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Item 2. Management’s Discussion and Analysis

2026-04-29 compared with 2025-10-29 · 151 added, 313 removed, 298 unchanged (61% of the section changed)

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

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.

Net income in the first three months of 2026 was $26.5 million, which increased $6.4 million , or 31.8%, from $20.1 million for the comparable period of 2025 .

Diluted earnings per common share was $1.04 in the first three months of 2026 , an increase of 33.3% from $0.78 in the comparable period of 2025 .

The increase in net income for 2026 was primarily due to an increase to net interest income of $3.9 million, or 7.4%, an increase in noninterest income of $2.0 million, or 18.3%, and a decrease in the provision for credit losses of $4.8 million, or 70.6%.

Offsetting these positive contributions was an increase in noninterest expense of $2.4 million, or 7.3%, and an increase to income tax expense of $1.9 million, or 46.3%.

Pretax pre-provision earnings, a non-GAAP measure calculated by adding net interest income to noninterest income and subtracting noninterest expense, were $34.6 million in the first three months of 2026 , an increase of $3.5 million , or 11.3%, compared to $31.0 million for the comparable period of 2025 .

Return on average total equity was 13.89% in the first three months of 2026 versus 11.70% in the comparable period of 2025 .

Return on average total assets was 1.52% in the first three months of 2026 versus 1.20% for the comparable period of 2025 .

The Company's average equity to average assets ratio was 10.91% in the first three months of 2026 versus 10.29% in the comparable period of 2025 .

The Company’s tangible common equity to tangible assets ratio, which is a non-GAAP financial measure, was 10.53% at March 31, 2026, compared to 10.09% at March 31, 2025 and 10.86% at December 31, 2025.

Unrealized losses from available-for-sale investment securities were $154.5 million at March 31, 2026, compared to $188.3 million at March 31, 2025 and $143.3 million at December 31, 2025.

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 12.20% at March 31, 2026, compared to 12.19% at March 31, 2025 and 12.45% at December 31, 2025.

Total assets were $7.084 billion as of March 31, 2026 versus $6.990 billion as of December 31, 2025, an increase of $93.7 million, or 1.3% .

Balance sheet expansion was driven by increases to t otal loans, net of the allowance for credit losses, which increased $98.1 million, or 1.8%, and cash and cash equivalents, which increased $10.0 million, or 7.1%.

These increases were offset by a decrease to available-for-sale securities of $25.1 million, or 2.4% The balance sheet expansion from December 31, 2025 to March 31, 2026 was funded by an increase in total deposits of $216.9 million, or 3.6%, and was offset by a decrease in borrowings of $116.0 million, or 63.0%.

Total equity decreased $13.5 million, or 1.8%, from $762.5 million at December 31, 2025 to $749.0 million at March 31, 2026.

The decrease to total equity was primarily attributable to an increase in treasury stock of $19.3 million, or 53.8%, driven by the Company's utilization of the share repurchase program, and a decrease in accumulated other comprehensive income (loss) of $8.5 million, contributed further to the decline in total equity.

Offsetting these reductions to total equity was an increase in retained earnings of $13.3 million, or 1.7%, primarily as a result of net income of $26.5 million less dividends declared and paid of $13.2 million.

The combined effect of the repurchase activity under the share repurchase program and dividends paid during the quarter represented a total return of capital to Company shareholders of $32.4 million.

CRITICAL ACCOUNTING POLICIES

The Company’s accounting policies are described in Note 1 to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2025.

Certain of the Company’s accounting policies are important to the portrayal of the Company’s financial condition, since they require management to make difficult, complex or subjective judgments, some of which may relate to matters that

are inherently uncertain.

Estimates associated with these policies are susceptible to material changes as a result of changes in facts and circumstances.

