First Internet Bancorp 10-K

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this report. The following discussion, analysis and comparisons generally focus on the operating results for the years ended December 31, 2025 and 2024. Discussion, analysis and comparisons of the years ended December 31, 2024 and 2023 that are not included in this Annual Report on Form 10-K can be found in “Management's Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2024. This discussion and analysis includes certain forward-looking statements that involve risks, uncertainties and assumptions. You should review the “Risk Factors” section of this report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by such forward-looking statements. See also the “Cautionary Note Regarding Forward-Looking Statements” at the beginning of this report. Results of Operations During the twelve months ended December 31, 2025, net loss was $35.2 million, or $4.03 diluted loss per share, compared to net income of $25.3 million, or $2.88 per diluted share, for the twelve months ended December 31, 2024 and net income of $8.4 million, or $0.95 per diluted share, for the twelve months ended December 31, 2023. The $60.4 million decrease in net income for the twelve months ended December 31, 2025 compared to the twelve months ended December 31, 2024 was due primarily to an increase of $55.2 million, or 323.6%, in provision for credit losses, a decrease of $44.6 million, or 94.3%, in noninterest income and an increase of $4.9 million, or 5.5%, in noninterest expense, partially offset by an increase of $26.4 million, or 30.2%, in net interest income and a decrease of $18.0 million in income tax expense. During the twelve months ended December 31, 2025, the Company closed on the sale of $851.2 million of single tenant lease financing loans recognizing a pre-tax loss of $38.2 million on the transaction. The transaction was executed as part of an initiative to strengthen the Company’s regulatory capital ratios and improve its interest rate risk position. While the loss on the transaction negatively impacted shareholders’ equity and regulatory capital, the transaction significantly reduced risk-weighted assets, resulting in a net positive effect on regulatory capital ratios. Furthermore, the loan sale reduced the Company’s interest rate risk profile by reducing exposure to longer-duration assets. Additionally, the Company expects the transaction to have a beneficial impact on key profitability metrics, such as net interest margin and return on average assets, in future periods. During the twelve months ended December 31, 2025, return on average assets (“ROAA”), return on average equity (“ROAE”) and return on average tangible common equity (“ROATCE”) were (0.60%), (9.15%) and (9.26%), respectively. Excluding the after tax net loss on the sale of the single tenant lease financing loans, adjusted net loss for the twelve months ended December 31, 2025, was $5.7 million, and adjusted diluted loss per share was $0.66. Additionally, for the twelve months ended December 31, 2025, adjusted ROAA, adjusted ROAE and adjusted ROATCE were (0.10%), (1.49%) and (1.51%), respectively. The increase in net income of $16.9 million for the twelve months ended December 31, 2024 compared to the twelve months ended December 31, 2023 was due primarily to increases of $21.2 million, or 81.2%, in noninterest income and $12.5 million, or 16.7%, in net interest income, partially offset by increases of $10.7 million, or 13.4%, in noninterest expense, $5.7 million in income tax expense and $0.4 million, or 2.5%, in provision for credit losses. During the twelve months ended December 31, 2024, ROAA, ROAE and ROATCE were 0.46%, 6.70% and 6.78%, respectively. The Company recognized gains of $2.9 million from the termination of interest rate swap agreements and $1.8 million from the prepayment of FHLB advances, as well as expenses of $0.5 million in IT termination fees and $0.1 million in anniversary expenses. Adjusted for these items, net income for the twelve months ended December 31, 2024 was $22.0 million, and adjusted diluted earnings per share was $2.51. Additionally, for the twelve months ended December 31, 2024, adjusted ROAA, adjusted ROAE and adjusted ROATCE were 0.40%, 5.83% and 5.90%, respectively. Refer to the “Reconciliation of Non-GAAP Financial Measures” section of Item 7 of Part II of this report, Management's Discussion and Analysis of Financial Condition and Results of Operations for additional information. 25 Consolidated Average Balance Sheets and Net Interest Income Analyses For the periods presented, the following table provides the average balances of interest-earning assets and interest-bearing liabilities and the related yields and cost of funds. The table does not reflect any effect of income taxes. Balances are based on the average of daily balances. Nonaccrual loans are included in average loan balances. Twelve Months Ended December 31, 2025 December 31, 2024 December 31, 2023 (dollars in thousands) Average Balance Interest/Dividends Yield/Cost Average Balance Interest/Dividends Yield/Cost Average Balance Interest/Dividends Yield/Cost Assets Interest-earning assets Loans, including loans held-for-sale $ 4,223,146 $ 259,840 6.15 % $ 3,997,397 $ 233,844 5.85 % $ 3,685,729 $ 192,337 5.22 % Securities - taxable 839,878 34,950 4.16 % 692,806 26,742 3.86 % 551,479 17,189 3.12 % Securities - non-taxable 79,897 2,618 3.28 % 77,987 3,775 4.84 % 72,571 3,532 4.87 % Other earning assets 519,976 22,749 4.38 % 516,836 27,526 5.33 % 500,061 26,384 5.28 % Total interest-earning assets 5,662,897 320,157 5.65 % 5,285,026 291,887 5.52 % 4,809,840 239,442 4.98 % Allowance for credit losses - loans (51,440) (42,758) (36,038) Noninterest-earning assets 237,366 220,462 194,712 Total assets $ 5,848,823 $ 5,462,730 $ 4,968,514 Liabilities Interest-bearing liabilities Interest-bearing demand deposits $ 1,152,210 $ 36,007 3.13 % $ 494,082 $ 10,448 2.11 % $ 366,082 $ 6,186 1.69 % Savings accounts 20,229 171 0.85 % 22,336 189 0.85 % 29,200 249 0.85 % Money market accounts 1,243,300 45,459 3.66 % 1,230,443 51,036 4.15 % 1,276,602 49,890 3.91 % Fintech - brokered deposits — — — % 141,860 6,023 4.25 % 33,039 1,402 4.24 % Certificates and brokered deposits 2,451,191 106,753 4.36 % 2,430,205 115,454 4.75 % 2,040,041 85,636 4.20 % Total interest-bearing deposits 4,866,930 188,390 3.87 % 4,318,926 183,150 4.24 % 3,744,964 143,363 3.83 % Other borrowed funds 421,947 18,007 4.27 % 629,137 21,360 3.40 % 719,617 21,175 2.94 % Total interest-bearing liabilities 5,288,877 206,397 3.90 % 4,948,063 204,510 4.13 % 4,464,581 164,538 3.69 % Noninterest-bearing deposits 154,712 114,396 125,816 Other noninterest-bearing liabilities 20,802 23,056 20,317 Total liabilities 5,464,391 5,085,515 4,610,714 Shareholders' equity 384,432 377,215 357,800 Total liabilities and shareholders' equity $ 5,848,823 $ 5,462,730 $ 4,968,514 Net interest income $ 113,760 $ 87,377 $ 74,904 Interest rate spread 1 1.75 % 1.39 % 1.29 % Net interest margin 2 2.01 % 1.65 % 1.56 % Net interest margin - FTE 3 2.09 % 1.74 % 1.67 % 1 Yield on total interest-earning assets minus cost of total interest-bearing liabilities 2 Net interest income divided by average interest-earning assets 3 On a fully-taxable equivalent (“FTE”) basis assuming a 21% tax rate. Refer to the “Reconciliation of Non-GAAP Financial Measures” section of Item 7 of Part II of this report, Management's Discussion and Analysis of Financial Condition and Results of Operations 26 Rate/Volume Analysis The following table illustrates the impact of changes in the volume of interest-earning assets and interest-bearing liabilities and interest rates on net interest income for the periods indicated. The change in interest not due solely to volume or rate has been allocated in proportion to the absolute dollar amounts of the change in each. Rate/Volume Analysis of Net Interest Income Twelve Months Ended December 31, 2025 vs. December 31, 2024 Due to Changes in Twelve Months Ended December 31, 2024 vs. December 31, 2023 Due to Changes in (amounts in thousands) Volume Rate Net Volume Rate Net Interest income Loans, including loans held-for-sale $ 13,624 $ 12,372 $ 25,996 $ 17,100 $ 24,407 $ 41,507 Securities – taxable 6,009 2,199 8,208 4,961 4,592 9,553 Securities – non-taxable 90 (1,247) (1,157) 265 (22) 243 Other earning assets 166 (4,943) (4,777) 891 251 1,142 Total 19,889 8,381 28,270 23,217 29,228 52,445 Interest expense Interest-bearing demand deposits 18,753 6,806 25,559 2,491 1,771 4,262 Savings accounts (18) — (18) (60) — (60) Money market accounts 527 (6,104) (5,577) (1,847) 2,993 1,146 Fintech - brokered deposits (6,023) — (6,023) 4,618 3 4,621 Certificates and brokered deposits 976 (9,677) (8,701) 17,699 12,119 29,818 Other borrowed funds (8,047) 4,694 (3,353) (2,867) 3,052 185 Total 6,168 (4,281) 1,887 20,034 19,938 39,972 Increase in net interest income $ 13,721 $ 12,662 $ 26,383 $ 3,183 $ 9,290 $ 12,473 Net interest income for the twelve months ended December 31, 2025 was $113.8 million, an increase of $26.4 million, or 30.2%, compared to $87.4 million for the twelve months ended December 31, 2024. The increase in net interest income was the result of a $28.3 million, or 9.7%, increase in total interest income to $320.2 million for the twelve months ended December 31, 2025 compared to $291.9 million for the twelve months ended December 31, 2024. The increase in total interest income was partially offset by a $1.9 million, or 0.9%, increase in total interest expense to $206.4 million for the twelve months ended December 31, 2025 compared to $204.5 million for the twelve months ended December 31, 2024. The growth in total interest income was due primarily to an increase in interest earned on loans, resulting from an increase of 30 bps in the yield earned on loans, as well as an increase of $225.7 million, or 5.6%, in the average balance of loans, including loans held-for-sale. Additionally, the average balance of securities increased $149.0 million, or 19.3%, and the yield earned on the securities portfolio increased 13 bps. The increase in total interest income was partially offset by a 95 bp decrease in the yield on other earning assets. The increase in the yield earned on loans was driven by new originations throughout the year as the yield on funded portfolio originations was 7.31%, well above the overall loan portfolio yield. Additionally, the yield earned on the loan portfolio benefitted from the sale of the single tenant lease financing loans, which had interest rates below the overall loan portfolio yield. The increase in the yield earned on securities was primarily driven by new securities purchases during the year, partially offset by the maturity of an interest rate swap designed to enhance the yield on certain municipal securities. The decrease in the yield earned on other earning assets was due mainly to the impact of decreases in the Fed Funds rates on cash balances held at the Federal Reserve. The increase in total interest expense was due primarily to an increase of $25.6 million, or 244.6%, in interest expense associated with interest-bearing demand deposits, partially offset by decreases of $8.7 million, or 7.5%, in interest expense associated with certificates and brokered deposits, $5.6 million, or 10.9%, in interest expense associated with money market accounts and $3.4 million, or 15.7%, in interest expense associated with other borrowed funds. When combined with deposits formerly classified as fintech - brokered deposits, the increase in interest expense related to interest-bearing demand deposits was due primarily to a 378 bp increase in the cost of these deposits, as well as an increase of $516.3 million, or 81.2%, in the average balance of these deposits. The decrease in interest expense related to certificates and brokered deposits was driven by a 39 bp decline in cost of these deposits, partially offset by a slight increase in the average balance of these deposits. The decrease in the cost of funds was due to the combination of lower rates on new certificates of deposit production and using on-balance sheet liquidity to paydown higher-cost brokered deposits as they matured. The decrease in interest expense related to money 27 market accounts was driven primarily by a decrease of 49 bps in the cost of these deposits, partially offset by a slight increase in the average balance of these deposits. The decrease in the cost of funds was due to the impact of decreases in the Fed Funds rate late in 2024 and in the second half of 2025. The decrease in interest expense related to other borrowed funds was driven by a decrease in the average balance of $207.2 million, or 32.9%, partially offset by an 87 bp increase in the cost of these funds. The decrease in the average balance of other borrowed funds was driven primarily by the early paydown of Federal Home Loan Bank advances late in 2024 as the Company deployed excess on-balance liquidity to reduce the size of the balance sheet and lower interest expense in future periods. The increase in the cost of the funds was due mainly to the cost of one issuance of subordinated debt repricing higher as its fixed-rate term expired in the third quarter of 2024 and converted to variable rate. Net interest margin (“NIM”) was 2.01% for the twelve months ended December 31, 2025 compared to 1.65% for the twelve months ended December 31, 2024, an increase of 36 bps. On a fully-taxable equivalent (“FTE”) basis, NIM was 2.09% for the twelve months ended December 31, 2025 compared to 1.74% for the twelve months ended December 31, 2024, an increase of 35 bps. The increase in NIM and FTE NIM compared to the twelve months ended December 31, 2024 reflects the combination of higher yields on loans and securities and continued improvement in the cost of funds related to deposits. Noninterest Income The following table presents noninterest income for the three most recent years. Twelve Months Ended December 31, (amounts in thousands) 2025 2024 2023 Service charges and fees $ 1,366 $ 959 $ 851 Loan servicing revenue 8,730 6,188 3,833 Loan servicing asset revaluation (5,466) (2,537) (1,463) Mortgage banking activities — — 76 (Loss) gain on sale of loans (8,313) 33,329 20,526 Other 6,395 9,406 2,302 Total noninterest income $ 2,712 $ 47,345 $ 26,125 Noninterest income for the twelve months ended December 31, 2025 was $2.7 million, representing a decrease of $44.6 million, or 94.3%, compared to $47.3 million for the twelve months ended December 31, 2024. Excluding the pre-tax loss of $38.2 million on the sale of the single tenant lease financing loans, adjusted noninterest income for the twelve months ended December 31, 2025 was $40.9 million. Excluding the gain on termination of interest rate swaps of $2.9 million and the gain on prepayment of FHLB advances of $1.8 million, adjusted noninterest income for the twelve months ended December 31, 2024 was $42.6 million. The decline in adjusted noninterest income of $1.7 million, or 3.9%, was due primarily to a decrease of $3.4 million, or 10.2%, in gain on sale of loans, partially offset by an increase of $1.7 million in other noninterest income. During 2025, the Company recognized $29.4 million in gain of sales of U.S. Small Business Administration (“SBA”) 7(a) guaranteed loans compared to $33.2 million in 2024. The decrease was due mainly to a decrease in sold loan volume as the Company implemented a process change in the second quarter 2025 to hold SBA loans held-for-sale longer before selling into the secondary market. This process change had a one quarter effect as gain on sale revenue reverted to normalized levels in the third quarter 2025. The increase in other noninterest income was primarily driven by higher fintech partnership revenue resulting from increased program management fees and higher payments volume. 28 Noninterest Expense The following table presents noninterest expense for the three most recent years. Twelve Months Ended December 31, (amounts in thousands) 2025 2024 2023 Salaries and employee benefits $ 51,026 $ 51,756 $ 45,322 Marketing, advertising and promotion 2,475 2,589 2,567 Consulting and professional services 4,327 3,744 3,082 Data processing 2,654 2,448 2,373 Loan expenses 6,714 5,947 5,756 Premises and equipment 13,673 11,902 10,599 Deposit insurance premium 6,109 5,000 3,880 Other 8,049 6,724 5,857 Total noninterest expense $ 95,027 $ 90,110 $ 79,436 Noninterest expense for the twelve months ended December 31, 2025 was $95.0 million, representing an increase of $4.9 million or 5.5%, compared to $90.1 million for the twelve months ended December 31, 2024. Excluding the IT termination fees of $0.5 million and anniversary expenses of $0.1 million, adjusted noninterest expense for the twelve months ended December 31, 2024 was $89.5 million. The decline in adjusted noninterest expense of $5.5 million, or 6.1%, was due primarily to increases of $2.2 million, or 19.4%, in premises and equipment, $1.4 million, or 21.9%, in other noninterest expense and $1.1 million, or 22.2%, in deposit insurance premium. The increase in premises and equipment was driven by higher software maintenance costs. The increase in other noninterest expense was due mainly to higher fintech volume activity and the increase in deposit insurance premium was due to changes in the composition of the loan portfolio. 29 Income Taxes In December 2023, the FASB issued ASU 2023-09, which expands income tax disclosure requirements to include additional information related to the rate reconciliation of our effective tax rates to statutory rates. The Company adopted ASU 2023-09 on a prospective basis for the year ended December 31, 2025. December 31, 2025 (amounts in thousands) Amount Percent U.S. federal statutory tax rate $ (10,682) (21.0 %) State and local income tax, net of federal tax effect 1 (1,189) (2.3 %) Effect of: Tax credits (206) (0.4 %) Nontaxable or nondeductible items: Income from tax-exempt securities and loans (3,497) (6.9 %) Other (127) (0.3 %) Total $ (15,701) (30.9 %) 1 The states that contribute to the majority (greater than 50%) of the tax effect in the category include Indiana and Florida for 2025. The following table reconciles reported income tax provision (benefit) to that computed at the statutory federal tax rate for the years ended December 31, 2024 and 2023, in accordance with the guidance prior to the adoption of ASU 2023-09. December 31, (amounts in thousands) 2024 2023 Statutory rate times pre-tax income $ 5,784 $ 1,037 (Subtract) add the tax effect of: Income from tax-exempt securities and loans (3,500) (3,951) State income taxes, net of federal tax effect 47 (30) Bank-owned life insurance (262) (215) Tax credits (110) (168) Other differences 307 (150) Income tax provision (benefit) $ 2,266 $ (3,477) We recognized an income tax benefit of $15.7 million in 2025, compared to an income tax provision of $2.3 million and an effective tax rate of 8.2% in 2024 and a benefit of $3.5 million in 2023. Our federal statutory tax rate was 21% in 2024. The variance from the federal statutory rate was due primarily to tax-exempt income. Interest income on certain loans or securities issued by governmental, municipal and not-for-profit entities, and earnings from bank-owned life insurance were the primary components of tax-exempt income. The income tax benefit recognized during 2025 also reflects the impact of a pre-tax loss of $38.2 million from the loss on the sale of the single tenant lease financing loans. 30 Financial Condition The following table presents summary balance sheet data as of the end of the last two years. (amounts in thousands) December 31, Balance Sheet Data: 2025 2024 Total assets $ 5,571,647 $ 5,737,859 Loans 3,746,728 4,170,646 Total securities 1,029,296 837,151 Loans held-for-sale 108,608 54,695 Noninterest-bearing deposits 146,879 136,451 Interest-bearing deposits 4,692,934 4,796,755 Total deposits 4,839,813 4,933,206 Advances from Federal Home Loan Bank 249,500 295,000 Total shareholders' equity 359,767 384,063 Total assets decreased $166.2 million, or 2.9%, to $5.6 billion as of December 31, 2025 compared to $5.7 billion as of December 31, 2024. The decrease was driven by a decline in loans due to the single tenant lease financing loan sale and lower franchise finance balances, partially offset by higher investor commercial real estate, commercial and industrial and small business lending balances. Total liabilities declined $141.9 million, or 2.7%, to $5.2 billion at December 31, 2025 compared to $5.4 billion at December 31, 2024. The decrease was due mainly to a decrease in total deposits, as well as a decline in advances from the Federal Home Loan Bank. Increased liquidity from growth in fintech partnership deposits allowed the Company to pay down higher cost brokered deposits and advances from the Federal Home Loan Bank throughout 2025. Additionally, following the sale of the single tenant lease financing loans, the Company moved a significant amount of fintech deposits off-balance sheet in order to manage the overall size of the balance sheet. As of December 31, 2025, total shareholders’ equity was $359.8 million, a decrease of $24.3 million, or 6.3%, compared to December 31, 2024. The decrease in shareholders’ equity was due primarily to the net loss during 2025, partially offset by a decrease in accumulated other comprehensive loss as unrealized losses on securities declined during the year. Tangible common equity totaled $355.1 million as of December 31, 2025, representing a decrease of $24.3 million, or 6.4%, compared to December 31, 2024. The ratio of total shareholders’ equity to total assets decreased to 6.46% as of December 31, 2025 from 6.69% as of December 31, 2024 and the ratio of tangible common equity to tangible assets decreased to 6.38% as of December 31, 2025 from 6.62% as of December 31, 2024. Book value per common share decreased 6.5% to $41.41 as of December 31, 2025 from $44.31 as of December 31, 2024. Tangible book value per share decreased 6.6% to $40.87 as of December 31, 2025 from $43.77 as of December 31, 2024. The decrease in both book value per common share and tangible book value per common share was driven primarily by the decreases in total shareholders’ equity and tangible common equity. Refer to the “Reconciliation of Non-GAAP Financial Measures” section of Item 7 of Part II of this report, Management's Discussion and Analysis of Financial Condition and Results of Operations for additional information. 31 Loan Portfolio Analysis The following table provides information regarding our loan portfolio as of the end of the last two years. December 31, (dollars in thousands) 2025 2024 Commercial loans Commercial and industrial $ 221,714 5.9 % $ 120,175 2.9 % Owner-occupied commercial real estate 48,575 1.3 % 53,591 1.3 % Investor commercial real estate 647,394 17.3 % 269,431 6.5 % Construction 372,668 9.9 % 413,523 9.9 % Single tenant lease financing 222,925 5.9 % 949,748 22.7 % Public finance 442,234 11.8 % 485,867 11.6 % Healthcare finance 139,469 3.7 % 181,427 4.4 % Small business lending 1 430,024 11.5 % 331,914 8.0 % Franchise finance 417,045 11.1 % 536,909 12.9 % Total commercial loans 2,942,048 78.4 % 3,342,585 80.2 % Consumer loans Residential mortgage 343,110 9.2 % 375,160 9.0 % Home equity 14,725 0.4 % 18,274 0.4 % Other consumer 425,458 11.4 % 407,947 9.8 % Total consumer loans 783,293 21.0 % 801,381 19.2 % Total commercial and consumer loans 3,725,341 99.4 % 4,143,966 99.4 % Net deferred loan origination costs, premiums and discounts on purchased loans and other 2 21,387 0.6 % 26,680 0.6 % Total loans 3,746,728 100.0 % 4,170,646 100.0 % Allowance for credit losses - loans (55,686) (44,769) Net loans $ 3,691,042 $ 4,125,877 1 Balances include $52.2 million and $34.0 million that are guaranteed by the U.S. government as of December 31, 2025 and December 31, 2024, respectively. 2 Includes carrying value adjustments of $19.1 million and $22.9 million related to terminated interest rate swaps associated with public finance loans as of December 31, 2025 and December 31, 2024, respectively. Total loans were $3.7 billion as of December 31, 2025, a decrease of $423.9 million, or 10.2%, compared to December 31, 2024. Total commercial loan balances were $2.9 billion, as of December 31, 2025, a decrease of $400.5 million, or 12.0%, from December 31, 2024. Total consumer loan balances were $783.3 million as of December 31, 2025, a decrease of $18.1 million, or 2.3%, compared to December 31, 2024. Compared to December 31, 2024, the decrease in commercial loan balances was driven by the sale of the single tenant lease financing loans, planned run-off in the franchise finance and healthcare finance portfolios and a decline in the fixed rate public finance portfolio. The decreases were partially offset by increases in investor commercial real estate, which was driven by completed construction projects that were moved to investor commercial real estate upon entering their stabilization period, as well as growth in the commercial and industrial and small business lending portfolios. The slight decrease in consumer loan balances was due primarily to expected run-off in the residential mortgage portfolio, partially offset by origination activity in the other consumer loans portfolio. 