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Item 8. Financial Statements and Supplementary Data

2026-03-25 compared with 2025-03-31 · 690 added, 870 removed, 969 unchanged (62% of the section changed)

Financial Statements

Financial Statements and Supplementary Data

Report of Independent Registered Public Accounting Firm

3 unchanged sentences

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Finward Bancorp (the “Company”) as of December 31, 2024 and 2023, the related consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows for each of the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”).

We have audited the accompanying consolidated balance sheets of Finward Bancorp (the “Company”) as of December 31, 2025 and 2024, the related consolidated statements of income, comprehensive income (loss), changes in stockholders’ equity, and cash flows for each of the years then ended, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the years then ended in conformity with accounting principles generally accepted in the United States of America.

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Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

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(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

The communication of a critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Allowance for Credit Losses

As discussed in Note 1 to the consolidated financial statements, the Company’s loan portfolio totaled $1.5 billion as of December 31, 2025, and the associated allowance for credit losses (“ACL”) on loans was $17.5 million.

As discussed in Notes 1 and 3 to the consolidated financial statements, the Company measures expected credit losses for loans on a collective pooled basis when similar risk characteristics exist using relevant available information, from internal and external sources, relating to past events, current conditions, reasonable and supportable forecasts.

Historical peer provides the basis for the estimation of expected credit losses.

Historical peer data provides the basis for the estimation of expected credit losses.

Management also considers further adjustments to historical loss information for current conditions and reasonable and supportable forecasts that differ from the conditions that exist for the period over which historical information is evaluated as well as other changes in qualitative factors not inherently considered in the quantitative analyses.

The resulting qualitative adjustments are applied to the relevant collectively evaluated loan pools.

We have identified the ACL, and more specifically the qualitative adjustments applied in the ACL, as a critical audit matter.

The principal consideration for our determination is the high degree of judgment and subjectivity in auditing the assumptions utilized by management in calculating the qualitative reserve component.

We have identified the ACL, and more specifically the qualitative adjustment for the existence, growth, and effect of any concentrations of credit applied in the ACL, as a critical audit matter.

The principal consideration for our determination is the high degree of judgment and subjectivity in auditing the assumptions utilized by management in calculating the qualitative reserve.

This required a high degree of judgement due to the nature and extent of audit evidence and effort required to address this matter.

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• Obtained an understanding and evaluated the design of controls over the Company’s process for establishing the qualitative adjustments used in the ACL, including the key assumptions used to develop the qualitative adjustments applied to the ACL.

Evaluated the relevancy and reliability of key data and assumptions used to derive the qualitative factors, including considering the key data’s completeness and accuracy within the model

• Evaluated the relevancy and reliability of key data and assumptions used to derive the qualitative factors, specifically the existence, growth, and effect of any concentrations of credit factor, including considering the key data’s completeness and accuracy within the model.

• Evaluated the mathematical accuracy of the application of qualitative factors within the model.

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March 25, 2026

Finward Bancorp

Consolidated Balance Sheets

(Dollars in thousands)

(Dollars in thousands) December 31,

2025 December 31,

Cash and non-interest bearing deposits in other financial institutions $ 18,265 $ 17,883

$ 17,883 $ 17,942

Interest bearing deposits in other financial institutions 101,382 52,047

52,047 67,647

Federal funds sold - 654

Total cash and cash equivalents 119,647 70,584

70,584 86,008

Securities available-for-sale 316,227 333,554

333,554 371,374

Loans held-for-sale 1,096 1,253

Loans receivable, net of deferred fees and costs 1,450,387 1,508,976

1,508,976 1,512,595

Allowance for credit losses ( 17,506 ) ( 16,911 )

( 16,911 ) ( 18,768 )

Net loans receivable 1,432,881 1,492,065

1,492,065 1,493,827

Federal Home Loan Bank stock 6,547 6,547

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Premises and equipment 44,976 47,259

47,259 38,436

Foreclosed real estate

Cash value of bank owned life insurance 33,586 33,514

33,514 32,702

22,395 22,395

Goodwill 22,395 22,395

Other intangible assets 1,172 1,860

43,947 45,262

$ 2,060,699 $ 2,108,279

Other assets 34,873 43,947

Total assets $ 2,021,181 $ 2,060,699

LIABILITIES AND STOCKHOLDERS' EQUITY

Non-interest bearing $ 267,441 $ 263,324

$ 263,324 $ 295,594

Interest bearing 1,459,530 1,497,242

1,497,242 1,517,827

1,760,566 1,813,421

Repurchase agreements

40,116 38,124

Total 1,726,971 1,760,566

Federal funds purchased and repurchase agreements 39,703 40,116

Borrowed funds 45,000 65,000

65,000 80,000

Accrued expenses and other liabilities 34,844 43,603

43,603 29,389

Total liabilities 1,846,518 1,909,285

1,909,285 1,960,934

Commitments and contingencies

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Additional paid-in capital 70,331 70,034

70,034 69,555

Accumulated other comprehensive loss ( 41,662 ) ( 58,084 )

( 58,084 ) ( 51,613 )

Retained earnings 145,994 139,464

139,464 129,403

Total stockholders' equity 174,663 151,414

151,414 147,345

Total liabilities and stockholders' equity $ 2,021,181 $ 2,060,699

$ 2,060,699 $ 2,108,279

See accompanying notes to consolidated financial statements.

Finward Bancorp

Consolidated Statements of Income

(Dollars in thousands, except per share data)

Year Ended December 31,

(Dollars in thousands, except per share data) 2025 2024

Interest income:

Loans receivable $ 80,337 $ 77,515

$ 77,515 $ 74,762

Securities 7,819 8,250

Other interest earning assets 3,607 3,413

Total interest income 91,763 89,178

89,178 85,783

Interest expense:

35,162 25,438

Repurchase agreements

Deposits 31,426 35,162

Federal funds purchased and repurchase agreements 1,430 1,600

Borrowed funds 2,164 3,969

Total interest expense 35,020 40,731

40,731 31,228

Net interest income 56,743 48,447

48,447 54,555

Provision (benefit) for credit losses

( 503 ) 2,025

Net interest income after provision (benefit) for credit losses

48,950 52,530

Noninterest income:

Provision for (benefit from) credit losses ( 205 ) ( 503 )

Net interest income after provision for credit losses 56,948 48,950

Non-interest income:

Fees and service charges 5,387 5,312

Wealth management operations 2,733 2,855

Gain on tax credit investment

Gain on sale of loans held-for-sale, net

Loss on sale of securities, net

( 531 ) ( 48 )

Increase in cash value of bank owned life insurance

Gain on real estate

Gain (Loss) on sale of foreclosed real estate

Total noninterest income

22,647 10,746

Noninterest expense:

Gain (loss) on tax credit investment 90 1,236

Gain (loss) on sale of loans held-for-sale, net 1,219 1,138

Gain (loss) on sale of securities, net ( 1,577 ) ( 531 )

Bank owned life insurance 1,379 812

Gain (loss) on sale of property and equipment ( 55 ) 11,661

Other 122 164

Total non-interest income 9,298 22,647

Non-interest expense:

Compensation and benefits 29,588 27,737

27,737 27,655

Occupancy and equipment 8,161 8,250

Data processing 4,961 4,672

Marketing 787 799

Federal deposit insurance premiums 1,720 1,790

Professional and outside services 4,226 5,405

Total noninterest expense

58,142 55,231

Technology 2,069 2,243

Other 6,624 7,246

Total non-interest expense 58,136 58,142

Income before income tax expense 8,110 13,455

Income tax expense (benefit) 23 1,325

1,325 ( 335 )

$ 12,130 $ 8,380

Net income $ 8,087 $ 12,130

Earnings per common share:

$ 2.85 $ 1.96

$ 2.84 $ 1.96

Basic $ 1.89 $ 2.85

Diluted $ 1.88 $ 2.84

Dividends declared per common share $ 0.36 $ 0.48

$ 0.48 $ 1.05

See accompanying notes to consolidated financial statements.

Consolidated Statements of Comprehensive Income

(Dollars in thousands)

Finward Bancorp

Consolidated Statements of Comprehensive Income (Loss)

Year Ended December 31

$ 12,130 $ 8,380

Net change in net unrealized gains and losses on securities available-for-sale:

Unrealized gain (loss) arising during the period

( 9,042 ) 16,630

reclassification adjustment for losses included in net income

Net securities gain (loss) during the period

( 8,511 ) 16,678

2,040 ( 3,991 )

Other comprehensive income, net of tax

( 6,471 ) 12,687

Comprehensive income net of tax

$ 5,659 $ 21,067

(Dollars in thousands) 2025 2024

Net income $ 8,087 $ 12,130

Unrealized gains (losses) on securities available for sale:

Unrealized gains (losses) arising during the period 20,038 ( 9,042 )

reclassification adjustment for gains (losses) included in net income ( 1,577 ) ( 531 )

Changes in unrealized gains (losses) on securities available for sale 21,615 ( 8,511 )

tax expense (benefit) 5,193 ( 2,040 )

Other comprehensive income (loss), net of tax 16,422 ( 6,471 )

Comprehensive income (loss), net of tax $ 24,509 $ 5,659

See accompanying notes to consolidated financial statements.

Consolidated Statements of Changes in Stockholders ’ Equity

Finward Bancorp

Consolidated Statements of Changes in Stockholder's Equity

(Dollars in thousands, except per share data) Common

Stock Additional

Capital Accumulated

Comprehensive

(Dollars in thousands, except per share data)

(Loss)/Income Retained

Stockholders'

Balance at January 1, 2024 $ - $ 69,555 $ ( 51,613 ) $ 129,403 $ 147,345

$ - $ 69,032 $ ( 64,300 ) $ 125,543 $ 130,275

- - - 8,380 8,380

Other comprehensive income, net of tax

- - 12,687 - 12,687

Net income - - - 12,130 12,130

Other comprehensive income (loss), net of tax - - ( 6,471 ) - ( 6,471 )

Net surrender value of 3,485 restricted stock awards

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Stock-based compensation expense - 565 - - 565

- 719 - - 719

Cash dividends, $ 0.48 per share

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Balance at December 31, 2024 $ - $ 70,034 $ ( 58,084 ) $ 139,464 $ 151,414

$ - $ 69,555 $ ( 51,613 ) $ 129,403 $ 147,345

Balance at January 1, 2025 $ - $ 70,034 $ ( 58,084 ) $ 139,464 $ 151,414

$ - $ 69,555 $ ( 51,613 ) $ 129,403 $ 147,345

- - - 12,130 12,130

Other comprehensive loss, net of tax

- - ( 6,471 ) - ( 6,471 )

Net income - - - 8,087 8,087

Other comprehensive income (loss), net of tax - - 16,422 - 16,422

Net surrender value of 5,439 restricted stock awards

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Stock-based compensation expense - 447 - - 447

- 565 - - 565

Cash dividends, $ 0.36 per share

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Balance at December 31, 2025 $ - $ 70,331 $ ( 41,662 ) $ 145,994 $ 174,663

$ - $ 70,034 $ ( 58,084 ) $ 139,464 $ 151,414

See accompanying notes to consolidated financial statements.

Finward Bancorp

Consolidated Statements of Cash Flows

(Dollars in thousands)

Year ended December 31,

(Dollars in thousands) 2025 2024

CASH FLOWS FROM OPERATING ACTIVITIES:

$ 12,130 $ 8,380

Net income $ 8,087 $ 12,130

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

Origination of loans for sale ( 40,875 ) ( 36,779 )

( 36,779 ) ( 37,939 )

Sale of loans originated for sale 42,275 36,955

36,955 40,217

Depreciation and amortization, net of accretion 6,191 7,291

Deferred tax benefit

Deferred tax expense (benefit) ( 556 ) 645

Stock based compensation expense 447 565

Cash payments for lease liabilities ( 1,603 ) ( 1,360 )

( 1,360 ) ( 69 )

Loss on sale of securities, net

Gain on tax credit investment

Gain on sale of loans held-for-sale, net

( 1,091 ) ( 1,084 )

Gain on sale of real estate

( 11,661 ) ( 276 )

Gain on sale of foreclosed real estate

Increase of cash value of bank owned life insurance

( 812 ) ( 766 )

Gain on derivatives

Provision (benefit) for credit losses

( 503 ) 2,025

(Gain) loss on sale of securities, net 1,577 531

(Gain) loss on tax credit investment ( 90 ) ( 1,236 )

(Gain) loss on sale of loans held-for-sale, net ( 1,252 ) ( 1,091 )

(Gain) loss on sale of property and equipment 55 ( 11,661 )

(Gain) loss on sale of foreclosed real estate - ( 1 )

(Increase) decrease of cash value of bank owned life insurance ( 835 ) ( 812 )

(Gain) loss on death benefits of bank-owned life insurance ( 544 ) -

(Gain) loss on derivatives 33 ( 47 )

Provision for (benefit from) credit losses ( 205 ) ( 503 )

Interest receivable ( 60 ) 324

Interest payable ( 337 ) ( 2,445 )

( 2,445 ) 2,729

Other assets 3,425 3,502

Accrued expenses and other liabilities ( 5,832 ) 3,797

Total adjustments 1,814 ( 2,325 )

( 2,325 ) 15,831

Net cash provided by operating activities

Net cash provided by (used in) operating activities 9,901 9,805

CASH FLOWS FROM INVESTING ACTIVITIES:

Proceeds from maturities of certificates of deposit in other financial institutions

Proceeds from maturities and pay downs of securities available-for-sale 11,431 12,653

12,653 14,332

Proceeds from sales of securities available-for-sale 24,519 14,697

Purchase of securities available-for-sale

Net change in loans receivable 57,654 764

764 ( 6,378 )

Proceeds from loans held for sale previously classified as loans receivable

Purchase of premises and equipment ( 853 ) ( 3,074 )

( 3,074 ) ( 1,148 )

Proceeds from sale of premises and equipment 819 17,677

Proceeds from sale of foreclosed real estate - 72

Net cash provided by investing activities

42,789 15,021

Proceeds from death benefits of bank owned life insurance 1,307 -

Net cash provided by (used in) investing activities 94,877 42,789

CASH FLOWS FROM FINANCING ACTIVITIES:

Change in deposits ( 33,595 ) ( 52,855 )

( 52,855 ) 38,404

Proceeds from borrowed funds 40,000 150,000

150,000 80,000

Repayment of borrowed funds ( 60,000 ) ( 165,000 )

( 165,000 ) ( 120,000 )

Net surrender value of restricted stock awards ( 150 ) ( 86 )

( 86 ) ( 196 )

Change in repurchase agreements

Change in federal funds purchased and repurchase agreements ( 413 ) 1,992

Dividends paid ( 1,557 ) ( 2,069 )

( 2,069 ) ( 5,335 )

Net cash provided by (used in) financing activities ( 55,715 ) ( 68,018 )

( 68,018 ) 15,494

Net change in cash and cash equivalents 49,063 ( 15,424 )

( 15,424 ) 54,726

Cash and cash equivalents at beginning of period 70,584 86,008

86,008 31,282

Cash and cash equivalents at end of period $ 119,647 $ 70,584

$ 70,584 $ 86,008

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

Cash paid during the period for:

$ 43,178 $ 28,528

Interest $ 35,303 $ 43,178

Income taxes 150 415

Noncash activities:

Transfer of loans receivable to loans held for sale

Transfers from loans to foreclosed real estate

Dividends declared not paid - 518

Initial recoginition of ASU 2016-13

Right-of-use asset obtained in exchange for lease liability - 16,140

Loans transferred to other real estate owned 89 -

See accompanying notes to consolidated financial statements.

Finward Bancorp

Notes to Consolidated Financial Statements

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Note 1 - Summary of Significant Accounting Policies

Principles of Consolidation – The consolidated financial statements include Finward Bancorp (the “Company”) and Peoples Bank (the “Bank”), and the Bank’s wholly owned subsidiaries, Peoples Service Corporation, NWIN, LLC, NWIN Funding, Incorporated, and Columbia Development Company, LLC.

Principles of Consolidation – The consolidated financial statements include Finward Bancorp and Peoples Bank, and the Bank’s wholly owned subsidiaries, Peoples Service Corporation, NWIN, LLC, NWIN Funding, Incorporated, and Columbia Development Company, LLC.

The Company’s business activities include being a holding company for the Bank.

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Interest and dividend income, adjusted by amortization of premiums or discounts on a level yield method, are included in earnings.

The full amount of the loss will be charged to earnings if the Company intends to sell an impaired security or it is more likely than not that the Company would be required to sell an impaired security before recovering its amortized cost basis.

Changes in the allowance for credit losses would be recorded as a provision for credit losses.

Losses would be charged against the allowance when management believes the security is uncollectible or management intends to sell or is required to sell the security.

See Note 2—Securities for additional information.