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RESULTS OF OPERATIONS

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,

Selected income statement information for the three months ended March 31, 2026 and 2025 is presented in the following table:

Three Months Ended March 31,

(dollars in thousands) 2026 2025

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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 increase 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 cycle of monetary policy tightening from 2022 and 2023 and demonstrates the Company's longer-term trend in capital strength.

See reconciliation on the following pages.

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

As of and For The As of and For The

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

As of and For The

Three Months Ended March 31,

(dollars in thousands, except per share data) 2026 2025

19 unchanged sentences

Pretax Pre-Provision Earnings $ 34,555 $ 31,040

Adjusted core noninterest income, adjusted core noninterest expense, adjusted earnings before income taxes, core operational profitability, core operational diluted earnings per common share and adjusted core efficiency ratio are non-GAAP financial measures calculated based on GAAP amounts.

These adjusted amounts are calculated by excluding the impact of the net gain on Visa shares, legal accrual and insurance recovery for the periods presented below.

Management considers these measures of financial performance to be meaningful to understanding the Company’s core business performance for these periods.

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

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

Insurance Recovery 0 0 0 (1,000)

Adjusted Core Noninterest Income $ 12,954 $ 11,932 $ 35,368 $ 34,972

Noninterest Expense $ 34,965 $ 30,393 $ 98,160 $ 94,431

Legal Accrual 0 0 0 (4,537)

Adjusted Core Noninterest Expense $ 34,965 $ 30,393 $ 98,160 $ 89,894

Earnings Before Income Taxes $ 32,062 $ 27,738 $ 89,232 $ 82,463

Adjusted Core Impact:

Noninterest Income 0 15 0 (9,996)

Noninterest Expense 0 0 0 4,537

Total Adjusted Core Impact 0 15 0 (5,459)

Adjusted Earnings Before Income Taxes 32,062 27,753 89,232 77,004

Tax Effect (5,658) (4,404) (15,777) (11,817)

Core Operational Profitability (1) $ 26,404 $ 23,349 $ 73,455 $ 65,187

Diluted Earnings Per Common Share $ 1.03 $ 0.91 $ 2.85 $ 2.69

Impact of Adjusted Core Items 0.00 0.00 0.00 (0.16)

Core Operational Diluted Earnings Per Common Share $ 1.03 $ 0.91 $ 2.85 $ 2.53

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

(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%.

Net income was $26.5 million in the first three months of 2026, which increased $6.4 million , or 31.8%, from $20.1 million for the comparable period of 2025 .

Diluted earnings per common share was $1.04 in the first three months of 2026 , an increase of 33.3% from $0.78 in the comparable period of 2025 .

The increase in net income for the first three months of 2026 was primarily due to an increase to net interest income of $3.9 million, or 7.4%, an increase to noninterest income of $2.0 million, or 18.3%, and a decrease in the provision for credit losses of $4.8 million, or 70.6%.

Offsetting these positive contributions was an increase in noninterest expense of $2.4 million, or 7.3%, and an increase to income tax expense of $1.9 million, or 46.3%.

N et Interest Income

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

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

Taxable (2)(3) $ 5,181,704 $ 251,648 6.49 % $ 4,982,891 $ 252,386 6.77 %

Tax exempt (1) 25,501 1,074 5.63 40,665 2,267 7.45

Securities (1) 1,129,664 25,199 2.98 1,135,304 23,987 2.82

Short-term investments 2,863 83 3.88 2,796 103 4.92

Interest bearing deposits 158,511 5,049 4.26 119,021 4,618 5.18

Total earning assets $ 6,498,243 $ 283,053 5.82 % $ 6,280,677 $ 283,361 6.03 %

Allowance for credit losses (82,671) (76,003)

Nonearning Assets

Cash and due from banks 66,766 65,608

Premises and equipment 62,079 58,695

Other nonearning assets 295,345 289,125

Total assets $ 6,839,762 $ 6,618,102

Interest Bearing Liabilities

Savings deposits $ 284,797 $ 127 0.06 % $ 288,283 $ 141 0.07 %

Interest bearing checking accounts 3,662,917 90,955 3.32 3,206,452 97,511 4.06

Time deposits:

In denominations under $100,000 208,872 5,255 3.36 218,755 5,702 3.48

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

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

Total interest bearing liabilities $ 4,807,547 $ 115,903 3.22 % $ 4,616,129 $ 134,803 3.90 %

Noninterest Bearing Liabilities

Demand deposits 1,248,876 1,249,710

Other liabilities 79,775 100,806

Stockholders' Equity 703,564 651,457

Total liabilities and stockholders' equity $ 6,839,762 $ 6,618,102

Interest Margin Recap

Interest income/average earning assets 283,053 5.82 % 283,361 6.03 %

Interest expense/average earning assets 115,903 2.38 134,803 2.87

Net interest income and margin $ 167,150 3.44 % $ 148,558 3.16 %

(1) Tax exempt income was converted to a fully taxable equivalent basis at a 21 percent tax rate.

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 $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 September 30,

Three Months Ended March 31,

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

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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 .

Taxable equivalent basis adjustment was $1.1 million for the three-month periods ended March 31, 2026 and 2025.

(2) Loan fees, which are immaterial in relation to total taxable loan interest income for the three months ended March 31, 2026 and 2025, 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 $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 .

Net interest income, on a fully tax equivalent basis, increased $3.9 million, or 7.2%, to $57.9 million for the three months ended March 31, 2026, compared to $54.0 million for the first three months of 2025 .

The increase in net interest income on a fully tax equivalent basis was driven by a decrease in deposit interest expense of $3.0 million , or 8.3% , from $36.5 million to $33.4 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 $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 $6.498 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 $4.808 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.

Securities interest income contributed further to the increase in fully tax equivalent net interest income, increasing by $448,000 , or 5.4% .

Loan interest income increased by $1.4 million, or 1.7%, as an increase in average loans offset decreased average yields.

Borrowings expense increased by $661,000 , or 58.9% .

Total average earning assets were $6.729 billion for the three months ended March 31, 2026, an increase of $298.6 million, or 4.6%, compared to $6.431 billion for the three months ended March 31, 2025 .

Average loans outstanding drove the increase to total average earning assets, increasing $255.0 million, or 4.9%, to $5.441 billion from $5.186 billion for the three months ended March 31, 2026 and 2025 , respectively .

Average investment securities increased $53.9 million, or 4.7%, to $1.190 billion from $1.136 billion between the respective periods .

Total average interest bearing liabilities were $5.005 billion for the three months ended March 31, 2026, an increase of $288.2 million, or 6.1%, from $4.716 billion for the three months ended March 31, 2025.

This increase was driven by growth in average interest bearing deposits of $204.6 million, or 4.4%, from $4.616 billion for the three months ended March 31, 2025 to $4.821 billion for the three months ended March 31, 2026.

Average short-term borrowings increased by $82.6 million, or 82.7% between the respective periods.

Noninterest bearing demand deposits decreased $23.8 million, or 1.9%, to $1.235 billion from $1.258 billion between the two periods.

The tax equivalent net interest margin was 3.49% for the three months ended March 31, 2026, compared to 3.40% during the first three months of 2025 , representing a 9 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 2.12% for the three months ended March 31, 2026 , down from 2.37% for the comparable period of 2025 , or a decrease of 25 basis points.

This decline was attributable to a decrease in the rate for total interest bearing liabilities of 38 basis points from 3.23% to 2.85% between the respective periods.

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%.

Contributing further to the reduction in the rate for interest bearing liabilities was a reduction in the average borrowings rate, which declined 60 basis points from 4.54% to 3.94%.

The Company anticipates the cost of funds would continue to respond favorably to any further monetary policy easing by the Federal Reserve Bank.

