LAKELAND FINANCIAL CORP 10-Q

ITEM 1. FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEETS (dollars in thousands, except share data) March 31, 2025 December 31, 2024 (Unaudited) ASSETS Cash and due from banks $ 89,325 $ 71,733 Short-term investments 145,899 96,472 Total cash and cash equivalents 235,224 168,205 Securities available-for-sale, at fair value 1,000,875 991,426 Securities held-to-maturity, at amortized cost (fair value of $ 109,481 and $ 113,107 , respectively) 131,979 131,568 Real estate mortgage loans held-for-sale 1,295 1,700 Loans, net of allowance for credit losses of $ 92,433 and $ 85,960 5,130,788 5,031,988 Land, premises and equipment, net 60,797 60,489 Bank owned life insurance 113,826 113,320 Federal Reserve and Federal Home Loan Bank stock 21,420 21,420 Accrued interest receivable 28,818 28,446 Goodwill 4,970 4,970 Other assets 121,186 124,842 Total assets $ 6,851,178 $ 6,678,374 LIABILITIES Noninterest bearing deposits $ 1,296,907 $ 1,297,456 Interest bearing deposits 4,663,287 4,603,510 Total deposits 5,960,194 5,900,966 Borrowings - Federal Home Loan Bank advances 108,200 0 Accrued interest payable 14,699 15,117 Other liabilities 73,576 78,380 Total liabilities 6,156,669 5,994,463 STOCKHOLDERS’ EQUITY Common stock: 90,000,000 shares authorized, no par value 26,016,494 shares issued and 25,556,904 outstanding as of March 31, 2025 25,978,831 shares issued and 25,509,592 outstanding as of December 31, 2024 130,243 129,664 Retained earnings 743,650 736,412 Accumulated other comprehensive income (loss) ( 163,879 ) ( 166,500 ) Treasury stock at cost ( 459,590 shares as of March 31, 2025, 469,239 shares as of December 31, 2024) ( 15,594 ) ( 15,754 ) Total stockholders’ equity 694,420 683,822 Noncontrolling interest 89 89 Total equity 694,509 683,911 Total liabilities and equity $ 6,851,178 $ 6,678,374 The accompanying notes are an integral part of these consolidated financial statements. 1 Table of Contents CONSOLIDATED STATEMENTS OF INCOME (unaudited - dollars in thousands, except share and per share data) Three Months Ended March 31, 2025 2024 NET INTEREST INCOME Interest and fees on loans Taxable $ 81,740 $ 82,042 Tax exempt 292 900 Interest and dividends on securities Taxable 3,389 3,039 Tax exempt 3,910 3,947 Other interest income 1,124 1,106 Total interest income 90,455 91,034 Interest on deposits 36,458 41,164 Interest on short-term borrowings 1,122 2,454 Total interest expense 37,580 43,618 NET INTEREST INCOME 52,875 47,416 Provision for credit losses 6,800 1,520 NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 46,075 45,896 NONINTEREST INCOME Wealth advisory fees 2,867 2,455 Investment brokerage fees 452 522 Service charges on deposit accounts 2,774 2,691 Loan and service fees 2,884 2,852 Merchant and interchange fee income 822 863 Bank owned life insurance income 322 1,036 Mortgage banking income (loss) ( 51 ) 52 Net securities gains (losses) 0 ( 46 ) Other income 858 2,187 Total noninterest income 10,928 12,612 NONINTEREST EXPENSE Salaries and employee benefits 17,902 16,833 Net occupancy expense 1,980 1,740 Equipment costs 1,382 1,412 Data processing fees and supplies 4,265 3,839 Corporate and business development 1,406 1,381 FDIC insurance and other regulatory fees 800 789 Professional fees 2,380 2,463 Other expense 2,648 2,248 Total noninterest expense 32,763 30,705 INCOME BEFORE INCOME TAX EXPENSE 24,240 27,803 Income tax expense 4,155 4,402 NET INCOME $ 20,085 $ 23,401 BASIC WEIGHTED AVERAGE COMMON SHARES 25,714,818 25,657,063 BASIC EARNINGS PER COMMON SHARE $ 0.78 $ 0.91 DILUTED WEIGHTED AVERAGE COMMON SHARES 25,802,865 25,747,643 DILUTED EARNINGS PER COMMON SHARE $ 0.78 $ 0.91 The accompanying notes are an integral part of these consolidated financial statements. 2 Table of Contents CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (unaudited - dollars in thousands) Three Months Ended March 31, 2025 2024 Net income $ 20,085 $ 23,401 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 2,815 ( 15,389 ) Reclassification adjust for amortization of unrealized losses on securities transferred to held-to-maturity 490 496 Reclassification adjustment for (gains) losses included in net income 0 46 Net securities gain (loss) activity during the period 3,305 ( 14,847 ) Tax effect ( 694 ) 3,118 Net of tax amount 2,611 ( 11,729 ) Defined benefit pension plans: Amortization of net actuarial loss 13 15 Net gain activity during the period 13 15 Tax effect ( 3 ) ( 4 ) Net of tax amount 10 11 Total other comprehensive income (loss), net of tax 2,621 ( 11,718 ) Comprehensive income $ 22,706 $ 11,683 The accompanying notes are an integral part of these consolidated financial statements. 3 Table of Contents CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (unaudited - dollars in thousands, except share and per share data) Three Months Ended Common Stock Retained Earnings Accumulated Other Comprehensive Income (Loss) Treasury Stock Total Stockholders’ Equity Noncontrolling Interest Total Equity Shares Stock Balance at January 1, 2024 25,430,566 $ 127,692 $ 692,760 $ ( 155,195 ) $ ( 15,553 ) $ 649,704 $ 89 $ 649,793 Impact of ASU 2023-02 adoption, 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 Comprehensive income: Net income 23,401 23,401 23,401 Other comprehensive income (loss), net of tax ( 11,718 ) ( 11,718 ) ( 11,718 ) Cash dividends declared and paid, $ 0.48 per share ( 12,299 ) ( 12,299 ) ( 12,299 ) Treasury shares purchased under deferred directors' plan ( 3,230 ) 208 ( 208 ) 0 0 Treasury shares sold and distributed under deferred directors' plan 13,275 ( 391 ) 391 0 0 Stock activity under equity compensation plans 62,814 ( 2,516 ) ( 2,516 ) ( 2,516 ) Stock based compensation expense 880 880 880 Balance at March 31, 2024 25,503,425 $ 125,873 $ 703,330 $ ( 166,913 ) $ ( 15,370 ) $ 646,920 $ 89 $ 647,009 Balance at January 1, 2025 25,509,592 $ 129,664 $ 736,412 $ ( 166,500 ) $ ( 15,754 ) $ 683,822 $ 89 $ 683,911 Comprehensive income: Net income 20,085 20,085 20,085 Other comprehensive income (loss), net of tax 2,621 2,621 2,621 Cash dividends declared and paid, $ 0.50 per share ( 12,847 ) ( 12,847 ) ( 12,847 ) Treasury shares purchased under deferred directors' plan ( 3,095 ) 215 ( 215 ) 0 0 Treasury shares sold and distributed under deferred directors' plan 12,744 ( 375 ) 375 0 0 Stock activity under equity compensation plans 37,663 ( 1,493 ) ( 1,493 ) ( 1,493 ) Stock based compensation expense 2,232 2,232 2,232 Balance at March 31, 2025 25,556,904 $ 130,243 $ 743,650 $ ( 163,879 ) $ ( 15,594 ) $ 694,420 $ 89 $ 694,509 The accompanying notes are an integral part of these consolidated financial statements. 