Loans Held-for-Sale – Mortgage loans originated and intended for sale in the secondary market are carried at the lower of aggregate cost or fair value, as determined by outstanding commitments from investors.

Net unrealized losses, if any, are recorded as a valuation allowance and charged to earnings.

Mortgage loans held-for-sale can be sold with servicing rights retained or released.

The carrying value of mortgage loans sold is reduced by the amount allocated to the servicing rights.

Gains and losses on sales of mortgage loans are based on the difference between the selling price and the carrying value of the related loan sold.

If the fair value of an available-for sale debt security is less than its amortized cost basis, the Company evaluates whether the decline in fair value is attributable to credit-related factors or other factors.

If the Company intends to sell the security or it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis, the entire unrealized loss is recognized in earnings.

If neither condition exists, the Company evaluates whether a credit loss exists.

Credit-related losses are recognized through an allowance for credit losses, limited to the amount by which amortized cost exceeds the fair value, with a corresponding change to provision for credit losses.

Any non-credit related unrealized losses are recognized in other comprehensive income.

Amounts are written off against the allowance when management determines that all or a portion of the security is uncollectible.

The Company evaluates AFS securities in an unrealized loss position on a quarterly basis to determine whether a credit loss exists.

This approach allowed the Company to retain the amortized cost basis of the securities following adoption of the current expected credit loss model.

The Company has $ 173 thousand of previously recorded credit impairment on collateralized debt obligations.

The Company believes this continues to represent the expected credit losses of the amortized cost basis, therefore, has established an ACL for AFS debt securities.

The ACL is monitored quarterly and is measured by evaluating the present value of cash flows as compared to the amortized cost basis of the security.

extent that there are improvements in credit related to these securities, the ACL will be reduced to account for the improvements.

If any improvements in credit exceed the amount of previously reduced amortized cost bases, recoveries will be recorded through the income statement in the period received.

The allowance for collateralized debt credit losses was at $ 173 thousand at December 31, 2025 and December 31, 2024.

Loans Held-for-Sale – Loans held for sale generally consist of mortgage loans originated and intended for sale in the secondary market are carried at the lower of aggregate cost or fair value, as determined by outstanding commitments from investors.

Gains and losses are recognized through non-interest income.

Net unrealized losses, if any, are recorded as a valuation allowance that is also charged to non-interest income.

Loans and Loan Interest Income – Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at the principal balance outstanding, net of unearned interest, and net deferred loan fees and costs.

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Past due status is based on the contractual terms of the loan.

In all cases, loans are placed on non-accrual status or charged-off at an earlier date if collection of principal or interest is considered doubtful.

Generally, interest accrued but not received for loans placed on non-accrual status is reversed against interest income.

In all cases, loans are placed on nonaccrual status or charged-off at an earlier date if collection of principal or interest is considered doubtful.

Generally, interest accrued but not received for loans placed on nonaccrual status is reversed against interest income.

Interest received on such loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual.

15 unchanged sentences

Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments when appropriate.

The contractual term excludes expected extensions, renewals, and modifications unless either of the following applies:

management has a reasonable expectation at the reporting date that a troubled debt restructuring will be executed with an individual borrower or the extension or renewal options are included in the original or modified contract at the reporting date and are not unconditionally cancellable by the Company.

The contractual term excludes expected extensions, renewals, and modifications unless the extension or renewal options are included in the original or modified contract at the reporting date and are not unconditionally cancellable by the Company.

The Company also maintains an allowance for credit losses on off-balance sheet credit exposures for unfunded loan commitments.

13 unchanged sentences

We attempt to reduce credit risk in the commercial real estate portfolio by emphasizing loans on owner-occupied industrial, office, and retail buildings where the loan-to-value ratio, established by independent appraisals, does not generally exceed 80 % of cost of appraised value.

We also generally require that a borrower’s cash flow exceed 120 % of monthly debt service obligations.

We also generally require that a borrower’s cash flow achieve 120 % or greater of monthly debt service obligations.

Commercial real estate loans are generally viewed as having more risk of default than residential real estate loans.

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Troubled Loan Modifications – A troubled loan modification of a loan is undertaken to improve the likelihood that the loan will be repaid in full under the modified terms in accordance with a reasonable repayment schedule.

All modified loans are evaluated to determine whether the loan should be reported as a troubled loan modification (TLM).

All modified loans are evaluated to determine whether the loan should be reported as a TLM.

A loan is a TLM when the Company, for economic or legal reasons related to the borrower's financial difficulties, grants a type of loan modification to the borrower by modifying or renewing a loan under terms that the Company would not otherwise consider.

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In addition, the determination of the useful lives over which an intangible asset will be amortized is subjective.

Under the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 350, goodwill and indefinite-lived assets recorded are reviewed for impairment on an annual basis, as well as on an interim basis if events or changes indicate that the asset might be impaired.

Under FASB ASC 350, goodwill and indefinite-lived assets recorded are reviewed for impairment on an annual basis, as well as on an interim basis if events or changes indicate that the asset might be impaired.

An impairment loss is recognized for any excess of carrying value over fair value of the goodwill or the indefinite-lived intangible asset.

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Trust Assets – Assets of the Company’s wealth management department, other than cash on deposit at the Company, are not included in these consolidated financial statements because they are not assets of the Company.

Adoption of New Accounting Pronouncements –

In June 2022, the FASB issued ASU No.

2022 - 03 “Fair Value Measurements (Topic 820 ):

Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions.” These amendments clarify that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value.

This guidance is effective for public business entities for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2023.

Early adoption is permitted.

ASU 2022 - 03 did not have a material impact on our consolidated financial statements.

In March 2023, the FASB issued Accounting Standards (ASU) No.

2023 - 02 “Investments Equity Method and Joint Ventures (Topic 323 ):

Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method.” These amendments allow reporting entities to elect to account for qualifying tax equity investments using the proportional amortization method, regardless of the program giving rise to the related income tax credits.

This guidance is effective for public business entities for fiscal years including interim periods within those fiscal years, beginning after December 15, 2023.

Early adoption is permitted in any interim period.

ASU 2023 - 02 did not have a material impact on our consolidated financial statements.

In November 2023, the FASB issued ASU 2023 - 07, Segment Reporting (Topic 280 ):

Improvements to Reportable Segment Disclosures, which requires all public entities to provide enhanced disclosures about significant segment expenses.

Provisions in the amendment include:

( 1 ) Requirement that a public entity disclose, on an annual and interim basis, significant segment expenses that are regularly provided to the chief operating decision maker ("CODM") and included within each reported measure of segment profit or loss (collectively referred to as the "significant expense principle");

( 2 ) Requirement that a public entity disclose, on an annual and interim basis, an amount for other segment items by reportable segment and a description of its composition.

The other segment items category is the difference between segment revenue less the segment expenses disclosed under the significant expense principle and each reported measure of segment profit or loss;

( 3 ) Requirement that a public entity provide all annual disclosures about a reportable segment's profit or loss and assets currently required by ASC 280 in interim periods;

( 4 ) Clarification that if the CODM uses more than one measure of a segment's profit or loss in assessing segment performance and deciding how to allocate resources, a public entity may report one or more of those additional measures of segment profit.

However, at least one of the reported segment profit or loss measures (or the single reported measure, if only one is disclosed) should be the measure that is most consistent with the measurement principles used in measuring the corresponding amounts in the public entity's consolidated financial statements;

( 5 ) Requirement that a public entity disclose the title and position of the CODM and explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources;

and ( 6 ) Requirement that a public entity that has a single reportable segment provide all the disclosures by the amendments in the update and all existing segment disclosures in ASC 280.

The amendments in the update are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

For public business entities, amendments in the update should be applied retrospectively to all periods presented in the financial statements, and upon transition the segment expense categories and amounts disclosed in the prior periods should be based on the significant segment expense categories identified and disclosed in the period of adoption.

The Company adopted this standard effective January 1, 2024, and did not have a material impact on the consolidated financial statements.

Upcoming Accounting Pronouncements -

Accounting Pronouncements Recently Adopted or Issued

In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements:

1 unchanged sentence

The ASU incorporates several disclosure and presentation requirements currently residing in the SEC Regulations S-X and S-K.

The amendments will be applied prospectively and are effective when the SEC removes the related requirements from Regulations S- X or S-K.

The amendments will be applied prospectively and

are effective when the SEC removes the related requirements from Regulations S-X or S-K.

Any amendments the SEC does not remove by June 30, 2027 will not be effective.

As we are currently subject to these SEC requirements, this ASU is not expected to have a material impact on our consolidated financial statements or related disclosures.

Income Taxes.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

1 unchanged sentence

This accounting standards update will be effective for us for fiscal year 2025, with early adoption permitted.

We are currently evaluating the impact of this accounting standard, but do not expect it to have a material impact on our consolidated financial statements.

In November 2024, the FASB issued ASU 2024 - 03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures, which requires public business entities disclose additional information about specific expense categories in the notes to financial statements at interim and annual reporting periods.

We have implemented the enhanced disclosure requirements in 2025 and retrospectively applied them to the prior periods presented.

Refer to Note 6 for additional information.

In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures, which requires public business entities to disclose additional information about specific expense categories in the notes to financial statements at interim and annual reporting periods.

The amendments in this update are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027.

4 unchanged sentences

Early adoption is permitted.

It was determined that there was no material impact of this accounting standard to our consolidated financial statements.

In July 2025, the FASB issued ASU 2025-05, Financial Instruments—Credit Losses (Topic 326):

Measurement of Credit Losses for Accounts Receivable and Contract Assets, which introduces a practical expedient for all entities and an accounting policy election that is available to all entities other than public business entities related to applying ASC-320 to simplify the measurement of credit losses on current accounts receivable and current contract assets that occur from transactions accounted for under ASC 606.

The amendments are effective for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods beginning after December 15, 2025.

Early adoption is permitted.

It was determined that there was no material impact of this accounting standard to the consolidated financial statements.

In November 2025, the FASB issued ASU 2025-08, Financial Instruments—Credit Losses (Topic 326):

Purchased Loans, which expands the gross-up approach for initial recognition and measurement of acquired financial assets to purchased seasoned loans.

The amendments are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual periods.

Early adoption is permitted.

We are currently evaluating the impact of this accounting standard, but we do not expect it to have a material impact on our consolidated financial statements.

Note 2 - Securities

The estimated fair value of available-for-sale securities and the related gross unrealized gains and losses recognized in accumulated other comprehensive loss were as follows

The estimated fair value of available-for-sale securities and the related gross unrealized gains and losses recognized in accumulated other comprehensive income were as follows:

(Dollars in thousands)

Losses Estimated

December 31, 2025

US government sponsored entities

government agency securities (1)

$ 8,884 $ - $ ( 418 ) $ 8,466

2 unchanged sentences

Municipal securities 236,168 2 ( 34,956 ) 201,214

262,954 - ( 48,205 ) 214,749

Collateralized debt obligations 2,141 - ( 259 ) 1,882

2,156 - ( 737 ) 1,419

Total securities available-for-sale $ 371,026 $ 2 $ ( 54,801 ) $ 316,227

$ 409,968 $ - $ ( 76,414 ) $ 333,554

1) Includes securities issued or backed by the U.S.

government and its agencies and U.S.

government sponsored entities.

(Dollars in thousands)

Losses Estimated

December 31, 2024

US government sponsored entities

government agency securities (1)

$ 8,884 $ - $ ( 823 ) $ 8,061

2 unchanged sentences

Municipal securities 262,954 - ( 48,205 ) 214,749

278,813 60 ( 40,203 ) 238,670

Collateralized debt obligations 2,156 - ( 737 ) 1,419

2,170 - ( 813 ) 1,357

Total securities available-for-sale $ 409,968 $ - $ ( 76,414 ) $ 333,554

$ 439,277 $ 60 $ ( 67,963 ) $ 371,374

The cost basis, estimated fair value of available-for-sale securities, and carrying amount, if different, at December 31, 2024, by contractual maturity were as follows.

Securities not due at a single maturity date, primarily mortgage-backed securities, are shown separately.

1) Includes securities issued or backed by the U.S.

government and its agencies and U.S.

government sponsored entities.

The cost basis and estimated fair value of available-for-sale debt securities at December 31, 2025, by contractual maturity, were as follows.

Securities not due at a single maturity date, primarily collateralized mortgage obligations and residential mortgage-backed securities, are shown separately.

(Dollars in thousands)

Available-for-sale

December 31, 2024

December 31, 2025 Cost

Basis Estimated

Due in one year or less $ - $ -

Due from one to five years 13,044 12,367

11,953 10,801

Due from five to ten years 39,873 35,800

32,560 28,835

Due over ten years 194,276 163,395

229,481 184,593

Collateralized mortgage obligations and residential mortgage-backed securities 123,833 104,665

135,974 109,325

$ 409,968 $ 333,554

Sales of available-for-sale securities were as follows:

Total $ 371,026 $ 316,227

Sales of available-for-sale securities were as follows for the quarter ended:

Year Ended December 31

(Dollars in thousands) 2025 2024

$ 14,697 $ 476

( 531 ) ( 48 )

The tax benefits related to these net realized losses were approximately $ 127 thousand for 2024.

The tax benefits related to these net realized losses were approximately $ 11 thousand for 2023.

Accumulated other comprehensive loss balances, net of tax, related to available-for-sale securities, were as follows:

Proceeds $ 24,519 $ 14,697

Gross gains - -

Gross losses ( 1,577 ) ( 531 )

Accumulated other comprehensive income/(loss) balances, net of tax, related to available-for-sale securities, were as follows:

(Dollars in thousands)

Ending balance, December 31, 2023

Current period change

Unrealized loss

Beginning Balance, January 1, 2025 $ ( 58,084 )

Period change 16,422

Ending Balance, December 31, 2025 $ ( 41,662 )

(Dollars in thousands)

Ending balance, December 31, 2022

Period change

Unrealized loss

Beginning balance, January 1, 2024 $ ( 51,613 )

Current period change ( 6,471 )

Ending balance, December 31, 2024 $ ( 58,084 )

Securities with carrying values of approximately $ 326.5 million and $ 324.1 million were pledged as of December 31, 2024 and 2023, respectively, as collateral for repurchase agreements, public funds, and for other purposes as permitted or required by law.

Securities with unrealized losses at December 31, 2024, and 2023, not recognized in income are as follows:

Securities with market values of approximately $ 315.5 million and $ 326.5 million were pledged as of December 31, 2025 and December 31, 2024, respectively, as collateral for repurchase agreements, public funds, and for other purposes as permitted or required by law.

Securities with gross unrealized losses and the related estimated fair value, segregated between investments that have been in a continuous unrealized loss position for less than twelve months and for twelve months or more at December 31, 2025, and December 31, 2024:

(Dollars in thousands)

Less than 12 months

12 months or longer

Percentage of

Less than 12 months 12 months or longer Total

December 31, 2025 Estimated

Value Unrealized

Losses Estimated

Value Unrealized

Losses Estimated

Value Unrealized

Losses Percentage of

Total Portfolio

in Loss Position

December 31, 2024

US government sponsored entities

$ - $ - $ 8,061 $ ( 823 ) $ 8,061 $ ( 823 ) 100.0 %

government agency securities $ - $ - $ 8,466 $ ( 418 ) $ 8,466 $ ( 418 ) 100.0 %

Collateralized mortgage obligations and residential mortgage-backed securities - - 104,665 ( 19,168 ) 104,665 ( 19,168 ) 100.0 %

- - 109,325 ( 26,649 ) 109,325 ( 26,649 ) 100.0

Municipal securities - - 200,469 ( 34,956 ) 200,469 ( 34,956 ) 99.6 %

3,310 ( 156 ) 211,439 ( 48,049 ) 214,749 ( 48,205 ) 100.0

Collateralized debt obligations - - 1,882 ( 259 ) 1,882 ( 259 ) 100.0 %

- - 1,419 ( 737 ) 1,419 ( 737 ) 100.0

Total securities balance

$ 3,310 $ ( 156 ) $ 330,244 $ ( 76,258 ) $ 333,554 $ ( 76,414 ) 100.0 %

Total $ - $ - $ 315,482 $ ( 54,801 ) $ 315,482 $ ( 54,801 ) 99.8 %

Number of securities - 369 369

(Dollars in thousands)

Less than 12 months

12 months or longer

Percentage of

Less than 12 months 12 months or longer Total

December 31, 2024 Estimated

Value Unrealized

Losses Estimated

Value Unrealized

Losses Estimated

Value Unrealized

Losses Percentage of

Total Portfolio

in Loss Position

December 31, 2023

US government sponsored entities

$ - $ - $ 7,883 $ ( 1,001 ) $ 7,883 $ ( 1,001 ) 100.0 %

government agency securities $ - $ - $ 8,061 $ ( 823 ) $ 8,061 $ ( 823 ) 100.0 %

Collateralized mortgage obligations and residential mortgage-backed securities - - 109,325 ( 26,649 ) 109,325 ( 26,649 ) 100.0 %

- - 123,464 ( 25,946 ) 123,464 ( 25,946 ) 100.0

Municipal securities 3,310 ( 156 ) 211,439 ( 48,049 ) 214,749 ( 48,205 ) 100.0 %

- - 229,595 ( 40,203 ) 229,595 ( 40,203 ) 96.2

Collateralized debt obligations - - 1,419 ( 737 ) 1,419 ( 737 ) 100.0 %

- - 1,357 ( 813 ) 1,357 ( 813 ) 100.0

Total securities balance

$ - $ - $ 362,299 $ ( 67,963 ) $ 362,299 $ ( 67,963 ) 97.6 %

Total $ 3,310 $ ( 156 ) $ 330,244 $ ( 76,258 ) $ 333,554 $ ( 76,414 ) 100.0 %

Number of securities 4 409 413

Unrealized losses on securities have not been recognized into income because the securities are of high credit quality or have undisrupted cash flows.

