What changed in this filing

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Item 1. Financial Statements

2025-05-12 compared with 2024-11-14 · 322 added, 375 removed, 781 unchanged (47% of the section changed)

3 unchanged sentences

Consolidated Balance Sheets

(dollars in thousands, except per share data)

September 30, 2024 December 31, 2023

(dollars in thousands, except per share data) March 31, 2025 December 31, 2024

Cash and due from banks $ 21,558 $ 23,668

38 unchanged sentences

Consolidated Statements of Income (unaudited)

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

Three Months Ended March 31,

(dollars in thousands, except per share data) 2025 2024

2024 2023 2024 2023

INTEREST INCOME

12 unchanged sentences

Total interest expense on deposits 6,813 7,465

Interest on federal funds purchased and securities sold under agreements to repurchase — 38 1 83

Interest on Federal Home Loan Bank advances 499 849

3 unchanged sentences

Net interest income 15,294 14,748

Provision for credit losses on loans and unfunded commitments 500 110 726 790

Release of provision for credit losses on loans ( 282 ) —

Release of provision for credit losses on unfunded commitments ( 58 ) ( 230 )

Total release of provision for credit losses on loans and unfunded commitments

( 340 ) ( 230 )

Net interest income after provision for credit losses on loans and unfunded commitments 15,634 14,978

3 unchanged sentences

Earnings on bank-owned life insurance 509 136

Trust department income 341 283 960 820

Real estate servicing fees, net 81 125 33 417

Wealth management revenue 473 380

Gain on sale of mortgage loans, net 126 277

Gains (losses) on other real estate owned, net 262 ( 2,809 ) 751 ( 4,592 )

Gains on other real estate owned, net 21 34

Other 495 402

Total non-interest income 3,463 3,019

Investment securities gains (losses), net 8 3 ( 7 ) 18

Investment securities losses, net ( 2 ) —

NON-INTEREST EXPENSE

6 unchanged sentences

Postage, printing, and supplies 294 167

Loan expense 126 147 515 771

Other 1,511 1,653

8 unchanged sentences

AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income (Loss) (unaudited)

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

Consolidated Statements of Comprehensive Income (unaudited)

Three Months Ended March 31,

(dollars in thousands) 2025 2024

2024 2023 2024 2023

Net income $ 5,383 $ 4,456

3 unchanged sentences

Defined benefit pension plans:

Amortization of net gains included in net periodic pension cost, net of tax ( 136 ) ( 126 ) ( 409 ) ( 379 )

Amortization of net gains included in net periodic pension income, net of tax ( 215 ) ( 126 )

Total other comprehensive income (loss) 168 ( 2,341 )

Total comprehensive income (loss) $ 9,612 $ ( 6,872 ) $ 15,226 $ 72

Total comprehensive income $ 5,551 $ 2,115

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

2 unchanged sentences

Consolidated Statements of Stockholders’ Equity (unaudited)

Three Months Ended September 30, 2024 and 2023

(dollars in thousands, except per share data)

Common Stock Surplus Retained Earnings Accumulated Other Comprehensive Income (Loss) Treasury Stock Total Stockholders' Equity

Balance, June 30, 2024 $ 7,555 $ 76,808 $ 83,026 $ ( 17,233 ) $ ( 11,915 ) $ 138,241

Net income — — 4,574 — — 4,574

Other comprehensive income — — — 5,038 — 5,038

Share-based compensation expense — 48 — — — 48

Purchase of treasury stock — — — — ( 100 ) ( 100 )

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

— — ( 1,327 ) — — ( 1,327 )

Balance, September 30, 2024

$ 7,555 $ 76,856 $ 86,273 $ ( 12,195 ) $ ( 12,015 ) $ 146,474

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

Nine Months Ended September 30, 2024 and 2023

(dollars in thousands, except per share data)

Common Stock Surplus Retained Earnings Accumulated Other Comprehensive Income (Loss) Treasury Stock Total Stock - holders' Equity

Three Months Ended March 31, 2025 and 2024

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

Balance, December 31, 2024

4 unchanged sentences

Purchase of treasury stock — — — — ( 440 ) ( 440 )

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, September 30, 2024

Balance, March 31, 2025

$ 7,555 $ 76,938 $ 93,597 $ ( 12,275 ) $ ( 12,404 ) $ 153,411

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

3 unchanged sentences

Consolidated Statements of Cash Flows (unaudited)

Nine Months Ended September 30,

(dollars in thousands)

Three Months Ended March 31,

(In thousands) 2025 2024

Cash flows from operating activities:

1 unchanged sentence

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

Provision for credit losses on loans and unfunded commitments 726 790

Release of provision for credit losses on loans and unfunded commitments ( 340 ) ( 230 )

Depreciation expense 535 463

1 unchanged sentence

Change in fair value of mortgage servicing rights — ( 59 )

Investment securities losses (gains), net 7 ( 18 )

Gain on sales and dispositions of premises and equipment ( 69 ) ( 154 )

Investment securities losses, net 2 —

(Gain) loss on sales and dispositions of premises and equipment ( 50 ) 5

Gain on sales and dispositions of other real estate ( 21 ) ( 34 )

(Release of) provision for valuation allowance for other real estate owned ( 386 ) 4,643

Proceeds from the sale of mortgage servicing rights — 1,552

Share-based compensation expense 81 29

2 unchanged sentences

Decrease in operating lease liabilities ( 70 ) ( 50 )

Increase in other liabilities 1,369 146

Decrease in other liabilities ( 183 ) ( 856 )

Origination of mortgage loans held for sale ( 1,335 ) ( 13,856 )

3 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 — 2,219

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

Net decrease (increase) in loans 66,224 ( 35,469 )

Net (increase) decrease in loans ( 4,145 ) 20,225

Purchase of available-for-sale debt securities ( 6,656 ) ( 12,658 )

6 unchanged sentences

Proceeds from sales of other real estate and repossessed assets 799 60

Net cash provided by (used in) investing activities 19,758 ( 28,030 )

Net cash used in investing activities ( 5,983 ) ( 12,974 )

Cash flows from financing activities:

Net decrease in demand deposits ( 11,602 ) ( 28,338 )

Net increase (decrease) in demand deposits 42,085 ( 9,653 )

Net decrease in interest-bearing transaction accounts ( 27,445 ) ( 56,680 )

Net (decrease) increase in time deposits ( 3,934 ) 23,363

Net increase in federal funds purchased and securities sold under agreements to repurchase — 1,009

Repayment of FHLB advances and other borrowings ( 46,100 ) ( 8,000 )

2 unchanged sentences

Cash dividends paid - common stock ( 1,328 ) ( 1,197 )

Net cash used in financing activities ( 82,641 ) ( 40,157 )

Net decrease in cash and cash equivalents ( 39,226 ) ( 55,866 )

Net cash provided by (used in) financing activities 51,513 ( 42,581 )

Net increase (decrease) in cash and cash equivalents 51,264 ( 49,952 )

Cash and cash equivalents, beginning of period 50,994 93,450

4 unchanged sentences

Consolidated Statements of Cash Flows (unaudited) continued

Nine Months Ended September 30,

(dollars in thousands)

Three Months Ended March 31,

(In thousands) 2025 2024

Supplemental disclosures of cash flow information:

3 unchanged sentences

Non-cash investing and financing activities:

Transfer of loans to other real estate and repossessed assets

Right of use assets obtained in exchange for new operating lease liabilities $ 1,420 $ —

Dividends declared not paid - common stock $ 1,328 $ 1,195

Stock dividends $ — $ 6,005

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

5 unchanged sentences

(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, and the greater Kansas City metropolitan area.

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

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

Additionally, the Company and its subsidiaries are subject to the regulations of certain regulatory agencies and undergo periodic examinations by those regulatory agencies.

8 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.

Recent Accounting Pronouncements

Impact of Recently Issued Accounting Standards But Not Yet Adopted

Income Taxes.

In December 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No.

2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures.

This ASU requires that public business entities on an annual basis (1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold.

The ASU requires that all entities disclose on an annual basis (1) the amount of income taxes paid, disaggregated by federal, state and foreign taxes and (2) the amount of income taxes paid disaggregated by individual jurisdictions in which income taxes paid is equal or greater than 5 percent of total income taxes paid.

The ASU also requires that all entities disclose (1) income (loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic or foreign and (2) income tax expense (or benefit) from continuing operations disaggregated by federal (national), state and foreign.

The ASU addresses investor requests for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information.

This ASU is effective for public business entities for annual periods beginning after December 15, 2024.

The Company does not expect adoption of the ASU to have a material effect on the Company's consolidated financial statements.

Income Statement.

In November 2024, the FASB issued ASU No.

2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses .

The amendments in this ASU require public companies to disclose, in the notes to the financial statements, specified information about certain costs and expenses at each interim and annual reporting period.

Additionally, in January 2025, the FASB issued ASU No.

2025-01, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40):

Clarifying the Effective Date .

The ASU addresses investors requests for more disaggregated expense information to better understand an entity's performance, better assess the entity's prospects for future cash flows, and compare an entity's performance over time and with that of other entities.

This ASU amends the effective date of ASU No.

2024-03 to clarify that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after

HAWTHORN BANCSHARES, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

December 15, 2027.

Early adoption of ASU No.

2024-03 is permitted.

The Company is currently evaluating the impact of the ASU on the Company’s consolidated financial statements.

(2) Loans and Allowance for Credit Losses

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

(dollars in thousands)

September 30, 2024 December 31, 2023

Major classifications within the Company’s loans held for investment portfolio at March 31, 2025 and December 31, 2024 were as follows:

(dollars in thousands) March 31, 2025 December 31, 2024

Commercial, financial, and agricultural $ 202,405 $ 202,329

8 unchanged sentences

The Bank does not have a concentration of credit in any one economic sector.

Accrued interest on loans totaled $ 6.8 million and $ 7.2 million at September 30, 2024 and December 31, 2023, respectively, and is included in accrued interest receivable and other assets on the Company's consolidated balance sheets.

Accrued interest on loans totaled $ 6.4 million and $ 6.5 million at March 31, 2025 and December 31, 2024, respectively, and is included in accrued interest receivable and other assets 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 September 30, 2024, loans of $ 720.7 million were pledged to the Federal Home Loan Bank (FHLB) as collateral for borrowings and letters of credit.

HAWTHORN BANCSHARES, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

At March 31, 2025, loans of $ 733.7 million were pledged to the Federal Home Loan Bank (FHLB) as collateral for borrowings and letters of credit.

Allowance for Credit Losses

6 unchanged sentences

Loans are charged off against the allowance for credit losses when management believes the balance has become uncollectible.

For loans evaluated for credit losses on a collective basis, average historical loss rates are calculated for each pool using relevant peer historical net charge-offs (combined charge-offs and recoveries by observable historical reporting period) and the Company's outstanding loan balances during a lookback period.

The Company chose to use relevant peer loan loss data due to statistical relevance concerns, low observation counts, historical data limitations, and the inability to secure through the cycle loan-level data.

Lookback periods can be different based on the individual pool and represent management’s credit expectations for the pool of loans over the remaining contractual life.

The calculated average net charge-off rate is then adjusted for current conditions and reasonable and supportable forecasts.

These adjustments increase or decrease the average historical loss rate to reflect expectations of future losses given a single path economic forecast of a single macroeconomic variable, which is the civilian unemployment rate.

The adjustments are based on results from various regression models projecting the impact of the selected macroeconomic variable to loss rates.

The forecast is used for a reasonable and supportable period before reverting back to historical averages using a straight-line method.

The forecast adjusted loss rate is applied to the loans over the remaining contractual lives, adjusted for expected prepayments.

The contractual term excludes expected extensions, renewals and modifications.

Credit cards and certain similar consumer lines of credit do not have stated maturities and therefore, for these loan classes, remaining contractual lives are determined by estimating future cash flows expected to be received from customers until payments have been fully allocated to outstanding balances.

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

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

2 unchanged sentences

The liability for unfunded lending commitments utilizes the same model as the allowance for credit losses on loans, however, the liability for unfunded lending commitments incorporates an assumption for the portion of unfunded commitments that are expected to be funded.

Sensitivity in the Allowance for Credit Loss Model

The allowance for credit losses is an estimate that requires significant judgment including projections of the macroeconomic environment.

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

The allowance for credit losses on unfunded commitments totaled $ 0.9 million at both March 31, 2025 and December 31, 2024, respectively.

HAWTHORN BANCSHARES, INC.

1 unchanged sentence

Notes to the Consolidated Financial Statements

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

Three Months Ended September 30, 2024

Sensitivity in the Allowance for Credit Loss Model

The allowance for credit losses is an estimate that requires significant judgment including projections of the macroeconomic environment.

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

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

Three Months Ended March 31, 2025

(dollars 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 $ 1,560 $ 578 $ 2,221 $ 5,310 $ 12,305 $ 138 $ ( 68 ) $ 22,044

3 unchanged sentences

Balance at end of period $ 1,447 $ 583 $ 1,667 $ 5,134 $ 12,608 $ 117 $ 224 $ 21,780

Liability for Unfunded Commitments

Balance at beginning of period $ 91 $ 126 $ 451 $ 110 $ 112 $ 1 $ — $ 891

Provision for (release of) credit losses on unfunded commitments 13 ( 27 ) ( 103 ) ( 3 ) 27 — — ( 93 )

Balance at end of period $ 104 $ 99 $ 348 $ 107 $ 139 $ 1 $ — $ 798

Allowance for credit losses on loans and liability for unfunded commitments $ 1,734 $ 685 $ 2,172 $ 5,389 $ 12,773 $ 147 $ ( 165 ) $ 22,735

Nine Months Ended September 30, 2024

(dollars 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 2,158 — — 23 433 196 — 2,810

Recoveries 36 — — 12 — 80 — 128

Provision for (release of) credit losses 544 ( 457 ) ( 1,449 ) 29 2,530 30 ( 352 ) 875

Balance at end of period $ 1,630 $ 586 $ 1,824 $ 5,282 $ 12,634 $ 146 $ ( 165 ) $ 21,937

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 ( 93 ) ( 174 ) 103 4 29 — ( 18 ) ( 149 )

Balance at end of period $ 104 $ 99 $ 348 $ 107 $ 139 $ 1 $ — $ 798

Allowance for credit losses on loans and liability for unfunded commitments $ 1,734 $ 685 $ 2,172 $ 5,389 $ 12,773 $ 147 $ ( 165 ) $ 22,735

HAWTHORN BANCSHARES, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

Three Months Ended September 30, 2023

Three Months Ended March 31, 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

3 unchanged sentences

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

Liability for Unfunded Commitments

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

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

Balance at end of period $ 121 $ 287 $ 304 $ 104 $ 125 $ 1 $ 5 $ 947

Allowance for credit losses on loans and liability for unfunded commitments $ 2,057 $ 1,160 $ 3,569 $ 5,418 $ 10,858 $ 245 $ 102 $ 23,409

Nine Months Ended September 30, 2023

(dollars in thousands)

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

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

Charge-offs 59 — — — 28 204 — 291

Recoveries 183 — — 6 3 65 — 257

Provision for (release of) credit losses ( 274 ) 425 ( 504 ) 89 1,145 137 97 1,115

Balance at end of period $ 1,936 $ 873 $ 3,265 $ 5,314 $ 10,733 $ 244 $ 97 $ 22,462

Liability for Unfunded Commitments

Balance at beginning of period $ — $ — $ — $ — $ — $ — $ — $ —

Adoption of ASU 2016-13 104 341 569 107 150 1 — 1,272

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

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

Balance at end of period $ 121 $ 287 $ 304 $ 104 $ 125 $ 1 $ 5 $ 947

Allowance for credit losses on loans and liability for unfunded commitments $ 2,057 $ 1,160 $ 3,569 $ 5,418 $ 10,858 $ 245 $ 102 $ 23,409

Collateral-Dependent loans

5 unchanged sentences

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, 2024.

HAWTHORN BANCSHARES, INC.

1 unchanged sentence

Notes to the Consolidated Financial Statements

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 September 30, 2024 and December 31, 2023 was as follows:

The amortized cost of collateral-dependent loans by class as of March 31, 2025 and December 31, 2024 was as follows:

Collateral Type

(dollars in thousands)

Real Estate Other Allowance Allocated

September 30, 2024

(dollars in thousands) Real Estate Other Allowance Allocated

March 31, 2025

Commercial, financial, and agricultural $ — $ 766 $ 125

5 unchanged sentences

Real estate construction − residential 454 — 194

Real estate mortgage − residential 46 — 19

Real estate mortgage − commercial 65 — —

17 unchanged sentences

Notes to the Consolidated Financial Statements

The following table presents the recorded investment by risk categories at September 30, 2024:

Amortized Cost Basis by Origination Year and Risk Grades

(dollars 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, 2024

The following table presents the recorded investment by risk categories at March 31, 2025:

Revolving Converted to

Term Loans Loans Term Loans

Amortized Cost Basis by Origination Year and Risk Grades Amortized Amortized

(dollars in thousands) 2025 2024 2023 2022 2021 Prior Cost Basis Cost Basis Total

March 31, 2025

Commercial, Financial, & Agricultural

1 unchanged sentence

Watch 57 110 110 1,693 — 257 720 — 2,947

Special Mention — — — — — 297 468 — 765

Substandard — — — 3,268 610 — — 403 4,281

Doubtful — — — 15 — — — 15

Non-accrual loans — 286 87 78 — 37 435 — 923

17 unchanged sentences

Substandard 59 — — — — 93 — — 152

Doubtful — — — — — 9 — — 9

Non-accrual loans 90 — — 334 89 174 163 — 850

27 unchanged sentences

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

Amortized Cost Basis by Origination Year and Risk Grades

(dollars in thousands) 2023 2022 2021 2020 2019 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Loans Amortized Cost Basis Total

Revolving Converted to

Term Loans Loans Term Loans

Amortized Cost Basis by Origination Year and Risk Grades Amortized Amortized

(dollars in thousands) 2023 2022 2021 2020 2019 Prior Cost Basis Cost Basis Total

December 31, 2024

2 unchanged sentences

Watch — 120 1,473 — — 262 504 — 2,359

Special Mention — — — — 309 — 741 — 1,050

Substandard — — 3,350 628 — — — 403 4,381

Doubtful — — — — — — 79 — 79

Non-accrual loans 286 87 78 — 37 — 356 — 844

23 unchanged sentences

Watch 2,298 51 4,763 1,961 — 184 — 581 9,838

Special Mention 27,271 — 5,679 — — — — — 32,950

Substandard — — 231 — — — — — 231

4 unchanged sentences

Pass $ 2,188 $ 3,636 $ 3,591 $ 1,165 $ 554 $ 2,805 $ 72 $ — $ 14,011

Non-accrual loans — — — — — 10 — — 10

Total $ 2,188 $ 3,636 $ 3,591 $ 1,165 $ 554 $ 2,815 $ 72 $ — $ 14,021

3 unchanged sentences

Watch 8,911 295 6,289 2,352 423 1,121 534 581 20,506

Special Mention 27,271 — 5,679 — 309 — 741 — 34,000

Substandard — 29 3,581 628 — 98 — 403 4,739

Doubtful — — — — — — 79 — 79

Non-accrual loans 804 162 504 89 37 337 525 — 2,458

13 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 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 September 30, 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 March 31, 2025 and December 31, 2024:

(dollars 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, 2024

March 31, 2025

Commercial, Financial, and Agricultural $ — $ 923 $ 923 $ — $ 923

13 unchanged sentences

Total $ — $ 2,537 $ 2,537 $ 210 $ 2,747

No material amount of interest income was recognized on non-accrual loans during the three and nine months ended September 30, 2024.

No material amount of interest income was recognized on non-accrual loans during the three months ended March 31, 2025.

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, 2024 and December 31, 2023.

(dollars 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, 2024

The following table provides aging information for the Company’s past due and non-accrual loans at March 31, 2025 and December 31, 2024.

(dollars 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, 2025

Commercial, Financial, and Agricultural $ 201,115 $ 367 $ — $ 923 $ 202,405

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 three and nine months ended September 30, 2024, the Company did not modify any loans made to borrowers experiencing financial difficulty.

For the three months ended March 31, 2025, 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.

2 unchanged sentences

The Company designates certain long-term fixed rate personal real estate loans as held for sale.

Prior to September 30, 2024, these loans were initially measured at fair value under the fair value option election with subsequent changes in fair value recognized in mortgage banking income.

As of September 30, 2024, loans held for sale are being carried at the lower of cost or estimated fair value.

Loans held for sale are being carried at the lower of cost or estimated fair value.

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

At September 30, 2024, the carrying amount of these loans was $ 0.3 million compared to $ 3.9 million at December 31, 2023.

At March 31, 2025, the carrying amount of these loans was $ 0.2 million compared to no loans at December 31, 2024.

HAWTHORN BANCSHARES, INC.

2 unchanged sentences

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

September 30, December 31,

March 31, December 31,

(dollars in thousands) 2025 2024

Commercial $ 98 $ —

Real estate construction - commercial $ 2,549 $ 2,549

1 unchanged sentence

Real estate mortgage - commercial 98 858

Repossessed assets — 6

Total $ 2,671 $ 3,449

1 unchanged sentence

Total other real estate owned and repossessed assets $ 668 $ 1,446

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,

(dollars in thousands)

2024 2023 2024 2023

Balance at beginning of period $ 5,369 $ 10,924 $ 7,694 $ 11,459

760 — 5,181 44

Proceeds from sales — ( 54 ) ( 3,282 ) ( 681 )

Charge-offs against the valuation allowance for other real estate owned, net — ( 40 ) ( 3,820 ) ( 40 )

Net gain on sales — 1 356 49

Total other real estate owned 6,129 10,831 $ 6,129 $ 10,831

Less valuation allowance for other real estate owned ( 1,744 ) ( 7,267 ) ( 1,744 ) ( 7,267 )

Balance at end of period $ 4,385 $ 3,564 $ 4,385 $ 3,564

At March 31, 2025, there were no consumer mortgage loans secured by residential real estate properties in the process of foreclosure compared to $ 0.3 million at December 31, 2024.

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,

(dollars in thousands) 2025 2024

2024 2023 2024 2023

Balance at beginning of period $ 2,003 $ 5,950

Provision for valuation allowance for other real estate owned

— 2,812 ( 386 ) 4,643

Release of 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, 2024 and December 31, 2023 were as follows:

The amortized cost and fair value of debt securities classified as available-for-sale at March 31, 2025 and December 31, 2024 were as follows:

Gross Unrealized

(dollars in thousands)

Total Amortized Cost Gains Losses Fair Value

September 30, 2024

(dollars in thousands) Total Amortized Cost Gains Losses Fair Value

March 31, 2025

Treasury $ 4,940 $ 65 $ — $ 5,005

government and federal agency obligations 382 — ( 4 ) 378

2 unchanged sentences

Mortgage-backed securities

Residential 68,942 335 ( 3,048 ) 66,229

Commercial 16,095 16 ( 2,291 ) 13,820

Other debt securities (a) 23,148 131 ( 671 ) 22,608

7 unchanged sentences

Mortgage-backed securities

Residential 68,346 59 ( 4,034 ) 64,371

Commercial 16,383 — ( 2,644 ) 13,739

Other debt securities (a) 19,419 49 ( 781 ) 18,687

6 unchanged sentences

government-sponsored enterprises.

Debt securities with carrying values aggregating approximately $ 84.9 million and $ 89.2 million at September 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 nine months ended September 30, 2024 and 2023.

All gains and losses recognized on equity securities during the three and nine months ended September 30, 2024 and 2023 were unrealized.

Debt securities with carrying values aggregating approximately $ 88.8 million and $ 82.4 million at March 31, 2025 and December 31, 2024, 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, 2025 and 2024.

All gains and losses recognized on equity securities during the three months ended March 31, 2025 and 2024 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, 2024, by contractual maturity are shown below.

Accrued interest on investments was consistent at $ 1.4 million at both September 30, 2024 and December 31, 2023, and is included in accounts receivable and other assets on the Company's consolidated balance sheets.

The amortized cost and fair value of debt securities classified as available-for-sale at March 31, 2025, by contractual maturity are shown below.

Accrued interest on investments was consistent at $ 1.5 million at both March 31, 2025 and December 31, 2024, and is included in accrued interest receivable and other assets on the Company's consolidated balance sheets.

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

1 unchanged sentence

Expected maturities may differ from contractual maturities because borrowers have the right to call or prepay obligations with or without prepayment penalties.

(dollars in thousands)

Amortized Cost Fair Value

(dollars in thousands) Amortized Cost Fair Value

Due in one year or less $ 3,297 $ 3,300

8 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.

(dollars in thousands)

September 30, 2024 December 31, 2023

(dollars in thousands) March 31, 2025 December 31, 2024

Other securities:

6 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, 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 March 31, 2025 and December 31, 2024 were as follows:

Less than 12 months 12 months or more

(dollars in thousands)

Fair Value Unrealized Losses Fair Value Unrealized Losses Total Fair Value Total Unrealized Losses

September 30, 2024

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

March 31, 2025

government and federal agency obligations $ — $ — $ 378 $ ( 4 ) $ 378 $ ( 4 )

2 unchanged sentences

Mortgage-backed securities

Residential 6,356 ( 32 ) 23,014 ( 3,016 ) 29,370 ( 3,048 )

Commercial 2,258 ( 14 ) 10,191 ( 2,277 ) 12,449 ( 2,291 )

Other debt securities 7,361 ( 117 ) 9,271 ( 554 ) 16,632 ( 671 )

8 unchanged sentences

Mortgage-backed securities

Residential 34,179 ( 435 ) 23,453 ( 3,599 ) 57,632 ( 4,034 )

Commercial 3,580 ( 128 ) 10,159 ( 2,516 ) 13,739 ( 2,644 )

Other debt securities 4,900 ( 58 ) 9,101 ( 723 ) 14,001 ( 781 )

1 unchanged sentence

Total $ 51,361 $ ( 811 ) $ 144,583 $ ( 30,221 ) $ 195,944 $ ( 31,032 )

The total available-for-sale portfolio consisted of approximately 394 securities at September 30, 2024.

The portfolio included 356 securities having an aggregate fair value of $ 158.2 million that were in a loss position at September 30, 2024.

Securities identified as temporarily impaired which had been in a loss position for 12 months or longer totaled $ 152.0 million at fair value at September 30, 2024.

The $ 25.3 million aggregate unrealized loss included in accumulated other comprehensive loss at September 30, 2024 was caused by interest rate fluctuations.

The total available-for-sale portfolio consisted of approximately 390 securities at March 31, 2025.

The portfolio included 357 securities having an aggregate fair value of $ 159.4 million that were in a loss position at March 31, 2025.

Securities identified as temporarily impaired which had been in a loss position for 12 months or longer totaled $ 140.4 million at fair value at March 31, 2025.

The $ 31.0 million aggregate unrealized loss included in accumulated other comprehensive loss at March 31, 2025 was caused by interest rate fluctuations.

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.

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

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) Derivative Instruments

As part of the Company’s overall interest rate risk management, the Company utilizes derivative instruments to minimize significant, unanticipated earnings fluctuations caused by interest rate volatility, including interest rate lock commitments, forward commitments to sell mortgage-backed securities, cash flow hedges and interest rate swap contracts.

The notional amount does not represent amounts exchanged by the parties, rather the amount exchanged is determined by reference to the notional amount and the other terms of the individual agreements.

HAWTHORN BANCSHARES, INC.

1 unchanged sentence

Notes to the Consolidated Financial Statements

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

Nine Months Ended September 30,

(dollars in thousands)

Balance at beginning of period $ 1,738 $ 2,899

Originated mortgage servicing rights — 38

Sale proceeds ( 1,670 ) —

Changes in fair value:

Due to changes in model inputs and assumptions (1) — 145

Other changes in fair value (2) ( 68 ) ( 197 )

Total changes in fair value ( 68 ) ( 52 )

Balance at end of period $ — $ 2,885

(1) The change in fair value resulting from changes in valuation inputs or assumptions, reported in real estate servicing fees, net, used in the valuation model reflects the change in discount rates and prepayment speed assumptions primarily due to changes in interest rates.

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

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 for the periods indicated as of September 30, 2023:

Nine Months Ended September 30,

Weighted average constant prepayment rate NA 6.51 %

Weighted average note rate NA 3.49 %

Weighted average discount rate NA 11.00 %

Weighted average expected life (in years) NA 7.14

Interest Rate Swap Contracts Not Designated as Hedges

The Company enters into interest rate swap contracts sold to commercial customers who wish to modify their interest rate sensitivity.

These swaps are offset by contracts simultaneously purchased by the Company from other financial dealer institutions with mirror-image terms.

Because of the mirror-image terms of the offsetting contracts, in addition to collateral provisions which mitigate the impact of non-performance risk, changes in the fair value subsequent to initial recognition have a minimal effect on earnings.

These derivative contracts do not qualify for hedge accounting.

The following table reflects the estimated fair value of derivative instruments included in other assets and other liabilities on the consolidated balance sheets along with their respective notional amounts on a gross basis.

As of March 31, 2025 As of December 31, 2024

Fair Value Fair Value

(dollars in thousands) Notional Amount Derivative Assets Derivative Liabilities Notional Amount Derivative Assets Derivative Liabilities

Derivatives not designated as hedging instruments

Interest Rate Products $ 16,542 $ 222 $ 268 $ 16,542 $ 66 $ 89

Total derivatives not designated as hedging instruments $ 222 $ 268 $ 66 $ 89

The table below presents the effect of the Company’s derivative financial instruments that are not designated as hedging instruments on the consolidated statements of income for the three months ended March 31, 2025 and 2024.

The Company did not recognize other income related to client swaps in either of the three months ended March 31, 2025 and 2024.

Gain or (Loss) Recognized in Income on Derivative

Three Months Ended March 31,

(dollars in thousands) Location of Gain or (Loss) Recognized in Income on Derivative 2025 2024

Derivatives Not Designated as Hedging Instruments:

Interest Rate Products (1) Other non-interest income $ ( 23 ) $ —

Total $ ( 23 ) $ —

(1) Gain (loss) represents net fair value adjustments (including credit related adjustments) for client swaps.

Credit-risk-related Contingent Features

The Company has agreements with each of its derivative counterparties that contain a provision to the effect that, if the Company (either) defaults (or is capable of being declared in default) on any of its indebtedness, then the Company could also be declared in default on its derivative obligations.

Collateral Requirements

The Company has agreements with certain of its derivative counterparties that contain a provision where if the Company fails to maintain its status as a well / adequately capitalized institution, then the Company could be required to post additional collateral.

Certain derivative transactions have collateral requirements, both at the inception of the trade, and as the value of each derivative position changes.

As of March 31, 2025, the Company had recorded the obligation to collect cash collateral of $ 0.2 million.

As of March 31, 2025, the fair value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements was $ 0.05 million.

As of March 31, 2025, the

HAWTHORN BANCSHARES, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

Company has not posted any collateral related to these agreements.

If the Company had breached any of these provisions at March 31, 2025, it could have been required to settle its obligations under the agreements at their termination value of $ 0 .

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.

(dollars in thousands)

September 30, 2024 December 31, 2023

(dollars in thousands) March 31, 2025 December 31, 2024

Time deposits with balances > $250,000 $ 97,510 $ 100,383

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 September 30, 2024, operating right of use (ROU) assets and liabilities were $ 1.7 million and $ 1.8 million, respectively.

As of September 30, 2024, the weighted-average remaining lease term on these operating leases was approximately 5.9 years and the weighted-average discount rate used to measure the lease liabilities was approximately 4.1 %.

As of March 31, 2025, operating right of use (ROU) assets and liabilities were $ 2.9 million and $ 3.0 million, respectively.

As of March 31, 2025, the weighted-average remaining lease term on these operating leases was approximately 5.9 years and the weighted-average discount rate used to measure the lease liabilities was approximately 4.4 %.

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.

HAWTHORN BANCSHARES, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

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 $ 0.1 million and $ 0.2 million for the three and nine months ended September 30, 2024, respectively, compared to $ 0.1 million and $ 0.3 million for the three and nine months ended September 30, 2023, respectively.

The operating lease cost was $ 0.14 million for the three months ended March 31, 2025, compared to $ 0.07 million for the three months ended March 31, 2024.

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

7 unchanged sentences

Total lease liabilities, as reported $ 3,028

HAWTHORN BANCSHARES, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

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

Accumulated Other Comprehensive Income (Loss)

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

Nine Months Ended September 30, 2024

(dollars 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 income (loss) for the three months ended March 31, 2025 and 2024:

Three Months Ended March 31, 2025

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

Balance at beginning of period $ ( 24,416 ) $ 11,973 $ ( 12,443 )

2 unchanged sentences

Current period other comprehensive income (loss), before tax 485 ( 272 ) 213

Income tax (expense) benefit ( 525 ) 109 ( 416 )

Income tax benefit (expense) ( 102 ) 57 ( 45 )

Current period other comprehensive income (loss), net of tax 383 ( 215 ) 168

Balance at end of period $ ( 24,033 ) $ 11,758 $ ( 12,275 )

HAWTHORN BANCSHARES, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

Nine Months Ended September 30, 2023

(dollars 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, 2024

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

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

Other comprehensive income (loss), before reclassifications

( 10,061 ) ( 480 ) ( 10,541 )

Other comprehensive loss, before reclassifications ( 2,804 ) ( 159 ) ( 2,963 )

Amounts reclassified from accumulated other comprehensive loss — — —

Current period other comprehensive income (loss), before tax

( 10,061 ) ( 480 ) ( 10,541 )

Income tax (expense) benefit

2,113 101 2,214

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

( 7,948 ) ( 379 ) ( 8,327 )

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

Income tax benefit 589 33 622

Current period other comprehensive loss, net of tax ( 2,215 ) ( 126 ) ( 2,341 )

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

(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.

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

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 repurchased, as well as the timing of any such repurchases.

The Company repurchased 15,856 common shares under the repurchase plan during the first three months of 2025 at an average cost of $ 27.51 per share totaling $ 0.4 million.

As of March 31, 2025, $ 3.5 million remained available for share repurchases pursuant to the plan.

(9) Share-Based Compensation

4 unchanged sentences

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.

The terms of the Equity Plan provide for the grant of stock

HAWTHORN BANCSHARES, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

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.

5 unchanged sentences

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 nine months ended September 30, 2024:

(dollars 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

The following table summarizes the status of the Company's RSUs for the three months ended March 31, 2025:

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

Non-vested at beginning of period 35,336 $ 22.84 18,277 $ 20.63

Granted 2,000 33.17 — —

1 unchanged sentence

Forfeited — — — —

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

Non-vested at end of period 37,336 $ 23.39 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 and nine months ended September 30, 2024 for these RSUs was $ 0.05 million and $ 0.1 million, respectively.

No share-based compensation expense was recognized for the three and nine months ended September 30, 2023.

Total share-based compensation expense recognized for the three months ended March 31, 2025 and 2024 for these RSUs was $ 0.08 million and $ 0.03 million, respectively.

Forfeitures will be recognized as they occur.

HAWTHORN BANCSHARES, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

At September 30, 2024, there was $ 0.4 million of total unrecognized compensation expense related to RSUs that is expected to be recognized over a weighted-average period of 2.2 years.

(10) Employee Benefit Plans

Employee Benefits

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,

(dollars in thousands)

2024 2023 2024 2023

Payroll taxes $ 361 $ 374 $ 1,188 $ 1,228

Medical plans 399 505 1,235 1,400

401(k) match and profit sharing 310 250 931 761

Periodic pension cost 264 265 792 796

Other 90 11 91 30

Total employee benefits $ 1,424 $ 1,405 $ 4,237 $ 4,215

At March 31, 2025, there was $ 0.7 million of total unrecognized compensation expense related to RSUs that is expected to be recognized over a weighted-average period of 2.2 years.

(10) Retirement Plans

Profit-sharing Plan

The Company's profit-sharing plan includes a matching 401(k) portion, in which the Company matches the first 3 % of eligible employee contributions.

1 unchanged sentence

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

Total expense recorded for the Company-match was $ 0.2 million and $ 0.1 million for the three months ended March 31, 2025 and 2024, respectively.

The employer discretionary profit-sharing contribution made to the 401(k) plan was $ 0.3 million and $ 0.2 million for plan years 2024 and 2023, respectively.

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 $ 1.7 million as of September 30, 2024, and the expense for the three and nine months ended September 30, 2024 was $ 0.02 million and $ 0.07 million, respectively, compared to $ 0.01 million and $ 0.02 million for the three and nine months ended September 30, 2023, respectively, and is recognized over the required service period.

The accrued liability relating to the SERP was $ 1.7 million as of March 31, 2025, and the expense was consistent at $ 0.02 million for both the three months ended March 31, 2025 and 2024, 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 (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 September 30, Nine Months Ended September 30,

Three Months Ended March 31,

(dollars in thousands) 2025 2024

2024 2023 2024 2023

Service cost - benefits earned during the year $ 221 $ 256

11 unchanged sentences

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

HAWTHORN BANCSHARES, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

(11) Earnings per Share

2 unchanged sentences

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) 2025 2024

7 unchanged sentences

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 repurchased, as well as the timing of any such repurchases.

The Company repurchased 56,692 common

HAWTHORN BANCSHARES, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

shares under the repurchase plan during the first nine months of 2024 at an average cost of $ 19.51 per share totaling $ 1.1 million.

As of September 30, 2024, $ 3.9 million remained available for share repurchases pursuant to the plan.

(12) Fair Value Measurements

14 unchanged sentences

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.

HAWTHORN BANCSHARES, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

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

9 unchanged sentences

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

Equity securities that do not have readily determinable fair values are carried at cost and are periodically

HAWTHORN BANCSHARES, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

assessed for impairment.

Equity securities that do not have readily determinable fair values are carried at cost and are periodically assessed for impairment.

The Company uses Level 1 inputs to value equity securities that are traded in active markets.

2 unchanged sentences

Derivative Assets and Liabilities

Derivative assets and liabilities include interest rate lock commitments (IRLCs) and forward sale commitments.

The fair values of IRLCs and forward sale commitments are determined using readily observable market data such as interest rates, prices, volatility factors, and customer credit-related adjustments.

For IRLCs, the fair value is subject to the anticipated loan funding probability (pull-through rate), which is considered an unobservable factor.

Factors that affect pull-through rates include origination channel, current mortgage interest rates in the market versus the interest rate incorporated in the IRLC, the purpose of the mortgage, stage of completion of the underlying application and underwriting process, and the time remaining until the IRLC expires.

The Company classifies IRLCs as Level 3 due to the unobservable input of pull-through rates.

As of September 30, 2024, the Company elected not to record the derivatives associated with IRLC due to the reduced volume of loans sold to the secondary market and therefore immateriality of the derivative.

Mortgage Servicing Rights (MSRs)

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.

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.

Derivative assets and liabilities include interest rate swaps.

The fair value is determined using a discounted cash flow analysis on the expected cash flows of each derivative, which also includes a credit value adjustment for client swaps.

An independent third-party valuation is used to verify and confirm these values, which are classified as Level 2 within the fair value hierarchy.

HAWTHORN BANCSHARES, INC.

2 unchanged sentences

Fair Value Measurements

(dollars 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, 2024

(dollars 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, 2025

Treasury $ 5,005 $ 5,005 $ — $ —

government and federal agency obligations 378 — 378 —

2 unchanged sentences

Mortgage-backed securities

Residential 66,229 — 66,229 —

Commercial 13,820 — 13,820 —

Other debt securities 22,608 — 22,608 —

1 unchanged sentence

Equity securities 72 72 — —

Derivative instruments, interest rate swaps 222 222

Loans held for sale 224 — 224 —

Total $ 220,165 $ 5,077 $ 215,088 $ —

Derivative instruments, interest rate swaps $ 268 $ — $ 268 $ —

Total $ 268 $ — $ 268 $ —

December 31, 2024

4 unchanged sentences

Mortgage-backed securities

Residential 64,371 — 64,371 —

Commercial 13,739 — 13,739

Other debt securities 18,687 — 18,687 —

1 unchanged sentence

Equity securities 74 74 — —

Interest rate lock commitments 43 — — 43

Loans held for sale 3,884 — 3,884 —

Mortgage servicing rights 1,738 — — 1,738

Derivative instruments, interest rate swaps 66 — 66 —

Total $ 218,792 $ 4,989 $ 213,803 $ —

Interest rate lock commitments $ 2 $ — $ — $ 2

Forward sale commitments 41 — 41 —

Derivative instruments, interest rate swaps $ 89 $ — $ 89 $ —

Total $ 89 $ — $ 89 $ —

5 unchanged sentences

Mortgage Servicing Rights Interest Rate Lock Commitments

Nine Months Ended September 30,

Three Months Ended March 31,

(dollars in thousands) 2025 2024 2025 2024

2024 2023 2024 2023

Balance at beginning of period $ — $ 1,738 $ — $ 41

3 unchanged sentences

Purchases — — — —

Sales ( 1,670 ) — ( 86 ) ( 125 )

— ( 1,552 ) — ( 41 )

Issues — 0 — 45

Balance at end of period $ — $ 127 $ — $ 36

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

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

7 unchanged sentences

In the case of non-real estate collateral, reliance is placed on a variety of sources, including external estimates of value and judgments based on the experience and expertise of internal specialists.

Values of all loan collateral are regularly reviewed by a senior loan committee.

Values of all loan collateral are regularly reviewed by the executive loan committee.

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

As of September 30, 2024, the Company identified $ 1.8 million in collateral-dependent loans that required a $ 0.3 million specific allowance for credit losses.

Related to these loans, there were $ 0.4 million and $ 2.3 million in charge-offs recorded during the three and nine months ended September 30, 2024, respectively.

As of September 30, 2023, the Company identified $ 2.6 million in collateral-dependent loans that required a $ 0.02 million specific allowance for credit losses.

Related to these loans, there were $ 3,000 and $ 0.03 million in charge-offs recorded during the three and nine months ended September 30, 2023, respectively.

Other Real Estate and Foreclosed Assets

10 unchanged sentences

Fair Value Measurements Using

(dollars 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, 2024

(dollars 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, 2025

Collateral dependent impaired loans:

1 unchanged sentence

Real estate construction − residential 260 — — 260 —

Real estate mortgage - residential — — — — — ( 22 )

Real estate mortgage - commercial 65 — — 65 —

1 unchanged sentence

Other real estate and repossessed assets $ — $ — $ — $ — $ —

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 —

14 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.

Accrued Interest Receivable and Payable

For accrued interest receivable and payable, the carrying amount is a reasonable estimate of fair value because of the short maturity for these financial instruments.

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

Accrued Interest Receivable and Payable

For accrued interest receivable and payable, the carrying amount is a reasonable estimate of fair value because of the short maturity for these financial instruments.

The fair value of deposits with no stated maturity, such as non-interest-bearing demand, NOW accounts, savings, and money market, is equal to the amount payable on demand.

6 unchanged sentences

The discount rate is estimated using the rates currently offered for other borrowed money of similar remaining maturities.

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

September 30, 2024

A summary of the carrying amounts and fair values of the Company’s financial instruments at March 31, 2025 and December 31, 2024 is as follows:

March 31, 2025

Fair Value Measurements

September 30, 2024 Quoted Prices in Active Markets for Identical Assets Other Observable Inputs Net Significant Unobservable Inputs

(dollars in thousands)

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

March 31, 2025 Quoted Prices in Active Markets for Identical Assets Other Observable Inputs Net Significant Unobservable Inputs

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

Cash and due from banks $ 21,558 $ 21,558 $ 21,558 $ — $ —

1 unchanged sentence

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

Available-for-sale securities 203,292 203,292 — 203,292 —

Other investment securities 6,862 6,862 — 6,862 —

Loans, net 1,448,543 1,416,761 — — 1,416,761

Loans held for sale 315 315 — 315 —

Accrued interest receivable 8,074 8,074 8,074 — —

12 unchanged sentences

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

(dollars in thousands)

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

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

Cash and due from banks $ 23,668 $ 23,668 $ 23,668 $ — $ —

Federal funds sold and overnight interest-bearing deposits 27,326 27,326 27,326 — —

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

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

Other investment securities 5,075 5,075 — 5,075 —

Loans, net 1,444,116 1,380,252 — — 1,380,252

Loans held for sale 3,884 3,884 — 3,884 —

Interest rate lock commitments 43 43 — — 43

Accrued interest receivable 8,221 8,221 8,221 — —

5 unchanged sentences

Subordinated notes 49,486 41,602 — 41,602 —

Interest rate lock commitments 2 2 — — 2

Forward sale commitments 41 41 — 41 —

Accrued interest payable 1,754 1,754 1,754 — —

10 unchanged sentences

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.

The Company’s extent of involvement and maximum potential exposure to credit loss in the event of non-performance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by

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 March 31, 2025, the allowance for credit losses for unfunded commitments was $ 0.9 million.

HAWTHORN BANCSHARES, INC.

1 unchanged sentence

Notes to the Consolidated Financial Statements

the contractual amount of these instruments.

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, 2024, the allowance for credit losses for unfunded commitments was $ 0.8 million.

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

(dollars in thousands)

September 30, 2024 December 31, 2023

(dollars in thousands) March 31, 2025 December 31, 2024

Commitments to extend credit $ 321,345 $ 305,811

Interest rate lock commitments — 3,694

Forward sale commitments 224 —

7 unchanged sentences

Collateral held varies, but may include accounts receivable, inventory, furniture and equipment, and real estate.

The Company has two types of commitments related to mortgage loans held for sale:

interest rate lock commitments and forward loan sale commitments.

Interest rate lock commitments are commitments to extend credit to a customer that has an interest rate lock and are considered derivative instruments.

As of September 30, 2024, the Company elected not to record the derivatives associated with IRLCs due to the reduced volume of loans sold to the secondary market.

The Company's forward loan sale commitments are related to mortgage loans held for sale.

Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third-party.

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 ranged from one month to five years at September 30, 2024.

The approximate remaining term of standby letters of credit ranged from one month to five years at March 31, 2025.

Pending Litigation

3 unchanged sentences

Some legal matters, which are at early stages in the legal process, have not yet progressed to the point where a loss is deemed probable or an amount can be estimated.

(15) Segment Information

The Company determines its operating segments based on how the chief operating decision maker (CODM) views and analyzes each segment’s operations, performance and allocates resources.

The Chief Executive Officer, is the CODM.

The CODM reviews the actual net income compared to budgeted net income on a monthly basis to evaluate segment performance, make decisions, and determine where to deploy capital.

This analysis is also used for benchmarking performance against the Company's peers.

The Company previously reported under one segment.

During the three months March 31, 2025, the Company identified its Wealth Management business as a strategic opportunity and hired additional management resources to provide the structure for products and processes for this business.

As a result, during the three months ended March 31, 2025, the Company identified its Wealth Management Business as its own separate reporting segment and now reports two aggregated reporting segments, consisting of the Bank and its Wealth Management business.

The Bank segment is composed of operations from providing a broad range of banking products and services located within the Missouri communities in and surrounding Jefferson City, Columbia, Clinton, Warsaw, Springfield, and the greater Kansas City metropolitan area.

The Wealth Management segment includes a broad range of financial and investment planning services for individuals and business owners.

The Company's existing trust services will also be included in the Wealth Management segment.

HAWTHORN BANCSHARES, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

The table below highlights the Company’s revenues, expenses and net income (loss) for each reportable segment and is reconciled to net income (loss) on a consolidated basis for the three months ended March 31, 2025 and 2024, respectively was as follows:

Three Months Ended March 31, 2025

(dollars in thousands) Hawthorn Bank Wealth Management Non-Bank Total

Operating revenue

Interest income $ 23,432 $ — $ 26 $ 23,458

Interest expense 7,312 — 852 8,164

Net interest income $ 16,120 $ — $ ( 826 ) $ 15,294

Provision for credit losses ( 340 ) — — ( 340 )

Operating expenses

Salaries and employee benefits $ 6,397 $ 156 $ 359 $ 6,912

Occupancy, furniture and equipment expense 1,178 15 — 1,193

Processing, network, and bank card expense 1,383 18 — 1,401

Legal, examination, and professional fees 396 — 97 493

Depreciation 535 — — 535

Other 1,739 15 211 1,965

Total operating expenses $ 11,628 $ 204 $ 667 $ 12,499

Non-interest income $ 2,591 $ 512 $ 360 $ 3,463

Investment securities losses, net ( 2 ) — — ( 2 )

Income taxes 1,450 — ( 237 ) 1,213

Net income $ 5,971 $ 308 $ ( 896 ) $ 5,383

Segment assets $ 1,871,281 $ 4 $ 12,138 $ 1,883,423

HAWTHORN BANCSHARES, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

Three Months Ended March 31, 2024

(dollars in thousands) Hawthorn Bank Non-Bank Total

Operating revenue

Interest income $ 24,022 $ 30 $ 24,052

Interest expense 8,315 989 9,304

Net interest income $ 15,707 $ ( 959 ) $ 14,748

Provision for credit losses ( 230 ) — ( 230 )

Operating expenses

Salaries and employee benefits $ 6,392 $ 338 $ 6,730

Occupancy, furniture and equipment expense 1,106 — 1,106

Processing, network, and bank card expense 920 450 1,370

Legal, examination, and professional fees 623 200 823

Depreciation 463 — 463

Other 2,430 ( 347 ) 2,083

Total operating expenses $ 11,934 $ 641 $ 12,575

Non-interest income $ 2,733 $ 286 $ 3,019

Investment securities losses, net — — —

Income taxes 1,242 ( 276 ) 966

Net income $ 5,494 $ ( 1,038 ) $ 4,456

Segment assets $ 1,825,851 $ 57,572 $ 1,883,423

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