The improvement in interest expense as a percentage of average earning assets was offset by a 16 basis point reduction in interest income as a percentage of average earning assets, which declined fro m 5.77% to 5.61%.

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.

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 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%.

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.

This decrease was primarily attributable to a decline in average loan yields, which decreased 20 basis points to 6.22% for the three months ended March 31, 2026, down from 6.42% for the comparable period of 2025 .

Provision for Credit Losses

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.

The Company recorded provision for credit losses expense of $2.0 million for the three months ended March 31, 2026, compared to provision expense of $6.8 million during the comparable period of 2025 , a decrease of $4.8 million, or 70.6%.

Net charge-offs were $2.1 million during the three month period ended March 31, 2026, compared to $327,000 during the comparable period of 2025 , an increase of $1.8 million.

The decrease in provision expense between the respective periods was attributable to the allocation of reserves to a previously disclosed nonperforming credit during the first quarter of 2025.

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 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

Wealth advisory fees $ 8,389 $ 7,770 $ 619 8.0 %

Investment brokerage fees 1,559 1,438 121 8.4

Service charges on deposit accounts 8,522 8,332 190 2.3

Loan and service fees 9,309 8,855 454 5.1

Merchant and interchange fee income 2,568 2,653 (85) (3.2)

Bank owned life insurance income 2,929 2,994 (65) (2.2)

Interest rate swap fee income 20 0 20 100.0

Mortgage banking income (loss) 67 68 (1) (1.5)

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

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

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

Total noninterest income $ 35,368 $ 44,968 $ (9,600) (21.3) %

Noninterest income to total revenue 17.76 % 23.67 %

Noninterest income categories for the three months ended March 31, 2026 and 2025 are shown in the following tables:

Three Months Ended

September 30,

(dollars in thousands) 2026 2025 Dollar Change Percent Change

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Bank owned life insurance income 976 322 654 203.1

Interest rate swap fee income 701 0 701 100.0

Mortgage banking income (loss) 81 (51) 132 (258.8)

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

Other income 730 858 (128) (14.9)

1 unchanged sentence

Noninterest income to total revenue 18.55 % 17.13 %

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.

Noninterest income increased $2.0 million, or 18.3%, to $12.9 million for the first quarter of 2026, compared to $10.9 million for the first quarter of 2025.

Loan and service fees income increased $323,000, or 11.2%, driven by increased commercial loan fees.

Wealth advisory fees increased $196,000, or 6.8%, driven by continued growth in customers and assets under management.

Investment brokerage fees increased $72,000, or 15.9%, due to increased volume and commissions on product mix.

Bank owned life insurance income increased $654,000, or 203.1%, from improved market performance of the Bank's variable owned life insurance policies, which reflect returns in the equity markets, as well as incremental income from policies purchased in 2025.

Interest rate swap fee income was $701,000 for the first quarter of 2026, which is borrower and market driven.

Offsetting these increases was a decrease to other income of $128,000, or 14.9%, primarily driven by reduced limited partnership investment income.

Noninterest Expense

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

Salaries and employee benefits $ 55,412 $ 49,467 $ 5,945 12.0 %

Net occupancy expense 5,604 5,159 445 8.6

Equipment costs 4,294 4,207 87 2.1

Data processing fees and supplies 12,533 11,419 1,114 9.8

Corporate and business development 4,129 4,015 114 2.8

FDIC insurance and other regulatory fees 2,517 2,571 (54) (2.1)

Professional fees 5,812 6,675 (863) (12.9)

Other expense 7,859 10,918 (3,059) (28.0)

Total noninterest expense $ 98,160 $ 94,431 $ 3,729 3.9 %

Efficiency ratio 49.28 % 49.71 %

Noninterest expense categories for the three months ended March 31, 2026 and 2025 are shown in the following tables:

Three Months Ended

September 30,

(dollars in thousands) 2026 2025 Dollar Change Percent Change

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Efficiency ratio 50.43 % 51.35 %

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.

tax laws, including extending or making permanent certain provisions of the Tax Cuts and Jobs Act and repealing certain clean energy initiatives, in addition to other changes.

