What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2026-05-08 compared with 2025-11-07 · 221 added, 288 removed, 895 unchanged (36% of the section changed)

3 unchanged sentences

Consolidated Balance Sheets

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

(dollars in thousands, except per share data) March 31, 2026 December 31, 2025

Cash and due from banks $ 13,369 $ 16,632

9 unchanged sentences

Premises and equipment - net 30,762 29,963

Premises and equipment held for sale, net 3,706 3,956

Other real estate owned - net 64 98

10 unchanged sentences

Operating lease liabilities 3,694 2,682

Finance lease liabilities 1,167 1,205

Accrued interest payable and other liabilities 13,435 11,013

15 unchanged sentences

Consolidated Statements of Income (unaudited)

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

Three Months Ended March 31,

(dollars in thousands, except per share data) 2026 2025

13 unchanged sentences

Total interest expense on deposits 5,871 6,813

Interest on federal funds purchased and securities sold under agreements to repurchase 1 — 2 1

Interest on federal funds purchased and securities sold under agreements to repurchase and other 13 —

Interest on Federal Home Loan Bank advances 635 499

3 unchanged sentences

Net interest income 17,102 15,294

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

Release of credit losses on loans ( 120 ) ( 282 )

Provision for (release of) credit losses on unfunded commitments 193 ( 58 )

7 unchanged sentences

Gain on sale of mortgage loans, net 77 126

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

(Losses) gains on other real estate owned and other assets, net ( 34 ) 21

Other 221 495

20 unchanged sentences

Consolidated Statements of Comprehensive Income (unaudited)

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

Three Months Ended March 31,

(dollars in thousands) 2026 2025

Net income $ 5,743 $ 5,383

Other comprehensive income, net of tax

Other comprehensive income (loss), net of tax

Investment securities available-for-sale:

Change in unrealized gains on investment securities available-for-sale, net of tax ( 2,613 ) 383

Adjustment for gains on sale of investment securities, net of tax ( 9 ) —

Defined benefit pension plans:

Amortization of net gains included in net periodic pension income, net of tax ( 236 ) ( 215 )

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

Total other comprehensive income (loss) ( 2,858 ) 168

Total comprehensive income $ 2,885 $ 5,551

3 unchanged sentences

Consolidated Statements of Stockholders’ Equity (unaudited)

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

Net income — — 6,132 — — 6,132

Other comprehensive income — — — 3,571 — 3,571

Share-based compensation expense — 104 — — — 104

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

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

— — ( 1,384 ) — — ( 1,384 )

Balance, September 30, 2025

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

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

Net income — — 4,574 — — 4,574

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

Share-based compensation expense — 48 — — — 48

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

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

— — ( 1,327 ) — — ( 1,327 )

Balance, September 30, 2024

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

Nine Months Ended September 30, 2025 and 2024

Three Months Ended March 31, 2026 and 2025

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

2 unchanged sentences

Net income — — 5,743 — — 5,743

Other comprehensive income — — — 4,125 — 4,125

Other comprehensive loss — — — ( 2,858 ) — ( 2,858 )

Share-based compensation expense — 122 — — — 122

3 unchanged sentences

— — ( 1,450 ) — — ( 1,450 )

Balance, September 30, 2025

Balance, March 31, 2026

$ 7,555 $ 76,927 $ 112,156 $ ( 6,471 ) $ ( 14,781 ) $ 175,386

5 unchanged sentences

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

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

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

— — ( 1,328 ) — — ( 1,328 )

Balance, September 30, 2024

Balance, March 31, 2025

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

3 unchanged sentences

Consolidated Statements of Cash Flows (unaudited)

Nine Months Ended September 30,

Three Months Ended March 31,

(In thousands) 2026 2025

2 unchanged sentences

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

(Release of) provision for credit losses on loans and unfunded commitments ( 16 ) 726

Provision (release of) for credit losses on loans and unfunded commitments 73 ( 340 )

Depreciation expense 439 535

Net amortization of investment securities, premiums, and discounts 77 118

Provision for valuation allowance for premises and equipment held for sale 278 —

Investment securities (gains) losses, net ( 5 ) 2

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

Losses on sales and dispositions of premises and equipment ( 5 ) ( 50 )

