What changed in this filing

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Item 1. Financial Statements

2026-08-06 compared with 2026-05-08 · 276 added, 148 removed, 968 unchanged (30% of the section changed)

3 unchanged sentences

Consolidated Balance Sheets

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

(dollars in thousands, except per share data) June 30, 2026 December 31, 2025

Cash and due from banks $ 22,900 $ 16,632

40 unchanged sentences

Consolidated Statements of Income (unaudited)

Three Months Ended March 31,

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

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

20 unchanged sentences

Release of credit losses on loans ( 65 ) ( 159 ) ( 185 ) ( 441 )

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

Provision for credit losses on unfunded commitments 303 108 496 50

Total provision for (release of) credit losses on loans and unfunded commitments 238 ( 51 ) 311 ( 391 )

6 unchanged sentences

Gain on sale of mortgage loans, net 69 117 146 242

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

Gains (losses) on other real estate owned and other assets, net 335 ( 177 ) 302 ( 156 )

Other 1,988 611 2,208 1,105

20 unchanged sentences

Consolidated Statements of Comprehensive Income (unaudited)

Three Months Ended March 31,

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

(dollars in thousands) 2026 2025 2026 2025

2 unchanged sentences

Investment securities available-for-sale:

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

Change in unrealized gains (losses) on investment securities available-for-sale, net of tax 1,872 674 ( 741 ) 1,058

Adjustment for gains on sale of investment securities, net of tax ( 211 ) — ( 220 )

7 unchanged sentences

Consolidated Statements of Stockholders’ Equity (unaudited)

Three Months Ended March 31, 2026 and 2025

Three Months Ended June 30, 2026 and 2025

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

Balance, March 31, 2026 $ 7,555 $ 76,927 $ 112,156 $ ( 6,471 ) $ ( 14,781 ) $ 175,386

Net income — — 7,326 — — 7,326

Other comprehensive income — — — 1,374 — 1,374

Share-based compensation expense — 152 — — — 152

Restricted share unit vesting and taxes paid related to net share settlement — ( 388 ) — — 392 4

Cash dividends declared, common stock ($ 0.21 per share)

— — ( 1,448 ) — — ( 1,448 )

Balance, June 30, 2026

$ 7,555 $ 76,691 $ 118,034 $ ( 5,097 ) $ ( 14,389 ) $ 182,794

Balance, March 31, 2025 $ 7,555 $ 76,938 $ 93,597 $ ( 12,275 ) $ ( 12,404 ) $ 153,411

Net income — — 6,101 — — 6,101

Other comprehensive income — — — 386 — 386

Share-based compensation expense — 96 — — — 96

Purchase of treasury stock — — — — ( 1,782 ) ( 1,782 )

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

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

— — ( 1,389 ) — — ( 1,389 )

Balance, June 30, 2025

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

Six Months Ended June 30, 2026 and 2025

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

Balance, December 31, 2025

7 unchanged sentences

— — ( 2,898 ) — — ( 2,898 )

Balance, March 31, 2026

Balance, June 30, 2026

$ 7,555 $ 76,691 $ 118,034 $ ( 5,097 ) $ ( 14,389 ) $ 182,794

5 unchanged sentences

Purchase of treasury stock — — — — ( 2,222 ) ( 2,222 )

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

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

— — ( 2,717 ) — — ( 2,717 )

Balance, March 31, 2025

Balance, June 30, 2025

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

3 unchanged sentences

Consolidated Statements of Cash Flows (unaudited)

Three Months Ended March 31,

Six Months Ended June 30,

(In thousands) 2026 2025

2 unchanged sentences

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

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

Provision for (release of) credit losses on loans and unfunded commitments 311 ( 391 )

Depreciation expense 1,257 1,140

2 unchanged sentences

Investment securities (gains) losses, net ( 285 ) 3

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

Gain on sales and dispositions of premises and equipment ( 1,390 ) ( 48 )

Gain on sales and dispositions of other real estate ( 302 ) ( 28 )