4 Table of Contents CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited - in thousands) Three Months Ended March 31, 2025 2024 Cash flows from operating activities: Net income $ 20,085 $ 23,401 Adjustments to reconcile net income to net cash from operating activities: Depreciation 1,479 1,534 Provision for credit losses 6,800 1,520 Amortization of loan servicing rights 106 109 Loans originated for sale, including participations ( 2,533 ) ( 4,535 ) Net gain on sales of loans ( 85 ) ( 108 ) Proceeds from sale of loans, including participations 2,986 4,112 Net (gain) loss on sales of premises and equipment 0 13 Net (gain) loss on sales and calls of securities available-for-sale 0 46 Net securities amortization 1,000 1,264 Stock based compensation expense 2,232 880 Earnings on life insurance ( 322 ) ( 1,036 ) Gain on life insurance 0 ( 243 ) Tax expense (benefit) of stock award issuances 136 ( 201 ) Net change: Interest receivable and other assets ( 2,754 ) 3,298 Interest payable and other liabilities ( 206 ) ( 5,260 ) Total adjustments 8,839 1,393 Net cash from operating activities 28,924 24,794 Cash flows from investing activities: Proceeds from sale of securities available-for-sale 0 7,136 Proceeds from maturities, calls and principal paydowns of securities available-for-sale 14,655 13,537 Purchases of securities available-for-sale ( 22,210 ) 0 Purchase of life insurance ( 211 ) ( 193 ) Net (increase) decrease in total loans ( 105,600 ) ( 81,337 ) Proceeds from sales of land, premises and equipment 0 3 Purchases of land, premises and equipment ( 1,787 ) ( 1,541 ) Proceeds from life insurance 0 536 Net cash from investing activities ( 115,153 ) ( 61,859 ) Cash flows from financing activities: Net increase (decrease) in total deposits 59,228 ( 102,440 ) Proceeds from long-term FHLB borrowings 1,200 0 Proceeds from short-term FHLB borrowings 107,000 150,000 Common dividends paid ( 12,847 ) ( 12,299 ) Payments related to equity incentive plans ( 1,493 ) ( 2,516 ) Purchase of treasury stock ( 215 ) ( 208 ) Sale of treasury stock 375 391 Net cash from financing activities 153,248 32,928 Net change in cash and cash equivalents 67,019 ( 4,137 ) Cash and cash equivalents at beginning of the period 168,205 151,824 Cash and cash equivalents at end of the period 235,224 147,687 Cash paid during the period for: Interest $ 37,998 49,988 Supplemental non-cash disclosures: Right-of-use assets obtained in exchange for lease liabilities, net 20 0 The accompanying notes are an integral part of these consolidated financial statements. 5 Table of Contents NOTE 1. BASIS OF PRESENTATION This report is filed for Lakeland Financial Corporation (the "Company"), which has one wholly owned subsidiary, Lake City Bank (the "Bank"). Also included in this report are results for the Bank’s wholly owned subsidiary, LCB Investments II, Inc. ("LCB Investments"), which manages the Bank’s investment securities portfolio. LCB Investments owns LCB Funding, Inc. ("LCB Funding"), a real estate investment trust. All significant inter-company balances and transactions have been eliminated in consolidation. The unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial information and with the instructions for Form 10-Q. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements and are unaudited. In the opinion of management, all adjustments (all of which are normal and recurring in nature) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2025 are not necessarily indicative of the results that may be expected for any subsequent reporting periods, including the year ending December 31, 2025. The Company’s 2024 Annual Report on Form 10-K should be read in conjunction with these statements. Operating Segments All of the Company's financial results are similar and considered by management to be aggregated into one reportable segment. While the Company has assigned certain management responsibilities by region and business-line, the Company's Chief Operating Decision Maker ("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. 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 line 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. Adoption of New Accounting Standards 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. 6 Table of Contents 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. This standard did not have an impact on the consolidated financial statements based upon the nature of the Company's current operations. On March 18, 2025, the FASB issued ASU 2025-02, which provided amendments to SEC paragraphs pursuant to Staff Accounting Bulletin 122. This amendment removed text related to "Accounting for Obligations to Safeguard Crypto-Assets an Entity Holds for Its Platform Users," from ASU 405-10-S99-1 as Staff Accounting Bulletin 122 rescinded the topic. 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 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 14, 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures" , to address investor requests for greater transparency in regards to income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. The amendments are designed to enhance transparency surrounding income tax disclosures by requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation; and (2) income taxes paid disaggregation by taxing jurisdiction, which will allow investors to better assess, in their capital allocation decisions, how an entity's operations and related tax risks and tax planning and operational opportunities affect its income tax rate and prospects for future cash flows. Other amendments in this update are designed to improve the effectiveness and comparability of disclosures by (1) adding disclosures of pretax income (loss) and income tax expense (benefit) to be consistent with the SEC's Regulation S-X 210.4-08(h), Rules of General Application-General Notes to Financial Statements: Income Tax Expense; and (2) removing disclosures that are no longer considered cost beneficial or relevant. The amendments 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 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 year-end 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 about a public business entity's expenses and address requests from investors for more detailed information about 7 Table of Contents 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 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 voluntarily disclosures that may provide investors with additional decision-useful information. 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, however does not expect the adoption of this update to have a material impact on the consolidated financial statements. 8 Table of Contents 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) is provided in the table below. (dollars in thousands) Amortized Cost Gross Unrealized Gain Gross Unrealized Losses Allowance for Credit Losses Fair Value March 31, 2025 U.S. government sponsored agencies $ 139,872 $ 44 $ ( 24,798 ) $ 0 $ 115,118 Mortgage-backed securities: residential 505,416 494 ( 66,992 ) 0 438,918 State and municipal securities 543,847 17 ( 97,025 ) 0 446,839 Total $ 1,189,135 $ 555 $ ( 188,815 ) $ 0 $ 1,000,875 December 31, 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 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 unrealized gains and losses is presented in the table below. (dollars in thousands) Amortized Cost Gross Unrealized Gain Gross Unrealized Losses Allowance for Credit Losses Fair Value March 31, 2025 State and municipal securities $ 131,979 $ 0 $ ( 22,498 ) $ 0 $ 109,481 December 31, 2024 State and municipal securities $ 131,568 $ 0 $ ( 18,461 ) $ 0 $ 113,107 The Company has the current intent and ability to hold held-to-maturity securities until maturity. All of the Company's securities designated as held-to-maturity were transferred from the available-for-sale classification. The net unrealized gain or loss on the transferred securities was recorded as a component of accumulated other comprehensive income (loss) at the time of the transfer and is amortized over the remaining life of the underlying securities as an adjustment to the yield on those securities. The net amount of the unamortized unrealized loss on the transferred securities included in accumulated other comprehensive income (loss) was $ 18.5 million ($ 14.6 million, net of tax) at March 31, 2025. 9 Table of Contents Information regarding the amortized cost and fair value of available-for-sale and held-to-maturity debt securities by maturity as of March 31, 2025 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 a 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 $ 220 $ 220 $ 0 $ 0 Due after one year through five years 9,727 9,191 0 0 Due after five years through ten years 68,708 61,691 7,239 6,283 Due after ten years 605,064 490,855 124,740 103,198 683,719 561,957 131,979 109,481 Mortgage-backed securities 505,416 438,918 0 0 Total debt securities $ 1,189,135 $ 1,000,875 $ 131,979 $ 109,481 Available-for-sale securities proceeds, gross gains and gross losses are presented below. Three Months Ended March 31, (dollars in thousands) 2025 2024 Sales of securities available-for-sale Proceeds $ 0 $ 7,136 Gross gains 0 0 Gross losses 0 ( 46 ) Number of securities 0 15 In accordance with ASU No. 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 $ 554.0 million and $ 560.2 million were pledged as of March 31, 2025 and December 31, 2024, respectively, as collateral for borrowings from the Federal Home Loan Bank ("FHLB") and Federal Reserve Bank and for other purposes as permitted or required by law. Unrealized Loss Analysis on Available-for-Sale and Held-to-Maturity Securities Information regarding available-for-sale securities with unrealized losses as of March 31, 2025 and December 31, 2024 is presented on the following page. 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. 10 Table of Contents Less than 12 months 12 months or more Total (dollars in thousands) Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses March 31, 2025 U.S. government sponsored agencies $ 0 $ 0 $ 110,076 $ 24,798 $ 110,076 $ 24,798 Mortgage-backed securities: residential 7,773 73 389,792 66,919 397,565 66,992 State and municipal securities 20,078 794 421,691 96,231 441,769 97,025 Total available-for-sale $ 27,851 $ 867 $ 921,559 $ 187,948 $ 949,410 $ 188,815 December 31, 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 available-for-sale $ 36,132 $ 688 $ 943,487 $ 190,487 $ 979,619 $ 191,175 Information regarding held-to-maturity securities with unrealized losses as of March 31, 2025 and December 31, 2024 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 March 31, 2025 State and municipal securities $ 0 $ 0 $ 109,481 $ 22,498 $ 109,481 $ 22,498 December 31, 2024 State and municipal securities $ 0 $ 0 $ 113,107 $ 18,461 $ 113,107 $ 18,461 The total number of securities with unrealized losses as of March 31, 2025 and December 31, 2024 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 March 31, 2025 U.S. government sponsored agencies 0 17 17 0 0 0 Mortgage-backed securities: residential 4 123 127 0 0 0 State and municipal securities 26 385 411 0 41 41 Total temporarily impaired 30 525 555 0 41 41 December 31, 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 Available-for-sale 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 above criteria and for held-to-maturity securities, management evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is 11 Table of Contents 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 debt securities was recorded at March 31, 2025 or December 31, 2024. Accrued interest receivable on securities totaled $ 7.0 million and $ 7.5 million at March 31, 2025 and December 31, 2024, respectively, and is excluded from the estimate of credit losses. 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. 