Finward Bancorp 10-Q

Item 1. Financial Statements and Notes (unaudited) Finward Bancorp Condensed Consolidated Balance Sheets (unaudited) (Dollars in thousands) March 31, 2026 December 31, 2025 ASSETS Cash and non-interest bearing deposits in other financial institutions $ 15,758 $ 18,265 Interest bearing deposits in other financial institutions 102,997 101,382 Total cash and cash equivalents 118,755 119,647 Securities available-for-sale 307,686 316,227 Loans held-for-sale - 1,096 Loans receivable, net of deferred fees and costs 1,455,118 1,450,387 Less: Allowance for credit losses ( 17,285 ) ( 17,506 ) Net loans receivable 1,437,833 1,432,881 Federal Home Loan Bank stock 6,547 6,547 Accrued interest receivable 7,700 7,781 Premises and equipment 44,315 44,976 Cash value of bank owned life insurance 33,786 33,586 Goodwill 22,395 22,395 Other intangible assets 1,076 1,172 Other assets 35,063 34,873 Total assets $ 2,015,156 $ 2,021,181 LIABILITIES AND STOCKHOLDERS' EQUITY Deposits: Non-interest bearing $ 278,705 $ 267,441 Interest bearing 1,440,366 1,459,530 Total 1,719,071 1,726,971 Federal funds purchased and repurchase agreements 40,815 39,703 Borrowed funds 50,000 45,000 Accrued expenses and other liabilities 32,870 34,844 Total liabilities 1,842,756 1,846,518 Commitments and contingencies Stockholders' Equity: Preferred stock, no par or stated value; 10,000,000 shares authorized, none outstanding - - Common stock, no par or stated value; 10,000,000 shares authorized; shares issued and outstanding: March 31, 2026 - 4,330,486 December 31, 2025 - 4,326,747 - - Additional paid-in capital 70,397 70,331 Accumulated other comprehensive loss ( 45,713 ) ( 41,662 ) Retained earnings 147,716 145,994 Total stockholders' equity 172,400 174,663 Total liabilities and stockholders' equity $ 2,015,156 $ 2,021,181 See accompanying notes to condensed consolidated financial statements. 6 Finward Bancorp Condensed Consolidated Statements of Income (unaudited) Three Months Ended March 31, (Dollars in thousands, except per share data) 2026 2025 Interest income: Loans receivable $ 19,871 $ 19,655 Securities 1,771 2,133 Other interest earning assets 1,079 553 Total interest income 22,721 22,341 Interest expense: Deposits 6,959 8,045 Federal funds purchased and repurchase agreements 272 348 Borrowed funds 419 635 Total interest expense 7,650 9,028 Net interest income 15,071 13,313 Provision for (benefit from) credit losses 55 454 Net interest income after provision for credit losses 15,016 12,859 Non-interest income: Fees and service charges 1,295 1,109 Wealth management operations 661 619 Gain (loss) on tax credit investment - 67 Gain (loss) on sale of loans held-for-sale, net 257 230 Bank owned life insurance 201 198 Other 3 6 Total non-interest income 2,417 2,229 Non-interest expense: Compensation and benefits 7,591 7,372 Occupancy and equipment 1,991 2,111 Data processing 1,105 1,039 Marketing 587 86 Federal deposit insurance premiums 381 433 Professional and outside services 1,169 1,260 Technology 508 454 Other 1,436 1,717 Total non-interest expense 14,768 14,472 Income before income tax expense 2,665 616 Income tax expense (benefit) 423 161 Net income $ 2,242 $ 455 Earnings per common share: Basic $ 0.52 $ 0.11 Diluted $ 0.52 $ 0.11 Dividends declared per common share $ 0.12 $ - See accompanying notes to condensed consolidated financial statements. 7 Finward Bancorp Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited) Three Months Ended March 31 (Dollars in thousands) 2026 2025 Net income $ 2,242 $ 455 Unrealized gains (losses) on securities available for sale: Changes in unrealized gains (losses) on securities available for sale ( 5,330 ) ( 210 ) Less: tax expense (benefit) ( 1,279 ) ( 50 ) Other comprehensive income (loss), net of tax ( 4,051 ) ( 160 ) Comprehensive income (loss), net of tax $ ( 1,809 ) $ 295 See accompanying notes to condensed consolidated financial statements. 8 Finward Bancorp Condensed Consolidated Statements of Changes in Stockholder's Equity (unaudited) (Dollars in thousands, except per share data) Common Stock Additional Paid-in Capital Accumulated Other Comprehensive (Loss)/Income Retained Earnings Total Stockholders' Equity Balance at January 1, 2025 $ - $ 70,034 $ ( 58,084 ) $ 139,464 $ 151,414 Net income - - - 455 455 Other comprehensive income (loss), net of tax - - ( 160 ) - ( 160 ) Stock-based compensation expense - 98 - - 98 Balance at March 31, 2025 $ - $ 70,132 $ ( 58,244 ) $ 139,919 $ 151,807 Balance at January 1, 2026 $ - $ 70,331 $ ( 41,662 ) $ 145,994 $ 174,663 Net income - - - 2,242 2,242 Other comprehensive income (loss), net of tax - - ( 4,051 ) - ( 4,051 ) Net surrender value of 1,508 restricted stock awards - ( 60 ) - - ( 60 ) Stock-based compensation expense - 126 - - 126 Cash dividends, $ 0.12 per share - - - ( 520 ) ( 520 ) Balance at March 31, 2026 $ - $ 70,397 $ ( 45,713 ) $ 147,716 $ 172,400 See accompanying notes to condensed consolidated financial statements. 9 Finward Bancorp Condensed Consolidated Statements of Cash Flows (unaudited) Three months ended March 31, (Dollars in thousands) 2026 2025 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 2,242 $ 455 Adjustments to reconcile net income to net cash provided by operating activities: Origination of loans for sale ( 9,407 ) ( 9,596 ) Sale of loans originated for sale 10,779 8,263 Depreciation and amortization, net of accretion 1,325 1,600 Stock based compensation expense 126 98 Cash payments for lease liabilities ( 404 ) ( 397 ) (Gain) loss on sale of loans held-for-sale, net ( 276 ) ( 265 ) (Increase) decrease of cash value of bank owned life insurance ( 201 ) ( 198 ) (Gain) loss on derivatives 19 35 Provision for (benefit from) credit losses 55 454 Change in: Interest receivable 81 ( 100 ) Interest payable 13 ( 34 ) Other assets 1,145 2,095 Accrued expenses and other liabilities ( 1,862 ) ( 6,219 ) Total adjustments 1,393 ( 4,264 ) Net cash provided by (used in) operating activities 3,635 ( 3,809 ) CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from maturities and pay downs of securities available-for-sale 2,886 2,863 Purchase of loans ( 10,312 ) - Net change in loans receivable 5,402 16,946 Purchase of premises and equipment ( 135 ) ( 183 ) Proceeds from sale of foreclosed real estate - 72 Net cash provided by (used in) investing activities ( 2,159 ) 19,698 CASH FLOWS FROM FINANCING ACTIVITIES: Change in deposits ( 7,900 ) ( 10,182 ) Proceeds from borrowed funds 15,000 1,657 Repayment of borrowed funds ( 10,000 ) ( 10,000 ) Net surrender value of restricted stock awards ( 60 ) - Change in federal funds purchased and repurchase agreements 1,112 4,937 Dividends paid ( 520 ) ( 518 ) Net cash provided by (used in) financing activities ( 2,368 ) ( 14,106 ) Net change in cash and cash equivalents ( 892 ) 1,783 Cash and cash equivalents at beginning of period 119,647 70,584 Cash and cash equivalents at end of period $ 118,755 $ 72,367 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest $ 8,621 $ 8,994 Noncash activities: Transfer of premises and equipment to other assets 103 - See accompanying notes to condensed consolidated financial statements. 10 Finward Bancorp Notes to Condensed Consolidated Financial Statements (unaudited) Note 1 - Basis of Presentation Organization and Description of Business The condensed consolidated financial statements include the accounts of Finward Bancorp (the “Company” or “FNWD”) 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. The Company has no other business activity other than being a holding company for the Bank and the Company’s earnings are primarily dependent upon the earnings of the Bank. The accompanying unaudited condensed consolidated financial statements were prepared in accordance with instructions for Form 10-Q and, therefore, do not include all disclosures required by GAAP for complete presentation of condensed consolidated financial statements. In the opinion of management, the condensed consolidated financial statements contain all adjustments necessary to present fairly the condensed consolidated balance sheets of the Company as of March 31, 2026, and December 31, 2025, and the condensed consolidated statements of income, comprehensive income (loss), and changes in stockholders’ equity for the three months ended March 31, 2026, and 2025, and condensed consolidated statements of cash flows for the three months ended March 31, 2026, and 2025. The income reported for the three months ended March 31, 2026, is not necessarily indicative of the results to be expected for the full year. The 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 CODM. This review is supported by the Chief Financial Officer, Chief Revenue Officer, and Chief Operating Officer. Financial performance is reported to the CODM monthly. The presentation of financial performance to the CODM is consistent with amounts and financial statement line items shown in the Company's consolidated balance sheets and consolidated statements of income. Additionally, the Company's significant expenses are adequately segmented by category and amount in the consolidated statements of income to include all significant items when considering both qualitative and quantitative factors. Significant expenses of the Company include compensation and benefits, net occupancy expense, equipment costs, data processing fees, and professional fees. 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. Accordingly, all of the Company’s operations are considered by management to be aggregated in one reportable operating segment. The Notes to the Condensed Consolidated Financial Statements appearing in Finward Bancorp’s Annual Report on Form 10-K (2025 Annual Report), which include descriptions of significant accounting policies, should be read in conjunction with these interim financial statements. The Condensed Consolidated Balance Sheet at December 31, 2025, has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by GAAP for condensed financial statements. Note 2 - Use of Estimates Preparing condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period, as well as the disclosures provided. Actual results could differ from those estimates. Estimates associated with the allowance for credit losses are particularly susceptible to material change in the near term. Note 3 – Accounting Pronouncements Recently Adopted or Issued 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 11 beginning after December 15, 2027. 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 condensed 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 4 - Securities The estimated fair value of available-for-sale securities and the related gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) were as follows: (Dollars in thousands) Cost Basis Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value March 31, 2026 U.S. government agency securities(1) $ 8,884 $ - $ ( 401 ) $ 8,483 Collateralized mortgage obligations and residential mortgage-backed securities 120,947 - ( 19,045 ) 101,902 Municipal securities 235,846 - ( 40,436 ) 195,410 Collateralized debt obligations 2,138 - ( 247 ) 1,891 Total securities available-for-sale $ 367,815 $ - $ ( 60,129 ) $ 307,686 (1) Includes securities issued or backed by the U.S. government and its agencies and U.S. government sponsored entities. (Dollars in thousands) Cost Basis Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value December 31, 2025 U.S. government agency securities(1) $ 8,884 $ - $ ( 418 ) $ 8,466 Collateralized mortgage obligations and residential mortgage-backed securities 123,833 - ( 19,168 ) 104,665 Municipal securities 236,168 2 ( 34,956 ) 201,214 Collateralized debt obligations 2,141 - ( 259 ) 1,882 Total securities available-for-sale $ 371,026 $ 2 $ ( 54,801 ) $ 316,227 (1) Includes securities issued or backed by the U.S. government and its agencies and U.S. government sponsored entities. 12 The cost basis and estimated fair value of available-for-sale debt securities at March 31, 2026, 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 March 31, 2026 Cost Basis Estimated Fair Value Due in one year or less $ - $ - Due from one to five years 13,041 12,377 Due from five to ten years 44,261 38,631 Due over ten years 189,566 154,776 Collateralized mortgage obligations and residential mortgage-backed securities 120,947 101,902 Total $ 367,815 $ 307,686 Sales of available-for-sale securities were as follows for the quarter ended: Three Months Ended March 31 2026 2025 Proceeds $ - $ - Gross gains - - Gross losses - - Accumulated other comprehensive income/(loss) balances, net of tax, related to available-for-sale securities, were as follows: (Dollars in thousands) Unrealized loss Beginning Balance, January 1, 2026 $ ( 41,662 ) Period change ( 4,051 ) Ending Balance, March 31, 2026 $ ( 45,713 ) (Dollars in thousands) Unrealized loss Beginning Balance, January 1, 2025 $ ( 58,084 ) Current period change ( 160 ) Ending balance, March 31, 2025 $ ( 58,244 ) Securities with market values of approximately $ 306.9 million and $ 315.5 million were pledged as of March 31, 2026 and December 31, 2025, respectively, as collateral for repurchase agreements, public funds, and for other purposes as permitted or required by law. 13 Securities with unrealized losses not recognized in income at March 31, 2026, and December 31, 2025, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, were as follows: (Dollars in thousands) Less than 12 months 12 months or longer Total Estimated Fair Value Unrealized Losses Estimated Fair Value Unrealized Losses Estimated Fair Value Unrealized Losses Percentage of Total Portfolio in Loss Position March 31, 2026 U.S. government agency securities $ - $ - $ 8,483 $ ( 401 ) $ 8,483 $ ( 401 ) 100.0 % Collateralized mortgage obligations and residential mortgage-backed securities - - 101,902 ( 19,045 ) 101,902 ( 19,045 ) 100.0 % Municipal securities 1,819 ( 55 ) 193,591 ( 40,381 ) 195,410 ( 40,436 ) 100.0 % Collateralized debt obligations - - 1,891 ( 247 ) 1,891 ( 247 ) 100.0 % Total $ 1,819 $ ( 55 ) $ 305,867 $ ( 60,074 ) $ 307,686 $ ( 60,129 ) 100.0 % Number of securities 3 367 370 (Dollars in thousands) Less than 12 months 12 months or longer Total Estimated Fair Value Unrealized Losses Estimated Fair Value Unrealized Losses Estimated Fair Value Unrealized Losses Percentage of Total Portfolio in Loss Position December 31, 2025 U.S. 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 % Municipal securities - - 200,469 ( 34,956 ) 200,469 ( 34,956 ) 99.6 % Collateralized debt obligations - - 1,882 ( 259 ) 1,882 ( 259 ) 100.0 % Total $ - $ - $ 315,482 $ ( 54,801 ) $ 315,482 $ ( 54,801 ) 99.8 % Number of securities - 369 369 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 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 March 31, 2026 and a cost basis of $ 2.1 million and a fair value of $ 1.9 million at December 31, 2025, 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 March 31, 2026, and $ 2.0 million at December 31, 2025. 