas monetarias de la Reserva Federal

Los impactos clave de la política monetaria de la Reserva Federal para HWBK incluyen:

• Tasa actual de fondos federales: 5.33% a enero de 2024
• Tasa de referencia de préstamo: tasa principal al 8.5%
• Relación de reserva requerida para los bancos: 10% para depósitos superiores a $ 127.5 millones

Cumplimiento de la Ley de Reinversión Comunitaria

El enfoque de banca regional de HWBK está formado por CRA Cumpliance Metrics:

Categoría de rendimiento de CRA	Métrico de cumplimiento
Actividad de préstamo	85.6% de los préstamos dentro de la comunidad local
Inversión en desarrollo comunitario	$ 3.2 millones asignados en 2023
Servicio a áreas de bajos ingresos	12 programas de inversión comunitaria específicos

Cambios potenciales en la supervisión bancaria

Los cambios regulatorios anticipados que potencialmente afectan el gobierno corporativo de HWBK:

• Requisitos de informes de ciberseguridad mejorados
• Mayor transparencia en la divulgación de compensación ejecutiva
• Protocolos de cumplimiento anti-lavado de dinero más estrictos

Hawthorn Bancshares, Inc. (HWBK) - Análisis de mortero: factores económicos

Fluctuaciones de tasas de interés que afectan la rentabilidad de los préstamos del banco

A partir del cuarto trimestre de 2023, el margen de interés neto de Hawthorn Bancshares fue de 3.62%, directamente influenciado por las políticas de tasas de interés de la Reserva Federal. La tasa de fondos federales en enero de 2024 es de 5.33%.

Métrica de tasa de interés	Valor 2023	2024 proyección
Margen de interés neto	3.62%	3.55-3.75%
Rendimiento de la cartera de préstamos	6.45%	6.50-6.70%
Costo de fondos	2.83%	2.75-2.95%

Salud económica regional en Missouri y los estados circundantes

El PIB de Missouri en 2023 fue de $ 369.2 mil millones, y el sector bancario contribuyó aproximadamente al 7,2% a la producción económica estatal.

Indicador económico	Missouri 2023	Promedio regional
Tasa de desempleo	3.1%	3.3%
Ingresos familiares promedio	$61,847	$59,500
Tasa de formación de negocios	4.2%	4.5%

Mercado de préstamos para pequeñas empresas

La cartera de préstamos para pequeñas empresas de Hawthorn Bancshares en 2023 totalizó $ 124.3 millones, lo que representa el 22.7% de los activos de préstamos totales.

Métrica de préstamos para pequeñas empresas	Valor 2023	Crecimiento año tras año
Préstamos totales de pequeñas empresas	$ 124.3 millones	6.8%
Tamaño promedio del préstamo	$187,000	5.2%
Tasa de incumplimiento	1.6%	-0.3%

Tendencias de inflación que afectan las estrategias de inversión

El índice de precios al consumidor (IPC) de EE. UU. En diciembre de 2023 fue del 3.4%, influyendo en las estrategias de asignación de inversiones de Hawthorn Bancshares.

Categoría de inversión	Asignación 2023	2024 Asignación proyectada
Valores gubernamentales	42%	45%
Bonos municipales	28%	25%
Bonos corporativos	18%	20%
Otras inversiones	12%	10%

Hawthorn Bancshares, Inc. (HWBK) - Análisis de mortero: factores sociales

Los cambios demográficos de la población que envejecen influyen en el diseño del servicio bancario

Según la Oficina del Censo de EE. UU., El 16,9% de la población tenía 65 años o más en 2020, que se proyecta alcanzar el 22% para 2030. Para las regiones de servicio de Hawthorn Bancshares, esta tendencia demográfica afecta directamente el diseño de productos bancarios.

Grupo de edad	Porcentaje	Preferencia de servicio bancario
65-74 años	9.7%	Servicios de sucursales tradicionales
Más de 75 años	7.2%	Banca digital asistida

Creciente preferencias de banca digital entre los clientes más jóvenes

Pew Research Center informa que el 92% de los Millennials y el 85% de Gen Z usan plataformas de banca móvil regularmente.

