What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2026-03-13 compared with 2025-03-12 · 116 added, 163 removed, 425 unchanged (40% of the section changed)

3 unchanged sentences

This discussion and analysis is intended to provide a better understanding of the consolidated financial statements and statistical data included elsewhere in this Annual Report on Form 10-K.

Forward-Looking Statements

Information in this Annual Report on Form 10-K contains certain forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Rule 175 promulgated thereunder, and Section 21E of the Securities Exchange Act of 1934, as amended and Rule 3b-6 promulgated thereunder.

We intend such forward looking statements to be covered by the safe harbor provisions for forward looking statements contained in the Private Securities Litigation Reform Act of 1995, and are included in this statement for purposes of these safe harbor provisions.

Forward-looking statements generally relate to losses, impact of events, financial condition, plans, objectives, outlook for earnings, revenues, expenses, capital and liquidity levels and ratios, asset levels, asset quality, financial position, and other matters regarding or affecting the Corporation and its future business and operations.

Forward-looking statements are typically identified by words or phrases such as “will likely result", “expect”, “plan”, “believe”, “estimate”, “anticipate”, “strategy”, “trend”, “forecast”, “outlook”, “project”, “intend”, “assume”, “outcome”, “continue”, “remain”, “potential”, “opportunity”, “comfortable”, “current”, “position”, “maintain”, “sustain”, “seek”,“achieve” and variations of such words and similar expressions, or future or conditional verbs such as will, would, should, could or may.

Although we believe the assumptions upon which these forward-looking statements are based are reasonable, any of these assumptions could prove to be inaccurate and the forward-looking statements based on these assumptions could be incorrect.

The matters discussed in these forward-looking statements are subject to various risks, uncertainties and other factors that could cause actual results and trends to differ materially from those made, projected, or implied in or by the forward-looking statements depending on a variety of uncertainties or other factors described in this report, or included in any subsequent filing by the Corporation with the Securities and Exchange Commission.

Forward-looking statements are based on beliefs and assumptions using information available at the time the statements are made.

The Corporation cautions you not to unduly rely on forward-looking statements because the assumptions, beliefs, expectations and projections about future events may, and often do, differ materially from actual results.

Any forward-looking statement speaks only as to the date on which it is made, and we undertake no obligation to update any forward-looking statement to reflect developments occurring after the statement is made.

Non-GAAP Financial Measures

2 unchanged sentences

Non-GAAP financial measures do not include operating and other statistical measures or ratios, or statistical measures calculated using exclusively either financial measures calculated in accordance with GAAP, operating measures or other measures that are not non-GAAP financial measures or both.

The non-GAAP financial measures that we discuss in this Annual Report on Form 10-K should not be considered in isolation or as a substitute for the most directly comparable or other financial measures calculated in accordance with GAAP.

We believe that, from time to time, these non-GAAP financial measures provide additional understanding of ongoing operations, enhance the comparability of our results of operations with prior periods and show the effects of significant gains and charges in the periods presented without the impact of items or events that may obscure trends in our underlying performance.

However, there may be limits in the usefulness of these measures to investors.

The way we calculate the non-GAAP financial measures that we discuss in this Annual Report on Form 10-K may differ from that of other companies reporting measures with similar names.

Investors should understand how such other banking organizations calculate their financial measures similar to, or with names like, the non-GAAP financial measures we have discussed in this Annual Report on Form 10-K when comparing such non-GAAP financial measures.

As a result, the non-GAAP financial measures that we discuss in this Annual Report on Form 10-K should not be considered in isolation or as a substitute for the most directly comparable or other financial measures calculated in accordance with GAAP.

Moreover, the manner in which we calculate the non-GAAP financial measures that we discuss in this report may differ from that of other companies reporting measures with similar names.

Ta ble of Contents

Executive Summary

Comparison of Operating Results for the year ended December 31, 2024 and 2023

We reported net income for the year ended December 31, 2024 of $13,889, or $1.86 per diluted share, compared with $18,167, or $2.40 per diluted share, for the same period of 2023.

The non-GAAP measure of net income was $15,016, or $2.01 per diluted share, compared to $17,989, or $2.37 per diluted share, for the respective periods.

The adjusted net income for 2024 excludes a net charge-off of $1,556 related to overdrawn deposit accounts from a single customer.

The decrease in adjusted net income primarily reflects the impact on net interest income due to slower repricing of earning assets as compared to the rising costs of interest bearing liabilities.

The decrease in net income for the comparative periods also included an increase in provision for credit losses and compensation expenses.

