What changed in this filing

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Item 1. Financial Statements

2025-11-07 compared with 2025-08-11 · 229 added, 221 removed, 954 unchanged (32% of the section changed)

3 unchanged sentences

Consolidated Balance Sheets

(dollars in thousands, except per share data) June 30, 2025 December 31, 2024

(dollars in thousands, except per share data) September 30, 2025 December 31, 2024

Cash and due from banks $ 17,613 $ 23,668

7 unchanged sentences

Net loans 1,492,098 1,444,116

Loans held for sale 1,432 —

Premises and equipment - net 30,031 31,166

28 unchanged sentences

Consolidated Statements of Income (unaudited)

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

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

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

19 unchanged sentences

Net interest income 16,865 14,327 48,301 43,246

(Release of) provision for credit losses on loans ( 159 ) 282 ( 441 ) 282

Provision for (release of) credit losses on loans 375 593 ( 66 ) 875

Provision for (release of) credit losses on unfunded commitments — ( 93 ) 50 ( 149 )

Total (release of) provision for credit losses on loans and unfunded commitments ( 51 ) 457 ( 391 ) 227

Net interest income after provision for credit losses on loans and unfunded commitments 16,193 13,715 31,827 28,693

Total provision for (release of) credit losses on loans and unfunded commitments 375 500 ( 16 ) 726

Net interest income after provision for (release of) credit losses on loans and unfunded commitments 16,490 13,827 48,317 42,520

NON-INTEREST INCOME

4 unchanged sentences

Gain on sale of mortgage loans, net 78 111 320 786

(Losses) gains on other real estate owned, net ( 177 ) 454 ( 156 ) 488

Gains (losses) on other real estate owned, net — 262 ( 156 ) 751

Other 546 561 1,651 1,300

Total non-interest income 3,716 3,783 10,724 10,798

Investment securities losses, net ( 1 ) ( 15 ) ( 3 ) ( 15 )

Investment securities gains (losses), net 105 8 102 ( 7 )

NON-INTEREST EXPENSE

17 unchanged sentences

Consolidated Statements of Comprehensive Income (unaudited)

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

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

(dollars in thousands) 2025 2024 2025 2024

Net income $ 6,132 $ 4,574 $ 17,616 $ 13,659

Other comprehensive income (loss), net of tax

Other comprehensive income, net of tax

Investment securities available-for-sale:

Change in unrealized gains (losses) on investment securities available-for-sale, net of tax 674 ( 983 ) 1,058 ( 3,198 )

Change in unrealized gains on investment securities available-for-sale, net of tax 3,823 5,174 4,881 1,976

Defined benefit pension plans:

Amortization of net gains included in net periodic pension income, net of tax ( 252 ) ( 136 ) ( 756 ) ( 409 )

Total other comprehensive income (loss) 386 ( 1,130 ) 554 ( 3,471 )

Total other comprehensive income 3,571 5,038 4,125 1,567

Total comprehensive income $ 9,703 $ 9,612 $ 21,741 $ 15,226

3 unchanged sentences

Consolidated Statements of Stockholders’ Equity (unaudited)

Three Months Ended June 30, 2025 and 2024

Three Months Ended September 30, 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, March 31, 2025 $ 7,555 $ 76,938 $ 93,597 $ ( 12,275 ) $ ( 12,404 ) $ 153,411

Balance, June 30, 2025 $ 7,555 $ 76,812 $ 98,309 $ ( 11,889 ) $ ( 13,964 ) $ 156,823

Net income — — 6,132 — — 6,132

2 unchanged sentences

Purchase of treasury stock — — — — ( 308 ) ( 308 )

Restricted share unit vesting and taxes paid related to net share settlement — ( 222 ) — — 222 —

Cash dividends declared, common stock ($ 0.20 per share)

— — ( 1,384 ) — — ( 1,384 )

Balance, June 30, 2025

Balance, September 30, 2025

$ 7,555 $ 76,916 $ 103,057 $ ( 8,318 ) $ ( 14,272 ) $ 164,938

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

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

Net income — — 4,574 — — 4,574

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

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

Share-based compensation expense — 48 — — — 48

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

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

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

— — ( 1,327 ) — — ( 1,327 )

Balance, June 30, 2024

Balance, September 30, 2024

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

Six Months Ended June 30, 2025 and 2024

Nine Months Ended September 30, 2025 and 2024

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

8 unchanged sentences

— — ( 4,101 ) — — ( 4,101 )

Balance, June 30, 2025

Balance, September 30, 2025

$ 7,555 $ 76,916 $ 103,057 $ ( 8,318 ) $ ( 14,272 ) $ 164,938

2 unchanged sentences

Net income — — 13,659 — — 13,659

Other comprehensive loss — — — ( 3,471 ) — ( 3,471 )