32 Loan Maturities and Rate Sensitivity The following table shows the contractual maturity distribution intervals (without regard to repayment or repricing schedules) of the outstanding loans in our portfolio as of December 31, 2025. (amounts in thousands) Within 1 Year 1-5 Years 5-15 Years Beyond 15 Years Total Commercial loans Commercial and industrial $ 13,295 $ 106,847 $ 101,572 $ — $ 221,714 Owner-occupied commercial real estate 5,618 21,992 20,965 — 48,575 Investor commercial real estate 450,237 196,641 516 — 647,394 Construction 130,412 238,536 3,720 — 372,668 Single tenant lease financing 21,939 163,593 37,393 — 222,925 Public finance 13,262 110,941 315,411 2,620 442,234 Healthcare finance 2,237 95,239 41,993 — 139,469 Small business lending 37 7,327 357,467 65,193 430,024 Franchise finance 1,329 239,162 176,554 — 417,045 Total commercial loans 638,366 1,180,278 1,055,591 67,813 2,942,048 Consumer loans Residential mortgage 473 363 13,133 329,141 343,110 Home equity 731 229 3,147 10,618 14,725 Other consumer 447 19,703 337,192 68,116 425,458 Total consumer loans 1,651 20,295 353,472 407,875 783,293 Total commercial and consumer loans $ 640,017 $ 1,200,573 $ 1,409,063 $ 475,688 $ 3,725,341 The following table shows the rate sensitivity of the outstanding loans in our portfolio by the contractual maturity distribution intervals as of December 31, 2025. (amounts in thousands) Within 1 Year 1-5 Years 5-15 Years Beyond 15 Years Total Fixed rate $ 60,523 $ 702,570 $ 1,020,338 $ 365,377 $ 2,148,808 Variable rate 579,494 498,003 388,725 110,311 1,576,533 Total commercial and consumer loans $ 640,017 $ 1,200,573 $ 1,409,063 $ 475,688 $ 3,725,341 Loan Approval Procedures and Authority Our lending activities follow written, non-discriminatory policies with loan approval limits approved by the Board of Directors of the Bank. Loan officers have underwriting and approval authorization of varying amounts based on their lending experience and product type. Additionally, based on the amount of the loan, multiple approvals may be required. Based on the Bank’s legal lending limit, the maximum it could lend to any one borrower at December 31, 2025 was $70.4 million. Our goal is to have a well-diversified and balanced loan portfolio. In order to manage our loan portfolio risk, we establish concentration limits by borrower, product type, industry and geography. To supplement our internal loan review resources, we have engaged independent third-party loan review groups, which are a key component of our overall risk management process related to credit administration. 33 Asset Quality December 31, (dollars in thousands) 2025 2024 Nonaccrual loans Commercial loans: Commercial and industrial $ 240 $ — Single tenant lease financing 1,665 — Healthcare finance 2,596 — Small business lending 1 19,781 11,429 Franchise finance 26,978 10,382 Total commercial loans 51,260 21,811 Consumer loans: Residential mortgage 4,893 4,083 Other consumer 234 61 Total consumer loans 5,127 4,144 Total nonaccrual loans 56,387 25,955 Past due 90 days and accruing loans Commercial loans: Small business lending — 1,320 Franchise finance 1,144 — Total commercial loans 1,144 1,320 Consumer loans: Residential mortgage 1,007 1,142 Other consumer — 4 Total consumer loans 1,007 1,146 Total past due 90 days and accruing loans 2,151 2,466 Total nonperforming loans 58,538 28,421 Other real estate owned Small business lending 2,631 — Residential mortgage — 272 Total other real estate owned 2,631 272 Other nonperforming assets 186 212 Total nonperforming assets $ 61,355 $ 28,905 Total nonperforming loans to total loans 1.56 % 0.68 % Total nonperforming assets to total assets 1.10 % 0.50 % Allowance for credit losses - loans to total loans 1.49 % 1.07 % Nonaccrual loans to total loans 1.50 % 0.62 % Allowance for credit losses - loans to nonaccrual loans 98.8 % 172.5 % Allowance for credit losses - loans to nonperforming loans 95.1 % 157.5 % 1 Balances include $13.6 million and $4.9 million that are guaranteed by the U.S. government as of December 31, 2025 and December 31, 2024, respectively. A loan is individually evaluated, when, based on current information or events, it is probable that we will be unable to collect all amounts due (principal and interest) according to the contractual terms of the loan agreement. Payments with delays generally not exceeding 90 days outstanding are not individually evaluated. Certain nonaccrual and substantially all delinquent loans more than 90 days past due may be individually evaluated. Generally, loans are placed on nonaccrual status at 90 days past due and accrued interest is reversed against earnings, unless the loan is well secured and in the process of collection. The 34 accrual of interest on individually evaluated loans is discontinued when, in management’s opinion, the borrower may be unable to meet payments as they become due. Individually evaluated loans include nonperforming loans and may also include loans where concessions have been granted to borrowers experiencing financial difficulties. These concessions could include a reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance, or other actions intended to maximize collection. Nonperforming loans are comprised of total nonaccrual loans and loans 90 days past due and accruing. Nonperforming assets include nonperforming loans, other real estate owned (“OREO”) and other nonperforming assets, which consist of repossessed assets. Nonperforming assets could also include individual securities for which a credit loss has been recognized; however, we did not own any securities classified as such during the two-year period ended December 31, 2025. Total nonperforming loans increased $30.1 million, or 106.0%, to $58.5 million as of December 31, 2025 compared to $28.4 million as of December 31, 2024, due primarily to an increase in nonperforming loans in the franchise finance and small business lending portfolios during the year. Total nonperforming assets increased $32.5 million, or 112.3%, to $61.4 million as of December 31, 2025, compared to $28.9 million as of December 31, 2024, due primarily to the aforementioned increase in nonperforming loans and an increase in OREO related to small business lending. As of December 31, 2025, the Company had three small business lending properties in OREO with a carrying value of $2.6 million. As of December 31, 2024, the Company had one residential mortgage property in OREO with a carrying value of $0.3 million. 35 Allowance for Credit Losses - Loans The following table provides a rollforward of the ACL on loans by loan portfolio segment for the twelve months ended December 31, 2025 and 2024; however, allocation of a portion of the allowance to one segment does not preclude its availability to absorb losses in other segments. December 31, (dollars in thousands) 2025 2024 Balance, beginning of period $ 44,769 $ 38,774 Provision charged to expense 71,921 18,815 Losses charged off Commercial and industrial (153) — Single tenant lease financing — (195) Small business lending (39,650) (10,441) Franchise finance (21,754) (1,466) Residential mortgage (75) (159) Other consumer (1,457) (1,009) Total losses charged off (63,089) (13,270) Recoveries Commercial and industrial 21 8 Small business lending 1,681 325 Franchise finance 94 — Residential mortgage 19 1 Home equity 7 7 Other consumer 263 109 Total recoveries 2,085 450 Balance, end of period $ 55,686 $ 44,769 Net charge-offs $ 61,004 $ 12,820 Net charge-offs (recoveries) to average loans (annualized) Commercial and industrial 0.11 % (0.01 %) Single tenant lease financing — % 0.02 % Small business lending 8.16 % 3.39 % Franchise Finance 4.48 % 0.27 % Total commercial net charge-offs 1.76 % 0.37 % Residential mortgage 0.02 % 0.04 % Home equity (0.04 %) (0.03 %) Other consumer 0.41 % 0.28 % Total consumer net charge-offs 0.16 % 0.13 % Net charge-offs to average loans 1.45 % 0.32 % The determination of the ACL and the related provision for credit losses are components of our significant accounting policies as discussed within Note 1 to our consolidated financial statements. The adequacy of the ACL and the provision are based on the review and evaluation of the loan portfolio and reflect management’s assessment of the risks and potential losses within the portfolio. This evaluation uses a discounted cash flow analysis based on historical loss data, reasonable and supportable forecasts and prepayment rates, as well as qualitative factors such as economic and business conditions, portfolio growth, concentrations of credit in the portfolio, trends in risk grades, delinquencies within the portfolio and changes in our lending policies and practices. Management actively monitors asset quality and, when appropriate, charges off loans against the ACL. Although management believes it uses the best information available to make determinations with respect to the ACL, future adjustments may be necessary if economic conditions differ substantially from those in the assumptions used to determine the size of the ACL. 36 The ACL was $55.7 million as of December 31, 2025, compared to $44.8 million as of December 31, 2024. The increase in the ACL reflects updated assumptions to the Company’s CECL model, including updates that significantly increased the ACL related to small business lending, as well as additional specific reserves related to franchise finance loans that were placed on nonaccrual during the year, partially offset by the removal of specific reserves for small business lending and franchise finance loans that were charged off. Furthermore, the ACL as a percentage of total loans was impacted by lower total loan balances following the sale of the single tenant lease financing loans. The ACL as a percentage of total loans was 1.49% as of December 31, 2025, compared to 1.07% at December 31, 2024. The ACL as a percentage of nonperforming loans decreased to 95.1% as of December 31, 2025, compared to 157.5% as of December 31, 2024, as the increase in nonperforming loans outweighed the increase in the ACL. The provision for credit losses - loans was $71.9 million for the twelve months ended December 31, 2025 compared to $18.8 million for the twelve months ended December 31, 2024. The increase in the provision for credit losses - loans for the twelve months ended December 31, 2025 was driven primarily by the net charge-offs and the increase in the ACL related to small business lending and the additional specific reserves related to franchise finance discussed above, partially offset by the decrease in the ACL resulting from the sale of the single tenant lease financing loans mentioned above and by the decrease in specific reserves related to small business lending and franchise finance loans that were charged off. Investment Securities Portfolio In managing our investment securities portfolio, management focuses on providing an adequate level of liquidity and managing long-term interest rate risk, while earning an adequate level of investment income without taking undue credit risk. Investment securities that are acquired and held principally for the purpose of selling them in the near term with the objective of generating economic profits on short-term differences in market characteristics are classified as “trading securities.” We did not classify any securities as trading securities as of December 31, 2025 and 2024. Securities that we intend to hold until maturity are classified as “held-to-maturity” securities, and all other investment securities are classified as “available-for-sale.” The carrying values of available-for-sale investment securities are adjusted for unrealized gains or losses as a valuation allowance and any gain or loss is reported on an after-tax basis as a component of other comprehensive (loss) income. We periodically evaluate each security in an unrealized loss position to determine if there is an impairment. As of December 31, 2025, the unrealized losses in our investment securities portfolio were due primarily to interest rate changes. We have the ability and intent to hold all investment securities in an unrealized loss position resulting from interest rate changes to the earlier of the forecasted recovery or the maturity of the underlying investment security. As of December 31, 2025, and 2024, we did not have any investment securities of a single issuer that exceeded 10% of shareholders’ equity. The term “issuer” excludes the U.S. Government and its sponsored agencies and corporations. 37 The following tables present the amortized cost and approximate fair value of our investment securities portfolio by security type as of the end of the last two years. (amounts in thousands) December 31, Amortized Cost 2025 2024 Securities available-for-sale U.S. Government-sponsored agencies $ 64,298 $ 83,811 Municipal securities 64,777 67,441 Agency mortgage-backed securities - residential 409,718 300,914 Agency mortgage-backed securities - commercial 59,112 64,214 Private label mortgage-backed securities - residential 124,264 46,623 Asset-backed securities 42,492 23,802 Corporate securities 37,761 40,049 Total securities available-for-sale 802,422 626,854 Securities held-to-maturity, net carrying value Municipal securities 11,006 12,843 Agency mortgage-backed securities - residential 213,530 201,840 Agency mortgage-backed securities - commercial 5,635 5,705 Corporate securities 20,438 29,408 Total securities held-to-maturity, net carrying value 250,609 249,796 Total securities $ 1,053,031 $ 876,650 (amounts in thousands) December 31, Approximate Fair Value 2025 2024 Securities available-for-sale U.S. Government-sponsored agencies $ 63,764 $ 82,816 Municipal securities 63,386 63,654 Agency mortgage-backed securities - residential 389,457 269,641 Agency mortgage-backed securities - commercial 58,477 63,331 Private label mortgage-backed securities - residential 123,673 45,821 Asset-backed securities 42,553 23,821 Corporate securities 37,377 38,271 Total securities available-for-sale 778,687 587,355 Securities held-to-maturity Municipal securities 10,551 11,925 Agency mortgage-backed securities - residential 203,715 184,412 Agency mortgage-backed securities - commercial 4,720 4,548 Corporate securities 19,829 27,966 Total securities held-to-maturity 238,815 228,851 Total securities $ 1,017,502 $ 816,206 The approximate fair value of investment securities available-for-sale increased $191.3 million, or 32.6%, to $778.7 million as of December 31, 2025 compared to $587.4 million as of December 31, 2024. The increase was due primarily to increases of $119.8 million in agency mortgage-backed securities - residential, $77.9 million in private label mortgage-backed securities - residential and $18.7 million in asset-backed securities, partially offset by decreases of $19.1 million in U.S. Government-sponsored agencies securities and $4.9 million in agency mortgage-backed securities - commercial. The Company deployed liquidity during 2025 primarily into new purchases of available-for-sale variable-rate mortgage-backed and asset-backed securities, which was partially offset by net pay down activity in other security types. As of December 31, 2025, the Company had securities with a net carrying value of $250.6 million designated as held-to-maturity compared to $249.8 million as of December 31, 2024. The slight increase was due primarily to purchases of CRA-eligible agency mortgage-backed securities - residential made in the first quarter 2025, which was partially offset by net paydown activity of corporate and municipal securities. 38 Investment Maturities The following table summarizes the contractual maturity schedule (without regard to repricing schedules) of our investment securities at their amortized cost and their weighted average yields at December 31, 2025. (dollars in thousands) 1 year or less More than 1 year to 5 years More than 5 years to 10 years More than 10 years Total Securities: Amortized Cost Wtd. Avg. Yield 1 Amortized Cost Wtd. Avg. Yield 1 Amortized Cost Wtd. Avg. Yield 1 Amortized Cost Wtd. Avg. Yield 1 Amortized Cost Wtd. Avg. Yield 1 U.S. Government-sponsored agencies $ 1 2.58 % $ 5,853 5.57 % $ 17,123 4.77 % $ 41,322 4.81 % $ 64,299 4.87 % Municipal securities 2,270 3.02 % 9,443 3.29 % 39,367 2.92 % 24,703 2.98 % 75,783 2.99 % Agency mortgage-backed securities - residential — — % 518 1.78 % 8,768 1.95 % 613,961 3.73 % 623,247 3.71 % Agency mortgage-backed securities - commercial — — % 22,703 4.19 % 16,555 4.98 % 25,489 3.69 % 64,747 4.19 % Private-label mortgage-backed securities - residential — — % — — % — — % 124,264 5.06 % 124,264 5.06 % Asset-backed securities — — % — — % — — % 42,492 5.34 % 42,492 5.34 % Corporate securities — — % 29,547 5.65 % 28,652 6.00 % — — % 58,199 5.82 % Total securities $ 2,271 3.02 % $ 68,064 4.80 % $ 110,465 4.24 % $ 872,231 4.03 % $ 1,053,031 4.10 % 1 Weighted-average yields are calculated on a fully-taxable equivalent basis using the federal statutory rate of 21% for 2025. Accrued Income and Other Assets Accrued income and other assets increased $26.1 million, or 41.4%, to $89.1 million at December 31, 2025 compared to $63.0 million at December 31, 2024. The increase was due primarily to increases of $14.5 million in deferred tax assets and $10.4 million in equity investments. Deposits The following table presents the composition of our deposit base as of the end of the last two years. December 31, (dollars in thousands) 2025 2024 Noninterest-bearing deposits $ 146,879 3.0 % $ 136,451 2.8 % Interest-bearing demand deposits 1,120,850 23.2 % 896,661 18.2 % Savings accounts 18,991 0.4 % 19,823 0.4 % Money market accounts 1,272,845 26.3 % 1,183,789 24.0 % Certificates of deposits 2,004,909 41.4 % 2,133,455 43.2 % Brokered deposits 275,339 5.7 % 563,027 11.4 % Total $ 4,839,813 100.0 % $ 4,933,206 100.0 % Total deposits decreased $93.4 million, or 1.9%, to $4.8 billion as of December 31, 2025 compared to $4.9 billion as of December 31, 2024. This decrease was due primarily to decreases of $287.7 million, or 51.1%, in brokered deposits and $128.5 million, or 6.0%, in certificates of deposits, partially offset by increases of $224.2 million, or 25.0%, in interest-bearing demand deposits, $89.1 million, or 7.5%, in money market accounts and $10.4 million, or 7.6%, in noninterest-bearing deposits. The Company experienced strong growth in fintech partnership deposits during 2025, driving the increases in interest-bearing demand and noninterest-bearing deposits. The strong growth, combined with liquidity from the sale of the single tenant lease financing loans, provided the ability to pay down maturing higher-cost brokered deposits and certificates of deposit. Additionally, following the sale of the single tenant lease financing loans, the Company moved a significant amount of fintech partnership deposits off-balance sheet in order to manage the size of the balance sheet and improve profitability and balance sheet metrics. As of December 31, 2025, the Company had $859.9 million of fintech deposits on-balance sheet and $1.1 billion of deposits off-balance sheet, providing flexibility for future funding and liquidity needs. Uninsured deposit balances represented 33% of total deposits at December 31, 2025, up from 25% at December 31, 2024. These balances include Indiana-based municipal deposits, which are insured by the Indiana Board for Depositories, as well as larger balance accounts under contractual agreements that only allow withdrawal under certain conditions. After 39 subtracting these types of deposits, the adjusted uninsured deposit balance drops to 27% as of December 31, 2025, compared to 20% as of December 31, 2024. The following tables present contractual interest rates paid on time deposits and brokered deposits, their scheduled maturities, and the scheduled maturities for time deposits greater than $250,000. Time Deposit Maturities at December 31, 2025 Period to Maturity Percentage of Total Certificate Accounts (dollars in thousands) Less than 1 year > 1 year to 2 years > 2 years to 3 years More than 3 years Total Interest Rate: <1.00% $ 36,510 $ 34,869 $ — $ — $ 71,379 3.3 % 1.00% – 1.99% 8,948 226 — — 9,174 0.4 % 2.00% – 2.99% 810 738 — — 1,548 0.1 % 3.00% – 3.99% 21,209 48,351 1,810 2,100 73,470 3.4 % 4.00% – 4.99% 1,188,886 128,190 106,877 212,455 1,636,408 76.1 % 5.00% – 5.99% 123,118 73,378 59,491 103,359 359,346 16.7 % Total $ 1,379,481 $ 285,752 $ 168,178 $ 317,914 $ 2,151,325 100.0 % Time Deposit Maturities Greater than $250,000 (amounts in thousands) December 31, 2025 Maturity Period: 3 months or less $ 126,586 Over 3 through 6 months 134,091 Over 6 through 12 months 131,163 Over 12 months 213,415 Total $ 605,255 Federal Home Loan Bank Advances Although deposits are the primary source of funds for our lending and investment activities and for general business purposes, we may use short-term advances from the Federal Home Loan Bank of Indianapolis (the “FHLB”) to manage liquidity needs and longer-term advances to supplement deposit growth and manage interest rate risk. The following table is a summary of FHLB borrowings for the periods indicated. At or For The Twelve Months Ended December 31, (dollars in thousands) 2025 2024 Balance outstanding at end of period $ 249,500 $ 295,000 Average amount outstanding during period 316,638 524,143 Maximum outstanding at any month end during period 557,241 614,934 Weighted average interest rate at end of period 3.56 % 3.39 % Weighted average interest rate during period 3.67 % 2.93 % Accrued Expenses and Other Liabilities Accrued expenses and other liabilities decreased $2.6 million, or 14.4%, to $15.4 million at December 31, 2025, compared to $17.9 million at December 31, 2024. The decrease was due primarily to decreases of $3.0 million in accrued salary and benefits and $1.1 million in other accrued expenses, partially offset by increases of $1.1 million in unfunded commitments and $0.4 million in the reserve for unfunded loan commitments 40 Liquidity and Capital Resources Liquidity management is the process used by the Company to manage the continuing flow of funds necessary to meet its financial commitments on a timely basis and at a reasonable cost while also maintaining safe and sound operations. Liquidity, represented by cash and investment securities, is a product of the Company’s operating, investing and financing activities. The primary sources of funds are deposits, principal and interest payments on loans and investment securities, maturing loans and investment securities, access to wholesale funding sources and collateralized borrowings. While scheduled payments and maturities of loans and investment securities are relatively predictable sources of funds, deposit flows are greatly influenced by interest rates, general economic conditions and competition. Therefore, the Company may supplement deposit growth and enhance interest rate risk management through borrowings and wholesale funding, which are generally advances from the Federal Home Loan Bank and brokered deposits. The Company holds cash and investment securities that qualify as liquid assets to maintain adequate liquidity to ensure safe and sound operations and meet its financial commitments. At December 31, 2025, on a consolidated basis, the Company had $1.2 billion in cash and cash equivalents and investment securities available-for-sale, and $108.6 million in loans held-for-sale that were generally available for our cash needs. Importantly, the Company also had access to an additional $1.1 billion in the form of off-balance sheet deposits sold into the IntraFi deposit network. In addition, the Company can generate funds from wholesale funding sources and collateralized borrowings. At December 31, 2025, the Company had the ability to borrow an additional $1.7 billion from the Federal Home Loan Bank, Federal Reserve and correspondent bank Fed Funds lines of credit. The Company is a separate legal entity from the Bank and must provide for its own liquidity. In addition to its operating expenses, the Company is responsible for paying any dividends declared to its common shareholders and interest and principal on outstanding debt. The Company’s primary sources of funds are cash maintained at the holding company level and dividends from the Bank, the payment of which is subject to regulatory limits. At December 31, 2025, the Company, on an unconsolidated basis, had $14.5 million in cash generally available for its cash needs, which is in excess of its current annual regular shareholder dividend and operating expenses. The Company uses its sources of funds primarily to meet ongoing financial commitments, including withdrawals by depositors, credit commitments to borrowers, operating expenses and capital expenditures. At December 31, 2025, approved outstanding loan commitments, including unused lines of credit and standby letters of credit, amounted to $617.6 million. Certificates of deposits and brokered certificates of deposits scheduled to mature in one year or less at December 31, 2025 totaled $1.4 billion. At December 31, 2025, capital ratios for the Company and the Bank were above regulatory requirements for well-capitalized institutions. Refer