The Company anticipates an insignificant impact to deferred tax assets and liabilities and to income taxes payable in the period of enactment.

The Company continues to evaluate the impact the new legislation will have on the consolidated financial statements.

Noninterest expense increased $2.4 million, or 7.3%, to $35.2 million for the first quarter of 2026, compared to $32.8 million during the first quarter of 2025.

Salaries and employee benefits expense increased by $2.4 million, or 13.4%, primarily the result of increased salaries and wages, performance-based incentive pay, and employee benefits expenses.

Net occupancy expense increased $124,000, or 6.3%, and equipment costs increased $82,000, or 5.9%, from the Company's continued expansion and reinvestment into its physical branch network.

Corporate and business development expense increased $87,000, or 6.2%, and FDIC insurance and other regulatory fees increased $73,000, or 9.1%.

Offsetting these increases was a decrease in professional fees of $443,000, or 18.6%, driven by reduced technology implementation fees incurred during the quarter.

The Company's income tax expense increased $1.9 million, or 46.3%, to $6.1 million in the three months ended March 31, 2026, compared to $4.2 million for the same period in 2025.

The effective tax rate was 18.7% in the three months ended March 31, 2026, compared to 17.1% for the comparable period of 2025, driven by lower tax-free interest income on loans.

FINANCIAL CONDITION

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 $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.

Total assets were $7.084 billion as of March 31, 2026 versus $6.990 billion as of December 31, 2025, an increase of $93.7 million, or 1.3% .

Total equity decreased $13.5 million, or 1.8%, from $762.5 million at December 31, 2025 to $749.0 million at March 31, 2026.

The decrease to total equity was primarily attributable to an increase in treasury stock of $19.3 million, or 53.8%, driven by the Company's utilization of the share repurchase program.

A decrease in accumulated other comprehensive income (loss) of $8.5 million contributed further to the decline in total equity.

The combined effect of the repurchase activity under the share repurchase program and dividends paid during the quarter represented a total return of capital to Company shareholders of $32.4 million.

Uses of Funds

Total Cash and Cash Equivalents

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.

Total cash and cash equivalents increased by $10.0 million, or 7.1%, to $151.3 million at March 31, 2026, from $141.3 million at December 31, 2025.

Cash and cash equivalents include short-term investments.

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%.

The fluctuation in cash and cash equivalents at March 31, 2026 was driven by an increase in cash and due from banks of $8.6 million, or 15.0%, and an increase in interest bearing short-term investment accounts of $1.4 million, or 1.7%, which were deposited primarily at the Federal Reserve Bank of Chicago.

Investment Portfolio

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

The amortized cost and the fair value of securities as of March 31, 2026 and December 31, 2025 were as follows:

March 31, 2026 December 31, 2025

(dollars in thousands) Amortized

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Total Investment Portfolio $ 1,315,108 $ 1,141,232 $ 1,328,525 $ 1,169,572

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

At March 31, 2026 and December 31, 2025, 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 $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.

Purchases of available-for-sale securities were $5.1 million in the first three months of 2026.

Investment securities represented 16.4% of total assets on March 31, 2026, compared to 17.0% of total assets on December 31, 2025.

The Company anticipates receiving principal and interest cash flows of approximately $88.2 million during the remainder of 2026 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 5.8 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.

Tax equivalent adjusted effective duration for the investment securities portfolio was 6.0 years at March 31, 2026 and 5.9 years at December 31, 2025.

Paydowns from prepayments and scheduled payments of $18.1 million were received in the first three months of 2026, and the amortization of premiums, net of the accretion of discounts, was $870,000.

There were no sales of available-for-sale investment securities in the first three months of 2026.

