Core Viewpoint - FinWise Bancorp is a financial institution that provides a range of banking services, focusing on commercial and consumer loans, as well as deposit products, competing with various financial entities in the market [1] Financial Performance - FinWise Bancorp has a Return on Invested Capital (ROIC) of 10.56% and a Weighted Average Cost of Capital (WACC) of 11.63%, resulting in a ROIC to WACC ratio of 0.91, indicating a need for improvement in capital utilization [2][5] - Comparatively, Third Coast Bancshares has a negative ROIC of -1.53% and a high WACC of 22.25%, leading to a ROIC to WACC ratio of -0.07, indicating inefficiency [3] - Primis Financial Corp also shows inefficiency with a ROIC of -6.83% and a WACC of 25.66%, resulting in a ROIC to WACC ratio of -0.27 [3] - In contrast, Five Star Bancorp excels with a ROIC of 32.96% and a WACC of 14.67%, achieving a ROIC to WACC ratio of 2.25, highlighting its superior ability to generate returns above its cost of capital [4][5]

Core Viewpoint - Hawthorn Bancshares reported a strong second quarter for 2025, with significant improvements in profitability and cost control, despite declines in overall loans and deposits [1][5][12] Financial Performance - Net income reached $6.1 million, with earnings per share (EPS) of $0.88, a 33.3% increase from $0.66 in Q2 2024 [1][2] - Net interest income rose to $16.1 million, up 13.8% year-over-year, driven by higher loan yields and lower deposit costs [2][5] - The net interest margin expanded to 3.89%, an increase from 3.33% in the prior year [2][5] Efficiency and Cost Control - The efficiency ratio improved to 62.32%, down from over 66% in the prior year, indicating better cost management [2][6] - Non-interest income decreased by 11.3% year-over-year, reflecting challenges in service fee categories [2][6] Balance Sheet Trends - Loans held for investment decreased by $7.4 million (0.5%) from the previous quarter and $35.6 million (2.4% annualized) from the prior year [7] - Deposits declined primarily due to reduced balances in savings and interest-bearing accounts, while investment securities increased by $38.2 million compared to the prior year [7][10] Credit Quality - Non-performing assets constituted 0.35% of loans, an improvement from 0.54% in the prior year, although there was a sequential increase [8] - Net loan charge-offs were minimal at $51,000, significantly lower than the $1.98 million recorded in Q2 2024 [8] Business Overview and Priorities - Hawthorn Bancshares focuses on providing loans and deposit accounts to individuals and small-to-mid-size businesses in Missouri [3] - Recent priorities include maintaining regulatory compliance, managing capital levels, and adjusting the balance sheet in response to market changes [4] Outlook - Management did not provide formal guidance for the upcoming quarter or fiscal year 2025, indicating a cautious approach [11] - The quarterly dividend was maintained at $0.20 per share, with no changes to the dividend policy indicated [12]

Financial Data and Key Metrics Changes - The company reported record quarterly net income of $195.5 million, up from $189 million in the previous quarter [6] - Net interest income also reached a quarterly record of $547 million, driven by loan growth of $2.3 billion in the second quarter [6][10] - Total assets grew by $3.1 billion to $69 billion, including the impact of a $425 million preferred stock offering [11][16] Business Line Data and Key Metrics Changes - Residential mortgage activity increased slightly but remains muted in the current rate environment [8] - The property and casualty premium finance group saw over $1 billion in growth, while commercial real estate grew by $377 million [20][21] - The mortgage warehouse team grew by $213 million, indicating strong onboarding of new relationships [21] Market Data and Key Metrics Changes - The company experienced a 17% increase in deposits over the prior quarter, totaling $2.2 billion [10] - Loan growth for the first half of the year was $3 billion, representing a 12% annualized increase [11] - Non-performing loans as a percentage of total loans remained stable, with charge-offs for the quarter unchanged at 11 basis points [24] Company Strategy and Development Direction - The company aims for continued mid to high single-digit loan growth for the second half of the year, supported by strong pipelines [6][35] - Management emphasized a disciplined approach to growth, avoiding opportunities with unfavorable pricing or credit structures [7] - The company is cautiously optimistic about the overall business environment, with a focus on maintaining strong credit quality [24] Management's Comments on Operating Environment and Future Outlook - Management noted that credit quality remains very good, with a stable environment for non-performing loans and charge-offs [24] - There is a belief that the impacts of economic uncertainties will be limited due to strong underwriting standards [23] - The company is optimistic about the business environment as it enters the second half of the year, with strong pipelines in core markets [22][24] Other Important Information - The company continues to build tangible book value per share and has grown it every year since going public [16] - The recent preferred stock issuance will impact earnings per share calculations in the third quarter but will not affect operating net income [17][18] Q&A Session Summary Question: Loan growth expectations for Q3 - Management expects loan growth to be in line with historical trends, targeting mid to high single digits [35] Question: Sources of deposit growth - Deposit growth is broad-based, with significant contributions from commercial and consumer households [38] Question: Wealth management outsourcing progress - The conversion to the LPL platform is largely complete, and the company sees growth potential in the wealth management business [40] Question: NII growth sustainability - Management believes mid to high single-digit NII growth is reasonable given stable margins and asset growth [45] Question: Deregulation impact on M&A - The company is hopeful for regulatory adjustments that could facilitate growth and is open to acquisition opportunities [52] Question: Core C&I sentiment and growth - There is cautious optimism among core commercial clients, with sentiment improving compared to previous quarters [56] Question: Non-performing loans in CRE portfolio - The increase in non-performing loans is minor and attributed to a few specific credits, with overall management feeling confident [58] Question: Competitive pricing and loan yield compression - There has been some margin compression, but the company maintains a disciplined pricing strategy [66] Question: Capital targets and CET1 ratios - The company views a 10% CET1 ratio as a floor and expects gradual growth in capital with earnings [111]