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

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

Provision for valuation allowance for other real estate owned 34 —

Share-based compensation expense 122 81

Increase in cash surrender value - life insurance ( 357 ) ( 386 )

(Increase) decrease in accrued interest receivable and other assets ( 6,556 ) 4,053

Decrease in operating lease liabilities ( 242 ) ( 178 )

Decrease in accrued interest receivable and other assets 1,263 889

Increase (decrease) in operating lease liabilities 39 ( 70 )

Increase in accrued interest payable and other liabilities 271 ( 183 )

5 unchanged sentences

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

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

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

Proceeds from maturities of certificates of deposit in other banks 1,000 —

Net decrease (increase) in loans 33,179 ( 4,145 )

Purchase of available-for-sale debt securities ( 4,515 ) ( 6,656 )

6 unchanged sentences

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

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

Net cash provided by (used in) investing activities 33,053 ( 5,983 )

Cash flows from financing activities:

Net increase (decrease) in demand deposits 39,415 ( 11,602 )

Net increase in demand deposits 1,865 42,085

Net decrease in interest bearing transaction accounts ( 38,753 ) ( 27,445 )

2 unchanged sentences

Proceeds from FHLB advances and other borrowings 719,290 88,675

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

Proceeds from financing obligation 1,908 —

Purchase of treasury stock ( 400 ) ( 440 )

1 unchanged sentence

Net cash provided by (used in) financing activities ( 43,418 ) 51,513

Net increase (decrease) in cash and cash equivalents 48,881 ( 39,226 )

Net (decrease) increase in cash and cash equivalents ( 2,394 ) 51,264

Cash and cash equivalents, beginning of period 104,312 50,994

4 unchanged sentences

Consolidated Statements of Cash Flows (unaudited) continued

Nine Months Ended September 30,

Three Months Ended March 31,

(In thousands) 2026 2025

4 unchanged sentences

Non-cash investing and financing activities:

Other real estate and repossessed assets acquired in settlement of loans $ — $ 3,490

Right of use assets obtained in exchange for new operating lease liabilities 935 1,420

19 unchanged sentences

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.

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

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.

Shelf Registration.

1 unchanged sentence

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.

Failed Sale-Leaseback/Financing Obligation.

During the quarter, the Company transferred legal title to certain real estate and entered into a related lease and development arrangement with the buyer.

The transaction did not qualify as a sale under ASC 842 because control did not transfer under ASC 606 due to continuing involvement, including contractual provisions that affect the transfer of control.

Accordingly, the Company continues to recognize the real estate within premises and equipment and recorded the $ 1.9 million of proceeds received as a financing obligation.

The financing obligation is subsequently accounted for under the effective interest method and periodic payments are allocated between interest expense and reduction of the financing obligation.

Proceeds received are presented as financing cash inflows and principal repayments as financing cash outflows in the statement of cash flows.

Recent Accounting Pronouncements

Impact of Recently Issued Accounting Standards But Not Yet Adopted

Income Taxes.

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

2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures.

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

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

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

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

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

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

HAWTHORN BANCSHARES, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

Income Statement.

In November 2024, the FASB issued ASU No.

In November 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

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

4 unchanged sentences

Clarifying the Effective Date .

HAWTHORN BANCSHARES, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

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

5 unchanged sentences

(2) Loans and Allowance for Credit Losses

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

Major classifications within the Company’s loans held for investment portfolio at March 31, 2026 and December 31, 2025 were as follows:

(dollars in thousands) March 31, 2026 December 31, 2025

Commercial, financial, and agricultural $ 223,378 $ 227,584

7 unchanged sentences

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

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

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

Accrued interest on loans totaled $ 6.8 million at both March 31, 2026 and December 31, 2025, and is included in accrued interest receivable and other assets on the Company's consolidated balance sheets.

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

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

At September 30, 2025, loans of $ 742.0 million were pledged to the Federal Home Loan Bank (“FHLB”) as collateral for borrowings and letters of credit.