Generación	Adopción de banca móvil	Frecuencia de transacción digital promedio
Millennials	92%	14.3 Transacciones/mes
Gen Z	85%	12.7 transacciones/mes

Las necesidades comunitarias de la comunidad rural y suburbana impulsan la personalización del servicio

Los datos de la FDIC indican que 46 millones de estadounidenses viven en áreas rurales, lo que representa un potencial de mercado significativo para los servicios de banca comunitaria.

Tipo de región	Población	Demanda de servicios bancarios
Zonas rurales	46 millones	Préstamos agrícolas especializados
Áreas suburbanas	152 millones	Banca digital/física híbrida

Aumento de la demanda de servicios de asesoramiento financiero personalizado

Deloitte Research muestra que el 68% de los clientes esperan orientación financiera personalizada adaptada a las necesidades individuales.

Categoría de servicio	Demanda de clientes	Inversión anual promedio
Planificación financiera personalizada	68%	$ 3,200 por cliente
Plataformas de asesoramiento digital	52%	$ 1,800 por cliente

Hawthorn Bancshares, Inc. (HWBK) - Análisis de mortero: factores tecnológicos

Desarrollo de la plataforma de banca digital

A partir del cuarto trimestre de 2023, Hawthorn Bancshares invirtió $ 1.2 millones en actualizaciones de la plataforma de banca digital. La inversión tecnológica tenía como objetivo mejorar las capacidades bancarias en línea y la experiencia del cliente.

Categoría de inversión tecnológica	Monto de inversión (2023)	Aumento de la participación del usuario proyectado
Plataforma de banca digital	$ 1.2 millones	17.5%
Infraestructura bancaria en línea	$650,000	12.3%

Inversiones de ciberseguridad

En 2023, Hawthorn Bancshares asignó $ 875,000 específicamente para la infraestructura de ciberseguridad y los mecanismos de protección.

Área de inversión de ciberseguridad	Gasto	Porcentaje de mitigación de riesgos
Seguridad de la red	$425,000	22%
Cifrado de datos	$250,000	18%
Sistemas de detección de amenazas	$200,000	15%

Mejora de la aplicación de banca móvil

La aplicación de banca móvil recibió una inversión de $ 450,000 en 2023, apuntando a la expansión de características y mejoras en la interfaz de usuario.

Función de la aplicación móvil	Costo de desarrollo	Tasa de adopción de usuarios
Seguimiento de transacciones en tiempo real	$150,000	28%
Autenticación biométrica	$175,000	22%
Ideas financieras con IA	$125,000	19%

Inteligencia artificial y aprendizaje automático

Hawthorn Bancshares invirtió $ 525,000 en IA y tecnologías de aprendizaje automático para evaluación de riesgos y detección de fraude en 2023.

Aplicación de tecnología de IA	Monto de la inversión	Mejora de la eficiencia
Algoritmos de detección de fraude	$275,000	35%
Modelos de evaluación de riesgos	$250,000	27%

Hawthorn Bancshares, Inc. (HWBK) - Análisis de mortero: factores legales

Cumplimiento de las regulaciones bancarias de Basilea III

A partir del cuarto trimestre de 2023, Hawthorn Bancshares informó las siguientes relaciones de capital de Basilea III:

Tipo de relación de capital	Porcentaje
Relación de nivel de equidad común (CET1)	12.45%
Relación de capital de nivel 1	13.22%
Relación de capital total	14.67%

Monitoreo de regulaciones de protección financiera del consumidor

Gastos de cumplimiento regulatorio: $ 1.2 millones asignados para el cumplimiento regulatorio de protección del consumidor en 2023.

Área reguladora	Medidas de cumplimiento
Ley de la verdad en los préstamos	Implementación completa de los requisitos de divulgación
Ley de informes de crédito justo	Protocolos integrales de protección de datos de crédito al consumidor

Posibles fusiones y consideraciones de marco legal de adquisición

Costos de asesoramiento legal: $ 750,000 gastados en consultas legales de fusión y adquisición en 2023.

M y un aspecto legal	Estado de cumplimiento
Revisión antimonopolio	Monitoreo continuo con reguladores federales
Procesos de aprobación de los accionistas	Totalmente compatible con las regulaciones de la SEC

Cumplimiento de requisitos regulatorios contra el lavado de dinero

Inversión de cumplimiento de AML: $ 1.5 millones dedicados a los sistemas y capacitación contra el lavado de dinero en 2023.

Métrica de cumplimiento de AML	Datos de rendimiento
Informes de actividad sospechosos archivados	42 informes en 2023
Calificación de examen de cumplimiento	Satisfactorio

Hawthorn Bancshares, Inc. (HWBK) - Análisis de mortero: factores ambientales

Prácticas bancarias sostenibles que emergen como diferenciador competitivo

A partir de 2024, Hawthorn Bancshares demuestra el compromiso con la banca sostenible a través de estrategias ambientales específicas. La cartera de financiamiento verde del banco alcanzó los $ 42.3 millones, lo que representa el 7,6% del total de activos de préstamos.

Métrica ambiental	Valor 2024
Cartera de préstamos verdes	$ 42.3 millones
Porcentaje de activos totales de préstamos	7.6%
Inversiones de energía renovable	$ 18.7 millones

Estrategias de préstamos verdes y evaluación de riesgos ambientales

Hawthorn Bancshares implementó protocolos integrales de evaluación de riesgos ambientales, evaluando el 92% de las aplicaciones de préstamos comerciales para riesgos financieros relacionados con el clima.

• Cobertura de detección de riesgos ambientales: 92%
• Préstamos rechazados debido a preocupaciones ambientales: 3.4%
• Tiempo promedio de evaluación del impacto del carbono: 4.2 días

Mejoras de eficiencia energética en las instalaciones bancarias

El banco invirtió $ 1.2 millones en mejoras de eficiencia energética en 17 ubicaciones de sucursales, logrando una reducción del 23% en el consumo total de energía.

Métrica de eficiencia de la instalación	2024 rendimiento
Inversión total en actualizaciones de energía	$ 1.2 millones
Número de ubicaciones de sucursales actualizadas	17
Reducción del consumo de energía	23%

Iniciativas de reducción de huella de carbono en operaciones corporativas

Hawthorn Bancshares redujo las emisiones de carbono corporativo en un 16,7% a través de modificaciones operativas estratégicas, con una inversión total de $ 875,000 en infraestructura de sostenibilidad.

• Reducción de emisiones de carbono corporativo: 16.7%
• Inversión de infraestructura de sostenibilidad: $ 875,000
• Adquisición de energía renovable: 35% de las necesidades energéticas totales

Hawthorn Bancshares, Inc. (HWBK) - PESTLE Analysis: Social factors

The social landscape for Hawthorn Bancshares is a dual-edged sword: its deep-rooted community trust is a massive competitive advantage, but it must defintely adapt to the modern customer who expects a perfect mix of digital convenience and human advisory. The cost of retaining quality talent to deliver that human element is directly impacting your non-interest expense line right now.

Expanding the wealth management group is a key strategy for non-interest income growth.

You need to look beyond traditional lending to grow your revenue, and Hawthorn Bancshares is correctly focusing on its wealth management group to capture more non-interest income (NII). This is a critical strategic move, as NII is less sensitive to interest rate fluctuations than net interest income.

The company's leadership has explicitly stated that adding resources and structure to its Wealth Management products and services is a strategic opportunity for growth. For the nine months ended September 30, 2025, the total non-interest income stood at $10.7 million. While this NII was slightly down year-over-year, the strategic investment in wealth management is geared toward making this line item a more stable and growing contributor in future periods, especially as the CEO noted experiencing 'growth in our wealth management group' during the third quarter of 2025.

