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Item 2. Management’s Discussion and Analysis

2025-10-29 compared with 2025-08-06 · 214 added, 221 removed, 397 unchanged (52% of the section changed)

ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Net income in the first six months of 2025 was $47.1 million, which increased $1.1 million , or 2.4%, from $46.0 million for the comparable period of 2024 .

Diluted income per common share was $1.82 in the first six months of 2025 , an increase of 2.2% from $1.78 in the comparable period of 2024 .

The increase in net income for 2025 was primarily due to an increase to net interest income of $12.0 million, or 12.6%, a decrease in noninterest expense of $843,000, or 1.3%, and a decrease in the provision for credit losses of $0.2 million, or 2.0%.

Offsetting these positive contributions to net income was a decrease in noninterest income of $10.6 million, or 32.2%.

Pretax pre-provision earnings, a non-GAAP measure calculated by adding net interest income to noninterest income and subtracting noninterest expense, were $67.0 million in the first six months of 2025 , an increase of $2.2 million , or 3.5%, compared to $64.7 million for the comparable period of 2024 .

Core operational profitability, a non-GAAP measure that excludes the impact of certain non-routine operating events that occurred during 2024, improved by $5.2 million , or 12.5%, from $41.8 million to $47.1 million for the six months ended June 30, 2024 and 2025, respectively.

Annualized return on average total equity was 13.62% in the first six months of 2025 versus 14.39% in the comparable period of 2024 .

Annualized return on average total assets was 1.39% in the first six months of 2025 versus 1.40% for the comparable period of 2024 .

The Company's average equity to average assets ratio was 10.19% in the first six months of 2025 versus 9.73% in the comparable period of 2024 .

Net income in the second quarter of 2025 was $27.0 million, an increase of $4.4 million, or 19.6%, from $22.5 million for the comparable period of 2024.

Diluted earnings per common share was $1.04 in the second quarter of 2025, an increase of 19.5% from $0.87 in the comparable period of 2024.

The increase was driven primarily by an increase in net interest income of $6.6 million, or 13.6%, a decrease in provision for credit losses of $5.5 million and a decrease in noninterest expense of $2.9 million, or 8.7%.

Offsetting these effects was a decrease in noninterest income of $9.0 million, or 43.8%.

Pretax pre-provision earnings in the second quarter of 2025 were $35.9 million, an increase of $528,000, or 1.5%, compared to $35.4 million for the comparable period of 2024.

Core operational profitability improved $7.8 million, or 40.5%, to $27.0 million for the second quarter of 2025, compared to $19.2 million for the second quarter of 2024 .

Annualized return on average total equity was 15.52% in the second quarter of 2025 versus 14.19% in the comparable period of 2024.

Annualized return on average total assets was 1.57% in the second quarter of 2025 versus 1.37% in the comparable period of 2024.

The average equity to average assets ratio was 10.09% in the second quarter of 2025 versus 9.62% in the comparable period of 2024.

The Company’s tangible common equity to tangible assets ratio, which is a non-GAAP financial measure, was 10.15% at June 30, 2025, compared to 9.91% at June 30, 2024 and 10.19% at December 31, 2024.

Unrealized losses from available-for-sale investment securities were $185.3 million at June 30, 2025, compared to $194.9 million at June 30, 2024 and $191.1 million at December 31, 2024.

When excluding the impact of accumulated other comprehensive income (loss) ("AOCI") on tangible common equity and tangible assets, the Company's adjusted tangible common equity to adjusted tangible assets ratio, which is a non-GAAP financial measure, was 12.17% at June 30, 2025, compared to 12.18% at June 30, 2024 and 12.37% at December 31, 2024.

Total assets were $6.964 billion as of June 30, 2025 versus $6.678 billion as of December 31, 2024, an increase of $285.9 million, or 4.3% .

Balance sheet expansion was driven by increases to t otal loans, net of the allowance for credit losses, which increased $128.3 million, or 2.5%, cash and cash equivalents, which increased $142.0 million, or 84.4%, and available-for-sale securities, which increased $5.5 million, or 0.6%.

The balance sheet expansion from December 31, 2024 to June 30, 2025 was funded by an increase in total deposits of $275.9 million, or 4.7%.

Total equity increased $26.1 million, or 3.8%, from $683.9 million at December 31, 2024 to $710.0 million at June 30, 2025.

Retained earnings increased $21.3 million, or 2.9%, primarily as a result of net income of $47.1 million and reduced by dividends declared and paid of $25.7 million.

Net income in the first nine months of 2025 was $73.5 million, which increased $4.2 million , or 6.0%, from $69.3 million for the comparable period of 2024 .

Diluted earnings per common share was $2.85 in the first nine months of 2025 , an increase of 5.9% from $2.69 in the comparable period of 2024 .

The increase in net income for 2025 was primarily due to an increase to net interest income of $18.8 million, or 13.0%, and a decrease in the provision for credit losses of $1.3 million, or 9.6%.

Offsetting these positive contributions was a decrease in noninterest income of $9.6 million, or 21.3%, and an increase in noninterest expense of $3.7 million, or 3.9%.

Pretax pre-provision earnings, a non-GAAP measure calculated by adding net interest income to noninterest income and subtracting noninterest expense, were $101.0 million in the first nine months of 2025 , an increase of $5.5 million , or 5.8%, compared to $95.5 million for the comparable period of 2024 .

Core operational profitability, a non-GAAP measure that excludes the impact of certain non-routine operating events that occurred during 2024, improved by $8.3 million , or 12.7%, from $65.2 million to $73.5 million for the nine months ended September 30, 2024 and 2025, respectively.

Return on average total equity was 13.96% in the first nine months of 2025 versus 14.21% in the comparable period of 2024 .

Return on average total assets was 1.44% in the first nine months of 2025 versus 1.40% for the comparable period of 2024 .

The Company's average equity to average assets ratio was 10.29% in the first nine months of 2025 versus 9.84% in the comparable period of 2024 .

Net income in the third quarter of 2025 was $26.4 million, an increase of $3.1 million, or 13.1%, from $23.3 million for the comparable period of 2024.

Diluted earnings per common share was $1.03 in the third quarter of 2025, an increase of 13.2% from $0.91 in the comparable period of 2024.

The increase was driven primarily by an increase in net interest income of $6.8 million, or 13.8%, a decrease in provision for credit losses of $1.1 million, or 34.6% and an increase in noninterest income of $1.0 million, or 8.7%.

Offsetting these positive contributions was an increase in noninterest expense of $4.6 million, or 15.0%.

Pretax pre-provision earnings in the third quarter of 2025 were $34.1 million, an increase of $3.3 million, or 10.6%, compared to $30.8 million for the comparable period of 2024.

Return on average total equity was 14.60% in the third quarter of 2025 versus 13.85% in the comparable period of 2024.

Return on average total assets was 1.53% in the third quarter of 2025 versus 1.39% in the comparable period of 2024.

The average equity to average assets ratio was 10.47% in the third quarter of 2025 versus 10.07% in the comparable period of 2024.

The Company’s tangible common equity to tangible assets ratio, which is a non-GAAP financial measure, was 10.79% at September 30, 2025, improved from 10.47% at September 30, 2024 and 10.19% at December 31, 2024.

Unrealized losses from available-for-sale investment securities were $159.9 million at September 30, 2025, compared to $154.5 million at September 30, 2024 and $191.1 million at December 31, 2024.

When excluding the impact of accumulated other comprehensive income (loss) ("AOCI") on tangible common equity and tangible assets, the Company's adjusted tangible common equity to adjusted tangible assets ratio, which is a non-GAAP financial measure, was 12.57% at September 30, 2025, improved from 12.29% at September 30, 2024 and 12.37% at December 31, 2024.

Total assets were $6.895 billion as of September 30, 2025 versus $6.678 billion as of December 31, 2024, an increase of $216.7 million, or 3.2% .

Balance sheet expansion was driven by increases to t otal loans, net of the allowance for credit losses, which increased $148.5 million, or 3.0%, available-for-sale securities, which increased $40.5 million, or 4.1%, and cash and cash equivalents, which increased $24.6 million, or 14.6%.

The balance sheet expansion from December 31, 2024 to September 30, 2025 was funded by an increase in total deposits of $123.4 million, or 2.1%, and borrowings of $56.2 million.