Net interest income was $55,835 in 2024 compared with $57,944 in the same period of 2023.

Comparison of Operating Results for the years ended December 31, 2025 and December 31, 2024

We reported net income for the year ended December 31, 2025 of $18,910, or $2.56 per diluted share, compared with $13,889, or $1.86 per diluted share, for the year ended December 31, 2024.

Net income in 2025 was impacted by a $1,556 recovery of an overdrawn deposit account that was charged off in 2024.

The impact to diluted earnings per share was a favorable $0.17 in 2025 and an unfavorable $0.16 in 2024.

Net interest income was $62,544 for the year ended December 31, 2025 compared with $55,835 for the year ended December 31, 2024.

The comparison of NIM and yield on interest earning assets were 3.16% and 4.84% compared to 2.90%, and 4.65% for 2025 and 2024, respectively.

1 unchanged sentence

The weighted average maturity of our U.S.

Treasury portfolio is less than 1.4 years, and the proceeds are expected to be reinvested in market rate loans and securities, or to pay off borrowed funds.

The yield on loans expanded to 5.58%, from 5.02% due to higher rates on new loans and fixed rate commercial loans that have and continue to reprice to variable rates.

At the end of 2024, approximately 40% of commercial loans were fixed at rates lower than current market rates, but the majority will contractually reprice to variable rates over the next four years.

Our cost of interest bearing liabilities increased to 2.37% from 1.57% in 2023, but have stabilized in comparison to the first half of the year.

The provision for credit losses for the year ended December 31, 2024 was $1,884, compared to $629 for the same period in 2023.

The provision for 2024 includes the recovery of contractual principal of two previously charged-off commercial loans totaling $314.

Given these loan recoveries, our historical loss rate experience improved which provided a benefit of $435.

The benefits were offset by a $1,556 net charge-off related to an overdrawn deposit account from a single customer and additional reserves for core loan growth.

Noninterest income for the year ended December 31, 2024 was $14,576, an increase of $749, or 5.4%, in comparison to 2023.

Wealth management fees grew $484, or 13.6%, due to higher assets under management.

Treasury portfolio is less than one year, and the proceeds are expected to be reinvested in market rate loans and securities or to pay off borrowed funds.

The yield on loans increased to 5.75%, from 5.58% in 2024 due to higher rates on new loans and variable rate commercial loans that continue to reprice.

Our cost of interest bearing liabilities decreased to 2.25% from 2.37% in 2024 due to lower rates on the money market and certificate of deposit products.

The provision for credit losses for the year ended December 31, 2025 was a reversal of $563, compared to a provision of $1,884 for the year ended December 31, 2024.

The credit reversal in 2025 includes recoveries of $2,268, which includes a $1,556 recovery related to overdrawn deposit accounts from a single customer that were charged off in 2024.

The provision for loan losses in 2025 was also impacted by loan growth.

While credit quality remained strong with low levels of past due and nonaccrual loans and net charge offs, we continue to closely monitor credit quality.

Noninterest income for the year ended December 31, 2025 was $15,966, an increase of $1,390, or 9.5%, compared to 2024.

Earnings on BOLI policies increased $618 due to new investments in a separate account BOLI, which was offset in part by a one-time expenses of $120 due to restructuring charges.

Service charges and fees increased $583 and was mostly the result of internal initiatives designed to align our fees within our market.

Wealth management fees also grew $206 due to growth in assets under management.

Managed assets increased $49,076 driven by growth in new accounts and higher security valuations.

Customer service fees increased $329, based on a higher number of transaction accounts.

Noninterest expenses were $52,129 for the year ended December 31, 2024, increasing $2,819 when compared to the same period in 2023.

Annual merit increases and medical claims resulted in a $2,671 increase in compensation and benefits.

Our efficiency ratio was 73.01% in 2024 compared to 67.76% in 2023 and the increase primarily reflects lower NIM and a relatively stable base of noninterest expense.

Noninterest expenses for the year ended December 31, 2025 were $54,950, an increase of $2,821, or 5.4%, compared to 2024.

Annual merit increases, increased incentives, and higher medical claims resulted in a $1,465 increase in compensation and benefits.

Other professional services increased by $1,028 as a result of an increased utilization of outsourced services as well as additional costs related to profitability initiatives.

Income tax expense for the year ended December 31, 2025 was $5,213, an increase of $2,704, or 107.8%, compared to 2024.

The ETR was 22% for the year ended 2025 and 15% for the year ended 2024.

