What changed in this filing

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Item 1. Financial Statements

2024-05-09 compared with 2023-11-09 · 253 added, 388 removed, 866 unchanged (43% of the section changed)

3 unchanged sentences

Consolidated Balance Sheets

(In thousands, except per share data) September 30, 2023 December 31, 2022

(In thousands, except per share data) March 31, 2024 December 31, 2023

Cash and due from banks $ 15,273 $ 15,675

Federal funds sold — 46

Other interest-bearing deposits 28,225 77,775

Cash and cash equivalents 43,498 93,450

Certificates of deposit in other banks 735 2,955

Available-for-sale debt securities, at fair value 183,454 188,742

6 unchanged sentences

Premises and equipment - net 31,861 32,047

Mortgage servicing rights, at fair value 2,885 2,899

Other real estate owned - net 1,937 1,744

9 unchanged sentences

Total deposits 1,527,874 1,570,844

Federal funds purchased and securities sold under agreements to repurchase 6,196 5,187

Federal Home Loan Bank advances and other borrowings 109,000 107,000

7 unchanged sentences

Common stock, $ 1.00 par value, authorized 15,000,000 shares;

issued 7,554,893 and 7,284,151 shares, respectively

issued 7,554,893 shares

Surplus 76,847 76,818

2 unchanged sentences

Treasury stock;

515,570 shares, at cost, respectively

536,565 and 515,570 shares, at cost, respectively

( 11,404 ) ( 10,990 )

1 unchanged sentence

Total liabilities and stockholders’ equity $ 1,833,760 $ 1,875,350

(1) September 30, 2023 amounts include the impacts of the January 1, 2023 adoption of ASU 2016-13.

See Note 2 for details.

See accompanying notes to the consolidated financial statements (unaudited) .

2 unchanged sentences

Consolidated Statements of Income (unaudited)

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

(In thousands, except per share data) 2024 2023

5 unchanged sentences

Nontaxable 592 626

Federal funds sold — — 2 5

Other interest-bearing deposits and certificates of deposit in other banks 85 76 724 179

Other interest-bearing deposits 812 537

Dividends on other investments 137 93

12 unchanged sentences

Net interest income 14,748 13,948

Provision for (release of) credit losses on loans and unfunded commitments (1) 110 300 790 ( 1,000 )

Net interest income after provision for (release of) credit losses on loans and unfunded commitments 15,037 14,767 42,507 44,773

(Release of) provision for credit losses on loans and unfunded commitments

Net interest income after (release of) provision for credit losses on loans and unfunded commitments

14,978 13,268

NON-INTEREST INCOME

4 unchanged sentences

Gain on sale of mortgage loans, net 277 496

Losses (gains) on other real estate owned, net ( 2,809 ) — ( 4,592 ) 30

Gains on other real estate owned, net 34 9

Other 613 569

Total non-interest income 3,019 3,182

Investment securities gains (losses), net 3 1 18 ( 12 )

Investment securities gains, net

NON-INTEREST EXPENSE

14 unchanged sentences

Diluted earnings per share $ 0.63 $ 0.47

(1) Prior to adoption of ASU No 2016-13 on January 1, 2023, credit losses were estimated using the incurred loss approach.

See accompanying notes to the consolidated financial statements (unaudited) .

1 unchanged sentence

AND SUBSIDIARIES

Consolidated Statements of Comprehensive (Loss) Income (unaudited)

Three Months Ended September 30, Nine Months Ended September 30,

Consolidated Statements of Comprehensive Income (unaudited)

Three Months Ended March 31,

(In thousands) 2024 2023

Net income $ 4,456 $ 3,271

Other comprehensive loss, net of tax

Other comprehensive (loss) income, net of tax

Investment securities available-for-sale:

2 unchanged sentences

Amortization of net gains included in net periodic pension cost, net of tax ( 126 ) ( 112 )

Total other comprehensive loss ( 9,451 ) ( 12,430 ) ( 8,327 ) ( 43,438 )

Total comprehensive (loss) income $ ( 6,872 ) $ ( 7,503 ) $ 72 $ ( 27,413 )

Total other comprehensive (loss) income ( 2,341 ) 4,401

Total comprehensive income $ 2,115 $ 7,672

See accompanying notes to the consolidated financial statements (unaudited) .

2 unchanged sentences

Consolidated Statements of Stockholders’ Equity (unaudited)

Three Months Ended September 30, 2023 and 2022

(In thousands, except per share data) Common Stock Surplus Retained Earnings Accumulated Other Comprehensive Income (Loss) Treasury Stock Total Stockholders' Equity

Balance, June 30, 2023 $ 7,284 $ 77,047 $ 83,722 $ ( 30,590 ) $ ( 10,990 ) $ 126,473

Net income — — 2,579 — — 2,579

Other comprehensive loss — — — ( 9,451 ) — ( 9,451 )

Stock dividend 271 ( 271 ) — — — —

Cash dividends declared, common stock ($ 0.17 per share)

— — ( 1,197 ) — — ( 1,197 )

Balance, September 30, 2023

$ 7,555 $ 76,776 $ 85,104 $ ( 40,041 ) $ ( 10,990 ) $ 118,404

Balance, June 30, 2022 $ 7,024 $ 71,302 $ 84,437 $ ( 27,715 ) $ ( 10,990 ) $ 124,058

Net income — — 4,927 — — 4,927

Other comprehensive loss — — — ( 12,430 ) — ( 12,430 )

Stock dividend 260 ( 260 ) — — — —

Cash dividends declared, common stock ($ 0.17 per share)

— — ( 1,150 ) — — ( 1,150 )

Balance, September 30, 2022

$ 7,284 $ 71,042 $ 88,214 $ ( 40,145 ) $ ( 10,990 ) $ 115,405

Nine Months Ended September 30, 2023 and 2022

Three Months Ended March 31, 2024 and 2023

(In thousands, except per share data) Common Stock Surplus Retained Earnings Accumulated Other Comprehensive Income (Loss) Treasury Stock Total Stock - holders' Equity

1 unchanged sentence

$ 7,555 $ 76,818 $ 76,464 $ ( 13,762 ) $ ( 10,990 ) $ 136,085

Adoption of ASU 2016-13 — — ( 5,581 ) — — ( 5,581 )

Balance, January 01, 2023 7,284 71,042 86,208 ( 31,714 ) ( 10,990 ) 121,830

Net income — — 4,456 — — 4,456

Other comprehensive loss — — — ( 2,341 ) — ( 2,341 )

Stock dividend 271 5,734 ( 6,005 ) — — —

Share-based compensation expense — 29 — — — 29

Purchase of treasury stock — — — — ( 414 ) ( 414 )

Cash dividends declared, common stock ($ 0.17 per share)

— — ( 1,195 ) — — ( 1,195 )

Balance, September 30, 2023

Balance, March 31, 2024

$ 7,555 $ 76,847 $ 79,725 $ ( 16,103 ) $ ( 11,404 ) $ 136,620

1 unchanged sentence

$ 7,284 $ 71,042 $ 91,789 $ ( 31,714 ) $ ( 10,990 ) $ 127,411

Adoption of ASU 2016-13 — — ( 5,581 ) — — ( 5,581 )

Balance, January 01, 2023 7,284 71,042 86,208 ( 31,714 ) ( 10,990 ) 121,830

Net income — — 3,271 — — 3,271

Other comprehensive loss — — — ( 43,438 ) — ( 43,438 )

Purchase of treasury stock — — — — ( 2,892 ) ( 2,892 )

Stock dividend 260 6,605 ( 6,865 ) — — —

Other comprehensive income — — — 4,401 — 4,401

Cash dividends declared, common stock ($ 0.17 per share)

— — ( 1,150 ) — — ( 1,150 )

Balance, September 30, 2022

Balance, March 31, 2023

$ 7,284 $ 71,042 $ 88,329 $ ( 27,313 ) $ ( 10,990 ) $ 128,352

3 unchanged sentences

Consolidated Statements of Cash Flows (unaudited)

Nine Months Ended September 30,

Three Months Ended March 31,

(In thousands) 2024 2023

2 unchanged sentences

Adjustments to reconcile net income to net cash provided by operating activities:

Provision for (release of) credit losses on loans and unfunded commitments 790 ( 1,000 )

(Release of) provision for credit losses on loans and unfunded commitments ( 230 ) 680

Depreciation expense 463 540

1 unchanged sentence

Change in fair value of mortgage servicing rights — ( 29 )

Investment securities (gains) losses, net ( 18 ) 12

Gain on sales and dispositions of premises and equipment ( 154 ) ( 147 )

Investment securities gains, net — ( 8 )

(Gain) loss on sales and dispositions of premises and equipment 5 ( 132 )

Gain on sales and dispositions of other real estate ( 34 ) ( 9 )

Provision for (release of) valuation allowance for other real estate owned 4,643 ( 28 )

Increase in accrued interest receivable ( 580 ) ( 427 )

Increase in cash surrender value - life insurance ( 43 ) ( 44 )

(Increase) decrease in other assets ( 554 ) 155

Share-based compensation expense 29 —

(Increase) decrease in accrued interest receivable ( 356 ) 665

Earnings on bank-owned life insurance ( 136 ) ( 15 )

