What changed in this filing

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Item 1. Business

2026-03-05 compared with 2025-03-17 · 99 added, 135 removed, 149 unchanged (61% of the section changed)

8 unchanged sentences

The Company received approval from the Federal Reserve and elected to become a financial holding company on October 21, 2001.

The Company acquired Hawthorn Bank and its constituent predecessor banks, as well as Union State Bancshares ("Union"), in a series of transactions that are summarized as follows:

• On April 7, 1993 the Company acquired all of the issued and outstanding capital stock of The Exchange National Bank of Jefferson City, a national banking association, pursuant to a corporate reorganization involving an exchange of shares;

• On November 3, 1997, the Company acquired Union, and Union's wholly-owned subsidiary, Union State Bank and Trust of Clinton;

• On January 3, 2000, the Company acquired Osage Valley Bank;

• Following the May 4, 2000 acquisition of Citizens State Bank of Calhoun by Union State Bank and Trust of Clinton, Citizens State Bank of Calhoun merged into Union State Bank and Trust of Clinton to form Citizens Union State Bank & Trust;

• On June 16, 2000, the Company acquired City National Savings Bank, FSB, which was then merged into The Exchange National Bank of Jefferson City;

• On May 2, 2005, the Company acquired all of the issued and outstanding capital stock of Bank 10, a Missouri state bank;

• On December 1, 2006, the Company announced its development of a strategic plan in which, among other things, The Exchange National Bank of Jefferson City, Citizens Union State Bank & Trust, Osage Valley Bank and Bank 10 would be consolidated into a single bank under a Missouri state trust charter.

This consolidation was completed in October 2007, and the subsidiary bank is now known as Hawthorn Bank (the "Bank");

• On December 29, 2023, the Company dissolved its wholly-owned subsidiary, Union, which owned all of the outstanding capital stock of Hawthorn Bank, in order to streamline the Company's ownership of Hawthorn Bank.

Except as otherwise provided herein or to the extent the context otherwise requires, references herein to the "Company," "we," "us" or "our" refer to Hawthorn Bancshares, Inc.

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It is not currently anticipated that the Company will engage in any business other than that directly related to its ownership of the Bank or other financial institutions.

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 with the first quarter of 2025, the Company identified its Wealth Management Business as a separate reportable segment and now has two reportable segments:

the Bank segment and the Wealth Management segment.

The Company’s remaining operations are not reportable segments, as defined by applicable accounting standards, and are classified as Non-Bank, and primarily represent the parent holding company, other insignificant non-bank subsidiaries and eliminations.

For the years ended December 31, 2024 and 2023, the Company had one reportable segment, the Bank.

Refer to Note 20, "Segment Information," in the Company's consolidated financial statements, included under the caption "Consolidated Financial Statements" in the Company's 2025 Annual Report to Shareholders (included as Exhibit 13 hereto), incorporated herein by reference.

The Bank was founded in 1932 as a Missouri bank and converted to a Missouri trust company on August 16, 1989.

However, its predecessors trace their lineage back to the founding of Exchange National Bank in 1865.

The Bank has 18 banking offices, including its principal office at 132 East High Street in the central business district of Jefferson City, MO.

The Bank is a full service bank conducting a general banking and trust business, offering its customers checking and savings accounts, internet banking, debit cards, certificates of deposit, trust services, brokerage services, safety deposit boxes and a wide range of lending services, including commercial and industrial loans, single payment personal loans, installment loans and commercial and residential real estate loans.

The Bank has 18 banking offices, including its principal office at 132 East High Street in the central business district of Jefferson City, Missouri.

The Bank is a full service bank and, through the Bank segment, conducts a general banking business, offering its customers checking and savings accounts, internet banking, debit cards, certificates of deposit, brokerage services, safety deposit boxes and a wide range of lending services, including commercial and industrial loans, single payment personal loans, installment loans and commercial and residential real estate loans.

The Bank also offers, through the Wealth Management segment, a broad range of financial and investment planning services for individuals and business owners, as well as trust services formerly included in the Bank segment.

The Bank's deposit accounts are insured by the Federal Deposit Insurance Corporation (the "FDIC") to the extent provided by law.

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HB Realty, LLC, a Missouri limited liability company ("HB Realty"), was formed in February 2018 and commenced operations in April 2018.

HB Realty is intended to qualify as a "real estate investment trust" under the Internal Revenue Code of 1986, as amended (the "IRC").

