HAWTHORN BANCSHARES INC

Previous wording

We have described additional factors that could cause actual results to be materially different from those described in the forward-looking statements under the caption Risk Factors in Item 1A. of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 (the "2023 Form 10-K"), and in other reports filed by us with the Securities and Exchange Commission ("SEC") from time to time. Other factors that have not been identified in this report could also have this effect. You are cautioned not to put undue reliance on any forward-looking statement, which speak only as of the date they were made. Except as required by law, the Company undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events, or changes in its business, results of operations or financial condition over time.

Current wording

The Company has described additional factors that could cause actual results to be materially different from those described in the forward-looking statements under the caption Risk Factors in Item 1A. of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 (the "2023 Form 10-K"), and in other reports filed by us with the Securities and Exchange Commission ("SEC") from time to time. Other factors that have not been identified in this report could also have this effect. You are cautioned not to put undue reliance on any forward-looking statement, which speak only as of the date they were made. Except as required by law, the Company undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events, or changes in its business, results of operations or financial condition over time.

Previous wording

Crucial to the Company’s community banking strategy is growth in its commercial banking services, retail mortgage lending and retail banking services. Through the branch network of its subsidiary bank, Hawthorn Bank (the "Bank"), the Company, with $1.8 billion in assets at June 30, 2024, provides a broad range of commercial and personal banking services. The Bank’s specialties include commercial banking for small and mid-sized businesses, including equipment, operating, commercial real estate, Small Business Administration loans, comprehensive suite of cash management services, and personal banking services including real estate mortgage lending, installment and consumer loans, certificates of deposit, individual retirement and other time deposit accounts, checking accounts, savings accounts, and money market accounts. Other financial services that the Company provides include trust services that include estate planning, investment and asset management services. The geographic areas in which the Company provides products and services include the Missouri communities in and surrounding Jefferson City, Columbia, Clinton, Warsaw, Springfield, and the greater Kansas City metropolitan area.

Current wording

Crucial to the Company’s community banking strategy is growth in its commercial banking services, retail mortgage lending and retail banking services. Through the branch network of its subsidiary bank, Hawthorn Bank (the "Bank"), the Company, with $1.8 billion in assets at September 30, 2024, provides a broad range of commercial and personal banking services. The Bank’s specialties include commercial banking for small and mid-sized businesses, including equipment, operating, commercial real estate, Small Business Administration loans, a comprehensive suite of cash management services, and personal banking services including real estate mortgage lending, installment and consumer loans, certificates of deposit, individual retirement and other time deposit accounts, checking accounts, savings accounts, and money market accounts. Other financial services that the Company provides include trust services that include estate planning, investment and asset management services. The geographic areas in which the Company provides products and services include the Missouri communities in and surrounding Jefferson City, Columbia, Clinton, Warsaw, Springfield, and the greater Kansas City metropolitan area.

Previous wording

Consolidated net incomeof $4.6 million, or $0.66 per diluted share, for the second quarter ended June 30, 2024 increased $2.1 million, or 81.6%, compared to $2.5 million, or $0.36 per diluted share, for the second quarter ended June 30, 2023. For the second quarter 2024, the return on average assets was 1.02%, the return on average stockholders’ equity was 13.75%, and the efficiency ratio was 66.2%.

Current wording

Consolidated net incomeof $4.6 million, or $0.66 per diluted share, for the third quarter ended September 30, 2024 increased $2.0 million, or 77.4%, compared to $2.6 million, or $0.36 per diluted share, for the third quarter ended September 30, 2023. For the third quarter 2024, the return on average assets was 1.00%, the return on average stockholders’ equity was 12.87%, and the efficiency ratio was 66.2%.

Previous wording

For the six months ended June 30, 2024 consolidated net income increased $3.3 million, or 56.1%, to $9.1 million, or $1.29 per diluted share, compared to $5.8 million, or $0.83 per diluted share, for the six months ended June 30, 2023. For the six months ended June 30, 2024, the return on average assets was 0.99%, the return on average stockholders’ equity was 13.43%, and the efficiency ratio was 68.5%.

Current wording

For the nine months ended September 30, 2024 consolidated net income increased $5.3 million, or 62.6%, to $13.7 million, or $1.95 per diluted share, compared to $8.4 million, or $1.19 per diluted share, for the nine months ended September 30, 2023. For the nine months ended September 30, 2024, the return on average assets was 1.00%, the return on average stockholders’ equity was 13.24%, and the efficiency ratio was 67.7%.

Previous wording

The Company continues to see a positive impact from focusing on the core business of the Bank. The Company's sale of its mortgage servicing rights portfolio closed during the second quarter 2024, and the Company remains committed to expanding our products and services to our core customer base, while managing operating expenses.

Current wording

The Company continues to see a positive impact from focusing on the core business of the Bank and remains committed to expanding our products and services to the core customer base, while managing operating expenses.

Previous wording

Net interest incomewas consistent at $14.2 million for both the second quarter ended June 30, 2024 and June 30, 2023. Net interest margin, on a fully taxable equivalent basis ("FTE"), was 3.33% for the second quarter 2024, an increase from 3.19% for the second quarter 2023.

Current wording

Net interest incomewas $14.3 million for the third quarter ended September 30, 2024 decreased $0.8 million compared to and $15.1 million for the third quarter ended September 30, 2023. Net interest margin, on a fully taxable equivalent basis ("FTE"), was 3.36% for the third quarter 2024, an increase from 3.35% for the third quarter 2023.

Previous wording

Net interest incomeof $28.9 million for the six months ended June 30, 2024 increased $0.7 million compared to $28.2 million for the six months ended June 30, 2023. Net interest margin, on a FTE basis, was 3.36% for the six months ended June 30, 2024, an increase from 3.17% for the six months ended June 30, 2023. The change to net interest margin on a FTE basis is discussed in greater detail under the Average Balance Sheet Dataand Rate and Volume Analysis sections below.

Current wording

Net interest incomewas $43.2 million for the nine months ended September 30, 2024 decreased $0.1 million compared to $43.3 million for the nine months ended September 30, 2023. Net interest margin, on a FTE basis, was 3.36% for the nine months ended September 30, 2024, an increase from 3.23% for the nine months ended September 30, 2023. The change to net interest margin on a fully taxable equivalent basis is discussed in greater detail under the Average Balance Sheet Dataand Rate and Volume Analysis sections.

Previous wording

Non-interest incomewas $4.0 million and $7.0 million for the three and six months ended June 30, 2024, respectively, compared to $1.6 million and $4.8 million for the three and six months ended June 30, 2023, respectively. The increases were primarily due to earnings on bank-owned life insurance and the gain on sale of other real estate. These changes are discussed in greater detail under the Non-interest Income and Expense section below.

Current wording

Non-interest incomewas $3.8 million and $10.8 million for the three and nine months ended September 30, 2024, respectively, compared to $0.6 million and $5.4 million for the three and nine months ended September 30, 2023, respectively. The increases were primarily due to earnings on bank-owned life insurance and the gain on sale of other real estate. These changes are discussed in greater detail under the Non-interest Income and Expense section.

Previous wording

Non-interest expense was $12.0 million and $24.6 million the three and six months ended June 30, 2024, respectively, compared to $12.7 million and $25.2 million for the three and six months ended June 30, 2023, respectively. The decreases are primarily due to operating within a unified company culture, focusing on core business lines and improving operational efficiencies. The Company began investing in new technologies and utilizing consulting and professional services to accomplish these goals. These changes are discussed in greater detail under the Non-interest Income and Expense section below.

Current wording

Non-interest expense was $12.0 million and $36.6 million for the three and nine months ended September 30, 2024, respectively, compared to $12.6 million and $37.8 million for the three and nine months ended September 30, 2023, respectively. The decreases are primarily due to operating within a unified company culture, focusing on core business lines and improving operational efficiencies. These changes are discussed in greater detail under the Non-interest Income and Expense section.

Previous wording

Cash and cash equivalents – Cash and cash equivalents decreased $17.6 million to $75.8 million as of June 30, 2024 compared to $93.4 million as of December 31, 2023 and increased $51.2 million compared to $24.6 million as of June 30, 2023. The Company purchased $19.0 million in securities and $35.0 million in bank-owned life insurance during the six months ended June 30, 2024. See the Liquidity Management sectionfor further discussion.

Current wording

Cash and cash equivalents – Cash and cash equivalents decreased $39.2 million to $54.2 million as of September 30, 2024 compared to $93.4 million as of December 31, 2023 and increased $26.4 million compared to $27.9 million as of September 30, 2023. The Company purchased $32.9 million securities and $35.0 million in bank-owned life insurance during the nine months ended September 30, 2024. See the Liquidity Management sectionfor further discussion.

Previous wording

Loans – Loans held for investment decreased $40.6 million to $1.50 billion as of June 30, 2024 compared to $1.54 billion as of December 31, 2023 and decreased $64.7 million compared to $1.56 billion as of June 30, 2023.

Current wording

Loans – Loans held for investment decreased $72.4 million to $1.47 billion as of September 30, 2024 compared to $1.54 billion as of December 31, 2023 and decreased $90.2 million compared to $1.56 billion as of September 30, 2023. Normal amortizing payments, unscheduled payoffs and a weaker demand for loans have contributed to the variance.

Previous wording

Deposits – Total deposits decreased $20.6 million to $1.55 billion as of June 30, 2024 compared to $1.57 billion as of December 31, 2023, and increased $7.0 million compared to $1.54 billion as of June 30, 2023. The decrease in deposits at June 30, 2024 as compared to December 31, 2023 was primarily a result of a decrease in public funds partially offset by a high interest savings promotion.

Current wording

Deposits – Total deposits decreased $67.3 million to $1.50 billion as of September 30, 2024 compared to $1.57 billion as of December 31, 2023, and decreased $76.9 million compared to $1.58 billion as of September 30, 2023. The decrease in deposits at September 30, 2024 as compared to December 31, 2023 was primarily a result of a decrease in public funds partially offset by an increase in savings accounts.

Previous wording

Federal Home Loan Bank ("FHLB") advances and other borrowings– Total FHLB advances and other borrowings decreased $7.9 million to $99.1 million as of June 30, 2024 compared to $107.0 million as of December 31, 2023, and decreased $65.2 million compared to $164.3 million as of June 30, 2023

Current wording

Federal Home Loan Bank ("FHLB") advances and other borrowings– Total FHLB advances and other borrowings decreased $10.5 million to $96.5 million as of September 30, 2024 compared to $107.0 million as of December 31, 2023, and decreased $15.5 million compared to $112.0 million as of September 30, 2023

Previous wording

Capital – The Company maintains its “well capitalized” regulatory capital position. At June 30, 2024, capital ratios were as follows: total risk-based capital to risk-weighted assets 14.30%; tier 1 capital to risk-weighted assets 12.94%; tier 1 leverage 10.94%; and common equity to assets 7.48%.

Current wording

Capital – The Company maintains its “well capitalized” regulatory capital position. At September 30, 2024, capital ratios were as follows: total risk-based capital to risk-weighted assets 14.91%; tier 1 capital to risk-weighted assets 13.66%; tier 1 leverage 11.33%; and common equity to assets 8.09%.

Previous wording

Net interest income is the largest source of revenue resulting from the Company’s lending, investing, borrowing, and deposit gathering activities. It is affected both by changes in the level of interest rates and changes in the amounts and mix of interest-earning assets and interest-bearing liabilities. The following table presents average balance sheet data, net interest income, average yields of earning assets, average costs of interest-bearing liabilities, net interest spread and net interest margin on a FTE basis for each of the three and six month periods ended June 30, 2024 and 2023, respectively. The average balances used in this table and other statistical data were calculated using average daily balances.

Current wording

Net interest income is the largest source of revenue resulting from the Company’s lending, investing, borrowing, and deposit gathering activities. It is affected both by changes in the level of interest rates and changes in the amounts and mix of interest-earning assets and interest-bearing liabilities. The following table presents average balance sheet data, net interest income, average yields of earning assets, average costs of interest-bearing liabilities, net interest spread and net interest margin on a FTE basis for each of the three and nine month periods ended September 30, 2024 and 2023, respectively. The average balances used in this table and other statistical data were calculated using average daily balances.

Previous wording

(1)Interest income and yields are presented on a FTE basis using the federal statutory income tax rate of 21%, net of nondeductible interest expense, for both the three months ended June 30, 2024 and 2023. Such adjustments totaled $0.2 million and $0.3 million for the three months ended June 30, 2024 and 2023, respectively.

Current wording

(1)Interest income and yields are presented on a FTE basis using the federal statutory income tax rate of 21%, net of nondeductible interest expense, for both the three months ended September 30, 2024 and 2023. Such adjustments totaled $0.19 million and $0.24 million for the three months ended September 30, 2024 and 2023, respectively.

Previous wording

The following table summarizes the changes in net interest income on a FTE basis, by major category of interest earning assets and interest-bearing liabilities, identifying changes related to volumes and rates for the three and six months ended June 30, 2024 compared to the three and six months ending ended June 30, 2023, respectively. The change in interest due to the combined rate/volume variance has been allocated to rate and volume changes in proportion to the absolute dollar amounts of change in each.

Current wording

The following table summarizes the changes in net interest income on a FTE basis, by major category of interest earning assets and interest-bearing liabilities, identifying changes related to volumes and rates for the three and nine months ended September 30, 2024 compared to the three and nine months ending ended September 30, 2023, respectively. The change in interest due to the combined rate/volume variance has been allocated to rate and volume changes in proportion to the absolute dollar amounts of change in each.

Previous wording

(1)Interest income and yields are presented on a FTE basis using the federal statutory income tax rate of 21%, net of nondeductible interest expense, for the three and six months ended June 30, 2024 and 2023. Such adjustments totaled $0.2 million and $0.4 million for the three and six months ended June 30, 2024, respectively, compared to $0.3 million and $0.6 million for the three and six months ended June 30, 2023, respectively.

Current wording

(1)Interest income and yields are presented on a FTE basis using the federal statutory income tax rate of 21%, net of nondeductible interest expense, for the three and nine months ended September 30, 2024 and 2023, respectively. Such adjustments totaled $0.2 million and $0.6 million for the three and nine months ended September 30, 2024, respectively, compared to $0.2 million and $0.9 million for the three and nine months ended September 30, 2023, respectively.

Previous wording

Financial results for the quarter ended June 30, 2024 compared to the quarter ended June 30, 2023 reflected a decrease in net interest income, on a FTE basis, of $0.1 million, or 0.9%, and financial results for the the six months ended June 30, 2024 compared to the six months ended June 30, 2023 reflected an increase of $0.5 million, or 1.9%. Measured as a percentage of average earning assets, the net interest margin (expressed on a FTE basis) increased to 3.33% for the quarter ended June 30, 2024 compared to 3.19% for the quarter ended June 30, 2023, and increased to 3.36% for the six months ended June 30, 2024 compared to 3.17% for the six months ended June 30, 2023.

Current wording

Financial results for the quarter ended September 30, 2024 compared to the quarter ended September 30, 2023 reflected a decrease in net interest income, on a FTE basis, of $0.9 million, or 5.7%, and financial results for the the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 reflected a decrease of $0.3 million, or 0.8%. Measured as a percentage of average earning assets, the net interest margin (expressed on a FTE basis) increased to 3.36% for the quarter ended September 30, 2024 compared to 3.35% for the quarter ended September 30, 2023, and increased to 3.36% for the nine months ended September 30, 2024 compared to 3.23% for the nine months ended September 30, 2023.

Previous wording

Average interest-earning assets decreased $90.3 million, or 4.9%, to $1.74 billion for the quarter ended June 30, 2024 compared to $1.83 billion for the quarter ended June 30, 2023, and average interest-bearing liabilities decreased $37.1 million, or 2.8%, to $1.29 billion for the quarter ended June 30, 2024 compared to $1.32 billion for the quarter ended June 30, 2023.

Current wording

Average interest-earning assets decreased $104.6 million, or 5.7%, to $1.72 billion for the quarter ended September 30, 2024 compared to $1.82 billion for the quarter ended September 30, 2023, and average interest-bearing liabilities decreased $48.3 million, or 3.6%, to $1.27 billion for the quarter ended September 30, 2024 compared to $1.32 billion for the quarter ended September 30, 2023.

Previous wording

Average interest-earning assets decreased $75.3 million, or 4.1%, to $1.75 billion for the six months ended June 30, 2024 compared to $1.83 billion for the six months ended June 30, 2023, and average interest-bearing liabilities decreased $28.8 million, or 2.2%, to $1.30 billion for the six months ended June 30, 2024 compared to $1.33 billion for the six months ended June 30, 2023.

Current wording

Average interest-earning assets decreased $85.1 million, or 4.7%, to $1.74 billion for the nine months ended September 30, 2024 compared to $1.83 billion for the nine months ended September 30, 2023, and average interest-bearing liabilities decreased $35.3 million, or 2.7%, to $1.29 billion for the nine months ended September 30, 2024 compared to $1.33 billion for the nine months ended September 30, 2023.

Previous wording

Total interest income (expressed on a FTE basis) was $23.8 million and $48.0 million for the three and six months ended June 30, 2024, respectively, compared to $22.2 million and $43.5 million for the three and six months ended June 30, 2023, respectively. The Company’s rates earned on interest earning assets were consistent at 5.50% for the three and six months ended June 30, 2024, respectively, compared to 4.88% and 4.79% for the three and six months ended June 30, 2023, respectively.

Current wording

Total interest income (expressed on a FTE basis) was $24.0 million and $72.0 million for the three and nine months ended September 30, 2024, respectively, compared to $24.1 million and $67.6 million for the three and nine months ended September 30, 2023, respectively. The Company’s rates earned on interest earning assets were 5.56% and 5.52% for the three and nine months ended September 30, 2024, respectively, compared to 5.25% and 4.95% for the three and nine months ended September 30, 2023, respectively.

Previous wording

Interest income on loans held for investment was $21.6 million and $43.4 million for the three and six months ended June 30, 2024, respectively, compared to $20.2 million and $39.1 million for the three and six months ended June 30, 2023, respectively.

Current wording

Interest income on loans held for investment was $21.8 million and $65.2 million for the three and nine months ended September 30, 2024, respectively, compared to $22.2 million and $61.3 million for the three and nine months ended September 30, 2023, respectively.

Previous wording

Average loans outstanding decreased $41.9 million, or 2.7%, to $1.51 billion for the quarter ended June 30, 2024 compared to $1.55 billion for the quarter ended June 30, 2023. The average yield on loans increased to 5.75% for the quarter ended June 30, 2024 compared to 5.23% for the quarter ended June 30, 2023.

Current wording

Average loans outstanding decreased $69.0 million, or 4.4%, to $1.49 billion for the quarter ended September 30, 2024 compared to $1.55 billion for the quarter ended September 30, 2023. The average yield on loans increased to 5.83% for the quarter ended September 30, 2024 compared to 5.67% for the quarter ended September 30, 2023.

Previous wording

Average loans outstanding decreased $19.8 million, or 1.3%, to $1.52 billion for the six months ended June 30, 2024 compared to $1.54 billion for the six months ended June 30, 2023. The average yield on loans increased to 5.75% for the six months ended June 30, 2024 compared to 5.13% for the six months ended June 30, 2023. See the Lending and Credit Management section for further discussion of changes in the composition of the lending portfolio.

Current wording

Average loans outstanding decreased $36.4 million, or 2.4%, to $1.51 billion for the nine months ended September 30, 2024 compared to $1.54 billion for the nine months ended September 30, 2023. The average yield on loans increased to 5.78% for the nine months ended September 30, 2024 compared to 5.31% for the nine months ended September 30, 2023. See the Lending and Credit Management section for further discussion of changes in the composition of the lending portfolio.

Previous wording

Interest income on available-for-sale securitieswas $1.5 million and $3.0 million for the three and six months ended June 30, 2024, respectively, compared to $1.7 million and $3.5 million for the three and six months ended June 30, 2023, respectively.

Current wording

Interest income on available-for-sale securitieswas $1.6 million and $4.6 million for the three and nine months ended September 30, 2024, respectively, compared to $1.7 million and $5.1 million for the three and nine months ended September 30, 2023, respectively.

Previous wording

Average securities decreased $73.9 million, or 28.9%, to $182.2 million for the quarter ended June 30, 2024 compared to $256.1 million for the quarter ended June 30, 2023. The average yield on securities increased to 3.35% for the quarter ended June 30, 2024 compared to 2.71% for the quarter ended June 30, 2023

Current wording

Average securities decreased $55.0 million, or 22.2%, to $192.3 million for the quarter ended September 30, 2024 compared to $247.2 million for the quarter ended September 30, 2023. The average yield on securities increased to 3.32% for the quarter ended September 30, 2024 compared to 2.66% for the quarter ended September 30, 2023

Previous wording

Average securities decreased $72.2 million, or 28.3%, to $183.3 million for the six months ended June 30, 2024 compared to $255.6 million for the six months ended June 30, 2023. The average yield on securities increased to 3.29% for the six months ended June 30, 2024 compared to 2.72% for the six months ended June 30, 2023. During the fourth quarter of 2023, the Company repositioned its balance sheet by selling $83.7 million in book value of investment securities, with an average yield of 1.57%. See the Liquidity Management section for further discussion.

Current wording

Average securities decreased $66.4 million, or 26.3%, to $186.3 million for the nine months ended September 30, 2024 compared to $252.7 million for the nine months ended September 30, 2023. The average yield on securities increased to 3.30% for the nine months ended September 30, 2024 compared to 2.70% for the nine months ended September 30, 2023. During the fourth quarter of 2023, the Company repositioned its balance sheet by selling $83.7 million in book value of investment securities, with an average yield of 1.57%. See the Liquidity Management section for further discussion.

Previous wording

Total interest expense was $9.4 million and $18.7 million for the three and six months ended June 30, 2024, respectively, compared to $7.7 million and $14.7 million for the three and six months ended June 30, 2023, respectively. The Company’s rates paid on interest bearing liabilities were 2.94% and 2.89% for the three and six months ended June 30, 2024, respectively, compared to 2.34% and 2.24% for the three and six months ended June 30, 2023, respectively. See the Liquidity Management section for further discussion.

Current wording

Total interest expense was $9.5 million and $28.2 million for the three and nine months ended September 30, 2024, respectively, compared to $8.7 million and $23.5 million for the three and nine months ended September 30, 2023, respectively. The Company’s rates paid on interest bearing liabilities were 2.96% and 2.92% for the three and nine months ended September 30, 2024, respectively, compared to 2.62% and 2.36% for the three and nine months ended September 30, 2023, respectively. See the Liquidity Management section for further discussion.

Previous wording

Interest expense on deposits was $7.6 million and $15.0 million for the three and six months ended June 30, 2024, respectively, compared to $6.0 million and $11.5 million for the three and six months ended June 30, 2023, respectively.

Current wording

Interest expense on deposits was $7.7 million and $22.8 million for the three and nine months ended September 30, 2024, respectively, compared to $6.6 million and $18.2 million for the three and nine months ended September 30, 2023, respectively.

Previous wording

Average interest-bearing deposits decreased $24.1 million, or 2.1%, to $1.13 billion for the quarter ended June 30, 2024 compared to $1.16 billion for the quarter ended June 30, 2023. The average cost of deposits increased to 2.69% for the quarter ended June 30, 2024 compared to 2.07% for the quarter ended June 30, 2023.

Current wording

Average interest-bearing deposits decreased $11.7 million, or 1.0%, to $1.13 billion for the quarter ended September 30, 2024 compared to $1.14 billion for the quarter ended September 30, 2023. The average cost of deposits increased to 2.74% for the quarter ended September 30, 2024 compared to 2.32% for the quarter ended September 30, 2023.

Previous wording

Average interest-bearing deposits decreased $26.8 million, or 2.3%, to $1.14 billion for the six months ended June 30, 2024 compared to $1.17 billion for the six months ended June 30, 2023. The average cost of deposits increased to 2.65% for the six months ended June 30, 2024 compared to 1.99% for the six months ended June 30, 2023.

Current wording

Average interest-bearing deposits decreased $21.7 million, or 1.9%, to $1.14 billion for the nine months ended September 30, 2024 compared to $1.16 billion for the nine months ended September 30, 2023. The average cost of deposits increased to 2.68% for the nine months ended September 30, 2024 compared to 2.10% for the nine months ended September 30, 2023.

Previous wording

Interest expense on borrowings was $1.8 million and $3.7 million for the three and six months ended June 30, 2024, respectively, compared to $1.7 million and $3.2 million for the three and six months ended June 30, 2023, respectively.

Current wording

Interest expense on borrowings was $1.7 million and $5.4 million for the three and nine months ended September 30, 2024, respectively, compared to $2.1 million and $5.3 million for the three and nine months ended September 30, 2023, respectively.

Previous wording

Average borrowings decreased $13.0 million, or 7.8%, to $154.3 million for the quarter ended June 30, 2024 compared to $167.3 million for the quarter ended June 30, 2023. The average cost of borrowings increased to 4.73% for the quarter ended June 30, 2024 compared to 4.19% for the quarter ended June 30, 2023.

Current wording

Average borrowings decreased $36.6 million, or 19.7%, to $148.8 million for the quarter ended September 30, 2024 compared to $185.4 million for the quarter ended September 30, 2023. The average cost of borrowings increased to 4.67% for the quarter ended September 30, 2024 compared to 4.50% for the quarter ended September 30, 2023.

Previous wording

Average borrowings decreased $2.0 million, or 1.2%, to $157.4 million for the six months ended June 30, 2024 compared to $159.4 million for the six months ended June 30, 2023. The average cost of borrowings increased to 4.67% for the six months ended June 30, 2024 compared to 4.02% for the six months ended June 30, 2023. The increase in average cost of borrowings was primarily a result from higher market interest rates.

Current wording

Average borrowings decreased $13.6 million, or 8.1%, to $154.5 million for the nine months ended September 30, 2024 compared to $168.2 million for the nine months ended September 30, 2023. The average cost of borrowings increased to 4.67% for the nine months ended September 30, 2024 compared to 4.20% for the nine months ended September 30, 2023. The increase in average cost of borrowings primarily resulted from higher market interest rates.

Previous wording

Earnings on bank-owned life insurance increased to $0.5 million for the second quarter ended June 30, 2024 compared to $0.01 million for the second quarter ended June 30, 2023, and increased to $0.6 million for the six months ended June 30, 2024 compared to $0.03 million for the six months ended June 30, 2023. The Company purchased $35.0 million in bank- owned life insurance policies in the first quarter of 2024. The earnings generated from these polices are primarily derived from the investment returns on the cash value component.

Current wording

Earnings on bank-owned life insurance increased to $0.5 million for the third quarter ended September 30, 2024 compared to $0.01 million for the third quarter ended September 30, 2023, and increased to $1.2 million for the nine months ended September 30, 2024 compared to $0.04 million for the nine months ended September 30, 2023. The

Previous wording

Real estate (costs) servicing fees, net of the change in valuation of mortgage servicing rights (MSRs) decreased to $(0.05) million for the second quarter ended June 30, 2024 compared to $0.1 million for the second quarter ended June 30, 2023, and decreased to $(0.05) million for the six months ended June 30, 2024 compared to $0.3 million for the six months ended June 30, 2023. On January 31, 2024, the Company sold its servicing portfolio and the balance of the serviced loans transferred on April 30, 2024. The remaining servicing fees and costs were settled during the second quarter of 2024.

Current wording

Real estate servicing fees, net of the change in valuation of mortgage servicing rights (MSRs) decreased to $0.08 million for the third quarter ended September 30, 2024 compared to $0.1 million for the third quarter ended September 30, 2023, and decreased to $0.03 million for the nine months ended September 30, 2024 compared to $0.4 million for the nine months ended September 30, 2023. On January 31, 2024, the Company sold its servicing portfolio and the balance of the serviced loans transferred on April 30, 2024. The remaining servicing fees and costs were settled during the second and third quarter of 2024.

Previous wording

Gain on sales of mortgage loans decreased to $0.4 million for the second quarter ended June 30, 2024 compared to $0.7 million for the second quarter ended June 30, 2023, and decreased to $0.7 million for the six months ended June 30, 2024 compared to $1.2 million for the six months ended June 30, 2023. The Company sold $21.7 million and $38.0 million of mortgage loans for the three and six months ended June 30, 2024, respectively, compared to $26.9 million and $47.2 million for the three and six months ended June 30, 2023, respectively.

Current wording

Gain on sales of mortgage loans decreased to $0.1 million for the third quarter ended September 30, 2024 compared to $0.9 million for the third quarter ended September 30, 2023, and decreased to $0.8 million for the nine months ended September 30, 2024 compared to $2.0 million for the nine months ended September 30, 2023. The Company sold $7.4 million and $45.0 million of mortgage loans for the three and nine months ended September 30, 2024, respectively, compared to $37.2 million and $84.4 million for the three and nine months ended September 30, 2023, respectively.

Previous wording

Total non-interest income increased $2.4 million, or 150.4%, to $4.0 million for the second quarter ended June 30, 2024 compared to $1.6 million for the second quarter ended June 30, 2023, and increased $2.2 million, or 46.8%, to $7.0 million for the six months ended June 30, 2024 compared to $4.8 million for the six months ended June 30, 2023. The increases are primarily due to earnings on bank-owned life insurance and the gain on sale of other real estate. During the second quarter of 2023, the Company recognized a $1.8 million valuation write-down on foreclosed property in other real estate owned based on a current appraisal. The remaining acres related to this property were sold in the second quarter of 2024, and the Company recognized a $0.4 million release of the valuation write-down.

Current wording

Gains (losses) on other real estate owned increased to a $0.3 million gain for the third quarter ended September 30, 2024 compared to a $2.8 million loss for the third quarter ended September 30, 2023, and increased to a $0.8 million gain for the nine months ended September 30, 2024 compared to a $4.6 million loss for the nine months ended September 30, 2023. During the second and third quarter of 2023, the Company recognized $1.8 million and $2.8 million in valuation write-downs, respectively, on foreclosed property in other real estate owned based on current appraisals. The Company sold the remaining parcel related to one of these properties in the second quarter of 2024, and the Company recognized a $0.4 million release of the valuation write-down. Moreover, the Company sold land previously intended for a new branch, resulting in a gain of $0.3 million in the third quarter of 2024.

Previous wording

Total non-interest expense decreased $0.7 million, or 5.4%, to $12.0 million for the second quarter ended June 30, 2024 compared to $12.7 million for the second quarter ended June 30, 2023, and decreased $0.6 million, or 2.4%, to $24.6 million for the six months ended June 30, 2024 compared to $25.2 million for the six months ended June 30, 2023.

Current wording

Total non-interest expense decreased $0.6 million, or 4.6%, to $12.0 million for the third quarter ended September 30, 2024 compared to $12.6 million for the third quarter ended September 30, 2023, and decreased $1.2 million, or 3.1%, to $36.6 million for the nine months ended September 30, 2024 compared to $37.8 million for the nine months ended September 30, 2023.