Updated 3/10/25
Hawthorn Bancshares (NASDAQ: HWBK) is a regional banking institution with deep roots in Missouri. Through its subsidiary, Hawthorn Bank, the company has been serving local communities for over a century. It’s not the biggest name in banking, but it has built a reputation for steady, relationship-driven financial services.
For investors looking for stable dividend income, small regional banks can sometimes offer a compelling alternative to large financial institutions. They tend to have loyal customer bases, relatively conservative lending practices, and—most importantly—a commitment to returning capital to shareholders. Hawthorn fits that mold well.
With that in mind, let’s take a closer look at what makes HWBK an interesting dividend stock.
Key Dividend Metrics
🟢 Dividend Yield: 2.52%
💰 Annual Dividend: $0.76 per share
📈 Payout Ratio: 82.44%
🔄 Dividend Growth Streak: 15 years
⚖️ Beta (Volatility Measure): 0.6 (Lower volatility than broader markets)
Dividend Overview
Hawthorn Bancshares currently offers a 2.52% dividend yield, making it a respectable choice for income-focused investors. The company pays an annual dividend of $0.76 per share, a solid payout for a bank of its size.
Dividend investors often look for consistency, and that’s exactly what Hawthorn delivers. Over the years, the company has maintained a steady dividend policy, which is a good sign of financial discipline. In an industry where some banks cut or suspend dividends during tough times, Hawthorn has continued rewarding shareholders.
Dividend Growth and Safety
One of the standout features of HWBK’s dividend is its 15-year growth streak. That means it has increased or maintained its dividend payout for over a decade and a half, weathering various economic cycles. That level of consistency is reassuring, particularly for investors who rely on dividends as a steady income stream.
However, one thing to keep an eye on is the company’s payout ratio, which sits at 82.44%. This means that about 82% of the company’s earnings are being paid out as dividends. While this is not a red flag, it does indicate that Hawthorn doesn’t have a huge buffer if earnings decline. A lower payout ratio would give the bank more room to reinvest profits and sustain dividends during economic downturns.
Analyst Ratings
🟢 Upgrades
In late January 2025, HWBK received an upgrade from StockNews.com, which raised its rating from “hold” to “buy.” This shift was driven by stronger-than-expected financial results in the fourth quarter of 2024. Hawthorn Bancshares reported a net income of $4.6 million, translating to $0.66 earnings per diluted share.
Another key driver of the upgrade was an improvement in net interest margin, which increased to 3.55% from 3.36% in the previous quarter. A rising net interest margin is a strong indicator of a bank’s ability to generate profit from lending activities. Analysts also pointed to Hawthorn’s conservative lending practices and stable asset quality as reasons for a more optimistic outlook.
🔴 Downgrades
While some analysts see upside potential, others have taken a more cautious stance. The biggest concern revolves around HWBK’s high payout ratio of 82.44 percent. A payout ratio at this level means that a significant portion of earnings is being returned to shareholders as dividends, leaving limited room for reinvestment. If earnings take a hit, maintaining the current dividend could become challenging.
Another factor influencing recent downgrades is the regional economic exposure of Hawthorn Bancshares. Since it operates primarily in Missouri, the bank’s performance is closely tied to the local economy. If business activity slows or loan delinquencies rise in the region, it could pressure the company’s profitability.
📊 Consensus Price Target
Currently, there is no widely agreed-upon analyst price target for HWBK. Given its status as a micro-cap regional bank, it does not receive as much analyst coverage as larger financial institutions. However, based on recent upgrades and downgrades, sentiment appears mixed, with some seeing value in the company’s dividend and financial strength, while others remain cautious about its high payout ratio and regional concentration.
Earning Report Summary
Hawthorn Bancshares wrapped up 2024 on a strong note, reporting solid earnings growth and improved financial metrics. For the fourth quarter, the company posted a net income of $4.6 million, or $0.66 per share, which was in line with the previous quarter. This is a big turnaround from the same period last year when the bank recorded a net loss of $7.4 million.
