LKFN filing — read by section

Item 8. Financial Statements and Supplementary Data

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 
 
 
 
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 
 Stockholders and the Board of Directors of Lakeland Financial Corporation 
 Warsaw, Indiana 
 Opinions on the Financial Statements and Internal Control over Financial Reporting 
 We have audited the accompanying consolidated balance sheets of Lakeland Financial Corporation (the "Company") as of December 31, 2024 and 2023, the related consolidated statements of income, comprehensive income (loss), changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2024, and the related notes (collectively referred to as the "financial statements"). We also have audited the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control – Integrated Framework: (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). 
 In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2024 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control – Integrated Framework: (2013) issued by COSO. 
 Basis for Opinions 
 The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Assessment of Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. 
 We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. 
 Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. 
 Definition and Limitations of Internal Control Over Financial Reporting 
 A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or 
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 disposition of the company’s assets that could have a material effect on the financial statements. 
 Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. 
 Critical Audit Matter 
 The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. 
 
 
 Allowance for Credit Losses (ACL) – Qualitative Adjustments 
 The Company adopted ASC 326 as of January 1, 2021, which among other things, required the Company to recognize expected credit losses over the contractual lives of financial asset carried at amortized costs, including loans receivables, utilizing the Current Expected Credit Losses (“CECL”) methodology. As of December 31, 2024, the ACL balance was $85,960,000. Estimates of expected credit losses are based on relevant information about current conditions, past events, and reasonable and supportable forward-looking forecasts regarding collectability of the reported amounts. The Company utilized a Probability of Default/ Loss Given Default model derived from historical charge-off data to construct a loss rate for each identified loan segment. The loss rates, subject to a floor, are then adjusted, for reasonable and supportable forecasts of relevant economic indicators as well as other environmental factors based on the risks present for each portfolio segment. The environmental factors (“qualitative adjustments”) include consideration of economic conditions and portfolio trends. 
 We have identified auditing the qualitative adjustments as a critical audit matter as management’s determination of the qualitative adjustments used in the ACL is subjective and involves significant management judgments; and our audit procedures related to the qualitative adjustments involved a high degree of auditor judgment and required significant audit effort, including the need to involve more experienced audit personnel. 
 The primary procedures we performed to address this critical audit matter included: 
 • Testing th e effectiveness of controls over the qualitative adjustments used in the ACL calculation including controls addressing the: 
 ◦ Significant assumptions and judgments applied in the development of the qualitative adjustments. 
 ◦ Mathematical accuracy of the qualitative adjustments applied to the loan segments in the ACL calculation. 
 • Substantively testing management's determination of the qualitative adjustments used in the ACL estimate, including: 
 ◦ Testing management’s process for developing the qualitative adjustments, which included assessing the relevance and reliability of data used to develop the qualitative adjustments, including evaluating their judgments and assumptions for reasonableness. Among other procedures, our evaluation considered evidence from internal and external sources. 
 ◦ Analytically evaluating the qualitative adjustments for directional consistency, testing for reasonableness, and obtaining evidence for significant changes. 
 ◦ Testing the mathematical accuracy of the qualitative adjustments applied to the loan segments in the ACL calculation. 
 /s/ Crowe LLP 
 Crowe LLP 
 We have served as the Company's auditor since 1983. 
 South Bend, Indiana 
 February 19, 2025 
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 CONSOLIDATED BALANCE SHEETS (in thousands, except share data) 
 
 

 
 December 31 2024 2023 
 ASSETS 
 Cash and due from banks $ 71,733 $ 70,451 
 Short-term investments 96,472 81,373 
 Total cash and cash equivalents 168,205 151,824 
 
 Securities available-for-sale, at fair value 991,426 1,051,728 
 Securities held-to-maturity, at amortized cost (fair value of $ 113,107 and $ 119,215 respectively) 
 131,568 129,918 
 Real estate mortgage loans held-for-sale 1,700 1,158 
 
 Loans, net of allowance for credit losses of $ 85,960 and $ 71,972 
 5,031,988 4,844,562 
 
 Land, premises and equipment, net 60,489 57,899 
 Bank owned life insurance 113,320 109,114 
 Federal Reserve and Federal Home Loan Bank Stock 21,420 21,420 
 Accrued interest receivable 28,446 30,011 
 Goodwill 4,970 4,970 
 Other assets 124,842 121,425 
 Total assets $ 6,678,374 $ 6,524,029 
 
 LIABILITIES AND STOCKHOLDERS’ EQUITY 
 
 LIABILITIES 
 Noninterest bearing deposits $ 1,297,456 $ 1,353,477 
 Interest bearing deposits 4,603,510 4,367,048 
 Total deposits 5,900,966 5,720,525 
 
 
 Borrowings - Federal Home Loan Bank advances 0 50,000 
 
 
 Accrued interest payable 15,117 20,893 
 Other liabilities 78,380 82,818 
 Total liabilities 5,994,463 5,874,236 
 
 Commitments, off-balance sheet risks and contingencies (Notes 1 and 17) 
 
 STOCKHOLDERS’ EQUITY 
 Common stock: 90,000,000 shares authorized, no par value 
 
 25,978,831 shares issued and 25,509,592 outstanding as of December 31, 2024 
 
 25,903,686 shares issued and 25,430,566 outstanding as of December 31, 2023 
 129,664 127,692 
 Retained earnings 736,412 692,760 
 Accumulated other comprehensive income (loss) ( 166,500 ) ( 155,195 ) 
 Treasury stock, at cost ( 469,239 shares and 473,120 shares as of December 31, 2024 and 2023, respectively) 
 ( 15,754 ) ( 15,553 ) 
 Total stockholders’ equity 683,822 649,704 
 Noncontrolling interest 89 89 
 Total equity 683,911 649,793 
 Total liabilities and equity $ 6,678,374 $ 6,524,029 

 
 The accompanying notes are an integral part of these consolidated financial statements. 
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 CONSOLIDATED STATEMENTS OF INCOME (in thousands, except share and per share data) 
 
 

 
 Years Ended December 31 2024 2023 2022 
 NET INTEREST INCOME 
 Interest and fees on loans 
 Taxable $ 335,639 $ 304,130 $ 202,004 
 Tax exempt 2,126 3,885 1,664 
 Interest and dividends on securities 
 Taxable 12,048 13,153 14,132 
 Tax exempt 15,714 16,396 19,553 
 Other interest income 7,631 5,703 2,214 
 Total interest income 373,158 343,267 239,567 
 
 Interest on deposits 172,759 137,791 36,281 
 Interest on borrowings 
 Short-term 3,720 8,441 272 
 Long-term 0 0 127 
 Total interest expense 176,479 146,232 36,680 
 
 NET INTEREST INCOME 196,679 197,035 202,887 
 
 Provision for credit losses 16,750 5,850 9,375 
 
 NET INTEREST INCOME AFTER PROVISION FOR 
 CREDIT LOSSES 179,929 191,185 193,512 
 
 NONINTEREST INCOME 
 Wealth advisory fees 10,469 9,080 8,636 
 Investment brokerage fees 1,894 1,815 2,318 
 Service charges on deposit accounts 11,157 10,773 11,595 
 Loan and service fees 11,832 11,750 12,214 
 Merchant and interchange fee income 3,542 3,651 3,560 
 Bank owned life insurance income 4,210 3,133 432 
 Interest rate swap fee income 0 794 579 
 Mortgage banking income (loss) 116 ( 254 ) 633 
 Net securities gains (losses) ( 46 ) ( 25 ) 21 
 Net gain on Visa shares 8,996 0 0 
 Other income 4,674 9,141 1,874 
 Total noninterest income 56,844 49,858 41,862 
 
 NONINTEREST EXPENSE 
 Salaries and employee benefits 66,728 59,147 58,530 
 Net occupancy expense 6,865 6,360 6,287 
 Equipment costs 5,612 5,632 5,763 
 Data processing fees and supplies 15,161 14,003 12,826 
 Corporate and business development 4,965 4,807 5,198 
 FDIC insurance and other regulatory fees 3,465 3,363 1,999 
 Professional fees 8,950 8,583 6,483 
 Wire fraud loss 0 18,058 0 
 Other expense 13,338 10,757 13,124 
 Total noninterest expense 125,084 130,710 110,210 
 
 INCOME BEFORE INCOME TAX EXPENSE 111,689 110,333 125,164 
 Income tax expense 18,211 16,566 21,347 
 NET INCOME $ 93,478 $ 93,767 $ 103,817 
 
 BASIC WEIGHTED AVERAGE COMMON SHARES 25,676,543 25,604,751 25,528,328 
 
 BASIC EARNINGS PER COMMON SHARE $ 3.64 $ 3.67 $ 4.07 
 
 DILUTED WEIGHTED AVERAGE COMMON SHARES 25,769,018 25,723,165 25,712,538 
 
 DILUTED EARNINGS PER COMMON SHARE $ 3.63 $ 3.65 $ 4.04 

 
 
 
 The accompanying notes are an integral part of these consolidated financial statements. 
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 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (in thousands) 
 
 

 
 
 Years Ended December 31 2024 2023 2022 
 Net income $ 93,478 $ 93,767 $ 103,817 
 Other comprehensive income (loss) 
 Change in available-for-sale and transferred securities: 
 Unrealized holding gain (loss) on securities available-for-sale arising during the period ( 16,530 ) 40,639 ( 261,256 ) 
 Reclassification adjustment for amortization of unrealized losses on securities transferred to held-to-maturity 1,962 1,987 1,518 
 Reclassification adjustment for (gains) losses included in net income 46 25 ( 21 ) 
 Net securities gain (loss) activity during the period ( 14,522 ) 42,651 ( 259,759 ) 
 Tax effect 3,050 ( 8,957 ) 54,549 
 Net of tax amount ( 11,472 ) 33,694 ( 205,210 ) 
 Defined benefit pension plans: 
 Net gain (loss) on defined benefit pension plans 160 ( 13 ) 115 
 Amortization of net actuarial loss 62 59 144 
 Net gain on activity during the period 222 46 259 
 Tax effect ( 55 ) ( 12 ) ( 65 ) 
 Net of tax amount 167 34 194 
 Total other comprehensive income (loss), net of tax ( 11,305 ) 33,728 ( 205,016 ) 
 Comprehensive income (loss) $ 82,173 $ 127,495 $ ( 101,199 ) 

 
 The accompanying notes are an integral part of these consolidated financial statements. 
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 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (in thousands, except share and per share data) 
 
 

 
 Accumulated 
 Other Total 
 Common Stock Retained Comprehensive Treasury Stockholders’ Noncontrolling Total 
 Shares Amount Earnings Income (Loss) Stock Equity Interest Equity 
 
 Balance at January 1, 2022 25,300,793 $ 120,615 $ 583,134 $ 16,093 $ ( 15,025 ) $ 704,817 $ 89 $ 704,906 
 
 Net income 103,817 103,817 103,817 
 Other comprehensive loss, net of tax ( 205,016 ) ( 205,016 ) ( 205,016 ) 
 Cash dividends declared, $ 1.60 per share 
 ( 40,851 ) ( 40,851 ) ( 40,851 ) 
 Treasury shares purchased under deferred directors' plan ( 7,641 ) 579 ( 579 ) 0 0 
 Treasury shares sold and distributed under deferred directors’ plan 8,555 ( 221 ) 221 0 0 
 Stock activity under equity incentive plans 47,518 ( 1,780 ) ( 1,780 ) ( 1,780 ) 
 Stock based compensation expense 7,811 7,811 7,811 
 Balance at December 31, 2022 25,349,225 $ 127,004 $ 646,100 $ ( 188,923 ) $ ( 15,383 ) $ 568,798 $ 89 $ 568,887 
 Net income 93,767 93,767 93,767 
 Other comprehensive income, net of tax 33,728 33,728 33,728 
 Cash dividends declared, $ 1.84 per share 
 ( 47,107 ) ( 47,107 ) ( 47,107 ) 
 Treasury shares purchased under deferred directors’ plan ( 10,073 ) 575 ( 575 ) 0 0 
 Treasury shares sold and distributed under deferred directors’ plan 12,855 ( 405 ) 405 0 0 
 Stock activity under equity incentive plans 78,559 ( 3,135 ) ( 3,135 ) ( 3,135 ) 
 Stock based compensation expense 3,653 3,653 3,653 
 Balance at December 31, 2023 25,430,566 $ 127,692 $ 692,760 $ ( 155,195 ) $ ( 15,553 ) $ 649,704 $ 89 $ 649,793 
 Impact of adoption of ASU 2023-02, net of tax ( 532 ) ( 532 ) ( 532 ) 
 Adjusted Balance at January 1, 2024 25,430,566 127,692 692,228 ( 155,195 ) ( 15,553 ) 649,172 89 649,261 
 Net income 93,478 93,478 93,478 
 Other comprehensive loss, net of tax ( 11,305 ) ( 11,305 ) ( 11,305 ) 
 Cash dividends declared, $ 1.92 per share 
 ( 49,294 ) ( 49,294 ) ( 49,294 ) 
 Treasury shares purchased under deferred directors’ plan ( 9,394 ) 592 ( 592 ) 0 0 
 Treasury shares sold and distributed under deferred directors’ plan 13,275 ( 391 ) 391 0 0 
 Stock activity under equity incentive plans 75,145 ( 2,815 ) ( 2,815 ) ( 2,815 ) 
 Stock based compensation expense 4,586 4,586 4,586 
 Balance at December 31, 2024 25,509,592 $ 129,664 $ 736,412 $ ( 166,500 ) $ ( 15,754 ) $ 683,822 $ 89 $ 683,911 

 The accompanying notes are an integral part of these consolidated financial statements. 
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 CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) 
 
 

 
 Years Ended December 31 2024 2023 2022 
 Cash flows from operating activities: 
 Net income $ 93,478 $ 93,767 $ 103,817 
 Adjustments to reconcile net income to net cash from operating activities: 
 Depreciation 5,953 6,173 6,020 
 Provision for credit losses 16,750 5,850 9,375 
 Net loss on sale and write down of other real estate owned 23 0 96 
 Amortization of loan servicing rights 0 0 757 
 Net change in loan servicing rights valuation allowance 497 540 ( 715 ) 
 Loans originated for sale, including participations ( 20,969 ) ( 8,601 ) ( 28,666 ) 
 Net gain on sales of loans ( 556 ) ( 292 ) ( 1,028 ) 
 Proceeds from sale of loans, including participations 20,836 8,022 36,454 
 Net (gain) loss on Visa shares ( 8,996 ) 0 0 
 Net (gain) loss on sale of premises and equipment 81 3 7 
 Net (gain) loss on sales and calls of securities available-for-sale 46 25 ( 21 ) 
 Net securities amortization 4,796 4,915 6,342 
 Stock based compensation expense 4,586 3,653 7,811 
 Earnings on life insurance ( 4,210 ) ( 3,133 ) ( 432 ) 
 Gain on life insurance ( 243 ) ( 131 ) 0 
 Tax benefit of stock award issuances ( 215 ) ( 718 ) ( 514 ) 
 Net change: 
 Interest receivable and other assets 1,284 ( 6,169 ) ( 10,711 ) 
 Interest payable and other liabilities ( 10,656 ) 10,077 40,750 
 Total adjustments 9,007 20,214 65,525 
 Net cash from operating activities 102,485 113,981 169,342 
 Cash flows from investing activities: 
 Proceeds from sale of securities available-for-sale 7,136 105,175 25,332 
 Proceeds from sales of Visa shares 8,996 0 0 
 Proceeds from maturities, calls and principal paydowns of securities available-for-sale 59,669 71,833 108,129 
 Proceeds from maturities, calls and principal paydowns of securities held-to-maturity 0 5 30 
 Purchases of securities available-for-sale ( 27,517 ) ( 7,178 ) ( 315,272 ) 
 Purchase of life insurance ( 331 ) ( 258 ) ( 10,808 ) 
 Net (increase) decrease in total loans ( 204,176 ) ( 212,906 ) ( 427,097 ) 
 Proceeds from sales of land, premises and equipment 10 13 6 
 Purchases of land, premises and equipment ( 8,634 ) ( 5,991 ) ( 4,821 ) 
 Proceeds from redemption of Federal Home Loan Bank stock 0 0 932 
 Purchases of Federal Home Loan Bank stock 0 ( 5,625 ) ( 2,955 ) 
 Proceeds from sales of other real estate owned 76 0 0 
 Proceeds from life insurance 536 0 0 
 Net cash from investing activities ( 164,235 ) ( 54,932 ) ( 626,524 ) 
 Cash flows from financing activities: 
 Net increase (decrease) in total deposits 180,441 259,905 ( 274,787 ) 
 Net increase (decrease) in short-term borrowings 0 ( 22,000 ) 22,000 
 Payments on short-term FHLB borrowings ( 50,000 ) ( 275,000 ) 0 
 Proceeds from short-term FHLB borrowings 0 50,000 275,000 
 Payments on long-term FHLB borrowings 0 0 ( 75,000 ) 
 
 Common dividends paid ( 49,281 ) ( 47,094 ) ( 40,838 ) 
 Preferred dividends paid ( 13 ) ( 13 ) ( 13 ) 
 Payments related to equity incentive plan ( 2,815 ) ( 3,135 ) ( 1,780 ) 
 Purchase of treasury stock ( 592 ) ( 575 ) ( 579 ) 
 Sales of treasury stock 391 405 221 
 Net cash from financing activities 78,131 ( 37,507 ) ( 95,776 ) 
 Net change in cash and cash equivalents 16,381 21,542 ( 552,958 ) 
 Cash and cash equivalents at beginning of the year 151,824 130,282 683,240 
 Cash and cash equivalents at end of the year $ 168,205 $ 151,824 $ 130,282 
 Cash paid during the year for: 
 Interest $ 185,256 $ 128,525 $ 36,113 
 Income taxes 23,750 14,075 20,580 
 Supplemental non-cash disclosures: 
 Loans transferred to other real estate owned 0 284 0 
 
 Right-of-use assets obtained in exchange for lease liabilities 2,699 0 1,612 

 
 The accompanying notes are an integral part of these consolidated financial statements. 
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 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 
 Nature of Operations and Principles of Consolidation: 
 The consolidated financial statements include Lakeland Financial Corporation (the "Holding Company") and its wholly owned subsidiary, Lake City Bank (the "Bank"), referred to as (the "Company"). On December 18, 2006, LCB Investments II, Inc. was formed as a wholly owned subsidiary of the Bank incorporated in Nevada to manage the Bank’s investment portfolio beginning in 2007. On December 21, 2006, LCB Funding, Inc., a real estate investment trust incorporated in Maryland, was formed as a wholly owned subsidiary of LCB Investments II, Inc. On December 28, 2012, LCB Risk Management, Inc., a captive insurance company incorporated in Nevada, was formed as a wholly owned subsidiary of the Holding Company. LCB Risk Management, Inc. was dissolved as a corporate entity on December 18, 2023. All assets of the subsidiary were distributed to the Holding Company upon decommissioning. All intercompany transactions and balances are eliminated in consolidation. 
 The Company provides financial services through the Bank, a full-service commercial bank with 54 branch offices in fifteen counties in Northern and Central Indiana. The Company provides commercial, retail, trust and investment services to its customers. Commercial products include commercial loans and technology-driven solutions to meet commercial customers’ treasury management needs such as mobile business banking and online treasury management services. Retail banking clients are provided a wide array of traditional retail banking services, including lending, deposit and investment services. Retail lending programs are focused on mortgage loans, home equity lines of credit and traditional retail installment loans. Retail and commercial clients utilize the Lake City Bank Digital application to access and transact banking transactions. The Company provides credit card services to retail and commercial customers through its retail card program and merchant processing activity. The Company provides wealth advisory and trust clients with traditional personal and corporate trust services. The Company also provides retail brokerage services, including an array of financial and investment products such as annuities and life insurance. Other financial instruments, which represent potential concentrations of credit risk, include deposit accounts in other financial institutions. 
 Use of Estimates: 
 To prepare financial statements in conformity with U.S. generally accepted accounting principles ("GAAP"), management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided and future results could differ. 
 Cash Flows: 
 Cash and cash equivalents include cash, demand deposits in other financial institutions and short-term investments and certificates of deposit with maturities of 90 days or less. Cash flows are reported net for customer loan and deposit transactions, and certain short-term borrowings. 
 Securities: 
 Securities are classified as available-for-sale when they might be sold before maturity. Securities available-for-sale are carried at fair value, with unrealized holding gains and losses reported in other comprehensive income (loss), net of tax. Securities are classified as held-to-maturity and carried at amortized cost when management has the positive intent and ability to hold them to maturity. 
 Purchase premiums or discounts are recognized in interest income using the interest method over the terms of the securities or over estimated lives for mortgage-backed securities. Gains and losses on sales are based on the amortized cost of the security sold and recorded on the trade date. 
 
 
 For securities in an unrealized loss position, management considers the extent and duration of the unrealized loss, and the financial condition and near-term prospects of the issuer. Management also assesses whether it intends to sell, or it is more likel y than not that it will be required to sell, a security in an unrealized loss position before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the entire difference between amortized cost and fair value is recognized as impairment through earnings. For debt securities that do not meet the aforementioned criteria, the Company 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, nature of the security, the underlying collateral, and the financial condition of the issuer, among other factors. If this assessment indicates a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present 
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 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 
 
 
 value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and a valuation allowance for securities losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through a valuation allowance for securities losses is recognized in other comprehensive income (loss). 
 
 
 Changes in the valuation allowance for securities losses are recorded as a component of credit loss expense. Losses are charged against the valuation allowance for securities losses when management believes the uncollectibility of the security is confirmed or when either criteria regarding intent or requirement to sell is met. 
 
 
 A portion of the municipal bond portfolio is classified as held-to-maturity. The Company measures expected credit losses on investment securities held-to-maturity on a collective basis by major security type with each type sharing similar risk characteristics and considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. The Company considers (1) issuer bond ratings, (2) historical loss rates for given bond ratings, (3) the financial condition of the issuer, and (4) whether issuers continue to make timely principal and interest payments under the contractual terms of the securities. Historical loss rates associated with securities having similar grades as those in the Company's portfolio have been insignificant. After completing this assessment, the Company determined any credit losses as of December 31, 2024 and 2023 were not material to the consolidated financial statements. 
 
 
 Real Estate Mortgage Loans Held-for-Sale: 
 Loans held-for-sale are reported at the lower of cost or fair value on an aggregate basis. Net unrealized losses, if any, are recorded as a valuation allowance and charged to earnings. 
 Loan sales occur on the delivery date agreed to in the relevant commitment agreement. The Company retains servicing on the majority of loans sold. The carrying value of loans sold is reduced by the amount allocated to the servicing right. The gain or loss on the sale of loans is the difference between the carrying value of the loans sold and the funds received from the sale. 
 Loans: 
 Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at the principal balance outstanding, net of unearned interest, deferred loan fees and costs, and an allowance for credit losses. 
 Interest income is reported on the interest method and includes amortization of net deferred loan fees and costs over the loan term. All classes of commercial and industrial, commercial real estate and multi-family residential, agri-business and agricultural, other commercial and consumer 1-4 family mortgage loans for which collateral is insufficient to cover all principal and accrued interest are reclassified as nonaccrual loans, on or before the date when the loan becomes 90 days delinquent. When a loan is classified as a nonaccrual loan, interest on the loan is no longer accrued, all unpaid accrued interest is reversed and interest income is subsequently recorded on the cash-basis or cost-recovery method. Accrual status is resumed when all contractually due payments are brought current and future payments are reasonably assured. Other consumer loans are not placed on a nonaccrual status since these loans are charged-off when they have been delinquent from 90 to 180 days, and when the related collateral, if any, is not sufficient to offset the indebtedness. Nonaccrual loans and loans past due 90 days still on accrual include both smaller balance homogeneous loans that are collectively evaluated and individually analyzed loans. 
 The recorded investment in loans is the loan balance net of unamortized deferred loan fees and costs. The total amount of loans accrued interest as of December 31, 2024 and 2023 was $ 20.3 million and $ 21.5 million. 
 Allowance for Credit Losses: 
 The allowance for credit losses is a valuation allowance to provide for expected credit losses. Losses are charged against the allowance when management believes that the principal is uncollectible. Subsequent recoveries, if any, are credited to the allowance. Allocations of the allowance are made for specific loans and for pools of similar types of loans, although the entire allowance is available for any loan that, in management's judgment, should be charged against the allowance. A provision for credit losses is taken based on management's ongoing evaluation of the appropriate allowance balance. A formal evaluation of the adequacy of the credit loss allowance is conducted monthly. The ultimate recovery of all loans is susceptible to future market factors beyond the Company's control. 
 
 
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 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 
 The determination of the appropriate allowance is inherently subjective, as it requires significant estimates by management. The Company has an established process to determine the adequacy of the allowance for credit losses that generally includes consideration of changes in the nature and volume of the loan portfolio and overall portfolio quality, along with current and forecasted economic conditions that may affect borrowers' ability to repay. Consideration is not limited to these factors although they represent the most commonly cited factors. To determine the specific allocation levels for individual credits, management considers the current valuation of collateral and the amounts and timing of expected future cash flows as the primary measures. Management also considers trends in adversely classified loans based upon an ongoing review of those credits. With respect to pools of similar loans, an appropriate level of general allowance is determined by portfolio segment using a pr obability of default-loss given default ("PD/LGD") model, subject to a floor. A default can be triggered by one of several asset quality factors, including past due status, nonaccrual status, material modification to a borrower experiencing financial difficulty or if the loan has had a charge off. This PD is then combined with a LGD derived from historical charge off data to construct a loss rate. This loss rate is then supplemented with adjustments for reasonable and supportable forecasts of relevant economic indicators, particularly the unemployment rate forecast from the Federal Open Market Committee's Summary of Economic Projections, as well as portfolio trends based on the risks present for each portfolio segment. These environmental factors include consideration of portfolio trends and conditions; industry conditions; and effects of changes in credit concentrations. It is also possible that these factors could include social, political, economic, and terrorist events or activities. All of these factors are susceptible to change, which may be significant. As a result of this detailed process, the allowance results in two forms of allocations, specific and general. These two components represent the total allowance for credit losses deemed adequate to cover expected losses within the loan portfolio. 
 Commercial loans are subject to a dual standardized grading process administered by the credit administration function. These grade assignments are performed independent of each other, and a consensus is reached by credit administration and the loan officer. Specific allowances are established in cases where management has identified significant conditions or circumstances related to an individual credit that indicate it should be evaluated on an individual basis. Considerations with respect to specific allocations for these individual credits include, but are not limited to, the following: (a) the sufficiency of the customer's cash flow or net worth to repay the loan; (b) the adequacy of the discounted value of collateral relative to the loan balance; (c) whether the loan has been criticized in a regulatory examination; (d) whether the loan is nonperforming; (e) any other reasons the ultimate collectability of the loan may be in question; or (f) any unique loan characteristics that require special monitoring. 
 Allocations are also applied to categories of loans considered not to be individually analyzed, but for which the rate of loss is expected to be consistent with or greater than historical averages. Such allocations are based on past loss experience and information about specific borrower situations and estimated collateral values. These general pooled loan allocations are performed for portfolio segments of commercial and industrial; commercial real estate, multi-family, and construction; agri-business and agricultural; other commercial loans; and consumer 1-4 family mortgage and other consumer loans. 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 historical loss rates are all supplemented with consideration of economic conditions and portfolio trends. The risk characteristics of each of the identified portfolio segments are as follows: 
 Commercial and Industrial - Borrowers may be subject to industry conditions including decreases in product demand; increase in material or other production costs that cannot be immediately recaptured in the sales or distribution cycle; interest rate increases that could have an adverse impact on profitability; non-payment of credit that has been extended under normal vendor terms for goods sold or services; and interruption related to the importing or exporting of production materials or sold products. 
 Commercial Real Estate and Multi-Family Residential - Borrowers may be subject to potential adverse market conditions that cause a decrease in market value or lease rates; the potential for environmental impairment from events occurring on subject or neighboring properties; and obsolescence in location or function. Multi-family residential is also subject to adverse market conditions associated with a change in governmental or personal funding sources for tenants; over supply of units in a specific region; a shift in population; and reputational risks. Construction and land development risks include slower absorption than anticipated on speculative projects; deterioration in market conditions that may impact a project's value; unforeseen costs not considered in the original construction budget; or any other factors that may impact the completion or success of the project. 
 Agri-business and Agricultural - Borrowers may be subject to adverse market or weather conditions including changes in local or foreign demand; lower yields than anticipated; political or other impact on storage, distribution or use; foreign trade policies including tariffs; exposure to increasing commodity prices which result in higher production, distribution or exporting costs, or falling commodity prices which result in revenues that may be insufficient to cover costs. 
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 Other Commercial - Governmental borrowers may be subject to an interruption in the flow of funds to states and other political subdivisions for the purpose of debt repayments on loans held by the Bank. Not-for-profit borrowers may be subject to changes in tax law that adversely impact revenues. 
 Consumer 1-4 Family Mortgage - Borrowers may be subject to adverse employment conditions in the local economy leading to increased default rates; decreased market values from oversupply in a geographic area; and impact to the borrowers' ability to maintain payments in the event of incremental rate increases on adjustable rate mortgages. 
 Other Consumer - Borrowers may be subject to adverse employment conditions in the local economy which may lead to higher default rates; and decreases in the value of underlying collateral. 
 A loan is individually analyzed for specific allocation when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. Allocations are analyzed individually or in total for smaller-balance loans of similar nature such as all classes of consumer 1-4 family and other consumer loans, and individually for all classes of commercial and industrial, commercial real estate and multi-family, agri-business and agricultural and other commercial loans. The Company analyzes commercial loans individually by classifying the loans as to credit risk. This analysis is performed on a quarterly basis for Special Mention, Substandard and Doubtful grade loans and annually on Pass grade loans over $ 250,000 . Factors considered by management in determining individual evaluation include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as individually evaluated. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. If a loan is individually evaluated, a portion of the allowance may be allocated so that the loan is reported, net, at the present value of estimated future cash flows using the loan’s original rate or at the fair value of collateral less anticipated costs to sell. All classes of commercial and industrial, commercial real estate and multifamily residential, agri-business and agricultural, other commercial, consumer 1-4 family mortgage loans and other consumer loans that become delinquent beyond 90 days are analyzed and a charge off is taken when it is determined that the underlying collateral, if any, is not sufficient to offset the indebtedness. 
 Loans, for which the terms have been modified for borrowers experiencing financial difficulties and a concession has been granted that could materially change the Company's expected future cash flows, are classified as individually evaluated and may be either accruing or non-accruing. Modifications to borrowers experiencing financial difficulties on nonaccrual status follow the same policy as described above for other loans. Individual evaluation for modifications to borrowers experiencing financial difficulty is measured at the present value of estimated future cash flows using the loan’s effective rate at inception or at discounted collateral value for collateral dependent loans. 
 Due to the imprecise nature of estimating the allowance for credit losses, the Company's allowance for credit losses includes an immaterial unallocated component. The unallocated component of the allowance for credit losses incorporates the Company's judgmental determination of potential expected losses that may not be fully reflected in other allocations. As a practical expedient, the Company has elected to disclose accrued interest separately from loan principal balances on the consolidated balance sheet. Additionally, when a loan is placed on non-accrual, interest payments are reversed through interest income. 
 For off balance sheet credit exposures outlined in the ASC at 326-20-30-11, it is the Company's position that nearly all of the unfunded amounts on lines of credit are unconditionally cancellable, and therefore not subject to having a liability recorded. 
 Investments in Limited Partnerships: 
 The Company enters into and invests in limited partnerships in order to support Community Reinvestment Act activities. The Company invests in Small Business Investment Company Program funds, a mission-driven financial institutions fund, and a technology consortium fund. The Company is a limited partner in these investments and, as such, the Company is not involved in the management or operation of such investments. These investments are accounted for using the equity method of accounting. Under the equity method of accounting, the Company records its share of the partnership’s earnings or losses in its income statement and adjusts the carrying amount of the investments on the consolidated balance sheet. These investments are evaluated for impairment when events indicate the carrying amount may not be recoverable. The investments recorded at 
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 December 31, 2024 and 2023 were $ 7.6 million and $ 6.2 million, respectively and are included with other assets in the consolidated balance sheet. 
 Investments in Tax Credit Structures: 
 The Company invests in tax credit structures. At December 31, 2024 and 2023, the balance of investments in tax credit structures was $ 7.2 million and $ 6.8 million respectively. These balances are reflected in the other assets line on the consolidated balance sheets. Total unfunded commitments related to these investments in tax credit structures totaled $ 3.8 million and $ 2.8 million at December 31, 2024 and 2023, respectively. The Company expects to fulfill these commitments during the next 15 years. 
 The Company adopted the proportional amortization method for accounting for investments in tax credit structures effective January 1, 2024. Prior to this, these investments were accounted for using the equity method. During the year ended December 31, 2024, the Company recognized amortization expense of $ 794,000 , which was included within income tax expense on the consolidated statements of income. During the year ended December 31, 2023, the Company recognized amortization expense (investment loss) of $ 592,000 , which was included within other noninterest income on the consolidated statements of income. Additionally, during the years ended December 31, 2024 and 2023, the Company recognized tax credits and other benefits from its investment in tax credit structures of $ 807,000 and $ 713,000 , respectively, which was included within income tax expense on the consolidated statements of income and in cash flows from operations on our consolidated statements of cash flows. 
 Foreclosed Assets: 
 Assets acquired through loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell. If fair value declines, a valuation allowance is recorded through expense. Costs incurred after acquisition are expensed. At December 31, 2024 and 2023, the balance of other real estate owned was $ 284,000 and $ 384,000 , respectively, and is included with other assets on the consolidated balance sheet. 
 Land, Premises and Equipment, Net: 
 Land is carried at cost. Premises and equipment are stated at cost less accumulated depreciation. Depreciation is computed on the straight-line method over the useful lives of the assets. Premises and improvements assets have useful lives between 5 and 40 years. Equipment and furniture assets have useful lives between 3 and 7 years. 
 Loan Servicing Rights: 
 Servicing rights are recognized separately when they are acquired through sales of loans. When mortgage loans are sold, servicing rights are initially recorded at fair value with the income statement effect recorded in mortgage banking income . Fair value is based on a valuation model that calculates the present value of estimated future net servicing income. All classes of servicing assets are subsequently measured using the amortization method which requires servicing rights to be amortized into noninterest income in proportion to, and over the period of, the estimated future net servicing income of the underlying loans. The amortization of servicing rights is netted against mortgage banking income. Servicing fees were $ 1.1 million for the year ended 2024 and $ 1.2 million for the years ended 2023 and 2022. Late fees and ancillary fees related to loan servicing are not material. 
 Servicing rights are evaluated for impairment based upon the fair value of the rights as compared to carrying amount. Impairment is determined by stratifying rights into groupings based on predominant risk characteristics, such as loan type, term and interest rate. Any impairment of a grouping is reported as a valuation allowance, to the extent that fair value is less than the carrying amount. If the Company later determines that all or a portion of the impairment no longer exists for a particular grouping, a reduction of the allowance may be recorded as an increase to income. Changes in the valuation allowance are reported with mortgage banking income on the income statement. The fair values of servicing rights are subject to significant fluctuations as a result of changes in estimated and actual prepayment speeds and default rates and losses. 
 The carrying value of mortgage servicing rights, which is included with other assets in the consolidated balance sheet, was $ 1.9 million and $ 2.2 million as of December 31, 2024 and 2023, respectively. Mortgage loans serviced for others are not 
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 included in the accompanying consolidated balance sheets. The unpaid principal balances of these loans were $ 313.0 million and $ 333.1 million at December 31, 2024 and 2023, respectively. Custodial escrow balances maintained in connection with serviced loans were $ 1.7 million and $ 1.5 million at year end 2024 and 2023, respectively. 
 Servicing fee income (loss), which is included in loan and service fees on the income statement, is recorded for fees earned for servicing loans. Fees earned for servicing loans are based on a contractual percentage of the outstanding principal amount of the loan and are recorded as income when earned. 
 Transfers of Financial Assets: 
 Transfers of financial assets are accounted for as sales when control over the assets has been relinquished. Control over transferred assets is deemed to be surrendered when the assets have been isolated from the Company, the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets and the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity. 
 Mortgage Banking Derivatives: 
 Commitments to fund mortgage loans (interest rate locks) to be sold into the secondary market and forward commitments for the future delivery of these mortgage loans are accounted for as free-standing derivatives. Fair values of these mortgage derivatives are estimated based on changes in mortgage interest rates from the date the interest on the loan is locked. The Company enters into forward commitments for the future delivery of mortgage loans when interest rate locks are entered into, in order to hedge the change in interest rates resulting from its commitments to fund the loans. Changes in fair values of these derivatives are included in mortgage banking income. 
 Interest Rate Swap Derivatives: 
 The Company offers a derivative product to certain creditworthy commercial banking customers. This product allows the commercial banking customers to enter into an agreement with the Company to swap a variable rate loan to a fixed rate. These derivative products are designed to reduce, eliminate or modify the borrower’s interest rate exposure. The extension of credit incurred in connection with these derivative products is subject to the same approval and underwriting standards as traditional credit products. The Company limits its risk exposure by simultaneously entering into a similar, offsetting swap agreement with a separate, well-capitalized and highly rated counterparty previously approved by the Company’s Asset Liability Committee. By using these interest rate swap arrangements, the Company is also better insulated from the interest rate risk associated with underwriting fixed-rate loans and is better able to meet customer demand for fixed rate loans. These derivative contracts are not designated against specific assets or liabilities and, therefore, do not qualify for hedge accounting. The derivatives are recorded as assets and liabilities on the balance sheet at fair value with changes in fair value recorded in non-interest income for both the commercial banking customer swaps and the related offsetting swaps. The fair value of the derivative instruments incorporates a consideration of credit risk (in accordance with ASC 820), resulting in some potential volatility in earnings each period. Cash flow activity is recorded through other assets and other liabilities. 
 The notional amount of the combined interest rate swaps with customers and counterparties at December 31, 2024 and 2023 was $ 744.8 million and $ 826.4 million, respectively. The fair value of the interest rate swap asset was $ 25.4 million and $ 27.2 million and the fair value of the interest rate swap liability was $ 25.4 million and $ 27.2 million at December 31, 2024 and 2023, respectively. 
 The Company is a party in a risk participation transaction of an interest rate swap, which had a total notional amount of $ 4.9 million at December 31, 2024. The Company was not a party to such transactions at December 31, 2023. 
 Bank Owned Life Insurance: 
 At December 31, 2024 and 2023, the Company owned $ 107.3 million and $ 104.8 million, respectively, of life insurance policies on certain officers to provide a life insurance benefit for these officers. At December 31, 2024 and 2023, the Company also owned $ 6.0 million and $ 4.3 million, respectively, of variable life insurance on certain officers related to a deferred compensation plan. Bank owned life insurance is recorded at the amount that can be realized under the insurance contract at the balance sheet date, i.e., the cash surrender value adjusted for other changes or other amounts due that are probable at settlement. 
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 Goodwill and Other Intangible Assets: 
 All goodwill on the Company’s consolidated balance sheet resulted from business combinations prior to January 1, 2009 and represents the excess of the purchase price over the fair value of acquired tangible assets and liabilities and identifiable intangible assets. Goodwill is not amortized, but assessed at least annually for impairment and any such impairment would be recognized in the period identified. 
 FHLB and Federal Reserve Bank Stock: 
 FHLB and Federal Reserve Bank stock are carried at cost in other assets, classified as a restricted security and are periodically evaluated for impairment based on ultimate recoverability of par value. Both cash and stock dividends are reported as income. 
 Long-term Assets: 
 Premises and equipment, and other long-term assets are reviewed for impairment when events indicate their carrying amount may not be recoverable from future undiscounted cash flows. If impaired, the assets are recorded at fair value. There was no such impairment identified for the years ended December 31, 2024, 2023 and 2022. 
 Benefit Plans: 
 The Company has a noncontributory defined benefit pension plan, which covered substantially all employees until the plan was frozen effective April 1, 2000. Funding of the plan equals or exceeds the minimum funding requirement determined by the actuary. Pension expense is the net of interest cost, return on plan assets and amortization of gains and losses not immediately recognized. Benefits are based on years of service and compensation levels. 
 The Company maintains a 401(k) profit sharing plan for all employees meeting certain age and service requirements. The Company contributions are based upon the percentage of budgeted net income earned during the year. 
 An employee deferred compensation plan is available to certain employees with returns based on investments in mutual funds. 
 The Company maintains a directors’ deferred compensation plan. Effective January 1, 2003, the directors’ deferred compensation plan was amended to restrict the deferral to be in stock only and deferred directors’ fees are included in equity. The Company acquires shares on the open market and records such shares as treasury stock. 
 Revenue Recognition: 
 All of the Company’s revenue from contracts with customers in the scope of ASC 606 is recognized within noninterest income. The following is a description of principal activities from which we generate revenue. Revenues are recognized as the Company satisfies its obligations with our customers, in an amount that reflects the consideration that we expect to receive in exchange for those services. 
 Wealth advisory fees 
 The Company provides wealth advisory services to its customers and earns fees from its contracts with trust customers to manage assets for investment and/or to transact on their accounts. These fees are primarily earned over time as the Company provides the contracted monthly, quarterly, or annual services and are generally assessed based on a tiered scale of the market value of assets under management at month-end. Fees that are transaction based, including trade execution services, are recognized at the point in time that the transaction is executed. Other related services, such as escrow accounts that are based on a fixed schedule, are recognized when the services are rendered. 
 
 
 Investment brokerage services 
 
 
 The Company provides investment brokerage services through a full service brokerage and investment and advisory firm, Cetera Investment Services LLC ("Cetera"). The Company receives commissions from Cetera on a monthly basis based upon customer activity for the month. The fees are recognized monthly and a receivable is recorded until commissions are generally paid by the 5th business day of the following month. Because the Company (i) acts as an agent in arranging the 
 
 
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 relationship between the customer and Cetera and (ii) does not control the services to the customers, investment brokerage service fees are presented net of Cetera’s related costs. 
 
 
 Service charges on deposit accounts 
 
 
 The Company earns fees from its deposit customers for transaction-based, account maintenance, and overdraft services. Transaction-based fees, which include services such as ATM use fees, stop payment charges, statement rendering, and ACH fees, are recognized at the time the transaction is executed as that is the point in time the Company fulfills the customer’s request. Account maintenance fees, which relate primarily to monthly maintenance, are earned over the course of a month, representing the period over which the Company satisfies the performance obligation. Overdraft fees are recognized at the point in time that the overdraft occurs. Service charges on deposits are withdrawn from the customer’s balance. 
 
 
 Interchange income 
 
 
 The Company provides the ability to transact on certain deposit accounts through the use of debit cards by outsourcing the services through third party service providers. Performance obligations are met on a transactional basis and income is recognized monthly based on transaction type and volume. Under ASC 606, fees from interchange income related to its customers use of debit cards will be reported gross in loan and service fees under noninterest income. The cost of using third party providers for these interchange services are reported in data processing fees and supplies under noninterest expense. 
 
 
 Gain on sale of other real estate owned ("OREO") financed by seller 
 
 
 On occasion, the Company underwrites a loan to purchase property owned by the Company. Under ASC 606, the Company assesses whether the buyer is committed to perform their obligations under the contract and whether collectability of the transaction price is probable. Once these criteria are met, the OREO asset is derecognized and the gain or loss on sale is recorded upon the transfer of control of the property to the buyer. In determining the gain or loss on the sale, the Company adjusts the transaction price and related gain (loss) on sale if a significant financing component is present. 
 
 
 Debit card incentive rebates 
 
 
 The Company receives incentive rebates based on debit card transaction volume. Performance obligations are met on a transactional basis and income is recognized monthly based on transaction volume. Under ASC 606, these rebates related to debit card transaction volume are reported as a contra expense in data processing fees and supplies under noninterest expense. 
 
 
 Stock Based Compensation: 
 
 
 Compensation cost is recognized for stock options and restricted stock awards issued to employees, based on the fair value of these awards at the date of grant. A Black-Scholes model is utilized to estimate the fair value of stock options, while the market price of the Company’s common stock at the date of grant adjusted for the present value of expected dividends is used for restricted stock awards. Compensation cost is recognized over the required service period, generally defined as the vesting period. Certain of the restricted stock awards are performance based, as more fully discussed in Note 14 – Stock Based Compensation. 
 Income Taxes: 
 Annual consolidated federal and state income tax returns are filed by the Company. Deferred income tax assets and liabilities are determined using the liability (or balance sheet) method. Income tax expense is recorded based on the amount of taxes due on its tax return plus net deferred taxes computed based upon the expected future tax consequences of temporary differences between carrying amounts and tax basis of assets and liabilities, using enacted tax rates. A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized. 
 A tax position is recognized as a benefit only if it is "more likely than not" that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is more likely of being realized on examination than not. For tax positions not meeting the "more likely than not" test, no tax benefit is recorded. 
 
 
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 The Company recognizes interest and/or penalties related to income tax matters in income tax expense. 
 Off-Balance Sheet Financial Instruments: 
 Financial instruments include credit instruments, such as commitments to make loans and standby letters of credit, issued to meet customer financing needs. The face amount for these items represents the exposure to loss, before considering customer collateral or ability to repay. Such financial instruments are recorded when they are funded. The fair value of standby letters of credit is recorded as a liability during the commitment period. 
 Earnings Per Common Share: 
 Basic earnings per common share is net income divided by the weighted average number of common shares outstanding during the period. Diluted earnings per common share includes the dilutive effect of additional potential common shares issuable under stock options, restricted stock awards and warrants. Earnings and dividends per share are restated for all stock splits and dividends through the date of issue of the financial statements. The common shares included in treasury stock for 2024 and 2023 were 469,239 and 473,120 shares, respectively. Common stock that has been purchased under the directors’ deferred compensation plan, described above, is included in the treasury stock total and represented 180,138 and 184,019 shares of treasury stock as of December 31, 2024 and 2023, respectively. Because these shares are held in trust for the participants, they are treated as outstanding when computing the weighted-average common shares outstanding for the calculation of both basic and diluted earnings per share. Treasury stock is carried at cost using the treasury stock method. 
 Comprehensive Income (Loss): 
 Comprehensive income (loss) consists of net income and other comprehensive income (loss). Other comprehensive income (loss) includes unrealized gains and losses on securities available-for-sale, reclassification adjustments for securities transferred to held-to-maturity, reclassification adjustments for gains on the sale of available-for-sale securities and changes in the funded status of the pension plan, which are also recognized as separate components of equity. 
 Loss Contingencies: 
 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. 
 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 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 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 recognized during the second quarter of 2024 related to the resolution of this matter and the expense was recorded within other expense on the consolidated statements of income. 
 Restrictions on Cash: 
 The Federal Reserve Bank eliminated the reserve requirement for all depository institutions in March of 2020. Therefore, the Company was not required to have cash on hand or on deposit with the Federal Reserve Bank to meet regulatory reserve and clearing requirements at December 31, 2024 and 2023. 
 Dividend Restriction: 
 Banking regulations require maintaining certain capital levels and may limit the dividends paid by the Bank to the Company or by the Company to its stockholders. These restrictions currently pose no practical limit on the ability of the Bank or the Company to pay dividends at historical levels. 
 Fair Value of Financial Instruments: 
 Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disc losed in Note 5 - Fair Value. Fair value estimates involve uncertainties and matters of significant judgment regarding 
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 interest rates, credit risk, prepayments and other factors, especially in the absence of broad markets for particular items. Changes in assumptions or in market conditions could significantly affect the estimates. 
 Operating Segments: 
 The Company's revenue is primarily derived from the business of banking. The Company's financial performance is monitored on consolidated basis by Management Committee, which is considered to be the Company's Chief Operating Decision Maker ("CODM"). Management Committee includes the following officers of the Company: Chairman of the Board and Chief Executive Officer; President; Executive Vice President, Chief Financial Officer; Executive Vice President, Chief Commercial Banking Officer; Executive Vice President, Chief Retail Banking Officer; Senior Vice President, Chief Credit Officer; Senior Vice President, Chief Wealth Advisory Officer; Senior Vice President, Chief Human Resources Officer; and Senior Vice President, General Counsel. Financial performance is reported to the CODM monthly, and the primary measure of performance is consolidated net income. The allocation of resources throughout the Company is determined annually based upon consolidated net income performance. The presentation of financial performance to the CODM is consistent with amounts and financial statement lines items shown in the Company's consolidated balance sheets and consolidated statements of income. Additionally, the Company's significant expenses are adequately segmented by category and amount in the consolidated statements of income to include all significant items when considering both qualitative and quantitative factors. Significant expenses of the Company include salaries and employee benefits, net occupancy expense, equipment costs, data processing fees and supplies, and professional fees. 
 All of the Company’s financial results are similar and considered by management to be aggregated into one reportable operating segment. While the Company has assigned certain management responsibilities by region and business-line, the Company’s CODM evaluates financial performance on a Company-wide basis. The majority of the Company’s revenue is from the business of banking and the Company’s assigned regions have similar economic characteristics, products, services and customers. Accordingly, all of the Company’s operations are considered by management to be aggregated in one reportable operating segment. 
 Adoption of New Accounting Standards: 
 On March 28, 2023, the FASB issued ASU 2023-02, "Investments - Equity Method and Joint Ventures (ASC 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method." ASU 2014-01, "Investments - Equity method and Joint Ventures (ASC 323): Accounting for Investments in Qualified Affordable Housing Projects" , previously introduced the option to apply the proportional amortization method to account for investments made primarily for the purpose of receiving income tax credits and other income tax benefits when certain requirements are met; however, this guidance limited the proportional amortization method to investments in low-income-housing tax credit ("LIHTC") structures. The proportional amortization method results in the cost of the investment being amortized in proportion to the income tax credits and other income tax benefits received, with the amortization of the investment and the income tax credits being presented net in the income statement as a component of net income tax expense (benefit). Equity investments in other tax credit structures are typically accounted for using the equity method, which results in investment income, gains and losses, and tax credits being presented gross on the income statement in their respective line items. 
 The amendments in this update permit reporting entities to elect to account for certain tax equity investments, regardless of the tax credit program from which the income tax credits are received, using the proportional amortization method if certain conditions are met. Under the proportional amortization method, an entity amortizes the initial cost of the investment in proportion to the income tax benefits in the income statement as a component of income tax expense (benefit). To qualify for the proportional amortization method, all of the following conditions must be met: (1) It is probable that the income tax credits allocated to the tax equity investor will be available; (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; (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; and (5) The tax equity investor is a limited liability investor in the limited liability entity for both legal and tax purposes, and the tax equity investor's liability is limited to its capital investment. An accounting policy election is allowed to apply the proportional amortization method on a tax-credit-program-by-tax-credit-program basis rather than electing to apply the proportional amortization method at the reporting entity level or to individual investments. The amendments in this update require specific disclosures that must be applied to all investments that generate income tax credits 
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 and other income tax benefits from a tax credit program for which the entity has elected to apply the proportional amortization method. The amendments require that a reporting entity disclose certain information in annual and interim reporting periods that enable investors to understanding the following information about its investments that generate income tax credits and other income tax benefits from a tax credit program including: (1) The nature of its tax equity investments; and (2) The effect of its tax equity investments and related income tax credits and other income tax benefits on its financial position and results of operations. 
 For public business entities, the amendments in this update are effective for fiscal years beginning after December 31, 2023, including interim periods within those fiscal years. Early adoption is permitted in any interim period. If early adoption is elected, the provisions shall be adopted as of the beginning of the fiscal year that includes the interim period of adoption. The amendments in this update must be applied on either a modified retrospective or a retrospective basis. The Company chose the modified retrospective approach and recorded a day one adjustment of ($ 532,000 ) to beginning retained earnings upon adoption of ASU 2023-02 on January 1, 2024, which did not have a material impact on the consolidated financial statements. 
 On November 27, 2023, the FASB issued ASU 2023-07, "Segment Reporting (ASC 280): Improvements to Reportable Segment Disclosures" , intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. Provisions in the amendment include: (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; (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; (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 allocate resources, a public entity may report one or more of those additional measures of segment profit. 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 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; and (6) Requirement that a public entity that has a single reportable segment provide all the disclosures by the amendments in the update and all existing segment disclosures in ASC 280. 
 The amendments in the update are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. For public business entities, amendments in the update should be applied retrospectively to all periods presented in the financial statements, and upon transition the segment expense categories and amounts disclosed in the prior periods should be based on the significant segment expense categories identified and disclosed in the period of adoption. The Company adopted this standard effective January 1, 2024, and did not have a material impact on the consolidated financial statements. 
 
 
 Newly Issued But Not Yet Effective Accounting Standards: 
 On October 9, 2023, the FASB issued ASU 2023-06, "Disclosure Improvements: Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative" , which modified the disclosure or presentation requirements of a variety of Topics in the Codification and was intended to both clarify or improve such requirements and align the requirements with the SEC's regulations. The amendments to Topics of Codification provided in this update apply to all reporting entities within the scope of the affected Topics unless otherwise indicated by the update. Given the variety of Topics 
 amended, a broad range of entities may be affected by one or more of the amendments provided in the update. The Company evaluated the amendments provided in the update and believes certain of the disclosure improvements are applicable to the 
 Company's interim or annual disclosures. Subtopic 230-10, as amended, requires disclosure within the accounting policy in annual periods of where cash flows associated with derivative instruments and their related gains and losses are presented within the statement of cash flows. Subtopic 260-10, as amended, requires disclosure of the methods used in the diluted earnings-per-share computation for each dilutive security and clarifies that certain disclosures should be made during interim 
 periods. Subtopic 470-10, as amended, requires disclosure of amounts and terms of unused lines of credit and unfunded commitments and the weighted-average interest rate on short-term borrowings outstanding as of the date of each balance sheet presented. The effective date for each amendment for entities subject to the SEC's existing disclosure requirements is the 
 
 
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 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 
 effective date of the removal of the related disclosure from Regulation S-X or Regulation S-K, with early adoption prohibited. The amendments in the update are to be applied prospectively. The Company will apply prospectively the provisions provided 
 in the amendments as such provisions become effective, and does not believe the application of these modified disclosure requirements will have a material impact on the consolidated financial statements. If by June 30, 2027, the SEC has not removed the applicable requirement from Regulation S-X or Regulation S-K, the pending content of the related amendment in the Update will be removed from the Codification and will not become effective. 
 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 statement. 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 about 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 disaggregated 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 improve the effectiveness and comparability of disclosures by (1) adding disclosures of pretax income (or loss) and income tax expense (or 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. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The amendments in this update should be applied on a prospective basis, however retrospective application is 
 
 
 
 
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 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 
 permitted. 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. 
 
 
 On November 8, 2024, the FASB issued ASU 2024-03, "Income Statement—Reporting Comprehensive Income— Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses" , to improve the disclosures surrounding a public business entity's expenses and address requests from investors for more detailed information about the types of expenses (including purchases of inventory, employee compensation, depreciation, amortization, and depletion) in commonly presented expense captions (such as cost of sales, SG&A, and research and development). 
 The amendments in this update require disclosure, in the notes to the financial statements, of specified information about certain costs and expenses. The amendments require that at each interim and annual reporting period an entity (1) Disclose the amounts of (a) purchases of inventory, (b) employee compensation, (c) depreciation, (d) intangible asset amortization and (e) depreciation, depletion and amortization recognized as part of oil- and gas-producing activities (DD&A) (or other amounts of depletion expense) included in each relevant expense caption. A relevant expense caption is an expense caption presented on the face of the income statement within continuing operations that contains any of the following expense categories listed in (a)-(e); (2) Include certain amounts that are already required to be disclosed under current GAAP in the same disclosure as other disaggregation requirements; (3) Disclose a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively; and (4) Disclose the total amount of selling expenses, and in annual reporting periods, an entity's definition of selling expenses. An entity is not precluded from providing additional voluntary disclosures that may provide investors with additional decision-useful information. 
 The amendments in this update are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods after December 15, 2027. Early adoption is permitted. On January 6, 2025, the FASB issued ASU 2025-01, "Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date", to clarify the effective date of the ASU 2024-03. The update amends the effective date of Update 2024-03 to annual reporting periods beginning after December 15, 2026, and interim periods within annual periods beginning after December 15, 2027. The Company is currently evaluating the impact of this update on its disclosures. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 NOTE 2 – SECURITIES 
 Debt securities purchased with the intent and ability to hold to their maturity are classified as held-to-maturity securities. All other investment securities are classified as available-for-sale securities. 
 Available-for-Sale Securities 
 Information related to the amortized cost, fair value and allowance for credit losses of securities available-for-sale and the related gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) at December 31, 2024 and 2023 is provided in the tables below. 
 
 (dollars in thousands) Amortized 
Cost Gross 
Unrealized 
Gain Gross 
Unrealized 
Losses Allowance for Credit Losses Fair 
Value 
 2024 
 
 U.S. government sponsored agencies $ 137,150 $ 0 $ ( 27,715 ) $ 0 $ 109,435 
 Mortgage-backed securities: residential 500,278 83 ( 77,952 ) 0 422,409 
 
 State and municipal securities 545,073 17 ( 85,508 ) 0 459,582 
 Total $ 1,182,501 $ 100 $ ( 191,175 ) $ 0 $ 991,426 
 
 2023 
 
 U.S. government sponsored agencies $ 146,692 $ 0 $ ( 27,213 ) $ 0 $ 119,479 
 Mortgage-backed securities: residential 522,275 118 ( 74,551 ) 0 447,842 
 
 State and municipal securities 557,352 65 ( 73,010 ) 0 484,407 
 Total $ 1,226,319 $ 183 $ ( 174,774 ) $ 0 $ 1,051,728 

 Held-to-Maturity Securities 
 Information related to the amortized cost, fair value and allowance for credit losses of securities held-to-maturity and the related gross gains and unrealized gains and losses at December 31, 2024 and 2023 is presented in the table below. 
 
 (dollars in thousands) Amortized
Cost Gross Unrealized Gain Gross Unrealized Losses Allowance for Credit Losses Fair Value 
 2024 
 State and municipal securities $ 131,568 $ 0 $ ( 18,461 ) $ 0 $ 113,107 
 
 2023 
 State and municipal securities $ 129,918 $ 0 $ ( 10,703 ) $ 0 $ 119,215 

 On April 1, 2022, the Company elected to transfer securities from available-for-sale to held-to-maturity as an overall balance sheet management strategy. The fair value of securities transferred was $ 127.0 million from available-for-sale to held-to-maturity. The Company has the current intent and ability to hold the transferred securities until maturity. Any net unrealized gain or loss on the transferred securities included in accumulated other comprehensive income (loss) at the time of the transfer will be amortized over the remaining life of the underlying security as an adjustment to the yield on those securities. The unrealized loss on the securities transferred from available-for-sale to held-to-maturity was $ 24.4 million ($ 19.3 million, net of tax) based on the fair value of the securities on the transfer date and has amortized down to $ 19.0 million ($ 15.0 million, net of tax) at December 31, 2024. 
 
 
 
 
 
 
 
 
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 NOTE 2 – SECURITIES (continued) 
 Information regarding the fair value and amortized cost of available-for-sale and held-to-maturity debt securities by maturity as of December 31, 2024 is presented below. Maturity information is based on contractual maturity for all securities other than mortgage-backed securities. Actual maturities of securities may differ from contractual maturities because borrowers may have the right to prepay the obligation without prepayment penalty. 
 
 Available-for-Sale Held-to-Maturity 
 (dollars in thousands) Amortized 
Cost Fair 
Value Amortized
Cost Fair
Value 
 Due in one year or less $ 440 $ 438 $ 0 $ 0 
 Due after one year through five years 8,359 7,778 0 0 
 Due after five years through ten years 60,937 55,046 7,202 6,343 
 Due after ten years 612,487 505,755 124,366 106,764 
 682,223 569,017 131,568 113,107 
 Mortgage-backed securities 500,278 422,409 0 0 
 Total debt securities $ 1,182,501 $ 991,426 $ 131,568 $ 113,107 

 
 Security proceeds, gross gains and gross losses for 2024, 2023 and 2022 were as follows: 
 
 
 (dollars in thousands) 2024 2023 2022 
 Sales of securities available-for-sale 
 Proceeds $ 7,136 $ 105,175 $ 25,332 
 Gross gains 0 439 140 
 Gross losses ( 46 ) ( 464 ) ( 119 ) 
 Number of securities 15 115 30 

 In accordance with ASU 2017-8, purchase premiums for callable securities are amortized to the earliest call date and premiums on non-callable securities as well as discounts are recognized in interest income using the interest method over the terms of the securities or over the estimated lives of mortgage-backed securities. 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 $ 560.2 million and $ 792.0 million were pledged as of December 31, 2024 and 2023, respectively, as collateral for borrowings from the FHLB and Federal Reserve Bank and for other purposes as permitted or required by law. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 NOTE 2 – SECURITIES (continued) 
 Unrealized Loss Analysis on Available-for-Sale and Held-to-Maturity Securities 
 Information regarding available-for-sale securities securities with unrealized losses as of December 31, 2024 and 2023 is prese nted below. Th e tables distribute the securities between those with unrealized losses for less than twelve months and those with unrealized losses for twelve months or more. 
 Less than 12 months 12 months or more Total 
 (dollars in thousands) Fair 
Value Unrealized Losses Fair 
Value Unrealized Losses Fair 
Value Unrealized Losses 
 2024 
 
 U.S. government sponsored agencies $ 0 $ 0 $ 109,435 $ 27,715 $ 109,435 $ 27,715 
 Mortgage-backed securities: residential 23,204 249 390,483 77,703 413,687 77,952 
 
 State and municipal securities 12,928 439 443,569 85,069 456,497 85,508 
 Total temporarily impaired $ 36,132 $ 688 $ 943,487 $ 190,487 $ 979,619 $ 191,175 
 
 2023 
 
 U.S. government sponsored agencies $ 0 $ 0 $ 119,479 $ 27,213 $ 119,479 $ 27,213 
 Mortgage-backed securities: residential 52 0 442,765 74,551 442,817 74,551 
 
 State and municipal securities 31,345 440 440,446 72,570 471,791 73,010 
 Total temporarily impaired $ 31,397 $ 440 $ 1,002,690 $ 174,334 $ 1,034,087 $ 174,774 

 Information regarding held-to-maturity securities with unrealized losses as of December 31, 2024 and 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. 
 
 Less than 12 months 12 months or more Total 
 (dollars in thousands) Fair
Value Unrealized
Losses Fair
Value Unrealized
Losses Fair
Value Unrealized
Losses 
 2024 
 State and municipal securities $ 0 $ 0 $ 113,107 $ 18,461 $ 113,107 $ 18,461 
 
 2023 
 State and municipal securities $ 0 $ 0 $ 119,215 $ 10,703 $ 119,215 $ 10,703 

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 NOTE 2 – SECURITIES (continued) 
 The number of securities with unrealized losses as of December 31, 2024 and 2023 is presented below. 
 
 Available-for-Sale Held-to-Maturity 
 Less than 
12 months 12 months 
or more Total Less than 
12 months 12 months 
or more Total 
 2024 
 
 U.S. government sponsored agencies 0 17 17 0 0 0 
 Mortgage-backed securities: residential 9 124 133 0 0 0 
 
 State and municipal securities 23 392 415 0 41 41 
 Total temporarily impaired 32 533 565 0 41 41 
 
 2023 
 
 U.S. government sponsored agencies 0 17 17 0 0 0 
 Mortgage-backed securities: residential 1 126 127 0 0 0 
 
 State and municipal securities 40 370 410 0 41 41 
 Total temporarily impaired 41 513 554 0 41 41 

 Available-for-sale and held-to-maturity debt securities in unrealized loss positions are evaluated for impairment related to credit losses at least quarterly. For available-for-sale debt securities in an unrealized loss position, management first assesses whether it intends to sell, or it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through the consolidated income statement. For available-for-sale debt securities that do not meet the 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. 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. If the present value of cash flows expected to be collected is less than the amortized cost basis for the security, a credit loss exists and an allowance for credit losses is recorded, limited to the amount that the fair value of the security is less than its amortized cost basis. 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 securities was recorded at December 31, 2024 or 2023. Accrued interest receivable on available-for-sale and held-to-maturity debt securities totaled $ 7.5 million and $ 7.6 million at December 31, 2024 and 2023, respectively, and is excluded from the estimate of credit losses. 
 Ninety-nine percent of the securities are backed by the U.S. government, government agencies, government sponsored agencies or are rated above investment grade with a long history of no credit losses, except for certain non-local or local municipal securities, which are not rated. The U.S. government sponsored agencies and mortgage-backed securities are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major credit rating agencies, and have a long history of no credit losses. Therefore, for those securities, we do not record expected credit losses. 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. 
 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 the Company's balance sheet. 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, which are carried at fair value. 
 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. During the second and third quarters of 2024, the Bank liquidated its Visa Class C common stock, which resulted in a net realized gain of $ 5.1 million. The Bank remains a party of a makewhole agreement with Visa as a requirement of entering the exchange. The Bank did not record a liability as of December 31, 2024 under the terms of this agreement as a loss was neither probable nor estimable at this time. 
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 NOTE 3 – LOANS 
 Total loans outstanding as of the years ended December 31, 2024 and 2023 consisted of the following: 
 
 (dollars in thousands) 2024 2023 
 Commercial and industrial loans: 
 Working capital lines of credit loans $ 649,609 $ 604,893 
 Non-working capital loans 801,256 815,871 
 Total commercial and industrial loans 1,450,865 1,420,764 
 
 Commercial real estate and multi-family residential loans: 
 Construction and land development loans 567,781 634,435 
 Owner occupied loans 807,090 825,464 
 Nonowner occupied loans 872,671 724,101 
 Multi-family loans 344,978 253,534 
 Total commercial real estate and multi-family residential loans 2,592,520 2,437,534 
 
 Agri-business and agricultural loans: 
 Loans secured by farmland 156,609 162,890 
 Loans for agricultural production 230,787 225,874 
 Total agri-business and agricultural loans 387,396 388,764 
 
 Other commercial loans 95,584 120,726 
 Total commercial loans 4,526,365 4,367,788 
 
 Consumer 1-4 family mortgage loans: 
 Closed end first mortgage loans 259,286 258,103 
 Open end and junior lien loans 214,125 189,663 
 Residential construction and land development loans 16,818 8,421 
 Total consumer 1-4 family mortgage loans 490,229 456,187 
 
 Other consumer loans 104,041 96,022 
 Total consumer loans 594,270 552,209 
 Gross loans 5,120,635 4,919,997 
 Less: Allowance for credit losses ( 85,960 ) ( 71,972 ) 
 Net deferred loan fees ( 2,687 ) ( 3,463 ) 
 Loans, net $ 5,031,988 $ 4,844,562 

 The recorded investment in loans does not include accrued interest, which totaled $ 20.3 million and $ 21.5 million at December 31, 2024 and 2023, respectively. 
 The Company had $ 424,000 and $ 238,000 in residential real estate loans in process of foreclosure as of December 31, 2024 and 2023, respectively. 
 
 
 
 
 
 
 
 
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 NOTE 4 – ALLOWANCE FOR CREDIT LOSSES AND CREDIT QUALITY 
 
 The following table presents the activity in the allowance for credit losses by portfolio segment for the year ended December 31, 2024, 2023 and 2022: 
 (dollars in thousands) Commercial 
and 
Industrial Commercial 
Real Estate 
and 
Multi-family
 Residential Agri-business 
and 
Agricultural Other 
Commercial Consumer 
1-4 Family 
Mortgage Other 
Consumer Unallocated Total 
 2024 
 Beginning balance $ 30,338 $ 31,335 $ 4,150 $ 1,129 $ 3,474 $ 1,174 $ 372 $ 71,972 
 Provision for credit losses 16,639 264 ( 609 ) ( 386 ) ( 75 ) 906 11 16,750 
 Loans charged-off ( 1,615 ) ( 840 ) 0 0 ( 94 ) ( 919 ) 0 ( 3,468 ) 
 Recoveries 177 106 0 0 53 370 0 706 
 Net loans (charged-off) recovered ( 1,438 ) ( 734 ) 0 0 ( 41 ) ( 549 ) 0 ( 2,762 ) 
 Ending balance $ 45,539 $ 30,865 $ 3,541 $ 743 $ 3,358 $ 1,531 $ 383 $ 85,960 

 
 (dollars in thousands) Commercial 
and 
Industrial Commercial 
Real Estate 
and 
Multi-family
 Residential Agri-business 
and 
Agricultural Other 
Commercial Consumer 
1-4 Family 
Mortgage Other 
Consumer Unallocated Total 
 2023 
 Beginning balance $ 35,290 $ 27,394 $ 4,429 $ 917 $ 3,001 $ 1,021 $ 554 $ 72,606 
 Provision for credit losses 1,209 3,619 ( 279 ) 212 598 673 ( 182 ) 5,850 
 Loans charged-off ( 6,341 ) 0 0 0 ( 163 ) ( 828 ) 0 ( 7,332 ) 
 Recoveries 180 322 0 0 38 308 0 848 
 Net loans (charged-off) recovered ( 6,161 ) 322 0 0 ( 125 ) ( 520 ) 0 ( 6,484 ) 
 Ending balance $ 30,338 $ 31,335 $ 4,150 $ 1,129 $ 3,474 $ 1,174 $ 372 $ 71,972 

 
 (dollars in thousands) Commercial 
and 
Industrial Commercial 
Real Estate 
and 
Multi-family
 Residential Agri-business 
and 
Agricultural Other 
Commercial Consumer 
1-4 Family 
Mortgage Other 
Consumer Unallocated Total 
 2022 
 
 Beginning balance $ 30,595 $ 26,535 $ 5,034 $ 1,146 $ 2,866 $ 1,147 $ 450 $ 67,773 
 Provision for credit losses 8,646 1,179 ( 605 ) ( 229 ) 125 155 104 9,375 
 Loans charged-off ( 4,022 ) ( 597 ) 0 0 ( 42 ) ( 473 ) 0 ( 5,134 ) 
 Recoveries 71 277 0 0 52 192 0 592 
 Net loans (charged-off) recovered ( 3,951 ) ( 320 ) 0 0 10 ( 281 ) 0 ( 4,542 ) 
 Ending balance $ 35,290 $ 27,394 $ 4,429 $ 917 $ 3,001 $ 1,021 $ 554 $ 72,606 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 NOTE 4 – ALLOWANCE FOR CREDIT LOSSES AND CREDIT QUALITY (continued) 
 
 Credit Quality Indicators: 
 The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes commercial loans individually by classifying the loans as to credit risk. This analysis is performed on a quarterly basis for Special Mention, Substandard and Doubtful grade loans and annually on Pass grade loans over $ 250,000 . 
 The Company uses the following definitions for risk ratings: 
 Special Mention. Loans classified as Special Mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date. 
 Substandard. Loans classified as Substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized as the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. 
 Doubtful. Loans classified as Doubtful have all the weaknesses inherent in those classified as Substandard, with the added characteristics that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. 
 Loans are considered to be "Pass" rated when they are reviewed as part of the previously described process and do not meet the criteria above with the exception of consumer troubled debt restructurings, which are evaluated and listed with Substandard commercial grade loans and consumer nonaccrual loans which are evaluated individually and listed with "Not Rated" loans. 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. 
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 NOTE 4 – ALLOWANCE FOR CREDIT LOSSES AND CREDIT QUALITY (continued) 
 The following tables summarize the risk category of loans by loan segment and origination date as of December 31, 2024 and 2023. Balances presented are at the amortized cost basis by origination year. 
 
 (dollars in thousands) 2024 2023 2022 2021 2020 Prior Term Total Revolving Total 
 Commercial and industrial loans: 
 Working capital lines of credit loans: 
 Pass $ 1,599 $ 114 $ 1,640 $ 1,647 $ 651 $ 0 $ 5,651 $ 525,179 $ 530,830 
 Special Mention 0 0 0 0 0 0 0 48,301 48,301 
 Substandard 0 0 933 0 195 219 1,347 25,878 27,225 
 Doubtful 0 3,090 39,994 0 0 0 43,084 0 43,084 
 
 Total 1,599 3,204 42,567 1,647 846 219 50,082 599,358 649,440 
 Working capital lines of credit loans: 
 Current period gross write offs 0 0 94 0 0 0 94 136 230 
 Non-working capital loans: 
 Pass 151,920 157,276 173,274 58,591 32,909 28,582 602,552 164,106 766,658 
 Special Mention 3,901 2,614 2,024 1,637 393 1,894 12,463 6,491 18,954 
 Substandard 0 2,986 1,598 107 4,142 584 9,417 406 9,823 
 Doubtful 0 0 0 21 386 0 407 0 407 
 Not Rated 1,297 1,657 1,149 395 395 23 4,916 0 4,916 
 Total 157,118 164,533 178,045 60,751 38,225 31,083 629,755 171,003 800,758 
 Non-working capital loans: 
 Current period gross write offs 0 383 0 542 179 44 1,148 237 1,385 
 Commercial real estate and multi-family residential loans: 
 Construction and land development loans: 
 Pass 23,264 69,737 43,228 2,566 0 0 138,795 426,577 565,372 
 Special Mention 603 0 0 0 0 0 603 0 603 
 
 
 
 Total 23,867 69,737 43,228 2,566 0 0 139,398 426,577 565,975 
 Construction and land development loans: 
 Current period gross write offs 0 0 0 0 0 0 0 0 0 
 Owner occupied loans: 
 Pass 98,847 138,299 120,191 143,642 109,451 129,051 739,481 35,003 774,484 
 Special Mention 6,295 2,728 14,777 0 619 2,488 26,907 0 26,907 
 Substandard 318 318 0 3,101 1,457 0 5,194 0 5,194 
 
 
 Total 105,460 141,345 134,968 146,743 111,527 131,539 771,582 35,003 806,585 
 Owner occupied loans 
 Current period gross write offs 0 0 0 0 0 840 840 0 840 
 Nonowner occupied loans: 
 Pass 152,963 118,517 168,387 101,064 119,612 77,497 738,040 110,441 848,481 
 Special Mention 0 15,650 108 5,868 0 0 21,626 1,895 23,521 
 
 
 
 Total 152,963 134,167 168,495 106,932 119,612 77,497 759,666 112,336 872,002 
 

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 NOTE 4 – ALLOWANCE FOR CREDIT LOSSES AND CREDIT QUALITY (continued) 
 
 (dollars in thousands) 2024 2023 2022 2021 2020 Prior Term Total Revolving Total 
 Nonowner occupied loans (continued): 
 Current period gross write offs 0 0 0 0 0 0 0 0 0 
 Multi-family loans: 
 Pass 70,497 61,679 11,708 52,995 29,177 9,794 235,850 108,486 344,336 
 Special Mention 0 0 307 0 0 0 307 0 307 
 
 
 
 Total 70,497 61,679 12,015 52,995 29,177 9,794 236,157 108,486 344,643 
 Multi-family loans: 
 Current period gross write offs 0 0 0 0 0 0 0 0 0 
 Agri-business and agricultural loans: 
 Loans secured by farmland: 
 Pass 14,574 21,241 29,601 23,043 25,192 18,312 131,963 24,249 156,212 
 Special Mention 122 209 0 0 0 0 331 0 331 
 Substandard 0 0 0 0 0 71 71 0 71 
 
 
 Total 14,696 21,450 29,601 23,043 25,192 18,383 132,365 24,249 156,614 
 Loans secured by farmland: 
 Current period gross write offs 0 0 0 0 0 0 0 0 0 
 Loans for agricultural production: 
 Pass 15,945 26,704 21,611 24,374 21,446 1,450 111,530 118,090 229,620 
 Special Mention 0 0 0 0 0 0 0 1,275 1,275 
 
 
 
 Total 15,945 26,704 21,611 24,374 21,446 1,450 111,530 119,365 230,895 
 Loans for agricultural production: 
 Current period gross write offs 0 0 0 0 0 0 0 0 0 
 Other commercial loans: 
 Pass 6,639 17,137 29,985 3,397 11,310 5,544 74,012 19,609 93,621 
 Special Mention 0 0 0 0 0 1,872 1,872 0 1,872 
 
 
 
 Total 6,639 17,137 29,985 3,397 11,310 7,416 75,884 19,609 95,493 
 Other commercial loans: 
 Current period gross write offs 0 0 0 0 0 0 0 0 0 
 Consumer 1-4 family mortgage loans: 
 Closed end first mortgage loans: 
 Pass 11,104 8,511 9,274 11,278 6,252 4,685 51,104 4,299 55,403 
 Special Mention 122 226 165 66 0 0 579 0 579 
 Substandard 0 83 319 90 0 629 1,121 0 1,121 
 
 Not Rated 28,706 55,641 47,355 34,173 13,543 22,396 201,814 0 201,814 
 Total 39,932 64,461 57,113 45,607 19,795 27,710 254,618 4,299 258,917 
 Closed end first mortgage loans: 
 Current period gross write offs 0 0 0 0 0 0 0 0 0 
 Open end and junior lien loans: 
 Pass 574 738 0 438 0 5 1,755 10,090 11,845 
 Special Mention 0 0 0 0 309 0 309 0 309 

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 NOTE 4 – ALLOWANCE FOR CREDIT LOSSES AND CREDIT QUALITY (continued) 
 
 (dollars in thousands) 2024 2023 2022 2021 2020 Prior Term Total Revolving Total 
 Open end and junior lien loans (continued): 
 Substandard 0 104 0 15 0 81 200 118 318 
 
 Not Rated 21,929 16,134 18,053 4,660 644 2,894 64,314 139,351 203,665 
 Total 22,503 16,976 18,053 5,113 953 2,980 66,578 149,559 216,137 
 Open end and junior lien loans: 
 Current period gross write offs 0 0 79 0 0 0 79 15 94 
 Residential construction loans: 
 
 
 
 
 Not Rated 10,030 1,154 2,045 1,386 759 1,348 16,722 0 16,722 
 Total 10,030 1,154 2,045 1,386 759 1,348 16,722 0 16,722 
 Residential construction loans: 
 Current period gross write offs 0 0 0 0 0 0 0 0 0 
 Other consumer loans: 
 Pass 79 971 234 109 0 0 1,393 20,742 22,135 
 Special Mention 0 0 475 0 157 0 632 0 632 
 Substandard 0 128 54 76 17 0 275 0 275 
 
 Not Rated 23,508 22,250 11,824 6,688 3,743 1,782 69,795 10,930 80,725 
 Total 23,587 23,349 12,587 6,873 3,917 1,782 72,095 31,672 103,767 
 Other consumer loans: 
 Current period gross write offs 49 303 236 33 0 26 647 272 919 
 
 Total Loans $ 644,836 $ 745,896 $ 750,313 $ 481,427 $ 382,759 $ 311,201 $ 3,316,432 $ 1,801,516 $ 5,117,948 
 
 Total current period gross write offs $ 49 $ 686 $ 409 $ 575 $ 179 $ 910 $ 2,808 $ 660 $ 3,468 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 NOTE 4 – ALLOWANCE FOR CREDIT LOSSES AND CREDIT QUALITY (continued) 
 
 
 (dollars in thousands) 2023 2022 2021 2020 2019 Prior Term Total Revolving Total 
 Commercial and industrial loans: 
 Working capital lines of credit loans: 
 Pass $ 193 $ 1,876 $ 2,214 $ 1,132 $ 0 $ 50 $ 5,465 $ 532,086 $ 537,551 
 Special Mention 0 0 0 0 0 0 0 46,498 46,498 
 Substandard 0 200 0 0 125 0 325 20,516 20,841 
 
 
 Total 193 2,076 2,214 1,132 125 50 5,790 599,100 604,890 
 Working capital lines of credit loans: 
 Current period gross write offs 0 0 75 0 139 0 214 327 541 
 Non-working capital loans: 
 Pass 199,071 224,333 85,273 49,999 28,773 10,501 597,950 171,264 769,214 
 Special Mention 4,038 9,577 1,051 2,498 2,306 4,298 23,768 5,477 29,245 
 Substandard 3,754 1,612 683 3,892 51 218 10,210 397 10,607 
 
 Not Rated 2,585 1,999 881 707 162 18 6,352 0 6,352 
 Total 209,448 237,521 87,888 57,096 31,292 15,035 638,280 177,138 815,418 
 Non-working capital loans: 
 Current period gross write offs 0 5,445 0 178 129 0 5,752 48 5,800 
 Commercial real estate and multi-family residential loans: 
 Construction and land development loans: 
 Pass 50,693 15,558 17,655 0 177 0 84,083 547,570 631,653 
 
 
 
 
 Total 50,693 15,558 17,655 0 177 0 84,083 547,570 631,653 
 Construction and land development loans: 
 Current period gross write offs 0 0 0 0 0 0 0 0 0 
 Owner occupied loans: 
 Pass 144,411 132,850 156,680 132,407 61,415 118,406 746,169 40,288 786,457 
 Special Mention 7,597 686 4,913 0 1,394 2,245 16,835 14,739 31,574 
 Substandard 362 250 3,325 1,474 345 1,161 6,917 0 6,917 
 
