Investment Securities

3 Months Ended

Mar. 31, 2025

Investments, Debt and Equity Securities [Abstract]

The amortized cost and fair value of debt securities classified as available-for-sale at March 31, 2025 and December 31, 2024 were as follows:


			Gross Unrealized
(dollars in thousands)	Total Amortized Cost		Gains		Losses		Fair Value
March 31, 2025
U.S. Treasury	$	4,940	$	65	$	—	$	5,005
U.S. government and federal agency obligations	382		—		(4)		378
U.S. government-sponsored enterprises	13,015		34		(188)		12,861
Obligations of states and political subdivisions	122,059		—		(24,577)		97,482
Mortgage-backed securities
Residential	68,942		335		(3,048)		66,229
Commercial	16,095		16		(2,291)		13,820
Other debt securities (a)	23,148		131		(671)		22,608
Bank issued trust preferred securities (a)	1,486		—		(222)		1,264
Total available-for-sale securities	$	250,067	$	581	$	(31,001)	$	219,647

December 31, 2024
U.S. Treasury	$	4,937	$	—	$	(22)	$	4,915
U.S. government and federal agency obligations	408		—		(7)		401
U.S. government-sponsored enterprises	13,020		11		(227)		12,804
Obligations of states and political subdivisions	125,559		7		(23,080)		102,486
Mortgage-backed securities
Residential	68,346		59		(4,034)		64,371
Commercial	16,383		—		(2,644)		13,739
Other debt securities (a)	19,419		49		(781)		18,687
Bank issued trust preferred securities (a)	1,486		—		(237)		1,249
Total available-for-sale securities	$	249,558	$	126	$	(31,032)	$	218,652

(a) Certain hybrid instruments possessing characteristics typically associated with debt obligations.

The Company’s investment securities are classified as available for sale. Agency bonds and notes, loan certificates guaranteed by the Small Business Administration, residential and commercial agency mortgage-backed securities, and agency collateralized mortgage obligations include securities issued by the Government National Mortgage Association, a U.S. government agency, and the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, and the FHLB, which are U.S. government-sponsored enterprises.

Debt securities with carrying values aggregating approximately $88.8 million and $82.4 million at March 31, 2025 and December 31, 2024, respectively, were pledged to secure public funds, securities sold under agreements to repurchase, and for other purposes as required or permitted by law.

There were no proceeds from sales of available-for-sale securities for the three months ended March 31, 2025 and 2024. All gains and losses recognized on equity securities during the three months ended March 31, 2025 and 2024 were unrealized.

The amortized cost and fair value of debt securities classified as available-for-sale at March 31, 2025, by contractual maturity are shown below. Accrued interest on investments was consistent at $1.5 million at both March 31, 2025 and December 31, 2024, and is included in accrued interest receivable and other assets on the Company's consolidated balance sheets. The total amount of accrued interest is excluded from the amortized cost basis of investments presented below. Further, the Company has elected not to measure an allowance for credit losses for accrued interest receivable. Expected maturities may differ from contractual maturities because borrowers have the right to call or prepay obligations with or without prepayment penalties.


(dollars in thousands)	Amortized Cost		Fair Value
Due in one year or less	$	3,297	$	3,300
Due after one year through five years	22,112		21,710
Due after five years through ten years	40,679		37,694
Due after ten years	98,942		76,894
Total	$	165,030	$	139,598
Mortgage-backed securities	85,037		80,049
Total available-for-sale securities	$	250,067	$	219,647

Other Investment Securities

Other investment securities include equity securities with readily determinable fair values and other investment securities that do not have readily determinable fair values. Investments in FHLB stock, and Midwest Independent BankersBank ("MIB") stock, that do not have readily determinable fair values, are required for membership in those organizations.


(dollars in thousands)	March 31, 2025		December 31, 2024
Other securities:
FHLB stock	$	6,711	$	4,924
MIB stock	151		151
Equity securities with readily determinable fair values	72		74
Total other investment securities	$	6,934	$	5,149

Gross unrealized losses on debt securities and the fair value of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at March 31, 2025 and December 31, 2024 were as follows:


	Less than 12 months				12 months or more
(dollars in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Total Fair Value		Total Unrealized Losses
March 31, 2025

U.S. government and federal agency obligations	$	—	$	—	$	378	$	(4)	$	378	$	(4)
U.S. government-sponsored enterprises	—		—		1,812		(188)		1,812		(188)
Obligations of states and political subdivisions	2,967		(203)		94,515		(24,374)		97,482		(24,577)
Mortgage-backed securities
Residential	6,356		(32)		23,014		(3,016)		29,370		(3,048)
Commercial	2,258		(14)		10,191		(2,277)		12,449		(2,291)
Other debt securities	7,361		(117)		9,271		(554)		16,632		(671)
Bank issued trust preferred securities	—		—		1,264		(222)		1,264		(222)
Total	$	18,942	$	(366)	$	140,445	$	(30,635)	$	159,387	$	(31,001)

(dollars in thousands)
December 31, 2024
U.S. Treasury	$	4,915	$	(22)	$	—	$	—	$	4,915	$	(22)
U.S. government and federal agency obligations	—		—		401		(7)		401		(7)
U.S. government-sponsored enterprises	996		(5)		1,778		(222)		2,774		(227)
Obligations of states and political subdivisions	2,791		(163)		98,442		(22,917)		101,233		(23,080)
Mortgage-backed securities
Residential	34,179		(435)		23,453		(3,599)		57,632		(4,034)
Commercial	3,580		(128)		10,159		(2,516)		13,739		(2,644)
Other debt securities	4,900		(58)		9,101		(723)		14,001		(781)
Bank issued trust preferred securities	—		—		1,249		(237)		1,249		(237)
Total	$	51,361	$	(811)	$	144,583	$	(30,221)	$	195,944	$	(31,032)

The total available-for-sale portfolio consisted of approximately 390 securities at March 31, 2025. The portfolio included 357 securities having an aggregate fair value of $159.4 million that were in a loss position at March 31, 2025. Securities identified as temporarily impaired which had been in a loss position for 12 months or longer totaled $140.4 million at fair value at March 31, 2025. The $31.0 million aggregate unrealized loss included in accumulated other comprehensive loss at March 31, 2025 was caused by interest rate fluctuations.

The decline in fair value is attributable to changes in interest rates and not credit quality. In the absence of changes in credit quality of these investments, the fair value is expected to recover on all debt securities as they approach their maturity date or re-pricing date, or if market yields for such investments decline. In addition, the Company does not have the intent to sell these investments over the period of recovery, and it is not more likely than not that the Company will be required to sell such investment securities.

HAWTHORN BANCSHARES, INC. 10-Q