Hawthorn Bancshares, Inc. (HWBK): BCG Matrix [Dec-2025 Updated]

You're looking at Hawthorn Bancshares, Inc. (HWBK) through the BCG lens as of late 2025, and honestly, it paints a clear picture for a bank in a mature regional market. The core business is definitely humming, anchored by a stable funding base and a primary revenue driver-Net Interest Income-that hit $48.3 million for the first nine months. Still, the real strategic tension lies between those reliable 'Cash Cows' and the capital-hungry 'Question Marks' like the new Wealth Management push and digital overhaul. Let's break down exactly where HWBK is generating its stable cash and where it's betting big for future share, so you can see which segments need investment and which are ripe for trimming.

Background of Hawthorn Bancshares, Inc. (HWBK)

Hawthorn Bancshares, Inc. (NASDAQ: HWBK) functions as the bank holding company for Hawthorn Bank. This community-focused financial institution is headquartered in Jefferson City, Missouri, and provides a comprehensive suite of banking and financial services across its operating footprint. You'll find Hawthorn Bank serving individuals, small businesses, agricultural enterprises, and commercial clients primarily across southwest Missouri and select markets in nearby states, including the Kansas City metropolitan area.

The company's core business revolves around traditional banking services, but they actively work to enhance their offerings. Their deposit products include checking, savings, and money market accounts. On the lending side, Hawthorn Bancshares delivers consumer solutions like residential mortgages, home equity lines of credit, auto loans, and personal loans.

For their business clients, the offerings are robust, covering financing for commercial real estate, equipment acquisition, working capital needs, and agricultural operations. Furthermore, Hawthorn Bancshares maintains a trust and wealth management division. This segment provides investment advisory, fiduciary, and estate planning services, which complement their treasury management and merchant services for day-to-day business operations.

Looking at the performance leading up to late 2025, the results show clear momentum. For the third quarter of 2025, Hawthorn Bancshares reported a net income of $6.1 million, which represented a significant year-over-year improvement of 34.1% from the third quarter of 2024. This translated to earnings per diluted share (EPS) of $0.88 for that quarter.

For the nine months ended September 30, 2025, the cumulative net income reached $17.6 million, up from $13.7 million for the same period in 2024. The efficiency ratio also improved to 62.30% in Q3 2025, down from 66.23% in the prior year quarter, largely due to margin expansion. The net interest margin, fully taxable equivalent (FTE), stood at 3.97% for the third quarter of 2025.

As of September 30, 2025, the loan portfolio held for investment totaled $1.51 billion, showing growth compared to the prior quarter and the prior year. The book value per share was reported at $23.76 at the end of the third quarter. To support shareholder value, Hawthorn Bancshares, Inc. announced a quarterly cash dividend of $0.20 per common share, payable on January 1, 2026.

Hawthorn Bancshares, Inc. (HWBK) - BCG Matrix: Stars

You're looking at the Stars quadrant, which, for Hawthorn Bancshares, Inc., is more about the potential for internal momentum than dominating a rapidly expanding external market. Honestly, the Missouri banking market is mature, so finding a true high-growth, high-share segment is tough for any regional player like Hawthorn Bancshares, Inc.

The company's reported focus isn't on capturing a high-growth market segment, but rather on internal execution. For instance, the CEO highlighted continued core growth in the third quarter of 2025. This internal focus is where you see the numbers that would be associated with a Star's performance-strong sequential growth in key areas.

Here's a look at the balance sheet momentum as of September 30, 2025:

• Loans grew by $51.1 million quarter-over-quarter.
• Book Value per Share (BVPS) increased to $23.76.
• BVPS showed a quarterly increase of 5.5%.
• Total Risk-Based Capital stood at 14.90%.

The strategy is definitely centered on margin expansion and core growth, not market dominance. This is evident in the profitability metrics achieved through careful asset/liability management. The Net Interest Margin (NIM) is the clearest indicator of this internal focus.

Here are the numbers that confirm the margin expansion strategy is working as of Q3 2025:

The efficiency ratio improvement to 62.30% year-over-year from 66.23% in the prior year quarter also supports the focus on operational efficiency. The company is generating more profit from its existing base, which is the hallmark of managing a mature business unit for maximum return.

You can see the results of this focus in the bottom line for the nine months ended September 30, 2025:

• Net Income for the nine months was $17.6 million.
• Diluted EPS for the nine months was $2.53.
• Q3 2025 Net Income was $6.1 million.
• Q3 2025 EPS was $0.88.

Hawthorn Bancshares, Inc. (HWBK) - BCG Matrix: Cash Cows

You see the core stability in the business unit performance, which is what we expect from a Cash Cow. Net Interest Income (NII) for Hawthorn Bancshares, Inc. was a solid $48.3 million for the nine months ended September 30, 2025. This revenue stream is mature but highly reliable, funding other parts of the enterprise.

The lending operations, which anchor this high market share, show the portfolio is substantial. Loans held for investment stood at $1.51 billion as of September 30, 2025, reflecting growth of 3.5% quarter-over-quarter, indicating continued strength in established local markets for Hawthorn Bancshares, Inc..

Funding costs are well-managed, which directly supports the high-profit margin characteristic of a Cash Cow. Non-Interest Bearing Demand Deposits made up a strong 27.8% of total deposits at September 30, 2025. This low-cost funding helped push the Net Interest Margin (FTE) to 3.97% for the third quarter of 2025.

Operational discipline is evident in the efficiency metrics. The efficiency ratio for Hawthorn Bancshares, Inc. improved to 62.30% in Q3 2025, a clear step down from 66.23% reported for the prior year quarter, showing strong cost management supporting cash flow generation.

Here is a quick look at the key financial indicators supporting this Cash Cow assessment for Hawthorn Bancshares, Inc. as of Q3 2025:

The stability of this segment is supported by several factors that allow for passive milking of gains:

• Loan portfolio grew 3.5% quarter-over-quarter.
• Net income for Q3 2025 was $6.1 million.
• Book value per share reached $23.76.
• Allowance for credit losses covered 446% of non-performing loans.
• Total risk-based capital stood at 14.90%.

Hawthorn Bancshares, Inc. (HWBK) - BCG Matrix: Dogs

Dogs are units or products with a low market share and low growth rates. They frequently break even, neither earning nor consuming much cash. Dogs are generally considered cash traps because businesses have money tied up in them, even though they bring back almost nothing in return. These business units are prime candidates for divestiture.

Dogs are in low growth markets and have low market share. Dogs should be avoided and minimized. Expensive turn-around plans usually do not help.

For Hawthorn Bancshares, Inc. (HWBK), the following areas fit the profile of a Dog as of the third quarter of 2025, characterized by minimal contribution to overall growth or significant capital drain relative to returns.

Mortgage Loan Originations (Held for Sale)

This segment saw a deliberate downsizing in 2024 due to prevailing market conditions, which is reflected in the low volume carried into 2025. The volume of originations held for sale was reported at only $6.2 million for the first nine months of 2025. This low figure suggests minimal active participation in a market where agency securitizations for Q1 2025 were estimated at $246 billion, indicating a very low relative share in the current lending environment. The pressure on mortgage lenders is evident, with the average lender losing $28 for each loan originated in Q1 2025.

Key metrics related to this low-activity area include:

• Originations Held for Sale (9M 2025): $6.2 million
• Average Lender Loss per Origination (Q1 2025): $28
• Agency Mortgage Securitizations (Q1 2025 Est.): $246 billion

Investment Securities Portfolio

The Investment Securities Portfolio represents capital that is not being deployed into higher-yielding core loan assets. As of June 30, 2025, the balance of investment securities stood at $229,392 thousand. This segment is subject to low growth and faces fluctuating net losses driven by interest rate changes, which ties up capital without delivering the high returns seen in the core loan book. For instance, while the yield on average loans held for investment increased to 5.98% (FTE) in Q2 2025, the pressure on the securities side, as noted in Q1 2025 analysis, involved net losses impacting the overall revenue mix.

Here's a quick look at the segment's balance versus core assets as of mid-2025:

The low relative return from this pool of assets, especially when compared to the 15.12% total risk-based capital ratio as of June 30, 2025, suggests this capital could be better utilized elsewhere, fitting the Dog profile.

Select Legacy Branch Locations

Certain older, smaller branch locations within Hawthorn Bancshares, Inc.'s network, particularly those situated in slow-growth rural areas, function as Dogs. These locations require ongoing maintenance capital for physical upkeep and staffing but struggle to generate significant market share against larger, more established competitors in those specific sub-markets. While the total number of branches is not explicitly detailed as being reduced, the overall strategic focus on improving the efficiency ratio to 62.32% in Q2 2025 suggests cost control is paramount, which often targets underperforming physical assets. The company, headquartered in Jefferson City, Missouri, serves southwest Missouri and select nearby states, meaning these legacy sites are geographically concentrated in areas where growth may be stagnant.

The operational reality for these units includes:

• Efficiency Ratio Improvement: From 70.78% (Q1 2024) to 62.32% (Q2 2025)
• Net Income (Q2 2025): $6.1 million (Overall Company)
• Capital Position (Q2 2025): Total risk-based capital of 15.12%

These branches represent fixed overhead and maintenance costs that do not contribute proportionally to the overall growth in loans, which increased by 3.5% annualized to $1.51 billion as of September 30, 2025, primarily driven by other segments.

Hawthorn Bancshares, Inc. (HWBK) - BCG Matrix: Question Marks

Question Marks represent business areas within Hawthorn Bancshares, Inc. (HWBK) operating in high-growth markets but currently holding a relatively low market share, thus consuming cash for expansion while their returns are not yet fully realized. These units require significant capital infusion to capture market share quickly or risk becoming Dogs.

Wealth Management Group: This division is explicitly flagged by CEO Brent Giles as an area reflecting growth. The financial results from Q3 2025 support this focus, as revenue from wealth management services surged by 54.3% in the quarter. This growth contrasts with the total non-interest income for the quarter, which was $3.7 million, showing wealth management is a key driver of the non-interest income segment's performance, even if its overall contribution to total revenue remains smaller than core lending.

Commercial, Financial, and Agricultural (CFA) Lending: While the overall loan portfolio showed strong momentum, increasing by 3.5% quarter-over-quarter to reach $1.514 billion as of September 30, 2025, the risk profile in the commercial segment signals a need for careful capital deployment. The movement of one commercial relationship to non-accrual status in Q3 2025 caused non-performing assets (NPAs) to tick up to $7.3 million, or 0.48% of total loans, from 0.35% in Q2 2025. This event underscores the high-risk, high-reward nature of expanding this portfolio to diversify away from real estate concentrations, requiring capital for new customer acquisition while managing potential credit losses.

Digital Banking Initiatives: Competing effectively against FinTechs requires substantial, upfront technology investment, which is reflected in rising operational costs. Total non-interest expense increased by $0.6 million (4.5%) quarter-over-quarter in Q3 2025, largely driven by salaries, benefits, and operational costs associated with opening of new branch locations, which aligns with the CEO's stated focus on enhancements to digital banking capabilities. These investments are necessary to secure future market share but currently pressure the efficiency ratio, which stood at 62.30% for the quarter.

High-Risk Commercial Relationship Impact: The specific event causing the NPA increase highlights the immediate cash consumption risk associated with this growth area. The provision for credit losses for Q3 2025 was $0.4 million, compared to a release of $0.1 million in Q2 2025, directly reflecting the need to provision capital for this specific credit issue. The allowance for credit losses remained robust at 1.45% of loans as of September 30, 2025, covering the non-performing loans by 446.02%.

The following table summarizes key financial metrics from Q3 2025 that illustrate the investment-heavy, high-potential nature of these Question Mark areas:

The overall balance sheet strength, with total risk-based capital at 14.90% and Book Value Per Share at $23.76, provides the necessary capital base to fund these aggressive growth strategies, but the cash burn must be monitored closely.

• Invest heavily in Wealth Management to solidify market share gains.
• Aggressively underwrite CFA loans while maintaining strict NPA monitoring.
• Continue technology investment to improve efficiency ratio below 62.30%.
• Ensure the $8.7 million remaining share repurchase capacity is conserved for strategic needs.