 
 Total 152,370 133,786 164,918 133,881 63,154 121,812 769,921 55,027 824,948 
 Owner occupied loans: 
 Current period gross write offs 0 0 0 0 0 0 0 0 0 
 Nonowner occupied loans: 
 Pass 123,633 158,415 112,582 134,050 87,288 66,755 682,723 27,860 710,583 
 Special Mention 4,503 0 6,257 0 0 2,246 13,006 0 13,006 
 
 
 
 Total 128,136 158,415 118,839 134,050 87,288 69,001 695,729 27,860 723,589 
 Nonowner occupied loans: 
 Current period gross write offs 0 0 0 0 0 0 0 0 0 
 Multi-family loans: 
 Pass 90,954 23,315 9,042 35,648 13,971 14,609 187,539 45,987 233,526 
 Special Mention 19,671 0 0 0 0 0 19,671 0 19,671 
 
 
 
 Total 110,625 23,315 9,042 35,648 13,971 14,609 207,210 45,987 253,197 
 

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 NOTE 4 – ALLOWANCE FOR CREDIT LOSSES AND CREDIT QUALITY (continued) 
 
 
 (dollars in thousands) 2023 2022 2021 2020 2019 Prior Term Total Revolving Total 
 Multi-family loans (continued): 
 Current period gross write offs 0 0 0 0 0 0 0 0 0 
 Agri-business and agricultural loans: 
 Loans secured by farmland: 
 Pass 24,503 32,060 25,308 27,924 9,104 19,160 138,059 24,724 162,783 
 
 Substandard 0 0 0 0 0 100 100 0 100 
 
 
 Total 24,503 32,060 25,308 27,924 9,104 19,260 138,159 24,724 162,883 
 Loans secured by farmland: 
 Current period gross write offs 0 0 0 0 0 0 0 0 0 
 Loans for agricultural production: 
 Pass 28,657 13,589 27,175 25,504 3,533 10,429 108,887 116,406 225,293 
 Special Mention 0 0 187 0 0 0 187 500 687 
 
 
 
 Total 28,657 13,589 27,362 25,504 3,533 10,429 109,074 116,906 225,980 
 Loans for agricultural production: 
 Current period gross write offs 0 0 0 0 0 0 0 0 0 
 Other commercial loans: 
 Pass 7,058 26,918 33,247 13,684 90 7,332 88,329 29,819 118,148 
 Special Mention 0 0 0 0 0 2,419 2,419 0 2,419 
 
 
 
 Total 7,058 26,918 33,247 13,684 90 9,751 90,748 29,819 120,567 
 Other commercial loans: 
 Current period gross write offs 0 0 0 0 0 0 0 0 0 
 Consumer 1-4 family mortgage loans: 
 Closed end first mortgage loans: 
 Pass 9,910 10,541 12,486 8,614 3,924 4,625 50,100 8,330 58,430 
 Special Mention 0 0 0 519 0 0 519 0 519 
 Substandard 87 0 96 123 0 253 559 0 559 
 
 Not Rated 64,233 51,018 38,014 17,432 4,314 23,225 198,236 0 198,236 
 Total 74,230 61,559 50,596 26,688 8,238 28,103 249,414 8,330 257,744 
 Closed end first mortgage loans: 
 Current period gross write offs 0 0 0 0 0 0 0 0 0 
 Open end and junior lien loans: 
 Pass 557 137 491 335 0 6 1,526 8,689 10,215 
 
 Substandard 108 0 23 0 26 48 205 68 273 
 
 Not Rated 24,792 29,648 8,471 1,554 2,286 1,962 68,713 112,371 181,084 
 Total 25,457 29,785 8,985 1,889 2,312 2,016 70,444 121,128 191,572 
 Open end and junior lien loans: 
 Current period gross write offs 0 50 14 0 0 0 64 99 163 
 Residential construction loans: 
 
 
 
 
 Not Rated 1,525 2,982 1,515 839 263 1,220 8,344 0 8,344 
 Total 1,525 2,982 1,515 839 263 1,220 8,344 0 8,344 

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 NOTE 4 – ALLOWANCE FOR CREDIT LOSSES AND CREDIT QUALITY (continued) 
 
 (dollars in thousands) 2023 2022 2021 2020 2019 Prior Term Total Revolving Total 
 Residential construction loans (continued): 
 Current gross period write offs 0 0 0 0 0 0 0 0 0 
 Other consumer loans: 
 Pass 1,082 789 1,391 301 0 0 3,563 11,894 15,457 
 
 Substandard 40 34 35 0 2 0 111 0 111 
 
 Not Rated 32,481 17,585 9,994 6,008 1,611 1,957 69,636 10,545 80,181 
 Total 33,603 18,408 11,420 6,309 1,613 1,957 73,310 22,439 95,749 
 Other consumer loans: 
 Current gross period write offs 16 258 90 8 212 1 585 243 828 
 
 TOTAL $ 846,498 $ 755,972 $ 558,989 $ 464,644 $ 221,160 $ 293,243 $ 3,140,506 $ 1,776,028 $ 4,916,534 
 
 Total current period gross write offs $ 16 $ 5,753 $ 179 $ 186 $ 480 $ 1 $ 6,615 $ 717 $ 7,332 

 As of December 31, 2024 and 2023, $ 1.2 million and $ 1.3 million, respectively, 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"). 
 
 
 
 
 
 
 
 
 
 
 
 
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 NOTE 4 – ALLOWANCE FOR CREDIT LOSSES AND CREDIT QUALITY (continued) 
 Nonaccrual and Past Due Loans: 
 For all loan classes, a loan is generally placed on nonaccrual status when principal or interest becomes 90 days past due unless it is well secured and in process of collection, or earlier when concern exists as to the ultimate collectability of principal or interest. Interest accrued but not received is reversed against earnings. Cash interest received on these loans is applied to the principal balance until the principal is recovered or until the loan returns to accrual status. 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 the payments are reasonably assured. 
 The following table presents the aging of the amortized cost basis in past due loans as of December 31, 2024 and 2023 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 
 2024 
 Commercial and industrial loans: 
 Working capital lines of credit loans $ 603,016 $ 1,082 $ 0 $ 604,098 $ 45,342 $ 594 $ 649,440 
 Non-working capital loans 792,577 663 3 793,243 7,515 37 800,758 
 Commercial real estate and multi-family residential loans: 
 Construction and land development loans 565,975 0 0 565,975 0 0 565,975 
 Owner occupied loans 804,810 0 0 804,810 1,775 318 806,585 
 Nonowner occupied loans 872,002 0 0 872,002 0 0 872,002 
 Multi-family loans 344,643 0 0 344,643 0 0 344,643 
 Agri-business and agricultural loans: 
 Loans secured by farmland 156,543 0 0 156,543 71 0 156,614 
 Loans for agricultural production 230,895 0 0 230,895 0 0 230,895 
 Other commercial loans 95,493 0 0 95,493 0 0 95,493 
 Consumer 1‑4 family mortgage loans: 
 Closed end first mortgage loans 256,486 1,284 26 257,796 1,121 665 258,917 
 Open end and junior lien loans 215,505 314 0 215,819 318 318 216,137 
 Residential construction loans 16,722 0 0 16,722 0 0 16,722 
 Other consumer loans 102,565 927 0 103,492 275 17 103,767 
 Total $ 5,057,232 $ 4,270 $ 29 $ 5,061,531 $ 56,417 $ 1,949 $ 5,117,948 

 An insignificant amount of interest income was recognized on nonaccrual loans during the twelve months ended December 31, 2024. 
 
 
 
 
 
 
 
 
 
 
 
 
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 NOTE 4 – ALLOWANCE FOR CREDIT LOSSES AND CREDIT QUALITY (continued) 
 
 (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 
 2023 
 Commercial and industrial loans: 
 Working capital lines of credit loans $ 602,236 $ 0 $ 0 $ 602,236 $ 2,654 $ 0 $ 604,890 
 Non-working capital loans 805,305 1,372 0 806,677 8,741 244 815,418 
 Commercial real estate and multi-family residential loans: 
 Construction and land development loans 631,653 0 0 631,653 0 0 631,653 
 Owner occupied loans 821,701 0 0 821,701 3,247 1,161 824,948 
 Nonowner occupied loans 723,589 0 0 723,589 0 0 723,589 
 Multi-family loans 253,197 0 0 253,197 0 0 253,197 
 Agri-business and agricultural loans: 
 Loans secured by farmland 162,783 0 0 162,783 100 0 162,883 
 Loans for agricultural production 225,980 0 0 225,980 0 0 225,980 
 Other commercial loans 120,567 0 0 120,567 0 0 120,567 
 Consumer 1‑4 family mortgage loans: 
 Closed end first mortgage loans 256,016 1,142 27 257,185 559 329 257,744 
 Open end and junior lien loans 190,956 344 0 191,300 272 164 191,572 
 Residential construction loans 8,344 0 0 8,344 0 0 8,344 
 Other consumer loans 95,135 502 0 95,637 112 3 95,749 
 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 during the twelve months 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. A loan is considered collateral dependent when the borrower is experiencing financial difficulty and the loan is expected to be repaid substantially through the operation or sale of the collateral. The class of loan represents the primary collateral type associated with the loan. Significant year over year changes are reflective of changes in nonaccrual status and not necessarily associated with credit quality indicators like appraisal value. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 NOTE 4 – ALLOWANCE FOR CREDIT LOSSES AND CREDIT QUALITY (continued) 
 The following tables present the amortized cost basis of collateral dependent loans by class of loan as of December 31, 2024 and 2023: 
 (dollars in thousands) Real Estate General
Business
 Assets Other Total 
 2024 
 Commercial and industrial loans: 
 Working capital lines of credit loans $ 50 $ 64,023 $ 447 $ 64,520 
 Non-working capital loans 1,891 6,585 19 8,495 
 Commercial real estate and multi-family residential loans: 
 Owner occupied loans 318 3,512 0 3,830 
 Nonowner occupied loans 0 0 0 0 
 Agri-business and agricultural loans: 
 Loans secured by farmland 0 71 0 71 
 Consumer 1-4 family mortgage loans: 
 Closed end first mortgage loans 1,121 0 0 1,121 
 Open end and junior lien loans 318 0 0 318 
 Other consumer loans 0 0 272 272 
 Total $ 3,698 $ 74,191 $ 738 $ 78,627 

 
 (dollars in thousands) Real Estate General
Business
 Assets Other Total 
 2023 
 Commercial and industrial loans: 
 Working capital lines of credit loans $ 50 $ 2,454 $ 0 $ 2,504 
 Non-working capital loans 40 8,202 400 8,642 
 Commercial real estate and multi-family residential loans: 
 Owner occupied loans 595 1,474 1,161 3,230 
 Nonowner occupied loans 0 0 0 0 
 Agri-business and agricultural loans: 
 Loans secured by farmland 0 100 0 100 
 Consumer 1-4 family mortgage loans: 
 Closed end first mortgage loans 559 0 0 559 
 Open end and junior lien loans 164 0 0 164 
 Other consumer loans 0 0 112 112 
 Total $ 1,408 $ 12,230 $ 1,673 $ 15,311 

 
 
 
 
 
 
 
 
 
 
 
 
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 NOTE 4 – ALLOWANCE FOR CREDIT LOSSES AND CREDIT QUALITY (continued) 
 Modifications Made to Borrowers Experiencing Financial Difficulty 
 The allowance for credit losses incorporates an estimate of lifetime expected credit losses and is recorded on each asset upon origination. The starting point to estimate such credit losses is historical loss information. The Company uses a probability of default/loss given default model to determine the allowance for credit losses recorded at origination. Occasionally, the Company subsequently modifies loans for borrowers experiencing financial distress by providing the following forms of relief: forgiveness of loan principal, extension of repayment terms, reduction of interest rate or an other than insignificant payment delay. In some instances, the Company provides multiple types of concessions for such modifications. Because the effect of most modifications to borrowers experiencing financial difficulty is already included in the allowance for credit losses, no change to the allowance for credit losses is generally recorded for these modifications. 
 During the twelve months ended December 31, 2024, there were an insignificant amount of modifications to borrowers experiencing financial difficulty. 
 The following table presents the amortized cost basis at the end of the reporting period of loans that were experiencing financial difficulty and received a modification of terms during the twelve months ended December 31, 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 at the end of the reporting period 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 
 Twelve Months Ended December 31, 2023 
 
 Commercial and industrial loans: 
 Working capital lines of credit loans $ 944 $ 0 $ 0 $ 944 0.16 % 
 Non-working capital loans 0 1,912 1,572 3,484 0.43 
 Total commercial and industrial loans 944 1,912 1,572 4,428 0.31 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Total loan modifications made to borrowers experiencing financial difficulty $ 944 $ 1,912 $ 1,572 $ 4,428 0.09 % 

 The Company had no material commitments to lend additional funds to borrowers included in the previous table at December 31, 2023. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 NOTE 4 – ALLOWANCE FOR CREDIT LOSSES AND CREDIT QUALITY (continued) 
 The following table presents the financial effect of the loan modifications presented above for material modifications to borrowers experiencing financial difficulty for the twelve months ended December 31, 2023: 
 
 (dollars in thousands) Principal Forgiveness Weighted Average Interest Rate Reduction Weighted Average Term Extension Payment Delay 
 Twelve Months Ended December 31, 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 commercial and industrial loans 9,380 7.84 % 44 months 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Total modifications $ 9,380 7.84 % 44 months 

 (1) Principal forgiveness of $ 9.4 million represents one $ 11.0 million non-working capital loan, of which $ 3.7 million and $ 5.6 million was charged off during the twelve months ended December 31, 2023 and 2022, respectively. 
 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 December 31, 2024, no loans receiving such a modification within the last twelve months were 30 days or greater past due. 
 At December 31, 2024, no loans receiving a modification due to borrower financial difficulty within the last twelve months has 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. 
 
 
 
 
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 NOTE 5 – FAIR VALUE 
 Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values: 
 Level 1 Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date. 
 Level 2 Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. 
 Level 3 Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability. 
 The Company used the following methods and significant assumptions to estimate the fair value of each type of financial instrument: 
 Securities: Securities available-for-sale are valued primarily by a third party pricing service. The fair values of securities available-for-sale are determined on a recurring basis by obtaining quoted prices on nationally recognized securities exchanges (Level 1 inputs) or pricing models which utilize significant observable inputs such as matrix pricing. This is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs). These models utilize the market approach with standard inputs that include, but are not limited to benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data. For certain municipal securities that are not rated and observable inputs about the specific issuer are not available, fair values are estimated using observable data from other municipal securities presumed to be similar or other market data on other non-rated municipal securities (Level 3 inputs). 
 The Company’s Finance Department, which is responsible for all accounting and SEC compliance, and the Company’s Treasury Department, which is responsible for investment portfolio management and asset/liability modeling, are the two areas that determine the Company’s valuation policies and procedures. Both of these areas report directly to the Executive Vice President and Chief Financial Officer of the Company. For assets or liabilities that may be considered for Level 3 fair value measurement on a recurring basis, these two departments and the Executive Vice President and Chief Financial Officer determine the appropriate level of the assets or liabilities under consideration. If there are assets or liabilities that are determined to be Level 3 by this group, the Risk Management Committee of the Company and the Audit Committee of the board of directors (the "Board") are made aware of such assets at their next scheduled meeting. 
 Securities pricing is obtained on securities from a third party pricing service and all security prices are tested annually against prices from another third party provider and reviewed with a market value price tolerance variance that varies by sector: municipal securities +/- 5 %, government agency/MBS/CMO +/- 3 % and U.S. treasuries +/- 1 %. If any securities fall outside the tolerance threshold and have a variance of $ 100,000 or more, a determination of materiality is made for the amount over the threshold. Any security that would have a material threshold difference would be further investigated to determine why the variance exists and if any action is needed concerning the security pricing for that individual security. Changes in market value are reviewed monthly in aggregate by security type and any material differences are reviewed to determine why they exist. At least annually, the pricing methodology of the pricing service is received and reviewed to support the fair value levels used by the Company. A detailed pricing evaluation is requested and reviewed on any security determined to be fair valued using unobservable inputs by the pricing service. 
 Mortgage banking derivative: The fair values of mortgage banking derivatives are based on observable market data as of the measurement date (Level 2). 
 Interest rate swap derivatives: Our derivatives are traded in an over-the-counter market where quoted market prices are not always available. Therefore, the fair values of derivatives are determined using quantitative models that utilize multiple market inputs. The inputs will vary based on the type of derivative, but could include interest rates, prices and indices to generate continuous yield or pricing curves, prepayment rates, and volatility factors to value the position. The majority of market inputs are actively quoted and can be validated through external sources, including brokers, market transactions and third-party pricing 
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 NOTE 5 – FAIR VALUE (continued) 
 services. The fair value of interest rate swap derivatives is determined by pricing or valuation models using observable market data as of the measurement date (Level 2). 
 Collateral dependent loans: Collateral dependent loans with specific allocations of the allowance for credit losses generally based on the fair value of the underlying collateral when repayment is expected solely from the collateral. Fair value is determined using several methods. Generally, the fair value of real estate is based on appraisals by qualified third party appraisers. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and result in a Level 3 classification of the inputs for determining fair value. In addition, the Company’s management routinely applies internal discount factors to the value of appraisals used in the fair value evaluation of collateral dependent loans. The deductions to the appraisals take into account changing business factors and market conditions, as well as value impairment in cases where the appraisal date predates a likely change in market conditions. Commercial real estate is generally discounted from its appraised value by 30 - 50 % with the higher discounts applied to real estate that is determined to have a thin trading market or to be specialized collateral. In addition to real estate, the Company’s management evaluates other types of collateral as follows: (a) raw materials inventory is typically 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 generally 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 generally discounted by 10 %- 30 %, depending on the type of investment, age of valuation report and general market conditions. This methodology is based on a market approach and typically results in a Level 3 classification of the inputs for determining fair value. 
 Mortgage servicing rights: As of December 31, 2024, the fair 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. A valuation model is used to estimate fair value by stratifying the portfolios on the basis of certain risk characteristics, including loan type and interest rate. Impairment is estimated based on an income approach. The inputs used include estimates of prepayment speeds, discount rate, cost to service, escrow account earnings, contractual servicing fee income, ancillary income, late fees, and float income. The most significant assumption used to value MSRs is prepayment rate. Prepayment rates are estimated based on published industry consensus prepayment rates. The most significant unobservable assumption is the discount rate. At December 31, 2024, the constant prepayment speed ("PSA") used was 157 and discount rate used was 10.0 %. At December 31, 2023, the PSA used was 148 and the discount rate used was 10.5 %. 
 Other real estate owned: Nonrecurring adjustments to certain commercial and residential real estate properties classified as other real estate owned are measured at the lower of carrying amount or fair value less costs to sell. Fair values are generally based on third party appraisals of the property and are reviewed by the Company’s internal appraisal officer. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable properties used to determine value. Such adjustments are usually significant and result in a Level 3 classification. In addition, the Company’s management may apply discount factors to the appraisals to take into account changing business factors and market conditions, as well as value impairment in cases where the appraisal date predates a likely change in market conditions. In cases where the carrying amount exceeds the fair value, less costs to sell, an impairment loss is recognized. 
 Real estate mortgage loans held-for-sale : 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. 
 
 
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 NOTE 5 – FAIR VALUE (continued) 
 
 
 The tables below present the balances of assets and liabilities measured at fair value on a recurring basis as of December 31, 2024 and 2023: 
 
 2024 
 Fair Value Measurements Using Assets 
 (dollars in thousands) Level 1 Level 2 Level 3 at Fair Value 
 Assets: 
 
 U.S. government sponsored agency securities $ 0 $ 109,435 $ 0 $ 109,435 
 Mortgage-backed securities: residential 0 422,409 0 422,409 
 
 State and municipal securities 0 454,922 4,660 459,582 
 Total available-for-sale securities 0 986,766 4,660 991,426 
 Mortgage banking derivative 0 94 0 94 
 Interest rate swap derivative 0 25,403 0 25,403 
 Total assets $ 0 $ 1,012,263 $ 4,660 $ 1,016,923 
 
 Liabilities: 
 
 Interest rate swap derivative 0 25,403 0 25,403 
 Total liabilities $ 0 $ 25,403 $ 0 $ 25,403 

 
 
 2023 
 Fair Value Measurements Using Assets 
 (dollars in thousands) Level 1 Level 2 Level 3 at Fair Value 
 Assets: 
 
 U.S. government sponsored agency securities $ 0 $ 119,479 $ 0 $ 119,479 
 Mortgage-backed securities: residential 0 447,842 0 447,842 
 
 State and municipal securities 0 482,127 2,280 484,407 
 Total available-for-sale securities 0 1,049,448 2,280 1,051,728 
 Mortgage banking derivative 0 47 0 47 
 Interest rate swap derivative 0 27,189 0 27,189 
 Total assets $ 0 $ 1,076,684 $ 2,280 $ 1,078,964 
 
 Liabilities: 
 Mortgage banking derivative $ 0 $ 11 $ 0 $ 11 
 Interest rate swap derivative 0 27,190 0 27,190 
 Total liabilities $ 0 $ 27,201 $ 0 $ 27,201 

 
 
 The fair value of Level 3 available-for-sale securities was immaterial to warrant additional recurring fair value disclosures as of December 31, 2024 and 2023. 
 
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 NOTE 5 – FAIR VALUE (continued) 
 
 
 The tables below present the amount of assets measured at fair value on a nonrecurring basis as of December 31, 2024 and 2023: 
 
 2024 
 Fair Value Measurements Using Assets 
 (dollars in thousands) Level 1 Level 2 Level 3 at Fair Value 
 Assets 
 Collateral dependent loans: 
 Commercial and industrial loans: 
 Working capital lines of credit loans $ 0 $ 0 $ 23,174 $ 23,174 
 Non-working capital loans 0 0 3,281 3,281 
 Commercial real estate and multi-family residential loans: 
 Owner occupied loans 0 0 664 664 
 Agri-business and agricultural loans: 
 Loans secured by farmland 0 0 32 32 
 
 
 
 
 Total collateral dependent loans $ 0 $ 0 $ 27,151 $ 27,151 
 
 Total assets $ 0 $ 0 $ 27,151 $ 27,151 

 
 
 2023 
 Fair Value Measurements Using Assets 
 (dollars in thousands) Level 1 Level 2 Level 3 at Fair Value 
 Assets 
 Collateral dependent loans: 
 Commercial and industrial loans: 
 Working capital lines of credit loans $ 0 $ 0 $ 1,263 $ 1,263 
 Non-working capital loans 0 0 3,374 3,374 
 Commercial real estate and multi-family residential loans: 
 
 Owner occupied loans 0 0 682 682 
 Agri-business and agricultural loans: 
 Loans secured by farmland 0 0 31 31 
 
 
 
 
 Total collateral dependent loans $ 0 $ 0 $ 5,350 $ 5,350 
 Other real estate owned 0 0 384 384 
 Total assets $ 0 $ 0 $ 5,734 $ 5,734 

 
 
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 NOTE 5 – FAIR VALUE (continued) 
 
 
 The following table presents the valuation methodology and unobservable inputs for Level 3 assets measured at fair value on a non-recurring basis at December 31, 2024: 
 
 (dollars in thousands) Fair Value Valuation Methodology Unobservable Inputs Average Range of Inputs 
 Collateral dependent loans: 
 Commercial and industrial $ 26,455 Collateral based measurements Discount to reflect current market conditions and ultimate collectability 51 % 
 4 %- 99 % 
 
 
 Collateral dependent loans: 
 Commercial real estate and multi-family residential 664 Collateral based measurements Discount to reflect current market conditions and ultimate collectability 54 % 
 
 
 Collateral dependent loans: 
 Loans secured by farmland 32 Collateral based measurements Discount to reflect current market conditions and ultimate collectability 54 % 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 The following table presents the valuation methodology and unobservable inputs for Level 3 assets measured at fair value on a non-recurring basis at December 31, 2023: 
 
 (dollars in thousands) Fair Value Valuation Methodology Unobservable Inputs Average Range of Inputs 
 Collateral dependent loans: 
 Commercial and industrial $ 4,637 Collateral based measurements Discount to reflect current market conditions and ultimate collectability 
 64 % 
 9 %- 99 % 
 
 
 Collateral dependent loans: 
 Commercial real estate and multi-family residential 682 Collateral based measurements Discount to reflect current market conditions and ultimate collectability 
 37 % 
 9 %- 69 % 
 
 
 Collateral dependent loans: 
 Loans secured by farmland 31 Collateral based measurements Discount to reflect current market conditions and ultimate collectability 69 % 
 
 
 
 
 Other real estate owned 384 Appraisals Discount to reflect current market conditions and ultimate collectability 36 % 
 

 
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 NOTE 5 – FAIR VALUE (continued) 
 
 
 The following tables contain the estimated fair values and the related carrying values of the Company’s financial instruments at December 31, 2024 and 2023. Items which are not financial instruments are not included. 
 
 2024 
 Carrying Estimated Fair Value 
 (dollars in thousands) Value Level 1 Level 2 Level 3 Total 
 Financial Assets: 
 Cash and cash equivalents $ 168,205 $ 168,205 $ 0 $ 0 $ 168,205 
 Securities available-for-sale 991,426 0 986,766 4,660 991,426 
 Securities held-to-maturity 131,568 0 113,107 0 113,107 
 Real estate mortgages held-for-sale 1,700 0 1,733 0 1,733 
 Loans, net 5,031,988 0 0 4,916,231 4,916,231 
 Mortgage banking derivative 94 0 94 0 94 
 Interest rate swap derivative 25,403 0 25,403 0 25,403 
 Federal Reserve and Federal Home Loan Bank Stock 21,420 N/A N/A N/A N/A 
 Accrued interest receivable 28,446 0 8,178 20,268 28,446 
 Financial Liabilities: 
 Certificates of deposit 855,876 0 851,933 0 851,933 
 All other deposits 5,045,090 5,045,090 0 0 5,045,090 
 
 
 
 Interest rate swap derivative 25,403 0 25,403 0 25,403 
 Standby letters of credit 294 0 0 285 285 
 Accrued interest payable 15,117 425 14,692 0 15,117 

 
 
 2023 
 Carrying Estimated Fair Value 
 (dollars in thousands) Value Level 1 Level 2 Level 3 Total 
 Financial Assets: 
 Cash and cash equivalents $ 151,824 $ 151,824 $ 0 $ 0 $ 151,824 
 Securities available-for-sale 1,051,728 0 1,049,448 2,280 1,051,728 
 Securities held-to-maturity 129,918 0 119,215 0 119,215 
 Real estate mortgages held-for-sale 1,158 0 1,158 0 1,158 
 Loans, net 4,844,562 0 0 4,694,532 4,694,532 
 Mortgage banking derivative 47 0 47 0 47 
 Interest rate swap derivative 27,189 0 27,189 0 27,189 
 Federal Reserve and Federal Home Loan Bank Stock 21,420 N/A N/A N/A N/A 
 Accrued interest receivable 30,011 0 8,558 21,453 30,011 
 Financial Liabilities: 
 Certificates of deposit 1,016,821 0 1,010,172 0 1,010,172 
 All other deposits 4,703,704 4,703,704 0 0 4,703,704 
 
 Federal Home Loan Bank advances 50,000 50,000 0 0 50,000 
 Mortgage banking derivative 11 0 11 0 11 
 Interest rate swap derivative 27,190 0 27,190 0 27,190 
 Standby letters of credit 289 0 0 289 289 
 Accrued interest payable 20,893 753 20,140 0 20,893 

 
 
 
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 NOTE 6 – LAND, PREMISES AND EQUIPMENT, NET 
 Land, premises and equipment and related accumulated depreciation were as follows at December 31, 2024 and 2023: 
 
 (dollars in thousands) 2024 2023 
 Land $ 12,572 $ 12,472 
 Premises and improvements 68,481 63,862 
 Equipment and furniture 32,753 37,483 
 Total cost 113,806 113,817 
 Less accumulated depreciation 53,317 55,918 
 Land, premises and equipment, net $ 60,489 $ 57,899 

 The Company had no land, premises and equipment held for sale and included in other assets as of December 31, 2024 and 2023. 
 
 NOTE 7 – GOODWILL AND OTHER INTANGIBLE ASSETS 
 Goodwill 
 There have been no changes in the $ 5.0 million carrying amount of goodwill since 2002. 
 Impairment exists when a reporting unit’s carrying value of goodwill exceeds its fair value. At December 31, 2024, the Company’s reporting unit had positive equity and the Company elected to perform a qualitative assessment to determine if it was more likely than not that the fair value of the reporting unit exceeded its carrying value, including goodwill. The qualitative assessment indicated that it was more likely than not that the fair value of the reporting unit exceeded its carrying value, resulting in no impairment. The Company’s annual impairment analysis was performed as of May 31, 2024. Circumstances did not substantially change during the second half of the year such that the Company believed it was necessary to perform an additional impairment analysis. 
 
 NOTE 8 – DEPOSITS 
 The following table details total deposits as of December 31, 2024 and 2023: 
 
 (dollars in thousands) 2024 2023 
 Non-interest bearing demand deposits $ 1,297,456 $ 1,353,477 
 Savings and transaction accounts: 
 Savings deposits 276,179 301,168 
 Interest bearing demand deposits 3,471,455 3,049,059 
 Time deposits: 
 Other time deposits 213,099 224,083 
 Deposits of $100,000 to $250,000 201,412 235,096 
 Deposits of $250,000 or more 441,365 557,642 
 Total deposits $ 5,900,966 $ 5,720,525 

 
 
 
 
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 NOTE 8 – DEPOSITS (continued) 
 
 
 At December 31, 2024, the scheduled maturities of time deposits were as follows: 
 
 (dollars in thousands) Amount 
 Maturing in 2025 $ 720,094 
 Maturing in 2026 90,709 
 Maturing in 2027 35,337 
 Maturing in 2028 5,813 
 Maturing in 2029 3,718 
 Thereafter 205 
 Total time deposits $ 855,876 

 
 During 2023 the Bank entered into agreements with IntraFi Network relative to their Insured Cash Sweep One-Way Buy program. As of December 31, 2023 the total amount available to the Bank via this program was $ 100.0 million, of which, $ 10.0 million was drawn. During 2024 the agreement was terminated, and no amounts were outstanding or available as of December 31, 2024. 
 
 
 NOTE 9 – BORROWINGS 
 The following table details outstanding fixed rate bullet advances with the Federal Home Loan Bank ("FHLB") of Indianapolis for the years ended December 31, 2024 and 2023: 
 
 (dollars in thousands) 2024 2023 
 Federal Home Loan Bank of Indianapolis $ 0 $ 50,000 
 
 

 The advance outstanding at December 31, 2023 was a fixed-rate bullet advance and could not be prepaid by the Company without a penalty. The advance had an interest rate of 5.55 % and matured on January 5, 2024. The note required payment at maturity and was secured by residential real estate loans and securities with a carrying value of $ 824.0 million at December 31, 2023. 
 At December 31, 2024 and 2023, the Company owned $ 18.0 million of FHLB stock, which also secures debts owed to the FHLB. The Company is authorized by the Board to borrow up to $ 800.0 million at the FHLB, but availability is limited to $ 555.9 million based on collateral and outstanding borrowings. Federal Reserve Discount Window borrowings were secured by commercial loans and investment securities with a carrying value of $ 1.71 billion and $ 1.59 billion as of December 31, 2024 and 2023, respectively. The Company had a borrowing capacity of $ 1.36 billion and $ 1.26 billion at the Federal Reserve Bank as of December 31, 2024 and 2023, respectively. There were no borrowings outstanding at the Federal Reserve Bank at December 31, 2024 and 2023. The Company enrolled in the Federal Reserve Bank Term Funding Program that was initiated in March 2023 and had available borrowings secured by investment securities with a collateral value of $ 150.5 million as of December 31, 2023. There were no borrowings outstanding under the Bank Term Funding Program as of December 31, 2023. The Bank Term Funding Program was officially closed in March of 2024 whereupon the investment securities pledged as collateral by the Company were released by the Federal Reserve Bank. 
 The Company had $ 395.0 million and $ 325.0 million of availability in federal funds lines with thirteen and eleven correspondent banks as of December 31, 2024 and 2023, respectively; no amounts were drawn upon as of either year-end. The Bank is also a member of the American Financial Exchange (AFX) where overnight fed funds purchased can be obtained from other banks on the Exchange that have approved the Bank for an unsecured, overnight line. These funds are only available if the approving banks have an ‘offer’ out to sell that day. The total amount approved for the Bank via AFX banks was $ 304.0 million and $ 319.0 million at December 31, 2024 and 2023, respectively. There were no amounts drawn as of December 31, 2024 and 2023. 
 
 
 
 
 
 
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 NOTE 9 – BORROWINGS (continued) 
 On October 11, 2023, the Company entered into an unsecured revolving credit agreement with another financial institution allowing the Company to borrow up to $ 30.0 million; this credit agreement was subsequently amended and renewed on October 2, 2024 and renews annually thereafter. There were no borrowings outstanding on the credit agreement at December 31, 2024 or December 31, 2023. Funds provided under the agreement may 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. The credit agreement has a one year term which may be amended, extended, modified or renewed. 
 
 NOTE 10 – PENSION AND OTHER POSTRETIREMENT PLANS 
 In April 2000, the Lakeland Financial Corporation Pension Plan was frozen. The Company also maintains a Supplemental Executive Retirement Plan ("SERP") for select officers that was established as a funded, non-qualified deferred compensation plan. Currently, four retired officers are the only participants in the SERP. The measurement date for both the pension plan and SERP is December 31, 2024 and 2023. 
 Information as to the Company’s employee benefit plans at December 31, 2024 and 2023 is as follows: 
 
 Pension Benefits SERP Benefits 
 (dollars in thousands) 2024 2023 2024 2023 
 Change in benefit obligation: 
 Beginning benefit obligation $ 1,497 $ 1,546 $ 693 $ 700 
 Interest cost 66 75 30 33 
 Actuarial (gain) loss ( 213 ) ( 112 ) 30 93 
 Benefits paid ( 114 ) ( 12 ) ( 133 ) ( 133 ) 
 Ending benefit obligation 1,236 1,497 620 693 
 
 Change in plan assets (primarily equity and fixed income investments and money market funds), at fair value: 
 Beginning plan assets 1,835 1,820 546 606 
 Actual return 221 232 57 73 
 Employer contribution 0 0 0 0 
 Benefits paid ( 289 ) ( 217 ) ( 133 ) ( 133 ) 
 Ending plan assets 1,767 1,835 470 546 
 Funded status at end of year $ 531 $ 338 $ ( 150 ) $ ( 147 ) 

 Amounts recognized in the consolidated balance sheets consist of: 
 
 Pension Benefits SERP Benefits 
 (dollars in thousands) 2024 2023 2024 2023 
 Funded status included in other assets $ 531 $ 0 $ 0 $ 0 
 Funded status included in other liabilities 0 ( 338 ) 150 147 

 Amounts recognized in accumulated other comprehensive income (loss) consist of: 
 
 Pension Benefits SERP Benefits 
 (dollars in thousands) 2024 2023 2024 2023 
 Net actuarial loss $ 469 $ 478 $ 288 $ 502 

 
 
 
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 NOTE 10 – PENSION AND OTHER POSTRETIREMENT PLANS (continued) 
 The accumulated benefit obligation for the pension plan was $ 1.2 million and $ 1.5 million for December 31, 2024 and 2023, respectively. The accumulated benefit obligation for the SERP was $ 620,000 and $ 693,000 for December 31, 2024 and 2023, respectively. 
 Net period benefit cost and other amounts recognized in other comprehensive income (loss) include the following: 
 
 Pension Benefits SERP Benefits 
 (dollars in thousands) 2024 2023 2022 2024 2023 2022 
 Net pension expense: 
 Service cost $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 
 Interest cost 66 75 53 30 33 20 
 Expected return on plan assets ( 116 ) ( 123 ) ( 130 ) ( 33 ) ( 38 ) ( 45 ) 
 Recognized net actuarial (gain) loss 16 18 99 45 42 45 
 Settlement cost 25 27 23 0 0 0 
 Net pension expense $ ( 9 ) $ ( 3 ) $ 45 $ 42 $ 37 $ 20 
 
 Net (gain) loss $ ( 168 ) $ ( 43 ) $ ( 215 ) $ 8 $ 56 $ 100 
 Amortization of net loss ( 17 ) ( 17 ) ( 99 ) ( 45 ) ( 42 ) ( 45 ) 
 Total recognized in other comprehensive income (loss) ( 185 ) ( 60 ) ( 314 ) ( 37 ) 14 55 
 Total recognized in net pension expense and other comprehensive income (loss) $ ( 194 ) $ ( 63 ) $ ( 269 ) $ 5 $ 51 $ 75 

 The estimated net loss (gain) for the defined benefit pension plan and SERP that will be amortized (accreted) from accumulated other comprehensive income (loss) into net periodic benefit cost over the next fiscal year is ($ 40,000 ) for the pension plan and $ 53,000 for the SERP. The settlement costs in 2024, 2023 and 2022 were related to participants taking lump sum distributions from the pension plan during those years. 
 For 2024, 2023 and 2022, the assumed form of payment elected by active participants upon retirement was a lump sum to reflect participant trends. The lump sum assumed interest rates, on the next page, for December 31, 2024, 2023 and 2022 reflect the mortality table in effect for 2024, 2023 and 2022, respectively. For 2024, 2023 and 2022, the mortality assumption was the PRI-2012 White Collar Mortality Table, with full generational Projection Scale MP-2021 at year-end. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 NOTE 10 – PENSION AND OTHER POSTRETIREMENT PLANS (continued) 
 
 Pension Benefits SERP Benefits 
 2024 2023 2022 2024 2023 2022 
 The following assumptions were used in calculating the net benefit obligation: 
 Weighted average discount rate 5.46 % 4.83 % 5.03 % 5.46 % 4.83 % 5.03 % 
 Rate of increase in future compensation N/A N/A N/A N/A N/A N/A 
 Lump sum assumed interest rates First 5 years 4.42 % 5.77 % 5.10 % N/A N/A N/A 
 Next 15 years 5.04 % 6.14 % 5.83 % N/A N/A N/A 
 All future years 5.46 % 6.19 % 5.68 % N/A N/A N/A 
 
 The following assumptions were used in calculating the net pension expense: 
 
 Weighted average discount rate 4.83 % 5.03 % 2.49 % 4.83 % 5.03 % 2.49 % 
 Rate of increase in future compensation N/A N/A N/A N/A N/A N/A 
 Expected long-term rate of return 6.50 % 6.50 % 6.50 % 6.50 % 6.50 % 6.50 % 

 
 Pension Plan and SERP Assets 
 The Company’s investment strategies are to invest in a prudent manner for the purpose of providing benefits to participants in the pension plan and the SERP. The investment strategies are targeted to maximize the total return of the portfolio net of inflation, spending and expenses. Risk is controlled through diversification of asset types and investments in domestic and international equities and fixed income securities. The target allocations for plan assets are shown in the tables on the next page. Equity securities primarily include investments in common stocks. Debt securities include government agency and commercial bonds. Other investments consist of money market mutual funds. 
 The weighted average expected long-term rate of return on pension plan and SERP assets is developed in consultation with the plans actuary. It is primarily based upon industry trends and consensus rates of return which are then adjusted to reflect the specific asset allocations and historical rates of return of the Company’s plan assets. The following assumptions were used in determining the total long-term rate of return: equity securities were assumed to have a long-term rate of return of approximately 8.85 % and debt securities were assumed to have a long-term rate of return of approximately 3.00 %. These rates of return were adjusted to reflect an approximate target allocation of 60 % equity securities and 40 % debt securities with a small downward adjustment due to investments in the "Other" category, which consist of low yielding money market mutual funds. 
 Certain asset types and investment strategies are prohibited including, the investment in commodities, options, futures, short sales, margin transactions and non-marketable securities. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 NOTE 10 – PENSION AND OTHER POSTRETIREMENT PLANS (continued) 
 
 
 The Company’s pension plan asset allocation at year end 2024 and 2023, target allocation for 2025, and expected long-term rate of return by asset category are as follows: 
 
 Target 
Allocation Percentage of Plan 
Assets 
at Year End Weighted 
Average Expected 
Long-Term Rate 
of Return 
 Asset Category 2025 2024 2023 
 Equity securities 55 - 65 % 59 % 63 % 8.85 % 
 Debt securities 35 - 45 % 38 % 34 % 3.00 % 
 Other 5 - 10 % 3 % 3 % 0.10 % 
 Total 100 % 100 % 6.50 % 

 The Company’s SERP plan asset allocation at year end 2024 and 2023, target allocation for 2025, and expected long-term rate of return by asset category are as follows: 
 
 
 Target 
Allocation Percentage of Plan 
Assets 
at Year End Weighted 
Average Expected 
Long-Term Rate 
of Return 
 Asset Category 2025 2024 2023 
 Equity securities 55 - 65 % 60 % 65 % 8.85 % 
 Debt securities 35 - 45 % 36 % 33 % 3.00 % 
 Other 5 - 10 % 4 % 2 % 0.10 % 
 Total 100 % 100 % 6.50 % 

 
 Fair Value of Pension Plan and SERP Assets 
 Fair value is the exchange price that would be received for an asset in the principal or most advantageous market for the asset in an orderly transaction between market participants on the measurement date. Also, a fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. 
 The Company used the following methods and significant assumptions to estimate the fair value of each type of financial instrument: 
 Equity and debt securities: The fair values of securities are determined on a recurring basis by obtaining quoted prices on nationally recognized securities exchanges (Level 1 inputs) or pricing models, which utilize significant observable inputs such as matrix pricing. This is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs). 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 NOTE 10 – PENSION AND OTHER POSTRETIREMENT PLANS (continued) 
 
 
 The fair values of the Company’s pension plan assets at December 31, 2024, by asset category are as follows: 
 
 Asset Category Total Quoted Prices 
in Active 
Markets for 
Identical Assets 
(Level 1) Significant 
Observable 
Inputs 
(Level 2) Significant 
Unobservable 
Inputs 
(Level 3) 
 (dollars in thousands) 
 Equity securities - US large cap common stocks $ 698 $ 698 $ 0 $ 0 
 Equity securities - US mid cap stock mutual funds 96 96 0 0 
 Equity securities - US small cap stock mutual funds 50 50 0 0 
 Equity securities - international stock mutual funds 153 153 0 0 
 Equity securities - emerging markets stock mutual funds 53 53 0 0 
 Debt securities - intermediate term bond mutual funds 466 466 0 0 
 Debt securities - short term bond mutual funds 172 172 0 0 
 
 
 
 Debt securities - preferred stock mutual funds 34 34 0 0 
 Cash - money market account 45 45 0 0 
 Total $ 1,767 $ 1,767 $ 0 $ 0 

 The fair values of the Company’s pension plan assets at December 31, 2023, by asset category are as follows: 
 
 Asset Category Total Quoted Prices 
in Active 
Markets for 
Identical Assets 
(Level 1) Significant 
Observable 
Inputs 
(Level 2 ) Significant 
Unobservable 
Inputs 
(Level 3) 
 (dollars in thousands) 
 Equity securities - US large cap common stocks $ 763 $ 763 $ 0 $ 0 
 Equity securities - US mid cap stock mutual funds 44 44 0 0 
 Equity securities - US small cap stock mutual funds 135 135 0 0 
 Equity securities - international stock mutual funds 143 143 0 0 
 Equity securities - emerging markets stock mutual funds 68 68 0 0 
 Debt securities - intermediate term bond mutual funds 373 373 0 0 
 Debt securities - short term bond mutual funds 153 153 0 0 
 Debt securities - high yield bond mutual funds 18 18 0 0 
 Debt securities - nontraditional bond mutual funds 12 12 0 0 
 Debt securities - bank loan mutual funds 35 35 0 0 
 Debt securities - preferred stock mutual funds 36 36 0 0 
 Cash - money market account 55 55 0 0 
 Total $ 1,835 $ 1,835 $ 0 $ 0 

 
 There were no Level 2 or 3 securities during either year. 
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 NOTE 10 – PENSION AND OTHER POSTRETIREMENT PLANS (continued) 
 
 
 The fair values of the Company’s SERP assets at December 31, 2024, by asset category are as follows: 
 
 Asset Category Total Quoted Prices 
in Active 
Markets for 
Identical Assets 
(Level 1) Significant 
Observable 
Inputs 
(Level 2) Significant 
Unobservable 
Inputs 
(Level 3) 
 (dollars in thousands) 
 
 Equity securities - US large cap stock mutual funds $ 82 $ 82 $ 0 $ 0 
 Equity securities - US mid cap stock mutual funds 28 28 0 0 
 Equity securities - US small cap stock mutual funds 15 15 0 0 
 Equity securities - US large cap exchange traded funds 105 105 0 0 
 Equity securities - emerging markets stock mutual funds 14 14 0 0 
 Equity securities - international stock mutual funds 39 39 0 0 
 Debt securities - intermediate term bond mutual funds 124 124 0 0 
 Debt securities - short term bond mutual funds 36 36 0 0 
 
 
 
 Debt securities - preferred stock mutual funds 10 10 0 0 
 Cash - money market account 17 17 0 0 
 Total $ 470 $ 470 $ 0 $ 0 

 The fair values of the Company’s SERP assets at December 31, 2023, by asset category are as follows: 
 
 
 Asset Category Total Quoted Prices 
in Active 
Markets for 
Identical Assets 
(Level 1) Significant 
Observable 
Inputs 
(Level 2) Significant 
Unobservable 
Inputs 
(Level 3) 
 (dollars in thousands) 
 Equity securities - US large cap common stocks $ 236 $ 236 $ 0 $ 0 
 Equity securities - US mid cap stock mutual funds 42 42 0 0 
 Equity securities - US small cap stock mutual funds 13 13 0 0 
 Equity securities - emerging markets stock mutual funds 20 20 0 0 
 Equity securities - international stock mutual funds 45 45 0 0 
 Debt securities - intermediate term bond mutual funds 107 107 0 0 
 Debt securities - short term bond mutual funds 44 44 0 0 
 Debt securities - high yield bond mutual funds 5 5 0 0 
 Debt securities - nontraditional bond mutual funds 4 4 0 0 
 Debt securities - bank loan mutual funds 10 10 0 0 
 Debt securities - preferred stock mutual funds 10 10 0 0 
 Cash - money market account 10 10 0 0 
 Total $ 546 $ 546 $ 0 $ 0 

 
 There were no Level 2 or 3 securities during either year. 
 Contributions 
 The Company did not contribute to its pension or SERP plans in 2024. 
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 NOTE 10 – PENSION AND OTHER POSTRETIREMENT PLANS (continued) 
 Estimated Future Benefit Payments 
 The following benefit payments are expected to be paid over the next ten years: 
 
 
 Plan Year Pension 
Benefits SERP 
Benefits 
 (dollars in thousands) 
 2025 $ 141 $ 129 
 2026 192 119 
 2027 134 107 
 2028 129 93 
 2029 117 76 
 2030-2034 442 206 

 
 
 
 NOTE 11 – OTHER BENEFIT PLANS 
 401(k) Plan 
 The Company maintains a 401(k) profit sharing plan for all employees meeting certain age and service requirements. The 401(k) plan allows employee contributions up to the maximum amount allowable under the Internal Revenue Code, which are matched based upon the percentage of budgeted net income earned during the year on the first 6 % of the compensation contributed. The expense recognized from matching was $ 2.5 million, $ 2.0 million and $ 2.4 million in 2024, 2023 and 2022, respectively. 
 Deferred Compensation Plan 
 Effective January 1, 2004, the Company adopted the Lake City Bank Deferred Compensation Plan. The purpose of the deferred compensation plan is to extend full 401(k) type retirement benefits to certain individuals without regard to statutory limitations under tax qualified plans. A liability is accrued by the Company for its obligation under this plan. The expense (benefit) recognized was $ 1.4 million, $ 425,000 and ($ 1.0 ) million during the years ended December 31, 2024, 2023 and 2022, respectively. This resulted in a deferred compensation liability of $ 5.6 million and $ 4.1 million as of year end 2024 and 2023, respectively. The deferred compensation plan is funded solely by participant contributions and does not receive a Company match. 
 Employee Agreements 
 Under employment agreements with certain executives, certain events leading to separation from the Company could result in cash payments totaling $ 5.4 million as of December 31, 2024. On December 31, 2024, no amounts were accrued on these contingent obligations. 
 Directors’ Deferred Compensation and Cash Plans 
 The Company maintains a directors’ deferred compensation plan and a cash plan. The amount owed to directors for fees under the deferred directors’ compensation and cash plans as of December 31, 2024 and 2023 was $ 5.7 million and $ 5.8 million, respectively. The related expense for the deferred directors’ compensation and cash plans for the years ended December 31, 2024, 2023 and 2022 was $ 387,000 , $ 432,000 and $ 458,000 , respectively. 
 
 
 
 
 
 
 
 
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 NOTE 12 – INCOME TAXES 
 Income tax expense for the years ended December 31, 2024, 2023 and 2022 consisted of the following: 
 
 (dollars in thousands) 2024 2023 2022 
 Current federal $ 21,949 $ 16,171 $ 22,825 
 Deferred federal ( 2,829 ) 1,302 ( 2,327 ) 
 
 Current state 63 ( 131 ) 1,297 
 Deferred state ( 972 ) ( 776 ) ( 448 ) 
 Total income tax expense $ 18,211 $ 16,566 $ 21,347 

 The differences between financial statement tax expense and amounts computed by applying the statutory federal income tax rate of 21 % to income before income taxes were as follows: 
 
 (dollars in thousands) 2024 2023 2022 
 Income taxes at statutory federal rate of 21% $ 23,455 $ 23,170 $ 26,284 
 Increase (decrease) in taxes resulting from: 
 Tax exempt income ( 3,712 ) ( 4,226 ) ( 4,438 ) 
 Nondeductible expense 280 269 159 
 State income tax, net of federal tax effect ( 718 ) ( 716 ) 671 
 Captive insurance premium income 0 ( 261 ) ( 417 ) 
 Tax credit investments ( 150 ) ( 713 ) ( 586 ) 
 Bank owned life insurance ( 903 ) ( 658 ) ( 78 ) 
 Long-term incentive plan and deferred compensation ( 270 ) ( 715 ) ( 530 ) 
 Nondeductible compensation expense 405 784 181 
 Other ( 176 ) ( 368 ) 101 
 Total income tax expense $ 18,211 $ 16,566 $ 21,347 

 
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 NOTE 12 – INCOME TAXES (continued) 
 The net deferred tax asset recorded in the consolidated balance sheets at December 31, 2024 and 2023 consisted of the following: 
 
 (dollars in thousands) 2024 2023 
 Deferred tax assets: 
 Bad debts $ 21,909 $ 18,384 
 Pension and deferred compensation liability 2,166 1,823 
 Nonaccrual loan interest 955 494 
 Long-term incentive plan 1,755 2,342 
 Lease liability 1,727 1,199 
 Deferred loan fees 574 781 
 Accrued legal reserve 0 635 
 Net operating loss carryforward 1,343 913 
 Other 724 591 
 31,153 27,162 
 Deferred tax liabilities: 
 Depreciation 3,324 3,645 
 Loan servicing rights 502 570 
 State taxes 1,153 949 
 Intangible assets 1,267 1,270 
 REIT spillover dividend 2,040 2,140 
 Prepaid expenses 900 801 
 Lease right of use 1,727 1,199 
 Other 331 480 
 11,244 11,054 
 Valuation allowance 0 0 
 Net deferred tax asset $ 19,909 $ 16,108 

 At December 31, 2024, the Company has Indiana net operating loss carryforwards of approximately $ 29.9 million that will expire in 2038 if not used. Management has concluded that the state net operating losses will be fully utilized and therefore no valuation allowance is necessary on the state net operating loss. 
 In addition to the net deferred tax assets included above, the deferred income tax asset (liability) allocated to the unrealized net gain (loss) on securities available-for-sale included in equity was $ 44.1 million and $ 41.1 million for 2024 and 2023, respectively. The deferred income tax asset allocated to the pension plan and SERP included in equity was $ 188,000 and $ 243,000 for 2024 and 2023, respectively. 
 The Company evaluated its deferred tax asset at year end 2024 and has concluded that it is more likely than not that it will be realized. The Company expects to have taxable income in the future such that the deferred tax asset will be realized. Therefore, no valuation allowance is required. 
 Unrecognized Tax Benefits 
 The Company did no t have any unrecognized tax benefits at December 31, 2024 or 2023. The Company does not expect the total amount of unrecognized tax benefits to significantly increase or decrease in the next twelve months. 
 No interest or penalties were recorded in the income statement and no amount was accrued for interest and penalties for the periods ending December 31, 2024, 2023 and 2022. Should the accrual of any interest or penalties relative to unrecognized tax benefits be necessary, it is the Company’s policy to record such accruals in its income taxes accounts. 
 The Company and its subsidiaries file a consolidated U.S. federal tax return and a combined unitary return in the States of Indiana and Michigan. These returns are subject to examinations by authorities for all years after 2020. 
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 NOTE 13 – RELATED PARTY TRANSACTIONS 
 Loans to principal officers, directors, and their affiliates as of December 31, 2024 and 2023 were as follows: 
 
 
 (dollars in thousands) 2024 2023 
 Beginning balance $ 132,481 $ 113,435 
 New loans and advances 56,946 69,822 
 Effect of changes in related parties 0 230 
 Repayments and renewals ( 57,693 ) ( 51,006 ) 
 Ending balance $ 131,734 $ 132,481 

 Deposits from principal officers, directors, and their affiliates at year end 2024 and 2023 were $ 24.7 million and $ 22.5 million, respectively. 
 The Company and Bank are an investor in certain funds managed by Centerfield Capital ("Centerfield"), a private equity investment firm. Faraz Abbasi, a director of the Company, is a Managing Partner and an owner of Centerfield. As of December 31, 2024 and 2023, the Company had an aggregate investment balance of approximately $ 2.7 million and $ 3.0 million, respectively, in such funds, which are included in other assets on the consolidated balance sheet, and had remaining commitments to invest up to approximately $ 2.1 million and $ 2.3 million, respectively. Under the terms of the applicable funds, Centerfield is entitled to customary management fees with respect to the amounts under management and investment gains, and it is estimated that Mr. Abbasi’s interest in such fees was approximately $ 25,000 annually for the years ended December 31, 2024 and 2023. 
 
 NOTE 14 – STOCK BASED COMPENSATION 
 Effective April 8, 2008, the Company adopted the Lakeland Financial Corporation 2008 Equity Incentive Plan (the "2008 Plan"), which was approved by the Company’s stockholders. At its inception there were 1,125,000 shares of common stock reserved for grants of stock options, stock appreciation rights, stock awards and cash incentive awards to employees of the Company, its subsidiaries and Board. Effective April 9, 2013, the Company adopted the Lakeland Financial Corporation 2013 Equity Incentive Plan (the "2013 Plan"), which was also approved by the Company’s stockholders. At its inception the remaining shares of common stock available to grant under the 2008 Plan of 435,867 were transferred to the 2013 Plan and reserved for grants of stock options, stock appreciation rights, stock awards and cash incentive awards to employees of the Company, its subsidiaries and Board. Non-vested shares from the 2008 Plan that were unused at vesting were added to the shares available to grant of the 2013 Plan. Effective April 12, 2017, the Company adopted the Lakeland Financial Corporation 2017 Equity Incentive Plan (the "2017 Plan"), which was also approved by the Company’s stockholders and does not permit share recycling. At its inception there were 1,000,000 shares of common stock reserved for grants of stock options, stock appreciation rights, stock awards and cash incentive awards to employees of the Company, its subsidiaries and Board. As of December 31, 2024, 158,658 shares were available for future grants in the 2017 Plan, which is the only active plan. Certain stock awards provide for accelerated vesting if there is a change in control. The Company has a policy of issuing new shares to satisfy exercises of stock awards. 
 Included in net income for the years ended December 31, 2024, 2023 and 2022 was employee stock compensation expense of $ 4.6 million, $ 3.7 million and $ 7.8 million, and a related tax benefit of $ 1.1 million, $ 908,000 and $ 2.0 million, respectively. 
 Stock Options 
 The equity incentive plan requires that the exercise price for options be the market price on the date the options are granted. The maximum option term is ten years and the awards usually vest over three years . The fair value of each stock option is estimated with the Black-Scholes pricing model, using the following weighted-average assumptions as of the grant date for stock options granted during the years presented. Expected volatility is based on historical volatility of the Company’s stock over the immediately preceding expected life period, as well as other factors known on the grant date that would have a significant effect on the stock price during the expected life period. The expected stock option life used is the historical option life of the similar employee base or Board. The turnover rate is based on historical data of the similar employee base as a group 
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 NOTE 14 – STOCK BASED COMPENSATION (continued) 
 and the Board as a group. The risk-free interest rate is the Treasury rate on the date of grant corresponding to the expected life period of the stock option. 
 There were no stock option grants or modifications in 2024, 2023 or 2022. As of December 31, 2024, there was no unrecognized compensation cost related to non-vested stock options granted under the plan. 
 There were no options outstanding, issued or exercised during the years ended December 31, 2024, 2023 or 2022. 
 Restricted Stock Awards and Units 
 The fair value of restricted stock awards and units is the closing price of the Company’s common stock on the date of grant, adjusted for the present value of expected dividends. The restricted stock awards fully vest after one year or more of service, determined at the grant date, with the exception of 12,350 shares granted to non-employee directors of the Board included as vested, below, which vested on the grant date. 
 A summary of the changes in the Company’s non-vested shares for the year follows: 
 
 Nonvested Shares Shares Weighted-Average 
Grant-Date 
Fair Value 
 Nonvested at January 1, 2024 47,340 $ 69.65 
 Granted 42,294 59.51 
 Vested ( 17,142 ) 60.34 
 Forfeited ( 2,237 ) 64.56 
 Nonvested at December 31, 2024 70,255 $ 66.01 

 As of December 31, 2024, there was $ 1.7 million unrecognized compensation cost related to non-vested shares granted under the plan. The cost is expected to be recognized over a weighted period of 1.7 years. The total fair value of shares vested during the years ended December 31, 2024, 2023 and 2022 was $ 1.1 million, $ 862,000 and $ 1.2 million, respectively. 
 Performance Stock Units 
 The fair value of stock awards is the closing price of the Company’s common stock on the date of grant, adjusted for the present value of expected dividends. The expected dividend rate is assumed to be the most recent dividend rate declared by the Board on the grant date. The grant date fair value of stock awards is assumed at the target payout rate. The stock awards fully vest on the third anniversary of the grant date. The 2024-2026, 2023-2025 and 2022-2024 Long-Term Incentive Plans must be paid in stock and have performance conditions which include revenue growth, diluted earnings per share growth and average return on beginning equity. Shares granted below include the number of shares assumed granted based on actual performance criteria of the 2024-2026, 2023-2025 and 2022-2024 Long-Term Incentive Plans at December 31, 2024. 
 
 
 Nonvested Shares Shares Weighted-Average 
Grant-Date 
Fair Value 
 Nonvested at January 1, 2024 156,206 $ 63.18 
 Granted, net 45,655 58.57 
 Vested ( 100,236 ) 57.59 
 Forfeited ( 6,521 ) 64.58 
 Nonvested at December 31, 2024 95,104 $ 66.76 

 As of December 31, 2024, there wa s $ 2.1 million of total unrecognized compensation cost related to non-vested shares granted under the plan. The cost is expected to be recognized over a weighted period of 1.9 years. The total fair value of shares vested during the year ended December 31, 2024, 2023 and 2022 was $ 6.7 million, $ 7.8 million and $ 4.3 million, respectively. During the years ended December 31, 2024, 2023 and 2022, 100,236 , 107,789 and 53,670 shares vested, respectively. 
 
 
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 NOTE 15 – CAPITAL REQUIREMENTS AND RESTRICTIONS ON RETAINED EARNINGS 
 The Company and the Bank are subject to various regulatory capital requirements administered by federal banking agencies. Failure to meet certain heightened minimum capital requirements can initiate certain mandatory, and possibly discretionary actions by regulators that, if undertaken, could have a direct material effect on the financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weighting and other factors. 
 The capital adequacy requirements were heightened by the Basel III Rule, previously defined, which went into effect on January 1, 2015 with a phase-in period for certain aspects of the rule through 2019. Under the Basel III rule, the Company must hold a capital conservation buffer above the adequately capitalized risk-based capital ratios. The capital conservation buffer was phased in from 0.00% for 2015 to 2.50% by 2019. The capital conservation buffer for 2024 and 2023 was 2.50%. The net unrealized gain or loss on available-for-sale securities is not included in computing regulatory capital. The quantitative measures established by regulation to ensure capital adequacy that were in effect on December 31, 2024 and 2023, require the Company and the Bank to maintain minimum capital amounts and ratios (set forth in the following table) of Total, Tier I and Common Equity Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined in the regulation), and of Tier I capital (as defined in the regulation) to average assets (as defined). Management believes, as of the years ended December 31, 2024 and 2023, that the Company and the Bank met all capital adequacy requirements to which they are subject. 
 
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 NOTE 15 – CAPITAL REQUIREMENTS AND RESTRICTIONS ON RETAINED EARNINGS (continued) 
 
 
 As of December 31, 2024, the most recent notification from the federal regulators categorized the Company and the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain minimum Total risk-based capital ratios, Tier I risk-based capital ratios and Tier I leverage capital ratios as set forth in the table. There have been no conditions or events since that notification that management believes have changed the Company and the Bank’s category. 
 
 
 Actual Minimum Required 
For Capital 
Adequacy Purposes For Capital Adequacy 
Purposes Plus Capital 
Conservation Buffer Minimum "Required" to 
Be "Well" Capitalized 
Under "Prompt" Corrective 
Action Regulations 
 (dollars in thousands) Amount Ratio Amount Ratio Amount Ratio Amount Ratio 
 As of December 31, 2024 
 Total Capital (to Risk Weighted Assets) 
 Consolidated $ 917,769 15.90 % $ 461,847 8.00 % $ 606,175 N/A N/A N/A 
 Bank 909,232 15.76 461,612 8.00 605,866 10.50 % $ 577,015 10.00 % 
 Tier I Capital (to Risk Weighted Assets) 
 Consolidated 845,352 14.64 346,385 6.00 490,713 N/A N/A N/A 
 Bank 836,845 14.50 346,209 6.00 490,463 8.50 461,612 8.00 
 Common Equity Tier 1 (CET1) 
 Consolidated 845,352 14.64 259,789 4.50 404,116 N/A N/A N/A 
 Bank 836,845 14.50 259,657 4.50 403,911 7.00 375,060 6.50 
 Tier I Capital (to Average Assets) 
 Consolidated 845,352 12.15 278,369 4.00 278,369 N/A N/A N/A 
 Bank 836,845 12.03 278,240 4.00 278,240 4.00 347,800 5.00 
 
 As of December 31, 2023 
 Total Capital (to Risk Weighted Assets) 
 Consolidated $ 870,390 15.47 % $ 450,211 8.00 % $ 590,901 N/A N/A N/A 
 Bank 852,405 15.16 449,894 8.00 590,486 10.50 % $ 562,367 10.00 % 
 Tier I Capital (to Risk Weighted Assets) 
 Consolidated 799,929 14.21 337,658 6.00 478,349 N/A N/A N/A 
 Bank 781,999 13.91 337,420 6.00 478,012 8.50 449,894 8.00 
 Common Equity Tier 1 (CET1) 
 Consolidated 799,929 14.21 253,243 4.50 393,934 N/A N/A N/A 
 Bank 781,999 13.91 253,065 4.50 393,657 7.00 365,539 6.50 
 Tier I Capital (to Average Assets) 
 Consolidated 799,929 11.82 270,636 4.00 270,636 N/A N/A N/A 
 Bank 781,999 11.58 270,041 4.00 270,041 4.00 337,551 5.00 

 The Bank is required to obtain the approval of the Indiana Department of Financial Institutions for the payment of any dividend if the total amount of all dividends declared by the Bank during the calendar year, including the proposed dividend, would exceed the sum of the retained net income for the year-to-date combined with the retained net income for the previous two years. Indiana law defines "retained net income" to mean the net income of a specified period, calculated under the consolidated report of income instructions, less the total amount of all dividends declared for the specified period. As of December 31, 2024, approximately $ 104.2 million was available to be paid as dividends to the Company by the Bank. 
 The payment of dividends by any financial institution or its holding company is affected by the requirement to maintain adequate capital pursuant to applicable capital adequacy guidelines and regulations, and a financial institution generally is prohibited from paying any dividends if, following payment thereof, the institution would be undercapitalized. As described above, the Bank exceeded its minimum capital requirements under applicable guidelines as of December 31, 2024. Notwithstanding the availability of funds for dividends, however, the FDIC may prohibit the payment of any dividends by the Bank if the FDIC determines such payment would constitute an unsafe or unsound practice. 
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 NOTE 16 – 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 December 31, 2024 and 2023. 
 
 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 
 (dollars in thousands) Financial 
Instruments Cash Collateral 
Position Net 
Amount 
 Assets 
 Interest Rate Swap Derivatives $ 25,403 $ 0 $ 25,403 $ 0 $ ( 21,815 ) $ 3,588 
 Total Assets $ 25,403 $ 0 $ 25,403 $ 0 $ ( 21,815 ) $ 3,588 
 Liabilities 
 Interest Rate Swap Derivatives $ 25,403 $ 0 $ 25,403 $ 0 $ 0 $ 25,403 
 Total Liabilities $ 25,403 $ 0 $ 25,403 $ 0 $ 0 $ 25,403 

 
 2023 
 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 
 (dollars in thousands) Financial 
Instruments Cash Collateral 
Position Net 
Amount 
 Assets 
 Interest Rate Swap Derivatives $ 27,189 $ 0 $ 27,189 $ 0 $ ( 25,555 ) $ 1,634 
 Total Assets $ 27,189 $ 0 $ 27,189 $ 0 $ ( 25,555 ) $ 1,634 
 Liabilities 
 Interest Rate Swap Derivatives $ 27,190 $ 0 $ 27,190 $ 0 $ ( 90 ) $ 27,100 
 Total Liabilities $ 27,190 $ 0 $ 27,190 $ 0 $ ( 90 ) $ 27,100 

 If an event of default occurs causing an early termination of an interest rate swap derivative, any early termination amount payable to one party by the other party may be reduced by set-off against any other amount payable by the one party to the other party. If a default in performance of any obligation of a repurchase agreement occurs, each party will set-off property held in respect of transactions against obligations owing in respect of any other transactions. 
 
 
 
 
 
 
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 NOTE 17 – COMMITMENTS, OFF-BALANCE SHEET RISKS AND CONTINGENCIES 
 During the normal course of business, the Company becomes a party to financial instruments with off-balance sheet risk in order to meet the financing needs of its customers. These financial instruments include commitments to make loans and open-ended revolving lines of credit. Amounts as of the years ended December 31, 2024 and 2023, were as follows: 
 
 
 2024 2023 
 (dollars in thousands) Fixed 
Rate Variable Rate Fixed 
Rate Variable Rate 
 Commercial loan lines of credit $ 60,856 $ 2,150,375 $ 96,814 $ 2,373,830 
 Standby letters of credit 0 49,558 0 51,383 
 Real estate mortgage loans 2,032 5,854 302 4,271 
 Real estate construction mortgage loans 1,010 5,165 0 4,271 
 Home equity mortgage open-ended revolving lines 0 388,235 0 364,928 
 Consumer loan open-ended revolving lines 0 26,589 0 26,870 
 Total $ 63,898 $ 2,625,776 $ 97,116 $ 2,825,553 

 
 
 The index on variable rate commercial loan commitments is principally the national prime rate. Interest rate ranges on commitments and open-ended revolving lines of credit for years ended December 31, 2024 and 2023, were as follows: 
 
 
 2024 2023 
 Fixed 
Rate Variable 
Rate Fixed 
Rate Variable 
Rate 
 Commercial loan 1.00 - 14.50 % 
 3.35 - 11.75 % 
 1.00 - 14.50 % 
 1.63 - 14.50 % 
 
 Real estate mortgage loan 3.00 - 7.38 % 
 6.00 - 12.50 % 
 7.38 % 
 4.63 - 13.50 % 
 
 Consumer loan open-ended revolving line 15.00 % 
 7.50 - 15.00 % 
 15.00 % 
 8.50 - 15.00 % 
 

 Commitments, excluding open-ended revolving lines, generally have fixed expiration dates of one year or less. Open-ended revolving lines are monitored for proper performance and compliance on a monthly basis. Since many commitments expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements. The Company follows the same credit policy (including requiring collateral, if deemed appropriate) to make such commitments as it follows for those loans that are recorded in its financial statements. 
 The Company’s exposure to credit losses in the event of nonperformance is represented by the contractual amount of the commitments. Management does not expect any significant losses as a result of these commitments. 
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 NOTE 18 – PARENT COMPANY STATEMENTS 
 The Company operates primarily in the banking industry, which accounts for substantially all of its revenues, operating income and assets. Presented below are parent only financial statements: 
 CONDENSED BALANCE SHEETS 
 
 
 December 31, 
 (dollars in thousands) 2024 2023 
 ASSETS 
 Deposits with Lake City Bank $ 5,901 $ 15,239 
 Deposits with other depository institutions 435 1,887 
 Cash 6,336 17,126 
 Investments in banking subsidiary 675,315 631,774 
 
 Other assets 2,824 3,578 
 Total assets $ 684,475 $ 652,478 
 LIABILITIES 
 Dividends payable and other liabilities $ 653 $ 2,774 
 
 STOCKHOLDERS’ EQUITY 683,822 649,704 
 Total liabilities and stockholders’ equity $ 684,475 $ 652,478 

 
 
 CONDENSED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (LOSS) 
 
 
 Years Ended December 31, 
 (dollars in thousands) 2024 2023 2022 
 Dividends from Lake City Bank $ 42,118 $ 46,263 $ 40,590 
 Dividends from non-bank subsidiaries 0 1,525 1,300 
 Other income 2 5 1 
 
 Miscellaneous expense ( 5,642 ) ( 4,768 ) ( 8,795 ) 
 INCOME BEFORE INCOME TAXES AND EQUITY IN UNDISTRIBUTED INCOME OF SUBSIDIARIES 36,478 43,025 33,096 
 Income tax benefit 1,608 1,957 2,770 
 INCOME BEFORE EQUITY IN UNDISTRIBUTED INCOME OF SUBSIDIARIES 38,086 44,982 35,866 
 Equity in undistributed income of subsidiaries 55,392 48,785 67,951 
 NET INCOME $ 93,478 $ 93,767 $ 103,817 
 COMPREHENSIVE INCOME (LOSS) $ 82,173 $ 127,495 $ ( 101,199 ) 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 NOTE 18 – PARENT COMPANY STATEMENTS (continued) 
 
 
 CONDENSED STATEMENTS OF CASH FLOWS 
 
 
 Years Ended December 31, 
 (dollars in thousands) 2024 2023 2022 
 Cash flows from operating activities: 
 Net income $ 93,478 $ 93,767 $ 103,817 
 Adjustments to net cash from operating activities: 
 Equity in undistributed income of subsidiaries ( 55,392 ) ( 48,785 ) ( 67,951 ) 
 Other changes 3,421 16,601 6,157 
 Net cash from operating activities 41,507 61,583 42,023 
 Cash flows from investing activities: 
 Return of capital from subsidiary 0 3,602 0 
 Cash flows from investing activities 0 3,602 0 
 Cash flows from financing activities: 
 
 
 Payments related to equity incentive plans ( 2,815 ) ( 3,135 ) ( 1,780 ) 
 Purchase of treasury stock ( 592 ) ( 575 ) ( 579 ) 
 Sales of treasury stock 391 405 221 
 Dividends paid ( 49,281 ) ( 47,094 ) ( 40,838 ) 
 Cash flows from financing activities ( 52,297 ) ( 50,399 ) ( 42,976 ) 
 Net increase (decrease) in cash and cash equivalents ( 10,790 ) 14,786 ( 953 ) 
 Cash and cash equivalents at beginning of the year 17,126 2,340 3,293 
 Cash and cash equivalents at end of the year $ 6,336 $ 17,126 $ 2,340 

 
 
 NOTE 19 – EARNINGS PER SHARE 
 Following are the factors used in the earnings per share computations: 
 
 (dollars in thousand except share and per share data) 2024 2023 2022 
 Basic earnings per common share: 
 Net income $ 93,478 $ 93,767 $ 103,817 
 Weighted-average common shares outstanding 25,676,543 25,604,751 25,528,328 
 Basic earnings per common share $ 3.64 $ 3.67 $ 4.07 
 Diluted earnings per common share: 
 Net income $ 93,478 $ 93,767 $ 103,817 
 Weighted-average common shares outstanding for basic earnings per common share 25,676,543 25,604,751 25,528,328 
 Add: Dilutive effect of assumed exercises of stock options and awards 92,475 118,414 184,210 
 Average shares and dilutive potential common shares 25,769,018 25,723,165 25,712,538 
 Diluted earnings per common share $ 3.63 $ 3.65 $ 4.04 

 There were no antidilutive stock options for 2024, 2023 and 2022. 
 
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 NOTE 20 – ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) 
 The following tables summarize the changes within each classification of accumulated other comprehensive income (loss) for the years ended December 31, 2024 and 2023, all shown net of tax: 
 
 (dollars in thousands) Unrealized 
Gains and 
(Losses) on 
Available-for-Sale 
Securities Defined 
Benefit 
Pension 
Items Total 
 Balance at January 1, 2024 $ ( 154,460 ) $ ( 735 ) $ ( 155,195 ) 
 Other comprehensive income (loss) before reclassification ( 13,058 ) 121 ( 12,937 ) 
 Amounts reclassified from accumulated other comprehensive income (loss) 1,586 46 1,632 
 Net current period other comprehensive income (loss) ( 11,472 ) 167 ( 11,305 ) 
 Balance at December 31, 2024 $ ( 165,932 ) $ ( 568 ) $ ( 166,500 ) 

 
 (dollars in thousands) Unrealized 
Gains and 
(Losses) on 
Available-for-Sale 
Securities Defined 
Benefit 
Pension 
Items Total 
 Balance at January 1, 2023 $ ( 188,154 ) $ ( 769 ) $ ( 188,923 ) 
 Other comprehensive income (loss) before reclassification 32,105 ( 10 ) 32,095 
 Amounts reclassified from accumulated other comprehensive income (loss) 1,589 44 1,633 
 Net current period other comprehensive income (loss) 33,694 34 33,728 
 Balance at December 31, 2023 $ ( 154,460 ) $ ( 735 ) $ ( 155,195 ) 

 
 
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 NOTE 20 – ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (continued) 
 
 
 Reclassifications out of accumulated other comprehensive income (loss) for the years ended December 31, 2024, 2023 and 2022 are as follows: 
 
 
 Details about 
Accumulated Other
Comprehensive
Income Components Amount
Reclassified From
Accumulated Other
Comprehensive 
Income (Loss) Affected Line Item
in the Statement
Where Net
Income is Presented 
 2024 
 (dollars in thousands) 
 Amortization of unrealized losses on held-to-maturity securities $ ( 1,962 ) Interest income 
 Realized gains and (losses) on available-for-sale securities ( 46 ) Net securities gains (losses) 
 Tax effect 422 Income tax expense 
 Subtotal ( 1,586 ) Net of tax 
 Amortization of defined benefit pension items (1) 
 ( 62 ) Salaries and employee benefits 
 Tax effect 16 Income tax expense 
 Subtotal ( 46 ) Net of tax 
 Total reclassifications for the period $ ( 1,632 ) Net income 
 
 
 2023 
 (dollars in thousands) 
 Amortization of unrealized losses on held-to-maturity securities $ ( 1,987 ) Interest income 
 Realized gains and (losses) on available-for-sale securities ( 25 ) Net securities gains (losses) 
 Tax effect 423 Income tax expense 
 Subtotal ( 1,589 ) Net of tax 
 Amortization of defined benefit pension items (1) 
 ( 59 ) Salaries and employee benefits 
 Tax effect 15 Income tax expense 
 Subtotal ( 44 ) Net of tax 
 Total reclassifications for the period $ ( 1,633 ) Net income 
 
 
 2022 
 (dollars in thousands) 
 Amortization of unrealized losses on held-to-maturity securities $ ( 1,518 ) Interest income 
 Realized gains and (losses) on available-for-sale securities 21 Net securities gains (losses) 
 Tax effect 315 Income tax expense 
 Subtotal ( 1,182 ) Net of tax 
 Amortization of defined benefit pension items (1) 
 ( 144 ) Salaries and employee benefits 
 Tax effect 36 Income tax expense 
 Subtotal ( 108 ) Net of tax 
 Total reclassifications for the period $ ( 1,290 ) Net income 

 
 (1) Included in the computation of net pension plan expense as more fully discussed in Note 10 – Pension and Other Postretirement Plans. 
 
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 NOTE 21 – SELECTED QUARTERLY DATA (UNAUDITED) (in thousands except per share data) 
 
 2024 4th
Quarter 3rd
Quarter 2nd
Quarter 1st
Quarter 
 Interest income $ 93,370 $ 95,018 $ 93,736 $ 91,034 
 Interest expense 41,676 45,745 45,440 43,618 
 Net interest income 51,694 49,273 48,296 47,416 
 Provision for credit losses 3,691 3,059 8,480 1,520 
 Net interest income after provision 48,003 46,214 39,816 45,896 
 Noninterest income 11,876 11,917 20,439 12,612 
 Noninterest expense 30,653 30,393 33,333 30,705 
 Income tax expense 5,036 4,400 4,373 4,402 
 Net income $ 24,190 $ 23,338 $ 22,549 $ 23,401 
 
 Basic earnings per common share $ 0.94 $ 0.91 $ 0.88 $ 0.91 
 Diluted earnings per common share $ 0.94 $ 0.91 $ 0.87 $ 0.91 

 
 
 2023 4th
Quarter 3rd
Quarter 2nd
Quarter 1st
Quarter 
 Interest income $ 90,942 $ 88,623 $ 84,482 $ 79,220 
 Interest expense 42,343 40,230 35,958 27,701 
 Net interest income 48,599 48,393 48,524 51,519 
 Provision for credit losses 300 400 800 4,350 
 Net interest income after provision 48,299 47,993 47,724 47,169 
 Noninterest income 17,208 10,835 11,501 10,314 
 Noninterest expense 29,445 29,097 42,734 29,434 
 Income tax expense 6,436 4,479 1,880 3,771 
 Net income $ 29,626 $ 25,252 $ 14,611 $ 24,278 
 
 Basic earnings per common share $ 1.16 $ 0.99 $ 0.57 $ 0.95 
 Diluted earnings per common share $ 1.16 $ 0.98 $ 0.57 $ 0.94 

 
 
 NOTE 22 – LEASES 
 The Company leases certain office facilities under long-term operating lease agreements. The leases expire at various dates through 2044 and some include renewal options. Many of these leases require the payment of property taxes, insurance premiums, maintenance, utilities and other costs. In many cases, rentals are subject to increase in relation to a cost-of-living index. The Company accounts for lease and non-lease components together as a single lease component. 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. The Company’s corresponding lease obligations are included in other liabilities on the consolidated balance sheet. ROU lease assets represent the Company’s right to use an underlying asset for the lease term and lease obligations represent the Company’s obligation to make lease payments arising from the lease. Operating ROU lease assets and obligations are recognized at the commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The ROU lease asset also includes any lease payments made and excludes lease incentives. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. 
 
 
 
 
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 NOTE 22 - LEASES (continued) 
 Lease expense for lease payments is recognized on a straight-line basis over the lease term. Short-term leases are leases having a term of twelve months or less. 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 practical expedient of the lease standard. 
 The following is a maturity analysis of the operating lease liabilities as of December 31, 2024: 
 
 
 Years ending December 31, (in thousands) Operating Lease 
Obligation 
 2025 $ 822 
 2026 792 
 2027 810 
 2028 770 
 2029 644 
 2030 and thereafter 5,267 
 Total undiscounted lease payments 9,105 
 Less imputed interest ( 2,328 ) 
 Lease liability $ 6,777 
 Right-of-use asset $ 6,777 

 
 Year Ended Year Ended Year Ended 
 (dollars in thousands) 
 December 31, 2024 December 31, 2023 December 31, 2022 
 Lease cost 
 Operating lease cost $ 742 $ 724 $ 667 
 Short-term lease cost 7 18 22 
 Total lease cost $ 749 $ 742 $ 689 

 
 Other information 
 Operating cash outflows from operating leases $ 742 $ 724 $ 667 
 Weighted-average remaining lease term - operating leases 7.6 years 6.3 years 7.3 years 
 Weighted average discount rate - operating leases 3.7 % 2.5 % 2.5 % 

 
 
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 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 
 Within the prior two years of the date of the most recent financial statement, there have been no changes in or disagreements with the Company’s accountants.
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.
LAKELAND FINANCIAL CORP 10-K

Item 8. Financial Statements and Supplementary Data