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 condensed consolidated balance sheet. 14 Note 5 - Loans Receivable 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 ARM’s 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 15 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 March 31, 2026, and December 31, 2025: (Dollars in thousands) March 31, 2026 December 31, 2025 Loans secured by real estate: Residential real estate $ 445,097 $ 442,443 Home equity 53,855 53,497 Commercial real estate 564,613 555,594 Construction and land development 76,582 77,208 Multifamily 185,824 183,902 Total loans secured by real estate 1,325,971 1,312,644 Commercial business 94,160 99,304 Consumer 310 870 Manufactured homes 22,981 23,708 Government 9,998 12,298 Loans receivable 1,453,420 1,448,824 Add: Net deferred loan origination costs 1,723 1,606 Loan clearing funds ( 25 ) ( 43 ) Loans receivable, net of deferred fees and costs $ 1,455,118 $ 1,450,387 16 The Company's age analysis of past due loans is summarized below: (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 Receivable March 31, 2026 Residential real estate $ 7,792 $ 1,677 $ - $ 9,469 $ 428,831 $ 438,300 $ 6,797 $ 445,097 Home equity 326 - - 326 52,768 53,094 761 53,855 Commercial real estate 10,520 3,032 - 13,552 548,827 562,379 2,234 564,613 Construction and land development - - - - 75,989 75,989 593 76,582 Multifamily 1,143 1,152 - 2,295 182,932 185,227 597 185,824 Commercial business 677 774 - 1,451 91,410 92,861 1,299 94,160 Consumer - - - - 310 310 - 310 Manufactured homes 299 - - 299 22,592 22,891 90 22,981 Government - - - - 9,998 9,998 - 9,998 Total $ 20,757 $ 6,635 $ - $ 27,392 $ 1,413,657 $ 1,441,049 $ 12,371 $ 1,453,420 December 31, 2025 Residential real estate $ 4,991 $ 1,552 $ - $ 6,543 $ 429,968 $ 436,511 $ 5,932 $ 442,443 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 Construction and land development 2,343 129 - 2,472 74,083 76,555 653 77,208 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 Consumer - - - - 870 870 - 870 Manufactured homes 241 28 - 269 23,368 23,637 71 23,708 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 The following table shows the amortized cost of loans, segregated by portfolio segment, credit quality rating and year of origination as of March 31, 2026, and December 31, 2025, and gross charge-offs for the three months ended March 31, 2026, and for the year ended December 31, 2025. March 31, 2026 2026 2025 2024 2023 2022 Prior Revolving Revolving Converted to Term Total Total Loans Receivable $ 81,826 $ 198,143 $ 135,564 $ 134,662 $ 263,157 $ 640,068 $ - $ - $ 1,453,420 Total current period gross charge-off $ ( 14 ) $ ( 5 ) $ - $ - $ - $ - $ - $ - $ ( 19 ) Residential real estate Pass (1-6) $ 14,265 $ 14,750 $ 16,412 $ 24,044 $ 77,120 $ 285,217 $ - $ - $ 431,808 17 Special Mention (7) - - - 618 2,859 3,015 - - 6,492 Substandard (8) - 296 107 712 1,970 3,712 - - 6,797 Total $ 14,265 $ 15,046 $ 16,519 $ 25,374 $ 81,949 $ 291,944 $ - $ - $ 445,097 Current period gross charge-off - ( 5 ) - - - - - - ( 5 ) Home equity Pass (1-6) $ 3,590 $ 11,003 $ 7,118 $ 7,148 $ 9,453 $ 14,481 $ - $ - $ 52,793 Special Mention (7) - - - 6 50 245 - - 301 Substandard (8) - - 43 277 41 400 - - 761 Total $ 3,590 $ 11,003 $ 7,161 $ 7,431 $ 9,544 $ 15,126 $ - $ - $ 53,855 Current period gross charge-off - - - - - - - - - Commercial real estate Pass (1-6) $ 27,660 $ 68,471 $ 77,907 $ 66,307 $ 108,871 $ 198,262 $ - $ - $ 547,478 Special Mention (7) 347 2,061 2,726 2,207 3,624 3,936 - - 14,901 Substandard (8) - 317 - 197 221 1,499 - - 2,234 Total $ 28,007 $ 70,849 $ 80,633 $ 68,711 $ 112,716 $ 203,697 $ - $ - $ 564,613 Current period gross charge-off - - - - - - - - - Construction and land development Pass (1-6) $ 12,107 $ 43,234 $ 9,525 $ 8,653 $ 280 $ 131 $ - $ - $ 73,930 Special Mention (7) 486 - - - - - - - 486 Substandard (8) - - - 936 - 1,230 - - 2,166 Total $ 12,593 $ 43,234 $ 9,525 $ 9,589 $ 280 $ 1,361 $ - $ - $ 76,582 Current period gross charge-off - - - - - - - - - Multifamily Pass (1-6) $ 8,974 $ 14,934 $ 6,901 $ 12,303 $ 44,169 $ 95,252 $ - $ - $ 182,533 Special Mention (7) 443 402 - - 750 1,099 - - 2,694 Substandard (8) - - - 196 401 - - - 597 Total $ 9,417 $ 15,336 $ 6,901 $ 12,499 $ 45,320 $ 96,351 $ - $ - $ 185,824 Current period gross charge-off - - - - - - - - Commercial business Pass (1-6) $ 13,736 $ 36,974 $ 13,361 $ 9,147 $ 9,917 $ 6,255 $ - $ - $ 89,390 Special Mention (7) 99 1,314 60 958 825 215 - - 3,471 Substandard (8) - - 174 894 30 201 - - 1,299 Total $ 13,835 $ 38,288 $ 13,595 $ 10,999 $ 10,772 $ 6,671 $ - $ - $ 94,160 Current period gross charge-off - - - - - - - - - Consumer Pass (1-6) $ 119 $ 57 $ 50 $ 59 $ 15 $ 10 $ - $ - $ 310 18 Total $ 119 $ 57 $ 50 $ 59 $ 15 $ 10 $ - $ - $ 310 Current period gross charge-off ( 14 ) - - - - - - - ( 14 ) Manufactured homes Pass (1-6) $ - $ - $ - $ - $ 1,717 $ 21,174 $ - $ - $ 22,891 Special Mention (7) - - - - - - - - $ - Substandard (8) - - - - - 90 - - 90 Total $ - $ - $ - $ - $ 1,717 $ 21,264 $ - $ - $ 22,981 Current period gross charge-off - - - - - - - - - Government Pass (1-6) $ - $ 4,330 $ 1,180 $ - $ 844 $ 3,644 $ - $ - $ 9,998 Total $ - $ 4,330 $ 1,180 $ - $ 844 $ 3,644 $ - $ - $ 9,998 Current period gross charge-off - - - - - - - - - December 31, 2025 2025 2024 2023 2022 2021 Prior Revolving Revolving Converted to Term Total Total Loans Receivable $ 132,738 $ 125,371 $ 125,504 $ 257,065 $ 260,859 $ 438,852 $ 106,883 $ 1,552 $ 1,448,824 Total current period gross charge-off $ ( 202 ) $ - $ ( 44 ) $ - $ ( 13 ) $ ( 496 ) $ - $ - ( 755 ) Residential real estate 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 Substandard (8) 296 74 887 1,475 430 2,854 - - 6,016 Total $ 12,866 $ 19,213 $ 28,065 $ 83,773 $ 95,129 $ 200,920 $ 2,477 $ - $ 442,443 Current period gross charge-off - - - - ( 13 ) - - - ( 13 ) Home equity Pass (1-6) $ 766 $ 92 $ 41 $ 232 $ 49 $ 2,086 $ 47,926 $ 1,187 $ 52,379 Special Mention (7) - - 7 - - 59 45 194 305 Substandard (8) - 24 - - 20 181 417 171 813 Total $ 766 $ 116 $ 48 $ 232 $ 69 $ 2,326 $ 48,388 $ 1,552 $ 53,497 Current period gross charge-off - - - - - - - - - Commercial real estate 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 Substandard (8) - - 208 221 - 1,132 - - 1,561 Total $ 58,054 $ 66,178 $ 65,351 $ 114,601 $ 81,934 $ 165,759 $ 3,717 $ - $ 555,594 19 Current period gross charge-off - - - - - - - - - Construction and land development Pass (1-6) $ 36,388 $ 19,226 $ 12,795 $ 2,288 $ 1,074 $ 753 $ 1,893 $ - $ 74,417 Special Mention (7) - - - 129 428 - - - 557 Substandard (8) - - 939 60 1,235 - - - 2,234 Total $ 36,388 $ 19,226 $ 13,734 $ 2,477 $ 2,737 $ 753 $ 1,893 $ - $ 77,208 Current period gross charge-off - - - - - - - - - Multifamily 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 Substandard (8) - - 200 409 - 87 - - 696 Total $ 12,249 $ 6,289 $ 11,415 $ 45,969 $ 64,731 $ 42,605 $ 644 $ - $ 183,902 Current period gross charge-off - - - - - ( 201 ) - - ( 201 ) Commercial business 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 Substandard (8) - 87 898 34 124 189 107 - 1,439 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 ) Consumer Pass (1-6) $ 705 $ 58 $ 72 $ 19 $ 16 $ - $ - $ - $ 870 Substandard (8) - - - - - - - - - Total $ 705 $ 58 $ 72 $ 19 $ 16 $ - $ - $ - $ 870 Current period gross charge-off ( 44 ) - - - - ( 2 ) - - ( 46 ) Manufactured homes Pass (1-6) $ - $ - $ - $ 1,733 $ 10,383 $ 11,493 $ - $ - $ 23,609 Special Mention (7) - - - - - 28 - - 28 Substandard (8) - - - - 46 25 - - 71 Total $ - $ - $ - $ 1,733 $ 10,429 $ 11,546 $ - $ - $ 23,708 Current period gross charge-off - - - - - - - - - Government 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 - - - - - - - - - 20 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. The use and application of these grades by the Company is uniform and conforms to regulatory definitions. The loan grading system is as follows: 1 – Superior Quality Loans in this category are substantially risk free. Loans fully collateralized by a Bank certificate of deposit or Bank deposits with a hold are substantially risk free. 2 – Excellent Quality The borrower generates excellent and consistent cash flow for debt coverage, excellent average credit scores, excellent liquidity and net worth and are reputable operators with over 15 years' experience. Current and debt to tangible net worth ratios are excellent. Loan to value is substantially below policy and collateral condition is excellent. 3 – Great Quality The borrower generates more than sufficient cash flow to fund debt service and cash flow is improving. Average credit scores are very strong. Operators are reputable with significant years of experience. Liquidity, net worth, current and debt to tangible net worth ratios are very strong. Loan to value is significantly below policy and collateral condition is significantly above average. 4 – Above Average Quality The borrower generates more than sufficient cash flow to fund debt service, but cash flow trends may be stable or slightly declining. Average credit scores are strong. The borrower is a reputable operator with many years of experience. Liquidity, net worth, current and debt to tangible net worth ratios are strong. Loan to value is below policy and collateral condition is above average. 5 – Average Quality Borrowers are considered creditworthy and can repay the debt in the normal course of business, however, cash flow trends may be inconsistent or fluctuating. Average credit scores are satisfactory, and years of experience is acceptable. Liquidity and net worth are satisfactory. Current and debt to tangible net worth ratios are average. Loan to value is slightly below policy and the collateral condition is slightly above average. 6 – Pass 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. The borrower has limited years of experience. Liquidity, net worth, current and debt to tangible net worth ratios are below average. Loan to value is nearing policy limits and collateral condition is average. 7 – Special Mention 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 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. The Special Mention rating is viewed as transitional and will be monitored closely. Loans in this category may exhibit some of the following risk factors. Cash flow trends may be consistently declining or may be questionable. Debt coverage ratios may be at or near 1:1. Average credit scores may be very weak, or the borrower may have minimal years of experience. Liquidity, net worth, current and debt to tangible net worth ratios may be very weak. Loan to value may be at policy limits or may exceed policy limits. Collateral condition may be below average. 8 – Substandard This classification consists of loans which are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged. Financial statements normally reveal some or all of the following: poor trends, lack of earnings and cash flow, excessive debt, lack of liquidity, and the absence of creditor protection. Loans are still considered collectible, but due to increased risks and defined weaknesses of the credit, some loss could be incurred in collection if the deficiencies are not corrected. 9 – Doubtful Such loans have been placed on nonaccrual status and may be heavily dependent upon collateral possessing a value that is difficult to determine or based upon some near-term event which lacks clear certainty. These loans have all of the 21 weaknesses of those classified as Substandard; however, based on existing conditions, these weaknesses make full collection of the principal balance highly improbable. 10 – Loss Loans that are considered uncollectible and of such little value that continuing to carry them as assets is not warranted. Loans with risk classifications of pass and special mention were part of the pooled loan ACL analysis. Loans classified as substandard or worse were individually evaluated for impairment and specific reserves were established, if applicable. Risk gradings for loans with balances greater than $ 1 million are updated every 12 months through analysis during origination, renewals, modifications, or regular annual review. Risk gradings for loans with balances less than $ 1 million are updated primarily through analysis during origination, renewals, modifications, or periodic review. Risk gradings are also downgraded due to delinquency at month end. In particular, 60 days past due are downgraded to Special Mention, while 90 days past due are further downgraded to Substandard. Modifications to Borrowers Experiencing Financial Difficulty 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 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 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 basis of loans at March 31, 2026 and March 31, 2025, that were both experiencing financial difficulty and modified during the three months ended March 31, 2026 and March 31, 2025, 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. Three Months Ended March 31, 2026 (Dollars in thousands) Payment Delay Term Extension Interest Rate Reduction Combination Term Extension and Interest Rate Reduction % of Total Segment Financing Receivables Residential real estate $ 676 $ 1,402 $ - $ - 0.47 % Three Months Ended March 31, 2025 (Dollars in thousands) Payment Delay Term Extension Interest Rate Reduction Combination Term Extension and Interest Rate Reduction % of Total Segment Financing Receivables Residential real estate $ - $ 172 $ - $ - 0.04 % There were no commitments to lend additional amounts to the borrowers included in the previous tables. The borrowers with term extension have had their payments deferred which resulted in payment relief or 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. 