Total equity increased $63.6 million, or 9.3%, from $683.9 million at December 31, 2024 to $747.5 million at September 30, 2025.

Retained earnings increased $34.9 million, or 4.7%, primarily as a result of net income of $73.5 million less dividends declared and paid of $38.6 million and an improvement in accumulated other comprehensive income (loss) of $25.8 million.

CRITICAL ACCOUNTING POLICIES

7 unchanged sentences

RESULTS OF OPERATIONS

Selected income statement information for the three and six months ended June 30, 2025 and 2024 is presented in the following table:

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

Selected income statement information for the three and nine months ended September 30, 2025 and 2024 is presented in the following table:

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

(dollars in thousands) 2025 2024 2025 2024

20 unchanged sentences

Calculated by removing the fair market value adjustment impact of the available-for-sale investment securities portfolio included in accumulated other comprehensive income (loss) ("AOCI") from tangible equity and tangible assets.

Management believes this is an important measure because it provides better comparability to periods preceding the recent significant rise in prevailing interest rates and demonstrates long-term trends capital strength.

Management believes this is an important measure because it provides better comparability to periods preceding the recent increase in prevailing interest rates and demonstrates long-term trends capital strength.

See reconciliation on the following pages.

14 unchanged sentences

As of and For The As of and For The

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

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

(dollars in thousands, except per share data) 2025 2024 2025 2024

23 unchanged sentences

A reconciliation of these non-GAAP financial measures is provided below.

Three Months Ended Six Months Ended

(dollars in thousands, except per share data) Jun.

30, 2025 Jun.

30, 2024 Jun.

30, 2025 Jun.

Three Months Ended Nine Months Ended

(dollars in thousands, except per share data) Sep.

30, 2025 Sep.

30, 2024 Sep.

30, 2025 Sep.

Noninterest Income $ 12,954 $ 11,917 $ 35,368 $ 44,968

Net Gain on Visa Shares 0 (9,011) 0 (9,011)

Net (Gain) Loss on Visa Shares 0 15 0 (8,996)

Insurance Recovery 0 0 0 (1,000)

15 unchanged sentences

Adjusted Core Efficiency Ratio 50.65 % 49.66 % 49.28 % 49.95 %

(1) Core operational profitability was $3.4 million lower than reported net income for the three months ended June 30, 2024 and $4.1 million lower for the six months ended June 30, 2024.

Net income was $47.1 million in the first six months of 2025, which increased $1.1 million , or 2.4%, from $46.0 million for the comparable period of 2024 .

Diluted income per common share was $1.82 in the first six months of 2025 , an increase of 2.2% from $1.78 in the comparable period of 2024 .

The increase in net income for the first six months of 2025 was primarily due to an increase to net interest income of $12.0 million, or 12.6%, a decrease in noninterest expense of $843,000, or 1.3%, and a decrease in the provision for credit losses of $200,000, or 2.0%.

Offsetting these positive contributions to net income was a decrease to noninterest income of $10.6 million, or 32.2%.

Net income during the second quarter of 2025 was $27.0 million, an improvement of 19.6% from $22.5 million for the comparable period of 2024.

Diluted earnings per common share was $1.04 in the second quarter of 2025, an increase of 19.5% from $0.87 in the comparable period of 2024.

The increase was driven primarily by an increase in net interest income of $6.6 million, or 13.6%.

Contributing further to the increase was a decrease in noninterest expense of $2.9 million, or 8.7%, and a decrease in the provision for credit losses of $5.5 million.

Offsetting these positive contributions to net income was a decrease

in noninterest income of $9.0 million, or 43.8%.

Core operational profitability improved $7.8 million, or 40.5%, to $27.0 million for the second quarter of 2025, compared to $19.2 million for the second quarter of 2024.

(1) Core operational profitability was $11,000 higher than reported net income for the three months ended September 30, 2024 and $4.1 million lower for the nine months ended September 30, 2024.

Net income was $73.5 million in the first nine months of 2025, which increased $4.2 million , or 6.0%, from $69.3 million for the comparable period of 2024 .

Diluted earnings per common share was $2.85 in the first nine months of 2025 , an increase of 5.9% from $2.69 in the comparable period of 2024 .

The increase in net income for the first nine months of 2025 was primarily due to an increase to net interest income of $18.8 million, or 13.0%, and a decrease in the provision for credit losses of $1.3 million, or 9.6%.

Offsetting these positive contributions was a decrease to noninterest income of $9.6 million, or 21.3%, and an increase in noninterest expense of $3.7 million, or 3.9%.

Net income during the third quarter of 2025 was $26.4 million, an improvement of 13.1% from $23.3 million for the comparable period of 2024.

Diluted earnings per common share was $1.03 in the third quarter of 2025, an increase of 13.2% from $0.91 in the comparable period of 2024.

The increase was driven primarily by an increase in net interest income of $6.8 million, or 13.8%, a decrease in the provision for credit losses of $1.1 million, or 34.6%, and an increase in noninterest income

of $1.0 million, or 8.7%.

Offsetting these positive contributions was an increase in noninterest expense of $4.6 million, or 15.0%.

N et Interest Income

The following tables set forth consolidated information regarding average balances and rates:

Six Months Ended June 30,

(fully tax equivalent basis, dollars in thousands) Average Balance Interest Yield (1)/

Rate Average Balance Interest Yield (1)/

Nine Months Ended September 30,

(fully tax equivalent basis, dollars in thousands) Average Balance Interest Income Yield (1)/

Rate Average Balance Interest Income Yield (1)/

Earning Assets

17 unchanged sentences

In denominations over $100,000 595,367 17,678 3.97 814,034 27,729 4.55

Other short-term borrowings 66,380 1,520 4.62 126,443 3,531 5.62

Short-term borrowings 54,706 1,888 4.61 88,605 3,720 5.61

Long-term borrowings 888 0 0.00 0 0 0.00

11 unchanged sentences

The tax equivalent rate for tax exempt loans and tax exempt securities acquired after January 1, 1983 included the Tax Equity and Fiscal Responsibility Act of 1982 (“TEFRA”) adjustment applicable to nondeductible interest expenses.

Taxable equivalent basis adjustments were $2.2 million and $2.5 million for the six-month periods ended June 30, 2025 and June 30, 2024, respectively.

(2) Loan fees, which are immaterial in relation to total taxable loan interest income for the six months ended June 30, 2025 and 2024, are included as taxable loan interest income.

Taxable equivalent basis adjustments were $3.3 million and $3.6 million for the nine-month periods ended September 30, 2025 and September 30, 2024, respectively.

(2) Loan fees, which are immaterial in relation to total taxable loan interest income for the nine months ended September 30, 2025 and 2024, are included as taxable loan interest income.

(3) Nonaccrual loans are included in the average balance of taxable loans.

Three Months Ended June 30,

(fully tax equivalent basis, dollars in thousands) Average Balance Interest Yield (1)/

Rate Average Balance Interest Yield (1)/

Three Months Ended September 30,

(fully tax equivalent basis, dollars in thousands) Average Balance Interest Income Yield (1)/

Rate Average Balance Interest Income Yield (1)/

Earning Assets

17 unchanged sentences

In denominations over $100,000 563,920 5,345 3.76 844,882 9,775 4.60

Other short-term borrowings 33,297 398 4.79 77,077 1,077 5.62

Short-term borrowings 31,739 368 4.60 13,752 189 5.48

Long-term borrowings 1,200 0 0.00 0 0 0.00

11 unchanged sentences

Taxable equivalent basis adjustments were $1.1 million and $1.2 million in the three-month periods ended June 30, 2025 and June 30, 2024, respectively.

(2) Loan fees, which are immaterial in relation to total taxable loan interest income for the three months ended June 30, 2025 and 2024, are included as taxable loan interest income .

Taxable equivalent basis adjustments were $1.1 million and $1.1 million in the three-month periods ended September 30, 2025 and September 30, 2024, respectively.

(2) Loan fees, which are immaterial in relation to total taxable loan interest income for the three months ended September 30, 2025 and 2024, are included as taxable loan interest income .

(3) Nonaccrual loans are included in the average balance of taxable loans.

