1ST SOURCE CORP 10-K

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. This analysis is intended to assist you in understanding our results of operations for each of the past three years and financial condition for each of the past two years. FORWARD-LOOKING STATEMENTS This report, including Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains forward-looking statements. Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, anticipations, assumptions, estimates, intentions, and future performance, and involve known and unknown risks, uncertainties and other factors, which may be beyond our control, and which may cause actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. All statements other than statements of historical fact are statements that could be forward-looking statements. Words such as “believe,” “contemplate,” “seek,” “estimate,” “plan,” “project,” “anticipate,” “possible,” “assume,” “expect,” “intend,” “targeted,” “continue,” “remain,” “will,” “should,” “indicate,” “would,” “may” and other similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements. Forward-looking statements provide current expectations or forecasts of future events and are not guarantees of future performance, nor should they be relied upon as representing management’s views as of any subsequent date. All written or oral forward-looking statements that are made by or attributable to us are expressly qualified in their entirety by this cautionary notice. We have no obligation, and do not undertake, to update, revise, or correct any of the forward-looking statements after the date of this report, or after the respective dates on which such statements otherwise are made. We have expressed our expectations, beliefs, and projections in good faith and we believe they have a reasonable basis. However, we make no assurances that our expectations, beliefs, or projections will be achieved or accomplished. The results or outcomes indicated by our forward-looking statements may not be realized due to a variety of factors, including, without limitation, the following: • Local, regional, national, and international economic conditions and the impact they may have on us and our clients and our assessment of that impact. • Changes in the level of nonperforming assets and charge-offs. • Changes in estimates of future cash reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements. • The effects of and changes in trade and monetary and fiscal policies and laws, including the interest rate policies of the Federal Reserve Board. • Inflation, interest rate, securities market, and monetary fluctuations, including substantial changes in the cost of fuel. • Political instability, acts of war or terrorism, or cybersecurity threats. • The spread of infectious diseases or pandemics. • The timely development and acceptance of new products and services and perceived overall value of these products and services by others. • Changes in consumer spending, borrowings, and savings habits. • Changes in the financial performance and/or condition of our borrowers. • Technological changes. • The impact of climate change. • Acquisitions and integration of acquired businesses. • The ability to increase market share and control expenses. • The ability to expand effectively into new markets that we target. • Changes in the competitive environment. • The effect of changes in laws and regulations (including laws and regulations concerning taxes, banking, securities, insurance, and climate change) with which we and our subsidiaries must comply. • The effect of changes in accounting policies and practices and auditing requirements, as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board, and other accounting standard setters. • Changes in our organization, compensation, and benefit plans. • The costs and effects of legal and regulatory developments including the resolution of legal proceedings or regulatory or other governmental inquires and the results of regulatory examinations or reviews. 18 Table of Contents • Greater than expected costs or difficulties related to the integration of new products and lines of business. • Our success at managing the risks described in Item 1A. Risk Factors. APPLICATION OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES Our consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP) and follow general practices within the industries in which we operate. Application of these principles requires management to make estimates or judgments that affect the amounts reported in the financial statements and accompanying notes. These estimates or judgments reflect management’s view of the most appropriate manner in which to record and report our overall financial performance. Because these estimates or judgments are based on current circumstances, they may change over time or prove to be inaccurate based on actual experience. As such, changes in these estimates, judgments, and/or assumptions may have a significant impact on our financial statements. All accounting policies are important, and all policies described in Part II, Item 8, Financial Statements and Supplementary Data – Note 1 of the Notes to Consolidated Financial Statements (Note 1), should be reviewed for a greater understanding of how our financial performance is recorded and reported. We have identified the following two policies as being critical because they require management to make particularly difficult, subjective, and/or complex estimates or judgments about matters that are inherently uncertain and because of the likelihood that materially different amounts would be reported under different conditions or using different assumptions. These policies relate to the determination of the allowance for credit losses and fair value measurements. Management believes it has used the best information available to make the estimations or judgments necessary to value the related assets and liabilities. Actual performance that differs from estimates or judgments and future changes in the key variables could change future valuations and impact net income. Management has reviewed the application of these policies with the Audit, Finance and Risk Committee of the Board of Directors. Following is a discussion of the areas we view as our most critical accounting policies. Allowance for Credit Losses — The allowance for credit losses represents management’s estimate of expected credit losses over the expected contractual life of our existing loan and lease portfolio and the establishment of an allowance that is sufficient to absorb those losses. Determining the appropriateness of the allowance is complex and requires judgment by management about the effect of matters that are inherently uncertain. In determining an appropriate allowance, management makes numerous judgments, assumptions, and estimates which are inherently subjective, as they require material estimates that may be susceptible to significant change. These estimates are derived based on continuous review of the loan and lease portfolio, assessments of client performance, movement through delinquency stages, probability of default, losses given default, collateral values, and disposition, as well as expected cash flows, economic forecasts, and qualitative factors, such as changes in current economic conditions. As stated in Note 1, we segment our loan and lease portfolios based on similar risk characteristics for collective evaluation using a non-discounted cash flow approach to estimate expected losses. We use a cohort cumulative loss methodology for select loan and lease segments. The cohort methodology has a steady state assumption. For other segments, we use a PD/LGD (probability of default/loss given default) model which aligns well with our internal risk rating system. When we observe limitations in the data or models, we use model overlays to make adjustments to model outputs to capture a particular risk or compensate for a known limitation, or in the case of the cohort model, changes in the steady state assumptions. Actual losses may differ from estimated amounts due to model inefficiencies or management’s inability to adequately determine appropriate model adjustment factors. Additionally, we are required to use forecasts about future economic conditions to determine the expected credit losses over the remaining life of the asset. Forecast adjustments are inherently challenging for many reasons including, the current macroeconomic environment, a softening labor market, heightened geopolitical uncertainty, inflation which remains above long-term policy targets, and interest rates that are still restrictive despite recent easing. We endeavor to apply a forecast adjustment that is directionally consistent, reasonable, supportable, and reflective of current expectations and conditions. We use a two-year reasonable and supportable period across all loan and lease segments to forecast economic conditions. We believe the two-year time horizon aligns with available industry guidance and various forecasting sources. Following this two-year forecasting period, we use a two-year reversion period to revert forecast rates to historical loss rates. In assessing the factors used to derive an appropriate allowance, management benefits from a lengthy organizational history and experience with credit decisions and related outcomes. We have been diligent in our efforts to review our portfolios, loan segmentations, methodologies and models and believe we have made appropriate and prudent decisions. Nonetheless, if management’s underlying assumptions prove to be inaccurate, the allowance for credit losses would have to be adjusted. Our accounting policies related to the allowance for credit losses is disclosed in Note 1 under the heading “Allowance for Credit Losses.” 