What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-08-14 compared with 2024-05-09 · 225 added, 171 removed, 948 unchanged (29% of the section changed)

3 unchanged sentences

Consolidated Balance Sheets

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

(In thousands, except per share data) June 30, 2024 December 31, 2023

Cash and due from banks $ 16,754 $ 15,675

1 unchanged sentence

Cash and cash equivalents 75,842 93,450

Certificates of deposit in other banks 1,000 —

Available-for-sale debt securities, at fair value 185,325 188,742

Other investments 5,834 6,300

Total investment securities 189,741 195,042

Loans held for investment 1,498,504 1,539,147

5 unchanged sentences

Accrued interest receivable 7,981 8,661

Cash surrender value - life insurance 37,760 2,624

Cash surrender value of bank-owned life insurance 38,109 2,624

Other assets 20,280 22,495

10 unchanged sentences

Accrued interest payable 2,113 1,772

Liability for unfunded commitments 717 947

Other liabilities 7,510 8,950

15 unchanged sentences

Consolidated Statements of Income (unaudited)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(In thousands, except per share data) 2024 2023 2024 2023

5 unchanged sentences

Nontaxable 596 632 1,188 1,258

Federal funds sold — 1 — 1

Other interest-bearing deposits 452 102 1,263 640

13 unchanged sentences

Net interest income 14,172 14,202 28,920 28,150

(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

Provision for credit losses on loans and unfunded commitments 457 — 227 680

Net interest income after provision for credit losses on loans and unfunded commitments 13,715 14,202 28,693 27,470

NON-INTEREST INCOME

1 unchanged sentence

Bank card income and fees 1,075 1,055 2,048 2,015

Earnings on bank-owned life insurance 505 14 641 29

Trust department income 317 266 619 538

Real estate servicing fees, net 3 193

Real estate servicing (costs) fees, net ( 51 ) 99 ( 48 ) 292

Gain on sale of mortgage loans, net 398 667 675 1,162

Gains on other real estate owned, net 34 9

Gains (losses) on other real estate owned, net 454 ( 1,793 ) 488 ( 1,783 )

Other 521 551 998 1,105

Total non-interest income 3,996 1,596 7,015 4,778

Investment securities gains, net

Investment securities (losses) gains, net ( 15 ) 7 ( 15 ) 15

NON-INTEREST EXPENSE

17 unchanged sentences

AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income (unaudited)

Three Months Ended March 31,

Consolidated Statements of Comprehensive Income (Loss) (unaudited)

Three Months Ended June 30, Six Months Ended June 30,

(In thousands) 2024 2023 2024 2023

Net income $ 4,629 $ 2,549 $ 9,085 $ 5,820

Other comprehensive (loss) income, net of tax

Other comprehensive income (loss), net of tax

Investment securities available-for-sale:

3 unchanged sentences

Total other comprehensive (loss) income ( 1,130 ) ( 3,277 ) ( 3,471 ) 1,124

Total comprehensive income $ 2,115 $ 7,672

Total comprehensive income (loss) $ 3,499 $ ( 728 ) $ 5,614 $ 6,944

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

2 unchanged sentences

Consolidated Statements of Stockholders’ Equity (unaudited)

Three Months Ended March 31, 2024 and 2023

Three Months Ended June 30, 2024 and 2023

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

Balance, March 31, 2024 $ 7,555 $ 76,847 $ 79,725 $ ( 16,103 ) $ ( 11,404 ) $ 136,620

Net income — — 4,629 — — 4,629

Other comprehensive loss — — — ( 1,130 ) — ( 1,130 )

Share-based compensation expense — 42 — — — 42

Purchase of treasury stock — — — — ( 592 ) ( 592 )

Restricted share unit vesting and taxes paid related to net share settlement — ( 81 ) — — 81 —

Cash dividends declared, common stock ($ 0.19 per share)

— — ( 1,328 ) — — ( 1,328 )

Balance, June 30, 2024

$ 7,555 $ 76,808 $ 83,026 $ ( 17,233 ) $ ( 11,915 ) $ 138,241

Balance, March 31, 2023 $ 7,284 $ 71,042 $ 88,329 $ ( 27,313 ) $ ( 10,990 ) $ 128,352