Net interest income, on a fully tax equivalent basis, increased $11.8 million, or 12.0%, to $110.0 million for the six months ended June 30, 2025, compared to $98.2 million for the first six months of 2024 .

Net interest income, on a fully tax equivalent basis, increased $18.6 million, or 12.5%, to $167.2 million for the nine months ended September 30, 2025, compared to $148.6 million for the first nine months of 2024 .

The increase in net interest income on a fully tax equivalent basis was driven by a decrease in deposit interest expense of $17.1 million , or 13.0% , from $131.1 million to $114.0 million .

Borrowings expense declined by $1.8 million , or 49.2% .

Securities interest income contributed further to the increase in fully tax equivalent net interest income, increasing by $638,000 , or 4.0% .

Securities interest income contributed further to the increase in fully tax equivalent net interest income, increasing by $1.2 million , or 5.1% .

A decline in loan interest income negatively impacted fully tax equivalent net interest income, decreasing $1.9 million, or 0.8%, from $254.7 million to $252.7 million between the two periods, due primarily to the decline in interest income from variable rate loans that resulted from the decline in interest rates.

Total average earning assets were $6.501 billion for the six months ended June 30, 2025, an increase of $245.0 million, or 3.9%, compared to $6.256 billion for the six months ended June 30, 2024 .

Average loans outstanding drove the increase to total average earning assets, increasing $205.0 million, or 4.1%, to $5.208 billion from $5.003 billion for the six months ended June 30, 2025 and 2024, respectively .

Total average earning assets were $6.498 billion for the nine months ended September 30, 2025, an increase of $217.6 million, or 3.5%, compared to $6.281 billion for the nine months ended September 30, 2024 .

Average loans outstanding drove the increase to total average earning assets, increasing $183.6 million, or 3.7%, to $5.207 billion from $5.024 billion for the nine months ended September 30, 2025 and 2024, respectively .

Offsetting this increase was a decrease to average investment securities of $5.6 million, or 0.5%, to $1.130 billion from $1.135 billion between the respective periods .

Total average interest bearing liabilities were $4.802 billion for the six months ended June 30, 2025, an increase of $203.0 million, or 4.4%, from $4.599 billion for the six months ended June 30, 2024.

This increase was driven by increased interest bearing deposits of $262.4 million, or 5.9%, from $4.473 billion for the six months ended June 30, 2024 to $4.735 billion for the six months ended June 30, 2025.

Offsetting the increase to average interest bearing deposits was a decrease in total average borrowings of $59.3 million, or 46.9%, to $67.1 million from $126.4 million for the six months ended June 30, 2025 and 2024 , respectively.

Noninterest bearing demand deposits decreased $1.3 million, or 0.1%, to $1.251 billion from $1.253 billion between the two periods.

The tax equivalent net interest margin was 3.41% for the six months ended June 30, 2025, compared to 3.16% during the first six months of 2024, representing a 25 basis point expansion between the two periods.

The net interest margin increase was primarily driven by a decrease to interest expense as a percentage of average earning assets, which decreased to 2.39% for the six months ended June 30, 2025 , down from 2.86% for the comparable period of 2024, or a decrease of 47 basis points.

Total average interest bearing liabilities were $4.808 billion for the nine months ended September 30, 2025, an increase of $191.4 million, or 4.1%, from $4.616 billion for the nine months ended September 30, 2024.

This increase was driven by growth in average interest bearing deposits of $224.4 million, or 5.0%, from $4.528 billion for the nine months ended September 30, 2024 to $4.752 billion for the nine months ended September 30, 2025.

Offsetting the increase to average interest bearing deposits was a decrease in total average borrowings of $33.0 million, or 37.3%, to $55.6 million from $88.6 million for the nine months ended September 30, 2025 and 2024 , respectively.

Noninterest bearing demand deposits decreased $834,000, or 0.1%, to $1.249 billion from $1.250 billion between the two periods.

The tax equivalent net interest margin was 3.44% for the nine months ended September 30, 2025, compared to 3.16% during the first nine months of 2024, representing a 28 basis point expansion between the two periods.

The net interest margin increase was primarily driven by a decrease to interest expense as a percentage of average earning assets, which decreased to 2.38% for the nine months ended September 30, 2025 , down from 2.87% for the comparable period of 2024, or a decrease of 49 basis points.

This decline was attributable to a decrease in the rate for total interest bearing liabilities of 68 basis points from 3.90% to 3.22% between the respective periods.

These decreases were driven by reduced costs associated with the repricing of the Company's interest bearing deposits as a result of monetary policy easing from the Federal Reserve Bank.

These decreases were driven by reduced costs associated with the repricing of the Company's interest bearing deposits and borrowings as a result of monetary policy easing from the Federal Reserve Bank.

The decrease in the rate for interest bearing liabilities was driven by a decrease in the average rate for interest bearing deposits of 66 basis points, from 3.87% to 3.21%.

2 unchanged sentences

The improvement in interest expense as a percentage of average earning assets was offset by a 21 basis point reduction in interest income as a percentage of average earning assets, which declined fro m 6.03% to 5.82%.

This decrease was primarily attributable to a decline in average loan yields, which decreased 30 basis points to 6.46% for the six months ended June 30, 2025, down from 6.76% for the comparable period of 2024.

This decrease was primarily attributable to a decline in average loan yields, which decreased 28 basis points to 6.49% for the nine months ended September 30, 2025, down from 6.77% for the comparable period of 2024.

This decrease was offset by an increase to investment securities yields, which increased 16 basis points from 2.82% to 2.98%.

The Company expects that any continued easing of monetary policy by the Federal Reserve Bank, which commenced in September 2024, would exert downward pressure on loan yields as variable rate commercial loans reprice lower.

however, this decline may be countered by further reductions in deposit pricing.

During the six months ended June 30, 2025, the Company recorded a prepayment fee of $541,000 from the early payment of a fixed rate commercial loan, which was recorded as part of interest income.

The prepayment fee benefited net interest margin by 1 basis point during the six months ended June 30, 2025.

Excluding the impact of the prepayment fee, net interest margin increased by 24 basis points to 3.40%.

Net interest income, on a fully tax equivalent basis, increased by $6.5 million, or 13.1% , for the three months ended June 30, 2025 as compared to the three months ended June 30, 2024.

The increase in net interest income on a fully tax equivalent basis was driven by a decrease in deposit interest expense of $5.3 million , or 11.8% , from $44.4 million to $39.1 million, and a decrease to borrowings expense of $679,000, or 63.0%.

A decline in loan interest income negatively impacted fully tax equivalent net interest income, decreasing $232,000, or 0.3%, from $85.0 million to $84.8 million and a decrease to securities interest income of $334,000 , or 4.1% .

Total average earning assets were $6.571 billion for the second quarter of 2025, an increase of $275.3 million, or 4.4%, compared to $6.295 billion for the second quarter of 2024.

The increase in average earning assets was driven by an increase in average loans of $194.8 million, or 3.9%, from $5.035 billion for the second quarter of 2024 to $5.230 billion for the second quarter of 2025.

Average investment securities increased $6.8 million, or 0.6%, from $1.119 billion for the second quarter of 2024 to $1.126 billion for the second quarter of 2025.

Total average interest bearing liabilities were $4.887 billion for the second quarter of 2025, an increase of $220.8 million, or 4.7%, from $4.666 billion for the second quarter of 2024.

This increase was driven by growth in interest bearing deposits of $263.4 million, or 5.7%, from $4.589 billion for the second quarter of 2024 to $4.852 billion for the second quarter of 2025.

Noninterest bearing demand deposits increased $13.2 million, or 1.1%, from $1.231 billion for the second quarter of 2024 to $1.244 billion for the second quarter of 2025 and average

borrowings decreased $42.6 million, or 55.2%, from $77.1 million for the second quarter of 2024 to $34.5 million for the second quarter of 2025.

The tax equivalent net interest margin expanded by 25 basis points, or 7.9%, to 3.42% for the second quarter of 2025 , compared to 3.17% for the second quarter of 2024 .

The net interest margin expansion was primarily driven by a decrease in interest expense as a percentage of average earning assets, which decreased to 2.41% for the three months ended June 30, 2025 , down from 2.90% for the comparable period of 2024 , for a decrease of 49 basis points.

