HAWTHORN BANCSHARES, INC.

Previous wording

This report contains certain forward-looking statements with respect to the financial condition, results of operations, plans, objectives, strategy, future performance and business of Hawthorn Bancshares, Inc., and its subsidiaries (collectively, the “Company”, “we”, “our”, or “us”), including, without limitation statements that are not historical in nature, and statements preceded by, followed by or that include the words believes, expects, may, will, should, could, anticipates, estimates, intends, plans, hopes or similar expressions. Forward-looking statements are not guarantees of future performance or results. They involve risks, uncertainties and assumptions. Actual results may differ materially from those contemplated by the forward-looking statements due to, among others, such possible events or factors such as: changes in economic conditions generally or in the Company's market area, changes in policies by regulatory agencies, governmental legislation and regulation, tariffs and trade disruptions, fluctuations in interest rates, changes in liquidity requirements, demand for loans in the Company’s market area, changes in accounting and tax principles, estimates made on income taxes, competition with other entities that offer financial services, and cybersecurity threats and such other factors as described in 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, 2024 (the “2024 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. During the quarter ended September 30, 2025, there were no material changes to the Risk Factors disclosed in the Company’s 2024 Annual Report on Form 10-K.

Current wording

This report contains certain forward-looking statements with respect to the financial condition, results of operations, plans, objectives, strategy, future performance and business of Hawthorn Bancshares, Inc., and its subsidiaries (collectively, the “Company”, “we”, “our”, or “us”), including, without limitation statements that are not historical in nature, and statements preceded by, followed by or that include the words believes, expects, may, will, should, could, anticipates, estimates, intends, plans, hopes or similar expressions. Forward-looking statements are not guarantees of future performance or results. They involve risks, uncertainties and assumptions. Actual results may differ materially from those contemplated by the forward-looking statements due to, among others, such possible events or factors such as: changes in economic conditions generally or in the Company's market area, changes in policies by regulatory agencies, governmental legislation and regulation, tariffs and trade disruptions, fluctuations in interest rates, changes in liquidity requirements, demand for loans in the Company’s market area, changes in accounting and tax principles, estimates made on income taxes, competition with other entities that offer financial services, cybersecurity threats, economic or other disruptions caused by acts of terrorism, war or other conflicts, changes in geopolitical conditions, natural disasters, such as hurricanes, wild fires, freezes, flooding and other man-made disasters, health emergencies, epidemics or pandemics, climate changes or other catastrophic events and such other factors as 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, 2025 (the “2025 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. During the quarter ended March 31, 2026, there were no material changes to the Risk Factors disclosed in the Company’s 2025 Form 10-K.

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 $1.93 billion in assets at September 30, 2025, 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 (“SBA”) loans, 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. The Company also provides other financial services through its Wealth Management business, including trust services, estate planning, investment and asset management services and a comprehensive suite of cash management services. Beginning with the first quarter of 2025, the Company's Wealth Management business is reported as a separate reporting segment, and the Company operates two reporting segments, consisting of the Bank and the Wealth Management business. 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 $1.86 billion in assets at March 31, 2026, 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 (“SBA”) loans, 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. The Company also provides other financial services through its Wealth Management business, including trust services, estate planning, investment and asset management services and a comprehensive suite of cash management services. Beginning with the first quarter of 2025, the Company's Wealth Management business is reported as a separate reporting segment, and the Company operates two reporting segments, consisting of the Bank and the Wealth Management business. 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 incomewas $6.1 million, or $0.88 per diluted share, and $17.6 million, or $2.53 per diluted share, for the three and nine months ended September 30, 2025, respectively, compared to $4.6 million, or $0.66 per diluted share, and $13.7 million, or $1.95 per diluted share, for the three and nine months ended September 30, 2024, respectively. For the three and nine months ended September 30, 2025, the return on average assets was 1.33% and 1.30%, respectively, the return on average stockholders’ equity was 15.21% and 15.13%, respectively, and the efficiency ratio was 62.30% and 63.68%, respectively.

Current wording

Consolidated net incomewas $5.7 million, or $0.83 per diluted share for the three months ended March 31, 2026, compared to $5.4 million, or $0.77 per diluted share, for the three months ended March 31, 2025. For the three months ended March 31, 2026, the return on average assets was 1.26%, the return on average stockholders’ equity was 13.07%, and the efficiency ratio was 64.29%.

Previous wording

Net interest incomewas $16.9 million and $48.3 million for the three and nine months ended September 30, 2025, respectively, compared to $14.3 million and $43.2 million for the three and nine months ended September 30, 2024, respectively. Net interest margin, on a fully taxable equivalent (“FTE”) basis, was 3.97% and 3.85% for the three and nine months ended September 30, 2025, respectively, compared to 3.36% for both the three and nine months ended September 30, 2024. 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.

Current wording

Net interest incomewas $17.1 million for the three months ended March 31, 2026, compared to $15.3 million for the three months ended March 31, 2025. Net interest margin, on a fully taxable equivalent (“FTE”) basis, was 4.07% for the three months ended March 31, 2026, compared to 3.67% for the three months ended March 31, 2025. The change to net interest margin on an FTE basis is discussed in greater detail under the Average Balance Sheet Dataand Rate and Volume Analysis sections.

Previous wording

Non-interest incomewas $3.7 million and $10.7 million for the three and nine months ended September 30, 2025, respectively, compared to $3.8 million and $10.8 million for the three and nine months ended September 30, 2024, respectively. These changes are discussed in greater detail under the Non-interest Income and Expense section.

Current wording

Non-interest incomewas $3.1 million for the three months ended March 31, 2026, compared to $3.5 million for the three months ended March 31, 2025. These changes are discussed in greater detail under the Non-interest Income and Expense section.

Previous wording

Non-interest expense was $12.8 million and $37.6 million for the three and nine months ended September 30, 2025, respectively, compared to $12.0 million and $36.6 million for the three and nine months ended September 30, 2024, respectively. These changes are discussed in greater detail under the Non-interest Income and Expense section.

Current wording

Non-interest expense was $13.0 million for the three months ended March 31, 2026, compared to $12.5 million for the three months ended March 31, 2025. 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 increased $48.9 million to $99.9 million as of September 30, 2025 compared to $51.0 million as of December 31, 2024, and increased $45.7 million compared to $54.2 million as of September 30, 2024. See the Liquidity Management sectionfor further discussion.

Current wording

Cash and cash equivalents – Cash and cash equivalents decreased $2.4 million to $101.9 million as of March 31, 2026 compared to $104.3 million as of December 31, 2025, and decreased $0.3 million compared to $102.3 million as of March 31, 2025. See the Liquidity Management sectionfor further discussion.

Previous wording

Loans – Loans held for investment increased $47.8 million to $1.51 billion as of September 30, 2025 compared to $1.47 billion as of December 31, 2024, and increased $47.3 million compared to $1.47 billion as of September 30, 2024.

Current wording

Loans – Loans held for investment decreased $32.6 million to $1.45 billion as of March 31, 2026 compared to $1.49 billion as of December 31, 2025, and decreased $16.2 million compared to $1.47 billion as of March 31, 2025.

Previous wording

Asset quality – Non-performing assets totaled $7.3 million, or 0.48% of total loans, at September 30, 2025 compared to $4.2 million, or 0.29% of total loans, at December 31, 2024 and $8.5 million, or 0.58% of total loans, at September 30, 2024.

Current wording

Asset quality – Non-performing assets totaled $6.9 million, or 0.47% of total loans, at March 31, 2026 compared to $7.0 million, or 0.47% of total loans, at December 31, 2025 and $3.1 million, or 0.21% of total loans, at March 31, 2025.

Previous wording

In the third quarter of 2025, the Company had net loan charge-offs of $0.04 million, or 0.01% of average loans, compared to net loan charge-offs $0.6 million, or 0.17% of average loans, in the same prior year quarter.

Current wording

In the first quarter of 2026, the Company had net loan charge-offs of $0.06 million, or 0.02% of average loans, compared to net loan recoveries of $0.02 million, or 0.01% of average loans, in the same prior year quarter.

Previous wording

The allowance for credit losses was $21.9 million, or 1.45% of loans outstanding, at September 30, 2025 compared to $22.0 million, or 1.50% of loans outstanding, at December 31, 2024, and $21.9 million, or 1.50% of loans outstanding at September 30, 2024. These changes are discussed in greater detail under the Lending and Credit Management section.

Current wording

The allowance for credit losses was $20.9 million, or 1.44% of loans outstanding, at March 31, 2026 compared to $21.1 million, or 1.42% of loans outstanding, at December 31, 2025, and $21.8 million, or 1.48% of loans outstanding, at March 31, 2025. These changes are discussed in greater detail under the Lending and Credit Management section.

Previous wording

Deposits – Total deposits decreased $7.3 million to $1.53 billion as of September 30, 2025 compared to $1.53 billion as of December 31, 2024, and increased $22.4 million compared to $1.50 billion as of September 30, 2024.

Current wording

Deposits – Total deposits decreased $35.8 million to $1.52 billion as of March 31, 2026 compared to $1.55 billion as of December 31, 2025, and decreased $25.6 million compared to $1.54 billion as of March 31, 2025.

Previous wording

Federal Home Loan Bank (“FHLB”) advances and other borrowings– Total FHLB advances and other borrowings increased $95.6 million to $177.1 million as of September 30, 2025, compared to $81.5 million as of December 31, 2024, and increased $80.6 million compared to $96.5 million as of September 30, 2024.

Current wording

Federal Home Loan Bank (“FHLB”) advances and other borrowings– Total FHLB advances and other borrowings decreased $7.7 million to $94.4 million as of March 31, 2026, compared to $102.1 million as of December 31, 2025, and decreased $29.7 million compared to $124.1 million as of March 31, 2025.

Previous wording

Capital – The Company maintains its “well capitalized” regulatory capital position. At September 30, 2025, capital ratios were as follows: total risk-based capital to risk-weighted assets 14.90%; tier 1 capital to risk-weighted assets 13.65%; tier 1 leverage 11.97%; and stockholders’ equity to assets 8.54%.

Current wording

Capital – The Company maintains its “well-capitalized” regulatory capital position. At March 31, 2026, capital ratios were as follows: total risk-based capital to risk-weighted assets 15.84%; tier 1 capital to risk-weighted assets 14.59%; tier 1 leverage 12.34%; and stockholders’ equity to assets 9.45%.

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 tables present 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 an FTE basis for each of the three and nine month periods ended September 30, 2025 and 2024, 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 tables present 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 an FTE basis for each of the three month periods ended March 31, 2026 and 2025, 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 an FTE basis using the federal statutory income tax rate of 21%, net of nondeductible interest expense, for both the three andnine months ended September 30, 2025 and 2024. Such adjustments totaled $0.4 million and $0.2 million for the three months ended September 30, 2025 and 2024, respectively, compared to $1.0 million and $0.6 million for the nine months ended September 30, 2025 and 2024, respectively.

Current wording

(1)Interest income and yields are presented on an FTE basis using the federal statutory income tax rate of 21%, net of nondeductible interest expense, for the three months ended March 31, 2026 and 2025. Such adjustments totaled $0.4 million and $0.2 million for the three months ended March 31, 2026 and 2025, respectively.

Previous wording

The following table summarizes the changes in net interest income on an 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, 2025 compared to the three and nine months ending ended September 30, 2024, 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 an FTE basis, by major category of interest earning assets and interest bearing liabilities, identifying changes related to volumes and rates for the three months ended March 31, 2026 compared to the three months ended March 31, 2025. 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 an FTE basis using the federal statutory income tax rate of 21%, net of nondeductible interest expense, for both the three and nine months ended September 30, 2025 and 2024, respectively. Such adjustments totaled $0.4 million and $1.0 million for the three and nine months ended September 30, 2025, respectively, compared to $0.2 million and $0.6 million for the three and nine months ended September 30, 2024, respectively.

Current wording

(1)Interest income and yields are presented on an FTE basis using the federal statutory income tax rate of 21%, net of nondeductible interest expense, for both the three months ended March 31, 2026 and 2025. Such adjustments totaled $0.4 million for the three months ended March 31, 2026, compared to $0.2 million for the three months ended March 31, 2025.

Previous wording

Financial results for the quarter ended September 30, 2025 compared to the quarter ended September 30, 2024, reflected an increase in net interest income on an FTE basis of $2.7 million, or 18.9%, and financial results for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 reflected an increase in net interest income on an FTE basis of $5.5 million, or 12.5%. Measured as a percentage of average earning assets, the net interest margin (expressed on an FTE basis) increased to 3.97% for the quarter ended September 30, 2025 compared to 3.36% for the quarter ended September 30, 2024, and increased to 3.85% for the nine months ended September 30, 2025 compared to 3.36% for the nine months ended September 30, 2024.

Current wording

Financial results for the quarter ended March 31, 2026 compared to the quarter ended March 31, 2025, reflected an increase in net interest income on an FTE basis of $1.9 million, or 12.4%. Measured as a percentage of average earning assets, the net interest margin (expressed on an FTE basis) increased to 4.07% for the quarter ended March 31, 2026 compared to 3.67% for the quarter ended March 31, 2025.

Previous wording

Average interest earning assets increased $5.6 million, or 0.3%, to $1.72 billion for the quarter ended September 30, 2025 compared to $1.72 billion for the quarter ended September 30, 2024, and average interest bearing liabilities decreased $37.3 million, or 2.9%, to $1.24 billion for the quarter ended September 30, 2025 compared to $1.27 billion for the quarter ended September 30, 2024.

Current wording

Average interest earning assets increased $23.0 million, or 1.3%, to $1.74 billion for the quarter ended March 31, 2026 compared to $1.72 billion for the quarter ended March 31, 2025, and average interest bearing liabilities decreased $15.9 million, or 1.3%, to $1.24 billion for the quarter ended March 31, 2026 compared to $1.26 billion for the quarter ended March 31, 2025.

Previous wording

Total interest income (expressed on an FTE basis) was $25.4 million and $73.4 million for the three and nine months ended September 30, 2025, respectively, compared to $24.0 million and $72.0 million for the three and nine months ended September 30, 2024, respectively. The Company’s rates earned on interest earning assets were 5.84% and 5.72% for the three and nine months ended September 30, 2025, respectively, compared to 5.56% and 5.52% for the three and nine months ended September 30, 2024, respectively.

Current wording

Total interest income (expressed on an FTE basis) was $24.8 million for the three months ended March 31, 2026, compared to $23.7 million for the three months ended March 31, 2025. The Company’s rates earned on interest earning assets were 5.77% for the three months ended March 31, 2026, compared to 5.60% for the three months ended March 31, 2025.

Previous wording

Interest income on loans held for investment (expressed on an FTE basis) was $22.8 million and $65.7 million for the three and nine months ended September 30, 2025, respectively, compared to $21.8 million and $65.2 million for the three and nine months ended September 30, 2024, respectively.

Current wording

Interest income on loans held for investment (expressed on an FTE basis) was $22.3 million for the three months ended March 31, 2026, compared to $21.3 million for the three months ended March 31, 2025.

Previous wording

Average loans outstanding decreased $41.8 million, or 2.8%, to $1.47 billion for the nine months ended September 30, 2025 compared to $1.51 billion for the nine months ended September 30, 2024. The average yield on loans increased to 6.00% for the nine months ended September 30, 2025 compared to 5.78% for the nine months ended September 30, 2024. See the Lending and Credit Management section for further discussion of changes in the composition of the lending portfolio.

Current wording

Average loans outstanding increased $11.7 million, or 0.8%, to $1.48 billion for the quarter ended March 31, 2026 compared to $1.47 billion for the quarter ended March 31, 2025. The average yield on loans increased to 6.11% for the quarter ended March 31, 2026 compared to 5.89% for the quarter ended March 31, 2025. 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 securities(expressed on an FTE basis) was $2.2 million and $6.5 million for the three and nine months ended September 30, 2025, respectively, compared to $1.6 million and $4.6 million for the three and nine months ended September 30, 2024, respectively.

Current wording

Interest income on available-for-sale securities(expressed on an FTE basis) was $1.9 million for the three months ended March 31, 2026, compared to $2.1 million for the three months ended March 31, 2025.

Previous wording

Total interest expense was $8.1 million and $24.1 million for the three and nine months ended September 30, 2025, respectively, compared to $9.5 million and $28.2 million for the three and nine months ended September 30, 2024, respectively. The Company’s rates paid on interest bearing liabilities were 2.61% and 2.60% for the three and nine months ended September 30, 2025, respectively, compared to 2.96% and 2.92% for the three and nine months ended September 30, 2024, respectively. See the Liquidity Management section for further discussion.

Current wording

Total interest expense was $7.3 million for the three months ended March 31, 2026, compared to $8.2 million for the three months ended March 31, 2025. The Company’s rates paid on interest bearing liabilities were 2.39% for the three months ended March 31, 2026, compared to 2.64% for the three months ended March 31, 2025. See the Liquidity Management section for further discussion.

Previous wording

Interest expense on deposits was $6.6 million and $19.9 million for the three and nine months ended September 30, 2025, respectively, compared to $7.7 million and $22.8 million for the three and nine months ended September 30, 2024, respectively.

Current wording

Interest expense on deposits was $5.9 million for the three months ended March 31, 2026, compared to $6.8 million for the three months ended March 31, 2025.

Previous wording

Average interest bearing deposits decreased $24.2 million, or 2.2%, to $1.10 billion for the quarter ended September 30, 2025 compared to $1.13 billion for the quarter ended September 30, 2024. The average cost of deposits decreased to 2.36% for the quarter ended September 30, 2025 compared to 2.74% for the quarter ended September 30, 2024.

Current wording

Average interest bearing deposits decreased $24.0 million, or 2.1%, to $1.11 billion for the quarter ended March 31, 2026 compared to $1.13 billion for the quarter ended March 31, 2025. The average cost of deposits decreased to 2.15% for the quarter ended March 31, 2026 compared to 2.44% for the quarter ended March 31, 2025.

Previous wording

Interest expense on borrowings was $1.6 million and $4.2 million for the three and nine months ended September 30, 2025, respectively, compared to $1.7 million and $5.4 million for the three and nine months ended September 30, 2024, respectively.

Current wording

Interest expense on borrowings was $1.4 million for both the three months ended March 31, 2026 and March 31, 2025.

Previous wording

The following table shows the principal components of non-interest income for the three and nine months ended September 30, 2025 and 2024.

Current wording

The following table shows the principal components of non-interest income for the three months ended March 31, 2026 and 2025.

Previous wording

Earnings on bank-owned life insurancewas $0.5 million for both quarters ended September 30, 2025 and September 30, 2024, and increased to $1.5 million for the nine months ended September 30, 2025 compared to $1.2 million for the nine months ended September 30, 2024. The Company purchased $35.0 million in bank-owned life insurance policies in the first quarter of 2024. The earnings generated from these policies are primarily derived from the investment returns on the cash value component.

Current wording

Earnings on bank-owned life insurance decreased to $0.49 million for the three months ended March 31, 2026 compared to $0.51 million for the three months ended March 31, 2025. The Company purchased $35.0 million in bank-owned life insurance policies in the first quarter of 2024. The earnings generated from these policies are primarily derived from the investment returns on the cash value component.

Previous wording

Gain on sales of mortgage loans was $0.1 million for both quarters ended September 30, 2025 and September 30, 2024, and decreased to $0.3 million for the nine months ended September 30, 2025 compared to $0.8 million for the nine months ended September 30, 2024. The Company sold mortgage loans totaling $2.2 million and $5.1 million for the three and nine months ended September 30, 2025, respectively, compared to $7.0 million and $45.0 million for the three and nine months ended September 30, 2024, respectively.

Current wording

Gain on sales of mortgage loans decreased to $0.08 million for the three months ended March 31, 2026 compared to $0.13 million for the three months ended March 31, 2025. The Company sold mortgage loans totaling $14.8 million for the three months ended March 31, 2026, compared to $1.2 million for the three months ended March 31, 2025.

Previous wording

Gains (losses) on other real estate owned were zero for the quarter ended September 30, 2025 compared to gains of $0.3 million for the quarter ended September 30, 2024, and were losses of $0.2 million for the nine months ended September 30, 2025 compared to gains of $0.8 million for the nine months ended September 30, 2024. The Company sold the remaining parcel related to a foreclosed property 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.

Current wording

Gains (losses) on other real estate owned were losses of $0.03 million for the quarter ended March 31, 2026 compared to gains of $0.02 million for the quarter ended March 31, 2025.

Previous wording

The following table shows the principal components of non-interest expense for the three and nine months ended September 30, 2025 and 2024.

Current wording

The following table shows the principal components of non-interest expense for the three months ended March 31, 2026 and 2025.

Previous wording

The increases for both the three and nine months ended September 30, 2025 primarily resulted from the opening of two new branch locations and one new operations facility.

Current wording

Occupancy expense, net, increased $0.06 million, or 6.0%, to $1.0 million for the quarter ended March 31, 2026 compared to $0.9 million for the quarter ended March 31, 2025. The increase for the three months ended March 31, 2026 primarily resulted from the expansion of one branch and the opening of two new branch locations and one new operations facility in the first quarter of 2026.

Previous wording

Legal, examination and professional fees increased $0.1 million, or 24.3%, to $0.5 million for the quarter ended September 30, 2025 compared to $0.4 million for the quarter ended September 30, 2024, and decreased $0.3 million, or 18.8%, to $1.4 million for the nine months ended September 30, 2025 compared to $1.7 million for the nine months ended September 30, 2024.

Current wording

Legal, examination, and professional fees increased $0.3 million, or 62.7%, to $0.8 million for the quarter ended March 31, 2026 compared to $0.5 million for the quarter ended March 31, 2025. The increase was due to higher legal fees and fees related to the execution of a lease on a bank building held for sale.

Previous wording

Income taxes as a percentage of earnings before income taxes as reported in the consolidated financial statements were 18.1% and 18.3% for the three and nine months ended September 30, 2025, respectively, compared to 18.7% and 18.2% for the three and nine months ended September 30, 2024, respectively. The effective tax rate for each of the three and nine months ended September 30, 2025 and 2024 was lower than the U.S. federal statutory rate of 21% primarily due to tax-free revenues.

Current wording

Income taxes as a percentage of earnings before income taxes as reported in the consolidated financial statements were 19.5% for the three months ended March 31, 2026, compared to 18.4% for the three months ended March 31, 2025. The effective tax rate for each of the three months ended March 31, 2026 and 2025 was lower than the U.S. federal statutory rate of 21% primarily due to tax-free revenues.

Previous wording

Interest earned on the loan portfolio is a primary source of interest income for the Company. Net loans represented 77.2% of total assets as of September 30, 2025 compared to 79.1% as of December 31, 2024.

Current wording

Interest earned on the loan portfolio is a primary source of interest income for the Company. Net loans represented 78.4% of total assets as of March 31, 2026 compared to 78.5% as of December 31, 2025.

Previous wording

General reserves are recorded for collectively analyzed loans using a consistent methodology. Two different models are used for calculating the general reserve. The Discounted Cash Flow model considers quantitative peer group historic loss experience, forecasts over the estimated life of the loan pools, industry data, and qualitative or environmental factors, such as: lending policies and procedures; economic conditions; the nature, volume and terms of the portfolio; lending staff and management; past due loans; the loan review system; collateral values; concentrations of credit; and external factors. The Remaining Life model applies a long-term average loss rate calculated using peer data that is adjusted for qualitative or environmental factors such as those previously noted. The model used depends on the loan portfolio segment. Management believes, but there can be no assurance, that these procedures keep management informed of potential problem loans. At September 30, 2025 and December 31, 2024, the ACL on loans included a qualitative adjustment of approximately $9.7 million and $11.2 million, respectively.

Current wording

General reserves are recorded for collectively analyzed loans using a consistent methodology. Two different models are used for calculating the general reserve. The Discounted Cash Flow model considers quantitative peer group historic loss experience, forecasts over the estimated life of the loan pools, industry data, and qualitative or environmental factors, such as: lending policies and procedures; economic conditions; the nature, volume and terms of the portfolio; lending staff and management; past due loans; the loan review system; collateral values; concentrations of credit; and external factors. The Remaining Life model applies a long-term average loss rate calculated using peer data that is adjusted for qualitative or environmental factors such as those previously noted. The model used depends on the loan portfolio segment. Management believes, but there can be no assurance, that these procedures keep management informed of potential problem loans. At March 31, 2026 and December 31, 2025, the ACL on loans included a qualitative adjustment of approximately $10.0 million and $10.3 million, respectively.

Previous wording

Total non-performing assets were $7.3 million, or 0.48% of total loans, at September 30, 2025 compared to $4.2 million, or 0.29% of total loans, at December 31, 2024.

Current wording

Total non-performing assets were $6.9 million, or 0.47% of total loans, at March 31, 2026 compared to $7.0 million, or 0.47% of total loans, at December 31, 2025.

Previous wording

Total non-accrual loans at September 30, 2025 increased $1.5 million, or 59.9%, to $4.1 million compared to $2.5 million at December 31, 2024. The increase in non-accrual loans since December 31, 2024 was primarily due to the movement of one commercial relationship to non-accrual status. There were $0.9 million in loans past due 90 days and still accruing interest at September 30, 2025 compared to $0.2 million at December 31, 2024. Other real estate and repossessed assets were $2.4 million and $1.4 million at September 30, 2025 and December 31, 2024, respectively.

Current wording

Total non-accrual loans at March 31, 2026 decreased $0.1 million, or 0.8%, to $6.8 million compared to $6.8 million at December 31, 2025. There were $0.01 million in loans past due 90 days and still accruing interest at March 31, 2026 compared to $0.03 million at December 31, 2025. Other real estate and repossessed assets were $0.1 million at both March 31, 2026 and December 31, 2025.