No allowance for credit losses was recognized for available-for-sale or held-to-maturity securities as of March 31, 2026 and December 31, 2025.

The fair value of the available-for-sale investment securities portfolio as of March 31, 2026 included net unrealized losses of $154.5 million, compared to net unrealized losses of $143.3 million as of December 31, 2025.

Unrealized losses in the available-for-sale investment securities portfolio are generally attributable to market value declines experienced during the rate tightening cycle of 2022 and 2023.

Increases in the 10-year Treasury rate during the first quarter of 2026 increased unrealized losses in the investment securities portfolio.

The investment portfolio is managed by a third-party firm to provide for an appropriate balance between liquidity, credit risk, interest rate risk management and investment return and to limit the Company’s exposure to credit risk in the investment securities portfolio.

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Real Estate Mortgage Loans Held-for-Sale

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.

Real estate mortgage loans held-for-sale decreased by $1.6 million, or 59.9%, to $1.1 million at March 31, 2026, from $2.7 million at December 31, 2025.

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 $16.2 million in the first nine months of 2025, compared to $12.7 million in the first nine months of 2024.

Proceeds from sales of residential mortgages totaled $4.8 million in the first three months of 2026, compared to $3.0 million in the first three months of 2025.

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 $299.0 million and $313.0 million, as of September 30, 2025 and December 31, 2024, respectively.

The unpaid principal balances of loans serviced for others were $290.4 million and $294.5 million, as of March 31, 2026 and December 31, 2025, respectively.

Loan Portfolio

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

(dollars in thousands) September 30,

The loan portfolio by portfolio segment as of March 31, 2026 and December 31, 2025 is summarized as follows:

(dollars in thousands) March 31,

2026 December 31,

10 unchanged sentences

Loans, net $ 5,404,444 $ 5,306,354 $ 98,090

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.

Total net loans, excluding real estate mortgage loans held-for-sale, increased by $98.1 million, or 1.8%, to $5.404 billion at March 31, 2026 from $5.306 billion at December 31, 2025.

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 September 30, 2025 and December 31, 2024:

(dollars in thousands) September 30,

The following table summarizes the Company’s non-performing assets, excluding deferred fees and costs, as of March 31, 2026 and December 31, 2025:

(dollars in thousands) March 31,

2026 December 31,

8 unchanged sentences

Nonperforming assets to total assets 0.30 % 0.30 %

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.

Total nonperforming assets increased by $12,000, or 0.1%, to $20.9 million during the three month period ended March 31, 2026.

The ratio of nonperforming assets to total assets remained at 0.30% as of December 31, 2025 and March 31, 2026.

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

1 unchanged sentence

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 $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.

Total individually analyzed loans increased by $136,000, or 0.3%, to $43.2 million at March 31, 2026 from $43.0 million at December 31, 2025.

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

12 unchanged sentences

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 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.

At March 31, 2026, the allowance for credit losses was 1.26% of total loans, a decrease of 2 basis points from 1.28% at December 31, 2025.

At March 31, 2026, 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.

The process of identifying credit losses is a subjective process.

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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 $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.

Loans totaling $103.6 million for this sector represented 1.9% of total loans at March 31, 2026.

Additionally, commercial real estate loans secured by multi-family residential properties and secured by non-farm non-residential properties were approximately 214.9% of the Bank's risk-based capital at March 31, 2026.

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

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.

As of March 31, 2026, based on management’s review of the loan portfolio, the Company had 95 credit relationships with principal balances totaling $182.3 million on the classified loan list versus 96 credit relationships with principal balances totaling $184.0 million as of December 31, 2025.

As of March 31, 2026, the Company $132.7 million of assets classified as Special Mention, $49.5 million classified as Substandard, $73,000 classified as Doubtful and $0 classified as Loss as compared to $134.0 million, $50.0 million, $74,000 and $0, respectively, at December 31, 2025.

The amounts by grade in "Note 4 - Allowance for Credit Losses and Credit Quality" are reported at amortized cost and include deferred fees and costs.

Watch list loans as a percentage of total loans were 3.33% as of March 31, 2026, down 9 basis points from 3.42% at December 31, 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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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 $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.

The allowance for credit losses decreased $81,000, or 0.1%, from $69.0 million at December 31, 2025 to $68.9 million at March 31, 2026.

The decrease was primarily driven by net charge offs of $2.1 million, offset by provision for credit losses of $2.0 million.

Net charge offs for the three months ended March 31, 2026 were primarily driven by a $2.0 million charge off to one commercial credit.

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 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,

As of March 31, 2026, the Company had access to $3.312 billion in unused liquidity available from these aggregate sources as compared to $3.526 billion at December 31, 2025.

The average daily deposits and borrowings together with average rates paid on those deposits and borrowings for the three months ended March 31, 2026 and 2025 are summarized in the following table:

Three months ended March 31,

(dollars in thousands) Balance Rate Balance Rate

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Total funding sources $ 6,239,162 2.29 % $ 5,974,809 2.55 %

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 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.

Average total deposits were $6.056 billion for the three months ended March 31, 2026, an increase of $180.8 million, or 3.1%, from the comparable period in 2025.

Average total borrowings were $183.6 million for the three months ended March 31, 2026, an increase of $83.5 million, or 83.5%, from the comparable period in 2025.

Total average deposit costs decreased 28 basis points from 2.52% for the three months ended March 31, 2025, to 2.24% for the three months ended March 31, 2026.

Total average borrowing costs decreased 60 basis points from 4.54% for the three months ended March 31, 2025 to 3.94% for the three months ended March 31, 2026.

As a result, the total cost of funding sources decreased by 26 basis points from 2.55% for the three months ended March 31, 2025, to 2.29% for the three months ended March 31, 2026.

Deposits and Borrowings

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,

As of March 31, 2026, total deposits increased by $216.9 million, or 3.6%, from December 31, 2025.

Core deposits, which excludes brokered deposits, decreased by $108.1 million, or 1.8%, to $5.815 billion as of March 31, 2026 from $5.923 billion as of December 31, 2025.

Total brokered deposits were $375.6 million at March 31, 2026, compared to $50.6 million at December 31, 2025, an increase of $325.0 million, or 642.7%.

The following table summarizes deposit composition at March 31, 2026 and December 31, 2025:

(dollars in thousands) March 31,

2026 Percentage of Total December 31,

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Total deposits $ 6,190,260 100.0 % $ 5,973,350 100.0 % $ 216,910

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).

On March 31, 2026, commercial deposits represented 34.5% of total deposits versus 36.5% at December 31, 2025.

Retail deposits represented 29.1% at March 31, 2026 versus 29.5% at December 31, 2025.

Public Funds deposits represented 30.3% at March 31, 2026 versus 33.2% at December 31, 2025.

Brokered deposits represented 6.1% of total deposits at March 31, 2026 versus 0.8% at December 31, 2025.

Commercial deposits contracted $43.6 million, or 2.0%, from $2.180 billion at December 31, 2025 to $2.136 billion at March 31, 2026;

public funds deposits contracted $101.5 million, or 5.1%, from $1.979 billion at December 31, 2025 to $1.878 billion at March 31, 2026, due to seasonal fluctuations in public funds balances;

and retail deposits expanded $37.0 million, or 2.1%, from $1.763 billion at December 31, 2025 to $1.800 billion at March 31, 2026.

Deposits not covered by FDIC deposit insurance were 55.1% as of March 31, 2026, versus 59.1% at December 31, 2025.

Deposits not covered by FDIC deposit insurance or the Indiana Public Deposit Insurance Fund, which insures public fund deposits in Indiana, were 25.0% of total deposits as of March 31, 2026, versus 26.0% as of December 31, 2025.

As of March 31, 2026 and December 31, 2025, 97.9% and 97.8% of deposit accounts had deposit balances less than $250,000, respectively.

As of March 31, 2026, total stockholders’ equity was $749.0 million, a decrease of $13.5 million, or 1.8%, from $762.5 million at December 31, 2025.

The decrease to total stockholders' equity was driven by an increase in treasury stock of $19.3 million, or 53.8%, from utilization of the Company's share repurchase program and a reduction of $8.5 million in accumulated other comprehensive income (loss).

Offsetting these decreases was net income of $26.5 million less dividends declared and paid of $13.2 million for a $13.3 million increase to retained earnings.

The combined effect of the repurchase activity under the share repurchase program and dividends paid during the quarter represented a total return of capital to Company shareholders of $32.6 million.

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

2 unchanged sentences

banking organizations.

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.

As of March 31, 2026, the Company's capital levels remained characterized as “well-capitalized”.

The actual capital amounts and ratios of the Company and the Bank as of March 31, 2026 and December 31, 2025, are presented in the table below.

Capital ratios for March 31, 2026 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 September 30, 2025:

As of March 31, 2026:

Total Capital (to Risk Weighted Assets)

29 unchanged sentences

Actual results could differ materially from those addressed in the forward-looking statements as a result of numerous factors, including, without limitation:

• 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, including effects of the ongoing shutdown of the federal government;

• the effects of future economic, business and market conditions and changes, particularly in but not limited to our Indiana market area, including prevailing interest rates, the rate of inflation, and energy price volatility;

• governmental foreign, trade, monetary, tax and fiscal policies, including the policy decisions of the Federal Reserve;

• 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;

1 unchanged sentence

• the failure of assumptions and estimates used in our reviews of our loan portfolio, underlying the establishment of reserves for possible credit losses, our analysis of our capital position and other estimates;

• the performance of our commercial real estate loan portfolio, including the effects of the elevated interest rate environment, the strength of the commercial real estate market in our Indiana markets, and recent changes in retail and office usage patterns;

• the performance of our commercial real estate loan portfolio, including the effects of the elevated interest rate environment and the strength of the commercial real estate market in our Indiana markets;

• risk of cybersecurity attacks that could result in damage to the Company's or third-party service providers' networks or data of the Company

• technological changes implemented by us and other parties, including our third-party vendors, which may have unforeseen consequences to us and our customers, including the development and implementation of tools incorporating artificial intelligence;

• the timing and scope of any legislative and regulatory changes, including changes in banking, securities and tax laws and regulations and their application by our regulators;

• the effects of competition from a wide variety of local, regional, national and other providers of financial, investment and insurance services;

• 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;

• increased competition in the financial services sector, including from non-bank competitors such as credit unions and fintech companies, and the inability to attract new customers;

• the effects of war, geopolitical 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 inputs, goods and land used for agricultural purposes, generally and in our markets;

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

4 unchanged sentences

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

• changes in technology or products that may be more difficult or costly, or less effective than anticipated;

• the loss of key executives and employees, talent shortages and employee turnover;

• changes in technology or products that may be more difficult or costly to implement, or less effective than anticipated;

• changes in accounting policies, rules and practices;

• the risks related to mergers, acquisitions and divestitures, including, without limitation, the related time and costs of implementing such transactions, integrating operations as part of these transactions and possible failures to achieve expected gains, revenue growth and/or expense savings from such transactions;

• the risks noted in the Risk Factors discussed under Item 1A of Part 1 of our Annual Report on Form 10-K for the year ended December 31, 2024, as well as other risks and uncertainties set forth from time to time in the Company’s other filings with the SEC.

• the risks noted in the Risk Factors discussed under Item 1A of Part 1 of our Annual Report on Form 10-K for the year ended December 31, 2025, as well as other risks and uncertainties set forth from time to time in the Company’s other filings with the Securities and Exchange Commission.

These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.

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