Hawthorn Bancshares earns $7.1 million despite quarterly decline
Key Facts
Hawthorn Bancshares reported on October 30 that net income was $7.1 million in the third quarter of 2026, with diluted earnings per share of $1.01. Net income fell $0.26 million, or 3.6%, from the previous quarter, but rose $0.9 million, or 15.2%, from the third quarter of 2025. The company reported net income of $6.1 million and diluted earnings per share of $0.88 in the year-earlier period. The comparison shows divergent quarterly and annual earnings performance, alongside growth in net interest income and an expanded balance sheet following its acquisition of FSC. The company’s shares, HWBK, closed at $39.70 on October 29, according to EL7 data.
Net interest income was $19.3 million, up $2.0 million from the previous quarter and $2.4 million from the third quarter of 2025. The company said interest income rose $1.8 million year over year, mainly driven by higher yields on interest-earning assets during the quarter. By contrast, interest expense fell $0.7 million from the same period last year as deposit costs declined. These movements in interest income and expense came during a period when net interest income rose both quarterly and annually. The company said the impact of higher asset yields and lower deposit costs helped explain the annual changes in both items.
Other income totaled $3.7 million in the third quarter, down $1.7 million, or 31.1%, from the previous quarter. The company attributed the decline to a gain on the sale of an administrative office recorded in the second quarter that did not recur in the latest period. On the balance sheet, loans held for investment rose $273.8 million, or 19.3%, from the end of June to $1.69 billion on September 30. The company attributed the increase mainly to the acquisition. Deposits totaled $1.79 billion at the end of September, up $302.8 million, or 20.3%, from June 30; the company attributed most of the increase to the FSC acquisition.
On September 3, Hawthorn completed the merger of FSC Bancshares and Farmers State Bank with Hawthorn Bancshares and Hawthorn Bank, respectively. Consideration paid to FSC shareholders consisted of 413,101 Hawthorn shares and about $13.953 million in cash, plus cash payments for fractional shares. After the deal closed, the company said the combined group had assets of about $2.2 billion. It added that Hawthorn Bank operated 27 banking locations in Missouri and one in Kansas. The expansion in loans and deposits recorded in the third quarter followed the deal’s completion, which the company said was the primary driver of loan growth and most of the increase in deposits.
As for asset quality indicators, nonperforming assets totaled $9.9 million on September 30, compared with $7.5 million on June 30 and $7.3 million on September 30, 2025. The company attributed the year-over-year increase to commercial loans on nonaccrual status. Regarding shareholder returns, the board on October 30 approved a quarterly cash distribution of $0.21 per common share. The distribution is scheduled to be paid on January 1, 2027, to shareholders of record at the close of business on December 15, 2026. The distribution announcement comes as quarterly net income reached $7.1 million, despite declining from the previous quarter.
Hawthorn said the integration of Farmers State Bank into Hawthorn Bank is expected in March 2027, after the bank operates as a separate division. The company had previously expected to transition customers to its platform during the first quarter of 2027. Until the transition, Farmers State Bank customers will continue to receive service through their banking centers, website and current mobile app. The operational transition is the next announced milestone following the September merger, with the company setting March as the expected date for integrating the two banks. The company also set December 15, 2026, as the record date for distribution recipients, with payment scheduled for January 1, 2027.