22 Three Months Ended March 31, 2026 (Dollars in thousands) Principal Forgiveness Weighted average interest rate reduction Weighted average term extension (months) Payment delay (months) Residential real estate $ - — % 3 8 Three Months Ended March 31, 2025 (Dollars in thousands) Principal Forgiveness Weighted average interest rate reduction Weighted average term extension (months) Payment delay (months) Residential real estate $ - — % 7 0 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. March 31, 2026 (Dollars in thousands) Current 30-59 Days Past Due 60-89 Days Past Due Greater Than 90 Days Past Due Residential real estate $ 1,834 $ - $ - $ - Commercial real estate - 389 - - Total $ 1,834 $ 389 $ - $ - March 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 $ 644 $ 344 $ 125 $ 192 Total $ 644 $ 344 $ 125 $ 192 Upon the Company’s determination that a modified loan has subsequently been deemed uncollectible, the loan is written off. Therefore, the amortized cost of the loan is reduced by the uncollectible amount and the allowance for credit losses is adjusted by the same amount. All modified loans are deemed collectible. Foreclosures As part of the normal course of business, the Company had $ 1.1 million in loans involved in the foreclosure process at both March 31, 2026 and December 31, 2025. The Company had $ 89 thousand in other real estate owned as of both March 31, 2026 and December 31, 2025. Acquired Loan Purchase Discounts As part of the fair value of loans receivable, there was a net fair value discount for loans acquired of $ 3.4 million at March 31, 2026, compared to $ 3.6 million at December 31, 2025. 23 Accretable yield, or income recorded for the three months ended March 31, is as follows: (Dollars in thousands) Total 2025 $ 230 2026 183 Accretable yield, or income expected to be recorded in the future is as follows: (Dollars in thousands) Total Remainder of 2026 $ 306 2027 291 2028 276 2029 242 2030 235 2031 and thereafter 1,977 Total $ 3,327 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 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. In determining the allowance, the Company estimates expected future losses for the loan’s entire contractual term adjusted for expected payments when appropriate. The allowance estimate considers relevant available information, from internal and external sources relating to the historical loss experience, current conditions, and reasonable and supportable forecasts for the Company’s outstanding loan balances. The allowance is an estimation that reflects management’s evaluation of expected losses related to the Company’s financial assets measured at amortized cost. To ensure that the allowance is maintained at an adequate level, a detailed analysis is performed on a quarterly basis and an appropriate provision is made to adjust the allowance. The Company categorizes the loan portfolio into nine segments based on similar risk characteristics. Loans within each segment are collectively evaluated using the PD/LGD 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 following tables show the changes in the allowance for credit losses, segregated by portfolio segment, for the three months ended March 31, 2026, and 2025. 24 The Company's activity in the allowance for credit losses, by loan segment, is summarized below for the three months ended March 31, 2026: (Dollars in thousands) Beginning Balance Charge-offs Recoveries Provisions Ending Balance Allowance for credit losses: Residential real estate $ 2,757 $ ( 5 ) $ 21 $ 263 $ 3,036 Home equity 688 - - ( 6 ) 682 Commercial real estate 9,152 - - ( 522 ) 8,630 Construction and land development 1,114 - - 547 1,661 Multifamily 2,078 - - 3 2,081 Commercial business 1,583 - - ( 518 ) 1,065 Consumer 2 ( 14 ) 1 12 1 Manufactured homes 116 - - 9 125 Government 16 - - ( 12 ) 4 Total $ 17,506 $ ( 19 ) $ 22 $ ( 224 ) $ 17,285 The Company's activity in the allowance for credit losses, by loan segment, is summarized below for the three months ended March 31, 2025: (Dollars in thousands) Beginning Balance Charge-offs Recoveries Provisions Ending Balance Allowance for credit losses: Residential real estate $ 4,481 $ - $ 16 $ ( 2,055 ) $ 2,442 Home equity 835 - - ( 213 ) 622 Commercial real estate 6,444 - 4 3,209 9,657 Construction and land development 2,651 - - ( 1,007 ) 1,644 Multifamily 1,003 ( 46 ) 10 1,225 2,192 Commercial business 1,185 ( 61 ) 55 55 1,234 Consumer 5 ( 12 ) 1 9 3 Manufactured homes 252 - - ( 123 ) 129 Government 55 - - ( 23 ) 32 Total $ 16,911 $ ( 119 ) $ 86 $ 1,077 $ 17,955 A loan is individually evaluated for expected credit losses when, based on current information and events, it is probable that a borrower will be unable to pay all amounts due according to the contractual terms of the loan agreement or will require close monitoring due to one or more factors which could lead to credit quality deterioration. A collateral dependent financial 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. Collateral dependent loans that do not share similar risk characteristics with other loans are individually evaluated under ASC 326. Other collateral dependent loans that continue to share similar risk characteristics with the applicable portfolio segment remain included in the collectively evaluated allowance for credit losses. 25 The table below presents the amortized cost basis of collateral dependent loans, including loans evaluated individually and collectively, and the related ACL allocation, where applicable, in accordance with ASC 326. (Dollars in thousands) March 31, 2026 Real Estate Equipment/Inventory Accounts Receivable Vehicles Total ACL Allocation Residential real estate $ 6,797 $ - $ - $ - $ 6,797 $ - Home equity 761 - - - 761 - Commercial real estate 2,234 - - - 2,234 - Construction and land development 593 - - - 593 - Multifamily 597 - - - 597 - Commercial business - 1,126 137 36 1,299 - Manufactured homes 90 - - - 90 - Total $ 11,072 $ 1,126 $ 137 $ 36 $ 12,371 $ - (Dollars in thousands) December 31, 2025 Real Estate Equipment/Inventory Accounts Receivable Vehicles Total ACL Allocation Residential real estate $ 2,185 $ - $ - $ - $ 2,185 $ 39 Home equity 4 - - - 4 - Commercial real estate 1,561 - - - 1,561 86 Construction and land development 2,234 - - - 2,234 - Multifamily 696 - - - 696 - Commercial business - 1,267 130 42 1,439 138 Total $ 6,680 $ 1,267 $ 130 $ 42 $ 8,119 $ 263 A deferred cost reserve is maintained for the portfolio of manufactured home loans that have been purchased. This reserve is available for use for manufactured home loan nonperformance and costs associated with nonperformance. If the segment performs in line with expectations, the deferred cost reserve is paid as a premium to the third-party originator of the loan. The unamortized balance of the deferred cost reserve totaled $ 2.3 million and $ 2.4 million as of March 31, 2026, and December 31, 2025, respectively, and is included in net deferred loan origination cost. 26 The following table presents non–accrual loans and loans past due over 90 days still on accrual by class of loans: As of March 31, 2026 Nonaccrual with No Allowance for Credit Loss Nonaccrual with Allowance for Credit Loss Nonaccrual Loans in Total Loans Past Due over 90 Days Still Accruing Residential real estate $ - $ 6,797 $ 6,797 $ - Home equity - 761 761 - Commercial real estate 1,432 802 2,234 - Construction and land development 593 - 593 - Multifamily 402 195 597 - Commercial business 945 354 1,299 - Manufactured homes - 90 90 - Total $ 3,372 $ 8,999 $ 12,371 $ - As of December 31, 2025 Nonaccrual with No Allowance for Credit Loss Nonaccrual with Allowance for Credit Loss Nonaccrual Loans in Total Loans Past Due over 90 Days Still Accruing Residential real estate $ 1,873 $ 4,059 $ 5,932 $ - Home equity - 810 810 - Commercial real estate 1,158 403 1,561 - Construction and land development 653 - 653 - Multifamily 696 - 696 - Commercial business 391 1,048 1,439 - Manufactured homes - 71 71 - Total $ 4,771 $ 6,391 $ 11,162 $ - Accrued interest receivable on loans totaled $ 5.6 million on March 31, 2026, as compared to $ 5.7 million on December 31, 2025, 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. Accrued interest deemed uncollectible will be written off through interest income. Liability for Credit Losses on Unfunded Loan Commitments The liability for credit losses inherent in unfunded loan commitments is included in accrued expenses and other liabilities on the Condensed Consolidated Balance Sheet. The adequacy of the reserve for unfunded commitments is determined quarterly based on methodology similar to the methodology for determining the ACL. The following table shows the changes in the liability for credit losses on unfunded loan commitments. (Dollars in thousands) Three months ended, March 31, 2026 Three months ended, March 31, 2025 Balance, beginning of period $ 1,752 $ 2,739 Provision for (benefit from) unfunded loan commitments 279 ( 623 ) Balance, end of period $ 2,031 $ 2,116 27 Note 6 – Intangibles and Acquisition-Related Accounting (Dollars in thousands) 2026 2025 Goodwill balance January 1, $ 22,395 $ 22,395 Goodwill balance March 31, $ 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. If the implied fair value of goodwill is lower than its carrying amount, goodwill impairment is indicated, and goodwill is written down to its implied fair value. There has not been any impairment of goodwill identified or recorded. In addition to goodwill, a core deposit intangible was established from previous acquisitions. The Company had core deposit intangible balances of $ 1.1 million and $ 1.2 million as of March 31, 2026, and December 31, 2025, respectively. The table below summarizes the intangibles amortization: The amortization recorded for the quarter ended March 31, is as follows: (Dollars in thousands) Total 2025 $ 225 2026 $ 96 Amortization to be recorded in future periods, is as follows: (Dollars in thousands) Total Remainder of 2026 $ 265 2027 294 2028 228 2029 162 2030 97 Thereafter 30 Total $ 1,076 Note 7 – Deposits The Company’s end-of-period deposit portfolio balances were as follows: (Dollars in thousands) March 31, 2026 December 31, 2025 Checking $ 587,575 $ 592,214 Savings 253,408 254,055 Money market 389,274 381,111 Certificates of deposit 488,814 499,591 Total deposits $ 1,719,071 $ 1,726,971 The aggregate amount of retail and brokered certificates of deposit with a balance of $250 thousand or more was approximately $ 108.3 million at March 31, 2026 and $ 104.5 million at December 31, 2025. At March 31, 2026, selected maturities of retail and brokered certificate of deposits were as follows: 28 (Dollars in thousands) 2026 437,562 2027 47,434 2028 2,965 2029 753 Thereafter 100 Total $ 488,814 Note 8 - Concentrations of Credit Risk The Company grants residential, commercial real estate, commercial business, and installment loans to customers primarily in Lake County in northwest Indiana and Cook County in northeast Illinois. The Company is also an active lender in Porter County, and to a lesser extent, LaPorte, Newton and Jasper counties in Indiana; and DuPage, Lake, and Will counties in Illinois. Substantially all loans are secured by specific items of collateral including residences, commercial real estate, land development, business assets and consumer assets. Note 9 - 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 and diluted earnings per common share computations for the three months ended March 31, 2026 and 2025, are as follows: Three months ended March 31, (dollars in thousands except per share data) 2026 2025 Basic earnings per common share: Net income as reported $ 2,242 $ 455 Weighted average common shares outstanding—basic 4,276,530 4,266,976 Basic earnings per common share $ 0.52 $ 0.11 Diluted earnings per common share: Net income as reported $ 2,242 $ 455 Weighted average common shares outstanding 4,276,530 4,266,976 Add: Dilutive effect of unvested restricted stock awards 25,676 17,520 Weighted average common shares outstanding—diluted 4,302,206 4,284,496 Diluted earnings per common share $ 0.52 $ 0.11 Note 10 - Stock Based Compensation 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 (the “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 Plan is 270,727 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 three months ended March 31, 2026, stock 29 based compensation expense of $ 126 thousand was recorded, compared to $ 98 thousand for the three months ended March 31, 2025. It is anticipated that current outstanding unvested awards will result in additional compensation expense of approximately $ 640 thousand with a weighted average life of 1.7 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 one year after the grant date for independent directors and three years after the grant date for employees. Forfeiture provisions exist for personnel that separate employment before the vesting period expires. A summary of restricted stock activity under the Company’s Plan described above for the three months ended March 31, 2026, follows: Non-vested Shares Shares Weighted Average Grant Date Fair Value Non-vested at January 1, 2026 45,336 $ 36.36 Granted 5,367 37.83 Vested ( 6,025 ) 38.79 Forfeited ( 120 ) 29.79 Non-vested at March 31, 2026 44,558 $ 36.23 Note 11 – Derivative Financial Instruments The Company uses derivative financial instruments to help manage exposure to interest rate risk and the effects that changes in interest rates may have on net income and the fair value of assets and liabilities. The Company has certain interest rate derivative positions that are not designated as hedging instruments. Derivative assets and liabilities are recorded at fair value on the Condensed Consolidated Balance Sheet and do not take into account the effects of master netting agreements. Master netting agreements allow the Company to settle all derivative contracts held with a single counterparty on a net basis, and to offset net derivative positions with related collateral, where applicable. These derivative positions relate to transactions in which the Company enters into an interest rate swap with a client while at the same time entering into an offsetting interest rate swap with another financial institution. In connection with each transaction, the Company agrees to pay interest to the client on a notional amount at a variable interest rate and receive interest from the client on the same notional amount at a fixed interest rate. At the same time, the Company agrees to pay another financial institution the same fixed interest rate on the same notional amount and receive the same variable interest rate on the same notional amount. The transaction allows the client to effectively convert a variable rate loan to a fixed rate. Because the terms of the swaps with the customers and the other financial institutions offset each other, with the only difference being counterparty credit risk, changes in the fair value of the underlying derivative contracts are not materially different and do not significantly impact the Company’s results of operations. The Company enters into commitments to originate loans whereby the interest rate on the loan is determined prior to funding (i.e., interest rate lock commitment). The interest rate lock commitments are considered derivatives and are recorded on the accompanying condensed consolidated balance sheets at fair value in accordance with FASB ASC 815, Derivatives and Hedging. 30 The following table shows the amounts of non-hedging derivative financial instruments: March 31, 2026 Asset derivatives Liability derivatives (Dollars in thousands) Notional or contractual amount Statement of Financial Condition classification Fair value Statement of Financial Condition classification Fair value Interest rate swap contracts $ 99,145 Other assets $ 3,445 Other liabilities $ 3,445 Interest rate lock commitments 1,820 Other assets 31 N/A - Total $ 100,965 $ 3,476 $ 3,445 December 31, 2025 Asset derivatives Liability derivatives (Dollars in thousands) Notional or contractual 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 The following table shows the amounts included in the Statements of Income for non-hedging derivative financial instruments: Three Months Ended March 31, (Dollars in thousands) Statement of Income Classification 2026 2025 Interest rate swap contracts Fees and service charges $ 81 $ ( 30 ) Interest rate lock commitments Gain on sale of loans held-for-sale, net ( 19 ) ( 35 ) Total $ 62 $ ( 65 ) The following table shows the offsetting of financial assets and derivative assets: Gross Amounts not Offset 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 March 31, 2026 Interest rate swap contracts $ 3,445 $ - $ 3,445 $ - $ 2,510 $ 935 Interest rate lock commitments 31 - 31 - - 31 Total $ 3,476 $ - $ 3,476 $ - $ 2,510 $ 966 31 Gross Amounts not Offset 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 Interest rate lock commitments 50 - 50 - - 50 Total $ 3,691 $ - $ 3,691 $ - $ 1,900 $ 1,791 The following table shows the offsetting of financial liabilities and derivative liabilities: Gross Amounts not Offset 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 March 31, 2026 Interest rate swap contracts $ 3,445 $ - $ 3,445 $ - $ - $ 3,445 Gross Amounts not Offset 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 Note 12 - 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: Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date. 32 Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability. The fair values of securities available-for-sale are determined on a recurring basis by obtaining quoted prices on nationally recognized securities exchanges or pricing models utilizing significant observable inputs such as matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities, but rather by relying on the securities’ relationship to other benchmark quoted securities. 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 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 evaluates AFS security impairment on a quarterly basis. This allows the Company to maintain the same amortized cost basis of the securities before and after adoption date. 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 March 31, 2026 and December 31, 2025. 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. This measure is an indicator of the level of collateral that can default before potential cash flow disruptions may occur. In addition, management calculates subordination assuming future collateral defaults by utilizing the default/deferral assumptions in the Company’s impairment analysis. Subordination assuming future default/deferral assumptions is calculated by deducting future defaults from the current performing collateral. At March 31, 2026 and December 31, 2025, 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; the length of time that the security has been in “payment in kind” status; and the Company’s class position within each security. At March 31, 2026 and December 31, 2025, the collateralized debt obligations with a cost basis of $ 2.1 million and $ 2.1 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. For the securities in “payment in kind” status, management anticipates to receive the unpaid contractual interest payments from the issuer, because of the self- correcting cash flow waterfall provisions within the structure of the securities. When a tranche senior to the Company’s position fails the coverage test, the Company’s interest cash flows are paid to the senior tranche and recorded as a reduction of principal. The coverage test represents an over collateralization target by stating the balance of the performing collateral as a percentage of the balance of the Company’s tranche, plus the balance of all senior tranches. The principal reduction in the senior tranche continues until the appropriate coverage test is passed. 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 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. The fair value of the Company’s interest rate lock commitments is based on the price of the underlying loans expected to be sold to an investor while taking into consideration the probability the rate lock commitments will close and are classified within Level 2 of the valuation hierarchy. The Company utilized a third-party pricing service for classifying and valuing the fair value of collateralized debt obligations held. 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. 33 Assets and Liabilities Measured at Fair Value on a Recurring Basis There were no transfers to or from Levels 1 and 2 during the three months ended March 31, 2026 and the year ended December 31, 2025. 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 three months ended March 31, 2026 and all of 2025. Assets measured at fair value on a recurring basis are summarized below: Fair Value Measurements at March 31, 2026 Using (Dollars in thousands) Estimated Fair Value Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Assets: Interest rate swap contracts $ 3,445 $ - $ 3,445 $ - Interest rate lock commitments 31 - 31 - Available-for-sale debt securities: U.S. government sponsored entities 8,483 - 8,483 - Collateralized mortgage obligations and residential mortgage-backed securities 101,902 - 101,902 - Municipal securities 195,410 - 195,410 - Collateralized debt obligations 1,891 - - 1,891 Total securities available-for-sale $ 307,686 $ - $ 305,795 $ 1,891 Liabilities: Interest rate swap contracts $ 3,445 $ - $ 3,445 $ - Fair Value Measurements at December 31, 2025 Using (Dollars in thousands) Estimated Fair Value Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Assets: Interest rate swap contracts $ 3,641 $ - $ 3,641 $ - Interest rate lock commitments 50 - 50 - Available-for-sale debt securities: U.S. government sponsored entities 8,466 - 8,466 - Collateralized mortgage obligations and residential mortgage-backed securities 104,655 - 104,655 - Municipal securities 201,214 - 201,214 - Collateralized debt obligations 1,882 - - 1,882 Total securities available-for-sale $ 316,217 $ - $ 314,335 $ 1,882 Liabilities: Interest rate swap contracts $ 3,641 $ - $ 3,641 $ - 34 A reconciliation of available-for-sale securities, which require significant adjustment based on unobservable data, are presented in the following table: (Dollars in thousands) Estimated Fair Value Measurements Using Significant Unobservable Inputs (Level 3) Available-for- sale securities Beginning balance, January 1, 2026 $ 1,882 Principal payments ( 4 ) Total unrealized gains, included in other comprehensive income (loss) 13 Ending balance, March 31, 2026 $ 1,891 Beginning balance, January 1, 2025 $ 1,419 Principal payments ( 4 ) Total unrealized gains, included in other comprehensive income (loss) 215 Ending balance, March 31, 2025 $ 1,630 Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis 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. No valuation adjustments or write-offs related to the collateral dependent loans or other real estate owned were recorded during the three months ended March 31, 2026. Assets measured at fair value on a non-recurring basis are summarized below. The table includes only those assets for which fair value adjustments were recorded during the period presented. Fair Value Measurements at December 31, 2025 Using (Dollars in thousands) Estimated Fair Value Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Collateral dependent loans $ 6,535 $ - $ - $ 6,535 Other real estate owned $ 89 $ - $ - $ 89 Significant (Level 3) Inputs The following tables present quantitative information about unobservable inputs used in recurring and nonrecurring Level 3 fair value measurements. (Dollars in thousands) Fair Value at March 31, 2026 Valuation Technique Significant Unobservable Inputs Range Weighted-Average Collateralized debt obligations $ 1,891 Discounted cash flow model Default rates, loss severity assumptions, discount rates 7.9 % - 11.2 % 9.6 % 35 (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 % 9.6 % Collateral dependent loans $ 6,535 Fair Value of Collateral Discount for type of property and current market conditions — % - 80 % 8.6 % Other real estate (1) $ 89 Fair Value of Collateral Discount for type of property and current market conditions — % — % (1) At March 31, 2026 and December 31, 2025, there was only one property, so no range or weighted-average range is reported. The following table shows carrying values and related estimated fair values of financial instruments not carried at fair value in the condensed 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. March 31, 2026 Estimated Fair Value Measurements at March 31, 2026 Using (Dollars in thousands) Carrying Value Estimated Fair Value Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Financial assets: Cash and cash equivalents $ 118,755 $ 118,755 $ 118,755 $ - $ - Loans receivable, net 1,437,833 1,395,102 - - 1,395,102 Federal Home Loan Bank stock 6,547 6,547 - 6,547 - Accrued interest receivable 7,700 7,700 - 7,700 - Financial liabilities: Non-interest bearing deposits 278,705 278,705 278,705 - - Interest bearing deposits 1,440,366 1,439,105 951,552 487,553 - Federal funds purchased and repurchase agreements 40,815 40,732 38,686 2,046 - Borrowed funds 50,000 49,723 - 49,723 - Accrued interest payable 945 945 - 945 - 36 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 Inputs (Level 2) Significant Unobservable Inputs (Level 3) Financial assets: Cash and cash equivalents $ 119,647 $ 119,647 $ 119,647 $ - $ - Loans held-for-sale 1,096 1,124 - 1,124 - Loans receivable, net 1,432,881 1,403,061 - - 1,403,061 Federal Home Loan Bank stock 6,547 6,547 - 6,547 - Accrued interest receivable 7,781 7,781 - 7,781 - Financial liabilities: Non-interest bearing deposits 267,441 267,441 267,441 - - Interest bearing deposits 1,459,530 1,458,116 959,939 498,177 - Repurchase agreements 39,703 39,671 37,717 1,954 - Borrowed funds 45,000 44,921 - 44,921 - Accrued interest payable 958 958 - 958 - The following methods were used to estimate the fair value of financial instruments presented in the preceding table at March 31, 2026 and December 31, 2025: 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). The estimated fair value for net loans receivable is based on the exit price notion which is the exchange price that would be received to transfer the loans at the most advantageous market price in an orderly transaction between market participants on the measurement date (Level 3). 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. Non-interest and interest bearing deposits, which include checking, savings, and money market deposits, are estimated to have fair values based on the amount payable as of the reporting date (Level 1). The fair value of fixed-maturity certificates of deposit (included in interest bearing deposits) are based on estimates of the rate the Company would pay on similar deposits, applied for the time period until maturity (Level 2). 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 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 value 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 13 - Borrowings At March 31, 2026, and December 31, 2025, borrowed funds are summarized below: 37 (Dollars in thousands) March 31, 2026 December 31, 2025 FHLB Variable rate advance with outstanding rate of 3.79 %, maturing June 24, 2026 15,000 - FHLB Fixed rate advance with outstanding rate of 3.63 %, maturing March 7, 2028 (1) 10,000 10,000 FHLB Fixed rate advance with outstanding rate of 3.46 %, maturing June 26, 2028 (1) - 10,000 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 Total $ 50,000 $ 45,000 (1) FHLB retains putable option to call these advances after a period of time. At March 31, 2026, scheduled maturities of borrowed funds were as follows: (Dollars in thousands) 2026 $ 15,000 2027 - 2028 10,000 2029 25,000 2030 - 2031 - Total $ 50,000 The Company has available liquidity of $ 757 million including borrowing capacity from the FHLB and Federal Reserve facilities and other sources. The Company also maintains a $ 25 million line of credit with the Federal Home Loan Bank of Indianapolis. The Company did not have a balance at March 31, 2026, or as of December 31, 2025. The Company did not have other borrowings at March 31, 2026, or as of December 31, 2025. Note 14 - Leases Under ASC 842, operating lease expense is generally recognized on a straight-line basis over the term of the lease. As the rate implicit in the leases generally is not readily determinable for our operating leases, the discount rates used to determine the present value of our lease liability are based on our incremental borrowing rate at the lease commencement date and commensurate with the remaining lease term. Our incremental borrowing rate for a lease is the rate of interest we would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. Leases with an initial term of 12 months or less are not recorded on the balance sheet and are excluded from our weighted-average remaining lease term. The following table summarizes supplemental cash flow and other information related to our operating leases: 38 (Dollars in thousands) Three Months Ended March 31, 2026 2025 Operating cash flows Cash paid for amounts included in the measurement of lease liabilities for leases $ 404 $ 397 Weighted-average remaining lease terms (in years) - operating leases 13 14 Weighted-average discount rate - operating leases 7.64 % 7.66 % Variable lease payments $ 70 $ 70 Operating lease costs 481 481 Total lease costs (1) $ 551 $ 551 (1) Included in occupancy and equipment costs on the condensed consolidated statements of income The following table represents the maturity of the Company's operating lease liabilities as of March 31, 2026: (Dollars in thousands) Maturity Analysis Remainder 2026 $ 1,221 2027 1,657 2028 1,692 2029 1,679 2030 1,688 2031 1,722 Thereafter 13,388 Total 23,047 Less: Present value discount ( 8,643 ) Lease liability $ 14,404 At March 31, 2026, operating lease right of use assets were $ 14.9 million and are included in premises and equipment on the consolidated balance sheet. Operating lease liabilities of $ 14.4 million were included in other liabilities on the consolidated balance sheet. 39