to “Note 14: Regulatory Capital Requirements” for additional information regarding regulatory capital requirements. Management is not aware of any other events or regulatory requirements that, if implemented, are likely to have a material effect on either the Company’s or the Bank’s liquidity. The following table presents the Company’s significant contractual obligations as of December 31, 2025. Payments Due In (amounts in thousands) Note Reference Less than 1 year 1-3 years 3-5 years More than 5 years Total Deposits and brokered deposits without stated maturity 1 8 $ 2,688,488 $ — $ — $ — $ 2,688,488 Certificates of deposits and brokered deposits 1 8 1,381,591 452,184 317,550 — 2,151,325 FHLB advances 1 9 10,000 89,500 — 150,000 249,500 Subordinated debt 1 10 — — 107,000 — 107,000 Total contractual obligations $ 4,080,079 $ 541,684 $ 424,550 $ 150,000 $ 5,196,313 1 Amounts do not include associated interest payments. On December 19, 2022, the Company's Board of Directors approved a stock repurchase program that authorized the repurchase of up to $25.0 million of our outstanding common stock from time to time on the open market or in privately negotiated transactions. The stock repurchase authorization expired on December 31, 2024. Under the program, the Company repurchased 559,522 shares of common stock, at an average price of $19.06, for a total investment of $10.7 million. 41 On October 20, 2025, the Board of Directors of the Company authorized the repurchase of up to $25.0 million of the Company's outstanding common stock from time to time on the open market or in privately negotiated transactions. Under the program, the Company repurchased 27,998 shares of common stock, at an average price of $18.64, for a total investment of $0.5 million as of December 31, 2025. The stock repurchase authorization is scheduled to expire on September 30, 2027. 42 Reconciliation of Non-GAAP Financial Measures This Management's Discussion and Analysis contains financial information determined by methods other than in accordance with GAAP. Non-GAAP financial measures, specifically tangible common equity, tangible assets, tangible book value per common share, tangible common equity to tangible assets, average tangible common equity, return on average tangible common equity, total interest income - FTE, net interest income - FTE, net interest margin - FTE, adjusted total revenue, pre-provision net revenue, adjusted pre-provision net revenue, adjusted noninterest income, adjusted noninterest expense, adjusted (loss) income before income taxes, adjusted income tax (benefit) provision, adjusted net (loss) income, adjusted diluted earnings per share, adjusted return on average assets, adjusted return on average shareholders’ equity and adjusted return on average tangible common equity are used by the Company's management to measure the strength of its capital and analyze profitability, including its ability to generate earnings on tangible capital invested by its shareholders. The Company also believes that it is standard practice in the banking industry to present total interest income, net interest income and net interest margin on a fully-taxable equivalent basis, as those measures provide useful information for peer comparisons. Although the Company believes these non-GAAP financial measures provide a greater understanding of its business, they should not be considered a substitute for financial measures determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP financial measures that may be presented by other companies. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the following tables for the last three completed fiscal years ended on December 31. 43 (dollars in thousands, except share and per share data) At or For The Twelve Months Ended December 31, 2025 2024 2023 Total equity - GAAP $ 359,767 $ 384,063 $ 362,795 Adjustments: Goodwill (4,687) (4,687) (4,687) Tangible common equity $ 355,080 $ 379,376 $ 358,108 Total assets - GAAP $ 5,571,647 $ 5,737,859 $ 5,167,572 Adjustments: Goodwill (4,687) (4,687) (4,687) Tangible assets $ 5,566,960 $ 5,733,172 $ 5,162,885 Total common shares outstanding 8,686,994 8,667,894 8,644,451 Book value per common share $ 41.41 $ 44.31 $ 41.97 Effect of goodwill (0.54) (0.54) (0.54) Tangible book value per common share $ 40.87 $ 43.77 $ 41.43 Total shareholders’ equity to assets 6.46 % 6.69 % 7.02 % Effect of goodwill (0.08 %) (0.07 %) (0.08 %) Tangible common equity to tangible assets 6.38 % 6.62 % 6.94 % Total average equity - GAAP $ 384,432 $ 377,215 $ 357,800 Adjustments: Average goodwill (4,687) (4,687) (4,687) Average tangible common equity $ 379,745 $ 372,528 $ 353,113 Return on average shareholders' equity (9.15 %) 6.70 % 2.35 % Effect of goodwill (0.11 %) 0.08 % 0.03 % Return on average tangible common equity (9.26 %) 6.78 % 2.38 % Total interest income $ 320,157 $ 291,887 $ 239,442 Adjustments: Fully-taxable equivalent adjustments 1 4,645 4,650 5,233 Total interest income - FTE $ 324,802 $ 296,537 $ 244,675 Net interest income $ 113,760 $ 87,377 $ 74,904 Adjustments: Fully-taxable equivalent adjustments 1 4,645 4,650 5,233 Net interest income - FTE $ 118,405 $ 92,027 $ 80,137 Net interest margin 2.01 % 1.65 % 1.56 % Effect of fully-taxable equivalent adjustments 1 0.08 % 0.09 % 0.11 % Net interest margin - FTE 2.09 % 1.74 % 1.67 % 1 Assuming a 21% tax rate 44 (dollars in thousands, except share and per share data) At or For The Twelve Months Ended December 31, 2025 2024 2023 Total revenue - GAAP $ 116,472 $ 134,722 $ 101,029 Adjustments: Loss on sale of loans 38,234 — — Mortgage-related revenue — — (65) Gain on prepayment of FHLB advances — (1,829) — Gain on termination of interest rate swaps — (2,904) — Adjusted total revenue $ 154,706 $ 129,989 $ 100,964 Net (loss) income - GAAP $ (35,168) $ 25,276 $ 8,417 Adjustments: 1 Provision for credit losses 72,314 17,070 16,653 Income tax (benefit) provision (15,701) 2,266 (3,477) Pre-provision net revenue $ 21,445 $ 44,612 $ 21,593 Pre-provision net revenue $ 21,445 $ 44,612 $ 21,593 Adjustments: 1 Loss on sale of loans 38,234 — — Mortgage-related revenue — — (65) IT termination fees — 357 — Anniversary expenses — 95 — Gain on prepayment of FHLB advances — (1,829) — Gain on termination of swaps — (2,904) — Adjusted pre-provision net revenue $ 59,679 $ 40,331 $ 21,528 Noninterest income - GAAP $ 2,712 $ 47,345 $ 26,125 Adjustments: Loss on sale of loans 38,234 — — Mortgage-related revenue — — (65) Gain on prepayment of FHLB advances — (1,829) — Gain on termination of interest rate swaps — (2,904) — Adjusted noninterest income $ 40,946 $ 42,612 $ 26,060 Noninterest expense - GAAP $ 95,027 $ 90,110 $ 79,436 Adjustments: Mortgage-related costs — — (3,052) IT termination fees — (452) — Anniversary expenses — (120) — Adjusted noninterest expense $ 95,027 $ 89,538 $ 76,384 Income (loss) before income taxes - GAAP $ (50,869) $ 27,542 $ 4,940 Adjustments: 1 Loss on sale of loans 38,234 Mortgage-related revenue — — (65) Mortgage-related costs — — 3,052 Partial charge-off of C&I participation loan — — 6,914 IT termination fees — 452 — Anniversary expenses — 120 — Gain on prepayment of FHLB advances — (1,829) — Gain on termination of interest rate swaps — (2,904) — Adjusted income before income taxes $ (12,635) $ 23,381 $ 14,841 1 Assuming a 21% tax rate 45 (dollars in thousands, except share and per share data) At or For The Twelve Months Ended December 31, (dollars in thousands, except share and per share data) 2025 2024 2023 Income tax (benefit) provision - GAAP $ (15,701) $ 2,266 $ (3,477) Adjustments: 1 Loss on sale of loans 8,785 — — Mortgage-related revenue — — (14) Mortgage-related costs — — 641 Partial charge-off of C&I participation loan — — 1,452 IT termination fees — 95 — Anniversary expenses — 25 — Gain on prepayment of FHLB advances — (384) — Gain on termination of interest rate swaps — (610) — Adjusted income tax (benefit) provision $ (6,916) $ 1,392 $ (1,398) Net (loss) income - GAAP $ (35,168) $ 25,276 $ 8,417 Adjustments: Loss on sale of loans 29,449 — — Mortgage-related revenue — — (51) Mortgage-related costs — — 2,411 Partial charge-off of C&I participation loan — — 5,462 IT termination fees — 357 — Anniversary expenses — 95 — Gain on prepayment of FHLB advances — (1,445) — Gain on termination of interest rate swaps — (2,294) — Adjusted net (loss) income $ (5,719) $ 21,989 $ 16,239 Diluted average common shares outstanding 8,729,970 8,765,725 8,858,890 Diluted (loss) earnings per share - GAAP $ (4.03) $ 2.88 $ 0.95 Adjustments: Effect of loss on sale of loans 3.37 — — Effect of mortgage-related revenue — — (0.01) Effect of mortgage-related costs — — 0.27 Effect of partial charge-off of C&I participation loan — — 0.62 Effect of IT termination fees — 0.04 — Effect of anniversary expenses — 0.01 — Effect of gain on prepayment of FHLB advances — (0.16) — Effect of gain on termination of interest rate swaps — (0.26) — Adjusted diluted (loss) earnings per share $ (0.66) $ 2.51 $ 1.83 Return on average assets (0.60 %) 0.46 % 0.17 % Effect of loss on sale of loans 0.50 % 0.00 % 0.00 % Effect of mortgage-related revenue 0.00 % 0.00 % 0.00 % Effect of mortgage-related costs 0.00 % 0.00 % 0.05 % Effect of partial charge-off of C&I participation loan 0.00 % 0.00 % 0.11 % Effect of IT termination fees 0.00 % 0.01 % 0.00 % Effect of gain on prepayment of FHLB advances 0.00 % (0.03 %) 0.00 % Effect of gain on termination of interest rate swaps 0.00 % (0.04 %) 0.00 % Adjusted return on average assets (0.10 %) 0.40 % 0.33 % 1 Assuming a 21% tax rate 46 (dollars in thousands, except share and per share data) At or For The Twelve Months Ended December 31, (dollars in thousands, except share and per share data) 2025 2024 2023 Return on average shareholders' equity (9.15 %) 6.70 % 2.35 % Effect of loss on sale of loans 7.66 % 0.00 % 0.00 % Effect of mortgage-related revenue 0.00 % 0.00 % (0.01 %) Effect of mortgage-related costs 0.00 % 0.00 % 0.67 % Effect of partial charge-off of C&I participation loan 0.00 % 0.00 % 1.53 % Effect of IT termination fees 0.00 % 0.09 % 0.00 % Effect of anniversary expenses 0.00 % 0.03 % 0.00 % Effect of gain on prepayment of FHLB advances 0.00 % (0.38 %) 0.00 % Effect of gain on termination of interest rate swaps 0.00 % (0.61 %) 0.00 % Adjusted return on average shareholders' equity (1.49 %) 5.83 % 4.54 % Return on average tangible common equity (9.26 %) 6.78 % 2.38 % Effect of loss on sale of loans 7.75 % 0.00 % 0.00 % Effect of mortgage-related revenue 0.00 % 0.00 % (0.01 %) Effect of mortgage-related costs 0.00 % 0.00 % 0.68 % Effect of partial charge-off of C&I participation loan 0.00 % 0.00 % 1.55 % Effect of IT termination fees 0.00 % 0.10 % 0.00 % Effect of anniversary expenses 0.00 % 0.03 % 0.00 % Effect of gain on prepayment of FHLB advances 0.00 % (0.39 %) 0.00 % Effect of gain on termination of interest rate swaps 0.00 % (0.62 %) 0.00 % Adjusted return on average tangible common equity (1.51 %) 5.90 % 4.60 % 47 Critical Accounting Policies and Estimates ACL - Loans Management considers the policies related to the ACL- loans to be critical to the financial statement presentation. The total allowance for credit losses on loans includes activity related to allowances calculated in accordance with Accounting Standards Codification (“ASC”) 326, Financial Instruments - Credit Losses. The ACL for loans represents management's estimate of all expected credit losses over the expected life of the Company’s existing loan portfolio. Management estimates the ACL balance using relevant available information about the collectability of cash flows, from internal and external sources, including historical information relating to past events, current conditions, and reasonable and supportable forecasts of future economic conditions. When the Company is unable to forecast future economic events, management may revert to historical information. Accrued interest receivable on loans 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. ACL - Loans - Collectively Evaluated The ACL is measured on a collective pool basis when similar risk characteristics exist. The Company utilized a discounted cash flow (“DCF”) method to estimate the quantitative portion of the allowance for credit losses for loans evaluated on a collective pooled basis. For each segment, a loss driver analysis was performed in order to identify loss drivers and create a regression model for use in forecasting cash flows. In creating the DCF model, the Company has established a one-year reasonable and supportable forecast period with a one-year straight line reversion to the long-term historical average for most segments. Due to its limited loss history, the Company elected to use peer data for a more reasonable calculation. Key inputs into the DCF model include loan-level detail, including the amortized cost basis of individual loans, payment structure, loss history, and forecasted loss drivers. The Company utilizes a third party to provide economic forecasts under various scenarios, which are assessed quarterly considering the scenarios in the context of the current economic environment and loss risk. Expected credit losses are estimated over the contractual term of the loans and adjusted for prepayments when appropriate. The contractual term excludes 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. Additional key assumptions in the DCF model include the probability of default (“PD”), loss given default (“LGD”), and prepayment/curtailment rates. The Company utilizes the model-driven PD and a LGD derived from a method referred to as Frye Jacobs. The Frye Jacobs method is a mathematical formula that traces the relationship between LGD and PD over time and projects the LGD based on the level of PD forecasted. In all cases, the Frye Jacobs method is utilized to calculate LGDs during the forecast period, reversion period and long-term historical average. Prepayment and curtailment rates were calculated through third party analysis of the Company’s own data. Qualitative factors for the DCF and weighted-average remaining maturity methodologies include the following: • Changes in lending policies and procedures, including changes in underwriting standards and collections, charge-offs and recovery practices • Changes in international, national, regional and local conditions • Changes in the nature and volume of the portfolio and terms of loans • Changes in the experience, depth and ability of lending management • Changes in the volume and severity of past due loans and other similar conditions • Changes in the quality of the organization’s loan review system • Changes in the value of underlying collateral for collateral dependent loans • The existence and effect of any concentrations of credit and changes in the levels of such concentrations 48 • The effect of other external factors (i.e. competition, legal and regulatory requirements) on the level of estimated credit losses ACL - Loans - Individually Evaluated Loans that do not share risk characteristics are evaluated on an individual basis and are excluded from the collective evaluation. The Company has determined that any loans which have been placed on nonaccrual status will be individually evaluated. Individual analysis will establish a specific reserve for loans, if necessary. Specific reserves on nonaccrual loans are typically based on management’s best estimate of the fair value of collateral securing these loans, adjusted for selling costs as necessary. ACL - Off-Balance Sheet Credit Exposures The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The allowance on off-balance sheet credit exposure is recorded as a liability and adjusted as a provision for credit loss expense. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life. Funding rates are based on a historical analysis of the Company’s portfolio, while estimates of credit losses are determined using the same loss rates as funded loans. Recent Accounting Pronouncements Refer to Note 23 to our consolidated financial statements. Off-Balance Sheet Arrangements In the ordinary course of business, we may enter into financial transactions to extend credit, engage in interest rate swaps or other forms of commitments that may be considered off-balance sheet arrangements. Interest rate swaps were arranged to receive hedge accounting treatment and were classified as either fair value or cash flow hedges. Fair value hedges were purchased to convert certain fixed rate assets to floating rate. Cash flow hedges were used to convert certain variable rate liabilities into fixed rate liabilities. At December 31, 2025 and 2024, we had no interest rate swaps that were classified as either fair value or cash flow hedges. Refer to Note 18 to our consolidated financial statements for additional information about derivative financial instruments. 49