At March 31, 2026, loans of $ 724.6 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

1 unchanged sentence

This allowance is included in other liabilities on the consolidated balance sheets with associated expense recognized as a component of the provision for credit losses on the consolidated statements of income.

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 September 30, 2025 and December 31, 2024, respectively.

The liability for unfunded lending commitments utilizes the same model as the allowance for credit losses on loans, however, the liability for unfunded lending

HAWTHORN BANCSHARES, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

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 $ 1.2 million and $ 1.0 million at March 31, 2026 and December 31, 2025, 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 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

Balance at beginning of period $ 2,144 $ 328 $ 1,484 $ 4,917 $ 12,392 $ 112 $ 193 $ 21,570

Charge-offs 5 — — 1 4 104 — 114

Recoveries 30 — — 14 — 29 — 73

Provision for (release of) credit losses 252 93 18 186 ( 261 ) 51 36 375

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

Nine Months Ended September 30, 2025

Balance at beginning of period $ 1,560 $ 578 $ 2,221 $ 5,310 $ 12,305 $ 138 $ ( 68 ) $ 22,044

Charge-offs 39 — — 15 40 303 397

Recoveries 132 — — 33 58 100 323

Provision for (release of) credit losses 768 ( 157 ) ( 719 ) ( 212 ) ( 196 ) 153 297 ( 66 )

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

Three Months Ended September 30, 2024

Three Months Ended March 31, 2026

4 unchanged sentences

Balance at end of period $ 4,329 $ 1,047 $ 1,900 $ 4,389 $ 9,172 $ 96 $ — $ 20,933

Nine Months Ended September 30, 2024

Three Months Ended March 31, 2025

4 unchanged sentences

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

HAWTHORN BANCSHARES, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

Collateral-Dependent loans

6 unchanged sentences

There have been no significant changes to the types of collateral securing the Company's collateral dependent loans since December 31, 2025.

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

HAWTHORN BANCSHARES, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

The amortized cost of collateral-dependent loans by class as of March 31, 2026 and December 31, 2025 was as follows:

Collateral Type

(dollars in thousands) Real Estate Other Allowance Allocated

September 30, 2025

March 31, 2026

Commercial, financial, and agricultural $ — $ 3,437 $ 2,078

4 unchanged sentences

Commercial, financial, and agricultural $ — $ 3,558 $ 1,477

Real estate construction − residential 454 — 194

Real estate mortgage − commercial 65 — —

Real estate mortgage − residential 3,914 — 432

Total $ 3,914 $ 3,558 $ 1,909

13 unchanged sentences

Notes to the Consolidated Financial Statements

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

The following table presents the recorded investment by risk categories at March 31, 2026:

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

51 unchanged sentences

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

December 31, 2025

Commercial, Financial, & Agricultural

3 unchanged sentences

Substandard 203 679 15 3,184 536 25 594 — 5,236

Doubtful — — — — — — 79 — 79

Total $ 66,880 $ 12,226 $ 12,389 $ 20,779 $ 20,403 $ 24,820 $ 68,808 $ 1,279 $ 227,584

2 unchanged sentences

Pass $ 30,523 $ 4,066 $ 4,881 $ — $ — $ — $ 51 $ — $ 39,521

Substandard 454 — — — — — — — 454

Watch — — 88 — — — — — 88

Total $ 30,523 $ 4,066 $ 4,969 $ — $ — $ — $ 51 $ — $ 39,609

29 unchanged sentences

Substandard 5,006 924 517 8,643 550 974 954 — 17,568

Doubtful — — — — — — 79 — 79

Total $ 404,057 $ 121,490 $ 148,483 $ 300,954 $ 217,992 $ 149,355 $ 139,259 $ 5,202 $ 1,486,792

12 unchanged sentences

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

The following table presents the recorded investment in non-accrual loans and loans past due over 90 days still on accrual by class of loans as of September 30, 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 March 31, 2026 and December 31, 2025:

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

September 30, 2025

March 31, 2026

Commercial, Financial, and Agricultural $ 603 $ 231 $ 834 $ 2 $ 836

5 unchanged sentences

Commercial, Financial, and Agricultural $ 603 $ 400 $ 1,003 $ — $ 1,003

Real estate construction − residential — 454 454 — 454

Real estate construction − commercial — 49 49 — 49

Real estate mortgage − residential — 5,656 5,656 29 5,685

2 unchanged sentences

Total $ 603 $ 6,233 $ 6,836 $ 29 $ 6,865

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

No material amount of interest income was recognized on non-accrual loans during the three months ended March 31, 2026.

