Hawthorn Bancshares, Inc. (HWBK): Analyse de Pestle [Jan-2025 Mise à jour]

Plongez dans le monde complexe de Hawthorn Bancshares, Inc. (HWBK), où la banque répond à la complexité dans un paysage dynamique de défis réglementaires, d'innovations technologiques et de demandes en évolution du marché. Cette analyse complète du pilon dévoile les forces multiformes qui façonnent les décisions stratégiques de la banque, des réglementations politiques nuancées du Missouri aux transformations technologiques de pointe redéfinissant les services financiers. Découvrez comment HWBK navigue dans les intersections complexes des facteurs politiques, économiques, sociologiques, technologiques, juridiques et environnementaux qui non seulement remettent en question mais propulsent également son positionnement concurrentiel dans l'écosystème bancaire régional.

Hawthorn Bancshares, Inc. (HWBK) - Analyse du pilon: facteurs politiques

Les réglementations bancaires de l'État du Missouri ont un impact sur les stratégies opérationnelles

Les réglementations financières du Missouri influencent directement le cadre opérationnel de HWBK. En 2024, les lois bancaires de l'État du Missouri exigent:

Exigence réglementaire	Métrique de conformité spécifique
Exigence de réserve de capital	Ratio de capital de 10,5% de niveau 1
Information financière annuelle	Soumission obligatoire dans les 60 jours suivant la fin de l'exercice
Normes de protection des consommateurs	Adhésion stricte aux règles de divulgation des prêts au niveau de l'État

Les politiques monétaires de la Réserve fédérale influencent

Les effets de politique monétaire de la Réserve fédérale clés pour HWBK comprennent:

• Taux de fonds fédéraux actuels: 5,33% en janvier 2024
• Taux de référence de prêt: taux premiers à 8,5%
• Ratio de réserve requis pour les banques: 10% pour les dépôts de plus de 127,5 millions de dollars

Conformité de la Loi sur le réinvestissement communautaire

L'approche bancaire régionale de HWBK est façonnée par les mesures de conformité de l'ARC:

Catégorie de performance de l'ARC	Métrique de conformité
Activité de prêt	85,6% des prêts au sein de la communauté locale
Investissement dans le développement communautaire	3,2 millions de dollars alloués en 2023
Service aux zones à faible revenu	12 programmes d'investissement communautaire ciblés

Changements potentiels dans la surveillance bancaire

Les changements réglementaires prévus affectant potentiellement la gouvernance d'entreprise de HWBK:

• Exigences de rapport de cybersécurité améliorées
• Accélération de la transparence de la divulgation de la rémunération des cadres
• Protocoles de conformité anti-blanchiment plus strictes

Hawthorn Bancshares, Inc. (HWBK) - Analyse du pilon: facteurs économiques

Les fluctuations des taux d'intérêt ont un impact sur la rentabilité des prêts de la banque

Depuis le quatrième trimestre 2023, la marge nette des intérêts de Hawthorn Bancshares était de 3,62%, directement influencée par les politiques de taux d'intérêt de la Réserve fédérale. Le taux des fonds fédéraux en janvier 2024 s'élève à 5,33%.

Métrique des taux d'intérêt	Valeur 2023	2024 projection
Marge d'intérêt net	3.62%	3.55-3.75%
Rendement du portefeuille de prêts	6.45%	6.50-6.70%
Coût des fonds	2.83%	2.75-2.95%

Santé économique régionale au Missouri et aux États environnants

Le PIB du Missouri en 2023 était de 369,2 milliards de dollars, le secteur bancaire contribuant à environ 7,2% à la production économique de l'État.

Indicateur économique	Missouri 2023	Moyenne régionale
Taux de chômage	3.1%	3.3%
Revenu médian des ménages	$61,847	$59,500
Taux de formation d'entreprise	4.2%	4.5%

Marché de prêts aux petites entreprises

Le portefeuille de prêts aux petites entreprises de Hawthorn Bancshares en 2023 a totalisé 124,3 millions de dollars, ce qui représente 22,7% du total des actifs de prêt.

Métrique de prêt de petites entreprises	Valeur 2023	Croissance d'une année à l'autre
Prêts totaux pour les petites entreprises	124,3 millions de dollars	6.8%
Taille moyenne du prêt	$187,000	5.2%
Taux par défaut	1.6%	-0.3%

Tendances de l'inflation affectant les stratégies d'investissement

L'indice des prix à la consommation aux États-Unis (CPI) en décembre 2023 était de 3,4%, influençant les stratégies d'allocation d'investissement de Hawthorn Bancshares.

Catégorie d'investissement	2023 allocation	2024 allocation projetée
Titres du gouvernement	42%	45%
Obligations municipales	28%	25%
Obligations d'entreprise	18%	20%
Autres investissements	12%	10%

Hawthorn Bancshares, Inc. (HWBK) - Analyse du pilon: facteurs sociaux

Les changements démographiques de la population vieillissants influencent la conception du service bancaire

Selon le U.S. Census Bureau, 16,9% de la population était de 65 ans et plus en 2020, prévoyant de atteindre 22% d'ici 2030. Pour les régions de service de Hawthorn Bancshares, cette tendance démographique a un impact direct sur la conception des produits bancaires.

Groupe d'âge	Pourcentage	Préférence de service bancaire
65-74 ans	9.7%	Services de succursale traditionnels
Plus de 75 ans	7.2%	Banque numérique assisté

Préférences de banque numérique croissante chez les jeunes clients

Pew Research Center rapporte que 92% des milléniaux et 85% de la génération Z utilisent régulièrement des plateformes de banque mobile.

Génération	Adoption des banques mobiles	Fréquence moyenne des transactions numériques
Milléniaux	92%	14.3 Transactions / mois
Gen Z	85%	12.7 Transactions / mois

Les besoins bancaires de la communauté rurale et suburbaine ont la personnalisation des services de conduite

Les données de la FDIC indiquent que 46 millions d'Américains vivent dans des zones rurales, ce qui représente un potentiel de marché important pour les services bancaires communautaires.

Type de région	Population	Demande de service bancaire
Zones rurales	46 millions	Prêts agricoles spécialisés
Zones de banlieue	152 millions	Banque numérique / physique hybride

Demande croissante de services de conseil financier personnalisés

La recherche Deloitte montre que 68% des clients s'attendent à des conseils financiers personnalisés adaptés aux besoins individuels.

Catégorie de service	Demande des clients	Investissement annuel moyen
Planification financière personnalisée	68%	3 200 $ par client
Plates-formes de conseil numérique	52%	1 800 $ par client

Hawthorn Bancshares, Inc. (HWBK) - Analyse du pilon: facteurs technologiques

Développement de la plate-forme bancaire numérique

Au quatrième trimestre 2023, Hawthorn Bancshares a investi 1,2 million de dollars dans les mises à niveau de la plate-forme bancaire numérique. L'investissement technologique visait à améliorer les capacités bancaires en ligne et l'expérience client.

Catégorie d'investissement technologique	Montant d'investissement (2023)	Augmentation de l'engagement des utilisateurs projetés
Plate-forme bancaire numérique	1,2 million de dollars	17.5%
Infrastructure bancaire en ligne	$650,000	12.3%

Investissements en cybersécurité

En 2023, Hawthorn Bancshares a alloué 875 000 $ spécifiquement pour les mécanismes d'infrastructure et de protection de la cybersécurité.

Zone d'investissement en cybersécurité	Dépense	Pourcentage d'atténuation des risques
Sécurité du réseau	$425,000	22%
Chiffrement des données	$250,000	18%
Systèmes de détection des menaces	$200,000	15%

Amélioration des applications bancaires mobiles

L'application bancaire mobile a reçu un investissement de 450 000 $ en 2023, ciblant l'expansion des fonctionnalités et les améliorations de l'interface utilisateur.

Fonctionnalité d'application mobile	Coût de développement	Taux d'adoption des utilisateurs
Suivi des transactions en temps réel	$150,000	28%
Authentification biométrique	$175,000	22%
Informations financières propulsées par l'IA	$125,000	19%

Intelligence artificielle et apprentissage automatique

Hawthorn Bancshares a investi 525 000 $ dans les technologies de l'IA et de l'apprentissage automatique pour l'évaluation des risques et la détection de fraude en 2023.

Application technologique AI	Montant d'investissement	Amélioration de l'efficacité
Algorithmes de détection de fraude	$275,000	35%
Modèles d'évaluation des risques	$250,000	27%

Hawthorn Bancshares, Inc. (HWBK) - Analyse du pilon: facteurs juridiques

Conformité aux réglementations bancaires de Bâle III

Au quatrième trimestre 2023, Hawthorn Bancshares a rapporté les ratios de capital Bâle III suivants:

Type de ratio de capital	Pourcentage
Ratio de niveau de capitaux propres communs (CET1)	12.45%
Ratio de capital de niveau 1	13.22%
Ratio de capital total	14.67%

Suivi des réglementations de protection financière des consommateurs

Dépenses de conformité réglementaire: 1,2 million de dollars alloués à la conformité réglementaire sur la protection des consommateurs en 2023.

Zone de réglementation	Mesures de conformité
La vérité dans le prêt	Mise en œuvre complète des exigences de divulgation
Loi sur les rapports de crédit équitable	Protocoles complets de protection des données de crédit aux consommateurs

Mugers potentiels et considérations de cadre juridique d'acquisition

Coûts de conseil juridique: 750 000 $ dépensés pour les consultations juridiques de fusion et d'acquisition en 2023.

Aspect juridique des fusions et acquisitions	Statut de conformité
Examen antitrust	Surveillance continue avec les régulateurs fédéraux
Processus d'approbation des actionnaires	Entièrement conforme aux réglementations SEC

Exigences réglementaires anti-blanchiment

Investissement de conformité AML: 1,5 million de dollars dédiés aux systèmes anti-blanchiment et à la formation en 2023.

Métrique de la conformité AML	Données de performance
Rapports d'activités suspectes déposées	42 rapports en 2023
Note d'examen de conformité	Satisfaisant

Hawthorn Bancshares, Inc. (HWBK) - Analyse du pilon: facteurs environnementaux

Des pratiques bancaires durables émergent comme un différenciateur compétitif

Depuis 2024, Hawthorn Bancshares démontre un engagement envers les services bancaires durables grâce à des stratégies environnementales ciblées. Le portefeuille de financement vert de la banque a atteint 42,3 millions de dollars, ce qui représente 7,6% du total des actifs de prêt.

Métrique environnementale	Valeur 2024
Portefeuille de prêts verts	42,3 millions de dollars
Pourcentage de l'actif total des prêts	7.6%
Investissements en énergie renouvelable	18,7 millions de dollars

Stratégies de prêt vert et d'évaluation des risques environnementaux

Hawthorn Bancshares a mis en œuvre des protocoles complets d'évaluation des risques environnementaux, dépistant 92% des demandes de prêt commercial pour les risques financiers liés au climat.

• Couverture de dépistage des risques environnementaux: 92%
• Discute de prêts en raison de préoccupations environnementales: 3,4%
• Temps d'évaluation de l'impact du carbone moyen: 4,2 jours

Améliorations de l'efficacité énergétique dans les installations bancaires

La banque a investi 1,2 million de dollars dans des mises à niveau de l'efficacité énergétique sur 17 succursales, réalisant une réduction de 23% de la consommation totale d'énergie.

Métrique d'efficacité de l'installation	2024 performance
Investissement total dans les mises à niveau énergétiques	1,2 million de dollars
Nombre de succursales améliorées	17
Réduction de la consommation d'énergie	23%

Initiatives de réduction de l'empreinte carbone dans les opérations des entreprises

Hawthorn Bancshares a réduit les émissions de carbone d'entreprise de 16,7% grâce à des modifications opérationnelles stratégiques, avec un investissement total de 875 000 $ dans les infrastructures de durabilité.

• Réduction des émissions de carbone d'entreprise: 16,7%
• Investissement d'infrastructure de durabilité: 875 000 $
• Aachat d'énergie renouvelable: 35% du total des besoins énergétiques

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.