Management has the intent and ability to hold those securities for the foreseeable future, and the decline in fair value is largely due to changes in interest rates and volatility in securities markets.

Management has the intent and ability to hold these securities for the foreseeable future, and the decline in fair value is largely due to changes in interest rates and volatility in securities markets.

The fair values are expected to recover as the securities approach maturity.

Collateralized debt obligations with a cost basis of $ 2.1 million and fair value of $ 1.9 million at December 31, 2025 and a cost basis of $ 2.2 million and fair value of $ 1.4 million at December 31, 2024, had previously recorded impairment of $ 173 thousand, which will not be recoverable until maturity of the security.

Accrued interest receivable on AFS debt securities totaled $ 2.0 million at December 31, 2025, and $ 2.3 million at December 31, 2024.

These amounts are excluded from the estimate of credit losses.

The Company made the policy election to exclude accrued interest from the amortized cost basis of AFS debt securities and report accrued interest separately on the consolidated balance sheet.

Note 3 - Loans Receivable

Year end loans are summarized below:

(Dollars in thousands)

December 31, 2024

December 31, 2023

The Company’s current lending programs are described below:

Residential Real Estate.

A primary lending activity of the Company has been the granting of conventional mortgage loans to enable borrowers to purchase existing homes, refinance existing homes, or construct new homes.

Conventional loans are made up to a maximum of 97 % of the purchase price or appraised value, whichever is less.

For loans made in excess of 80 % of value, private mortgage insurance is generally required in an amount sufficient to reduce the Company’s exposure to 80 % or less of the appraised value of the property.

Loans insured by private mortgage insurance companies can be made for up to 97 % of value.

Fixed rate loans generally conform to Freddie Mac guidelines for loans purchased under the 1-4 family program.

Loan interest rates are determined based on secondary market yield requirements and local market conditions.

Fixed rate mortgage loans may be sold and/or classified as held-for-sale to control exposure to interest rate risk.

The Company’s ARMs include offerings that have a three , five , seven or ten year fixed period.

The ability of the Company to successfully market ARMs depends upon loan demand, prevailing interest rates, volatility of interest rates, and terms offered by competitors.

Home Equity Line of Credit.

The Company offers a fixed and variable rate revolving line of credit secured by the equity in the borrower’s home.

Both products offer an interest only option where the borrower pays interest only on the outstanding balance each month.

Equity lines will typically require a second mortgage appraisal and a second mortgage lender’s title insurance policy.

Loans are generally made up to a maximum of 89 % of the appraised value of the property less any outstanding liens.

Fixed-term home improvement and equity loans are made up to a maximum of 85 % of the appraised value of the improved property, less any outstanding liens.

These loans are offered on both a fixed and variable rate basis with a maximum term of 240 months.

All home equity loans are made on a direct basis to borrowers.

Commercial Real Estate and Multifamily Loans.

Commercial real estate loans are typically made to a maximum of 80 % of the appraised value.

Such loans are generally made on an adjustable-rate basis.

These loans are typically made for terms of 15 to 25 years.

Loans with an amortizing term exceeding 15 years normally have a balloon feature calling for a full repayment within seven to ten years from the date of the loan.

The balloon feature affords the Company the opportunity to restructure the loan if economic conditions warrant.

Commercial real estate loans include loans secured by commercial rental units, apartments, condominium developments, small shopping centers, owner occupied commercial/industrial properties, hospitality units and other retail and commercial developments.

While commercial real estate lending is generally considered to involve a higher degree of risk than single family residential lending due to the concentration of principal in a limited number of loans and the effects of general economic conditions on real estate developers and managers, the Company has endeavored to reduce this risk in several ways.

In originating commercial real estate loans, the Company considers the feasibility of the project, the financial strength of the borrowers and lessees, the managerial ability of the borrowers, the location of the project and the economic environment.

Management evaluates the debt coverage ratio and analyzes the reliability of cash flows, as well as the quality of earnings.

All such loans are made in accordance with well-defined underwriting standards and are generally supported by personal guarantees, which represent a secondary source of repayment.

Loans for the construction of commercial properties are generally located within an area permitting physical inspection and regular review of business records.

Projects financed outside of the Company’s primary lending area generally involve borrowers and guarantors who are or were previous customers of the Company or projects that are underwritten according to the Bank’s underwriting standards.

Construction and Land Development.

Construction loans on residential properties are made primarily to individuals who are under contract with a general contractor.

The maximum loan-to-value ratio is 89 % of either the current appraised

value or the cost of construction, whichever is less.

Residential construction loans are typically made for a period of one year .

Loans are also made for the construction of commercial properties.

All such loans are made in accordance with well-defined underwriting standards.

Generally if the loans are not owner occupied, these types of loans require proof of intent to lease and a confirmed end-loan takeout.

In general, loans made do not exceed 80 % of the appraised value of the property.

Commercial construction loans are typically made for periods not to exceed two years or date of occupancy, whichever is less.

Commercial Business.

Although the Company’s priority in extending various types of commercial business loans changes from time to time, the basic considerations in determining the makeup of the commercial business loan portfolio are economic factors, regulatory requirements and money market conditions.

The Company seeks commercial loan relationships from the local business community and from its present customers.

Prudent lending policies based upon sound credit analysis governs the extension of commercial credit.

The following loans, although not inclusive, are considered preferable for the Company’s commercial loan portfolio:

agriculture loans, loans collateralized by liquid assets;

loans secured by general use machinery and equipment;

secured short-term working capital loans to established businesses secured by business assets;

short-term loans with established sources of repayment and secured by sufficient equity and real estate;

and unsecured loans to customers whose character and capacity to repay are firmly established.

Consumer Loans.

The Company offers consumer loans to individuals for personal, household or family purposes.

Consumer loans are either secured by adequate collateral, or unsecured.

Unsecured loans are based on the strength of the applicant’s financial condition.

All borrowers must meet current underwriting standards.

The consumer loan program includes both fixed and variable rate products.

Manufactured Homes.

The Company has purchased fixed rate closed loans from a third-party that are subject to the Company’s underwriting requirements and secured by manufactured homes.

The maturity date on these loans can range up to 25 years.

In addition, these loans are partially secured by a reserve account held at the Company.

Government Loans.

The Company is permitted to purchase non-rated municipal securities, tax anticipation notes and warrants within the local market area.

Loans consist of the following as of December 31, 2025, and December 31, 2024:

(Dollars in thousands) December 31, 2025 December 31, 2024

Loans secured by real estate:

Residential real estate $ 442,443 $ 467,293

$ 467,293 $ 484,948

49,758 46,599

Home equity 53,497 49,758

Commercial real estate 555,594 551,674

551,674 503,202

Construction and land development 77,208 82,874

82,874 115,227

212,455 219,917

Multifamily 183,902 212,455

Total loans secured by real estate 1,312,644 1,364,054

1,364,054 1,369,893

Commercial business 99,304 104,246

104,246 97,386

Consumer 870 551

Manufactured homes 23,708 26,708

26,708 30,845

11,024 10,021

Government 12,298 11,024

Loans receivable 1,448,824 1,506,583

1,506,583 1,508,755

Net deferred loan origination costs 1,606 2,439

1 unchanged sentence

Loans receivable, net of deferred fees and costs $ 1,450,387 $ 1,508,976

$ 1,508,976 $ 1,512,595

The Company's age analysis of past due loans is summarized below:

(Dollars in thousands)

Total Past Due

(Dollars in thousands) 30-59 Days Past Due 60-89 Days Past Due Greater Than 90

Days Past Due Total Past Due and

Accruing Current Accruing Loans Nonaccrual

Loans Total Loans

December 31, 2025

Residential real estate $ 4,991 $ 1,552 $ - $ 6,543 $ 429,968 $ 436,511 $ 5,932 $ 442,443

$ 4,423 $ 1,184 $ - $ 5,607 $ 457,021 $ 462,628 $ 4,665 $ 467,293

1,002 123 - 1,125 48,150 49,275 483 49,758

Home equity 324 - - 324 52,363 52,687 810 53,497

Commercial real estate 4,106 3,905 - 8,011 546,022 554,033 1,561 555,594

4,556 571 - 5,127 545,267 550,394 1,280 551,674

Construction and land development 2,343 129 - 2,472 74,083 76,555 653 77,208

2,039 - - 2,039 80,177 82,216 658 82,874

1,961 359 - 2,320 206,773 209,093 3,362 212,455

Multifamily 450 1,303 - 1,753 181,453 183,206 696 183,902

Commercial business 1,214 47 - 1,261 96,604 97,865 1,439 99,304

493 508 - 1,001 99,955 100,956 3,290 104,246

5 - - 5 546 551 - 551

Consumer - - - - 870 870 - 870

Manufactured homes 241 28 - 269 23,368 23,637 71 23,708

428 54 - 482 26,226 26,708 - 26,708

- - - - 11,024 11,024 - 11,024

$ 14,907 $ 2,799 $ - $ 17,706 $ 1,475,139 $ 1,492,845 $ 13,738 $ 1,506,583

Government - - - - 12,298 12,298 - 12,298

Total $ 13,669 $ 6,964 $ - $ 20,633 $ 1,417,029 $ 1,437,662 $ 11,162 $ 1,448,824

December 31, 2024

Residential real estate $ 4,423 $ 1,184 $ - $ 5,607 $ 457,021 $ 462,628 $ 4,665 $ 467,293

$ 5,857 $ 4,362 $ 1,131 $ 11,350 $ 471,905 $ 483,255 $ 1,693 $ 484,948

226 18 - 244 45,887 46,131 468 46,599

Home equity 1,002 123 - 1,125 48,150 49,275 483 49,758

Commercial real estate 4,556 571 - 5,127 545,267 550,394 1,280 551,674

3,168 262 712 4,142 498,227 502,369 833 503,202

Construction and land development 2,039 - - 2,039 80,177 82,216 658 82,874

2,523 - - 2,523 112,704 115,227 - 115,227

5,333 - - 5,333 210,869 216,202 3,715 219,917

Multifamily 1,961 359 - 2,320 206,773 209,093 3,362 212,455

Commercial business 493 508 - 1,001 99,955 100,956 3,290 104,246

105 29 - 134 94,355 94,489 2,897 97,386

12 - - 12 596 608 2 610

Consumer 5 - - 5 546 551 - 551

Manufactured homes 428 54 - 482 26,226 26,708 - 26,708

634 379 - 1,013 29,832 30,845 - 30,845

- - - - 10,021 10,021 - 10,021

$ 17,858 $ 5,050 $ 1,843 $ 24,751 $ 1,474,396 $ 1,499,147 $ 9,608 $ 1,508,755

Government - - - - 11,024 11,024 - 11,024

Total $ 14,907 $ 2,799 $ - $ 17,706 $ 1,475,139 $ 1,492,845 $ 13,738 $ 1,506,583

The following table shows the amortized cost of loans, segregated by portfolio segment, credit quality rating and year of origination as of December 31, 2025, and December 31, 2024, and gross charge-offs for the year ended December 31, 2025, and for the year ended December 31, 2024.

December 31, 2024

December 31, 2025 2025 2024 2023 2022 2021 Prior Revolving Revolving

Total Loans Receivable $ 132,738 $ 125,371 $ 125,504 $ 257,065 $ 260,859 $ 438,852 $ 106,883 $ 1,552 $ 1,448,824

$ 124,670 $ 143,098 $ 291,855 $ 308,352 $ 211,268 $ 324,738 $ 102,602 $ - $ 1,506,583

Total current period gross charge-off $ ( 202 ) $ - $ ( 44 ) $ - $ ( 13 ) $ ( 496 ) $ - $ - $ ( 755 )

$ ( 64 ) $ - $ ( 1,010 ) $ ( 125 ) $ ( 2 ) $ ( 1,267 ) $ - $ - $ ( 2,468 )

Residential real estate

$ 13,118 $ 30,947 $ 90,324 $ 99,390 $ 102,552 $ 119,449 $ 2,468 $ - $ 458,248

Pass (1-6) $ 12,570 $ 19,139 $ 26,559 $ 80,834 $ 93,636 $ 196,415 $ 2,477 $ - $ 431,630

Special Mention (7) - - 619 1,464 1,063 1,651 - - 4,797

- 371 365 1,064 554 1,937 - - 4,291

Substandard (8) 296 74 887 1,475 430 2,854 - - 6,016

- 539 1,161 601 510 1,943 - - 4,754

$ 13,118 $ 31,857 $ 91,850 $ 101,055 $ 103,616 $ 123,329 $ 2,468 $ - $ 467,293

Total $ 12,866 $ 19,213 $ 28,065 $ 83,773 $ 95,129 $ 200,920 $ 2,477 $ - $ 442,443

Current period gross charge-off - - - - ( 13 ) - - - ( 13 )

- - - - - ( 28 ) - - ( 28 )

$ 193 $ 68 $ 153 $ 110 $ - $ 3,342 $ 44,943 $ - $ 48,809

Pass (1-6) $ 766 $ 92 $ 41 $ 232 $ 49 $ 2,086 $ 47,926 $ 1,187 $ 52,379

Special Mention (7) - - 7 - - 59 45 194 305

- 132 - - 3 15 309 - 459

Substandard (8) - 24 - - 20 181 417 171 813

26 - 138 - - 218 108 - 490

$ 219 $ 200 $ 291 $ 110 $ 3 $ 3,575 $ 45,360 $ - $ 49,758

Total $ 766 $ 116 $ 48 $ 232 $ 69 $ 2,326 $ 48,388 $ 1,552 $ 53,497

Current period gross charge-off - - - - - - - - -

- - - - - - - - -

Commercial real estate

$ 49,861 $ 67,290 $ 123,342 $ 96,206 $ 53,864 $ 148,529 $ 2,976 $ - $ 542,068

Pass (1-6) $ 58,029 $ 65,768 $ 62,929 $ 111,515 $ 78,531 $ 160,344 $ 3,717 $ - $ 540,833

Special Mention (7) 25 410 2,214 2,865 3,403 4,283 - - 13,200

974 - 1,036 2,375 668 2,930 25 - 8,008

Substandard (8) - - 208 221 - 1,132 - - 1,561

- - - - 202 1,396 - - 1,598

$ 50,835 $ 67,290 $ 124,378 $ 98,581 $ 54,734 $ 152,855 $ 3,001 $ - $ 551,674

Total $ 58,054 $ 66,178 $ 65,351 $ 114,601 $ 81,934 $ 165,759 $ 3,717 $ - $ 555,594

Current period gross charge-off - - - - - - - - -

- - - - - - - - -

Construction and land development

$ 34,599 $ 24,360 $ 3,732 $ 7,867 $ 224 $ 820 $ 5,312 $ - $ 76,914

Pass (1-6) $ 36,388 $ 19,226 $ 12,795 $ 2,288 $ 1,074 $ 753 $ 1,893 $ - $ 74,417

Special Mention (7) - - - 129 428 - - - 557

- - - 1,207 2,468 - - - 3,675

Substandard (8) - - 939 60 1,235 - - - 2,234

- 1,018 - 1,267 - - - - 2,285

$ 34,599 $ 25,378 $ 3,732 $ 10,341 $ 2,692 $ 820 $ 5,312 $ - $ 82,874

Total $ 36,388 $ 19,226 $ 13,734 $ 2,477 $ 2,737 $ 753 $ 1,893 $ - $ 77,208

Current period gross charge-off - - - - - - - - -

- - - - - - - - -

$ 6,398 $ 8,923 $ 56,771 $ 74,716 $ 36,075 $ 20,066 $ 627 $ - $ 203,576

Pass (1-6) $ 12,249 $ 6,289 $ 11,215 $ 44,804 $ 64,357 $ 40,791 $ 644 $ - $ 180,349

Special Mention (7) - - - 756 374 1,727 - - 2,857

- - 780 3,332 1,217 - - - 5,329

Substandard (8) - - 200 409 - 87 - - 696

- - 446 1,219 1,516 369 - - 3,550

$ 6,398 $ 8,923 $ 57,997 $ 79,267 $ 38,808 $ 20,435 $ 627 $ - $ 212,455

Total $ 12,249 $ 6,289 $ 11,415 $ 45,969 $ 64,731 $ 42,605 $ 644 $ - $ 183,902

Current period gross charge-off - - - - - ( 201 ) - - ( 201 )

- - - ( 125 ) - - - - ( 125 )

Commercial business

$ 14,655 $ 8,123 $ 9,441 $ 6,094 $ 3,653 $ 11,416 $ 44,046 $ - $ 97,428

Pass (1-6) $ 6,601 $ 11,813 $ 5,661 $ 7,121 $ 4,595 $ 10,980 $ 48,326 $ - $ 95,097

Special Mention (7) 299 61 260 62 18 737 1,331 - 2,768

- 25 978 39 - 800 1,686 - 3,528

Substandard (8) - 87 898 34 124 189 107 - 1,439

- 1,139 80 171 177 1,621 102 - 3,290

$ 14,655 $ 9,287 $ 10,499 $ 6,304 $ 3,830 $ 13,837 $ 45,834 $ - $ 104,246

Total $ 6,900 $ 11,961 $ 6,819 $ 7,217 $ 4,737 $ 11,906 $ 49,764 $ - $ 99,304

Current period gross charge-off ( 158 ) - ( 44 ) - - ( 293 ) - - ( 495 )

- - ( 1,010 ) - - ( 1,239 ) - - ( 2,249 )

$ 301 $ 163 $ 34 $ 51 $ - $ 2 $ - $ - $ 551

Substandard (8)

- - - - - - - - -

$ 301 $ 163 $ 34 $ 51 $ - $ 2 $ - $ - $ 551

Pass (1-6) $ 705 $ 58 $ 72 $ 19 $ 16 $ - $ - $ - $ 870

Total $ 705 $ 58 $ 72 $ 19 $ 16 $ - $ - $ - $ 870

Current period gross charge-off ( 44 ) - - - - ( 2 ) - - ( 46 )

( 64 ) - - - ( 2 ) - - - ( 66 )

Manufactured homes

$ - $ - $ 1,634 $ 11,360 $ 7,559 $ 6,101 $ - $ - $ 26,654

Pass (1-6) $ - $ - $ - $ 1,733 $ 10,383 $ 11,493 $ - $ - $ 23,609

Special Mention (7) - - - - - 28 - - $ 28

Substandard (8) - - - - 46 25 - - 71

- - - 28 26 - - - 54

$ - $ - $ 1,634 $ 11,388 $ 7,585 $ 6,101 $ - $ - $ 26,708

Total $ - $ - $ - $ 1,733 $ 10,429 $ 11,546 $ - $ - $ 23,708

Current period gross charge-off - - - - - - - - -

- - - - - - - - -

$ 4,545 $ - $ 1,440 $ 1,255 $ - $ 3,784 $ - $ - $ 11,024

Pass (1-6) $ 4,810 $ 2,330 $ - $ 1,044 $ 1,077 $ 3,037 $ - $ - $ 12,298

Total $ 4,810 $ 2,330 $ - $ 1,044 $ 1,077 $ 3,037 $ - $ - $ 12,298

Current period gross charge-off - - - - - - - - -

- - - - - - - - -

December 31, 2023

December 31, 2024 2024 2023 2022 2021 2020 Prior Revolving Revolving

Total Loans Receivable $ 124,670 $ 143,098 $ 291,855 $ 308,352 $ 211,268 $ 324,738 $ 102,602 $ - $ 1,506,583

$ 148,105 $ 323,820 $ 321,183 $ 234,861 $ 108,683 $ 274,027 $ 94,893 $ 3,183 $ 1,508,755

Total current period gross charge-off $ ( 64 ) $ - $ ( 1,010 ) $ ( 125 ) $ ( 2 ) $ ( 1,267 ) $ - $ - ( 2,468 )

$ ( 95 ) $ ( 150 ) $ - $ ( 367 ) $ ( 50 ) $ ( 1,882 ) $ ( 27 ) $ - ( 2,571 )

Residential real estate

$ 20,740 $ 97,671 $ 106,778 $ 115,001 $ 23,873 $ 113,987 $ 1,716 $ - $ 479,766

Pass (1-6) $ 13,118 $ 30,947 $ 90,324 $ 99,390 $ 102,552 $ 119,449 $ 2,468 $ - $ 458,248

Special Mention (7) - 371 365 1,064 554 1,937 - - 4,291

405 - 473 173 431 1,602 - - 3,084

Substandard (8) - 539 1,161 601 510 1,943 - - 4,754

- 786 152 471 217 472 - - 2,098

$ 21,145 $ 98,457 $ 107,403 $ 115,645 $ 24,521 $ 116,061 $ 1,716 $ - $ 484,948

Total $ 13,118 $ 31,857 $ 91,850 $ 101,055 $ 103,616 $ 123,329 $ 2,468 $ - $ 467,293

Current period gross charge-off - - - - - ( 28 ) - - ( 28 )

- ( 40 ) - ( 25 ) ( 39 ) ( 893 ) - - ( 997 )

$ 110 $ 114 $ 101 $ 14 $ 61 $ 2,051 $ 42,801 $ 700 $ 45,952

Pass (1-6) $ 193 $ 68 $ 153 $ 110 $ - $ 3,342 $ 44,943 $ - $ 48,809

Special Mention (7) - 132 - - 3 15 309 - 459

- - - - 4 31 70 63 168

Substandard (8) 26 - 138 - - 218 108 - 490

- 161 - - - 67 251 - 479

$ 110 $ 275 $ 101 $ 14 $ 65 $ 2,149 $ 43,122 $ 763 $ 46,599

Total $ 219 $ 200 $ 291 $ 110 $ 3 $ 3,575 $ 45,360 $ - $ 49,758

Current period gross charge-off - - - - - - - - -

- - - - - ( 16 ) ( 27 ) - ( 43 )

Commercial real estate

$ 52,880 $ 127,607 $ 90,108 $ 55,236 $ 56,255 $ 108,489 $ 2,649 $ - $ 493,224

Pass (1-6) $ 49,861 $ 67,290 $ 123,342 $ 96,206 $ 53,864 $ 148,529 $ 2,976 $ - $ 542,068

Special Mention (7) 974 - 1,036 2,375 668 2,930 25 - 8,008

- 69 2,429 1,274 1,123 2,397 142 - 7,434

Substandard (8) - - - - 202 1,396 - - 1,598

- - - 230 - 2,314 - - 2,544

$ 52,880 $ 127,676 $ 92,537 $ 56,740 $ 57,378 $ 113,200 $ 2,791 $ - $ 503,202

Total $ 50,835 $ 67,290 $ 124,378 $ 98,581 $ 54,734 $ 152,855 $ 3,001 $ - $ 551,674

Current period gross charge-off - - - - - - - - -

- - - - - ( 372 ) - - ( 372 )

Construction and land development

$ 48,518 $ 24,948 $ 13,411 $ 1,732 $ 4,284 $ 473 $ 12,539 $ 2,420 $ 108,325

Pass (1-6) $ 34,599 $ 24,360 $ 3,732 $ 7,867 $ 224 $ 820 $ 5,312 $ - $ 76,914

Special Mention (7) - - - 1,207 2,468 - - - 3,675

365 76 4,205 2,256 - - - - 6,902

Substandard (8) - 1,018 - 1,267 - - - - 2,285

- - - - - - - - -

$ 48,883 $ 25,024 $ 17,616 $ 3,988 $ 4,284 $ 473 $ 12,539 $ 2,420 $ 115,227

Total $ 34,599 $ 25,378 $ 3,732 $ 10,341 $ 2,692 $ 820 $ 5,312 $ - $ 82,874

Current period gross charge-off - - - - - - - - -

- - - - - - - - -

$ 9,333 $ 53,493 $ 78,122 $ 41,773 $ 13,156 $ 19,609 $ 186 $ - $ 215,672

Pass (1-6) $ 6,398 $ 8,923 $ 56,771 $ 74,716 $ 36,075 $ 20,066 $ 627 $ - $ 203,576

Special Mention (7) - - 780 3,332 1,217 - - - 5,329

Substandard (8) - - 446 1,219 1,516 369 - - 3,550

- - 1,666 1,562 - 1,017 - - 4,245

$ 9,333 $ 53,493 $ 79,788 $ 43,335 $ 13,156 $ 20,626 $ 186 $ - $ 219,917

Total $ 6,398 $ 8,923 $ 57,997 $ 79,267 $ 38,808 $ 20,435 $ 627 $ - $ 212,455

Current period gross charge-off - - - ( 125 ) - - - - ( 125 )

- - - - - - - - -

Commercial business

$ 13,110 $ 13,774 $ 9,327 $ 5,705 $ 4,105 $ 12,905 $ 33,954 $ - $ 92,880

Pass (1-6) $ 14,655 $ 8,123 $ 9,441 $ 6,094 $ 3,653 $ 11,416 $ 44,046 $ - $ 97,428

Special Mention (7) - 25 978 39 - 800 1,686 - 3,528

373 197 58 - 129 436 417 - 1,610

Substandard (8) - 1,139 80 171 177 1,621 102 - 3,290

43 1,094 256 214 - 1,121 168 - 2,896

$ 13,526 $ 15,065 $ 9,641 $ 5,919 $ 4,234 $ 14,462 $ 34,539 $ - $ 97,386

Total $ 14,655 $ 9,287 $ 10,499 $ 6,304 $ 3,830 $ 13,837 $ 45,834 $ - $ 104,246

Current period gross charge-off - - ( 1,010 ) - - ( 1,239 ) - - ( 2,249 )

- ( 110 ) - ( 342 ) ( 11 ) ( 601 ) - - ( 1,064 )

$ 338 $ 73 $ 108 $ 4 $ 14 $ 71 $ - $ - $ 608

Pass (1-6) $ 301 $ 163 $ 34 $ 51 $ - $ 2 $ - $ - $ 551

Substandard (8) - - - - - - - - -

- - - 2 - - - - 2

$ 338 $ 73 $ 108 $ 6 $ 14 $ 71 $ - $ - $ 610

Total $ 301 $ 163 $ 34 $ 51 $ - $ 2 $ - $ - $ 551

Current period gross charge-off ( 64 ) - - - ( 2 ) - - - ( 66 )

( 95 ) - - - - - - - ( 95 )

Manufactured homes

$ - $ 1,942 $ 12,556 $ 9,214 $ 5,031 $ 2,102 $ - $ - $ 30,845

Pass (1-6) $ - $ - $ 1,634 $ 11,360 $ 7,559 $ 6,101 $ - $ - $ 26,654

Substandard (8) - - - 28 26 - - - 54

Total $ - $ - $ 1,634 $ 11,388 $ 7,585 $ 6,101 $ - $ - $ 26,708

Current period gross charge-off - - - - - - - - -

- - - - - - - - -

$ 1,890 $ 1,815 $ 1,433 $ - $ - $ 4,883 $ - $ - $ 10,021

Pass (1-6) $ 4,545 $ - $ 1,440 $ 1,255 $ - $ 3,784 $ - $ - $ 11,024

Total $ 4,545 $ - $ 1,440 $ 1,255 $ - $ 3,784 $ - $ - $ 11,024

Current period gross charge-off - - - - - - - - -

- - - - - - - - -

The Company has established a standard loan grading system to assist management, lenders and review personnel in their analysis and supervision of the loan portfolio.

26 unchanged sentences

Loan to value is slightly below policy and the collateral condition is slightly above average.

Borrowers are considered credit worthy but financial condition may show signs of weakness due to internal or external factors.

Borrowers are considered creditworthy, but financial condition may show signs of weakness due to internal or external factors.

Cash flow trends may be declining annually.

Average credit scores may be low but remain acceptable.

Borrower has limited years of experience.

The borrower has limited years of experience.

Liquidity, net worth, current and debt to tangible net worth ratios are below average.

2 unchanged sentences

A special mention asset has identified weaknesses that deserve Management’s close attention.

If left uncorrected, these weaknesses may result in deterioration of the repayment prospects for the asset or in the Bank’s credit position at some future date.

Special mention assets are not adversely classified and do not expose the Bank institution to sufficient risk to warrant adverse classification.

If left uncorrected, these weaknesses may result in deterioration of the repayment prospects for the asset or in the Company’s credit position at some future date.

Special mention assets are not adversely classified and do not expose the Company to sufficient risk to warrant adverse classification.

There is still adequate protection by the current sound worth and paying capacity of the obligor or of the collateral pledged.

23 unchanged sentences

Modifications to Borrowers Experiencing Financial Difficulty

The allowance for credit losses incorporates an estimate of lifetime expected credit losses and is recorded on each asset upon origination.

The allowance of credit losses incorporates an estimate of lifetime expected credit losses and is recorded on each asset upon origination.

The starting point to estimate such credit losses is historical loss information.

The Company uses a probability of default/loss given default model to determine the allowance for credit losses recorded at origination.

Occasionally, the Company subsequently modifies loans for borrowers experiencing financial distress by providing the following forms of relief:

Occasionally, the Company subsequently modifies loans to borrowers experiencing financial difficulty by providing the following terms of relief:

principal forgiveness, term extension, payment delay, or interest rate reduction.

In some cases, the Company provides multiple types of modifications on one loan.

In some cases, the Bank provides multiple types of modifications on one loan.

Because the effect of most modifications to borrowers experiencing financial difficulty is already included in the allowance for credit losses, no change to the allowance for credit losses is generally recorded for these modifications.

The following table shows the amortized cost of loans at December 31, 2024, that were both experiencing financial difficulty and modified during the year ended December 31, 2024, segregated by portfolio segment and type of modification.

The percentage of the amortized cost of loans that were modified to borrowers in financial distress as compared to the amortized cost of each segment of financial receivable is also presented below.

For the twelve months ended December 31, 2024

(Dollars in thousands)

Combination Term

Extension and

Interest Rate

The following tables show the amortized cost basis of loans at December 31, 2025 and December 31, 2024, that were both experiencing financial difficulty and modified during the years ended December 31, 2025 and December 31, 2024, segregated by portfolio segment and type of modification.

The percentage of the amortized cost of loans that were modified to borrowers in financial distress as compared to the amortized cost of each segment of financing receivable is also presented below.

For the year ended December 31, 2025

(Dollars in thousands) Payment

Extension Interest

Reduction Combination

Term Extension

and Interest Rate

Reduction % of Total

Residential real estate $ - $ 601 $ - $ - 0.14 %

$ 528 $ 1,115 $ - $ - 0.35 %

41 - - - 0.01 %

$ 569 $ 1,115 $ - $ - 0.11 %

Commercial real estate 131 390 - - 0.09 %

Construction and land development 593 - - - 0.77 %

Commercial business 945 - - - 0.95 %

Total $ 1,669 $ 991 $ - $ - 0.18 %

For the year ended December 31, 2024

(Dollars in thousands)

Combination Term

Extension and

Interest Rate

(Dollars in thousands) Payment

Extension Interest

Reduction Combination

Term Extension

and Interest Rate

Reduction % of Total

Residential real estate $ 528 $ 1,115 $ - $ - 0.35 %

$ - $ 868 $ - $ - 0.18 %

$ - $ 868 $ - $ - 0.06 %

The financial effects of payment delay modifications and term extension modifications were forbearance average of five months and four months weighted average extension to life of loan, respectively.

Home Equity 41 - - - 0.01 %

Total $ 569 $ 1,115 $ - $ - 0.11 %

The financial effects of payment delay modifications and term extension modifications had a forbearance average of five months and one hundred eighty-six months weighted average extension to life of loan, respectively.

There were no commitments to lend additional amounts to the borrowers included in the previous tables.

The Company closely monitors the performance of loans and leases that have been modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts.

The performance of such modified loans is presented below.

The borrowers with term extension have had their maturity dates extended and as a result their monthly payments were reduced or had payments added to the end of the loan which resulted in payment relief.

For the year ended December 31, 2025

(Dollars in thousands)

Greater Than 90

Days Past Due

(Dollars in thousands) Principal Forgiveness Weighted average interest rate reduction Weighted average term extension (months) Payment delay

Residential real estate $ - — % 6 -

$ 545 $ 570 $ - $ 528

$ 545 $ 570 $ - $ 569

Commercial real estate $ - — % 180 5

Construction and land development $ - — % - 5

Commercial business $ - — % - 5

For the year ended December 31, 2024

(Dollars in thousands)

Greater Than 90

(Dollars in thousands) Principal Forgiveness Weighted average interest rate reduction Weighted average term extension (months) Payment delay

Residential real estate $ - — % 7 6

The Company closely monitors the performance of loans that have been modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts.

The following tables present the performance of such loans in the twelve months following modification.