During the nine months ended September 30, 2025, the Company recorded a prepayment fee of $541,000 from the early payment of a fixed rate commercial loan, which was recorded as part of interest income.

The prepayment fee benefited tax equivalent net interest margin by 1 basis point during the nine months ended September 30, 2025.

Net interest income, on a fully tax equivalent basis, increased by $6.8 million, or 13.5% , for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024.

The increase in net interest income on a fully tax equivalent basis was driven by a decrease in deposit interest expense of $7.1 million , or 15.6% , from $45.6 million to $38.4 million.

Securities interest income increased $573,000, or 7.3%, from $7.8 million to $8.4 million between the two periods.

A decline in loan interest income negatively impacted fully tax equivalent net interest income, decreasing $640,000, or 0.7%, from $86.5 million to $85.8 million.

Borrowings expense increased $179,000, or 94.7%, from $189,000 to $368,000.

Total average earning assets were $6.493 billion for the third quarter of 2025, an increase of $163.4 million, or 2.6%, compared to $6.329 billion for the third quarter of 2024.

The increase in average earning assets was driven by an increase in average loans of $141.5 million, or 2.8%, from $5.064 billion for the third quarter of 2024 to $5.206 billion for the third quarter of 2025.

Average investment securities decreased $1.6 million, or 0.1%, from $1.129 billion for the third quarter of 2024 to $1.127 billion for the third quarter of 2025.

Total average interest bearing liabilities were $4.818 billion for the third quarter of 2025, an increase of $168.4 million, or 3.6%, from $4.650 billion for the third quarter of 2024.

This increase was driven by growth in interest bearing deposits of $149.2 million, or 3.2%, from $4.636 billion for the third quarter of 2024 to $4.785 billion for the third quarter of 2025.

Noninterest bearing demand deposits increased $197,000, or 0.2%, at $1.244 billion for the

third quarter of 2025 and 2024.

Average borrowings increased $19.2 million, or 139.5%, from $13.8 million for the third quarter of 2024 to $32.9 million for the third quarter of 2025.

The tax equivalent net interest margin expanded by 34 basis points, or 10.8%, to 3.50% for the third quarter of 2025, compared to 3.16% for the third quarter of 2024 .

The net interest margin expansion was primarily driven by a decrease in interest expense as a percentage of average earning assets, which decreased to 2.37% for the three months ended September 30, 2025 , down from 2.88% for the comparable period of 2024 , for a decrease of 51 basis points.

This decrease was attributable to a decrease in the rate for total interest bearing liabilities of 71 basis points from 3.91% to 3.20% between the respective periods.

This decrease was driven by reduced costs associated with the repricing of the Company's interest bearing deposits as a result of monetary policy easing from the Federal Reserve Bank.

The average rate for interest bearing deposits declined 66 basis points from 3.89% to 3.23%.

This decrease was driven by reduced costs associated with the repricing of the Company's interest bearing deposits and borrowings as a result of monetary policy easing from the Federal Reserve Bank.

The average rate for interest bearing deposits declined 72 basis points fro m 3.91% to 3.19% .

Contributing further to the reduction in the rate for interest bearing liabilities was a reduction in the average borrowings rate, which declined 105 basis points from 5.48% to 4.43%.

The improvement in interest expense as a percentage of average earning assets was offset by a 24 basis point reduction in interest income as a percentage of average earning assets, which declined from 6.07% for the second quarter of 2024 to 5.83% for the second quarter of 2025.

Th e improvement in interest expense as a percentage of average earning assets was offset by a 17 basis point reduction in interest income as a percentage of average earning assets, which declined from 6.04% for the third quarter of 2024 to 5.87% for the third quarter of 2025.

This decrease was primarily attributable to a decrease in loan yields, which decreased 25 basis points from 6.79% to 6.54% between the two periods.

This decrease was offset by an increase to investment securities yields, which increased 20 basis points from 2.77% to 2.97% between the two periods.

During the second quarter of 2025, the Company recorded a prepayment fee of $541,000 from the early payment of a fixed rate commercial loan, which was recorded as part of interest income.

The prepayment fee benefited net interest margin by 3 basis points for the second quarter of 2025.

Provision for Credit Losses

The Company recorded provision for credit losses expense of $9.8 million for the six months ended June 30, 2025, compared to provision expense of $10.0 million during the comparable period of 2024, a decrease of $200,000, or 2.0%.

Net charge-offs were $29.2 million during the six month period ended June 30, 2025, compared to $1.3 million during the comparable period of 2024, an increase of $27.9 million.

The increase in net charge offs between the respective periods was attributable to a partial charge off related to a previously disclosed $43.3 million nonperforming credit for an industrial company in Northern Indiana.

During the six months ended June 30, 2025, the nonperforming borrower reached an agreement to sell and liquidate the business to two unrelated entities.

The transactions are expected to close in the third quarter of 2025.

As a result of the pending sale and liquidation, the Company recognized a charge off of $28.6 million during the second quarter, which was fully allocated at the time of the charge off.

The Company expects to collect the remainder of the outstanding principal balance from sale and liquidation proceeds and proceeds from the personal guarantee from the borrower.

The Company recorded provision expense of $3.0 million during the second quarter of 2025, compared to $8.5 million during the second quarter of 2024.

Provision expense during the quarter was primarily driven by an increase in the specific reserve allocation from the aforementioned nonperforming credit as well as loan growth during the period.

Net charge-offs were $28.9 million during the second quarter of 2025 compared to $949,000 during the second quarter of 2024.

The Company recorded provision for credit losses expense of $11.8 million for the nine months ended September 30, 2025, compared to provision expense of $13.1 million during the comparable period of 2024, a decrease of $1.3 million, or 9.6%.

Net charge-offs were $29.6 million during the nine month period ended September 30, 2025, compared to $1.4 million during the comparable period of 2024, an increase of $28.2 million.

The increase in net charge offs between the respective periods was attributable to a partial charge off related to a previously disclosed nonperforming credit for an industrial company in Northern Indiana.

This credit was reserved for prior to the partial charge off.

The Company recorded provision expense of $2.0 million during the third quarter of 2025, compared to $3.1 million during the third quarter of 2024.

Net charge-offs were $384,000 during the third quarter of 2025 compared to $143,000 during the third quarter of 2024.

Additional factors considered by management in determining provision expense included key loan quality metrics, reserve coverage of nonperforming loans, economic conditions in the Company’s markets, and changes in the facts and circumstances of watch list credits, which includes the security position of the borrower.

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Noninterest Income

Noninterest income categories for the three and six months ended June 30, 2025 and 2024 are shown in the following tables:

Six Months Ended

Noninterest income categories for the three and nine months ended September 30, 2025 and 2024 are shown in the following tables:

Nine Months Ended

September 30,

(dollars in thousands) 2025 2024 Dollar Change Percent Change

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Net securities gains (losses) 0 (46) 46 100.0

Net gain on Visa shares 0 9,011 (9,011) (100.0)

Net gain (loss) on Visa shares 0 8,996 (8,996) (100.0)

Other income 2,005 3,908 (1,903) (48.7)

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Three Months Ended

September 30,

(dollars in thousands) 2025 2024 Dollar Change Percent Change

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Loan and service fees 3,419 2,955 464 15.7

Merchant card fee income 854 892 (38) (4.3)

Merchant and interchange fee income 892 898 (6) (0.7)

Bank owned life insurance income 1,567 1,068 499 46.7

Interest rate swap fee income 20 0 20 100.0

Mortgage banking income (loss) (6) (7) 1 (14.3)

Net gain on Visa shares 0 9,011 (9,011) (100.0)

Net gain (loss) on Visa shares 0 (15) 15 (100.0)

Other income 749 1,027 (278) (27.1)

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Noninterest income to total revenue 18.77 % 19.48 %

Noninterest income decreased by $10.6 million, or 32.2%, to $22.4 million for the six months ended June 30, 2025, compared to $33.1 million for the prior year six-month period.

Noninterest income was elevated during the first six months of 2024 as compared to the comparable period of 2025 primarily as a result of the net gain on Visa shares of $9.0 million and a $1.0 million insurance recovery.

Adjusted core noninterest income, a non-GAAP financial measure that excludes the impact of these non-routine events, declined $626,000, or 2.7%, from $23.0 million for the six months ended June 30, 2024.