19 Table of Contents Fair Value Measurements — We use fair value measurements to record certain financial instruments and to determine fair value disclosures. Available-for-sale securities, trading account securities, mortgage loans held for sale, and interest rate swap agreements are financial instruments recorded at fair value on a recurring basis. Additionally, from time to time, we may be required to record at fair value other financial assets on a nonrecurring basis. These nonrecurring fair value adjustments typically involve write-downs of, or specific reserves against, individual assets. GAAP establishes a three-level hierarchy for disclosure of assets and liabilities recorded at fair value. The classification of assets and liabilities within the hierarchy is based on whether the inputs to the valuation methodology used in the measurement are observable or unobservable. Observable inputs reflect market-driven or market-based information obtained from independent sources, while unobservable inputs reflect our estimates about market data. The degree of management judgment involved in determining the fair value of a financial instrument is dependent upon the availability of quoted market prices or observable market data. For financial instruments that trade actively and have quoted market prices or observable market data, there is minimal subjectivity involved in measuring fair value. When observable market prices and data are not fully available, management judgment is necessary to estimate fair value. In addition, changes in the market conditions may reduce the availability of quoted prices or observable data. For example, reduced liquidity in the capital markets or changes in secondary market activities could result in observable market inputs becoming unavailable. Therefore, when market data is not available, we use valuation techniques that require more management judgment to estimate the appropriate fair value measurement. Fair value is discussed further in Note 1 under the heading “Fair Value Measurements” and in Note 21, “Fair Value Measurements.” EARNINGS SUMMARY Net income available to common shareholders in 2025 was $158.28 million, up from $132.62 million in 2024 and up from $124.93 million in 2023. Diluted net income per common share was $6.41 in 2025, $5.36 in 2024, and $5.03 in 2023. Return on average total assets was 1.76% in 2025 compared to 1.52% in 2024, and 1.48% in 2023. Return on average common shareholders’ equity was 13.16% in 2025 versus 12.54% in 2024, and 13.48% in 2023. Net income in 2025, as compared to 2024, was positively impacted by a $47.36 million or 15.74% increase in net interest income, which was partially offset by a $13.24 million or 6.50% increase in noninterest expense. Net income in 2024, as compared to 2023, was positively impacted by a $22.17 million or 7.96% increase in net interest income, which was offset by a $6.60 million increase in provision for credit losses, a $4.32 million or 4.76% decrease in noninterest income and a $1.88 million or 0.93% increase in noninterest expense. Dividends paid on common stock in 2025 amounted to $1.52 per share, compared to $1.40 per share in 2024, and $1.30 per share in 2023. The level of earnings reinvested and dividend payouts are determined by the Board of Directors based on various considerations, including liquidity needs, capital requirements, and management’s assessment of future growth opportunities and the level of capital necessary to support them. Net Interest Income — Our primary source of earnings is net interest income, the difference between income on earning assets and the cost of funds supporting those assets. Significant categories of earning assets are loans and leases and investment securities while deposits and borrowings represent the major portion of interest-bearing liabilities. For purposes of the following discussion, comparison of net interest income is done on a tax-equivalent basis, which provides a common basis for comparing yields on earning assets exempt from federal income taxes to those which are fully taxable. Net interest margin (the ratio of net interest income to average earning assets) is significantly affected by movements in interest rates and changes in the mix of earning assets and the liabilities that fund those assets. Net interest margin on a fully taxable- equivalent basis was 4.07% in 2025, compared to 3.64% in 2024 and 3.51% in 2023. Net interest income was $348.18 million for 2025, compared to $300.82 million for 2024 and $278.65 million for 2023. Tax-equivalent net interest income totaled $348.79 million for 2025, up $47.38 million from the $301.40 million reported in 2024. Tax-equivalent net interest income for 2024 was up $22.02 million from the $279.39 million reported for 2023. During 2025, average earning assets increased $279.10 million or 3.37% while average interest-bearing liabilities increased $128.46 million or 2.20% over the comparable period in 2024. The yield on average earning assets increased 16 basis points to 6.01% for 2025 from 5.85% for 2024 primarily due to higher loan and lease average balances and higher rates on investment securities offset by lower rates on other investments, which include federal funds sold, time deposits with other banks, Federal Reserve Bank excess balances, Federal Reserve Bank and Federal Home Loan Bank (FHLB) stock and commercial paper. Total cost of average interest-bearing liabilities decreased 35 basis points to 2.79% during 2025 from 3.14% in 2024 mainly as a result of repricing of interest-bearing deposits and lower rates and average balances of other short-term borrowings which is primarily short-term FHLB borrowings offset by higher rates on mandatorily redeemable securities. The result to the fully taxable-equivalent net interest margin was an increase of 43 basis points. 20 Table of Contents The largest contributors to the increase in the yield on average earning assets in 2025 was an increase in average loan and lease balances and higher rates on taxable investment securities. During 2025, average loans and leases increased $336.29 million or 5.10% from 2024 while the yield decreased to 6.79% from 6.84% in 2024. Strong growth primarily within our Renewable Energy portfolio and selective growth in our Commercial Real Estate portfolio drove total average loans and leases higher during the year. Net interest recoveries positively contributed seven basis points to the yield on average loans and leases during 2025 and three basis points to the average loans and leases yield during 2024. The tax-equivalent yield on investment securities increased 81 basis points to 2.53% while the average balance decreased $73.56 million or 4.68% with the largest decreases in U.S. treasury and federal agency securities and state and municipal securities. Average mortgages held for sale increased $0.66 million or 20.45% during 2025 while the yield decreased 33 basis points. Average other investments increased $15.71 million or 13.96% during 2025 while the yield decreased 72 basis points. The average balance increase in other investments was primarily a result of higher balances held at the Federal Reserve Bank. Average interest-bearing deposits increased $270.38 million or 4.91% during 2025 while the effective rate paid on those deposits decreased 33 basis points. The increased average balance was primarily due to increases in non-brokered time deposits and money market accounts. The decrease in the average cost of interest-bearing deposits was primarily the result of Fed rate cuts during the second half of 2024 and second half of 2025 . Average noninterest-bearing demand deposits decreased $7.05 million or 0.44% during 2025 due primarily to persistent rate competition for deposits and greater utilization of excess funds by our business customers. Average short-term borrowings decreased $142.22 million or 62.15% during 2025 while the effective rate paid decreased 209 basis points primarily due to the maturity and pay off of $100 million in borrowings from the Federal Reserve’s Bank Term Funding Program. Average long-term debt and mandatorily redeemable securities balances increased $0.31 million or 0.75% during 2025 while the effective rate increased 364 basis points primarily due to a higher imputed interest on mandatorily redeemable securities from an increased improvement in book value per share during 2025 compared to 2024. Mandatorily redeemable shares are issued under the terms of one of our executive incentive compensation plans and are settled based on book value per share with changes from the previous reporting date recorded as interest expense. 21 Table of Contents The following table provides an analysis of net interest income and illustrates interest income earned and interest expense charged for each major component of interest earning assets and the interest bearing liabilities. Yields/rates are computed on a tax-equivalent basis, using a 21% rate. Nonaccrual loans and leases are included in the average loan and lease balance outstanding. 2025 2024 2023 (Dollars in thousands) Average Balance Interest Income/Expense Yield/Rate Average Balance Interest Income/Expense Yield/Rate Average Balance Interest Income/Expense Yield/Rate ASSETS Investment securities available-for-sale: Taxable $ 1,463,913 $ 36,360 2.48 % $ 1,539,900 $ 25,720 1.67 % $ 1,632,567 $ 24,501 1.50 % Tax-exempt (1) 32,894 1,501 4.56 % 30,464 1,312 4.31 % 44,083 1,805 4.09 % Mortgages held for sale 3,894 245 6.29 % 3,233 214 6.62 % 2,368 155 6.55 % Loans and leases, net of unearned discount (1) 6,934,619 471,070 6.79 % 6,598,329 451,432 6.84 % 6,203,857 387,524 6.25 % Other investments 128,273 5,830 4.54 % 112,563 5,925 5.26 % 73,729 3,663 4.97 % Total earning assets (1) 8,563,593 515,006 6.01 % 8,284,489 484,603 5.85 % 7,956,604 417,648 5.25 % Cash and due from banks 66,638 65,285 70,304 Allowance for loan and lease losses (161,191) (151,050) (144,183) Other assets 512,297 540,815 532,072 Total assets $ 8,981,337 $ 8,739,539 $ 8,414,797 LIABILITIES AND SHAREHOLDERS’ EQUITY Interest-bearing deposits $ 5,780,337 $ 155,914 2.70 % $ 5,509,956 $ 166,842 3.03 % $ 5,204,095 $ 123,162 2.37 % Short-term borrowings: Securities sold under agreements to repurchase 59,433 494 0.83 % 60,388 542 0.90 % 78,928 136 0.17 % Other short-term borrowings 27,191 1,088 4.00 % 168,460 8,434 5.01 % 134,683 6,896 5.12 % Subordinated notes 58,764 4,033 6.86 % 58,764 4,217 7.18 % 58,764 4,174 7.10 % Long-term debt and mandatorily redeemable securities 41,278 4,690 11.36 % 40,971 3,165 7.72 % 46,323 3,892 8.40 % Total interest-bearing liabilities 5,967,003 166,219 2.79 % 5,838,539 183,200 3.14 % 5,522,793 138,260 2.50 % Noninterest-bearing deposits 1,601,954 1,609,001 1,753,149 Other liabilities 152,504 161,657 151,659 Shareholders’ equity 1,202,863 1,057,331 926,935 Noncontrolling interests 57,013 73,011 60,261 Total liabilities and equity $ 8,981,337 $ 8,739,539 $ 8,414,797 Less: Fully tax-equivalent adjustments (612) (586) (741) Net interest income/margin (GAAP-derived) (1) $ 348,175 4.07 % $ 300,817 3.63 % $ 278,647 3.50 % Fully tax-equivalent adjustments 612 586 741 Net interest income/margin - FTE (1) $ 348,787 4.07 % $ 301,403 3.64 % $ 279,388 3.51 % (1) See “Reconciliation of Non-GAAP Financial Measures” for more information on this performance measure/ratio. 22 Table of Contents Reconciliation of Non-GAAP Financial Measures — Our accounting and reporting policies conform to GAAP in the United States and prevailing practices in the banking industry. However, certain non-GAAP performance measures are used by management to evaluate and measure the Company’s performance. These include taxable-equivalent net interest income (including its individual components) and net interest margin (including its individual components). Management believes that these measures provide users of the Company’s financial information a more meaningful view of the performance of the interest-earning assets and interest-bearing liabilities. Management reviews yields on certain asset categories and the net interest margin of the Company and its banking subsidiaries on a fully taxable-equivalent (“FTE”) basis. In this non-GAAP presentation, net interest income is adjusted to reflect tax-exempt interest income on an equivalent before-tax basis. This measure ensures comparability of net interest income arising from both taxable and tax-exempt sources. The following table shows the reconciliation of non-GAAP financial measures for the most recent three years ended December 31. (Dollars in thousands) 2025 2024 2023 Calculation of Net Interest Margin (A) Interest income (GAAP) $ 514,394 $ 484,017 $ 416,907 Fully tax-equivalent adjustments: (B) - Loans and leases 302 317 381 (C) - Tax-exempt investment securities 310 269 360 (D) Interest income - FTE (A+B+C) 515,006 484,603 417,648 (E) Interest expense (GAAP) 166,219 183,200 138,260 (F) Net interest income (GAAP) (A-E) 348,175 300,817 278,647 (G) Net interest income - FTE (D-E) 348,787 301,403 279,388 (H) Total earning assets $ 8,563,593 $ 8,284,489 $ 7,956,604 Net interest margin (GAAP-derived) (F/H) 4.07 % 3.63 % 3.50 % Net interest margin - FTE (G/H) 4.07 % 3.64 % 3.51 % 23 Table of Contents The change in interest due to both rate and volume illustrated in the following table has been allocated to volume and rate changes in proportion to the relationship of the absolute dollar amounts of the change in each. The following table shows changes in tax-equivalent interest earned and interest paid, resulting from changes in volume and changes in rates. Increase (Decrease) due to (Dollars in thousands) Volume Rate Net 2025 compared to 2024 Interest earned on: Investment securities available-for-sale: Taxable $ (1,326) $ 11,966 $ 10,640 Tax-exempt 108 81 189 Mortgages held for sale 42 (11) 31 Loans and leases, net of unearned discount 22,864 (3,226) 19,638 Other investments 770 (865) (95) Total earning assets $ 22,458 $ 7,945 $ 30,403 Interest paid on: Interest-bearing deposits $ 7,910 $ (18,838) $ (10,928) Short-term borrowings: Securities sold under agreements to repurchase (8) (40) (48) Other short-term borrowings (5,927) (1,419) (7,346) Subordinated notes — (184) (184) Long-term debt and mandatorily redeemable securities 24 1,501 1,525 Total interest-bearing liabilities $ 1,999 $ (18,980) $ (16,981) Net interest income - FTE $ 20,459 $ 26,925 $ 47,384 2024 compared to 2023 Interest earned on: Investment securities available-for-sale: Taxable $ (1,443) $ 2,662 $ 1,219 Tax-exempt (582) 89 (493) Mortgages held for sale 57 2 59 Loans and leases, net of unearned discount 25,580 38,328 63,908 Other investments 2,032 230 2,262 Total earning assets $ 25,644 $ 41,311 $ 66,955 Interest paid on: Interest-bearing deposits $ 7,590 $ 36,090 $ 43,680 Short-term borrowings: Securities sold under agreements to repurchase (39) 445 406 Other short-term borrowings 1,694 (156) 1,538 Subordinated notes — 43 43 Long-term debt and mandatorily redeemable securities (428) (299) (727) Total interest-bearing liabilities $ 8,817 $ 36,123 $ 44,940 Net interest income - FTE $ 16,827 $ 5,188 $ 22,015 24 Table of Contents Noninterest Income — Noninterest income decreased in 2025 from 2024 following a decrease in 2024 from 2023. The following table shows the components of our noninterest income for the most recent three years ended December 31. (Dollars in thousands) 2025 2024 2023 2025 $ Change from 2024 2025 % Change from 2024 2024 $ Change from 2023 2024 % Change from 2023 Noninterest income: Trust and wealth advisory $ 27,867 $ 26,709 $ 23,706 $ 1,158 4.34 % $ 3,003 12.67 % Service charges on deposit accounts 13,184 12,877 12,749 307 2.38 % 128 1.00 % Debit card 17,774 17,785 17,980 (11) (0.06) % (195) (1.08) % Mortgage banking 4,103 4,210 3,471 (107) (2.54) % 739 21.29 % Insurance commissions 7,700 6,730 6,911 970 14.41 % (181) (2.62) % Equipment rental 3,021 5,171 8,837 (2,150) (41.58) % (3,666) (41.48) % Losses on investment securities available-for-sale (8,679) (3,889) (2,926) (4,790) (123.17) % (963) (32.91) % Other 20,633 16,714 19,895 3,919 23.45 % (3,181) (15.99) % Total noninterest income $ 85,603 $ 86,307 $ 90,623 $ (704) (0.82) % $ (4,316) (4.76) % NM = Not Meaningful Trust and wealth advisory fees (which include investment management fees, estate administration fees, mutual fund fees, annuity fees, and fiduciary fees) increased in 2025 from 2024, compared to an increase in 2024 over 2023. Trust and wealth advisory fees are largely based on the number and size of client relationships and the market value of assets under management. The market value of trust assets under management at December 31, 2025 and 2024 was $6.28 billion and $5.97 billion, respectively. The positive performance of the stock and bond markets during 2025 resulted in an increase in the market value of trust assets under management compared to 2024. At December 31, 2025, these trust assets were comprised of $4.37 billion of personal and agency trusts and estate administration assets, $1.05 billion of employee benefit plan assets, $0.66 billion of individual retirement accounts, and $0.20 billion of custody assets. Service charges on deposit accounts increased in 2025 from 2024, compared to an increase in 2024 from 2023. The growth in service charges on deposit accounts in 2025 was primarily due to higher consumer nonsufficient fund and overdraft transactions. The growth in service charges on deposit accounts in 2024 was primarily due to a higher volume of business deposit account fees. Debit card income remained relatively flat during 2025 following a slight decrease during 2024. The decline in 2024 to 2023 was related to shifts in both client transaction behavior and the networks over which those merchants are routing transactions. Mortgage banking income decreased in 2025 over 2024, compared to an increase in 2024 from 2023. During 2025, 2024, and 2023, we determined that no permanent write-down was necessary for previously recorded impairment on MSRs. During 2025, mortgage banking income decreased due to lower margins on loans originated for the secondary market and a reduction in servicing fees resulting from fewer loans being serviced for others. During 2024, mortgage banking income increased due to higher production of loans originated for the secondary market resulting in increased income on loans sold into the secondary market. Insurance commissions increased in 2025 compared to 2024, and decreased in 2024 compared to 2023. The increase in 2025 was primarily due to higher contingent commissions received and an increased book of business. The decrease in 2024 was primarily due to fewer contingent commissions received. Equipment rental income generated from operating leases decreased during 2025 from 2024, compared to a similar reduction during 2024 from 2023. The average equipment rental portfolio decreased in 2025 and 2024 as a result of reduced leasing volume primarily in the medium and heavy duty truck and construction equipment portfolios due to changing customer preferences and competitive pricing pressures for new business. In 2025 and 2024, the decline in rental income was offset by a similar decline in depreciation on equipment owned under operating leases. Losses on investment securities available-for-sale during 2025 were exclusively the result of repositioning the portfolio during the second, third, and fourth quarters. In the combined repositioning trades, approximately $256 million of securities with a weighted average yield of 0.92% were sold and used to purchase approximately $254 million of securities with a weighted average yield of 3.66%. In the 2024 repositioning, approximately $63 million of securities with a weighted average yield of 0.71% were sold and used to purchase approximately $63 million of securities with a weighted average yield of 4.64%. In the 2023 repositioning, approximately $40 million of securities with a weighted average yield of 1.10% were sold and used to purchase approximately $40 million of securities with a weighted average yield of 4.80%. The remaining 2023 losses were the result of sales to support liquidity and fund loan growth during the first quarter. 25 Table of Contents Other income increased in 2025 from 2024, compared to a decrease in 2024 from 2023. The increase in 2025 was mainly a result of higher partnership investment gains on sale of renewable energy tax equity investments of $2.07 million, an increase in brokerage commissions and fees of $0.41 million, and increased customer interest rate swap fees of $0.54 million offset by a write-down of $0.77 million on a small business capital investment. The decrease in 2024 was mainly a result of lower partnership investment gains on sale of renewable energy tax equity investments, a writedown of $0.86 million on a small business capital investment and a reduction in customer interest rate swap fees of $0.48 million, offset by increased brokerage commissions and fees of $0.84 million and rental income of $0.23 million related to a repossessed asset. Noninterest Expense — Noninterest expense increased in 2025 from 2024 following an increase in 2024 from 2023. The following table shows the components of our noninterest expense for the most recent three years ended December 31. (Dollars in thousands) 2025 2024 2023 2025 $ Change from 2024 2025 % Change from 2024 2024 $ Change from 2023 2024 % Change from 2023 Noninterest expense: Salaries and employee benefits $ 129,564 $ 121,909 $ 115,612 $ 7,655 6.28 % $ 6,297 5.45 % Net occupancy 12,724 11,939 11,090 785 6.58 % 849 7.66 % Furniture and equipment 6,454 5,612 5,653 842 15.00 % (41) (0.73) % Data Processing 29,844 27,567 25,055 2,277 8.26 % 2,512 10.03 % Depreciation — leased equipment 2,415 4,073 7,093 (1,658) (40.71) % (3,020) (42.58) % Professional fees 7,115 7,098 6,705 17 0.24 % 393 5.86 % FDIC and other insurance 5,793 6,142 5,926 (349) (5.68) % 216 3.64 % Business development and marketing 8,855 6,876 7,157 1,979 28.78 % (281) (3.93) % Provision (recovery of provision) for unfunded loan commitments — — 2,566 NM NM NM NM Other 14,075 12,385 14,867 1,690 13.65 % (2,482) (16.69) % Total noninterest expense $ 216,839 $ 203,601 $ 201,724 $ 13,238 6.50 % $ 1,877 0.93 % NM = Not Meaningful Total salaries and employee benefits increased in 2025 from 2024, following an increase in 2024 from 2023. Employee salaries grew $5.21 million or 5.16% in 2025 from 2024, compared to an increase of $7.45 million or 7.97% in 2024 from 2023. The increase in 2025 was mainly a result of higher base salaries due to normal merit increases and a rise in incentive compensation. The increase in 2024 was mainly a result of higher base salaries due to normal merit increases, the impact of wage inflation, and an increase in the number of employees from the filling of prior open positions and lower employee turnover as well as an increase in incentive compensation. Employee benefits increased $2.45 million or 11.67% in 2025 from 2024, compared to a $1.15 million or 5.20% decrease in 2024 from 2023. During 2025, group insurance costs were higher due to overall higher health insurance claims experienced and an increase in employer profit sharing contribution expense due to the utilization of accumulated plan forfeitures to offset employer contributions in the prior year. During 2024, group insurance costs were lower due to fewer claims experienced and the utilization of accumulated plan forfeitures of $0.65 million to offset current year employer contribution expense. Occupancy expense rose in 2025 from 2024, compared to an increase in 2024 from 2023. The expense increase in 2025 was primarily the result of higher building depreciation and increased premises expenses. The expense increase in 2024 was primarily the result of increased premises expenses and higher rents. Furniture and equipment expense, including depreciation, increased in 2025 from 2024, and was relatively flat in 2024 from 2023. The increase in 2025 was primarily due to an increase in equipment repairs and maintenance and higher equipment depreciation. Data processing expense rose in 2025 from 2024, following an increase in 2024 from 2023. The increases in both 2025 and 2024 were due to a rise in software maintenance costs and higher computer processing charges related to a variety of technology projects. Depreciation on equipment owned under operating leases declined in 2025 from 2024, following a similar decrease in 2024 from 2023. In 2025 and 2024, depreciation on equipment owned under operating leases correlated with the change in equipment rental income. Professional fees remained flat in 2025 from 2024, compared to an increase in 2024 from 2023. The higher expense in 2024 can primarily be attributed to a $1.08 million reversal of accrued legal fees in the first quarter of 2023, as well as an increase in audit and examination fees and the utilization of consulting services for technology projects and compliance services during the year. 26 Table of Contents FDIC and other insurance expense decreased in 2025 from 2024, and increased in 2024 from 2023. The decrease in 2025 was mainly the result of lower insurance premiums due to a more cost effective policy renewal. The increase in 2024 was mainly the result of higher insurance premiums during 2024. FDIC insurance premiums remained relatively stable during 2025 and 2024. Business development and marketing expenses increased in 2025 from 2024, following a decrease in 2024 from 2023. The increased expense in 2025 was mainly the result of a $1.00 million dollar charitable contribution, increased business development expenses, and marketing promotions. The decreased expense in 2024 was mainly the result of a charitable contribution of $1.00 million made during 2023 offset with higher marketing promotions during the year. During 2024, we reclassified the provision for unfunded loan commitments out of Other Noninterest Expense and into the Provision for Credit Losses in the Consolidated Statements of Income. We believe this reclassification more appropriately reflected the nature of this expense item and enhances comparability for peer comparison purposes. Other expenses increased in 2025 as compared to 2024, and decreased in 2024 as compared to 2023. The higher expense in 2025 was primarily the result of fewer gains related to the sale of fixed assets and off-lease equipment, higher collection and repossession expenses, and increased intangible asset amortization offset by a reduction in fraud losses. The lower expense in 2024 was primarily the result of higher gains on the sale of fixed assets and leased equipment, lower printing and postage costs, reduced data communication line charges and a reduction in employment and relocation costs offset by a $0.85 million stolen check fraud loss. Income Taxes — 1st Source recognized income tax expense in 2025 of $46.12 million, compared to $38.44 million in 2024, and $36.75 million in 2023. The effective tax rate in 2025 was 22.57% compared to 22.47% in 2024, and 22.73% in 2023. For a detailed analysis of 1st Source’s income taxes see Part II, Item 8, Financial Statements and Supplementary Data — Note 17 of the Notes to Consolidated Financial Statements. FINANCIAL CONDITION Loan and Lease Portfolio — The following table shows 1st Source’s loan and lease distribution at the end of each of the last two years as of December 31. (Dollars in thousands) 2025 2024 Commercial and agricultural $ 797,592 $ 772,974 Renewable energy 652,799 487,266 Auto and light truck 887,876 948,435 Medium and heavy duty truck 269,749 289,623 Aircraft 1,086,821 1,123,797 Construction equipment 1,221,135 1,203,912 Commercial real estate 1,269,765 1,215,265 Residential real estate and home equity 740,777 680,071 Consumer 120,155 133,465 Total loans and leases $ 7,046,669 $ 6,854,808 At December 31, 2025, there were no concentrations within the loan portfolio of 10% or more of total loans and leases. Loans and leases, net of unearned discount, at December 31, 2025, were $7.05 billion and were 77.82% of total assets, compared to $6.85 billion and 76.74% of total assets at December 31, 2024. Average loans and leases, net of unearned discount, increased $336.29 million or 5.10% and increased $394.47 million or 6.36% in 2025 and 2024, respectively. Commercial and agricultural lending, excluding those loans secured by real estate, increased $24.62 million or 3.18% in 2025 over 2024. Commercial and agricultural lending outstandings were $797.59 million and $772.97 million at December 31, 2025 and December 31, 2024, respectively. Commercial loan growth continued to be somewhat constrained as our clients dealt with higher costs and tighter gross margins. Tariff impact is partially to blame as well as slowing consumer demand. Loan growth was particularly constrained in the small business sector. We saw this in the form of reduced line of credit (LOC) balances throughout the year. Further, the agricultural and recreational vehicle sectors are entering their fourth consecutive year of depressed commodity prices and demand, which caused lower LOC usage and reduced investments by these borrowers. Finally, our commercial and industrial loan outstandings continue to be impacted by the acquisition and subsequent pay-offs by private equity firms and larger competitors. Renewable energy loans and leases increased $165.53 million or 33.97% in 2025 over 2024. Renewable energy loan and lease outstandings were $652.80 million and $487.27 million at December 31, 2025 and 2024, respectively. The increase during 2025 was due to continued positive momentum from the addition of new clients and repeat business from existing clients. Demand for renewable energy loans and leases remained accelerated during 2025 from the incentives associated with the Inflation Reduction Act and the shortened phase out period of these incentives with the passage of the One Big Beautiful Bill. 27 Table of Contents Auto and light truck loans decreased $60.56 million or 6.39% in 2025 over 2024. At December 31, 2025, auto and light truck loans had outstandings of $887.88 million and $948.44 million at December 31, 2024. This decrease was primarily attributable to vehicle rental clients’ reaction to cyclical market adjustments resulting in the downsizing of total fleet and transition into lower capital cost units along with our selective credit approach. Medium and heavy duty truck loans and leases decreased $19.87 million or 6.86% in 2025. Medium and heavy duty truck financing at December 31, 2025 and 2024 had outstandings of $269.75 million and $289.62 million, respectively. The decrease at December 31, 2025 from December 31, 2024 can be mainly attributed to reduced equipment demand related to an ongoing trucking industry recession, selective credit approach, and maintenance of our adjusted yields. Aircraft financing at year-end 2025 decreased $36.98 million or 3.29% from year-end 2024. Aircraft financing at December 31, 2025 and 2024 had outstandings of $1.09 billion and $1.12 billion, respectively. Domestic aircraft average outstandings increased modestly, while end-of-period balances declined year-over-year. The decline was driven by elevated client payoffs as aircraft owners capitalized on strong market pricing by divesting assets or aviation-related businesses during 2025. We continue to exercise a consistent disciplined approach to aircraft types and client credit profiles. Our foreign outstandings, all denominated in U.S. dollars, increased 6.23% during 2025 and were $319.93 million and $301.18 million as of December 31, 2025 and 2024, respectively. Loan and lease outstandings to borrowers in Brazil and Mexico were $136.98 million and $163.70 million as of December 31, 2025, respectively, compared to $129.12 million and $145.85 million as of December 31, 2024, respectively. Outstanding balances to other borrowers in other countries were insignificant. Construction equipment financing increased $17.22 million or 1.43% in 2025 compared to 2024. Construction equipment financing at December 31, 2025 had outstandings of $1.22 billion, compared to outstandings of $1.20 billion at December 31, 2024. The growth in this category was primarily due to significant new client relationships and continued growth with existing clients primarily amongst road builders and site development clients. Commercial loans secured by real estate increased $54.50 million or 4.48% in 2025 over 2024. Commercial loans secured by real estate outstanding at December 31, 2025 were $1.27 billion and $1.22 billion at December 31, 2024. Approximately 61% of loans were owner occupied at December 31, 2025. We continue to have solid loan demand within our markets as liquidity concerns, which have impacted many of our competitors’ willingness to lend as aggressively as they had been into commercial real estate, gave us more opportunities while underwriting standards and yields also improved. The majority of our non-owner occupied commercial real estate (CRE) projects are located within our primary market area. We had good CRE loan growth in 2025, fueled by continued funding of in-process projects nearing completion throughout the year. This new project funding was partially offset by an increasing number of CRE payoffs, via the sale of projects or refinancing in secondary markets. We continue to have very minimal exposure to non-owner occupied office property. Residential real estate and home equity loans were $740.78 million at December 31, 2025 and $680.07 million at December 31, 2024. Residential real estate and home equity loans increased $60.71 million or 8.93% in 2025 from 2024. Residential mortgage and home equity outstandings grew in 2025 as clients began to turn back to home equity loans as variable rates began to decrease. Also, our fixed rate term second mortgages grew as clients looked to pull equity from increased home values instead of doing cash out refinances, which would impact their low mortgage rates that were locked in during COVID. In addition, the overall increase in home values, as well as home repairs and improvements, has resulted in more loans in our portfolio. Consumer loans decreased $13.31 million or 9.97% in 2025 over 2024. Consumer loans outstanding at December 31, 2025, were $120.16 million and $133.47 million at December 31, 2024. During 2025, higher vehicle prices, reduced inventory levels, and consumer’s lack of liquidity contributed to the decrease in consumer loans. 28 Table of Contents The following table shows the contractual maturities of loans and leases outstanding as of December 31, 2025 as well as classification according to the sensitivity to changes in interest rates. (Dollars in thousands) 0-1 Year 1-5 Years 5-15 Years Over 15 Years Total Commercial and agricultural Fixed rate $ 70,819 $ 176,490 $ 11,526 $ — $ 258,835 Variable rate 331,005 182,735 24,700 317 538,757 Total commercial and agricultural 401,824 359,225 36,226 317 797,592 Renewable energy Fixed rate 12,726 34,582 52,911 1,849 102,068 Variable rate 196,133 163,793 190,805 — 550,731 Total renewable energy 208,859 198,375 243,716 1,849 652,799 Auto and light truck Fixed rate 197,305 268,914 4,393 — 470,612 Variable rate 166,761 250,503 — — 417,264 Total auto and light truck 364,066 519,417 4,393 — 887,876 Medium and heavy duty truck Fixed rate 93,162 172,984 3,122 — 269,268 Variable rate 293 188 — — 481 Total medium and heavy duty truck 93,455 173,172 3,122 — 269,749 Aircraft Fixed rate 167,142 533,982 13,087 — 714,211 Variable rate 76,094 210,888 85,628 — 372,610 Total aircraft 243,236 744,870 98,715 — 1,086,821 Construction equipment Fixed rate 376,894 790,095 12,344 — 1,179,333 Variable rate 16,949 23,912 941 — 41,802 Total construction equipment 393,843 814,007 13,285 — 1,221,135 Commercial real estate Fixed rate 115,449 451,689 44,930 — 612,068 Variable rate 62,065 422,748 166,454 6,430 657,697 Total commercial real estate 177,514 874,437 211,384 6,430 1,269,765 Residential real estate and home equity Fixed rate 73,344 188,565 184,933 5,298 452,140 Variable rate 62,748 147,217 77,189 1,483 288,637 Total residential real estate and home equity 136,092 335,782 262,122 6,781 740,777 Consumer Fixed rate 51,855 52,593 86 — 104,534 Variable rate 10,170 5,445 6 — 15,621 Total consumer 62,025 58,038 92 — 120,155 Total loans and leases Fixed rate 1,158,696 2,669,894 327,332 7,147 4,163,069 Variable rate 922,218 1,407,429 545,723 8,230 2,883,600 Total loans and leases $ 2,080,914 $ 4,077,323 $ 873,055 $ 15,377 $ 7,046,669 During 2025, approximately 38% of the Bank’s residential mortgage originations were sold into the secondary market. Mortgage loans held for sale were $4.87 million at December 31, 2025 and were $2.57 million at December 31, 2024. 1st Source Bank sells residential mortgage loans to Fannie Mae as well as FHA-insured and VA-guaranteed loans in Ginnie Mae mortgage-backed securities. Additionally, we have sold loans on a service released basis to various other financial institutions in the past. The agreements under which we sell these mortgage loans contain various representations and warranties regarding the acceptability of loans for purchase. On occasion, we may be asked to indemnify the loan purchaser for credit losses on loans that were later deemed ineligible for purchase or we may be asked to repurchase a loan. Both circumstances are collectively referred to as “repurchases.” Within the industry, repurchase demands have decreased during recent years. We believe the loans we have underwritten and sold to these entities have met or exceeded applicable transaction parameters. 29 Table of Contents Our liability for repurchases, included in Accrued Expenses and Other Liabilities on the Statements of Financial Condition, was $0.12 million and $0.18 million as of December 31, 2025 and 2024, respectively. Our expense for repurchase losses, included in Loan and Lease Collection and Repossession expense on the Statements of Income, was $0.07 million of recoveries in 2025 compared to $0.02 million of expense in 2024 and recoveries of $0.07 million in 2023. The mortgage repurchase liability represents our best estimate of the loss that we may incur. The estimate is based on specific loan repurchase requests and a historical loss ratio with respect to origination dollar volume. Because the level of mortgage loan repurchase losses is dependent on economic factors, investor demand strategies and other external conditions that may change over the life of the underlying loans, the level of liability for mortgage loan repurchase losses is difficult to estimate and requires considerable management judgment. CREDIT EXPERIENCE Allowance for Credit Losses — The allowance for credit losses considers the historical loss experience, current conditions, and reasonable and supportable forecasts. To estimate expected loan and lease losses under the Current Expected Credit Losses (CECL) methodology, we use a broad range of data over a lengthy time horizon, generally back to the fourth quarter of 2007, thus capturing most of the economic business cycle which includes the Great Recession and the subsequent recovery which supports full lifetime losses. CECL requires our loan portfolio to be segregated into pools based on similar risk characteristics. Pooled loans and leases are collectively evaluated using either a cohort cumulative loss rate methodology or a transition matrix-based probability of default (PD)/loss given default (LGD) methodology. Our management evaluates the allowance quarterly, reviewing all loans and leases over a fixed-dollar amount ($250,000) where the internal credit quality grade is at or below a predetermined classification, considering actual and anticipated loss experience, current economic events in specific industries, and other pertinent factors including general economic conditions. Determination of the allowance is inherently subjective as it requires significant estimates and adjustments to historical loss rates to capture differences that may exist between current and historical conditions, including consideration of economic risk which is generally reflected in a forecast adjustment, specific industry risk and concentration risk, all of which may be susceptible to significant and unforeseen changes. We review the loan and lease portfolios to identify borrowers that might develop financial problems and to mitigate losses. Our allowance for loan and lease losses is provided for by direct charges to the provision for credit losses on the Consolidated Statements of Income. Losses on loans and leases are charged against the allowance and likewise, recoveries during the period for prior losses are credited to the allowance. We utilize similar processes to estimate our liability for credit losses on unfunded loan commitments which is included in Accrued Expenses and Other Liabilities on the Consolidated Statements of Financial Position and is provided for by direct charges to the provision for unfunded loan commitments located in Provision for Credit Losses on the Consolidated Statements of Income. See Part II, Item 8, Financial Statements and Supplementary Data — Note 1 of the Notes to Consolidated Financial Statements for additional information on management’s evaluation of the allowance for credit losses. We perform a thorough analysis of charge-offs, non-performing asset levels, special attention outstandings and delinquency to review portfolio trends, including specific industry risks and economic conditions, which may have an impact on the allowance and allowance ratios applied to various portfolios. We adjust the calculated historical-based ratio based on analysis of environmental factors, principally specific industry risk, collateral risk, and concentration risk, along with global economic and political issues. Our forecast adjustment includes key economic factors affecting our portfolios such as growth in gross domestic product, unemployment rates, housing market trends, commodity prices, and inflation. Forecasts are difficult to establish and the current environment presents ongoing challenges. The domestic economic outlook remains uncertain amid shifting trade/tariff policies, still-elevated inflation and interest rates, softening labor conditions, signs of consumer stress and weakening sentiment, and heightened geopolitical risks. GDP growth has largely exceeded forecasts in recent quarters, in large part due to front loading of inventory purchases in preparation for the implementation of tariffs. However, substantial headwinds remain in the forward outlook. Uncertainty is elevated given broadening global conflicts and significant political shifts domestically and internationally. U.S. tariff policy remains fluid, which has created volatility in the operating backdrop for our borrowers and markets. Collateral values are significant to underwriting our specialty finance portfolios and there is heightened potential for future policy changes to impact asset valuations. Management cannot predict the timing or magnitude of future policy changes but actively monitors developments and adjusts underwriting, including amortization and down payment requirements, as conditions evolve. Concentration risk is impacted primarily by geographic concentration in northern Indiana and southwestern Michigan in our business banking and commercial real estate portfolios and by collateral concentration in our specialty finance portfolios. 30 Table of Contents We include a factor for global risk in our analysis. While difficult to predict with precision, global risks may adversely impact our borrowers, weakening their ability to repay their financial obligations. The global outlook calls for slowing growth, pressured by high sovereign debt levels and fiscal vulnerabilities, rising protectionism and trade tensions, and still-elevated interest rates and inflation. Global geopolitical uncertainty impacts the outlook and various ongoing foreign conflicts introduce downside risk. Trade tensions are rising which increases the potential for supply chain disruptions. Terrorism remains a persistent concern and risks of a catastrophic event are elevated. In Brazil and Mexico, where we have a presence with our aircraft lending, there are concerns with deteriorating economic growth prospects, persistent inflation and high interest rates, and long-standing structural issues including income inequality, poverty, and crime. Inflation remains a headline concern in Brazil where central bank rates are currently at a nearly two-decade high, and a heavy public debt burden pressures fiscal policy. Mexico is facing prospects of weakened economic growth, elevated inflation, and ongoing U.S. trade tensions. The following discussion focuses on relevant economic conditions and various circumstances impacting the December 31, 2025 allowance for loan and lease losses of each of our loan and lease segments. Commercial and agricultural – The allowance increased year-over-year due to modest loan growth, partially offset by a slight decline in special attention balances which carry higher reserves, and lower historical loss rates within the portfolio prior to the impact of the forecast adjustment. Multiple industries are represented in the commercial and agricultural portfolio and the outlook for the portfolio remains guarded. Small businesses remain challenged to absorb still-elevated interest rates, higher cost of capital, compete for labor, and control expenses. In our underlying industries, wholesalers have generally performed well, while manufacturers remain under pressure. The recreational vehicle industry, which is centered in our footprint, continues to struggle with low demand as it navigates a sharp pullback from record high shipment levels reached in 2022. The outlook for 2026 reflects ongoing weak demand and only modest improvement as compared to 2025. Pressures in the agricultural sector remain evident, although grain did find some footing in 2025 after experiencing sharp declines the previous year. Charge-off rates in the commercial and agricultural portfolio were modest in 2025 and credit quality remains acceptable, but we continue to see elevated special attention activity within the portfolio, particularly in small dollar accounts. Renewable energy – Our allowance increased primarily due to loan growth, along with a slight increase in qualitative adjustments to address changes in the regulatory environment applicable to the portfolio. Our renewable energy (predominately solar) portfolio continues to perform well. Growth opportunities abound and overall credit quality remains solid. Risks include construction and developer related risks and delays, site issues, climate and weather risks, regulatory problems and permitting issues, as well as utility interconnection delays. Maturity risk and refinancing costs are elevated given the elevated interest rate environment. To date, we have not incurred any losses in this portfolio and credit performance continues to be favorable. Auto and light truck – The primary auto rental segment of the auto and light truck portfolio remains under stress as the industry struggles with overcapacity, higher vehicle prices, elevated interest costs, and weak rental rates. Our allowance increased due to higher special attention balances, which are reserved at higher rates, an increase in historical loss rates, and an increase in qualitative adjustments to address continued elevated risk within the auto rental segment. The decline in loan balances within the portfolio is largely due to borrowers’ de-fleeting activity in the auto rental segment to address overcapacity. Credit quality weakened for a second consecutive year in the auto rental segment, as average delinquency and non-performing rates increased year-over-year. Wholesale used vehicle prices have held up better than in past industry downturns and stable asset valuations, along with tighter underwriting standards, have limited charge-off exposures. Overall, wholesale vehicle prices ended the year relatively stable and remain above the longer-term valuation trend line. Somewhat muted original equipment manufacturers’ (“OEM”) production volumes have also likely provided pricing support to used vehicle markets. The auto leasing segment performed well in 2025 and the portfolio continues to exhibit stable credit quality and low delinquency. Leasing customers lease to auto rental companies as well as other commercial entities. Our auto leasing portfolio is concentrated in larger client exposures. We remain diligent in our underwriting, setting residual values appropriately and monitoring fleet mix given the potential for volatility in vehicle prices. Medium and heavy duty truck – The portfolio’s allowance decreased due to lower loan balances. The industry remains challenged by overcapacity, but freight rates appear to be stabilizing. This portfolio has historically been a barometer for overall economic weakness and the industry has experienced several high-profile carrier bankruptcies and generally difficult conditions over the last several years. In previous downturns, small companies and independent owner-operators were hit the hardest and asset valuations were pressured. Asset valuations have weakened in the segment. We did not incur any credit losses in the portfolio during the period. 31 Table of Contents Aircraft – The portfolio’s allowance decreased as we experienced a modest decline in loan balances year-over-year in our domestic aircraft segment, while growth in our foreign aircraft segment was essentially flat. Credit quality metrics remain stable. Aircraft collateral values, particularly those in our niche, strengthened considerably early in this economic cycle but have leveled off with more available inventory. The portfolio has maintained stable credit quality in recent years, but was among the sectors affected most by the sluggish economy following the Great Recession. We experienced minimal loss in the portfolio this year, but our portfolio loss history has experienced past volatility, characterized by lengthy periods of minimal losses or modest recoveries followed by short intervals of high losses. In this portfolio, we have $320 million of foreign exposure, primarily domiciled in Mexico and Brazil. Brazil’s economy remains burdened by high sovereign debt levels and high interest rates. Mexico’s economic growth is expected to be somewhat weak as it manages through ongoing U.S. trade tensions. Heavy indebtedness and financial problems with state-owned oil firm Pemex are an ongoing concern for Mexico’s broader growth prospects. Construction equipment – Our construction equipment portfolio reported more muted loan growth in 2025, compared to relatively high growth rates in previous years since the end of the pandemic. The allowance decrease was primarily driven by a reduction in qualitative factors for elevated problem loan activity in the segment due to improving credit quality trends. Infrastructure spending continues to have a positive impact on many contractors within the segment. Credit quality generally improved as delinquency rates were muted, special attention balances, which are reserved at higher rates, ended the year lower and non-performing balances also declined. The portfolio has experienced some elevated loss activity in recent years which has been successfully mitigated, achieving fairly high recovery rates with time. There is ongoing concern for construction contractors as the portfolio is inherently vulnerable to energy price volatility, high interest rates, and changes in the regulatory environment. Construction projects can have unknown costs or delays and large project risk is ever-present. Volatile energy, labor, and material prices create difficulties for cost structures in an industry that often operates under longer-term contracts lacking adequate cost escalators. Shifting trade policies add uncertainty, potentially increasing raw material and equipment costs. Historically, we have experienced less volatility in this portfolio than the broader industry as losses have been mitigated by appropriate underwriting and a global market for used construction equipment. Commercial real estate – Similar to the commercial portfolio, our commercial real estate loans are concentrated in our local market with local customers although we do fund select projects outside our market with multi-state developers that are headquartered in our footprint. The allowance increase was due to loan growth in both owner and non-owner-occupied segments. We continue to monitor construction risk and maturity repricing risk in the elevated interest rate environment. Approximately 61% of the Bank’s exposure in this portfolio is from owner-occupied facilities where we are the primary relationship bank for our clients. Special attention activity in both the owner-occupied and non-owner-occupied segments remains modest with generally stable credit quality. We have seen limited evidence of slow lease-up and rental rate pressures in select markets in the multi-family segment. We reviewed our qualitative adjustments as of year-end and made slight adjustments to a factor addressing interest rate maturity risk and a slight increase to our construction risk factor as the loan volume of projects under construction remains higher than prior periods. Residential real estate and home equity – Our residential real estate and home equity portfolio consists of loans to individuals in the communities we serve. The allowance increased due to loan growth. Generally, residential mortgage loans are originated using standards that result in salable mortgages. Home equity loans are also advanced in compliance with regulatory guidelines and the Bank’s credit policy. Losses in these portfolios have been immaterial since 2013. Qualitative factors in the portfolio are primarily for reasonable and supportable forecasts, although we maintain an adjustment to account for an elevated amount of non-salable adjustable-rate mortgages in the loan mix with repricing risk at maturity. Consumer – Our consumer loan portfolio consists of loans to individuals in the communities we serve. This portfolio consists primarily of loans secured by autos with advances in compliance with the Bank’s underwriting standards. The allowance was minimally changed year-over-year as lower loan balances were offset by higher historical loss rates in the portfolio. Delinquency rates remain manageable but are trending upward. Loss rates were modest from 2013 through the end of the pandemic, but we have experienced higher write-downs in each of the last three years. We review our qualitative adjustments each quarter, which primarily consist of reasonable and supportable forecasts and also include an adjustment to account for increasing delinquency and nonperforming activity within the portfolio. Allowance for loan and lease losses – The allowance for loan and lease losses at December 31, 2025, totaled $161.85 million and was 2.30% of loans and leases, compared to $155.54 million or 2.27% of loans and leases at December 31, 2024 and $147.55 million or 2.26% of loans and leases at December 31, 2023. It is our opinion that the allowance for loan and lease losses was appropriate to absorb current expected credit losses inherent in the loan and lease portfolio as of December 31, 2025. Charge-offs for loan and lease losses were $8.30 million for 2025, compared to $13.73 million for 2024 and $6.65 million for 2023. Primarily reflective of loan and lease growth and accretive forecast adjustments, we added $10.51 million to the provision for credit losses on loans and leases for 2025, compared to a provision of $13.66 million for 2024 and a provision of $5.87 million for 2023. 32 Table of Contents The following table summarizes our loan and lease loss experience for each of the last three years ended December 31. (Dollars in thousands) 2025 2024 2023 Amounts of loans and leases outstanding at end of period $ 7,046,669 $ 6,854,808 $ 6,518,505 Average amount of net loans and leases outstanding during period $ 6,934,619 $ 6,598,329 $ 6,203,857 Amount of unfunded loan commitments at end of period (1) $ 1,460,418 $ 1,326,724 $ 1,478,840 Balance of allowance for loan and lease losses at beginning of period $ 155,540 $ 147,552 $ 139,268 Charge-offs: Commercial and agricultural 2,420 9,825 4,305 Renewable energy — — — Auto and light truck 2,366 730 729 Medium and heavy duty truck — — — Aircraft 485 68 — Construction equipment 1,407 1,692 54 Commercial real estate 27 — 248 Residential real estate and home equity 74 66 101 Consumer 1,521 1,349 1,211 Total charge-offs 8,300 13,730 6,648 Recoveries: Commercial and agricultural 929 418 243 Renewable energy — — — Auto and light truck 1,806 3,273 5,591 Medium and heavy duty truck — — 12 Aircraft 565 1,279 967 Construction equipment 426 2,100 1,656 Commercial real estate 90 724 11 Residential real estate and home equity 21 26 334 Consumer 257 235 252 Total recoveries 4,094 8,055 9,066 Net charge-offs (recoveries) 4,206 5,675 (2,418) Provision for credit losses - loans and leases 10,512 13,663 5,866 Balance of allowance for loan and lease losses at end of period $ 161,846 $ 155,540 $ 147,552 Balance of liability for unfunded loan commitments at beginning of period $ 6,985 $ 8,182 $ 5,616 Provision (recovery of provision) for credit losses - unfunded loan commitments 2,050 (1,197) 2,566 Balance of liability for unfunded loan commitments at end of period $ 9,035 $ 6,985 $ 8,182 Asset Quality Ratios: Net charge-offs (recoveries) to average net loans and leases outstanding 0.06 % 0.09 % (0.04) % Allowance for loan and lease losses to net loans and leases outstanding end of period 2.30 % 2.27 % 2.26 % Liability for unfunded loan commitments to unfunded loan commitments end of period 0.62 % 0.53 % 0.55 % Allowance for loan and lease losses and liability for unfunded loan commitments to net loans and leases outstanding and unfunded loan commitments end of period 2.01 % 1.99 % 1.95 % (1) Represents noncancelable commitments The following table shows net charge-offs (recoveries) as a percentage of average loans and leases by portfolio type: 2025 2024 2023 Commercial and agricultural 0.19 % 1.29 % 0.52 % Renewable energy — — — Auto and light truck 0.06 (0.26) (0.55) Medium and heavy duty truck — — — Aircraft (0.01) (0.11) (0.09) Construction equipment 0.08 (0.04) (0.16) Commercial real estate (0.01) (0.06) 0.02 Residential real estate and home equity 0.01 0.01 (0.04) Consumer 1.00 0.81 0.66 Total net charge-offs (recoveries) to average portfolio loans and leases 0.06 % 0.09 % (0.04) % 33 Table of Contents The allowance for loan and lease losses has been allocated according to the amount deemed necessary to provide for the estimated current expected credit losses. The following table shows the amount of such components of the allowance for loan and lease losses at December 31 and the ratio of such loan and lease categories to total outstanding loan and lease balances. 2025 2024 (Dollars in thousands) Allowance Amount Percentage of Loans and Leases in Each Category to Total Loans and Leases Allowance Amount Percentage of Loans and Leases in Each Category to Total Loans and Leases Commercial and agricultural $ 21,983 11.32 % $ 21,316 11.28 % Renewable energy 11,833 9.26 8,562 7.11 Auto and light truck 21,653 12.60 18,437 13.84 Medium and heavy duty truck 6,295 3.83 7,292 4.22 Aircraft 35,843 15.42 36,663 16.39 Construction equipment 27,529 17.33 28,258 17.56 Commercial real estate 25,396 18.02 24,821 17.73 Residential real estate and home equity 9,076 10.51 7,976 9.92 Consumer 2,238 1.71 2,215 1.95 Total $ 161,846 100.00 % $ 155,540 100.00 % Nonperforming Assets — Nonperforming assets include loans past due over 90 days, nonaccrual loans and leases, other real estate, repossessions and other nonperforming assets we own. Our policy is to discontinue the accrual of interest on loans and leases where principal or interest is past due and remains unpaid for 90 days or more, or when an individual analysis of a borrower’s credit worthiness indicates a credit should be placed on nonperforming status, except for residential real estate and home equity loans, and consumer loans that are both well secured and in the process of collection. Nonperforming assets amounted to $77.38 million at December 31, 2025, compared to $31.33 million at December 31, 2024, and $24.24 million at December 31, 2023. During 2025, interest income on nonaccrual loans and leases would have increased by approximately $5.83 million compared to $2.06 million in 2024 if these loans and leases had earned interest at their full contractual rate. Nonperforming assets at December 31, 2025 increased from December 31, 2024, mainly due to increases in nonaccrual loans and leases in the auto rental segment of our auto and light truck portfolio, partially offset by lower nonaccrual loans and leases in our construction portfolio. Repossessions consisted mainly of units in the construction equipment and consumer portfolios. There is no other real estate owned as of year end. 34 Table of Contents Nonperforming assets at December 31 (Dollars in thousands) 2025 2024 Loans past due over 90 days $ 460 $ 106 Nonaccrual loans and leases: Commercial and agricultural 2,493 4,715 Renewable energy — — Auto and light truck 54,348 2,806 Medium and heavy duty truck 1,576 — Aircraft — — Construction equipment 11,341 17,976 Commercial real estate 2,459 1,595 Residential real estate and home equity 3,645 2,711 Consumer 740 810 Total nonaccrual loans and leases 76,602 30,613 Total nonperforming loans and leases 77,062 30,719 Other real estate — 460 Repossessions: Commercial and agricultural 21 — Auto and light truck — — Medium and heavy duty truck — — Aircraft — — Construction equipment 192 134 Consumer 54 21 Total repossessions 267 155 Operating leases 49 — Total nonperforming assets $ 77,378 $ 31,334 Nonperforming loans and leases to loans and leases, net of unearned discount 1.09 % 0.45 % Nonperforming assets to loans and leases and operating leases, net of unearned discount 1.10 % 0.46 % Coverage ratio of allowance for loan and lease losses to nonperforming loans and leases 210.02 % 506.33 % Potential Problem Loans — Potential problem loans consist of loans that are performing but for which management has concerns about the ability of a borrower to continue to comply with repayment terms because of potential operating or financial difficulties. Management monitors these loans closely and reviews their performance on a regular basis. As of December 31, 2025 and 2024, we had $11.10 million and $20.60 million, respectively, in loans of this type which are not included in either of the non-accrual or 90 days past due loan categories. At December 31, 2025, potential problem loans consisted of five relationships; two relationships in the commercial and agricultural portfolio, two relationships in the auto and light truck portfolio, and one relationship in the commercial real estate portfolio. Weakness in the borrowers’ operating performance have caused us to give heighten attention to these credits. INVESTMENT PORTFOLIO The amortized cost of securities available-for-sale at year-end 2025 decreased 4.98% from 2024, following a 6.34% decrease from year-end 2023 to year-end 2024. The amortized cost of securities available-for-sale at December 31, 2025 was 17.32% of total assets, compared to 18.48% of total assets at December 31, 2024. The following table shows the amortized cost of investment securities available-for-sale as of December 31. (Dollars in thousands) 2025 2024 U.S. Treasury and Federal agencies securities $ 697,652 $ 786,417 U.S. States and political subdivisions securities 113,126 86,305 Mortgage-backed securities — Federal agencies 757,151 777,962 Corporate debt securities 500 — Total debt securities available-for-sale $ 1,568,429 $ 1,650,684 35 Table of Contents Yields on tax-exempt obligations are calculated on a fully tax-equivalent basis assuming a 21% tax rate. The following table shows the maturities of securities available-for-sale at December 31, 2025, at the amortized costs and weighted average yields of such securities. (Dollars in thousands) Amount Yield U.S. Treasury and Federal agencies securities Under 1 year $ 79,684 1.41 % 1 – 5 years 556,589 3.31 5 – 10 years 61,379 4.35 Over 10 years — — Total U.S. Treasury and Federal agencies securities 697,652 3.19 U.S. States and political subdivisions securities Under 1 year 6,806 2.87 1 – 5 years 53,756 3.10 5 – 10 years 38,134 4.89 Over 10 years 14,430 5.89 Total U.S. States and political subdivisions securities 113,126 4.04 Corporate debt securities Under 1 year — — 1 – 5 years 500 4.15 5 – 10 years — — Over 10 years — — Total Corporate debt securities 500 4.15 Mortgage-backed securities — Federal agencies 757,151 2.89 Total investment securities available-for-sale $ 1,568,429 3.11 % At December 31, 2025, the residential mortgage-backed securities we held consisted of GNMA, FNMA and FHLMC pass-through certificates (Government Sponsored Enterprise, GSEs). The type of loans underlying the securities were all conforming loans at the time of issuance. The underlying GSEs backing these mortgage-backed securities are rated Aaa or AA+ from the rating agencies. At December 31, 2025, the vintage (years originated) of the underlying loans comprising our securities are: 12% in the year 2025; 8% in the year 2024; 18% in the years 2022 and 2023; 48% in the years 2020 and 2021; 5% in the years 2018 and 2019; 9% in the years 2017 and prior. DEPOSITS The following table shows the average daily amounts of deposits and rates paid on such deposits. 2025 2024 2023 (Dollars in thousands) Amount Rate Amount Rate Amount Rate Noninterest bearing demand $ 1,601,954 — % $ 1,609,001 — % $ 1,753,149 — % Interest bearing demand 2,554,311 2.36 2,463,386 2.73 2,481,362 2.33 Savings 1,376,299 1.57 1,255,111 1.45 1,181,314 0.68 Time 1,849,727 4.00 1,791,459 4.55 1,541,419 3.73 Total deposits $ 7,382,291 $ 7,118,957 $ 6,957,244 The following table shows the estimated scheduled maturities of the portion of time deposits in U.S. offices in excess of the FDIC insurance limit and time deposits that are otherwise uninsured. (Dollars in thousands) Under 3 Months $ 165,518 4 – 6 Months 157,830 7 – 12 Months 151,325 Over 12 Months 172,118 Total $ 646,791 See Part II, Item 8, Financial Statements and Supplementary Data — Note 10 of the Notes to Consolidated Financial Statements for additional information on deposits. 36 Table of Contents SHORT-TERM BORROWINGS The following table shows the distribution of our short-term borrowings and the weighted average interest rates thereon at the end of each of the last two years. Also provided are the maximum amount of borrowings and the average amount of borrowings, as well as weighted average interest rates for the last two years. (Dollars in thousands) Federal Funds Purchased and Securities Repurchase Agreements Federal Home Loan Bank Advances Federal Reserve Advances Other Short-Term Borrowings Total Borrowings 2025 Balance at December 31, 2025 $ 112,470 $ 125,000 $ — $ 1,151 $ 238,621 Maximum amount outstanding at any month-end 112,470 125,000 — 1,835 239,305 Average amount outstanding 63,170 20,041 1,918 1,495 86,624 Weighted average interest rate during the year 1.04 % 4.46 % 1.45 % — % 1.83 % Weighted average interest rate for outstanding amounts at December 31, 2025 2.04 % 3.79 % — % — % 2.94 % 2024 Balance at December 31, 2024 $ 72,346 $ 75,000 $ 100,000 $ 1,852 $ 249,198 Maximum amount outstanding at any month-end 82,591 170,000 100,000 2,450 355,041 Average amount outstanding 61,956 64,987 100,027 1,878 228,848 Weighted average interest rate during the year 1.01 % 5.40 % 4.84 % — % 3.92 % Weighted average interest rate for outstanding amounts at December 31, 2024 1.15 % 4.50 % 4.76 % — % 3.60 % During January 2024, we borrowed $100 million from the Federal Reserve’s Bank Term Funding Program based on the economics of the borrowing relative to our other funding sources. During January 2025, we repaid the borrowing in full. LIQUIDITY AND CAPITAL RESOURCES Core Deposits — Our major source of investable funds is provided by stable core deposits consisting of all interest bearing and noninterest bearing deposits, excluding brokered certificates of deposit, listing services certificates of deposit and certain certificates of deposit over $250,000 based on established FDIC insured deposits. In 2025, average core deposits equaled 72.62% of average total assets, compared to 71.39% in 2024 and 73.77% in 2023. The effective rate of core deposits in 2025 was 1.80%, compared to 1.97% in 2024 and 1.45% in 2023. Average noninterest bearing core deposits decreased 0.44% in 2025 compared to a decrease of 8.22% in 2024. These represented 24.56% of total core deposits in 2025, compared to 25.79% in 2024, and 28.24% in 2023. Purchased Funds — We use purchased funds to supplement core deposits, which include certain certificates of deposit over $250,000, brokered certificates of deposit, listing services certificates of deposit, over-night borrowings, securities sold under agreements to repurchase, commercial paper, and other short-term borrowings which includes Federal Home Loan Bank and Federal Reserve Bank borrowings. Purchased funds are raised from customers seeking short-term investments and are used to manage the Bank’s interest rate sensitivity. During 2025, our reliance on purchased funds decreased to 10.54% of average total assets from 12.69% in 2024. Shareholders’ Equity — Average shareholders’ equity equated 13.39% of average total assets in 2025, compared to 12.10% in 2024. Shareholders’ equity was 14.08% of total assets at year-end 2025, compared to 12.44% at year-end 2024. We include unrealized gains (losses) on available-for-sale securities, net of income taxes, in accumulated other comprehensive income (loss) which is a component of shareholders’ equity. While regulatory capital adequacy ratios exclude unrealized gains (losses), it does impact our equity as reported in the audited financial statements. The unrealized losses on available-for-sale securities, net of income taxes, were $34.78 million and $87.23 million at December 31, 2025 and 2024, respectively. The unrealized losses occurred as a result of changes in interest rates, market spreads and market conditions subsequent to purchase. Additionally, we do not intend to sell these available-for-sale investment securities and it is more likely than not that we will not be required to sell these investments before recovery of the amortized cost basis, which may be the maturity dates of the securities. Other Liquidity — Under Indiana law governing the collateralization of public fund deposits, the Indiana Board of Depositories determines which financial institutions are required to pledge collateral based on the strength of their financial ratings. We have been informed that no collateral is required for our public fund deposits. However, the Board of Depositories could alter this requirement in the future and adversely impact our liquidity. Our potential liquidity exposure if we must pledge collateral is approximately $1.44 billion. 37 Table of Contents Liquidity Risk Management — The Bank’s liquidity is monitored and closely managed by the Asset/Liability Management Committee (ALCO), whose members are comprised of the Bank’s senior management. Asset and liability management includes the management of interest rate sensitivity and the maintenance of an adequate liquidity position. The purpose of interest rate sensitivity management is to stabilize net interest income during periods of changing interest rates. Liquidity management is the process by which the Bank ensures that adequate liquid funds are available to meet short-term and long-term financial commitments on a timely basis. Financial institutions must maintain liquidity to meet day-to-day requirements of depositors and borrowers, take advantage of market opportunities and provide a cushion against unforeseen needs. Liquidity of the Bank is derived primarily from core deposits, principal payments received on loans, the sale and maturity of investment securities, net cash provided by operating activities, and access to other funding sources. The most stable source of liability-funded liquidity is deposit growth and retention of the core deposit base. The principal source of asset-funded liquidity is available-for-sale investment securities, cash and due from banks, overnight investments, securities purchased under agreements to resell, and loans and interest bearing deposits with other banks maturing within one year. Additionally, liquidity is provided by repurchase agreements, and the ability to borrow from the Federal Reserve Bank (FRB) and the Federal Home Loan Bank (FHLB). The Bank’s liquidity strategy is guided by internal policies and the Interagency Policy Statement on Funding and Liquidity Risk Management. Internal guidelines consist of: (i) Available Liquidity (sum of short term borrowing capacity) greater than $500 million; (ii) Liquidity Ratio (total of net cash, short term investments and unpledged marketable assets divided by the sum of net deposits and short term liabilities) greater than 15%; (iii) Dependency Ratio (net potentially volatile liabilities minus short-term investments divided by total earning assets minus short-term investments) less than 15%; and (iv) Loans to Deposits Ratio less than 100% At December 31, 2025, we were in compliance with the foregoing internal policies and regulatory guidelines. The Bank also maintains a contingency funding plan that assesses the liquidity needs under various scenarios of market conditions, asset growth and credit rating downgrades. The plan includes liquidity stress testing which measures various sources and uses of funds under the different scenarios. The contingency plan provides for ongoing monitoring of unused borrowing capacity and available sources of contingent liquidity to prepare for unexpected liquidity needs and to cover unanticipated events that could affect liquidity. We maintain prudent strategies to support a strong liquidity position. The following table represents our sources of liquidity as of December 31, 2025. (Dollars in thousands) Available Internal Sources Unencumbered securities $ 1,285,144 External Sources FHLB advances (1) 479,610 FRB borrowings 366,265 Fed funds purchased (2) 360,000 Brokered deposits (3) 685,119 Listing services deposits (3) 451,572 Total liquidity $ 3,627,710 % of Total deposits net brokered and listing services certificates of deposit 51.79 % (1) Availability is shown net of required stock purchases under the FHLB activity-based stock ownership requirement, which is currently 4.50%, and may vary (2) Availability contingent on correspondent bank approvals at time of borrowing (3) Availability contingent on internal borrowing guidelines External sources as listed in the table above are managed to approved guidelines by our Board of Directors. Total net available liquidity was $3.63 billion at December 31, 2025, which accounted for approximately 52% of total deposits net of brokered and listing services certificates of deposits. 38 Table of Contents Interest Rate Risk Management — ALCO monitors and manages the relationship of earning assets to interest bearing liabilities and the responsiveness of asset yields, interest expense, and interest margins to changes in market interest rates. In the normal course of business, we face ongoing interest rate risks and uncertainties. We may utilize interest rate swaps to partially manage the primary market exposures associated with the interest rate risk related to underlying assets, liabilities, and anticipated transactions. A hypothetical change in net interest income was modeled by calculating an immediate 200 basis point (2.00%) and 100 basis point (1.00%) increase and a 100 basis point (1.00%) decrease in interest rates across all maturities. The following table shows the aggregate hypothetical impact to pre-tax net interest income. Percentage Change in Net Interest Income December 31, 2025 December 31, 2024 Basis Point Interest Rate Change 12 Months 24 Months 12 Months 24 Months Up 200 1.63% 6.59% (2.19)% 2.79% Up 100 0.79% 3.31% (1.11)% 1.35% Down 100 (1.83)% (4.88)% 0.89% (2.10)% The earnings simulation model excludes the earnings dynamics related to how fee income and noninterest expense may be affected by changes in interest rates. Actual results may differ materially from those projected. The use of this methodology to quantify the market risk of the balance sheet should not be construed as an endorsement of its accuracy or the accuracy of the related assumptions. At December 31, 2025 and 2024, the impact of these hypothetical fluctuations in interest rates on our derivative holdings was not significant, and, as such, separate disclosure is not presented. We manage the interest rate risk related to mortgage loan commitments by entering into contracts for future delivery of loans with outside parties. See Part II, Item 8, Financial Statements and Supplementary Data — Note 18 of the Notes to Consolidated Financial Statements. Commitments and Contractual Obligations — In the ordinary course of operations, we enter into certain contractual obligations. Such obligations include customer deposits, the funding of operations through debt issuances as well as operating leases for the rent of premises and equipment. Additionally, we routinely enter into contracts for services that may require payment to be provided in the future and may contain penalty clauses for early termination of the contract. Further discussion of commitments and contractual obligations is included in Part II, Item 8, Financial Statements and Supplementary Data — Notes 10, 11, 12 and 18 of the Notes to Consolidated Financial Statements. We also enter into derivative contracts under which we are required to either receive cash from, or pay cash to, counterparties depending on changes in interest rates. Derivative contracts are carried at fair value on the consolidated balance sheet with the fair value representing the net present value of expected future cash receipts or payments based on market interest rates as of the balance sheet date. The fair value of the contracts changes daily as market interest rates change. Further discussion of derivative contracts is included in Part II, Item 8, Financial Statements and Supplementary Data — Note 19 of the Notes to Consolidated Financial Statements. OFF-BALANCE SHEET ARRANGEMENTS Assets under management and assets under custody are held in fiduciary or custodial capacity for our clients. In accordance with U.S. generally accepted accounting principles, these assets are not included on our balance sheet. We are also party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of our clients. These financial instruments include commitments to extend credit and standby letters of credit. Further discussion of these commitments is included in Part II, Item 8, Financial Statements and Supplementary Data — Note 18 of the Notes to Consolidated Financial Statements. Item 7A. Quantitative and Qualitative Disclosures about Market Risk. For information regarding Quantitative and Qualitative Disclosures about Market Risk, see Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, Interest Rate Risk Management. 39 Table of Contents