What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-08-07 compared with 2024-05-01 · 242 added, 111 removed, 1034 unchanged (25% of the section changed)

21 unchanged sentences

Total deposits 5,763,537 5,720,525

Federal Funds purchased 55,000 0

Federal Home Loan Bank advances 0 50,000

Total borrowings 55,000 50,000

Accrued interest payable 15,354 20,893

4 unchanged sentences

90,000,000 shares authorized, no par value

25,966,500 shares issued and 25,503,425 outstanding as of March 31, 2024

25,968,167 shares issued and 25,503,744 outstanding as of June 30, 2024

25,903,686 shares issued and 25,430,566 outstanding as of December 31, 2023

2 unchanged sentences

Accumulated other comprehensive income (loss) ( 170,458 ) ( 155,195 )

Treasury stock at cost ( 463,075 shares as of March 31, 2024, 473,120 shares as of December 31, 2023)

Treasury stock at cost ( 464,423 shares as of June 30, 2024, 473,120 shares as of December 31, 2023)

( 15,453 ) ( 15,553 )

6 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

NET INTEREST INCOME

19 unchanged sentences

Merchant and interchange fee income 892 929 1,755 1,806

Bank owned life insurance income (loss) 1,036 691

Bank owned life insurance income 890 693 1,926 1,384

Interest rate swap fee income 0 794 0 794

Mortgage banking income (loss) 23 ( 35 ) 75 ( 134 )

Net securities gains (losses) 0 3 ( 46 ) 19

Net gain on Visa shares 9,011 0 9,011 0

Other income 694 690 2,881 1,309

8 unchanged sentences

Professional fees 2,123 2,049 4,586 4,170

Wire fraud loss 0 18,058 0 18,058

Other expense 6,118 2,571 8,366 5,133

9 unchanged sentences

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited - dollars in thousands)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Net income $ 22,549 $ 14,611 $ 45,950 $ 38,889

23 unchanged sentences

Interest Total

Balance at April 1, 2023

25,430,917 $ 125,840 $ 658,629 $ ( 167,370 ) $ ( 15,182 ) $ 601,917 $ 89 $ 602,006

Comprehensive income:

Net income 14,611 14,611 14,611

Other comprehensive income (loss), net of tax ( 10,275 ) ( 10,275 ) ( 10,275 )

Cash dividends declared and paid, $ 0.46 per share

( 11,793 ) ( 11,793 ) ( 11,793 )

Treasury shares purchased under deferred directors' plan ( 1,701 ) 81 ( 81 ) 0 0

Stock activity under equity compensation plans 0 0 0 0

Stock based compensation expense ( 2,554 ) ( 2,554 ) ( 2,554 )

Balance at June 30, 2023

25,429,216 $ 123,367 $ 661,447 $ ( 177,645 ) $ ( 15,263 ) $ 591,906 $ 89 $ 591,995

Balance at April 1, 2024

25,503,425 $ 125,873 $ 703,330 $ ( 166,913 ) $ ( 15,370 ) $ 646,920 $ 89 $ 647,009

Comprehensive income:

Net income 22,549 22,549 22,549

Other comprehensive income (loss), net of tax ( 3,545 ) ( 3,545 ) ( 3,545 )

Cash dividends declared and paid, $ 0.48 per share

( 12,338 ) ( 12,338 ) ( 12,338 )

Treasury shares purchased under deferred directors' plan ( 1,348 ) 83 ( 83 ) 0 0

Stock activity under equity compensation plans 1,667 ( 80 ) ( 80 ) ( 80 )

Stock based compensation expense 995 995 995

Balance at June 30, 2024

25,503,744 $ 126,871 $ 713,541 $ ( 170,458 ) $ ( 15,453 ) $ 654,501 $ 89 $ 654,590

Six Months Ended

Common Stock Retained

Earnings Accumulated Other Comprehensive

Income (Loss) Treasury

Stock Total Stockholders’

Equity Noncontrolling

Interest Total

Balance at January 1, 2023

9 unchanged sentences

Stock based compensation expense ( 393 ) ( 393 ) ( 393 )

Balance at March 31, 2023

Balance at June 30, 2023

25,429,216 $ 123,367 $ 661,447 $ ( 177,645 ) $ ( 15,263 ) $ 591,906 $ 89 $ 591,995

12 unchanged sentences

Stock based compensation expense 1,875 1,875 1,875

Balance at March 31, 2024

Balance at June 30, 2024

25,503,744 $ 126,871 $ 713,541 $ ( 170,458 ) $ ( 15,453 ) $ 654,501 $ 89 $ 654,590

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited - in thousands)

Three Months Ended March 31, 2024 2023

Six Months Ended June 30, 2024 2023

Cash flows from operating activities:

7 unchanged sentences

Proceeds from sale of loans, including participations 9,116 3,421

Net (gain) loss on Visa shares ( 9,011 ) 0

Net (gain) loss on sales of premises and equipment 55 ( 1 )

11 unchanged sentences

Proceeds from sale of securities available-for-sale 7,136 99,951

Proceeds from sale of Visa shares 7,358 0

Proceeds from maturities, calls and principal paydowns of securities available-for-sale 28,917 38,886

6 unchanged sentences

Purchase of Federal Home Loan Bank stock 0 ( 5,625 )

Proceeds from redemption of Federal Home Loan Bank stock 0 0

Proceeds from sales of other real estate 0 0

Proceeds from life insurance 536 0

3 unchanged sentences

Net increase (decrease) in short-term borrowings 55,000 ( 22,000 )

Proceeds from (payments on) short-term FHLB borrowings 150,000 ( 75,000 )

Proceeds from short-term FHLB borrowings 0 125,000

Net payments on short-term FHLB borrowings ( 50,000 ) 0

Common dividends paid ( 24,624 ) ( 23,529 )

Preferred dividends paid ( 13 ) ( 13 )

Payments related to equity incentive plans ( 2,596 ) ( 3,124 )

8 unchanged sentences

Income taxes 11,680 7,125

Supplemental non-cash disclosures:

Loans transferred to other real estate owned 0 284

The accompanying notes are an integral part of these consolidated financial statements.

10 unchanged sentences

In the opinion of management, all adjustments (all of which are normal and recurring in nature) considered necessary for a fair presentation have been included.

Operating results for the three months ended March 31, 2024 are not necessarily indicative of the results that may be expected for any subsequent reporting periods, including the year ending December 31, 2024.

Operating results for the three and six months ended June 30, 2024 are not necessarily indicative of the results that may be expected for any subsequent reporting periods, including the year ending December 31, 2024.

The Company’s 2023 Annual Report on Form 10-K should be read in conjunction with these statements.

11 unchanged sentences

(2) The tax equity investor does not have the ability to exercise significant influence over the operating and financial policies of the underlying project;

(3) Substantially all of the projected benefits are from income tax credits and other income tax benefits.

Projected benefits included income tax credits, other income tax benefits, and other non-income tax -related benefits.

The projected benefits are determined on a discounted basis, using a discount rate that is consistent with the cash flow assumptions used by the tax equity investor in making its decision to invest in the project;

(3) Substantially all of the projected benefits are from income tax credits and other income tax benefits (projected benefits included income tax credits, other income tax benefits, and other non-income tax -related benefits and are determined on a discounted basis, using a discount rate that is consistent with the cash flow assumptions used by the tax equity investor in making its decision to invest in the project);

(4) The tax equity investor's projected yield based solely on the cash flows from the income tax credits and other income tax benefits is positive;

25 unchanged sentences

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

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

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

(2) Requirement that a public entity disclose, on an annual and interim basis, an amount for other segment items by reportable segment and a description of its composition (the other segment items category is the difference between segment revenue less the segment expenses disclosed under the significant expense principle and each reported measure of segment profit or loss);

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

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

(4) Clarification that if the CODM uses more than one measure of a segment's profit or loss in assessing segment performance and deciding how to allocation resources, a public entity may report one or more of those additional measures of segment profit (at least one of the reported segment profit or loss measures, or the single reported measure if only one is disclosed, should be the measure that is the most consistent with the measurement principles used in measuring the corresponding amounts in the public entity's consolidated financial statements);

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

3 unchanged sentences

The Company is currently evaluating the impact of this standard on its disclosures, however does not expect adoption of the update to have a material impact of the consolidated financial statements.

On December 13, 2023, the FASB issued ASU 2023-08, "Intangibles—Goodwill and Other—Crypto Assets (Subtopic 350-60):

Accounting for and Disclosure of Crypto Assets" , to provide improved accounting and disclosure guidance for crypto assets.

Stakeholders stated that current accounting guidance, except as provided in GAAP for certain specialized industries, surrounding crypto asset holdings as indefinite-lived intangible assets fails to provide financial statement users with decision-useful information.

To remedy these shortcomings, the amendments in this update require an entity present (1) crypto assets measured at fair value separately from other intangible assets reported in the balance sheet and (2) changes from the remeasurement of crypto assets separately from changes in the carrying amounts of other intangible assets in the income

While the amendments in the update do not otherwise change the presentation requirements for the statement of cash flows, they do require specific presentation of cash receipts arising from crypto assets that are received as noncash consideration in the ordinary course of business and are converted nearly immediately into cash.

The amendments in the update also provide for several enhancements related to disclosure of an entity's crypto asset holdings.

For annual and interim reporting periods, the amendments in the update require an entity disclose the following information:

(1) The name, cost basis, fair value, and number of units for each significant crypto asset holding and aggregate fair values and costs bases of the crypto asset holdings that are not individually significant;

and (2) For crypto assets that are subject to contractual sale restrictions, the fair value of those crypto assets, the nature and remaining duration of the restriction(s), and the circumstances that could cause the restriction(s) to lapse.

For annual reporting periods, the amendments in the update require an entity disclose the following information:

(1) A rollforward, in the aggregate, of activity in the reporting period for crypto asset holdings, including additions (with a description of the activities that resulted in the additions), dispositions, gains, and losses;

(2) For any dispositions for crypto assets in the reporting period, the difference between the disposal price and the cost basis and a description of the activities that resulted in the dispositions;

(3) If gains and losses are not presented separately, the income statement line item in which those gains and losses are recognized;

and (4) The method for determining the cost basis of crypto assets.

The amendments in this update are effective for public business entities for annual periods beginning after December 15, 2024, including interim periods within those fiscal years.

Early adoption is permitted for both interim and annual financial statements that have not yet been issued (or made available for issuance).

If an entity adopts the amendments in an interim period, it must adopt them as of the beginning of the fiscal year that includes that interim period.

The amendments in this update require a cumulative-effect adjustment to the opening balance of retained earnings (or other appropriate components of equity or net assets) as of the beginning of the annual reporting period in which an entity adopts the amendments.

The Company is currently evaluating the impact of this update on its disclosures, however does not expect the adoption of this update to have a material impact on the consolidated financial statements based upon the nature of the Company's current operations.

On December 14, 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740):

Improvements to Income Tax Disclosures" , to address investor requests for greater transparency in regards to income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information.

The amendments are designed to enhance transparency surrounding income tax disclosures by requiring (1) Consistent categories and greater disaggregation of information in the rate reconciliation and (2) Income taxes paid disaggregation by taxing jurisdiction, which will allow investors to better assess, in their capital allocation decisions, how an entity's operations and related tax risks and tax planning and operational opportunities affect its income tax rate and prospects for future cash flows.

Other amendments in this

Update are designed to improve the effectiveness and comparability of disclosures by (1) adding disclosures of pretax income (loss) and income tax expense (benefit) to be consistent with the SEC's Regulation S-X 210.4-08(h), Rules of General Application-General Notes to Financial Statements:

Income Tax Expense , and (2) Removing disclosures that are no longer considered cost beneficial or relevant.

The amendments are designed to enhance transparency surrounding income tax disclosures by requiring (1) Consistent categories and greater disaggregation of information in the rate reconciliation;

and (2) Income taxes paid disaggregation by taxing jurisdiction, which will allow investors to better assess, in their capital allocation decisions, how an entity's operations and related tax risks and tax planning and operational opportunities affect its income tax rate and prospects for future cash flows.

Other amendments in this update are designed to improve the effectiveness and comparability of disclosures by (1) adding disclosures of pretax income (loss) and income tax expense (benefit) to be consistent with the SEC's Regulation S-X 210.4-08(h), Rules of General Application-General Notes to Financial Statements:

Income Tax Expense;

and (2) Removing disclosures that are no longer considered cost beneficial or relevant.

The amendments in this update are effective for public business entities for annual periods beginning after December 31, 2024.

11 unchanged sentences

Cost Gross Unrealized Gain Gross Unrealized Losses Allowance for Credit Losses Fair Value

March 31, 2024

June 30, 2024

government sponsored agencies $ 142,183 $ 0 $ ( 28,486 ) $ 0 $ 113,697

13 unchanged sentences

Cost Gross Unrealized Gain Gross Unrealized Losses Allowance for Credit Losses Fair Value

March 31, 2024

June 30, 2024

State and municipal securities $ 130,746 $ 0 $ ( 16,749 ) $ 0 $ 113,997

4 unchanged sentences

The net unrealized gain or loss on the transferred securities was recorded as a component of accumulated other comprehensive income (loss) at the time of the transfer and is amortized over the remaining life of the underlying securities as an adjustment to the yield on those securities.

The net amount of the unamortized unrealized loss on the transferred securities included in accumulated other comprehensive income (loss) was $ 20.4 million ($ 16.1 million, net of tax) at March 31, 2024.

Information regarding the amortized cost and fair value of available-for-sale and held-to-maturity debt securities by maturity as of March 31, 2024 is presented below.

The net amount of the unamortized unrealized loss on the transferred securities included in accumulated other comprehensive income (loss) was $ 19.9 million ($ 15.8 million, net of tax) at June 30, 2024.

Information regarding the amortized cost and fair value of available-for-sale and held-to-maturity debt securities by maturity as of June 30, 2024 is presented below.

Maturity information is based on contractual maturity for all securities other than mortgage-backed securities.

11 unchanged sentences

Available-for-sale securities proceeds, gross gains and gross losses are presented below.

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(dollars in thousands) 2024 2023 2024 2023

7 unchanged sentences

Gains and losses on sales are based on the amortized cost of the security sold and recorded on the trade date.

Securities with fair values of $ 642.0 million and $ 792.0 million were pledged as of March 31, 2024 and December 31, 2023, respectively, as collateral for borrowings from the Federal Home Loan Bank ("FHLB") and Federal Reserve Bank and for other purposes as permitted or required by law.

Securities with fair values of $ 578.6 million and $ 792.0 million were pledged as of June 30, 2024 and December 31, 2023, respectively, as collateral for borrowings from the Federal Home Loan Bank ("FHLB") and Federal Reserve Bank and for other purposes as permitted or required by law.

Unrealized Loss Analysis on Available-for-Sale and Held-to-Maturity Securities

Information regarding available-for-sale securities with unrealized losses as of March 31, 2024 and December 31, 2023 is presented on the following page.

Information regarding available-for-sale securities with unrealized losses as of June 30, 2024 and December 31, 2023 is presented on the following page.

The tables divide the securities between those with unrealized losses for less than twelve months and those with unrealized losses for twelve months or more.

4 unchanged sentences

Value Unrealized

March 31, 2024

June 30, 2024

government sponsored agencies $ 0 $ 0 $ 113,697 $ 28,486 $ 113,697 $ 28,486

9 unchanged sentences

Total available-for-sale $ 31,397 $ 440 $ 1,002,690 $ 174,334 $ 1,034,087 $ 174,774

Information regarding held-to-maturity securities with unrealized losses as of March 31, 2024 and December 31, 2023 is presented below.

Information regarding held-to-maturity securities with unrealized losses as of June 30, 2024 and December 31, 2023 is presented below.

The table divides the securities between those with unrealized losses for less than twelve months and those with unrealized losses for twelve months or more.

4 unchanged sentences

Value Unrealized

March 31, 2024

June 30, 2024

State and municipal securities $ 0 $ 0 $ 113,997 $ 16,749 $ 113,997 $ 16,749

1 unchanged sentence

State and municipal securities $ 0 $ 0 $ 119,215 $ 10,703 $ 119,215 $ 10,703

The total number of securities with unrealized losses as of March 31, 2024 and December 31, 2023 is presented below.

The total number of securities with unrealized losses as of June 30, 2024 and December 31, 2023 is presented below.

Available-for-Sale Held-to-Maturity

3 unchanged sentences

or more Total

March 31, 2024

June 30, 2024

government sponsored agencies 0 17 17 0 0 0

13 unchanged sentences

For available-for-sale debt securities that do not meet the above criteria and for held-to-maturity securities, management evaluates whether the decline in fair value has resulted from credit losses or other factors.

In making this assessment, management considers the extent to which fair value is

less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security and the issuer, among other factors.

In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically

related to the security and the issuer, among other factors.

If this assessment indicates that a credit loss exists, management compares the present value of cash flows expected to be collected from the security with the amortized cost basis of the security.

1 unchanged sentence

For available-for-sale debt securities, any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income (loss), net of applicable taxes.

No allowance for credit losses for available-for-sale or held-to-maturity debt securities was recorded at March 31, 2024 or December 31, 2023.

Accrued interest receivable on securities totaled $ 7.0 million and $ 7.6 million at March 31, 2024 and December 31, 2023, respectively, and is excluded from the estimate of credit losses.

No allowance for credit losses for available-for-sale or held-to-maturity debt securities was recorded at June 30, 2024 or December 31, 2023.

Accrued interest receivable on securities totaled $ 7.5 million and $ 7.6 million at June 30, 2024 and December 31, 2023, respectively, and is excluded from the estimate of credit losses.

government sponsored agencies and mortgage-backed securities are either explicitly or implicitly guaranteed by the U.S.

2 unchanged sentences

State and municipal securities credit losses are benchmarked against highly rated municipal securities of similar duration, as published by Moody's, resulting in an immaterial allowance for credit losses.

(dollars in thousands) March 31,

(dollars in thousands) June 30,

2024 December 31,

27 unchanged sentences

Loans, net $ 4,971,630 $ 4,844,562

The recorded investment in loans does not include accrued interest, which totaled $ 22.7 million and $ 21.5 million as of March 31, 2024 and December 31, 2023, respectively.

The Company h ad $ 417,000 and $ 238,000 in residential real estate loans in the process of foreclosure as of March 31, 2024 and December 31, 2023, respectively.

The recorded investment in loans does not include accrued interest, which totaled $ 22.4 million and $ 21.5 million as of June 30, 2024 and December 31, 2023, respectively.

The Company h ad $ 325,000 and $ 238,000 in residential real estate loans in the process of foreclosure as of June 30, 2024 and December 31, 2023, respectively.

ALLOWANCE FOR CREDIT LOSSES AND CREDIT QUALITY

59 unchanged sentences

(dollars in thousands) Commercial and Industrial Commercial Real Estate and Multifamily Residential Agri-business and Agricultural Other Commercial Consumer 1-4 Family Mortgage Other Consumer Unallocated Total

Three Months Ended March 31, 2024

Three Months Ended June 30, 2024

Beginning balance, April 1 $ 30,720 $ 32,078 $ 4,112 $ 1,022 $ 3,518 $ 1,229 $ 501 $ 73,180

Provision for credit losses 8,412 422 ( 444 ) ( 202 ) 68 326 ( 102 ) 8,480

Loans charged-off ( 12 ) ( 840 ) 0 0 ( 22 ) ( 202 ) 0 ( 1,076 )

Recoveries 41 27 0 0 22 37 0 127

Net loans (charged-off) recovered 29 ( 813 ) 0 0 0 ( 165 ) 0 ( 949 )

Ending balance $ 39,161 $ 31,687 $ 3,668 $ 820 $ 3,586 $ 1,390 $ 399 $ 80,711

Three Months Ended June 30, 2023

Beginning balance, April 1 $ 31,190 $ 29,036 $ 4,621 $ 1,034 $ 3,398 $ 1,096 $ 840 $ 71,215

Provision for credit losses ( 272 ) 1,593 ( 219 ) 86 51 50 ( 489 ) 800

Loans charged-off ( 7 ) 0 0 0 ( 14 ) ( 369 ) 0 ( 390 )

Recoveries 67 284 0 0 13 69 0 433

Net loans (charged-off) recovered 60 284 0 0 ( 1 ) ( 300 ) 0 43

Ending balance $ 30,978 $ 30,913 $ 4,402 $ 1,120 $ 3,448 $ 846 $ 351 $ 72,058

Six Months Ended June 30, 2024

Beginning balance, January 1 $ 30,338 $ 31,335 $ 4,150 $ 1,129 $ 3,474 $ 1,174 $ 372 $ 71,972

5 unchanged sentences

Three Months Ended March 31, 2023

Six Months Ended June 30, 2023

Beginning balance, January 1 $ 35,290 $ 27,394 $ 4,429 $ 917 $ 3,001 $ 1,021 $ 554 $ 72,606

19 unchanged sentences

Loans listed as Not Rated are consumer loans or commercial loans with consumer characteristics included in groups of homogenous loans which are analyzed for credit quality indicators utilizing delinquency status.

The following table summarizes the risk category of loans by loan segment and year of origination as of March 31, 2024:

The following table summarizes the risk category of loans by loan segment and year of origination as of June 30, 2024:

(dollars in thousands) 2024 2023 2022 2021 2020 Prior Term Total Revolving Total

18 unchanged sentences

Pass 21,179 40,050 8,490 46,822 0 173 116,714 537,960 654,674

Special Mention 0 0 0 0 0 0 0 1,661 1,661

Total 21,179 40,050 8,490 46,822 0 173 116,714 539,621 656,335

11 unchanged sentences

Special Mention 603 15,925 110 6,065 0 0 22,703 0 22,703

Nonowner occupied loans (continued):

Total 88,780 143,487 157,937 116,310 123,116 87,035 716,665 45,086 761,751

17 unchanged sentences

Special Mention 0 0 0 182 0 0 182 500 682

Substandard 0 0 0 0 0 0 0 0 0

Doubtful 0 0 0 0 0 0 0 0 0

Not Rated 0 0 0 0 0 0 0 0 0

Total 14,189 27,670 22,196 25,947 23,309 5,702 119,013 80,743 199,756

14 unchanged sentences

Total 19,653 73,243 59,354 47,320 23,395 32,154 255,119 3,618 258,737

Closed end first mortgage loans:

Closed end first mortgage loans (continued):

Current period gross write offs 0 0 0 0 0 0 0 0 0

1 unchanged sentence

Pass 49 763 0 464 0 6 1,282 10,845 12,127

Special Mention 0 0 0 0 321 0 321 0 321

Substandard 0 106 0 21 0 82 209 122 331

10 unchanged sentences

Pass 479 986 274 1,162 97 0 2,998 12,656 15,654

Special Mention 0 0 475 0 152 0 627 0 627

Substandard 0 163 32 36 0 0 231 0 231

5 unchanged sentences

Total period gross write offs $ 3 $ 207 $ 263 $ 26 $ 0 $ 866 $ 1,365 $ 215 $ 1,580

As of March 31, 2024, $ 1.2 million in PPP loans were included in the "Pass" category of non-working capital commercial and industrial loans.

As of June 30, 2024, $ 1.2 million in PPP loans were included in the "Pass" category of non-working capital commercial and industrial loans.

These loans were included in this risk rating category because they are fully guaranteed by the Small Business Administration ("SBA").

32 unchanged sentences

Pass 123,633 158,415 112,582 134,050 87,288 66,755 682,723 27,860 710,583

Nonowner occupied loans (continued):

Special Mention 4,503 0 6,257 0 0 2,246 13,006 0 13,006

33 unchanged sentences

Not Rated 64,233 51,018 38,014 17,432 4,314 23,225 198,236 0 198,236

Closed end first mortgage loans (continued):

Total 74,230 61,559 50,596 26,688 8,238 28,103 249,414 8,330 257,744

30 unchanged sentences

Loans may be returned to accrual status when all the principal and interest amounts contractually due are brought current, remain current for a prescribed period, and future payments are reasonably assured.

The following table presents the aging of the amortized cost basis in past due loans as of March 31, 2024 by class of loans and loans past due 90 days or more and still accruing by class of loan:

The following table presents the aging of the amortized cost basis in past due loans as of June 30, 2024 by class of loans and loans past due 90 days or more and still accruing by class of loan:

(dollars in thousands) Loans Not Past Due 30-89 Days Past Due Greater than 89 Days Past Due and Accruing Total Accruing Total Nonaccrual Nonaccrual With No Allowance For Credit Loss Total

17 unchanged sentences

Total $ 4,993,587 $ 1,616 $ 26 $ 4,995,229 $ 57,112 $ 1,352 $ 5,052,341

An insignificant amount of interest income was recognized on nonaccrual loans during the three month period ended March 31, 2024.

An insignificant amount of interest income was recognized on nonaccrual loans during the six month period ended June 30, 2024.

The following table presents the aging of the amortized cost basis in past due loans as of December 31, 2023 by class of loans and loans past due 90 days or more and still accruing by class of loan:

18 unchanged sentences

Total $ 4,897,462 $ 3,360 $ 27 $ 4,900,849 $ 15,685 $ 1,901 $ 4,916,534

An insignificant amount of interest income was recognized on nonaccrual loans was insignificant during the year ended December 31, 2023.

An insignificant amount of interest income was recognized on nonaccrual loans during the year ended December 31, 2023.

When management determines that foreclosure is probable, expected credit losses for collateral dependent loans are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate.

3 unchanged sentences

The following tables present the amortized cost basis of collateral dependent loans by class of loan as of:

March 31, 2024

June 30, 2024

(dollars in thousands) Real Estate General

10 unchanged sentences

Open end and junior lien loans 331 0 0 331

Residential construction and land development loans 0 0 0 0

Other consumer loans 0 0 183 183

23 unchanged sentences

In the event forgiveness of principal is provided, the amount of the forgiveness is charged off against the allowance for credit losses.

During the three months ended March 31, 2024 and 2023, there were no material modifications made to borrowers experiencing financial difficulty.

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

The following table presents the performance of such loans that have been modified in the last 12 months at March 31, 2024:

(dollars in thousands) 30-59 Days Past Due 60-89 Days Past Due Greater Than 89 Days Past Due Total Past Due

During the three and six months ended June 30, 2024, there were no material modifications made to borrowers experiencing financial difficulty.

(dollars in thousands) Combination Principal Forgiveness, Interest Rate Reduction and Term Extension and Payment Delay Total Modifications Total Class of Financing Receivable

Three and Six Months Ended June 30, 2023

Commercial and industrial loans:

Working capital lines of credit loans $ 941 $ 0 $ 0 $ 941

Non-working capital loans $ 1,544 $ 1,544 0.19 %

Total commercial and industrial loans 1,544 1,544 0.10

Total $ 941 $ 0 $ 0 $ 941

One working capital line of credit loan receiving a modification due to borrower financial difficulty within the past 12 months was 30-59 days past due at March 31, 2024.

The delinquency for this line of credit was due to ongoing negotiations with the borrower for an additional restructuring of the outstanding debt for the admission of new partners into the borrower's business.

At March 31, 2024, no loans receiving a modification due to borrower financial difficulty within the last twelve months experienced a payment default.

Total loan modifications made to borrowers experiencing financial difficulty $ 1,544 $ 1,544 0.03 %

The Company has no material commitments to lend additional funds to borrowers included in the previous table .

The following tables present the financial effect of the loan modifications presented above for borrowers experiencing financial difficulty for the three and six months ended June 30, 2023:

(dollars in thousands) Principal Forgiveness Interest Rate Reduction

Financial Effect Term Extension

Financial Effect Payment Delay Total Class of Financing Receivable

Three and Six Months Ended June 30, 2023

Commercial and industrial loans:

Non-working capital loans (1) $ 9,380 Reduction of one term loan from Prime plus 0.75 % to 1.00 % Fixed

Term extension from 40 months to 60 months

Extension of amortization period from 40 months to 480 months with excess cash flow recapture provisions for earlier repayment

(1) Represents one $ 11.0 million non-working capital loan that received principal forgiveness of $ 9.4 million, of which $ 9.3 million was charged off.

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

At June 30, 2024, no loans receiving such a modification within the last twelve months were 30 days or greater past due.

At June 30, 2024, no loans receiving a modification due to borrower financial difficulty within the last twelve months experienced a payment default.

Upon the Company's determination that a modified loan (or portion thereof) has subsequently been deemed uncollectible, the loan (or a portion thereof) is written off.

Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the allowance for credit losses is adjusted by the same amount.

For the period ended March 31, 2024, the Company had an advance outstanding from the FHLB in the amount of $ 200.0 million.

The outstanding advance was a fixed rate bullet advance with an interest rate of 5.49 % and matured April 10, 2024.

For the period ended June 30, 2024, the Company had no outstanding advances from the FHLB.

For the period ended December 31, 2023, the Company had a fixed rate bullet advance from the FHLB with an interest rate of 5.55 % in the amount of $ 50.0 million that matured on January 5, 2024.

Federal Funds purchased were $ 55.0 million at June 30, 2024, and there were none at December 31, 2023.

On October 11, 2023 the Company entered into an unsecured revolving credit agreement with a financial institution allowing the Company to borrow up to $ 30.0 million.

The credit agreement has a one year term which may be amended, extended, modified or renewed.

Funds provided under the agreement can be used to repurchase shares of the Company’s common stock under the share repurchase program, which was reauthorized by the Company’s board of directors on April 11, 2023 and expires on April 30, 2025, and for general operations.

2023 and expires on April 30, 2025, and for general operations.

The credit agreement includes a negative pledge agreement whereby the Company agrees not to pledge or otherwise encumber the stock of the Bank.

There were no outstanding borrowings on the credit agreement at March 31, 2024 and December 31, 2023.

There were no outstanding borrowings on the credit agreement at June 30, 2024 and December 31, 2023.

FAIR VALUE DISCLOSURES

43 unchanged sentences

In addition to real estate, the Company’s management evaluates other types of collateral as follows:

scope of use of the finished good (c) work in process inventory is typically discounted by 60 %- 100 %, depending on the length of manufacturing time, types of components used in the completion process, and the breadth of the user base (d) equipment is valued at a percentage of depreciated book value or recent appraised value, if available, and is typically discounted at 20 - 50 % after various considerations including age and condition of the equipment, marketability, breadth of use, and whether the equipment includes unique components or add-ons;

(a) raw and finished inventory is discounted from its cost or book value by 40 - 60 %, depending on the marketability of the goods (b) finished goods are generally discounted by 40 - 60 %, depending on the ease of marketability, cost of transportation or scope of use of the finished good (c) work in process inventory is typically discounted by 60 %- 100 %, depending on the length of manufacturing time, types of components used in the completion process, and the breadth of the user base (d) equipment is valued at a percentage of depreciated book value or recent appraised value, if available, and is typically discounted at 20 - 50 % after various considerations including age and condition of the equipment, marketability, breadth of use, and whether the equipment includes unique components or add-ons;

and (e) marketable securities are discounted by 10 %- 30 %, depending on the type of investment, age of valuation report and general market conditions.

1 unchanged sentence

Mortgage servicing rights:

As of March 31, 2024, the fair value of the Company’s Level 3 servicing assets for residential mortgage loans (“MSRs”) was $ 2.1 million, carried at amortized cost and no valuation reserve.

As of June 30, 2024, the fair value of the Company’s Level 3 servicing assets for residential mortgage loans (“MSRs”) was $ 2.0 million, carried at amortized cost and no valuation reserve.

These residential mortgage loans have a weighted average interest rate of 3.6 %, a weighted average maturity of 20 years and are secured by homes generally within the Company’s market area of Northern Indiana and Indianapolis.

5 unchanged sentences

The most significant unobservable assumption is the discount rate.

At March 31, 2024, the constant prepayment speed (“PSA”) used was 154 and used a discount rate range of 10.0 %- 12.0 %.

At June 30, 2024, the constant prepayment speed (“PSA”) used was 156 and used a discount rate range of 10.0 %- 12.0 %.

At December 31, 2023, the PSA used was 148 and the discount rate used was 10.5 %.

8 unchanged sentences

Real estate mortgage loans held-for-sale are carried at the lower of cost or fair value, as determined by outstanding commitments, from third party investors, and result in a Level 2 classification.

Visa Class C Shares :

On April 8, 2024, Visa Inc.

announced the commencement of an exchange offer for Visa Class B-1 common stock, which was being carried at a historical cost basis of zero.

On May 7, 2024, the Bank received notice that Visa had accepted the Bank's tender of its 23,804 shares of Visa Class B-1 common stock in exchange for a combination of Visa Class B-2 common stock and Visa Class C common stock.

Visa's acceptance resulted in a gain for the Company relating to the Visa Class C common stock, which is carried at fair value, and results in a Level 1 classification.

Subsequent to the exchange and during the second quarter of 2024, the Bank sold its Visa Class B-2 common stock, which resulted in a realized gain of $ 3.9 million, and liquidated two-thirds of its Visa Class C common stock, which resulted in a realized gain of $ 3.4 million.

Of this recognized net gain on Visa shares, $ 1.7 million related to Visa Class C common stock that is still owned and held by the Bank as of June 30, 2024 and carried at fair value in other assets on the consolidated balance sheet.

The Bank plans to liquidate these remaining shares during the third quarter of 2024 pursuant to the Visa redemption provisions.

The recognized net gain on Visa shares was $ 9.0 million during the second quarter of 2024.

The tables below present the balances of assets measured at fair value on a recurring basis:

March 31, 2024

June 30, 2024

Fair Value Measurements Using Assets

6 unchanged sentences

Total securities available-for-sale 0 990,351 2,706 993,057

Visa class c shares 1,653 0 0 1,653

Mortgage banking derivative 0 99 0 99

1 unchanged sentence

Total assets $ 1,653 $ 1,020,445 $ 2,706 $ 1,024,804

Mortgage banking derivative $ 0 $ 9 $ 0 $ 9

Interest rate swap derivative $ 0 $ 29,995 $ 0 $ 29,995

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The tables below present the balances of assets measured at fair value on a nonrecurring basis:

March 31, 2024

June 30, 2024

Fair Value Measurements Using Assets

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Total assets $ 0 $ 0 $ 5,734 $ 5,734

The following table presents the valuation methodology and unobservable inputs for Level 3 assets measured at fair value on a non-recurring basis at March 31, 2024:

The following table presents the valuation methodology and unobservable inputs for Level 3 assets measured at fair value on a non-recurring basis at June 30, 2024:

(dollars in thousands) Fair Value Valuation Methodology Unobservable Inputs Average Range of Inputs

17 unchanged sentences

Items that are not financial instruments are not included.

March 31, 2024

June 30, 2024

Value Estimated Fair Value

5 unchanged sentences

Real estate mortgages held-for-sale 399 0 409 0 409

Visa class c shares 1,653 1,653 0 0 1,653

Loans, net 4,971,630 0 0 4,842,857 4,842,857

32 unchanged sentences

OFFSETTING ASSETS AND LIABILITIES

The following tables summarize gross and net information about financial instruments and derivative instruments that are offset in the statement of financial position or that are subject to an enforceable master netting arrangement at March 31, 2024 and December 31, 2023.

March 31, 2024

June 30, 2024

Gross Amounts of Recognized Assets/Liabilities Gross Amounts Offset in the Statement of Financial Position Net Amounts presented in the Statement of Financial Position Gross Amounts Not Offset in the Statement of Financial Position Net Amount

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Diluted earnings per common share includes the dilutive effect of additional potential common shares issuable under stock based awards and warrants, none of which were antidilutive.

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Weighted average shares outstanding for basic earnings per common share 25,678,231 25,607,663 25,667,647 25,595,412

4 unchanged sentences

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following tables summarize the changes within each classification of accumulated other comprehensive income (loss) for the three months ended March 31, 2024 and 2023, all shown net of tax:

The following tables summarize the changes within each classification of accumulated other comprehensive income (loss) for the three months ended June 30, 2024 and 2023, all shown net of tax:

(dollars in thousands) Unrealized Gains and Losses on Available-

for-Sales Securities Defined Benefit Pension Items Total

Balance at April 1, 2024

$ ( 166,189 ) $ ( 724 ) $ ( 166,913 )

Other comprehensive income (loss) before reclassification ( 3,943 ) 0 ( 3,943 )

Amounts reclassified from accumulated other comprehensive income (loss) 386 12 398

Net current period other comprehensive income (loss) ( 3,557 ) 12 ( 3,545 )

Balance at June 30, 2024 $ ( 169,746 ) $ ( 712 ) $ ( 170,458 )

(dollars in thousands) Unrealized Gains and Losses on Available-

for-Sales Securities Defined Benefit Pension Items Total

Balance at April 1, 2023

$ ( 166,612 ) $ ( 758 ) $ ( 167,370 )

Other comprehensive income (loss) before reclassification ( 10,674 ) 0 ( 10,674 )

Amounts reclassified from accumulated other comprehensive income (loss) 388 11 399

Net current period other comprehensive income (loss) ( 10,286 ) 11 ( 10,275 )

Balance at June 30, 2023 $ ( 176,898 ) $ ( 747 ) $ ( 177,645 )

The following tables summarize the changes within each classification of accumulated other comprehensive income (loss) for the six months ended June 30, 2024 and 2023, all shown net of tax:

(dollars in thousands) Unrealized Gains and Losses on Available-

for-Sales Securities Defined Benefit Pension Items Total

Balance at January 1, 2024 $ ( 154,460 ) $ ( 735 ) $ ( 155,195 )

2 unchanged sentences

Net current period other comprehensive income (loss) ( 15,286 ) 23 ( 15,263 )

Balance at March 31, 2024

Balance at June 30, 2024

$ ( 169,746 ) $ ( 712 ) $ ( 170,458 )

5 unchanged sentences

Net current period other comprehensive income (loss) 11,256 22 11,278

Balance at March 31, 2023

Balance at June 30, 2023

$ ( 176,898 ) $ ( 747 ) $ ( 177,645 )

Reclassifications out of accumulated comprehensive income (loss) for the three months ended March 31, 2024 are as follows:

Reclassifications out of other accumulated other comprehensive income (loss) for the three months ended June 30, 2024 are as follows:

Details about

13 unchanged sentences

Total reclassifications for the period $ ( 398 ) Net income

Reclassifications out of accumulated other comprehensive income (loss) for the three months ended March 31, 2023 are as follows:

Reclassifications out of other accumulated comprehensive income (loss) for the three months ended June 30, 2023 are as follows:

Details about

6 unchanged sentences

Amortization of unrealized losses on held-to-maturity securities $ ( 494 ) Interest income

Realized gains and (losses) on available-for-sale securities 3 Net securities gains (losses)

Tax effect 103 Income tax expense

4 unchanged sentences

Total reclassifications for the period $ ( 399 ) Net income

Reclassifications out of accumulated comprehensive income (loss) for the six months ended June 30, 2024 are as follows:

Details about

Accumulated Other

Comprehensive

Income (Loss) Components Amount

Reclassified From Accumulated Other Comprehensive Income (Loss) Affected Line Item

in the Statement Where Net Income is Presented

(dollars in thousands)

Amortization of unrealized losses on held-to-maturity securities $ ( 985 ) Interest income

Realized gains and (losses) on available-for-sale securities ( 46 ) Net securities gains (losses)

Tax effect 217 Income tax expense

( 814 ) Net of tax

Amortization of defined benefit pension items ( 31 ) Other expense

Tax effect 8 Income tax expense

( 23 ) Net of tax

Total reclassifications for the period $ ( 837 ) Net income

Reclassifications out of accumulated other comprehensive income (loss) for the six months ended June 30, 2023 are as follows:

Details about

Accumulated Other

Comprehensive

Income (Loss) Components Amount

Reclassified From Accumulated Other Comprehensive Income (Loss) Affected Line Item

in the Statement Where Net Income is Presented

(dollars in thousands)

Amortization of unrealized losses on held-to-maturity securities $ ( 985 ) Interest income

Realized gains and (losses) on available-for-sale securities 19 Net securities gains (losses)

Tax effect 203 Income tax expense

( 763 ) Net of tax

Amortization of defined benefit pension items ( 30 ) Other expense

Tax effect 8 Income tax expense

( 22 ) Net of tax

Total reclassifications for the period $ ( 785 ) Net income

The Company leases certain office facilities under long-term operating lease agreements.

4 unchanged sentences

The Company determines if an arrangement is a lease at inception.

Operating leases are recorded as a right-of-use ("ROU") lease assets and are included in other assets on the consolidated balance sheet.

Operating leases are recorded as a right-of-use ("ROU") lease asset and are included in other assets on the consolidated balance sheet.

The Company's corresponding lease obligations are included in other liabilities on the consolidated balance sheet.

7 unchanged sentences

The Company recognizes short-term leases on a straight-line basis and does not record a related lease asset or liability for such leases, as allowed as a practical expedient of the standard.

The following is a maturity analysis of the operating lease liabilities as of March 31, 2024:

The following is a maturity analysis of the operating lease liabilities as of June 30, 2024:

Years ending December 31, (in thousands) Operating Lease Obligation

4 unchanged sentences

Right-of-use asset $ 4,385

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(dollars in thousands) 2024 2023 2024 2023

4 unchanged sentences

Operating cash outflows from operating leases $ 161 $ 220 $ 346 $ 389

Weighted-average remaining lease term - operating leases 6.0 years 7.0 years

Weighted-average remaining lease term - operating leases 5.8 years 6.8 years 5.8 years 6.8 years

Weighted average discount rate - operating leases 2.5 % 2.5 % 2.5 % 2.5 %

1 unchanged sentence

Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated.

In July 2019, the Bank discovered potentially fraudulent activity by a former treasury management client involving multiple banks.

The former client subsequently filed several related bankruptcy cases, captioned In re Interlogic Outsourcing, Inc., et al ., which were filed in the United States Bankruptcy Court for the Western District of Michigan.

On April 27, 2021, the bankruptcy court entered an order approving an amended plan of liquidation, which was filed by the former client, other debtors and bankruptcy plan proponents, and approving the consolidation of the assets in the aforementioned cases under the Khan IOI Consolidated Estate Trust.

On August 9, 2021, the liquidating trustee for the bankruptcy estates filed a complaint against the Bank and the Company, and agreed to stay prosecution of the action through August 31, 2022.

The original complaint focused on a series of business transactions among the client, related entities and the Bank, which the liquidating trustee alleged are voidable under applicable federal bankruptcy and state law.

The complaint also addressed treatment of the Bank's claims filed in the bankruptcy cases.

On August 31, 2022, the trustee filed his amended complaint against the former client, the Bank, the Company, four officers of the Bank and one independent director of the Bank.

The amended complaint alleged that the former client engaged in a check kiting scheme involving multiple banks.

The amended complaint alleged that a series of business transactions among the client, his related entities and the Bank are voidable under applicable bankruptcy and state laws.

The amended complaint also alleged that the Bank, the Company and the five individual bank representatives who are named as defendants violated various federal and state laws in assisting the former client in his check kiting scheme.

On October 26, 2022, the trustee filed his second amended complaint which was virtually identical to his amended complaint.

On January 5, 2023, the Bank, the Company and the five individual bank representatives filed motions to dismiss the second amended complaint.

On May 30, 2023, the court issued its decision granting the defendants' motion to dismiss in part and denying it in part.

The court dismissed all claims against the Company and the Bank's independent director.

The court dismissed several of the claims against the defendants but granted the trustee the right to file an amended complaint.

On June 20, 2023, the trustee filed his third amended complaint.

The trustee alleges many of the same claims that were alleged in the second amended complaint.

The defendants

filed a motion to dismiss the third amended complaint on July 25, 2023.

The trustee subsequently filed a response to this motion.

On November 26, 2023, the court issued its decision granting the defendants' motion to dismiss in part and denying it in part.

The court scheduled a pre-trial conference for January 11, 2024, to among other things, set the scope, timing and parameters of the pre-trial discovery process with the parties as the litigation of all claims not dismissed by the court in its ruling has ensued.

Both parties commenced the steps in their respective pre-trial discovery plans in the first quarter and have agreed to another round of mediation, which is scheduled for May 2, 2024, in Grand Rapids, Michigan, at which time the trustee, the bank, its insurers and the parties’ respective counsel will attempt to settle the remaining claims.

Based on current information, we have determined that a material loss is neither probable nor estimable at this time, and the Bank and the four individual Bank representatives who remain as defendants intend to vigorously defend themselves against all allegations asserted in this amended complaint.

As previously disclosed, in July 2019, the Bank discovered potentially fraudulent activity by a former treasury management client involving multiple banks.

The former client subsequently filed several related bankruptcy cases, captioned In re Interlogic Outsourcing, Inc., et al.

, which were filed in the United States Bankruptcy Court for the Western District of Michigan.

The Bank and the other remaining individual defendants have settled the matter with the liquidating trustee and the case was dismissed with prejudice on June 21, 2024.

A $ 4.5 million accrual was recorded during the second quarter of 2024 related to the resolution of this matter.

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 1. Financial Statements