Companies

Hawthorn's Net Interest Margin Expands for a Second Straight Quarter

The Tip Desk · July 29, 2026 · 3 min read

Fully taxable-equivalent net interest margin reached 4.16% in the second quarter 2026 as net interest income rose to $17.3 million.

Hawthorn Bancshares (HWBK), the Jefferson City, Missouri holding company for Hawthorn Bank, reported second-quarter 2026 net income of $7.3 million, or $1.06 a share, up $1.58 million, or 27.6%, from the first quarter.

Net interest income rose $0.2 million to $17.3 million after a $0.5 million sequential decline in the first quarter. Fully taxable-equivalent net interest margin expanded 9 basis points to 4.16% from 4.07% in the first quarter, after a 4 basis-point expansion to 4.07% from 4.03% in the fourth quarter of 2025.

The yield on average loans held for investment increased to 6.18% on an FTE basis from 6.11% in the first quarter. The average cost of deposits fell to 2.13% from 2.15%. Non-interest-bearing demand deposits remained 28.0% of total deposits at June 30, 2026.

Non-interest income increased $2.2 million, or 72.1%, to $5.3 million from $3.1 million in the first quarter. The company said the increase was primarily due to recognition of a gain on the sale of a bank administrative office that was no longer being used. Non-interest expense rose $0.7 million, or 5.4%, to $13.7 million. The efficiency ratio improved to 60.66% from 64.29% in the first quarter.

The balance sheet continued to shrink. Loans held for investment decreased $37.8 million, or 2.6%, to $1.42 billion at June 30, 2026, following a $32.6 million, or 2.2%, sequential decline in the first quarter. Deposits decreased $30.1 million, or 2.0%, to $1.49 billion, after a $35.8 million, or 2.3%, sequential decline in the first quarter. Investment securities increased $25.4 million, or 12.0%, to $236.2 million, reversing a $5.1 million, or 2.4%, sequential decline in the first quarter. Total assets were $1.77 billion.

Credit quality deteriorated modestly. Non-performing assets to total loans rose to 0.53% at June 30, 2026 from 0.47% at March 31, 2026. Non-performing assets totaled $7.5 million versus $6.9 million. Net loan charge-offs were $0.14 million, or 0.04% annualized of average loans, versus $0.06 million, or 0.02%, in the first quarter. The provision for credit losses was $0.2 million versus a $0.1 million provision in the first quarter. The allowance for credit losses was $20.7 million, or 1.46% of outstanding loans and 311.50% of non-performing loans.

Return on average assets was 1.63% and return on average equity 16.39%. Book value per share was $26.50, up $1.07, or 4.2%, from the prior quarter.

The company remained well capitalized. Total risk-based capital rose to 16.40% at June 30, 2026 from 15.84% at March 31, 2026; common equity tier 1 was 12.07% versus 11.54%.

The Board of Directors amended the repurchase plan on July 29, 2026 to increase the authorized limit to $10 million. The company repurchased 12,000 common shares in the first six months of 2026 at an average cost of $32.68 a share, totaling $0.4 million. As of June 30, 2026, $8.0 million remained available under the plan. On the same date the Board approved a quarterly cash dividend of $0.21 a share, payable October 1, 2026.

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HAWTHORN BANCSHARES, INC. — all coverage and financials