What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-05-06 compared with 2025-11-10 · 140 added, 211 removed, 305 unchanged (54% of the section changed)

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(Dollars in thousands except per share amounts and ratios, unless otherwise noted)

The following is management's discussion and analysis of our financial condition and results of operations for the unaudited periods covered by this Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2025 (this “Form 10-Q”).

This analysis should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2024, as filed with the SEC on March 12, 2025 (the “2024 Annual Report on Form 10-K”) and with the unaudited interim condensed consolidated financial statements and notes, beginning on page 4 of this Form 10-Q.

The following is management's discussion and analysis of our financial condition and results of operations for the unaudited periods covered by this Form 10-Q.

This analysis should be read in conjunction with our 2025 Annual Report on Form 10-K and with the unaudited interim condensed consolidated financial statements and notes, beginning on page 4 of this Form 10-Q.

Unless we state otherwise or the context otherwise requires, references in this Form 10-Q to “we,” “our,” “us,” and “the Corporation” refer to Isabella Bank Corporation, a Michigan corporation and registered financial holding company, our wholly-owned banking subsidiary, Isabella Bank, and our other consolidated subsidiaries.

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The area includes significant agricultural production, manufacturing, retail, gaming and tourism, and several colleges and universities.

Cautionary Notice Regarding Forward-Looking Statements

Forward-Looking Statements

This Form 10-Q contains statements that we believe are “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

These forward-looking statements reflect our current views with respect to, among other things, future events and our financial performance.

These statements are often, but not always, made through the use of words or phrases such as “may,” “might,” “should,” “could,” “predict,” “potential,” “believe,” “expect,” “continue,” “will,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “strive,” “projection,” “goal,” “target,” “outlook,” “aim,” “would,” “annualized” and “outlook,” or the negative version of those words or other comparable words or phrases of a future or forward-looking nature.

These statements are often, but not always, made through the use of words or phrases such as “may,” “might,” “should,” “could,” “predict,” “potential,” “believe,” “expect,” “continue,” “will,” “likely,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “strive,” “projection,” “goal,” “target,” “outlook,” “aim,” “would,” and “annualized,” or the negative version of those words or other comparable words or phrases of a future or forward-looking nature.

These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control.

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There are or will be important factors that could cause our actual results to differ materially from those indicated in these forward-looking statements, including, but not limited to, the following:

• slower economic growth rates or potential recession in the United States and our market areas;

• the impacts related to or resulting from uncertainty in the banking industry as a whole;

• Uncertainty or perceived instability in the banking industry as a whole;

• increased competition for deposits among traditional and nontraditional financial services companies, and related changes in deposit customer behavior;

• the lingering inflationary pressures, and the risk of the resurgence of elevated levels of inflation, in the United States and our market areas, and its impact on market interest rates, the economy and credit quality;

• our ability to effectively execute our expansion strategy and manage our growth, including identifying and consummating suitable acquisitions;

• business and economic conditions, particularly those affecting our market areas, as well as the concentration of our business in such market areas;

• risks associated with concentrations of our business in market areas, loans secured by real estate, and public funds deposits as a percentage of total deposits;

• adverse changes in customer spending, borrowing, and savings habits;

• the impact of pandemics, epidemics, or any other health-related crisis;

• high concentrations of loans secured by real estate located in our market areas;

• changes in unemployment rates in the United States and our market areas;

• risks associated with our commercial loan portfolio, including the risk for deterioration in value of the general business assets that secure such loans;

• potential changes in the prices, values and sales volumes of commercial and residential real estate securing our real estate loans;

• risks associated with our agricultural loan portfolio, including the heightened sensitivity to weather conditions, commodity prices, and other factors generally outside the borrowers and our control;

• risks associated with our commercial loan portfolio and agricultural loan portfolio;

• risks related to the significant amount of credit that we have extended to a limited number of borrowers and in a limited geographic area;

• public funds deposits comprising a relatively high percentage of our deposits;

• potential impairment on the goodwill we have recorded or may record in connection with business acquisitions;

• our ability to maintain our reputation;

• our ability to successfully manage our credit risk and the sufficiency of our allowance for credit losses;

• our ability to attract, hire and retain qualified management personnel;

• our dependence on our management team, including our ability to retain executive officers and key employees and their customer and community relationships;

• interest rate fluctuations, which could have an adverse effect on our profitability;

• competition from banks, credit unions and other financial services providers;

• damage to our reputation resulting from adverse publicity, regulatory actions, litigation, operational failures, and the failure to meet client expectations and other facts;

• our ability to keep pace with technological change or difficulties we may experience when implementing new technologies;

• cybersecurity risk, including cyber incidents or other failures, disruptions or breaches of our operational or security systems or infrastructure, or those of our third-party vendors or other service providers, including as a result of a cyber-attack, could impact the Corporation’s reputation, increase regulatory oversight, and impact the financial results of the Corporation;

• our ability to maintain effective internal control over financial reporting;

• employee error, fraudulent activity by employees or customers and inaccurate or incomplete information about our customers and counterparties;

• increased capital requirements imposed by banking regulators, which may require us to raise capital at a time when capital is not available on favorable terms or at all;

• our ability to maintain adequate liquidity and to raise necessary capital to fund our acquisition strategy and operations or to meet increased minimum regulatory capital levels;

• costs and effects of litigation, investigations or similar matters to which we may be subject, including any effect on our reputation;

• natural disasters, severe weather, acts of god, acts of war or terrorism, geopolitical instability, public health outbreaks (such as coronavirus), other international or domestic calamities, and other events beyond our control, including as a result of in the policies of the current U.S.

• costs and effects of litigation, investigations or similar matters to which we may be subject;

• natural disasters, severe weather, acts of god, military conflicts (including the conflicts in the Middle East, the possible expansion of such conflicts and potential geopolitical and economic consequences), acts of terrorism, domestic civil unrest, geopolitical instability, public health outbreaks (such as coronavirus), other international or domestic calamities, and other events beyond our control, including as a result of in the policies of the current U.S.

presidential administration or Congress;

• a deterioration of the credit rating for United States long-term sovereign debt or uncertainty regarding United States fiscal debt, deficit and budget matters;

• the impacts of tariffs, sanctions and other trade policies of the United States and its global trading counterparts and the resulting impact on the Corporation and its customers;

• compliance with governmental and regulatory requirements, including the Dodd-Frank Act Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”), Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018 (“EGRRCPA”), and others relating to banking, consumer protection, securities and tax matters;

• changes in accounting principles and standards;

• changes in the laws, rules, regulations, interpretations or policies that apply to the Corporation’s business and operations, and any additional regulations, or repeals that may be forthcoming as a result thereof, which could cause the Corporation to incur additional costs and adversely affect the Corporation’s business environment, operations and financial results;

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Because of these risks and other uncertainties, our actual future results, performance or achievements, or industry results, may be materially different from the results indicated by the forward-looking statements in this Form 10-Q.

In addition, our past results of operations are not

necessarily indicative of our future results.

In addition, our past results of operations are not necessarily indicative of our future results.

Accordingly, you should not rely on any forward-looking statements, which represent our beliefs, assumptions, and estimates only as of the dates on which such forward-looking statements were made.

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Our accounting and reporting policies conform to GAAP and the prevailing practices in the financial services industry.

However, we also evaluate our performance by reference to certain additional financial measures discussed in this Quarterly Report on Form 10-Q that we identify as being “non-GAAP financial measures.” In accordance with SEC rules, we classify a financial measure as being a non-GAAP financial measure if that financial measure excludes or includes amounts, or is subject to adjustments that have the effect of excluding or including amounts, as the case may be, in the most directly comparable measure calculated and presented in accordance with GAAP as in effect from time to time in the United States in our statements of income, balance sheets or statements of cash flows.

However, we also evaluate our performance by reference to certain additional financial measures discussed in this Form 10-Q that we identify as being “non-GAAP financial measures.” In accordance with SEC rules, we classify a financial measure as being a non-GAAP financial measure if that financial measure excludes or includes amounts, or is subject to adjustments that have the effect of excluding or including amounts, as the case may be, in the most directly comparable measure calculated and presented in accordance with GAAP as in effect from time to time in the United States in our statements of income, balance sheets or statements of cash flows.

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.

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.

Management believes that 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 Quarterly Report on Form 10-Q 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 Quarterly Report on Form 10-Q when comparing such non-GAAP financial measures.

As a result, the non-GAAP financial measures that we discuss in this Quarterly Report on Form 10-Q 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.

The way we calculate the non-GAAP financial measures that we discuss in this Form 10-Q 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 Form 10-Q when comparing such non-GAAP financial measures.

As a result, the non-GAAP financial measures that we discuss in this Form 10-Q 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.

Available Information

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The Corporation makes available, free of charge, on its web site (under ir.isabellabank.com/sec-filings/default) the Corporation’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or Section 15(d) of the Exchange Act as soon as reasonably practicable after the Corporation files such material with, or furnishes it to, the SEC.

The Corporation also makes available, free of charge, through its web site (under ir.isabellabank.com/governance/governance-documents/default) links to the Corporation’s Code of Conduct and Business Ethics and the charters for its board committees.

The Corporation also makes available, free of charge, through its web site (under ir.isabellabank.com/governance/governance-documents) links to the Corporation’s Code of Conduct and Business Ethics and the charters for its board committees.

In addition, the SEC maintains an Internet site (at www.sec.gov ) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.

The Corporation routinely posts important information for investors on its web site (under ir.isabellabank.com and, more specifically, under the News tab at ir.isabellabank.com/news/default).

The Corporation routinely posts important information for investors on its web site (under ir.isabellabank.com and, more specifically, under the News tab at ir.isabellabank.com/news).

The Corporation intends to use its web site as a means of disclosing material non-public information and for complying with its disclosure obligations under SEC Regulation FD (Fair Disclosure).

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The information contained on, or that may be accessed through, the Corporation’s web site is not incorporated by reference into, and is not a part of, this Form 10-Q.

Reclassifications

Certain amounts reported in the interim 2025 consolidated financial statements have been reclassified to conform with the 2026 presentation.

The most significant of these changes related to amounts that were previously reported as commercial and industrial loans being reclassified as commercial real estate loans.

Executive Summary

Comparison of Operating Results for the three and nine months ended September 30, 2025, and 2024, unless otherwise noted

Net income in the third quarter of 2025 was $5,240, or $0.71 per diluted share, compared with $3,281, or $0.44 per diluted share, in the same quarter of 2024.

Net income for the year-to-date period of 2025 was $14,220, or $1.92 per diluted share, compared with $9,893, or $1.32 per diluted share, in the same period of 2024.

Net interest income was $16,162 in the third quarter of 2025 and $14,488 in the same quarter of 2024, representing 3.15% and 2.96% of earning assets, or NIM on an FTE basis, respectively.

The book yield from securities was 2.42% and 2.17% during the third quarters of 2025 and 2024, respectively.

Our yield on loans expanded to 5.78% in the third quarter of 2025, up from 5.72% in the same quarter of 2024.

The expansion in loan yields was a result of higher rates on new loans and variable rate commercial loans that continue to reprice.

Our cost of interest-bearing liabilities in the third quarter of 2025 decreased to 2.25% from 2.42% in the third quarter of 2024 due to reductions to rates in the money market and certificate of deposit products.

NIM is expected to continue to expand as assets reprice and the cost of interest-bearing liabilities stabilizes.

For the first nine months of 2025, net interest income was $45,816 compared with $41,280 in the same period of 2024.

The comparison of NIM and yield on interest earning assets for the nine months ending September 30, 2025 were 3.12% and 4.80%, respectively, compared to 2.87% and 4.62%, respectively, for the same period in 2024.

The yield on loans expanded to 5.75%, from 5.55%, and our cost of interest bearing liabilities decreased to 2.25% from 2.36% for the first nine months of 2025 and 2024, respectively.

The explanations for the improvement in NIM are consistent with those provided in the year-over-year three month comparison above.

The provision for credit losses was a credit of $209 in the third quarter of 2025, which reflects a $172 increase in the ACL on loans, net charge offs totaling $74, and an increase in the reserve for unfunded commitments.

The provision for loan losses in the same period of 2024 was $946 due to growth in core loans (non-GAAP), which excludes advances to mortgage brokers, unfunded commitments, and $1,767 in charge offs.

The increase in charge offs was related to overdrawn deposit accounts from a single customer.

For the first nine months of 2025, the provision for credit losses was a credit of $997 compared to a provision of $1,508 in the same period of 2024.

Recoveries totaled $2,147, of which $1,556 were related to the overdrawn deposit accounts from a single customer charged off during the third quarter of 2024.

Credit quality remains strong with low levels of past due and nonaccrual loans and net charge offs.

The Corporation continues to closely monitor credit quality in light of the continued economic uncertainty caused by, among other factors, the interest rate environment, employment data in recent periods, continued uncertainty regarding U.S.

trade and tariff policy, and the risk of the resurgence of elevated levels of inflation, in the United States and our market areas.

Accordingly, additional provisions for credit losses may be necessary in future periods.

Noninterest income for the three months ended September 30, 2025 and 2024 was $4,308 and $3,528, respectively.

Service charges and fees increased $219 as a result of profitability initiatives designed to increase fee income.

Wealth management fees grew $71 due to growth in assets under management throughout the year.

Earnings on BOLI policies increased $216 over the prior year quarter due to new investments in a separate account BOLI, which was offset in part by a one-time expense of $120 due to restructuring charges.

Other noninterest income includes a $163 gain on the redemption of a BOLI policy.

For the first nine months of 2025, noninterest income was $11,522, compared to $10,604 in the same period of 2024.

Service charges and fees, wealth management fees, earnings on BOLI policies, and other income increased $308, $147, $392, and $94, respectively.

The reasons for the increase in noninterest income for the nine month comparison are the same as the three month comparison.

Noninterest expenses for the three-month period ended September 30, 2025 increased $757 in comparison to the same period in 2024.

Compensation and benefit expenses increased $379 reflecting annual merit increases in 2025, incentives, and higher medical insurance claims compared to the third quarter of 2024.

Other professional services increased $263 primarily due to a temporary increase in outsourced services.

For the first nine months of 2025, noninterest expenses were $41,029, compared to $38,799 in the same period of 2024.

Compensation and benefits increased $1,273 for the same reasons as the three month comparison.

Other professional service fees increased $797 principally due to $173 of profitability initiative costs, $168 in legal fees related to our Nasdaq uplisting, and temporary increases in outsourced services.

Offsetting these increases was a $407 decline in other losses, largely due to fraudulent related activity.

Income tax expense for the three months ended September 30, 2025 and 2024 was $1,036 and $561 and the ETR was 17% and 15%, respectively.

The increase in the ETR was primarily due to a higher annual forecast of pretax income.

Income tax expense for the first nine months of 2025 was $3,086, compared to $1,684 in the same period of 2024 and the ETR was 18% and 15%, respectively.

The ETR in the first nine months of 2025 included a one-time tax expense totaling $166 due to the taxes owed from the lifetime earnings on BOLI policies that were surrendered during the first quarter of 2025.

Excluding the one-

time charge, the ETR was 17% for the first nine months of 2025, which is higher than the prior year due to a higher annual forecast of pretax income.

Financial Condition (September 30, 2025 to December 31, 2024 comparison)

Total assets increased $173,413 to $2,259,654 as of September 30, 2025, primarily due to an increase of $127,465 in interest bearing cash, a $22,941 increase in AFS securities, and a $10,769 increase in BOLI policies.

Our AFS securities portfolio totaled $511,970 at September 30, 2025, increasing $22,941 at the end of third quarter 2025.

The increase was driven by $62,148 in purchases, offset by amortization and maturities of $52,359.

Net unrealized losses at September 30, 2025 totaled $12,564, or 2.40%, of the portfolio and improved during the quarter due to the treasury portfolio rapidly approaching maturity and an increase in bond prices.

Gross loans increased $8,334 to $1,431,905 as of September 30, 2025.

While core loans (non-GAAP) grew $66,358, advances to mortgage brokers decreased $58,024 due to lower participation demand from our counterparty.

Core loans (non-GAAP) grew $66,358, led by growth in the commercial and industrial and commercial real estate portfolios of $17,509 and $34,924, respectively.

Residential mortgages increased $31,184 since year-end 2024 with $13,388 of growth in the third quarter as construction drawdowns and seasonal patterns occurred.

Financial Condition (March 31, 2026 to December 31, 2025 comparison)

Total assets increased $42,508 to $2,251,956 as of March 31, 2026.

This increase was primarily due to an increase of $23,103 in interest bearing cash and a $22,577 increase in loans.

The AFS securities portfolio decreased $5,047 to $492,744 as of March 31, 2026.

The decrease was a result of maturities and principal paydowns of $53,053, offset by $48,918 in purchases.

Net unrealized losses on AFS securities were $10,622 as of March 31, 2026, compared to $9,898 at December 31, 2025.

Net unrealized losses as a percentage of the amortized cost of AFS securities were consistent compared to December 31, 2025, at 2%.

Loans increased $22,577 to $1,558,941 as of March 31, 2026.

Adjusted loans (non-GAAP), which exclude advances to mortgage brokers, increased $27,170, primarily by growth in the commercial real estate and residential real estate portfolios of $20,885 and $10,453, respectively.

Most residential originations were adjustable rate products, which are put on the balance sheet rather than sold in the secondary market.

The consumer loan portfolio continues to slowly roll off amid decreasing demand, competition, and our adherence to credit quality standards.

The ACL was $13,149 at September 30, 2025, an increase of $254 from $12,895 at December 31, 2024.

The increase is due to core loan growth (non-GAAP), offset by improvement in historical loss experience driven by the recovery of previously charged-off loans during the year.

Nonaccrual loans were $3,443 as of September 30, 2025 compared to $282 at December 31, 2024.

This increase relates to one commercial real estate loan.

Past due and accruing accounts between 30 to 89 days as a percentage of total loans was 0.03% at September 30, 2025, compared to 0.40% at year-end 2024.

Overall, credit quality remains strong.

BOLI assets were $45,651 at September 30, 2025, an increase of $10,769 from December 31, 2024.

The growth was mostly driven by a $10,583 investment of new policies in a separate account product at the beginning of January.

In the first half of 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 increased $178,542 from December 31, 2024, to $1,925,602 at September 30, 2025.

The growth was driven by demand and money market deposits.

Approximately half of the $134,329 increase in money market deposits was driven by one customer with large deposits during the second and third quarters that are expected to be withdrawn by the customer by the end of the year.

Consumer demand for retail certificates of deposit accounts continues based on the rate environment, resulting in a $17,207 increase in the balance during the first nine months of 2025.

Total equity was $227,420, or $30.94 per share, at September 30, 2025 compared to $210,276, or $28.32 per share, at year-end 2024.

Our tangible book value per share (non-GAAP) was $24.37 as of September 30, 2025, compared to $21.82 on December 31, 2024.

Net unrealized losses on AFS securities reduced tangible book value per share (non-GAAP) by $1.36 and $2.82 for the respective periods.

Share repurchases totaled 122,502 during the first nine months of 2025 for a value of $3,259 at an average price of $26.60.

The consumer loan portfolio continues to decrease amid declining demand, competition, and our adherence to credit quality standards.

Advances to mortgage brokers decreased $4,593 during the quarter due to lower participation demand from our counterparty.

The ACL increased $287 to $14,014 as of March 31, 2026.

The increase is due to loan growth and an increase in loss rates driven by loans charged off during the quarter.

Nonaccrual loans were $4,418 as of March 31, 2026 compared to $4,578 at December 31, 2025.

Past due and accruing accounts between 30 to 89 days as a percentage of total loans was 0.37% at March 31, 2026, compared to 0.44% at year-end 2025.

We believe that our credit quality remains strong.

Total deposits increased $40,191 to $1,859,845 as of March 31, 2026.

The growth was primarily a result of new customer relationships and included a $40,913 increase in money market accounts and a $20,303 increase in savings deposits.

The growth was offset by a $15,126 decline in noninterest bearing deposits and a $3,666 decline in certificates of deposit.

Total equity was $233,961, or $31.90 per share, at March 31, 2026 compared to $231,396, or $31.60 per share, as of December 31, 2025.

Our tangible book value per share (non-GAAP) was $25.32 as of March 31, 2026, compared to $25.01 as of December 31, 2025.

Net unrealized losses in the AFS securities portfolio reduced tangible book value per share (non-GAAP) by $1.17 and $1.09 for the respective periods.

Share repurchases totaled 8,062 during the first three months of 2026 for a value of $402 at an average repurchase price of $49.86 per share.

We continue to have robust liquidity levels and capital.

As of September 30, 2025, we had $975,856 of unencumbered sources of liquidity and strong capital ratios;

As of March 31, 2026, we had $817,775 of unencumbered sources of liquidity and strong consolidated capital ratios;

the Tier 1 Leverage Ratio was 8.89%, Tier 1 risk-based capital was 11.71%, and Total risk-based capital was 14.01%.

Recent Events

On July 4, 2025, the One Big Beautiful Bill Act (the “OBBBA”) was signed into law by President Trump, which includes a broad range of tax reform provisions affecting businesses, including extending and modifying certain key provisions from the Tax Cuts and Jobs Act of 2017 and expanding certain incentives from the Inflation Reduction Act of 2022 while accelerating the phase-out of others.

The Corporation continues to evaluate the OBBBA but does not anticipate that the OBBBA will have a material impact on the Corporation’s Consolidated Financial Statements.

Nasdaq Listing

Beginning with the opening of trading on Monday, May 12, 2025, our shares of common stock were listed for trading on The Nasdaq Capital Market under our current symbol, “ISBA.” Prior to this listing on Nasdaq, our shares of common stock were listed on the OTCQX under the same symbol through May 9, 2025.

Reclassifications

Certain amounts reported in the interim 2024 consolidated financial statements have been reclassified to conform to the 2025 presentation.

Subsequent Events

We evaluated subsequent events after September 30, 2025 through the date our interim condensed consolidated financial statements were issued for potential recognition and disclosure.

We determined that no subsequent events require financial statement recognition or disclosure between September 30, 2025 and the date our interim condensed consolidated financial statements were issued.

Comparison of Operating Results for the three months ended March 31, 2026, and 2025, unless otherwise noted

Net income in first quarter 2026 was $4,992, or $0.68 per diluted share, compared with $3,949, or $0.53 per diluted share, in first quarter 2025.

Net interest income was $16,882 in first quarter 2026 and $14,525 in first quarter 2025, representing 3.33% and 3.06% of earning assets, or NIM on an FTE basis, respectively.

The book yield from securities was 2.52% and 2.20% during the first quarters of 2026 and 2025, respectively.

Our yield on loans expanded to 5.78% in first quarter 2026 from 5.71% in first quarter 2025.

The increase in loan yields was primarily due to higher rates on new loans and variable rate commercial loans that continue to reprice.

Our cost of interest-bearing liabilities in first quarter 2026 decreased to 2.14% from 2.26% in first quarter 2025 due to lower rates on money market and certificate of deposit products.

The provision for credit losses was $604 in first quarter 2026, driven by a $287 increase in the ACL on loans, net charge offs totaling $253, and an increase in the reserve for unfunded commitments.

The provision for credit losses in first quarter 2025 was a credit of $107 due to the change in ACL on loans and $52 in net recoveries, offset by an increase in the reserve for unfunded commitments.

Noninterest income for the three months ended March 31, 2026 and 2025 was $4,361 and $3,528, respectively.

Service charges and fees increased $398 as a result of internal initiatives designed to align our fees with the market.

Wealth management fees grew $129 due to growth in assets under management since first quarter 2025.

Earnings on BOLI policies increased $76 compared to first quarter 2025 due to additional investments in a separate account BOLI in 2025.

Other noninterest income in 2026 includes a $131 gain related to a death benefit from a BOLI policy.

Noninterest expenses for the three-month period ended March 31, 2026 increased $1,363 in comparison to the same period in 2025.

Compensation and benefit expenses increased $545, reflecting annual merit increases, incentives, and higher medical

insurance claims compared to first quarter 2025.

Other professional services increased $304 as a result of costs related to profitability initiatives and product implementation costs.

Income tax expense for the three months ended March 31, 2026 and 2025 was $985 and $912, respectively, while the ETR for the same periods was 16% and 19%, respectively.

The ETR in the first three months of 2025 included a one-time tax expense totaling $166 due to the taxes owed from the lifetime earnings on BOLI policies that were surrendered during first quarter 2025.

Excluding the one-time charge, the ETR was 15% for the first three months of 2025.

Selected Financial Data (Unaudited)

The following table outlines our results of operations and provides certain performance measures as of, and for the:

Three Months Ended Nine Months Ended

2025 March 31

The following table outlines our results of operations and provides certain performance measures as of the dates and for the periods indicated:

Three Months Ended

2026 December 31

2025 September 30

2024 September 30

2025 September 30

2025 March 31

Basic earnings $ 0.68 $ 0.64 $ 0.71 $ 0.68 $ 0.53

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Efficiency ratio (2)

Gross loan to deposit ratio (1)

68.50 % 65.02 % 67.62 % 72.14 % 72.39 %

Loan to deposit ratio (1)

83.82 % 84.43 % 74.36 % 75.57 % 76.07 %

Shareholders’ equity to total assets (1)

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8.43 % 8.47 % 8.10 % 8.17 % 8.14 %

FINANCIAL DATA (in millions)

FINANCIAL DATA

Total assets (1)

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492,744 497,791 511,970 500,560 513,040

Gross loans (1)

1,558,941 1,536,364 1,431,905 1,397,513 1,367,724

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Average Balances, Interest Rates, and Net Interest Income

The following schedules present the daily average amount outstanding for each major category of interest earning assets, non-earning assets, interest bearing liabilities, and noninterest bearing liabilities.

These schedules also present an analysis of interest income and interest expense for the periods indicated.

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Three Months Ended

September 30, 2025 June 30, 2025 September 30, 2024

March 31, 2026 December 31, 2025 March 31, 2025

Interest Average

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FHLB stock 5,600 75 5.36 % 5,600 63 4.54 % 11,011 160 5.82 %

Fed funds sold 186 2 4.35 % 6 — 3.83 % 4 — 5.36 %

Federal funds sold 7 — 3.54 % 9 — 3.86 % 4 — 4.32 %

64,190 602 3.75 % 28,344 498 6.88 % 47,374 482 4.06 %

Total interest earning assets (3)

NONEARNING ASSETS

Allowance for credit losses (13,057) (13,369) (13,125)

Cash and demand deposits due from banks 25,591 22,026 25,903

Premises and equipment 28,313 28,306 27,868

Other assets 109,692 106,595 87,002

Total assets $ 2,206,722 $ 2,092,687 $ 2,095,200

INTEREST BEARING LIABILITIES

Interest bearing demand deposits $ 234,105 144 0.24 % $ 236,076 220 0.37 % $ 232,018 161 0.28 %

Money market deposits 534,127 3,533 2.63 % 449,110 2,857 2.55 % 451,216 3,148 2.77 %

Savings 289,442 560 0.77 % 286,434 544 0.76 % 274,828 423 0.61 %

Certificates of deposit 399,781 3,775 3.75 % 395,450 3,770 3.82 % 375,936 3,899 4.13 %

Short-term borrowings 52,700 441 3.32 % 41,661 324 3.11 % 48,304 384 3.17 %

FHLB advances — — — % 11,539 132 4.53 % 40,435 571 5.52 %

Subordinated debt, net of unamortized issuance costs

2,069,705 25,267 4.94 % 2,042,657 25,416 4.94 % 1,943,633 22,817 4.75 %

Total interest bearing liabilities 1,539,632 8,720 2.25 % 1,449,725 8,113 2.24 % 1,452,125 8,853 2.42 %

NONINTEREST BEARING LIABILITIES AND SHAREHOLDERS' EQUITY

Demand deposits 428,144 409,262 418,973

Other liabilities 14,976 14,158 15,658

Shareholders’ equity 223,970 219,542 208,444

Total liabilities and shareholders’ equity $ 2,206,722 $ 2,092,687 $ 2,095,200

Net interest income (FTE) $ 16,340 $ 15,307 $ 14,720

Net yield on interest earning assets (FTE) 3.15 % 3.14 % 2.96 %

Nine Months Ended

September 30, 2025 September 30, 2024

Average Balance Tax Equivalent Interest Average Yield/Rate Average Balance Tax Equivalent Interest Average Yield/Rate

INTEREST EARNING ASSETS

$ 1,389,936 $ 59,763 5.75 % $ 1,376,122 $ 57,150 5.55 %

AFS securities (2)

522,049 9,210 2.34 % 546,376 9,153 2.23 %

FHLB stock 7,384 355 6.41 % 12,762 472 4.93 %

Fed funds sold 66 2 4.35 % 6 — 5.35 %

63,959 1,968 3.92 % 17,941 750 5.49 %

Total interest earning assets 1,983,394 71,298 4.80 % 1,953,207 67,525 4.62 %

NONEARNING ASSETS

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Net interest income (FTE) (5)

$ 17,020 $ 16,866 $ 14,709

Net yield on interest earning assets (FTE) (5)

3.33 % 3.28 % 3.06 %

(1) Includes loans HFS and nonaccrual loans.

(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.

The following table displays loan balances as of:

2025 March 31

(3) Includes FTE adjustments of $138, $138, and $184, respectively.

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

(5) Non-GAAP financial measure;

refer to the "Reconciliation of Non-GAAP Financial Measures" section of this Form 10-Q.

The following table displays loan balances as of the dates indicated:

2026 December 31

2025 September 30

2024 Annualized Growth %

Quarter to Date Annualized Growth %

2025 March 31

Commercial and industrial $ 225,369 $ 220,450 $ 218,132 $ 207,719 $ 205,172

Commercial real estate 660,643 639,758 626,642 614,383 596,282

Advances to mortgage brokers 5,056 3,005 3,015 63,080 76,187 N/M (122.65) %

Advances to mortgage brokers 72,083 76,676 5,056 3,005 3,015

Agricultural 96,969 102,109 97,794 96,842 94,359

Total commercial loans 947,624 921,949 898,828 955,115 960,608 11.14 % (1.05) %

Residential real estate 438,333 427,880 412,056 398,668 387,348

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Total $ 1,558,941 $ 1,536,364 $ 1,431,905 $ 1,397,513 $ 1,367,724

The following table presents the composition of our commercial real estate portfolio by industry as of:

September 30, 2025 December 31, 2024

The following table presents the composition of our commercial real estate portfolio by industry as of the dates indicated:

March 31, 2026 December 31, 2025

Balance Percent of Total Balance Percent of Total

1-4 family investor $ 91,307 14.57 % $ 86,736 14.66 %

Multifamily 71,148 11.35 % 61,033 10.31 %

Real estate 171,139 27.31 % 158,739 26.83 %

Investment and development $ 140,784 21.31 % $ 134,013 20.95 %

1-4 family residential investment 97,059 14.69 % 93,806 14.66 %

Hotels 92,326 13.98 % 90,571 14.16 %

Residential multifamily 76,549 11.59 % 71,695 11.21 %

Health care 59,582 9.02 % 59,573 9.31 %

Storage facilities 37,028 5.60 % 37,145 5.81 %

Retail trade 34,235 5.18 % 34,479 5.39 %

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

The following table displays deposit balances as of:

2025 March 31

The following table displays deposit balances as of the dates indicated:

2026 December 31

2025 September 30

2024 Annualized Growth %

Quarter to Date Annualized Growth %

2025 March 31

Noninterest bearing demand deposits $ 411,216 $ 426,342 $ 421,027 $ 493,477 $ 404,194

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Asset Quality Analysis

The following table outlines our asset quality analysis as of, and for the three-month periods ended:

2025 March 31

The following table outlines our asset quality analysis as of the dates and for the periods indicated:

Three Months Ended

2026 December 31

2025 September 30

2025 March 31

NONPERFORMING ASSETS

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Total nonperforming assets $ 4,991 $ 5,516 $ 4,479 $ 1,862 $ 848

Nonperforming loans to gross loans 0.24 % 0.09 % 0.01 % 0.02 % 0.04 %

Nonperforming loans to total loans 0.28 % 0.30 % 0.24 % 0.09 % 0.01 %

Nonperforming assets to total assets 0.22 % 0.25 % 0.20 % 0.09 % 0.04 %

Nonaccrual loans to gross loans 0.24 % 0.08 % 0.01 % 0.02 % 0.04 %

ACL as a % of nonaccrual loans 381.91 % N/M N/M N/M N/M

Nonaccrual loans to total loans 0.28 % 0.30 % 0.24 % 0.08 % 0.01 %

ACL as a % of nonaccrual loans 317.20 % 299.85 % 381.91 % N/M N/M

ALLOWANCE FOR CREDIT LOSSES

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Net loan charge-offs (recoveries) 253 34 74 (1,432) (52)

(Reversal of) provision for credit losses - loans 246 (1,190) (212) 362 899

Provision for (reversal of) credit losses - loans 540 612 246 (1,190) (212)

Allowance at end of period $ 14,014 $ 13,727 $ 13,149 $ 12,977 $ 12,735

ACL to gross loans 0.92 % 0.93 % 0.93 % 0.91 % 0.89 %

ACL to loans 0.90 % 0.89 % 0.92 % 0.93 % 0.93 %

Reserve for unfunded commitments 557 493 671 708 617

Provision for credit losses - unfunded commitments (37) 91 105 14 47

Provision for (reversal of) credit losses - unfunded commitments 64 (178) (37) 91 105

Reserve to unfunded commitments 0.15 % 0.14 % 0.16 % 0.16 % 0.14 %

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Total $ 253 $ 34 $ 74 $ (1,432) $ (52)

Net (recoveries) charge-offs (Quarter to Date annualized to average loans) 0.02 % (0.41) % (0.02) % 0.03 % 0.39 %

Net (recoveries) charge-offs (Year to Date annualized to average loans) (0.14) % (0.22) % (0.02) % 0.14 % 0.17 %

Net (recoveries) charge-offs to average loans 0.02 % 0.00 % 0.01 % (0.10 %) 0.00 %

DELINQUENT AND NONACCRUAL LOANS

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We are authorized to raise capital through dividend reinvestment, employee and director stock purchases, and shareholder stock purchases.

Pursuant to these authorizations, we issued 36,809 shares or $1,031 of common stock during the first nine months of 2025, as compared to 61,560 shares or $1,190 of common stock during the same period in 2024.

Pursuant to these authorizations, we issued 9,682 shares or $433 of common stock during the first three months of 2026, as compared to 17,332 shares or $419 of common stock during the same period in 2025.

We offer the Directors Plan in which participants purchase stock units through deferred fees, in lieu of cash payments.

Pursuant to this plan, we increased shareholders’ equity by $233 and $332 during the nine-month periods ended September 30, 2025 and 2024, respectively.

Pursuant to this plan, we increased shareholders’ equity by $156 and $167 during the three-month periods ended March 31, 2026 and 2025, respectively.

We also grant restricted stock awards pursuant to the RSP.

Pursuant to this plan, we increased shareholders’ equity by $45 during the first nine months of 2025, as compared to $71 during the same period in 2024.

Pursuant to this plan, we increased shareholders’ equity by $16 during the first three months of 2026, as compared to $7 during the same period in 2025.

We have publicly announced a common stock repurchase program.

Pursuant to this repurchase program, we repurchased 122,502 shares or $3,259 of common stock during the first nine months of 2025 and 124,969 shares or $2,419 of common stock during the first nine months of 2024.

As of September 30, 2025, we were authorized to repurchase up to an additional 495,727 shares of common stock under the repurchase program.

Pursuant to this repurchase program, we repurchased 8,062 shares or $402 of common stock during the first three months of 2026 and 45,582 shares or $1,145 of common stock during the first three months of 2025.

As of March 31, 2026, we were authorized to repurchase up to an additional 453,210 shares of common stock under the repurchase program.

The FRB has established minimum risk-based capital guidelines.

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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 September 30, 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 September 30, 2025 that would materially adversely change such capital classifications.

As of March 31, 2026, 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 March 31, 2026 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 our consolidated capital ratios as of:

2025 March 31

The following table sets forth our consolidated capital ratios as of the dates indicated:

2026 December 31

2025 September 30

2025 March 31

Common equity tier 1 capital 11.71 % 11.73 % 12.37 % 12.46 % 12.58 %

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

Cash, cash equivalents and unencumbered AFS securities totaled $487,212, or 21.56% of assets, as of September 30, 2025, compared to $330,876, or 15.86%, as of December 31, 2024.

The increase in the amount and percentage of primary liquidity is a direct result of an increase in cash, driven by deposit growth.

Cash, cash equivalents and unencumbered AFS securities totaled $303,441, or 13.47% of assets, as of March 31, 2026, compared to $337,011, or 15.25%, as of December 31, 2025.

The decrease in the amount and percentage of primary liquidity is primarily due to a decrease in AFS securities, offset by an increase in cash and cash equivalents.

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.

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Some borrowed funds, including FHLB advances, FRB Discount Window advances, and repurchase agreements, require us to pledge assets, typically in the form of AFS securities or loans, as collateral.

As of September 30, 2025, we had available lines of credit of $384,555.

As of March 31, 2026, we had available lines of credit of $397,670.

We monitor our daily liquidity position to meet our cash flow needs.

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

Our liquidity position remained strong at September 30, 2025, which is illustrated in the following table:

2025 March 31

Our liquidity position remained strong as of March 31, 2026, which is illustrated in the following table:

2026 December 31

2025 September 30

2025 March 31

Total cash and cash equivalents $ 50,105 $ 26,041 $ 161,301 $ 108,554 $ 69,179

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Available lines of credit

Fed funds lines with correspondent banks 93,000 93,000 93,000 93,000 93,000

Federal funds lines with correspondent banks 93,000 93,000 93,000 93,000 93,000

FHLB borrowings 270,159 218,088 257,288 249,890 250,884

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Coverage ratio of uninsured deposits with total cash and liquidity 112 % 112 % 134 % 127 % 132 %

(1) In cludes estimated unencumbered lendable value of FHLB collateral of $230,000 as of September 30, 2025.

(1) In cludes estimated unencumbered lendable value of FHLB collateral of $170,000 as of March 31, 2026.

We utilize fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures.

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Reconciliation of Non-GAAP Financial Measures

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

2025 March 31

The following tables provide a detailed analysis, and reconciliation for, our non-GAAP financial measures as of the dates and for the periods indicated:

Three Months Ended

2026 December 31

2025 September 30

Gross loans $ 1,431,905 $ 1,397,513 $ 1,367,724 $ 1,423,571 $ 1,424,283

2025 March 31

Loans $ 1,558,941 $ 1,536,364 $ 1,431,905 $ 1,397,513 $ 1,367,724

Advances to mortgage brokers 72,083 76,676 5,056 3,005 3,015

Core loans $ 1,426,849 $ 1,394,508 $ 1,364,709 $ 1,360,491 $ 1,348,096

Adjusted loans $ 1,486,858 $ 1,459,688 $ 1,426,849 $ 1,394,508 $ 1,364,709

Total shareholders’ equity $ 233,961 $ 231,396 $ 227,420 $ 220,500 $ 215,556

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Tangible book value per share (A/B) $ 25.32 $ 25.01 $ 24.37 $ 23.39 $ 22.58

Noninterest expenses $ 14,662 $ 13,921 $ 13,985 $ 13,745 $ 13,299

Amortization of acquisition intangibles — — — — 1

Adjusted noninterest expense (C) $ 14,662 $ 13,921 $ 13,985 $ 13,745 $ 13,298

Net interest income $ 16,882 $ 16,728 $ 16,162 $ 15,129 $ 14,525

Tax equivalent adjustment for net interest margin 138 138 144 178 184

Net interest income (FTE) 17,020 16,866 16,306 15,307 14,709

Noninterest income 4,361 4,444 4,308 3,686 3,528

Tax equivalent adjustment for BOLI 94 102 98 63 78

Adjusted revenue (FTE) 21,475 21,412 20,712 19,056 18,315

Net gains (losses) on foreclosed assets 70 3 31 3 (55)

Adjusted revenue (D) $ 21,405 $ 21,409 $ 20,681 $ 19,053 $ 18,370

Efficiency ratio (C/D) 68.50 % 65.02 % 67.62 % 72.14 % 72.39 %

(1) Whole shares.

2 unchanged sentences

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-Q

Item 2. Management’s Discussion and Analysis