Hawthorn Bancshares, Inc. (HWBK): Análise de Pestle [Jan-2025 Atualizado]

Mergulhe no intrincado mundo de Hawthorn Bancshares, Inc. (HWBK), onde o setor bancário atende à complexidade em um cenário dinâmico de desafios regulatórios, inovações tecnológicas e demandas de mercado em evolução. Essa análise abrangente de pestles revela as forças multifacetadas que moldam as decisões estratégicas do banco, desde os regulamentos políticos diferenciados do Missouri até as transformações tecnológicas de ponta, redefinindo os serviços financeiros. Descubra como o HWBK navega pelas intrincadas interseções de fatores políticos, econômicos, sociológicos, tecnológicos, legais e ambientais que não apenas desafiam, mas também impulsionam seu posicionamento competitivo no ecossistema bancário regional.

Hawthorn Bancshares, Inc. (HWBK) - Análise de Pestle: Fatores políticos

Os regulamentos bancários do estado do Missouri impactam as estratégias operacionais

Os regulamentos financeiros do Missouri influenciam diretamente a estrutura operacional da HWBK. A partir de 2024, as leis bancárias estaduais do Missouri exigem:

Requisito regulatório	Métrica de conformidade específica
Requisito de reserva de capital	10,5% de índice de capital mínimo de nível 1
Relatórios financeiros anuais	Submissão obrigatória dentro de 60 dias após o final do ano fiscal
Padrões de proteção ao consumidor	Recurso estrito às regras de divulgação de empréstimos em nível estadual

Políticas monetárias do Federal Reserve influenciam

Os principais impactos da política monetária do Federal Reserve para o HWBK incluem:

• Taxa atual de fundos federais: 5,33% em janeiro de 2024
• Taxa de referência de empréstimo: taxa prima em 8,5%
• Relação de reserva necessária para bancos: 10% para depósitos acima de US $ 127,5 milhões

Conformidade da Lei de Reinvestimento Comunitário

A abordagem bancária regional da HWBK é moldada pelas métricas de conformidade do CRA:

Categoria de desempenho do CRA	Métrica de conformidade
Atividade de empréstimo	85,6% dos empréstimos na comunidade local
Investimento em desenvolvimento comunitário	US $ 3,2 milhões alocados em 2023
Serviço para áreas de baixa renda	12 programas de investimento comunitário direcionado

Mudanças potenciais na supervisão bancária

Mudanças regulatórias previstas potencialmente afetando a governança corporativa da HWBK:

• Requisitos aprimorados de relatório de segurança cibernética
• Maior transparência na divulgação de compensação de executivos
• Protocolos de conformidade de lavagem anti-dinheiro mais rigorosos

Hawthorn Bancshares, Inc. (HWBK) - Análise de Pestle: Fatores Econômicos

Flutuações de taxa de juros que afetam a rentabilidade de empréstimos do Banco

No quarto trimestre 2023, a margem de juros líquidos de Hawthorn Bancshares foi de 3,62%, diretamente influenciada pelas políticas de taxa de juros do Federal Reserve. A taxa de fundos federais em janeiro de 2024 é de 5,33%.

Métrica da taxa de juros	2023 valor	2024 Projeção
Margem de juros líquidos	3.62%	3.55-3.75%
Rendimento da carteira de empréstimos	6.45%	6.50-6.70%
Custo de fundos	2.83%	2.75-2.95%

Saúde Econômica Regional no Missouri e estados vizinhos

O PIB do Missouri em 2023 foi de US $ 369,2 bilhões, com o setor bancário contribuindo com aproximadamente 7,2% para a produção econômica do estado.

Indicador econômico	Missouri 2023	Média regional
Taxa de desemprego	3.1%	3.3%
Renda familiar média	$61,847	$59,500
Taxa de formação de negócios	4.2%	4.5%

Mercado de empréstimos para pequenas empresas

O portfólio de empréstimos para pequenas empresas da Hawthorn Bancshares em 2023 totalizou US $ 124,3 milhões, representando 22,7% do total de ativos de empréstimos.