December 31, 2025

(Dollars in thousands) Current 30-59 Days

Past Due 60-89 Days

Past Due Greater Than 90

Days Past Due

Residential real estate $ 582 $ 19 $ - $ -

$ 868 $ - $ - $ -

Commercial real estate 390 - - 131

Construction and land development - - - 593

Commercial business - - - 945

Total $ 972 $ 19 $ - $ 1,669

December 31, 2024

(Dollars in thousands) Current 30-59 Days

Past Due 60-89 Days

Past Due Greater Than 90

Days Past Due

Residential real estate $ 545 $ 570 $ - $ 528

Home equity - - - 41

Total $ 545 $ 570 $ - $ 569

Upon the Company’s determination that a modified loan has subsequently been deemed uncollectible, the loan is written off.

1 unchanged sentence

All modified loans are deemed collectible.

There were $ 589 thousand in multifamily loans, $ 7 thousand in home equity loans and $ 736 thousand in residential loans in the process of foreclosure as of December 31, 2024.

As part of the normal course of business, the Company had $ 1.1 million in loans involved in the foreclosure process at December 31, 2025 compared to $ 1.3 million at December 31, 2024.

As of December 31, 2025, the Company had $ 89 thousand in real estate owned, compared to no ne at December 31, 2024.

Acquired Loan Purchase Discounts

As part of the fair value of loans receivable, there was a net fair value discount for loans acquired of $ 3.6 million at December 31, 2025, compared to $ 4.4 million at December 31, 2024.

Accretable yield, or income recorded for the twelve months ended December 31, is as follows:

(Dollars in thousands)

Accretable yield, or income recorded for the year ended December 31, is as follows:

(Dollars in thousands) Total

Accretable yield, or income expected to be recorded in the future is as follows:

(Dollars in thousands)

(Dollars in thousands) Total

2030 and thereafter 2,275

Total $ 3,527

Allowance for Credit Losses

The allowance for credit losses is established for current expected credit losses on the Company’s loan portfolio utilizing guidance in Accounting Standards Codification (ASC) Topic 326.

The allowance for credit losses is established for current expected credit losses on the Company’s loan portfolio utilizing guidance in ASC Topic 326.

The determination of the allowance requires significant judgment to estimate credit losses measured on a collective pool basis when similar risk characteristics exist, and for loans evaluated individually.

4 unchanged sentences

The Company categorizes the loan portfolio into nine segments based on similar risk characteristics.

Loans within each segment are collectively evaluated using the probability of default (“PD”)/loss given default (“LGD”) methodology (PD/LGD).

In creating the “current expected credit loss (CECL)” model as required under ASC 326, the Company has established a two -year reasonable and supportable forecast period with a two -year straight line reversion to the long-term historical average.

Loans within each segment are collectively evaluated using the probability of default/loss given default methodology.

In creating the CECL model as required under ASC 326, the Company has established a two-year reasonable and supportable forecast period with a two-year straight line reversion to the long-term historical average.

Due to its minimal loss history, the Company elected to use peer data for a more reasonable calculation.

The Bancorp's activity in the allowance for credit losses, by loan segment, is summarized below for the year ended December 31, 2024:

(Dollars in thousands)

Beginning Balance

Ending Balance

The following tables show the changes in the allowance for credit losses, segregated by portfolio segment, for the year ended December 31, 2025, and 2024.

The Company's activity in the allowance for credit losses, by loan segment, is summarized below for the year ended December 31, 2025:

(Dollars in thousands) Beginning Balance Charge-offs Recoveries Provisions Ending Balance

Allowance for credit losses:

Residential real estate $ 4,481 $ ( 13 ) $ 66 $ ( 1,777 ) $ 2,757

$ 3,984 $ ( 28 ) $ 44 $ 481 $ 4,481

698 - - 137 835

Home equity 835 - - ( 147 ) 688

Commercial real estate 6,444 - 4 2,704 9,152

7,045 - 5 ( 606 ) 6,444

Construction and land development 2,651 - - ( 1,537 ) 1,114

4,206 - - ( 1,555 ) 2,651

933 ( 125 ) 31 164 1,003

Multifamily 1,003 ( 201 ) 29 1,247 2,078

Commercial business 1,185 ( 495 ) 460 433 1,583

1,649 ( 2,249 ) 310 1,475 1,185

7 ( 66 ) 22 42 5

Consumer 5 ( 46 ) 9 34 2

Manufactured homes 252 - - ( 136 ) 116

181 - - 71 252

65 - - ( 10 ) 55

$ 18,768 $ ( 2,468 ) $ 412 $ 199 $ 16,911

The Bancorp's activity in the allowance for credit losses, by loan segment, is summarized below for the year ended December 31, 2023:

(Dollars in thousands)

Beginning Balance

Ending Balance

Government 55 - - ( 39 ) 16

Total $ 16,911 $ ( 755 ) $ 568 $ 782 $ 17,506

The Company's activity in the allowance for credit losses, by loan segment, is summarized below for the year ended December 31, 2024:

(Dollars in thousands) Beginning Balance Charge-offs Recoveries Provisions Ending Balance

Allowance for credit losses:

Residential real estate $ 3,984 $ ( 28 ) $ 44 $ 481 $ 4,481

$ 5,244 $ ( 997 ) $ 149 $ ( 412 ) $ 3,984

538 ( 43 ) - 203 698

Home equity 698 - - 137 835

Commercial real estate 7,045 - 5 ( 606 ) 6,444

7,230 ( 372 ) 3 184 7,045

Construction and land development 4,206 - - ( 1,555 ) 2,651

2,988 - - 1,218 4,206

1,148 - 131 ( 346 ) 933

Multifamily 933 ( 125 ) 31 164 1,003

Commercial business 1,649 ( 2,249 ) 310 1,475 1,185

1,690 ( 1,064 ) 265 758 1,649

79 ( 95 ) 15 8 7

Consumer 7 ( 66 ) 22 42 5

Manufactured homes 181 - - 71 252

112 - - 69 181

$ 19,084 $ ( 2,571 ) $ 563 $ 1,692 $ 18,768

A collateral dependent loan relies solely on the operation or sale of the collateral for repayment.

In evaluating the overall risk associated with the loan, the Company considers character, overall financial condition and resources, and payment record of the borrower;

the prospects for support from any financially responsible guarantors;

and the nature and degree of protection provided by the cash flow and value of any underlying collateral.

However, as other sources of repayment become inadequate over time, the significance of the collateral's value increases and the loan may become collateral dependent.

The table below presents the amortized cost basis and allowance for credit losses (“ACL”) allocated for collateral dependent loans in accordance with ASC 326, which are individually evaluated to determine expected credit losses.

(Dollars in thousands)

December 31, 2024

Equipment/Inventory

Accounts Receivable

ACL Allocation

Government 65 - - ( 10 ) 55

Total $ 18,768 $ ( 2,468 ) $ 412 $ 199 $ 16,911

Collateral dependent loans are individually evaluated to determine expected credit losses when repayment is expected to be provided substantially through the operation or sale of the underlying collateral.

For these loans, the allowance for credit losses is measured based on the fair value of the collateral less estimated costs to sell when applicable.

Collateral securing these loans primarily consists of real estate, equipment and inventory, accounts receivable, and vehicles.

The fair values are determined using most recent independent appraisals, evaluations or other relevant market information.

The Company monitors collateral values on an ongoing basis and records adjustments to the allowance for credit losses as necessary.

There were no significant changes in the extent to which collateral secures these loans during the period.

The table below presents the amortized cost basis of collateral dependent loans and the related allowance for credit losses in accordance with ASC 326..

(Dollars in thousands) December 31, 2025

Real Estate Equipment/Inventory Accounts Receivable Vehicles Total ACL Allocation

Residential real estate $ 2,185 $ - $ - $ - $ 2,185 $ 39

$ 3,012 $ - $ - $ - $ 3,012 $ 50

219 - - - 219 -

Home equity 4 - - - 4 -

Commercial real estate 1,561 - - - 1,561 86

1,598 - - - 1,598 43

Construction and land development 2,234 - - - 2,234 -

2,285 - - - 2,285 -

3,550 - - - 3,550 -

Multifamily 696 - - - 696 -

Commercial business - 1,267 130 42 1,439 138

712 1,399 1,428 144 3,683 191

$ 11,376 $ 1,399 $ 1,428 $ 144 $ 14,347 $ 284

(Dollars in thousands)

December 31, 2023

Equipment/Inventory

Accounts Receivable

ACL Allocation

Total $ 6,680 $ 1,267 $ 130 $ 42 $ 8,119 $ 263

(Dollars in thousands) December 31, 2024

Real Estate Equipment/Inventory Accounts Receivable Vehicles Total ACL Allocation

Residential real estate $ 3,012 $ - $ - $ - $ 3,012 $ 50

$ 30 $ - $ - $ - $ 30 $ 30

Home equity 219 - - - 219 -

Commercial real estate 1,598 - - - 1,598 43

2,541 - - - 2,541 53

4,244 - - - 4,244 85

Construction and land development 2,285 - - - 2,285 -

Multifamily 3,550 - - - 3,550 -

Commercial business 712 1,399 1,428 144 3,683 191

- 1,583 1,557 192 3,332 738

$ 6,815 $ 1,583 $ 1,557 $ 192 $ 10,147 $ 906

Total $ 11,376 $ 1,399 $ 1,428 $ 144 $ 14,347 $ 284

A deferred cost reserve is maintained for the portfolio of manufactured home loans that have been purchased.

2 unchanged sentences

The unamortized balance of the deferred cost reserve totaled $ 2.4 million and $ 2.9 million as of December 31, 2025, and December 31, 2024, respectively, and is included in net deferred loan origination cost.

The following table presents non–accrual loans, and loans past due over 90 days still on accrual by class of loans:

As of December 31, 2024

(Dollars in thousands)

Nonaccrual with

The following table presents nonaccrual loans and loans past due over 90 days still on accrual by class of loans:

As of December 31, 2025 Nonaccrual with

No Allowance for

Nonaccrual with

Credit Loss Nonaccrual with

Allowance for

Nonaccrual Loans

Loans Past Due

Credit Loss Nonaccrual Loans

in Total Loans Past Due

over 90 Days Still

Residential real estate $ 1,873 $ 4,059 $ 5,932 $ -

$ 1,514 $ 3,150 4,664 $ -

179 304 483 -

Home equity - 810 810 -

Commercial real estate 1,158 403 1,561 -

1,078 202 1,280 -

Construction and land development 653 - 653 -

3,362 - 3,362 -

Multifamily 696 - 696 -

Commercial business 391 1,048 1,439 -

3,099 191 3,290 -

$ 9,891 $ 3,847 $ 13,738 $ -

As of December 31, 2023

(Dollars in thousands)

Nonaccrual with

Manufactured homes - 71 71 -

Total $ 4,771 $ 6,391 $ 11,162 $ -

As of December 31, 2024 Nonaccrual with

No Allowance for

Nonaccrual with

Credit Loss Nonaccrual with

Allowance for

Nonaccrual Loans

Loans Past Due

Credit Loss Nonaccrual Loans

in Total Loans Past Due

over 90 Days Still

Residential real estate $ 1,514 $ 3,150 $ 4,664 $ -

$ 442 $ 1,251 $ 1,693 $ 1,131

161 307 468 -

Home equity 179 304 483 -

Commercial real estate 1,078 202 1,280 -

603 230 833 712

2,357 1,358 3,715 -

Construction and land development 659 - 659 -

Multifamily 3,362 - 3,362 -

Commercial business 3,099 191 3,290 -

1,724 1,173 2,897 -

$ 5,287 $ 4,321 $ 9,608 $ 1,843

Accrued interest receivable on loans totaled $ 5.5 million as of December 31, 2024 and $ 5.7 million as of December 31, 2023 and is excluded from the estimate of credit losses.

Total $ 9,891 $ 3,847 $ 13,738 $ -

Accrued interest receivable on loans totaled $ 5.7 million on December 31, 2025, and $ 5.5 million on December 31, 2024, and is excluded from the estimate of credit losses.

The Company made the accounting policy election to not measure an ACL for accrued interest receivable.

4 unchanged sentences

The following table shows the changes in the liability for credit losses on unfunded loan commitments.

For the year ended

(Dollars in thousands)

December 31, 2024

(Dollars in thousands) Year ended,

December 31, 2025 Year ended,

December 31, 2024

Balance, beginning of period $ 2,739 $ 3,441

$ 3,441 $ 3,108

Provision (Release)

Provision for (benefit from) unfunded loan commitments ( 987 ) ( 702 )

Balance, end of period $ 1,752 $ 2,739

$ 2,739 $ 3,441

Note 4 – Premises and Equipment, Net

1 unchanged sentence

(Dollars in thousands) 2025 2024

$ 9,066 $ 11,773

Land $ 9,066 $ 9,066

Buildings and improvements 34,851 34,876

34,876 41,252

Lease right of use 16,682 16,682

Furniture and equipment 20,879 20,310

20,310 19,401

80,934 72,968

Less accumulated depreciation

( 33,675 ) ( 34,532 )

Total cost 81,478 80,934

accumulated depreciation ( 36,502 ) ( 33,675 )

Premises and equipment, net $ 44,976 $ 47,259

$ 47,259 $ 38,436

Depreciation and amortization expense was approximately $ 2.8 million and $ 2.9 million for 2024 and 2023, respectively.

Note 5 – Goodwill and Other Intangible Assets

At year end, goodwill and other intangible assets are summarized as follows:

(Dollars in thousands) 2025 2024

Goodwill balance January 1, $ 22,395 $ 22,395

$ 22,395 $ 22,395

Goodwill balance December 31, $ 22,395 $ 22,395

$ 22,395 $ 22,395

Goodwill arising from business combinations represents the value attributable to unidentifiable intangible assets in the business acquired.

The Company’s goodwill relates to the value inherent in the banking industry and that value is dependent upon the ability of the Company to provide quality, cost effective banking services in a competitive marketplace.

Goodwill is tested periodically for impairment.

2 unchanged sentences

In addition to goodwill, a core deposit intangible was established from previous acquisitions.

The Company had core deposit intangible balances of $ 1.9 million and $ 3.3 million as of December 31, 2024, and 2023, respectively.

The table below summarizes the annual amortization:

The amortization recorded for the nine months ended December 31, is as follows:

(Dollars in thousands)

The Company had core deposit intangible balances of $ 1.2 million and $ 1.9 million as of December 31, 2025, and December 31, 2024, respectively.

The table below summarizes the intangibles amortization:

The amortization recorded for the year ended December 31, is as follows:

(Dollars in thousands) Total

Amortization to be recorded in future periods, is as follows:

(Dollars in thousands)

(Dollars in thousands) Total

Thereafter 127

Total $ 1,172

Note 6 – Income Taxes

Pre-tax income is entirely related to domestic activities, the Company did not have any foreign operations.

At year-end, components of income tax expense (benefit) consist of the following:

(Dollars in thousands) 2025 2024

Deferred, net of valuation allowance

Income tax expense (benefit)

$ 1,325 $ ( 335 )

Current income tax expense:

Total current expense

Deferred income tax (benefit) expense:

Total deferred (benefit) expense

Change in valuation allowance 9 1

Total income tax expense (benefit) $ 23 $ 1,325

The Company did not have any income tax expense (benefit) in foreign jurisdictions.

Effective tax rates differ from the federal statutory rate of 21% for 2025 and 2024 applied to income before income taxes due to the following:

(Dollars in thousands)

Federal statutory rate

Tax expense at statutory rate

(Dollars in thousands) Amount % of Pre-tax Income Amount % of Pre-tax Income

federal statutory income tax $ 1,703 21.0 % $ 2,826 21.0 %

State and local income tax, net of federal income tax benefit (1)

170 2.1 311 2.3

State tax, net of federal effect

Tax exempt income

Low income housing tax credits (2)

( 23 ) ( 0.3 ) ( 12 ) ( 0.1 )

New markets tax credits (3)

( 479 ) ( 5.9 ) ( 474 ) ( 3.5 )

Changes in valuation allowances 9 0.1 1 —

Nontaxable or nondeductible items:

Tax-exempt income, net

( 1,181 ) ( 14.6 ) ( 1,249 ) ( 9.3 )

Bank owned life insurance

( 290 ) ( 3.6 ) ( 171 ) ( 1.3 )

Captive insurance

Tax credit investments

Other nondeductible items

14 0.2 45 0.3

Total income tax expense (benefit)

Share-based compensation (4)

111 1.4 48 0.4

Other, net ( 11 ) ( 0.1 ) - —

Income tax expense (benefit) at effective tax rate $ 23 0.3 % $ 1,325 9.8 %

(1) State taxes in Illinois make up the majority (greater than 50%) of the tax effect in this category.

(2) Net of amortization and tax losses.

(3) Net of basis reduction.

(4) Share-based compensation includes any excess benefits or shortfalls from vestings and exercises.

