Hawthorn Bancshares Reports $5.7 Million Net Income in Q1 2026, Plans Acquisition of FSC Bancshares

Hawthorn Bancshares, Inc. reported a net income of $5.7 million, or $0.83 per diluted share, for the first quarter of 2026, reflecting an increase from $5.4 million, or $0.77 per diluted share, in the same period of 2025. The company's net interest income rose to $17.1 million, up from $15.3 million year-over-year, driven by a net interest margin improvement to 4.07% from 3.67%. Total revenue, which includes non-interest income, was $20.2 million, compared to $18.8 million in the prior year. The efficiency ratio improved to 64.29% from 66.64%, indicating better cost management relative to revenue generation.

In terms of balance sheet performance, total assets decreased to $1.86 billion as of March 31, 2026, down from $1.89 billion at the end of 2025. Loans held for investment fell to $1.45 billion, a decrease of $32.6 million from the previous quarter. Total deposits also declined by $35.8 million to $1.52 billion, with a notable drop in savings and interest checking accounts. The allowance for credit losses was $20.9 million, representing 1.44% of total loans, slightly down from 1.42% at the end of 2025.

Operationally, the company experienced a decrease in non-interest income, which totaled $3.1 million for the quarter, down from $3.5 million in the prior year. This decline was primarily attributed to a write-down of a bank property held for sale. However, wealth management revenue increased by 30.2% to $0.6 million, reflecting growth in that segment. The company also reported net loan charge-offs of $0.06 million, compared to recoveries of $0.02 million in the same quarter of 2025.

Strategically, Hawthorn Bancshares announced plans to acquire FSC Bancshares, Inc. and its subsidiary, Farmers State Bank, in a cash and stock transaction expected to close in the third quarter of 2026, pending regulatory approval. This acquisition aims to enhance the company's footprint in northern Missouri, where FSC operates nine branch locations. The company continues to focus on expanding its commercial banking services and enhancing customer relationships while maintaining a strong capital position, with a total risk-based capital ratio of 15.84% as of March 31, 2026.

Looking ahead, Hawthorn Bancshares remains optimistic about its growth strategy, emphasizing the importance of managing interest rate risk and maintaining adequate liquidity. The company is also addressing a material weakness in its internal controls related to accounting for non-routine transactions, which management is actively working to remediate.