Income tax expense in 2025 included a one-time expense totaling $942 to write-off deferred tax assets and a one-time expense totaling $195 related to taxes owed from the lifetime earnings on BOLI policies that were surrendered during the year.

Excluding the one-time charges during 2025, the ETR was 17%, which is higher than the prior year due primarily to higher pretax income and a decline in tax credits.

Financial Condition (December 31, 2025 to December 31, 2024 comparison)

Total assets were $2,086,241 at December 31, 2024, increasing $27,273 due to loan growth funded by deposits and amortization of AFS securities.

Our AFS securities portfolio totaled $489,029 at December 31, 2024, declining $39,119 due to municipal maturities and principal paydowns on mortgage-related securities.

Net unrealized losses on our AFS securities portfolio were $26,487 at December 31, 2024, improving $5,339 since December 31, 2023.

Net unrealized losses as a percentage of total AFS securities improved to 5.1% from 5.7% at the end of 2023 due to an increase in bond yields.

Bond rates may vary from quarter to quarter, however, unrealized losses are expected to decrease as most of the bond portfolio approaches its maturity over the next two years.

Loans outstanding as of December 31, 2024 totaled $1,423,571, increasing $74,108 since December 31, 2023.

Growth during 2024 was driven by an increase of $44,539 in advances to mortgage brokers, $35,156 in commercial and industrial loans, and $24,454 in residential loans, offset by a $16,797 decrease in commercial real estate loans.

The growth in commercial and industrial loans primarily was in the hotel management and construction industries.

The increase in residential loans was related to steady new volume and continued slowing of prepayments.

The decline in commercial real estate loans during 2024 included a $6.4 payoff during the fourth quarter on a relationship that had an elevated credit risk as well as declines in the multifamily real estate, healthcare, and hotel industries.

Core loans, which excludes advances to mortgage brokers, grew $29,569 or 2.2%.

The ACL was $12,895 at December 31, 2024, a decrease of $213 from $13,108 at December 31, 2023.

Most of the decrease is due to improvement in historical loss experience, which was driven by the recovery of previously charged-off loans during the

Ta ble of Contents

This improvement was offset by core loan growth and the impact from a few commercial loans totaling $33,875 that migrated to a special mention risk rating during the fourth quarter.

The downgraded loans are well collateralized and are not an indication of a negative trend in the broader portfolio.

Nonaccrual loans were $282 as of December 31, 2024 compared to $982 at December 31, 2023.

Past due and accruing accounts between 30 to 89 days as a percentage of total loans was 0.40% at December 31, 2024, compared to 0.29% at year-end 2023.

Overall, credit quality remains strong, and there are no negative trends.

Total deposits were $1,747,060 as of December 31, 2024, increasing $23,365, or 1.4%, from December 31, 2023.

Retail certificates of deposit accounts were up $41,217, driven by continued demand due to the rate environment.

Interest bearing demand deposits increased $20,629, while savings and demand deposits declined $26,349 and $12,132, respectively.

The decline in savings products was driven in part by expected outflows of businesses and municipalities to fund large, regional projects and disintermediation into higher yielding accounts.

Total equity was $210,276 at December 31, 2024 compared to $202,402 at year-end 2023.

Our tangible book value per share was $21.82 as of December 31, 2024, compared to $20.59 on December 31, 2023.

Total assets were $2,209,448 as of December 31, 2025, an increase of $123,207, or 5.9%, compared to December 31, 2024.

This increase is primarily attributable to loan growth, an increase in BOLI policies, and an increase in the fair value of AFS securities.

Our AFS securities portfolio totaled $497,791 as of December 31, 2025, an increase of $8,762, or 1.8%, since December 31, 2024.

The increase during the year was largely driven by purchases of $67,348 and an improvement in unrealized losses of $16,589, partially offset by amortizations, prepayments, and maturities totaling $75,175.

Net unrealized losses on our AFS securities portfolio were $9,898 at December 31, 2025 compared to $26,487 at December 31, 2024.

Net unrealized losses as a percentage of total AFS securities decreased to 1.9% from 5.1% at the end of 2024 primarily due to the treasury portfolio rapidly approaching maturity.

Loans outstanding as of December 31, 2025 totaled $1,536,364, an increase of $112,793, or 7.9%, since December 31, 2024.

During 2025, the commercial real estate and commercial and industrial portfolios grew $48,040 and $19,827, respectively.

Residential mortgages increased $47,008 since year-end 2024.

Most residential mortgage originations were adjustable-rate loans, which are retained rather than sold in the secondary market.