HB Realty is intended to qualify as a real estate investment trust ("REIT") under the Internal Revenue Code of 1986, as amended (the "IRC").

HB Realty was formed in order to hold certain mortgage loans and participation interests contributed to it by the Bank.

HB Realty was initially capitalized with mortgage loans and participation interests having an approximate aggregate book value of $404,665,296.

As of December 31, 2024, the approximate aggregate book value of the mortgage loans held by HB Realty was $595,466,845.

Effective September 30, 2022, to comply with collateral eligibility requirements of the Federal Home Loan Bank with whom the Bank maintains credit facilities, any participation interest in mortgage loans owned by HB Realty as of that date were converted into mortgage loans owned by HB Realty and, after that date, HB Realty will only acquire mortgage loans from the Bank, not participation interests.

HB Realty was initially capitalized with mortgage loans and participation interests having an approximate aggregate book value of $404.7 million.

As of December 31, 2025, the approximate aggregate book value of the mortgage loans held by HB Realty was $578.4 million.

Effective September 30, 2022, HB Realty only acquires mortgage loans from the Bank, not participation interests.

Qualification as a REIT requires satisfaction of specific provisions of the IRC, including gross asset tests, gross income tests, and a minimum of 100 shareholders.

Initially, the Bank was the sole common member and the sole preferred member of HB Realty, owning all 1,000 common shares and all 1,000 preferred shares.

On April 1, 2018, the Bank contributed all 1,000 common shares and 850 preferred shares to Jefferson City IHC, LLC, a Missouri limited liability company that is wholly owned by the Bank ("JCIHC").

Under the IRC, a real estate investment trust must have at least 100 owners.

Pursuant to a newly established Hawthorn Bank Real Estate Investment Trust Ownership Plan, the Bank made available to certain of its employees, as an employee benefit, up to a total of 150 preferred shares of HB Realty.

Each selected employee was given the opportunity to own one preferred share of HB Realty.

These preferred shares were transferred to employees beginning in January 2019.

On April 1, 2018, the Bank contributed all 1,000 common shares and 850 preferred shares to Jefferson City IHC, LLC ("JCIHC"), a Missouri limited liability company that is wholly owned by the Bank.

Pursuant to a newly established Hawthorn Bank Real Estate Investment Trust Ownership Plan, beginning in January 2019, the Bank made available to certain of its employees, as an employee benefit and to enable HB Realty to qualify as a REIT, up to a total of 150 preferred shares of HB Realty.

Each preferred share is generally entitled to an annual dividend of $30 and a liquidation amount of $500.

Although dividends are not guaranteed, it is expected that HB Realty will pay dividends in December of each year.

By virtue of its ownership of JCIHC, the Bank indirectly owns the remaining economic interest associated with membership interests in HB Realty.

Through its ownership of JCIHC, the Bank is, indirectly, the controlling member of HB Realty and is entitled to control the appointment of managers of HB Realty.

The Board of Managers of HB Realty, which is responsible for the management of the business and affairs of HB Realty, is currently comprised of Brent M.

Giles, Kathleen L.

Bruegenhemke, Gregg A.

Bexten and Chris E.

Hawthorn Risk Management, Inc., a non-bank subsidiary of the Company, which was formed and began operations on December 28, 2017, was a Missouri-based captive insurance company which provided property and casualty insurance coverage to the Company and the Bank for which insurance was not then available or economically feasible in the insurance marketplace.

By virtue of its ownership of JCIHC, the Bank indirectly controls the management of, and owns the remaining economic interest associated with membership interests in, HB Realty.

Hawthorn Risk Management, Inc., a non-bank subsidiary of the Company, which was formed and began operations on December 28, 2017, was a Missouri-based captive insurance company that provided property and casualty insurance coverage to the Company and the Bank for which insurance was not then available or economically feasible in the insurance marketplace.

Hawthorn Risk Management, Inc.

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This subsidiary was dissolved as of December 1, 2023.

Human Capital

We believe our employees are connected to each other as "One Hawthorn," collaborating to serve our customers and ensuring community banking will continue to thrive.

Our employees are one of our most valuable assets.

We encourage employees to participate and engage in activities which support the communities we serve.

We are grateful for each other and appreciate each other's contributions.

We strive to provide a safe and enjoyable workplace for our employees.