Net income — — 2,549 — — 2,549

Other comprehensive loss — — — ( 3,277 ) — ( 3,277 )

Stock dividend — 6,005 ( 6,005 ) — — —

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

— — ( 1,151 ) — — ( 1,151 )

Balance, June 30, 2023

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

Six Months Ended June 30, 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

5 unchanged sentences

Purchase of treasury stock — — — — ( 1,006 ) ( 1,006 )

Restricted share unit vesting and taxes paid related to net share settlement — ( 81 ) — — 81 —

Cash dividends declared, common stock ($ 0.36 per share)

— — ( 2,523 ) — — ( 2,523 )

Balance, March 31, 2024

Balance, June 30, 2024

$ 7,555 $ 76,808 $ 83,026 $ ( 17,233 ) $ ( 11,915 ) $ 138,241

5 unchanged sentences

Other comprehensive income — — — 1,124 — 1,124

Stock dividend — 6,005 ( 6,005 ) — — —

Cash dividends declared, common stock ($ 0.34 per share)

— — ( 2,301 ) — — ( 2,301 )

Balance, March 31, 2023

Balance, June 30, 2023

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

3 unchanged sentences

Consolidated Statements of Cash Flows (unaudited)

Three Months Ended March 31,

Six Months Ended June 30,

(In thousands) 2024 2023

2 unchanged sentences

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

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

Provision for credit losses on loans and unfunded commitments 227 680

Depreciation expense 925 1,075

1 unchanged sentence

Change in fair value of mortgage servicing rights — 27

Investment securities gains, net — ( 8 )

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

Investment securities losses (gains), net 15 ( 15 )

Gain on sales and dispositions of premises and equipment ( 6 ) ( 154 )

Gain on sales and dispositions of other real estate ( 94 ) ( 48 )

(Release of) provision for valuation allowance for other real estate owned ( 386 ) 1,831

Share-based compensation expense 71 —

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

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

Decrease in accrued interest receivable 680 283

Increase in cash surrender value - life insurance ( 485 ) ( 29 )

Decrease in other assets 2,817 282

7 unchanged sentences

Cash flows from investing activities:

Purchase of certificates of deposit in other banks ( 1,000 ) —

Proceeds from maturities of certificates of deposit in other banks — 1,974

14 unchanged sentences

Net increase in time deposits 22,298 38,202

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

Net increase in federal funds purchased and securities sold under agreements to repurchase — 316

Repayment of FHLB advances and other borrowings ( 22,200 ) ( 163,800 )

10 unchanged sentences

Consolidated Statements of Cash Flows (unaudited) continued

Three Months Ended March 31,

Six Months Ended June 30,

(In thousands) 2024 2023

3 unchanged sentences

Income taxes $ — $ 820

Non-cash investing and financing activities:

Other real estate and repossessed assets acquired in settlement of loans $ 2,730 $ 44

Stock dividends $ — $ 6,005

Dividends declared not paid - common stock $ 1,329 $ 1,151

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

16 unchanged sentences

The Company’s management has evaluated and did not identify any subsequent events or transactions requiring recognition or disclosure in the consolidated financial statements other than mentioned below.

Stock Dividend.

On July 1, 2023, the Company paid a special stock dividend of four percent ( 4 %) to shareholders of record at the close of business on June 15, 2023.

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

(2) Loans and Allowance for Credit Losses

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

Major classifications within the Company’s held for investment loan portfolio at June 30, 2024 and December 31, 2023 were as follows:

(in thousands) June 30, 2024 December 31, 2023

Commercial, financial, and agricultural $ 217,098 $ 226,275

9 unchanged sentences

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

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

Accrued interest on loans totaled $ 6.4 million and $ 7.2 million at June 30, 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 presented above.

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

At June 30, 2024, loans of $ 709.0 million were pledged to the Federal Home Loan Bank ("FHLB") as collateral for borrowings and letters of credit.

HAWTHORN BANCSHARES, INC.

1 unchanged sentence

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 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

38 unchanged sentences

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

Three Months Ended March 31, 2024

Three Months Ended June 30, 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

7 unchanged sentences

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

Provision for credit losses on unfunded commitments ( 1 ) 12 149 7 12 — ( 4 ) 175

Balance at end of period $ 91 $ 126 $ 451 $ 110 $ 112 $ 1 $ 1 $ 892

Allowance for credit losses on loans and liability for unfunded commitments $ 1,712 $ 724 $ 1,928 $ 5,323 $ 13,020 $ 164 $ 1 $ 22,872

Six Months Ended June 30, 2024

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 1,888 — — 23 89 130 — 2,130

Recoveries 20 — — 5 — 59 — 84

Provision for (release of) credit losses 281 ( 445 ) ( 1,796 ) ( 33 ) 2,460 2 ( 187 ) 282

Balance at end of period $ 1,621 $ 598 $ 1,477 $ 5,213 $ 12,908 $ 163 $ — $ 21,980

Liability for Unfunded Commitments

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

Provision for (release of) credit losses on unfunded commitments ( 106 ) ( 147 ) 206 7 2 — ( 17 ) ( 55 )

1 unchanged sentence

Allowance for credit losses on loans and liability for unfunded commitments $ 1,712 $ 724 $ 1,928 $ 5,323 $ 13,020 $ 164 $ 1 $ 22,872

Three Months Ended March 31, 2023

HAWTHORN BANCSHARES, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

Three Months Ended June 30, 2023

1 unchanged sentence

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

Charge-offs 14 — — — 20 69 — 103

Recoveries 164 — — 2 — 29 — 195

Provision for (release of) credit losses ( 227 ) 117 ( 1,042 ) 201 828 35 253 165

Balance at end of period $ 1,844 $ 748 $ 3,422 $ 5,465 $ 10,295 $ 217 $ 245 $ 22,236

Liability for Unfunded Commitments

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

Provision for credit losses on unfunded commitments ( 12 ) ( 34 ) ( 148 ) ( 2 ) ( 16 ) — 47 ( 165 )

Balance at end of period $ 112 $ 355 $ 414 $ 108 $ 126 $ 1 $ 21 $ 1,137

Allowance for credit losses on loans and liability for unfunded commitments $ 1,956 $ 1,103 $ 3,836 $ 5,573 $ 10,421 $ 218 $ 266 $ 23,373

Six Months Ended June 30, 2023

Allowance for Credit Losses on Loans

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

Adoption of ASU 2016-13 ( 649 ) 291 2,894 1,890 1,613 ( 80 ) ( 166 ) 5,793

16 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

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.

HAWTHORN BANCSHARES, INC.

1 unchanged sentence

Notes to the Consolidated Financial Statements

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:

The amortized cost of collateral-dependent loans by class as of June 30, 2024 and December 31, 2023 was as follows:

Collateral Type

(in thousands) Real Estate Other Allowance Allocated

March 31, 2024

June 30, 2024

Commercial, financial, and agricultural $ — $ 30 $ 17

Real estate construction − residential 454 — 194

Real estate mortgage − residential 45 — 24

Real estate mortgage − commercial 1,100 — 360

15 unchanged sentences

Such loans are characterized by the distinct possibility that the Company may sustain some loss if the deficiencies are not corrected.

• Doubtful - loans that have all the weaknesses inherent in loans classified as Substandard with the added characteristic that the weaknesses make collection or liquidation in full highly questionable and improbable on the basis of currently known facts, conditions, and values.

These loans are also on non-accrual status.

• Non-accrual - loans that are delinquent for 90 days or more and the ultimate collectability of interest or principal is no longer probable.

Real estate loans secured by one-to-four family residential properties are exempt from these non-accrual guidelines.

These loans are placed on non-accrual status after they become 120 days past due.

(The majority of the Company's non-accrual loans have a substandard risk grade.)

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, 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 March 31, 2024:

The following table presents the recorded investment by risk categories at June 30, 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

March 31, 2024

June 30, 2024

Commercial, Financial, & Agricultural

2 unchanged sentences

Substandard 586 361 3,587 — 13 — 318 100 4,965

Doubtful — 200 — 14 — — — — 214

Non-accrual loans — 29 81 219 — — 159 — 488

37 unchanged sentences

Substandard 701 1,088 3,797 1,155 13 370 318 100 7,542

Doubtful — 200 — 14 — — — — 214

Non-accrual loans — 1,621 367 309 57 501 351 — 3,206

64 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 March 31, 2024 and December 31, 2023:

The following table presents the recorded investment in non-accrual loans and loans past due over 90 days still on accrual by class of loans as of June 30, 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

March 31, 2024

June 30, 2024

Commercial, Financial, and Agricultural $ — $ 702 $ 702 $ — $ 702

13 unchanged sentences

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

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

No material amount of interest income was recognized on non-accrual loans during the three and six months ended June 30, 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 March 31, 2024 and December 31, 2023.

The following table provides aging information for the Company’s past due and non-accrual loans at June 30, 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

March 31, 2024

June 30, 2024

Commercial, Financial, and Agricultural $ 215,363 $ 1,033 $ — $ 702 $ 217,098

18 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 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.

For the three and six months ended June 30, 2024, 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.

4 unchanged sentences

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

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

At June 30, 2024, the carrying amount of these loans was $ 1.4 million compared to $ 3.9 million at December 31, 2023.

HAWTHORN BANCSHARES, INC.

2 unchanged sentences

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

March 31, December 31,

June 30, December 31,

(in thousands) 2024 2023

2 unchanged sentences

Real estate mortgage - residential — 20

Real estate mortgage - commercial 2,722 —

Repossessed assets — 6

3 unchanged sentences

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

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(in thousands) 2024 2023 2024 2023

2 unchanged sentences

Proceeds from sales ( 1,488 ) ( 70 ) ( 1,548 ) ( 627 )

Charge-offs against the valuation allowance for other real estate owned, net ( 3,820 ) — ( 3,820 ) —

Net gain on sales 60 39 94 48

2 unchanged sentences

Balance at end of period $ 3,625 $ 6,429 $ 3,625 $ 6,429

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.

At June 30, 2024, there were $ 0.1 million of consumer mortgage loans secured by residential real estate properties in the process of foreclosure compared to $ 0.01 million at December 31, 2023.

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

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(in thousands) 2024 2023 2024 2023

1 unchanged sentence

Provision for valuation allowance for other real estate owned

( 386 ) 1,831 ( 386 ) 1,831

Charge-offs ( 3,820 ) — ( 3,820 ) —

4 unchanged sentences

(4) Investment Securities

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:

The amortized cost and fair value of debt securities classified as available-for-sale at June 30, 2024 and December 31, 2023 were as follows:

Gross Unrealized

(in thousands) Total Amortized Cost Gains Losses Fair Value

March 31, 2024

Treasury $ 993 $ — $ — $ 993

June 30, 2024

government and federal agency obligations $ 409 $ — $ ( 15 ) $ 394

19 unchanged sentences

government-sponsored enterprises.

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.

Debt securities with carrying values aggregating approximately $ 91.6 million and $ 89.2 million at June 30, 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 and six months ended June 30, 2024 and 2023.

All gains and losses recognized on equity securities during the three and six months ended June 30, 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 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 amortized cost and fair value of debt securities classified as available-for-sale at June 30, 2024, by contractual maturity are shown below.

Accrued interest on investments totaled $ 1.5 million and $ 1.4 million at June 30, 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) March 31, 2024 December 31, 2023

(in thousands) June 30, 2024 December 31, 2023

Other securities:

FHLB stock $ 5,620 $ 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 March 31, 2024 and December 31, 2023 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 June 30, 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

March 31, 2024

June 30, 2024

government and federal agency obligations $ — $ — $ 394 $ ( 15 ) $ 394 $ ( 15 )

15 unchanged sentences

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

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 389 securities at June 30, 2024.

The portfolio included 376 securities having an aggregate fair value of $ 175.4 million that were in a loss position at June 30, 2024.

Securities identified as temporarily impaired which had been in a loss position for 12 months or longer totaled $ 151.2 million at fair value at June 30, 2024.

The $ 31.3 million aggregate unrealized loss included in accumulated other comprehensive loss at June 30, 2024 was caused by interest rate fluctuations.

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

7 unchanged sentences

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.

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

The balance of the servicing portfolio for loans sold to the secondary market was approximately $ 220.7 million at December 31, 2023 and $ 231.1 million at June 30, 2023.

Mortgage loan servicing fees, reported in real estate servicing fees, net, earned on loans sold were $ 0.04 million and $ 0.1 million for the three and six months ended

HAWTHORN BANCSHARES, INC.

1 unchanged sentence

Notes to the Consolidated Financial Statements

June 30, 2024, respectively, compared to $ 0.2 million and $ 0.3 million for the three and six months ended June 30, 2023, respectively.

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

Three Months Ended March 31,

Six Months Ended June 30,

(in thousands) 2024 2023

12 unchanged sentences

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 %

Weighted average note rate 3.49 % 3.44 %

Weighted average discount rate 11.00 % 11.00 %

Weighted average expected life (in years) 7.14 7.18

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) March 31, 2024 December 31, 2023

The following key data and assumptions were used in estimating the fair value of the Company’s MSRs for the periods indicated/as of June 30, 2023:

Six Months Ended June 30,

Weighted average constant prepayment rate NA 6.74 %

Weighted average note rate NA 3.47 %

Weighted average discount rate NA 11.00 %

Weighted average expected life (in years) NA 7.12

The table below presents 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) June 30, 2024 December 31, 2023

Time deposits with balances > $250,000 $ 101,025 $ 108,147

1 unchanged sentence

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

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.

Currently, the Company does not have any finance leases.

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

As of June 30, 2024, operating right of use (ROU) assets and liabilities were both $ 1.1 million.

As of June 30, 2024, the weighted-average remaining lease term on these operating leases was approximately 4.7 years and the weighted-average discount rate used to measure the lease liabilities was approximately 4.0 %.

HAWTHORN BANCSHARES, INC.

1 unchanged sentence

Notes to the Consolidated Financial Statements

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

Currently, the Company does not have any finance leases.

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.

1 unchanged sentence

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 consistent at $ 0.1 million for each of the three months ended March 31, 2024 and 2023.

The operating lease cost was $ 0.06 million and $ 0.1 million for the three and six months ended June 30, 2024, respectively, compared to $ 0.1 million and $ 0.2 million for the three and six months ended June 30, 2023, respectively.

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

2 unchanged sentences

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

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.

Operating lease expense for these leases was $ 0.02 million and $ 0.04 million for the three and six months ended June 30, 2024, respectively, compared to $ 0.03 million and $ 0.06 million for the three and six months ended June 30, 2023, respectively.

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

2 unchanged sentences

(in thousands)

2024 (excluding 3 months ended March 31, 2024)

2024 (excluding 6 months ended June 30, 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 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.

Income taxes as a percentage of earnings before income taxes as reported in the consolidated financial statements was 18.2 % and 18.0 % for the three and six months ended June 30, 2024, respectively, compared to 17.2 % and 17.6 % for the three and six months ended June 30, 2023, respectively.

The effective tax rate for each of the three and six months ended June 30, 2024 and 2023, respectively, 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 $ 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.

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income of the appropriate character during the periods in which those temporary differences become deductible.

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 March 31, 2024.

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 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.

1 unchanged sentence

Notes to the Consolidated Financial Statements

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

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

For each of the three and six months ended June 30, 2024 and 2023, the Company did not have any uncertain tax provisions, and did not record any related tax liabilities.

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

Accumulated Other Comprehensive (Loss) Income

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

The following table summarizes the change in the components of the Company’s accumulated other comprehensive income (loss) for the six months ended June 30, 2024 and 2023:

Six Months Ended June 30, 2024

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

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

Other comprehensive loss, before reclassifications ( 4,048 ) ( 345 ) ( 4,393 )

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

Amounts reclassified from accumulated other comprehensive (loss) income

Amounts reclassified from accumulated other comprehensive income (loss)

Current period other comprehensive loss, before tax ( 4,048 ) ( 345 ) ( 4,393 )

2 unchanged sentences

Balance at end of period $ ( 24,659 ) $ 7,426 $ ( 17,233 )

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

Six Months Ended June 30, 2023

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

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

1 unchanged sentence

1,743 ( 320 ) 1,423

Amounts reclassified from accumulated other comprehensive (loss) income

Amounts reclassified from accumulated other comprehensive loss — — —

Current period other comprehensive income (loss), before tax

5 unchanged sentences

Balance at end of period $ ( 35,280 ) $ 4,690 $ ( 30,590 )

(1) The pre-tax amounts reclassified from accumulated other comprehensive (loss) income are included in investment securities gains (losses), net in the consolidated statements of income.

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

(1) The pre-tax amounts reclassified from accumulated other comprehensive income (loss) are included in investment securities gains (losses), net in the consolidated statements of income.

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

(10) Share-Based Compensation

6 unchanged sentences

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

Eligible participants under the Equity Plan

HAWTHORN BANCSHARES, INC.

1 unchanged sentence

Notes to the Consolidated Financial Statements

vest in equal amounts over three years .

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 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 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:

The following table summarizes the status of the Company's RSUs for the six months ended June 30, 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

Granted 11,151 20.18

Vested ( 4,092 ) 19.80

Forfeited — —

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

Non-vested at June 30, 2024 25,336 $ 20.20

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.

Total share-based compensation expense recognized for the three and six months ended June 30, 2024 for these RSUs was $ 0.04 million and $ 0.1 million, respectively.

No share-based compensation expense was recognized for the three and six months ended June 30, 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.

At June 30, 2024, there was $ 0.5 million of total unrecognized compensation expense related to RSUs that is expected to be recognized over a weighted-average period of 2.5 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 March 31,

Three Months Ended June 30, Six Months Ended June 30,

(in thousands) 2024 2023 2024 2023

3 unchanged sentences

Periodic pension cost 245 247 528 531

Other — 8 1 19

Total employee benefits $ 1,332 $ 1,290 $ 2,812 $ 2,809

2 unchanged sentences

In addition, employees were able to make additional tax-deferred contributions.

On November 7, 2018, the Board of Directors of the Company adopted a supplemental executive retirement plan (SERP), effective as of January 1, 2018.

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 $ 1.8 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.

1 unchanged sentence

Notes to the Consolidated Financial Statements

On November 7, 2018, the Board of Directors of the Company adopted a supplemental executive retirement plan (SERP), effective as of January 1, 2018.

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 $ 1.8 million as of June 30, 2024, and the expense for the three and six months ended June 30, 2024 was $ 0.02 million and $ 0.05 million, respectively, compared to $ 0.01 million and $ 0.02 million for the three and six months ended June 30, 2023, respectively, and is recognized over the required service period.

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.

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

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

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

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(in thousands) 2024 2023 2024 2023

8 unchanged sentences

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.

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.

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.

1 unchanged sentence

Currently, there is no prior service cost or net transition (asset)/obligation to be amortized.

(12) Earnings per Share

Stock Dividend

On July 1, 2023, the Company paid a special stock dividend of 4.0 % to common shareholders of record at the close of business on June 15, 2023.

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

Basic earnings per share is computed by dividing income available to shareholders by the weighted average number of shares outstanding during the period.

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

HAWTHORN BANCSHARES, INC.

1 unchanged sentence

Notes to the Consolidated Financial Statements

(12) Earnings per Share

Basic earnings per share is computed by dividing income available to shareholders by the weighted average number of shares outstanding during the period.

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

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 March 31,

Three Months Ended June 30, Six Months Ended June 30,

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

6 unchanged sentences

Diluted earnings per share $ 0.66 $ 0.36 $ 1.29 $ 0.83

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.

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

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 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.

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

The Company repurchased 51,692 common shares under the repurchase plan during the first six months of 2024 at an average cost of $ 19.46 per share totaling $ 1.0 million.

As of June 30, 2024, $ 4.0 million remained available for share repurchases pursuant to the plan.

(13) Fair Value Measurements

12 unchanged sentences

These may be internally developed using the Company’s best information and assumptions that a market participant would consider.

In accordance with fair value accounting guidance, the Company measures, records, and reports various types of assets and liabilities at fair value on either a recurring or non-recurring basis in the consolidated financial statements.

Nonfinancial assets measured at fair value on a non-recurring basis would include foreclosed real estate, long-lived assets, and core deposit intangible assets, which are reviewed when circumstances or other events indicate that impairment may have occurred.

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

HAWTHORN BANCSHARES, INC.

1 unchanged sentence

Notes to the Consolidated Financial Statements

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

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

11 unchanged sentences

Loans Held for Sale

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

8 unchanged sentences

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

The model incorporates assumptions that market participants use in estimating future net servicing income, including estimates of prepayment speeds, market discount rates, cost to service, float earnings rates, and other ancillary income, including late fees.

The valuation models estimate the present value of estimated future net servicing income.

The Company classifies its MSRs as Level 3.

HAWTHORN BANCSHARES, INC.

1 unchanged sentence

Notes to the Consolidated Financial Statements

The valuation models estimate the present value of estimated future net servicing income.

The Company classifies its MSRs as Level 3.

Fair Value Measurements

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

March 31, 2024

Treasury $ 993 $ 993 $ — $ —

June 30, 2024

government and federal agency obligations $ 394 $ — $ 394 $ —

8 unchanged sentences

Loans held for sale 1,368 — 1,368 —

Mortgage servicing rights 127 — — 127

Total $ 186,768 $ 63 $ 186,694 $ 11

24 unchanged sentences

Mortgage Servicing Rights Interest Rate Lock Commitments

Three Months Ended March 31,

Six Months Ended June 30,

(in thousands) 2024 2023 2024 2023

18 unchanged sentences

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

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.

As of June 30, 2024, the Company identified $ 1.6 million in collateral-dependent loans that required a $ 0.6 million specific allowance for credit losses.

Related to these loans, there were $ 1.9 million in charge-offs recorded in each of the three and six months ended June 30, 2024.

As of June 30, 2023, the Company identified $ 2.9 million in collateral-dependent loans that required a $ 0.03 million specific allowance for credit losses.

Related to these loans, there were $ 0.02 million and $ 0.03 million in charge-offs recorded during the three and six months ended June 30, 2023, respectively.

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 March 31, Total Gains (Losses)*

March 31, 2024

Six Months Ended June 30, Total Gains (Losses)*

June 30, 2024

Collateral dependent impaired loans:

5 unchanged sentences

Other real estate and repossessed assets $ 3,625 $ — $ — $ 3,625 $ 446 $ 480

March 31, 2023

June 30, 2023

Collateral dependent impaired loans:

4 unchanged sentences

Other real estate and repossessed assets $ 6,429 $ — $ — $ 6,429 $ ( 1,792 ) $ ( 1,783 )

* 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.

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

(14) Fair Value of Financial Instruments

11 unchanged sentences

which is equal to fair value.

HAWTHORN BANCSHARES, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

Cash Surrender Value - Life Insurance

2 unchanged sentences

which equals the carrying amount.

HAWTHORN BANCSHARES, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

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 March 31, 2024 and December 31, 2023 is as follows:

March 31, 2024

A summary of the carrying amounts and fair values of the Company’s financial instruments at June 30, 2024 and December 31, 2023 is as follows:

June 30, 2024

Fair Value Measurements

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

June 30, 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 59,088 59,088 59,088 — —

Certificates of deposit in other banks 1,000 1,000 1,000 — —

Available-for-sale securities 185,325 185,325 0 185,325 —

57 unchanged sentences

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

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

At June 30, 2024, the allowance for credit losses for unfunded commitments was $ 0.9 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

(in thousands) June 30, 2024 December 31, 2023

Commitments to extend credit $ 310,584 $ 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.

The approximate remaining term of standby letters of credit ranged from one month to five years at June 30, 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