HAWTHORN BANCSHARES, INC.

1 unchanged sentence

Notes to the Consolidated Financial Statements

The following table provides aging information for the Company’s past due and non-accrual loans at September 30, 2025 and December 31, 2024.

The following table provides aging information for the Company’s past due and non-accrual loans at March 31, 2026 and December 31, 2025:

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

September 30, 2025

March 31, 2026

Commercial, Financial, and Agricultural $ 222,542 $ — $ 2 $ 834 $ 223,378

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 nine months ended September 30, 2025 and 2024, the Company did not modify any loans made to borrowers experiencing financial difficulty.

For each of the three months ended March 31, 2026 and 2025, the Company did not modify any loans made to borrowers experiencing financial difficulty.

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

4 unchanged sentences

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

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

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

Loans held for sale totaled $ 1.0 thousand at March 31, 2026 and $ 0.6 million at December 31, 2025.

HAWTHORN BANCSHARES, INC.

2 unchanged sentences

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

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 $ —

Real estate construction - commercial — 2,549

Real estate mortgage - residential — 42

The following table provides details of the Company’s other real estate and other assets acquired in the settlement of loans as of March 31, 2026 and December 31, 2025:

(dollars in thousands) March 31, 2026 December 31, 2025

Real estate mortgage - commercial 98 98

2 unchanged sentences

Total other real estate owned and repossessed assets $ 64 $ 98

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.

At March 31, 2026, there were $ 0.2 million of consumer mortgage loans secured by residential real estate properties in the process of foreclosure.

There were none at December 31, 2025.

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

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

Three Months Ended March 31,

(dollars in thousands) 2026 2025

7 unchanged sentences

(4) Investment Securities

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:

The amortized cost and fair value of debt securities classified as available-for-sale at March 31, 2026 and December 31, 2025 were as follows:

Gross Unrealized

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

September 30, 2025

March 31, 2026

Treasury $ 4,952 $ 68 $ — $ 5,020

11 unchanged sentences

Treasury $ 4,949 $ 119 $ — $ 5,068

government and federal agency obligations 408 — ( 7 ) 401

government-sponsored enterprises 5,001 31 ( 116 ) 4,916

13 unchanged sentences

government-sponsored enterprises.

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

Debt securities with carrying values aggregating approximately $ 105.6 million and $ 101.5 million at March 31, 2026 and December 31, 2025, 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 months ended March 31, 2026 and 2025.

All gains and losses recognized on equity securities during each of the three months ended March 31, 2026 and 2025 were unrealized.

During the three months ended March 31, 2026, the Company recorded net investment securities gains of approximately $ 0.01 million from called securities.

The amortized cost and fair value of debt securities classified as available-for-sale at March 31, 2026, by contractual maturity are shown below.

Accrued interest on investments totaled $ 1.3 million and $ 1.5 million at March 31, 2026 and December 31, 2025, 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

HAWTHORN BANCSHARES, INC.

1 unchanged sentence

Notes to the Consolidated Financial Statements

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.

presented below.

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

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

March 31, 2026

(dollars in thousands) Amortized Cost Fair Value

9 unchanged sentences

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

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

(dollars in thousands) March 31, 2026 December 31, 2025

FHLB stock $ 5,405 $ 5,759

5 unchanged sentences

Notes to the Consolidated Financial Statements

Gross unrealized losses on debt securities and the fair value of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at September 30, 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 March 31, 2026 and December 31, 2025 were as follows:

Less than 12 months 12 months or more

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

September 30, 2025

March 31, 2026

government-sponsored enterprises $ — $ — $ 1,873 $ ( 127 ) $ 1,873 $ ( 127 )

7 unchanged sentences

December 31, 2025

Treasury $ 4,915 $ ( 22 ) $ — $ — $ 4,915 $ ( 22 )

government and federal agency obligations — — 401 ( 7 ) 401 ( 7 )

government-sponsored enterprises — — 1,884 ( 116 ) 1,884 ( 116 )

6 unchanged sentences

Total $ 4,155 $ ( 80 ) $ 138,938 $ ( 22,164 ) $ 143,093 $ ( 22,244 )

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 total available-for-sale portfolio consisted of approximately 382 securities at March 31, 2026.