For the full year, Hawthorn reported $18.3 million in net income, translating to $2.61 per diluted share. That’s a massive improvement from 2023, when earnings barely cleared $1 million. A key highlight was the bank’s net interest margin, which edged up to 3.41% from 3.29%, showing that Hawthorn is finding ways to improve profitability even in a shifting rate environment.
Other financial indicators also pointed in the right direction. Return on average assets came in at 1.00%, and return on equity was a healthy 13.04%. The company’s investment portfolio grew by nearly 15%, a sign that management is positioning the bank for long-term growth.
There were a few areas that saw some declines, though. Loans held for investment dropped by 4.7%, while deposits slipped by 2.4%. While not ideal, these decreases weren’t alarming given the overall strong capital position. The bank’s total risk-based capital stood at 14.79%, keeping it well above regulatory requirements.
One of the more encouraging aspects of the report was the improvement in asset quality. Non-performing loans as a percentage of total loans fell to just 0.19%, nearly half of what it was a year ago. That’s a clear sign of strong underwriting and responsible lending practices.
The bank’s book value per share climbed to $21.36, an 11% increase year-over-year. On top of that, non-interest expenses were trimmed by 5.4%, which shows the company is keeping a close eye on costs.
CEO Brent Giles was upbeat about the results, pointing to improvements in operational efficiency and income generation. He also announced plans to expand with a new banking center opening in Overland Park, Kansas, in early 2025. That’s a sign that Hawthorn is looking to grow its presence while maintaining its steady financial foundation.
All in all, 2024 was a strong year for Hawthorn Bancshares. The bank has positioned itself well, balancing growth with financial discipline. While there are always challenges in the banking sector, Hawthorn appears to be managing them well, making steady progress in key areas.
Financial Health and Stability
From a stability standpoint, Hawthorn is a relatively conservative bank. Its beta of 0.6 suggests that its stock price is less volatile than the overall market, which is a plus for long-term investors looking for less day-to-day fluctuation.
Being a smaller regional bank, its financial health depends largely on the local economies it serves. If Missouri’s economy remains strong, Hawthorn should continue performing well. However, as with any financial institution, loan defaults and economic downturns can impact earnings. The company’s ability to navigate such challenges will be key to maintaining its dividend.
Valuation and Stock Performance
HWBK is currently trading around $26.62 per share, within a typical range for a bank of its size. The stock has seen some movement recently, fluctuating between $26.40 and $29.09, which isn’t unusual for small-cap financial stocks.
Compared to larger banks, Hawthorn doesn’t attract as much attention, meaning it doesn’t see the same kind of dramatic price swings. That can be a good thing for dividend investors who prefer stability over speculation.
At its current price, the stock offers a reasonable valuation for income-focused investors, but it’s always wise to consider how interest rate changes and broader economic conditions could affect future earnings.
Risks and Considerations
While Hawthorn has been a reliable dividend payer, it’s important to be aware of some potential risks:
- High Payout Ratio – At 82.44%, the company is paying out most of its earnings to shareholders. That leaves less room for reinvestment and could put pressure on future dividend growth if earnings don’t keep pace.
- Regional Exposure – Since Hawthorn primarily serves Missouri, its fortunes are closely tied to the state’s economy. A downturn in the region could impact loan demand and credit quality.
- Interest Rate Sensitivity – Like all banks, Hawthorn’s earnings depend on interest rates. If the Federal Reserve adjusts rates significantly, it could impact the company’s net interest margins and profitability.
Final Thoughts
Hawthorn Bancshares is a steady, income-producing stock that fits well within a dividend-focused portfolio. Its long history of paying dividends, relatively low stock volatility, and regional banking model make it an attractive choice for those seeking reliable income.
That said, investors should be mindful of the bank’s high payout ratio and its exposure to regional economic conditions. As with any investment, understanding both the potential rewards and risks is key to making informed decisions.
For those comfortable with the regional banking sector, HWBK offers a solid option with a proven track record of rewarding shareholders.
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