The growth was offset by a $18,093 decline in consumer loans amid decreasing demand, competition, and an adherence to credit quality standards.

Loans, excluding advances to mortgage brokers, grew $99,197 or 7.3%.

The ACL was $13,727 as of December 31, 2025, an increase of $832, or 6.5%, compared to December 31, 2024.

The increase reflects loan growth and an increase of specific reserves, offset by improvement in historical loss experience driven by the recovery of previously charged-off loans during the year.

Nonaccrual loans remained low at $4,578 as of December 31, 2025 compared to $282 at December 31, 2024.

The increase in nonaccrual loans related to one well-secured loan of $3,000 at December 31, 2025.

Past due and accruing accounts between 30 to 89 days, as a percentage of total loans, were 0.44% at December 31, 2025 compared to 0.40% at December 31, 2024.

Overall credit quality remains strong.

BOLI totaled $46,133 as of December 31, 2025, an increase of $11,251, or 32.3%, from December 31, 2024.

The growth was primarily attributed to a $10,583 investment of new policies in 2025.

During 2025, we also surrendered and/or exchanged over $13,000 of existing general account policies and redeployed the funds into a separate account BOLI structure, which yields a higher rate compared to existing general account policies.

Total deposits were $1,819,654 as of December 31, 2025, an increase of $72,594, or 4.2%, from December 31, 2024.

Interest bearing demand deposit accounts increased by $28,639 during 2025.

Consumer demand for retail certificates of deposit accounts continues to be strong based on the current market interest rate environment, resulting in a $22,474 increase during the year.

Total equity was $231,396 as of December 31, 2025 compared to $210,276 as of December 31, 2024.

Our tangible book value per share (non-GAAP) was $25.01 as of December 31, 2025, compared to $21.82 on December 31, 2024.

Net unrealized losses on AFS securities reduced tangible book value per share by $1.09 and $2.82 for the respective periods.

3 unchanged sentences

the Tier 1 Leverage Ratio was 8.84%, Tier 1 risk-based capital was 11.73%, and Total risk-based capital was 14.41%.

Reclassifications

Certain amounts reported in management's discussion and analysis of financial condition and results of operations for 2023 and 2022 have been reclassified to conform with the 2024 presentation.

Subsequent Events

We evaluated subsequent events after December 31, 2024 through the date our consolidated financial statements were issued for potential recognition and disclosure.

No subsequent events require financial statement recognition or disclosure between December 31, 2024 and the date our consolidated financial statements were issued.

We have not received, nor are aware of, any notices of regulatory actions as of March 12, 2026.

Ta ble of Contents

Selected Financial Data

3 unchanged sentences

Diluted earnings 2.56 1.86 2.40

Adjusted diluted earnings (1)

2.01 2.37 2.91

Dividends 1.12 1.12 1.12

7 unchanged sentences

Return on average total assets 0.88 % 0.67 % 0.89 %

Adjusted return on average total assets (1)

0.72 % 0.88 % 1.08 %

Return on average shareholders' equity 8.51 % 6.73 % 9.52 %

Adjusted return on average shareholders' equity (1)

7.28 % 9.43 % 11.40 %

Return on average tangible shareholders' equity (2)

Adjusted return on average tangible shareholders' equity (1)

10.87 % 8.78 % 12.75 %

Net interest margin yield (FTE) 3.16 % 2.90 % 3.05 %

2.90 % 3.05 % 3.18 %

Efficiency ratio (2)

69.11 % 73.01 % 67.76 %

Gross loan to deposit ratio (2)

Loan to deposit ratio (1)

84.43 % 81.48 % 78.29 %

3 unchanged sentences

8.47 % 7.95 % 7.66 %

FINANCIAL DATA (in millions)

FINANCIAL DATA

Total assets (1)

1 unchanged sentence

AFS securities (1)

Gross loans (2)

497,791 489,029 528,148

1,536,364 1,423,571 1,349,463

13,727 12,895 13,108

1,819,654 1,747,060 1,723,695

Borrowed funds (1)

142,514 112,991 116,136

Shareholders' equity (1)

231,396 210,276 202,402

Wealth assets under management (1)

707,118 658,042 641,027

Net income 18,910 13,889 18,167

2 unchanged sentences

Net interest income 62,544 55,835 57,944

Provision for credit losses 2 1 —

Provision (reversal) for credit losses (563) 1,884 629

Noninterest income 15,966 14,576 13,827

Noninterest expenses 54,950 52,129 49,310

(1) Non-GAAP financial measure;

refer to the "Recconcilation of Non-GAAP Financial Measures" section

(1) At end of period.