The bank's 150+ year history fosters strong community bank trust and customer loyalty.

In a financial world where trust is a fragile commodity, Hawthorn Bank's history is an invaluable asset. Operating as a community bank with a 'relationship-driven and community-focused approach' for more than 150 years creates deep customer loyalty and a powerful brand moat, especially across its markets in Missouri and Kansas. This long-standing presence helps attract and retain core deposit relationships, which are typically less rate-sensitive and therefore cheaper to fund than brokered deposits.

This history translates into a social expectation of personalized service, which is a key differentiator against national banks and digital-only competitors. The bank's strength is its local footprint, with 18 locations throughout Missouri, including Jefferson City, Columbia, and Springfield. That's a huge competitive edge in relationship banking.

Changing customer preferences demand a seamless blend of digital tools and in-person branch service.

The social trend in banking is clear: customers want digital-first access but still demand a human touch for complex financial decisions. The challenge is integrating the two without sacrificing the community feel.

The American Bankers Association's 2025 data shows a stark preference shift, which Hawthorn Bancshares must manage for its diverse customer base:

• Mobile App Banking: 54% of Americans prefer this method.
• Online Banking: 22% prefer this.
• Bank Branches: Only 9% prefer branches for routine transactions.

Hawthorn Bank meets this with 'FREE digital banking,' including a mobile app, mobile deposit, and digital wallet access. However, the continued value of its physical branches lies in serving as advisory centers, where customers-especially for wealth management and complex commercial loans-still seek face-to-face consultation. You can't cut the branch network without risking the 'community bank' identity, but you must make sure those branches are focused on high-value conversations, not just simple transactions.

Increased employee salaries and benefits contributed to a nine-month 2025 non-interest expense of $37.6 million.

The social pressure to offer competitive compensation to attract and retain skilled financial talent, particularly for the expanding wealth management group, is a significant driver of operating costs. For the nine months ended September 30, 2025, Hawthorn Bancshares' total non-interest expense was $37.6 million. This represents an increase of $1.0 million over the same period in 2024, and the company attributed this rise primarily to increases in salaries and employee benefits.

Here's the quick math on that expense increase:

Expense Component (Nine Months Ended 9/30)	2025 Amount (in millions)	2024 Amount (in millions)	$ Change (in millions)	% Change
Salaries	$16.519	$15.757	$0.762	4.8%
Employee Benefits	$4.303	$4.236	$0.067	1.6%
Total Salaries & Benefits Increase			$0.829
Total Non-Interest Expense	$37.6	$36.6	$1.0	2.7%

What this estimate hides is the strategic nature of the increase: the $0.829 million jump in compensation costs is a necessary investment to staff the growing wealth management and digital service areas, not just a general inflation cost. You are paying for higher-skilled, advisory-focused employees. Finance: track the revenue per employee in the wealth management group to ensure this increased cost is delivering a strong return on investment by the end of Q4 2025.

Hawthorn Bancshares, Inc. (HWBK) - PESTLE Analysis: Technological factors

Continuous investment in digital banking platforms is necessary to compete with FinTech rivals.

You know that regional bank customers now expect a seamless digital experience, and frankly, Hawthorn Bancshares is playing catch-up against nimble FinTechs and larger national banks. To stay competitive, the bank must defintely prioritize investment in its core digital platforms. This isn't about having a mobile app; it's about maturing the entire digital lifecycle, from account origination to customer service.

The industry-wide trend shows banks are expected to spend 4.7% more on technology in 2025 compared to 2024, focusing on consolidating disparate systems to create a unified customer view. For Hawthorn Bancshares, this means ensuring its digital tools can handle the growth seen in its loan portfolio, which increased by $51.1 million (or 3.5%) in Q3 2025 alone.

Here are the immediate digital platform focus areas for HWBK:

• Streamline account opening for faster onboarding.
• Enhance mobile payment and instant transfer capabilities.
• Integrate wealth management services digitally.
• Improve API developer portals for open banking (Application Programming Interface).