Métrica de empréstimo para pequenas empresas	2023 valor	Crescimento ano a ano
Empréstimos totais de pequenas empresas	US $ 124,3 milhões	6.8%
Tamanho médio do empréstimo	$187,000	5.2%
Taxa padrão	1.6%	-0.3%

Tendências de inflação que afetam estratégias de investimento

O Índice de Preços ao Consumidor dos EUA (CPI) em dezembro de 2023 foi de 3,4%, influenciando as estratégias de alocação de investimentos da Hawthorn Bancshares.

Categoria de investimento	2023 Alocação	2024 Alocação projetada
Valores mobiliários do governo	42%	45%
Títulos municipais	28%	25%
Títulos corporativos	18%	20%
Outros investimentos	12%	10%

Hawthorn Bancshares, Inc. (HWBK) - Análise de Pestle: Fatores sociais

Envelhecimento mudanças demográficas da população influenciam o design do serviço bancário

De acordo com o Bureau do Censo dos EUA, 16,9% da população tinha 65 anos ou mais em 2020, projetada para atingir 22% até 2030. Para as regiões de serviço de Hawthorn Bancshares, essa tendência demográfica afeta diretamente o design do produto bancário.

Faixa etária	Percentagem	Preferência de serviço bancário
65-74 anos	9.7%	Serviços tradicionais de ramificação
75 anos ou mais	7.2%	Banco digital assistido

Crescendo preferências bancárias digitais entre clientes mais jovens

O Pew Research Center relata 92% dos millennials e 85% da geração Z usam regularmente plataformas bancárias móveis.

Geração	Adoção bancária móvel	Frequência média de transação digital
Millennials	92%	14.3 Transações/mês
Gen Z	85%	12.7 Transações/mês

As necessidades bancárias comunitárias rurais e suburbanas precisam de personalização de serviços de condução

Os dados da FDIC indicam 46 milhões de americanos vivem em áreas rurais, representando um potencial de mercado significativo para serviços bancários comunitários.

Tipo de região	População	Demanda de serviços bancários
Áreas rurais	46 milhões	Empréstimos agrícolas especializados
Áreas suburbanas	152 milhões	Banco digital/físico híbrido

Crescente demanda por serviços de consultoria financeira personalizados

A Deloitte Research mostra que 68% dos clientes esperam orientações financeiras personalizadas adaptadas às necessidades individuais.

Categoria de serviço	Demanda do cliente	Investimento médio anual
Planejamento financeiro personalizado	68%	US $ 3.200 por cliente
Plataformas de consultoria digital	52%	US $ 1.800 por cliente

Hawthorn Bancshares, Inc. (HWBK) - Análise de Pestle: Fatores tecnológicos

Desenvolvimento da plataforma bancária digital

A partir do quarto trimestre de 2023, o Hawthorn Bancshares investiu US $ 1,2 milhão em atualizações de plataformas bancárias digitais. O investimento em tecnologia teve como objetivo melhorar os recursos bancários on -line e a experiência do cliente.

Categoria de investimento em tecnologia	Valor do investimento (2023)	Aumento do engajamento do usuário projetado
Plataforma bancária digital	US $ 1,2 milhão	17.5%
Infraestrutura bancária on -line	$650,000	12.3%

Investimentos de segurança cibernética

Em 2023, o Hawthorn Bancshares alocou US $ 875.000 especificamente para mecanismos de infraestrutura e proteção de segurança cibernética.

Área de investimento em segurança cibernética	Gasto	Porcentagem de mitigação de risco
Segurança de rede	$425,000	22%
Criptografia de dados	$250,000	18%
Sistemas de detecção de ameaças	$200,000	15%

Móvel de aplicativo bancário móvel

O aplicativo Banking Mobile recebeu um investimento de US $ 450.000 em 2023, direcionando a expansão dos recursos e as melhorias na interface do usuário.

Recurso de aplicativo móvel	Custo de desenvolvimento	Taxa de adoção do usuário
Rastreamento de transações em tempo real	$150,000	28%
Autenticação biométrica	$175,000	22%
Insights financeiros movidos a IA	$125,000	19%

Inteligência artificial e aprendizado de máquina

A Hawthorn Bancshares investiu US $ 525.000 em tecnologias de IA e aprendizado de máquina para avaliação de riscos e detecção de fraude em 2023.