Income taxes paid were as follows:

(Dollars in thousands) 2025 2024

Federal $ - $ -

State and local:

Total income taxes paid $ 150 $ 415

At December 31, the components of the net deferred tax asset recorded in other assets in the consolidated balance sheets are as follows:

14 unchanged sentences

Lease liability

Capital loss carryforward

Total deferred tax assets 31,298 36,464

36,464 31,392

Deferred tax liabilities:

10 unchanged sentences

( 3,929 ) ( 4,124 )

REIT spillover dividends

( 134 ) ( 125 )

Total deferred tax liabilities

( 64 ) ( 49 )

Total deferred tax liabilities ( 6,404 ) ( 6,946 )

Valuation allowance ( 72 ) ( 63 )

( 63 ) ( 62 )

Net deferred tax asset $ 24,822 $ 29,455

$ 29,455 $ 28,066

At December 31, 2025, the Company has Indiana net operating loss carry forwards of approximately $ 5.6 million which will begin to expire in 2038 if not used.

3 unchanged sentences

A valuation allowance of $ 72 thousand and $ 63 thousand was provided at December 31, 2025 and 2024, respectively for the state tax credits net of federal benefit.

The Company acquired $ 3.3 million of federal net operating loss carryforwards and $ 7.2 million of Illinois net operating loss carryforwards with the acquisition of First Personal Financial Corp during 2018 of which $ 2.2 million of the federal losses expire in years ranging from 2029 to 2035, $ 1.1 million of the federal losses do not expire, and the Illinois losses expire in years ranging from 2028 to 2036 Under Section 382 of the Internal Revenue Code, the annual limitation on the use of the federal losses is $ 362 thousand for First Personal while there is no limitation on the use of the Illinois losses.

Under Section 382 of the Internal Revenue Code, the annual limitation on the use of the federal losses is $ 362 thousand for First Personal while there is no limitation on the use of the Illinois losses.

Management has determined that all of the losses are more likely than not to be utilized before expiration.

The Company acquired $ 7.2 million of federal net operating loss carryforwards and $ 11.4 million of Illinois net operating loss carryforwards with the acquisition of AJS Bancorp Inc.

during 2019 of which $ 3.6 million of the federal losses expire in years ranging from 2030 to 2037, $ 3.6 million of the federal losses do not expire, and the Illinois losses expire in years ranging from 2029 to 2037.

during 2019 of which $ 3.6 million of the federal losses expire in years ranging from 2030 to 2037, $ 3.6 million of the federal losses do not expire, and the Illinois losses

expire in years ranging from 2029 to 2037.

Under Section 382 of the Internal Revenue Code, the annual limitation on the use of the federal losses is $ 834 thousand for AJS, while there is no limitation on the use of the Illinois losses.

16 unchanged sentences

Note 7 – Deposits

The aggregate amount of retail and brokered certificates of deposit with a balance of $250 thousand or more was approximately $ 141.4 million at December 31, 2024 and $ 137.1 million at December 31, 2023.

At December 31, 2024, scheduled maturities of retail and brokered certificates of deposit were as follows:

(Dollars in thousands)

2029 and thereafter

The Company’s end-of-period deposit portfolio balances were as follows:

(Dollars in thousands)

$ 591,487 $ 653,529

275,121 302,782

333,705 324,993

(Dollars in thousands) December 31, 2025 December 31, 2024

Checking $ 592,214 $ 591,487

Savings 254,055 275,121

Money market 381,111 333,705

Certificates of deposit 499,591 560,253

560,253 532,117

Total deposits $ 1,726,971 $ 1,760,566

$ 1,760,566 $ 1,813,421

Note 8 – Borrowed Funds

At December 31, 2024 and December 31, 2023, borrowed funds and their outstanding rates are summarized below:

The aggregate amount of retail and brokered certificates of deposit with a balance of $250 thousand or more was approximately $ 104.5 million at December 31, 2025 and $ 141.4 million at December 31, 2024.

At December 31, 2025, selected maturities of retail and brokered certificate of deposits were as follows:

(Dollars in thousands)

Federal Reserve Fixed rate advance with outstanding rate of 4.38 %, matured March 22, 2024

FHLB Fixed rate advance with outstanding rate of 4.85 %, maturing May 16, 2025

FHLB Fixed rate advance with outstanding rate of 4.77 %, maturing May 19, 2025

FHLB Fixed rate advance with outstanding rate of 3.38 %, maturing August 7, 2028 (1)

FHLB Fixed rate advance with outstanding rate of 3.22 %, maturing August 7, 2029 (1)

Thereafter 103

Total $ 499,591

Note 8 - Borrowings

At December 31, 2025, and December 31, 2024, borrowed funds are summarized below:

(Dollars in thousands)

2025 December 31,

FHLB Fixed rate advance with outstanding rate of 4.85 %, maturing

FHLB Fixed rate advance with outstanding rate of 4.77 %, maturing

FHLB Fixed rate advance with outstanding rate of 3.63 %, maturing

March 7, 2028 (1)

FHLB Fixed rate advance with outstanding rate of 3.46 %, maturing

June 26, 2028 (1)

FHLB Fixed rate advance with outstanding rate of 3.38 %, maturing

August 7, 2028 (1)

FHLB Fixed rate advance with outstanding rate of 3.84 %, maturing February 28, 2029 (1)

15,000 15,000

FHLB Fixed rate advance with outstanding rate of 3.74 %, maturing February 28, 2029 (1)

10,000 10,000

FHLB Fixed rate advance with outstanding rate of 3.22 %, maturing

August 7, 2029 (1)

Total $ 45,000 $ 65,000

(1) FHLB retains puttable option to call these advances after a period of time.

1 unchanged sentence

(Dollars in thousands)

On March 12, 2023, the Federal Reserve Board announced the creation of a new Bank Term Funding Program (the “BTFP”).

The BTFP offered loans of up to one year to banks, savings associations, credit unions, and other eligible depository institutions pledging U.S.

Treasury securities, agency debt and mortgage-backed securities, and other qualifying assets as collateral.

These assets were valued at par for purposes of the collateral pledge under the BTFP.

During the first quarter of 2023, the Company participated in the BTFP by accessing $ 80 million of low-cost capital under the program.

During the quarter ending September 30, 2024, the Company terminated its involvement in the Bank Term Funding Program (the “BTFP”) and paid off its outstanding balance of $ 60 million.

Total $ 45,000

The Company has available liquidity of $ 876.0 million including borrowing capacity from the FHLB and Federal Reserve facilities and other sources.

The Company also maintains a $ 25.0 million line of credit with the Federal Home Loan Bank of Indianapolis.

The Company did not have a balance on the line of credit with the FHLB at December 31, 2025, or as of December 31, 2024.

The Company did not utilize the borrowing capacity available through the Federal Reserve discount window at December 31, 2025 or December 31, 2024.

The Company did not have other borrowings at December 31, 2025, or as of December 31, 2024.

Fixed rate advances are payable at maturity, with a prepayment penalty.

1 unchanged sentence

FHLB retains puttable option to call some of these advances 6 to 12 months after issuance.

The Bank had a balance of $ 65 million at December 31, 2024 compared to no balance at December 31, 2023 at FHLB.

In addition to the fixed rate advances, the Bank maintains a $ 25.0 million line of credit with the Federal Home Loan Bank of Indianapolis.

The Bank did not have a balance on the line of credit at December 31, 2024 or December 31, 2023.

At December 31, 2025, the Bank had available approximately $ 673.9 million in credit lines with various money center banks, including the FHLB and Federal Reserve.

The Bank uses federal funds purchased and repurchase agreements as sources of short-term wholesale funding.

Federal funds generally mature within one day.

Repurchase agreements consist of variable rate sweeps which mature daily as well as fixed rate term agreements that generally mature within 12 months.

These repurchase agreements are secured by municipal securities and collateralized mortgage obligations and residential mortgage-backed securities, under the Bank’s control.

At December 31, information concerning these retail repurchase agreements is summarized below:

Repurchase agreements decreased from $ 40.1 million at December 31, 2024 to $ 39.7 million at December 31, 2025 The repurchase agreements are secured by municipal securities and collateralized mortgage obligations and residential mortgage-backed securities, under the Bank’s control.

At December 31, 2025 and December 31, 2024, the Bank had investment securities with a carrying value of $ 47.2 million and

$ 57.8 million pledged as collateral for the repurchase agreements, and the fair value of the collateral approximated its carrying value.

(Dollars in thousands)

Federal funds purchased and repurchase agreements:

Ending balance

4 unchanged sentences

51,957 44,058

Securities underlying the agreements at year end:

Carrying value

57,833 54,458

Average interest rate during the year

3 unchanged sentences

Note 9 – Employees ’ Benefit Plans

The Company maintains an Unqualified Deferred Compensation Plan (the “UDC Plan”).

The Company maintains an Unqualified Deferred Compensation Plan.

The purpose of the UDC Plan is to provide deferred compensation to key senior management employees of the Company in order to recognize their substantial contributions to the Bank and provide them with additional financial security as inducement to remain with the Bank.

5 unchanged sentences

Fee deferrals, including interest, totaled approximately $ 66 thousand and $ 85 thousand for 2025 and 2024, respectively.

The deferred fee liability at both December 31, 2024 and 2023 was approximately $ 1.4 million.

The deferred fee liability at December 31, 2025 and 2024 was approximately $ 1.3 million and $ 1.4 million, respectively.

Note 10 - Stock Based Compensation

The Company’s 2015 Stock Option and Incentive Plan (the “Incentive Plan”), permits the grant of equity awards for up to 250,000 shares of common stock.

Awards granted under the Incentive Plan may be in the form of incentive stock options, non-qualified stock options, restricted stock, unrestricted stock, performance shares, or performance units.

The purposes of the Plan are (i) to align the personal interests of plan participants with those of the shareholders of the Company, (ii) to encourage key individuals to accept or continue employment or service with the Company and its subsidiaries, and (iii) to furnish incentives to such key individuals to improve operations and increase profits by providing such key individuals the opportunity to acquire common stock of the Company or to receive monetary payments based on the value of such common stock.

Restricted stock awards are generally granted with an award price equal to the market price of the Company’s common stock on the award date.

Restricted stock awards have been issued with a three year cliff-vesting period.

The Company replaced its expired 2015 Stock Option and Incentive Plan with a new equity incentive plan named the Finward Bancorp 2025 Omnibus Equity Incentive Plan, which was adopted by the Company’s Board of Directors on March 21, 2025, and approved by the Company’s shareholders on May 22, 2025.

The maximum number of shares of common stock cumulatively available for issuance under the 2025 Omnibus Plan is 265,174 shares.

Awards granted under the Plan may be in the form of incentive stock options, non-qualified stock options, restricted stock, unrestricted stock, restricted stock units, performance shares, stock appreciation rights, or any combination thereof, as provided in the Plan.

Unvested awards granted under the prior plan will continue to be governed by the terms of the award agreements entered into with the participants under the prior plan.

Shares of common stock underlying awards granted under the prior plan that expire, terminate, or are canceled or forfeited under the terms of the prior plan will be available for issuance under the new plan.

As required by the Stock Compensation Topic, companies are required to record compensation cost for stock options and awards provided to employees in return for employment service.

For the year ended December 31, 2025, stock based compensation expense of $ 447 thousand was recorded, compared to $ 565 thousand for the year ended December 31, 2024.

It is anticipated that current outstanding unvested awards will result in additional compensation expense of approximately $ 566 thousand with a weighted average life of 2.4 years.

Restricted stock awards are issued with an award price equal to the market price of the Company’s common stock on the award date and vest in one year after the grant date for independent directors and in full three years after the grant date for employees.

Forfeiture provisions exist for personnel that separate employment before the vesting period expires.

Compensation expense related to restricted stock awards is recognized over the vesting period.

Total compensation cost that has been charged to expense for those plans was approximately $ 565 thousand and $ 719 thousand for the years ended December 31, 2024 and 2023, respectively.

When awarded restricted shares vest, employees of the Bank can elect to surrender a portion of their vested shares back to the Company to cover the tax liability of their awards.

Shares were surrendered with a total value of $ 86 thousand and $ 196 thousand for the years ended December 31, 2024 and 2023, respectively.

A summary of changes in the Company’s non-vested restricted stock for the year ended December 31, 2024, follows:

Non-vested Shares

A summary of restricted stock activity under the Company’s Plan described above for the year ended December 31, 2025, follows:

Non-vested Shares Shares Weighted

Non-vested at January 1, 2025 44,570 $ 36.74

41,649 $ 43.86

( 15,174 ) 40.84

( 1,042 ) 33.55

Granted 20,321 27.08

Vested ( 17,722 ) 27.50

Forfeited ( 1,833 ) 28.53

Non-vested at December 31, 2025 45,336 $ 36.36

44,570 $ 36.74

As of December 31, 2024, there was approximately $ 515 thousand of total unrecognized compensation cost related to non-vested restricted shares granted under the Incentive Plan.

The cost is expected to be recognized over a weighted-average period of 1.7 years.

Note 11 – Regulatory Capital

6 unchanged sentences

If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required.

At December 31, 2024, and 2023, the most recent regulatory notifications categorized the Bank is well capitalized under the regulatory framework for prompt corrective action.

At December 31, 2025, and 2024, the most recent regulatory notifications categorized the Bank as well capitalized under the regulatory framework for prompt corrective action.

There are no conditions or events since that notification that management believes have changed the Bank’s category.

In addition to establishing the minimum regulatory capital requirements, the regulations limit capital distributions by the institution and certain discretionary bonus payments to management if an institution does not hold a “capital conservation buffer” consisting of 2.5% of common equity Tier 1 capital to risk-weighted assets above the amount necessary to meet its minimum risk-based capital requirements.

In addition, the following table shows that, at December 31, 2024, and 2023, the Bank’s capital exceeded all applicable regulatory capital requirements set forth in 12 C.F.R.

Bank Level Capital

Minimum Required To Be

(Dollars in thousands)

Minimum Required For

In addition, the following table shows that, at December 31, 2025 and December 31, 2024, the Bank’s capital exceeded all applicable regulatory capital requirements as set forth in 12 C.F.R.

(Dollars in thousands) Actual Minimum Required For

Capital Adequacy Purposes Minimum Required To Be

Well Capitalized Under Prompt

Capital Adequacy Purposes

Corrective Action Regulations

December 31, 2024

December 31, 2025 Amount Ratio Amount Ratio Amount Ratio

Common equity tier 1 capital to risk-weighted assets $ 186,214 11.86 % $ 70,626 4.50 % $ 102,016 6.50 %

$ 179,625 11.26 % $ 71,771 4.50 % $ 103,670 6.50 %

Tier 1 capital to risk-weighted assets $ 186,214 11.86 % $ 94,168 6.00 % $ 125,558 8.00 %

$ 179,625 11.26 % $ 95,695 6.00 % $ 127,594 8.00 %

Total capital to risk-weighted assets $ 205,472 13.09 % $ 125,558 8.00 % $ 156,947 10.00 %

$ 194,499 12.19 % $ 127,594 8.00 % $ 159,492 10.00 %

Tier 1 capital to adjusted average assets

$ 179,625 8.47 % $ 84,854 4.00 % $ 106,068 5.00 %

Bank Level Capital

Minimum Required To Be

(Dollars in thousands)

Minimum Required For

Tier 1 leverage ratio $ 186,214 8.93 % $ 83,379 4.00 % $ 104,223 5.00 %

(Dollars in thousands) Actual Minimum Required For

Capital Adequacy Purposes Minimum Required To Be

Well Capitalized Under Prompt

Capital Adequacy Purposes

Corrective Action Regulations

December 31, 2023

December 31, 2024 Amount Ratio Amount Ratio Amount Ratio

Common equity tier 1 capital to risk-weighted assets $ 179,625 11.26 % $ 71,771 4.50 % $ 103,670 6.50 %

$ 168,263 10.43 % $ 72,643 4.50 % $ 104,928 6.50 %

Tier 1 capital to risk-weighted assets $ 179,625 11.26 % $ 95,695 6.00 % $ 127,594 8.00 %

$ 168,263 10.43 % $ 96,857 6.00 % $ 129,142 8.00 %

Total capital to risk-weighted assets $ 194,499 12.19 % $ 127,594 8.00 % $ 159,492 10.00 %

$ 183,315 11.36 % $ 129,142 8.00 % $ 161,428 10.00 %

Tier 1 capital to adjusted average assets

$ 168,260 7.78 % $ 86,561 4.00 % $ 108,201 5.00 %

Tier 1 leverage ratio $ 179,625 8.47 % $ 84,854 4.00 % $ 106,068 5.00 %

The Company’s ability to pay dividends to its shareholders is largely dependent upon the Bank’s ability to pay dividends to the Company.

Under Indiana law, the Bank may pay dividends from its undivided profits (generally, earnings less losses, bad debts, taxes and other operating expenses) as is considered expedient by the Bank’s Board of Directors.

However, the Bank must obtain the approval of the Indiana Department of Financial Institutions (DFI) if the total of all dividends declared by the Bank during the current year, including the proposed dividend, would exceed the sum of retained net income for the year to date plus its retained net income for the previous two years.

However, the Bank must obtain the approval of the DFI if the total of all dividends declared by the Bank during the current year, including the proposed dividend, would exceed the sum of retained net income for the year to date plus its retained net income for the previous two years.

For this purpose, “retained net income,” means net income as calculated for call report purposes, less all dividends declared for the applicable period.

An exemption from DFI approval would require that the Bank have been assigned a composite uniform financial institutions rating of 1 or 2 as a result of the most recent federal or state examination;

the proposed dividend would not result in a Tier 1 leverage ratio below 7.5%;

and that the Bank not be subject to any corrective action, supervisory order, supervisory agreement, or board approved operating agreement.

the proposed dividend would not result in a Tier 1 leverage ratio below 7.5 %; and that the Bank not be subject to any corrective action, supervisory order, supervisory agreement, or board approved operating agreement.

In addition, under the terms of the MOU, the Bank must seek regulatory approval prior to paying cash dividends.

1 unchanged sentence

refrain from paying cash dividends without prior regulatory approval.

The aggregate amount of dividends that the Bank was eligible to declare in 2024, without the need for qualifying for an exemption or prior DFI approval, was its 2024 net profit.

Moreover, the FDIC and the Federal Reserve Board may prohibit the payment of dividends if it determines that the payment of dividends would constitute an unsafe or unsound practice in light of the financial condition of the Bank.

On December 20, 2024, the Board of Directors of the Company declared a fourth quarter dividend of $ 0.12 per share.

The Company’s fourth quarter dividend totaling $ 518 thousand was paid to shareholders on February 3, 2025.

Note 12 – Earnings per Common Share

The aggregate amount of dividends that the Bank was eligible to declare in 2025, without the need for qualifying for a further exemption or prior DFI approval, was its 2025 net income.

On December 3, 2025, the Board of Directors of the Company declared the most recent quarterly dividend of $ 0.12 per share.

The Company’s quarterly dividend was paid to shareholders on December 30, 2025 to shareholders of record on December 17, 2025.

Note 12 - Earnings per Share

Earnings per common share is computed by dividing net income by the weighted-average number of common shares outstanding.

A reconciliation of the numerators and denominators of the basic earnings per common share and diluted earnings per common share computations for 2024 and 2023 is presented below.

For the year ended,

A reconciliation of the numerators and denominators of the basic and diluted earnings per common share computations for the years ended December 31, 2025 and 2024, are as follows:

(dollars in thousands except per share data) 2025 2024

1 unchanged sentence

Net income as reported $ 8,087 $ 12,130

$ 12,130 $ 8,380

Weighted average common shares outstanding

4,259,570 4,273,824

Weighted average common shares outstanding—basic 4,271,350 4,259,570

Basic earnings per common share $ 1.89 $ 2.85

$ 2.85 $ 1.96

Diluted earnings per common share:

Net income as reported $ 8,087 $ 12,130

$ 12,130 $ 8,380

Weighted average common shares outstanding 4,271,350 4,259,570

4,259,570 4,273,824

Dilutive effect of unvested restricted stock awards 20,708 15,063

Weighted average common and dilutive potential common shares outstanding

4,274,633 4,282,282

Weighted average common shares outstanding—diluted 4,292,058 4,274,633

Diluted earnings per common share $ 1.88 $ 2.84

$ 2.84 $ 1.96

Note 13 – Related Party Transactions

The Company had aggregate loans outstanding to directors and executive officers (with individual balances exceeding $60 thousand) of approximately $ 4.4 million at December 31, 2024, and approximately $ 4.8 million at December 31, 2023.

For the year ended December 31, 2024, the following activity occurred on these loans:

The Company had aggregate loans outstanding to directors and executive officers of approximately $ 4.1 million at December 31, 2025, and approximately $ 4.4 million at December 31, 2024.

For the years ended December 31, 2025 and 2024, the following activity occurred on these loans:

(Dollars in thousands) 2025 2024

Aggregate balance at the beginning of the year $ 4,445 $ 4,832

$ 4,832 $ 4,565

( 387 ) ( 383 )

New loans 126 -

Repayments ( 445 ) ( 387 )

Aggregate balance at the end of the year $ 4,126 $ 4,445

$ 4,445 $ 4,832

Deposits from directors and executive officers totaled approximately $ 1.1 million and $ 3.8 million at December 31, 2025, and 2024, respectively.

8 unchanged sentences

The following table represents the commitments to extend credit and standby letters of credit as of December 31, 2025 and December 31, 2024, respectively:

(Dollars in thousands)

December 31, 2024

December 31, 2023

(Dollars in thousands) December 31, 2025 December 31, 2024

Commitments to extend credit $ 254,012 $ 228,461

$ 228,461 $ 244,080

Standby letters of credit 15,159 14,078

14,078 18,279

$ 242,539 $ 262,359

Total $ 269,171 $ 242,539

Note 15 – Derivative Financial Instruments

12 unchanged sentences

December 31, 2025

Notational or

Asset derivatives

Liability derivatives

(Dollars in thousands)

contractual amount

Statement of Financial Condition classification

Interest rate swap contracts

$ 89,964 Other assets

$ 5,486 Other liabilities

Interest rate lock commitments

1,426 Other assets

$ 91,390 $ 5,510 $ 5,486

Asset derivatives Liability derivatives

(Dollars in thousands) Notional or

contractural amount Statement of Financial Condition classification Fair value Statement of Financial Condition classification Fair value

Interest rate swap contracts $ 96,275 Other assets $ 3,641 Other liabilities $ 3,641

Interest rate lock commitments 2,939 Other assets 50 N/A -

Total $ 99,214 $ 3,691 $ 3,641

December 31, 2024

Notational or

Asset derivatives

Liability derivatives

(Dollars in thousands)

contractual amount

Statement of Financial Condition classification

Interest rate swap contracts

$ 86,995 Other assets

$ 5,591 Other liabilities

Interest rate lock commitments

2,071 Other assets

$ 89,066 $ 5,626 $ 5,591

Asset derivatives Liability derivatives

(Dollars in thousands) Notional or

contractural amount Statement of Financial Condition classification Fair value Statement of Financial Condition classification Fair value

Interest rate swap contracts $ 89,964 Other assets $ 5,486 Other liabilities $ 5,486

Interest rate lock commitments 1,426 Other assets 24 N/A -

Total $ 91,390 $ 5,510 $ 5,486

The following table shows the amounts included in the Statements of Income for non-hedging derivative financial instruments:

For the year ended

(Dollars in thousands)

Statement of Income Classification

Interest rate swap contracts

Fees and service charges

Interest rate lock commitments

Gain on sale of loans held-for-sale, net

Year Ended December 31,

(Dollars in thousands) Statement of Income Classification 2025 2024

Interest rate swap contracts Fees and service charges $ 199 $ 276

Interest rate lock commitments Gain on sale of loans held-for-sale, net ( 33 ) 47

Total $ 166 $ 323

The following table shows the offsetting of financial assets and derivative assets:

1 unchanged sentence

Statement of Financial Condition

(Dollars in Gross Amounts of

Gross Amounts Offset in the

Net Amounts of Assets Presented

Financial Cash Collateral

Recognized Assets

Statement of Financial Condition

in the Statement of Financial Condition

(Dollars in thousands) Gross Amounts of Recognized Assets Gross Amounts Offset in the Statement of Financial

Condition Net Amounts of Assets Presented in the Statement of Financial

Condition Financial Instruments Cash Collateral Received Net Amount

December 31, 2025

Interest rate swap contracts $ 3,641 $ - $ 3,641 $ - $ 1,900 $ 1,741

$ 5,486 $ - $ 5,486 $ - $ 5,120 $ 366

Interest rate lock commitments 50 - 50 - - 50

82 - 82 - - 82

$ 5,568 $ - $ 5,568 $ - $ 5,120 $ 448

Total $ 3,691 $ - $ 3,691 $ - $ 1,900 $ 1,791

Gross Amounts not Offset in the

Statement of Financial Condition

(Dollars in Gross Amounts of

Gross Amounts Offset in the

Net Amounts of Liabilities Presented

Financial Cash Collateral

Recognized Liabilities

Statement of Financial Condition

in the Statement of Financial Condition

(Dollars in thousands) Gross Amounts of Recognized Assets Gross Amounts Offset in the Statement of Financial

Condition Net Amounts of Assets Presented in the Statement of Financial

Condition Financial Instruments Cash Collateral Received Net Amount

December 31, 2024

Interest rate swap contracts $ 5,486 $ - $ 5,486 $ - $ 5,120 $ 366

$ 5,591 $ - $ 5,591 $ - $ 4,050 $ 1,541

Interest rate lock commitments 82 - 82 - - 82

35 - 35 - - 35

$ 5,626 $ - $ 5,626 $ - $ 4,050 $ 1,576

Total $ 5,568 $ - $ 5,568 $ - $ 5,120 $ 448

The following table shows the offsetting of financial liabilities and derivative liabilities:

1 unchanged sentence

Statement of Financial Condition

(Dollars in Gross Amounts of

Gross Amounts Offset in the

Net Amounts of Liabilities Presented

Financial Cash Collateral

Recognized Liabilities

Statement of Financial Condition

in the Statement of Financial Condition

(Dollars in thousands) Gross Amounts of Recognized Liabilities Gross Amounts Offset in the Statement of Financial

Condition Net Amounts of Assets Presented in the Statement of Financial

Condition Financial Instruments Cash Collateral Pledged Net Amount

December 31, 2025

Interest rate swap contracts $ 3,641 $ - $ 3,641 $ - $ - $ 3,641

$ 5,486 $ - $ 5,486 $ - $ - $ 5,486

Gross Amounts not Offset in the

Statement of Financial Condition

(Dollars in Gross Amounts of

Gross Amounts Offset in the

Net Amounts of Liabilities Presented

Financial Cash Collateral

Recognized Liabilities

Statement of Financial Condition

in the Statement of Financial Condition

(Dollars in thousands) Gross Amounts of Recognized Liabilities Gross Amounts Offset in the Statement of Financial

Condition Net Amounts of Assets Presented in the Statement of Financial

Condition Financial Instruments Cash Collateral Pledged Net Amount

December 31, 2024

Interest rate swap contracts $ 5,486 $ - $ 5,486 $ - $ - $ 5,486

$ 5,591 $ - $ 5,591 $ - $ - $ 5,591

Note 16 – Fair Values of Financial Instruments

The Fair Value Measurements Topic (the “Topic”) establishes a hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

Note 16 - Fair Value

The Fair Value Measurements Topic establishes a hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The Topic describes three levels of inputs that may be used to measure fair value:

6 unchanged sentences

Different judgments and assumptions used in pricing could result in different estimates of value.

In certain cases where market data is not readily available because of lack of market activity or little public disclosure, values may be based on unobservable inputs and classified in Level 3 of the fair value hierarchy.

The Company evaluates AFS security impairment on a quarterly basis.

ASC 326 allows for prospective adoption of previously recorded credit impairment on AFS securities.

This allows the Company to maintain the same amortized cost basis of the securities before and after adoption date.

At adoption, the Company has $ 173 thousand of previously recorded credit impairment on collateralized debt obligations.

The Company believes this continues to represent the expected credit losses of the amortized cost basis, therefore, has established an ACL for AFS debt securities.

The ACL is monitored quarterly and is measured by evaluating the present value of cash flows as compared to the amortized cost basis of the security.

To the extent that there are improvements in credit related to these securities, the ACL will be reduced to account for the improvements.

If any improvements in credit exceed the amount of previously reduced amortized cost bases, recoveries will be recorded through the income statement in the period received.

The allowance for collateralized debt credit losses was at $ 173 thousand at December 31, 2024 and December 31, 2023.

In certain cases where market data is not readily available because of a lack of market activity or little public disclosure, values may be based on unobservable inputs and classified in Level 3 of the fair value hierarchy.

The Company’s subordination for each collateralized debt obligation is calculated by taking the total performing collateral and subtracting the sum of the total collateral within the Company’s class and the total collateral within all senior classes, and then stating this result as a percentage of the total performing collateral.

2 unchanged sentences

Subordination assuming future default/deferral assumptions is calculated by deducting future defaults from the current performing collateral.

At December 31, 2024 and 2023, management reviewed the subordination levels for each security in context of the level of current collateral defaults and deferrals within each security;

At December 31, 2025 and December 31, 2024, management reviewed the subordination levels for each security in context of the level of current collateral defaults and deferrals within each security;

the potential for additional defaults and deferrals within each security;

1 unchanged sentence

and the Company’s class position within each security.

At December 31, 2024 and 2023, the collateralized debt obligations with a cost basis of $ 2.2 million have been placed in “payment in kind” status.

At December 31, 2025 and December 31, 2024, the collateralized debt obligations with a cost basis of $ 2.1 million and $ 2.2 million have been placed in “payment in kind” status.

The Company’s securities that are classified as “payment in kind” are a result of not receiving the scheduled quarterly interest payments.

4 unchanged sentences

As a result of the principal reduction in the senior tranche, more cash is available for future payments to the Company’s tranche.

Management will not capitalize the “payment in kind” interest payments to the book value of the securities and will keep these securities in non-accrual status until the quarterly interest payments resume.

Management will not capitalize the

“payment in kind” interest payments to the book value of the securities and will keep these securities in nonaccrual status until the quarterly interest payments resume.

The fair value of the Company’s interest rate swap contracts, both assets and liabilities, are valued by a third- party pricing agent using an income approach and are classified within Level 2 of the valuation hierarchy.

2 unchanged sentences

These securities were categorized as unobservable Level 3 and priced using an Option-Adjusted Discounted Cash flow model to value these securities.

The significant inputs to this model include yield, prepayment speed, default rate, and loss severity.

Assets and Liabilities Measured at Fair Values on a Recurring Basis

There were no transfers to or from Levels 1 and 2 during the years ended December 31, 2024 and 2023.

Changes in Level 3 assets relate to the result of changes in estimated fair values, payments received, and sales of securities that have been classified as Level 3 during all of 2024 and 2023.

The significant inputs to this model include prepayment speed, default rate, and loss severity.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

There were no transfers to or from Levels 1 and 2 during the year ended December 31, 2025 and the year ended December 31, 2024.

Changes in Level 3 assets relate to the result of change in estimated fair values, payments received, and sales of securities that have been classified as Level 3 during the year ended December 31, 2025 and all of 2024.

Assets measured at fair value on a recurring basis are summarized below:

Fair Value Measurements at December 31, 2025 Using

(Dollars in thousands)

Quoted Prices in

(Dollars in thousands) Estimated

Value Quoted Prices in

Active Markets for

Identical Assets

Significant Other Observable

(Level 1) Significant Other

(Level 2) Significant

Interest rate swap contracts $ 3,641 $ - $ 3,641 $ -

$ 5,486 $ - $ 5,486 $ -

Interest rate lock commitments 50 - 50 -

Available-for-sale debt securities:

US government sponsored entities

8,061 - 8,061 -

government agency securities 8,466 - 8,466 -

Collateralized mortgage obligations and residential mortgage-backed securities 104,665 - 104,665 -

109,325 - 109,325 -

Municipal securities 201,214 - 201,214 -

214,749 - 214,749 -

Collateralized debt obligations 1,882 - - 1,882

1,419 - - 1,419

Total securities available-for-sale $ 316,227 $ - $ 314,345 $ 1,882

$ 333,554 $ - $ 332,135 $ 1,419

Interest rate swap contracts $ 3,641 $ - $ 3,641 $ -

$ 5,486 $ - $ 5,486 $ -

Fair Value Measurements at December 31, 2024 Using

(Dollars in thousands)

Quoted Prices in

(Dollars in thousands) Estimated

Value Quoted Prices in

Active Markets for

Identical Assets

Significant Other Observable

(Level 1) Significant Other

(Level 2) Significant

Interest rate swap contracts $ 5,486 $ - $ 5,486 $ -

$ 5,591 $ - $ 5,591 $ -

Interest rate lock commitments 82 - 82 -

Available-for-sale debt securities:

US government sponsored entities

7,883 - 7,883 -

government agency securities 8,061 - 8,061 -

Collateralized mortgage obligations and residential mortgage-backed securities 109,325 - 109,325 -

123,464 - 123,464 -

Municipal securities 214,749 - 214,749 -

238,670 - 238,670 -

Collateralized debt obligations 1,419 - - 1,419

1,357 - - 1,357

Total securities available-for-sale $ 333,554 $ - $ 332,135 $ 1,419

$ 371,374 $ - $ 370,017 $ 1,357

Interest rate swap contracts $ 5,486 $ - $ 5,486 $ -

$ 5,591 $ - $ 5,591 $ -

A reconciliation of available-for-sale securities, which require significant adjustment based on unobservable data, is presented below:

(Dollars in thousands)

A reconciliation of available-for-sale securities, which require significant adjustment based on unobservable data, are presented in the following table:

Estimated Fair Value

1 unchanged sentence

Significant Unobservable

Available-for-

sale securities

Inputs (Level 3)

(Dollars in thousands) Available-for-sale securities

Beginning balance, January 1, 2025 $ 1,419

Principal payments ( 15 )

Total unrealized gains, included in other comprehensive income

Total unrealized gains, included in other comprehensive income (loss) 478

Ending balance, December 31, 2025 $ 1,882

1 unchanged sentence

Principal payments ( 14 )

Total unrealized gains, included in other comprehensive loss

Total unrealized gains, included in other comprehensive income (loss) 76

Ending balance, December 31, 2024 $ 1,419

Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis

Assets and liabilities measured at fair value on a non-recurring basis are summarized below:

Collateral dependent loans are carried the fair value of the underlying collateral, based on the most recent independent appraisals or evaluations, adjusted for current market conditions and property-specific factors.

These measurements are

classified as Level 3 due to the use of significant unobservable inputs.

Other real estate owned are measured at fair value less costs to sell and are classified as Level 3.

Assets measured at fair value on a non-recurring basis are summarized below:

Fair Value Measurements at December 31, 2025 Using

(Dollars in thousands)

Quoted Prices in

(Dollars in thousands) Estimated

Value Quoted Prices in

Active Markets for

Identical Assets

Significant Other Observable

(Level 1) Significant Other

(Level 2) Significant

Collateral dependent loans $ 6,535 $ - $ - $ 6,535

$ 1,496 $ - $ - $ 1,496

(Dollars in thousands)

Other real estate owned $ 89 $ - $ - $ 89

Fair Value Measurements at December 31, 2024 Using

(Dollars in thousands)

Quoted Prices in

(Dollars in thousands) Estimated

Value Quoted Prices in

Active Markets for

Identical Assets

Significant Other Observable

(Level 1) Significant Other

(Level 2) Significant

Collateral dependent loans $ 1,496 $ - $ - $ 1,496

$ 8,673 $ - $ - $ 8,673

Significant (Level 3) Inputs

The following tables present quantitative information about unobservable inputs used in recurring and nonrecurring Level 3 fair value measurements.

Fair Value at

Valuation Significate Unobservable

Weighted-Average

(Dollars in thousands)

December 31, 2024

Technique Inputs

Collateral dependent loans

Fair value of collateral Discount for type of property and current market conditions

0 % - 80 % 8 %

Fair Value at

Significate Unobservable

Weighted-Average

(Dollars in thousands)

December 31, 2023

Collateral dependent loans

$ 8,673 Fair value of collateral

Discount for type of property and current market conditions

0 % - 80 % 17 %

The following table shows carrying values and related estimated fair values of financial instruments as of the dates indicated.

(Dollars in thousands) Fair Value at

December 31, 2025 Valuation

Technique Significant Unobservable Inputs Range Weighted-Average

Collateralized debt obligations $ 1,882 Discounted cash flow model Default rates, loss severity assumptions, discount rates 7.9 % - 11.2 %

Collateral dependent loans $ 6,535 Fair Value of Collateral Discount for type of property and current market conditions 0.0 % - 80.0 %

Other real estate $ 89 Fair Value of Collateral Discount for type of property and current market conditions — % — %

1) At December 31, 2025, there was only one property, so no range or weighted-average range is reported.

(Dollars in thousands) Fair Value at

December 31, 2024 Valuation

Technique Significant Unobservable Inputs Range Weighted-Average

Collateral dependent loans $ 1,496 Fair Value of Collateral Discount for type of property and current market conditions — % - 80 %

The following table shows carrying values and related estimated fair values of financial instruments not carried at fair value in the consolidated balance sheets as of the dates indicated.

Estimated fair values are further categorized by the inputs used to measure fair value.

Items that are not financial instruments are not included.

December 31, 2024

Estimated Fair Value Measurements at December 31, 2024 Using

(Dollars in thousands)

Quoted Prices in

December 31, 2025 Estimated Fair Value Measurements

at December 31, 2025 Using

(Dollars in thousands) Carrying

Value Estimated

Fair Value Quoted Prices in

Active Markets for Identical Assets

(Level 1) Significant

Other Observable

(Level 2) Significant

Financial assets:

Cash and cash equivalents $ 119,647 $ 119,647 $ 119,647 $ - $ -

$ 70,584 $ 70,584 $ 70,584 $ - $ -

Loans held-for-sale 1,096 1,124 - 1,124 -

1,253 1,277 - 1,277 -

Loans receivable, net 1,450,387 1,403,061 - - 1,403,061

1,492,065 1,435,148 - - 1,435,148

Federal Home Loan Bank stock 6,547 6,547 - 6,547 -

6,547 6,547 - 6,547 -

Accrued interest receivable 7,781 7,781 - 7,781 -

7,721 7,721 - 7,721 -

Financial liabilities:

Non-interest bearing deposits 267,441 267,441 267,441 - -

263,324 263,324 263,324 - -

Interest bearing deposits 1,459,530 1,458,116 959,939 498,177 -

1,497,242 1,496,638 936,989 559,649 -

Repurchase agreements

40,116 39,960 32,364 7,596 -

Federal funds purchased and repurchase agreements 39,703 39,671 37,717 1,954 -

Borrowed funds 45,000 44,921 - 44,921 -

65,000 63,432 - 63,432 -

Accrued interest payable 958 958 - 958 -

620 620 - 620 -

December 31, 2023

Estimated Fair Value Measurements at December 31, 2023 Using

(Dollars in thousands)

Quoted Prices in

December 31, 2024 Estimated Fair Value Measurements

at December 31, 2024 Using

(Dollars in thousands) Carrying

Value Estimated

Fair Value Quoted Prices in

Active Markets for Identical Assets

(Level 1) Significant

Other Observable

(Level 2) Significant

Financial assets:

Cash and cash equivalents $ 70,584 $ 70,584 $ 70,584 $ - $ -

$ 86,008 $ 86,008 $ 86,008 $ - $ -

Loans held-for-sale 1,253 1,277 - 1,277 -

340 349 - 349 -

Loans receivable, net 1,492,065 1,435,148 - - 1,435,148

1,493,827 1,412,069 - - 1,412,069

Federal Home Loan Bank stock 6,547 6,547 - 6,547 -

6,547 6,547 - 6,547 -

Accrued interest receivable 7,721 7,721 - 7,721 -

8,045 8,045 - 8,045 -

Financial liabilities:

Non-interest bearing deposits 263,324 263,324 263,324 - -

295,594 295,594 295,594 - -

Interest bearing deposits 1,497,242 1,496,638 936,989 559,649 -

1,517,827 1,513,640 985,710 527,930 -

Repurchase agreements 40,116 39,960 32,364 7,596 -

38,124 37,938 31,033 6,905 -

Borrowed funds 65,000 63,432 - 63,432 -

80,000 79,791 - 79,791 -

Accrued interest payable 620 620 - 620 -

3,065 3,065 - 3,065 -

The following methods were used to estimate the fair value of financial instruments presented in the preceding table for the periods ended December 31, 2024 and 2023:

The following methods were used to estimate the fair value of financial instruments presented in the preceding table at December 31, 2025 and December 31, 2024:

Cash and cash equivalent carrying amounts approximate fair value.

The fair values of securities available-for-sale are obtained from broker pricing (Level 2), with the exception of collateralized debt obligations, which are valued by a third-party specialist (Level 3).

Loans held-for-sale comprise residential mortgages and are priced based on values established by the secondary mortgage markets (Level 2).

1 unchanged sentence

Federal Home Loan Bank stock is estimated at book value due to restrictions that limit the sale or transfer of the security.

Interest rate swap agreements, both assets and liabilities, are valued by a third-party pricing agent using an income approach (Level 2).

Fair values of accrued interest receivable and payable approximate book value, as the carrying values are determined using the observable interest rate, balance, and last payment date.

2 unchanged sentences

Estimated fair values for short-term repurchase agreements, which represent sweeps from demand deposits to accounts secured by pledged securities, are estimated based on the amount payable as of the reporting date (Level 1).

Longer-term repurchase agreements, with contractual maturity dates of three months or more, are based on estimates of the rate the Company would pay on similar deposits, applied for the time period until maturity (Level 2 ).

Longer-term repurchase agreements, with contractual maturity dates of quarter or more, are based on estimates of the rate the Company would pay on similar deposits, applied for the time period until maturity (Level 2).

Federal funds purchased carrying is a reasonable estimate of fair value because of the relatively short time between the origination of the instrument and its expected realization (Level 2).

Short-term borrowings are generally only held overnight, therefore, their carrying amount is a reasonable estimate of fair value (Level 1).

The fair value of FHLB Advances are estimated by discounting the future cash flows using quoted rates from the FHLB for similar advances with similar maturities (Level 2).

The estimated fair value of other financial instruments, and off-balance sheet loan commitments, approximate cost and are not considered significant to this presentation.

Note 17 – Parent Company Only Statements

(Dollars in thousands)

Finward Bancorp

Condensed Balance Sheets

Note 17 – Parent Company Only Financial Statements

Balance Sheets

(Dollars in thousands) December 31, 2025 December 31, 2024

Cash on deposit with Peoples Bank $ 524 $ 3,904

$ 3,904 $ 3,846

Investment in Peoples Bank 173,490 150,543

150,543 144,266

Dividends receivable from Peoples Bank

$ 154,662 $ 148,628

Other assets 649 215

Total assets $ 174,663 $ 154,662

Liabilities and stockholders' equity

3 unchanged sentences

Additional paid in capital 70,331 70,034

70,034 69,555

Accumulated other comprehensive (loss)

( 58,084 ) ( 51,613 )

Accumulated other comprehensive income (loss) ( 41,662 ) ( 58,084 )

Retained earnings 145,994 139,464

139,464 129,403

Total stockholders' equity 174,663 151,414

151,414 147,345

Total liabilities and stockholders' equity $ 174,663 $ 154,662

$ 154,662 $ 148,628

(Dollars in thousands)

Finward Bancorp

Condensed Statements of Income

Statements of Income

Year Ended December 31,

(Dollars in thousands) 2025 2024

Dividends from Peoples Bank $ 1,038 $ -

Dividends from NWIN Risk

Non-interest income 4 -

Operating expenses ( 67 ) ( 65 )

( 65 ) ( 104 )

Income before income taxes and equity in undistributed income of Peoples Bank 975 ( 65 )

Income tax (benefit)

( 12 ) ( 21 )

Income tax expense (benefit) ( 22 ) ( 12 )

Income before equity in undistributed income of Peoples Bank 997 ( 53 )

Equity in undistributed income of Peoples Bank 7,090 12,183

income of NWIN Risk Management, Inc.

$ 12,130 $ 8,380

(Dollars in thousands)

Finward Bancorp

Condensed Statements of Comprehensive Income

Net income $ 8,087 $ 12,130

Statements of Cash Flows

Year Ended December 31,

$ 12,130 $ 8,380

Net change in net unrealized gains and losses on securities available-for-sale:

Unrealized gain (loss) arising during the period

( 9,042 ) 16,630

reclassification adjustment for losses included in net income

Net securities gain (loss) during the period

( 8,511 ) 16,678

2,040 ( 3,991 )

Other comprehensive (loss) income, net of tax

( 6,471 ) 12,687

Comprehensive income, net of tax

$ 5,659 $ 21,067

(Dollars in thousands) 2025 2024

Finward Bancorp

Condensed Statements of Cash Flows

Year Ended December 31,

CASH FLOWS FROM OPERATING ACTIVITIES:

$ 12,130 $ 8,380

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

Net income $ 8,087 $ 12,130

Adjustments to reconcile net income to net cash provided by operating

Distributions in excess of income (equity in undistributed income):

( 7,090 ) ( 12,183 )

NWIN Risk Management, Inc.

Change in intercompany payable

( 2,176 ) 2,176

Change in other assets

3 unchanged sentences

( 9,760 ) ( 9,917 )

Net cash provided by operating activities

Net cash provided by (used in) operating activities ( 1,673 ) 2,213

CASH FLOWS FROM INVESTING ACTIVITIES:

Net cash used in investing activities

Net cash provided by (used in) investing activities - -

CASH FLOWS FROM FINANCING ACTIVITIES:

3 unchanged sentences

( 150 ) ( 86 )

Net cash used in financing activities

( 2,155 ) ( 5,531 )

Net change in cash

Cash at beginning of year

Cash at end of year

$ 3,904 $ 3,846

Net cash provided by (used in) financing activities ( 1,707 ) ( 2,155 )

Net change in cash on deposit with Peoples Bank ( 3,380 ) 58

Cash on deposit at Peoples Bank at beginning of period 3,904 3,846

Cash on deposit at Peoples Bank at end of period $ 524 $ 3,904

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

3 unchanged sentences

Under ASC 842, operating lease expense is generally recognized on a straight-line basis over the term of the lease.

On February 22, 2024, the Bank closed its previously announced sale-leaseback transaction with MountainSeed Real Estate Services, LLC (the “Buyer”), pursuant to which the Bank sold to the Buyer five properties owned and operated as branch locations (the “Properties”) for an aggregate purchase price of $ 17.2 million, including customary closing adjustments.

Under the Sale Agreement, the Bank also entered into triple net lease agreements (the “Lease Agreements”) with the Buyer under which the Bank leases each of the Properties, and pursuant to which the Bank is responsible for the insurance, real estate taxes, and maintenance and repairs for each of the properties.

On February 22, 2024, the Bank closed its previously announced sale-leaseback transaction with MountainSeed Real Estate Services, LLC, pursuant to which the Bank sold to the Buyer five properties owned and operated as branch locations for an

aggregate purchase price of $ 17.2 million, including customary closing adjustments.

Under the Sale Agreement, the Bank also entered into triple net lease agreements with the Buyer under which the Bank leases each of the Properties, and pursuant to which the Bank is responsible for the insurance, real estate taxes, and maintenance and repairs for each of the properties.

Each of the Lease Agreements became effective upon the closing of the sale-leaseback transaction and have an initial term of 15 years.

4 unchanged sentences

The following table summarizes supplemental cash flow and other information related to our operating leases:

Year Ended December 31,

(Dollars in thousands) 2025 2024

Twelve months ended December 31,

Gain on sale-leaseback transaction, net $ - $ ( 11,772 )

$ ( 11,772 ) $ -

Operating cash flows

Cash paid for amounts included in the measurement of lease liabilities for leases 1,603 1,360

ROU assets obtained in the exchange for lease liabilities - Operating leases (1)

ROU assets obtained in exchange for lease liabilities - operating leases (1)

Weighted-average remaining lease terms (in years) - operating leases 13 14

Weighted-average discount rate - operating leases 7.65 % 7.67 %

7.67 % 3.00 %

Variable lease payments $ 279 $ 279

Operating lease costs 1,923 1,488

Total lease costs (2)

$ 2,202 $ 1,767

(1) Right of Use Asset included in Premises and equipment on the consolidated balance sheet

3 unchanged sentences

Maturity Analysis

Thereafter 15,110

Present value discount ( 8,917 )

Lease liability $ 14,531

( 3 ) Included in Other Liabilities on the consolidated balance sheet

Note 19 – Segment Footnote

T he Company's revenue is primarily derived from the business of banking.

The Company's financial performance is monitored on a consolidated basis by the CEO, who is considered to be the Company's Chief Operating Decision Maker ("CODM").

At December 31, 2025, operating lease right of use assets were $ 15.1 million and included in premises and equipment on the consolidated balance sheet.

Operating lease liabilities of $ 14.5 million were included in other liabilities on the consolidated balance sheet.

Note 19 – Segments

The Company operates as a single reportable segment that derives its revenue primarily from the business of banking.

The Company's financial performance is monitored on a consolidated basis by the CEO, who is considered to be the CODM.

This review is supported by the Chief Financial Officer, Chief Revenue Officer, and Chief Operating Officer.

4 unchanged sentences

All of the Company’s financial results are similar and considered by management to be aggregated into one reportable operating segment.

The Company's revenue is primarily derived from the business of banking and the Company’s CODM evaluates financial performance on a Company-wide basis.

The Company's revenue is primarily derived from the business of banking and the Company’s CODM evaluates financial performance on a consolidated Company-wide basis.

Accordingly, all of the Company’s operations are considered by management to be aggregated in one reportable operating segment.

The CODM uses net income to evaluate income generated from segment assets, compare performance to peer banks, and monitor budget-to-actual results.

The CODM also is regularly provided with, and reviews, expense information at a level consistent with that disclosed in the Company's financial statements, including its significant expense categories, such as interest expense, provision for credit losses, salaries, employee benefits, and marketing.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data