What changed in this filing

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Item 1. Financial Statements

2024-10-30 compared with 2024-08-07 · 127 added, 114 removed, 1162 unchanged (17% of the section changed)

1 unchanged sentence

CONSOLIDATED BALANCE SHEETS (dollars in thousands, except share data)

September 30,

2024 December 31,

27 unchanged sentences

90,000,000 shares authorized, no par value

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

25,974,017 shares issued and 25,506,084 outstanding as of September 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) ( 138,136 ) ( 155,195 )

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

Treasury stock at cost ( 467,933 shares as of September 30, 2024, 473,120 shares as of December 31, 2023)

( 15,668 ) ( 15,553 )

6 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

24 unchanged sentences

Net securities gains (losses) 0 ( 35 ) ( 46 ) ( 16 )

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

Net gain (loss) on Visa shares ( 15 ) 0 8,996 0

Other income 1,027 598 3,908 1,907

19 unchanged sentences

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

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

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

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

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

14 unchanged sentences

Total other comprehensive income (loss), net of tax 32,322 ( 50,466 ) 17,059 ( 39,188 )

Comprehensive income $ 19,004 $ 4,336 $ 30,687 $ 50,167

Comprehensive income (loss) $ 55,660 $ ( 25,214 ) $ 86,347 $ 24,953

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

7 unchanged sentences

Interest Total

Balance at April 1, 2023

Balance at July 1, 2023

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

Comprehensive income:

Comprehensive loss:

Net income 25,252 25,252 25,252

5 unchanged sentences

Stock based compensation expense 2,185 2,185 2,185

Balance at June 30, 2023

Balance at September 30, 2023

25,431,724 $ 125,758 $ 674,917 $ ( 228,111 ) $ ( 15,469 ) $ 557,095 $ 89 $ 557,184

Balance at April 1, 2024

Balance at July 1, 2024

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

7 unchanged sentences

Stock based compensation expense 1,260 1,260 1,260

Balance at June 30, 2024

Balance at September 30, 2024

25,506,084 $ 128,346 $ 724,550 $ ( 138,136 ) $ ( 15,668 ) $ 699,092 $ 89 $ 699,181

Six Months Ended

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

Nine Months Ended

Common Stock Retained

15 unchanged sentences

Stock based compensation expense 1,792 1,792 1,792

Balance at June 30, 2023

Balance at September 30, 2023

25,431,724 $ 125,758 $ 674,917 $ ( 228,111 ) $ ( 15,469 ) $ 557,095 $ 89 $ 557,184

12 unchanged sentences

Stock based compensation expense 3,135 3,135 3,135

Balance at June 30, 2024

Balance at September 30, 2024

25,506,084 $ 128,346 $ 724,550 $ ( 138,136 ) $ ( 15,668 ) $ 699,092 $ 89 $ 699,181

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited - in thousands)

Six Months Ended June 30, 2024 2023

Nine Months Ended September 30, 2024 2023

Cash flows from operating activities:

12 unchanged sentences

Stock based compensation expense 3,135 1,792

Losses (earnings) on life insurance ( 1,926 ) ( 1,384 )

Earnings on life insurance ( 2,994 ) ( 2,393 )

Gain on life insurance ( 243 ) 0

20 unchanged sentences

Net increase (decrease) in short-term borrowings 30,000 ( 22,000 )

Proceeds from short-term FHLB borrowings 0 125,000

Net payments on short-term FHLB borrowings ( 50,000 ) ( 185,000 )

13 unchanged sentences

Loans transferred to other real estate owned 0 284

Right-of-use assets obtained in exchange for lease liabilities, net 2,699 0

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 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.

Operating results for the three and nine months ended September 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.

86 unchanged sentences

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

June 30, 2024

September 30, 2024

government sponsored agencies $ 139,998 $ 0 $ ( 23,330 ) $ 0 $ 116,668

13 unchanged sentences

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

June 30, 2024

September 30, 2024

State and municipal securities $ 131,157 $ 0 $ ( 12,296 ) $ 0 $ 118,861

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 $ 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.

The net amount of the unamortized unrealized loss on the transferred securities included in accumulated other comprehensive income (loss) was $ 19.5 million ($ 15.4 million, net of tax) at September 30, 2024.

Information regarding the amortized cost and fair value of available-for-sale and held-to-maturity debt securities by maturity as of September 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 June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 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 $ 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.

Securities with fair values of $ 592.6 million and $ 792.0 million were pledged as of September 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 June 30, 2024 and December 31, 2023 is presented on the following page.

Information regarding available-for-sale securities with unrealized losses as of September 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

June 30, 2024

September 30, 2024

government sponsored agencies $ 0 $ 0 $ 116,668 $ 23,330 $ 116,668 $ 23,330

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 June 30, 2024 and December 31, 2023 is presented below.

Information regarding held-to-maturity securities with unrealized losses as of September 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

June 30, 2024

September 30, 2024

State and municipal securities $ 0 $ 0 $ 118,861 $ 12,296 $ 118,861 $ 12,296

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 June 30, 2024 and December 31, 2023 is presented below.

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

Available-for-Sale Held-to-Maturity

3 unchanged sentences

or more Total

June 30, 2024

September 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 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.

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

Accrued interest receivable on securities totaled $ 7.0 million and $ 7.6 million at September 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) June 30,

(dollars in thousands) September 30,

2024 December 31,

27 unchanged sentences

Loans, net $ 4,998,363 $ 4,844,562

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.

The recorded investment in loans does not include accrued interest, which totaled $ 20.7 million and $ 21.5 million as of September 30, 2024 and December 31, 2023, respectively.

The Company h ad $ 432,000 and $ 238,000 in residential real estate loans in the process of foreclosure as of September 30, 2024 and December 31, 2023, respectively.

ALLOWANCE FOR CREDIT LOSSES AND CREDIT QUALITY

50 unchanged sentences

General allocations of the allowance are determined by a historical loss rate based on the calculation of each pool’s probability of default-loss given default, subject to a floor.

The length of the historical period for each pool is based on the average life of the pool.

The length of the historical period for each pool is based on the average life of the pool, which is updated at least annually.

The historical loss rates are supplemented with consideration of economic conditions and portfolio trends.

6 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 June 30, 2024

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

Three Months Ended September 30, 2024

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

Provision for credit losses 3,498 ( 355 ) ( 254 ) ( 86 ) ( 16 ) 308 ( 36 ) 3,059

4 unchanged sentences

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

Three Months Ended September 30, 2023

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

Provision for credit losses ( 167 ) 230 ( 139 ) ( 102 ) 197 283 98 400

4 unchanged sentences

Six Months Ended June 30, 2024

Nine Months Ended September 30, 2024

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

5 unchanged sentences

Six Months Ended June 30, 2023

Nine Months Ended September 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 June 30, 2024:

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

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

4 unchanged sentences

Substandard 0 0 1,011 0 245 269 1,525 22,855 24,380

Doubtful 0 3,090 39,994 0 0 0 43,084 0 43,084

Total 0 3,231 42,735 1,824 1,018 269 49,077 628,824 677,901

5 unchanged sentences

Substandard 0 3,269 1,608 134 4,400 673 10,084 467 10,551

Doubtful 0 227 0 540 416 0 1,183 0 1,183

Not Rated 1,101 1,809 1,265 506 455 46 5,182 0 5,182

17 unchanged sentences

Nonowner occupied loans:

Pass 88,177 127,562 157,827 110,245 123,116 87,035 693,962 45,086 739,048

Pass (continued) 108,277 123,755 152,690 107,647 121,272 80,108 693,749 50,584 744,333

Special Mention 0 15,790 109 5,967 0 0 21,866 0 21,866

Nonowner occupied loans (continued):

Nonowner occupied loans:

Total 108,277 139,545 152,799 113,614 121,272 80,108 715,615 50,584 766,199

31 unchanged sentences

Substandard 0 86 322 90 0 219 717 0 717

Not Rated 13,147 63,005 48,503 35,241 16,446 26,013 202,355 0 202,355

Not Rated (continued) 18,866 58,659 47,720 34,711 16,226 24,767 200,949 0 200,949

Total 28,348 69,459 57,600 46,398 22,711 30,367 254,883 6,217 261,100

Closed end first mortgage loans (continued):

Closed end first mortgage loans:

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

22 unchanged sentences

Total period gross write offs $ 4 $ 229 $ 274 $ 28 $ 0 $ 866 $ 1,401 $ 410 $ 1,811

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.

As of September 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").

101 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 June 30, 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 September 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 $ 5,023,529 $ 827 $ 95 $ 5,024,451 $ 57,539 $ 1,582 $ 5,081,990

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

An insignificant amount of interest income was recognized on nonaccrual loans during the nine month period ended September 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:

24 unchanged sentences

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

June 30, 2024

September 30, 2024

(dollars in thousands) Real Estate General

34 unchanged sentences

The Company can make any or all of these types of concessions as part of such modifications.

Since an estimate for historical losses is already included as a component of the allowance for credit losses, a change to the allowance for credit losses is generally not recorded at the time of such modifications unless the loan is individually analyzed and the modification changes the specific reserve allocation.

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 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

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

The following tables present the amortized cost basis of loans that were experiencing financial difficulty and received a modification of terms during the three and nine months ended September 30, 2023, by class and type of modification.

The percentage of the amortized cost basis of loans that were modified to borrowers in financial distress as compared to the amortized cost basis of each class of financing receivables is also presented below:

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

Three Months Ended September 30, 2023

Commercial and industrial loans:

Working capital lines of credit loans $ 931 $ 0 $ 0 $ 931 0.16 %

Non-working capital loans 0 2,000 0 2,000 0.25

1 unchanged sentence

Total loan modifications made to borrowers experiencing financial difficulty $ 931 $ 2,000 $ 0 $ 2,931 0.06 %

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

Nine Months Ended September 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.

Working capital lines of credit loans $ 931 $ 0 $ 0 $ 931 0.16 %

Non-working capital loans 0 2,000 1,596 3,596 0.44

Total commercial and industrial loans 931 2,000 1,596 4,527 0.32

Total loan modifications made to borrowers experiencing financial difficulty $ 931 $ 2,000 $ 1,596 $ 4,527 0.09 %

The Company had committed, as of September 30, 2024, to lend additional funds of $ 694,000 to borrowers included in the previous tables .

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

(dollars in thousands) Principal Forgiveness Weighted Average Interest Rate Reduction Weighted Average Term Extension Payment Delay

Three Months Ended September 30, 2023

Commercial and industrial loans:

Working capital lines of credit loans $ 0 7.50 % None None

Non-working capital loans 0 8.50 180 months Extension of payment terms from monthly variable rate interest only payments with balloon payment at end of term to fully amortizing ten year fixed rate principal and interest payment schedule

Total $ 0 8.15 % 70 months

(dollars in thousands) Principal Forgiveness Weighted Average Interest Rate Reduction Weighted Average Term Extension Payment Delay

Nine Months Ended September 30, 2023

Commercial and industrial loans:

Working capital lines of credit loans $ 0 7.50 % None None

Non-working capital loans (1) 9,380 7.87 58 months Extension of payment terms from fully amortizing variable rate 40 month term to 60 month fixed rate term with 480 month amortization schedule, monthly interest and semiannual principal payments, and excess cash flow recapture provisions

Extension of payment terms from monthly variable rate interest only payments with balloon payment at end of term to fully amortizing ten year fixed rate principal and interest payment schedule

Total $ 9,380 7.84 % 44 months

(1) Principal forgiveness of $ 9.4 million represents one $ 11.0 million non-working capital loan, 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.

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

At September 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 June 30, 2024, the Company had no outstanding advances from the FHLB.

For the period ended September 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.

Federal Funds purchased were $ 30.0 million at September 30, 2024, and there were none at December 31, 2023.

On October 2, 2024 the Company renewed 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.

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 June 30, 2024 and December 31, 2023.

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

FAIR VALUE DISCLOSURES

35 unchanged sentences

Fair value is determined using several methods.

Generally, the fair value of real estate is based on appraisals by qualified third party appraisers.

Generally, the fair value of real estate is based on appraisals by qualified third party

These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach.

5 unchanged sentences

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

(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;

(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 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.

As of September 30, 2024, the value of the Company’s Level 3 servicing assets for residential mortgage loans (“MSRs”) was $ 1.9 million, carried at amortized cost and no valuation reserve.

These residential mortgage loans have a weighted average interest rate of 3.7 %, 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 June 30, 2024, the constant prepayment speed (“PSA”) used was 156 and used a discount rate range of 10.0 %- 12.0 %.

At September 30, 2024, the constant prepayment speed (“PSA”) used was 160 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:

June 30, 2024

September 30, 2024

Fair Value Measurements Using Assets

6 unchanged sentences

Total securities available-for-sale 0 1,013,558 3,091 1,016,649

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

Mortgage banking derivative 0 137 0 137

1 unchanged sentence

Total assets $ 0 $ 1,034,094 $ 3,091 $ 1,037,185

Mortgage banking derivative $ 0 $ 2 $ 0 $ 2

Interest rate swap derivative 0 20,400 0 20,400

17 unchanged sentences

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

June 30, 2024

September 30, 2024

Fair Value Measurements Using Assets

27 unchanged sentences

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 June 30, 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 September 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.

June 30, 2024

September 30, 2024

Value Estimated Fair Value

5 unchanged sentences

Real estate mortgages held-for-sale 3,148 0 3,210 0 3,210

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

Loans, net 4,998,363 0 0 4,913,027 4,913,027

6 unchanged sentences

All other deposits 4,834,400 4,834,400 0 0 4,834,400

Federal Home Loan Bank advances 55,000 55,000 0 0 55,000

Federal Funds purchased 30,000 0 30,000 0 30,000

Mortgage banking derivative 2 0 2 0 2

Interest rate swap derivative 20,400 0 20,400 0 20,400

23 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 June 30, 2024 and December 31, 2023.

June 30, 2024

September 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

16 unchanged sentences

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 June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

5 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 June 30, 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 September 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

Balance at July 1, 2024

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

2 unchanged sentences

Net current period other comprehensive income (loss) 32,310 12 32,322

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

Balance at September 30, 2024 $ ( 137,436 ) $ ( 700 ) $ ( 138,136 )

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

for-Sales Securities Defined Benefit Pension Items Total

Balance at April 1, 2023

Balance at July 1, 2023

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

2 unchanged sentences

Net current period other comprehensive income (loss) ( 50,477 ) 11 ( 50,466 )

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:

Balance at September 30, 2023 $ ( 227,375 ) $ ( 736 ) $ ( 228,111 )

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

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

4 unchanged sentences

Net current period other comprehensive income (loss) 17,024 35 17,059

Balance at June 30, 2024

Balance at September 30, 2024

$ ( 137,436 ) $ ( 700 ) $ ( 138,136 )

5 unchanged sentences

Net current period other comprehensive income (loss) ( 39,221 ) 33 ( 39,188 )

Balance at June 30, 2023

Balance at September 30, 2023

$ ( 227,375 ) $ ( 736 ) $ ( 228,111 )

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

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

Details about

13 unchanged sentences

Total reclassifications for the period $ ( 397 ) Net income

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

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

Details about

13 unchanged sentences

Total reclassifications for the period $ ( 434 ) Net income

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

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

Details about

13 unchanged sentences

Total reclassifications for the period $ ( 1,234 ) Net income

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

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

Details about

29 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 June 30, 2024:

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

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

4 unchanged sentences

Right-of-use asset $ 6,920

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

Three Months Ended September 30, Nine Months Ended September 30,

(dollars in thousands) 2024 2023 2024 2023

12 unchanged sentences

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.

A $ 4.5 million accrual was recorded and recognized 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