Ta ble of Contents

(2) Non-GAAP financial measure;

refer to the "Reconciliation of Non-GAAP Financial Measures" section.

CRITICAL ACCOUNTING POLICIES

11 unchanged sentences

Additionally, changes in factors and inputs may be directionally inconsistent, such that improvement in one factor may offset deterioration in others.

However, to consider the impact of a hypothetical stressed forecast, we estimated the ACL using forecast inputs that were severely unfavorable to the expected scenario for the external factors related to economic conditions, the value of underlying collateral, and the volume and severity of past due, nonaccrual, and adversely classified loans.

This stress scenario resulted in an ACL that is approximately $4,500 higher than the recorded ACL as of December 31, 2024.

For additional discussion concerning our ACL and related matters, see “ACL - Loans” and “Note 3 – Loans and ACL” of “Notes to Consolidated Financial Statements” in Item 8.

5 unchanged sentences

Once valuations have been determined, the net difference between the price paid for the acquired entity and the net value of assets acquired on our balance sheet, including identifiable intangibles, is recorded as goodwill.

Acquisition intangibles and goodwill are qualitatively and quantitatively evaluated annually to determine if it is more likely than not that the carrying balance is impaired on at least an annual basis.

Acquisition intangibles and goodwill are qualitatively and quantitatively evaluated annually to determine if it is more likely than not that the carrying balance is impaired.

Based on the analysis completed, it was determined that our estimated fair value of Isabella Bank and Isabella Bank Corporation at December 31, 2025 was greater than our recorded book value and no impairment of goodwill was identified.

8 unchanged sentences

If these conditions are not met, the security is evaluated to determine whether the decline in fair value has resulted from credit losses or other factors.

Ta ble of Contents

Average Balances, Interest Rates, and Net Interest Income

23 unchanged sentences

Interest bearing demand deposits $ 240,220 817 0.34 % $ 237,086 754 0.32 % $ 256,907 269 0.10 %

Money market deposits 473,394 12,219 2.58 % 443,251 12,407 2.80 % 424,077 8,320 1.96 %

Savings 286,134 2,140 0.75 % 279,544 1,600 0.57 % 291,918 787 0.27 %

11 unchanged sentences

Net interest income (FTE) (4)

$ 63,188 $ 56,765 $ 58,967

Net yield on interest earning assets (FTE) (4)

2 unchanged sentences

(2) Average balances for AFS securities are based on amortized cost.

(3) Includes average interest-bearing deposits with other banks, net of Federal Reserve daily cash letter

(3) Includes average interest bearing deposits with other banks, net of FRB daily cash letter.

(4) Non-GAAP financial measure;

refer to the "Non-GAAP Financial Measures" section

Ta ble of Contents

refer to the "Reconciliation of Non-GAAP Financial Measures" section.

Volume and Rate Variance Analysis

18 unchanged sentences

Interest bearing demand deposits 10 53 63 (22) 507 485

Money market deposits 813 (1,001) (188) 392 3,695 4,087

Savings 39 501 540 (35) 848 813

6 unchanged sentences

Net change in interest margin (FTE) $ 1,678 $ 4,745 $ 6,423 $ (701) $ (1,501) $ (2,202)

Ta ble of Contents

The following table displays loan balances for the years ended December 31:

19 unchanged sentences

Balance Percent of Total Balance Percent of Total

Non-owner occupied $ 122,280 22.34 % $ 129,016 22.87 %

1-4 family investor 92,497 16.90 % 89,208 15.81 %

Multifamily 68,456 12.50 % 78,108 13.84 %

Owner occupied 25,286 4.62 % 27,758 4.92 %

Investment and development $ 134,013 20.95 % $ 138,232 23.36 %

1-4 family residential investment 93,806 14.66 % 86,736 14.66 %

Hotels 90,571 14.16 % 83,756 14.15 %

Residential multifamily 71,695 11.21 % 61,033 10.31 %

Health care 59,573 9.31 % 50,083 8.46 %

Storage facilities 37,145 5.81 % 20,507 3.47 %

Retail trade 34,479 5.39 % 35,063 5.93 %

Manufacturing 18,281 2.86 % 17,030 2.88 %

Construction 16,193 2.53 % 12,825 2.17 %

Accommodation services 15,604 2.44 % 16,804 2.84 %

Educational services 11,160 2.04 % 11,589 2.05 %

Wholesale trade 11,123 1.74 % 11,073 1.87 %

Construction 8,422 1.54 % 5,079 0.90 %

Educational services 10,582 1.65 % 11,160 1.89 %

Other 46,693 7.29 % 47,416 8.01 %

4 unchanged sentences

Our practices also include appropriate loan reviews, and monitoring of past due levels, concentrations, industry trends, and other qualitative factors.