We offer a comprehensive benefits package to qualifying employees, including health, dental and vision insurance, as well as a 40l(k) plan and profit-sharing plan.

We believe that employee retention is critical to our success and periodically review our compensation and benefit packages to ensure we remain competitive.

As of December 31, 2025, the Company and its subsidiaries had approximately 255 full-time and 11 part-time employees.

None of its employees is presently represented by any union or collective bargaining group, and the Company considers its employee relations to be satisfactory.

Bank holding companies and their subsidiaries and affiliates encounter intense competition from both banking and nonbanking sources in all of their activities.

The Bank's competitors include other commercial banks, thrifts, savings banks, credit unions, and money market mutual funds.

Bank holding companies and their subsidiaries and affiliates encounter intense competition from both banking and non-banking sources in all of their activities.

The Bank segment's competitors include other commercial banks, thrifts, savings banks, credit unions, and money market mutual funds.

Thrifts and credit unions now have the authority to offer checking accounts and to make corporate and agricultural loans and were granted expanded investment authority by recent federal regulations.

In addition, large national and multinational corporations have in recent years become increasingly visible in offering a broad range of financial services to all types of commercial and consumer customers.

In the Bank's service areas, new competitors, as well as the expanding operations of existing competitors, have had, and are expected to continue to have, an adverse impact on the Bank's market share of deposits and loans in such service areas.

The Bank experiences substantial competition for deposits and loans within Missouri communities in and surrounding its primary service areas of the cities of Jefferson City, Columbia, Clinton, Warsaw, Springfield, and the greater Kansas City metropolitan area, as well as within its secondary service areas of the nearby Missouri communities in the counties of Cole, Boone, Henry, Cass, Benton, and Greene.

The Bank's principal competition for deposits and loans comes from other banks within its primary service areas and, to an increasing extent, other banks located in its secondary service areas.

Based on publicly available information, management believes that the Bank is the second largest (in terms of deposits) of the 11 banks within Cole county, the eleventh largest (in terms of deposits) of the 21 banks within Boone county, the largest (in terms of deposits) of the eight banks within Henry county, the second largest (in terms of deposits) of the 19 banks within Cass county, and the second largest (in terms of deposits) of the five banks within Benton county.

The main competition for Hawthorn Bank's trust services is from other commercial banks, including those of the Kansas City metropolitan area.

In the Bank segment's service areas, new competitors, as well as the expanding operations of existing competitors, have had, and are expected to continue to have, an adverse impact on the Bank's market share of deposits and loans in such service areas.

The Bank segment experiences substantial competition for deposits and loans within its primary service areas of the cities of Jefferson City, Columbia, Clinton, Warsaw, and Springfield, Missouri and the Kansas City metropolitan statistical area ("MSA")

as well as within its secondary service areas of the nearby communities in the Missouri counties of Cole, Boone, Henry, Cass, Benton, and Greene.

The Bank segment's principal competition for deposits and loans comes from other banks within its primary service areas and, to an increasing extent, other banks located in its secondary service areas.

The Wealth Management segment’s competitors include a diverse mix of national banks, regional banks and other community banks, as well as commercial banks, full-service firms, and brokerage houses, alongside disruptive robo-advisors, fintech platforms, and independent advisors, both inside and outside the markets in which it serves.

Regulation Applicable to Bank Holding Companies

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• merging or consolidating with another bank holding company.

Regulatory Capital Requirements.

The FRB has issued risk-based and leverage capital guidelines applicable to United States ("U.S.") banking organizations.

If a bank holding company's capital falls below minimum required levels, then the bank holding company must implement a plan to increase its capital, and its ability to pay dividends and make acquisitions of new bank subsidiaries may be restricted or prohibited.

In July 2013, the federal banking agencies announced new risk-based capital and leverage ratios that became applicable to us on January 1, 2015 (the "Basel III Rules").

The Basel III Rules established three components of regulatory capital:

(1) common equity tier 1 (“CET1”) capital, (2) additional tier 1 ("AT1") capital, and (3) tier 2 ("Tier 2") capital.

CET1 capital generally includes common stock instruments and related surplus (net of treasury stock), retained earnings, and, subject to certain adjustments, minority common equity interests in subsidiaries, less goodwill and certain other adjustments.

Tier 1 ("Tier 1") capital generally includes CET1 capital plus elements of AT1 capital, such as non-cumulative perpetual preferred stock and similar instruments meeting specified criteria and minority interests in subsidiaries that do not satisfy the requirements for treatment as CET1 capital.

Cumulative preferred stock (other than cumulative preferred stock issued to the U.S.

Treasury under the Capital Purchase Program or the Small Business Lending Fund) does not qualify as AT1 capital.

Trust-preferred securities and other non-qualifying capital instruments issued prior to May 19, 2010 by bank and savings and loan holding companies with less than $15 billion in assets as of December 31, 2009 or by mutual holding companies may continue to be included in Tier 1 capital but will be phased out over ten years beginning in 2016 for all other banking organizations.

These non-qualifying capital instruments, however, may be included in Tier 2 capital.

Tier 2 capital may also include certain qualifying debt and the allowance for credit losses up to 1.25% of risk-weighted assets and other adjustments.

The Basel III Rules provide for a number of deductions from and adjustments to CET1 capital.

These include, for example, the requirement that mortgage servicing rights, deferred tax assets dependent upon future taxable income and investments in the capital of unconsolidated financial institutions be deducted from CET1 capital to the extent that any one such category exceeds 10% of CET1 capital or all such categories in the aggregate exceed 15% of CET1 capital.

Beginning April 1, 2020, this framework for regulatory capital deductions to CET1 capital was simplified by increasing the deduction threshold to 25% at the individual level for each of the aforementioned categories.

Pursuant to the Basel III Rules, the effects of certain accumulated other comprehensive income or loss (“AOCI”) items are not excluded;

however, “non-advanced approaches banking organizations,” including the Company and the Bank, could make a one-time permanent election to continue to exclude these items.

The Company made its one-time, permanent election to continue to exclude AOCI items from capital in its filing with the FRB for the quarter ended March 31, 2015.

If the Company would not have made this election, unrealized gains and losses would have been included in the calculation of its regulatory capital.

The sum of the three tiers of capital less investments in unconsolidated subsidiaries represents the total capital.

The risk-based capital ratios are calculated by dividing CET1 capital, Tier 1 capital and total capital by risk-weighted assets (including certain off-balance sheet activities).

Under the Basel III Rules, the minimum capital ratios are:

• CET1 risk-based capital ratio equal to at least 4.5% of its risk-weighted assets;

• Tier 1 risk-based capital ratio equal to at least 6% of its risk-weighted assets;

• Total risk-based capital ratio equal to at least 8% of its risk-weighted assets;

• Tier 1 capital to average consolidated assets (leverage ratio) of at least 4%.

In addition to the higher requirements, the Basel III Rules established bank holding companies are required to maintain a CET1 capital conservation buffer of at least 2.5% of risk-weighted assets over and above the minimum risk-based capital requirements.

Institutions that do not maintain the required capital buffer will become subject to progressively more stringent limitations on the percentage of earnings that can be paid out in dividends or used for stock repurchases and on the payment of discretionary bonuses to senior executive management.

The capital conservation buffer requirement was phased in over four years beginning in 2016.

The capital conservation buffer requirement of 2.5%, effectively raised the minimum required risk-based capital ratios to 7% CET1 capital, 8.5% Tier 1 capital and 10.5% total capital on a fully phased-in basis as of December 31, 2019.

On December 31, 2024 the Company was in compliance with the FRB's capital adequacy guidelines.

The Company's capital ratios calculated under the Basel III Rules (minimum plus a 2.5% capital conservation buffer) on December 31, 2024 are as follows:

Tier 1 Leverage Ratio (4%) (min requirement)

Based Capital Ratio (7.0%)

(min requirement plus buffer) Tier 1 Risk-Based Capital

(min requirement plus buffer) Total Risk-Based

Capital Ratio (10.5%)

(min requirement plus buffer)

11.46 % 10.49 % 13.54 % 14.79 %

The Economic Growth, Regulatory Relief, and Consumer Protection Act (the "EGRRCPA") directs the federal banking agencies to develop a specified community bank leverage ratio (the "CBLR") (that is, the ratio of a bank's equity capital to its consolidated assets) of not less than 8% and not more than 10%.

On November 4, 2019, federal regulators issued final rules that provide certain banks and their holding companies with the option to elect out of complying with the

Basel III Rules.

Under this new rule, a qualifying community banking organization is eligible to elect the CBLR framework if it has a CBLR greater than 9% at the time of election.

A qualifying community banking organization ("QCBO") is defined as a bank, a savings association, a bank holding company or a savings and loan holding company with:

• a CBLR greater than 9%;

• total consolidated assets of less than $10 billion;

• total off-balance sheet exposures (excluding derivatives other than credit derivatives and unconditionally cancelable commitments) of 25% or less of total consolidated assets;

• total trading assets and trading liabilities of 5% or less of total consolidated assets.

A QCBO may elect out of complying with the Basel III Rules if, at the time of the election, the QCBO has a CBLR above 9%.

The CBLR is generally calculated in accordance with the regulations for calculating the Tier 1 leverage ratio under the regulatory capital framework discussed above and below, with certain specified exceptions.

As of December 31, 2024, the Company and the Bank each qualified to elect the CBLR framework because they had a CBLR of greater than 9% and satisfied the other requirements.

The Company does not have immediate plans to elect to use the CBLR framework but may make such an election in the future.

Interstate Banking and Branching.

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Under cross-guaranty provisions of the Federal Deposit Insurance Act (the "FDIA"), bank subsidiaries of a bank holding company are liable for any loss incurred by the Deposit Insurance Fund (the "DIF"), the federal deposit insurance fund for banks, in connection with the failure of any other bank subsidiary of the bank holding company.

Bank Secrecy Act and USA PATRIOT Act .

Bank Secrecy Act and Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act ("USA PATRIOT Act").

The Company and the Bank must comply with the requirements of the Bank Secrecy Act, which was enacted to prevent banks and other financial service providers from being used as intermediaries for, or to hide the transfer or deposit of money derived from, drug trafficking, money laundering, and other crimes.

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These amendments include the Money Laundering Control Act of 1986, which made money laundering a criminal act, as well as the Money Laundering Suppression Act of 1994, which required regulators to develop enhanced examination procedures and increased examiner training to improve the identification of money laundering schemes in financial institutions.

The USA PATRIOT Act,

established in 2001, substantially broadened the scope of U.S.

The USA PATRIOT Act, established in 2001, substantially broadened the scope of U.S.

anti-money laundering laws and regulations by imposing significant new compliance and due diligence obligations, creating new crimes and penalties and expanding the extra-territorial jurisdiction of the U.S.

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Because of this restriction, among others, a bank holding company, prior to acquiring control of a bank or depository trust company that has deposits in Missouri, must receive the approval of the Missouri Division of Finance.

Regulation Applicable to the Bank

Capital Adequacy.

Banks and bank holding companies are subject to various regulatory capital requirements administered by state and federal regulatory agencies, which involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated under regulatory guidelines.

Capital amounts and classifications are also subject to qualitative judgments by regulators about components, risk weighting, and other factors.

The capital requirements are intended to ensure that institutions have adequate capital given the risk levels of assets and off-balance sheet financial instruments and are applied separately to the Company and the Bank.

Federal regulations require insured depository institutions and bank holding companies to meet several minimum capital standards as shown in the table below.

The regulations also require a capital conservation buffer designed to absorb losses during periods of economic stress.

The regulations change the risk-weights of certain assets for purposes of the risk-based capital ratios and phase out certain instruments as qualifying capital.

The Federal regulations also address the prompt corrective action framework, which is designed to place restrictions on an insured depository institution if its capital levels begin to show signs of weakness.

Under the prompt corrective action requirements, which are designed to complement the capital conservation buffer, insured depository institutions are required to meet the following increased capital level requirements to qualify as “well-capitalized” as shown in the table below.

Ratio Entity Minimum Regulatory

Capital Ratio % Minimum Ratio +

Capital Buffer % (1)

Well-Capitalized

Minimum % Ratio (2)

Common equity tier 1 risk-based capital Company 4.50 % 7.00 % N/A

Bank 4.50 7.00 6.50 %

Tier 1 risk-based capital Company 6.00 8.50 N/A

Bank 6.00 8.50 8.00

Total risk-based capital Company 8.00 10.50 N/A

Bank 8.00 10.50 10.00

Leverage ratio Company 4.00 N/A N/A

Bank 4.00 N/A 5.00

(1) Reflects a capital conservation buffer of 2.5%.

(2) Reflects the well-capitalized standard applicable to the Company under Federal Reserve Regulation Y and the well-capitalized standard applicable to the Bank.

The regulations contain other capital classification categories, such as "adequately capitalized," "undercapitalized," "significantly undercapitalized," and "critically undercapitalized," each of which are based on differing capital ratios.

Undercapitalized institutions are subject to certain mandatory restrictions, including on capital distributions and growth.

Significantly undercapitalized and critically undercapitalized institutions are subject to additional restrictions.

An institution may be downgraded to a category lower than indicated by its capital ratios if it is determined to be in an unsafe or unsound condition, or if the institution receives an unsatisfactory examination rating.

The application of these regulations may result in lower returns on invested capital, require the raising of additional capital or require regulatory action if the Bank were unable to comply with such requirements.

In addition, management may be required to modify its business strategy due to the changes to the asset risk-weights for risk-based capital calculations and the requirement to meet the capital conservation buffer.

The imposition of liquidity requirements in connection with these rules could also cause the Bank to increase its holdings of liquid assets, change its business strategy, and make other changes to the terms of its funding.

As of December 31, 2025 the Company was in compliance with the FRB's capital adequacy guidelines.

As of December 31, 2025, the Bank was classified as "well-capitalized," which is required for the Company to remain a financial holding company.

Refer to Note 16, "Capital Requirements," in the Company's consolidated financial statements, included under the caption "Consolidated Financial Statements" in the Company's 2025 Annual Report to Shareholders (included as Exhibit 13 hereto), incorporated herein by reference for further discussion on capital adequacy.

On November 4, 2019, federal regulators issued final rules that provide certain banks and their holding companies with the option to elect out of complying with the Basel III Rules.

Under this new rule, a qualifying community banking organization is eligible to elect the CBLR framework if it has a CBLR greater than 9% at the time of election.

As of December 31, 2025, the Company and the Bank each qualified to elect the CBLR framework because they had a CBLR of greater than 9% and satisfied the other requirements.

The Company does not have immediate plans to elect to use the CBLR framework but may make such an election in the future.

Regulations Applicable to the Bank

The Bank, a Missouri state non-member depository trust company, is subject to the regulation of the Missouri Division of Finance and the FDIC.

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Regulation by these agencies is designed to protect the depositors of the Bank, not the shareholders of the Company.

Bank Regulatory Capital Requirements.

The FDIC has adopted minimum capital requirements applicable to state non-member banks, which are similar to the capital adequacy guidelines established by the FRB for bank holding companies.

Federal banking laws classified an insured financial institution in one of the following five categories, depending upon the amount of its regulatory capital:

• "well-capitalized" if it has a total Tier 1 leverage ratio of 5% or greater, a CET1 risk-based capital ratio of 6.5% or greater, a Tier 1 risk-based capital ratio of 8% or greater and a total risk-based capital ratio of 10% or greater (and is not subject to any order or written directive requiring the bank to adhere to a higher capital ratio);

• "adequately capitalized" if it has a total Tier 1 leverage ratio of 4% or greater, a CET1 risk-based capital ratio of 4.5% or greater, a Tier 1 risk-based capital ratio of 6% or greater, and a total risk-based capital ratio of 8% or greater;

• "undercapitalized" if it has a total Tier 1 leverage ratio that is less than 4%, a CET1 risk-based capital ratio that is less than 4.5%, a Tier 1 risk-based capital ratio that is less than 6% or a total risk-based capital ratio that is less than 8%;

• "significantly undercapitalized" if it has a total Tier 1 leverage ratio that is less than 3%, a CET1 risk-based capital ratio that is less than 3%, a Tier 1 risk-based capital ratio that is less than 4% or a total risk-based ratio that is less than 6%;

• "critically undercapitalized" if it has a Tier 1 leverage ratio that is equal to or less than 2%.

Federal regulatory agencies are required to take prompt corrective action against undercapitalized financial institutions.

As of December 31, 2024, the Bank was classified as "well-capitalized," which is required for the Company to remain a financial holding company.

The capital ratios and classifications of the Bank as of December 31, 2024 and the minimum requirements to be considered well-capitalized are as follows:

Tier 1 Leverage Ratio (5.0% minimum

Based Capital Ratio (6.5%)

(min requirement)

Tier 1 Risk-Based Capital

(min requirement) Total Risk-Based

Capital Ratio (10.0%)

(min requirement)

10.83 % 12.85 % 12.85 % 14.10 %

Limitations on Interest Rates and Loans to One Borrower.

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Federal and state laws impose additional restrictions on the lending activities of banks.

The maximum amount that a Missouri state-chartered bank may lend to any one person or entity is

generally limited to 15% of the unimpaired capital of the bank located in a city having a population of 100,000 or more, 20% of the unimpaired capital of the bank located in a city having a population of less than 100,000 and over 7,000, and 25% of the unimpaired capital of the bank if located elsewhere in the state.

The maximum amount that a Missouri state-chartered bank may lend to any one person or entity is generally limited to 15% of the unimpaired capital of the bank located in a city having a population of 100,000 or more, 20% of the unimpaired capital of the bank located in a city having a population of less than 100,000 and over 7,000, and 25% of the unimpaired capital of the bank if located elsewhere in the state.

In the case of Missouri state-chartered banks with a composite rating of 1 or 2 under the Capital, Assets, Management, Earnings, Liquidity and Sensitivity ("CAMELS") rating system, the maximum amount is the greater of (i) the limits listed in the foregoing sentence or (ii) 25% of the unimpaired capital of the bank.

2 unchanged sentences

Under the FDIA, an FDIC-insured institution may not pay dividends while it is undercapitalized or if payment would cause it to become undercapitalized.

Under Missouri law, the Bank may pay dividends to the Company only from a portion of its undivided profits and may not pay dividends if its capital is impaired.

The National Bank Act and Missouri banking law also prohibit the declaration of a dividend out of the capital and surplus of the Bank.

Community Reinvestment Act.

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On October 24, 2023, the federal banking regulators issued a joint notice of final rulemaking to modernize the Community Reinvestment Act regulatory framework.

The final rule is intended, among other things, to adapt to changes in the banking industry, including the expanded role of mobile and online banking, and to tailor performance standards to account for differences in bank size and business models.

The final rule adjusts Community Reinvestment Act evaluations based on bank size and type, with many of the changes applying only to banks with over $2 billion in assets, and several applying only to banks with over $10 billion in assets.

The final rule took effect on April 1, 2024, with staggered compliance dates of January 1, 2026, and January 1, 2027.

The Company will evaluate the effects of the final rule on the Bank prior to the applicable compliance date and review its Community Reinvestment Act program in connection therewith.

In 2025, the Federal Reserve, FDIC and Office of the Comptroller of Currency ("OCC") proposed to rescind the 2023 regulations.

The Company is following the original regulations and will evaluate the effects of any final rules on the Bank prior to the applicable compliance date and review its Community Reinvestment Act program in connection therewith.

Limitations on Transactions with Affiliates.

2 unchanged sentences

Such acts further restrict the range of permissible transactions between a bank and an affiliated company.

A bank and its subsidiaries may engage in certain transactions, including loans and purchases of assets, with an affiliated company only if the terms and conditions of the transaction, including credit standards, are substantially the same as, or at least as favorable to the bank as, those prevailing at the time for comparable transactions with non-affiliated companies or, in the absence of comparable transactions, on terms and conditions that would be offered to non-affiliated companies.

and its subsidiaries may engage in certain transactions, including loans and purchases of assets, with an affiliated company only if the terms and conditions of the transaction, including credit standards, are substantially the same as, or at least as favorable to the bank as, those prevailing at the time for comparable transactions with non-affiliated companies or, in the absence of comparable transactions, on terms and conditions that would be offered to non-affiliated companies.

Consumer Protection.

The Bank is subject to a variety of federal and state consumer protection laws and regulations that govern its relationships and interactions with consumers.

The Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act") enacted substantial changes to the legal framework of the entire financial services industry and created the Consumer Financial Protection Bureau ("CFPB").

The CFPB has broad rulemaking authority over a wide range of federal consumer protection laws that apply to banks and other providers of financial products and services, including the authority to prohibit "unfair, deceptive or abusive" acts and practices.

In recent years, examination and enforcement by federal and state banking agencies for compliance with consumer protection laws and regulations have increased and become more intense.

Failure to comply with these laws and regulations may subject the Bank to various penalties.

The Bank closely monitors changes to the rules enforced by the CFPB and has a compliance system to ensure consumer protection.

Other Banking Activities.

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Various pieces of legislation, including proposals to change substantially the financial institution regulatory system, are from time to time introduced and considered by the Missouri state legislature and the U.S.

In July 2010, President Barack Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act"), which enacted substantial changes to the legal framework of the entire financial services industry.

The Dodd-Frank Act mandates the passage of numerous rules and regulations by various regulatory agencies over the next few years.

It also creates the Consumer Financial Protection Bureau, which will overtake supervision of most providers of consumer financial products and services, and will be empowered to declare acts or practices related to the delivery of a consumer financial product or service to be "unfair, deceptive or abusive." This law will continue to change banking regulation and the operating environment of the Company in substantial and unpredictable ways.

These changes could increase or decrease the cost of doing business, limit or expand permissible activities or affect the competitive balance among banks, savings associations, credit unions and other financial institutions.

The Company cannot predict the impact that the Dodd-Frank Act, and the various regulations issued thereunder will have on its business.

The Company is monitoring the impact of the change in presidential administration to the Consumer Financial Protection Bureau and other applicable banking regulations, which impact is not currently known.

Key provisions of the EGRRCPA as it relates to community banks and bank holding companies include, but are not limited to:

(i) designating mortgages held in portfolio as "qualified mortgages" for banks with less than $10 billion in assets, subject to certain documentation and product limitations;

(ii) exempting banks with less than $10 billion in assets (and total trading assets and trading liabilities of 5% or less of total assets) from Volcker Rule requirements relating to proprietary trading;

(iii) simplifying capital calculations for banks with less than $10 billion in assets by requiring federal banking agencies to establish a CBLR of tangible equity to average consolidated assets of not less than 8% or more than 10%, and provide that banks that maintain tangible equity in excess of such ratio will be deemed to be in compliance with risk-based capital and leverage requirements;

(iv) assisting smaller banks with obtaining stable funding by providing an exception for reciprocal deposits from FDIC restrictions on acceptance of brokered deposits;

(v) raising the eligibility for use of short-form Call Reports from $1 billion to $5 billion in assets;

(vi) clarifying definitions pertaining to high-volatility commercial real estate, which require higher capital allocations, so that only loans with increased risk are subject to higher risk weightings;

and (vii) changing the eligibility for use of the small bank holding company policy statement from institutions with under $1 billion in assets to institutions with under $3 billion in assets.

There have been several bills introduced in Congress that propose to establish additional regulation and oversight of the digital asset markets.

On July 18, 2025, the Guiding and Establishing National Innovation for U.S.

Stablecoins Act (the "GENIUS Act") was passed and signed into law of the United States, which directs for a federal regulatory framework for the issuance of "payment stablecoins" that are designed to be used as a means of payment and settlement.

The GENIUS Act proscribes a regulatory framework that would further reduce uncertainty of the legal status and treatment of "payment stablecoins" or other digital assets in general and clarify in certain instances that such digital assets would not be treated or regulated as "securities." The GENIUS Act may accelerate and increase the competition that non-traditional financial institutions pose to banks’ payment services but may also create opportunities for banks to hold stablecoin reserve assets, custody stablecoins, or issue stablecoins.

Several key provisions of the GENIUS Act require federal regulatory agencies to adopt implementing regulations, and the GENIUS Act will take effect the earlier of 18 months after its enactment or 120 days after the agencies issue final implementing regulations.

On July 4, 2025, the One Big Beautiful Bill Act (the "OBBBA") was signed into law in the United States.

The OBBBA includes significant changes to tax provisions, such as the permanent extension of certain expiring provisions enacted in the Tax Cuts and Jobs Act of 2017 and the restoration of favorable tax treatment for certain business provisions.

The OBBBA tax provisions have multiple effective dates, with certain provisions effective in 2025 and others being phased in through 2027.

The Company is continuing to evaluate the effect that the OBBBA will have on the Company’s financial condition but does not currently expect it will have a material impact on its results of operations.

Fiscal Monetary Policies.

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• imposing or changing reserve requirements against depository institutions' deposits;

• imposing or changing reserve requirements against certain borrowings by bank and their affiliates.

• imposing or changing reserve requirements against certain borrowings by banks and their affiliates.

These methods are used in varying degrees and combinations to directly affect the availability of bank loans and deposits, as well as the interest rates charged on loans and paid on deposits.

The policies of the FRB have a material effect on the Company's business, results of operations and financial condition.

The references in the foregoing discussion to various aspects of statutes and regulation are merely summaries, which do not purport to be complete and which are qualified in their entirety by reference to the actual statutes and regulations.

The references in the foregoing discussion to various aspects of statutes and regulations are merely summaries, which do not purport to be complete and which are qualified in their entirety by reference to the actual statutes and regulations.

Available Information

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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-K

Item 1. Business