12 Table of Contents NOTE 3. LOANS (dollars in thousands) March 31, 2025 December 31, 2024 Commercial and industrial loans: Working capital lines of credit loans $ 716,522 13.7 % $ 649,609 12.7 % Non-working capital loans 807,048 15.5 801,256 15.6 Total commercial and industrial loans 1,523,570 29.2 1,450,865 28.3 Commercial real estate and multi-family residential loans: Construction and land development loans 623,905 12.0 567,781 11.1 Owner occupied loans 804,933 15.4 807,090 15.8 Nonowner occupied loans 852,033 16.3 872,671 17.0 Multifamily loans 339,946 6.5 344,978 6.7 Total commercial real estate and multi-family residential loans 2,620,817 50.2 2,592,520 50.6 Agri-business and agricultural loans: Loans secured by farmland 156,112 3.0 156,609 3.1 Loans for agricultural production 227,659 4.3 230,787 4.5 Total agri-business and agricultural loans 383,771 7.3 387,396 7.6 Other commercial loans: 94,927 1.8 95,584 1.9 Total commercial loans 4,623,085 88.5 4,526,365 88.4 Consumer 1-4 family mortgage loans: Closed end first mortgage loans 265,855 5.1 259,286 5.1 Open end and junior lien loans 217,981 4.2 214,125 4.2 Residential construction and land development loans 16,359 0.3 16,818 0.3 Total consumer 1-4 family mortgage loans 500,195 9.6 490,229 9.6 Other consumer loans 102,254 1.9 104,041 2.0 Total consumer loans 602,449 11.5 594,270 11.6 Subtotal 5,225,534 100.0 % 5,120,635 100.0 % Less: Allowance for credit losses ( 92,433 ) ( 85,960 ) Net deferred loan fees ( 2,313 ) ( 2,687 ) Loans, net $ 5,130,788 $ 5,031,988 The recorded investment in loans does not include accrued interest, which totaled $ 21.1 million and $ 20.3 million as of March 31, 2025 and December 31, 2024, respectively. The Company h ad $ 821,000 and $ 424,000 in residential real estate loans in the process of foreclosure as of March 31, 2025 and December 31, 2024, respectively. NOTE 4. ALLOWANCE FOR CREDIT LOSSES AND CREDIT QUALITY The Company maintains an allowance for credit losses 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. The level of credit loss provision is influenced by growth in the overall loan portfolio, emerging market risk, emerging concentration risk, commercial loan focus and large credit concentration, new industry lending activity, general economic conditions and historical loss analysis. In addition, management gives consideration to changes in the facts and circumstances 13 Table of Contents of watch list credits, which includes the security position of the borrower, in determining the appropriate level of the credit loss provision. Furthermore, management’s overall view on credit quality is a factor in the determination of the provision. 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 probability of default-loss given default (“PD/LGD”) model, subject to a floor. A default can be triggered by one of several different asset quality factors, including past due status, nonaccrual status, material modification status 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 default 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, and other environmental factors based on the risks present for each portfolio segment. These environmental factors include consideration of the following: levels of, and trends in, delinquencies and nonperforming loans; trends in volume and terms of loans; effects of any changes in risk selection and underwriting standards; other changes in lending policies, procedure, and practices; experience, ability, and depth of lending management and other relevant staff; national and local economic 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 probable losses inherent in 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 review 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, which is updated at least annually. The historical loss rates are supplemented with consideration of economic conditions and portfolio trends. 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 ASU 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. 14 Table of Contents The following tables present the activity in the allowance for credit losses by portfolio segment for the periods shown: (dollars in thousands) Commercial and Industrial Commercial Real Estate and Multifamily Residential Agri-business and Agricultural Other Commercial Consumer 1-4 Family Mortgage Other Consumer Unallocated Total Three Months Ended March 31, 2025 Beginning balance, January 1 $ 45,539 $ 30,865 $ 3,541 $ 743 $ 3,358 $ 1,531 $ 383 $ 85,960 Provision for credit losses 6,741 ( 423 ) ( 41 ) ( 20 ) 124 343 76 6,800 Loans charged-off ( 10 ) 0 0 0 ( 24 ) ( 474 ) 0 ( 508 ) Recoveries 32 26 0 0 6 117 0 181 Net loans (charged-off) recovered 22 26 0 0 ( 18 ) ( 357 ) 0 ( 327 ) Ending balance $ 52,302 $ 30,468 $ 3,500 $ 723 $ 3,464 $ 1,517 $ 459 $ 92,433 (dollars in thousands) Commercial and Industrial Commercial Real Estate and Multifamily Residential Agri-business and Agricultural Other Commercial Consumer 1-4 Family Mortgage Other Consumer Unallocated Total Three Months Ended March 31, 2024 Beginning balance, January 1 $ 30,338 $ 31,335 $ 4,150 $ 1,129 $ 3,474 $ 1,174 $ 372 $ 71,972 Provision for credit losses 542 717 ( 38 ) ( 107 ) 21 256 129 1,520 Loans charged-off ( 194 ) 0 0 0 0 ( 310 ) 0 ( 504 ) Recoveries 34 26 0 0 23 109 0 192 Net loans (charged-off) recovered ( 160 ) 26 0 0 23 ( 201 ) 0 ( 312 ) Ending balance $ 30,720 $ 32,078 $ 4,112 $ 1,022 $ 3,518 $ 1,229 $ 501 $ 73,180 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 Company’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 by the distinct possibility that the Company 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, 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. 15 Table of Contents The following table summarizes the risk category of loans by loan segment and year of origination as of March 31, 2025: (dollars in thousands) 2025 2024 2023 2022 2021 Prior Term Total Revolving Total Commercial and industrial loans: Working capital lines of credit loans: Pass $ 3,747 $ 1,550 $ 103 $ 1,550 $ 1,192 $ 528 $ 8,670 $ 582,436 $ 591,106 Special Mention 0 0 997 0 0 0 997 51,128 52,125 Substandard 0 0 0 931 0 259 1,190 28,978 30,168 Doubtful 0 0 3,015 39,994 0 0 43,009 0 43,009 Total 3,747 1,550 4,115 42,475 1,192 787 53,866 662,542 716,408 Working capital lines of credit loans: Current period gross write offs 0 0 0 0 0 0 0 0 0 Non-working capital loans: Pass 26,773 157,729 148,366 156,661 52,864 54,564 596,957 173,657 770,614 Special Mention 892 7,093 2,324 2,039 1,607 896 14,851 6,419 21,270 Substandard 314 0 3,063 1,594 105 3,946 9,022 401 9,423 Doubtful 0 0 0 0 21 363 384 0 384 Not Rated 512 1,226 1,524 1,028 302 295 4,887 0 4,887 Total 28,491 166,048 155,277 161,322 54,899 60,064 626,101 180,477 806,578 Non-working capital loans: Current period gross write offs 0 0 0 0 0 0 0 10 10 Commercial real estate and multi-family residential loans: Construction and land development loans: Pass 16,094 24,839 58,263 40,754 24,140 0 164,090 458,160 622,250 Total 16,094 24,839 58,263 40,754 24,140 0 164,090 458,160 622,250 Construction and land development loans: Current period gross write offs 0 0 0 0 0 0 0 0 0 Owner occupied loans: Pass 29,473 99,197 124,885 118,041 140,991 222,158 734,745 37,777 772,522 Special Mention 300 6,153 2,621 14,609 0 3,056 26,739 0 26,739 Substandard 1,737 315 311 0 1,349 1,454 5,166 0 5,166 Total 31,510 105,665 127,817 132,650 142,340 226,668 766,650 37,777 804,427 Owner occupied loans: Current period gross write offs 0 0 0 0 0 0 0 0 0 Nonowner occupied loans: Pass 26,755 156,586 116,164 150,467 104,684 170,940 725,596 107,705 833,301 16 Table of Contents (dollars in thousands) 2025 2024 2023 2022 2021 Prior Term Total Revolving Total Nonowner occupied loans (continued): Special Mention 0 588 15,506 106 0 0 16,200 1,930 18,130 Total 26,755 157,174 131,670 150,573 104,684 170,940 741,796 109,635 851,431 Nonowner occupied loans: Current period gross write offs 0 0 0 0 0 0 0 0 0 Multifamily loans: Pass 38,669 70,356 72,075 7,851 52,921 34,930 276,802 62,556 339,358 Special Mention 0 0 0 303 0 0 303 0 303 Total 38,669 70,356 72,075 8,154 52,921 34,930 277,105 62,556 339,661 Multifamily 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 3,602 15,147 18,955 33,162 22,760 42,785 136,411 17,313 153,724 Special Mention 2,000 122 205 0 0 0 2,327 0 2,327 Substandard 0 0 0 0 0 67 67 0 67 Total 5,602 15,269 19,160 33,162 22,760 42,852 138,805 17,313 156,118 Loans secured by farmland: Current period gross write offs 0 0 0 0 0 0 0 0 0 Loans for agricultural production: Pass 885 15,418 25,757 21,102 23,557 21,345 108,064 118,430 226,494 Special Mention 0 0 0 0 0 0 0 1,251 1,251 Total 885 15,418 25,757 21,102 23,557 21,345 108,064 119,681 227,745 Loans for agricultural production: Current period gross write offs 0 0 0 0 0 0 0 0 0 Other commercial loans: Pass 3,424 7,405 16,598 28,944 3,202 15,667 75,240 17,743 92,983 Special Mention 0 0 0 0 0 1,842 1,842 0 1,842 Total 3,424 7,405 16,598 28,944 3,202 17,509 77,082 17,743 94,825 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 4,697 11,361 8,085 8,666 11,024 10,284 54,117 6,821 60,938 17 Table of Contents (dollars in thousands) 2025 2024 2023 2022 2021 Prior Term Total Revolving Total Closed end first mortgage loans (continued): Special Mention 0 121 223 163 64 0 571 0 571 Substandard 0 0 263 317 89 611 1,280 0 1,280 Not Rated 6,298 29,141 53,471 46,886 32,157 34,747 202,700 0 202,700 Total 10,995 40,623 62,042 56,032 43,334 45,642 258,668 6,821 265,489 Closed end first mortgage loans: Current period gross write offs 0 0 0 0 0 24 24 0 24 Open end and junior lien loans: Pass 128 561 726 0 212 5 1,632 9,973 11,605 Special Mention 0 0 0 0 0 302 302 0 302 Substandard 0 0 103 0 12 23 138 81 219 Not Rated 5,963 18,706 14,296 16,205 3,869 1,847 60,886 147,016 207,902 Total 6,091 19,267 15,125 16,205 4,093 2,177 62,958 157,070 220,028 Open end and junior lien loans: Current period gross write offs 0 0 0 0 0 0 0 0 0 Residential construction loans: Not Rated 130 9,932 762 2,014 1,361 2,069 16,268 0 16,268 Total 130 9,932 762 2,014 1,361 2,069 16,268 0 16,268 Residential construction loans: Current period gross write offs 0 0 0 0 0 0 0 0 0 Other consumer loans: Pass 303 78 963 168 93 0 1,605 22,044 23,649 Special Mention 0 0 0 475 0 131 606 0 606 Substandard 0 111 120 84 12 38 365 0 365 Not Rated 4,218 21,526 20,061 10,691 5,990 4,828 67,314 10,059 77,373 Total 4,521 21,715 21,144 11,418 6,095 4,997 69,890 32,103 101,993 Other consumer loans: Current period gross write offs 0 20 82 8 58 0 168 306 474 Total Loans $ 176,914 $ 655,261 $ 709,805 $ 704,805 $ 484,578 $ 629,980 $ 3,361,343 $ 1,861,878 $ 5,223,221 Total period gross write offs $ 0 $ 20 $ 82 $ 8 $ 58 $ 24 $ 192 $ 316 $ 508 18 Table of Contents The following table summarizes the risk category of loans by loan segment and year of origination as of December 31, 2024: (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 19 Table of Contents (dollars in thousands) 2024 2023 2022 2021 2020 Prior Term Total Revolving Total Nonowner occupied loans (continued): 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 Nonowner occupied loans: Current period gross write offs 0 0 0 0 0 0 0 0 0 Multifamily 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 Multifamily 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 20 Table of Contents (dollars in thousands) 2024 2023 2022 2021 2020 Prior Term Total Revolving Total Closed end first mortgage loans (continued): 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 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 21 Table of Contents Nonaccrual and Past Due Loans: The Company does not record interest on nonaccrual loans until principal is recovered. 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 the 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 future payments are reasonably assured. The following table presents the aging of the amortized cost basis in past due loans as of March 31, 2025 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 Commercial and industrial loans: Working capital lines of credit loans $ 669,137 $ 997 $ 0 $ 670,134 $ 46,274 $ 567 $ 716,408 Non-working capital loans 798,635 515 0 799,150 7,428 156 806,578 Commercial real estate and multi-family residential loans: Construction and land development loans 622,250 0 0 622,250 0 0 622,250 Owner occupied loans 802,662 0 0 802,662 1,765 311 804,427 Nonowner occupied loans 851,431 0 0 851,431 0 0 851,431 Multifamily loans 339,661 0 0 339,661 0 0 339,661 Agri-business and agricultural loans: Loans secured by farmland 156,038 13 0 156,051 67 0 156,118 Loans for agricultural production 227,745 0 0 227,745 0 0 227,745 Other commercial loans 94,825 0 0 94,825 0 0 94,825 Consumer 1‑4 family mortgage loans: Closed end first mortgage loans 261,921 2,282 7 264,210 1,279 647 265,489 Open end and junior lien loans 219,696 113 0 219,809 219 219 220,028 Residential construction loans 16,268 0 0 16,268 0 0 16,268 Other consumer loans 101,239 389 0 101,628 365 23 101,993 Total $ 5,161,508 $ 4,309 $ 7 $ 5,165,824 $ 57,397 $ 1,923 $ 5,223,221 An insignificant amount of interest income was recognized on nonaccrual loans during the three month period ended March 31, 2025. 