The portfolio included 343 securities having an aggregate fair value of $ 149.0 million that were in a loss position at March 31, 2026.

The $ 25.2 million aggregate unrealized loss included in accumulated other comprehensive loss at March 31, 2026 was caused by interest rate fluctuations.

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

7 unchanged sentences

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

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

These derivative contracts do not qualify for hedge accounting.

HAWTHORN BANCSHARES, INC.

1 unchanged sentence

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 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

As of March 31, 2026 As of December 31, 2025

Fair Value Fair Value

2 unchanged sentences

Total derivatives not designated as hedging instruments $ 142 $ 171 $ 180 $ 191

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 nine months ended September 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.

The Company did not recognize other income related to client swaps in any of the three months ended March 31, 2026 and 2025.

Gain or (Loss) Recognized in Income on Derivative

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

Three Months Ended March 31,

(dollars in thousands) Location of Gain or (Loss) Recognized in Income on Derivative 2026 2025

8 unchanged sentences

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

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.

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

As of March 31, 2026, the Company had recorded the obligation to collect cash collateral of $ 0.13 million.

As of March 31, 2026, 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 $ 0.03 million.

As of March 31, 2026, the Company has not posted any collateral related to these agreements.

If the Company had breached any of these provisions at March 31, 2026, it could have been required to settle its obligations under the agreements at their termination value of $ 0 .

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

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

(dollars in thousands) March 31, 2026 December 31, 2025

Time deposits with balances > $250,000 $ 92,890 $ 90,504

Brokered deposits 4,012 502

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

As of September 30, 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.

Currently, the Company does not have any finance leases.

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

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

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

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 $ 0.5 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:

HAWTHORN BANCSHARES, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

Leases are classified as operating or finance leases at the lease commencement date.

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

Lease right-of-use ("ROU") assets represent the Company's right to use an underlying asset during the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease.

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

Operating lease expense, 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 components of lease expense for the three months ending March 31, 2026, and 2025 are shown in the table below.

(dollars in thousands) 2026 2025

Operating lease expense $ 227 $ 141

Financing lease expense 13 —

ROU assets and lease liabilities by lease type, and the associated balance sheet classifications are shown in table below as of March 31, 2026 and 2025.

(dollars in thousands) Balance Sheet Classification 2026 2025

ROU assets-operating leases Premises and equipment, net $ 3,449 $ 2,941

ROU assets-finance leases Premises and equipment, net 1,168 —

Total ROU assets $ 4,617 $ 2,941

Lease liabilities

Operating lease liabilities Operating lease liabilities $ 3,694 $ 3,028

Finance lease liabilities Finance lease liabilities 1,167 —

Total lease liabilities $ 4,861 $ 3,028

Contractual lease payment obligations for each of the next five years and thereafter, in addition to a reconciliation to the Company's lease liabilities were as follows:

Lease payments due in:

Operating Lease

Operating Lease Finance Leases Total

(dollars in thousands)

2026 remaining

$ 549 $ 150 $ 699

2027 789 201 990

2028 789 201 990

2029 596 201 797

2030 567 201 768

Thereafter 909 400 1,309

2 unchanged sentences

Total lease liabilities, as reported $ 3,694 $ 1,167 $ 4,861

(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

Nine Months Ended September 30, 2025

The following table presents the weighted average remaining lease term, in years, and the weighted average discount rate by lease type as of March 31, 2026 and 2025.

Operating lease weighted average remaining lease term (in years) 5.7 5.9

Operating lease weighted average discount rate 4.40 % 4.40 %

Finance lease weighted average remaining lease term (in years) 6.75 0

Finance lease weighted average discount rate 4.55 % — %

(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 three months ended March 31, 2026 and 2025:

Three Months Ended March 31, 2026

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

2 unchanged sentences

Balance at beginning of period $ ( 16,590 ) $ 12,977 $ ( 3,613 )

Other comprehensive income (loss), before reclassifications 6,179 ( 957 ) 5,222

Amounts reclassified from accumulated other comprehensive income (loss)

Current period other comprehensive income (loss), before tax 6,179 ( 957 ) 5,222

Income tax (expense) benefit ( 1,298 ) 201 ( 1,097 )

Current period other comprehensive income (loss), net of tax 4,881 ( 756 ) 4,125

Other comprehensive loss, before reclassifications ( 3,310 ) ( 299 ) ( 3,609 )

Amounts reclassified from accumulated other comprehensive loss ( 9 ) — ( 9 )

Current period other comprehensive loss, before tax ( 3,319 ) ( 299 ) ( 3,618 )

Income tax benefit 697 63 760

Current period other comprehensive loss, net of tax ( 2,622 ) ( 236 ) ( 2,858 )

Balance at end of period $ ( 19,212 ) $ 12,741 $ ( 6,471 )

Nine Months Ended September 30, 2024

Three Months Ended March 31, 2025

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

3 unchanged sentences

Other comprehensive income (loss), before reclassifications 485 ( 272 ) 213

Amounts reclassified from accumulated other comprehensive income (loss)

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

Income tax benefit ( 525 ) 109 ( 416 )

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

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

6 unchanged sentences

The timing and total amount of stock repurchases will depend on market and other conditions and may be made from time to time in open market purchases or privately negotiated transactions.

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 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.

The program has no termination date, may be suspended or

HAWTHORN BANCSHARES, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

discontinued at any time and does not obligate the Company to acquire any amount of common stock.

The Company repurchased 12,000 common shares under its repurchase programs during the first three months of 2026 at an average cost of $ 32.68 per share totaling $ 0.4 million.

As of March 31, 2026, $ 8.0 million remained available for share repurchases pursuant to the Company's current repurchase program.

(9) Share-Based Compensation

6 unchanged sentences

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

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

HAWTHORN BANCSHARES, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

directors and consultants of the Company or its subsidiaries.

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

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

3 unchanged sentences

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

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

Nine Months Ended September 30,

The following table summarizes the status of the Company's RSUs for the three months ended March 31, 2026 and 2025:

Three Months Ended March 31,

Quantity Weighted-Average Grant Date Fair Value Per share Quantity Weighted-Average Grant Date Fair Value Per share

5 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 $ 0.3 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.

Total share-based compensation expense recognized for these RSUs was $ 0.1 million for the three months ended March 31, 2026, compared to $ 0.08 million for the three months ended March 31, 2025.

Forfeitures will be recognized as they occur.

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.

At March 31, 2026, 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 2.0 years.

(10) Retirement Plans

2 unchanged sentences

The Company made annual contributions for the discretionary portion in an amount up to 6 % of income before income taxes and before contributions to the profit-sharing and pension plans for all participants, limited to the maximum amount deductible for federal income tax purposes, for each of the periods shown.

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

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

employees were able to make additional tax-deferred contributions.

Total expense recorded for the Company match was $ 0.1 million and $ 0.2 million in the three months ended March 31, 2026 and 2025, respectively.

The employer discretionary profit-sharing expense for the 401(k) plan was $ 0.3 million and $ 0.3 million for the three months ended March 31, 2026 and 2025, 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 $ 1.6 million as of March 31, 2026, and the expense for the three months ended March 31, 2026 was $ 0.02 million, compared to $ 0.02 million for the three months ended March 31, 2025, and is recognized over the required service period.

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

7 unchanged sentences

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

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

Three Months Ended March 31,

(dollars in thousands) 2026 2025

1 unchanged sentence

Interest costs on projected benefit obligations (1)

388 370 1,164 1,108

Expected return on plan assets (1)

8 unchanged sentences

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

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

The prior service credit is amortized over the average remaining service period to full eligibility for participating employees expected to receive benefits.

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

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

HAWTHORN BANCSHARES, INC.

1 unchanged sentence

Notes to the Consolidated Financial Statements

active participants in the pension plan.

The prior service credit is amortized over the average remaining service period to full eligibility for participating employees expected to receive benefits.

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

(11) Earnings per Share

2 unchanged sentences

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

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

Three Months Ended March 31,

(in thousands, except per share data) 2026 2025

21 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

17 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:

The following table presents assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2026 and December 31, 2025 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

September 30, 2025

March 31, 2026

Treasury $ 5,020 $ 5,020 $ — $ —

government and federal agency obligations — — — —

government-sponsored enterprises 3,889 — 3,889 —

12 unchanged sentences

Treasury $ 5,068 $ 5,068 $ — $ —

government and federal agency obligations 401 — 401 —

government-sponsored enterprises 4,916 — 4,916 —

10 unchanged sentences

Total $ 191 $ — $ 191 $ —

HAWTHORN BANCSHARES, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

The changes in Level 3 assets and liabilities measured at fair value on a recurring basis are summarized as follows:

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)

Mortgage Servicing Rights Interest Rate Lock Commitments

Nine Months Ended September 30,

(dollars in thousands) 2025 2024 2025 2024

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

Total gains or (losses) (realized/unrealized):

Included in earnings — ( 68 ) — ( 11 )

— ( 1,670 ) — ( 86 )

Issues — — — 56

Balance at end of period $ — $ — $ — $ —

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

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

4 unchanged sentences

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.

In determining the value of real estate collateral, the Company relies on external and

HAWTHORN BANCSHARES, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

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.

3 unchanged sentences

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

Other Real Estate and Foreclosed Assets

Other real estate owned (“OREO”) and foreclosed assets consisted of loan collateral repossessed through foreclosure.

Other Real Estate and Repossessed Assets

Other real estate owned (“OREO”) and repossessed assets consisted of loan collateral repossessed through foreclosure.

This collateral is comprised of commercial and residential real estate and other non-real estate property, including autos, manufactured homes, and construction equipment.

4 unchanged sentences

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

HAWTHORN BANCSHARES, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

Premises and Equipment Held for Sale, net

Premises and equipment held for sale, net, are carried at the lower of cost or estimated fair value less disposal costs.

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

Valuations are updated periodically, and the assets may be written down to reflect a new cost basis.

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

Subsequent write-downs and gains or losses on sales are recorded to (losses) gains on other real estate owned and other assets, net.

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) Year to Date Total Gains (Losses) (1)

September 30, 2025

March 31, 2026

Collateral dependent loans:

1 unchanged sentence

Real estate mortgage - residential 3,864 — — 3,864 —

Real estate mortgage - commercial 65 — — 65 —

Total $ 5,223 $ — $ — $ 5,223 $ —

Other real estate and repossessed assets $ 64 $ — $ — $ 64 $ ( 34 )

Premises and equipment held for sale, net $ 3,706 $ — $ — $ — $ 3,706 $ ( 278 )

December 31, 2025

1 unchanged sentence

Commercial, financial, & agricultural $ 2,081 $ — $ — $ 2,081 $ ( 1,640 )

Real estate construction − residential 260 — — 260 —

Real estate mortgage - residential 3,482 — — 3,482 ( 432 )

Real estate mortgage - commercial 65 — — 65 ( 436 )

Total $ 5,563 $ — $ — $ 5,563 $ ( 2,072 )

Other real estate and repossessed assets $ 98 $ — $ — $ 98 $ —

(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.

Premises and equipment held for sale, net $ 3,956 $ 3,956 $ ( 225 )

(1) Total gains (losses) reported for Other real estate owned and repossessed assets and Premises and equipment held for sale, net, includes charge-offs,

valuation write-downs, and net losses taken during the periods reported.

(13) Fair Value of Financial Instruments

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate such value:

HAWTHORN BANCSHARES, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

Fair values are estimated for portfolios with similar financial characteristics.

10 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.

HAWTHORN BANCSHARES, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

Accrued Interest Receivable and Payable

8 unchanged sentences

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

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

September 30, 2025

HAWTHORN BANCSHARES, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

A summary of the carrying amounts and fair values of the Company’s financial instruments at March 31, 2026 and December 31, 2025 is as follows:

March 31, 2026

Fair Value Measurements

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

March 31, 2026 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)

27 unchanged sentences

Loans, net 1,465,681 1,445,226 — — 1,445,226

Loans held for sale 616 616 — 616 —

Accrued interest receivable 8,447 8,447 8,447 — —

25 unchanged sentences

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

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

At March 31, 2026 and December 31, 2025, the allowance for credit losses for unfunded commitments was $ 1.2 million and $ 1.0 million, respectively.

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

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

(dollars in thousands) March 31, 2026 December 31, 2025

Commitments to extend credit $ 377,254 $ 335,244

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 two months to 3.4 years at September 30, 2025.

The approximate remaining term of standby letters of credit ranged from one month to 2.9 years at March 31, 2026.

Pending Litigation

16 unchanged sentences

Notes to the Consolidated Financial Statements

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

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 months ended March 31, 2026 and 2025, respectively:

Three Months Ended March 31, 2026

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

3 unchanged sentences

Net interest income 17,849 — ( 747 ) 17,102

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

Provision for credit losses 73 — — 73

Operating expenses

7 unchanged sentences

Non-interest income 2,106 616 379 3,101

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

Investment securities losses, net 5 — — 5

Income taxes 1,585 — ( 196 ) 1,389

Net income (loss) $ 6,196 $ 283 $ ( 736 ) $ 5,743

Nine Months Ended September 30, 2025

Segment assets $ 1,842,782 $ 18 $ 13,060 $ 1,855,860

Three Months Ended March 31, 2025

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

13 unchanged sentences

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

Investment securities losses, net 102 — — 102

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

Income taxes 1,450 — ( 237 ) 1,213

4 unchanged sentences

Notes to the Consolidated Financial Statements

Three Months Ended September 30, 2024

(dollars in thousands) Hawthorn Bank Non-Bank Total

Operating revenue

Interest income $ 23,789 $ 30 $ 23,819

Interest expense 8,503 989 9,492

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

Provision for (release of) credit losses 500 — 500

Operating expenses

Salaries and employee benefits 6,202 337 6,539

Occupancy, furniture and equipment expense 1,143 — 1,142

Processing, network, and bank card expense 1,480 — 1,480

Legal, examination, and professional fees 310 68 378

Depreciation 488 — 488

Other 1,768 199 1,967

Total operating expenses 11,391 604 11,994

Non-interest income 3,478 305 3,783

Investment securities gains (losses), net 8 — 8

Income taxes 1,919 ( 869 ) 1,050

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

Nine Months Ended September 30, 2024

(dollars in thousands) Hawthorn Bank Non-Bank Total

Operating revenue

Interest income $ 71,338 $ 89 $ 71,427

Interest expense 25,216 2,965 28,181

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

Provision for (release of) credit losses 726 — 726

Operating expenses

Salaries and employee benefits 19,007 986 19,993

Occupancy, furniture and equipment expense 3,217 — 3,217

Processing, network, and bank card expense 4,212 — 4,212

Legal, examination, and professional fees 1,425 288 1,713

Depreciation 1,413 — 1,413

Other 5,448 607 6,055

Total operating expenses 34,722 1,881 36,603

Non-interest income 9,894 904 10,798

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

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

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.

On April 29, 2026, the Company announced its entry into a definitive agreement under which the Company will acquire FSC Bancshares, Inc.

and its wholly owned subsidiary, Farmers State Bank (collectively, “FSC”) in a cash and stock transaction.

The business combination transaction is expected to result in the mergers of FSC Bancshares, Inc.

with and into Hawthorn Bancshares, Inc.

and Farmers State Bank with and into Hawthorn Bank.

FSC has nine branch locations located in northern Missouri.

The transaction is currently expected to close in the third quarter of 2026, subject to approval by bank regulatory authorities, as well as the satisfaction of customary closing conditions.

HAWTHORN BANCSHARES, INC.

2 unchanged sentences

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

What changed 10-Q

Item 1. Financial Statements