2 unchanged sentences

Increase in cash surrender value - life insurance ( 596 ) ( 765 )

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

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

Decrease (increase) in accrued interest receivable and other assets 732 ( 384 )

Decrease in operating lease liabilities ( 240 ) ( 138 )

Increase in accrued interest payable and other liabilities 5,068 49

4 unchanged sentences

Cash flows from investing activities:

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

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

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

Net decrease in loans 72,217 3,229

Purchase of available-for-sale debt securities ( 36,470 ) ( 13,332 )

Proceeds from maturities of available-for-sale debt securities 5,865 4,273

Proceeds from calls of available-for-sale debt securities 12 1,755

Proceeds from maturities, calls, and paydowns of available-for-sale debt securities 11,870 11,378

Purchases of FHLB stock ( 48,852 ) ( 9,657 )

5 unchanged sentences

Cash flows from financing activities:

Net increase in demand deposits 1,865 42,085

Net increase (decrease) in demand deposits ( 7,179 ) 34,892

Net decrease in interest bearing transaction accounts ( 51,277 ) ( 58,123 )

2 unchanged sentences

Proceeds from FHLB advances and other borrowings 1,082,040 228,675

Decrease in finance lease liabilities ( 75 ) —

Proceeds from financing obligation 1,908 —

Repayment of financing obligation ( 3 ) —

Purchase of treasury stock ( 396 ) ( 2,222 )

8 unchanged sentences

Consolidated Statements of Cash Flows (unaudited) continued

Three Months Ended March 31,

Six Months Ended June 30,

(In thousands) 2026 2025

4 unchanged sentences

Non-cash investing and financing activities:

Other real estate and repossessed assets acquired in settlement of loans $ 2,609 $ —

Loans held for investment originated through other real estate and repossessed assets sold 2,099 —

Loans held for investment originated through premises and equipment sold $ 1,875 $ —

Right of use assets obtained in exchange for new operating lease liabilities 1,122 1,351

26 unchanged sentences

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.

In March 2026, 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 Accounting Standards Codification (“ASC”) Topic 842 because control did not transfer under ASC Topic 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.

1 unchanged sentence

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

Pending Acquisition.

On April 29, 2026, the Company entered into an agreement to acquire FSC Bancshares, Inc.

in a cash-and-stock merger valued at approximately $ 28.3 million, with the transaction expected to close in the third quarter of

HAWTHORN BANCSHARES, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

2026, subject to approval by shareholders of FSC Bancshares, Inc.

and other customary closing conditions.

Refer to Note 17, “Pending Acquisition”, for further details regarding this transaction.

Recent Accounting Pronouncements

7 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.

3 unchanged sentences

2024-03 is permitted.

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

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

(2) Loans and Allowance for Credit Losses

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

Major classifications within the Company’s loans held for investment portfolio at June 30, 2026 and December 31, 2025 were as follows:

(dollars in thousands) June 30, 2026 December 31, 2025

Commercial, financial, and agricultural $ 196,084 $ 227,584

8 unchanged sentences

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.

Accrued interest on loans totaled $ 5.9 million and $ 6.8 million at June 30, 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 loans presented above.

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

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.

At June 30, 2026, loans of $ 707.7 million were pledged to the Federal Home Loan Bank (“FHLB”) as collateral for borrowings and letters of credit.

Allowance for Credit Losses

3 unchanged sentences

Loans that do not share similar risk characteristics, primarily large loans on non-accrual status, are evaluated on an individual basis.

The allowance for credit losses is a valuation account that is deducted from loans amortized cost basis to present the net amount expected to be collected on the instrument.

The allowance for credit losses is a valuation account that is deducted from loans amortized cost basis to present the net amount

HAWTHORN BANCSHARES, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

expected to be collected on the instrument.

Expected recoveries are included in the allowance and do not exceed the aggregate of amounts previously charged-off and expected to be charged-off.

3 unchanged sentences

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

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.

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 $ 1.5 million and $ 1.0 million at June 30, 2026 and December 31, 2025, respectively.

Sensitivity in the Allowance for Credit Loss Model

1 unchanged sentence

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

HAWTHORN BANCSHARES, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

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

Three Months Ended March 31, 2026

Three Months Ended June 30, 2026

(dollars in thousands) Commercial, Financial, & Agricultural Real Estate Construction - Residential Real Estate Construction - Commercial Real Estate Mortgage - Residential Real Estate Mortgage - Commercial Installment and Other Consumer Un- allocated Total

Allowance for Credit Losses on Loans

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

3 unchanged sentences

Balance at end of period $ 3,628 $ 1,041 $ 2,221 $ 4,557 $ 9,028 $ 93 $ 162 $ 20,730

Three Months Ended March 31, 2025

Six Months Ended June 30, 2026

Allowance for Credit Losses on Loans

Balance at beginning of period $ 3,655 $ 975 $ 1,719 $ 4,823 $ 9,839 $ 100 $ — $ 21,111

3 unchanged sentences

Balance at end of period $ 3,628 $ 1,041 $ 2,221 $ 4,557 $ 9,028 $ 93 $ 162 $ 20,730

Three Months Ended June 30, 2025

Allowance for Credit Losses on Loans

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

Charge-offs ( 21 ) — — ( 8 ) ( 3 ) ( 109 ) — ( 141 )

Recoveries 34 — — 12 — 44 — 90

Provision for (release of) credit losses 684 ( 255 ) ( 183 ) ( 221 ) ( 213 ) 60 ( 31 ) ( 159 )

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

Six Months Ended June 30, 2025

Allowance for Credit Losses on Loans

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

Charge-offs ( 34 ) — — ( 14 ) ( 36 ) ( 199 ) — ( 283 )

Recoveries 102 — — 19 58 71 — 250

Provision for (release of) credit losses 516 ( 250 ) ( 737 ) ( 398 ) 65 102 261 ( 441 )

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

Collateral-Dependent loans

3 unchanged sentences

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

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

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

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

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

HAWTHORN BANCSHARES, INC.

1 unchanged sentence

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:

significant pieces of collateral.

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 June 30, 2026 and December 31, 2025 was as follows:

Collateral Type

(dollars in thousands) Real Estate Other Allowance Allocated

March 31, 2026

June 30, 2026

Commercial, financial, and agricultural $ — $ 3,690 $ 2,066

17 unchanged sentences

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

The following table presents the recorded investment by risk categories at June 30, 2026:

HAWTHORN BANCSHARES, INC.

1 unchanged sentence

Notes to the Consolidated Financial Statements

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

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

44 unchanged sentences

Total Gross YTD charge-offs $ — $ 171 $ — $ 8 $ — $ 157 $ — $ — $ 336

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

HAWTHORN BANCSHARES, INC.

1 unchanged sentence

Notes to the Consolidated Financial Statements

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

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

57 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 March 31, 2026 and December 31, 2025:

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

March 31, 2026

June 30, 2026

Commercial, Financial, and Agricultural $ 1,538 $ 413 $ 1,951 $ — $ 1,951

9 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 months ended March 31, 2026.

No material amount of interest income was recognized on non-accrual loans during the three and six months ended June 30, 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 March 31, 2026 and December 31, 2025:

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

March 31, 2026

June 30, 2026

Commercial, Financial, and Agricultural $ 193,156 $ 977 $ — $ 1,951 $ 196,084

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

For each of the three and six months ended June 30, 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 $ 1.0 thousand at March 31, 2026 and $ 0.6 million at December 31, 2025.

Loans held for sale totaled $ 0.2 million at June 30, 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 March 31, 2026 and December 31, 2025:

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

The following table provides details of the Company’s other real estate and other assets acquired in the settlement of loans as of June 30, 2026 and December 31, 2025:

(dollars in thousands) June 30, 2026 December 31, 2025

Real estate mortgage - residential $ 845 $ —

Real estate mortgage - commercial — 98

2 unchanged sentences

Total other real estate owned and repossessed assets $ 845 $ 98

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.

At June 30, 2026, there were $ 0.6 million of consumer mortgage loans secured by residential real estate properties in the process of foreclosure.

There were no such loans outstanding at December 31, 2025.

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

Three Months Ended March 31,

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

(dollars in thousands) 2026 2025 2026 2025

7 unchanged sentences

(4) Investment Securities

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:

The amortized cost and fair value of debt securities classified as available-for-sale at June 30, 2026 and December 31, 2025 were as follows:

Gross Unrealized

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

March 31, 2026

June 30, 2026

Treasury $ 6,911 $ 22 $ — $ 6,933

26 unchanged sentences

government-sponsored enterprises.

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

Debt securities with carrying values aggregating approximately $ 110.8 million and $ 101.5 million at June 30, 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 and six months ended June 30, 2026 and 2025.

All gains and losses recognized on equity securities during each of the three and six months ended June 30, 2026 and 2025 were unrealized.

During the six months ended June 30, 2026, the Company recorded net investment securities gains of approximately $ 0.3 million from called securities.

The amortized cost and fair value of debt securities classified as available-for-sale at June 30, 2026, by contractual maturity are shown below.

Accrued interest on investments totaled $ 1.7 million and $ 1.5 million at June 30, 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 presented below.

HAWTHORN BANCSHARES, INC.

1 unchanged sentence

Notes to the Consolidated Financial Statements

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.

March 31, 2026

June 30, 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) March 31, 2026 December 31, 2025

(dollars in thousands) June 30, 2026 December 31, 2025

FHLB stock $ 2,473 $ 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 March 31, 2026 and December 31, 2025 were as follows:

Gross unrealized losses on debt securities and the fair value of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at June 30, 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

March 31, 2026

June 30, 2026

government-sponsored enterprises $ — $ — $ 1,864 $ ( 136 ) $ 1,864 $ ( 136 )

15 unchanged sentences

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

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 total available-for-sale portfolio consisted of approximately 396 securities at June 30, 2026.

The portfolio included 347 securities having an aggregate fair value of $ 167.6 million that were in a loss position at June 30, 2026.

The $ 22.9 million aggregate unrealized loss included in accumulated other comprehensive loss at June 30, 2026 was caused by interest rate fluctuations.

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

2 unchanged sentences

(5) Derivative Instruments

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

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

8 unchanged sentences

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 March 31, 2026 As of December 31, 2025

As of June 30, 2026 As of December 31, 2025

Fair Value Fair Value

2 unchanged sentences

Total derivatives not designated as hedging instruments $ 3 $ 27 $ 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 months ended March 31, 2026 and 2025.

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

The Company did not recognize other income related to client swaps in any of the three or six months ended June 30, 2026 and 2025.

Gain or (Loss) Recognized in Income on Derivative

Three Months Ended March 31,

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

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

As of June 30, 2026, the Company had recorded the obligation to collect cash collateral of $ 0.04 million.

As of June 30, 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 $ 0.02 million.

As of June 30, 2026, the Company has not posted any collateral related to these agreements.

If the Company had breached any of these provisions at June 30, 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) March 31, 2026 December 31, 2025

(dollars in thousands) June 30, 2026 December 31, 2025

Time deposits with balances > $250,000 $ 92,144 $ 90,504

Brokered deposits 4,025 502

Total $ 96,169 $ 91,006

HAWTHORN BANCSHARES, INC.

6 unchanged sentences

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.

The components of lease expense for the three and six months ended June 30, 2026, and 2025 are shown in the table below.

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

(dollars in thousands) 2026 2025 2026 2025

1 unchanged sentence

Financing lease expense 13 — 26 —

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 and lease liabilities by lease type, and the associated balance sheet classifications are shown in table below as of June 30, 2026 and December 31, 2025.

(dollars in thousands) Balance Sheet Classification June 30, 2026 December 31, 2025

ROU assets-operating leases Premises and equipment, net $ 3,298 $ 2,476

22 unchanged sentences

Notes to the Consolidated Financial Statements

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.

The following table presents the weighted average remaining lease term, in years, and the weighted average discount rate by lease type as of June 30, 2026 and 2025.

June 30, 2026 December 31, 2025

Operating lease weighted average remaining lease term (in years) 5.5 5.4

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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

The following table summarizes the change in the components of the Company’s accumulated other comprehensive income (loss) for the six months ended June 30, 2026 and 2025:

Six Months Ended June 30, 2026

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

8 unchanged sentences

Balance at end of period $ ( 17,551 ) $ 12,454 $ ( 5,097 )

Three Months Ended March 31, 2025

Six Months Ended June 30, 2025

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

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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

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.

HAWTHORN BANCSHARES, INC.

1 unchanged sentence

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.

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

As of June 30, 2026, $ 8.0 million remained available for share repurchases pursuant to the Company's current repurchase program.

On July 29, 2026, the Company’s Board of Directors amended the repurchase program to increase the authorized repurchase limit to $ 10.0 million.

(9) Share-Based Compensation

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

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

Three Months Ended March 31,

The following table summarizes the status of the Company's RSUs for the six months ended June 30, 2026 and 2025:

Six Months Ended June 30,

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

4 unchanged sentences

Non-vested at end of period 41,685 $ 30.69 38,701 $ 21.91

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 for the three months ended March 31, 2026, compared to $ 0.08 million for the three months ended March 31, 2025.

The fair value of the RSUs is determined using the Company’s stock price on the date of grant.

Total share-based compensation expense recognized for these RSUs was $ 0.2 million and $ 0.3 million for the three and six months ended June 30, 2026, respectively, compared to $ 0.1 million and $ 0.2 million for the three and six months ended June 30, 2025, respectively.

Forfeitures will be recognized as they occur.

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.

At June 30, 2026, there was $ 1.1 million of total unrecognized compensation expense related to RSUs that is expected to be recognized over a weighted-average period of 1.9 years.

HAWTHORN BANCSHARES, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

(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.

HAWTHORN BANCSHARES, INC.

AND SUBSIDIARIES

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.

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

Total expense recorded for the Company match was $ 0.2 million and $ 0.3 million for the three and six months ended June 30, 2026, respectively, compared to $ 0.1 million and $ 0.3 million for the three and six months ended June 30, 2025, respectively.

The employer discretionary profit-sharing expense for the 401(k) plan was $ 0.3 million and $ 0.5 million for the three and six months ended June 30, 2026, respectively, compared to $ 0.3 million and $ 0.6 million for the three and six months ended June 30, 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 accrued liability relating to the SERP was $ 1.6 million as of June 30, 2026, and the expense for the three and six months ended June 30, 2026 was $ 0.02 million and $ 0.04 million, respectively, compared to $ 0.02 million and $ 0.04 million for the three and six months ended June 30, 2025, respectively, 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 March 31,

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

(dollars in thousands) 2026 2025 2026 2025

1 unchanged sentence

Interest costs on projected benefit obligations (1)

377 376 774 775

Expected return on plan assets (1)

4 unchanged sentences

Net periodic pension income $ ( 505 ) $ ( 411 ) $ ( 799 ) $ ( 613 )

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

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

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

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

HAWTHORN BANCSHARES, INC.

1 unchanged sentence

Notes to the Consolidated Financial Statements

active participants in the pension plan.

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

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

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

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.

4 unchanged sentences

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

Three Months Ended March 31,

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

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

6 unchanged sentences

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

No RSUs were determined to be anti-dilutive during the three and six months ended June 30, 2026 and June 30, 2025.

(12) Fair Value Measurements

9 unchanged sentences

These might include quoted prices for similar assets and liabilities in active markets, such as interest rates and yield curves that are observable at commonly quoted intervals.

HAWTHORN BANCSHARES, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

Level 3 – Inputs are unobservable inputs for the asset or liability and significant to the fair value.

2 unchanged sentences

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

HAWTHORN BANCSHARES, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

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

19 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 March 31, 2026 and December 31, 2025 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 June 30, 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

March 31, 2026

June 30, 2026

Treasury $ 6,933 $ 6,933 $ — $ —

56 unchanged sentences

Fair Value Measurements Using

(dollars in thousands) Total Fair Value Quoted Prices in Active Markets for Identical Assets (Level 1) Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Year to Date Total Gains (Losses) (1)

March 31, 2026

(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)

June 30, 2026

Collateral-dependent loans:

1 unchanged sentence

Real estate mortgage - residential 1,254 — — 1,254

Real estate mortgage - commercial 1,054 — — 1,054

Total $ 3,932 $ — $ — $ 3,932

8 unchanged sentences

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

(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.

1 unchanged sentence

Notes to the Consolidated Financial Statements

Quantitative Information about Level 3 Fair Value Instruments

Weighted Average Discount

Valuation Technique Unobservable Input June 30, 2026 December 31, 2025

Nonrecurring measurements:

Collateral-dependent loans Discounted appraisals Collateral discounts 39 % 48 %

Other real estate and repossessed assets and Premises and equipment held for sale, net Discounted appraisals Collateral discounts and estimated costs to sell 15 % 5 %

(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:

Fair values are estimated for portfolios with similar financial characteristics.

13 unchanged sentences

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

The fair value of time deposits is based on the discounted value of contractual cash flows.

The fair value of time deposits is based on the discounted value

HAWTHORN BANCSHARES, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

of contractual cash flows.

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

4 unchanged sentences

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

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

A summary of the carrying amounts and fair values of the Company’s financial instruments at June 30, 2026 and December 31, 2025 is as follows:

June 30, 2026

Fair Value Measurements

March 31, 2026 Quoted Prices in Active Markets for Identical Assets Other Observable Inputs Net Significant Unobservable Inputs

June 30, 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)

55 unchanged sentences

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

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

At June 30, 2026 and December 31, 2025, the allowance for credit losses for unfunded commitments was $ 1.5 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) March 31, 2026 December 31, 2025

(dollars in thousands) June 30, 2026 December 31, 2025

Commitments to extend credit $ 375,495 $ 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 one month to 2.9 years at March 31, 2026.

The approximate remaining term of standby letters of credit ranged from one month to 2.7 years at June 30, 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 months ended March 31, 2026 and 2025, respectively:

Three Months Ended March 31, 2026

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 six months ended June 30, 2026 and 2025, respectively:

Three Months Ended June 30, 2026

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

13 unchanged sentences

Non-interest income 2,899 654 1,824 5,377

Investment securities losses, net 5 — — 5

Investment securities gains, net 280 — — 280

Income taxes 1,565 — 39 1,604

Net income (loss) $ 7,066 $ ( 5 ) $ 265 $ 7,326

Six Months Ended June 30, 2026

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

Operating revenue

Interest income $ 48,697 $ — $ 49 $ 48,746

Interest expense 12,834 — 1,552 14,386

Net interest income 35,863 — ( 1,503 ) 34,360

Provision for credit losses 311 — — 311

Operating expenses

Salaries and employee benefits 13,304 741 362 14,407

Occupancy, furniture and equipment expense 2,120 35 ( 1 ) 2,154

Processing, network, and bank card expense 2,745 92 — 2,837

Legal, examination, and professional fees 1,291 — 455 1,746

Depreciation 1,256 1 — 1,257

Other 3,760 77 511 4,348

Total operating expenses 24,476 946 1,327 26,749

Non-interest income 6,285 1,270 922 8,477

Investment securities gains, net 285 — — 285

Income taxes 3,394 — ( 401 ) 2,993

Net income (loss) $ 14,252 $ 324 $ ( 1,507 ) $ 13,069

Segment assets $ 1,759,823 $ 18 $ 13,199 $ 1,773,040

Three Months Ended March 31, 2025

HAWTHORN BANCSHARES, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

Three Months Ended June 30, 2025

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

3 unchanged sentences

Net interest income 16,972 — ( 830 ) 16,142

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

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

Operating expenses

10 unchanged sentences

Net income (loss) $ 6,692 $ 137 $ ( 729 ) $ 6,101

Six Months Ended June 30, 2025

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

Operating revenue

Interest income $ 47,313 $ — $ 56 $ 47,369

Interest expense 14,224 — 1,709 15,933

Net interest income 33,089 — ( 1,653 ) 31,436

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

Operating expenses

Salaries and employee benefits 12,310 665 640 13,615

Occupancy, furniture and equipment expense 2,170 38 1 2,209

Processing, network, and bank card expense 2,808 36 — 2,844

Legal, examination, and professional fees 738 — 183 921

Depreciation 1,140 — — 1,140

Other 3,540 46 453 4,039

Total operating expenses 22,706 785 1,277 24,768

Non-interest income 5,072 1,054 882 7,008

Investment securities gains (losses), net ( 2 ) — ( 1 ) ( 3 )

Income taxes 3,011 — ( 431 ) 2,580

Net income (loss) $ 12,833 $ 269 $ ( 1,618 ) $ 11,484

Segment assets $ 1,871,265 $ 20 $ 6,132 $ 1,877,417

(16) Qualified Affordable Housing Tax Credit and Other Investments

The Company invested in a qualified affordable housing project utilizing the Low-Income Housing Tax Credit (“LIHTC”) pursuant to Section 42 of the Internal Revenue Code.

This investment is intended to achieve a satisfactory return on capital, facilitate the sale of affordable housing product offerings, and assist in achieving goals associated with the Community Reinvestment Act.

At June 30, 2026 and December 31, 2025, the balance of the investment for qualified housing projects was $ 0.8 million and $ 0 , respectively.

This balance is reflected in accrued interest receivable and other assets on the

HAWTHORN BANCSHARES, INC.

1 unchanged sentence

Notes to the Consolidated Financial Statements

(16) Subsequent Events

consolidated balance sheets.

Total unfunded commitments related to the affordable housing project investment was $ 3.9 million and $ 0 at June 30, 2026 and December 31, 2025, respectively.

The Company expects to fulfill the majority of the commitment over the next two years .

The Company elected to use the proportional amortization method (“PAM”) to amortize the investment.

As of June 30, 2026, the project had not begun generating tax credits so no amortization expense was taken during the period.

The Company expects the project to begin generating tax credits in 2027.

The Company also invested in a Small Business Investment Company (“SBIC”).

At June 30, 2026 and December 31, 2025, the balance of the investment was $ 0.2 million and $ 0 , respectively.

This balance is reflected in accrued interest receivable and other assets on the consolidated balance sheets.

Total unfunded commitments related to the SBIC investment totaled $ 1.8 million and $ 0 at June 30, 2026 and December 31, 2025, respectively.

The Company expects to fulfill a majority of the commitment over the next five years .

The Company elected to use the equity method to account for this investment.

As of June 30, 2026, the Company has not recorded any income or loss on the investment due to the first capital call occurring at quarter-end.

The Company will evaluate the need to adjust the balance of the investment for earnings generated by the SBIC through the equity method in future periods.

(17) Pending Acquisition

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.

and its wholly owned subsidiary, Farmers State Bank (collectively, “FSC”) in a cash and stock transaction valued at approximately $ 28.3 million.

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.

with and into the Company and Farmers State Bank with and into the Bank.

The acquisition will be accounted for under ASC Topic 805.

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.

As of June 30, 2026, Farmers State Bank reported total assets of $ 383.7 million, which included gross loans of $ 303.5 million;

total deposits of $ 343.6 million;

and $ 2.0 million in net income.

The Company anticipates there will be a core deposit intangible and goodwill recorded with this acquisition.

The transaction is anticipated to close in the third quarter of 2026, subject to FSC shareholder approval and other customary closing conditions.

(18) Subsequent Events

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

HAWTHORN BANCSHARES, INC.

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