Other comprehensive income — — — 1,567 — 1,567

Share-based compensation expense — 119 — — — 119

3 unchanged sentences

— — ( 3,850 ) — — ( 3,850 )

Balance, June 30, 2024

Balance, September 30, 2024

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

3 unchanged sentences

Consolidated Statements of Cash Flows (unaudited)

Six Months Ended June 30,

Nine Months Ended September 30,

(In thousands) 2025 2024

5 unchanged sentences

Net amortization of investment securities, premiums, and discounts 301 618

Change in fair value of mortgage servicing rights — ( 149 )

Investment securities losses, net 3 15

Investment securities (gains) losses, net ( 102 ) 7

Gain on sales and dispositions of premises and equipment ( 61 ) ( 69 )

1 unchanged sentence

Provision for (release of) valuation allowance for other real estate owned 184 ( 386 )

Proceeds from the sale of mortgage servicing rights — 1,589

Share-based compensation expense 281 119

2 unchanged sentences

Decrease in operating lease liabilities ( 242 ) ( 178 )

Increase (decrease) in accrued interest payable and other liabilities 49 ( 1,143 )

Increase in accrued interest payable and other liabilities 1,299 1,369

Origination of mortgage loans held for sale ( 6,223 ) ( 40,640 )

5 unchanged sentences

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

Net decrease in loans 3,229 35,867

Net (increase) decrease in loans ( 47,916 ) 66,224

Purchase of available-for-sale debt securities ( 18,777 ) ( 32,919 )

6 unchanged sentences

Proceeds from sales of other real estate and repossessed assets 1,418 3,282

Net cash used in investing activities ( 692 ) ( 254 )

Net cash (used in) provided by investing activities ( 44,620 ) 19,758

Cash flows from financing activities:

1 unchanged sentence

Net decrease in interest bearing transaction accounts ( 58,280 ) ( 34,498 )

Net increase in time deposits 8,035 22,298

Net increase (decrease) in time deposits 11,600 ( 21,240 )

Repayment of FHLB advances and other borrowings ( 35,014 ) ( 21,000 )

FHLB advances 228,675 14,300

Proceeds from FHLB advances and other borrowings 575 10,525

Net increase (decrease) in short term FHLB borrowings 130,000 —

Purchase of treasury stock ( 2,530 ) ( 1,106 )

8 unchanged sentences

Consolidated Statements of Cash Flows (unaudited) continued

Six Months Ended June 30,

Nine Months Ended September 30,

(In thousands) 2025 2024

24 unchanged sentences

Actual results could differ from those estimates.

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 Developments

One Big Beautiful Bill Act .

On July 4, 2025, the One Big Beautiful Bill Act, which includes a broad range of tax reform provisions, was signed into law in the United States.

The Company is continuing to evaluate the impact of the new legislation, but does not currently expect it will have a material impact on its results of operations.

Shelf Registration.

On June 24, 2025, the Company filed a universal shelf registration statement on Form S-3 with the Securities and Exchange Commission, which became effective on July 2, 2025.

The shelf registration statement is intended to provide the Company with financial flexibility to raise capital from the offering of up to $ 150 million of any combination of common stock, preferred stock, debt securities, depositary shares, warrants, purchase contracts, purchase units, subscription rights and units in one or multiple offerings while the shelf registration statement is effective.

Recent Accounting Pronouncements

10 unchanged sentences

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

HAWTHORN BANCSHARES, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

Income Statement.

8 unchanged sentences

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.

2 unchanged sentences

(2) Loans and Allowance for Credit Losses

Major classifications within the Company’s loans held for investment portfolio at June 30, 2025 and December 31, 2024 were as follows:

(dollars in thousands) June 30, 2025 December 31, 2024

Major classifications within the Company’s loans held for investment portfolio at September 30, 2025 and December 31, 2024 were as follows:

(dollars in thousands) September 30, 2025 December 31, 2024

Commercial, financial, and agricultural $ 227,309 $ 202,329

8 unchanged sentences

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

Accrued interest on loans totaled $ 6.0 million and $ 6.5 million at June 30, 2025 and December 31, 2024, respectively, and is included in accrued interest receivable and other assets on the Company's consolidated balance sheets.

Accrued interest on loans totaled $ 6.8 million and $ 6.5 million at September 30, 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 June 30, 2025, loans of $ 723.2 million were pledged to the Federal Home Loan Bank (FHLB) as collateral for borrowings and letters of credit.

At September 30, 2025, loans of $ 742.0 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.

HAWTHORN BANCSHARES, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

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.

The allowance for credit losses on unfunded commitments totaled $ 1.0 million and $ 0.9 million at June 30, 2025 and December 31, 2024, respectively.

HAWTHORN BANCSHARES, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

The allowance for credit losses on unfunded commitments totaled $ 1.0 million and $ 0.9 million at September 30, 2025 and December 31, 2024, respectively.

Sensitivity in the Allowance for Credit Loss Model

2 unchanged sentences

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

Three Months Ended June 30, 2025

Three Months Ended September 30, 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

4 unchanged sentences

Balance at end of period $ 2,421 $ 421 $ 1,502 $ 5,116 $ 12,127 $ 88 $ 229 $ 21,904

Six Months Ended June 30, 2025

Nine Months Ended September 30, 2025

4 unchanged sentences

Balance at end of period $ 2,421 $ 421 $ 1,502 $ 5,116 $ 12,127 $ 88 $ 229 $ 21,904

Three Months Ended June 30, 2024

Three Months Ended September 30, 2024

4 unchanged sentences

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

Six Months Ended June 30, 2024

Nine Months Ended September 30, 2024

4 unchanged sentences

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

HAWTHORN BANCSHARES, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

Collateral-Dependent loans

3 unchanged sentences

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

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

HAWTHORN BANCSHARES, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

pieces of collateral.

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

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

There have been no significant changes to the types of collateral securing the Company's collateral dependent loans since December 31, 2024.

The amortized cost of collateral-dependent loans by class as of June 30, 2025 and December 31, 2024 was as follows:

The amortized cost of collateral-dependent loans by class as of September 30, 2025 and December 31, 2024 was as follows:

Collateral Type

(dollars in thousands) Real Estate Other Allowance Allocated

June 30, 2025

September 30, 2025

Commercial, financial, and agricultural $ — $ 1,812 $ 587

11 unchanged sentences

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

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

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

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

7 unchanged sentences

Notes to the Consolidated Financial Statements

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

June 30, 2025

The following table presents the recorded investment by risk categories at September 30, 2025:

Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Loans Amortized Cost Basis

Amortized Cost Basis by Origination Year and Risk Grades

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

Commercial, Financial, & Agricultural

45 unchanged sentences

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

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

Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Loans Amortized Cost Basis

Amortized Cost Basis by Origination Year and Risk Grades

(dollars in thousands) 2024 2023 2022 2021 2020 Prior Total

Commercial, Financial, & Agricultural

55 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 June 30, 2025 and December 31, 2024:

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, 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

June 30, 2025

September 30, 2025

Commercial, Financial, and Agricultural $ — $ 2,004 $ 2,004 $ 500 $ 2,504

11 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 six months ended June 30, 2025.

No material amount of interest income was recognized on non-accrual loans during the three and nine months ended September 30, 2025 and 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 June 30, 2025 and December 31, 2024.

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

June 30, 2025

September 30, 2025

Commercial, Financial, and Agricultural $ 224,567 $ 238 $ 500 $ 2,004 $ 227,309

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 each of the three and six months ended June 30, 2025 and June 30, 2024, the Company did not modify any loans made to borrowers experiencing financial difficulty.

For each of the three and nine months ended September 30, 2025 and 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.

There were no loans held for sale at both June 30, 2025 and December 31, 2024.

Loans held for sale totaled $ 1.4 million at September 30, 2025.

There were no loans held for sale at December 31, 2024.

HAWTHORN BANCSHARES, INC.

2 unchanged sentences

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

June 30, December 31,

(dollars in thousands) 2025 2024

The following table provides details of the Company’s other real estate and other assets acquired in the settlement of loans as of September 30, 2025 and December 31, 2024.

(dollars in thousands) September 30, 2025 December 31, 2024

Commercial $ 2,552 $ —

5 unchanged sentences

Total other real estate owned and repossessed assets $ 2,425 $ 1,446

At June 30, 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.

At September 30, 2025, there were $ 0.6 million 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 June 30, Six Months Ended June 30,

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

(dollars in thousands) 2025 2024 2025 2024

1 unchanged sentence

Provision for (release of) provision for valuation allowance for other real estate owned — — 184 ( 386 )

184 ( 386 ) 184 ( 386 )

Charge-offs — — ( 1,962 ) ( 3,820 )

4 unchanged sentences

(4) Investment Securities

The amortized cost and fair value of debt securities classified as available-for-sale at June 30, 2025 and December 31, 2024 were as follows:

The amortized cost and fair value of debt securities classified as available-for-sale at September 30, 2025 and December 31, 2024 were as follows:

Gross Unrealized

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

June 30, 2025

September 30, 2025

Treasury $ 4,946 $ 111 $ — $ 5,057

government and federal agency obligations 381 — ( 2 ) 379

government-sponsored enterprises 11,174 39 ( 130 ) 11,083

3 unchanged sentences

Commercial 15,454 13 ( 2,069 ) 13,398

Other debt securities (a) 27,854 171 ( 585 ) 27,440

Bank issued trust preferred securities (a) 1,486 — ( 207 ) 1,279

Other debt securities (1)

23,444 257 ( 419 ) 23,282

Bank issued trust preferred securities (1)

1,486 — ( 207 ) 1,279

Total available-for-sale securities $ 241,432 $ 1,077 $ ( 25,804 ) $ 216,705

7 unchanged sentences

Commercial 16,383 — ( 2,644 ) 13,739

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

Bank issued trust preferred securities (a) 1,486 — ( 237 ) 1,249

Other debt securities (1)

19,419 49 ( 781 ) 18,687

Bank issued trust preferred securities (1)

1,486 — ( 237 ) 1,249

Total available-for-sale securities $ 249,558 $ 126 $ ( 31,032 ) $ 218,652

(a) Certain hybrid instruments possessing characteristics typically associated with debt obligations.

(1) Certain hybrid instruments possessing characteristics typically associated with debt obligations.

The Company’s investment securities are classified as available for sale.

2 unchanged sentences

government-sponsored enterprises.

Debt securities with carrying values aggregating approximately $ 89.8 million and $ 82.4 million at June 30, 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 each of the three and six months ended June 30, 2025 and 2024.

All gains and losses recognized on equity securities during each of the three and six months ended June 30, 2025 and 2024 were unrealized.

Debt securities with carrying values aggregating approximately $ 92.7 million and $ 82.4 million at September 30, 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 each of the three and nine months ended September 30, 2025 and 2024.

All gains and losses recognized on equity securities during each of the three and nine months ended September 30, 2025 and 2024 were unrealized.

During the three and nine months ended September 30, 2025, the Company recorded net investment securities gains of approximately $ 114,000 from called securities.

The amortized cost and fair value of debt securities classified as available-for-sale at September 30, 2025, by contractual maturity are shown below.

Accrued interest on investments totaled $ 1.4 million and $ 1.6 million at September 30, 2025

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 June 30, 2025, by contractual maturity are shown below.

Accrued interest on investments was consistent at $ 1.6 million at both June 30, 2025 and December 31, 2024, and is included in accrued interest receivable and other assets on the Company's consolidated balance sheets.

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 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.

September 30, 2025

(dollars in thousands) Amortized Cost Fair Value

7 unchanged sentences

Other Investment Securities

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

Other investment securities include equity securities with readily determinable fair values and other investment securities that do not have readily determinable fair values and are shown in the table below.

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) June 30, 2025 December 31, 2024

Other securities:

(dollars in thousands) September 30, 2025 December 31, 2024

FHLB stock $ 9,099 $ 4,924

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 June 30, 2025 and December 31, 2024 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 September 30, 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

June 30, 2025

government and federal agency obligations $ — $ — $ 380 $ ( 2 ) $ 380 $ ( 2 )

September 30, 2025

government-sponsored enterprises $ — $ — $ 1,870 $ ( 130 ) $ 1,870 $ ( 130 )

6 unchanged sentences

Total $ 7,632 $ ( 100 ) $ 136,942 $ ( 25,704 ) $ 144,574 $ ( 25,804 )

(dollars in thousands)

December 31, 2024

9 unchanged sentences

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

The total available-for-sale portfolio consisted of approximately 390 securities at June 30, 2025.

The portfolio included 354 securities having an aggregate fair value of $ 152.9 million that were in a loss position at June 30, 2025.

Securities identified as temporarily impaired that had been in a loss position for 12 months or longer totaled $ 137.1 million at fair value at June 30, 2025.

The $ 30.4 million aggregate unrealized loss included in accumulated other comprehensive loss at June 30, 2025 was caused by interest rate fluctuations.

The total available-for-sale portfolio consisted of approximately 387 securities at September 30, 2025.

The portfolio included 343 securities having an aggregate fair value of $ 144.6 million that were in a loss position at September 30, 2025.

The $ 25.8 million aggregate unrealized loss included in accumulated other comprehensive loss at September 30, 2025 was caused by interest rate fluctuations.

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

4 unchanged sentences

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.

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

Interest Rate Swap Contracts Not Designated as Hedges

1 unchanged sentence

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.

Because of the mirror-image terms of the offsetting contracts, in addition to collateral

HAWTHORN BANCSHARES, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

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 June 30, 2025 As of December 31, 2024

The following table reflects the estimated fair value of derivative instruments not designated as hedging 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 September 30, 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 $ 354 $ 390 $ 16,542 $ 66 $ 89

Total derivatives not designated as hedging instruments $ 354 $ 390 $ 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 each of the three and six months ended June 30, 2025 and 2024.

The Company did not recognize other income related to client swaps in any of the three and six months ended June 30, 2025 and 2024.

The Company did not recognize other income related to client swaps in any of the three and nine months ended September 30, 2025 and 2024.

Gain or (Loss) Recognized in Income on Derivative

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

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

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

Derivatives Not Designated as Hedging Instruments:

Interest Rate Products (1) Other non-interest income $ 4 $ — $ ( 19 ) $ —

Interest Rate Products (1)

Other non-interest income $ 6 $ — $ ( 13 ) $ —

Total $ 6 $ — $ ( 13 ) $ —

3 unchanged sentences

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.

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 capitalized or 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 June 30, 2025, the Company had recorded the obligation to collect cash collateral of $ 0.1 million.

As of June 30, 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 $ 0.04 million.

As of June 30, 2025, the Company

As of September 30, 2025, the Company had recorded the obligation to collect cash collateral of $ 0.04 million.

As of September 30, 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 $ 0.04 million.

As of September 30, 2025, the Company has not posted any collateral related to these agreements.

If the Company had breached any of these provisions at September 30, 2025, it could have been required to settle its obligations under the agreements at their termination value of $ 0 .

HAWTHORN BANCSHARES, INC.

1 unchanged sentence

Notes to the Consolidated Financial Statements

has not posted any collateral related to these agreements.

If the Company had breached any of these provisions at June 30, 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) June 30, 2025 December 31, 2024

(dollars in thousands) September 30, 2025 December 31, 2024

Time deposits with balances > $250,000 $ 89,907 $ 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 June 30, 2025, operating right of use (ROU) assets and liabilities were $ 2.7 million and $ 2.9 million, respectively.

As of June 30, 2025, the weighted-average remaining lease term on these operating leases was approximately 5.8 years and the weighted-average discount rate used to measure the lease liabilities was approximately 4.4 %.

As of September 30, 2025, operating right of use (“ROU”) assets and liabilities were $ 2.6 million and $ 2.8 million, respectively.

As of September 30, 2025, the weighted-average remaining lease term on these operating leases was approximately 5.6 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.

4 unchanged sentences

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 $ 0.2 million and $ 0.3 million for the three and six months ended June 30, 2025, respectively, compared to $ 0.06 million and $ 0.1 million for the three and six months ended June 30, 2024, respectively.

The table below summarizes the maturity of remaining operating lease liabilities at June 30, 2025:

The operating lease cost was $ 0.2 million and $ 0.5 million for the three and nine months ended September 30, 2025, respectively, compared to $ 0.1 million and $ 0.2 million for the three and nine months ended September 30, 2024, respectively.

The table below summarizes the maturity of remaining operating lease liabilities at September 30, 2025:

Lease payments due in:

6 unchanged sentences

Total lease liabilities, as reported $ 2,787

(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, 2025 and 2024:

HAWTHORN BANCSHARES, INC.

1 unchanged sentence

Notes to the Consolidated Financial Statements

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

Nine Months Ended September 30, 2025

(dollars in thousands) Unrealized Gains (Losses) on Securities (1)

Unrecognized Net Pension and Postretirement (Income) 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 six months ended June 30, 2025 and 2024:

Six Months Ended June 30, 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 )

5 unchanged sentences

Balance at end of period $ ( 19,535 ) $ 11,217 $ ( 8,318 )

Six Months Ended June 30, 2024

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

Nine Months Ended September 30, 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 loss, before reclassifications ( 4,048 ) ( 345 ) ( 4,393 )

Amounts reclassified from accumulated other comprehensive loss — — —

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

Other comprehensive income (loss), before reclassifications 2,501 ( 518 ) 1,983

Amounts reclassified from accumulated other comprehensive income (loss)

Current period other comprehensive income (loss), before tax 2,501 ( 518 ) 1,983

Income tax benefit ( 525 ) 109 ( 416 )

Current period other comprehensive loss, net of tax ( 3,198 ) ( 273 ) ( 3,471 )

Current period other comprehensive income (loss), net of tax 1,976 ( 409 ) 1,567

Balance at end of period $ ( 19,485 ) $ 7,290 $ ( 12,195 )

6 unchanged sentences

The program has no termination date, may be suspended or discontinued at any time and does not obligate the Company to acquire any amount of common stock.

The Company repurchased 79,777 common shares under its repurchase programs during the first six months of 2025 at an average cost of $ 27.62 per share totaling $ 2.2 million.

As of June 30, 2025, $ 9.0 million remained available for share repurchases pursuant to the Company's current repurchase program.

HAWTHORN BANCSHARES, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

The Company repurchased 90,466 common shares under its repurchase programs during the first nine months of 2025 at an average cost of $ 27.72 per share totaling $ 2.5 million.

As of September 30, 2025, $ 8.7 million remained available for share repurchases pursuant to the Company's current repurchase program.

(9) Share-Based Compensation

Equity-Based Compensation Plan

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

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

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

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

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

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

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

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

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

Eligible participants under the Equity Plan include all employees, non-employee

HAWTHORN BANCSHARES, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

directors and consultants of the Company or its subsidiaries.

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

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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 six months ended June 30, 2025 and 2024:

(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

The following table summarizes the status of the Company's RSUs for the nine months ended September 30, 2025 and 2024:

Nine Months Ended September 30,

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

4 unchanged sentences

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 these RSUs was $ 0.1 million and $ 0.2 million for the three and six months ended June 30, 2025, respectively, compared to $ 0.04 million and $ 0.1 million for the three and six ended June 30, 2024, respectively.

Total share-based compensation expense recognized for these RSUs was $ 0.1 million and $ 0.3 million for the three and nine months ended September 30, 2025, respectively, compared to $ 0.05 million and $ 0.1 million for the three and nine months ended September 30, 2024, respectively.

Forfeitures will be recognized as they occur.

At June 30, 2025, there was $ 0.8 million of total unrecognized compensation expense related to RSUs that is expected to be recognized over a weighted-average period of 1.5 years.

At September 30, 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 2.0 years.

(10) Retirement Plans

3 unchanged sentences

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

Total expense recorded for the Company-match was $ 0.1 million and $ 0.3 million for the three and six months ended June 30, 2025, respectively, compared to $ 0.1 million and $ 0.3 million for the three and six ended June 30, 2024, respectively.

Total expense recorded for the Company match was $ 0.1 million and $ 0.4 million in each of the three and nine months ended September 30, 2025 and September 30, 2024, respectively.

The employer discretionary profit-sharing contribution made to the 401(k) plan was $ 0.8 million and $ 0.6 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, 2025, and the expense for the three and nine months ended September 30, 2025 was $ 0.02 million and $ 0.06 million, respectively, compared to $ 0.02 million and $ 0.07 million for the three and nine months ended September 30, 2024, respectively, 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 $ 1.7 million as of June 30, 2025, and the expense for the three and six months ended June 30, 2025 was $ 0.02 million and $ 0.04 million, respectively, compared to $ 0.02 million and $ 0.05 million for the three and six months ended June 30, 2024, 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.

The Company maintains a noncontributory defined benefit pension plan for all full-time and eligible employees hired before September 30, 2017.

Beginning January 1, 2018, and for all retrospective periods presented, the Company adopted the guidance under ASU 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost .

5 unchanged sentences

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 June 30, Six Months Ended June 30,

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

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

(dollars in thousands) 2025 2024 2025 2024

Service cost - benefits earned during the year $ 174 $ 236 $ 521 $ 710

Interest costs on projected benefit obligations (a) 376 366 775 738

Expected return on plan assets (a) ( 585 ) ( 589 ) ( 1,170 ) ( 1,179 )

Interest costs on projected benefit obligations (1)

388 370 1,164 1,108

Expected return on plan assets (1)

( 585 ) ( 590 ) ( 1,755 ) ( 1,769 )

Expected administrative expenses 36 28 109 82

Amortization of unrecognized net gain (a) ( 365 ) ( 186 ) ( 638 ) ( 345 )

Amortization of unrecognized net gain (1)

( 319 ) ( 173 ) ( 957 ) ( 518 )

Net periodic pension income $ ( 306 ) $ ( 129 ) $ ( 919 ) $ ( 387 )

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

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

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

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

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

9 unchanged sentences

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 June 30, Six Months Ended June 30,

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

Basic and Diluted Earnings Per Share:

Presented below is a summary of the components used to calculate basic and diluted earnings per common share:

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

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

Net income available to shareholders $ 6,132 $ 4,574 $ 17,616 $ 13,659

11 unchanged sentences

This hierarchy uses three levels of inputs to measure the fair value of assets and liabilities as follows:

The fair value hierarchy is as follows:

Level 1 – Inputs are unadjusted quoted prices for identical assets or liabilities in active markets.

7 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.

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:

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:

Available-for-Sale Securities

5 unchanged sentences

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

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

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

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

2 unchanged sentences

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

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 these loans as Level 2.

Derivative Assets and Liabilities

5 unchanged sentences

Notes to the Consolidated Financial Statements

The following table presents assets and liabilities that are measured at fair value on a recurring basis as of September 30, 2025 and December 31, 2024 aggregated by the level in the fair value hierarchy within which those measurements fall:

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)

June 30, 2025

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

September 30, 2025

Treasury $ 5,057 $ 5,057 $ — $ —

33 unchanged sentences

Mortgage Servicing Rights Interest Rate Lock Commitments

Six Months Ended June 30,

Nine Months Ended September 30,

(dollars in thousands) 2025 2024 2025 2024

8 unchanged sentences

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

Collateral Dependent Impaired Loans

Collateral Dependent Loans

While the overall loan portfolio is not carried at fair value, the Company periodically records non-recurring adjustments to the carrying value of loans based on fair value measurements for partial charge-offs of the uncollectible portions of those loans.

Non-recurring adjustments also include certain impairment amounts for collateral dependent loans when establishing the allowance for credit losses.

Such amounts are generally based on the fair value of the underlying collateral supporting the loan.

Such amounts are generally based on the fair value of the underlying collateral supporting the loan less estimated selling costs.

In determining the value of real estate collateral, the Company relies on external and internal appraisals of property values depending on the size and complexity of the real estate collateral.

Appraisals may be discounted based on the Company’s historical experience or other available information.

The Company maintains staff trained to perform in-house evaluations and also to review third-party appraisal reports for reasonableness.

7 unchanged sentences

Fair value, when recorded, is generally based upon appraisals by approved, independent state-certified appraisers.

Like impaired loans, appraisals on OREO may be discounted based on the Company’s historical knowledge, changes in market conditions from the time of appraisal or other information available.

Like collateral dependent loans, appraisals on OREO may be discounted based on the Company’s historical knowledge, changes in market conditions from the time of appraisal or other information available.

During the holding period, valuations are updated periodically, and the assets may be written down to reflect a new cost basis.

4 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 June 30, Total Gains (Losses)*

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

June 30, 2025

Collateral dependent impaired loans:

September 30, 2025

Collateral dependent loans:

Commercial, financial, & agricultural $ 1,225 $ — $ — $ 1,225 $ —

3 unchanged sentences

Other real estate and repossessed assets $ 2,425 $ — $ — $ 2,425 $ ( 225 )

June 30, 2024

Collateral dependent impaired loans:

December 31, 2024

Collateral dependent loans:

Commercial, financial, & agricultural $ 641 $ — $ — $ 641 $ ( 1,931 )

4 unchanged sentences

Other real estate and repossessed assets $ 546 $ — $ — $ 546 $ 875

* 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.

(1) Total gains (losses) reported for other real estate and foreclosed assets include charge-offs and valuation write downs during the nine months ended September 30, 2025 and the year ended December 31, 2024, respectively.

(13) Fair Value of Financial Instruments

5 unchanged sentences

The discount rates used are estimated using comparable market rates for similar types of loan products adjusted to be commensurate with the credit risk, overhead costs, and optionality of such instruments.

Loans Held for Sale

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

Federal funds Sold, Cash, and Due from Banks

3 unchanged sentences

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.

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 June 30, 2025 and December 31, 2024 is as follows:

June 30, 2025

A summary of the carrying amounts and fair values of the Company’s financial instruments at September 30, 2025 and December 31, 2024 is as follows:

September 30, 2025

Fair Value Measurements

June 30, 2025 Quoted Prices in Active Markets for Identical Assets Other Observable Inputs Net Significant Unobservable Inputs

September 30, 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)

4 unchanged sentences

Loans, net 1,492,098 1,465,025 — — 1,465,025

Loans held for sale 1,432 1,432 — 1,432 —

Accrued interest receivable 8,365 8,365 8,365 — —

Total assets $ 1,612,020 $ 1,584,947 $ 109,240 $ 10,682 $ 1,465,025

Non-interest bearing demand $ 424,437 $ 424,437 $ 424,437 $ — $ —

5 unchanged sentences

Accrued interest payable 1,673 1,673 1,673 — —

Total liabilities $ 1,754,162 $ 1,746,954 $ 1,214,169 $ 220,722 $ 312,063

HAWTHORN BANCSHARES, INC.

11 unchanged sentences

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

Total assets $ 1,509,406 $ 1,445,542 $ 60,215 $ 5,075 $ 1,380,252

Non-interest bearing demand $ 385,022 $ 385,022 $ 385,022 $ — $ —

5 unchanged sentences

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

Total liabilities $ 1,665,947 $ 1,656,688 $ 1,233,115 $ 123,187 $ 300,386

Off-Balance Sheet Financial Instruments

11 unchanged sentences

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 June 30, 2025 and December 31, 2024, the allowance for credit losses for unfunded commitments was $ 1.0 million and $ 0.9 million, respectively.

HAWTHORN BANCSHARES, INC.

1 unchanged sentence

Notes to the Consolidated Financial Statements

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, 2025 and December 31, 2024, the allowance for credit losses for unfunded commitments was $ 1.0 million and $ 0.9 million, respectively.

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

(dollars in thousands) June 30, 2025 December 31, 2024

(dollars in thousands) September 30, 2025 December 31, 2024

Commitments to extend credit $ 329,189 $ 305,811

10 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 ranged from one month to five years at June 30, 2025.

The approximate remaining term of standby letters of credit ranged from two months to 3.4 years at September 30, 2025.

Pending Litigation

The Company and its subsidiaries are defendants in various legal actions incidental to the Company’s past and current business activities.

From time to time, the Company and its subsidiaries are defendants in various legal actions incidental to the Company’s past and current business activities.

Based on the Company’s analysis, and considering the inherent uncertainties associated with litigation, management does not believe that it is reasonably possible that these legal actions will materially adversely affect the Company’s consolidated financial condition or results of operations in the near term.

3 unchanged sentences

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 Chief Executive Officer (“CEO”) 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.

2 unchanged sentences

During 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, beginning in the first quarter of 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 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 are also included in the Wealth Management segment.

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 and six months ended June 30, 2025 and 2024, respectively, was as follows:

The Wealth Management segment includes a broad range of financial and investment planning services for individuals and business owners as well as the Company's existing trust services.

HAWTHORN BANCSHARES, INC.

1 unchanged sentence

Notes to the Consolidated Financial Statements

Three Months Ended June 30, 2025

The tables below highlight 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 and nine months ended September 30, 2025 and 2024, respectively:

Three Months Ended September 30, 2025

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

3 unchanged sentences

Net interest income 17,699 — ( 834 ) 16,865

Release of provision for credit losses ( 51 ) — — ( 51 )

Provision for (release of) credit losses 375 — — 375

Operating expenses

7 unchanged sentences

Non-interest income 2,645 651 420 3,716

Investment securities losses, net ( 1 ) — — ( 1 )

Investment securities gains (losses), net 105 — — 105

Income taxes 1,572 — ( 214 ) 1,358

Net income $ 6,691 $ 137 $ ( 727 ) $ 6,101

Six Months Ended June 30, 2025

Net income (loss) $ 6,653 $ 285 $ ( 806 ) $ 6,132

Nine Months Ended September 30, 2025

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

3 unchanged sentences

Net interest income 50,791 — ( 2,490 ) 48,301

Release of provision for credit losses ( 391 ) — — ( 391 )

Provision for (release of) credit losses ( 16 ) — — ( 16 )

Operating expenses

9 unchanged sentences

Income taxes 4,583 — ( 645 ) 3,938

Net income $ 12,837 $ 269 $ ( 1,622 ) $ 11,484

Net income (loss) $ 19,530 $ 515 $ ( 2,429 ) $ 17,616

Segment assets $ 1,920,938 $ 16 $ 11,151 $ 1,932,105

2 unchanged sentences

Notes to the Consolidated Financial Statements

Three Months Ended June 30, 2024

Three Months Ended September 30, 2024

(dollars in thousands) Hawthorn Bank Non-Bank Total

3 unchanged sentences

Net interest income 15,286 ( 959 ) 14,327

Provision for credit losses 457 — 457

Provision for (release of) credit losses 500 — 500

Operating expenses

7 unchanged sentences

Non-interest income 3,478 305 3,783

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

Investment securities gains (losses), net 8 — 8

Income taxes 1,919 ( 869 ) 1,050

Net income $ 5,641 $ ( 1,012 ) $ 4,629

Six Months Ended June 30, 2024

Net income (loss) $ 4,962 $ ( 389 ) $ 4,574

Nine Months Ended September 30, 2024

(dollars in thousands) Hawthorn Bank Non-Bank Total

3 unchanged sentences

Net interest income 46,122 ( 2,876 ) 43,246

Provision for credit losses 227 — 227

Provision for (release of) credit losses 726 — 726

Operating expenses

7 unchanged sentences

Non-interest income 9,894 904 10,798

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

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

Income taxes 4,463 ( 1,414 ) 3,049

Net income $ 11,135 $ ( 2,050 ) $ 9,085

Net income (loss) $ 16,098 $ ( 2,439 ) $ 13,659

Segment assets $ 1,802,345 $ 7,424 $ 1,809,769

(16) Subsequent Events

The Company has evaluated subsequent events that may require recognition or disclosure through the filing date of this Quarterly Report on Form 10-Q.

HAWTHORN BANCSHARES, INC.

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Notes to the Consolidated Financial Statements

(16) Subsequent Events

On July 4, 2025, the One Big Beautiful Bill Act, which includes a broad range of tax reform provisions, was signed into law in the United States.

The Company is currently evaluating the impact of the new legislation but does not expect it will have a material impact on its results of operations.

On June 24, 2025, the Company filed a universal shelf registration statement on Form S-3 with the Securities and Exchange Commission, which became effective on July 2, 2025.

The shelf registration statement is intended to provide us with financial flexibility to raise capital from the offering of up to $ 150 million of any combination of common stock, preferred stock, debt securities, depositary shares, warrants, purchase contracts, purchase units, subscription rights and units in one or multiple offerings while the shelf registration statement is effective.

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