Ta ble of Contents

The following table illustrates the amounts of the ACL and ALLL allocated to each loan segments to gross loans as of December 31:

The following table illustrates the amounts of the ACL and ALLL allocated to each loan segments to loans as of December 31:

2025 2024 2023 2022 2021

ACL Allocation % of Gross Loans ACL Allocation % of Gross Loans ALLL Allocation % of Gross Loans ALLL Allocation % of Gross Loans ALLL Allocation % of Gross Loans

ACL Allocation % of Loans ACL Allocation % of Loans ALLL Allocation % of Loans ALLL Allocation % of Loans ALLL Allocation % of Loans

Commercial and Industrial $ 1,136 14.35 $ 1,316 14.09 $ 968 13.62 $ 860 13.64 $ 680 13.21

11 unchanged sentences

Financial Statements and Supplementary Data.

Ta ble of Contents

AFS Securities

24 unchanged sentences

Interest bearing demand deposits 266,187 237,548 241,656 281,369 273,065

Money market deposits 436,631 423,883 423,638 411,394 395,078

Savings 280,429 281,665 283,522 305,126 293,082

6 unchanged sentences

Interest bearing demand deposits 28,639 12.06 % (4,108) (1.70) % (39,713) (14.11) %

Money market deposits 12,748 3.01 % 245 0.06 % 12,244 2.98 %

Savings (1,236) (0.44) % (1,857) (0.65) % (21,604) (7.08) %

1 unchanged sentence

Total $ 72,594 4.16 % $ 23,365 1.36 % $ (20,580) (1.18) %

Ta ble of Contents

The following table presents estimated balances of uninsured deposits as of December 31:

11 unchanged sentences

Total $ 67,675

Ta ble of Contents

Asset Quality Analysis

13 unchanged sentences

Total nonperforming assets $ 5,516 $ 845 $ 1,487

Nonperforming loans to gross loans 0.02 % 0.08 % 0.04 %

Nonperforming loans to total loans 0.30 % 0.02 % 0.08 %

Nonperforming assets to total assets 0.25 % 0.04 % 0.07 %

Nonaccrual loans to gross loans 0.02 % 0.07 % 0.04 %

ACL as a % of nonaccrual loans N/M N/M N/M

Nonaccrual loans to total loans 0.30 % 0.02 % 0.07 %

ACL as a % of nonaccrual loans 299.85 % N/M N/M

ALLOWANCE FOR CREDIT LOSSES

4 unchanged sentences

Net loan charge-offs (recoveries) (1,376) 1,900 115

Provision for credit losses - loans 1,687 629 483

Provision (reversal) for credit losses - loans (544) 1,687 629

Allowance at end of period $ 13,727 $ 12,895 $ 13,108

ACL to gross loans 0.91 % 0.97 % 0.78 %

ACL to loans 0.89 % 0.91 % 0.97 %

Reserve for unfunded commitments 493 512 315

Provision for credit losses - unfunded commitments 197 — —

Provision (reversal) for credit losses - unfunded commitments (19) 197 —

Reserve to unfunded commitments 0.14 % 0.15 % 0.10 %

13 unchanged sentences

Total past due and nonaccrual loans $ 11,267 $ 5,983 $ 4,964

Ta ble of Contents

Capital consists solely of common stock, retained earnings, and accumulated other comprehensive income (loss).

4 unchanged sentences

We also grant restricted stock awards pursuant to the RSP.

Pursuant to this plan, we increased shareholders’ equity by $95 and $253 during 2024 and 2023.

Pursuant to the RSP, we increased shareholders’ equity by $64 and $95 during 2025 and 2024.

We have publicly announced a common stock repurchase plan.

4 unchanged sentences

Regulatory capital is divided by the risk adjusted assets with the resulting ratio compared to the minimum standard to determine whether a corporation has adequate capital.

At December 31, 2025, we and the Bank were “well capitalized” under the regulatory framework for prompt corrective action.

Management believes that no conditions or events have occurred since December 31, 2025 that would materially adversely change such capital classifications.

From time to time, we may need to raise additional capital to support our and the Bank’s further growth and to maintain our “well capitalized” status.

The following table sets forth these requirements and our ratios as of December 31:

4 unchanged sentences

Tier 1 leverage 8.84 % 4.00 % 5.00 % 8.86 % 4.00 % 5.00 %

(1) “Well-capitalized” minimum Common Equity Tier 1 to Risk-Weighted and Leverage Ratio are not formally defined under applicable regulations for bank holding companies.

Liquidity is monitored regularly by our ALCO, which consists of members of senior management.

The committee reviews projected cash flows, key ratios, and liquidity available from both primary and secondary sources.

The ALCO reviews projected cash flows, key ratios, and liquidity available from both primary and secondary sources.

Our primary sources of liquidity are retail deposits, cash and cash equivalents, and unencumbered AFS securities.

These categories totaled $330,876 or 15.86% of assets as of December 31, 2024, compared to $381,417 or 18.52% as of December 31, 2023.

The decline in the amount and percentage of primary liquidity is a direct result of an increase in loans and a decrease in unencumbered AFS securities collateralizing non-market funding.

Cash, cash equivalents, and unencumbered AFS securities totaled $337,011 or 15.25% of assets as of December 31, 2025, compared to $330,876 or 15.86% as of December 31, 2024.

The decline in the percentage of primary liquidity is a direct result of an increase in loans and other assets.

Liquidity is important for financial institutions because of their need to meet loan funding commitments, depositor withdrawal requests, and various other commitments including expansion of operations, investment opportunities, and payment of cash dividends.

Based on these same factors, daily liquidity could vary significantly.

Our secondary sources include the ability to borrow from the FHLB, from the FRB, and through various correspondent banks in the form of federal funds purchased and a line of credit.

Our secondary sources include the ability to borrow from the FHLB, from the FRB, and through various correspondent banks in the form of federal funds purchased and lines of credit.

These funding methods typically carry a higher interest rate than traditional market deposit accounts.

4 unchanged sentences

Our liquidity stress testing is designed with consideration of these and other factors that could pose undue risk to liquidity.

Ta ble of Contents

Our liquidity position remained strong at the end of 2025.

16 unchanged sentences

AFS securities, cash flow hedge derivative instruments and certain liabilities are recorded at fair value on a recurring basis.

Additionally, from time to time, we may be required to record at fair value other assets on a nonrecurring basis, such as mortgage loans AFS, impaired loans, goodwill, foreclosed assets, OMSR, and certain other assets and liabilities.

Additionally, from time to time, we may be required to record at fair value other assets on a nonrecurring basis, such as mortgage loans AFS, collateral dependent loans, goodwill, foreclosed assets, OMSR, and certain other assets and liabilities.

These nonrecurring fair value adjustments typically involve the application of lower of cost or market accounting or write downs of individual assets.

1 unchanged sentence

Financial Statements and Supplementary Data.

Our primary market risks are interest rate risk and liquidity risk.

As a financial institution, our primary market risks are interest rate risk and liquidity risk.

IRR is the exposure of our net interest income to changes in interest rates.

5 unchanged sentences

We have policies, procedures, and internal controls for measuring and managing these risks.

Specifically, our ALCO policy and procedures include defining acceptable types and terms of investments and funding sources, liquidity requirements, limits on investments in long-term assets, limiting the mismatch in repricing opportunities of assets and liabilities, and the frequency of measuring and reporting to our Board of Directors.

The primary technique to measure IRR is simulation analysis.

7 unchanged sentences

We regularly monitor our projected net interest income sensitivity to ensure that it remains within established limits.

Ta ble of Contents

The following tables summarize our interest rate sensitivity for 12 and 24 months as of December 31, 2024 and 2023.

The results displayed in the tables reflect the modeling of immediate shifts in the yield curve and a flat balance sheet and do not reflect actual or expected changes.

December 31, 2024

12 Months 24 Months

Immediate basis point change assumption (short-term) -200 -100 100 200 -200 -100 100 200

Percent change in net interest income vs.

constant rate (3.44) % (1.55) % 1.45 % 2.83 % (4.67) % (2.18) % 1.22 % 2.00 %

December 31, 2023

12 Months 24 Months

Immediate basis point change assumption (short-term) -200 -100 100 200 -200 -100 100 200

Percent change in net interest income vs.

constant rate 0.94 % 0.49 % (0.54) % (1.07) % 1.41 % 0.97 % (0.61) % (1.37) %

Gap analysis, the secondary method to measure IRR, measures the cash flows and/or the earliest repricing of our interest bearing assets and liabilities.

7 unchanged sentences

Certificates of deposit have penalties that discourage early withdrawals.

Gap analysis is also used as a method to measure interest rate sensitivity.