22 Table of Contents The following table presents the aging of the amortized cost basis in past due loans as of December 31, 2024 by class of loans and loans past due 90 days or more and still accruing by class of loan: (dollars in thousands) Loans Not Past Due 30-89 Days Past Due Greater than 89 Days Past Due and Accruing Total Accruing Total Nonaccrual Nonaccrual With No Allowance For Credit Loss Total 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 Multifamily 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 year ended December 31, 2024. 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 quarter over quarter changes are reflective of changes in nonaccrual status and not necessarily associated with credit quality indicators like appraisal value. 23 Table of Contents The following tables present the amortized cost basis of collateral dependent loans by class of loan as of: March 31, 2025 (dollars in thousands) Real Estate General Business Assets Other Total Commercial and industrial loans: Working capital lines of credit loans $ 125 $ 65,695 $ 446 $ 66,266 Non-working capital loans 1,759 6,463 11 8,233 Commercial real estate and multi-family residential loans: Owner occupied loans 315 3,501 0 3,816 Agri-business and agricultural loans: Loans secured by farmland 0 67 0 67 Consumer 1-4 family mortgage loans: Closed end first mortgage loans 1,279 0 0 1,279 Open end and junior lien loans 222 0 0 222 Other consumer loans 0 0 359 359 Total $ 3,700 $ 75,726 $ 816 $ 80,242 December 31, 2024 (dollars in thousands) Real Estate General Business Assets Other Total 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 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 Loan Modifications Made to Borrowers Experiencing Financial Difficulty The allowance for credit losses incorporates an estimate of lifetime expected credit losses using historical loss information. The Company uses a probability of default/loss given default model to determine an estimate which is recorded for each asset upon origination. Occasionally, the Company has reason to modify certain terms of loans for borrowers experiencing financial distress by providing the following forms of relief: forgiveness of loan principal, extension of repayment terms, interest rate reduction or an other than insignificant payment delay. The Company can make any or all of these types of concessions as part of such modifications. Since an estimate for historical losses is already included as a component of the allowance for credit losses, a change to the allowance for credit losses is generally not recorded at the time of such modifications unless the loan is individually analyzed and the modification changes the specific reserve allocation. In the event forgiveness of principal is provided, the amount of the forgiveness is charged off against the allowance for credit losses. During the three months ended March 31, 2025 and 2024, there were no material modifications made to borrowers experiencing financial difficulty. The Company closely monitors the performance of loans that are modified to borrowers experiencing financial difficulty by reviewing the delinquency and payment default status of such loans to understand the effectiveness of its relief efforts. At March 31, 2025, no loans within the previous twelve months received a modification due to a borrower experiencing financial difficulty. 24 Table of Contents 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. NOTE 5. BORROWINGS For the periods ended below, advances from the Federal Home Loan Bank of Indianapolis ("FHLBI") were as follows: (dollars in thousands) March 31, 2025 December 31, 2024 Short-term fixed rate bullet advance, 4.49 %, due April 3, 2025 $ 107,000 $ 0 Long-term fixed rate bullet advance, 0.00 %, due March 12, 2035 1,200 0 Total $ 108,200 $ 0 For the period ended March 31, 2025, the Company had advances outstanding from the FHLBI of $ 108.2 million. The fixed rate bullet advance due April 3, 2025 had an interest rate of 4.49 % in the amount $ 107.0 million and was paid at maturity. The fixed rate bullet advance due March 12, 2035 has an interest rate of 0.00 % in the amount of $ 1.2 million. The $ 1.2 million advance is a rate-subsidized Community Development Financial Institution ("CDFI") Rate Buydown Advance offered by the FHLBI. The Company extended a low cost loan to a qualifying CDFI within its operating footprint that was then funded by the fixed rate advance from the Rate Buydown Advance program. For the period ended December 31, 2024, the Company had no advances outstanding with the FHLBI. There were no Federal Funds purchased outstanding at March 31, 2025 and December 31, 2024. On October 2, 2024, the Company renewed an unsecured revolving credit agreement with a financial institution allowing the Company to borrow up to $ 30.0 million. The credit agreement has a one year term which may be amended, extended, modified or renewed. Funds provided under the agreement can be used to repurchase shares of the Company’s common stock under the share repurchase program, which was reauthorized by the Company’s board of directors on April 8, 2025, and expires on April 30, 2027, and for general operations. The credit agreement includes a negative pledge agreement whereby the Company agrees not to pledge or otherwise encumber the stock of the Bank. There were no outstanding borrowings on the credit agreement at March 31, 2025 and December 31, 2024. NOTE 6. FAIR VALUE DISCLOSURES 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 25 Table of Contents 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 disclosure 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 new 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 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 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 changes 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 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 are 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 and finished inventory is discounted from its cost or book value by 40 - 60 %, depending on the marketability of the goods; (b) finished goods are generally discounted by 40 - 60 %, depending on the ease of marketability, cost of transportation or scope of use of the finished good; (c) work in process inventory is typically discounted by 60 %- 100 %, depending on the length of manufacturing time, types of components used in the completion process, and the breadth of the user base; (d) equipment is valued at a percentage of depreciated book value or recent appraised value, if available, and is typically discounted at 20 - 50 % after various considerations including age and condition of the equipment, marketability, breadth of use, and whether the equipment includes unique components or add-ons; and (e) marketable securities are discounted by 10 %- 30 %, depending on the type of investment, age of valuation report and general market conditions. 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 March 31, 2025, the value of the Company’s Level 3 servicing assets for residential mortgage loans (“MSRs”) was $ 1.8 million, carried at amortized cost and no valuation reserve. These residential mortgage loans have a 26 Table of Contents weighted average interest rate of 3.8 %, 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 third-party valuation 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 March 31, 2025, the constant prepayment speed (“PSA”) used was 162 and used a discount rate of 10.0 %. At December 31, 2024, the PSA used was 157 and the discount rate used was 10.0 %. 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. 27 Table of Contents The tables below present the balances of assets measured at fair value on a recurring basis: March 31, 2025 Fair Value Measurements Using Assets at Fair Value (dollars in thousands) Level 1 Level 2 Level 3 Assets: U.S. government sponsored agency securities $ 0 $ 115,118 $ 0 $ 115,118 Mortgage-backed securities: residential 0 438,918 0 438,918 State and municipal securities 0 442,259 4,580 446,839 Total securities available-for-sale 0 996,295 4,580 1,000,875 Mortgage banking derivative 0 86 0 86 Interest rate swap derivative 0 20,247 0 20,247 Total assets $ 0 $ 1,016,628 $ 4,580 $ 1,021,208 Liabilities: Mortgage banking derivative $ 0 $ 23 $ 0 $ 23 Interest rate swap derivative 0 20,247 0 20,247 Total liabilities $ 0 $ 20,270 $ 0 $ 20,270 December 31, 2024 Fair Value Measurements Using Assets at Fair Value (dollars in thousands) Level 1 Level 2 Level 3 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 securities available-for-sale 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 The fair value of Level 3 available-for-sale securities was immaterial and thus did not require additional recurring fair value disclosure. 28 Table of Contents The tables below present the balances of assets measured at fair value on a nonrecurring basis: March 31, 2025 Fair Value Measurements Using Assets at Fair Value (dollars in thousands) Level 1 Level 2 Level 3 Assets Collateral dependent loans: Commercial and industrial loans: Working capital lines of credit loans $ 0 $ 0 $ 18,657 $ 18,657 Non-working capital loans 0 0 3,051 3,051 Commercial real estate and multi-family residential loans: Owner occupied loans 0 0 646 646 Agri-business and agricultural loans: Loans secured by farmland 0 0 30 30 Total collateral dependent loans 0 0 22,384 22,384 Total assets $ 0 $ 0 $ 22,384 $ 22,384 December 31, 2024 Fair Value Measurements Using Assets at Fair Value (dollars in thousands) Level 1 Level 2 Level 3 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 The following table presents the valuation methodology and unobservable inputs for Level 3 assets measured at fair value on a non-recurring basis at March 31, 2025: (dollars in thousands) Fair Value Valuation Methodology Unobservable Inputs Average Range of Inputs Collateral dependent loans: Commercial and industrial $ 21,708 Collateral based measurements Discount to reflect current market conditions and ultimate collectability 66 % 35 %- 99 % Collateral dependent loans: Commercial real estate and multi-family residential loans 646 Collateral based measurements Discount to reflect current market conditions and ultimate collectability 56 % Collateral dependent loans: Agri-business and agricultural 30 Collateral based measurements Discount to reflect current market conditions and ultimate collectability 56 % 29 Table of Contents 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 loans 664 Collateral based measurements Discount to reflect current market conditions and ultimate collectability 54 % Collateral dependent loans: Agri-business and agricultural 32 Collateral based measurements Discount to reflect current market conditions and ultimate collectability 54 % The following tables contain the estimated fair values and the related carrying values of the Company’s financial instruments. Items that are not financial instruments are not included. March 31, 2025 Carrying Value Estimated Fair Value (dollars in thousands) Level 1 Level 2 Level 3 Total Financial Assets: Cash and cash equivalents $ 235,224 $ 235,224 $ 0 $ 0 $ 235,224 Securities available-for-sale 1,000,875 0 996,295 4,580 1,000,875 Securities held-to-maturity 131,979 0 109,481 0 109,481 Real estate mortgages held-for-sale 1,295 0 1,326 0 1,326 Loans, net 5,130,788 0 0 5,039,975 5,039,975 Mortgage banking derivative 86 0 86 0 86 Interest rate swap derivative 20,247 0 20,247 0 20,247 Federal Reserve and Federal Home Loan Bank Stock 21,420 N/A N/A N/A N/A Accrued interest receivable 28,818 0 7,763 21,055 28,818 Financial Liabilities: Certificates of deposit $ 815,209 $ 0 $ 811,881 $ 0 $ 811,881 All other deposits 5,144,985 5,144,985 0 0 5,144,985 Federal Home Loan Bank advances: Short-term advance 107,000 107,000 0 0 107,000 Long-term advance 1,200 754 0 0 754 Mortgage banking derivative 23 0 23 0 23 Interest rate swap derivative 20,247 0 20,247 0 20,247 Standby letters of credit 251 0 0 251 251 Accrued interest payable 14,699 406 14,293 0 14,699 30 Table of Contents December 31, 2024 Carrying Value Estimated Fair Value (dollars in thousands) 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 NOTE 7. OFFSETTING ASSETS AND LIABILITIES The following tables summarize gross and net information about financial instruments and derivative instruments that are offset in the statement of financial position or that are subject to an enforceable master netting arrangement at March 31, 2025 and December 31, 2024. March 31, 2025 Gross Amounts of Recognized Assets/Liabilities Gross Amounts Offset in the Statement of Financial Position Net Amounts presented in the Statement of Financial Position Gross Amounts Not Offset in the Statement of Financial Position Net Amount (dollars in thousands) Financial Instruments Cash Collateral Position Assets Interest Rate Swap Derivatives $ 20,247 $ 0 $ 20,247 $ 0 $ ( 20,835 ) $ ( 588 ) Total Assets $ 20,247 $ 0 $ 20,247 $ 0 $ ( 20,835 ) $ ( 588 ) Liabilities Interest Rate Swap Derivatives $ 20,247 $ 0 $ 20,247 $ 0 $ 0 $ 20,247 Total Liabilities $ 20,247 $ 0 $ 20,247 $ 0 $ 0 $ 20,247 December 31, 2024 Gross Amounts of Recognized Assets/Liabilities Gross Amounts Offset in the Statement of Financial Position Net Amounts presented in the Statement of Financial Position Gross Amounts Not Offset in the Statement of Financial Position Net Amount (dollars in thousands) Financial Instruments Cash Collateral Position 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 31 Table of Contents 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. NOTE 8. EARNINGS PER SHARE Basic earnings per common share is net income divided by the weighted average number of common shares outstanding during the period, which includes shares held in treasury on behalf of participants in the Company’s Directors Fee Deferral Plan, and share repurchases. Diluted earnings per common share includes the dilutive effect of additional potential common shares issuable under stock based awards and warrants, none of which were antidilutive. Three Months Ended March 31, 2025 2024 Weighted average shares outstanding for basic earnings per common share 25,714,818 25,657,063 Dilutive effect of stock based awards 88,047 90,580 Weighted average shares outstanding for diluted earnings per common share 25,802,865 25,747,643 Basic earnings per common share $ 0.78 $ 0.91 Diluted earnings per common share $ 0.78 $ 0.91 NOTE 9. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) The following tables summarize the changes within each classification of accumulated other comprehensive income (loss) for the three months ended March 31, 2025 and 2024, all shown net of tax: (dollars in thousands) Unrealized Gains and Losses on Available- for-Sales Securities Defined Benefit Pension Items Total Balance at January 1, 2025 $ ( 165,932 ) $ ( 568 ) $ ( 166,500 ) Other comprehensive income (loss) before reclassification 2,224 0 2,224 Amounts reclassified from accumulated other comprehensive income (loss) 387 10 397 Net current period other comprehensive income (loss) 2,611 10 2,621 Balance at March 31, 2025 $ ( 163,321 ) $ ( 558 ) $ ( 163,879 ) (dollars in thousands) Unrealized Gains and Losses on Available- for-Sales Securities Defined Benefit Pension Items Total Balance at January 1, 2024 $ ( 154,460 ) $ ( 735 ) $ ( 155,195 ) Other comprehensive income (loss) before reclassification ( 12,157 ) 0 ( 12,157 ) Amounts reclassified from accumulated other comprehensive income (loss) 428 11 439 Net current period other comprehensive income (loss) ( 11,729 ) 11 ( 11,718 ) Balance at March 31, 2024 $ ( 166,189 ) $ ( 724 ) $ ( 166,913 ) 32 Table of Contents Reclassifications out of accumulated comprehensive income (loss) for the three months ended March 31, 2025 are as follows: Details about Accumulated Other Comprehensive Income (Loss) Components Amount Reclassified From Accumulated Other Comprehensive Income (Loss) Affected Line Item in the Statement Where Net Income is Presented (dollars in thousands) Amortization of unrealized losses on held-to-maturity securities $ ( 490 ) Interest income Tax effect 103 Income tax expense ( 387 ) Net of tax Amortization of defined benefit pension items ( 13 ) Other expense Tax effect 3 Income tax expense ( 10 ) Net of tax Total reclassifications for the period $ ( 397 ) Net income Reclassifications out of accumulated other comprehensive income (loss) for the three months ended March 31, 2024 are as follows: Details about Accumulated Other Comprehensive Income (Loss) Components Amount Reclassified From Accumulated Other Comprehensive Income (Loss) Affected Line Item in the Statement Where Net Income is Presented (dollars in thousands) Amortization of unrealized losses on held-to-maturity securities $ ( 496 ) Interest income Realized gains and (losses) on available-for-sale securities ( 46 ) Net securities gains (losses) Tax effect 114 Income tax expense ( 428 ) Net of tax Amortization of defined benefit pension items ( 15 ) Other expense Tax effect 4 Income tax expense ( 11 ) Net of tax Total reclassifications for the period $ ( 439 ) Net income NOTE 10. 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 asset and are included in other assets on the consolidated balance sheet. The Company's corresponding lease obligations are included in other liabilities on the consolidated balance sheet. 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. 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 a practical expedient of the standard. 33 Table of Contents The following is a maturity analysis of the operating lease liabilities as of March 31, 2025: Years ending December 31, (in thousands) Operating Lease Obligation 2025 $ 622 2026 803 2027 814 2028 770 2029 644 2030 and thereafter 5,267 Total undiscounted lease payments 8,920 Less imputed interest ( 2,267 ) Lease liability $ 6,653 Right-of-use asset $ 6,653 Three Months Ended March 31, (dollars in thousands) 2025 2024 Lease cost Operating lease cost $ 198 $ 185 Short-term lease cost 1 2 Total lease cost $ 199 $ 187 Other information Operating cash outflows from operating leases $ 198 $ 185 Weighted-average remaining lease term - operating leases 7.6 years 6.0 years Weighted average discount rate - operating leases 3.7 % 2.5 % 34 Table of Contents