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Hawthorn Bancshares(HWBK) - 2025 Q1 - Quarterly Report

Financial Performance - For the first quarter ended March 31, 2025, the Company reported a net income of $5.4 million, or $0.77 per diluted share, representing a 20.8% increase from $4.5 million, or $0.63 per diluted share, in the same period of 2024[155]. - Non-interest income rose to $3.5 million in the first quarter of 2025, compared to $3.0 million in the same quarter of 2024[157]. - The efficiency ratio improved to 66.6% for the first quarter of 2025, down from 70.78% in the same quarter of 2024[155]. Interest Income and Margin - Net interest income for the first quarter of 2025 was $15.3 million, an increase of $0.5 million compared to $14.7 million in the first quarter of 2024, with a net interest margin of 3.67%, up from 3.39% year-over-year[156]. - Net interest income on a fully taxable equivalent (FTE) basis increased by $0.6 million, or 3.9%, for the three months ended March 31, 2025, compared to the same period in 2024[170]. - The net interest margin (FTE) rose to 3.67% for the three months ended March 31, 2025, up from 3.39% in the prior year[170]. Asset Quality - Non-performing assets decreased to $3.1 million, or 0.21% of total loans, at March 31, 2025, down from $10.5 million, or 0.69% of total loans, at March 31, 2024[160]. - The allowance for credit losses was $21.8 million, or 1.48% of loans outstanding, as of March 31, 2025, compared to $23.7 million, or 1.56%, as of March 31, 2024[161]. - Total non-performing assets were $3.1 million, or 0.21% of total loans, at March 31, 2025, down from $4.2 million, or 0.29% of total loans, at December 31, 2024[200]. Deposits and Liquidity - Total deposits increased by $10.7 million to $1.54 billion as of March 31, 2025, compared to $1.53 billion as of December 31, 2024, and increased by $16.0 million compared to $1.53 billion as of March 31, 2024[162]. - Cash and cash equivalents increased by $51.3 million to $102.3 million as of March 31, 2025, compared to $51.0 million as of December 31, 2024[158]. - The Company had $368.7 million in unused loan commitments and standby letters of credit as of March 31, 2025, indicating adequate liquidity resources[224]. Expenses - Total non-interest expense decreased by $0.1 million, or 0.6%, to $12.5 million for the three months ended March 31, 2025, compared to $12.6 million for the same period in 2024[186]. - Occupancy expense increased by $0.1 million, or 15.0%, to $0.9 million for the three months ended March 31, 2025, primarily due to the opening of two new branch locations[186]. - Legal, examination, and professional fees decreased by $0.3 million, or 40.1%, to $0.5 million for the three months ended March 31, 2025, due to prior year settlement costs[187]. Capital Adequacy - The Company maintained a "well capitalized" regulatory capital position with a total risk-based capital ratio of 14.94% and a tier 1 leverage ratio of 11.64% as of March 31, 2025[163]. - As of March 31, 2025, the Company and the Bank met all capital adequacy requirements, with total capital to risk-weighted assets at 14.94% for the Company and 14.41% for the Bank[233]. - The Company’s Common Equity Tier 1 Capital ratio was 10.64% as of March 31, 2025, exceeding the minimum requirement of 7.00%[233]. Cash Flow - Operating activities generated total cash of $5.7 million for the three months ended March 31, 2025[221]. - Investing activities used total cash of $6.0 million, primarily due to a $4.1 million net increase in loans held for investment and $6.7 million in purchases of securities[222]. - Financing activities provided total cash of $51.5 million, mainly from a $42.1 million increase in demand deposits and a $42.6 million net increase in FHLB advances[223]. Loans and Borrowings - Loans held for investment increased by $4.2 million to $1.47 billion as of March 31, 2025, compared to $1.47 billion as of December 31, 2024[159]. - The company had $124.0 million in outstanding borrowings with the Federal Home Loan Bank as of March 31, 2025, compared to $81.4 million at December 31, 2024[217]. - Average borrowings decreased by $35.5 million, or 22.1%, to $125.0 million for the quarter ended March 31, 2025[179]. Interest Rate Risk - Interest rate risk exposure is managed through simulations and analyses, with a projected 12.00% increase in net interest income for a 200 basis point increase in interest rates[240]. - Management believes the change in projected net interest income from interest rate shifts of up to 200 basis points is an acceptable level of interest rate risk[240].