Other income decreased $1.6 million, or 56.4%, as other income during the first six months of 2024 benefited from the $1.0 million insurance recovery.

Reduced limited partnership investment income further contributed to the decline between the periods.

Bank owned life insurance income decreased $564,000, or 29.3%, primarily as a result of reduced market performance from the Bank's variable bank owned life insurance policies, which correlate to returns in the equities markets.

Offsetting these decreases were increases to wealth advisory fees of $482,000, or 9.5%, and service charges on deposit accounts of $104,000, or 1.9%.

The increase in wealth advisory fees was primarily driven by continued growth in customers and assets under management.

The Company’s noninterest income decreased $9.0 million, or 43.8%, to $11.5 million for the second quarter of 2025, compared to $20.4 million for the second quarter of 2024.

Noninterest income was elevated during the second quarter of 2024 as compared to the second quarter of 2025 as a result of the net gain on Visa shares of $9.0 million that was recorded in the second quarter of 2024.

Adjusted core noninterest income, a non-GAAP financial measure that excludes the effect of the net gain on Visa shares, increased $58,000, or less than 1%, from $11.4 million during the second quarter of 2024.

Bank owned life insurance income increased $150,000, or 16.9%, primarily as a result of increased general account bank owned life insurance income from the purchase of insurance policies during the second quarter of 2025.

Mortgage banking income increased $101,000 due to growth in the Company's mortgage pipeline, which favorably impacted secondary market loan sale gains and mortgage rate lock income.

Wealth advisory fees increased $70,000, or 2.7%, driven by continued growth in customers and assets under management.

Investment brokerage fees increased $72,000, or 15.1%, due to increased volume and product mix.

Noninterest income decreased by $9.6 million, or 21.3%, to $35.4 million for the nine months ended September 30, 2025, compared to $45.0 million for the prior year nine-month period.

Noninterest income was elevated during the first nine months of 2024 as compared to the comparable period of 2025 primarily because of the net gain on Visa shares of $9.0 million and a $1.0 million insurance recovery.

Adjusted core noninterest income, a non-GAAP financial measure that excludes the impact of these non-routine events, improved $396,000, or 1.1%, to $35.4 million from $35.0 million for the nine months ended September 30, 2025 and 2024, respectively.

Wealth advisory fees improved $619,000, or 8.0%, loan and service fees improved $454,000, or 5.1%, service charges on deposit accounts improved $190,000, or 2.3%, and investment brokerage fees improved $121,000, or 8.4%.

The increase to wealth advisory fees was driven by continued growth in customers and assets under management.

Loan and service fees income benefitted from the recognition of a loan syndication fee in Indianapolis.

Investment brokerage fees was driven higher by increased volume and commissions on product mix.

Other income decreased $1.9 million, or 48.7%.

Other income during the first nine months of 2024 benefited from the $1.0 million insurance recovery.

Additionally, reduced limited partnership investment income further contributed to the decline between the periods.

The Company’s noninterest income increased $1.0 million, or 8.7%, to $13.0 million for the third quarter of 2025, compared to $11.9 million for the third quarter of 2024.

Loan and service fees income increased $464,000, or 15.7%, wealth advisory fees increased $137,000, or 5.0%, and investment brokerage fees increased $119,000, or 27.2%.

Bank owned life insurance income increased $499,000, or 46.7%, from increased income from additional general account policies purchased in 2025 and from improved market performance of the bank's variable owned life insurance policies, which correlate to returns in the equities markets.

Offsetting these increases was a decrease to other income of $278,000, or 27.1%, primarily driven by reduced limited partnership investment income.

Noninterest Expense

Noninterest expense categories for the three and six months ended June 30, 2025 and 2024 are shown in the following tables:

Six Months Ended

Noninterest expense categories for the three and nine months ended September 30, 2025 and 2024 are shown in the following tables:

Nine Months Ended

September 30,

(dollars in thousands) 2025 2024 Dollar Change Percent Change

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Three Months Ended

September 30,

(dollars in thousands) 2025 2024 Dollar Change Percent Change

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Efficiency ratio 50.65 % 49.67 %

Noninterest expense decreased by $843,000, or 1.3%, for the six months ended June 30, 2025 to $63.2 million compared to $64.0 million for the six months ended June 30, 2024.

Noninterest expense was elevated during the first six months of 2024 as compared to 2025 due to a $4.5 million accrual that was recorded from the resolution of a legal matter.

Adjusted core noninterest expense, which excludes the impact of the $4.5 million legal accrual, increased $3.7 million, or 6.2%, from $59.5 million for the six months ended June 30, 2024.

Salaries and benefits expense increased by $2.0 million, or 6.1%, due primarily to increased performance-based compensation accruals of $1.3 million, increased salaries of $1.3 million and offset by decreased deferred compensation expense of $763,000.

Data processing fees and supplies and expense increased $766,000, or 10.0%.

Net occupancy expense increased $289,000, or 8.4%, as a result of increased occupancy expense from the continued expansion of the Company's branch network and improvements to existing facilities.

Offsetting these increases were decreases to other expense of $3.4 million, or 40.9%, and professional fees of $500,000, or 10.9%.

Noninterest expense decreased $2.9 million, or 8.7%, to $30.4 million for the second quarter of 2025, compared to $33.3 million during the second quarter of 2024.

Noninterest expense was elevated during the second quarter of 2024 as compared to 2025 due to a $4.5 million accrual that was recorded from the resolution of a legal matter.

Adjusted core noninterest expense, which excludes the impact of the legal accrual, increased $1.6 million, or 5.7%, from $28.8 million for the second quarter of 2024.

Salaries and benefits expense increased by $938,000, or 5.8%.

The primary drivers for the increase to salaries and benefits expense were increased salaries expense of $756,000 and increased health insurance expense of $127,000.

Additionally, data processing fees and supplies expense increased $340,000, or 8.9%, from continued investment in customer-facing and operational technology solutions.

Offsetting these increases were decreases to other expense of $3.8 million, or 62.5%, professional fees of $417,000, or 19.6%, and corporate and business development expense of $105,000, or 8.3%.

The decrease to other expense was driven by the legal accrual recorded during the second quarter of 2024.

The decrease to professional fees was primarily driven by reduced technology implementation consulting fees and swap collateral fees.

Corporate and business development expense decreased primarily as a result of lower advertising expense.

The Company's income tax expense increased $1.3 million, or 15.3%, to $10.1 million in the six months ended June 30, 2025, compared to $8.8 million for the same period in 2024.

The effective tax rate was 17.7% in the six months ended June 30, 2025, compared to 16.0% for the comparable period of 2024, driven by a reduction in the tax benefit recognized from stock-based compensation vesting of shares for plan participants.

Noninterest expense increased by $3.7 million, or 3.9%, for the nine months ended September 30, 2025 to $98.2 million compared to $94.4 million for the nine months ended September 30, 2024.

Salaries and employee benefits expense increased $5.9 million, or 12.0%, due to performance-based incentive compensation accruals of $3.8 million, salaries and wages of $2.3 million, and health insurance of $385,000.

Offsetting these increases was a decrease in variable deferred compensation expense of $549,000.

Data processing fees and supplies expense increased $1.1 million, or 9.8%, and net occupancy expense increased $445,000, or 8.6%.

The increase to data processing fees and supplies expense was driven by continued investment in customer-facing and operational technology solutions.

Net occupancy expense increased due to the continued expansion of the Bank's physical branch network, with the Bank's 55th branch location opening in Westfield, Indiana, during the third quarter.

Offsetting these increases was a decrease to other expense of $3.1 million, or 28.0%, and a decrease in professional fees of $863,000, or 12.9%.

Adjusted core noninterest expense, a non-GAAP financial measure, increased $8.3 million, or 9.2%, to $98.2 million from $89.9 million at September 30, 2025 and 2024, respectively.

Noninterest expense increased $4.6 million, or 15.0%, to $35.0 million for the third quarter of 2025, compared to $30.4 million during the third quarter of 2024.

Salaries and benefits expense increased by $3.9 million, or 23.9%, primarily the result of increased accruals related to performance-based incentive compensation plans.

Other expense increased by $364,000, or 14.3%, was driven by semi-annual stock-based compensation awards to directors, which are paid in January and July.

and processing fees and supplies expense increased $348,000, or 9.2%.

Corporate and business development expense increased $194,000, or 14.2%, due to increased advertising spending, corporate development expenses, and charitable and community-driven contributions.

Net occupancy expense expanded by $156,000, or 9.1%.

Offsetting these increases was a decrease to professional fees of $363,000, or 17.4%.

The Company's income tax expense increased $2.6 million, or 19.7%, to $15.8 million in the nine months ended September 30, 2025, compared to $13.2 million for the same period in 2024.

The effective tax rate was 17.7% in the nine months ended September 30, 2025, compared to 16.0% for the comparable period of 2024, driven by a reduction in the tax benefit recognized from stock-based compensation vesting of shares for plan participants.

On July 4, 2025, the United States enacted tax reform legislation through the One Big Beautiful Bill Act, which changes existing U.S.

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FINANCIAL CONDITION

Total assets were $6.964 billion as of June 30, 2025 versus $6.678 billion as of December 31, 2024, an increase of $285.9 million, or 4.3% .

The balance sheet expansion from December 31, 2024 to June 30, 2025 was funded by an increase in total deposits of $275.9 million, or 4.7%.

Total assets were $6.895 billion as of September 30, 2025 versus $6.678 billion as of December 31, 2024, an increase of $216.7 million, or 3.2% .

The balance sheet expansion from December 31, 2024 to September 30, 2025 was funded by an increase in total deposits of $123.4 million, or 2.1% and borrowings of $56.2 million.

The increase in total deposits was driven by an increase in interest bearing deposits of $152.6 million, or 3.3%, and was offset by a decrease in noninterest bearing deposits of $29.2 million, or 2.3%.

Total equity increased $26.1 million, or 3.8%, from $683.9 million at December 31, 2024 to $710.0 million at June 30, 2025.

Retained earnings increased $21.3 million, or 2.9%, as a result of net income of $47.1 million offset by dividends declared and paid of $25.7 million.

Total equity increased $63.6 million, or 9.3%, from $683.9 million at December 31, 2024 to $747.5 million at September 30, 2025.

Retained earnings increased $34.9 million, or 4.7%, as a result of net income of $73.5 million less dividends declared and paid of $38.6 million and an improvement in accumulated other comprehensive income (loss) of $25.8 million.

Uses of Funds

Total Cash and Cash Equivalents

Total cash and cash equivalents increased by $142.0 million, or 84.4%, to $310.2 million at June 30, 2025, from $168.2 million at December 31, 2024.

Total cash and cash equivalents increased by $24.6 million, or 14.6%, to $192.8 million at September 30, 2025, from $168.2 million at December 31, 2024.

Cash and cash equivalents include short-term investments.

The fluctuation in cash and cash equivalents at June 30, 2025 was driven by an increase in cash and due from banks of $25.7 million, or 35.8%, and an increase in interest bearing short-term investment accounts of $116.3 million, or 120.5%, which were deposited primarily at the Federal Reserve Bank of Chicago.

The fluctuation in cash and cash equivalents at September 30, 2025 was driven by an increase in interest bearing short-term investment accounts of $28.9 million, or 29.9%, which were deposited primarily at the Federal Reserve Bank of Chicago.

Cash and due from banks decreased $4.2 million, or 5.9%.

Investment Portfolio

The amortized cost and the fair value of securities as of June 30, 2025 and December 31, 2024 were as follows:

June 30, 2025 December 31, 2024

The amortized cost and the fair value of securities as of September 30, 2025 and December 31, 2024 were as follows:

September 30, 2025 December 31, 2024

(dollars in thousands) Amortized

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Available-for-Sale

U.S Treasury securities $ 5,011 $ 5,001 $ 0 $ 0

U.S government sponsored agencies 139,611 117,067 137,150 109,435

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Total Investment Portfolio $ 1,324,663 $ 1,145,742 $ 1,314,069 $ 1,104,533

At June 30, 2025 and December 31, 2024, there were no holdings of securities of any one issuer, other than the U.S.

At September 30, 2025 and December 31, 2024, there were no holdings of securities of any one issuer, other than the U.S.

government agencies and government sponsored entities, in an amount greater than 10% of stockholders’ equity.

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This is taken into consideration when evaluating the gain or loss of investment securities in the portfolio and the potential for an allowance for credit losses.

Purchases of available-for-sale securities were $32.8 million in the first six months of 2025.

Investment securities represented 16.2% of total assets on June 30, 2025, compared to 16.8% of total assets on December 31, 2024.

Purchases of available-for-sale securities were $60.3 million in the first nine months of 2025.

Investment securities represented 16.9% of total assets on September 30, 2025, compared to 16.8% of total assets on December 31, 2024.

The Company anticipates receiving principal and interest cash flows of approximately $34.1 million during the remainder of 2025 from the investment securities portfolio and plans to use that liquidity to fund loan growth as well as to fund reinvestments to the investment securities portfolio.

Tax equivalent adjusted effective duration for the investment securities portfolio was 5.9 years at June 30, 2025 and 6.0 years at December 31, 2024.

Paydowns from prepayments and scheduled payments of $31.3 million were received in the first six months of 2025, and the amortization of premiums, net of the accretion of discounts, was $2.0 million.

There were no sales of available-for-sale investment securities in the first six months of 2025.

No allowance for credit losses was recognized for available-for-sale or held-to-maturity securities as of June 30, 2025 and December 31, 2024.

The fair value of the available-for-sale investment securities portfolio as of June 30, 2025 included net unrealized losses of $185.3 million, compared to net unrealized losses of $191.1 million as of December 31, 2024.

Tax equivalent adjusted effective duration for the investment securities portfolio was 5.8 years at September 30, 2025 and 6.0 years at December 31, 2024.

Paydowns from prepayments and scheduled payments of $48.1 million were received in the first nine months of 2025, and the amortization of premiums, net of the accretion of discounts, was $3.0 million.

There were no sales of available-for-sale investment securities in the first nine months of 2025.

No allowance for credit losses was recognized for available-for-sale or held-to-maturity securities as of September 30, 2025 and December 31, 2024.

The fair value of the available-for-sale investment securities portfolio as of September 30, 2025 included net unrealized losses of $159.9 million, compared to net unrealized losses of $191.1 million as of December 31, 2024.

Unrealized losses in the available-for-sale investment securities portfolio resulted from the declines in market values of the investment securities resulting from the rise in interest rates.

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Real Estate Mortgage Loans Held-for-Sale

Real estate mortgage loans held-for-sale decreased by $63,000, or 3.7%, to $1.6 million at June 30, 2025, from $1.7 million at December 31, 2024.

Real estate mortgage loans held-for-sale decreased by $975,000, or 57.4%, to $725,000 at September 30, 2025, from $1.7 million at December 31, 2024.

The balance of this asset category is subject to a high degree of variability depending on, among other factors, recent mortgage loan rates and the timing of loan sales into the secondary market.

The Company generally sells conforming qualifying mortgage loans it originates on the secondary market.

Proceeds from sales of residential mortgages totaled $8.7 million in the first six months of 2025, compared to $9.1 million in the first six months of 2024.

Proceeds from sales of residential mortgages totaled $16.2 million in the first nine months of 2025, compared to $12.7 million in the first nine months of 2024.

Management expects the volume of loans originated for sale in the secondary market to increase if long-term interest rates decline from current levels.

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Mortgage loans serviced for others are not included in the accompanying consolidated balance sheets.

The unpaid principal balances of loans serviced for others were $302.6 million and $313.0 million, as of June 30, 2025 and December 31, 2024, respectively.

The unpaid principal balances of loans serviced for others were $299.0 million and $313.0 million, as of September 30, 2025 and December 31, 2024, respectively.

Loan Portfolio

The loan portfolio by portfolio segment as of June 30, 2025 and December 31, 2024 is summarized as follows:

(dollars in thousands) June 30,

The loan portfolio by portfolio segment as of September 30, 2025 and December 31, 2024 is summarized as follows:

(dollars in thousands) September 30,

2025 December 31,

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Loans, net $ 5,180,451 $ 5,031,988 $ 148,463

Total net loans, excluding real estate mortgage loans held-for-sale, increased by $128.3 million, or 2.5%, to $5.160 billion at June 30, 2025 from $5.032 billion at December 31, 2024.

Total net loans, excluding real estate mortgage loans held-for-sale, increased by $148.5 million, or 3.0%, to $5.180 billion at September 30, 2025 from $5.032 billion at December 31, 2024.

The increase was primarily driven by originations of loans concentrated in the commercial and industrial loans, commercial real estate and multi-family residential loans and consumer 1-4 family mortgage loans categories and was offset by paydowns in the agri-business and agricultural loans segment, which traditionally experiences seasonal fluctuations in activity.

The following table summarizes the Company’s non-performing assets as of June 30, 2025 and December 31, 2024:

(dollars in thousands) June 30,

The following table summarizes the Company’s non-performing assets as of September 30, 2025 and December 31, 2024:

(dollars in thousands) September 30,

2025 December 31,

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Nonperforming assets to total assets 0.28 % 0.85 %

Total nonperforming assets decreased by $25.8 million, or 45.3%, to $31.1 million during the six month period ended June 30, 2025.

The ratio of nonperforming assets to total assets decreased 40 basis points from 0.85% at December 31, 2024 to

0.45% at June 30, 2025.

The decrease in nonperforming assets was driven by the $28.6 million partial charge off related to the previously disclosed $43.3 million nonperforming loan.

Total nonperforming assets decreased by $37.8 million, or 66.5%, to $19.1 million during the nine month period ended September 30, 2025.

The ratio of nonperforming assets to total assets decreased 57 basis points from 0.85% at December 31, 2024 to 0.28% at September 30, 2025.

The decrease in nonperforming assets was driven by the $28.6 million partial charge off of a previously disclosed nonperforming loan to a northern Indiana industrial company.

A loan is individually analyzed when full payment under the original loan terms is not expected.

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If a loan is individually analyzed, a portion of the allowance may be allocated so that the loan is reported, net, at the present value of estimated future cash flows or at the fair value of collateral if repayment is expected solely from the collateral.

Total individually analyzed loans decreased by $26.6 million, or 33.8%, to $52.1 million at June 30, 2025 from $78.6 million at December 31, 2024.

The decrease to individually analyzed loans was primarily related to the previously disclosed $28.6 million partial loan charge off, which was fully allocated for.

Total individually analyzed loans decreased by $39.2 million, or 49.8%, to $39.5 million at September 30, 2025 from $78.6 million at December 31, 2024.

The decrease to individually analyzed loans was primarily related to the previously disclosed partial loan charge off, which was fully allocated within the allowance for credit losses.

Loans are charged against the allowance for credit losses when management believes that the principal is uncollectible.

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If an asset or portion thereof is classified as a loss, the Company’s policy is to either establish specified allowances for credit losses in the amount of 100% of the portion of the asset classified loss or charge-off such amount.

At June 30, 2025, the allowance for credit losses was 1.27% of total loans, a decrease of 41 basis points from 1.68% at December 31, 2024.

At June 30, 2025, management believed the allowance for credit losses was at a level commensurate with the overall risk exposure of the loan portfolio.

At September 30, 2025, the allowance for credit losses was 1.30% of total loans, a decrease of 38 basis points from 1.68% at December 31, 2024.

The decline was primarily attributed to the previously disclosed charge-off.

At September 30, 2025, management believed the allowance for credit losses was at a level commensurate with the overall risk exposure of the loan portfolio.

However, if economic conditions deteriorate, certain borrowers may experience difficulty and the level of nonperforming loans, charge-offs and delinquencies could rise and require increases in the allowance for credit losses.

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The Company has limited exposure to commercial office space borrowers, all of which are located in the Bank's Indiana markets.

Loans totaling $106.9 million for this sector represented 2.1% of total loans at June 30, 2025.

Additionally, commercial real estate loans secured by multi-family residential properties and secured by non-farm non-residential properties were approximately 221.0% of the Bank's risk-based capital at June 30, 2025.

Loans totaling $107.4 million for this sector represented 2.1% of total loans at September 30, 2025.

Additionally, commercial real estate loans secured by multi-family residential properties and secured by non-farm non-residential properties were approximately 213.1% of the Bank's risk-based capital at September 30, 2025.

The Company continues to monitor the impact of tariffs on its borrowers.

As of June 30, 2025, based on management’s review of the loan portfolio, the Company had 89 credit relationships with principal balances totaling $191.6 million on the classified loan list versus 81 credit relationships with principal balances totaling $211.1 million as of December 31, 2024.

As of June 30, 2025, the Company had $132.5 million of assets classified as Special Mention, $44.3 million classified as Substandard, $14.8 million classified as Doubtful and $0 classified as Loss as compared to $123.6 million, $44.0 million, $43.5 million and $0, respectively, at December 31, 2024.

Watch list loans as a percentage of total loans were 3.67% as of June 30, 2025, down 46 basis points from 4.13% at December 31, 2024.

As of September 30, 2025, based on management’s review of the loan portfolio, the Company had 97 credit relationships with principal balances totaling $157.2 million on the classified loan list versus 81 credit relationships with principal balances totaling $211.1 million as of December 31, 2024.

As of September 30, 2025, the Company had $111.0 million of assets classified as Special Mention, $46.2 million classified as Substandard, $97,000 classified as Doubtful and $0 classified as Loss as compared to $123.6 million, $44.0 million, $43.5 million and $0, respectively, at December 31, 2024.

Watch list loans as a percentage of total loans were 3.00% as of September 30, 2025, down 113 basis points from 4.13% at December 31, 2024.

In addition to the previously disclosed partial loan charge off, net paydowns and upgrades to other watch list credits further contributed to the decrease in classified loans between December 31, 2024 and September 30, 2025.

Allowance estimates are developed by management after taking into account actual loss experience adjusted for current economic conditions and a reasonably supportable forecast period.

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Allowance estimates are considered a prudent measurement of the risk in the Company’s loan portfolio based upon loan segment.

In accordance with applicable accounting guidance, the allowance is based on information about past events, including historical experience, current conditions, and reasonable and supportable forecasts

that affect the collectability of the reported amounts.

For a more thorough discussion of the allowance for credit losses methodology see the "Critical Accounting Policies" section of this Item 2.

The allowance for credit losses decreased $19.4 million, or 22.6%, from $86.0 million at December 31, 2024 to $66.6 million at June 30, 2025.

The decrease was primarily driven by net charge offs of $29.2 million.

Net charge offs for the six months ended June 30, 2025 primarily consisted of one $28.6 million partial loan charge off previously discussed.

The allowance for credit losses decreased $17.8 million, or 20.7%, from $86.0 million at December 31, 2024 to $68.2 million at September 30, 2025.

The decrease was primarily driven by net charge offs of $29.6 million, offset by provision for credit losses expense.

Net charge offs for the nine months ended September 30, 2025 primarily consisted of the previously disclosed $28.6 million partial loan charge off.

As the bulk of the Company’s lending activity is concentrated in the commercial loan portfolio, which can result in overall asset quality being influenced by a small number of credits, management has historically considered growth and portfolio composition when determining credit loss allocations.

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In addition, the Company has access to unsecured borrowing capacity through long established relationships within the brokered deposit markets, Federal Funds lines from correspondent bank partners and Insured Cash Sweep (ICS) one-way buy funds available from the Intrafi network.

As of June 30, 2025, the Company had access to $3.678 billion in unused liquidity available from these aggregate sources as compared to $3.681 billion at December 31, 2024.

The average daily deposits and borrowings together with average rates paid on those deposits and borrowings for the six months ended June 30, 2025 and 2024 are summarized in the following table:

Six months ended June 30,

As of September 30, 2025, the Company had access to $3.585 billion in unused liquidity available from these aggregate sources as compared to $3.681 billion at December 31, 2024.

The average daily deposits and borrowings together with average rates paid on those deposits and borrowings for the nine months ended September 30, 2025 and 2024 are summarized in the following table:

Nine months ended September 30,

(dollars in thousands) Balance Rate Balance Rate

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Total funding sources $ 6,056,423 2.56 % $ 5,865,839 3.07 %

Average total deposits were $5.986 billion for the six months ended June 30, 2025, an increase of $261.0 million, or 4.6%, from the comparable period in 2024.

Average total borrowings were $67.1 million for the six months ended June 30, 2025, a decrease of $59.3.

Average total deposits were $6.001 billion for the nine months ended September 30, 2025, an increase of $223.6 million, or 3.9%, from the comparable period in 2024.

Average total borrowings were $55.6 million for the nine months ended September 30, 2025, a decrease of $33.0.

million, or 37.3%, from the comparable period in 2024.

Total average deposit costs decreased 45 basis points from 3.00% for the six months ended June 30, 2024, to 2.55% for the six months ended June 30, 2025.

Total average borrowing costs decreased 105 basis points from 5.62% for the six months ended June 30, 2024 to 4.57% for the six months ended June 30, 2025.

As a result, total funding costs decreased by 49 basis points from 3.06% for the six months ended June 30, 2024, to 2.57% for the six months ended June 30, 2025.

The decrease in funding costs between the two periods was attributable to easing of monetary policy by the Federal Reserve Bank which allowed deposit costs to reprice to lower levels and reduced the borrowings average rates.

Total average deposit costs decreased 49 basis points from 3.03% for the nine months ended September 30, 2024, to 2.54% for the nine months ended September 30, 2025.

Total average borrowing costs decreased 107 basis points from 5.61% for the nine months ended September 30, 2024 to 4.54% for the nine months ended September 30, 2025.

As a result, the total cost of funding sources decreased by 51 basis points from 3.07% for the nine months ended September 30, 2024, to 2.56% for the nine months ended September 30, 2025.

The decrease in the cost of funding sources between the two periods was attributable to easing of monetary policy by the Federal Reserve Bank which allowed deposit costs to reprice to lower levels and reduced the borrowings average rates.

Deposits and Borrowings

As of June 30, 2025, total deposits increased by $275.9 million, or 4.7%, from December 31, 2024.

Core deposits, which excludes brokered deposits, increased by $167.0 million, or 2.9%, to $6.026 billion as of June 30, 2025 from $5.859 billion as of December 31, 2024.

Total brokered deposits were $150.4 million at June 30, 2025, compared to $41.6 million at December 31, 2024, an increase of $108.9 million, or 261.9%.

The following table summarizes deposit composition at June 30, 2025 and December 31, 2024:

(dollars in thousands) June 30,

As of September 30, 2025, total deposits increased by $123.4 million, or 2.1%, from December 31, 2024.

Core deposits, which excludes brokered deposits, decreased by $10.7 million, or 0.2%, to $5.849 billion as of September 30, 2025 from $5.859 billion as of December 31, 2024.

Total brokered deposits were $175.6 million at September 30, 2025, compared to $41.6 million at December 31, 2024, an increase of $134.1 million, or 322.6%.

The following table summarizes deposit composition at September 30, 2025 and December 31, 2024:

(dollars in thousands) September 30,

2025 Percentage of Total December 31,

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Total deposits $ 6,024,318 100.0 % $ 5,900,966 100.0 % $ 123,352

On June 30, 2025, commercial deposits represented 36.6% of total deposits versus 38.4% at December 31, 2024.

Retail deposits represented 28.4% at June 30, 2025 versus 30.2% at December 31, 2024.

Public Funds deposits represented 32.6% at June 30, 2025 versus 30.7% at December 31, 2024.

Brokered deposits represented 2.4% of total deposits at June 30, 2025 versus 0.7% at December 31, 2024.

Commercial deposits contracted $12.4 million, or 0.5%, from $2.269 billion at December 31, 2024 to $2.257 billion at June 30, 2025;

retail deposits contracted $25.0 million, or 1.4%, from $1.781 billion at December 31, 2024 to $1.756 billion at June 30, 2025;

and public funds deposits expanded $204.4 million, or 11.3%, from $1.810 billion at December 31, 2024 to $2.014 billion at June 30, 2025, due to growth in public funds customers and seasonal activity.

Deposits not covered by FDIC deposit insurance were 59.4% as of June 30, 2025, versus 62.1% at December 31, 2024.

Deposits not covered by FDIC deposit insurance or the Indiana Public Deposit Insurance Fund, which insures public fund deposits in Indiana, were 27.1% of total deposits as of June 30, 2025, versus 32.3% as of December 31, 2024.

As of June 30, 2025 and December 31, 2024, 98.2% and 98.0% of deposit accounts had deposit balances less than $250,000, respectively.

As of June 30, 2025, total stockholders’ equity was $710.0 million, an increase of $26.1 million, or 3.8%, from $683.9 million at December 31, 2024.

The increase to total stockholders' equity was driven by net income of $47.1 million and was reduced by dividends declared and paid of $25.7 million and improvement of $5.4 million in accumulated other comprehensive income (loss).

On September 30, 2025, commercial deposits represented 38.0% of total deposits versus 38.4% at December 31, 2024.

Retail deposits represented 28.6% at September 30, 2025 versus 30.2% at December 31, 2024.

Public Funds deposits represented 30.5% at September 30, 2025 versus 30.7% at December 31, 2024.

Brokered deposits represented 2.9% of total deposits at September 30, 2025 versus 0.7% at December 31, 2024.

Commercial deposits expanded $19.7 million, or 0.9%, from $2.269 billion at December 31, 2024 to $2.289 billion at September 30, 2025;

public funds deposits expanded $25.4 million, or 1.4%, from $1.810 billion at December 31, 2024 to $1.835 billion at September 30, 2025, due to growth in public funds customers in our footprint;

and retail deposits contracted $55.7 million, or 3.1%, from $1.781 billion at December 31, 2024 to $1.725 billion at September 30, 2025.

Deposits not covered by FDIC deposit insurance were 57.0% as of September 30, 2025, versus 62.1% at December 31, 2024.

Deposits not covered by FDIC deposit insurance or the Indiana Public Deposit Insurance Fund, which insures public fund deposits in Indiana, were 27.0% of total deposits as of September 30, 2025, versus 32.3% as of December 31, 2024.

As of September 30, 2025 and December 31, 2024, 97.9% and 98.0% of deposit accounts had deposit balances less than $250,000, respectively.

As of September 30, 2025, total stockholders’ equity was $747.5 million, an increase of $63.6 million, or 9.3%, from $683.9 million at December 31, 2024.

The increase to total stockholders' equity was driven by net income of $73.5 million less dividends declared and paid of $38.6 million and an improvement of $25.8 million in accumulated other comprehensive income (loss).

The impact on equity for other comprehensive income (loss) is not included in regulatory capital.

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banking organizations.

As of June 30, 2025, the Company's capital levels remained characterized as “well-capitalized”.

The actual capital amounts and ratios of the Company and the Bank as of June 30, 2025 and December 31, 2024, are presented in the table below.

Capital ratios for June 30, 2025 are preliminary until the Call Report and FR Y-9C are filed.

As of September 30, 2025, the Company's capital levels remained characterized as “well-capitalized”.

The actual capital amounts and ratios of the Company and the Bank as of September 30, 2025 and December 31, 2024, are presented in the table below.

Capital ratios for September 30, 2025 are preliminary until the Call Report and FR Y-9C are filed.

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 June 30, 2025:

As of September 30, 2025:

Total Capital (to Risk Weighted Assets)

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• the effects of future economic, business and market conditions and changes, particularly in our Indiana market area, including prevailing interest rates and the rate of inflation;

• governmental trade, monetary, tax and fiscal policies;

• governmental trade, monetary, tax and fiscal policies, including effects of the ongoing shutdown of the federal government;

• the risks of changes in interest rates on the levels, composition and costs of deposits, loan demand and the values and liquidity of loan collateral, securities and other interest sensitive assets and liabilities;

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• the effects of war or other conflicts, acts of terrorism or other catastrophic events, including storms, droughts, tornados and flooding, that may affect general economic conditions, including agricultural production and demand and prices for agricultural goods and land used for agricultural purposes, generally and in our markets;

• the effects of fraud by or affecting employees, customers or third parties;

• the effects of disruption and volatility in capital markets on the value of our investment portfolio;

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• the impact of litigation and other claims we may be subject to from time to time;

• the effects of fraud by or affecting employees, customers or third parties;

• changes in the availability and cost of credit and capital in the financial markets;

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis