Hawthorn Bancshares (HWBK 1.77%), a regional bank focused in Missouri, reported second quarter results on July 30, 2025, for the period ending June 30. It delivered net income of $6.1 million and earnings per share (EPS) of $0.88, up sharply from $0.66 in the second quarter of 2024. Net interest margin widened to 3.89%, as the average loan yield climbed and deposit costs fell. However, overall loans and deposits declined. Compared to estimates, no forecast was provided by analysts. Overall, the quarter reflected stronger profitability and cost control alongside caution signals from balance sheet trends.
| Metric | Q2 2025 | Q1 2025 | Q2 2024 | Y/Y Change |
|---|---|---|---|---|
| EPS (GAAP) | $0.88 | $0.77 | $0.66 | 33.3% |
| Net Interest Income | $16.1 million | $15.3 million | $14.2 million | 13.8% |
| Non-interest Income | $3.5 million | $3.5 million | $4.0 million | (11.3%) |
| Efficiency Ratio | 62.32% | 66.64% | 66.24% | -3.92 pp |
| Net Interest Margin (FTE) | 3.89% | 3.67% | 3.33% | 0.56 pp |
Business Overview and Priorities
Hawthorn Bancshares is a community-based bank holding company. It operates a range of financial services through its primary subsidiary, Hawthorn Bank. Its main business is providing loans, deposit accounts, and other services focused on individuals and small-to-mid-size businesses throughout Missouri.
Recent business priorities for the company have centered on maintaining strong regulatory compliance, managing capital levels, and adjusting its balance sheet in response to market and rate changes. Key factors for success include keeping expense levels low, sustaining top-tier capital ratios, and careful risk monitoring. Capital management—especially measured by regulatory capital and book value per share—remains a particular focus, along with efforts to preserve a competitive position in its local markets.
Quarterly Performance and Key Developments
The quarter featured marked improvement in profitability. EPS increased to $0.88, with net income (GAAP) climbing by nearly $1.5 million from the prior year quarter. This boost was powered by margin expansion: net interest income rose as higher rates on loans translated into improved yields. Specifically, the average loan rate reached 5.98%, up from 5.75% in the prior year quarter. At the same time, lower deposit costs helped: the average deposit cost dropped to 2.35%. These advances contributed to net interest margin climbing to 3.89 %, from 3.33 % the prior year.
Expense controls were visible in the improved efficiency ratio, which fell to 62.32% from over 66% in the prior year quarter. This ratio measures how much of every dollar of revenue is consumed by operating expenses—so a lower figure signals better cost control. Tighter management of non-interest expense, which dropped $0.2 million from the previous quarter, helped further. However, non-interest income—such as service fees—continued its move lower, declining 11.3% from the prior year quarter. The company did not comment on which categories lagged but did note that the decrease was not offset by gains elsewhere.
Notable balance sheet changes included contractions in core lending and deposit categories. Loans held for investment fell $7.4 million (0.5%) from the prior quarter, and $35.6 million (2.4% annualized) from June 30, 2024. The company attributed deposit declines largely to reduced balances in savings, interest checking, and money market accounts. Meanwhile, investment securities rose by $38.2 million compared to the prior year.
Credit quality metrics stayed robust. Non-performing assets formed just 0.35% of loans at quarter-end, improved from 0.54% in the prior year quarter, although up sequentially. The rise in non-performing assets between the first and second quarters of 2025 resulted from moving an operational property to “other real estate owned,” as opposed to a rise in loan defaults. Net loan charge-offs were $51,000 (annualized 0.01%), well below the $1.98 million recorded in the second quarter of 2024. The allowance for credit losses remained unchanged at 1.47% of loans. The provision for credit losses saw a release of $0.1 million, reflecting continued confidence in the loan book’s quality.
Product Offerings and Segment Highlights
Hawthorn Bancshares provides traditional banking services—such as commercial and consumer loans, mortgages, and a variety of deposit products. It also operates a real estate subsidiary tasked with managing nonperforming assets.
Deposits shifted away from interest-bearing products, impacting average balances. Investment securities rose significantly from the prior year. This suggests an emphasis on preserving liquidity and asset quality during a time of slower loan growth and more cautious lending.
Outlook and What to Watch
Management did not provide formal financial or operational guidance for the upcoming quarter or the rest of fiscal 2025. No specific targets or forward-looking statements were disclosed in the earnings materials.
Given the recent trends—especially shrinking loans and deposits and the downturn in non-interest income—investors may pay close attention to whether these balance sheet trends persist. Net interest margin improvements and strong asset quality offer support for near-term stability, but ongoing expense management will likely remain a critical performance area. The quarterly dividend was maintained at $0.20 per share. No changes to dividend policy or payout trend were indicated in this release.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
