What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-07-01 compared with 2024-02-23 · 976 added, 325 removed, 1703 unchanged (43% of the section changed)

9 unchanged sentences

Premises, Equipment and Leases

Operating Leases - Lessor

Loan Servicing Rights

4 unchanged sentences

Trust Preferred Debentures

Accumulated Other Comprehensive Income (Loss)

Retirement Plans

8 unchanged sentences

Parent Company Only Financial Information

Restatement of Prior Period Financial Statements

Subsequent Events

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

2 unchanged sentences

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Midland States Bancorp, Inc.

We have audited the accompanying consolidated balance sheets of Midland Sates Bancorp, Inc.

(the "Company") as of December 31, 2024 and 2023, the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2024, and the related notes (collectively referred to as the "financial statements").

2 unchanged sentences

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2024 in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework:

Also, in our opinion, because of the effects of the material weaknesses discussed in the following paragraphs, the Company has not maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control – Integrated Framework:

(2013) issued by COSO.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

The following material weaknesses have been identified and included in management's report:

• The Company did not design and maintain controls to assess the risk of material misstatement with contracts related to non-routine transactions.

• The Company did not design and maintain an effective internal control activities for evaluating the accounting and financial reporting related to third-party credit enhancement contracts.

• The Company did not design and maintain effective internal controls over loan data, including the activities performed by certain third-party service organizations that perform core lending functions.

The loan data control deficiencies affect the allowance for credit losses, loan balances, accrued interest, interest income, servicing fees, and the fair value of the credit enhancement derivative.

We considered these material weaknesses identified above in determining the nature, timing, and extent of audit tests applied in our audit of the 2024 consolidated financial statements, and our opinion on Internal Control over Financial Reporting does not affect our opinion on the financial statements.

Restatement of Previously Issued Financial Statements

As discussed in Note 1 to the consolidated financial statements, the 2023 and 2022 consolidated financial statements have been restated to correct misstatements.

Basis for Opinions

13 unchanged sentences

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting

includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

2 unchanged sentences

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Allowance for Credit Losses on Loans – Modeling Techniques and Qualitative Factor Adjustments

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Allowance for Credit Losses on Loans – Qualitative Factors

As described in Notes 1 and 3 to the consolidated financial statements, the Allowance for Credit Losses on Loans (“ACL”) represents the Company’s estimate of amounts that are not expected to be collected over the contractual life of the Company’s held for investment loan portfolio.

The estimate of the ACL is based on historical experience, current conditions, and reasonable and supportable forecasts.

As of December 31, 2023, the Company’s ACL was $68,502,000, and the provision for credit losses on loans was $21,132,000 for the year then ended.

The Company employed a probability of default (“PD”) and loss given default (“LGD”) modeling approach to estimate the ACL, which were then adjusted for qualitative factors.

The estimated PD and LGD rates are applied to the estimated exposure at default to calculate expected credit losses.

The Company’s ACL model utilizes regression analysis to develop default rates based on forecasted macroeconomic variables that correlate to and are predictive of losses.

The methodologies utilized to develop and implement the macroeconomic factors that drive the loss estimates in the forecasting model were complex in their use of regression modeling techniques.

The process involved the selection of the macroeconomic variables and the evaluation of regression analysis outputs to determine the statistical fit of the macroeconomic variables used to forecast expected credit losses.

The Company also developed a qualitative analysis framework to address asset-specific risks, changes in economic and business conditions, or other risks management determines are not adequately considered by the model for each portfolio segment.

Significant management judgment was applied in evaluating the qualitative factor adjustments used in the analysis.

The audit procedures over the modeling techniques used to determine loss estimates and the selection and application of the macroeconomic variables involved a high degree of auditor judgment and required significant audit effort, including the use of more experienced audit personnel and use of credit and valuation specialists due to its complexity.

Additionally, the audit procedures over the qualitative factor adjustments utilized in management’s methodology involved challenging and subjective auditor judgment.

Therefore, we identified auditing the ACL modeling techniques and qualitative factor adjustments as a critical audit matter.

As of December 31, 2024, the Company’s ACL was $111.2 million, and the provision for credit losses on loans was $119.3 million for the year then ended.

The Company measures expected credit losses by utilizing a probability of default, loss given default, and exposure at default model to estimate the quantitative component of the allowance for credit losses for loans.

Management qualitatively adjusts the quantitative model results for risk factors that are not considered within the modeling process but are relevant in assessing the expected credit losses.

These qualitative factors are based upon management judgment and current assessment as to the impact of risks related to actual and expected changes in economic and business conditions and developments that affect the collectability of the loan pools, changes in volume and severity of past due financial assets, the volume of non-accrual assets, and the volume and severity of adversely classified or graded assets, changes in the value of the underlying collateral for loans that are non-collateral dependent, and other internal and external factors.

We have identified auditing the qualitative factors as a critical audit matter as management’s determination of the qualitative factors is subjective and involves significant management judgments;

and our audit procedures related to certain of the qualitative factors involved a high degree of auditor judgment and required significant audit effort, including the need to involve more experienced audit personnel.

The primary audit procedures we performed to address this critical audit matter included:

• Tested the operating effectiveness of the Company’s controls over:

◦ The Company’s allowance committee’s oversight and approval of management’s application of accounting policies, and selection and implementation of PD and LGD assumptions.

◦ Management’s review relating to selection and application of relevant macroeconomic variables and their appropriateness.

◦ Management’s review over the model methodologies, assumptions, judgments, and validation of inputs to the model.

◦ Management’s review over the appropriateness of the framework for the qualitative factor adjustments.

◦ The completeness and accuracy of internal data used in the loss estimation models and in the qualitative analysis framework.

◦ Management’s review over the relevance and reliability of external data used in the loss estimation model and qualitative analysis framework.

◦ The mathematical accuracy of the qualitative factor adjustments.

• Evaluated the reasonableness and appropriateness of the methodologies employed for suitability under the standard including, but not limited to, evaluating their conceptual soundness, and testing the PD models and LGD assumptions and judgments that were applied in the model.

• Tested the completeness and accuracy of internal data and relevance and reliability of external data used in the loss estimation models and in the qualitative analysis framework

• Specific to the qualitative analysis, we performed the following procedures, among others:

◦ Assessed the appropriateness and reasonableness of the framework developed for the qualitative analysis including evaluating management’s judgments as to which factors impacted the qualitative analysis for each portfolio segment.

◦ Performed testing over the accuracy of inputs utilized in the calculation of qualitative analysis for each portfolio segment.

◦ Tested the mathematical accuracy of the calculation of the qualitative factor adjustments.

• Tested the operating effectiveness of the Company’s controls over the:

▪ Review over the appropriateness of the framework for the qualitative factors.

▪ Completeness and accuracy of internal data used in the qualitative factors.

▪ Review over the relevance and reliability of external data used in the qualitative factors.

▪ Mathematical accuracy of the qualitative factors.

• Substantive tests included:

◦ Testing the completeness and accuracy of internal data and relevance and reliability of external data used in the qualitative factors

◦ Assessing the appropriateness and reasonableness of the framework developed for the qualitative factors including evaluating management’s judgments as to which factors impacted the qualitative analysis for each portfolio segment.

◦ Performing testing over the accuracy of inputs utilized in the calculation of qualitative factors for each portfolio segment.

◦ Testing the mathematical accuracy of the calculation of the qualitative factors.

Goodwill Impairment Assessment

As described in Notes 1 and 7 to the consolidated financial statements, goodwill is the excess of the purchase price over the fair value of the net assets of the business acquired and is periodically evaluated for impairment.

The Company’s goodwill balance was $161.9 million as of December 31, 2024, of which $157.2 million is allocated to the Company’s banking segment.

The Company tests for impairment at least annually or, more frequently, if an event occurs or circumstances change that indicate that the fair value of the reporting unit may be below its carrying amount (triggering event).

The Company determined that a triggering event occurred and performed a quantitative assessment of goodwill for the Company’s bank reporting unit as of December 31, 2024.

The Company engaged a third-party service provider in performing its quantitative impairment assessment.

The Company's impairment assessment estimated fair value using an income approach that incorporated a discounted cash flow model that involves management assumptions based upon internal forecasts.

We identified the auditing of the impairment assessment of goodwill as of December 31, 2024 as a critical audit matter due to the significant management judgments related to determining the fair value of the reporting unit, which in turn led to a high degree of auditor judgment and subjectivity in evaluating the fair value of the reporting unit, specifically the significant assumptions related to the multi-year cash projections that rely on internal forecasts and the discount rate.

In addition, we used auditor employed specialists to assist in evaluating the significant assumptions.

The primary audit procedures we performed to address this critical audit matter included:

• Tested the operating effectiveness of the Company’s controls over the:

◦ Review for completeness and accuracy of internal data and evaluation of the relevance and reliability of external data used in the impairment assessment.

◦ Review of the reasonableness of the Company’s internal forecasts utilized in the impairment assessment.

◦ Evaluation of the reasonableness of the valuation methodologies and the significant assumptions, including discount rate.

• Substantive tests included:

◦ Evaluating the reasonableness of the valuation methodologies used to determine the fair value of the reporting unit.

◦ Testing the completeness and accuracy of internal data, and evaluating the relevance and reliability of external data.

◦ Evaluating the reasonableness of the internal forecasts utilized in the impairment assessment.

◦ Utilization of auditor employed specialists to assist with the evaluation of the appropriateness of the valuation methodologies, reasonableness of the discount rate, and overall reasonableness of the fair value of the reporting unit.

Credit Enhancements Contained Within Third-Party Agreements

The Company has agreements with third parties to originate and service consumer and commercial loans that are included in the Company’s loan portfolio as described in Notes 1 and 3 to the consolidated financial statements.

As part of these programs, the third-party provider offered various credit enhancements with respect to loans originated under the programs, including contributions to reserve accounts, yield maintenance and certain other payments.

The Company has determined that the borrower payments and credit enhancement payments under the programs should be accounted for on a separate unit of account or gross basis, with loan yields and interest income recorded at the gross borrower loan rate, and credit losses and associated provisions for credit losses recorded on a gross basis over the life of the loans, and with all credit enhancement payments accounted for separately as a credit enhancement derivative.

As of December 31, 2024, the Company recorded a credit enhancement asset of $16.8 million, which represents the fair value of the credit enhancement derivative associated with the agreements related to loans recorded on the consolidated balance sheet as of the same date.

We identified auditing the accounting associated with the credit enhancement contained within the third-party agreements as a critical audit matter due to the nature and extent of audit effort required, including the need for individuals with specialized knowledge.

Additionally, material weaknesses were identified by the Company related to the accounting and financial reporting associated with the credit enhancement contained within the third-party agreements and its impact on consolidated financial statements.

The primary procedure we performed to address this critical audit matter included engaging our internal specialists to evaluate the third-party agreements and the related accounting treatment.

We have served as the Company’s auditor since 2017.

Oak Brook, Illinois

February 23, 2024

Oakbrook Terrace, Illinois

MIDLAND STATES BANCORP, INC.

16 unchanged sentences

Loan servicing rights, at lower of cost or fair value 17,842 20,253

Commercial FHA mortgage loan servicing rights held for sale — 20,745

Goodwill 161,904 161,904

1 unchanged sentence

Company-owned life insurance 211,168 203,485

Credit enhancement asset 16,804 15,389

Other assets 208,839 199,886

28 unchanged sentences

Years Ended December 31,

2023 2022 2021

Interest income:

25 unchanged sentences

Wealth management revenue 28,697 25,572 25,708

Residential mortgage banking revenue 1,903 1,509 5,526

Service charges on deposit accounts 13,154 11,990 10,237

Interchange revenue 13,955 14,302 13,879

(Loss) gain on sales of investment securities, net ( 9,372 ) ( 230 ) 537

Residential mortgage banking revenue 2,418 1,903 1,509

Income on company-owned life insurance 7,683 4,439 3,584

Loss on sales of investment securities, net ( 230 ) ( 9,372 ) ( 230 )

Gain on termination of hedged interest rate swaps — — 17,531

Impairment on commercial mortgage servicing rights — — ( 1,263 )

Income on company-owned life insurance 4,439 3,584 4,496

Credit enhancement income 60,998 48,194 69,976

Other income 12,066 17,756 8,936

5 unchanged sentences

FDIC insurance 5,278 4,779 3,336

Professional 7,049 6,907 10,971

Professional services 7,822 7,049 6,907

Marketing 3,926 3,158 3,318

1 unchanged sentence

Loan expense 5,954 4,206 4,586

Loan servicing fees 12,864 19,181 22,750

Amortization of intangible assets 4,008 4,758 5,410

1 unchanged sentence

Loss on mortgage servicing rights held for sale — — 3,250

Federal Home Loan Bank advances prepayment fees — — 8,536

Impairment on leased assets and surrendered assets 7,858 — —

Other expense 14,628 12,168 11,788

1 unchanged sentence

Income before income taxes 46,900 87,962 131,386

Income taxes 32,113 30,813 17,795

Income tax expense 8,856 26,807 31,149

Net income 38,044 61,155 100,237

11 unchanged sentences

Years Ended December 31,

2023 2022 2021

Net income $ 38,044 $ 61,155 $ 100,237

Other comprehensive income (loss):

Other comprehensive (loss) income:

Investment securities available for sale:

1 unchanged sentence

Recapture of credit loss expense — — ( 221 )

Reclassification adjustment for realized net losses (gains) on sales of investment securities included in net income

Reclassification adjustment for realized net losses on sales of investment securities included in net income

230 9,372 230

Reclassification adjustment for gains on fair value hedges included in net income

Income tax effect 1,677 ( 1,845 ) 28,876

1 unchanged sentence

Cash flow hedges:

Net unrealized derivative gains on cash flow hedges 1,556 2,438 6,851

Reclassification adjustment for gains realized in net income — ( 17,531 ) ( 2,159 )

Net unrealized derivative losses on cash flow hedges ( 1,692 ) ( 2,452 ) 2,551

Reclassification adjustment for net losses (gains) realized in net income 4,891 5,264 ( 17,644 )

Income tax effect ( 893 ) ( 759 ) 4,101

Change in cash flow hedges, net of tax 2,306 2,053 ( 10,992 )

Other comprehensive income (loss), net of tax 7,044 ( 89,034 ) ( 6,194 )

Other comprehensive (loss) income, net of tax ( 5,207 ) 7,044 ( 89,034 )

Total comprehensive income $ 32,837 $ 68,199 $ 11,203

11 unchanged sentences

Balances, December 31, 2021 $ — $ 221 $ 445,907 $ 212,472 $ 5,237 $ 663,837

Prior period adjustment from restatement — — — ( 63,647 ) — ( 63,647 )

Balances, January 1, 2022 (Restated)

— 221 445,907 148,825 5,237 600,190

Net income — — — 100,237 — 100,237

Other comprehensive loss — — — — ( 89,034 ) ( 89,034 )

Issuance of preferred stock, net of offering costs 110,548 — — — — 110,548

Common dividends declared ($ 1.16 per share)

— — — ( 25,923 ) — ( 25,923 )

Preferred dividends — — — ( 3,169 ) — ( 3,169 )

Common stock repurchased — ( 1 ) ( 1,108 ) — — ( 1,109 )

1 unchanged sentence

Issuance of common stock under employee benefit plans — 2 2,186 — — 2,188

Balances, December 31, 2021 $ — $ 221 $ 445,907 $ 212,472 $ 5,237 $ 663,837

Balances, December 31, 2022 (Restated)

$ 110,548 $ 222 $ 449,196 $ 219,970 $ ( 83,797 ) $ 696,139

Net income — — — 61,155 — 61,155

Other comprehensive loss — — — — ( 89,034 ) ( 89,034 )

Issuance of preferred stock, net of offering costs 110,548 — — — — 110,548

Other comprehensive income — — — — 7,044 7,044

Common dividends declared ($ 1.20 per share)

4 unchanged sentences

Issuance of common stock under employee benefit plans — 2 1,668 — — 1,670

Balances, December 31, 2022 $ 110,548 $ 222 $ 449,196 $ 282,405 $ ( 83,797 ) $ 758,574

Balances, December 31, 2023 (Restated)

$ 110,548 $ 216 $ 435,463 $ 245,639 $ ( 76,753 ) $ 715,113

Net income — — — 38,044 — 38,044

Other comprehensive income — — — — 7,044 7,044

Other comprehensive loss — — — — ( 5,207 ) ( 5,207 )

Common dividends declared ($ 1.24 per share)

10 unchanged sentences

Years Ended December 31,

2023 2022 2021

Cash flows from operating activities:

11 unchanged sentences

Gain on termination of hedged interest rate swaps — — ( 17,531 )

Loss (gain) on sales of investment securities, net 9,372 230 ( 537 )

Loss on sales of investment securities, net 230 9,372 230

Gain on repurchase of subordinated debt ( 231 ) ( 676 ) —

(Loss) gain on sales of other real estate owned ( 819 ) 118 ( 473 )

(Gain) loss on sales of other real estate owned ( 26 ) ( 819 ) 118

Impairment on other real estate owned 4,866 — 4,277

Origination of loans held for sale ( 81,077 ) ( 58,953 ) ( 134,612 )

Proceeds from sales of loans held for sale 98,851 269,958 739,954

Proceeds from sales of loans and leases held for sale 78,514 57,952 269,958

Gain on sale of loans held for sale ( 2,307 ) ( 2,395 ) ( 844 )

1 unchanged sentence

Loss on mortgage servicing rights held for sale — — 3,250

Impairment on leased assets and surrendered assets 7,858 — —

Net change in operating assets and liabilities:

Accrued interest receivable 8,804 ( 4,360 ) ( 1,448 )

Credit enhancement asset ( 1,415 ) ( 2,376 ) ( 18,792 )

Other assets ( 16,783 ) ( 24,038 ) 1,213

8 unchanged sentences

Net decrease (increase) in loans 346,883 72,877 ( 1,216,352 )

Proceeds from loans held for sale previously classified as portfolio loans 84,283 40,899 —

Purchases of premises and equipment ( 6,901 ) ( 8,731 ) ( 3,470 )

4 unchanged sentences

(Purchases of) proceeds from company-owned life insurance, net — ( 48,603 ) 1,518

Net cash acquired (paid) in acquisitions — 60,275 ( 2,715 )

Net cash used in investing activities ( 76,080 ) ( 1,098,887 ) ( 478,495 )

Net cash acquired in acquisitions — — 60,275

Net cash provided by (used in) investing activities 136,708 ( 74,800 ) ( 1,137,641 )

Cash flows from financing activities:

Net (decrease) increase in deposits ( 112,286 ) ( 55,123 ) 174,210

Net (decrease) increase in short-term borrowings ( 7,446 ) ( 34,492 ) 7,846

Proceeds from FHLB borrowings 23,288,000 3,540,000 500,000

Payments made on FHLB borrowings and other borrowings ( 23,272,000 ) ( 3,390,171 ) ( 977,536 )

FHLB advances prepayment fees — — 8,536

Net increase (decrease) in short-term borrowings 52,634 ( 7,446 ) ( 34,492 )

Net (decrease) increase in short-term FHLB borrowings ( 166,000 ) ( 174,000 ) 250,000

Proceeds from long-term FHLB borrowings 263,000 215,000 —

Payments made on long-term FHLB borrowings and other borrowings ( 315,000 ) ( 25,000 ) ( 100,171 )

Payments made on subordinated debt ( 15,763 ) ( 5,845 ) ( 40,000 )

5 unchanged sentences

Net cash (used in) provided by financing activities ( 333,549 ) ( 104,128 ) 332,082

Net (decrease) increase in cash and cash equivalents ( 25,570 ) ( 519,740 ) 338,731

Net decrease in cash and cash equivalents ( 20,295 ) ( 25,570 ) ( 519,740 )

Cash and cash equivalents:

4 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (RESTATED)

Nature of Operations

7 unchanged sentences

wealth management services;

commercial FHA mortgage loan servicing;

residential mortgage loan originations, sales and servicing;

mortgage loan originations, sales and servicing;

and, from time to time, gains on sales of assets.

2 unchanged sentences

The accompanying consolidated financial statements of the Company have been prepared in accordance with GAAP and conform to predominant practices within the banking industry.

Management of the Company has made a number of estimates and assumptions related to the reporting of assets and liabilities to prepare the consolidated financial statements in conformity with GAAP.

Actual results may differ from those estimates.

In the opinion of management, all adjustments, consisting of normal recurring accruals considered necessary for a fair presentation of the results of operations for annual periods presented herein, have been included.

Certain reclassifications of 2022 amounts have been made to conform to the 2023 presentation but do not have an effect on net income or shareholders’ equity.

Management of the Company has made a number of estimates and assumptions related to the reporting assets and liabilities to prepare the consolidated financial statements in conformity with GAAP.

Actual results may differ from these estimates.

Certain reclassifications of 2023 or 2022 amounts may have been made to conform to the 2024 presentation, but do not have an effect on net income or shareholders' equity.

The accompanying consolidated financial statements include a restatement of the financial statements (i) as of and for the year ended December 31, 2023 and (ii) for the year ended December 31, 2022 as referenced below.

Subsequent Events

Management has evaluated subsequent events for recognition and disclosure through February 23, 2024, which is the date the financial statements were available to be issued.

Management has evaluated subsequent events for recognition and disclosure through July 1, 2025, which is the date the financial statements were available to be issued.

Business Combinations

5 unchanged sentences

If the fair value of the net assets acquired is greater than the acquisition price, a bargain purchase gain is recognized and recorded in noninterest income.

Restatement of prior period Financial Statements

In connection with the preparation of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024, the Audit Committee, after discussion with management and the Company's independent registered public accounting firm, Crowe LLP, concluded that the Company's audited consolidated financial statements for the Restated Financial Periods should no longer be relied upon because of errors identified in such financial statements, as described below.

The errors relate to the Company’s accounting for loans originated pursuant to third-party loan origination programs.

These programs go back as far as 2012.

As part of these programs, the third-party providers offered various credit enhancements with respect to loans originated under the programs, including contributions to reserve accounts, yield maintenance and certain other payments.

Historically, the Company accounted for all borrower payments and credit enhancement payments under these programs on a single unit, or net basis, with all such payments presented as interest income representing the Company’s effective yield on the portfolios.

The Company has determined that these payments should instead

be accounted for on a separate unit of account, or gross basis, with loan yields and interest income recorded at the gross borrower loan rate, credit losses and associated provisions for credit losses recorded on a gross basis over the life of the loans, and with all credit enhancement payments recorded separately as a credit enhancement derivative.

As a result of the above, the Company is restating the financial statements (i) as of and for the year ended December 31, 2023 and (ii) for the year ended December 31, 2022, as presented in the audited financial statements as of and for the period ended December 31, 2024 in this Annual Report on Form 10-K.

The impact of the errors for years prior to January 1, 2022 have been adjusted through opening equity as of January 1, 2022 in the audited consolidated financial statements presented herein.

See Note 25 - Restatement of Prior Period Financial Statements for additional information, including the impact on the specific accounts.

Cash and Cash Equivalents and Cash Flows

11 unchanged sentences

Transfer of loans to other real estate owned 1,031 9,112 517

Transfer of premises and equipment, net to assets held for sale — — 23

Transfer of loan servicing rights, at lower of cost or market to loan servicing rights held for sale — — 23,995

6 unchanged sentences

All other debt securities are classified as available for sale.

As of December 31, 2023, all investment securities were classified as available for sale.

As of December 31, 2024 and 2023, all investment securities were classified as available for sale.

Investment securities available for sale are recorded at fair value with the unrealized gains and losses, net of the related tax effect, included in other comprehensive income.

9 unchanged sentences

For debt securities available for sale that do not meet the aforementioned criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors.

In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors.

In making this assessment, management considers the extent to which fair value is less than amortized cost, any

changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors.

If this assessment indicates that a credit loss exists, and the present value of cash flows expected to be collected from the security is less than the amortized cost basis, an allowance for credit losses is recorded.

Any impairment that has not been recorded through an allowance for credit losses is recorded in other comprehensive income.

Accrued interest receivable on investment securities available for sale totaled $ 5.1 million and $ 4.3 million at December 31, 2024 and 2023, respectively, and was reported in accrued interest receivable on the consolidated balance sheets.

The estimate of credit losses excludes this accrued interest receivable.

There was no allowance for credit losses recorded on investment securities available for sale at December 31, 2024 and 2023.

Equity Securities

20 unchanged sentences

The Company provides financing leases to small businesses for purchases of business equipment.

Under the direct financing method of accounting, the minimum lease payments to be received under the lease contract, together with the estimated unguaranteed residual values (approximately 3 % to 15 % of the cost of the related equipment), are recorded as lease receivables when the lease is signed and the leased property is delivered to the customer.

Under the direct financing method of accounting, the minimum lease payments to be received under the lease contract, together with the guaranteed residual values, which range from 1 % to 45 % of the cost of related equipment which average 3 %, are recorded as lease receivables when the lease is signed and the leased property is delivered to the customer.

The excess of the minimum lease payments and residual values over the cost of the equipment is recorded as unearned lease income.

12 unchanged sentences

The allowance for credit losses on loans is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans.

The amount of the allowance represents management's best estimate of current expected credit losses on loans considering available information, from internal and external sources, relevant to assessing collectibility over the loans' contractual terms, adjusted for expected prepayments when appropriate.

The amount of the allowance represents management's best estimate of current expected credit losses on loans considering available information, from internal and external sources, relevant to assessing collectability over the loans' contractual terms, adjusted for expected prepayments when appropriate.

Management estimates the allowance balance using relevant information, from internal and external sources, relating to historical credit loss experience, current conditions, and reasonable and supportable forecasts.

3 unchanged sentences

Expected credit losses for collateral dependent loans, including loans where the borrower is experiencing financial difficulty but foreclosure is not probable, are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate.

In calculating the allowance for credit losses, most loans are segmented into pools based upon similar characteristics and risk profiles.

In calculating the allowance for credit losses, most loans are segmented into pools based upon similar characteristics and risk profiles and measured on a collective basis.

Common characteristics and risk profiles may include internal credit ratings, risk ratings or classification, financial asset type, collateral type, size, industry of the borrower, historical or expected credit loss patterns, and reasonable and supportable forecast periods.

22 unchanged sentences

as a whole, and (v) Retail Sales for the State of Illinois.

The probability of default and prepayment assumptions were estimated by analyzing internally-sourced data related to historical performance of each loan pool.

They are adjusted to reflect the current impact of certain macroeconomic variables as well as their expected changes over a reasonable and supportable forecast period.

We have determined that we are reasonably able to forecast the macroeconomic variables used in our modeling processes with an acceptable degree of confidence for a total of two years with the last twelve months of the forecast period encompassing a reversion process whereby the forecasted macroeconomic variables are reverted to their historical mean utilizing a straight line basis.

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By reverting these modeling inputs to their historical mean and considering loan and borrower specific attributes, our models are intended to yield a measurement of expected credit losses that reflects our average historical loss rates for periods subsequent to the twelve-month reversion period.

The LGD is based on historical recovery averages for each loan pool, adjusted to reflect the current impact of certain macroeconomic variables as well as their expected changes over a two-year forecast period, with the final twelve months of the forecast period

encompassing a reversion process, which management considers to be both reasonable and supportable.

The same forecast and reversion periods are used for all macroeconomic variables in our models.

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These Q-Factor adjustments may increase or decrease management's estimate of expected credit losses by a calculated percentage or amount based upon the estimated level of risk.

The various risks that may be considered in making Q-Factor adjustments include, among other things, the impact of (i) changes in lending policies and procedures, including changes in underwriting standards and practices for collections, write-offs, and recoveries, (ii) actual and expected changes in economic and business conditions and developments that affect the collectibility of the loan pools, (iii) changes in the nature and volume of the loan pools and in the terms of the underlying loans, (iv) changes in the experience, ability, and depth of our lending management and staff, (v) changes in volume and severity of past due financial assets, the volume of non-accrual assets, and the volume and severity of adversely classified or graded assets, (vi) changes in the quality of our credit review function, (vii) changes in the value of the underlying collateral for loans that are non-collateral dependent, (viii) the existence, growth, and effect of any concentrations of credit and (ix) other factors such as the regulatory, legal and technological environments;

The various risks that may be considered in making Q-Factor adjustments include, among other things, the impact of (i) changes in lending policies and procedures, including changes in underwriting standards and practices for collections, charge-offs, and recoveries, (ii) actual and expected changes in economic and business conditions and developments that affect the collectability of the loan pools, (iii) changes in the nature and volume of the loan pools and in the terms of the underlying loans, (iv) changes in the experience, ability, and depth of our lending management and staff, (v) changes in volume and severity of past due financial assets, the volume of non-accrual assets, and the volume and severity of adversely classified or graded assets, (vi) changes in the quality of our credit review function, (vii) changes in the value of the underlying collateral for loans that are non-collateral dependent, (viii) the existence, growth, and effect of any concentrations of credit and (ix) other factors such as the regulatory, legal and technological environments;

and events such as natural disasters or health pandemics.

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Loans Held for Sale

Loans held for sale consist of residential mortgage loans originated with the intent to sell.

Prior to 2023, loans held for sale may have also included commercial FHA mortgage loans originated with the intent to sell.

Loans held for sale consist of residential mortgage loans originated with the intent to sell as well as the GreenSky portfolio which the Company had committed to a plan to sell at December 31, 2024.

Prior to 2023, loans held for sale also

included commercial FHA mortgage loans originated with the intent to sell.

Loans held for sale are carried at fair value, determined individually, as of the balance sheet date.

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The balance in the repurchase reserve at the balance sheet date reflects the estimated amount of potential loss the Company could incur from repurchasing a loan, as well as loss reimbursements, indemnification, and other “make whole” settlement resolutions.

Refer to Note 20 in the consolidated financial statements for additional information on the mortgage repurchase reserve.

There were no losses as a result of make-whole requests and loan repurchases for the years ended December 31, 2024, 2023 and 2022.

The liability for unresolved repurchase demands totaled $ 0.1 million at December 31, 2024 and 2023.

Premises and Equipment

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Goodwill and Intangible Assets

Goodwill resulting from a business combination is generally determined as the excess of the fair value of consideration transferred, plus the fair value of any noncontrolling interests in the acquiree, over the fair value of the net assets acquired and liabilities assumed as of the acquisition date.

Goodwill resulting from a business combination is generally determined as the excess of the fair value of consideration transferred over the fair value of the net assets acquired and liabilities assumed as of the acquisition date.

Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but tested for impairment at least annually or more frequently if events and circumstances exist that indicate that a goodwill impairment test should be performed.

Annually, the Company performs an impairment test of goodwill as of August 31 of each year.

During the current year, management performed quarterly qualitative assessments and an annual qualitative impairment test, as a result of the economic uncertainty and increased market volatility resulting from the rising interest rate environment.

Testing of goodwill impairment comprises a two-step process.

The testing is performed on each of the two reporting units, the Banking reporting unit and the Wealth Management reporting unit.

First, the Company performs a qualitative assessment to evaluate relevant events or circumstances to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

If the Company determines that it is more likely than not that an impairment has occurred, it proceeds to the quantitative impairment test, whereby it calculates the fair value of the reporting unit and compares it with its carrying amount, including goodwill.

In its performance of impairment testing, the Company has the unconditional option to proceed directly to the quantitative impairment test, bypassing the qualitative assessment.

If the carrying amount of the reporting unit exceeds the fair value, the amount by which the carrying amount exceeds fair value, up to the carrying value of goodwill, is recorded through earnings as an impairment charge.

If the results of the qualitative assessment indicate that it is not more likely than not that an impairment has occurred, or if the quantitative impairment test results in a fair value of the reporting unit that is greater than the carrying amount, then no impairment charge is recorded.

Annually, the Company performs an impairment test of goodwill as of August 31.

During the year ended December 31, 2024, management performed quarterly qualitative assessments and an annual qualitative impairment test, as a result of the economic uncertainty and increased market volatility resulting from the elevated interest rate environment.

The Company's annual impairment test of goodwill and other intangible assets did not identify any impairment.

Additionally, the Company determined that there were no triggering events and as a result no evidence of impairment between the annual impairment test and December 31, 2023.

The Company performed a quantitative impairment test on its Banking reporting unit as of December 31, 2024.

The Company engaged a third-party service provider to assist Management with the determination of the fair value of the Company in the fourth quarter of 2024.

The resulting calculation indicated that the fair value exceeded the carrying amount of the Company's Banking reporting unit by approximately 7 % as of December 31, 2024, which resulted in a determination of no impairment loss.

Significant judgment is necessary in the determination of the fair value of a reporting unit.

The income valuation methodology requires an estimation of future cash flows, considering the after-tax results of operations, the extent and timing of credit losses, and appropriate discount and growth rates.

Actual future cash flows may differ from forecasted results based on the assumptions used.

In performing the discounted cash flow analysis, the Company utilized multi-year cash projections that rely on internal forecasts of loan and deposit growth, bond mix, financing composition, market pricing of securities, credit performance, forward interest rates, future returns driven by net interest margin, fee generation and expense incurrence, industry and economic trends, and other relevant considerations.

The long-term growth rate used in the calculation of fair value was derived from published projections of the inflation rate, along with Management estimates.

The discount rate was calculated as the cost of equity capital using the modified capital asset pricing model, which includes variables including the risk-free interest rate, beta, equity risk premium, size premium, and company-specific risk premium.

Other intangible assets, which consist of core deposit and acquired customer relationship intangible assets, are typically amortized over a period ranging from 1 to 20 years using an accelerated method of amortization.

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The Company’s servicing portfolio consists of distinct portfolios of government-insured residential and commercial mortgages, conventional residential mortgages and SBA loans.

The Company periodically evaluates its loan servicing rights asset for impairment.

The Company periodically evaluates

its loan servicing rights asset for impairment.

Impairment is assessed based on the fair value of net servicing cash flows at each reporting date using estimated prepayment speeds of the underlying loans serviced and stratifications based on the risk characteristics of the underlying loans.

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This revenue, along with amortization of and changes in impairment on servicing rights, is reported in residential mortgage banking revenue and other noninterest income, respectively, in the consolidated statements of income.

Loans Servicing Rights Held for Sale

Mortgage servicing rights held for sale consist of commercial FHA mortgage servicing rights that management has committed to a plan to sell and has the ability to sell them to a buyer in their present condition.

Mortgage servicing rights held for sale are carried at the lower of their carrying value or fair value less estimated costs to sell.

Decreases in the valuation of mortgage servicing rights held for sale are included in loss on mortgage servicing rights held for sale in the consolidated statements of income.

Cash Surrender Value of Life Insurance Policies

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These policies are recorded as cash surrender value of life insurance policies in the consolidated balance sheets at each policy’s respective cash surrender value, adjusted for other charges or other amounts due that are probable at settlement, with changes in value recorded in noninterest income in the consolidated statements of income.

Credit Enhancement Asset

The Company is party to third-party loan origination programs.

As part of these programs the third-party providers offer various credit enhancements with respect to loans originated under the programs, including contributions to reserve accounts, yield maintenance and certain other payments.

In accordance with accounting guidance, we estimate and record an allowance for expected losses for these loans.

When the allowance for credit losses on loans is recorded, a credit enhancement derivative is also recorded on the balance sheet with a corresponding entry to noninterest income in recognition of the partner's legal commitment to indemnify or reimburse the Company.

The credit enhancement asset is relieved as credit enhancement payments and recoveries are received from the partner or taken from the partner's cash reserve account.

Derivative Financial Instruments

At the inception of a derivative contract, the Company designates the derivative as one of three types based on the intentions and belief as to likely effectiveness as a hedge.

These three types are (1) a hedge of the fair value of a recognized asset or liability or of an unrecognized firm commitment ("fair value hedge"), (2) a hedge of a forecasted transaction or the variability of cash flows to be received or paid related to a recognized asset or liability ("cash flow hedge"), or (3) instruments that do not meet the accounting definition of a hedge.

For a fair value hedge, the gain or loss on the derivative, as well as the offsetting loss or gain on the hedged item attributable to the hedged risk, are recognized in current earnings as fair values change.

For a cash flow hedge, the gain or loss on the derivative is reported in other comprehensive income and is reclassified into earnings in the same periods during with the hedged transaction affects earnings.

All derivatives are recognized on the consolidated balance sheet as a component of other assets or other liabilities at their fair value.

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This process includes linking all derivatives that are designated as cash flow hedges to specific assets and liabilities on the balance sheet or forecasted transactions.

We also formally assess, both at the hedge’s inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in cash flows of hedged items.

Hedge accounting is prospectively discontinued when (a) it is determined that the derivative is no longer effective in offsetting changes in the cash flows of a hedged item (including forecasted transactions);

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When hedge accounting is discontinued because it is probable that a forecasted transaction will not occur, the derivative will continue to be carried on the consolidated balance sheet at its fair value, and gains and losses that were in accumulated other comprehensive income will be recognized immediately in earnings.

In all other situations in which hedge

accounting is discontinued, the derivative will be carried at its fair value on the consolidated balance sheet, with subsequent changes in its fair value recognized in current-period earnings.

In all other situations in which hedge accounting is discontinued, the derivative will be carried at its fair value on the consolidated balance sheet, with subsequent changes in its fair value recognized in current-period earnings.

The Company also enters into interest rate lock commitments, which are agreements to originate mortgage loans whereby the interest rate on the loan is determined prior to funding and the customers have locked into that interest rate.

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Comprehensive income is defined as net income plus transactions and other occurrences that are the result of non-owner changes in equity.

Non-owner equity changes include unrealized gains and losses on available for sale securities and

changes in the fair value of cash flow hedges.

Non-owner equity changes include unrealized gains and losses on available for sale securities and changes in the fair value of cash flow hedges.

These are components of comprehensive income and do not have an impact on the Company’s net income.

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Accounting Guidance Adopted in 2024

2022-02, Financial Instruments-Credit Losses (Topic 326):

Troubled Debt Restructurings and Vintage Disclosures – In March 2022, the FASB issued ASU No.

2022-02, which 1) eliminates the accounting guidance for TDRs by creditors while enhancing the disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty;

and 2) requires that an entity disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases.

ASU 2022-02 is effective for fiscal years beginning after December 15, 2022 and the amendments should be applied prospectively, although the entity has the option to apply a modified retrospective transition method for the recognition and measurement of TDRs, resulting in a cumulative-effect adjustment to retained earnings in the period of adoption.

The Company adopted this guidance on January 1, 2023 and elected to apply on a prospective basis.

The adoption of this accounting pronouncement did not have an impact on the consolidated financial statements aside from additional and revised disclosures.

2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting – In March 2020, the FASB issued ASU No.

2020-04, allowing for optional expedients and exceptions for accounting related to contracts, hedging relationships and other transactions, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued.

The objective of the guidance in Topic 848 is to provide relief during the temporary transition period, so the FASB included a sunset provision based on the expectations of when LIBOR would cease being published.

In 2021, the UK Financial Conduct Authority delayed the intended cessation date of certain tenors of LIBOR to June 30, 2023.

In December 2022, to ensure the relief in Topic 848 covers the period of time during which a significant number of modifications may take place, the FASB issued ASU No.

2022-06, which defers the sunset date of Topic 848 from December 31, 2022, to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848.

The amendments in this ASU are effective March 12, 2020 through December 31, 2024.

The Company believes the adoption of this guidance will not have a material impact on the consolidated financial statements.

Accounting Guidance Issued But Not Yet Adopted

2023-02, Investments—Equity Method and Joint Ventures (Topic 323):

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The ASU is effective for fiscal years beginning after December 15, 2023.

Early adoption is permitted for all entities.

The Company b elieves the adoption will not have a material impact on the consolidated financial statements.

NOTE 2 – ACQUISITIONS

FNBC Bank & Trust

On June 17, 2022, the Company completed its branch acquisition from FNBC, whereby we acquired $ 79.8 million of deposits and $ 16.6 million of loans as well as other assets and liabilities associated with FNBC's branches in Mokena and

Yorkville, Illinois.

The acquisition was accounted for under the acquisition method of accounting.

Accordingly, the Company recognized amounts for identified tangible and intangible assets acquired and liabilities assumed at their estimated acquisition date fair values, while $ 0.4 million of transaction and integration costs were expensed as incurred.

A summary of the fair value of the assets acquired and liabilities assumed are included in the table below.

(dollars in thousands) FNBC

Assets acquired:

Cash and cash equivalents $ 60,275

Premises and equipment, net 950

Accrued interest receivable 36

Intangible assets 1,901

Total assets acquired $ 79,794

Liabilities assumed:

Deposits $ 79,794

Total liabilities assumed $ 79,794

Intangible assets:

Core deposit intangible $ 1,901

Estimated useful life 10 years

ATG Trust Company

On June 1, 2021, the Company completed its acquisition of substantially all of the trust assets of ATG Trust, a trust company based in Chicago, Illinois, with approximately $ 399.7 million in assets under management.

In aggregate, the Company acquired the assets of ATG Trust for $ 2.7 million in cash.

The acquisition was accounted for under the acquisition method of accounting.

Accordingly, the Company recognized amounts for identifiable assets acquired at their estimated acquisition date fair values, while $ 0.4 million of transaction and integration costs associated with the acquisition were expensed in 2021.

The Company adopted this guidance on January 1, 2024 on a prospective basis.

The adoption of this accounting pronouncement did not have a material impact on the consolidated financial statements.

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures - In December 2023, the FASB issued ASU No.

2023-07, which requires public entities to disclose significant segment expenses, an amount and description for other segment items, the title and position of the entity's chief operating decision maker and an explanation of how the chief operating decision maker uses the reported measures of profit or loss to assess segment performance, and, on an interim basis, certain segment related disclosures that previously were required only on an annual basis.

The ASU is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024.

The Company has updated the related disclosures for the current fiscal year.

Accounting Guidance Not Yet Adopted

2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures - In December 2023, the FASB issued ASU No.

2023-09, which requires public entities to disclose in their rate reconciliation table additional categories of information about federal, state and foreign income taxes and to provide more details about the reconciling items in some categories if items meet a quantitative threshold.

The pronouncement also requires entities to disclose income taxes paid, net of refunds, disaggregated by federal, state and foreign taxes for annual periods and to disaggregate the information by jurisdiction based on a quantitative threshold, among other things.

The ASU is effective for fiscal years beginning after December 15, 2024, with early adoption permitted.

The Company will update the related disclosures upon adoption.

2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses - In November 2024, the FASB issued ASU 2024-03 in order to improve the disclosures about a public business entity's expenses and address requests from investors for more detailed information about the types of expenses in commonly presented expense captions.

The amendments in ASU 2024-03 require disclosure, in the notes to the financial statements, of specified information about certain costs and expenses in interim and year-end reporting periods.

The amendments in this ASU apply to all public business entities and are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027.

Early adoption is permitted.

The amendments are to be applied either (1) prospectively to financial statements issued for reporting periods after the effective date or (2) retrospectively to any or all prior periods presented in the financial statements.

The Company will update the related disclosures upon adoption.

NOTE 2 – INVESTMENT SECURITIES

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(dollars in thousands) Amortized

losses Basis Adjustments (2)

Investment securities available for sale

Treasury securities $ 1,097 $ — $ — $ 1,097

government sponsored entities and U.S.

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State and municipal securities 75,597 96 ( 6,632 ) — 69,061

Collateralized loan obligations 27,646 3 84 27,565

Corporate securities 85,602 42 ( 5,763 ) — 79,881

Other securities (1)

90,372 158 ( 107 ) — 90,423

Total available for sale securities $ 1,316,785 $ 3,289 $ ( 112,358 ) $ ( 142 ) $ 1,207,574

(1) The fair value of other securities includes student loan asset backed securities of $ 50.0 million and structured financial products of $ 40.4 million.

(2) Basis adjustments represent the amount of fair value hedging adjustments included in the carrying amount of fixed-rate investment securities designated in fair value hedging arrangements.

See Note 8 - Derivative Instruments for additional information regarding these derivative financial instruments.

December 31, 2023

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Corporate securities 109,598 41 ( 10,467 ) 99,172

Other securities (1)

27,646 3 ( 84 ) 27,565

Total available for sale securities $ 1,012,592 $ 3,217 $ ( 99,914 ) $ 915,895

Investment securities with a carrying amount of $ 320.5 million and $ 440.6 million were pledged for public deposits at December 31, 2023 and December 31, 2022, respectively.

The following is a summary of the amortized cost and fair value of the investment securities available for sale, by maturity, at December 31, 2023.

Expected maturities may differ from contractual maturities in mortgage-backed securities because the mortgages underlying the securities may be prepaid without penalties.

The maturities of all other investment securities available for sale are based on final contractual maturity.

(1) The fair value of other securities includes structured financial products of $ 27.6 million.

Investment securities with a carrying amount of $ 283.7 million and $ 320.5 million were pledged for public deposits at December 31, 2024 and 2023 , respectively.

Excluding securities issued or backed by U.S.

government or its sponsored entities and agencies, there were no investments in securities from one issuer that exceeded 10% of shareholders' equity as of December 31, 2024 and 2023.

The table below shows the amortized cost and fair value of the investment securities portfolio by contractual maturity for all securities other than mortgage-backed securities, at December 31, 2024.

Expected maturities may differ from

contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties.

Securities not due at a single maturity date are shown separately.

(dollars in thousands) Amortized

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Total available for sale securities $ 1,316,785 $ 1,207,574

Proceeds and gross realized gains and losses on sales of investment securities available for sale for the years ended 2023, 2022, and 2021 are summarized as follows:

Proceeds and gross realized gains and losses on sales of investment securities available for sale for the years ended December 31, 2024, 2023 and 2022 are summarized as follows:

Years Ended December 31,

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State and municipal securities 21,209 365 43,131 6,267 64,340 6,632

Collateralized loan obligations 14,763 84 — — 14,763 84

Corporate securities 23,833 1,910 52,271 3,853 76,104 5,763

Other securities 25,202 106 2,130 1 27,332 107

Total available for sale securities $ 388,077 $ 12,176 $ 515,505 $ 100,182 $ 903,582 $ 112,358

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Investment securities available for sale

Treasury securities $ 1,839 $ 24 $ 59,865 $ 5,172 $ 61,704 $ 5,196

government sponsored entities and U.S.

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Corporate securities 4,688 53 84,662 10,414 89,350 10,467

Other securities 14,763 84 — — 14,763 84

Total available for sale securities $ 252,732 $ 13,713 $ 460,879 $ 86,201 $ 713,611 $ 99,914

At December 31, 2024, 295 investment securities available for sale had unrealized losses with aggregate depreciation of 10.82 % from their amortized cost basis.

For all of the above investment securities, the unrealized losses were generally due to changes in interest rates and other market conditions, and unrealized losses were considered to be temporary as the fair value is expected to recover as the securities approach their respective maturity dates.

The issuers are of high credit quality and all principal amounts are expected to be paid when securities mature.

The Company does not intend to sell and it is likely that the Company will not be required to sell the securities prior to their anticipated recovery.

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Total loans include net deferred loan costs of $ 1.4 million and $ 3.8 million at December 31, 2024 and December 31, 2023, respectively, and unearned discounts of $ 56.7 million and $ 66.4 million within the lease financing portfolio at December 31, 2024 and December 31, 2023, respectively.

At December 31, 2023, the Company had residential real estate loans held for sale totaling $ 3.8 million, compared to $ 1.3 million at December 31, 2022.

The Company sold loans and leases with proceeds totaling $ 98.9 million and $ 270.0 million during the years ended December 31, 2023 and 2022, respectively.

Classifications of Loan Portfolio

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Commercial loans are predominately secured by equipment, inventory, accounts receivable, and other sources of repayment.

Commercial FHA warehouse lines of $ 25.0 million as of December 31, 2022 were included in this classification.

Commercial real estate —Loans secured by real estate occupied by the borrower for ongoing operations, including loans to borrowers engaged in agricultural production, and non-owner occupied real estate leased to one or more tenants, including commercial office, industrial, special purpose, retail and multi-family residential real estate loans.

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Consumer loans consist of relatively small amounts that are spread across many individual borrowers.

Lease financing —Our equipment leasing business provides financing leases to varying types of businesses, nationwide, for purchases of business equipment and software.

Lease financing —Our leasing business provides financing leases to varying types of businesses, nationwide, for purchases of business equipment.

The financing is secured by a first priority interest in the financed assets and generally requires monthly payments.

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We have extended loans to certain of our directors, executive officers, principal shareholders and their affiliates.

These loans were made in the ordinary course of business upon substantially the same terms, including collateralization and interest rates prevailing at the time.

These loans were made in the ordinary course of business upon substantially the same terms as comparable transactions with non-insiders, including collateralization and interest rates prevailing at the time.

The new loans, other additions, repayments and other reductions for the years ended December 31, 2024 and 2023, are summarized as follows:

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Balance, end of period $ 42,776 $ 36,837 $ 3,550 $ 8,002 $ 5,400 $ 14,639 $ 111,204

Changes in allowance for credit losses on loans for the year ended December 31, 2022:

Changes in allowance for credit losses on loans for the year ended December 31, 2023 (restated) :

Balance, beginning of period $ 26,035 $ 29,290 $ 2,435 $ 4,301 $ 60,041 $ 6,787 $ 128,889

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Balance, end of period $ 29,672 $ 20,229 $ 4,163 $ 5,553 $ 86,762 $ 12,940 $ 159,319

Changes in allowance for credit losses on loans for the year ended December 31, 2021:

Changes in allowance for credit losses on loans for the year ended December 31, 2022 (restated) :

Balance, beginning of period $ 24,768 $ 22,993 $ 972 $ 2,695 $ 30,547 $ 7,469 $ 89,444

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The regression model uses forward-looking economic forecasts including variables such as gross domestic product, housing price index, and real disposable income to predict default rates.

The forecasting method for the equipment financing portfolio assumes a rolling twelve-month average of the through-the-cycle default rate, to predict default rates for the twelve month time horizon.

The loss given default component is the percentage of defaulted loan balance that is ultimately charged off.

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The Company’s expected loss estimate is anchored in historical credit loss experience, with an emphasis on all available portfolio data.

The Company’s historical look-back period includes January 2012 through the current period on a

monthly basis.

The Company’s historical look-back period includes January 2012 through the current period on a monthly basis.

When historical credit loss experience is not sufficient for a specific portfolio, the Company may supplement its own portfolio data with external models or data.

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The Company utilizes risk ratings for the commercial portfolios and days past due for the consumer and the lease financing portfolios.

Within the probability of default segmentation, credit metrics are identified to further segment the financial assets.

The Company utilizes risk ratings for the commercial portfolios and days past due for the consumer and the lease financing portfolios.

The Company has defined five transitioning risk states for each asset pool within the expected credit loss model.

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Expected Credit Losses

In calculating expected credit losses, the Company individually evaluates loans on nonaccrual status with a balance greater than $ 500,000 , loans past due 90 days or more and still accruing interest, and loans that do not share risk characteristics

with other loans in the pool.

The following table presents the amortized cost basis of individually evaluated loans on nonaccrual status as of December 31, 2024 and December 31, 2023:

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Collateral Dependent Financial Assets

A collateral dependent financial loan relies solely on the operation or sale of the collateral for repayment.

A collateral dependent financial asset is a loan that relies solely on the operation or sale of the collateral for repayment.

In evaluating the overall risk associated with a loan, the Company considers character, overall financial condition and resources, and payment record of the borrower;

the prospects for support from any financially responsible guarantors;

and the nature and degree of

protection provided by the cash flow and value of any underlying collateral.

and the nature and degree of protection provided by the cash flow and value of any underlying collateral.

However, as other sources of repayment become inadequate over time, the significance of the collateral’s value increases and the loan may become collateral dependent.

The table below presents the value of individually evaluated, collateral dependent loans by loan class, for borrowers experiencing financial difficulty, as of December 31, 2023 and December 31, 2022:

The table below presents the amortized cost basis of individually evaluated, collateral dependent loans by loan class, for borrowers experiencing financial difficulty, as of December 31, 2024 and December 31, 2023:

Type of Collateral

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Commercial $ — $ 7,074 $ — $ 7,074

Commercial other — — 1,232 1,232

Commercial real estate:

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Multi-family 54,133 — — 54,133

Construction and land development 8,399 — — 8,399

Residential real estate

Residential first lien — — — —

Other residential — — — —

Lease financing — — 465 465

Total collateral dependent loans $ 96,004 $ 14,661 $ 465 $ 111,130

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Commercial $ — $ — $ 1,972 $ 1,972

Commercial other — — 1,232 1,232

Commercial real estate:

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Multi-family 5,143 — — 5,143

Residential real estate

Residential first lien 220 — — 220

Total collateral dependent loans $ 28,565 $ — $ 3,204 $ 31,769

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Total loans $ 32,355 $ 11,326 $ 10,769 $ 54,450 $ 140,138 $ 4,972,986 $ 5,167,574

The aging status of the recorded investment in loans by portfolio as of December 31, 2022 was as follows:

The aging status of the recorded investment in loans by portfolio as of December 31, 2023 (restated) was as follows:

Accruing loans

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Loan Restructurings

The Company adopted the accounting guidance in ASU No.

2022-02, effective as of January 1, 2023, which eliminated the recognition and measurement of a TDR.

Due to the removal of the TDR designation, the Company evaluates all loan restructurings according to the accounting guidance for loan modifications to determine if the restructuring results in a new loan or a continuation of the existing loan.

Loan modifications to borrowers experiencing financial difficulties that result in a direct change in the timing or amount of contractual cash flows include situations where there is principal forgiveness, interest rate reductions, other-than-insignificant payment delays, term extensions, and combinations of the listed modifications.

Therefore, the disclosures related to loan restructurings are for modifications which have a direct impact on cash flows.

The Company may offer various types of concessions when modifying a loan.

Commercial and industrial loans modified in a loan restructuring often involve temporary interest-only payments, term extensions, and converting revolving credit lines to term loans.

The Company may offer various types of concessions when a borrower is experiencing financial difficulties that result in a direct change in the timing or amount of contractual cash flows including principal forgiveness, interest rate reductions, other-than-insignificant payment delays, term extensions, and combinations of the listed modifications.

Commercial loans modified in a loan restructuring often involve temporary interest-only payments, term extensions, and converting revolving credit lines to term loans.

Additional collateral, a co-borrower, or a guarantor is often requested.

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The allowance may be increased, adjustments may be made in the allocation of the allowance, or partial charge-offs may be taken to further write-down the carrying value of the loan.

In some cases, the Company will modify a loan by providing multiple types of concessions.

Typically, one type of concession, such as a term extension, is granted initially.

If the borrower continues to experience financial difficulty, another concession such as an interest rate reduction or principal forgiveness, may be granted.

During the year ended December 31, 2023 the Company restructured eleven loans and one lease for borrowers experiencing financial difficulties with principal balances totaling $ 2.4 million.

Nine of the restructured loans were provided a term extension with the other two receiving an interest rate reduction and a term extension.

The lease was provided a term extension with an increased interest rate.

The following table represents, by loan portfolio segment, a summary of the loan restructuring for the years ended December 31, 2024 and 2023:

Years Ended December 31,

(dollars in thousands) Balance Count Balance Count

Commercial $ 61,729 8 $ 40 1

Commercial other 1,790 17 1,447 6

Commercial real estate:

Commercial real estate non-owner occupied 31,550 5 — —

Commercial real estate owner occupied 6,131 3 — —

Multi-family 27,354 2 — —

Construction and land development 17,033 3 — —

Total commercial loans 145,587 38 1,487 7

Residential real estate:

Residential first lien 402 3 57 2

Other residential 82 2 — —

Consumer 44 3 22 1

Lease financing 3,301 18 763 2

Total loan restructurings $ 149,416 64 $ 2,329 12

Balance Count Balance Count

Interest Rate Reduction $ 10,037 2 $ — —

Term Extension 75,365 33 1,191 8

Payment Deferral 8,153 15 — —

Forgiveness of Principal or Interest 213 1 — —

Interest Rate Reduction and Term Extension 49,051 5 1,138 4

Interest Rate Reduction and Payment Deferral 312 2 — —

Interest Rate Reduction and Principal Forgiveness 77 1 — —

Term Extension and Payment Deferral 6,208 5 — —

Total loan restructurings $ 149,416 64 $ 2,329 12

The Company has not committed to lend any additional amounts to the borrowers that have been granted a loan modification.

The Company closely monitors the performance of loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of our modification efforts.

The following table presents the performance of such loans that have been modified in the last twelve months for the year ended December 31, 2024:

(dollars in thousands) 30-59

past due 60-89

past due Total

past due Nonaccrual Current Total

Commercial $ 2,722 $ — $ 2,722 $ — $ 59,007 $ 61,729

Commercial other 116 36 152 688 950 1,790

Commercial real estate:

Commercial real estate non-owner occupied — — — 6,301 25,249 31,550

Commercial real estate owner occupied — — — — 6,131 6,131

Multi-family — — — 27,354 — 27,354

Construction and land development — — — — 17,033 17,033

Total commercial loans 2,838 36 2,874 34,343 108,370 145,587

Residential real estate:

Residential first lien — — — 337 65 402

Other residential — — — 45 37 82

Consumer — — — — 44 44

Lease financing — — — 950 2,351 3,301

Total loan restructurings $ 2,838 $ 36 $ 2,874 $ 35,675 $ 110,867 $ 149,416

The following table presents the performance of such loans that have been modified in the last twelve months for the year ended December 31, 2023:

(dollars in thousands) 30-59

past due 60-89

past due Total

past due Nonaccrual Current Total

Commercial $ — $ — $ — $ — $ 40 $ 40

Commercial other 395 — 395 298 754 1,447

Total commercial loans 395 — 395 298 794 1,487

Residential real estate:

Residential first lien — — — 57 — 57

Consumer — — — — 22 22

Lease financing — — — — 763 763

Total loan restructurings $ 395 $ — $ 395 $ 355 $ 1,579 $ 2,329

Credit Quality Monitoring

27 unchanged sentences

Loans not graded in the commercial loan portfolio are monitored by aging status and payment activity.

As discussed previously in Loan Restructurings, the Company does provide various types of concessions when a borrower is experiencing financial difficulties that result in a direct change in the timing or amount of contractual cash flows.

Modified loans with terms at least as favorable to the lender as the terms for other customers with similar collection risks and with terms that are more than minor compared to the original terms are treated as a new loan to the borrower.

The following tables present the recorded investment of the commercial loan portfolio by risk category as of December 31, 2024 and December 31, 2023:

117 unchanged sentences

Total commercial loans $ 720,650 $ 1,490,893 $ 754,986 $ 306,746 $ 198,647 $ 368,931 $ 524,039 $ 4,364,892

The following table presents the gross charge-offs by class of loan and year of origination on the commercial loan portfolio for the year ended December 31, 2023:

The following table presents the gross charge-offs by class of loan and year of origination on the commercial loan portfolio for the years ended December 31, 2024 and 2023:

Term Loans by Origination Year

6 unchanged sentences

Multi-family — — 4,545 — — 1,539 — 6,084

Farmland — — — 115 — — — 115

Construction and land development

1 unchanged sentence

Total gross commercial charge-offs $ — $ 5,473 $ 27,431 $ 20,477 $ 377 $ 4,342 $ 342 $ 58,442

Term Loans by Origination Year

2023 2022 2021 2020 2019 Prior Revolving Loans Total

For the year ended December 31, 2023 (restated)

Commercial Commercial $ — $ — $ — $ 70 $ 126 $ 224 $ 2,211 $ 2,631

Commercial Other 258 5,432 2,351 1,273 773 985 — 11,072

Commercial Real Estate Non-owner occupied — — — — — 2,630 — 2,630

Owner occupied — — — — 48 1,510 — 1,558

Multi-family — — — — — 812 — 812

Construction and land development

— — — — 42 1,559 — 1,601

Total gross commercial charge-offs $ 258 $ 5,432 $ 2,351 $ 1,343 $ 989 $ 7,720 $ 2,211 $ 20,304

The Company evaluates the credit quality of its other loan portfolios, which includes residential real estate, consumer and lease financing loans, based primarily on the aging status of the loan and payment activity.

43 unchanged sentences

Total other loans $ 407,143 $ 640,209 $ 279,361 $ 139,078 $ 74,244 $ 142,140 $ 56,525 $ 1,738,700

The following table presents the gross charge-offs by class of loan and year of origination on the other loan portfolio for the year ended December 31, 2023:

The following table presents the gross charge-offs by class of loan and year of origination on the other loan portfolio for the years ended December 31, 2024 and 2023:

Term Loans by Origination Year

7 unchanged sentences

Total gross other charge-offs $ 18 $ 32,079 $ 54,254 $ 14,894 $ 5,974 $ 5,815 $ 157 $ 113,191

Term Loans by Origination Year

2023 2022 2021 2020 2019 Prior Revolving Loans Total

For the year ended December 31, 2023 (restated)

Residential real estate Residential first lien $ — $ — $ 8 $ 35 $ 108 $ 53 $ — $ 204

Other residential — — — — — 10 57 67

Consumer Consumer — 49 23 22 37 36 — 167

Consumer other 1,216 14,786 7,982 4,313 2,499 2,186 — 32,982

Lease financing 669 2,156 1,172 213 542 274 — 5,026

Total gross other charge-offs $ 1,885 $ 16,991 $ 9,185 $ 4,583 $ 3,186 $ 2,559 $ 57 $ 38,446

NOTE 4 – PREMISES, EQUIPMENT AND LEASES

20 unchanged sentences

Right-of-use assets obtained in exchange for lease obligations 2,889 2,470

Right-of-use assets derecognized due to terminations or impairment — ( 123 )

Weighted average remaining lease term 6.9 years 7.8 years

8 unchanged sentences

Total operating lease liabilities $ 10,112

NOTE 5 - OPERATING LEASES - LESSOR

The Company provides financing for various types of equipment through operating leasing arrangements.

The equipment leased to others is carried at cost less accumulated depreciation in other assets on our consolidated balance sheets.

The Company had equipment leased to others of $ 30.7 million and $ 58.0 million at December 31, 2024 and December 31, 2023, respectively, net of accumulated depreciation of $ 18.1 million and $ 21.2 million at December 31, 2024 and December 31, 2023, respectively.

The Company recorded lease income of $ 16.1 million and $ 18.0 million related to lease payments for operating leases in other income on our consolidated statements of income for the years ended December 31, 2024 and 2023, respectively.

Depreciation expense related to leased equipment was $ 12.6 million and $ 14.7 million for the years ended December 31, 2024 and 2023, respectively.

The Company performs assessment of the recoverability of long-lived assets when events or changes in circumstances indicate their carrying values may not be recoverable.

During the year ended December 31, 2024, the Company recognized impairment losses of $ 6.0 million associated with equipment leased to others in other expenses on our consolidated statements of income.

The future lease payments receivable from operating leases as of December 31, 2024 are as follows:

(dollars in thousands) Amount

Year ending December 31:

Thereafter 48

Total future minimum lease payments 17,174

NOTE 6 – LOAN SERVICING RIGHTS

5 unchanged sentences

Residential 197,161 338 225,067 431

Commercial FHA held for sale — — 2,255,617 20,745

Total $ 2,144,156 $ 17,842 $ 2,352,713 $ 20,253

Commercial FHA Mortgage Loan Servicing

During the third quarter of 2022, the Company committed to a plan to sell our commercial FHA servicing portfolio and, therefore, transferred $ 24.0 million to commercial FHA servicing rights held for sale.

At June 30, 2023, the Company abandoned its plans to sell this servicing asset and removed this asset from held for sale at lower of cost or fair value with no gain or loss recognized.

The fair value of commercial FHA loan servicing rights is determined using key assumptions, representing both general economic and other published information, including the assumed earnings rates related to escrow and replacement reserves, and the weighted average characteristics of the commercial portfolio, including the prepayment rate and discount rate.

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NOTE 8 – DERIVATIVE INSTRUMENTS

As part of the Company’s overall interest rate risk management, the Company utilizes derivative instruments to minimize significant, unanticipated earnings fluctuations caused by interest rate volatility, including interest rate lock commitments, forward commitments to sell mortgage-backed securities, cash flow hedges and interest rate swap contracts.

The notional amount does not represent amounts exchanged by the parties, rather the amount exchanged is determined by reference to the notional amount and the other terms of the individual agreements.

Interest Rate Lock Commitments / Forward Commitments to Sell Mortgage-Backed Securities

The Company issues interest rate lock commitments on originated fixed-rate commercial and residential real estate loans to be sold.

The interest rate lock commitments and loans held for sale are hedged with forward contracts to sell mortgage-backed securities.

The fair value of the interest rate lock commitments and forward contracts to sell mortgage-backed securities are included in other assets or other liabilities in the consolidated balance sheets.

Changes in the fair value of derivative financial instruments are recognized in residential mortgage banking revenue and other noninterest income in the consolidated statements of income.

The following table summarizes the interest rate lock commitments and forward commitments to sell mortgage-backed securities held by the Company, their notional amount and estimated fair values at December 31, 2023 and December 31, 2022:

Notional amount Fair value gain

(dollars in thousands) December 31,

2023 December 31,

2022 December 31,

2023 December 31,

Derivative instruments (included in other assets):

Interest rate lock commitments $ 2,405 $ 2,078 $ 62 $ 49

Notional amount Fair value loss

(dollars in thousands) December 31,

2023 December 31,

2022 December 31,

2023 December 31,

Derivative instruments (included in other liabilities):

Interest rate lock commitments $ — $ 4,419 $ — $ 15

Forward commitments to sell mortgage-backed securities 5,000 6,669 83 —

Total $ 5,000 $ 11,088 $ 83 $ 15

During the years ended December 31, 2023, 2022 and 2021, the Company recognized net losses of $ 0.1 million, $ 0.4 million and $ 1.5 million, respectively, on derivative instruments.

Cash Flow Hedges

The Company periodically enters into interest rate swap agreements, which qualify as cash flow hedges, to manage the risk of changes in future cash flows due to interest rate fluctuations.

The following table summarizes the Company's receive-fixed, pay-variable interest rate swaps on certain pools of loans indexed to prime at December 31, 2023 and December 31, 2022

(dollars in thousands) December 31,

2023 December 31,

Notional Amount $ 400,000 $ 200,000

Fair value loss included in other liabilities ( 8,443 ) ( 9,999 )

Tax effected amount included in accumulated other comprehensive (loss) income ( 6,164 ) ( 7,300 )

Average remaining life 2.67 3.37

Weighted average pay rate 6.55 % 7.23 %

Weighted average receive rate 5.41 % 5.48 %

Interest Rate Swap Contracts Not Designated as Hedges

The Company entered into interest rate swap contracts sold to commercial customers who wish to modify their interest rate sensitivity.

The Company enters into derivative instruments, which may include interest rate swaps and interest rate options, in connection with our risk-management activities.

Our primary objective for using derivative financial instruments is to manage interest rate risk associated with our fixed-rate and variable-rate assets and liabilities.

Interest Rate Risk

We monitor our mix of fixed-rate and variable-rate assets and liabilities and may enter into interest rate swaps, forwards, and options to achieve a more desired mix of fixed-rate and variable-rate assets and liabilities.

We execute these trades to modify our exposure to interest rate risk by converting certain fixed-rate instruments to a variable-rate and certain variable-rate instruments to a fixed-rate.

We use a mix of both derivatives that qualify for hedge accounting treatment and economic hedges that do not qualify for hedge accounting treatment.

Derivatives qualifying for hedge accounting treatment can include receive-fixed swaps designated as fair value hedges of specific fixed-rate unsecured debt obligations, receive-fixed swaps designated as fair value hedges of specific fixed-rate FHLB advances, and pay-fixed swaps designated as fair value hedges of securities within our available-for-sale portfolio.

Other derivatives qualifying for hedge accounting consist of interest rate floor contracts designated as cash flow hedges of the expected future cash flows in the form of interest receipts on a portion of our commercial and commercial real estate loans.

Both the fair value hedges and cash flow hedges were determined to be effective during all periods presented and the Company expects the hedges to remain effective during the remaining terms of the swaps.

We have the ability to execute economic hedges, which could consist of interest rate swaps, interest rate caps, forwards, and options to mitigate interest rate risk.

We also enter into interest rate lock commitments and forward commitments that are executed as part of our mortgage business that do not meet the accounting definition of hedges, as well as interest rate swap contracts sold to commercial customers who wish to modify their interest rate sensitivity.

These swaps are offset by contracts simultaneously purchased by the Company from other financial dealer institutions with mirror-image terms.

Because of the mirror-image terms of the offsetting contracts, in addition to collateral provisions which mitigate the impact of non-performance risk, changes in the fair value subsequent to initial recognition have a minimal effect on earnings.

These derivative contracts do not qualify for hedge accounting.

The notional amounts of the customer derivative instruments and the offsetting counterparty derivative instruments were $ 6.9 million and $ 7.4 million at December 31, 2023 and December 31, 2022, respectively.

The fair value of the customer derivative instruments and the offsetting counterparty derivative instruments was $ 0.3 million and $ 0.4 million at December 31, 2023 and December 31, 2022, respectively, which are included in other assets and other liabilities, respectively, on the consolidated balance sheets.

Balance Sheet Presentation

The following table summarizes the fair value of derivative instruments reported on our consolidated balance sheet.

The amounts are presented on a gross basis, are segregated by derivatives that are designated and qualifying as hedging instruments or those that are not, and are further segregated by type of contract within those two categories.

Derivative assets and derivative liabilities are included in other assets and other liabilities, respectively, on the consolidated balance sheet.

Notional amounts are reference amounts from which contractual obligations are derived and are not recorded on the balance sheet.

In our view, derivative notional is not an accurate measure of our derivative exposure when viewed in isolation from other factors, such as market rate fluctuations and counterparty credit risk.

December 31, 2024 December 31, 2023 (restated)

Fair Value Fair Value

(dollars in thousands) Assets Liabilities Notional amount Assets Liabilities Notional amount

Derivatives designated as accounting hedges

Interest rate contracts

Fixed-rate mortgage-backed securities $ 2,653 $ 654 $ 167,363 $ — $ 1,324 $ 150,000

Pools of commercial and commercial real estate loans — 4,502 200,000 — 6,654 200,000

FHLB advances, brokered CDs and other borrowings 863 281 75,000 — 465 50,000

Total derivatives designated as accounting hedges $ 3,516 $ 5,437 $ 442,363 $ — $ 8,443 $ 400,000

Derivatives not designated as accounting hedges

Interest rate contracts

Swaps $ 218 $ 218 $ 54,390 $ 310 $ 310 $ 13,832

Interest rate lock commitments 71 — 3,907 62 — 2,405

Forward commitments to sell mortgage-backed securities 32 — 10,198 — 83 5,000

Total derivatives not designated as accounting hedges $ 321 $ 218 $ 68,495 $ 372 $ 393 $ 21,237

The following table presents amounts recorded in the consolidated balance sheets related to cumulative basis adjustments for fair value hedges.

Carrying amount of the hedged items Cumulative amount of fair value hedging adjustment included in the carrying amount of the hedged items

(dollars in thousands) December 31, 2024 December 31, 2023 (restated)

December 31, 2024 December 31, 2023 (restated)

Investment securities available for sale $ 286,982 $ 220,501 $ 3,323 $ ( 1,324 )

Statement of Income Presentation

The following table summarizes the effect of derivative instruments in fair value hedging relationships on the consolidated statements of income.

Location of gain (loss) recognized in income on derivative Gain (loss) recognized in income on derivative Location of gain (loss) recognized in income on related hedged item Gain (loss) recognized in income on related hedged items

(dollars in thousands) 2024 2023 2024 2023

Years Ended December 31,

Gain (loss) on fair value hedging relationships

Interest rate contracts

Fixed-rate mortgage-backed securities Interest income on investment securities available for sale $ 9,341 $ — Interest income on investment securities available for sale $ ( 9,484 ) $ —

The following table summarizes the effect of derivative instruments in cash flow hedging relationships on the consolidated statements of income.

Gain (loss) recognized in AOCI on derivative Location of gain (loss) recognized in income on derivative Gain (loss) reclassified from AOCI into income

(dollars in thousands) 2024 2023

Years Ended December 31,

Gain (loss) on cash flow hedging relationships

Interest rate contracts

Pools of commercial and commercial real estate loans $ ( 3,705 ) $ ( 2,242 ) $ 2,551 Interest income on loans $ ( 5,857 ) $ ( 5,588 ) $ 113

Other noninterest income — — 17,531

FHLB advances, brokered CDs and other borrowings 2,013 ( 210 ) — Interest expense 966 324 —

Total gain (loss) on cash flow hedging relationships $ ( 1,692 ) $ ( 2,452 ) $ 2,551 $ ( 4,891 ) $ ( 5,264 ) $ 17,644

During the next 12 months, we estimate $ 1.9 million of losses will be reclassified into pretax earnings from derivatives designated as cash flow hedges.

The following table summarizes the effect of derivative instruments not designated as accounting hedges on the consolidated statements of income.

(dollars in thousands) Location of gain (loss) recognized in income on derivative 2024 2023

Years Ended December 31,

Gain (loss) on derivative instruments not designated as accounting hedges

Interest rate contracts Residential mortgage banking revenue $ 123 $ ( 70 ) $ ( 269 )

Other income — 15 ( 88 )

Total gain (loss) on derivative instruments not designated as accounting hedges $ 123 $ ( 55 ) $ ( 357 )

Credit Enhancement Derivatives

The Company has recognized derivative instruments associated with agreements entered into with third-party providers that support loan programs for which the Company originates and holds loans on its balance sheet.

These third-party agreements include contractual credit enhancements that transfer certain risks and benefits to or from the Company, resulting in recognition of a derivative.

The value of these derivatives consists primarily of two components:

(1) the credit loss reimbursement value, representing the present value of expected future payments from the third party for loan losses, and (2) the interest yield guarantee value, representing the present value of cash flows the Company expects to receive to ensure a minimum yield (e.g., Prime + 2%) on the portfolio when actual borrower payments fall short.

Under certain programs, additional features such as reimbursement for waived promotional interest are also included in the derivative valuation.

The fair value of these derivative instruments was $ 16.8 million and $ 15.4 million as of December 31, 2024 and 2023, respectively.

The Company utilizes a third-party valuation specialist to estimate fair value using the income approach, based on the present value of expected future cash flows.

The valuation relies on Level 3 unobservable inputs, including assumptions regarding credit loss rates, borrower prepayments, program yield performance, and discount rates.

Changes in fair value are recorded in noninterest income, and the Company does not apply hedge accounting to these instruments

The following table summarizes the most significant inputs and assumptions in determining the value of the credit enhancement derivatives as well as the resulting fair value as of December 31, 2024 and December 31, 2023:

December 31, 2024 December 31, 2023

MacTools commercial portfolio Greensky consumer portfolio LendingPoint consumer portfolio MacTools commercial portfolio

Weighted average interest rate 9.50 % 10.47 % 14.62 % 10.50 %

Implied/selected cohort default rate (CDR) 15.00 % 4.02 % 17.50 % 15.00 %

Selected LGD 85.00 % 85.00 % 85.00 % 85.00 %

Annual expected loss 12.75 % 3.42 % 14.88 % 12.75 %

Credit mark ( 20.66 ) % ( 7.18 ) % ( 23.82 ) % ( 23.32 ) %

Interest mark 10.04 % 3.29 % 13.23 % 13.01 %

Fair value of derivative 10.61 % 1.56 % ( 0.34 ) % 10.31 %

The LendingPoint consumer portfolio was sold during the fourth quarter of 2024.

The GreenSky consumer portfolio was written down to net realizable value and classified as held for sale as of December 31, 2024.

NOTE 9 – DEPOSITS

8 unchanged sentences

Total deposits $ 6,197,243 $ 6,309,529

Included in time deposits are time certificates of $250,000 or more of $ 179.2 million and $ 118.6 million as of December 31, 2023 and December 31, 2022, respectively.

Included in time deposits are time certificates of $250,000 or more of $ 166.8 million and $ 179.2 million as of December 31, 2024 and 2023, respectively.

As of December 31, 2024, the scheduled maturities of time deposits were as follows:

6 unchanged sentences

(dollars in thousands) December 31, 2024 December 31, 2023

FHLB advances – fixed rate, fixed term at rates averaging 4.94 % at December 31, 2023 - maturing through February 2028

$ 150,000 $ —

FHLB advances – putable fixed rate at rates averaging 3.07 % and 2.35 % at December 31, 2023 and December 31, 2022, respectively – maturing through October 2028 with call provisions through October 2024

FHLB advances – fixed rate, fixed term at rates averaging 4.50 % and 4.94 % at December 31, 2024 and December 31, 2023 - maturing through October 2029

$ 133,000 $ 150,000

FHLB advances –SOFR floater at rates averaging 5.92 % at December 31, 2022 – matured October 2023

FHLB advances – Short term fixed rate at rates averaging 5.45 % and 4.31 % at December 31, 2023 and December 31, 2022, respectively– maturing through January 2024

FHLB advances – putable fixed rate at rates averaging 3.69 % and 3.07 % at December 31, 2024 and December 31, 2023, respectively – maturing through July 2034 with call provisions through February 2025

125,000 160,000

FHLB advances – Short term fixed rate at rates of 5.45 % at December 31, 2023

Total FHLB advances and other borrowings $ 258,000 $ 476,000

The Company’s advances from the FHLB are collateralized by a blanket collateral agreement of qualifying mortgage and home equity line of credit loans and certain commercial real estate loans totaling approximately $ 3.23 billion and $ 2.98 billion at December 31, 2024 and December 31, 2023, respectively.

Based on this collateral, the Company was eligible to borrow $ 1.29 billion from the FHLB at December 31, 2024.

Contractual payments over the next five years for FHLB advances and other borrowings were as follows:

2 unchanged sentences

2025 $ 40,000

Thereafter 25,000

Total $ 258,000

2 unchanged sentences

Subordinated debt

Fixed to Float Fixed

(dollars in thousands) Issued September 2019 Issued September 2019 Issued June 2015 Total

Fixed to Float

(dollars in thousands) Issued September 2019 Issued September 2019 Total

At December 31, 2024

1 unchanged sentence

Carrying amount 50,750 26,999 77,749

Current rate 5.00 % 5.50 % N/A

Current rate 7.94 % 5.50 %

At December 31, 2023

3 unchanged sentences

Maturity date 9/30/2029 9/30/2034

Optional redemption date 9/30/2024 9/30/2029 N/A

Fixed to variable conversion date 9/30/2024 9/30/2029 N/A

Optional redemption date 9/30/2024 9/30/2029

Fixed to variable conversion date 9/30/2024 9/30/2029

Variable rate 3-month SOFR plus 3.61 %

3-month SOFR plus 4.05 %

Interest payment terms Semiannually Semiannually Semiannually

During the second quarter of 2023, the Company repurchased $ 6.0 million of the outstanding Fixed to Float Subordinated Notes due September 30, 2029.

The Company recognized a gain of $ 0.7 million, which included the discount realized on the repurchase, offset by the remaining unamortized debt issuance costs on the repurchase.

The Company also repurchased the outstanding Fixed Rate Subordinated Notes due June 18, 2025, having an aggregate principal amount of $ 0.6 million, during the second quarter of 2023.

The aggregate repurchase price was 100 % of the aggregate principal amount of the subordinated notes, plus accrued and unpaid interest.

Interest payment terms Semiannually through 9/30/2024;

Quarterly for all subsequent periods Semiannually through 9/30/2029;

Quarterly for all subsequent periods

The value of subordinated debentures have been reduced by the debt issuance costs, which are being amortized on a straight line basis through the earlier of the redemption option or maturity date.

29 unchanged sentences

All of the trust preferred debentures above may be included in Tier 1 capital (with certain limitations applicable) under current regulatory guidelines and interpretations.

NOTE 13 - ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following table summarizes the changes within each classification of AOCI, net of tax:

(dollars in thousands) Unrealized gains and losses on investment securities available for sale Unrealized gains and losses on cash flow hedges Total

Changes in AOCI for the year ended December 31, 2024

Balance, beginning of period $ ( 71,508 ) $ ( 5,245 ) $ ( 76,753 )

Other comprehensive income (loss) before reclassifications ( 7,577 ) ( 1,276 ) ( 8,853 )

Amounts reclassified from AOCI to income (1)

64 3,582 3,646

Balance, end of period $ ( 79,021 ) $ ( 2,939 ) $ ( 81,960 )

Changes in AOCI for the year ended December 31, 2023

Balance, beginning of period $ ( 76,499 ) $ ( 7,298 ) $ ( 83,797 )

Other comprehensive income (loss) before reclassifications ( 1,900 ) ( 1,740 ) ( 3,640 )

Amounts reclassified from AOCI to income (1)

6,891 3,793 10,684

Balance, end of period $ ( 71,508 ) $ ( 5,245 ) $ ( 76,753 )

Changes in AOCI for the year ended December 31, 2022

Balance, beginning of period $ 1,543 $ 3,694 $ 5,237

Other comprehensive income (loss) before reclassifications ( 78,048 ) 1,887 ( 76,161 )

Amounts reclassified from AOCI to income (1)

6 ( 12,879 ) ( 12,873 )

Balance, end of period $ ( 76,499 ) $ ( 7,298 ) $ ( 83,797 )

(1) See table below for details about reclassifications to income .

The following table summarizes the significant amounts reclassified out of each component of AOCI:

Years Ended December 31,

(dollars in thousands) 2024 2023 2022

Details about AOCI components Amounts reclassified from AOCI Affected line item in the statement of income

Unrealized gains and losses on investment securities available for sale $ 142 $ — $ — Interest income (expense)

— — 221 Recapture of credit losses

( 230 ) ( 9,372 ) ( 230 ) Loss on sales of investment securities, net

24 2,481 3 Income tax (expense) benefit

$ ( 64 ) $ ( 6,891 ) $ ( 6 ) Net income

Gains and losses on cash flow hedges $ ( 4,891 ) $ ( 5,264 ) $ 113 Interest income (expense)

— — 17,531 Other noninterest income

1,309 1,471 ( 4,765 ) Income tax (expense) benefit

$ ( 3,582 ) $ ( 3,793 ) $ 12,879 Net income

NOTE 14 – INCOME TAXES

12 unchanged sentences

State tax, net of federal benefit 1,192 5,666 6,372

State tax settlement, net of federal expense — — ( 5,614 )

Equity-based compensation benefit ( 120 ) ( 21 ) ( 186 )

3 unchanged sentences

Actual income tax expense $ 8,856 $ 26,807 $ 31,149

On June 29, 2021, the Company announced the settlement of a prior tax issue related to the treatment of gains recognized on FDIC-assisted transactions that resulted in a $ 6.8 million tax benefit that was recognized in 2021.

Deferred tax assets, net in the accompanying consolidated balance sheets at December 31, 2024 and 2023 include the following amounts of deferred tax assets and liabilities:

25 unchanged sentences

It is not expected that such tax-restricted retained earnings will be used in a manner that would create federal income tax liabilities.

The tax benefit associated with the state tax settlement is related to an agreement that was reached with the state taxing authorities on an issue from prior year state tax returns.

The Company had $ 33.6 million of federal net operating loss carryforwards expiring 2024 through 2035, $ 13.8 million of Illinois post-apportioned net operating loss carryforwards expiring in 2028 and 2029, and $ 33.6 million of Missouri pre-apportioned net operating loss carryforwards expiring 2024 through 2035, at December 31, 2023.

The Company had $ 29.7 million of federal net operating loss carryforwards expiring 2025 through 2035, $ 13.3 million of Illinois post-apportioned net operating loss carryforwards expiring 2029 and 2030, $ 29.7 million of Missouri pre-apportioned net operating loss carryforwards expiring 2025 through 2035, and $ 5.2 million of other state net operating loss carryforwards expiring 2029 through 2044, at December 31, 2024.

The utilization of the federal and Missouri net operating losses are subject to the limitations of Internal Revenue Code Section 382.

The utilization of the Illinois net operating loss is limited to $100,000 per year for years 2021 through 2023 and the carryforward period will toll in years the Company could have utilized more than $100,000 of net operating loss.

The utilization of the Illinois net operating loss is limited to $100,000 per year for years 2021 through 2023 and $500,000 in 2024, and years under which net operating losses are suspended do not count toward the number of carryforward years.

The Company has state tax credit carryforwards of $ 0.9 million with a five year carryforward period, expiring between 2025 and 2029.

34 unchanged sentences

Employee deferrals 268 255 446

Expense on deferred compensation liability 427 ( 474 ) 359

Expense (benefit) on deferred compensation liability 529 427 ( 474 )

Distributions ( 504 ) ( 396 ) ( 392 )

16 unchanged sentences

On June 30, 2023, we terminated the plan and notified the IRS, seeking a final determination letter.

We expect to receive the final determination letter and begin distributing assets to plan participants in late 2024.

The final determination letter was received in January 2025 and we expect to begin distributing assets to plan participants in early 2025.

The following table details the components of the net periodic benefit cost for the years ended December 31, 2024 and 2023:

58 unchanged sentences

Options forfeited ( 2,602 ) 28.43

Options expired — N/A

Options expired ( 4,532 ) 28.59

Options outstanding, end of year 274,861 27.54 5.7 years

19 unchanged sentences

Basic earnings per common share is calculated by dividing the sum of distributed earnings to common shareholders and undistributed earnings allocated to common shareholders by the weighted average number of common shares outstanding.

Diluted earnings per common share is calculated by dividing the sum of distributed earnings to common shareholders and undistributed earnings allocated to common

shareholders by the weighted average number of shares adjusted for the dilutive effect of common stock awards.

Diluted earnings per common share is calculated by dividing the sum of distributed earnings to common shareholders and undistributed earnings allocated to common shareholders by the weighted average number of shares adjusted for the dilutive effect of common stock awards.

Presented below are the calculations for basic and diluted earnings per common share for the years ended 2024, 2023, and 2022:

17 unchanged sentences

Weighted average common shares outstanding, basic 21,731,689 22,115,869 22,341,498

Options 8,533 54,200 65,964

Dilutive effect of options 6,269 8,533 54,200

Weighted average common shares outstanding, diluted 21,737,958 22,124,402 22,395,698

20 unchanged sentences

Action Requirements

(dollars in thousands) Amount Ratio Amount Ratio Amount Ratio

(dollars in thousands) Amount Ratio Amount Ratio (1)

December 31, 2024

15 unchanged sentences

Midland States Bank 712,263 9.38 254,877 4.00 318,596 5.00

December 31, 2022

December 31, 2023 (restated)

Total risk-based capital ratio

14 unchanged sentences

Midland States Bank 722,122 9.20 279,917 4.00 349,896 5.00

(1) Total risk-based capital ratio, Tier 1 risk-based capital ratio and Common equity tier 1 risk-based capital ratio include the capital conservation buffer of 2.5%.

In December 2018, the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, and the FDIC approved a final rule to address changes to credit loss accounting under GAAP, including banking organizations’ implementation of CECL.

17 unchanged sentences

The fair value of equity securities is determined using quoted prices or market prices for similar securities (Level 2).

Loans held for sale.

The fair value of loans held for sale is determined using quoted prices for a similar asset, adjusted for specific attributes of that loan (Level 2).

Residential loans held for sale.

The fair value of residential loans held for sale is determined using quoted prices for a similar asset, adjusted for specific attributes of that loan (Level 2).

Credit enhancement asset.

The fair value of the credit enhancement asset is calculated using the Income Approach Valuation Method (Level 3).

Derivative instruments.

The fair value of derivative instruments are determined based on derivative valuation models using observable market data as of the measurement date (Level 2).

Loan servicing rights.

In accordance with GAAP , the Company records impairment charges on loan servicing rights on a non-recurring basis when the carrying value exceeds the estimated fair value.

The fair value of our servicing rights is estimated by using a cash flow valuation model which calculates the present value of estimated future net servicing cash flows, taking into consideration expected mortgage loan prepayment rates, discount rates, servicing costs, replacement reserves and other economic factors which are estimated based on current market conditions (Level 3).

Mortgage servicing rights held for sale.

Mortgage servicing rights held for sale are carried at the lower of their carrying value or fair value less estimated costs to sell (Level 2).

Nonperforming loans.

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The nonperforming loans categorized as Level 3 also include unsecured loans and other secured loans whose fair values are based significantly on unobservable inputs such as the strength of a guarantor, cash flows discounted at the effective loan rate, and management’s judgment.

Consumer loans held for sale.

The fair value of consumer loans held for sale was derived from a purchase agreement with a third party (Level 3).

Other Real Estate Owned.

5 unchanged sentences

After the initial foreclosure appraisal, fair value is generally determined by an annual appraisal unless known events warrant adjustments to the recorded value (Level 2).

Assets held for sale.

Assets held for sale represent the fair value of the banking facilities that are expected to be sold.

The fair value of the assets held for sale was based on estimated market prices from independently prepared current appraisals (Level 2).

When adjustments are made to an appraised value to reflect various factors such as the age of the appraisal or known changes in the market or the collateral, such valuation inputs are considered unobservable (Level 3).

Appraisals for both collateral-dependent loans and other real estate owned are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by the Company.

Once received, a member of the Company’s asset quality or collections department reviews the assumptions and approaches utilized in the appraisal.

Assets and liabilities measured and recorded at fair value, including financial assets for which the Company has elected the fair value option, on a recurring and nonrecurring basis at December 31, 2024 and December 31, 2023, are summarized below:

7 unchanged sentences

Investment securities available for sale:

Treasury securities $ 1,097 $ 1,097 $ — $ —

government sponsored entities and U.S.

3 unchanged sentences

State and municipal securities 69,061 — 69,061 —

Collateralized loan obligations 27,565 — 27,565 —

Corporate securities 79,881 — 79,881 —

Other securities 90,423 — 90,423 —

Equity securities 4,792 4,792 — —

Loans held for sale 3,811 — 3,811 —

Residential loans held for sale 8,228 — 8,228 —

Derivative assets 3,837 — 3,837 —

4 unchanged sentences

Nonperforming loans $ 120,222 $ — $ — $ 120,222

Consumer loans held for sale 336,719 — — 336,719

Other real estate owned 4,941 — — 4,941

Credit enhancement asset 16,804 — — 16,804

December 31, 2023

13 unchanged sentences

Corporate securities 99,172 — 99,172 —

Other securities 27,565 — 27,565 —

Equity securities 4,501 4,501 — —

Loans held for sale 1,286 — 1,286 —

Residential loans held for sale 3,811 — 3,811 —

Derivative assets 372 — 372 —

3 unchanged sentences

Assets measured at fair value on a non-recurring basis:

Loan servicing rights $ 1,205 $ — $ — $ 1,205

Mortgage servicing rights held for sale 20,745 — 20,745 —

Nonperforming loans $ 4,633 $ — $ — $ 4,633

Other real estate owned 9,112 — — 9,112

Assets held for sale 356 — 356 —

There were no assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the years ended December 31, 2023 and 2022.

Credit enhancement asset 15,389 — — 15,389

The following table presents losses recognized on assets measured on a nonrecurring basis for the years ended December 31, 2024, 2023 and 2022:

11 unchanged sentences

December 31, 2024

Nonperforming loans $ 120,222 Fair value of collateral Discount for type of property, age of appraisal, and/or current status 0.00 % - 34.15 % ( 0.67 %)

Other real estate loans 4,941 Fair value of collateral Discount for type of property, age of appraisal, and/or current status 0.00 % - 43.54 % ( 10.68 %)

Consumer loans held for sale (2)

336,719 Discounted cash flow Discount rate 8.98 %

Credit enhancement asset 16,804 Income approach Discount rate 10.61 %

December 31, 2023 (restated)

Nonperforming loans $ 4,633 Collateral based measurements Discount to reflect current market conditions and ultimate collectability 24.38 % - 100.00 % ( 27.46 %)

December 31, 2022

Loan servicing rights:

SBA servicing rights $ 876 Discounted cash flow Prepayment speed 14.49 % - 15.44 % ( 15.00 %)

Discount rate No range ( 13.00 %)

Residential servicing rights 2,770 Discounted cash flow Prepayment speed 7.56 % - 26.28 % ( 7.92 %)

Discount rate 9.00 % - 11.50 % ( 10.13 %)

Other real estate loans 9,112 Fair value of collateral Discount for type of property, age of appraisal, and/or current status

Credit enhancement asset 15,389 Income approach Discount rate ( 0.34 )% - 10.31 % ( 1.80 %)

(1) Unobservable inputs were weighted by the relative fair value of the instruments.

(2) There was one pool of loans at December 31, 2024 with write-downs during 2024, so no range or weighted average is reported.

ASC Topic 825, Financial Instruments , requires disclosure of the estimated fair value of certain financial instruments and the methods and significant assumptions used to estimate such fair values.

13 unchanged sentences

(dollars in thousands) 2024 2023 2022

Commercial loans held for sale $ — $ — $ ( 67 )

Residential loans held for sale $ 47 $ 163 $ ( 425 )

Total loans held for sale $ 163 $ ( 425 ) $ ( 215 )

The carrying values and estimated fair value of certain financial instruments not carried at fair value at December 31, 2024 and December 31, 2023 were as follows:

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In the normal course of business, there are outstanding various contingent liabilities such as claims and legal actions, which are not reflected in the consolidated financial statements.

No material losses are anticipated as a result of these actions or claims.

During the second quarter of 2024, the Company recorded an accrual related to various legal actions.

No other material losses are anticipated as a result of these actions or claims.

We are a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of our customers.

9 unchanged sentences

Financial guarantees – standby letters of credit 22,298 22,745

The Company establishes a mortgage repurchase liability to reflect management’s estimate of losses on loans for which the Company could have a repurchase obligation based on the volume of loans sold in 2023 and years prior, borrower default expectations, historical investor repurchase demand and appeals success rates, and estimated loss severity.

Loans repurchased from investors are initially recorded at fair value, which becomes the Company’s new accounting basis.

Any difference between the loan’s fair value and the outstanding principal amount is charged or credited to the mortgage repurchase liability, as appropriate.

Subsequent to repurchase, such loans are carried in loans receivable.

There were no losses as a result of make-whole requests and loan repurchases for the years ended December 31, 2023, 2022 and 2021.

The liability for unresolved repurchase demands totaled $ 0.1 million and $ 0.2 million at December 31, 2023 and December 31, 2022.

NOTE 22 – SEGMENT INFORMATION

Our business segments are defined as Banking, Wealth Management, and Other.

The reportable business segments are consistent with the internal reporting and evaluation of the principle lines of business of the Company.

The Company's reportable segments are determined by the Chief Executive Officer, who is the designated chief operating decision maker, based upon information provided about the Company's products and services offered, primarily distinguished between Banking, Wealth Management and Corporate.

They are also distinguished by the level of information provided to the chief operating decision maker, who uses such information to review performance of various components of the business, which are then aggregated if operating performance, products and services, and customers are similar.

The chief operating decision maker analyzes the financial performance of the Company's segments, allocates resources and assesses compensation of certain employees by evaluating revenue streams, significant expenses and budget to actual results.

The performance of the Banking segment is assessed by monitoring the margin between interest income and interest expense related to loans, investments, deposits and other borrowings.

Pretax profit and loss is used to assess the performance of the Wealth Management segment.

Interest expense, provisions for credit losses and payroll provide the significant expenses in the Banking segment, while payroll provides the significant expenses in the Wealth Management segment.

The Banking segment provides a wide range of financial products and services to consumers and businesses, including commercial, commercial real estate, mortgage and other consumer loan products;

6 unchanged sentences

The Wealth Management segment consists of trust and fiduciary services, brokerage and retirement planning services.

The Other segment includes the operating results of the parent company, our captive insurance business unit, and the elimination of intercompany transactions.

The Corporate segment includes the holding company financing and investment activities, administrative expenses, as well as the elimination of intercompany transactions.

The Corporate segment also included our captive insurance business unit for the year ended December 31, 2023.

This business was dissolved as of December 31, 2023.

Reported segments and the financial information of the reported segments are not necessarily comparable with similar information reported by other financial institutions.

Additionally, because of the interrelationships of the various segments, the information presented is not indicative of how the segments would perform if they operated as independent entities.

Changes in management structure or allocation methodologies and procedures may result in future changes to previously reported segment financial data.

The accounting policies of the segments are substantially the same as those described in the “Summary of Significant Accounting Policies” in Note 1 of the Company’s 2023 Annual Report on Form 10-K.

Transactions between segments consist primarily of borrowed funds and servicing fees.

Noninterest income and expense directly attributable to a segment are assigned to it with various shared service costs such as human resources, accounting, finance, risk management and information technology expense assigned to the Banking segment.

Selected business segment financial information for the years ended December 31, 2024, 2023 and 2022 were as follows:

(dollars in thousands) Banking Wealth

Management Other Total

Management Corporate Total

Year Ended December 31, 2024

Interest income $ 426,113 $ — $ 15 $ 426,128

Interest expense 180,643 51 9,088 189,782

Net interest income (expense) 245,470 ( 51 ) ( 9,073 ) 236,346

Provision for credit losses 120,332 — — 120,332

Noninterest income 40,830 25,572 188 66,590

Noninterest expense 155,487 20,247 ( 1,832 ) 173,902

Wealth management revenue — 28,697 — 28,697

Credit enhancement income 60,998 — — 60,998

Other noninterest income 49,123 — ( 77 ) 49,046

Total noninterest income 110,121 28,697 ( 77 ) 138,741

Salaries and employee benefits 79,011 14,628 — 93,639

Depreciation expense 4,950 43 — 4,993

Amortization of intangible assets 2,900 1,108 — 4,008

Other noninterest expense (1)

101,855 6,111 ( 2,751 ) 105,215

Total noninterest expense 188,716 21,890 ( 2,751 ) 207,855

Income (loss) before income taxes (benefit) 46,543 6,756 ( 6,399 ) 46,900

2 unchanged sentences

Total assets $ 7,486,121 $ 32,303 $ ( 11,615 ) $ 7,506,809

Year Ended December 31, 2022

Year Ended December 31, 2023 (restated)

Interest income $ 416,997 $ — $ 103 $ 417,100

Interest expense 159,316 12 8,951 168,279

Net interest income (expense) 257,681 ( 12 ) ( 8,848 ) 248,821

Provision for credit losses 82,560 — — 82,560

Noninterest income 54,179 25,708 4 79,891

Noninterest expense 157,680 18,019 ( 37 ) 175,662

Wealth management revenue — 25,572 — 25,572

Credit enhancement income 48,194 — — 48,194

Other noninterest income 40,830 — 188 41,018

Total noninterest income 89,024 25,572 188 114,784

Salaries and employee benefits 79,584 13,854 — 93,438

Depreciation expense 4,722 56 — 4,778

Amortization of intangible assets 3,564 1,194 — 4,758

Other noninterest expense (1)

86,798 5,143 ( 1,832 ) 90,109

Total noninterest expense 174,668 20,247 ( 1,832 ) 193,083

Income (loss) before income taxes (benefit) 89,477 5,313 ( 6,828 ) 87,962

2 unchanged sentences

Total assets $ 7,768,201 $ 31,437 $ ( 9,592 ) $ 7,790,046

Year Ended December 31, 2021

(dollars in thousands) Banking Wealth

Management Corporate Total

Year Ended December 31, 2022 (restated)

Interest income $ 312,701 $ — $ 14 $ 312,715

Interest expense 45,515 — 10,505 56,020

Net interest income (expense) 267,186 — ( 10,491 ) 256,695

Provision for credit losses 76,764 — — 76,764

Noninterest income 42,249 26,876 774 69,899

Noninterest expense 158,803 17,372 ( 1,106 ) 175,069

Wealth management revenue — 25,708 — 25,708

Credit enhancement income 69,976 — — 69,976

Other noninterest income 54,179 — 4 54,183

Total noninterest income 124,155 25,708 4 149,867

Salaries and employee benefits 77,822 12,483 — 90,305

Depreciation expense 4,784 58 — 4,842

Amortization of intangible assets 4,121 1,289 — 5,410

Other noninterest expense (1)

93,703 4,189 ( 37 ) 97,855

Total noninterest expense 180,430 18,019 ( 37 ) 198,412

Income (loss) before income taxes (benefit) 134,147 7,689 ( 10,450 ) 131,386

2 unchanged sentences

Total assets $ 7,779,531 $ 29,332 $ ( 15,797 ) $ 7,793,066

(1) Other noninterest expense for Banking includes occupancy and equipment, data processing, FDIC insurance, professional services, marketing, communications, loan expense and other miscellaneous expenses.

Other noninterest expense for Wealth Management includes occupancy and equipment, data processing, professional services, marketing, communications and other miscellaneous expenses.

Other noninterest expense for Corporate includes data processing, professional services, marketing and other miscellaneous expenses.

NOTE 23 – REVENUE FROM CONTRACTS WITH CUSTOMERS

6 unchanged sentences

Trust management/administration fees $ 25,004 $ 22,208 $ 21,704

Investment advisory fees 6 — 1,282

Investment brokerage fees 1,720 2,068 2,050

Investment advisory and brokerage fees 1,971 1,726 2,068

Other 1,722 1,638 1,936

9 unchanged sentences

Topic 606 does not apply to revenue associated with financial instruments, including revenue from loans and investment securities.

In addition, certain noninterest income streams such as commercial FHA revenue, residential mortgage banking revenue and gain on sales of investment securities, net, are also not in scope of Topic 606.

In addition, certain noninterest income streams such as commercial FHA revenue, residential mortgage banking revenue, credit enhancement income, and gain on sales of investment securities, net, are also not in scope of Topic 606.

Topic 606 is applicable to noninterest income streams such as wealth management revenue, service charges on deposit accounts, interchange revenue, gain on sales of other real estate owned, and certain other noninterest income streams.

16 unchanged sentences

The Company’s performance obligation for the proper safeguard and remittance of funds, monthly account analysis and any other monthly service fees is generally satisfied, and the related revenue recognized, over the period in which the service is provided.

Payment for service

charges on deposit accounts is typically received immediately or in the following month through a direct charge to a customer’s account.

Payment for service charges on deposit accounts is typically received immediately or in the following month through a direct charge to a customer’s account.

Interchange Revenue

31 unchanged sentences

Years Ended December 31,

2023 2022 2021

Dividends from subsidiaries $ 54,000 $ 54,000 $ 14,765

Earnings of consolidated subsidiaries, net of dividends 28,286 90,021 44,582

(Loss) earnings of consolidated subsidiaries, net of dividends ( 10,347 ) 13,981 91,233

Interest income on note due from bank subsidiary 1,512 1,578 10

Other income 323 4 932

Other (loss) income ( 11 ) 323 4

Total income 45,154 69,882 106,012

8 unchanged sentences

Years Ended December 31,

2023 2022 2021

Cash flows from operating activities:

1 unchanged sentence

Adjustments to reconcile net income to net cash provided by operating activities:

Equity in undistributed income of subsidiaries ( 28,286 ) ( 90,021 ) ( 44,582 )

Equity in undistributed loss (income) of subsidiaries 10,347 ( 13,981 ) ( 91,233 )

Share-based compensation expense 3,031 2,489 2,211

16 unchanged sentences

Net cash (used in) provided by financing activities ( 55,897 ) ( 57,559 ) 42,364

Net increase (decrease) in cash 5,042 ( 35,155 ) ( 21,028 )

Net (decrease) increase in cash ( 2,597 ) 5,042 ( 35,155 )

Beginning of period 7,763 2,721 37,876

2 unchanged sentences

The note has a rolling 13 month maturity, and the interest rate is a variable rate equal to the one year treasury rate.

NOTE 25 - RESTATEMENT OF PRIOR PERIOD FINANCIAL STATEMENTS

The Company has restated herein the impacted line items to the Consolidated Balance Sheet as of December 31, 2023 and the Consolidated Statements of Income, Consolidated Statements of Comprehensive Income, Consolidated Statements of Shareholders' Equity and Consolidated Statements of Cash Flows for the years ended December 31, 2023 and 2022.

In addition, the Company has restated the impacted line items to its unaudited quarterly Consolidated Balance Sheets, Consolidated Statements of Income, Consolidated Statements of Comprehensive Income, Consolidated Statements of Shareholders' Equity and Consolidated Statements of Cash Flows as of and for the three months ended March 31, 2024 and 2023, for the three and six months ended June 30, 2024 and 2023, and for the three and nine months ended September 30, 2024 and 2023.

Description of Misstatements

The errors relate to the Company’s accounting for loans originated pursuant to third-party loan origination programs.

Historically, the Company accounted for all borrower payments and credit enhancement payments under these programs on a single unit, or net

basis, with all such payments presented as interest income representing the Company’s effective yield on the portfolios.

The Company has determined that these payments should instead be accounted for on a separate unit of account, or gross basis, with loan yields and interest income recorded at the gross borrower loan rate, credit losses and associated provisions for credit losses recorded on a gross basis over the life of the loans, and with all credit enhancement payments recorded separately as a credit enhancement derivative.

Description of Restated Tables

The following tables present the amounts previously reported and a reconciliation of the restated amounts reported on the restated Consolidated Balance Sheets, the restated Consolidated Statements of Income and the restated Consolidated Statements of Cash Flows for the periods presented.

Restated Audited Financial Statements

Restated Consolidated Balance Sheet

December 31, 2023

(dollars in thousands) As Previously Reported Adjustment As Restated

Loans $ 6,131,079 $ ( 27,487 ) $ 6,103,592

Allowance for credit losses on loans ( 68,502 ) ( 90,817 ) ( 159,319 )

Total loans, net 6,062,577 ( 118,304 ) 5,944,273

Accrued interest receivable 24,934 9,199 34,133

Credit enhancement asset — 15,389 15,389

Other assets 182,992 16,894 199,886

Total assets $ 7,866,868 $ ( 76,822 ) $ 7,790,046

Accrued interest payable and other liabilities $ 110,459 $ ( 82 ) $ 110,377

Total liabilities 7,075,015 ( 82 ) 7,074,933

Retained earnings 322,379 ( 76,740 ) 245,639

Total shareholders' equity 791,853 ( 76,740 ) 715,113

Total liabilities and shareholders' equity $ 7,866,868 $ ( 76,822 ) $ 7,790,046

Restated Consolidated Statements of Income

Years Ended December 31,

(dollars in thousands.

except per share data) As Previously Reported Adjustment As Restated As Previously Reported Adjustment As Restated

Interest income:

Loans including fees:

Taxable $ 365,529 $ 12,804 $ 378,333 $ 274,617 $ 10,960 $ 285,577

Total interest income 404,296 12,804 417,100 301,755 10,960 312,715

Net interest income 236,017 12,804 248,821 245,735 10,960 256,695

Provision for credit losses:

Provision for credit losses on loans 21,132 61,428 82,560 18,797 56,638 75,435

Total provision for credit losses 21,132 61,428 82,560 20,126 56,638 76,764

Net interest income after provision for credit losses 214,885 ( 48,624 ) 166,261 225,609 ( 45,678 ) 179,931

Noninterest income:

Credit enhancement income — 48,194 48,194 — 69,976 69,976

Total noninterest income 66,590 48,194 114,784 79,891 69,976 149,867

Noninterest expense:

Loan servicing fees — 19,181 19,181 — 22,750 22,750

Total noninterest expense 173,902 19,181 193,083 175,662 22,750 198,412

Income before income taxes 107,573 ( 19,611 ) 87,962 129,838 1,548 131,386

Income tax expense 32,113 ( 5,306 ) 26,807 30,813 336 31,149

Net income 75,460 ( 14,305 ) 61,155 99,025 1,212 100,237

Net income available to common shareholders $ 66,547 $ ( 14,305 ) $ 52,242 $ 95,856 $ 1,212 $ 97,068

Restated Consolidated Statement of Comprehensive Income

Years Ended December 31,

(dollars in thousands) As Previously Reported Adjustment As Restated As Previously Reported Adjustment As Restated

Net income $ 75,460 $ ( 14,305 ) $ 61,155 $ 99,025 $ 1,212 $ 100,237

Other comprehensive income (loss) 7,044 — 7,044 ( 89,034 ) — ( 89,034 )

Total comprehensive income $ 82,504 $ ( 14,305 ) $ 68,199 $ 9,991 $ 1,212 $ 11,203

Restated Consolidated Statements of Shareholders' Equity

Retained earnings Total shareholders' equity

(dollars in thousands) As Previously Reported Adjustment As Restated As Previously Reported Adjustment As Restated

Balances, December 31, 2021 $ 212,472 $ ( 63,647 ) $ 148,825 $ 663,837 $ ( 63,647 ) $ 600,190

Net income 99,025 1,212 100,237 99,025 1,212 100,237

Balances, December 31, 2022 282,405 ( 62,435 ) 219,970 758,574 ( 62,435 ) 696,139

Net income 75,460 ( 14,305 ) 61,155 75,460 ( 14,305 ) 61,155

Balances, December 31, 2023 $ 322,379 $ ( 76,740 ) $ 245,639 $ 791,853 $ ( 76,740 ) $ 715,113

Restated Consolidated Statements of Cash Flows

Years Ended December 31,

(dollars in thousands) As Previously Reported Adjustment As Restated As Previously Reported Adjustment As Restated

Net income $ 75,460 $ ( 14,305 ) $ 61,155 $ 99,025 $ 1,212 $ 100,237

Adjustments to reconcile net income to net cash provided by operating activities:

Provision for credit losses 21,132 61,428 82,560 20,126 56,638 76,764

Proceeds from sales of loans held for sale 98,851 ( 40,899 ) 57,952 269,958 — 269,958

Net change in operating assets and liabilities:

Accrued interest receivable ( 4,621 ) 261 ( 4,360 ) ( 807 ) ( 641 ) ( 1,448 )

Credit enhancement asset — ( 2,376 ) ( 2,376 ) — ( 18,792 ) ( 18,792 )

Other assets ( 18,731 ) ( 5,307 ) ( 24,038 ) 876 337 1,213

Accrued expenses and other liabilities 27,661 ( 82 ) 27,579 ( 13,579 ) — ( 13,579 )

Net cash provided by operating activities 154,638 ( 1,280 ) 153,358 247,065 38,754 285,819

Cash flows from investing activities:

Net decrease (increase) in loans 112,496 ( 39,619 ) 72,877 ( 1,177,598 ) ( 38,754 ) ( 1,216,352 )

Proceeds from loans held for sale previously classified as portfolio loans — 40,899 40,899 — — —

Net cash (used in) provided by investing activities $ ( 76,080 ) $ 1,280 $ ( 74,800 ) $ ( 1,098,887 ) $ ( 38,754 ) $ ( 1,137,641 )

Restated Unaudited Quarterly Financial Statements

Restated Consolidated Balance Sheets (unaudited)

September 30, 2024 June 30, 2024

(dollars in thousands) As Previously Reported Adjustment As Restated As Previously Reported Adjustment As Restated

Loans $ 5,748,819 $ ( 20,582 ) $ 5,728,237 $ 5,851,994 $ ( 22,937 ) $ 5,829,057

Allowance for credit losses on loans ( 85,804 ) ( 65,263 ) ( 151,067 ) ( 92,183 ) ( 63,260 ) ( 155,443 )

Total loans, net 5,663,015 ( 85,845 ) 5,577,170 5,759,811 ( 86,197 ) 5,673,614

Accrued interest receivable 27,099 7,938 35,037 25,756 8,359 34,115

Credit enhancement asset — 20,633 20,633 — 18,202 18,202

Other assets 177,663 9,980 187,643 199,487 10,436 209,923

Total assets $ 7,751,483 $ ( 47,294 ) $ 7,704,189 $ 7,757,274 $ ( 49,200 ) $ 7,708,074

Accrued interest payable and other liabilities $ 103,737 $ ( 256 ) $ 103,481 $ 103,694 $ ( 207 ) $ 103,487

Total liabilities 6,933,224 $ ( 256 ) 6,932,968 6,971,502 ( 207 ) 6,971,295

Retained earnings 334,522 ( 47,038 ) 287,484 325,022 ( 48,993 ) 276,029

Total shareholders' equity 818,259 ( 47,038 ) 771,221 785,772 ( 48,993 ) 736,779

Total liabilities and shareholders' equity $ 7,751,483 $ ( 47,294 ) $ 7,704,189 $ 7,757,274 $ ( 49,200 ) $ 7,708,074

Restated Consolidated Balance Sheets (unaudited) (continued)

March 31, 2024 September 30, 2023

(dollars in thousands) As Previously Reported Adjustment As Restated As Previously Reported Adjustment As Restated

Loans $ 5,958,462 $ ( 25,304 ) $ 5,933,158 $ 6,280,883 $ ( 27,448 ) $ 6,253,435

Allowance for credit losses on loans ( 78,057 ) ( 82,787 ) ( 160,844 ) ( 66,669 ) ( 91,146 ) ( 157,815 )

Total loans, net 5,880,405 ( 108,091 ) 5,772,314 6,214,214 ( 118,594 ) 6,095,620

Credit enhancement asset — 16,369 16,369 — 15,111 15,111

Other assets 182,201 14,850 197,051 222,966 17,593 240,559

Total assets $ 7,831,809 $ ( 68,101 ) $ 7,763,708 $ 7,969,285 $ ( 76,176 ) $ 7,893,109

Accrued interest payable and other liabilities $ 102,966 $ ( 139 ) $ 102,827 $ 106,743 $ ( 39 ) $ 106,704

Total liabilities 7,040,803 ( 139 ) 7,040,664 7,211,675 ( 39 ) 7,211,636

Retained earnings 327,264 ( 67,962 ) 259,302 310,461 ( 76,137 ) 234,324

Total shareholders' equity 791,006 ( 67,962 ) 723,044 757,610 ( 76,137 ) 681,473

Total liabilities and shareholders' equity $ 7,831,809 $ ( 68,101 ) $ 7,763,708 $ 7,969,285 $ ( 76,176 ) $ 7,893,109

June 30, 2023 March 31, 2023

(dollars in thousands) As Previously Reported Adjustment As Restated As Previously Reported Adjustment As Restated

Loans $ 6,367,344 $ ( 27,922 ) $ 6,339,422 $ 6,354,271 $ ( 27,347 ) $ 6,326,924

Allowance for credit losses on loans ( 64,950 ) ( 86,465 ) ( 151,415 ) ( 62,067 ) ( 78,797 ) ( 140,864 )

Total loans, net 6,302,394 ( 114,387 ) 6,188,007 6,292,204 ( 106,144 ) 6,186,060

Credit enhancement asset — 14,720 14,720 — 13,959 13,959

Other assets 175,821 16,404 192,225 160,272 14,195 174,467

Total assets $ 8,034,721 $ ( 73,425 ) $ 7,961,296 $ 7,930,174 $ ( 68,385 ) $ 7,861,789

Retained earnings $ 307,888 $ ( 73,425 ) $ 234,463 $ 295,200 $ ( 68,385 ) $ 226,815

Total shareholders' equity 776,821 $ ( 73,425 ) 703,396 775,643 ( 68,385 ) 707,258

Total liabilities and shareholders' equity $ 8,034,721 $ ( 73,425 ) $ 7,961,296 $ 7,930,174 $ ( 68,385 ) $ 7,861,789

Restated Consolidated Statements of Income (unaudited)

Three Months Ended Nine Months Ended

September 30, 2024 September 30, 2024

(dollars in thousands) As Previously Reported Adjustment As Restated As Previously Reported Adjustment As Restated

Interest income:

Loans including fees:

Taxable $ 88,860 $ 4,160 $ 93,020 $ 266,107 $ 11,854 $ 277,961

Total interest income 104,834 4,160 108,994 309,804 11,854 321,658

Net interest income 54,950 4,160 59,110 165,922 11,854 177,776

Provision for credit losses:

Provision for credit losses on loans 5,000 12,925 17,925 36,000 10,349 46,349

Total provision for credit losses 5,000 12,925 17,925 35,800 10,349 46,149

Net interest income after provision for credit losses 49,950 ( 8,765 ) 41,185 130,122 1,505 131,627

Noninterest income:

Credit enhancement income — 14,206 14,206 — 45,188 45,188

Total noninterest income 19,339 14,206 33,545 58,182 45,188 103,370

Noninterest expense:

Loan servicing fees — 3,031 3,031 — 10,077 10,077

Total noninterest expense 46,733 3,031 49,764 139,079 10,077 149,156

Income before income taxes 22,556 2,410 24,966 49,225 36,616 85,841

Income tax expense 4,080 455 4,535 10,114 6,914 17,028

Net income 18,476 1,955 20,431 39,111 29,702 68,813

Net income available to common shareholders $ 16,247 $ 1,955 $ 18,202 $ 32,426 $ 29,702 $ 62,128

Three Months Ended Six Months Ended

June 30, 2024 June 30, 2024

(dollars in thousands) As Previously Reported Adjustment As Restated As Previously Reported Adjustment As Restated

Interest income:

Loans including fees:

Taxable $ 88,252 $ 3,843 $ 92,095 $ 177,247 $ 7,694 $ 184,941

Total interest income 103,295 3,843 107,138 204,970 7,694 212,664

Net interest income 55,052 3,843 58,895 110,972 7,694 118,666

Provision for credit losses:

Provision for credit losses on loans 17,000 ( 8,518 ) 8,482 31,000 ( 2,576 ) 28,424

Total provision for credit losses 16,800 ( 8,518 ) 8,282 30,800 ( 2,576 ) 28,224

Net interest income after provision for credit losses 38,252 12,361 50,613 80,172 10,270 90,442

Noninterest income:

Credit enhancement income — 14,328 14,328 — 30,982 30,982

Total noninterest income 17,656 14,328 31,984 38,843 30,982 69,825

Noninterest expense:

Loan servicing fees — 3,305 3,305 — 7,046 7,046

Total noninterest expense 47,479 3,305 50,784 92,346 7,046 99,392

Income before income taxes 8,429 23,384 31,813 26,669 34,206 60,875

Income tax expense 1,679 4,415 6,094 6,034 6,459 12,493

Net income 6,750 18,969 25,719 20,635 27,747 48,382

Net income available to common shareholders $ 4,522 $ 18,969 $ 23,491 $ 16,179 $ 27,747 $ 43,926

Restated Consolidated Statement of Income (unaudited) (continued)

Three Months Ended

March 31, 2024

(dollars in thousands) As Previously Reported Adjustment As Restated

Interest income:

Loans including fees:

Taxable $ 88,995 $ 3,851 $ 92,846

Total interest income 101,675 3,851 105,526

Net interest income 55,920 3,851 59,771

Provision for credit losses:

Provision for credit losses on loans 14,000 5,942 19,942

Total provision for credit losses 14,000 5,942 19,942

Net interest income after provision for credit losses 41,920 ( 2,091 ) 39,829

Noninterest income:

Credit enhancement income — 16,654 16,654

Total noninterest income 21,187 16,654 37,841

Noninterest expense:

Loan servicing fees — 3,741 3,741

Total noninterest expense 44,867 3,741 48,608

Income before income taxes 18,240 10,822 29,062

Income tax expense 4,355 2,044 6,399

Net income 13,885 8,778 22,663

Net income available to common shareholders $ 11,657 $ 8,778 $ 20,435

Three Months Ended Nine Months Ended

September 30, 2023 September 30, 2023

(dollars in thousands) As Previously Reported Adjustment As Restated As Previously Reported Adjustment As Restated

Interest income:

Loans including fees:

Taxable $ 93,488 $ 3,029 $ 96,517 $ 272,297 $ 9,188 $ 281,485

Total interest income 103,585 3,029 106,614 299,615 9,188 308,803

Net interest income 58,596 3,029 61,625 177,940 9,188 187,128

Provision for credit losses:

Provision for credit losses on loans 5,168 17,194 22,362 14,182 52,278 66,460

Total provision for credit losses 5,168 17,194 22,362 14,182 52,278 66,460

Net interest income after provision for credit losses 53,428 ( 14,165 ) 39,263 163,758 ( 43,090 ) 120,668

Noninterest income:

Credit enhancement income — 14,918 14,918 — 38,380 38,380

Total noninterest income 11,545 14,918 26,463 46,077 38,380 84,457

Noninterest expense:

Loan servicing fees — 4,654 4,654 — 14,998 14,998

Total noninterest expense 42,038 4,654 46,692 129,414 14,998 144,412

Income before income taxes 22,935 ( 3,901 ) 19,034 80,421 ( 19,708 ) 60,713

Income tax expense 11,533 ( 1,189 ) 10,344 25,672 ( 6,006 ) 19,666

Net income 11,402 ( 2,712 ) 8,690 54,749 ( 13,702 ) 41,047

Net income available to common shareholders $ 9,173 $ ( 2,712 ) $ 6,461 $ 48,064 $ ( 13,702 ) $ 34,362

Restated Consolidated Statements of Income (unaudited) (continued)

Three Months Ended Six Months Ended

June 30, 2023 June 30, 2023

(dollars in thousands) As Previously Reported Adjustment As Restated As Previously Reported Adjustment As Restated

Interest income:

Loans including fees:

Taxable $ 91,350 $ 3,614 $ 94,964 $ 178,809 $ 6,159 $ 184,968

Total interest income 100,491 3,614 104,105 196,030 6,159 202,189

Net interest income 58,840 3,614 62,454 119,344 6,159 125,503

Provision for credit losses:

Provision for credit losses on loans 5,879 15,937 21,816 9,014 35,084 44,098

Total provision for credit losses 5,879 15,937 21,816 9,014 35,084 44,098

Net interest income after provision for credit losses 52,961 ( 12,323 ) 40,638 110,330 ( 28,925 ) 81,405

Noninterest income:

Credit enhancement income — 10,082 10,082 — 23,462 23,462

Total noninterest income 18,753 10,082 28,835 34,532 23,462 57,994

Noninterest expense:

Loan servicing fees — 5,008 5,008 — 10,344 10,344

Total noninterest expense 42,894 5,008 47,902 87,376 10,344 97,720

Income before income taxes 28,820 ( 7,249 ) 21,571 57,486 ( 15,807 ) 41,679

Income tax expense 7,245 ( 2,209 ) 5,036 14,139 ( 4,817 ) 9,322

Net income 21,575 ( 5,040 ) 16,535 43,347 ( 10,990 ) 32,357

Net income available to common shareholders $ 19,347 $ ( 5,040 ) $ 14,307 $ 38,891 $ ( 10,990 ) $ 27,901

Three Months Ended

March 31, 2023

(dollars in thousands) As Previously Reported Adjustment As Restated

Interest income:

Loans including fees:

Taxable $ 87,459 $ 2,545 $ 90,004

Total interest income 95,539 2,545 98,084

Net interest income 60,504 2,545 63,049

Provision for credit losses:

Provision for credit losses on loans 3,135 19,147 22,282

Total provision for credit losses 3,135 19,147 22,282

Net interest income after provision for credit losses 57,369 ( 16,602 ) 40,767

Noninterest income:

Credit enhancement income — 13,380 13,380

Total noninterest income 15,779 13,380 29,159

Noninterest expense:

Loan servicing fees — 5,336 5,336

Total noninterest expense 44,482 5,336 49,818

Income before income taxes 28,666 ( 8,558 ) 20,108

Income tax expense 6,894 ( 2,608 ) 4,286

Net income 21,772 ( 5,950 ) 15,822

Net income available to common shareholders $ 19,544 $ ( 5,950 ) $ 13,594

Restated Consolidated Statement of Comprehensive Income (unaudited)

Three Months Ended Nine Months Ended

September 30, 2024 September 30, 2024

(dollars in thousands) As Previously Reported Adjustment As Restated As Previously Reported Adjustment As Restated

Net income 18,476 1,955 20,431 39,111 29,702 68,813

Other comprehensive income 21,941 — 21,941 16,113 — 16,113

Total comprehensive income 40,417 1,955 42,372 55,224 29,702 84,926

Three Months Ended Six Months Ended

June 30, 2024 June 30, 2024

(dollars in thousands) As Previously Reported Adjustment As Restated As Previously Reported Adjustment As Restated

Net income 6,750 18,969 25,719 20,635 27,747 48,382

Other comprehensive loss ( 1,162 ) — ( 1,162 ) ( 5,828 ) — ( 5,828 )

Total comprehensive income 5,588 18,969 24,557 14,807 27,747 42,554

Three Months Ended

March 31, 2024

(dollars in thousands) As Previously Reported Adjustment As Restated

Net income 13,885 8,778 22,663

Other comprehensive loss ( 4,666 ) — ( 4,666 )

Total comprehensive income 9,219 8,778 17,997

Three Months Ended Nine Months Ended

September 30, 2023 September 30, 2023

(dollars in thousands) As Previously Reported Adjustment As Restated As Previously Reported Adjustment As Restated

Net income 11,402 ( 2,712 ) 8,690 54,749 ( 13,702 ) 41,047

Other comprehensive loss ( 16,462 ) — ( 16,462 ) ( 17,384 ) — ( 17,384 )

Total comprehensive (loss) income ( 5,060 ) ( 2,712 ) ( 7,772 ) 37,365 ( 13,702 ) 23,663

Three Months Ended Six Months Ended

June 30, 2023 June 30, 2023

(dollars in thousands) As Previously Reported Adjustment As Restated As Previously Reported Adjustment As Restated

Net income 21,575 ( 5,040 ) 16,535 43,347 ( 10,990 ) 32,357

Other comprehensive loss ( 6,922 ) — ( 6,922 ) ( 922 ) — ( 922 )

Total comprehensive income 14,653 ( 5,040 ) 9,613 42,425 ( 10,990 ) 31,435

Three Months Ended

March 31, 2023

(dollars in thousands) As Previously Reported Adjustment As Restated

Net income 21,772 ( 5,950 ) 15,822

Other comprehensive income 6,000 — 6,000

Total comprehensive income 27,772 ( 5,950 ) 21,822

Restated Consolidated Statements of Shareholders' Equity (unaudited)

Retained earnings Total shareholders' equity

(dollars in thousands) As Previously Reported Adjustment As Restated As Previously Reported Adjustment As Restated

For the three months ended September 30, 2024

Balances, June 30, 2024 $ 325,022 $ ( 48,993 ) $ 276,029 $ 785,772 $ ( 48,993 ) $ 736,779

Net income 18,476 1,955 20,431 18,476 1,955 20,431

Balances, September 30, 2024 $ 334,522 $ ( 47,038 ) $ 287,484 $ 818,259 $ ( 47,038 ) $ 771,221

For the nine months ended September 30, 2024

Balances, December 31, 2023 $ 322,379 $ ( 76,740 ) $ 245,639 $ 791,853 $ ( 76,740 ) $ 715,113

Net income 39,111 29,702 68,813 39,111 29,702 68,813

Balances, September 30, 2024 $ 334,522 $ ( 47,038 ) $ 287,484 $ 818,259 $ ( 47,038 ) $ 771,221

For the three months ended June 30, 2024

Balances, March 31, 2024 $ 327,264 $ ( 67,962 ) $ 259,302 $ 791,006 $ ( 67,962 ) $ 723,044

Net income 6,750 18,969 25,719 6,750 18,969 25,719

Balances, June 30, 2024 $ 325,022 $ ( 48,993 ) $ 276,029 $ 785,772 $ ( 48,993 ) $ 736,779

For the six months ended June 30, 2024

Balances, December 31, 2023 $ 322,379 $ ( 76,740 ) $ 245,639 $ 791,853 $ ( 76,740 ) $ 715,113

Net income 20,635 27,747 48,382 20,635 27,747 48,382

Balances, June 30, 2024 $ 325,022 $ ( 48,993 ) $ 276,029 $ 785,772 $ ( 48,993 ) $ 736,779

For the three months ended March 31, 2024

Balances, December 31, 2023 $ 322,379 $ ( 76,740 ) $ 245,639 $ 791,853 $ ( 76,740 ) $ 715,113

Net income 13,885 8,778 22,663 13,885 8,778 22,663

Balances, March 31, 2024 $ 327,264 $ ( 67,962 ) $ 259,302 $ 791,006 $ ( 67,962 ) $ 723,044

For the three months ended September 30, 2023

Balances, June 30, 2023 $ 307,888 $ ( 73,425 ) $ 234,463 $ 776,821 $ ( 73,425 ) $ 703,396

Net income 11,402 ( 2,712 ) 8,690 11,402 ( 2,712 ) 8,690

Balances, September 30, 2023 $ 310,461 $ ( 76,137 ) $ 234,324 $ 757,610 $ ( 76,137 ) $ 681,473

For the nine months ended September 30, 2023

Balances, December 31, 2022 $ 282,405 $ ( 62,435 ) $ 219,970 $ 758,574 $ ( 62,435 ) $ 696,139

Net income 54,749 ( 13,702 ) 41,047 54,749 ( 13,702 ) 41,047

Balances, September 30, 2023 $ 310,461 $ ( 76,137 ) $ 234,324 $ 757,610 $ ( 76,137 ) $ 681,473

For the three months ended June 30, 2023

Balances, March 31, 2023 $ 295,200 $ ( 68,385 ) $ 226,815 $ 775,643 $ ( 68,385 ) $ 707,258

Net income 21,575 ( 5,040 ) 16,535 21,575 ( 5,040 ) 16,535

Balances, June 30, 2023 $ 307,888 $ ( 73,425 ) $ 234,463 $ 776,821 $ ( 73,425 ) $ 703,396

For the six months ended June 30, 2023

Balances, December 31, 2022 $ 282,405 $ ( 62,435 ) $ 219,970 $ 758,574 $ ( 62,435 ) $ 696,139

Net income 43,347 ( 10,990 ) 32,357 43,347 ( 10,990 ) 32,357

Balances, June 30, 2023 $ 307,888 $ ( 73,425 ) $ 234,463 $ 776,821 $ ( 73,425 ) $ 703,396

For the three months ended March 31, 2023

Balances, December 31, 2022 282,405 ( 62,435 ) 219,970 758,574 ( 62,435 ) 696,139

Net income 21,772 ( 5,950 ) 15,822 21,772 ( 5,950 ) 15,822

Balances, March 31, 2023 295,200 ( 68,385 ) 226,815 775,643 ( 68,385 ) 707,258

Restated Consolidated Statements of Cash Flows (unaudited)

Nine Months Ended Six Months Ended

September 30, 2024 June 30, 2024

(dollars in thousands) As Previously Reported Adjustment As Restated As Previously Reported Adjustment As Restated

Net income $ 39,111 $ 29,702 $ 68,813 $ 20,635 $ 27,747 $ 48,382

Adjustments to reconcile net income to net cash provided by operating activities:

Provision for credit losses 35,800 10,349 46,149 30,800 ( 2,576 ) 28,224

Net change in operating assets and liabilities:

Accrued interest receivable ( 2,165 ) 1,261 ( 904 ) ( 822 ) 840 18

Credit enhancement asset — ( 5,244 ) ( 5,244 ) — ( 2,813 ) ( 2,813 )

Other assets 5,203 6,914 12,117 ( 16,278 ) 6,458 ( 9,820 )

Accrued expenses and other liabilities ( 13,501 ) ( 174 ) ( 13,675 ) ( 4,676 ) ( 125 ) ( 4,801 )

Net cash provided by operating activities 78,214 42,808 121,022 44,983 29,531 74,514

Cash flows from investing activities:

Net decrease in loans 348,351 ( 42,808 ) 305,543 257,249 ( 29,531 ) 227,718

Net cash provided by (used in) investing activities $ 75,020 $ ( 42,808 ) $ 32,212 $ 63,892 $ ( 29,531 ) $ 34,361

Three Months Ended Nine Months Ended

March 31, 2024 September 30, 2023

(dollars in thousands) As Previously Reported Adjustment As Restated As Previously Reported Adjustment As Restated

Net income $ 13,885 $ 8,778 $ 22,663 $ 54,749 $ ( 13,702 ) $ 41,047

Adjustments to reconcile net income to net cash provided by operating activities:

Provision for credit losses 14,000 5,942 19,942 14,182 52,278 66,460

Net change in operating assets and liabilities:

Accrued interest receivable ( 997 ) 428 ( 569 ) ( 3,970 ) ( 254 ) ( 4,224 )

Credit enhancement asset — ( 980 ) ( 980 ) — ( 2,098 ) ( 2,098 )

Other assets 1,034 2,044 3,078 ( 58,408 ) ( 6,005 ) ( 64,413 )

Accrued expenses and other liabilities ( 5,100 ) ( 57 ) ( 5,157 ) 30,874 ( 40 ) 30,834

Net cash provided by operating activities 26,917 16,155 43,072 67,283 30,179 97,462

Cash flows from investing activities:

Net decrease (increase) in loans 163,694 ( 16,155 ) 147,539 ( 6,195 ) ( 30,179 ) ( 36,374 )

Net cash provided by (used in) investing activities $ 43,069 $ ( 16,155 ) $ 26,914 $ ( 143,849 ) $ ( 30,179 ) $ ( 174,028 )

Six Months Ended Three Months Ended

June 30, 2023 March 31, 2023

(dollars in thousands) As Previously Reported Adjustment As Restated As Previously Reported Adjustment As Restated

Net income $ 43,347 $ ( 10,990 ) $ 32,357 $ 21,772 $ ( 5,950 ) $ 15,822

Adjustments to reconcile net income to net cash provided by operating activities:

Provision for credit losses 9,014 35,084 44,098 3,135 19,147 22,282

Net change in operating assets and liabilities:

Accrued interest receivable ( 687 ) ( 378 ) ( 1,065 ) ( 221 ) ( 145 ) ( 366 )

Credit enhancement asset — ( 1,707 ) ( 1,707 ) — ( 946 ) ( 946 )

Other assets ( 11,380 ) ( 4,817 ) ( 16,197 ) 4,423 ( 2,608 ) 1,815

Accrued expenses and other liabilities 9,995 — 9,995 ( 14,949 ) — ( 14,949 )

Net cash provided by operating activities 60,803 17,192 77,995 16,008 9,498 25,506

Cash flows from investing activities:

Net increase in loans ( 76,502 ) ( 17,192 ) ( 93,694 ) ( 49,923 ) ( 9,498 ) ( 59,421 )

Net cash used in investing activities $ ( 185,892 ) $ ( 17,192 ) $ ( 203,084 ) $ ( 98,412 ) $ ( 9,498 ) $ ( 107,910 )

NOTE 26 – SUBSEQUENT EVENTS

During the first quarter of 2025, Management determined that a triggering event had occurred at its Banking reporting unit as a result of further deteriorated credit quality coupled with the trends in the stock price.

The Company performed a quantitative impairment test on its Banking reporting unit as of March 31, 2025, and engaged a third-party service provider to assist Management with the determination of the fair value.

The resulting calculation indicated that the carrying amount exceeded the fair value of the Company's Banking reporting unit.

As a result of the assessment, the Company expects to recognize goodwill impairment expense between $ 135.0 million and $ 154.0 million in the first quarter of 2025.

Impairment will not impact our regulatory capital ratios, tangible common equity ratio nor our liquidity position.

The Company continues to take steps in 2025 to resolve nonperforming assets and improve its overall credit profile.

These steps include foreclosures, short sales, pursuit of guarantors and sales of notes.

The Company has continued to monitor credit actions and subsequent losses in order to determining the appropriate time period for recognition.

Notable credit actions and subsequent losses are presented in the table below, in thousands.

Losses taken by period

Asset Type of property Action taken Balance

December 31, 2024 2024 First

2025 Total Losses taken Reduction in nonperforming assets

OREO Assisted living Property sold

May 2025 $ 5,434 $ ( 1,472 ) $ — $ — $ ( 1,472 ) $ (1,472) $ ( 5,434 )

Loans Multi-Family Collateral sold

May 2025 3,722 ( 337 ) ( 1,113 ) — ( 1,450 ) ( 3,722 )

Loans Memory care Note sale

June 2025 7,737 — — ( 3,675 ) ( 3,675 ) ( 7,737 )

Loans Assisted living Charge off

May 2025 7,798 ( 7,798 ) — — ( 7,798 ) ( 7,798 )

Loans Multi-Family Note sale agreement June 2025

Expected close third quarter 2025 27,354 ( 2,354 ) — — ( 2,354 ) ( 2,354 )

Loans C&I Operating Charge off

May 2025 11,292 — — ( 5,847 ) ( 5,847 ) ( 5,847 )

Total $ 63,337 $ ( 11,961 ) $ ( 1,113 ) $ ( 9,522 ) $ ( 22,596 ) $ ( 32,892 )

ITEM 9 – CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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-K

Item 8. Financial Statements and Supplementary Data