Interest rate sensitivity is determined by the amount of earning assets and interest bearing liabilities repricing within a specific time period, and their relative sensitivity to a change in interest rates.

We strive to achieve reasonable stability in the net interest margin through periods of changing interest rates.

We do not believe there has been a material change in the nature or categories of our primary market risk exposure, or the particular markets that present the primary risk of loss.

1 unchanged sentence

We may change those methods in the future to adapt to changes in circumstances or to implement new techniques.

Gap analysis is also utilized as a method to measure interest rate sensitivity.

We strive to achieve reasonable stability in the net interest margin through periods of changing interest rates.

Ta ble of Contents

The following table shows the maturity of loans outstanding at December 31, 2025 based on contractual terms.

34 unchanged sentences

Financial Statements and Supplementary Data.

Ta ble of Contents

Reconciliation of Non-GAAP Financial Measures

The following tables provide a detailed analysis, and reconciliation for, our non-GAAP financial measures as of, and for the years ended December 31:

The following table provides a detailed analysis, and reconciliation for, our non-GAAP financial measures as of, and for the years ended December 31:

2025 2024 2023

Net income $ 13,889 $ 18,167 $ 22,238

Nonrecurring items

Net gains on sale of AFS securities — 67 —

Net gains on foreclosed assets 153 158 13

Overdraft (charge-off) recoveries (1)

Profitability initiative cost (23) — —

Income tax impact 299 (47) (3)

Total nonrecurring items (1,127) 178 10

Adjusted net income (A) $ 15,016 $ 17,989 $ 22,228

Loans $ 1,536,364 $ 1,423,571 $ 1,349,463

Advances to mortgage brokers 76,676 63,080 18,541

Adjusted loans $ 1,459,688 $ 1,360,491 $ 1,330,922

Total shareholders’ equity $ 231,396 $ 210,276 202,402

Goodwill and other intangible assets 48,282 48,283 48,284

Tangible equity (A) 183,114 161,993 154,118

Common shares outstanding (1)

(B) 7,322,207 7,424,893 $ 7,485,889

Tangible book value per share (A/B) $ 25.01 $ 21.82 $ 20.59

Noninterest expenses $ 54,950 $ 52,129 $ 49,310

Amortization of acquisition intangibles 1 1 3

Adjusted noninterest expense (B) $ 52,128 $ 49,307 $ 46,805

Adjusted noninterest expense (C) $ 54,949 $ 52,128 $ 49,307

Net interest income $ 62,544 $ 55,835 $ 57,944

Tax equivalent adjustment for net interest margin 644 930 1,023

Net interest income (FTE) (C) 56,765 58,967 61,537

Net interest income (FTE) 63,188 56,765 58,967

Noninterest income 15,966 14,576 13,827

Tax equivalent adjustment for efficiency ratio 211 193 186

Tax equivalent adjustment for BOLI 341 211 193

Adjusted revenue (FTE) 79,495 71,552 72,987

Nonrecurring items

Net gains on sale of AFS securities — — 67

Net gains on foreclosed assets 153 158 13

Total nonrecurring items 153 225 13

Net gains (losses) on foreclosed assets (18) 153 158

Adjusted revenue (D) $ 79,513 $ 71,399 $ 72,762

Efficiency ratio (B/D) 73.01 % 67.76 % 62.10 %

Average earning assets (E) 1,955,919 1,933,431 1,933,262

Net yield on interest earning assets (FTE) (C/E) 2.90 % 3.05 % 3.18 %

Average assets (F) 2,081,011 2,046,147 2,054,964

Average shareholders' equity (G) 206,401 190,767 194,958

Average tangible shareholders' equity (H) 158,118 142,482 146,663

Average diluted shares outstanding (2)

(I) 7,482,374 7,575,492 7,647,612

Adjusted diluted earnings per share (A/I) $ 2.01 $ 2.37 $ 2.91

Adjusted return on average assets (A/F) 0.72 % 0.88 % 1.08 %

Adjusted return on average shareholders' equity (A/G) 7.28 % 9.43 % 11.40 %

Adjusted return on average tangible shareholders' equity (A/H) 9.50 % 12.63 % 15.16 %

(1) Includes provision for credit losses related to overdrawn deposit accounts from a single customer in the third quarter of 2024.

Efficiency ratio (C/D) 69.11 % 73.01 % 67.76 %

(1) Whole shares.

2 unchanged sentences

Management’s Discussion and Analysis of Financial Condition and Results of Operations is incorporated herein by reference.

Ta ble of Contents

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis