What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2025-03-27 compared with 2024-03-29 · 269 added, 295 removed, 1045 unchanged (35% of the section changed)

6 unchanged sentences

We have audited the accompanying consolidated balance sheets of Richmond Mutual Bancorporation, Inc.

(Company) as of December 31, 2023 and 2022, the related consolidated statements of income, stockholders’ equity, and cash flows for each of the years then ended, and the related notes collectively referred to as the “financial statements”.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Change in Accounting Principle

As discussed in Note 1 and 5 to the consolidated financial statements, the Company changed its method of accounting for accounting for credit losses due to the adoption of Accounting Standards Codification Topic 326, Financial Instruments .

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

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 two-year period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

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We believe that our audits provide a reasonable basis for our opinion.

/s/ FORVIS, LLP

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 a 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 separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Allowance for Credit Losses on Loans and Leases – Qualitative Adjustments

As described in Note 5 to the consolidated financial statements, the Company’s allowance for credit losses on loans and leases (ACL) was approximately $15,791,000 as of December 31, 2024.

The ACL is established for current expected credit losses on the Company's loan and lease portfolios.

The Company estimates expected future losses for the loan's entire contractual term, taking into account expected payments when appropriate.

The ACL is an estimation based on management's evaluation of expected losses related to the Company's financial assets measured at amortized cost.

It considers relevant available information from internal and external sources relating to the historical loss experience, current conditions and reasonable and supportable forecasts for the Company's outstanding loan and lease balances.

The Company utilizes a cash flow analysis method of estimating expected losses, which relies on key inputs and assumptions.

Significant factors affecting the calculation are the segmenting of loans and leases based upon similar risk characteristics, applied loss rates based upon reasonable and supportable forecasts, and contractual term adjustments, including prepayment and curtailment adjustments.

To ensure the ACL is maintained at an adequate level, a detailed analysis is performed on a quarterly basis, with an appropriate provision made to adjust the ACL.

Qualitative adjustments are applied to each collectively segmented pool to appropriately capture differences in current or expected qualitative risk characteristics.

We identified the qualitative adjustments component of the ACL as a critical audit matter.

The qualitative adjustments component involves a high degree of auditor subjectivity in evaluating management’s estimates, such as evaluating management’s assessment of economic conditions and other external factors used to determine the qualitative adjustments.

How We Addressed the Matter in Our Audit

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

• Gaining an understanding of controls over the qualitative adjustments used in the ACL calculation including controls addressing the:

• Determination of qualitative adjustments for each loan and lease segment.

• Completeness and accuracy of the inputs to the qualitative adjustments applied to each loan and lease segment in the ACL calculation.

• Substantively testing management's determination of the qualitative adjustments used in the ACL calculation, including:

• Testing management’s process for developing the qualitative adjustments, which included assessing the relevance and reliability of data used to develop the qualitative adjustments, and included evaluating management’s judgments and assumptions for reasonableness.

Among other procedures, our evaluation considered evidence from internal and external sources.

• Performing a qualitative factor sensitivity analysis.

• Evaluating the qualitative adjustments for directional consistency, testing the qualitative adjustments for reasonableness, and obtaining evidence for significant changes.

• Testing the mathematical accuracy of the qualitative adjustments applied to the loan segments in the ACL calculation.

/s/ FORVIS MAZARS, LLP

Forvis Mazars, LLP

We have served as the Company’s auditor since at least 1982;

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Interest-bearing deposits

983,833,884 926,763,134

Total deposits 1,093,939,857 1,041,139,911

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Loan and lease servicing fees, including mortgage servicing right impairment 463,337 448,027

Net loss on securities (includes $( 50,698 ) and $ 0 , respectively, related to accumulated other comprehensive loss reclassifications)

Net gains on loan and lease sales 554,546 517,883

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Income Before Income Tax Expense 10,863,696 11,002,717

Provision for income taxes 1,515,881 2,783,467

Provision for income taxes (includes $( 10,647 ) and $ 0 , respectively, related to income tax expense from reclassification of items)

1,486,348 1,515,881

Net Income $ 9,377,348 $ 9,486,836

4 unchanged sentences

Richmond Mutual Bancorporation, Inc.

Consolidated Statements of Comprehensive Income (Loss)

Consolidated Statements of Comprehensive Income

Years Ended December 31, 2024 and 2023

Net Income $ 9,377,348 $ 9,486,836

Other Comprehensive Income (Loss)

Unrealized gain (loss) on available-for-sale securities, net of tax (expense) benefit of $( 1,782,629 ) and $ 12,902,816

Other Comprehensive (Loss) Income

Unrealized (loss) gain on available-for-sale securities, net of tax benefit (expense) of $ 744,610 and $( 1,782,629 ), respectively

( 2,801,152 ) 6,706,079

Comprehensive Income (Loss) $ 16,192,915 $ ( 35,573,725 )

reclassification adjustment for realized losses included in net income, net of tax expense of $( 10,647 ) and $ 0 , respectively

Total Other Comprehensive (Loss) Income ( 2,761,101 ) 6,706,079

Comprehensive Income $ 6,616,247 $ 16,192,915

See Notes to Consolidated Financial Statements

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Balances, December 31, 2022 11,784,246 $ 117,842 $ 106,088,897 $ 88,122,052 $ ( 12,193,043 ) $ ( 49,751,175 ) $ 132,384,573

Impact of ASU 2016-13 adoption — — — ( 3,785,168 ) — — ( 3,785,168 )

Balances, January 1, 2023 11,784,246 117,842 106,088,897 84,336,884 ( 12,193,043 ) ( 49,751,175 ) 128,599,405

Net income — — — 9,486,836 — — 9,486,836

Other comprehensive loss — — — — — ( 48,539,164 ) ( 48,539,164 )

Other comprehensive income, net of tax expense — — — — — 6,706,079 6,706,079

ESOP shares earned — — ( 123,772 ) — 735,317 — 611,545

4 unchanged sentences

Balances, December 31, 2023 11,208,500 $ 112,085 $ 101,347,566 $ 87,902,747 $ ( 11,457,726 ) $ ( 43,045,096 ) $ 134,859,576

Impact of ASU 2016-13 adoption — — — ( 3,785,168 ) — — ( 3,785,168 )

Balances, January 1, 2023 11,784,246 117,842 106,088,897 84,336,884 ( 12,193,043 ) ( 49,751,175 ) 128,599,405

Net income — — — 9,377,348 — — 9,377,348

Other comprehensive income — — — — — 6,706,079 6,706,079

Other comprehensive loss, net of tax benefit — — — — — ( 2,761,101 ) ( 2,761,101 )

ESOP shares earned — — ( 74,344 ) — 735,316 — 660,972

Forfeiture of restricted stock awards ( 400 ) ( 4 ) 4 — — — —

Stock based compensation — — 1,474,062 — — — 1,474,062

Exercise of stock options 1 1,952 20 ( 32 ) — — — ( 12 )

Common stock dividends ($ 0.56 per share)

3 unchanged sentences

See Notes to Consolidated Financial Statements

1 The amount shown represents the number of shares issued in net-settled option transactions where some shares are netted from a portion of the exercises.

Richmond Mutual Bancorporation, Inc.

3 unchanged sentences

Net income $ 9,377,348 $ 9,486,836

Items not requiring (providing) cash

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

Provision for credit losses 550,265 531,974

3 unchanged sentences

Investment securities amortization, net 943,315 1,136,167

Net loss on sale of investment securities available for sale

Net gains on loan and lease sales ( 554,546 ) ( 517,883 )

1 unchanged sentence

Gain on sale of premises and equipment

( 6,000 ) ( 1,800 )

Accretion of loan origination fees ( 767,469 ) ( 945,579 )

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Proceeds from maturities and paydowns of securities available for sale 20,603,526 20,810,919

Proceeds from sales of securities available for sale 6,907,932 —

Proceeds from maturities and paydowns of securities held to maturity 1,449,228 1,718,044

4 unchanged sentences

Purchases of FHLB stock ( 1,260,000 ) ( 2,699,800 )

Proceeds from sale of FHLB stock — 211,500

Net cash used in investing activities ( 49,298,314 ) ( 122,531,989 )

7 unchanged sentences

Repurchase of common stock ( 5,041,976 ) ( 6,250,519 )

Proceeds from stock option exercises ( 12 ) —

Dividends paid ( 5,697,109 ) ( 5,920,973 )

7 unchanged sentences

Transfers from loans to other real estate owned 37,435 1,053,040

Right of use assets obtained in exchange for new operating lease liabilities — 504,682

See Notes to Consolidated Financial Statements

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Additionally, a “liquidation account” was established for the benefit of certain depositors of the Bank in an amount equal to the MHC’s ownership interest in the retained earnings of RMB-Delaware as of December 31, 2017 and March 31, 2019.

First Bank is an Indiana state-chartered commercial bank headquartered in Richmond, Indiana.

The bank was originally established in 1887 as an Indiana state-chartered mutual savings and loan association and in 1935 converted to a federal mutual savings and loan association, operating under the name First Federal Savings and Loan Association of Richmond.

In 1993, the bank converted to a state-chartered mutual savings bank and changed its name to First Bank Richmond, S.B.

In 1998, the bank, in connection with its non-stock mutual holding company reorganization, converted to a national bank charter operating as First Bank Richmond, National Association.

In July 2007, Richmond Mutual Bancorporation-Delaware, the bank’s then current holding company, acquired Mutual Federal Savings Bank headquartered in Sidney, Ohio.

Mutual Federal Savings Bank was operated independently as a separately chartered, wholly owned subsidiary of Richmond Mutual Bancorporation-Delaware until 2016 when it was combined with the bank through an internal merger transaction that consolidated both banks into a single, more efficient commercial bank charter.

In 2017, the bank converted to an Indiana state-chartered commercial bank and changed its name to First Bank Richmond.

The former Mutual Federal Savings Bank continues to operate in Ohio under the name Mutual Federal, a division of First Bank Richmond.

First Bank, headquartered in Richmond, Indiana, is a state-chartered commercial bank.

Established in 1887 as a mutual savings and loan, it became a federal mutual savings and loan in 1935, operating as First Federal Savings and Loan Association of Richmond.

In 1993, the Bank operated as First Bank Richmond, S.

after converting to a state-chartered mutual savings bank.

It transitioned to a national bank charter in 1998 as part of a mutual holding company reorganization.

In 2007, its holding company, Richmond Mutual Bancorporation-Delaware, acquired Mutual Federal Savings Bank in Sidney, Ohio.

Mutual Federal operated independently until 2016, when it merged with First Bank Richmond to streamline operations.

In 2017, the Bank converted to an Indiana state-chartered commercial bank and adopted the name First Bank Richmond, while continuing to operate in Ohio under the name Mutual Federal, a division of First Bank Richmond.

First Bank generates commercial, mortgage and consumer loans and leases, and receives deposits from customers located primarily in Wayne and Shelby Counties in Indiana, and Shelby, Miami, and Franklin Counties in Ohio.

3 unchanged sentences

Actual results could differ from those estimates.

Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for credit losses, loan servicing rights, and fair values of financial instruments.

Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for credit losses.

Consolidation - The consolidated financial statements include the accounts of the Company and First Bank and their direct and indirect subsidiaries after elimination of all material intercompany transactions.

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Past due status is based on contractual terms of the loan.

For all loan classes, the entire balance of the loan is considered past due if the minimum payment

contractually required to be paid is not received by the contractual due date.

For all loan classes, the entire balance of the loan is considered past due if the minimum payment contractually required to be paid is not received by the contractual due date.

For all loan classes, loans are placed on nonaccrual or charged off at an earlier date if collection of principal or interest is considered doubtful.

For all loan portfolio segments except residential and consumer loans, the Company promptly charges off loans, or portions thereof, when available information confirms that specific loans are uncollectible based on information that includes, but is not limited to, (1) the deteriorating financial condition of the borrower, (2) declining collateral values, and/or (3) legal action, including bankruptcy, that impairs the borrower’s ability to adequately meet its obligations.

information that includes, but is not limited to, (1) the deteriorating financial condition of the borrower, (2) declining collateral values, and/or (3) legal action, including bankruptcy, that impairs the borrower’s ability to adequately meet its obligations.

For collateral dependent loans, a partial charge-off is recorded when a loss has been confirmed by an updated appraisal or other appropriate valuation of the collateral.

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Subsequent recoveries, if any, are credited to the allowance.

The allowance for credit losses is evaluated on a regular basis by management and is maintained at a level believed to be adequate to absorb credit losses within the Company's loan and lease portfolio.

The allowance for credit losses is evaluated on a regular basis by management and is maintained at a level believed to be adequate to absorb expected credit losses within the Company's loan and lease portfolio.

In evaluating the allowance, management considers all relevant information available, from internal and external sources relating to historical experience, current conditions, and reasonable and supportable forecasts.

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The Company has identified eight segments of loans and leases which are collectively pooled based on similar risk characteristics.

The allowance for credit losses on pooled loans is estimated based upon periodic review of the loan and lease portfolio.

The Company utilizes a cash flow ("CF") model to estimate the portion of quantitative allowance reserve for collectively pooled loans.

The allowance for credit losses on pooled loans and leases is estimated based upon periodic review of the loan and lease portfolio.

The Company utilizes a cash flow ("CF") model to estimate the portion of quantitative allowance reserve for collectively pooled loans and leases.

CF models allow for effective incorporation of reasonable and supportable forecasts in a consistent manner.

If inadequate information is available to perform CF modeling

for a collective pool, the Company uses the Remaining Life Method ("RLM") as a substitute.

The RLM uses periodic charge-off rates and applies those rates to the projected balances over the remaining life of the loan.

If inadequate information is available to perform CF modeling for a collective pool, the Company uses the Remaining Life Method ("RLM") as a substitute.

The RLM uses periodic charge-off rates and applies those rates to the projected balances over the remaining life of the loan or lease.

Accrued interest receivable is excluded from the calculation of the allowance for credit losses, as the Company's policy is to write off accrued interest promptly when deemed uncollectible by reversing interest income.

Key inputs into the CF model include loan-level information, such as the amortized cost basis of individual loans, prepayment and curtailment rates for the collective pool, and forecasted loss drivers.

Key inputs into the CF model include loan and lease-level information, such as the amortized cost basis of individual loans and leases, prepayment and curtailment rates for the collective pool, and forecasted loss drivers.

The Company uses prepayment and curtailment rates based upon studies done using internal historical information, or benchmarked rates from external sources when the Company's own historical data is not sufficient.

3 unchanged sentences

In assessing estimated credit losses, management considers any changes in the following factors and how they relate to the Company's current lending environment:

(i) lending policies, procedures, and strategies, (ii) the nature and volume of the portfolio, (iii) international, national, regional, and local conditions, (iv) the experience, depth, and ability of lending management, (v) the volume and severity of past due loans, (vi) the quality of the loan review system, (vii) the underlying collateral, (viii) concentration risk, and (ix) the effect of other external factors.

Loans with different risk characteristics are individually evaluated for potential credit losses and assigned individual reserves.

These individually evaluated loans are removed from the pools and are not included in the collective evaluation.

Individually analyzed loans may be identified due to current information and events, such as non-accrual status, delinquency status or history, or other potential identifiers impacting the collectability of the loan.

Individual reserves are determined at the loan-level based on an analysis of the expected future cash flows, the fair value of the collateral less costs to sell, or observable market value.

(i) lending policies, procedures, and strategies, (ii) the nature and volume of the portfolio, (iii) international, national, regional, and local conditions, (iv) the experience, depth, and ability of lending management, (v) the volume and severity of past due loans, (vi) the quality of the loan and lease review system, (vii) the underlying collateral, (viii) concentration risk, and (ix) the effect of other external factors.

Loans and leases with different risk characteristics are individually evaluated for potential credit losses and assigned individual reserves.

These individually evaluated loans and leases are removed from the pools and are not included in the collective evaluation.

Individually analyzed loans and leases may be identified due to current information and events, such as non-accrual status, delinquency status or history, or other potential identifiers impacting the collectability of the loan or lease.

Individual reserves are determined at the loan- or lease-level based on an analysis of the expected future cash flows, the fair value of the collateral less costs to sell, or observable market value.

Mortgage Loans Held for Sale – Mortgage loans originated and intended for sale in the secondary market are recorded at the lower of cost or fair value on an individual loan basis.

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For purposes of measuring impairment, the rights are stratified based on the predominant risk characteristics of the underlying loans.

The predominant

characteristic currently used for stratification is type of loan.

The predominant characteristic currently used for stratification is type of loan.

The amount of impairment recognized is the amount by which the capitalized mortgage servicing rights for a stratum exceed their fair value.

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All share-based payments are to be recognized as expense, based upon their fair values, in the financial statements over the vesting period of the awards.

The Company has recorded approximately $ 653,000 and $ 619,000 in compensation expense relating to vesting of stock options, which are recognized as they occur, for the year ended December 31, 2023 and 2022, respectively.

The Company has recorded approximately $ 594,000 and $ 653,000 in compensation expense relating to vesting of stock options, which are recognized as they occur, for the years ended December 31, 2024 and 2023, respectively.

The Company has recorded approximately $ 880,000 and $ 974,000 in compensation expense relating to the vesting restricted stock awards for the years ended December 31, 2024 and 2023, respectively.

Advertising Expense - The Company's advertising costs are expensed as incurred.

Adoption of New Accounting Standard s - In June 2016, the FASB issued Accounting Standards Update ("ASU") No.

2016-13, Financial Instruments-Credit Losses (Topic 326).

This ASU introduced the current expected credit loss, or "CECL", methodology, which requires earlier recognition of credit losses based upon historical experience, current conditions, and reasonable and supportable forecasts.

The CECL methodology utilizes a life-of-loan credit loss estimation, with the objective of recognizing credit losses on financial assets as they are originated or acquired.

The transition to CECL from the previous Incurred Loss Methodology became effective for the Company on January 1, 2023.

On January 1, 2023, the Company adopted CECL by recording a one-time adjustment from retained earnings of $ 2.0 million, net of tax, into the allowance for credit losses on loans and leases.

Prior to this one-time adjustment, the allowance for loan and lease losses totaled $ 12.4 million at December 31, 2022.

At January 1, 2023, the allowance for credit losses totaled $ 15.1 million.

Additionally, as a part of CECL adoption, the Company established an allowance for credit losses on unfunded commitments.

This allowance, which is included in other liabilities on the Consolidated Balance Sheets, is estimated based upon the loss rate for the loan or lease segment in which the loan or lease commitments would be classified if funded.

The calculation is further adjusted by the estimation of funding probability.

The Company recorded a one-time adjustment from retained earnings of $ 1.8 million, net of tax, to establish the allowance for credit losses on unfunded commitments.

At January 1, 2023, this allowance totaled $ 2.4 million.

The following table summarizes the impact of the day-one adoption of CECL:

December 31, 2023 CECL Adoption Impact January 1, 2023

Allowance for Credit Losses:

Commercial mortgage $ 4,776 $ ( 395 ) $ 4,381

Commercial and industrial 1,291 360 1,651

Construction and development 2,855 784 3,639

Multi-family 1,955 ( 99 ) 1,856

Residential mortgage 76 1,439 1,515

Home equity 23 89 112

Direct financing leases 1,196 422 1,618

Consumer 241 64 305

Total Allowance for Credit Losses on Loans and Leases $ 12,413 $ 2,664 $ 15,077

Reserve for Unfunded Commitments — 2,374 2,374

Total Reserve for Credit Losses $ 12,413 $ 5,038 $ 17,451

Retained Earnings

Total Pre-tax Impact $ ( 5,038 )

Tax Effect 1,253

Decrease to Retained Earnings $ ( 3,785 )

The allowance for credit losses on loans and leases and the allowance for credit losses on unfunded commitments are evaluated on a regular basis and maintained at levels that management believes to be adequate to absorb potential credit losses.

Increases to the allowances are expensed through provisions for credit losses.

Loans and leases, or portions thereof, that are determined not to be collectable are charged

against the allowance for credit losses on loans and leases.

Subsequent recoveries, if any, are credited to this allowance.

The Company did not record an allowance for available-for-sale securities at January 1, 2023 as a part of its day-one CECL adjustments.

Management regularly assesses the available-for-sale portfolio for any potential credit-related impairments which may impact earnings.

With the adoption of CECL, held to maturity securities are required to have an established allowance for credit losses that represents a portion of the amortized cost basis of a financial asset that is not expected to be collectable.

The Company regularly monitors the credit quality of securities held to maturity through the use of credit ratings.

At the day-one adoption of CECL on January 1, 2023, the Company did not establish an allowance for credit losses on held to maturity securities, as the Company expects to collect the full amortized cost basis of its held to maturity securities portfolio.

Accounting Pronouncements

The Jumpstart Our Business Startups Act (the "JOBS Act"), which was enacted in April 2012, has made numerous changes to the federal securities laws to facilitate access to capital markets.

Under the JOBS Act, a company with total annual gross revenues of less than $1.07 billion during its most recently completed fiscal year qualifies as an “emerging growth company.” The Company qualifies as and has elected to be an emerging growth company under the JOBS Act.

An emerging growth company may elect to comply with new or amended accounting pronouncements in the same manner as a private company, but must make such election when the company is first required to file a registration statement.

Such an election is irrevocable during the period a company is an emerging growth company.

The Company has elected to comply with new or amended accounting pronouncements in the same manner as a private company.

In June 2016, the FASB issued Accounting Standards Update ("ASU") No.

2016-13, Financial Instruments-Credit Losses (Topic 326).

The ASU is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations.

The ASU requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts.

Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates.

Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses.

Organizations will continue to use judgment to determine which loss estimation method is appropriate for their circumstances.

The ASU requires enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio.

These disclosures include qualitative and quantitative requirements that provide additional information about the amounts recorded in the financial statements.

In May 2019, the FASB issued ASU No.

2019-05, Financial Instruments-Credit Losses (Topic 326):

Targeted Transition Relief .

This ASU provides transition relief for entities adopting the FASB’s credit losses standard, ASU No.

2016-13 and allows companies to irrevocably elect, upon adoption of ASU No.

2016-13, the fair value option for certain financial instruments.

In April 2019, the FASB issued ASU No.

2019-04, “Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments".

2019-04 clarifies certain aspects of accounting for credit losses, hedging activities, and financial instruments.

In October 2019, the FASB voted to extend the implementation of ASU No.

2016-13 for certain financial institutions including smaller reporting companies.

As a result, ASU 2016-13 became effective for the Company for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022.

The Company adopted ASU No.

2016-13 on January 1, 2023.

As a result of the change in methodology from the incurred loss methodology to the current expected credit loss methodology ("CECL"), the Company recorded a one-time cumulative-effect adjustment of $ 2.0 million from retained earnings, net of tax, into the

allowance for credit losses on loans and leases.

The allowance increased $ 2.7 million, or 21.5 %, on January 1, 2023 from December 31, 2022 as a result of the adoption.

Additionally, as a part of the CECL adoption, the Company established an allowance for credit losses on unfunded commitments by recording a one-time adjustment of $ 1.8 million from retained earnings, net of tax, into the allowance for credit losses on unfunded commitments.

As of January 1, 2023, this allowance totaled $ 2.4 million, as compared to no allowance at December 31, 2022.

This allowance is reported in other liabilities on the Condensed Consolidated Balance Sheets.

In March 2022, the FASB issued ASU 2022-02, Financial Instruments - Credit Losses (Topic 326):

Troubled Debt Restructurings and Vintage Disclosures.

The ASU eliminates the accounting guidance for troubled debt restructured loans ("TDRs") by creditors while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty.

Additionally, the ASU requires public business entities to disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases.

This ASU became effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, upon the Company's adoption of the CECL amendments in ASU 2016-13.

The Jumpstart Our Business Startups Act (the "JOBS Act"), enacted in April 2012, introduced various changes to federal securities laws to facilitate access to capital markets.

Under the JOBS Act, a company with total annual gross revenues of less than $1.07 billion during its most recently completed fiscal year qualifies as an “emerging growth company” ("EGC").

The Company previously qualified as and elected to be an EGC under the JOBS Act.

As an EGC, the Company elected to comply with new or amended accounting pronouncements in the same manner as a private company, an election that had to be made when the Company first filed a registration statement and remained irrevocable while the Company maintained EGC status.

However, the Company no longer qualifies as an EGC as of December 31, 2024, and going forward, it will be required to comply with new or amended accounting pronouncements applicable to public companies.

In November 2023, the FASB issued ASU No.

2023-07, Segment Reporting:

Improvements to Reportable Segment Disclosures , requiring public entities to disclose information about significant expenses for their reportable segments on both an interim and annual basis.

Public entities must disclose significant expense categories and amounts for each reportable segment, which are derived from expenses regularly reported to the entity’s chief operating decision-maker (CODM) and included in the segment's reported measures of profit or loss.

Additionally, public entities must disclose the title and position of the CODM and explain how the CODM uses these measures to assess segment performance.

The ASU also mandates certain segment-related interim disclosures that were previously required only on an annual basis.

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

The Company adopted this ASU on January 1, 2024.

Adoption of ASU No.

2023-07 did not have a material impact on the Company’s consolidated financial statements.

In March 2020, the FASB issued ASU No.

6 unchanged sentences

The guidance ensures the relief in Topic 848 covers the period of time during which a significant number of modifications may take place and the ASU defers the sunset date of Topic 848 from December 31, 2022 to December 31, 2024.

In March 2023, the FASB issued ASU No.

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

Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method .

This ASU allows reporting entities to elect to account for qualifying tax equity investments using the proportional amortization method, regardless of the program giving rise to the related income tax credits.

2023-02 is effective for all public business entities for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2023.

The Company adopted this guidance on January 1, 2024.

Adoption of ASU 2023-02 did not have a material impact on the Company's consolidated financial statements.

In December 2023, the FASB issued ASU No.

2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures .

This ASU established new income tax disclosure requirements and modified existing requirements.

The ASU requires additional information be disclosed for specified categories, and reconciling items that meet a certain threshold, within the rate reconciliation on an annual basis.

Additionally, this ASU requires information be disclosed on the amount of income taxes paid (net of refunds), disaggregated by federal, state, and foreign taxes and the amount of income taxes paid (net of refunds) disaggregated by jurisdiction based on a quantitative threshold.

2023-09 is effective for all public business entities for annual periods beginning after December 15, 2024.

The ASU is effective for the Company beginning January 1, 2025.

The Company does not expect the adoption of ASU No.

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Investment Securities

The amortized cost and approximate fair values, together with gross unrealized gains and losses, of securities are as follows:

The amortized cost and approximate fair values, together with gross unrealized gains and losses, of investment securities are as follows:

Available for sale

22 unchanged sentences

Total investment securities $ 342,124 $ 91 $ 54,606 $ 287,609

The amortized cost and fair value of securities at December 31, 2023, by contractual maturity, are shown below.

The amortized cost and fair value of investment securities at December 31, 2024, by contractual maturity, are shown below.

Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

8 unchanged sentences

Totals $ 316,174 $ 258,192 $ 3,498 $ 3,421

Securities with a carrying value of $ 162,430,000 and $ 134,302,000 were pledged at December 31, 2023 and 2022, respectively, to secure certain deposits and for other purposes as permitted or required by law.

There were no sales of securities available for sale for the years ended December 31, 2023 and 2022.

Investment securities with a carrying value of $ 109,909,000 and $ 162,430,000 were pledged at December 31, 2024 and 2023, respectively, to secure certain deposits and for other purposes as permitted or required by law.

Proceeds from the sale of investment securities available for sale for the year ended December 31, 2024 were $ 6,908,000 .

Gross losses recognized on the sale of investment securities available for sale for the year ended December 31, 2024 were $ 71,000 .

Gross gains on the sale of investment securities available for sale were $ 20,000 for the year ended December 31, 2024.

There were no sales of investment securities available for sale for the year ended December 31, 2023.

Certain investments in debt securities are reported in the consolidated financial statements and notes at an amount less than their historical cost.

Total fair value of these investments at December 31, 2023 and 2022 was $ 279,852,000 and $ 288,846,000 , which is approximately 97 % and 99 %, respectively, of the Company’s available-for-sale and held-to-maturity investment portfolio.

Total fair value of these investments at December 31, 2024 and 2023 was $ 255,749,000 and $ 279,852,000 , respectively, which is approximately 98 % and 97 % of the fair value of the Company’s available for sale and held to maturity investment portfolio at those dates, respectively.

These declines primarily resulted from changes in market interest rates since their purchase.

The Company does not consider available-for-sale securities with unrealized losses to be experiencing credit losses at December 31, 2023.

Management considers it more likely than not that the Company will not be required to sell these securities before recovery of the amortized cost basis, which may be the maturity date of the securities.

Held to maturity securities are financial assets measured at amortized cost.

With the adoption of CECL, held to maturity securities are required to have an established allowance for credit losses that represents the portion of the amortized cost basis of a financial asset that is not expected to be collectable.

The Company does not consider investment securities available for sale with unrealized losses to be experiencing credit losses at December 31, 2024 and 2023.

Management considers it more likely than not that the Company will not be required to sell these investment securities before recovery of the amortized cost basis, which may be the maturity date of the securities.

Investment securities held to maturity are financial assets measured at amortized cost.

With the adoption of CECL, investment securities held to maturity are required to have an established allowance for credit losses that represents the portion of the amortized cost basis of a financial asset that is not expected to be collectable.

The Company estimates expected credit losses on a collective basis by security type, with consideration given to historical information, credit ratings, and the statistical probability of future losses.

The Company monitors the credit quality of securities held to maturity using credit ratings quarterly.

As of December 31, 2023, there was no allowance for credit losses recognized on the Company's securities held to maturity portfolio.

The following table summarizes the amortized cost of held to maturity securities by credit quality indicator as of December 31, 2023:

The Company monitors the credit quality of investment securities held to maturity using credit ratings quarterly.

As of December 31, 2024 and 2023, there was no allowance for credit losses recognized on the Company's investment securities held to maturity portfolio.

The following table summarizes the amortized cost of investment securities held to maturity by credit quality indicator as of December 31, 2024 and 2023:

State and municipal obligations

AA+ $ 483 $ 1,262

Not rated 2,115 2,207

$ 3,498 $ 4,950

Accrued interest receivable for held to maturity securities was $ 52,000 and $ 63,000 at December 31, 2024 and 2023, respectively.

The Company has elected to exclude accrued interest receivable from the calculation of the allowance for credit losses.

7 unchanged sentences

Available for sale

treasury securities $ 489 $ 4 $ 2,487 $ 16 $ 2,976 $ 20

SBA Pools $ 454 $ 1 $ 2,991 $ 542 $ 3,445 $ 543

120 unchanged sentences

For residential mortgage loans that are secured by 1-4 family residences and are generally owner-occupied, the Company generally establishes a maximum loan-to-value ratio and requires private mortgage insurance if that ratio is exceeded.

Home equity loans are typically secured by a subordinate interest in 1-4 family residences, and consumer personal loans are secured by consumer personal assets, such as automobiles or recreational vehicles.

Home equity loans are typically secured by a subordinate interest in 1-4 family residences.

Consumer personal loans are secured by consumer personal assets, such as automobiles or recreational vehicles.

Some consumer personal loans are unsecured, such as small installment loans and certain lines of credit.

5 unchanged sentences

A determination is made as to the applicant’s financial condition and ability to repay in accordance with the proposed terms as well as an overall assessment of the risks involved.

The following table presents the credit risk profile of the Company’s loan portfolio based on rating category, payment activity, and origination year as of December 31, 2023:

The following tables present the credit risk profile of the Company’s loan portfolio based on rating category, payment activity, and origination year as of December 31, 2024 and 2023:

2024 2023 2022 2021 2020 Prior Revolving loans amortized cost basis Total

2 unchanged sentences

Pass $ 22,469 $ 40,634 $ 82,254 $ 65,852 $ 31,382 $ 90,763 $ 33,393 $ 366,747

Special Mention — — — 4,850 — — — 4,850

Substandard — — — 234 4,724 — — 4,958

12 unchanged sentences

Pass 7,252 3,789 61,936 50,178 6,195 24,845 26,751 180,946

Special Mention — — — 1,461 3,457 — — 4,918

Total Multi-family 7,252 3,789 61,936 51,639 9,652 24,845 26,751 185,864

5 unchanged sentences

Current period gross charge-offs — — — — — 10 — 10

Home equity lines of credit

Pass 18 198 — 57 — — 16,539 16,812

14 unchanged sentences

Total current period gross charge-offs $ 47 $ 830 $ 706 $ 357 $ 72 $ 30 $ — $ 2,042

The following table presents the credit risk profile of the Company’s loan portfolio based on rating category and payment activity as of December 31, 2022:

Pass Special Mention Substandard Doubtful Loss Total

December 31, 2022

2023 2022 2021 2020 2019 Prior Revolving loans amortized cost basis Total

As of December 31, 2023:

Commercial mortgage

Pass $ 31,795 $ 83,567 $ 69,863 $ 33,226 $ 45,746 $ 60,563 $ 11,495 $ 336,255

Special Mention — — — 4,850 — — — 4,850

Substandard — — — — — 528 — 528

Total Commercial mortgage 31,795 83,567 69,863 38,076 45,746 61,091 11,495 341,633

Current period gross charge-offs — — — — — — — —

Commercial and industrial

Pass 38,721 13,509 13,390 4,348 1,727 9,430 30,287 111,412

Substandard — — — 10 — 138 3,868 4,016

Total Commercial and industrial 38,721 13,509 13,390 4,358 1,727 9,568 34,155 115,428

Current period gross charge-offs — 58 — — — — — 58

Construction and development

Multi-family 124,914 — — — — 124,914

Pass 36,868 81,715 30,383 2,981 111 847 — 152,905

Substandard — — — — 4,900 — — 4,900

Total Construction and development 36,868 81,715 30,383 2,981 5,011 847 — 157,805

Current period gross charge-offs — — — — — — — —

Pass 4,443 39,271 37,422 6,383 7,291 18,400 25,547 138,757

Total Multi-family 4,443 39,271 37,422 6,383 7,291 18,400 25,547 138,757

Current period gross charge-offs — — — — — — — —

Residential mortgage

Pass 31,352 31,447 35,174 17,651 8,812 36,118 216 160,770

Substandard — — — — 92 1,261 — 1,353

Total Residential mortgage 31,352 31,447 35,174 17,651 8,904 37,379 216 162,123

Current period gross charge-offs — — — — — — — —

Home equity lines of credit

Leases 133,254 152 34 29 — 133,469

Consumer 21,015 — 33 — — 21,048

Total $ 958,227 $ 4,034 $ 12,710 $ 29 $ — $ 975,000

Pass — — 282 — — — 10,597 10,879

Substandard — — — — — — 25 25

Total Home equity lines of credit — — 282 — — — 10,622 10,904

Current period gross charge-offs — — — — — — — —

Direct financing leases

Pass 76,018 41,838 24,675 10,264 2,895 462 — 156,152

Substandard 80 184 80 21 — — — 365

Doubtful 79 — — — 2 — — 81

Total Direct financing leases 76,177 42,022 24,755 10,285 2,897 462 — 156,598

Current period gross charge-offs 105 276 459 85 11 1 — 937

Pass 9,775 8,223 3,713 840 358 279 — 23,188

Substandard 35 17 15 — 9 — — 76

Total Consumer 9,810 8,240 3,728 840 367 279 — 23,264

Current period gross charge-offs 39 69 75 25 7 — — 215

Total Loans and Leases $ 229,166 $ 299,771 $ 214,997 $ 80,574 $ 71,943 $ 128,026 $ 82,035 $ 1,106,512

Total current period gross charge-offs $ 144 $ 403 $ 534 $ 110 $ 18 $ 1 $ — $ 1,210

The following tables present the Company’s loan portfolio aging analysis of the recorded investment in loans as of December 31, 2024 and 2023:

Delinquent Loans Total Portfolio Loans Total Loans >90 Days Accruing

Delinquent Loans Total Portfolio Loans Total Accruing Loans 90 Days or More Past Due

Past Due 60-89 Days

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Totals $ 2,522 $ 1,599 $ 6,709 $ 10,830 $ 1,164,466 $ 1,175,296 $ 1,714

Delinquent Loans Total Portfolio Loans Total Loans >90 Days Accruing

Delinquent Loans Total Portfolio Loans Total Accruing Loans 90 Days or More Past Due

Past Due 60-89 Days

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2024 December 31,

Nonaccrual loans and leases Nonaccrual loans and leases without an allowance for credit losses Nonaccrual loans and leases

Nonaccrual loans and leases Nonaccrual loans and leases without an allowance for credit losses Nonaccrual loans and leases Nonaccrual loans and leases without an allowance for credit losses

Commercial and industrial $ 35 $ — $ 1,241 $ 1,202

4 unchanged sentences

Total nonaccrual loans and leases $ 5,063 $ 128 $ 6,324 $ 1,385

During the year ended December 31, 2023, the Company recognized $ 57,000 of interest income on nonaccrual loans and leases.

The following table presents the Company's amortized cost basis of collateral dependent loans, and their respective collateral type, which are individually analyzed to determine expected credit losses:

During the years ended December 31, 2024 and 2023, the Company recognized $ 5,000 and $ 57,000 , respectively, of interest income on nonaccrual loans and leases.

The following tables present the Company's amortized cost basis of collateral dependent loans, and their respective collateral type, which are individually analyzed to determine expected credit losses, at the dates indicated:

December 31, 2024

Commercial Real Estate Multi-family Housing Residential Real Estate Other Total Allowance on Collateral Dependent Loans

Commercial mortgage $ 4,724 $ — $ — $ — $ 4,724 $ —

Commercial and industrial — — — 1,501 1,501 —

Construction and development

4,900 — — — 4,900 1,000

Multi-family — 1,461 — — 1,461 —

Residential mortgage — — 143 — 143 —

Total $ 9,624 $ 1,461 $ 143 $ 1,501 $ 12,729 $ 1,000

December 31, 2023

Commercial Real Estate Residential Real Estate Other Total Allowance on Collateral Dependent Loans

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If a determination is made that a modified loan or lease has been deemed uncollectible, the loan or lease (or portion of the loan or lease) is charged-off, reducing the amortized cost basis of the loan or lease and adjusting the allowance for credit losses.

At December 31, 2023, the Company had no modified loans or leases to borrowers experiencing financial difficulty that were modified during the year ended December 31, 2023.

There were no modified loans and leases that had a payment default during the year ended December 31, 2023 and that were modified in the twelve months prior to that default to borrowers experiencing financial difficulty.

Troubled Debt Restructuring (TDR) Disclosures Prior to the Adoption of ASU 2022-02

During the year ended December 31, 2022, there were no newly classified TDRs.

For the year ended December 31, 2022, the Company recorded no charge-offs related to TDRs.

As of December 31, 2022, TDRs had a related

allowance of $ 0 .

During the year ended December 31, 2022, there were no TDRs for which there was a payment default within the first 12 months of the modification.

During the year ended December 31, 2024, the Company modified two residential mortgage loans, both involving term extensions, to borrowers experiencing financial difficulty.

The total amortized cost basis of the loans modified at December 31, 2024 was $ 168,000 .

For the year ended December 31, 2024, loan and lease modifications to borrowers experiencing financial difficulty resulted in a weighted average term extension of 20 months for the modified loans.

During the year ended December 31, 2023, the Company had no new loan or lease modifications to borrowers experiencing financial difficulty.

There were no modified loans or leases that had a payment default during the years ended December 31, 2024 and 2023 and that were modified in the twelve months prior to that default to borrowers experiencing financial difficulty.

Other Real Estate Owned

3 unchanged sentences

The following lists the components of the net investment in direct financing leases:

December 31, 2024 December 31, 2023

Total minimum lease payments to be received $ 168,934 $ 177,952

2 unchanged sentences

Unearned income ( 30,192 ) ( 31,056 )

Net investment in leases $ 156,598 $ 133,469

The following summarizes the future minimum lease payments receivable in subsequent years:

Net investment in direct finance leases $ 148,102 $ 156,598

The following summarizes the future minimum lease payments receivable subsequent to December 31, 2024:

2025 $ 64,503

6 unchanged sentences

The Company utilizes a cash flow analysis method of estimating expected losses, which relies on key inputs and assumptions.

The Company utilizes a CF analysis method of estimating expected losses, which relies on key inputs and assumptions.

1 unchanged sentence

The Company has elected to exclude accrued interest receivable from the calculation of the allowance for credit losses, as it is the Company's policy to write off accrued interest in a timely manner as it is deemed uncollectible by reversing interest income.

Accrued interest receivable totaled $ 4.1 million and $ 3.8 million at December 31, 2024 and 2023, respectively.

The Company categorizes its loan portfolios into eight segments, as discussed above, based on similar risk characteristics.

Loans within each segment are collectively evaluated using either a CF methodology or the RLM.

Loans within each segment are collectively evaluated using either a CF methodology or remaining life methodology.

When estimating for credit loss, the Company forecasts the first four quarters of the credit loss estimate and reverts to a long-run average of each considered factor.

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• the effect of other external factors.

T he following tables summarize changes in the allowance for credit losses by segment for the year ended December 31, 2023:

Balances, December 31, 2022 Impact of adopting ASC 326 Balances, January 1, 2023 Post-ASC 326 adoption Provision for (reversal of) credit losses Charge-offs Recoveries Balances, December 31, 2023

The following tables summarize changes in the allowance for credit losses by segment for the years ended December 31, 2024 and 2023:

Balances, December 31, 2023 Provision for (reversal of) credit losses Charge-offs Recoveries Balances, December 31, 2024

Commercial mortgage $ 4,655 $ ( 169 ) $ — $ — $ 4,486

7 unchanged sentences

Total $ 15,663 $ 1,634 $ ( 2,042 ) $ 536 $ 15,791

Economic Outlook

Due to the future-focused nature of the calculation for the allowance on credit losses, management must make significant assumptions.

Estimating an appropriate allowance requires management to use relevant forward-looking information drawn from reasonable and supportable forecasts.

Economic factors are a consequential part of these forecasts, and as such are evaluated periodically for developments that may impact the financial institution's allowance for credit losses in the loan and lease portfolio.

As of December 31, 2023, the primary economic factors affecting the Company's loan and lease portfolio are persistent inflation, higher interest rates, a weakened economic growth and unemployment outlook, and continuing geopolitical risk.

These key factors will continue to adversely impact the Company's loan and lease portfolio into 2024.

In addition, market liquidity continues to impact the economic environment and could potentially further tighten credit conditions in the future.

The Company remains committed to three growth market regions:

Columbus, Ohio, Dayton/Springfield, Ohio, and Indianapolis, Indiana.

As high-growth areas, these market regions specialize in commercial real estate loans.

The respective forecasts for these markets are described below:

• Columbus, Ohio - The market region is forecasting estimated job growth to be stable with slight growth in certain sectors in 2024.

Although the forecasted unemployment rate for the region has slightly increased, the region still remains slightly below the national unemployment rate estimate.

• Dayton/Springfield, Ohio - The economic outlook for this market region remains positive, as the region is experiencing steady growth in multiple economic and housing sectors.

Although concerns about a recession are still present, the region's economic outlook for 2024 is mostly bullish.

Furthermore, the region continues to have one of the lowest unemployment rates in the state.

• Indianapolis, Indiana - The market region continues to forecast estimated job growth to be flat in 2024.

This is primarily due to inflation, elevated interest rates, and unemployment forecasts.

Certain economic sections may see slight growth.

The Company's assumption of a potential future economic slowdown could have an adverse impact on the loan and lease portfolio and specifically, the allowance for credit losses in the future.

However, there are various potential outcomes, and the variances could be significant and volatile.

As a result, the Company's future economic estimates may fluctuate in 2024.

Allowance for Loan Losses under prior GAAP ("Incurred Loss Method")

Prior to the adoption of ASU No.

2016-13, Financial Instruments-Credit Losses (Topic 326) on January 1, 2023, the Company maintained an allowance for loan and lease losses in accordance with the Incurred Loss Method.

The following table summarizes changes in the allowance for loan and lease losses under the Incurred Loss Method by segment for the year ended December 31, 2022:

Balance, beginning of period Provision (reversal) for losses Charge-offs Recoveries Balance, end of period

Year Ended Year Ended December 31, 2022:

Commercial mortgage $ 4,742 $ ( 19 ) $ — $ 53 $ 4,776

Commercial and industrial 1,639 ( 478 ) — 130 1,291

Construction and development 2,286 569 — — 2,855

Multi-family 1,875 80 — — 1,955

Residential mortgage 263 ( 200 ) ( 19 ) 32 76

Home equity 29 ( 16 ) — 10 23

Leases 1,079 488 ( 512 ) 141 1,196

Consumer 195 176 ( 150 ) 20 241

Total $ 12,108 $ 600 $ ( 681 ) $ 386 $ 12,413

The following table presents the balance in the allowance for loan and lease losses and the recorded investment in loans and leases based on portfolio segment and impairment method under the incurred loss method as of December 31, 2022:

Allowance for loan and lease losses:

Loans and leases:

Individually evaluated for impairment Collectively evaluated for impairment Balance, December 31 Individually evaluated for impairment Collectively evaluated for impairment Balance, December 31

As of December 31, 2022:

Balances, December 31, 2022

Impact of adopting ASC 326

Balances, January 1, 2023 Post-ASC 326 adoption

Provision for (reversal of) credit losses Charge-offs Recoveries Balances, December 31, 2023

Commercial mortgage $ 4,776 $ ( 395 ) $ 4,381 $ 261 $ — $ 13 $ 4,655

4 unchanged sentences

Home equity 23 89 112 ( 10 ) — — 102

Leases — 1,196 1,196 — 133,469 133,469

Direct financing leases 1,196 422 1,618 925 ( 937 ) 349 1,955

Consumer 241 64 305 172 ( 215 ) 55 317

Total $ 12,413 $ 2,664 $ 15,077 $ 1,264 $ ( 1,210 ) $ 532 $ 15,663

The following table presents the Company’s impaired loans and specific valuation allowance at December 31, 2022 under the Incurred Loss Method:

December 31, 2022

Balance Unpaid

Balance Specific

Allowance Average Investment in Impaired Loans and Leases Interest Income Recognized

Impaired loans without a specific valuation allowance

Commercial mortgage $ — $ 59 $ — $ 49 $ 12

Commercial and industrial 366 567 — 366 —

Residential mortgage 113 241 — 116 4

$ 479 $ 867 $ — $ 531 $ 16

Impaired loans with a specific valuation allowance

Commercial and industrial $ 595 $ 643 $ 281 $ 607 $ 18

Construction and development 4,900 4,900 750 4,900 —

$ 5,495 $ 5,543 $ 1,031 $ 5,507 $ 18

Total impaired loans

Commercial mortgage $ — $ 59 $ — $ 49 $ 12

Commercial and industrial 961 1,210 281 973 18

Construction and development 4,900 4,900 750 4,900 —

Residential mortgage 113 241 — 116 4

Total impaired loans $ 5,974 $ 6,410 $ 1,031 $ 6,038 $ 34

Our commercial loan portfolio, consisting of commercial and multi-family real estate loans, commercial and industrial loans, and construction loans, represented 69.5 % and 68.1 % of our portfolio as of December 31, 2024 and 2023, respectively.

The allowance for credit losses on loans and leases allocated to the commercial loan portfolio represented 68.9 % and 74.1 % of our total allowance at December 31, 2024 and 2023, respectively.

Economic Outlook

Due to the future-focused nature of the calculation for the allowance for credit losses, management must make significant assumptions.

Estimating an appropriate allowance requires management to use relevant forward-looking information drawn from reasonable and supportable forecasts.

Economic factors are a consequential part of these forecasts, and as such are evaluated periodically for developments that may impact the Company's allowance for credit losses and loan and lease portfolio.

As of December 31, 2024, the primary economic factors affecting the Company's loan and lease portfolio are persistent inflation, higher interest rates, a weakened economic growth and unemployment outlook, and continuing geopolitical risk.

These key factors will continue to adversely impact the Company's loan and lease portfolio for the near future.

The Company remains committed to three growth market regions:

Columbus, Ohio, Cincinnati/Dayton/Springfield, Ohio, and Indianapolis, Indiana.

As high-growth areas, these market regions specialize in commercial real estate loans.

Their respective forecasts are described below:

• Columbus, Ohio - The market region continues to forecast overall estimated job growth for the first half of 2025.

Recent construction on a new and expanded terminal at John Glenn Columbus International Airport could potentially impact the trajectory of the local market.

• Cincinnati/Dayton/Springfield, Ohio - The economic outlook for this market region for the first half of 2025 continues to remain positive.

The Cincinnati/Northern Kentucky International Airport is the fastest-growing U.S.

airport on a year-over-year basis.

The region's unemployment rate was slightly lower than the national unemployment rate during the fourth quarter of 2024.

• Indianapolis, Indiana - The market region experienced continuous and balanced economic growth throughout 2024.

The expectations for the first half of 2025 are consistent with 2024 results.

Expectations are driven primarily by an expanding labor market, retail sales growth, and increasing median household incomes.

Future potential economic volatility may have a significant impact on the Company's loan and lease portfolio, specifically the allowance for credit losses.

There are a myriad of potential outcomes, and the variances may be significant and unpredictable.

As a result, the Company's future estimates may fluctuate during 2025.

Allowance for Credit Losses on Unfunded Commitments

2 unchanged sentences

Additional provisions applied to the allowance are recognized in the provision for credit losses on the Consolidated Statements of Income.

The following table details activity in the allowance for credit losses on unfunded commitments during the year ended December 31, 2023:

The following table details activity in the allowance for credit losses on unfunded commitments during the year ended December 31, 2024 and 2023:

Year Ended December 31,

Balance, December 31, 2022 $ —

Beginning balance

Impact of adopting ASC 326 — 2,374

Reversal of provision for credit losses ( 1,084 ) ( 732 )

Balance, December 31, 2023 $ 1,642

Ending balance

$ 558 $ 1,642

Premises and Equipment

36 unchanged sentences

Maturity of lease liabilities

2029 and after 165

Thereafter 105

Total lease payments $ 452

13 unchanged sentences

Balances, end of period $ 1,951 $ 1,945

Valuation allowances

Balances, beginning of period — 380

Additions — 111

Reductions — ( 491 )

Balances, end of period — —

Servicing Rights, net $ 1,945 $ 2,012

Qualified Affordable Housing Investments

The Company has investments in certain limited partnerships that fund affordable housing projects and provide the Company with low income housing tax credits ("LIHTC").

At December 31, 2024 and 2023, the balance of these investments in LIHTC totaled $ 951,000 and $ 1.1 million, respectively.

These balances are reflected in the other assets line of the Condensed Consolidated Balance Sheet.

The assets are amortized as a component of the provision for income taxes.

The following table summarizes the amortization expense and tax credits recognized for the Company's LIHTC investments for the years ended December 31, 2024 and 2023:

Year Ended December 31,

Amortization expense

Tax credits recognized

Demand deposits $ 434,228 $ 405,338

5 unchanged sentences

$ 1,093,940 $ 1,041,140

Certificates maturing in years ending December 31:

Certificates and other time deposits maturing in years ending December 31:

2025 $ 366,777

2 unchanged sentences

First Bank has Federal Home Loan Bank advances, with interest rates ranging from 0.61 % to 5.33 %.

The maturities of FHLB advances at December 31, 2023 are as follows:

The maturities of FHLB advances at December 31, 2024 were as follows:

FHLB Advances

4 unchanged sentences

FHLB advances totaling $ 42,000,000 are subject to an option by the FHLB to put the entire advance to a periodic adjustable rate on the lock-out date.

The adjustable rate would be for the remaining term at a predetermined rate based on SOFR.

The adjustable rate would be for the remaining term at a predetermined rate based on the Secured Overnight Financing Rate, or SOFR.

If the FHLB exercises its option to convert the advance to an adjustable rate, the advance will be prepayable at the Company’s option, at par and without a penalty.

19 unchanged sentences

Stock compensation 11 51

Carryforward attribute expiration 407 —

Other ( 125 ) 61

Actual tax expense $ 1,486 $ 1,516

13 unchanged sentences

Fixed assets 1 138

State taxes — 152

Mortgage-servicing rights 455 454

2 unchanged sentences

Net deferred tax asset $ 16,759 $ 16,183

Certain immaterial revisions have been made to the 2022 financial statements for a deferred tax asset related to the Company's reorganization transaction that occurred in 2019.

Accordingly, the balance of the Company's deferred tax asset, which is included in other assets on the consolidated balance sheet, was reduced by $ 593,730 for the period ended December 31, 2022 with a corresponding reduction in retained earnings.

These revisions did not have a significant impact on the financial statement line items impacted.

As of December 31, 2023, the Company had approximately $ 2,600,000 of federal charitable contribution carryforwards, which will begin to expire in 2024, and state net operating loss carryforwards of $ 3,975,000 , which will begin to expire in 2041.

As of December 31, 2024, the Company had approximately $ 20,000 of federal charitable contribution carryforwards, which will expire in 2026, and state net operating loss carryforwards of $ 5.1 million, which will begin to expire in 2041.

At December 31, 2024 and 2023, the Company determined that it is more likely than not that the deferred tax assets will be realized, largely based on available tax planning strategies and its projections of future taxable income.

6 unchanged sentences

Net unrealized loss on available for sale securities

$ ( 57,982 ) $ ( 54,486 )

Tax benefit 12,176 11,441

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As part of the reorganization and related stock offering, the Company established an Employee Stock Ownership Plan ("ESOP") covering substantially all employees.

The ESOP acquired 1,082,130 shares of Company common stock at an average price of $ 13.59 per share on the open market with funds provided by a loan from the Company.

The ESOP acquired 1,082,130 shares of Company common stock at an average price of $ 13.59 per share in the open market with funds provided by a loan from the Company.

The Company is obligated at the option of each beneficiary to repurchase shares of the ESOP upon the beneficiary’s termination or after retirement.

2 unchanged sentences

Unearned ESOP shares, which are not vested, are excluded from the computation of average shares outstanding for earnings per share calculation.

Accordingly, $ 11,458,000 and $ 12,193,000 of common stock acquired by the ESOP was shown as a reduction of stockholders’ equity at December 31, 2023 and December 31, 2022, respectively.

Accordingly, $ 10,722,000 and $ 11,458,000 of common stock acquired by the ESOP was shown as a reduction of stockholders’ equity at December 31, 2024 and 2023, respectively.

Shares are released to participants proportionately as the loan is repaid.

24 unchanged sentences

Total compensation cost recognized in the income statement for restricted stock awards during 2024 and 2023 was $ 880,000 and $ 974,000 , respectively, and the related tax benefit recognized was $ 185,000 and $ 205,000 , respectively.

As of December 31, 2023, unrecognized compensation expense related to restricted stock awards was $ 1.3 million.

As of December 31, 2024, unrecognized compensation expense related to restricted stock awards was $ 434,000 .

Stock Option Plan.

3 unchanged sentences

Forfeited options may be awarded to other eligible recipients in future grants until the 2020 EIP terminates in September 2030.

A net-settle stock option exercise may occur by the option holder by withholding the exercise price from the number of shares that would otherwise be delivered upon a cash exercise of the option.

The withheld shares are canceled and no longer available for future grant.

A net-settle stock option exercise allows the option holder to pay the exercise price by withholding a portion of the shares that would otherwise be delivered upon a cash exercise of the option.

The withheld shares are then canceled and are no longer available for future grants.

The following table summarizes the stock option activity in the 2020 EIP during the year ended December 31, 2024.

47 unchanged sentences

Furthermore, First Bank’s regulators could require adjustments to regulatory capital not reflected in these financial statements.

Quantitative measures established by regulatory capital standards to ensure capital adequacy require First Bank to maintain minimum amounts and ratios (set forth in the table below) of total and Tier I capital (as defined) to risk-weighted assets (as defined), common equity Tier I capital (as defined) to total risk-weighted assets (as defined) and of Tier I capital (as defined) to average assets (as defined).

assets (as defined) and of Tier I capital (as defined) to average assets (as defined).

Management believes, as of December 31, 2024, that First Bank meets all capital adequacy requirements to which it is subject.

75 unchanged sentences

Nonrecurring Measurements

The following table presents the fair value measurement of assets measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements fall at December 31, 2022.

As of December 31, 2023, there were no assets or liabilities measured at fair value on a nonrecurring basis.

Fair Value Measurements Using

Value Quoted Prices

(Level 1) Significant

(Level 2) Significant

December 31, 2022

Collateral dependent loans $ 314 $ — $ — $ 314

Mortgage-servicing rights 2,012 — — 2,012

Following is a description of the valuation methodologies and inputs used for assets measured at fair value on a nonrecurring basis and recognized in the accompanying consolidated balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy.

For assets classified within Level 3 of the fair value hierarchy, the process used to develop the reported fair value is described below.

Collateral-Dependent Loans and Leases, Net of Allowance for Credit Losses

The estimated fair value of collateral-dependent loans is based on the appraised fair value of the collateral, less estimated cost to sell.

Collateral-dependent loans are classified within Level 3 of the fair value hierarchy.

The Company considers the appraisal or evaluation as the starting point for determining fair value and then considers other factors and events in the environment that may affect the fair value.

Appraisals of the collateral underlying collateral-dependent loans are obtained when the loan is determined to be collateral-dependent and subsequently as deemed necessary by management.

Appraisals are reviewed for accuracy and consistency by management.

Appraisers are selected from the list of approved appraisers maintained by management.

The appraised values are reduced by discounts to consider lack of marketability and estimated cost to sell if repayment or satisfaction of the loan is dependent on the sale of the collateral.

These discounts and estimates are developed by management by comparison to historical results.

Mortgage Servicing Rights

Mortgage-servicing rights do not trade in an active, open market with readily observable prices.

Accordingly, fair value is estimated using discounted cash flow models having significant inputs of discount rate, prepayment speed and default rate.

Due to the nature of the valuation inputs, mortgage-servicing rights are classified within Level 3 of the hierarchy.

Mortgage-servicing rights are tested for impairment on a quarterly basis by obtaining an independent valuation.

The valuation is reviewed by management for accuracy and for potential impairment.

Unobservable (Level 3) Inputs

The following tables present the fair value measurement of assets recognized in the accompanying consolidated balance sheets measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements fall at December 31, 2022.

As of December 31, 2023, there were no assets measured at fair value on a nonrecurring basis.

Fair Value at December 31, 2022 Valuation

Technique Unobservable

Collateral-dependent loans $ 314 Appraisal Marketability discount 0 % - 42 %

Mortgage-servicing rights $ 2,012 Discounted cash flow Discount rate 10 %

As of December 31, 2024 and 2023, there were no assets or liabilities measured at fair value on a nonrecurring basis.

Fair Value of Financial Instruments

6 unchanged sentences

Cash and cash equivalents $ 21,757 $ 21,757 $ — $ —

Interest-earning time deposits 300 — 300 —

Available-for-sale securities 258,192 3,161 255,031 —

14 unchanged sentences

Cash and cash equivalents $ 20,240 $ 20,240 $ — $ —

Interest-earning time deposits 490 — 490 —

Available-for-sale securities 282,688 2,976 279,712 —

32 unchanged sentences

Total liabilities and stockholders' equity $ 135,265 $ 137,241

Condensed Statements of Income and Comprehensive Income (Loss)

Condensed Statements of Income and Comprehensive Income

Dividends from bank subsidiary $ 4,750 $ —

2 unchanged sentences

Other expenses 2,875 3,120

(Loss) income before income tax benefit and undistributed subsidiary (loss) income

( 2,482 ) 17,175

Income (loss) before income tax benefit and undistributed subsidiary (loss) income 2,462 ( 2,482 )

Income tax benefit ( 301 ) ( 524 )

2 unchanged sentences

Captive subsidiary 985 1,101

Net (loss) income $ 9,487 $ 12,965

Comprehensive income (loss) $ 16,193 $ ( 35,574 )

Net income $ 9,377 $ 9,487

Comprehensive income $ 6,616 $ 16,193

Condensed Statements of Cash Flows

2 unchanged sentences

Adjustments to reconcile net income to net cash from operating activities:

Dividends in excess of net income (equity in undistributed net income of subsidiaries) ( 11,446 ) 4,842

Equity in undistributed net income of subsidiaries ( 6,614 ) ( 11,446 )

ESOP expense 661 612

4 unchanged sentences

Investing Activities

Capitalization of subsidiary — ( 250 )

Net cash used in investing activities — —

2 unchanged sentences

Repurchase of common stock ( 5,042 ) ( 6,251 )

Proceeds from stock option exercises — —

Net cash used in financing activities ( 10,739 ) ( 12,171 )

2 unchanged sentences

Cash and Cash Equivalents, End of Period $ 5,545 $ 13,225

Segment Information

The Company has one reportable segment:

community banking.

The Company's reportable segment is determined by the Chief Executive Officer, who serves as the chief operating decision maker (“CODM”), based on information regarding the Company's products and services.

The CODM evaluates the financial performance of the Company's business components by assessing revenue streams, significant expenses, and budget-to-actual results.

The Company's primary source of revenue is providing banking services to its customers.

Significant expenses associated with banking operations include interest expense, credit loss expense, and salaries and employee benefits.

The CODM evaluates performance, directs resource allocation, and makes key operating decisions based on consolidated net income reported in the Consolidated Statements of Income.

Segment assets are measured based on total consolidated assets as reported in the Consolidated Balance Sheets.

Significant Estimates and Concentrations

9 unchanged sentences

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