Aplicação de tecnologia da IA	Valor do investimento	Melhoria de eficiência
Algoritmos de detecção de fraude	$275,000	35%
Modelos de avaliação de risco	$250,000	27%

Hawthorn Bancshares, Inc. (HWBK) - Análise de Pestle: Fatores Legais

Conformidade com os regulamentos bancários de Basileia III

A partir do quarto trimestre 2023, Hawthorn Bancshares relatou os seguintes índices de capital de Basileia III:

Tipo de taxa de capital	Percentagem
Proporção de nível 1 de patrimônio líquido (CET1) comum	12.45%
Índice de capital de camada 1	13.22%
Índice de capital total	14.67%

Monitoramento de regulamentos de proteção financeira do consumidor

Despesas de conformidade regulatória: US $ 1,2 milhão alocados para a conformidade regulatória de proteção ao consumidor em 2023.

Área regulatória	Medidas de conformidade
Lei da verdade em empréstimos	Implementação completa dos requisitos de divulgação
Lei de Relatórios de Crédito Justo	Protocolos abrangentes de proteção de dados de crédito ao consumidor

Potenciais fusões e considerações de estrutura legal de aquisição

Custos de consultoria jurídica: US $ 750.000 gastos em consultas legais de fusão e aquisição em 2023.

Assembléia Legal de M&A	Status de conformidade
Revisão antitruste	Monitoramento em andamento com reguladores federais
Processos de aprovação dos acionistas	Totalmente compatível com os regulamentos da SEC

Requisitos regulatórios de lavagem de dinheiro

Investimento de conformidade com LBC: US $ 1,5 milhão dedicados a sistemas de lavagem de dinheiro e treinamento em 2023.

Métrica de conformidade com LBA	Dados de desempenho
Relatórios de atividades suspeitas arquivadas	42 relatórios em 2023
Classificação do exame de conformidade	Satisfatório

Hawthorn Bancshares, Inc. (HWBK) - Análise de Pestle: Fatores Ambientais

Práticas bancárias sustentáveis ​​emergentes como diferenciador competitivo

A partir de 2024, o Hawthorn Bancshares demonstra o compromisso com o setor bancário sustentável por meio de estratégias ambientais direcionadas. A carteira de financiamento verde do banco atingiu US $ 42,3 milhões, representando 7,6% do total de ativos de empréstimos.

Métrica ambiental	2024 Valor
Portfólio de empréstimos verdes	US $ 42,3 milhões
Porcentagem do total de ativos de empréstimo	7.6%
Investimentos de energia renovável	US $ 18,7 milhões

Estratégias de empréstimos verdes e de avaliação de risco ambiental

O Hawthorn Bancshares implementou protocolos abrangentes de avaliação de riscos ambientais, triagem 92% dos pedidos de empréstimos comerciais para riscos financeiros relacionados ao clima.

• Cobertura de triagem de risco ambiental: 92%
• Empréstimos recusados ​​devido a preocupações ambientais: 3,4%
• Tempo médio de avaliação de impacto no carbono: 4,2 dias

Melhorias de eficiência energética nas instalações bancárias

O banco investiu US $ 1,2 milhão em atualizações de eficiência energética em 17 locais de filiais, alcançando uma redução de 23% no consumo total de energia.

Métrica de eficiência da instalação	2024 Performance
Investimento total em atualizações energéticas	US $ 1,2 milhão
Número de locais de filial atualizados	17
Redução do consumo de energia	23%

Iniciativas de redução da pegada de carbono em operações corporativas

O Hawthorn Bancshares reduziu as emissões corporativas de carbono em 16,7% por meio de modificações operacionais estratégicas, com um investimento total de US $ 875.000 em infraestrutura de sustentabilidade.

• Redução das emissões de carbono corporativo: 16,7%
• Investimento de infraestrutura de sustentabilidade: US $ 875.000
• Aquisição de energia renovável: 35% das necessidades totais de energia

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.