Hawthorn Bancshares Reports Third Quarter 2026 Results

Hawthorn Bancshares posts strong Q3 growth, driven by the FSC Bancshares acquisition.

What the company is saying

Hawthorn Bancshares, Inc. (NASDAQ:HWBK) is highlighting a robust third quarter, reporting net income of $7.1 million and EPS of $1.01, with adjusted net income reaching $8.6 million and adjusted EPS at $1.23. The company frames its narrative around significant year-over-year and sequential improvements in core profitability, emphasizing a 15.2% increase in net income and a 38.2% jump in adjusted EPS versus Q3 2025. Management attributes much of the growth in loans ($273.8 million, up 19.3%) and deposits ($302.8 million, up 20.3%) to the completed acquisition of FSC Bancshares, Inc., which added 9 full-service branches. The announcement details the $17.0 million cash outlay and issuance of 413,042 shares for the acquisition, and notes that Farmers State Bank will operate as a separate division until its full merger into Hawthorn Bank, expected in March 2027. The company also underscores its capital strength, with a total risk-based capital ratio of 14.29%, and shareholder returns via a $0.21 per share dividend and $0.4 million in share repurchases. The tone is factual and confident, with explanations for changes—such as lower non-interest income due to a one-off gain in the prior quarter and higher acquisition-related expenses—clearly disclosed.

What the data suggests

The disclosed numbers show Hawthorn Bancshares delivered a strong Q3 2026, with net income of $7.1 million, up $0.9 million (15.2%) year-over-year, and adjusted net income of $8.6 million. EPS improved to $1.01, and adjusted EPS rose to $1.23, a 38.2% increase from Q3 2025. Net interest income climbed to $19.3 million, up $2.0 million from Q2 and $2.4 million from the prior year, as net interest margin expanded to 4.41%. Loan and deposit growth was substantial, driven by the FSC Bancshares acquisition, with loans up $273.8 million (19.3%) and deposits up $302.8 million (20.3%) from Q2. Book value per share increased to $27.29, up $0.79 from Q2 and $3.53 from Q3 2025. Asset quality remained stable, with non-performing assets at 0.59% of loans and an allowance for credit losses at 1.45% of loans. Non-interest income fell $1.7 million from Q2 due to a prior quarter asset sale, while non-interest expense rose $1.2 million, mainly from acquisition costs. The company remains well-capitalized, with a total risk-based capital ratio of 14.29%. The dividend and share repurchase activity reinforce a shareholder-friendly posture. The data is comprehensive, with all key financial and operational metrics disclosed and explained.

Analysis

The announcement is highly factual and supported by detailed, realised financial and operational data. Nearly all key claims—net income, EPS, loan and deposit growth, acquisition completion, and capital ratios—are backed by specific, current-period figures. The only forward-looking statements are the expected merger of Farmers State Bank into Hawthorn Bank in March 2027 and the scheduled dividend payment, both of which are routine and not promotional. There is no exaggerated or aspirational language; the tone is proportionate to the results. The acquisition, while capital intensive, is already completed and its impact is reflected in the disclosed numbers. No claims of future synergies or long-term benefits are made without evidence. The data quality is high, and the narrative closely matches the disclosed facts.

Risk flags

• ●Integration risk remains as Farmers State Bank will continue to operate as a separate division until its full merger into Hawthorn Bank, expected in March 2027. Delays or complications in integration could impact cost savings or operational efficiency.
• ●Non-interest income declined sharply from the prior quarter, primarily due to a non-recurring gain in Q2. If core non-interest income does not recover, future earnings growth may be less robust.
• ●Non-performing assets increased to $9.9 million, or 0.59% of loans, up from 0.48% a year ago. While still low, the trend bears monitoring, particularly given the rapid loan growth from the acquisition.
• ●Acquisition-related expenses surged to $2.0 million in Q3, up $1.4 million from Q2. If integration costs remain elevated or exceed expectations, short-term profitability could be pressured.
• ●The company’s capital ratios remain strong, but the sharp increase in assets and loans from the acquisition could require ongoing vigilance to maintain regulatory capital thresholds as integration proceeds.

Bottom line

Hawthorn Bancshares delivered a strong third quarter, with headline and adjusted earnings up sharply year-over-year and clear evidence that the FSC Bancshares acquisition is driving substantial loan and deposit growth. The company’s capital position is solid, and the dividend and share repurchase activity signal confidence in future cash flows. Asset quality remains sound, though non-performing assets have ticked up and integration of Farmers State Bank is not yet complete. The main execution risk is ensuring a smooth and cost-effective integration by March 2027. Investors should focus on how quickly Hawthorn can realize further operating efficiencies and revenue synergies from the acquisition, and whether core non-interest income stabilizes. The most important takeaway is that Hawthorn’s growth is already visible in the numbers, but sustained performance will depend on successful integration and maintaining credit quality.

Announcement summary

(NASDAQ:HWBK) Hawthorn Bancshares, Inc. reported third quarter 2026 net income of $7.1 million, or $1.01 per diluted share. Adjusted net income for the quarter was $8.6 million. Net income increased by $0.9 million, or 15.2%, from the third quarter 2025, but decreased by $0.26 million, or 3.6%, from the prior quarter. Adjusted EPS for the third quarter 2026 was $1.23, up 38.2% over the prior year quarter. The efficiency ratio was 65.00%, and the adjusted efficiency ratio was 55.64%. Net interest margin (FTE) improved to 4.41% from 4.16% in the prior quarter and 3.97% in the prior year quarter. Net interest income for the quarter was $19.3 million, an increase of $2.0 million from the prior quarter and $2.4 million from the prior year quarter. Interest income increased by $1.8 million compared to the prior year quarter, while interest expense decreased by $0.7 million. The yield on average loans held for investment rose to 6.42%. The average cost of deposits was 2.13%. Non-interest income for the quarter was $3.7 million, a decrease of $1.7 million from the prior quarter. Non-interest expense was $14.9 million, up $1.2 million from the prior quarter and $2.1 million from the prior year quarter. Acquisition-related expenses for the quarter were $2.0 million, an increase of $1.4 million from the prior quarter. Total assets as of September 30, 2026 were $2,141,080,000. Loans held for investment increased $273.8 million, or 19.3%, to $1.69 billion from June 30, 2026, mainly due to the acquisition of FSC Bancshares, Inc. Investments increased $41.7 million, or 17.7%, to $277.9 million. Deposits increased $302.8 million, or 20.3%, to $1.79 billion. Non-performing assets to total loans was 0.59%. Allowance for credit losses at September 30, 2026 was $24.4 million, or 1.45% of outstanding loans. The company repurchased 12,000 common shares during the first nine months of 2026 at an average cost of $32.68 per share, totaling $0.4 million, with $10.0 million remaining available for repurchase. Book value per share was $27.29, up $0.79 from the prior quarter and $3.53 from the prior year quarter. Tangible book value per share was $23.58. On October 30, 2026, the Board approved a quarterly cash dividend of $0.21 per common share, payable January 1, 2027 to shareholders of record at the close of business on December 15, 2026. On September 3, 2026, Hawthorn Bancshares completed its acquisition of FSC Bancshares, Inc. and its subsidiary Farmers State Bank, adding 9 full-service branch locations in northern Missouri. The company paid $17.0 million in cash and issued 413,042 shares of company stock for the acquisition. Farmers State Bank will operate as a separate division until its merger into Hawthorn Bank, expected in March 2027. Capital ratios at September 30, 2026 included total risk-based capital to risk-weighted assets of 14.29%, tier 1 capital to risk-weighted assets of 13.04%, common equity tier 1 of 10.15%, tier 1 leverage of 12.59%, and common equity to assets of 8.92%.

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