Decrease in other assets 1,125 102

Decrease in operating lease liabilities ( 50 ) ( 79 )

6 unchanged sentences

Cash flows from investing activities:

Purchase of certificates of deposit in other banks — ( 245 )

Proceeds from maturities of certificates of deposit in other banks — 739

Net increase in loans ( 35,469 ) ( 190,215 )

Purchase of bank-owned life insurance ( 35,000 ) —

Net decrease (increase) in loans 20,225 ( 20,903 )

Purchase of available-for-sale debt securities ( 12,658 ) ( 8,505 )

8 unchanged sentences

Cash flows from financing activities:

Net (decrease) increase in demand deposits ( 28,338 ) 45,587

Net (decrease) increase in interest-bearing transaction accounts ( 121,011 ) 7,235

Net decrease in demand deposits ( 9,653 ) ( 9,006 )

Net decrease in interest-bearing transaction accounts ( 56,680 ) ( 106,419 )

Net increase in time deposits 23,363 91,358

Net increase (decrease) in federal funds purchased and securities sold under agreements to repurchase 1,009 ( 17,939 )

Net decrease in federal funds purchased and securities sold under agreements to repurchase — ( 72 )

Repayment of FHLB advances and other borrowings ( 8,000 ) ( 5,500 )

2 unchanged sentences

Cash dividends paid - common stock ( 1,197 ) ( 1,150 )

Net cash (used in) provided for financing activities ( 40,157 ) 47,641

Net cash used in financing activities ( 42,581 ) ( 30,289 )

Net decrease in cash and cash equivalents ( 49,952 ) ( 49,947 )

5 unchanged sentences

Consolidated Statements of Cash Flows (unaudited) continued

Nine Months Ended September 30,

Three Months Ended March 31,

(In thousands) 2024 2023

3 unchanged sentences

Income taxes $ — $ —

Noncash investing and financing activities:

Other real estate and repossessed assets acquired in settlement of loans $ 44 $ 3

Stock dividends $ 6,005 $ 6,865

See accompanying notes to the consolidated financial statements (unaudited).

4 unchanged sentences

Hawthorn Bancshares, Inc.

(the Company) through its subsidiary, Hawthorn Bank (the Bank), provides a broad range of banking services to individual and corporate customers located within the Missouri communities in and surrounding Jefferson City, Columbia, Clinton, Warsaw, Springfield, St.

Louis, and the greater Kansas City metropolitan area.

The Company is subject to competition from other financial and nonfinancial institutions that provide financial products.

12 unchanged sentences

For all periods presented, share information, including basic and diluted earnings per share, has been adjusted retroactively to reflect this change.

Recently Adopted Accounting Pronouncements

Trouble Debt Restructurings.

On January 1, 2023, the effective date of the guidance, the Company adopted Accounting Standards Update (ASU) 2022-02, “Financial Instruments - Credit Losses (Topic 326):

Troubled Debt Restructurings and Vintage Disclosures”, on a prospective basis.

ASU 2022-02 eliminated the accounting guidance for troubled debt restructurings (TDRs), while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty.

Specifically, rather than applying the recognition and measurement guidance for TDRs, an entity must apply the loan refinancing and restructuring guidance to determine whether a modification results in a new loan or a continuation of an existing loan.

For entities that have already adopted ASU 2016-13, the amendments in ASU 2022-02 are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

Effective January 1, 2023, the Company adopted the amendments within ASU 2022-02, using the prospective transition method.

ASU 2022-02 did not have a material impact on the Company's consolidated financial statements.

On January 1, 2023, the Company adopted ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments,” which replaces the incurred loss methodology with an expected loss methodology commonly referred to as the current expected credit losses (CECL) methodology.

The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including loan receivables and held-to-maturity debt securities.

It also applies to off-balance sheet credit exposures such as loan commitments, standby letters of credit, financial guarantees, and other similar instruments.

In addition, this standard made changes to the accounting for available-for-sale debt securities, including the requirement for credit losses to be presented as an allowance rather than as a write-down on available-for-sale debt securities.

HAWTHORN BANCSHARES, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

The Company adopted this standard using the modified retrospective method for all financial assets measured at amortized cost, and off-balance-sheet credit exposures.

Results for reporting periods beginning after January 1, 2023 are presented under the new standard while prior period amounts continue to be reported in accordance with previously applicable U.S.

The Company recorded an after-tax decrease to retained earnings of $ 5.6 million as of January 1, 2023 for the cumulative effect of adopting this standard.

The following table illustrates the impact of adoption of ASU 2016-13:

(in thousands) December 31, 2022 Impact of Adoption January 1, 2023

Allowance for credit losses on loans $ 15,588 $ 5,793 $ 21,381

Deferred tax asset 3,267 1,483 4,750

Liability for unfunded commitments — 1,272 1,272

Shareholders' Equity

Retained Earnings 91,789 ( 5,581 ) 86,208

(2) Loans and Allowance for Credit Losses

Major classifications within the Company’s held for investment loan portfolio at September 30, 2023 and December 31, 2022 were as follows:

(in thousands) September 30, 2023 December 31, 2022

Major classifications within the Company’s held for investment loan portfolio at March 31, 2024 and December 31, 2023 were as follows:

(in thousands) March 31, 2024 December 31, 2023

Commercial, financial, and agricultural $ 218,018 $ 226,275

5 unchanged sentences

Total loans held for investment $ 1,518,853 $ 1,539,147

The Bank grants real estate, commercial, installment, and other consumer loans to customers located within the Missouri communities surrounding Jefferson City, Columbia, Clinton, Warsaw, Springfield, St.

Louis, and the greater Kansas City metropolitan area.

As such, the Bank is susceptible to changes in the economic environment in these communities.

1 unchanged sentence

Installment and other consumer loans consist primarily of the financing of automotive vehicles.

Accrued interest on loans totaled $ 7.1 million and $ 6.4 million at September 30, 2023 and December 31, 2022, respectively, and is included in the accrued interest receivable on the Company's consolidated balance sheets.

The total amount of accrued interest is excluded from the amortized cost basis of loans presented above.

Accrued interest on loans totaled $ 7.7 million and $ 7.2 million at March 31, 2024 and December 31, 2023, respectively, and is included in the accrued interest receivable on the Company's consolidated balance sheets.

The total amount of accrued interest is excluded from the amortized cost basis of loans

HAWTHORN BANCSHARES, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

presented above.

Further, the Company has elected not to measure an allowance for credit losses for accrued interest receivable.

At September 30, 2023, loans of $ 719.9 million were pledged to the Federal Home Loan Bank (FHLB) as collateral for borrowings and letters of credit.

At March 31, 2024, loans of $ 696.8 million were pledged to the Federal Home Loan Bank ("FHLB") as collateral for borrowings and letters of credit.

Allowance for Credit Losses

3 unchanged sentences

Loans that do not share similar risk characteristics, primarily large loans on non-accrual status, are evaluated on an individual basis.

The allowance for credit losses is a valuation account that is deducted from loans amortized cost basis to present the net amount

HAWTHORN BANCSHARES, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

expected to be collected on the instrument.

The allowance for credit losses is a valuation account that is deducted from loans amortized cost basis to present the net amount expected to be collected on the instrument.

Expected recoveries are included in the allowance and do not exceed the aggregate of amounts previously charged-off and expected to be charged-off.

11 unchanged sentences

Agriculture loans also use the remaining life methodology for estimating life of loan losses.

Additionally, the allowance for credit losses considers other qualitative factors not included in historical loss rates or macroeconomic forecast such as changes in portfolio composition, underwriting practices, or significant unique events or conditions.

Additionally, the allowance for credit losses considers qualitative or environmental factors, such as:

lending policies and procedures;

economic conditions;

the nature, volume and terms of the portfolio;

lending staff and management;

past due loans;

the loan review system;

collateral values;

concentrations of credit;

and external factors.

Allowance for Credit Losses on Off-Balance-Sheet Credit Exposures

5 unchanged sentences

The forecasted macroeconomic environment continuously changes which can cause fluctuations in estimated expected losses.

On January 1, 2023, the Company's adoption of the CECL methodology resulted in an increase to the allowance for credit losses of $ 5.8 million and a liability for unfunded commitments totaling $ 1.3 million.

HAWTHORN BANCSHARES, INC.

2 unchanged sentences

The following tables illustrate the changes in the allowance for credit losses by portfolio segment:

Three Months Ended September 30, 2023

Three Months Ended March 31, 2024

(in thousands) Commercial, Financial, & Agricultural Real Estate Construction - Residential Real Estate Construction - Commercial Real Estate Mortgage - Residential Real Estate Mortgage - Commercial Installment and Other Consumer Un- allocated Total

Allowance for Credit Losses on Loans

Balance at beginning of period $ 3,208 $ 1,043 $ 3,273 $ 5,264 $ 10,537 $ 232 $ 187 $ 23,744

Charge-offs ( 30 ) — — ( 1 ) ( 23 ) ( 70 ) — ( 124 )

Recoveries 10 — — 1 — 44 — 55

Provision for (release of) credit losses 186 ( 371 ) ( 1,976 ) ( 155 ) 2,343 ( 34 ) 7 —

Loans charged off 16 — — — 3 76 — 95

Less recoveries on loans ( 9 ) — — ( 2 ) ( 1 ) ( 9 ) — ( 21 )

Net loan charge-offs (recoveries) 7 — — ( 2 ) 2 67 — 74

Balance at end of period $ 3,374 $ 672 $ 1,297 $ 5,109 $ 12,857 $ 172 $ 194 $ 23,675

1 unchanged sentence

Balance at beginning of period $ 197 $ 273 $ 245 $ 103 $ 110 $ 1 $ 18 $ 947

Provision for credit losses on unfunded commitments 9 ( 68 ) ( 110 ) ( 4 ) ( 1 ) — ( 16 ) ( 190 )

Provision for (release of) credit losses on unfunded commitments ( 105 ) ( 159 ) 57 — ( 10 ) — ( 13 ) ( 230 )

Balance at end of period $ 92 $ 114 $ 302 $ 103 $ 100 $ 1 $ 5 $ 717

Allowance for credit losses on loans and liability for unfunded commitments $ 3,466 $ 786 $ 1,599 $ 5,212 $ 12,957 $ 173 $ 199 $ 24,392

Three Months Ended September 30, 2022

Balance at beginning of period $ 3,005 $ 66 $ 762 $ 2,747 $ 8,410 $ 312 $ 51 $ 15,353

Provision for (release of ) loan losses (1) ( 124 ) 5 87 481 ( 414 ) 129 136 300

Loans charged off 46 — — — ( 1 ) 146 191

Less recoveries on loans ( 13 ) — — ( 4 ) ( 5 ) ( 21 ) ( 43 )

Net loan charge-offs (recoveries) 33 — — ( 4 ) ( 6 ) 125 — 148

Balance at end of period $ 2,848 $ 71 $ 849 $ 3,232 $ 8,002 $ 316 $ 187 $ 15,505

HAWTHORN BANCSHARES, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

The following tables illustrate the changes in the allowance for loan losses by portfolio segment:

Nine Months Ended September 30, 2023

Three Months Ended March 31, 2023

Allowance for Credit Losses on Loans

Balance at beginning of period $ 2,735 $ 157 $ 875 $ 3,329 $ 8,000 $ 326 $ 166 $ 15,588

1 unchanged sentence

Balance at January 1, 2023 2,086 448 3,769 5,219 9,613 246 — 21,381

Charge-offs ( 30 ) — — — ( 5 ) ( 58 ) — ( 93 )

Recoveries 9 — — 2 2 28 — 41

Provision for (release of) credit losses ( 144 ) 183 695 41 ( 123 ) 6 ( 8 ) 650

Loans charged off 59 — — — 28 204 — 291

Less recoveries on loans ( 183 ) — — ( 6 ) ( 3 ) ( 65 ) — ( 257 )

Net loan charge-offs (recoveries) ( 124 ) — — ( 6 ) 25 139 — 34

Balance at end of period $ 1,921 $ 631 $ 4,464 $ 5,262 $ 9,487 $ 222 $ ( 8 ) $ 21,979

3 unchanged sentences

Balance at January 1, 2023 104 341 569 107 150 1 — 1,272

Provision for credit losses on unfunded commitments 17 ( 54 ) ( 265 ) ( 3 ) ( 25 ) — 5 ( 325 )

Provision for (release of) credit losses on unfunded commitments 20 48 ( 7 ) 3 ( 8 ) — ( 26 ) 30

Balance at end of period $ 124 $ 389 $ 562 $ 110 $ 142 $ 1 $ ( 26 ) $ 1,302

Allowance for credit losses on loans and liability for unfunded commitments $ 2,045 $ 1,020 $ 5,026 $ 5,372 $ 9,629 $ 223 $ ( 34 ) $ 23,281

Nine Months Ended September 30, 2022

Balance at beginning of period $ 2,717 $ 137 $ 588 $ 2,482 $ 10,662 $ 256 $ 61 $ 16,903

Provision for (release of ) loan losses (1) 188 ( 66 ) 261 723 ( 2,491 ) 259 126 ( 1,000 )

Loans charged off 106 — — — 178 262 — 546

Less recoveries on loans ( 49 ) — — ( 27 ) ( 9 ) ( 63 ) — ( 148 )

Net loan charge-offs (recoveries) 57 — — ( 27 ) 169 199 — 398

Balance at end of period $ 2,848 $ 71 $ 849 $ 3,232 $ 8,002 $ 316 $ 187 $ 15,505

(1) Beginning January 1, 2023, calculation is based on CECL methodology.

Prior to January 1, 2023, calculation was based on probable incurred loss methodology.

Collateral-Dependent loans

3 unchanged sentences

If the fair value of the collateral exceeds the loan’s amortized cost, no allowance is necessary.

The Company’s policy is to obtain appraisals on any significant pieces of collateral.

Higher discounts are applied in determining fair value for real estate collateral in industries that are undergoing significant stress, or for properties that are specialized use or have limited marketability.

There have been no significant changes to the types of collateral securing the Company's collateral dependent loans since December 31, 2022.

The Company’s policy is to obtain appraisals on any significant

HAWTHORN BANCSHARES, INC.

1 unchanged sentence

Notes to the Consolidated Financial Statements

The amortized cost of collateral-dependent loans by class as of September 30, 2023 was as follows:

pieces of collateral.

There have been no significant changes to the types of collateral securing the Company's collateral dependent loans since December 31, 2023.

The amortized cost of collateral-dependent loans by class as of March 31, 2024 and December 31, 2023 was as follows:

Collateral Type

(in thousands) Real Estate Other Allowance Allocated

September 30, 2023

March 31, 2024

Commercial, financial, and agricultural $ — $ 2,204 $ 1,861

Real estate construction − residential 456 — 196

Real estate mortgage − residential 45 — 24

1 unchanged sentence

Total $ 4,463 $ 2,204 $ 2,880

Impaired Loans

The following impaired loans disclosures were superseded by ASU 2016-13.

The following table illustrates the allowance for loan losses and recorded investment by portfolio segment based on the impairment method:

(in thousands) Commercial, Financial, and Agricultural Real Estate Construction - Residential Real Estate Construction - Commercial Real Estate Mortgage - Residential Real Estate Mortgage - Commercial Installment and Other Consumer Un- allocated Total

December 31, 2023

Allowance for loan losses:

Individually evaluated for impairment $ 36 $ — $ 11 $ 148 $ 62 $ 1 $ — $ 258

Collectively evaluated for impairment 2,699 157 864 3,181 7,938 325 166 15,330

Total $ 2,735 $ 157 $ 875 $ 3,329 $ 8,000 $ 326 $ 166 $ 15,588

Loans outstanding:

Individually evaluated for impairment $ 295 $ — $ 87 $ 1,863 $ 18,110 $ 6 $ — $ 20,361

Collectively evaluated for impairment 244,254 32,095 137,148 359,162 704,619 23,613 — 1,500,891

Total $ 244,549 $ 32,095 $ 137,235 $ 361,025 $ 722,729 $ 23,619 $ — $ 1,521,252

Loans evaluated under Accounting Standards Codification (ASC) 310-10-35 include loans that are individually evaluated for impairment.

All other loans are collectively evaluated for impairment under ASC 450-20.

Impaired loans individually evaluated for impairment totaled $ 20.4 million at December 31, 2022, and were comprised of loans on non-accrual status and loans classified as TDRs.

The net carrying value of impaired loans is based on the fair values of collateral obtained through independent appraisals, internal evaluations, or by discounting the total expected future cash flows.

At December 31, 2022, $ 17.7 million of impaired loans were evaluated based on the fair value less estimated selling costs of the loans' collateral.

The categories of impaired loans at December 31, 2022 were as follows:

(in thousands) December 31, 2022

Non-accrual loans $ 18,700

Performing TDRs 1,661

Total impaired loans $ 20,361

HAWTHORN BANCSHARES, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

The following table presents loans individually evaluated for impairment at December 31, 2022, segregated between loans for which an allowance was provided and loans for which no allowance was provided.

(in thousands) Recorded Investment Unpaid Principal Balance Specific Reserves Average Recorded Investment

December 31, 2022

With no related allowance recorded:

Real estate mortgage − residential $ — $ — $ — $ 1

Real estate mortgage − commercial 17,664 18,975 — 16,230

Total $ 17,664 $ 18,975 $ — $ 16,231

With an allowance recorded:

Commercial, financial, and agricultural $ — $ 2,221 $ 1,300

Real estate construction − commercial 87 127 11 93

Real estate construction − residential 432 — 164

Real estate mortgage − residential 46 — 19

Real estate mortgage − commercial 2,369 — —

Installment and other consumer 6 6 1 90

Total $ 2,847 $ 2,221 $ 1,483

Total impaired loans $ 20,361 $ 22,053 $ 258 $ 19,350

Credit Quality

2 unchanged sentences

• Watch - loans that have one or more weaknesses identified that may result in the borrower being unable to meet repayment terms or when the Company’s credit position could deteriorate at some future date.

• Special Mention - loans that have negative financial trends, or other weaknesses that if left uncorrected, could threaten its capacity to meet its debt obligations.

This is a transitional grade that is closely monitored by management for improvement or deterioration.

• Substandard - loans that are inadequately protected by the current sound worth and paying capacity of the obligor or by the collateral pledged, if any.

5 unchanged sentences

In the following tables, consumer loans are generally assigned a risk grade similar to the classifications described above;

however, upon reaching 90 days and 120 days past due, they are generally downgraded to non-accrual status, in accordance with the Federal Financial Institutions Examination Counsel's Retail Credit Classification Policy.

however, upon reaching 90 days and 120 days past due, they are generally downgraded to non-accrual status, unless the loans are in the process of collection, in accordance with the Federal Financial Institutions Examination Counsel's Retail Credit Classification Policy.

HAWTHORN BANCSHARES, INC.

1 unchanged sentence

Notes to the Consolidated Financial Statements

The following table presents the recorded investment by risk categories at September 30, 2023:

The following table presents the recorded investment by risk categories at March 31, 2024:

Amortized Cost Basis by Origination Year and Risk Grades

(in thousands) 2024 2023 2022 2021 2020 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Loans Amortized Cost Basis Total

September 30, 2023

March 31, 2024

Commercial, Financial, & Agricultural

7 unchanged sentences

Pass $ 2,327 $ 38,291 $ 5,210 $ 630 $ 173 $ — $ — $ — $ 46,631

Watch — — — — — — — — —

Substandard — — — — — — — — —

Non-accrual loans — 457 — — — — — — 457

4 unchanged sentences

Watch — 509 16 — — — 103 — 628

Substandard 710 — — — — — — — 710

Non-accrual loans — — — — — 64 — — 64

11 unchanged sentences

Watch 2,355 4,705 4,984 2,554 — 440 76 — 15,114

Special Mention 12,312 — 5,876 7,947 — — — — 26,135

Substandard — 710 213 428 48 282 — — 1,681

4 unchanged sentences

Pass $ 1,078 $ 5,802 $ 5,654 $ 2,299 $ 1,055 $ 2,173 $ 80 $ — $ 18,141

Watch — — — 2 — — — — 2

Substandard — — — — — — — — —

Non-accrual loans — — — 4 — — — — 4

4 unchanged sentences

Watch 4,131 5,649 7,687 2,988 845 1,797 2,839 — 25,936

Special Mention 12,312 — 5,876 7,947 — — — — 26,135

Substandard — 2,189 3,888 429 63 489 571 — 7,629

18 unchanged sentences

Pass $ 39,847 $ 17,259 $ 634 $ 175 $ — $ — $ — $ — $ 57,915

Watch — — — — — — — — —

Substandard — — — — — — — — —

Non-accrual loans 432 — — — — — — — 432

24 unchanged sentences

Pass $ 7,430 $ 6,497 $ 2,720 $ 1,287 $ 987 $ 1,803 $ 90 $ — $ 20,814

Watch — — — — — — — — —

Substandard — — — — — — — — —

Non-accrual loans 2 3 — 1 — — — — 6

Total $ 7,430 $ 6,497 $ 2,720 $ 1,287 $ 987 $ 1,803 $ 90 $ — $ 20,814

19 unchanged sentences

Non-accrual loans are returned to accrual status when, in the opinion of management, the financial condition of the borrower indicates that the timely collectability of interest and principal is probable and the borrower demonstrates the ability to pay under the terms of the note through a sustained period of repayment performance, which is generally six months.

The following tables present the recorded investment in non-accrual loans and loans past due over 90 days still on accrual by class of loans as of September 30, 2023 and December 31, 2022:

The following tables present the recorded investment in non-accrual loans and loans past due over 90 days still on accrual by class of loans as of March 31, 2024 and December 31, 2023:

(in thousands) Non-accrual with no Allowance Non-accrual with Allowance Total Non-accrual 90 Days Past Due And Still Accruing Total Non-performing Loans

September 30, 2023

March 31, 2024

Commercial, Financial, and Agricultural $ — $ 2,423 $ 2,423 $ — $ 2,423

Real estate construction − residential — 456 456 — 456

Real estate construction − commercial — 64 64 — 64

5 unchanged sentences

Commercial, Financial, and Agricultural $ — $ 2,228 $ 2,228 $ — $ 2,228

Real estate construction − residential — 432 432 — 432

Real estate construction − commercial — 69 69 — 69

3 unchanged sentences

Total $ 2,368 $ 3,926 $ 6,294 $ 119 $ 6,413

(1) Includes $ 0.3 million of restructured loans as of both September 30, 2023 and December 31, 2022.

No material amount of interest income was recognized on non-accrual loans during the three and nine months ended September 30, 2023.

No material amount of interest income was recognized on non-accrual loans during the three months ended March 31, 2024.

HAWTHORN BANCSHARES, INC.

1 unchanged sentence

Notes to the Consolidated Financial Statements

The following table provides aging information for the Company’s past due and non-accrual loans at September 30, 2023 and December 31, 2022.

The following table provides aging information for the Company’s past due and non-accrual loans at March 31, 2024 and December 31, 2023.

(in thousands) Current or Less Than 30 Days Past Due 30 - 89 Days Past Due 90 Days Past Due And Still Accruing Non-Accrual Total

September 30, 2023

March 31, 2024

Commercial, Financial, and Agricultural $ 214,547 $ 1,048 $ — $ 2,423 $ 218,018

13 unchanged sentences

Total $ 1,529,232 $ 3,502 $ 119 $ 6,294 $ 1,539,147

Loan Modifications for Borrowers Experiencing Financial Difficulty Subsequent to the Adoption of ASU 2022-02

Loan Modifications for Borrowers Experiencing Financial Difficulty

In the normal course of business, the Company may execute loan modifications with borrowers.

2 unchanged sentences

If a loan modification is determined to be made to a borrower experiencing financial difficulty, the loan is considered collateral-dependent and evaluated as part of the allowance for credit losses as described above in the Allowance for Credit Losses section of this note.

For both the three and nine months ended September 30, 2023, the Company did not modify any loans made to borrowers experiencing financial difficulty.

For the each of the three months ended March 31, 2024 and 2023, the Company did not modify any loans made to borrowers experiencing financial difficulty.

The Company monitors loan payments on an on-going basis to determine if a loan is considered to have a payment default.

Determination of payment default involves analyzing the economic conditions that exist for each customer and their ability to generate positive cash flows during the loan term.

HAWTHORN BANCSHARES, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

The following table presents information regarding modifications to borrowers experiencing financial difficulty as of September 30, 2023:

September 30, 2023

(Dollars in thousands) Number of contracts Recorded Investment % to Total Loans

Commercial, financial and agricultural 2 $ 164 0.01 %

Real estate mortgage − residential

Real estate mortgage − commercial

Total 10 $ 1,435 0.09 %

Troubled Debt Restructurings (TDRs) Prior to Adoption of ASU 2022-02

Prior to the adoption of ASU 2022-02, the Company accounted for a modification to the contractual terms of a loan that resulted in granting a concession to a borrower experiencing financial difficulties as a TDR.

See “Note 1 Summary of Significant Accounting Policies” in the Company's Annual Report on Form 10-K for the year ended December 31, 2022 for more information on our TDR policy, and “Note 1, Summary of Significant Accounting Policies” in this report for more information on the adoption of ASU 2022-02.

At September 30, 2022, loans classified as TDRs totaled $ 1.9 million, of which $ 0.3 million were classified as non-performing TDRs and $ 1.6 million were classified as performing TDRs.

Both performing and non-performing TDRs are considered impaired loans.

When an individual loan is determined to be a TDR, the amount of impairment is based upon the present value of expected future cash flows discounted at the loan’s effective interest rate or the fair value of the underlying collateral less applicable selling costs.

Accordingly, specific reserves of $ 171,000 related to TDRs were allocated to the allowance for loan losses at September 30, 2022.

For both the three and nine months ended September 30, 2022, the Company had one new loan meeting the TDR criteria.

For both the three and nine months ended September 30, 2022, the Company had no TDRs for which there was a payment default within the 12 months following the restructure date.

Loans Held for Sale

2 unchanged sentences

The loans are primarily sold to Freddie Mac, Fannie Mae, PennyMac, and various other secondary market investors.

At September 30, 2023, the carrying amount of these loans was $ 3.0 million compared to $ 0.6 million at December 31, 2022.

At March 31, 2024, the carrying amount of these loans was $ 2.9 million compared to $ 3.9 million at December 31, 2023.

HAWTHORN BANCSHARES, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

(3) Other Real Estate and Other Assets Acquired in Settlement of Loans

September 30, December 31,

March 31, December 31,

(in thousands) 2024 2023

Commercial $ 219 $ —

Real estate construction - commercial 7,668 7,668

Real estate mortgage - residential — 20

Real estate mortgage - commercial 706 1,186

Repossessed assets — 6

Total $ 7,887 $ 7,694

1 unchanged sentence

Total other real estate owned and repossessed assets $ 1,937 $ 1,744

HAWTHORN BANCSHARES, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

Changes in the net carrying amount of other real estate owned and repossessed assets were as follows for the periods indicated:

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands) 2024 2023

2 unchanged sentences

Proceeds from sales ( 60 ) ( 557 )

Charge-offs against the valuation allowance for other real estate owned, net ( 40 ) — ( 40 ) ( 219 )

Net gain on sales 34 9

2 unchanged sentences

Balance at end of period $ 1,937 $ 8,247

At September 30, 2023, there were $ 72,000 in consumer mortgage loans secured by residential real estate properties in the process of foreclosure compared to no such consumer mortgage loans at December 31, 2022.

At March 31, 2024 there were $ 0.02 million in consumer mortgage loans secured by residential real estate properties in the process of foreclosure compared to $ 0.01 million in consumer mortgage loans at December 31, 2023.

Activity in the valuation allowance for other real estate owned was as follows for the periods indicated:

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands) 2024 2023

Balance at beginning of period $ 5,950 $ 2,664

Provision for (release of) valuation allowance for other real estate owned

2,812 — 4,643 ( 28 )

Provision for valuation allowance for other real estate owned

Charge-offs — —

4 unchanged sentences

(4) Investment Securities

The amortized cost and fair value of debt securities classified as available-for-sale at September 30, 2023 and December 31, 2022 were as follows:

The amortized cost and fair value of debt securities classified as available-for-sale at March 31, 2024 and December 31, 2023 were as follows:

Gross Unrealized

(in thousands) Total Amortized Cost Gains Losses Fair Value

September 30, 2023

March 31, 2024

Treasury $ 993 $ — $ — $ 993

20 unchanged sentences

government-sponsored enterprises.

Debt securities with carrying values aggregating approximately $ 117.4 million and $ 111.6 million at September 30, 2023 and December 31, 2022, respectively, were pledged to secure public funds, securities sold under agreements to repurchase, and for other purposes as required or permitted by law.

Debt securities with carrying values aggregating approximately $ 91.4 million and $ 89.2 million at March 31, 2024 and December 31, 2023, respectively, were pledged to secure public funds, securities sold under agreements to repurchase, and for other purposes as required or permitted by law.

There were no proceeds from sales of available-for-sale securities for the three months ended March 31, 2024 and 2023.

All gains and losses recognized on equity securities during the three months ended March 31, 2024 and 2023 were unrealized.

HAWTHORN BANCSHARES, INC.

1 unchanged sentence

Notes to the Consolidated Financial Statements

The amortized cost and fair value of debt securities classified as available-for-sale at September 30, 2023, by contractual maturity are shown below.

Accrued interest on investments totaled $ 1.3 million and $ 1.5 million at September 30, 2023 and December 31, 2022, respectively, and is included in the accrued interest receivable on the Company's consolidated balance sheets.

The amortized cost and fair value of debt securities classified as available-for-sale at March 31, 2024, by contractual maturity are shown below.

Accrued interest on investments totaled $ 1.2 million and $ 1.4 million at March 31, 2024 and December 31, 2023, respectively, and is included in the accrued interest receivable on the Company's consolidated balance sheets.

The total amount of accrued interest is excluded from the amortized cost basis of investments presented below.

12 unchanged sentences

Investments in FHLB stock, and Midwest Independent BankersBank ("MIB") stock, that do not have readily determinable fair values, are required for membership in those organizations.

(in thousands) September 30, 2023 December 31, 2022

Other securities:

(in thousands) March 31, 2024 December 31, 2023

FHLB stock $ 6,058 $ 6,071

5 unchanged sentences

Notes to the Consolidated Financial Statements

Gross unrealized losses on debt securities and the fair value of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at September 30, 2023 and December 31, 2022 were as follows:

Gross unrealized losses on debt securities and the fair value of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at March 31, 2024 and December 31, 2023 were as follows:

Less than 12 months 12 months or more

(in thousands) Fair Value Unrealized Losses Fair Value Unrealized Losses Total Fair Value Total Unrealized Losses

September 30, 2023

Treasury $ 3,568 $ ( 10 ) $ 1,300 $ ( 30 ) $ 4,868 $ ( 40 )

March 31, 2024

government and federal agency obligations $ — $ — $ 392 $ ( 18 ) $ 392 $ ( 18 )

15 unchanged sentences

Total $ 17,428 $ ( 206 ) $ 155,243 $ ( 27,081 ) $ 172,671 $ ( 27,287 )

The total available-for-sale portfolio consisted of approximately 435 securities at September 30, 2023.

The portfolio included 434 securities having an aggregate fair value of $ 233.2 million that were in a loss position at September 30, 2023.

Securities identified as temporarily impaired that had been in a loss position for 12 months or longer totaled $ 219.5 million at fair value at September 30, 2023.

The $ 56.5 million aggregate unrealized loss included in accumulated other comprehensive loss at September 30, 2023 was caused by interest rate fluctuations.

The total available-for-sale portfolio consisted of approximately 385 securities at March 31, 2024.

The portfolio included 370 securities having an aggregate fair value of $ 167.9 million that were in a loss position at March 31, 2024.

Securities identified as temporarily impaired which had been in a loss position for 12 months or longer totaled $ 151.7 million at fair value at March 31, 2024.

The $ 30.1 million aggregate unrealized loss included in accumulated other comprehensive loss at March 31, 2024 was caused by interest rate changes.

The total available-for-sale portfolio consisted of approximately 385 securities at December 31, 2023.

The portfolio included 370 securities having an aggregate fair value of $ 172.7 million that were in a loss position at December 31, 2023.

Securities identified as temporarily impaired that had been in a loss position for 12 months or longer totaled $ 119.8 million at fair value at December 31, 2022.

Securities identified as temporarily impaired which had been in a loss position for 12 months or longer totaled $ 155.2 million at fair value at December 31, 2023.

The $ 27.3 million aggregate unrealized loss included in accumulated other comprehensive loss at December 31, 2023 was caused by interest rate fluctuations.

Because the decline in fair value is attributable to changes in interest rates and not credit quality, these investments were not considered other-than-temporarily impaired at September 30, 2023 and December 31, 2022, respectively.

The decline in fair value is attributable to changes in interest rates and not credit quality.

In the absence of changes in credit quality of these investments, the fair value is expected to recover on all debt securities as they approach their maturity date or re-pricing date, or if market yields for such investments decline.

In addition, the Company does not have the intent to sell these investments over the period of recovery, and it is not more likely than not that the Company will be required to sell such investment securities.

(5) Intangible Assets

Mortgage Servicing Rights

On January 31, 2024 the Company sold the mortgage servicing rights portfolio and all serviced loans transferred to the new servicer on April 30, 2024.

At March 31, 2024, the balance of the servicing portfolio for loans sold to the secondary market was approximately $ 215.2 million compared to $ 220.7 million at December 31, 2023, and $ 235.2 million at March 31, 2023.

Mortgage loan servicing fees, reported in real estate servicing fees, net, earned on loans sold were $ 0.1 million for the three months ended March 31, 2024 compared to $ 0.2 million for the three months ended March 31, 2023.

HAWTHORN BANCSHARES, INC.

1 unchanged sentence

Notes to the Consolidated Financial Statements

The following table presents the gross realized gains and losses from sales and calls of available-for-sale securities, as well as gains and losses on equity securities from fair value adjustments, which were recognized in earnings:

Three Months Ended September 30, Nine Months Ended September 30,

(in thousands) 2023 2022 2023 2022

Gross realized gains $ — $ — $ — $ —

Gross realized losses — — — —

Other-than-temporary impairment recognized — — — —

Other investment securities:

Fair value adjustments, net 3 1 18 ( 12 )

Investment securities gains (losses), net $ 3 $ 1 $ 18 $ ( 12 )

(5) Intangible Assets

Mortgage Servicing Rights

At September 30, 2023, the Company was servicing approximately $ 226.3 million of loans sold to the secondary market compared to $ 240.5 million at December 31, 2022, and $ 247.6 million at September 30, 2022.

Mortgage loan servicing fees, reported in real estate servicing fees, net, earned on loans sold were $ 0.2 million and $ 0.5 million for the three and nine months ended September 30, 2023, respectively, compared to $ 0.2 million and $ 0.7 million for the three and nine months ended September 30, 2022, respectively.

The table below presents changes in mortgage servicing rights (MSRs) for the periods indicated.

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands) 2024 2023

1 unchanged sentence

Originated mortgage servicing rights — 6

Sale proceeds ( 1,552 ) —

Changes in fair value:

5 unchanged sentences

(2) Other changes in fair value, reported in real estate servicing fees, net, reflect changes due to customer payments and passage of time.

The following key data and assumptions were used in estimating the fair value of the Company’s MSRs as of September 30, 2023 and 2022, respectively:

Nine Months Ended September 30,

Total changes in fair value are reported in real estate servicing fees, net, reported in non-interest income in the Company's consolidated statements of income.

In the fourth quarter of 2023, the Company recognized a $ 1.1 million mortgage MSR valuation write-down upon accepting a letter of intent to sell the Company's servicing portfolio which closed during the first quarter of 2024.

Prior to the fourth quarter of 2023, valuation assumptions were reviewed with a third party specialist.

The following key data and assumptions were used in estimating the fair value of the Company’s MSRs as of March 31, 2023:

Three Months Ended March 31,

Weighted average constant prepayment rate 6.51 % 6.51 %

2 unchanged sentences

Weighted average expected life (in years) 7.14 7.18

HAWTHORN BANCSHARES, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

The table below represents the aggregate amount of time deposits with balances that met or exceeded the Federal Deposit Insurance Corporation ("FDIC") insurance limit of $250,000 and brokered deposits for the periods indicated.

(aggregate amounts in thousands) September 30, 2023 December 31, 2022

(aggregate amounts in thousands) March 31, 2024 December 31, 2023

Time deposits with balances > $250,000 $ 100,306 $ 108,147

Brokered deposits $ 30,251 $ 161

(7) Federal Funds Purchased and Securities Sold under Agreements to Repurchase

(in thousands) September 30, 2023 December 31, 2022

Federal funds purchased $ — $ —

Repurchase agreements 6,196 5,187

Total $ 6,196 $ 5,187

The Company offers a sweep account program whereby amounts in excess of an established limit are “swept” from the customer’s demand deposit account on a daily basis into retail repurchase agreements pursuant to individual repurchase agreements between the Company and its customers .

Repurchase agreements are agreements to sell securities subject to an obligation to repurchase the same or similar securities.

They are accounted for as collateralized financing transactions, not as sales and purchases of the securities portfolio.

The securities collateral pledged for the repurchase agreements with customers is maintained by a designated third-party custodian .

The collateral amounts pledged to repurchase agreements by remaining maturity in the table below are limited to the outstanding balances of the related asset or liability;

thus amounts of excess collateral are not shown.

Repurchase Agreements Remaining Contractual Maturity of the Agreements

(in thousands) Overnight and continuous Less than 90 days Greater than 90 days Total

September 30, 2023

government-sponsored enterprises $ 6,196 $ — $ — $ 6,196

Total $ 6,196 $ — $ — $ 6,196

December 31, 2022

government-sponsored enterprises $ 5,187 $ — $ — $ 5,187

Total $ 5,187 $ — $ — $ 5,187

The Company's leases primarily consist of office space and bank branches with remaining lease terms of generally 1 to 10 years.

As of September 30, 2023, operating right of use (ROU) assets and liabilities were $ 1.3 million and $ 1.3 million, respectively.

As of September 30, 2023, the weighted-average remaining lease term on these operating leases is approximately 5.3 years and the weighted-average discount rate used to measure the lease liabilities is approximately 4.0 %.

As of March 31, 2024, operating right of use (ROU) assets and liabilities were $ 1.1 million and $ 1.2 million, respectively.

As of March 31, 2024, the weighted-average remaining lease term on these operating leases is approximately 4.9 years and the weighted-average discount rate used to measure the lease liabilities is approximately 4.0 %.

Operating leases in which the Company is the lessee are recorded as operating lease ROU assets and operating lease liabilities.

1 unchanged sentence

The ROU assets are included in premises and equipment, net on the consolidated balance sheets.

Operating lease ROU assets represent the Company's right to use an underlying asset during the lease term and operating lease liabilities represent the Company's obligation to make lease payments arising from the lease.

ROU assets and operating lease liabilities are recognized at lease commencement based on the present value of the remaining lease payments using a discount rate that represents the Company's incremental borrowing rate at the lease commencement date.

HAWTHORN BANCSHARES, INC.

1 unchanged sentence

Notes to the Consolidated Financial Statements

Operating lease cost, which is comprised of amortization of the ROU asset and the implicit interest accreted on the operating lease liability, is recognized on a straight-line basis over the lease term, and is recorded in net occupancy expense in the consolidated statements of income.

The operating lease cost was $ 93,000 and $ 279,000 for the three and nine months ended September 30, 2023, respectively, compared to $ 93,000 and $ 280,000 for the three and nine months ended September 30, 2022, respectively.

At adoption of ASU 2016-02 on January 1, 2019, lease and non-lease components of new lease agreements are accounted for separately.

The operating lease cost was consistent at $ 0.1 million for each of the three months ended March 31, 2024 and 2023.

Lease and non-lease components of new lease agreements are accounted for separately.

Lease components include fixed payments such as rent, real estate taxes and insurance costs and non-lease components include common-area maintenance costs.

1 unchanged sentence

the Company recognizes lease expense for these leases on a straight-line basis over the lease term.

Operating lease expense for these leases was $ 33,000 and $ 95,000 for the three and nine months ended September 30, 2023, respectively, compared to $ 21,000 and $ 65,000 for the three and nine months ended September 30, 2022, respectively.

Operating lease expense for these leases was $ 0.02 million for the three months ended March 31, 2024, compared to $ 0.03 million for the three months ended March 31, 2023.

The table below summarizes the maturity of remaining operating lease liabilities:

2 unchanged sentences

(in thousands)

2023 (excluding 9 months ended September 30, 2023)

2024 (excluding 3 months ended March 31, 2024)

Thereafter 44

3 unchanged sentences

(8) Income Taxes

Income taxes as a percentage of earnings before income taxes as reported in the consolidated financial statements were 16.2 % and 17.1 % for the three and nine months ended September 30, 2023, respectively, compared to 18.7 % and 18.5 % for the three and nine months ended September 30, 2022, respectively.

The effective tax rate for each of the three and nine months ended September 30, 2023 and 2022, respectively, is lower than the U.S.

Income taxes as a percentage of earnings before income taxes as reported in the consolidated financial statements was 17.8 % for both the three months ended March 31, 2024 and 2023.

The effective tax rate for each of the three months ended March 31, 2024 and 2023, is lower than the U.S.

federal statutory rate of 21% primarily due to tax-free revenues.

Included in the effective tax rate is a $ 13,000 and $ 40,000 benefit associated with a historic tax credit investment for the three and nine months ended September 30, 2023, respectively.

Included in the effective tax rate is a $ 0.01 million benefit associated with a historic tax credit investment for each of the three months ended March 31, 2024 and 2023.

The investment is expected to generate a $ 0.3 million tax benefit over the life of the project and is being recognized under the deferral method of accounting.

1 unchanged sentence

Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning initiatives in making this assessment.

In management's opinion, the Company will more likely than not realize the benefits of its deferred tax assets and, therefore, has not established a valuation allowance against its deferred tax assets as of September 30, 2023.

Management arrived at this conclusion based upon the level of historical taxable income and projections for future taxable income of the appropriate character over the periods in which the deferred tax assets are deductible.

The Company follows ASC Topic 740, Income Taxes, which addresses the accounting for uncertain tax positions .

For each of the nine months ended September 30, 2023 and 2022, respectively, the Company did not have any uncertain tax provisions, and did not record any related tax liabilities.

For each of the three months ended March 31, 2024 and 2023, the Company did not have any uncertain tax provisions, and did not record any related tax liabilities.

HAWTHORN BANCSHARES, INC.

2 unchanged sentences

(9) Stockholders’ Equity and Accumulated Other Comprehensive (Loss) Income

Equity-Based Compensation Plan

The following table summarizes the status of the Company's restricted share units (RSUs) for the nine months ended September 30, 2023:

(in thousands, except per share amounts) Quantity Weighted-Average Grant Date Fair Value Per share

Non-vested at January 1, 2023 — $ —

Granted 12,277 18.33

Forfeited — —

Non-vested at September 30, 2023 12,277 $ 18.33

Accumulated Other Comprehensive (Loss) Income

The following table summarizes the change in the components of the Company’s accumulated other comprehensive loss for the nine months ended September 30, 2023 and 2022:

Nine Months Ended September 30, 2023

(in thousands) Unrealized Gains (Losses) on Securities (1) Unrecognized Net Pension and Postretirement Costs (2) Accumulated Other Comprehensive Income (Loss)

The following table summarizes the change in the components of the Company’s accumulated other comprehensive (loss) income for the three months ended March 31, 2024 and 2023:

Three Months Ended March 31, 2024

(in thousands) Unrealized Gains (Losses) on Securities (1) Unrecognized Net Pension and Postretirement Costs (2) Accumulated Other Comprehensive (Loss) Income

Balance at beginning of period $ ( 21,461 ) $ 7,699 $ ( 13,762 )

Other comprehensive loss, before reclassifications

Amounts reclassified from accumulated other comprehensive loss — — —

( 2,804 ) ( 159 ) ( 2,963 )

Amounts reclassified from accumulated other comprehensive (loss) income

Current period other comprehensive loss, before tax ( 2,804 ) ( 159 ) ( 2,963 )

2 unchanged sentences

Balance at end of period $ ( 23,676 ) $ 7,573 $ ( 16,103 )

Nine Months Ended September 30, 2022

(in thousands) Unrealized Gains (Losses) on Securities (1) Unrecognized Net Pension and Postretirement Costs (2) Accumulated Other Comprehensive Income (Loss)

Three Months Ended March 31, 2023

(in thousands) Unrealized Gains (Losses) on Securities (1) Unrecognized Net Pension and Postretirement Costs (2) Accumulated Other Comprehensive (Loss) Income

Balance at beginning of period $ ( 36,657 ) $ 4,943 $ ( 31,714 )

Other comprehensive loss, before reclassifications ( 54,985 ) — ( 54,985 )

Amounts reclassified from accumulated other comprehensive loss — — —

Current period other comprehensive loss, before tax ( 54,985 ) — ( 54,985 )

Income tax benefit 11,547 — 11,547

Current period other comprehensive loss, net of tax ( 43,438 ) — ( 43,438 )

Other comprehensive income (loss), before reclassifications

5,713 ( 142 ) 5,571

Amounts reclassified from accumulated other comprehensive (loss) income

Current period other comprehensive income (loss), before tax

5,713 ( 142 ) 5,571

Income tax (expense) benefit

( 1,200 ) 30 ( 1,170 )

Current period other comprehensive income (loss), net of tax

4,513 ( 112 ) 4,401

Balance at end of period $ ( 32,144 ) $ 4,831 $ ( 27,313 )

1 unchanged sentence

(2) The pre-tax amounts reclassified from accumulated other comprehensive (loss) income are included in the computation of net periodic pension cost.

(10) Share-Based Compensation

Equity-Based Compensation Plan

At the 2023 Annual Meeting of Shareholders, held on June 6, 2023, the Company's shareholders approved the Hawthorn Bancshares, Inc.

Equity Incentive Plan (the Equity Plan), which was previously approved by the Company's Board of Directors.

The purpose of the Equity Plan is to allow eligible participants of the Company and its subsidiaries to acquire or increase a proprietary and vested interest in the growth and performance of the Company.

The Equity Plan is also designed to assist the Company in attracting and retaining selected service providers by providing them with the opportunity to participate in the success and profitability of the Company.

The terms of the Equity Plan provide for the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, other equity-based awards and cash awards.

Subject to certain adjustments, the maximum number of shares of the Company's common stock that may be delivered pursuant to awards under the Equity Plan is 203,000 shares.

Eligible participants under the Equity Plan include all employees, non-employee directors and consultants of the Company or its subsidiaries.

The Equity Plan is currently administered by the Compensation Committee of the Board of Directors.

The Compensation Committee has adopted a form of restricted stock unit award agreement (service-based vesting).

The Company issues restricted share units (RSUs) to provide additional incentives to key officers, employees, and non-employee directors.

Awards are granted as determined by the Compensation Committee.

The service-based RSUs typically

HAWTHORN BANCSHARES, INC.

1 unchanged sentence

Notes to the Consolidated Financial Statements

vest in equal amounts over three years .

The service-based RSUs vest, and shares of common stock are issued, in equal installments on the first, second, and third anniversaries of the date of grant.

The following table summarizes the status of the Company's RSUs for the three months ended March 31, 2024:

(in thousands, except per share amounts) Quantity Weighted-Average Grant Date Fair Value Per share

Non-vested at January 1, 2024 18,277 $ 20.63

Forfeited — —

Non-vested at March 31, 2024 18,277 $ 20.63

The fair value of the RSUs units is determined using the Company’s stock price on the date of grant.

Total share-based compensation expense recognized for the three months ended March 31, 2024 for these RSUs was $ 0.03 million.

No share-based compensation expense was recognized for the three months ended March 31, 2023.

Forfeitures will be recognized as they occur.

At March 31, 2024 there was $ 0.3 million of total unrecognized compensation expense related to RSUs that is expected to be recognized over a weighted-average period of 2.4 years.

(11) Employee Benefit Plans

1 unchanged sentence

Employee benefits charged to operating expenses are summarized in the table below for the periods indicated.

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands) 2024 2023

3 unchanged sentences

Periodic pension cost 283 283

Other 11 20 30 32

Total employee benefits $ 1,481 $ 1,519

4 unchanged sentences

The SERP provides select employees who satisfy certain eligibility requirements with certain benefits upon retirement, termination of employment or death.

The accrued liability relating to the SERP was $ 1.7 million as of September 30, 2023, and the expense for the three and nine months ended September 30, 2023 was $ 9,600 and $ 29,000 , respectively, compared to $ 93,000 and $ 279,000 for the three and nine months ended September 30, 2022, respectively, and is recognized over the required service period.

The accrued liability relating to the SERP was $ 1.8 million as of March 31, 2024, and the expense for the three months ended March 31, 2024 was $ 0.02 million compared to $ 0.01 million for the three months ended March 31, 2023, and is recognized over the required service period.

HAWTHORN BANCSHARES, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

The Company provides a noncontributory defined benefit pension plan for all full-time and eligible employees.

5 unchanged sentences

Effective July 1, 2017, the Company amended the pension plan to effectuate a “soft freeze” such that no individual hired (or rehired in the case of a former employee) by the Company after September 30, 2017, whether or not such individual is or was a vested member in the plan, will be eligible to be an active member and be entitled to accrue any benefits under the plan.

HAWTHORN BANCSHARES, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

Components of Net Pension Cost and Other Amounts Recognized in Accumulated Other Comprehensive (Loss) Income

The following items are components of net pension cost for the periods indicated:

Three Months Ended September 30, Nine Months Ended September 30,

Components of Net Pension Cost (Income) and Other Amounts Recognized in Accumulated Other Comprehensive Loss

The following items are components of net pension cost (income) for the periods indicated:

Three Months Ended March 31,

(in thousands) 2024 2023

3 unchanged sentences

Expected administrative expenses 27 29

Amortization of unrecognized net loss (a) ( 160 ) — ( 480 ) —

Net periodic pension cost $ ( 82 ) $ 125 $ ( 247 ) $ 376

(a) The components of net periodic pension cost other than the service cost and expected administrative expenses are included in other non-interest expense.

Net periodic pension benefit costs include interest costs based on an assumed discount rate, the expected return on plan assets based on actuarially derived market-related values, and the amortization of net actuarial losses.

Amortization of unrecognized net gain (a) ( 159 ) ( 142 )

Net periodic pension income $ ( 94 ) $ ( 39 )

(a) The components of net periodic pension cost (income) other than the service cost and expected administrative expenses are included in other non-interest income.

Net periodic pension benefit costs (income) include interest costs based on an assumed discount rate, the expected return on plan assets based on actuarially derived market-related values, and the amortization of net actuarial (gains) losses.

Net periodic postretirement benefit costs include service costs, interest costs based on an assumed discount rate, and the amortization of prior service credits and net actuarial gains.

Differences between expected and actual results in each year are included in the net actuarial gain or loss amount, which is recognized in other comprehensive (loss) income.

Differences between expected and actual results in each year are included in the net actuarial gain or loss amount, which is recognized in other comprehensive loss.

The net actuarial gain or loss in excess of a 10% corridor is amortized in net periodic benefit cost over the average remaining service period of active participants in the pension plan.

7 unchanged sentences

Diluted earnings per share gives effect to all dilutive potential shares that were outstanding during the period.

HAWTHORN BANCSHARES, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

Presented below is a summary of the components used to calculate basic and diluted earnings per common share, which have been restated for all stock dividends:

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

(dollars in thousands, except per share data) 2024 2023

7 unchanged sentences

The dilutive effect of restricted share units is reflected in diluted earnings per share unless the impact is anti-dilutive, by application of the treasury stock method.

HAWTHORN BANCSHARES, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

Repurchase Program

Pursuant to the Company's 2019 Repurchase Plan, management is given discretion to determine the number and pricing of the shares to be purchased, as well as the timing of any such purchases.

The Company did not repurchase any shares during the current quarter.

As of September 30, 2023, $ 2.1 million remained available for share repurchases pursuant to the plan.

Pursuant to the Company's 2019 Repurchase Plan, management is given discretion to determine the number and pricing of the shares to be purchased by the Company from time to time, as well as the timing of any such purchases.

The Company repurchased 20,995 common shares under the repurchase plan during the first quarter at an average cost of $ 19.73 per share totaling $ 0.4 million.

As of March 31, 2024, $ 4.6 million remained available for share repurchases pursuant to the plan.

(13) Fair Value Measurements

15 unchanged sentences

Valuation Methods for Assets and Liabilities Measured at Fair Value on a Recurring Basis

HAWTHORN BANCSHARES, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

Following is a description of the Company’s valuation methodologies used for assets and liabilities recorded at fair value on a recurring basis:

5 unchanged sentences

Other investment securities include equity securities with readily determinable fair values and other investment securities that do not have readily determinable fair values.

Investments in FHLB stock and MIB bankers bank stock, that do not have readily determinable fair values, are required for membership in those organizations.

Investments in FHLB stock and MIB stock, that do not have readily determinable fair values, are required for membership in those organizations.

Equity securities that are not actively traded are classified in Level 2.

HAWTHORN BANCSHARES, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

Equity securities with readily determinable fair values are recorded at fair value, with changes in fair value reflected in earnings.

2 unchanged sentences

Loans Held for Sale

The fair value of the committed in forward sale agreements loans is the price at which they could be sold in the principal market at the measurement date, therefore the Company classifies as Level 2.

The fair value of the commitment in forward sale agreements loans is the price at which they could be sold in the principal market at the measurement date, therefore the Company classifies as Level 2.

Derivative Assets and Liabilities

5 unchanged sentences

Mortgage Servicing Rights (MSRs)

The fair value of MSRs is based on the discounted value of estimated future cash flows utilizing contractual cash flows, servicing rate, constant prepayment rate, servicing cost, and discount rate factors.

The Company sold its servicing portfolio on January 31, 2024.

In prior periods the fair value of MSRs is based on the discounted value of estimated future cash flows utilizing contractual cash flows, servicing rate, constant prepayment rate, servicing cost, and discount rate factors.

Accordingly, the fair value is estimated based on a valuation model that calculates the present value of estimated future net servicing income.

7 unchanged sentences

(in thousands) Fair Value Quoted Prices in Active Markets for Identical Assets (Level 1) Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3)

September 30, 2023

March 31, 2024

Treasury $ 993 $ 993 $ — $ —

12 unchanged sentences

Interest rate lock commitments $ 7 $ — $ — $ 7

Forward sale commitments 9 — 9 —

Total $ 16 $ — $ 9 $ 7

9 unchanged sentences

Interest rate lock commitments 43 — — 43

Forward sale commitments 3 — 3 —

Loans held for sale 3,884 — 3,884 —

10 unchanged sentences

Mortgage Servicing Rights Interest Rate Lock Commitments

Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands) 2024 2023 2024 2023

6 unchanged sentences

Issues — 6 45 127

Settlements — — — —

Balance at end of period $ 127 $ 2,934 $ 36 $ 107

10 unchanged sentences

Because many of these inputs are not observable, the measurements are classified as Level 3.

As of September 30, 2023, the Company identified $ 2.6 million in collateral-dependent loans that required $ 22,000 of specific allowances for credit losses.

Related to these loans, there were $ 13,800 and $ 54,800 in charge-offs recorded during the three and nine months ended September 30, 2023, respectively.

As of September 30, 2022, the Company identified $ 15.9 million in collateral-dependent impaired loans that required no specific allowances for losses aggregating.

Related to these loans, there were $ 61,000 and $ 86,000 in charge-offs recorded during the three and nine months ended September 30, 2022, respectively.

As of March 31, 2024, the Company identified $ 6.7 million in collateral-dependent loans that required a $ 2.9 million specific allowance for credit losses.

Related to these loans, there was $ 0.03 million in charge-offs recorded during the three months ended March 31, 2024.

As of March 31, 2023, the Company identified $ 18.4 million in collateral-dependent loans that required a $ 0.1 million specific allowance for credit losses.

Related to these loans, there was $ 0.01 million in charge-offs recorded during the three months ended March 31, 2023.

Other Real Estate and Foreclosed Assets

10 unchanged sentences

Fair Value Measurements Using

(in thousands) Total Fair Value Quoted Prices in Active Markets for Identical Assets (Level 1) Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Three Months Ended September 30, Total Gains (Losses)*

Nine Months Ended September 30, Total Gains (Losses)*

September 30, 2023

March 31, 2024

Collateral dependent impaired loans:

Commercial, financial, & agricultural $ 343 — — $ 343 $ —

Real estate construction − residential 260 — — 260 —

Real estate mortgage - residential 21 — — 21 —

Real estate mortgage - commercial 3,163 — — 3,163 ( 23 )

Installment and other consumer — — — — ( 12 ) ( 29 )

Total $ 3,787 $ — $ — $ 3,787 $ ( 23 )

Other real estate and repossessed assets $ 1,937 $ — $ — $ 1,937 $ 34

September 30, 2022

March 31, 2023

Collateral dependent impaired loans:

Commercial, financial, & agricultural $ 50 $ — $ — $ 50 $ —

Real estate mortgage - residential 86 — — 86 —

Real estate mortgage - commercial 18,228 — — 18,228 ( 5 )

Installment and other consumer — — — — ( 38 ) ( 38 )

Total $ 18,364 $ — $ — $ 18,364 $ ( 5 )

Other real estate and repossessed assets $ 8,247 $ — $ — $ 8,247 $ 9

* Total losses reported for other real estate and foreclosed assets includes charge-offs, valuation write downs, and net losses taken during the periods reported.

* Total gains (losses) reported for other real estate and foreclosed assets includes charge-offs, valuation write downs, and net losses taken during the periods reported.

(14) Fair Value of Financial Instruments

9 unchanged sentences

Certificates of Deposit in Other Banks

Certificates of deposit are other investments made by the Company with other financial institutions that are carried at cost, which is equal to fair value.

Cash Surrender Value - Life Insurance

The fair value of Bank-owned life insurance approximates the carrying amount.

Upon liquidation of these investments, the Company would receive the cash surrender value, which equals the carrying amount.

Certificates of deposit are other investments made by the Company with other financial institutions that are carried at cost;

which is equal to fair value.

HAWTHORN BANCSHARES, INC.

1 unchanged sentence

Notes to the Consolidated Financial Statements

Cash Surrender Value - Life Insurance

The fair value of Bank-owned life insurance approximates the carrying amount.

Upon liquidation of these investments, the Company would receive the cash surrender value;

which equals the carrying amount.

Accrued Interest Receivable and Payable

11 unchanged sentences

Notes to the Consolidated Financial Statements

A summary of the carrying amounts and fair values of the Company’s financial instruments at September 30, 2023 and December 31, 2022 is as follows:

September 30, 2023

A summary of the carrying amounts and fair values of the Company’s financial instruments at March 31, 2024 and December 31, 2023 is as follows:

March 31, 2024

Fair Value Measurements

September 30, 2023 Quoted Prices in Active Markets for Identical Assets Other Observable Inputs Net Significant Unobservable Inputs

March 31, 2024 Quoted Prices in Active Markets for Identical Assets Other Observable Inputs Net Significant Unobservable Inputs

(in thousands) Carrying amount Fair value (Level 1) (Level 2) (Level 3)

1 unchanged sentence

Federal funds sold and overnight interest-bearing deposits 28,225 28,225 28,225 — —

Certificates of deposit in other banks 735 735 735 — —

Available-for-sale securities 183,454 183,454 993 182,461 —

6 unchanged sentences

Accrued interest receivable 9,017 9,017 9,017 — —

Total $ 1,817,829 $ 1,652,777 $ 42,054 $ 241,223 $ 1,369,500

Non-interest bearing demand $ 392,588 $ 392,588 $ 392,588 $ — $ —

1 unchanged sentence

Time deposits 345,514 343,509 — — 343,509

Federal funds purchased and securities sold under agreements to repurchase 6,196 6,196 6,196 — —

Federal Home Loan Bank advances and other borrowings 112,000 112,000 — 112,000 —

FHLB advances and other borrowings

109,000 109,001 — 109,001 —

Subordinated notes 49,486 40,117 — 40,117 —

Interest rate lock commitments 7 7 — — 7

Forward sale commitments 9 9 — 9 —

Accrued interest payable 1,971 1,971 1,971 — —

Total $ 1,749,900 $ 1,735,830 $ 1,235,743 $ 150,444 $ 349,643

HAWTHORN BANCSHARES, INC.

7 unchanged sentences

Federal funds sold and overnight interest-bearing deposits 77,775 77,775 77,775 — —

Certificates of deposit in other banks 2,955 2,955 2,955 — —

Available-for-sale securities 188,742 188,742 1,978 186,764 —

4 unchanged sentences

Interest rate lock commitments 43 43 — — 43

Forward sale commitments 3 3 — 3 —

Accrued interest receivable 8,661 8,661 8,661 — —

Total $ 1,860,573 $ 1,743,927 $ 96,826 $ 258,063 $ 1,389,038

Non-interest bearing demand $ 402,241 $ 402,241 $ 402,241 $ — $ —

1 unchanged sentence

Time deposits 322,151 319,929 — — 319,929

Federal funds purchased and securities sold under agreements to repurchase 5,187 5,187 5,187 — —

Federal Home Loan Bank advances and other borrowings 98,000 98,000 — 98,000 —

FHLB advances and other borrowings

107,000 107,245 — 107,245 —

Subordinated notes 49,486 38,939 — 38,939 —

2 unchanged sentences

Accrued interest payable 1,772 1,772 1,772 — —

Total $ 1,785,675 $ 1,770,785 $ 1,383,134 $ 137,200 $ 250,451

Off-Balance Sheet Financial Instruments

5 unchanged sentences

Changes in assumptions could significantly affect the fair value estimates.

(15) Commitments and Contingencies

The Company issues financial instruments with off-balance-sheet risk in the normal course of business of meeting the financing needs of its customers.

These financial instruments include commitments to extend credit and standby letters of

HAWTHORN BANCSHARES, INC.

1 unchanged sentence

Notes to the Consolidated Financial Statements

(15) Commitments and Contingencies

The Company issues financial instruments with off-balance-sheet risk in the normal course of business of meeting the financing needs of its customers.

These financial instruments include commitments to extend credit and standby letters of credit.

These instruments may involve, to varying degrees, elements of credit and interest rate risk in excess of the amounts recognized in the consolidated balance sheets.

1 unchanged sentence

The Company uses the same credit policies in making commitments and conditional obligations as it does for financial instruments included on its consolidated balance sheets.

The allowance for credit losses associated with unfunded commitments and letters of credit is recorded within other liabilities on the consolidated balance sheets.

At September 30, 2023, the allowance for credit losses for unfunded commitments was $ 0.9 million.

The contractual amount of off-balance-sheet financial instruments were as follows as of the dates indicated:

(in thousands) September 30, 2023 December 31, 2022

At March 31, 2024, the allowance for credit losses for unfunded commitments was $ 0.7 million.

The contractual amounts of off-balance-sheet financial instruments were as follows as of the dates indicated:

(in thousands) March 31, 2024 December 31, 2023

Commitments to extend credit $ 283,105 $ 286,939

14 unchanged sentences

These standby letters of credit are primarily issued to support contractual obligations of the Company’s customers.

The approximate remaining term of standby letters of credit range from one month to five years at March 31, 2024.

Pending Litigation

4 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements