HAWTHORN BANCSHARES, INC. (Form: 10-K, Received: 03/18/2024 15:55:07)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2023

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________________ to _________________.

Commission file number: 0-23636

HAWTHORN BANCSHARES, INC.

(Exact name of registrant as specified in its charter)


Missouri			43-1626350
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

132 East High Street, Box 688, Jefferson City, Missouri 65102

(Address of principal executive offices) (Zip Code)

(573) 761-6100

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $1.00 par value

HWBK

The Nasdaq Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer o	Accelerated filer o	Non-accelerated Filer ☒

Smaller reporting company ☒	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C 7262(b)) by the registered public accounting firm that prepared or issued its audit report. x

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x

The aggregate market value of the 5,600,627 shares of voting and non-voting common equity of the registrant held by non-affiliates computed by reference to the $17.95 closing price of such common equity on June 30, 2023, the last business day of the registrant's most recently completed second fiscal quarter, was $100,531,255. Aggregate market value excludes an aggregate of 1,438,696 shares of common stock held by officers and directors and by each person known by the registrant to own 5% or more of the outstanding common stock on such date. Exclusion of shares held by any of these persons should not be construed to indicate that such person possesses the power, direct or indirect, to direct or cause the direction of the management or policies of the registrant, or that such person is controlled by or under common control with the registrant. As of March 18, 2024, the registrant had 7,554,893 shares of common stock, par value $1.00 per share, issued and 7,020,548 shares outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the following documents are incorporated by reference into the indicated parts of this report: (1) 2023 Annual Report to Shareholders - Part II and (2) definitive Proxy Statement for the 2024 Annual Meeting of Shareholders to be filed with the Commission pursuant to Regulation 14A - Part III.

PART I

Item 1. Business.

This report and the documents incorporated by reference herein contain forward-looking statements, which are inherently subject to risks and uncertainties. See "Forward Looking Statements" under Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, of this report.

General

Hawthorn Bancshares, Inc. (the "Company"), is a bank holding company registered under the Bank Holding Company Act of 1956, as amended (the "Bank Holding Company Act"). The Company was incorporated under the laws of the State of Missouri on October 23, 1992 as Exchange National Bancshares, Inc. and changed its name to Hawthorn Bancshares, Inc. in August 2007. The Company owns all of the issued and outstanding capital stock of Hawthorn Bank. The Company received approval from the Federal Reserve and elected to become a financial holding company on October 21, 2001.

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

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

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

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

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

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

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

•On December 1, 2006, the Company announced its development of a strategic plan in which, among other things, The Exchange National Bank of Jefferson City, Citizens Union State Bank & Trust, Osage Valley Bank and Bank 10 would be consolidated into a single bank under a Missouri state trust charter. This consolidation was completed in October 2007, and the subsidiary bank is now known as Hawthorn Bank (the "Bank").

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

Except as otherwise provided herein or to the extent the context otherwise requires, references herein to the "Company," "we," "us" or "our" refer to Hawthorn Bancshares, Inc. and its consolidated subsidiaries, and references herein to the "Bank" refers to Hawthorn Bank and its constituent predecessors.

Description of Business

The Company. The Company is a bank holding company registered under the Bank Holding Company Act that has elected to become a financial holding company. The Company's activities currently are limited to ownership of the outstanding capital stock of the Bank and ownership of its other subsidiaries. In addition to ownership of its subsidiaries, the Company may seek expansion through acquisition and may engage in those activities (such as investments in banks or operations that are financial in nature) in which it is permitted to engage under applicable law. It is not currently anticipated that the Company will engage in any business other than that directly related to its ownership of the Bank or other financial institutions.

The Bank. The Bank was founded in 1932 as a Missouri bank and converted to a Missouri trust company on August 16, 1989. However, its predecessors trace their lineage back to the founding of Exchange National Bank in 1865. The Bank has 21 banking offices, including its principal office at 132 East High Street in the central business district of Jefferson City, MO. See "Item 2. Properties".

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

The Bank's deposit accounts are insured by the Federal Deposit Insurance Corporation (the "FDIC") to the extent provided by law. The Bank's operations are supervised and regulated by the FDIC and the Missouri Division of Finance. Periodic examinations of the Bank are conducted by representatives of the FDIC and the Missouri Division of Finance. Such regulations, supervision and examinations are principally for the benefit of depositors, rather than for the benefit of the holders of the Bank's common stock. See "Regulation Applicable to Bank Holding Companies" and "Regulation Applicable to the Bank".

Hawthorn Real Estate, LLC. Hawthorn Real Estate, LLC, a non-bank subsidiary of the Company, was formed in December 2008 in order to purchase and hold various nonperforming assets of the Bank. The purpose for holding these nonperforming assets in Hawthorn Real Estate, LLC is to allow for the orderly disposition of these assets and strengthen the Bank's financial position.

HB Realty, LLC. HB Realty, LLC, a Missouri limited liability company ("HB Realty"), was formed in February 2018 and commenced operations in April 2018. HB Realty is intended to qualify as a "real estate investment trust" under the Internal Revenue Code of 1986, as amended (the "IRC"). HB Realty was formed in order to hold certain mortgage loans and participation interests contributed to it by the Bank. HB Realty was initially capitalized with mortgage loans and participation interests having an approximate aggregate book value of $404,665,296. As of December 31, 2023, the approximate aggregate book value of the mortgage loans held by HB Realty was $563,150,351. Effective September 30, 2022, to comply with collateral eligibility requirements of the Federal Home Loan Bank with whom the Bank maintains credit facilities, any participation interest in mortgage loans owned by HB Realty as of that date were converted into mortgage loans owned by HB Realty and, after that date, HB Realty will only acquire mortgage loans from the Bank, not participation interests.

Initially, the Bank was the sole common member and the sole preferred member of HB Realty, owning all 1,000 common shares and all 1,000 preferred shares. On April 1, 2018, the Bank contributed all 1,000 common shares and 850 preferred shares to Jefferson City IHC, LLC, a Missouri limited liability company that is wholly owned by the Bank ("JCIHC"). Under the IRC, a real estate investment trust must have at least 100 owners. Pursuant to a newly established Hawthorn Bank Real Estate Investment Trust Ownership Plan, the Bank made available to certain of its employees, as an employee benefit, up to a total of 150 preferred shares of HB Realty. Each selected employee was given the opportunity to own one preferred share of HB Realty. These preferred shares were transferred to employees beginning in January 2019. Each preferred share is generally entitled to an annual dividend of $30 and a liquidation amount of $500. Although dividends are not guaranteed, it is expected that HB Realty will pay dividends in December of each year. By virtue of its ownership of JCIHC, the Bank indirectly owns the remaining economic interest associated with membership interests in HB Realty.

Through its ownership of JCIHC, the Bank is, indirectly, the controlling member of HB Realty and is entitled to control the appointment of managers of HB Realty. The Board of Managers of HB Realty, which is responsible for the management of the business and affairs of HB Realty, is currently comprised of Brent M. Giles, Kathleen L. Bruegenhemke, Gregg A. Bexten and Chris E. Hafner.

Hawthorn Risk Management, Inc., a non-bank subsidiary of the Company, which was formed and began operations on December 28, 2017, was a Missouri-based captive insurance company which provided property and casualty insurance coverage to the Company and the Bank for which insurance was not then available or economically feasible in the insurance marketplace. Hawthorn Risk Management, Inc. pooled resources with several other similar insurance company subsidiaries of financial institutions to spread a limited amount of risk among themselves. This subsidiary was dissolved as of December 1, 2023.

Employees

As of December 31, 2023, the Company and its subsidiaries had approximately 270 full-time and 14 part-time employees. None of its employees is presently represented by any union or collective bargaining group, and the Company considers its employee relations to be satisfactory.

Competition

Bank holding companies and their subsidiaries and affiliates encounter intense competition from both banking and nonbanking sources in all of their activities. The Bank's competitors include other commercial banks, thrifts, savings banks, credit unions, and money market mutual funds. Thrifts and credit unions now have the authority to offer checking accounts and to make corporate and agricultural loans and were granted expanded investment authority by recent federal regulations. In addition, large national and multinational corporations have in recent years become increasingly visible in offering a broad range of financial services to all types of commercial and consumer customers. In the Bank's service areas, new competitors, as well as the expanding operations of existing competitors, have had, and are expected to continue to have, an adverse impact on the Bank's market share of deposits and loans in such service areas.

The Bank experiences substantial competition for deposits and loans within both its primary service areas of the cities of Jefferson City, Columbia, Clinton, Lee's Summit, Warsaw, and Springfield, Missouri, as well as within its secondary service areas of the nearby communities in the Missouri counties of Cole, Boone, Henry, Cass, Benton, and Greene. The Bank's principal competition for deposits and loans comes from other banks within its primary service areas and, to an increasing extent, other banks located in its secondary service areas. Based on publicly available information, management believes that the Bank is the second largest (in terms of deposits) of the 11 banks within Cole county, the eleventh largest (in terms of deposits) of the 21 banks within Boone county, the largest (in terms of deposits) of the 8 banks within Henry county, the third largest (in terms of deposits) of the 18 banks within Cass county, and the second largest (in terms of deposits) of the 5 banks within Benton county. The main competition for Hawthorn Bank's trust services is from other commercial banks, including those of the Kansas City metropolitan area.

Regulation Applicable to Bank Holding Companies

General. As a registered bank holding company and a financial holding company under the Bank Holding Company Act and the Gramm-Leach-Bliley Act, the Company is subject to supervision and examination by the Board of Governors of the Federal Reserve System (the "FRB"). The FRB has authority to issue cease and desist orders against bank holding companies if it determines that their actions represent unsafe and unsound practices or violations of law. In addition, the FRB is empowered to impose civil money penalties for violations of banking statutes and regulations. Regulation by the FRB is intended to protect depositors of the Bank, not the shareholders of the Company. The Company is also subject to a number of restrictions and requirements imposed by the Sarbanes-Oxley Act of 2002 relating to internal control over financial reporting, disclosure controls and procedures, loans to directors or executive officers of the Company and its subsidiaries, the preparation and certification of the Company's consolidated financial statements, the duties of the Company's audit committee, relations with and functions performed by the Company's independent registered public accounting firm, and various accounting and corporate governance matters.

Limitation on Activities. The activities of bank holding companies are generally limited to the business of banking, managing or controlling banks, and other activities that the FRB has determined to be so closely related to banking or managing or controlling banks as to be a proper incident thereto. In addition, under the Gramm-Leach-Bliley Act, a bank holding company, all of whose controlled depository institutions are "well capitalized" and "well managed" (as defined in federal banking regulations) with "satisfactory" ratings under the Community Reinvestment Act, may declare itself to be a "financial holding company" and engage in a broader range of activities. As noted above, the Company is registered as a financial holding company.

A financial holding company may affiliate with securities firms and insurance companies and engage in other activities that are financial in nature or incidental or complementary to activities that are financial in nature. "Financial in nature" activities include:

•securities underwriting, dealing and market making;

•sponsoring mutual funds and investment companies;

•insurance underwriting and insurance agency activities;

•merchant banking; and

•activities that the FRB determines to be financial in nature or incidental to a financial activity or which are complementary to a financial activity and does not pose a safety and soundness risk.

A financial holding company that desires to engage in activities that are financial in nature or incidental to a financial activity but not previously authorized by the FRB must obtain approval from the FRB before engaging in such activity. Additionally, a financial holding company may seek FRB approval to engage in an activity that is complementary to a financial activity, if it shows, among other things, that the activity does not pose a substantial risk to the safety and soundness of its insured depository institutions or the financial system.

A financial holding company generally may acquire a company (other than a bank holding company, bank or savings association) engaged in activities that are financial in nature or incidental to activities that are financial in nature without prior approval from the FRB. Prior FRB approval is required, however, before the financial holding company may acquire control of more than 5% of the voting shares or substantially all of the assets of a bank holding company, bank or savings association. In addition, under the FRB's merchant banking regulations, a financial holding company is authorized to invest in companies that engage in activities that are not financial in nature, as long as the financial holding company makes its investment with the intention of limiting the duration of the investment, does not manage the company on a day-to-day basis, and the company does not cross-market its products or services with any of the financial holding company's controlled depository institutions.

•securities underwriting, dealing and market making;

•sponsoring mutual funds and investment companies;

•insurance underwriting and insurance agency activities;

•merchant banking; and

•activities that the FRB determines to be financial in nature or incidental to a financial activity or which are complementary to a financial activity and does not pose a safety and soundness risk.

Limitation on Acquisitions. The Bank Holding Company Act requires a bank holding company to obtain prior approval of the FRB before:

•taking any action that causes a bank to become a controlled subsidiary of the bank holding company;

•acquiring direct or indirect ownership or control of voting shares of any bank or bank holding company, if the acquisition results in the acquiring bank holding company having control of more than 5% of the outstanding shares of any class of voting securities of such bank or bank holding company, and such bank or bank holding company is not majority-owned by the acquiring bank holding company prior to the acquisition;

•acquiring substantially all of the assets of a bank; or

•merging or consolidating with another bank holding company.

Regulatory Capital Requirements. The FRB has issued risk-based and leverage capital guidelines applicable to United States ("U.S.") banking organizations. If a bank holding company's capital falls below minimum required levels, then the bank holding company must implement a plan to increase its capital, and its ability to pay dividends and make acquisitions of new bank subsidiaries may be restricted or prohibited. In July 2013, the federal banking agencies announced new risk-based capital and leverage ratios that became applicable to us on January 1, 2015 (the "Basel III Rules").

The Basel III Rules established three components of regulatory capital: (1) common equity tier 1 (“CET1”) capital, (2) additional tier 1 ("AT1") capital, and (3) tier 2 ("Tier 2") capital. CET1 capital generally includes common stock instruments and related surplus (net of treasury stock), retained earnings, and, subject to certain adjustments, minority common equity interests in subsidiaries, less goodwill and certain other adjustments. Tier 1 ("Tier 1") capital generally includes CET1 capital plus elements of AT1 capital, such as non-cumulative perpetual preferred stock and similar instruments meeting specified criteria and minority interests in subsidiaries that do not satisfy the requirements for treatment as CET1 capital. Cumulative preferred stock (other than cumulative preferred stock issued to the U.S. Treasury under the Capital Purchase Program or the Small Business Lending Fund) does not qualify as AT1 capital. Trust-preferred securities and other non-qualifying capital instruments issued prior to May 19, 2010 by bank and savings and loan holding companies with less than $15 billion in assets as of December 31, 2009 or by mutual holding companies may continue to be included in Tier 1 capital but will be phased out over ten years beginning in 2016 for all other banking organizations. These non-qualifying capital instruments, however, may be included in Tier 2 capital. Tier 2 capital may also include certain qualifying debt and the allowance for credit losses up to 1.25% of risk-weighted assets and other adjustments.

The Basel III Rules provide for a number of deductions from and adjustments to CET1 capital. These include, for example, the requirement that mortgage servicing rights, deferred tax assets dependent upon future taxable income and investments in the capital of unconsolidated financial institutions be deducted from CET1 capital to the extent that any one such category exceeds 10% of CET1 capital or all such categories in the aggregate exceed 15% of CET1 capital. Beginning April 1, 2020, this framework for regulatory capital deductions to CET1 capital was simplified by increasing the deduction threshold to 25% at the individual level for each of the aforementioned categories. Pursuant to the Basel III Rules, the effects of certain accumulated other comprehensive income or loss (“AOCI”) items are not excluded; however, “non-advanced approaches banking organizations,” including the Company and the Bank, could make a one-time permanent election to continue to exclude these items. The Company made its one-time, permanent election to continue to exclude AOCI items from capital in its filing with the FRB for the quarter ended March 31, 2015. If the Company would not have made this election, unrealized gains and losses would have been included in the calculation of its regulatory capital.

The sum of the three tiers of capital less investments in unconsolidated subsidiaries represents the total capital. The risk-based capital ratios are calculated by dividing CET1 capital, Tier 1 capital and total capital by risk-weighted assets (including certain off-balance sheet activities). Under the Basel III Rules, the minimum capital ratios are:

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

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

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

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

In addition to the higher requirements, the Basel III Rules established bank holding companies are required to maintain a CET1 capital conservation buffer of at least 2.5% of risk-weighted assets over and above the minimum risk-based capital requirements. Institutions that do not maintain the required capital buffer will become subject to progressively more stringent limitations on the percentage of earnings that can be paid out in dividends or used for stock repurchases and on the payment of discretionary bonuses to senior executive management. The capital conservation buffer requirement was phased in over four years beginning in 2016. The capital conservation buffer requirement of 2.5%, effectively raised the minimum required risk-based capital ratios to 7% CET1 capital, 8.5% Tier 1 capital and 10.5% total capital on a fully phased-in basis as of December 31, 2019.

On December 31, 2023 the Company was in compliance with the FRB's capital adequacy guidelines. The Company's capital ratios calculated under the Basel III Rules (minimum plus a 2.5% capital conservation buffer) on December 31, 2023 are as follows:


Tier 1 Leverage Ratio (4%) (min requirement)		CET1 Risk- Based Capital Ratio (7.0%) (min requirement plus buffer)		Tier 1 Risk-Based Capital Ratio (8.5%) (min requirement plus buffer)		Total Risk-Based Capital Ratio (10.5%) (min requirement plus buffer)
10.29	%	9.73	%	12.59	%	13.99	%

The Economic Growth, Regulatory Relief, and Consumer Protection Act (the "EGRRCPA") directs the federal banking agencies to develop a specified community bank leverage ratio (the "CBLR") (that is, the ratio of a bank's equity capital to its consolidated assets) of not less than 8% and not more than 10%. On November 4, 2019, federal regulators issued final rules that provide certain banks and their holding companies with the option to elect out of complying with the

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

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

•a CBLR greater than 9%;

•total consolidated assets of less than $10 billion;

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

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

A QCBO may elect out of complying with the Basel III Rules if, at the time of the election, the QCBO has a CBLR above 9%. The CBLR is generally calculated in accordance with the regulations for calculating the Tier 1 leverage ratio under the regulatory capital framework discussed above and below, with certain specified exceptions. As of December 31, 2023, the Company and the Bank each qualified to elect the CBLR framework because they had a CBLR of greater than 9% and satisfied the other requirements. The Company does not have immediate plans to elect to use the CBLR framework but may make such an election in the future.

Interstate Banking and Branching. Under the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the "Riegle-Neal Act"), a bank holding company is permitted to acquire the stock or substantially all of the assets of banks located in any state regardless of whether such transaction is prohibited under the laws of any state. The FRB will not approve an interstate acquisition if, as a result of the acquisition, the bank holding company would control more than 10% of the total amount of insured deposits in the U.S. or would control more than 30% of the insured deposits in the home state of the acquired bank. The 30% of insured deposits state limit does not apply if the acquisition is the initial entry into a state by a bank holding company or if the home state waives such limit. The Riegle-Neal Act also authorizes banks to merge across state lines, thereby creating interstate branches. The Bank and Savings Association Holding Company and Depository Institution Regulatory Improvements Act of 2010, a subset of the Dodd-Frank Act (defined below), permits banks to acquire and establish de novo branches in other states if a state bank in that other state would be permitted to establish the branch.

Under the Riegle-Neal Act, individual states may restrict interstate acquisitions in two ways. A state may prohibit an out-of-state bank holding company from acquiring a bank located in the state unless the target bank has been in existence for a specified minimum period of time (not to exceed five years). A state may also establish limits on the total amount of insured deposits within the state which are controlled by a single bank holding company, provided that such deposit limit does not discriminate against out-of-state bank holding companies.

Source of Strength. Bank holding companies, such as the Company, are required by statute to serve as a source of financial strength for their subsidiary depository institutions, by providing financial assistance to their insured depository institution subsidiaries in the event of financial distress. Under the source of strength requirement, the Company could be required to provide financial assistance to the Bank should it experience financial distress. Furthermore, the FRB has the right to order a bank holding company to terminate any activity that the FRB believes is a serious risk to the financial safety, soundness or stability of any subsidiary bank. The regulators may require these and other actions in support of controlled banks even if such action is not in the best interests of the bank holding company or its stockholders.

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

Bank Secrecy Act and USA PATRIOT Act. The Company and the Bank must comply with the requirements of the Bank Secrecy Act, which was enacted to prevent banks and other financial service providers from being used as intermediaries for, or to hide the transfer or deposit of money derived from, drug trafficking, money laundering, and other crimes. Since its passage, the Bank Secrecy Act has been amended several times. These amendments include the Money Laundering Control Act of 1986, which made money laundering a criminal act, as well as the Money Laundering Suppression Act of 1994, which required regulators to develop enhanced examination procedures and increased examiner training to improve the identification of money laundering schemes in financial institutions. The USA PATRIOT Act,

established in 2001, substantially broadened the scope of U.S. anti-money laundering laws and regulations by imposing significant new compliance and due diligence obligations, creating new crimes and penalties and expanding the extra-territorial jurisdiction of the U.S. The regulations impose obligations on financial institutions to maintain appropriate policies, procedures and controls to detect, prevent, and report money laundering and terrorist financing. The regulations include significant penalties for non-compliance.

Missouri Bank Holding Company Regulation. Missouri prohibits any bank holding company from acquiring ownership or control of any bank or Missouri depository trust company that has Missouri deposits if, after such acquisition, the bank holding company would hold or control more than 13% of total Missouri deposits. Because of this restriction, among others, a bank holding company, prior to acquiring control of a bank or depository trust company that has deposits in Missouri, must receive the approval of the Missouri Division of Finance.

Regulation Applicable to the Bank

General. The Bank, a Missouri state non-member depository trust company, is subject to the regulation of the Missouri Division of Finance and the FDIC. The FDIC is empowered to issue cease and desist orders against the Bank if it determines that any activities of the Bank represent unsafe and unsound banking practices or violations of law. In addition, the FDIC has the power to impose civil money penalties for violations of banking statutes and regulations. Regulation by these agencies is designed to protect the depositors of the Bank, not the shareholders of the Company.

Bank Regulatory Capital Requirements. The FDIC has adopted minimum capital requirements applicable to state non-member banks, which are similar to the capital adequacy guidelines established by the FRB for bank holding companies. Federal banking laws classified an insured financial institution in one of the following five categories, depending upon the amount of its regulatory capital:

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

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

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

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

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

Federal regulatory agencies are required to take prompt corrective action against undercapitalized financial institutions. As of December 31, 2023, the Bank was classified as "well-capitalized," which is required for the Company to remain a financial holding company.

The capital ratios and classifications of the Bank as of December 31, 2023 and the minimum requirements to be considered well-capitalized are as follows:


Tier 1 Leverage Ratio (5.0% minimum requirement)		CET1 Risk- Based Capital Ratio (6.5%) (min requirement)		Tier 1 Risk-Based Capital Ratio (8.0%) (min requirement)		Total Risk-Based Capital Ratio (10.0%) (min requirement)
10.31	%	12.67	%	12.67	%	13.91	%

Limitations on Interest Rates and Loans to One Borrower. The rate of interest a bank may charge on certain classes of loans is limited by state and federal law. At certain times in the past, these limitations have resulted in reductions of net interest margins on certain classes of loans. Federal and state laws impose additional restrictions on the lending activities of banks. The maximum amount that a Missouri state-chartered bank may lend to any one person or entity is

generally limited to 15% of the unimpaired capital of the bank located in a city having a population of 100,000 or more, 20% of the unimpaired capital of the bank located in a city having a population of less than 100,000 and over 7,000, and 25% of the unimpaired capital of the bank if located elsewhere in the state. In the case of Missouri state-chartered banks with a composite rating of 1 or 2 under the Capital, Assets, Management, Earnings, Liquidity and Sensitivity (CAMELS) rating system, the maximum amount is the greater of (i) the limits listed in the foregoing sentence or (ii) 25% of the unimpaired capital of the bank.

Payment of Dividends. The Company's primary source of funds is dividends from the Bank, and the Bank is subject to federal and state laws limiting the payment of dividends. Under the FDIA, an FDIC-insured institution may not pay dividends while it is undercapitalized or if payment would cause it to become undercapitalized. The National Bank Act and Missouri banking law also prohibit the declaration of a dividend out of the capital and surplus of the Bank.

Community Reinvestment Act. The Bank is subject to the Community Reinvestment Act and implementing regulations. These regulations establish the framework and criteria by which the bank regulatory agencies assess an institution's record of helping to meet the credit needs of its community, including low- and moderate-income neighborhoods. Community Reinvestment Act ratings are taken into account by regulators in reviewing certain applications made by the Company and the Bank. On October 24, 2023, the federal banking regulators issued a joint notice of final rulemaking to modernize the Community Reinvestment Act regulatory framework. The final rule is intended, among other things, to adapt to changes in the banking industry, including the expanded role of mobile and online banking, and to tailor performance standards to account for differences in bank size and business models. The final rule adjusts Community Reinvestment Act evaluations based on bank size and type, with many of the changes applying only to banks with over $2 billion in assets, and several applying only to banks with over $10 billion in assets. The final rule takes effect April 1, 2024, with staggered compliance dates of January 1, 2026, and January 1, 2027. The Company will evaluate the effects of the final rule on the Bank prior to the applicable compliance date and review its Community Reinvestment Act program in connection therewith.

Limitations on Transactions with Affiliates. The Company and its non-bank subsidiaries are "affiliates" within the meaning of the Federal Reserve Act. The amount of loans or extensions of credit which the Bank may make to non-bank affiliates, or to third parties secured by securities or obligations of the non-bank affiliates, are substantially limited by the Federal Reserve Act and the FDIA. Such acts further restrict the range of permissible transactions between a bank and an affiliated company. A bank and its subsidiaries may engage in certain transactions, including loans and purchases of assets, with an affiliated company only if the terms and conditions of the transaction, including credit standards, are substantially the same as, or at least as favorable to the bank as, those prevailing at the time for comparable transactions with non-affiliated companies or, in the absence of comparable transactions, on terms and conditions that would be offered to non-affiliated companies.

Other Banking Activities. The investments and activities of the Bank are also subject to regulation by federal and state banking agencies regarding, among other things, investments in subsidiaries, investments for their own account (including limitations on investments in junk bonds and equity securities), loans to officers, directors and their affiliates, security requirements, anti-tying limitations, anti-money laundering, financial privacy and customer identity verification requirements, truth-in-lending, the types of interest bearing deposit accounts which it can offer, trust department operations, brokered deposits, audit requirements, issuance of securities, branching and mergers and acquisitions.

Changes in Laws and Monetary Policies

Recent Legislation. Various pieces of legislation, including proposals to change substantially the financial institution regulatory system, are from time to time introduced and considered by the Missouri state legislature and the U.S. Congress. In July 2010, President Barack Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act"), which enacted substantial changes to the legal framework of the entire financial services industry. The Dodd-Frank Act mandates the passage of numerous rules and regulations by various regulatory agencies over the next few years. It also creates the Consumer Financial Protection Bureau, which will overtake supervision of most providers of consumer financial products and services, and will be empowered to declare acts or practices related to the delivery of a consumer financial product or service to be "unfair, deceptive or abusive." This law will continue to change banking regulation and the operating environment of the Company in substantial and unpredictable ways. These changes could increase or decrease the cost of doing business, limit or expand permissible activities or affect the competitive balance among banks, savings associations, credit unions and other financial institutions. The Company cannot predict the impact that the Dodd-Frank Act, and the various regulations issued thereunder will have on its business.

Key provisions of the EGRRCPA as it relates to community banks and bank holding companies include, but are not limited to: (i) designating mortgages held in portfolio as "qualified mortgages" for banks with less than $10 billion in assets, subject to certain documentation and product limitations; (ii) exempting banks with less than $10 billion in assets (and total trading assets and trading liabilities of 5% or less of total assets) from Volcker Rule requirements relating to proprietary trading; (iii) simplifying capital calculations for banks with less than $10 billion in assets by requiring federal banking agencies to establish a CBLR of tangible equity to average consolidated assets of not less than 8% or more than 10%, and provide that banks that maintain tangible equity in excess of such ratio will be deemed to be in compliance with risk-based capital and leverage requirements; (iv) assisting smaller banks with obtaining stable funding by providing an exception for reciprocal deposits from FDIC restrictions on acceptance of brokered deposits; (v) raising the eligibility for use of short-form Call Reports from $1 billion to $5 billion in assets; (vi) clarifying definitions pertaining to high-volatility commercial real estate, which require higher capital allocations, so that only loans with increased risk are subject to higher risk weightings; and (vii) changing the eligibility for use of the small bank holding company policy statement from institutions with under $1 billion in assets to institutions with under $3 billion in assets.

Fiscal Monetary Policies. The Company's business and earnings are affected significantly by the fiscal and monetary policies of the federal government and its agencies. The Company is particularly affected by the policies of the FRB, which regulates the supply of money and credit in the U.S. Among the instruments of monetary policy available to the FRB are:

•conducting open market operations in U.S. government securities;

•changing the discount rates of borrowings of depository institutions;

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

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

These methods are used in varying degrees and combinations to directly affect the availability of bank loans and deposits, as well as the interest rates charged on loans and paid on deposits. The policies of the FRB have a material effect on the Company's business, results of operations and financial condition.

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

Available Information

The address of the Company's principal executive offices is 132 East High Street, Jefferson City, Missouri 65101 and the telephone number at this location is (573) 761-6100. The Company's common stock trades on the Nasdaq Global Select Market under the symbol "HWBK".

We electronically file certain documents with the Securities and Exchange Commission (the "SEC"). We file annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K (as appropriate), along with any related amendments and supplements. From time-to-time, we also may file registration and related statements pertaining to equity or debt offerings. You may read and download the Company's SEC filings over the internet from several commercial document retrieval services as well as at the SEC's internet website (www.sec.gov).

The Company's internet website address is www.hawthornbancshares.com. Under the "Documents" menu tab of our website, we make available, without charge, the Company's public filings with the SEC, including the Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, or any amendments to those reports filed or furnished to the SEC pursuant to Section 13(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Please note that any internet addresses provided in this report are for information purposes only and are not intended to be hyperlinks. Accordingly, no information found and/or provided at such internet addresses is intended or deemed to be incorporated by reference herein.

Item 1A. Risk Factors.

Risk Factors

We are identifying important risks and uncertainties that could affect the Company's results of operations, financial condition or business and that could cause them to differ materially from the Company's historical results of operations, financial condition or business, or those contemplated by forward-looking statements made herein or elsewhere, by, or on behalf of, the Company. Factors that could cause or contribute to such differences include, but are not limited to, those factors described below. The risk factors highlighted below are not necessarily the only ones that the Company faces.

Risks Relating to Our Business and Market

Because We Primarily Serve Central and West Central Missouri, a Decline in the Local Economic Conditions Could Lower the Company's Profitability. The profitability of the Company is dependent on the profitability of the Bank, which operates out of central and west-central Missouri. The financial condition of the Bank is affected by slowing or recessionary economic conditions and business activity prevailing in the portion of Missouri in which its operations are located. Although our customers' business and financial interests may extend well beyond our market areas, the financial conditions of both the Company and the Bank would be adversely affected by deterioration in the general economic and real estate climate in Missouri.

An increase in unemployment, a decrease in profitability of regional businesses or real estate values, or an increase in interest rates are among the factors that could weaken the local economy. With a weaker local economy:

•customers may not want or need the products and services of the Bank,

•borrowers may be unable to repay their loans,

•the value of the collateral security of the Bank's loans to borrowers may decline,

•the number of loan delinquencies and foreclosures may increase, and

•the overall quality of the Bank's loan portfolio may decline.

Originating mortgage loans and consumer loans are a significant source of profits for the Bank. If individual customers in the local area do not want or need these loans, profits may decrease. Although the Bank could make other investments, the Bank may earn less revenue on these investments than on loans. Additionally, the Bank's losses on loans may increase if borrowers are unable to make payments on their loans.

Interest Rate Changes May Reduce the Profitability of the Company and the Bank. The primary source of earnings for the Bank is net interest income. To be profitable, the Bank has to earn more money in interest and fees on loans and other interest-earning assets than it pays as interest on deposits and other interest-bearing liabilities and as other expenses. If prevailing interest rates decrease, the amount of interest the Bank earns on loans and investment securities may decrease more rapidly than the amount of interest the Bank has to pay on deposits and other interest-bearing liabilities. This would result in a decrease in the profitability of the Company and the Bank.

Changes in the level or structure of interest rates also affect:

•the Bank's ability to originate loans,

•the value of the Bank's loan and securities portfolios,

•the Bank's ability to realize gains from the sale of loans and securities,

•the average life of the Bank's deposits, and

•the Bank's ability to obtain deposits.

Fluctuations in interest rates will ultimately affect both the level of income and expense recorded on a large portion of the Bank's assets and liabilities, and the fair value of all interest-earning assets, other than interest-earning assets that mature in the short term. In the fourth quarter of 2023, the Company repositioned its balance sheet by selling $83.7 million in book value of investment securities for an after-tax realized loss of $9.1 million. The Bank's interest rate management strategy is designed to stabilize net interest income and preserve capital over a broad range of interest rate

movements by matching the interest rate sensitivity of assets and liabilities. Although the Company believes that the Bank's current mix of loans, mortgage-backed securities, investment securities and deposits is reasonable, significant fluctuations in interest rates may have a negative effect on the profitability of the Bank.

Our Business Depends On Our Ability to Successfully Manage Credit Risk. The operation of our business requires us to manage credit risk. As a lender, the Bank is exposed to the risk that borrowers will be unable to repay their loans according to their terms, and that the collateral securing repayment of their loans, if any, may not be sufficient to ensure repayment. In addition, there are risks inherent in making any loan, including risks with respect to the period of time over which the loan may be repaid, risks relating to proper loan underwriting, risks resulting from changes in economic and industry conditions and risks inherent in dealing with individual borrowers. In order to successfully manage credit risk, we must, among other things, maintain disciplined and prudent underwriting standards and ensure that our loan officers follow those standards. The weakening of these standards for any reason, such as an attempt to attract higher yielding loans, a lack of discipline or diligence by our employees in underwriting and monitoring loans, the inability of our employees to adequately adapt policies and procedures to address changes in economic or other conditions affecting borrowers (such as the current recessionary environment and higher interest rates) and the quality of our loan portfolio, may result in loan defaults, foreclosures and additional charge-offs and may necessitate that we significantly increase our allowance for credit losses, each of which could adversely affect our net income. As a result, our inability to successfully manage credit risk could have a material adverse effect on our business, financial condition or results of operations.

The Company's Profitability Depends On The Bank's Asset Quality and Lending Risks. Success in the banking industry largely depends on the quality of loans and other assets. A significant source of risk for us arises from the possibility that losses will be sustained because borrowers, guarantors and related parties may fail to perform in accordance with the terms of their loans. The Bank's loan officers are actively encouraged to identify deteriorating loans. Loans are also monitored and categorized through an analysis of their payment status. The Bank's failure to timely and accurately monitor the quality of its loans and other assets could have a materially adverse effect on the operations and financial condition of the Company and the Bank. There is a degree of credit risk associated with any lending activity. The Bank attempts to minimize its credit risk through loan diversification. Although the Bank's loan portfolio is varied, with no undue concentration in any one industry, substantially all of the loans in the portfolio have been made to borrowers in central, west central, and southwest Missouri. Therefore, the loan portfolio is susceptible to factors affecting the central, west central, and southwest Missouri area and the level of non-performing assets is heavily dependent upon local conditions. There can be no assurance that the level of the Bank's non-performing assets will not increase above current levels. High levels of non-performing assets could have a materially adverse effect on the operations and financial condition of the Company and the Bank.

The Provision for Probable Credit Losses May Need to Be Increased. The Bank makes a provision for credit losses based upon management's estimate of probable losses in the loan portfolio and its consideration of prevailing economic and environmental conditions. The amount of future loan losses is susceptible to changes in economic, operating and other conditions, including changes in interest rates, which may be beyond the Company's control, and these losses may exceed current estimates. We cannot fully predict the amount or timing of losses or whether the loss allowance will be adequate in the future. The Bank may need to increase the provision for credit losses through additional provisions in the future if, among other things, the financial condition of any of its borrowers deteriorates, if its borrower fails to perform its obligations to it, or if real estate values decline. Furthermore, various regulatory agencies, as an integral part of their examination process, periodically review the Bank's loan portfolio, provision for credit losses, and real estate acquired by foreclosure. Such agencies may require the Bank to recognize additions to the provision for credit losses based on their judgments of information available to them at the time of the examination. Any additional provision for probable credit losses, whether required as a result of regulatory review or initiated by the Company itself, may materially alter the financial outlook of the Company and the Bank and may have a material adverse effect on the Company's financial condition and results of operations.

On January 1, 2023, the Company adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), which sets forth the current expected credit loss standard, or CECL. Previously, the impairment model was based on incurred losses, and investments were recognized as impaired when there was no longer an assumption that future cash flows would be collected in full under the originally contracted terms. Under the new CECL model, we are required to use historical information, current conditions and reasonable forecasts to estimate the expected loss over the life of the loan and record an allowance that, when deducted from the amortized cost basis of the financial asset, presents the net amount expected to be collected on the financial asset. The CECL model is expected to result in more timely recognition of credit losses. The ASU requires new disclosures for financial assets measured at amortized cost, loans and available-for-sale debt securities. Entities are required to apply the standard's provisions as a cumulative-effect adjustment to retained earnings as

of the beginning of the first reporting period in which the guidance is adopted. The adoption of the standard by the Company resulted in an increase to the allowance for credit losses of $5.8 million and a liability for unfunded commitments totaling $1.3 million. These one-time cumulative adjustments resulted in a $5.6 million tax-effected decrease to retained earnings. The transition to the CECL model brings with it significantly greater data requirements and changes to methodologies to accurately account for expected losses under the new parameters.

Adverse Market Conditions in the U.S. Economy and the Markets in Which We Operate Could Adversely Impact the Company's Business. Unfavorable or uncertain economic and market conditions, including slowing or recessionary economic conditions, reduced availability of commercial credit, and increasing unemployment may negatively impact the credit performance of commercial and consumer credit, resulting in additional write-downs. Concerns over the stability of the financial markets and the economy have resulted in decreased lending by financial institutions to their customers and to each other. This market turmoil and tightening of credit has led to increased commercial and consumer deficiencies, lack of customer confidence, increased market volatility and widespread reduction in general business activity. Competition among depository institutions for deposits has increased significantly. Financial institutions have experienced decreased access to deposits or borrowings.

Smaller Commercial Borrowers May Have Fewer Financial Resources, Which May Impair Their Ability to Repay Loans. We provide lending to many small- to medium-sized customers, which frequently have fewer financial resources than larger entities (in terms of capital or borrowing capacity). Accordingly, these businesses may be more vulnerable to economic downturns, often need substantial additional capital to expand or compete, and may experience substantial volatility in operating results, any of which may impair the borrower's ability to repay a loan. If these or other borrowers are harmed by adverse business conditions in the markets in which we operate, it may result in an adverse effect to the business, financial condition and results of operations of the Company or the Bank.

The Soundness of Other Financial Institutions Could Adversely Affect Us. The Company's ability to engage in routine funding transactions could be adversely affected by the actions and commercial soundness of other financial institutions. Financial services institutions are interrelated as a result of trading, clearing, counterparty or other relationships. We have exposure to many different industries and counterparties, and we routinely execute transactions with counterparties in the financial industry, including brokers and dealers, commercial banks, investment banks, mutual and hedge funds, and other institutional clients. As a result, defaults by, or even rumors or questions about, one or more financial services institutions, or the financial services industry generally, have led to market-wide liquidity problems and could lead to losses or defaults by us or by other institutions. Many of these transactions expose us to credit risk in the event of default of a counterparty or client. In addition, the Company's credit risk may be exacerbated when the collateral held by us cannot be realized upon or is liquidated at prices not sufficient to recover the full amount of the loan or derivative exposure due us. There is no assurance that any such losses would not materially and adversely affect the Company's results of operations.

The recent bank failures of Silicon Valley Bank in California, Signature Bank in New York, and First Republic Bank in California during the first and second quarters of 2023 have caused a degree of panic and uncertainty in the investor community and among bank customers generally. While the Company does not believe that the circumstances of these three banks' failures are indicators of broader issues with the banking system, the failures may reduce customer confidence, affect sources of funding and liquidity, increase regulatory requirements and costs, adversely affect financial markets and/or have a negative reputational ramification for the banking industry, including the Company. The Company will continue to monitor the ongoing events concerning these three banks as well as any future potential bank failures and volatility within the banking industry generally, together with any responsive measures taken by the banking regulators to mitigate or manage potential turmoil in the banking industry.

Liquidity risk could impair our ability to fund operations and meet our obligations as they become due, and failure to maintain sufficient liquidity could materially adversely affect our growth, business, profitability and financial condition. Liquidity is essential to our business. Liquidity risk is the potential that we will be unable to meet our obligations as they become due because of an inability to liquidate assets or obtain adequate funding at a reasonable cost, in a timely manner and without adverse conditions or consequences. We require sufficient liquidity to fund asset growth, meet customer loan requests, customer deposit maturities and withdrawals, payments on our debt obligations as they become due and other cash commitments under both normal operating conditions and other unpredictable circumstances, including events causing industry or general financial market stress. Liquidity risk can increase due to a number of factors, including an over-reliance on a particular source of funding or market-wide phenomena such as market dislocation and major disasters. Factors that could detrimentally impact access to liquidity sources include, but are not limited to, a decrease in the level of our business activity as a result of a slowdown in our market, adverse regulatory actions against us, or changes

in the liquidity needs of our depositors. Market conditions or other events could also negatively affect the level or cost of funding, affecting our ongoing ability to accommodate liability maturities and deposit withdrawals, meet contractual obligations, and fund asset growth and new business transactions at a reasonable cost, in a timely manner, and without adverse consequences. Our inability to raise funds through deposits, borrowings, the sale of loans, other sources, and our ability to maintain sufficient deposits, could have a substantial negative effect on our business, and could result in the closure of the Bank. Our access to funding sources in amounts adequate to finance our activities or on acceptable terms could be impaired by factors that affect our organization specifically or the financial services industry or economy in general. Any substantial, unexpected, and/or prolonged change in the level or cost of liquidity could impair our ability to fund operations and meet our obligations as they become due and could have a material adverse effect on our business, financial condition and results of operations.

We rely on customer deposits, including brokered deposits, and to a lesser extent on advances from the FHLB and federal funds purchased to fund our operations. Although we have historically been able to replace customer deposit withdrawals, maturing deposits, and advances if desired, we may not be able to replace such funds in the future if our financial condition, the financial condition of the FHLB or market conditions were to change. FHLB borrowings and other current sources of liquidity may not be available or, if available, sufficient to provide adequate funding for operations.

Deterioration in the Housing Market Could Cause Further Increases in Delinquencies and Non-Performing Assets, Including Loan Charge-Offs, and Depress the Company's Income and Growth. The volume of one-to-four family residential mortgages and home equity lines of credit may decrease during economic downturns as a result of, among other things, a decrease in real estate values, an increase in unemployment, a slowdown in housing price appreciation or increases in interest rates. These factors could reduce earnings and consequently the Company's financial condition because:

•borrowers may not be able to repay their loans;

•the value of the collateral securing loans may decline further;

•the quality of the Company's loan portfolio may decline further; and

•customers may not want or need the Company's products and services.

Any of these scenarios could cause an increase in delinquencies and non-performing assets, require us to charge-off a higher percentage of loans, increase substantially the provision for losses on loans, or make fewer loans, which would reduce income.

The FDIC's Changes in the Calculation of Deposit Insurance Premiums and Ability to Levy Special Assessments Could Increase the Company's Non-Interest Expense and May Reduce Its Profitability. The range of base assessment rates historically varies from 12 to 45 basis points depending on an institution's risk category, with newly added financial measures resulting in increased assessment rates for institutions heavily relying on brokered deposits to support rapid asset growth. However, the Dodd-Frank Act requires the FDIC to amend its regulations to redefine the assessment base used for calculating deposit insurance assessments. On February 9, 2011, the FDIC adopted a final rule that defines the assessment base as the average consolidated total assets during the assessment period minus the average tangible equity of the insured depository institution during the assessment period. The FDIC also imposed a new assessment rate scale (which was revised further in 2016). Under the new system, banks will generally pay assessments at a rate between 2.5 and 32 basis points per assets minus tangible equity, depending upon an institution's risk category (the final rule also includes progressively lower assessment rate schedules when the FDIC's reserve ratio reaches certain levels). The rulemaking changes the current assessment rate schedule so the schedule will result in the collection of assessment revenue that is approximately the same as generated under the current rate schedule and current assessment base. Nearly all banks with assets less than $10 billion will pay smaller deposit insurance assessments as a result of the new rule. The majority of the changes in the FDIC's final rule became effective on April 1, 2011. The FDIC has the statutory authority to impose special assessments on insured depository institutions in an amount, and for such purposes, as the FDIC may deem necessary. The FDIC issued a final rule in November 2023 to implement a special assessment to recover the significant losses incurred by the FDIC in connection with the 2023 bank failures, but that special assessment did not apply to the Bank. The change in the calculation methodology for deposit insurance premiums and the possible emergency special assessments could increase non-interest expense and may adversely affect the Company's profitability.

We May Elect Or Be Compelled To Seek Additional Capital In The Future, But That Capital May Not Be Available When It Is Needed. We are required by regulatory authorities to maintain adequate levels of capital to support operations. In addition, we may elect to raise additional capital to support the growth of the Company's business or to

finance acquisitions, if any, or we may elect to raise additional capital for other reasons. In that regard, a number of financial institutions have recently raised considerable amounts of capital as a result of a deterioration in their results of operations and financial condition arising from the turmoil in the mortgage loan market, deteriorating economic conditions, declines in real estate values and other factors. Should we elect or be required by regulatory authorities to raise additional capital, we may seek to do so through the issuance of, among other things, common stock or securities convertible into common stock, which could dilute your ownership interest in the Company. Although we remain "well-capitalized" and have not had a deterioration in liquidity, the future cost and availability of capital may be adversely affected by illiquid credit markets, economic conditions and a number of other factors, many of which are outside of the Company's control. Accordingly, we cannot assure you of the ability to raise additional capital if needed or on terms acceptable to us. If we cannot raise additional capital when needed or on terms acceptable to us, it may have a material adverse effect on the Company's financial condition and results of operations.

If We Are Unable to Successfully Compete for Customers in the Company's Market Area, the Company's Financial Condition and Results of Operations Could Be Adversely Affected. The Bank faces substantial competition in making loans, attracting deposits and providing other financial products and services. The Bank has numerous competitors for customers in its market area.

Such competition for loans comes principally from:


•other commercial banks •savings banks •savings and loan associations			•mortgage banking companies •finance companies •credit unions

Competition for deposits comes principally from:


•other commercial banks •savings banks •savings and loan associations •credit unions			•brokerage firms •insurance companies •money market mutual funds •mutual funds (such as corporate and government securities funds)

Many of these competitors have greater financial resources and name recognition, more locations, more advanced technology and more financial products to offer than the Bank. Competition from larger institutions may increase due to an acceleration of bank mergers and consolidations in Missouri and the rest of the nation. In addition, the Gramm-Leach-Bliley Act removes many of the remaining restrictions in federal banking law against cross-ownership between banks and other financial institutions, such as insurance companies and securities firms. The law will likely increase the number and financial strength of companies that compete directly with the Bank.

The profitability of the Bank depends on its continued ability to attract new customers and compete in its service areas. Increased competition in our markets from new competitors, as well as the expanding operations of existing competitors, may result in:

•interest rate changes to various types of accounts;

•a decrease in the amounts of the Bank's loans and deposits;

•reduced spreads between loan rates and deposit rates; and

•loan terms that are less favorable to the Bank.

Any of these results could have a material adverse impact on the Bank's market share of deposits and loans in the Bank's service areas. If the Bank is unable to successfully compete, its financial condition and results of operations will be adversely affected.

We May Experience Difficulties in Managing Growth and in Effectively Integrating Newly Acquired Companies. As part of the Company's general strategy, it may continue to acquire banks and businesses that it believes provide a strategic fit with its business. To the extent that the Company does grow, there can be no assurances that we will

be able to adequately and profitably manage such growth. Acquiring other banks and businesses will involve risks commonly associated with acquisitions, including:

•potential exposure to liabilities of the banks and businesses acquired;

•difficulty and expense of integrating the operations and personnel of the banks and businesses acquired;

•difficulty and expense of instituting the necessary systems and procedures, including accounting and financial reporting systems, to manage the combined enterprises on a profitable basis;

•potential disruption to existing business and operations;

•potential diversion of the time and attention of management; and

•impairment of relationships with and the possible loss of key employees and customers of the banks and businesses acquired.

The success of the Company's internal growth strategy will depend primarily on the ability of the Bank to generate an increasing level of loans and deposits at acceptable risk levels and on acceptable terms without significant increases in non-interest expenses relative to revenues generated. There is no assurance that we will be successful in implementing the Company's internal growth strategy.

The Bank is a Community Bank and Our Ability to Maintain the Bank's Reputation is Critical to the Success of Our Business and the Failure to Do So Could Materially Adversely Affect Our Performance. The Bank is a community bank, and its reputation is one of the most valuable components of our business. As such, we strive to conduct our business in a manner that enhances our reputation. This is done, in part, by recruiting, hiring and retaining employees who share our core values of being an integral part of the communities we serve, delivering superior service to our customers and caring about our customers and associates. However, employee error or employee and customer misconduct could subject us to financial losses or regulatory sanctions and seriously harm our reputation. Misconduct by our employees could include hiding unauthorized activities from us, improper or unauthorized activities on behalf of our clients or improper use of confidential information. It is not always possible to prevent employee error or misconduct, and the precautions we take to prevent and detect this activity may not be effective in all cases. Because the nature of the financial services business involves a high volume of transactions, certain errors may be repeated or compounded before they are discovered and successfully rectified. If our reputation is negatively affected, by the actions of our employees or otherwise, our business and, therefore, our operating results could be materially adversely affected.

Fraudulent Activity Could Damage Our Reputation, Disrupt Our Business, Increase our Costs and Cause Losses. Financial institutions are inherently exposed to operational risk in the form of theft and other fraudulent activity by employees, clients and other third parties targeting us and our customers or data. Such activity may take many forms, including check fraud, electronic fraud, wire fraud, phishing, social engineering, and other dishonest acts. Although the Company devotes substantial resources to maintaining effective policies and internal controls to identify and prevent such incidents, given the increasing sophistication of possible perpetrators, the Company or the Bank may experience financial losses or reputational harm as a result of fraud. In addition, we may be required to make significant capital expenditures in order to modify and enhance our protective measures or to investigate and remediate fraudulent activity. Although we have not experienced any material business or reputational harm as a result of fraudulent activities in the past, the occurrence of fraudulent activity could damage our reputation, disrupt our business, increase our costs and cause losses in the future.

The Company's Success Largely Depends on the Efforts of its Executive Officers. The success of the Company and the Bank has been largely dependent on the efforts of David Turner, Executive and Director, and Brent M. Giles, CEO and Director, and the other executive officers. These individuals are expected to continue to perform their services. However, the loss of the services of Mr. Turner or Mr. Giles, or any of the other key executive officers could have a materially adverse effect on the Company and the Bank.

If We Fail to Maintain an Effective System of Internal Control Over Financial Reporting, We May Not Be Able to Accurately Report Our Financial Results or Prevent Fraud, and, As a Result, Investors and Depositors Could Lose Confidence in Our Financial Reporting, Which Could Adversely Affect Our Business, the Trading Price of Our Stock, and Our Ability to Attract Additional Deposits. We are required to include in our annual reports filed with the SEC a report from our management regarding internal control over financial reporting. As a result, we documented and evaluated our internal control over financial reporting in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 and SEC rules and regulations, which require an annual management report on our internal control over financial reporting, including, among other matters, management's assessment of the effectiveness of internal

control over financial reporting. Failure or circumvention of our system of internal control could have an adverse effect on our business, profitability, and financial condition, and could result in regulatory actions and loss of investor confidence. Additionally, if we fail to identify and correct any significant deficiencies or material weaknesses in the design or operating effectiveness of our internal control over financial reporting or fail to prevent fraud, current and potential stockholders and depositors could lose confidence in our financial reporting, which could adversely affect our business, financial condition and results of operations, the trading price of our stock and our ability to attract additional deposits.

Severe Weather, Natural Disasters, Pandemics, and Other External Events Could Significantly Impact Our Business. Severe weather, including tornadoes, droughts, hailstorms and other natural disasters, pandemics, such as the outbreak of COVID-19, acts of war or terrorism and other adverse external events could have a significant impact on our ability to conduct business. Such events could affect the stability of our deposit base, impair the ability of borrowers to repay outstanding loans, impair the value of collateral securing loans, cause significant property damage, result in loss of revenue or cause us to incur additional expenses. Operations in our markets could be disrupted by both the evacuation of large portions of the population as well as damage or lack of access to our banking and operation facilities. Military and political conflicts, including the current military conflict between Russia and Ukraine, may increase volatility in commodity and energy prices, create supply chain issues and cause instability in financial markets, which may adversely affect us and our clients. Other severe weather or natural disasters, pandemics, acts of war or terrorism or other adverse external events may occur in the future. Although management has established business continuity plans and procedures, the occurrence of any such events could have a material adverse effect on our business, financial condition and results of operations.

Climate Change and Responses to Climate Change May Adversely Impact Our Business, Financial Condition and Results of Operations. Concerns over the long-term impacts of climate change have led and will continue to lead to governmental efforts to mitigate those impacts. Consumers and businesses are also changing their behavior and business preferences as a result of these concerns. New governmental regulations or guidance relating to climate change, as well as changes in consumers’ and businesses’ behaviors and business preferences, may cause us and our customers to experience cost increases, asset value reductions, operating process changes and delays in completion of projects. To the extent that climate change and responses to climate change negatively impact the businesses and financial condition of our customers, the credit risk associated with loans and other credit exposures to those customers may increase. In addition, weather events related to climate change could adversely affect our business and the businesses of our customers.

Public Health Threats or Outbreaks of Communicable Diseases May Adversely Affect the Company's Operations and Financial Results. The Company and the Bank may face risks related to public health threats or outbreaks of communicable diseases. A widespread healthcare crisis, such as an outbreak of a communicable disease could adversely affect the global economy and the Company's financial performance. For example, the COVID-19 pandemic destabilized the financial markets in which the Bank operates, and the effects of the pandemic continue to cause disruption in the global economies and financial markets, including the Bank's local markets. The Company and the Bank are dependent upon the willingness and ability of the Bank's customers to conduct banking and other financial transactions, which could be limited in the event of a disease outbreak or pandemic.

Risks Relating to Our Regulatory Environment

We May Be Adversely Affected by Changes in Laws And Regulations Affecting the Financial Services Industry. Banks and bank holding companies such as the Company are subject to regulation by both federal and state bank regulatory agencies. The regulations, which are designed to protect borrowers and promote certain social policies, include limitations on the operations of banks and bank holding companies, such as minimum capital requirements and restrictions on dividend payments. The regulatory authorities have extensive discretion in connection with their supervision and enforcement activities and their examination policies, including the imposition of restrictions on the operation of a bank, the classification of assets by an institution and requiring an increase in a bank's allowance for credit losses. These regulations are not necessarily designed to maximize the profitability of banking institutions.

In July 2010, President Barack Obama signed into law the Dodd-Frank Act, which enacted substantial changes to the legal framework of the entire financial services industry. The Dodd-Frank Act mandates the passage of numerous rules and regulations by various regulatory agencies over the next few years. This legislation will change banking regulation and the operating environment of the Company in substantial and unpredictable ways. It could increase or decrease the cost of doing business, limit or expand permissible activities or affect the competitive balance among banks, savings associations, credit unions and other financial institutions. The Company cannot predict the impact that the Dodd-Frank Act, and the various regulations issued thereunder will have on its business.

These, and other future changes in the banking laws and regulations and tax and accounting rules applicable to financial institutions, could have a material adverse effect on the operations and financial condition of the Company and the Bank.

The Federal Reserve May Require the Company to Commit Capital Resources to Support the Bank. As a matter of policy, the Federal Reserve expects a bank holding company to act as a source of financial and managerial strength to its subsidiary banks. The Federal Reserve may charge the bank holding company with engaging in unsafe and unsound practices for failure to adequately commit resources to a subsidiary bank. Accordingly, we may be required to make capital injections into a troubled subsidiary bank, even if such contribution creates a detriment to the Company or its stockholders. If we do not have sufficient resources on hand to fund the capital injection, we may be required to borrow funds or raise capital. Any such loans are subordinate in right of payment to deposits and to certain indebtedness of the subsidiary bank. In the event of bankruptcy of the bank holding company, claims based upon any commitments to fund capital injections are entitled to a priority of payment over claims made by general unsecured creditors, including holders of indebtedness. Thus, any borrowing incurred by the Company to make required capital injections to the Bank are difficult and expensive, and will adversely impact our financial condition, results of operations and future prospects.

The Short-Term And Long-Term Impact of the Changing Regulatory Capital Requirements and New Capital Rules is Uncertain. The federal banking agencies have substantially amended the regulatory capital rules applicable to us and the Bank. The amendments implement the Basel III Rules and changes required by the Dodd-Frank Act. The amended rules include new minimum risk-based capital and leverage ratios, which became effective in January 2015, with certain requirements to be phased in beginning in 2016, and refined the definition of what constitutes "capital" for purposes of calculating those ratios.

The application of more stringent capital requirements to us and the Bank could, among other things, result in lower returns on invested capital, require the raising of additional capital, and result in regulatory actions if we were to be unable to comply with such requirements. Implementation of changes to asset risk weightings for risk based capital calculations, items included or deducted in calculating regulatory capital and/or additional capital conservation buffers could result in management modifying its business strategy and could further limit the Company's ability to make distributions, including paying out dividends or buying back shares.

The EGRRCPA directs the federal banking agencies to develop a specified CBLR (that is, the ratio of a bank's equity capital to its consolidated assets) of not less than 8% and not more than 10%. On November 4, 2019, federal regulators issued final rules effective January 1, 2020 that provide certain banks and their holding companies with the option to elect out of complying with the Basel III Rules. Under this new rule, a qualifying community banking organization is eligible to elect the CBLR framework if it has a CBLR greater than 9% at the time of election. The final rule is described in more detail above under the section entitled "Regulatory Capital Requirements." As of December 31, 2020, the Company and the Bank each qualified to elect the CBLR framework because they had a CBLR of greater than 9% and satisfied the other requirements. The Company has not opted in to CBLR framework. The Company does not have immediate plans to elect to use the CBLR framework but may make such an election in the future.

Higher FDIC Deposit Insurance Premiums and Assessments Could Adversely Affect our Financial Condition. Our deposits are insured up to applicable limits by the DIF and are subject to deposit insurance assessments to maintain deposit insurance. As an FDIC-insured institution, we are required to pay quarterly deposit insurance premium assessments to the FDIC. Growth in insured deposits at FDIC-insured financial institutions in recent years caused the ratio of the DIF to total insured deposits to fall below the current statutory minimum, and the FDIC has approved an increase in the base assessment rates to increase the likelihood that the reserve ratio of the DIF reaches the statutory minimum level by the statutory deadline. Although we cannot predict what the insurance assessment rates will be in the future, either a deterioration in our risk-based capital ratios or further adjustments to the base assessment rates could have a material adverse impact on our business, financial condition, results of operations and cash flows.

Non-Compliance with the USA PATRIOT Act, Bank Secrecy Act, Real Estate Settlement Procedures Act, Truth-in-Lending Act, Community Reinvestment Act, Fair Lending Laws or Other Laws and Regulations Could Result in Fines or Sanctions, and Curtail Expansion Opportunities. Financial institutions are required under the USA PATRIOT and Bank Secrecy Acts to develop programs to prevent financial institutions from being used for money-laundering and terrorist activities. Financial institutions are also obligated to file suspicious activity reports with the U.S. Treasury Department's Office of Financial Crimes Enforcement Network if such activities are detected. These rules also require financial institutions to establish procedures for identifying and verifying the identity of customers seeking to open new financial accounts. Failure or the inability to comply with the USA PATRIOT Act and Bank Secrecy Act statutes and

regulations could result in fines or penalties, curtailment of expansion opportunities, enforcement actions, intervention or sanctions by regulators and costly litigation or expensive additional controls and systems. During the last few years, several banking institutions have received large fines for non-compliance with these laws and regulations. In addition, the U.S. Government imposed and will continue to expand laws and regulations relating to residential and consumer lending activities that create significant new compliance burdens and financial risks.

Regulations Relating to Privacy, Information Security and Data Protection Could Increase Our Costs, Affect or Limit How We Collect and Use Personal Information and Adversely Affect Our Business Opportunities. We are subject to various privacy, information security and data protection laws, including requirements concerning security breach notification, and we could be negatively impacted by these laws. For example, our business is subject to the Gramm-Leach-Bliley Act which, among other things: (i) imposes certain limitations on our ability to share non-public personal information about our clients with non-affiliated third parties; (ii) requires that we provide certain disclosures to clients about our information collection, sharing and security practices and afford clients the right to “opt out” of any information sharing by us with non-affiliated third parties (with certain exceptions); and (iii) requires that we develop, implement and maintain a written comprehensive information security program containing safeguards that are appropriate based on our size and complexity, the nature and scope of our activities and the sensitivity of client information we process, as well as plans for responding to data security breaches. Many state and federal banking regulators, states and foreign countries have also enacted data security breach notification requirements with varying levels of individual, consumer, regulatory or law enforcement notifications in certain circumstances in the event of a security breach. Moreover, legislators and regulators in the U.S. and other countries are increasingly adopting or revising privacy, information security and data protection laws that potentially could have a significant impact on our current and planned privacy, data protection and information security-related practices, our collection, use, sharing, retention and safeguarding of client or employee information, and some of our current or planned business activities. This could also increase our costs of compliance and business operations and could reduce income from certain business initiatives. This includes increased privacy-related enforcement activity at the federal level by the Federal Trade Commission, as well as at the state level.

Compliance with any current or future laws and regulations noted above (including those regarding security breach notification) could result in higher compliance costs and could restrict our ability to provide certain products and services, which could have a material adverse effect on our business, financial conditions or results of operations. Our failure to comply with any such laws could result in potentially significant regulatory or governmental investigations or actions, litigation, fines, sanctions and damage to our reputation, which could have a material adverse effect on our business, financial condition or results of operations.

We are Subject to Numerous Laws Designed to Protect Consumers, Including the Community Reinvestment Act and Fair Lending Laws, and Failure to Comply with These Laws Could Lead to a Wide Variety of Sanctions. The Community Reinvestment Act, the Equal Credit Opportunity Act, the Fair Housing Act and other fair lending laws and regulations impose nondiscriminatory lending requirements on financial institutions. The U.S. Department of Justice and other federal agencies are responsible for enforcing these laws and regulations. A successful regulatory challenge to an institution’s performance under the Community Reinvestment Act or fair lending laws and regulations could result in a wide variety of sanctions, including damages and civil money penalties, injunctive relief, restrictions on mergers and acquisitions activity, restrictions on expansion and restrictions on entering new business lines. Private parties may also have the ability to challenge an institution’s performance under fair lending laws in private class action litigation. Such actions could have a material adverse effect on our business, financial condition, results of operations and future prospects. We may be subject to liability for potential violations of predatory lending laws, which could adversely impact our results of operations, financial condition and business.

We Are Subject to a Number of Other Laws and Regulations, Which May Adversely Affect the Operation of Our Business and Increase Our Costs. We are extensively regulated under U.S. federal and state law, and are subject to a number of laws and regulations in addition to banking laws and regulations, including securities, insurance and tax laws and regulations. As a company whose stock is publicly traded, we are subject to various federal and state securities laws, including the Securities Act of 1933, as amended, the Exchange Act and the Sarbanes-Oxley Act of 2002, and we file periodic reports with the Securities and Exchange Commission. In addition, because our common stock is listed with The Nasdaq Stock Market LLC, we are subject to the listing rules of that exchange. The Company and its subsidiaries are subject to federal and state income taxes and Missouri franchise taxes, and are potentially subject to audits by the Internal Revenue Service and state income and franchise tax examinations by the Missouri Department of Revenue. Any failure by us to comply with any laws or regulations, any change in such laws or regulations or the position of any regulatory agency with respect thereto, or any adverse result in any regulatory investigation or examination, including any tax audit or examination, could adversely affect our business, financial condition and results of operations.

Technology and Vendor Risks

We Are Subject to Security and Operational Risks Relating to Our Use of Technology That Could Damage Our Reputation and Our Business. We rely heavily on communications and information systems to conduct our business. Furthermore, we have access to large amounts of confidential financial information and control substantial financial assets, including those belonging to our customers, to whom we offer remote access, and we regularly transfer substantial financial assets by electronic means. Our operations are dependent upon our ability to protect our computer equipment against damage from physical theft, fire, power loss, telecommunications failure or a similar catastrophic event, as well as from security breaches, denial of service attacks, viruses, worms and other disruptive problems caused by hackers. Any failure, interruption or breach in security of our systems could damage our reputation, result in a loss of customer business, subject us to additional regulatory scrutiny, or expose us to civil litigation and possible financial liability, any of which could have a material adverse effect on our financial condition and results of operations. Although we intend to continue to implement security technology and establish operational procedures to prevent such damage, our security measures may not be successful.

In addition, advances in computer capabilities, new discoveries in the field of cryptography or other developments could result in a compromise or breach of the algorithms we and our third-party service providers use to encrypt and protect customer transaction data. A failure of such security measures could have a material adverse effect on our financial condition and results of operations. We also face the risk of operational disruption, failure, termination or capacity constraints caused by third parties that facilitate our business activities by providing technology such as software applications, as well as financial intermediaries. Such parties could also be the source of an attack on, or breach of, our operational systems, data or infrastructure.

We also face the potential risk of loss due to fraud, including commercial checking account fraud, automated teller machine (ATM) skimming and trapping, write-offs necessitated by debit card fraud, and other forms of online banking fraud, which are becoming more sophisticated and present new challenges as mobile banking increases, as well as employee fraud. Employee errors could also subject us to financial claims for negligence. We maintain a system of internal controls and insurance coverage to mitigate against operational risks, including data processing system failures and errors and customer or employee fraud. Should our internal controls fail to prevent or detect an occurrence, and if any resulting loss is not insured or exceeds applicable insurance limits, such failure could have a material adverse effect on our business, financial condition and results of operations.

The Operation of Our Business, Including Customer Interaction, is Increasingly Done Via Electronic Means, and This Has Increased Our Risks Related to Cybersecurity. We rely on the successful and uninterrupted functioning of our information technology and telecommunications systems to conduct our business. This includes internally developed systems, the systems of third-party service providers, and digital and mobile technologies. Any failure, interruption or breach in security of these systems could result in failures or disruptions in our customer relationship management, general ledger, deposit, loan and other systems, and could damage our reputation, result in loss of customer business, subject us to regulatory scrutiny, or expose us to civil litigation and possible financial liability. We are exposed to the risk of cyber-attacks in the normal course of business, which can result from deliberate attacks or unintentional events. We have observed an increased level of attention in the industry focused on cyber-attacks that include, but are not limited to, gaining unauthorized access to digital systems for purposes of misappropriating assets or sensitive information, corrupting data, or causing operational disruption. Cyber-attacks may also be carried out in a manner that does not require gaining unauthorized access, such as by causing denial-of-service attacks on websites. Cyber-attacks may be carried out by third parties or insiders using techniques that range from highly sophisticated efforts to electronically circumvent network security or overwhelm websites to more traditional intelligence gathering and social engineering aimed at obtaining information necessary to gain access. The objectives of cyber-attacks vary widely and can include theft of financial assets, intellectual property, or other sensitive information, including the information belonging to our banking customers. Cyber-attacks may also be directed at disrupting our operations.

We may incur substantial costs and suffer other negative consequences if we fall victim to successful cyber-attacks. Such negative consequences could include remediation costs that may include liability for stolen assets or information and repairing system damage that may have been caused; increased cybersecurity protection costs that may include organizational changes, deploying additional personnel and protection technologies, training employees, and engaging third party experts and consultants; lost revenues resulting from unauthorized use of proprietary information or the failure to retain or attract customers following an attack; litigation; and reputational damage adversely affecting customer or investor confidence.

We Continually Encounter Technological Change, and We Cannot Predict How Changes in Technology Will Affect Our Business. The financial services industry is continually undergoing rapid technological change with frequent introductions of new technology driven by products and services, which include developments in:


•telecommunications •data processing •automation			•internet-based banking •telebanking •debit cards and so-called "smart cards"

The effective use of technology increases efficiency and enables financial institutions to better serve customers and to reduce costs. Our future success depends, in part, upon our ability to address the needs of our customers by using technology to provide products and services that will satisfy customer demands, as well as to create additional efficiencies in our operations. Many of our competitors have substantially greater resources to invest in technological improvements. We may not be able to effectively implement new technology driven products and services or be successful in marketing these products and services to our customers. Failure to successfully keep pace with technological change affecting the financial services industry could have a material adverse impact on our business and, in turn, our financial condition and results of operations.

We Rely On Others to Provide Key Components of Our Business Infrastructure. Third-party vendors provide key components of our business infrastructure such as internet connections, network access and core application processing. While we have selected these third party vendors carefully, we do not control their actions. If these third-party vendors experience financial, operational or technological difficulties, perform their services poorly or terminate their services, and we are unable to replace them with other service providers, our operations could be interrupted. Any problems caused by these third parties, including as a result of their not providing us their services for any reason or their performing their services poorly, could adversely affect our ability to deliver products and services to our customers or otherwise conduct our business efficiently and effectively. If a service interruption were to continue for a significant period of time, our business, financial condition and results of operations could be adversely affected, perhaps materially. Replacing these third party vendors could also entail significant delay and additional expense.

Risks Related to Our Common Stock

The Price of Our Common Stock Could Fluctuate Significantly, and This Could Make it Difficult for You to Resell Shares of Our Common Stock at Times or at Prices You Find Attractive. The stock market and, in particular, the market for financial institution stocks, has experienced significant volatility during the recent changes in economic and industry conditions. In some cases, the markets have produced downward pressure on stock prices for certain issuers without regard to those issuers' underlying financial strength. As a result, the trading volume in our common stock could fluctuate more than usual and cause significant price variations to occur. This could make it difficult for you to resell shares of our common stock at times or at prices you find attractive.

The trading price of the shares of our common stock will depend on many factors that could change from time to time and could be beyond our control. Among the factors that could affect our stock price are those identified under the heading "Forward-Looking Statements" in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, of this report and as follows:

•actual or anticipated quarterly fluctuations in our operating results and financial condition;

•changes in financial estimates or publication of research reports and recommendations by financial analysts or actions taken by rating agencies with respect to our common stock or those of other financial institutions;

•failure to meet analysts' revenue or earnings estimates;

•speculation in the press or investment community generally or relating to our reputation, our market area, our competitors or the financial services industry in general;

•strategic actions by us or our competitors, such as acquisitions, restructurings, dispositions or financings;

•actions by our current stockholders, including sales of common stock by existing stockholders and/or directors and executive officers;

•fluctuations in the stock price and operating results of our competitors;

•future sales of our equity, equity-related or debt securities;

•changes in the frequency or amount of dividends or share repurchases;

•proposed or adopted regulatory changes or developments;

•investigations, proceedings or litigation that involve or affect us;

•trading activities in our common stock, including short-selling;

•domestic and local economic factors unrelated to our performance; and

•general market conditions and, in particular, developments related to market conditions for the financial services industry.

A significant decline in our stock price could result in substantial losses for individual stockholders and could lead to costly and disruptive securities litigation.

The Trading Volume in Our Common Stock Has Been Low, and the Sale of a Substantial Number of Shares of Our Common Stock in the Public Market Could Depress the Price of Our Common Stock and Make it Difficult for You to Sell Your Shares. Our common stock is listed to trade on the Nasdaq Global Select Market, but is thinly traded. As a result, you may not be able to sell your shares of common stock on short notice. Additionally, thinly traded stock can be more volatile than stock trading in an active public market. The sale of a substantial number of shares of our common stock at one time could temporarily depress the market price of our common stock, making it difficult for you to sell your shares and impairing our ability to raise capital.

Our Common Stock is Not Insured by Any Governmental Entity. Our common stock is not a deposit account or other obligation of any bank and is not insured by the FDIC or any other governmental entity.

Additional Factors. Additional risks and uncertainties that may affect the future results of operations, financial condition or business of the Company and its banking subsidiary include, but are not limited to: (i) adverse publicity, news coverage by the media, or negative reports by brokerage firms, industry and financial analysts regarding the Bank or the Company; and (ii) changes in accounting policies and practices.

Item 1B. Unresolved Staff Comments.

None.

Item 1C. Cybersecurity.

Pursuant to General Instruction G(2) to Form 10-K, the information required by this Item is incorporated herein by reference to the information under “Information Technology Risk Management” under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's 2023 Annual Report to Shareholders (included as Exhibit 13 hereto).

Item 2. Properties.

The Company does not own or lease any property. The Company's principal office is located at 132 East High Street, Jefferson City, Missouri 65101. The table below provides a list of the Bank's facilities.


Location	Approximate Square Footage	Owned or Leased		Net Book Value at December 31, 2023 (in thousands)
8127 East 171st Street, Belton, MO	13,000	Owned		$	1,179
910 West Buchanan Street, California, MO	2,270	Owned		$	269
102 North Second Street, Clinton, MO	11,524	Owned		$	1,064
1400 East Ohio Street, Clinton, MO	13,551	Owned		$	2,215
803 E. Walnut St, Columbia, MO	9,698	Leased	(1)	$	949
1110 Club Village Drive, Columbia, MO	5,000	Owned		$	1,113
115 South 2nd Street, Drexel, MO	4,000	Owned		$	49
100 Plaza Drive, Harrisonville, MO	4,000	Owned		$	472
17430 East 39th Street, Independence, MO	4,070	Owned		$	430
220 West White Oak, Independence, MO	1,800	Owned		$	11
132 East High Street, Jefferson City, MO	34,800	Owned		$	1,998
3701 West Truman Blvd, Jefferson City, MO	21,000	Owned		$	287
211 West Dunklin Street, Jefferson City, MO	2,500	Owned		$	1,308
800 Eastland Drive, Jefferson City, MO	4,100	Owned		$	483
3600 Amazonas Drive, Jefferson City, MO	26,000	Owned		$	1,946
300 S.W. Longview Blvd, Lee's Summit, MO	11,700	Owned		$	1,523
5 Victory Lane, Suite 203 & 204, Liberty, MO	1,667	Leased	(2)	N/A
335 Chestnut, Osceola, MO	1,580	Owned		$	52
595 VFW Memorial Drive, St. Robert, MO	2,236	Owned		$	56
321 West Battlefield, Springfield, MO	12,500	Owned		$	491
1891 Commercial Drive, Warsaw, MO	11,000	Owned		$	1,204

___________________________

(1)The term of this lease began in July 2018 and ends in July 2028.

(2)The term of this lease began in May 2022 and ends in October 2024.

Management believes that the current condition of each of the Bank's facilities is adequate for its business and that such facilities are adequately covered by insurance.

Item 3. Legal Proceedings.

The information required by this Item is set forth in Note 19, Commitments and Contingencies, in the Company's consolidated financial statements, included under the caption "Consolidated Financial Statement" in the Company's 2023 Annual Report to Shareholders (included as Exhibit 13.1 hereto), incorporated herein by reference.

Item 4. Mine Safety Disclosures.

Not applicable

EXECUTIVE OFFICERS OF THE REGISTRANT

Executive officers of the Company are appointed by the board of directors and serve at the discretion of the board. The following table sets forth certain information with respect to all executive officers of the Company.

Name

Age

Position

Brent M. Giles

Chief Executive Officer and Director

Gregg A. Bexten

President and Director

Chris E. Hafner

Senior Vice President and Chief Financial Officer

Jason E. Schwartz

Senior Vice President and Chief Credit Officer

Kathleen L. Bruegenhemke

Senior Vice President, Chief Risk Officer, Secretary and Director

The business experience of the executive officers of the Company for the last five years is as follows:

Brent M. Giles has served as a director and CEO of the Company and of the Bank since May 2023. Mr. Giles served as Chairman, President and Chief Executive Officer of Bank of Blue Valley from July 2021 until he joined the Company, and as President and Chief Executive Officer of Wisconsin Bank & Trust from May 2020 until July 2021. From September 2003 until May 2020, Mr. Giles served as Chairman and Chief Executive Officer of Liberty Bancorp, Inc. and Bank Liberty, where he took the company public. Bank Liberty has been recognized as a “best bank,” “best place to work,” and “strongest mid-size bank.” Prior to 2003, Mr. Giles had several commercial banking roles of increasing responsibility and spent 9 years as an FDIC examiner. Mr. Giles received his bachelor’s degree in banking and finance and his MBA both from the University of Missouri where he is still involved speaking to graduate banking classes.

Gregg A. Bexten has served as a director and president of the Company and of the Bank since May 2023. From 2014 until May 2023, he served as Regional President of our Central Region. From 2000 until 2014 he served as a commercial lender in our Central Region with titles of Senior Vice President and Vice President. Prior to joining the Bank, Mr. Bexten served as a commercial lender with another financial institution and as a Commissioned Bank Examiner for the Federal Reserve Bank of St. Louis. Mr. Bexten possesses considerable expertise in overseeing lending, various finance and regulatory compliance aspects of community banking, which he attained through over 30 years of service, first as a bank regulator and then as a dedicated, tenured employee of the Bank.

Chris E. Hafner has served as Chief Financial Officer of the Company and of the Bank since October 2023. Mr. Hafner served as an outside banking and business consultant to several entities from December 2022 until he joined the Company and the Bank. Mr. Hafner previously served as Chief Accounting Officer of CrossFirst Bank, the bank subsidiary of CrossFirst Bankshares, Inc., a Nasdaq-listed bank holding company, from February 2016 until November 2022. Prior to that, he served as Chief Financial Officer at Missouri Bank, a privately held bank, from June 2015 until January 2016, and as Chief Risk Officer at Missouri Bank from April 2012 until May 2015. Prior to joining Missouri Bank, he served as Chief Financial Officer at First National Bank of Kansas, a privately held bank, from August 2005 until December 2011 and, prior to that, he served as Assistant Controller at Commerce Bancshares, Inc., a Nasdaq-listed bank holding company, from June 2000 until July 2005. He served in various roles in the audit practice of Forvis, LLP (formerly BKD LLP) from July 1994 until June 2000. Chris received a Bachelor of Business Administration degree from Iowa State University. He has been previously licensed as a Certified Public Accountant.

Jason E. Schwartz has served as the Chief Credit Officer of the Company and of the Bank since December 2018. From 2014 to 2018, he served as the Regional Senior Credit Officer for our Central Region. From 2000 until 2014 he served as a commercial lender in our Central Region with titles of Senior Vice President and Vice President. Mr. Schwartz possesses considerable expertise in overseeing lending, various finance, and regulatory compliance aspects of community banking, which he attained through over 20 years of service, first at City National Savings Bank and then as an employee of the Bank.

Kathleen L. Bruegenhemke has served as a director of the Company and of the Bank since March 2017. From January 2017 until November 2023, she served as Chief Operating Officer of the Bank. From October 2014 until December 2016 she served as Columbia Market President for the Bank. She has served as Senior Vice President and Secretary of the Company since November 1997 and as Chief Risk Officer of the Company since June 2006. From January 1992 until November 1997, she served as Internal Auditor of the Bank (or of one of its constituent predecessors). Prior to joining the Bank, Ms. Bruegenhemke served as a Commissioned Bank Examiner for the FDIC. Ms. Bruegenhemke is a certified public accountant and possesses considerable expertise in overseeing various finance, regulatory compliance and risk management aspects of community banking, which she attained through over 30 years of service, first as a bank regulator and then as a dedicated employee of the Bank.

There is no arrangement or understanding between any executive officer and any other person pursuant to which such executive officer was selected as an officer.

PART II

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Pursuant to General Instruction G(2) to Form 10-K, the information required by this Item, other than that referred to below, is incorporated herein by reference to the information under the caption "Market Price of and Dividends on Equity Securities and Related Matters" in the Company's 2023 Annual Report to Shareholders (included as Exhibit 13 hereto).

We refer you to Item 12 of this report under the caption "Securities Authorized For Issuance Under Equity Compensation Plans" for certain equity plan information.

The Company's Purchases of Equity Securities

There were no purchases made by or on behalf of the Company or any "affiliated purchaser" (as defined by applicable rules of the SEC) of shares of the Company's common stock during the fourth quarter of the year ended December 31, 2023. Pursuant to the Company's 2019 Repurchase Plan, management is given discretion to determine the number and pricing of the shares to be purchased under the plan, as well as the timing of any such purchases. As of December 31, 2023, $5.0 million remains available for share repurchases pursuant to the plan.

Recent Issuance of Securities

None.

Item 6. [Reserved].

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operation.

Pursuant to General Instruction G(2) to Form 10-K, the information required by this Item is incorporated herein by reference to the information under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's 2023 Annual Report to Shareholders (included as Exhibit 13 hereto).

Forward-Looking Statements

This report, including information included or incorporated by reference in this report, contains certain forward-looking statements with respect to the financial condition, results of operations, plans, objectives, strategy, future performance and business of the Company and its subsidiaries, 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" 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, the following factors:

•competitive pressures among financial services companies may increase significantly,

•changes in the interest rate environment may reduce interest margins,

•general economic conditions, either nationally or in Missouri, may be less favorable than expected and may adversely affect the quality of the Company's loans and other assets,

•increases in non-performing assets in the Company's loan portfolios and adverse economic conditions may necessitate increases to the provisions for credit losses,

•costs or difficulties related to the integration of the business of the Company and its acquisition targets may be greater than expected,

•legislative, regulatory, or tax law changes may adversely affect the business in which the Company and its subsidiaries are engaged, and

•changes may occur in the securities markets.

We have described additional factors that could cause actual results to be materially different from those described in the forward-looking statements, which factors are identified in Item 1A of this report under the heading "Risk Factors." Other factors that we have not 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 such statement is made. Except as otherwise required by law, we undertake no obligation to publicly update or revise any forward-looking statement to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

The Company's exposure to market risk is reviewed on a regular basis by our Bank's asset/liability committee and board of directors. Interest rate risk is the potential of economic losses due to future interest rate changes. These economic losses can be reflected as a loss of future net interest income and/or a loss of current fair market values. The objective is to measure the effect on net interest income and to adjust the balance sheet to minimize the inherent risk while at the same time maximizing income. Management realizes certain risks are inherent and that the goal is to identify and minimize those risks.

Tools used by the Bank's management include modeling the effects on net interest income under different rate shock scenarios. At December 31, 2023, the Company's rate shock scenario models indicated that annual net interest income could change by as much as 5.92% or 7.05% should interest rates rise or fall, respectively, 200 basis points from their current level over a one-year period. These levels of interest rate risk are within limits set by the board in the Company's Funds Management, Investment Asset Liability Policy and management believes this is an acceptable level of interest rate risk. However, there are no assurances that the change will not be more or less than this estimate.

Pursuant to General Instruction G(2) to Form 10-K, the information required by this Item, other than that provided above, is incorporated herein by reference to the information under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Quantitative and Qualitative Disclosures About Market Risk" in the Company's 2023 Annual Report to Shareholders (included as Exhibit 13 hereto).

Item 8. Financial Statements and Supplementary Data.

Pursuant to General Instruction G(2) to Form 10-K, the information required by this Item is incorporated herein by reference to the report of the independent registered public accounting firm and the information under the caption "Consolidated Financial Statements" in the Company's 2023 Annual Report to Shareholders (included as Exhibit 13 hereto).

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

(a)Evaluation of Disclosure Controls and Procedures.

As of the end of the period covered by this annual report, the Company's management, including the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Exchange Act). Based on that evaluation, the Company's management, including the Chief Executive Officer and Chief Financial Officer, concluded that, as of December 31, 2023, the Company's disclosure controls and procedures were effective.

(b)Management's Report on Internal Control Over Financial Reporting.

The Company's management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of the Company's management, including the Company's principal executive officer and principal

financial officer, we conducted an evaluation of the effectiveness of the Company's internal control over financial reporting, as of December 31, 2023, based on the framework set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013). Based upon its assessment, management has concluded that, as of December 31, 2023, the Company's internal control over financial reporting, is effective based on the criteria established in Internal Control-Integrated Framework (2013).

Management's assessment of the effectiveness of internal control over financial reporting, as of December 31, 2023, has been audited by KPMG LLP, an independent registered public accounting firm, as stated in their report, which is included in this Annual Report on Form 10-K.

(c)Changes in Internal Control over Financial Reporting.

There has been no changes in the Company's internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended December 31, 2023 that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

Hawthorn Bancshares, Inc.:

Opinion on Internal Control Over Financial Reporting

We have audited Hawthorn Bancshares, Inc. and subsidiaries' (the Company) internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income (loss), stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2023, and the related notes (collectively, the consolidated financial statements), and our report dated March 18, 2024 expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.


			/s / KPMG LLP
St. Louis, Missouri
March 18, 2024

Item 9B. Other Information.

None

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

None

PART III

Item 10. Directors, Executive Officers and Corporate Governance.

Pursuant to General Instruction G(3) to Form 10-K, the information required by this Item, other than that referred to below, is incorporated herein by reference to:

(i)the information under the caption "Item 1: Election of Directors--What is the structure of our board and how often are directors elected?" in the Company's definitive Proxy Statement for its 2024 Annual Meeting of Shareholders to be filed pursuant to Regulation 14A;

(ii)the information under the caption "Item 1: Election of Directors--Who are this year's nominees?" in the Company's definitive Proxy Statement for its 2024 Annual Meeting of Shareholders to be filed pursuant to Regulation 14A;

(iii)the information under the caption "Item 1: Election of Directors--What is the business experience of the nominees and of our continuing board members?" in the Company's definitive Proxy Statement for its 2024 Annual Meeting of Shareholders to be filed pursuant to Regulation 14A;

(iv)the information under the caption "Executive Officers of the Registrant" in Part I of this report;

(v)the information under the caption "Delinquent Section 16(a) Reports" in the Company's definitive Proxy Statement for its 2024 Annual Meeting of Shareholders to be filed pursuant to Regulation 14A;

(vi)the information under the caption "Corporate Governance and Board Matters--Consideration of Director Nominees" in the Company's definitive Proxy Statement for its 2024 Annual Meeting of Shareholders to be filed pursuant to Regulation 14A; and

(vii)the information under the caption "Corporate Governance and Board Matters--Committees of the Board--Audit Committee" in the Company's definitive Proxy Statement for its 2024 Annual Meeting of Shareholders to be filed pursuant to Regulation 14A.

Code of Ethics

The Company has adopted a Code of Business Conduct and Ethics for directors, officers and employees including, its principal executive officer, principal financial officer, principal accounting officer, controller and persons performing similar functions. This Code of Business Conduct and Ethics is posted on the Company's internet website (www.hawthornbancshares.com) under the "Governance Documents" menu tab and is available for your examination. A copy of this code will be furnished without charge upon written request to Corporate Secretary, Hawthorn Bancshares, Inc., 132 East High Street, Jefferson City, Missouri 65101. Any substantive amendment to, or waiver from, a provision of this code that applies to the Company's principal executive officer, principal financial officer, principal accounting officer, controller, or persons performing similar functions will be disclosed on the Company's internet website (www.hawthornbancshares.com) and, if required by the rules of the SEC or The Nasdaq Stock Market LLC, in reports the Company files with the SEC.

Item 11. Executive Compensation.

Pursuant to General Instruction G(3) to Form 10-K, the information required by this Item is incorporated herein by reference to:

(i)the information under the caption "Executive Compensation and Related Matters" in the Company's definitive Proxy Statement for its 2024 Annual Meeting of Shareholders to be filed pursuant to Regulation 14A; and

(ii)the information under the caption "Corporate Governance and Board Matters--Director Compensation" in the Company's definitive Proxy Statement for its 2024 Annual Meeting of Shareholders to be filed pursuant to Regulation 14A.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Pursuant to General Instruction G(3) to Form 10-K, the information required by this Item, other than that presented below, is incorporated herein by reference to the information under the caption "Ownership of Common Stock" in the Company's definitive Proxy Statement for its 2024 Annual Meeting of Shareholders to be filed pursuant to Regulation 14A.

Securities Authorized For Issuance Under Equity Compensation Plans

Information pertaining to equity compensation plans is contained in "Part II - Item 8. Financial Statements and Supplementary Data - Note 12 - Stockholders' Equity and Accumulated Other Comprehensive Income (Loss) Equity-Based Compensation Plan." of the Company's 2023 Annual report and are incorporated herin by reference.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

Pursuant to General Instruction G(3) to Form 10-K, the information required by this Item is incorporated herein by reference to:

(i)the information under the caption "Related Party Transactions" in the Company's definitive Proxy Statement for its 2024 Annual Meeting of Shareholders to be filed pursuant to Regulation 14A;

(ii)the information under the caption "Item 1: Election of Directors--What is the structure of our board and how often are directors elected?" in the Company's definitive Proxy Statement for its 2024 Annual Meeting of Shareholders to be filed pursuant to Regulation 14A; and

(iii)the information under the caption "Corporate Governance and Board Matters--Committees of the Board" in the Company's definitive Proxy Statement for its 2024 Annual Meeting of Shareholders to be filed pursuant to Regulation 14A.

Item 14. Principal Accountant Fees and Services.

Pursuant to General Instruction G(3) to Form 10-K, the information required by this Item is incorporated herein by reference to the information under the caption "Independent Registered Public Accounting Firm Fees and Services" in the Company's definitive Proxy Statement for its 2024 Annual Meeting of Shareholders to be filed pursuant to Regulation 14A.

PART IV

Item 15. Exhibits and, Financial Statement Schedules.

(a)Exhibits, Financial Statements and Financial Statement Schedules:

1.Financial Statements:

The following consolidated financial statements of the Company and reports of the Company's independent registered public accounting firm, included in the Company's 2023 Annual Report to Shareholders (included as Exhibit 13 hereto) under the caption "Consolidated Financial Statements", are incorporated herein by reference:

Report of Independent Registered Public Accounting Firm.

Auditor Name: KPMG LLP

Auditor Location: St. Louis, MO

Auditor Firm ID: 185

Consolidated Balance Sheets as of December 31, 2023 and 2022.

Consolidated Statements of Income for the years ended December 31, 2023, 2022, and 2021.

Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2023, 2022, and 2021.

Consolidated Statements of Stockholders' Equity for the years ended December 31, 2023, 2022, and 2021.

Consolidated Statements of Cash Flows for the years ended December 31, 2023, 2022, and 2021.

Notes to the Consolidated Financial Statements.

2.Financial Statement Schedules:

Financial statement schedules have been omitted because they either are not required or are not applicable or because equivalent information has been included in the financial statements, the notes thereto or elsewhere herein.

3.Exhibits:


Exhibit No.						Description

3.1						Restated Articles of Incorporation of the Company (filed as Exhibit 3.1 to the Company's current report on Form 8-K on August 9, 2007 and incorporated herein by reference).

3.2						Amended and Restated Bylaws of the Company (filed as Exhibit 3.1 to the Company's current report on Form 8-K on January 27, 2021 and incorporated herein by reference).

4.1						Description of the Company's Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934 (filed as Exhibit 4.0 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and incorporated herein by reference).

4.2						Specimen certificate representing shares of the Company's $1.00 par value Common Stock (filed as Exhibit 4.1 to the Company's current report on Form 8-K/A on June 23, 2017 and incorporated herein by reference).

10.1						Form of Change of Control Se verance Agreement filed as Exhibit 10.1 to th is Annual Report on Form 10-K .*

10.2						Hawthorn Bancshares, Inc. Excess Benefit Plan (filed as Exhibit 10.2 to the Company's current report on Form 8-K on November 13, 2018 an d incorporat ed herein by reference ). *

10.3						H awthorn Ba n cshares, Inc. Equity Incentive Plan (filed as Exhibit 10.1 to the Company's current report on Form 8-K on June 12, 2023 and incorporat ed herein by reference).*

10.4						Form of Hawthorn Bancshares, Inc. Equity Incentive Plan Restricted Stock Unit Award (Service-Based Vesting) (filed as Exhibit 10.2 to the Company's current report on Form 8-K on June 12, 2023 and incorporated herein by reference).*

13						The Company's 202 3 Annual Report to Shareholders (only those portions of this Annual Report to Shareholders which are specifically incorporated by reference into this Annual Report on Form 10-K shall be deemed to be filed with the SEC ).

14						Code of Business Conduct and Ethics of the Company (filed as Exhibit 14 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2018 and incorporated herein by reference).

21						List of Subsidiaries filed as Exhibit 21 to th is Annual Report on Form 10-K .

23						Consent of Independent Registered Public Accounting Firm.


Exhibit No.						Description
24						Power of Attorney (included on the signature page to this Annual Report on Form 10-K).

31.1						Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.

31.2						Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.

32.1						Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2						Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

97.1						Policy for the Recovery of Erroneously Awarded Compensation filed as Exhibit 97.1 to this Annual Report on Form 10-K.

101.INS						Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).

101.SCH						Inline XBRL Taxonomy Extension Schema Document.

101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104						Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).

____________________________

*Management contracts or compensatory plans or arrangements required to be identified by Item 15(a).

(b)Exhibits.

See exhibits identified above under Item 15(a)3.

(c)Financial Statement Schedules.

See financial statement schedules identified above under Item 15(a)2, if any.

Item 16. Form 10-K Summary.

None

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	HAWTHORN BANCSHARES, INC.

Dated: March 18, 2024	By	/s/	Brent M. Giles
			Brent M. Giles, Chief Executive Officer (Principal Executive Officer)

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Brent M. Giles and Chris E. Hafner, or either of them, his attorneys-in-fact, for such person in any and all capacities, to sign any amendments to this report and to file the same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that either of said attorneys-in-fact, or substitute or substitutes, may do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.


Date						Signature and Title

March 18, 2024						/s/ Brent M. Giles
						Brent M. Giles, Chief Executive Officer (Principal Executive Officer) and Director

March 18, 2024						/s/ Chris E. Hafner
						Chris E. Hafner, Chief Financial Officer
						(Principal Financial Officer and Principal Accounting Officer)

March 18, 2024						/s/ Gregg A. Bexten
						Gregg A. Bexten, President, Director

March 18, 2024						/s/ Kathleen L. Bruegenhemke
						Kathleen L. Bruegenhemke, Director

March 18, 2024						/s/ David T. Turner
						David T. Turner, Executive Chairman, Director

March 18, 2024						/s/ Frank E. Burkhead
						Frank E. Burkhead, Director

March 18, 2024						/s/ Philip D. Freeman
						Philip D. Freeman, Director

March 18, 2024						/s/ Kevin L. Riley
						Kevin L. Riley, Director

March 18, 2024						/s/ Gus S. (Jack) Wetzel III
						Gus S. (Jack) Wetzel III, Director

March 18, 2024						/s/ Shawna M. Hettinger
						Shawna M. Hettinger, Director

March 18, 2024						/s/ Jonathan L. States
						Jonathan L. States, Director

March 18, 2024						/s/ Douglas T. Eden
						Douglas T. Eden, Director

March 18, 2024						/s/ Jonathan D. Holtaway
						Jonathan D. Holtaway, Director


If to the Company:			If to the Executive:
Hawthorn Bancshares, Inc. 132 E. High Street Jefferson City, MO 65101 Attention: Secretary			Executive's address is set forth below Executive's signature hereto
132 E. High Street			Executive's signature hereto
Jefferson City, MO 65101
Attention: Secretary


	For the years ended December 31,
(In thousands, except per share amounts)	2023			2022			2021
Statement of income information:
Total interest income	$	91,968		$	69,256		$	64,454
Total interest expense	32,826			10,493			5,909
Net interest income	59,142			58,763			58,545
Provision for (release of) credit losses (2)	2,340			(900)			(1,700)
Non-interest income	7,536			13,978			16,786
Investment securities (losses) gains, net	(11,547)			(14)			149
Non-interest expense	52,359			48,538			48,966
Pre-tax income	432			25,089			28,214
Income taxes (benefit)	(524)			4,338			5,697
Net income	$	956		$	20,751		$	22,517
Basic earnings per share	$	0.14		$	2.94		$	3.15
Diluted earnings per share	$	0.14		$	2.94		$	3.15
Efficiency ratio (1)	78.5		%	66.7		%	65.0		%

Net interest margin	3.29		%	3.53		%	3.62		%


	As of and for the years ended December 31,
	2023			2022			2021
Key financial ratios:
Book value per share	$	19.33		$	18.04		$	20.84
Market price per share	$	25.37		$	20.57		$	23.98
Cash dividends paid on common stock	$	4,649		$	4,240		$	3,616
Common stock dividend	$	6,005		$	6,865		$	5,385
Return on average assets	0.05		%	1.16		%	1.30		%
Return on average common equity	0.76		%	15.94		%	16.46		%
Average stockholders' equity to average total assets	6.68		%	7.27		%	7.89		%


	As of and for the years ended December 31,
(In thousands, except per share amounts)	2023			2022			2021









Asset Quality Ratios
Net-charge-offs (recoveries)	$	302		$	415		$	(490)
Non-performing loans	$	6,413		$	18,701		$	25,473
Classified assets	$	31,298		$	40,262		$	49,791
Allowance for credit losses to total loans (2)	1.54		%	1.02		%	1.30		%
Non-performing loans to total loans	0.42		%	1.23		%	1.96		%
Non-performing assets to loans	0.53		%	1.81		%	2.76		%
Non-performing assets to assets	0.43		%	1.43		%	1.97		%

Allowance for credit losses to non-performing loans	370.25		%	83.35		%	66.36		%

Capital Ratios
Stockholders' equity to assets	7.26		%	6.62		%	8.13		%
Total risk-based capital ratio	13.99		%	13.85		%	14.79		%
Tier 1 risk-based capital ratio	12.59		%	12.52		%	13.59		%
Common equity Tier 1 capital	9.73		%	9.89		%	10.22		%
Tier 1 leverage ratio (1)	10.29		%	10.76		%	11.01		%

Balance sheet information:
Cash and cash equivalents	$	93,450		$	83,720		$	159,909
Total assets	$	1,875,350		$	1,923,540		$	1,831,550
Loans held for investment	1,539,147			1,521,252			1,302,133
Allowance for credit losses (2)	(23,744)			(15,588)			(16,903)
Loans held for sale	3,884			591			2,249
Investment securities	195,042			257,100			316,278
Deposits	1,570,844			1,632,079			1,516,820
Total stockholders’ equity	136,085			127,411			148,956


	2023						2022						2021
(In thousands)	Average Balance		Interest Income/ Expense(1)		Rate Earned/ Paid(1)		Average Balance		Interest Income/ Expense(1)		Rate Earned/ Paid(1)		Average Balance		Interest Income/ Expense(1)		Rate Earned/ Paid(1)
Assets
Loans: (2)
Commercial	$	230,988	$	14,401	6.23	%	$	236,228	$	12,320	5.22	%	$	245,779	$	15,527	6.32	%
Real estate construction - residential	50,497		3,707		7.34		24,766		1,296		5.23		34,357		1,662		4.84
Real estate construction - commercial	136,455		7,511		5.50		115,424		5,307		4.60		78,068		3,577		4.58
Real estate mortgage - residential	370,024		19,862		5.37		313,926		13,736		4.38		267,722		11,461		4.28
Real estate mortgage - commercial	734,657		37,957		5.17		692,712		29,881		4.31		631,612		26,665		4.22
Installment and other consumer	22,307		1,056		4.73		23,237		847		3.65		24,681		979		3.97
Total loans	$	1,544,928	$	84,494	5.47	%	$	1,406,293	$	63,387	4.51	%	$	1,282,219	$	59,871	4.67	%
Loans held for sale	$	3,609	$	160	4.43	%	$	1,738	$	90	5.18	%	$	3,947	$	102	2.58	%
Investment securities:
U.S. Treasury	$	4,200	$	176	4.19	%	$	3,538	$	40	1.13	%	$	3,088	$	18	0.58	%
U.S. government and federal agency obligations	24,832		436		1.76		25,709		362		1.41		22,562		364		1.61
Obligations of states and political subdivisions	107,482		3,374		3.14		115,132		4,112		3.57		97,632		2,953		3.02
Mortgage-backed securities	96,649		2,038		2.11		116,061		1,996		1.72		127,225		1,719		1.35
Other debt securities	11,787		696		5.90		12,889		644		5.00		11,985		578		4.82
Total investment securities	$	244,950	$	6,720	2.74	%	$	273,329	$	7,154	2.62	%	$	262,492	$	5,632	2.15	%
Other investment securities	6,973		441		6.32		5,627		270		4.80		5,911		301		5.09
Federal funds sold	44		2		4.55		1,724		6		0.35		10,150		8		0.08
Interest bearing deposits in other financial institutions	25,437		1,239		4.87		31,955		413		1.29		103,719		337		0.32
Total interest earning assets	$	1,825,941	$	93,056	5.10	%	$	1,720,666	$	71,320	4.14	%	$	1,668,438	$	66,251	3.97	%
All other assets	89,071						86,985						85,014
Allowance for credit losses	(20,737)						(15,581)						(18,751)
Total assets	$	1,894,275					$	1,792,070					$	1,734,701


Average Balance Sheets (continued)

	2023						2022						2021
(In thousands)	Average Balance		Interest Income/ Expense(1)		Rate Earned/ Paid(1)		Average Balance		Interest Income/ Expense(1)		Rate Earned/ Paid(1)		Average Balance		Interest Income/ Expense(1)		Rate Earned/ Paid(1)
Liabilities and Stockholders' Equity
Savings	$	182,870	$	1,026	0.56	%	$	180,122	$	61	0.03	%	$	157,549	$	54	0.03	%
NOW accounts	199,234		2,280		1.14		252,842		1,627		0.64		231,742		536		0.23
Interest checking	167,157		7,648		4.58		64,473		1,786		2.77		42,067		188		0.45
Money market	282,924		5,842		2.06		297,153		1,535		0.52		281,254		335		0.12
Time deposits	329,091		8,988		2.73		261,833		2,140		0.82		255,289		2,021		0.79
Total interest bearing deposits	$	1,161,276	$	25,784	2.22	%	$	1,056,423	$	7,149	0.68	%	$	967,901	$	3,134	0.32	%
Federal funds purchased and securities sold under agreements to repurchase	5,253		115		2.19		7,982		51		0.64		34,449		87		0.25
Federal Home Loan Bank advances and other borrowings	112,271		3,255		2.90		80,867		1,268		1.57		92,259		1,461		1.58
Subordinated notes	49,486		3,774		7.63		49,486		2,072		4.19		49,486		1,227		2.48
Total borrowings	$	167,010	$	7,144	4.28	%	$	138,335	$	3,391	2.45	%	$	176,194	$	2,775	1.57	%
Total interest bearing liabilities	$	1,328,286	$	32,928	2.48	%	$	1,194,758	$	10,540	0.88	%	$	1,144,095	$	5,909	0.52	%
Demand deposits	426,739						454,931						436,434
Other liabilities	12,719						12,170						17,347
Total liabilities	1,767,744						1,661,859						1,597,876
Stockholders' equity	126,531						130,211						136,825
Total liabilities and stockholders' equity	$	1,894,275					$	1,792,070					$	1,734,701
Net interest income (FTE)			$	60,128					$	60,780					$	60,342
Net interest spread (FTE)					2.62	%					3.26	%					3.45	%
Net interest margin (FTE)					3.29	%					3.53	%					3.62	%


	2023						2022
			Change due to						Change due to
(In thousands)	Total Change		Average Volume		Average Rate		Total Change		Average Volume		Average Rate
Interest income on a fully taxable equivalent basis: (1)
Loans: (2)
Commercial	$	2,081	$	(279)	$	2,360	$	(3,207)	$	(584)	$	(2,623)
Real estate construction - residential	2,411		1,737		674		(366)		(493)		127
Real estate construction - commercial	2,204		1,059		1,145		1,730		1,718		12
Real estate mortgage - residential	6,126		2,700		3,426		2,275		2,017		258
Real estate mortgage - commercial	8,076		1,893		6,183		3,216		2,625		591
Installment and other consumer	209		(35)		244		(132)		(55)		(77)
Loans held for sale	70		85		(15)		(12)		(78)		66
Investment securities:
U.S. Treasury	136		9		127		22		3		19
U.S. government and federal agency obligations	74		(13)		87		(2)		47		(49)
Obligations of states and political subdivisions	(738)		(262)		(476)		1,159		577		582
Mortgage-backed securities	42		(366)		408		277		(161)		438
Other debt securities	52		(58)		110		66		45		21
Other investment securities	171		73		98		(31)		(14)		(17)
Federal funds sold	(4)		(11)		7		(2)		(11)		9
Interest bearing deposits in other financial institutions	826		(100)		926		76		(364)		440
Total interest income	$	21,736	$	6,432	$	15,304	$	5,069	$	5,272	$	(203)
Interest expense:
Savings	965		1		964		7		8		(1)
NOW accounts	653		(402)		1,055		1,091		53		1,038
Interest checking	5,862		4,160		1,702		1,598		149		1,449
Money market	4,307		(77)		4,384		1,200		20		1,180
Time deposits	6,848		677		6,171		119		53		66
Federal funds purchased and securities sold under agreements to repurchase	64		(23)		87		(36)		(101)		65
Federal Home Loan Bank advances and other borrowings	1,987		624		1,363		(193)		(179)		(14)
Subordinated notes	1,702		—		1,702		845		—		845
Total interest expense	$	22,388	$	4,960	$	17,428	$	4,631	$	3	$	4,628
Net interest income on a fully taxable equivalent basis	$	(652)	$	1,472	$	(2,124)	$	438	$	5,269	$	(4,831)


										$ Change				% Change
(In thousands)	2023			2022			2021			2023 vs 2022		2022 vs 2021		2023 vs 2022		2022 vs 2021
Service charges and other fees	$	2,942		$	3,002		$	3,094		$	(60)	$	(92)	(2.0)	%	(3.0)	%
Bank card income and fees	4,028			4,083			3,957			(55)		126		(1.3)		3.2
Trust department income	1,090			1,184			1,324			(94)		(140)		(7.9)		(10.6)
Real estate servicing fees, net	(584)			1,004			580			(1,588)		424		(158.2)		73.1
Gain on sales of mortgage loans, net	2,560			2,661			7,165			(101)		(4,504)		(3.8)		(62.9)
(Losses) gains on other real estate owned, net	(4,429)			289			(871)			(4,718)		1,160		NM		(133.2)
Other	1,929			1,755			1,537			174		218		9.9		14.2
Total non-interest income	$	7,536		$	13,978		$	16,786		$	(6,442)	$	(2,808)	(46.1)	%	(16.7)	%
Non-interest income as a % of total revenue *	11.3		%	19.2		%	22.3		%


	December 31,
(In thousands)	2023			2022
Commercial, financial, and agricultural	$	226,275		$	244,549
Real estate construction − residential	58,347			32,095
Real estate construction − commercial	130,296			137,235
Real estate mortgage − residential	372,391			361,025
Real estate mortgage − commercial	731,024			722,729
Installment and other consumer	20,814			23,619
Total loans	$	1,539,147		$	1,521,252
Percent of categories to total loans:
Commercial, financial, and agricultural	14.7		%	16.1		%
Real estate construction − residential	3.8			2.1
Real estate construction − commercial	8.5			9.0
Real estate mortgage − residential	24.2			23.7
Real estate mortgage − commercial	47.5			47.5
Installment and other consumer	1.3			1.6
Total	100.0		%	100.0		%


	Principal Payments Due
(In thousands)	One Year Or Less		Over One Year Through Five Years		Over Five Years Through 15 Years		Over 15 Years		Total
Commercial, financial, and agricultural	$	63,382	$	89,253	$	45,393	$	28,247	$	226,275
Real estate construction − residential	24,080		10,138		1,114		23,015		58,347
Real estate construction − commercial	22,043		80,433		24,871		2,949		130,296
Real estate mortgage − residential	14,185		49,099		66,836		242,271		372,391
Real estate mortgage − commercial	40,218		411,199		134,270		145,337		731,024
Installment and other consumer	3,270		15,472		2,072		0		20,814
Total loans	$	167,178	$	655,594	$	274,556	$	441,819	$	1,539,147

Loans with fixed rates
Commercial, financial, and agricultural	$	14,837	$	84,767	$	24,693	$	—	$	124,297
Real estate construction − residential	10,791		1,712		705		—		13,208
Real estate construction − commercial	14,133		72,686		20,758		0		107,577
Real estate mortgage − residential	6,073		44,489		21,804		43,759		116,125
Real estate mortgage − commercial	32,600		351,463		44,827		6,211		435,101
Installment and other consumer	1,631		15,472		2,072		—		19,175
Total	80,065		570,589		114,859		49,970		815,483
Loans with floating rates
Commercial, financial, and agricultural	$	48,545	$	4,486	$	20,700	$	28,247	$	101,978
Real estate construction − residential	13,289		8,426		409		23,015		45,139
Real estate construction − commercial	7,910		7,747		4,113		2,949		22,719
Real estate mortgage − residential	8,112		4,610		45,032		198,512		256,266
Real estate mortgage − commercial	7,618		59,736		89,443		139,126		295,923
Installment and other consumer	1,639		—		—		—		1,639
Total	87,113		85,005		159,697		391,849		723,664
Total loans	$	167,178	$	655,594	$	274,556	$	441,819	$	1,539,147


	December 31, 2023						December 31, 2022
(In thousands)	Net Charge-offs (Recoveries)		Average Loans		Net Charge-offs (Recoveries) / Average Loans		Net Charge-offs (Recoveries)		Average Loans		Net Charge-offs (Recoveries) / Average Loans
Commercial, financial, and agricultural	$	(31)	$	230,988	(0.01)	%	$	79	$	236,228	0.03	%
Real estate construction − residential	—		50,497		—		—		24,766		—
Real estate construction − commercial	(22)		136,455		(0.02)		(22)		115,424		(0.02)
Real estate mortgage − residential	65		370,024		0.02		(45)		313,926		(0.01)
Real estate mortgage − commercial	28		734,657		—		170		692,712		0.02
Installment and other consumer	262		22,307		1.17		233		23,237		1.00
Total	$	302	$	1,544,928	0.02%		$	415	$	1,406,293	0.03%


(In thousands)	1 Year Or Less		Yield		Over 1 Through 5 Years		Yield		Over 5 Through 10 Years		Yield		Over 10 Years		Yield		Total		Yield
U.S. Treasury	$	1,978	5.24	%	$	—	—	%	$	—	—	%	$	—	—	%	$	1,978	5.24	%
U.S. government and federal agency obligations	—		—		427		2.20		—		—		—		—		427		2.20
U.S. government-sponsored enterprises	—		—		20,049		5.09		1,773		2.14		—		—		21,822		4.85
States and political subdivisions (1)	124		3.28		4,868		2.19		11,186		2.12		90,707		2.17		106,885		2.17
Mortgage-backed securities (2)	18		1.87		1,926		2.08		5,786		2.29		37,910		2.30		45,640		2.29
Other debt securities	—		—		—		—		10,821		4.93		—		—		10,821		4.93
Bank issued trust preferred securities	—		—		—		—		—		—		1,169		7.95		1,169		7.10
Total available-for-sale debt securities	$	2,120	5.10	%	$	27,270	4.31	%	$	29,566	3.18	%	$	129,786	1.88	%	$	188,742	2.70	%

Equity securities
Federal Agriculture Mortgage Corporation	$	—	—	%	$	—	—	%	$	—	—	%	$	78	3.77	%	$	78	3.77	%


(in thousands)
Due within:
Three months or less	$	39,593
Over three through six months	26,077
Over six through 12 months	40,152
Over 12 months	2,325
Total	$	108,147


	Payments due by Period
(In thousands)	Total		Less than 1 Year		1-3 Years		3-5 Years		Over 5 Years
Time deposits	$	322,151	$	292,731	$	22,025	$	7,395	$	—
FHLB advances and other borrowed money	107,000		26,000		53,000		17,500		10,500
Subordinated notes	49,486		—		—		—		49,486
Operating lease liabilities	1,213		253		516		526		(82)
Total	$	479,850	$	318,984	$	75,541	$	25,421	$	59,904


	Amount of Commitment Expiration per Period
(In thousands)	Total		Less than 1 Year		1-3 Years		3-5 Years		Over 5 Years
Unused loan commitments	$	286,939	$	175,855	$	29,540	$	18,672	$	62,872
Interest rate lock commitments	3,694		3,694		—		—		—
Forward sale commitments	3,779		3,779		—		—		—
Standby letters of credit	111,631		111,631		—		—		—
Total	$	406,043	$	294,959	$	29,540	$	18,672	$	62,872


										$ Change				% Change
(In thousands)	2023			2022			2021			2023 vs 2022		2022 vs 2021		2023 vs 2022		2022 vs 2021
Salaries	$	23,273		$	20,612		$	20,717		$	2,661	$	(105)	12.9	%	(0.5)	%
Employee benefits	5,698			6,446			6,940			(748)		(494)		(11.6)		(7.1)
Occupancy expense, net	3,247			3,175			3,075			72		100		2.3		3.3
Furniture and equipment expense	3,009			3,054			3,067			(45)		(13)		(1.5)		(0.4)
Processing, network and bank card expense	5,151			4,788			4,751			363		37		7.6		0.8
Legal, examination, and professional fees	2,508			1,630			3,024			878		(1,394)		53.9		(46.1)
Advertising and promotion	1,487			1,494			1,227			(7)		267		(0.5)		21.8
Postage, printing, and supplies	846			878			838			(32)		40		(3.6)		4.8
Loan expense	941			576			823			365		(247)		63.4		(30.0)
Other	6,199			5,885			4,504			314		1,381		5.3		30.7
Total non-interest expense	$	52,359		$	48,538		$	48,966		$	3,821	$	(428)	7.9	%	(0.9)	%
Efficiency ratio*	78.5		%	66.7		%	65.0		%
Number of full-time equivalent employees	281			304			298


	% Change in projected net interest income
Hypothetical shift in interest rates	December 31,
(bps)	2023		2022
200	5.92	%	3.01	%
100	6.12	%	3.78	%
(100)	7.08	%	5.20	%
(200)	7.05	%	5.80	%


			Page
Report of Independent Registered Public Accounting Firm			27
Consolidated Balance Sheets as of December 31, 202 3 and 2022			29
Consolidated Statements of Income for each of the years ended December 31, 202 3 , 202 2 , and 20 21			30
Consolidated Statements of Comprehensive Income for each of the years ended December 31, 202 3 , 202 2 , and 20 21			31
Consolidated Statements of Stockholders' Equity for each of the years ended December 31, 202 3 , 202 2 , and 20 21			32
Consolidated Statements of Cash Flows for each of the years ended December 31, 202 3 , 202 2 , and 20 21			33
Notes to the Consolidated Financial Statements			34


	December 31,
(In thousands, except per share data)	2023		2022
ASSETS
Cash and due from banks	15,675		$	18,661
Federal funds sold	—		46
Other interest-bearing deposits	77,775		65,013
Cash and cash equivalents	93,450		83,720
Certificates of deposit in other banks	—		2,955
Available-for-sale debt securities, at fair value	188,742		250,747
Other investments	6,300		6,353
Total investment securities	195,042		257,100
Loans held for investment	1,539,147		1,521,252
Allowance for credit losses (1)	(23,744)		(15,588)
Net loans	1,515,403		1,505,664
Loans held for sale, at lower of cost or fair value	3,884		591
Premises and equipment - net	32,047		32,856
Mortgage servicing rights, at fair value	1,738		2,899
Other real estate owned - net	1,744		8,795
Accrued interest receivable	8,661		7,953
Cash surrender value - life insurance	2,624		2,567
Other assets (1)	20,757		18,440
Total assets	$	1,875,350	$	1,923,540
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Non-interest-bearing demand	$	402,241	$	453,443
Savings, interest checking and money market	846,452		923,602
Time deposits $250,000 and over	108,147		94,859
Other time deposits	214,004		160,175
Total deposits	1,570,844		1,632,079

Federal funds purchased and securities sold under agreements to repurchase	—		5,187
Federal Home Loan Bank advances and other borrowings	107,000		98,000
Subordinated notes	49,486		49,486
Operating lease liabilities	1,213		1,533
Accrued interest payable	1,772		902
Liability for unfunded commitments (1)	947		—
Other liabilities	8,003		8,942
Total liabilities	1,739,265		1,796,129
Stockholders’ equity:
Common stock, $1 par value, authorized 15,000,000 shares; issued 7,554,893 and 7,284,151 shares, respectively	7,555		7,284
Surplus	76,818		71,042
Retained earnings	76,464		91,789
Accumulated other comprehensive loss, net of tax	(13,762)		(31,714)
Treasury stock; 515,570 shares at cost	(10,990)		(10,990)
Total stockholders’ equity	136,085		127,411
Total liabilities and stockholders’ equity	$	1,875,350	$	1,923,540


	Years Ended December 31,
(In thousands, except per share amounts)	2023		2022		2021
INTEREST INCOME
Interest and fees on loans	$	84,187	$	62,888	$	59,248
Interest and fees on loans held for sale	160		90		102
Interest on investment securities:
Taxable	3,450		3,150		2,798
Nontaxable	2,489		2,439		1,660
Federal funds sold	2		6		8
Other interest-bearing deposits, and certificates of deposit in other banks	1,239		413		337
Dividends on other investments	441		270		301
Total interest income	91,968		69,256		64,454
INTEREST EXPENSE
Interest on deposits:
Savings, interest checking and money market	16,796		5,009		1,113
Time deposit accounts $250,000 and over	4,317		1,059		575
Time deposits	4,569		1,034		1,446
Total interest expense on deposits	25,682		7,102		3,134

Interest on federal funds purchased and securities sold under agreements to repurchase	115		51		87
Interest on Federal Home Loan Bank advances	3,255		1,268		1,461
Interest on subordinated notes	3,774		2,072		1,227
Total interest expense on borrowings	7,144		3,391		2,775
Total interest expense	32,826		10,493		5,909
Net interest income	59,142		58,763		58,545
Provision for (release of) credit losses on loans and unfunded commitments (1)	2,340		(900)		(1,700)
Net interest income after provision for (release of) credit losses on loans and unfunded commitments	56,802		59,663		60,245
NON-INTEREST INCOME
Service charges and other fees	2,942		3,002		3,094
Bank card income and fees	4,028		4,083		3,957
Trust department income	1,090		1,184		1,324
Real estate servicing fees, net	(584)		1,004		580
Gain on sale of mortgage loans, net	2,560		2,661		7,165
(Losses) gains on other real estate owned, net	(4,429)		289		(871)
Other	1,929		1,755		1,537
Total non-interest income	7,536		13,978		16,786
Investment securities (losses) gains, net	(11,547)		(14)		149

NON-INTEREST EXPENSE
Salaries and employee benefits	28,971		27,058		27,657
Occupancy expense, net	3,247		3,175		3,075
Furniture and equipment expense	3,009		3,054		3,067
Processing, network, and bank card expense	5,151		4,788		4,751
Legal, examination, and professional fees	2,508		1,630		3,024
Advertising and promotion	1,487		1,494		1,227
Postage, printing, and supplies	846		878		838
Loan expense	941		576		823
Other	6,199		5,885		4,504
Total non-interest expense	52,359		48,538		48,966
Income before income taxes (benefit)	432		25,089		28,214
Income tax expense (benefit)	(524)		4,338		5,697
Net income	$	956	$	20,751	$	22,517
Basic earnings per share	$	0.14	$	2.94	$	3.15
Diluted earnings per share	$	0.14	$	2.94	$	3.15


(In thousands)	Common Stock		Surplus		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total Stock - holders' Equity
Balance, December 31, 2020	$	6,769	$	59,307	$	68,935	$	1,528	$	(5,950)	$	130,589
Net income	—		—		22,517		—		—		22,517
Other comprehensive income	—		—		—		1,765		—		1,765
Purchase of treasury stock	—		—		—		—		(2,148)		(2,148)
Stock dividend ($0.04 per share)	255		5,130		(5,385)		—		—		—
Cash dividends declared, common stock ($0.58 per share)	—		—		(3,767)		—		—		(3,767)
Balance, December 31, 2021	$	7,024	$	64,437	$	82,300	$	3,293	$	(8,098)	$	148,956
Net income	—		—		20,751		—		—		20,751
Other comprehensive loss	—		—		—		(35,007)		—		(35,007)
Purchase of treasury stock	—		—		—		—		(2,892)		(2,892)
Stock dividend ($0.04 per share)	260		6,605		(6,865)		—		—		—
Cash dividends declared, common stock ($0.66 per share)	—		—		(4,397)		—		—		(4,397)
Balance, December 31, 2022	$	7,284	$	71,042	$	91,789	$	(31,714)	$	(10,990)	$	127,411
Adoption of ASU 2016-13	—		—		(5,581)		—		—		(5,581)
Balance, January 01, 2023	7,284		71,042		86,208		(31,714)		(10,990)		121,830
Net income	—		—		956		—		—		956
Other comprehensive income	—		—		—		17,952		—		17,952

Share-based compensation expense	—		42		—		—		—		42
Stock dividend ($0.04 per share)	271		5,734		(6,005)		—		—		—
Cash dividends declared, common stock ($0.68 per share)	—		—		(4,695)		—		—		(4,695)
Balance, December 31, 2023	$	7,555	$	76,818	$	76,464	$	(13,762)	$	(10,990)	$	136,085


	Year Ended December 31,
(In thousands)	2023		2022		2021
Cash flows from operating activities:
Net income	$	956	$	20,751	$	22,517
Adjustments to reconcile net income to net cash from operating activities:
Provision for (release of) for credit losses on loans and unfunded commitments	2,340		(900)		(1,700)
Depreciation expense	2,106		2,141		2,283
Net amortization of investment securities, premiums, and discounts	1,008		1,358		1,743
Change in fair value of mortgage servicing rights	1,200		(176)		186
Investment securities losses (gains), net	11,547		14		(149)
(Gains) losses on sales and dispositions of premises and equipment	(133)		(160)		29
Gain on sales and dispositions of other real estate and repossessed assets	(298)		(255)		(27)
Provision for (release of) valuation allowance for other real estate owned	4,729		(29)		965
Share-based compensation expense	42		—		—
(Increase) decrease in accrued interest receivable	(708)		(1,332)		19
Increase in cash surrender value - life insurance	(57)		(58)		(58)
Increase in other assets	(4,894)		(1,413)		(2,222)
Decrease in operating lease liabilities	(320)		(304)		(300)
Increase (decrease) in accrued interest payable	870		620		(555)
Increase (decrease) in other liabilities	2,553		(1,522)		4,981
Origination of mortgage loans held for sale	(106,978)		(83,012)		(196,924)
Proceeds from the sale of mortgage loans held for sale	106,206		87,217		206,589
Gain on sale of mortgage loans, net	(2,560)		(2,661)		(7,165)

Net cash provided by operating activities	17,609		20,279		30,212
Cash flows from investing activities:
Purchase of certificates of deposit in other banks	—		(735)		(245)
Proceeds from maturities of certificates of deposit in other banks	2,219		2,966		4,436
Net increase in loans	(18,267)		(219,646)		(15,449)
Purchase of available-for-sale debt securities	(29,512)		(21,282)		(178,576)
Proceeds from maturities of available-for-sale debt securities	23,780		30,899		38,386
Proceeds from calls of available-for-sale debt securities	615		2,295		16,515
Proceeds from sales of available-for-sale debt securities	74,506		—		5,420
Purchases of FHLB stock	(14,672)		(13,334)		(362)
Proceeds from sales of FHLB stock	14,757		12,375		1,334
Purchases of premises and equipment	(2,097)		(2,566)		(591)
Proceeds from sales of premises and equipment	172		317		46


Proceeds from sales of other real estate and repossessed assets	2,691		2,176		1,551
Net cash provided by (used in) investing activities	54,192		(206,535)		(127,535)
Cash flows from financing activities:
Net (decrease) increase in demand deposits	(51,202)		377		70,574
Net (decrease) increase in interest-bearing transaction accounts	(77,150)		105,244		94,550
Net increase (decrease) in time deposits	67,117		9,638		(31,910)
Net decrease in federal funds purchased and securities sold under agreements to repurchase	(5,187)		(18,642)		(21,325)
Repayment of FHLB advances and other borrowings	(337,840)		(315,399)		(29,256)
FHLB advances	346,840		335,981		—
Purchase of treasury stock	—		(2,892)		(2,148)
Cash dividends paid - common stock	(4,649)		(4,240)		(3,616)
Net cash (used in) provided by financing activities	(62,071)		110,067		76,869
Net increase (decrease) in cash and cash equivalents	9,730		(76,189)		(20,454)
Cash and cash equivalents, beginning of year	83,720		159,909		180,363
Cash and cash equivalents, end of year	$	93,450	$	83,720	$	159,909


(in thousands)	December 31, 2022		Impact of Adoption		January 1, 2023
Assets:
Allowance for credit losses on loans	$	15,588	$	5,793	$	21,381
Deferred tax asset	3,267		1,483		4,750
Liabilities:
Liability for unfunded commitments	—		1,272		1,272
Shareholders' Equity
Retained Earnings	91,789		(5,581)		86,208


(in thousands)
Balance at December 31, 2022	$	9,415
New loans	4,373
Amounts collected	(4,191)
Balance at December 31, 2023	$	9,597


(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, December 31, 2020	$	5,121	$	213	$	475	$	2,679	$	9,354	$	264	$	7	$	18,113


Charge-offs	(194)		—		—		(22)		(43)		(229)		—		(488)
Recoveries	221		13		475		190		3		76		—		978

Provision for (release of) credit losses	(2,431)		(89)		(362)		(365)		1,348		145		54		(1,700)
Balance at, December 31, 2021	$	2,717	$	137	$	588	$	2,482	$	10,662	$	256	$	61	$	16,903


Charge-offs	(135)		—		—		—		(181)		(321)		—		(637)
Recoveries	56		—		22		45		11		88		—		222

Provision for (release of) credit losses	97		20		265		802		(2,492)		303		105		(900)
Balance at, December 31, 2022	$	2,735	$	157	$	875	$	3,329	$	8,000	$	326	$	166	$	15,588
Adoption of ASU 2016-13 (1)	(649)		291		2,894		1,890		1,613		(80)		(166)		5,793
Balance at January 1, 2023	2,086		448		3,769		5,219		9,613		246		—		21,381


Charge-offs	(161)		—		—		(88)		(32)		(347)		—		(628)
Recoveries	192		—		22		23		4		85		—		326

Provision for (release of) credit losses	1,091		595		(518)		110		952		248		187		2,665
Balance at, December 31, 2023	$	3,208	$	1,043	$	3,273	$	5,264	$	10,537	$	232	$	187	$	23,744
Liability for Unfunded Commitments
Balance at, December 31, 2022	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Adoption of ASU 2016-13 (1)	104		341		569		107		150		1		—		1,272
Balance at January 1, 2023	104		341		569		107		150		1		—		1,272
Provision for (release of) credit losses on unfunded commitments	93		(68)		(324)		(4)		(40)		—		18		(325)
Balance at, December 31, 2023	$	197	$	273	$	245	$	103	$	110	$	1	$	18	$	947
Total allowance for credit losses on loans and liability for unfunded commitments	$	3,405	$	1,316	$	3,518	$	5,367	$	10,647	$	233	$	205	$	24,691


	Collateral Type
(in thousands)	Real Estate		Other		Allowance Allocated
December 31, 2023
Commercial, financial, and agricultural	$	—	$	2,221	$	1,300
Real estate construction − residential	432		—		164

Real estate mortgage − residential	$	46	$	—	$	19
Real estate mortgage − commercial	2,369		—		—

Total	$	2,847	$	2,221	$	1,483


(in thousands)	Commercial, Financial, and Agricultural		Real Estate Construction - Residential		Real Estate Construction - Commercial		Real Estate Mortgage - Residential		Real Estate Mortgage - Commercial		Installment and other Consumer		Un- allocated		Total
December 31, 2022
Allowance for loan losses:
Individually evaluated for impairment	$	36	$	—	$	11	$	148	$	62	$	1	$	—	$	258
Collectively evaluated for impairment	2,699		157		864		3,181		7,938		325		166		15,330
Total	$	2,735	$	157	$	875	$	3,329	$	8,000	$	326	$	166	$	15,588
Loans outstanding:
Individually evaluated for impairment	$	295	$	—	$	87	$	1,863	$	18,110	$	6	$	—	$	20,361
Collectively evaluated for impairment	244,254		32,095		137,148		359,162		704,619		23,613		—		1,500,891
Total	$	244,549	$	32,095	$	137,235	$	361,025	$	722,729	$	23,619	$	—	$	1,521,252


(in thousands)	2022
Non-accrual loans	$	18,700
Performing TDRs	1,661
Total impaired loans	$	20,361


(in thousands)	Recorded Investment		Unpaid Principal Balance		Specific Reserves		Average Recorded Investment
December 31, 2022
With no related allowance recorded:
Real estate mortgage − residential	$	—	$	—	$	—	$	1
Real estate mortgage − commercial	17,664		18,975		—		16,230
Total	$	17,664	$	18,975	$	—	$	16,231
With an allowance recorded:
Commercial, financial and agricultural	$	295	$	330	$	36	$	319
Real estate construction − commercial	87		127		11		93
Real estate mortgage − residential	1,863		2,080		148		2,189
Real estate mortgage − commercial	446		535		62		428
Installment and other consumer	6		6		1		90
Total	$	2,697	$	3,078	$	258	$	3,119
Total impaired loans	$	20,361	$	22,053	$	258	$	19,350


	Term Loans
	Amortized Cost Basis by Origination Year and Risk Grades
(in thousands)	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term Loans Amortized Cost Basis		Total
December 31, 2023
Commercial, Financial, & Agricultural
Pass	$	40,103	$	43,082	$	32,812	$	30,965	$	4,774	$	5,022	$	55,379	$	213	$	212,350
Watch	1		2,505		32		586		3		282		2,502		—		5,911
Substandard	371		3,758		19		16		—		—		323		1,299		5,786
Non-accrual loans	159		96		317		—		7		—		1,649		—		2,228
Total	$	40,634	$	49,441	$	33,180	$	31,567	$	4,784	$	5,304	$	59,853	$	1,512	$	226,275
Gross YTD charge-offs	—		1		—		—		—		160		—		—		161
Real Estate Construction - Residential
Pass	$	39,847	$	17,259	$	634	$	175	$	—	$	—	$	—	$	—	$	57,915
Watch	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—		—
Non-accrual loans	432		—		—		—		—		—		—		—		432
Total	$	40,279	$	17,259	$	634	$	175	$	—	$	—	$	—	$	—	$	58,347
Gross YTD charge-offs	—		—		—		—		—		—		—		—		—
Real Estate Construction - Commercial
Pass	$	49,041	$	53,058	$	24,371	$	1,040	$	31	$	735	$	187	$	—	$	128,463
Watch	934		17		—		—		—		—		103		—		1,054
Substandard	710		—		—		—		—		—		—		—		710
Non-accrual loans	—		—		—		—		—		69		—		—		69
Total	$	50,685	$	53,075	$	24,371	$	1,040	$	31	$	804	$	290	$	—	$	130,296
Gross YTD charge-offs	—		—		—		—		—		—		—		—		—
Real Estate Mortgage - Residential
Pass	$	65,472	$	121,430	$	62,998	$	47,884	$	7,242	$	19,193	$	44,574	$	202	$	368,995
Watch	179		251		411		293		71		1,310		23		—		2,538
Substandard	16		—		—		129		—		126		—		—		271
Non-accrual loans	—		23		93		135		—		246		90		—		587
Total	$	65,667	$	121,704	$	63,502	$	48,441	$	7,313	$	20,875	$	44,687	$	202	$	372,391
Gross YTD charge-offs	—		—		—		75		—		—		13		—		88
Real Estate Mortgage - Commercial
Pass	$	99,081	$	208,699	$	204,789	$	84,363	$	27,085	$	39,941	$	16,059	$	659	$	680,676
Watch	15,759		10,978		2,737		91		345		897		70		—		30,877
Substandard	—		215		15,944		—		45		289		—		—		16,493
Non-accrual loans	1,817		54		712		212		83		—		100		—		2,978
Total	$	116,657	$	219,946	$	224,182	$	84,666	$	27,558	$	41,127	$	16,229	$	659	$	731,024
Gross YTD charge-offs	—		—		—		—		—		32		—		—		32
Installment and other Consumer
Pass	$	7,430	$	6,497	$	2,720	$	1,287	$	987	$	1,803	$	90	$	—	$	20,814
Watch	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—		—
Non-accrual loans	—		—		—		—		—		—		—		—		—
Total	$	7,430	$	6,497	$	2,720	$	1,287	$	987	$	1,803	$	90	$	—	$	20,814
Gross YTD charge-offs	84		23		7		—		—		232		1		—		347
Total Portfolio
Pass	$	300,974	$	450,025	$	328,324	$	165,714	$	40,119	$	66,694	$	116,289	$	1,074	$	1,469,213
Watch	16,873		13,751		3,180		970		419		2,489		2,698		—		40,380
Substandard	1,097		3,973		15,963		145		45		415		323		1,299		23,260
Non-accrual loans	2,408		173		1,122		347		90		315		1,839		—		6,294
Total	$	321,352	$	467,922	$	348,589	$	167,176	$	40,673	$	69,913	$	121,149	$	2,373	$	1,539,147
Total Gross YTD charge-offs	$	84	$	24	$	7	$	75	$	—	$	424	$	14	$	—	$	628


(in thousands)	Non-accrual with no Allowance		Non-accrual with Allowance		Total Non-accrual (1)		90 Days Past Due And Still Accruing		Total Non-performing Loans
December 31, 2023
Commercial, Financial, and Agricultural	$	—	$	2,228	$	2,228	$	—	$	2,228
Real estate construction − residential	—		432		432		—		432
Real estate construction − commercial	—		69		69		—		69
Real estate mortgage − residential	—		587		587		115		702
Real estate mortgage − commercial	2,368		610		2,978		—		2,978
Installment and Other Consumer	—		—		—		4		4
Total	$	2,368	$	3,926	$	6,294	$	119	$	6,413
December 31, 2022
Commercial, Financial, and Agricultural	$	—	$	121	$	121	$	—	$	121

Real estate construction − commercial	—		87		87		—		87
Real estate mortgage − residential	—		685		685		—		685
Real estate mortgage − commercial	17,664		137		17,801		—		17,801
Installment and Other Consumer	—		6		6		1		7
Total	$	17,664	$	1,036	$	18,700	$	1	$	18,701


(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
December 31, 2023
Commercial, Financial, and Agricultural	$	223,845	$	202	$	—	$	2,228	$	226,275
Real estate construction − residential	57,568		347		—		432		58,347
Real estate construction − commercial	130,227		—		—		69		130,296
Real estate mortgage − residential	368,956		2,733		115		587		372,391
Real estate mortgage − commercial	728,029		17		—		2,978		731,024
Installment and Other Consumer	20,607		203		4		—		20,814
Total	$	1,529,232	$	3,502	$	119	$	6,294	$	1,539,147
December 31, 2022
Commercial, Financial, and Agricultural	$	244,392	$	36	$	—	$	121	$	244,549
Real estate construction − residential	32,095		—		—		—		32,095
Real estate construction − commercial	137,148		—		—		87		137,235
Real estate mortgage − residential	359,672		668		—		685		361,025
Real estate mortgage − commercial	704,925		3		—		17,801		722,729
Installment and Other Consumer	23,506		106		1		6		23,619
Total	$	1,501,738	$	813	$	1	$	18,700	$	1,521,252


	December 31, 2023
(Dollars in thousands)	Number of contracts	Recorded Investment		% to Total Loans
Commercial, financial and agricultural	2	$	160	0.01%

Real estate mortgage − residential	6	980		0.06%
Real estate mortgage − commercial	2	270		0.02%

Total	10	$	1,410	0.09	%


Balance at December 31, 2021	$	13,436
Additions	162
Proceeds from sales	(2,176)
Charge-offs against the valuation allowance for other real estate owned, net	(218)
Net gain on sales	255
Balance at December 31, 2022	$	11,459
Additions	71
Proceeds from sales	(2,691)
Charge-offs against the valuation allowance for other real estate owned, net	(1,443)
Net gain on sales	298
Total other real estate owned	$	7,694
Less valuation allowance for other real estate owned	(5,950)
Balance at December 31, 2023	$	1,744


	Total Amortized Cost		Gross Unrealized				Fair Value
(in thousands)			Gains		Losses
December 31, 2023
U.S. Treasury	$	1,977	$	1	$	—	$	1,978
U.S. government and federal agency obligations	446		—		(19)		427
U.S. government-sponsored enterprises	22,042		16		(236)		21,822
Obligations of states and political subdivisions	126,396		55		(19,566)		106,885
Mortgage-backed securities	51,736		27		(6,123)		45,640
Other debt securities (a)	11,825		22		(1,026)		10,821
Bank issued trust preferred securities (a)	1,486		—		(317)		1,169
Total available-for-sale securities	$	215,908	$	121	$	(27,287)	$	188,742

December 31, 2022
U.S. Treasury	$	2,198	$	—	$	(46)	$	2,152
U.S. government and federal agency obligations	591		—		(32)		559
U.S. government-sponsored enterprises	26,499		—		(2,722)		23,777
Obligations of states and political subdivisions	134,994		—		(25,554)		109,440
Mortgage-backed securities	119,556		7		(16,864)		102,699
Other debt securities (a)	11,825		—		(882)		10,943
Bank issued trust preferred securities (a)	1,486		—		(309)		1,177
Total available-for-sale securities	$	297,149	$	7	$	(46,409)	$	250,747


(in thousands)	Amortized Cost		Fair Value
Due in one year or less	$	2,102	$	2,102
Due after one year through five years	25,465		25,346
Due after five years through ten years	26,216		23,779
Due after ten years	110,389		91,875
Total	164,172		143,102
Mortgage-backed securities	51,736		45,640
Total available-for-sale securities	$	215,908	$	188,742