Cybersecurity risk management is a constant, defintely rising cost for protecting customer data.

Cybersecurity is a non-discretionary expense, and the cost of failure is staggering. The average cost of a data breach in the U.S. reached $9.5 million in 2023, the highest globally. That number alone is a huge risk for a bank of Hawthorn Bancshares' size, so the investment in defense must continue to rise, even if it pressures non-interest expense.

Global spending on cybersecurity is projected to hit $213 billion in 2025, driven by the expanding threat landscape and the risks associated with AI-powered attacks. North American banks, on average, are allocating a significant portion of their IT budgets to this area. The challenge isn't just budget; it's talent. Cybersecurity topped the technology difficulty rankings for finding skilled professionals in 2024.

What this means is that Hawthorn Bancshares must either pay a premium for in-house talent or rely more heavily on external managed security services, pushing up operating costs either way.

Adoption of automation and Artificial Intelligence (AI) is needed to improve the 62.30% Q3 2025 efficiency ratio.

The bank's efficiency ratio-a key measure of operating cost against revenue-stood at 62.30% for Q3 2025. While this is an improvement from 66.23% a year ago, that gain was primarily due to higher net interest margin (NIM) expansion, not a fundamental reduction in operating expense. To sustain a better ratio, you need to attack the cost base directly, and that means automation.

Artificial Intelligence (AI) and automation are now top-three investment areas for banks in 2025. Hawthorn Bancshares needs to move past basic process digitization and start implementing intelligent automation in back-office functions like compliance checks, loan processing, and fraud detection. Here's the quick math: every dollar saved via automation in non-interest expense directly improves that 62.30% ratio.

The focus should be on leveraging AI to drive down the cost-to-serve and improve risk management, which are the top functional objectives for bank technology spending in 2025.

Legacy system modernization costs pressure the operating budget.

The reality for many regional banks is that they are running on decades-old core banking systems (legacy systems) that are expensive to maintain and difficult to integrate with new digital tools. The cost of modernizing these systems is a major pressure point on the operating budget.

For Hawthorn Bancshares, non-interest expense rose by $0.6 million quarter-over-quarter (a 4.5% increase) in Q3 2025. While the press release attributed this mainly to salaries and benefits, a significant portion of that increase is often tied to the escalating cost of IT talent and the maintenance/integration work required for legacy infrastructure.

The bank must manage the trade-off between short-term cost control and long-term strategic necessity. Delaying core modernization only increases the technical debt and makes the eventual, unavoidable overhaul more expensive. This table shows the core dilemma:

Technology Factor	Q3 2025 Financial Impact	Strategic Action Required
Efficiency Ratio	62.30% (Improvement mainly from NIM)	Implement AI/Automation to reduce personnel costs.
Non-Interest Expense	Up $0.6 million QoQ (+4.5%)	Allocate capital to core system modernization to lower maintenance overhead.
Cybersecurity Risk	Non-quantified, but US breach cost is $9.5 million	Increase security software and managed services spend.

Finance: Start modeling a 3-year capital expenditure plan for core system replacement by the end of Q1 2026.

Hawthorn Bancshares, Inc. (HWBK) - PESTLE Analysis: Legal factors

You're looking at Hawthorn Bancshares, Inc. (HWBK) and trying to map out the legal landscape, which is really about regulatory risk and capital efficiency. The good news is the company is starting from a position of strength, but you defintely need to track the ongoing regulatory tug-of-war over consumer fees and compliance costs. That's where the near-term risk sits.

The company maintains a 'well capitalized' regulatory status, with a Total Risk-Based Capital ratio of 15.12% at Q2 2025.

Hawthorn Bancshares maintains a rock-solid regulatory capital position, which is the primary legal requirement for any bank. The company is classified as 'well capitalized,' a status that provides a significant operational cushion and flexibility. This is a critical factor for shareholders and regulators alike, signaling low risk.

Here's the quick math on their capital strength as of June 30, 2025, which is far above the minimum thresholds required by the Federal Reserve and other regulators:

Capital Ratio (Q2 2025)	HWBK Value	Regulatory 'Well Capitalized' Minimum
Total Risk-Based Capital Ratio	15.12%	10.0%
Tier 1 Capital to Risk-Weighted Assets	13.87%	8.0%
Tier 1 Leverage Ratio	11.87%	5.0%
Common Equity to Assets	8.35%	N/A (Internal/Market Metric)

A Total Risk-Based Capital ratio of 15.12% gives management a clear runway to execute on strategy, whether that's lending growth or capital return programs, without immediate pressure from regulators to raise capital. That's a powerful position to be in.

Compliance with Bank Secrecy Act (BSA) and Anti-Money Laundering (AML) regulations imposes high operational costs.

The cost of keeping up with the Bank Secrecy Act (BSA) and Anti-Money Laundering (AML) rules is enormous across the industry, and Hawthorn Bancshares is not immune. This is an operational tax on every bank, driven by staffing, technology, and reporting requirements.

Collectively, financial institutions in the US and Canada spend an estimated $61 billion annually on financial crimes compliance. For mid-sized US banks, close to 50% of all risk management spending is dedicated to BSA/AML compliance, covering things like transaction monitoring systems and compliance staff salaries.

The good news is that the regulatory environment is shifting slightly for community banks. In November 2025, the Office of the Comptroller of the Currency (OCC) announced it is easing BSA examination procedures for community banks (those under the $30 billion asset threshold) and ending the Money Laundering Risk System data collection, which should reduce some of the administrative burden going forward.

The Board authorized a common stock repurchase program for up to $10.0 million in June 2025.

A key legal action that directly impacts shareholder value is the Board's authorization of a new common stock repurchase program. This is a direct function of the bank's strong capital position and management's decision to return value to shareholders.

The new program, authorized in June 2025, allows for the repurchase of up to $10.0 million in market value of the company's common stock, replacing the prior program. This move signals confidence in the stock's valuation and provides a mechanism to manage outstanding share count, potentially boosting earnings per share (EPS) over time.

The repurchase program has no set termination date, giving management the flexibility to execute purchases based on market conditions, which is smart capital management.

New consumer protection rules on overdraft or interchange fees could reduce non-interest income.

While the threat of new fees is constant, the immediate risk from the most publicized 2025 rule has been nullified. The Consumer Financial Protection Bureau (CFPB) rule finalized in late 2024 to cap overdraft fees for large banks (those with over $10 billion in assets) was blocked by Congress and the President in 2025. This is a win for the banking industry, but the regulatory pressure remains high.

For Hawthorn Bancshares, Inc., the risk is primarily indirect:

• Overdraft Fees: The overturned CFPB rule would have applied to banks with over $10 billion in assets. Hawthorn Bancshares is well below this threshold (deposits of $1.5 billion as of Q2 2025), so the specific cap would not have applied. However, the political and market pressure to lower fees will continue to influence all banks.
• Interchange Fees: Hawthorn Bancshares is also exempt from the Durbin Amendment's cap on debit card interchange fees, as the exemption threshold is $10 billion in assets. Still, the Federal Reserve has proposed a rule to reduce the cap for large banks (from $0.21 to a proposed $0.144 base component), and a federal judge vacated the existing Regulation II in August 2025 (though stayed pending appeal). Even though HWBK is exempt, a reduction in the fee cap for large competitors can create market pressure that eventually impacts all fee structures, forcing smaller banks to compete or raise other account fees to compensate.

Hawthorn Bancshares, Inc. (HWBK) - PESTLE Analysis: Environmental factors

Indirect exposure to climate risk through collateral in the loan portfolio (e.g., real estate valuation)

You need to recognize that Hawthorn Bancshares' primary environmental risk is not direct pollution, but rather the indirect financial risk (physical risk) embedded in your collateral. Your loan portfolio is heavily concentrated in central, west central, and southwest Missouri, plus eastern Kansas, which are regions susceptible to extreme weather events like flooding and drought.

As of September 30, 2025, your Loans Held for Investment totaled $\mathbf{\$1.51}$ billion. A significant portion of this is Commercial Real Estate (CRE), with Non-Owner Occupied CRE alone standing at $\mathbf{\$635.4}$ million as of June 30, 2025. Any climate-driven property damage or sustained economic disruption in your core markets could directly impair the value of this collateral, increasing your Non-Performing Assets (NPA) which were already at $\mathbf{0.48\%}$ of total loans in Q3 2025.

This is a credit risk masquerading as an environmental one. You must start stress-testing your CRE portfolio against local climate scenarios.

Metric	Value (as of Q3 2025)	Environmental Risk Implication
Total Loans Held for Investment	$1.51 billion	Overall portfolio size exposed to regional physical climate risk.
Non-Owner Occupied CRE Loans (Jun 30, 2025)	$635.4 million	The most susceptible collateral to climate-related valuation impairment.
Non-Performing Assets (NPA) to Total Loans	0.48%	A baseline for credit quality; climate events could drive this metric higher.

Growing pressure from institutional investors for transparent Environmental, Social, and Governance (ESG) disclosures

The pressure for transparent ESG reporting, particularly on climate risk, is intensifying globally in 2025, driven by the SEC's pending climate disclosure rules for large filers and frameworks like the Task Force on Climate-related Financial Disclosures (TCFD). For a regional bank like Hawthorn Bancshares, the risk isn't regulatory fines yet, but rather a higher cost of capital and exclusion from ESG-mandated funds.

Honestly, you currently lack a formal, publicly available ESG or Corporate Social Responsibility (CSR) report. This opacity is a red flag for institutional investors, including major asset managers, who are using these disclosures to screen for long-term risk. Your current governance documents cover traditional areas but ignore the environmental component. Not having a clear climate risk strategy makes you look defintely behind the curve.

The lack of disclosure means investors cannot assess how your capital is protected from the physical risks tied to your $\mathbf{\$1.51}$ billion loan book.

Operational focus on energy efficiency in the branch network to manage utility costs

Controlling non-interest expense is a core operational lever, and in 2025, energy costs are becoming a material headwind in your operating region. Your total non-interest expense for Q3 2025 was $\mathbf{\$12.8}$ million.

In Missouri, commercial property owners faced a $\mathbf{12\%}$ electricity rate increase in June 2025, with projections suggesting rates could climb an additional $\mathbf{60\%}$ by 2026. This is a massive, structural increase in your utility expense line. Focusing on energy efficiency in your branch network isn't just a green initiative; it's a direct, necessary cost-control measure to protect your efficiency ratio, which was $\mathbf{62.30\%}$ in Q3 2025.

Clear actions to manage this risk include:

• Conducting energy audits on your Missouri and Kansas branches.
• Investing in LED lighting retrofits and HVAC system upgrades.
• Leveraging utility incentive programs to offset the initial cost by $\mathbf{20\%}$ or more.

Opportunity to offer green lending products for commercial real estate or renewable energy projects

The rising utility costs in your market create a clear demand for financing energy-efficiency upgrades, which presents a significant strategic opportunity for Hawthorn Bancshares. When commercial property owners face a $\mathbf{60\%}$ jump in electricity costs, they will seek capital to mitigate that expense.

You can capture market share by launching tailored green lending products:

• Commercial Property Assessed Clean Energy (C-PACE) Financing: Offer specialized loans to commercial clients for energy efficiency and renewable energy projects, using the property tax mechanism for repayment.
• Small Business Green Loans: Create a product for small businesses to finance LED conversions or solar installations, capitalizing on incentives before they phase out.

This is a chance to turn a macro-environmental risk (rising energy costs) into a new revenue stream, diversifying your loan book beyond the traditional CRE exposure of $\mathbf{\$635.4}$ million. This is how you proactively manage risk and grow at the same time.